As Filed with the Securities and Exchange Commission on June 11, 1997
Registration No. 333-
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Panda Global Energy Company
(Exact name of Registrant as specified in its charter)
Cayman Islands 4900 Not Applicable
(State or other (Primary Standard (I.R.S. Employer
Jurisdication of Industrial Classification Identification No.)
incorporation or Code Number
organization)
Panda Global Holdings, Inc.
(Exact name of Co-Registrant (Guarantor) as specified in its charter)
Delaware 4900 75-2697755
(State or other (Primary Standard (I.R.S. Employer
Jurisdication of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
L. Stephen Rizzieri L. Stephen Rizzieri
Vice President and General Counsel Vice President and General Counsel
Panda Global Energy Company Panda Global Holdings, Inc.
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, including area code, and telephone, including area code
of registrant's principal executive of guarantor's principal executive
offices and agent for service) offices and agent for 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 Unit Price
12-1/2% Registered
Senior Secured Notes $155,200,000 93.444% $145,025,088 $43,947
due 2004
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 GLOBAL ENERGY COMPANY
PANDA GLOBAL HOLDINGS, INC.
Cross Reference Sheet
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 Consolidated Pro Forma
Financial Data of the Company; Selected
Financial Data of the Issuer; Selected
Financial Data of the Company
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 Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral
Documents
10. Interests of Named Experts and
Counsel Legal Matters; Experts
11. Information with Respect to the
Registrant and the Co-Registrant Outside Front Cover Page of Prospectus;
Available Information; Prospectus
Summary; Risk Factors; Business of the
Issuer, the Company, Panda
International and Their Subsidiaries;
Use of Proceeds; Capitalization;
Unaudited Consolidated Pro Forma
Financial Data of the Company; Selected
Financial Data of the Issuer; Selected
Financial Data of the Company;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations of the Issuer; Management's
Discussion and Analysis of Financial
Condition and Results of Operations of
the Company; The Exchange Offer;
Certain Tax Considerations of the
Exchange Offer; Description of the
Projects; Management; Legal
Proceedings; Description of Other
Indebtedness; Description of the
Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral
Documents; Plan of Distribution; Legal
Matters; Experts; Index to Financial
Statements; Certain Defined Terms; The
Electric Power Industry and Regulation
in the PRC and the United States;
Consolidated Pro Forma Report; Luannan
Engineering Report; Luannan Coal
Consultant's Report; Ownership
Structure of the Issuer, the Company,
Panda International and Certain of
Their Subsidiaries.
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities *
* Not applicable
SUBJECT TO COMPLETION, JUNE 11,1997
PROSPECTUS
OFFER TO EXCHANGE
12-1/2% Registered Senior Secured Notes due 2004
which have been registered under the Securities Act
for any and all outstanding
12-1/2% Senior Secured Notes due 2004 [LOGO]
of
PANDA GLOBAL ENERGY COMPANY
Fully and Unconditionally Guaranteed by
PANDA GLOBAL HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
Panda Global Energy Company, a Cayman Islands company (the "Issuer"), a
subsidiary of Panda Global Holdings, Inc., 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 $155,200,000 in aggregate principal amount
of its 12-1/2% Registered Senior Secured Notes, due 2004 (the "Exchange
Notes") for a like principal amount of its issued and outstanding 12-1/2%
Senior Secured Notes, due 2004 (the "Old Notes") 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 Notes are
substantially identical to the terms of the Old Notes, except that the Exchange
Notes (i) have been registered under the Securities Act, and (ii) holders of
the Exchange Notes will not be entitled to certain rights of holders of the Old
Notes 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 Notes who are eligible to tender their Old
Notes for exchange in the Exchange Offer and fail to do so. See "The Exchange
Offer -- Termination of Certain Rights." The Exchange Notes will evidence the
same debt as the Old Notes which they replace and will be issued under, and be
entitled to the benefits of, the indenture governing the Old Notes dated April
22, 1997 (the "Exchange Notes Indenture"). As of the date of this Prospectus,
$155,200,000 principal amount of Old Notes is outstanding. The Old Notes and
the Exchange Notes are sometimes referred to herein collectively as the
"Existing Notes."
The Exchange Notes will bear interest from the date of issuance, at the
rate per annum set forth above, payable semiannually in cash in arrears on
April 15 and October 15 of each year, commencing October 15, 1997. Interest on
the Old Notes accepted for exchange will accrue thereon to, but not including,
the date of issuance of the Exchange Notes and will be paid together with the
first interest payment on the Exchange Notes issued in exchange therefor. The
principal of the Exchange Notes is payable semiannually in installments as
described herein, commencing October 15, 2000. The Exchange Notes will mature
on April 15, 2004, and will be redeemable at the option of the Issuer, in whole
or in part, at any time on or after April 15, 2002, 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 Notes upon the
occurrence of certain events as set forth herein. Payment of principal of, and
premium, if any, and interest on the Exchange Notes is fully and
unconditionally guaranteed by the Company (the "Company Guaranty"). See
"Prospectus Summary -- Terms of the Exchange Notes -- The Exchange Notes
Guarantee. See "Description of the Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral
Documents."
Subject to the terms and conditions of the Exchange Offer, the Issuer will
accept for exchange any and all Old Notes validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on , 1997, unless extended
by the Issuer in its sole discretion (the "Expiration Date"). Tenders of Old
Notes 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
Notes being tendered or accepted for exchange. However, the Exchange Offer is
subject to certain customary conditions. The Old Notes may be tendered only in
integral multiples of $1,000. See "The Exchange Offer -- Conditions of the
Exchange Offer."
Prior to the consummation of the Exchange Offer, there has been no public
market for the Exchange Notes. The Issuer does not intend to apply for the
listing of the Exchange Notes on any securities exchange or to seek approval
for quotation through any automated quotation system, and no active public
market for the Exchange Notes is currently anticipated. There can be no
assurance that an active public market for the Exchange Notes will develop.
(continued on next page)
See "Risk Factors" beginning on page 21 for a discussion of certain matters
that should be considered in connection with the Exchange Offer and an
investment in the Exchange Notes 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 , 1997.
(cover page continued)
The Old Notes were originally issued and sold on April 22, 1997 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
("Rule 144A") and Regulation S promulgated under the Securities Act.
Accordingly, the Old Notes 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 their view of
interpretations provided to third parties by the staff of the Securities
and Exchange Commission (the "Commission"), the Issuer and the Company
believe that the Exchange Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by holders
thereof (other than any holder which (i) is an "affiliate" of the Company
or the Issuer within the meaning of Rule 405 promulgated under the
Securities Act (an "Affiliate"), (ii) is a broker-dealer which acquired
Old Notes directly from the Issuer, or (iii) is a broker-dealer which
acquired Old Notes as a result of market making or other trading
activities) without registration under the Securities Act, provided that
such Exchange Notes 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 Notes. Each broker-dealer
that receives Exchange Notes for its own account pursuant to the Exchange
Offer must notify the Company and the Issuer that it has acquired
Exchange Notes for its own account (which notification must be made in
the applicable location in the Letter of Transmittal that is delivered
by such broker-dealer along with such broker-dealer's Old Notes to be
exchanged pursuant to the terms of the Exchange Offer), and must
acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. 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 Notes received for its own account in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market making activities or other trading activities. The
Company and the Issuer have agreed to make available for a period of up
to two hundred and seventy (270) consecutive days after consummation of
the Exchange Offer a prospectus meeting the requirements of the
Securities Act to any such broker-dealer for use in connection with any
such resale, subject to certain conditions in the Registration Rights
Agreement. 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
Notes, 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 Notes 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 Exchange Notes issued pursuant to the Exchange Offer 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 Notes 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
Notes in certificated form will be issued in exchange for the global bond
only as set forth in the Exchange Notes Indenture. See "Description of
the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral Documents -- Book Entry; Delivery
and Form."
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION AS TO
WHETHER ANY HOLDER OF OLD NOTES SHOULD TENDER OLD NOTES 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.
ENFORCEMENT OF CIVIL LIABILITIES
The Issuer is an exempted company organized under the laws of the Cayman
Islands. Substantially all of the assets of the Issuer are located outside of
the United States. As a result, it may be difficult for investors to effect
service of process upon the Issuer within the United States or to enforce
against the Issuer in a U.S. court judgments obtained in U. S. courts,
including judgments predicated upon the civil liability provisions of the
federal securities laws of the United States ("Federal Securities Laws"). The
Issuer has designated CT Corporation System in New York City as its agent for
service of process in the United States with respect to the Exchange Notes (and
the Old Notes) and the indentures relating to the Exchange Notes (the
"Indentures") and the Collateral Documents (as defined below) in any United
States or New York State court located in the Borough of Manhattan, the City of
New York and the State of New York, and the Issuer has submitted to the
jurisdiction of such courts in connection with such matters.
The Issuer has been advised by its legal counsel in the Cayman Islands,
Maples & Calder, that a final judgment for the payment of money rendered by any
federal or state court in the United States based upon civil liability, whether
or not predicated solely upon the Federal Securities Laws, will be enforced in
the Cayman Islands without any re-examination on its merits, provided that (i)
enforcement of such judgment conforms to general principles of equity and (ii)
the performance of any obligation thereunder is not fraudulent or contrary to
public policy.
DEFINED TERMS
Unless otherwise specified, all references in this Prospectus to "U.S.
dollars," "dollars" or "$" are to United States dollars, and all references to
"Renminbi" or "RMB" are to Renminbi, which is the legal tender currency of the
People's Republic of China.
Unless otherwise specified, translation of amounts from Renminbi to U.S.
dollars for the convenience of the reader has been made in this Prospectus at
the noon buying rate in New York City for cable transfers in foreign currencies
as certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate") on April 4, 1997 of $1.00 = RMB 8.3268. No representation
is made that the Renminbi amounts could have been, or could be, converted into
U.S. dollars at that rate or at any other rate. See "Risk Factors--
Considerations Relating to the PRC--Government Control of Currency Conversion
and Exchange Rate Risks" and "Foreign Exchange System in the PRC and Exchange
Rate Information."
All capitalized terms used in this Prospectus and not otherwise defined
herein have the meanings assigned in the glossary included as Appendix A
hereto, or in "Description of the Exchange Notes, the Exchange Notes Guarantee,
the Issuer Loan, the Shareholder Loans and the Collateral Documents -- Certain
Definitions." See also "Certain Technical Terms Commonly Used in the Utility
Industry" set forth in Part II of the Appendix A hereto.
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 Notes 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 Notes 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 obligations to file periodic reports with
the Commission pursuant to the Exchange Act may be suspended if the Exchange
Notes are held of record by fewer than 300 holders at the beginning of any
fiscal year of the Company or the Issuer, respectively, other than the fiscal
year in which the Registration Statement becomes effective. Pursuant to the
Indentures, the Company has agreed that the Company will furnish to the Trustees
copies of annual, quarterly and current reports that it would be required to
file under the Exchange Act whether or not it is subject to such reporting
requirements. In addition, subject to the limitations set forth in the
Indentures, upon the written request of a holder of Old Notes, 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 Old Notes to be made pursuant to Rule 144A. Any such request will
be subject to the confidentiality provisions set forth below. Written requests
for such information should be addressed to Panda Global Energy Company, or
Panda Global Holdings, Inc., c/o Panda Energy International, Inc.,
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244, Attention:
General Counsel.
By requesting additional information relating to the offering of Exchange
Notes at a time when neither the Company nor the Issuer is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, 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.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical fact included in this
Prospectus, including, without limitation, statements regarding financial
position, projects under development, construction or other budgets,
information contained in the Independent Engineers' and the Consultants'
Reports and plans and objectives for future operations, are forward-looking
statements. Although the Issuer and the Company believe that the expectations
reflected in such forward-looking statements are reasonable, they can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Issuer's
and the Company's expectations ("Cautionary Statements") are disclosed under
"Risk Factors," in the assumptions made by the Independent Engineers and
Consultants and contained in their reports, and elsewhere in this Prospectus.
All subsequent written and oral forward-looking statements attributable to the
Issuer, the Company or persons acting on their behalf are expressly qualified
in their entirety by the Cautionary Statements.
In providing its conclusions set forth in the Independent Engineers' or
Consultants' Reports, each Independent Engineer or Consultant made certain
assumptions. Although the author of each report believes that the use of these
assumptions in its 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 and projections contained in the Independent
Engineers' and Consultants' Reports may not be indicative of future events.
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 Independent Engineers' or Consultants' Reports or if the
assumptions used in formulating the conclusions presented prove to be
incorrect, the ability of a direct or indirect Subsidiary of the Issuer to
repay its indebtedness to the Issuer and to make distributions to its equity
holders and thus ultimately to the Issuer, the Issuer's ability to make
payments of interest and principal on the Exchange Notes when due, and the
Company's ability to meet its obligations under the Exchange Notes Guarantee,
may be materially and adversely affected. See "Risk Factors--Reliance upon
Projections and Underlying Assumptions Contained in Independent Consultants'
Reports."
*****************************************************************************
Neither the Issuer, the Company nor any of their representatives makes any
recommendation to any holder of Old Notes as to whether to tender or refrain
from tendering Old Notes pursuant to the Exchange Offer. Neither the Issuer,
the Company nor any of their representatives makes any representation to any
offeree of the Exchange Notes offered hereby regarding the legality of any
investment by such offeree or purchaser under applicable legal investment or
similar laws. Each holder of Old Notes 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 Issuer's and the
Company's financial data, including the notes thereto, appearing elsewhere in
this Prospectus. All references to the Company which pertain to events prior to
March 7, 1997 relate solely to the business and operations of certain
subsidiaries of Panda Energy International, Inc., which are now subsidiaries of
the Company. See "Business of the Issuer, the Company, Panda International and
Their Subsidiaries--The Issuer, the Company and Panda International." Investors
should carefully consider the information set forth under "Risk Factors" prior
to making any decision to invest in the Exchange Notes. For definitions of
certain terms used herein, see the glossary included as Appendix A to this
Prospectus, and "Description of the Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the Shareholder Loans on the Collateral Documents -
- - Certain Definitions."
The Issuer and the Company
Panda Global Energy Company (the "Issuer") is a wholly-owned subsidiary of
Panda Global Holdings, Inc. (the "Company"). The Company is an independent
power company principally engaged in the development, acquisition, ownership
and operation of power generation facilities and activities related thereto
("Projects") in the United States and internationally. The Company's principal
business strategy is to use its and its affiliates' experience to profitably
develop, construct, finance and manage Projects to provide low-cost electricity
and electric generating capacity particularly, in the case of international
Projects, in areas of the world where demand for power exceeds supply by a
significant factor. The Company believes 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 the
Company and its affiliates, due to their low costs and development
capabilities.
The Company's current portfolio of Projects is comprised of (i) 100%
indirect ownership of a 180 megawatt ("MW") natural gas-fired, combined-cycle
cogeneration facility located in Roanoke Rapids, North Carolina (the "Rosemary
Facility") which commenced commercial operations in December 1990 and (ii) 100%
indirect ownership of the lessee under a long-term leveraged lease of a 230 MW
natural gas-fired, combined-cycle cogeneration facility located in Brandywine,
Maryland, near Washington, D.C. (the "Brandywine Facility") which commenced
commercial operations in October 1996. The Company indirectly owns an
approximately 83% ownership interest in a 2x50 MW coal-fired cogeneration power
plant together with a steam and hot water generation and distribution facility
and other related facilities under construction in Luannan County, Tangshan
Municipality, Hebei Province, People's Republic of China (collectively, the
"Luannan Facility"). Preliminary construction work on the Luannan Facility
commenced in December 1996, and full construction activity commenced upon the
closing of the offering of the Old Notes on April 22, 1997 (the "Prior
Offering"). The Company is also actively developing several other domestic and
international Projects which may be added to its portfolio of Projects. See
"Risk Factors -- Additional Indebtedness -- Effective Subordination of Exchange
Notes and Exchange Notes Guarantee."
The Luannan Facility
The Luannan Facility will be comprised of two coal-fired steam/electric
generating units, each nominally rated at 50 MW but with nameplate capability
of up to 60 MW gross output under full condensing conditions. Electric power
generated by the Luannan Facility will be interconnected to the Beijing-Tianjin-
Tangshan Regional Power Network (the "Jing-Jin-Tang Grid") serving the Beijing-
Tianjin-Tangshan region, where the economy has witnessed significant growth in
recent years. In addition, steam will be extracted from the steam turbines for
distribution by pipeline to local commercial and industrial users and used for
local heating. Coal will be delivered by truck to the Luannan Facility from
nearby mines.
All electrical output of the Luannan Facility will be sold pursuant to a
20-year power purchase agreement (the "Luannan Power Purchase Agreement") to
North China Power Group Company ("North China Power Company"), the business arm
of the North China Power Group ("North China Power"). Certain components of the
power price are subject to contractual adjustment to reflect changes in coal
costs, local inflation, U.S. inflation, and foreign exchange rate fluctuations.
North China Power is one of the five interprovincial power groups in China and
is subject to the supervision of the Ministry of Electric Power of the PRC (the
"MOEP"). North China Power's service area includes Beijing and Tianjin, which
are among the largest and most economically developed cities in China, as well
as Hebei Province, Shanxi Province and western Inner Mongolia. The financial
statements of North China Power included in its 1995 annual report (prepared in
accordance with Chinese accounting principles) indicate total assets (excluding
assets in Inner Mongolia) of RMB 70.0 billion ($8.4 billion) as of December 31,
1995, and revenue of approximately RMB 27.2 billion ($3.3 billion) (excluding
revenue generated from Inner Mongolia) for 1995. North China Power also
reported that it was ranked as one of the top three government-owned industrial
enterprises (in terms of revenues) in China in 1995.
Preliminary construction work on the Luannan Facility commenced in
December 1996, and the Issuer and the Company believe that the commercial
operation date of the Luannan Facility will occur by August 1999. The Luannan
Facility is being constructed pursuant to a fixed-price, turnkey contract (the
"Luannan EPC Contract") with Harbin Power Engineering Company Limited (the
"Luannan EPC Contractor"). The Luannan EPC Contractor is a wholly-owned
subsidiary of Harbin Power Equipment Company, Ltd. ("Harbin Power"), which,
with its subsidiaries, is one of the largest manufacturers of power plant
equipment in China and is listed on the Hong Kong Stock Exchange. The
obligations of the Luannan EPC Contractor will be subject to a retainage of 10%
of the Luannan EPC Contract price. Liquidated damages, if any, are payable
under the Luannan EPC Contract up to a maximum of 35% of the Luannan EPC
Contract price and are guaranteed by the Export-Import Bank of China ("CHEXIM")
in this amount (the "CHEXIM Guarantee"). Senior unsecured debt of CHEXIM is
rated A3 by Moody's Investors Service, Inc. ("Moody's"). Harbin Power has
guaranteed the payment and performance obligations of the Luannan EPC
Contractor (the "Luannan EPC Guarantee"). The Luannan EPC Contractor has
significant experience, having constructed eight 50 MW cogeneration facilities
in China of similar design to the Luannan Facility and numerous additional
50 MW non-cogeneration units. In 1995, the annual designed production capacity
of the facilities constructed by the Luannan EPC Contractor and its affiliates
was 3,000 MW of thermal power and 1,000 MW of hydro power.
Operations and maintenance services for the Luannan Facility will be
provided by Duke/Fluor Daniel International Services (the "Luannan O&M
Contractor"). The Luannan O&M Contractor is actively engaged in the operation
and maintenance of electric generation facilities throughout the world.
The Issuer believes that the Luannan Facility will use approximately
450,000 metric tons of coal per year. The principal fuel supply for the
Luannan Facility will come from the Qianjiaying Mine, which is owned and
operated by Kailuan Coal Mining Administration ("Kailuan Coal"), a state-owned
mining company, and is located 30 kilometers from the Luannan Facility. The
Qianjiaying Mine produced approximately 3.67 million metric tons of coal in
1996. Kailuan Coal has contractually committed to supply up to 300,000 metric
tons per year of coal from the Qianjiaying Mine to the Luannan Facility for ten
years. The Luannan Facility has also entered into coal supply agreements with
five other local coal mines (collectively with Kailuan Coal, the "Luannan Coal
Suppliers") to secure up to an additional 310,000 metric tons per year of coal
for ten years. The Luannan Coal Suppliers are all located within a 50
kilometer radius of the location of the Luannan Facility, thereby minimizing
transportation costs. The coal will be transported by truck from the mines to
the Luannan Facility.
Transmission facilities will be constructed, owned and operated by North
China Power Company and will connect the Luannan Facility with the Jing-Jin-
Tang Grid (the "Luannan Transmission Facilities"). The Luannan Transmission
Facilities will be comprised of three newly constructed substations, upgrades
to an existing substation and switching station, and approximately 43
kilometers of new 110 kV transmission lines to interconnect the Luannan
Facility to the Jing-Jin-Tang Grid. North China Power Company has guaranteed it
will complete the construction of the Luannan Transmission Facilities to
receive the total electrical output of the Luannan Facility within 18 months of
receiving notice to proceed.
Ownership and Financing
The Luannan Facility will be owned and operated by four separate equity
joint venture companies (each singularly, a "Joint Venture," and collectively,
the "Joint Ventures"). The Company owns an approximately 83% indirect equity
interest in each of the Joint Ventures; entities owned by Luannan County (the
"County Partners") own an approximate 12% interest in each of the Joint
Ventures with the remaining 5% being owned indirectly by the Company's
strategic partners. The Company believes that all government approvals
required to date to form the Joint Ventures and develop the Luannan Facility
have been obtained based on the opinion of its Chinese counsel and advice from
the Hebei Provincial Planning Commission, the Commission of Foreign Trade and
Economic Cooperation of Hebei Province and the County Partners. The Luannan
Engineering Report (as defined below) concludes that there is no reason to
believe that other approvals required for construction of the Luannan Facility
will not be granted.
The Issuer and the Company believe the total cost of the Luannan Facility
will be approximately $118.8 million, of which (i) $71.3 million has been
funded from the proceeds of the offering of Old Notes consummated on April 22,
1997 (plus interest thereon and other income expected to be earned during
construction) in the form of loans to the Joint Ventures (the "Shareholder
Loans"), (ii) $41.8 million also has been funded from the proceeds of the
offering of Old Notes consummated on April 22, 1997 (plus interest thereon and
other income expected to be earned during construction) in the form of equity
contributions to the Joint Ventures (the "JV Equity Contributions"), and
(iii) $5.7 million has been funded by the County Partners in the form of equity
contributions to the Joint Ventures from the same amounts paid to such partners
by the Joint Ventures to acquire certain water and land use rights and water
wells from them.
The Old Notes were rated B2 by Moody's and B by Duff & Phelps Credit
Rating Co. ("Duff & Phelps"). There can be no assurance that these ratings
will be maintained.
The Rosemary Facility
The Rosemary Facility is a 180 MW combined-cycle cogeneration facility
located in Roanoke Rapids, North Carolina, which is indirectly wholly-owned by
the Company. The Rosemary Facility, in operation since 1990, 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 Rosemary
Facility are sold to Virginia Electric and Power Company ("VEPCO") under a
power purchase agreement with 18 years remaining. Steam and chilled water
produced by the Rosemary Facility are sold to a textile mill adjacent to the
Rosemary Facility under a contract with 18 years remaining. A partnership of
wholly-owned subsidiaries of the Company which owns the Rosemary Facility (the
"Rosemary Partnership") has entered into agreements with Natural Gas
Clearinghouse for natural gas supply and fuel management services, with
Transcontinental Gas Pipe Line Corporation, Texas Gas Transmission Corporation
and CNG Transmission Corporation for firm and interruptible transportation of
natural gas and with certain other parties to provide pipeline operation, gas
balancing and interruptible transportation services. Panda Global Services,
Inc., an indirect wholly-owned subsidiary of Panda Energy International, Inc.
("Panda International") provides operations and maintenance services to the
Rosemary Facility.
In July 1996, Panda-Rosemary Funding Corporation, a wholly-owned Delaware
special purpose finance subsidiary of the 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
rated Baa3 by Moody's and BBB- by Duff & Phelps. See "Risk Factors --
Additional Indebtedness -- Effective Subordination of Exchange Notes and
Exchange Notes Guarantee".
The Brandywine Facility
The Brandywine Facility is a 230 MW combined-cycle cogeneration facility
located at Brandywine, Maryland, near Washington, D.C. The Brandywine Facility
is leased by an indirect wholly-owned subsidiary of the Company pursuant to a
lease which expires in December 2016 with General Electric Capital Corporation
("GE Capital"). The Brandywine Facility utilizes 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 Brandywine Facility
are sold to Potomac Electric Power Company pursuant to a power purchase
agreement (the "Brandywine Power Purchase Agreement") which expires in October
2021. Thermal energy produced by the Brandywine Facility is sold to a distilled
water production facility owned by an indirect wholly-owned subsidiary of the
Company. The Brandywine Facility purchases firm and interruptible natural gas
supplies from Cogen Development Company, which are transported to the
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 Brandywine Facility has contracted with Ogden
Brandywine Operations, Inc., a subsidiary of Ogden Corporation, to provide
operations and maintenance services to the Brandywine Facility. See "Risk
Factors -- Additional Indebtedness -- Effective Subordination of Exchange Notes
and Exchange Notes Guarantee".
Panda Interfunding Corporation
The Rosemary Facility and the Brandywine Facility are each indirectly
owned by Panda Interfunding Corporation, a Delaware corporation ("PIC"), an
indirect wholly-owned subsidiary of the Company. In July 1996, a wholly-owned
subsidiary of PIC, Panda Funding Corporation ("PFC"), issued $105.5 million in
bonds (the "Series A Bonds") which were rated Ba3 by Moody's and BB- by Duff &
Phelps. The Series A Bonds are fully and unconditionally guaranteed by PIC.
Additional Projects
In the future, Panda International and its affiliates (including the
Company) may develop additional Projects. Subject to certain conditions, Panda
International and its affiliates (including the Company) will be required to
transfer to PIC their interests in certain additional Projects, if any, for
which a power purchase agreement is entered into prior to July 31, 2001 and
which reach Financial Closing or achieve Commercial Operations (as such terms
are defined in the PIC Additional Projects Contract) prior to July 31, 2006.
Additional Projects, if any, which are not required to be transferred to PIC
may, at the option of Panda International and its affiliates, be transferred to
the Issuer or the Company, provided that, if additional indebtedness is to be
incurred by the Issuer or the Company in connection with any such additional
Project so transferred, certain conditions are satisfied. See "Risk Factors --
Additional Indebtedness -- Addition of Projects to PIC Portfolio" and "-- Risk
Factors -- Additional Indebtedness -- Addition of Projects to the Issuer or the
Company."
Effective Subordination of Exchange Notes and Exchange Notes Guarantee;
Collateral
The Exchange Notes and the Exchange Notes Guarantee will be the exclusive
obligations of the Issuer and the Company, respectively, and not of the Project
Entities which own or operate the Rosemary Facility or the Brandywine Facility,
the Joint Ventures or any other affiliate of the Issuer. The Project Entities
and the Joint Ventures are highly leveraged and their debt agreements restrict
their ability to pay dividends, make distributions or otherwise transfer funds,
through intermediate entities, to the Company. The restrictions in such
agreements generally require that, prior to the payment of dividends,
distributions or other transfers, Project Entities and the Joint Ventures
provide for the payment of other obligations, including operating expenses,
debt service and the funding of reserves. The Project Entities and the Joint
Ventures are separate and distinct legal entities and have no obligation to pay
any amounts due pursuant to the Exchange Notes or to make any funds available
therefor, whether by dividends, loans or other payments, and do not guarantee
the payment of the Exchange Notes. Thus, payments on the Exchange Notes are
effectively subordinated to the payment of all obligations of the Project
Entities and the Joint Ventures. In addition, the Company's right to receive
any assets of the Project Entities or the Joint Ventures upon their liquidation
or reorganization will be effectively subordinated to the claims of such
Project Entities' or Joint Ventures' creditors (including trade creditors and
holders of other debt issued by such Project Entity). As of March 31, 1997, the
Project Entities had approximately $338.6 million of indebtedness and other
liabilities (including payments on the long-term lease for the Brandywine
Facility), which is effectively senior to obligations of the Company under the
Exchange Notes Guarantee. See "Risk Factors -- Additional Indebtedness",
"Description of Other Indebtedness--The Rosemary Bonds" and "Description of
Other Indebtedness--The Brandywine Financing".
Similarly, the Company is highly leveraged as a result of the issuance of
the Series A Bonds by PFC (an indirect wholly-owned subsidiary of the Company),
which are collateralized in part by all of the issued and outstanding shares of
PIC (also an indirect wholly-owned subsidiary of the Company). The PFC
Indenture restricts the ability of PIC to pay dividends, make distributions or
otherwise transfer funds, through PEC, to the Company. PIC and PFC are separate
and distinct legal entities and have no obligation to pay any amounts due
pursuant to the Exchange Notes or to make any funds available therefor, whether
by dividends, loans or other payments, and do not guarantee payment of the
Exchange Notes. Thus, payments on the Exchange Notes are also effectively
subordinated to the payment of all obligations of PFC. In addition, the
Company's right to receive any assets of PIC upon its liquidation or
reorganization will be effectively subordinated to the claims of PFC's
creditors (including holders of the Series A Bonds). As of March 31, 1997, PFC
had approximately $106.6 million of indebtedness and other liabilities, which
is effectively senior to the obligations of the Company under the Exchange
Notes Guarantee. See "Risk Factors -- Additional Indebtedness" and "Description
of Other Indebtedness--The PFC Bonds."
The Exchange Notes are fully and unconditionally guaranteed by the Company
("Exchange Notes Guarantee"). The Exchange Notes Guarantee is secured by
pledges, or grants of security interests (i) by Panda International of 100%
of the Capital Stock of the Company; (ii) by the Company of 100% Capital
Stock of PEC; and (iii) by the Company, of and in its interest in
accounts, established in the Company's name with the Company Indenture
Trustee, into which certain distributions related to the Luannan Facility are
(or will be) deposited. The Exchange Notes are secured by pledges, or
grants of security interests (i) by the Issuer of at least 90% of the
Capital Stock of Pan-Sino; (ii) the Issuer Note issued by Pan-Western; (iii)
in the event that Pan-Sino is merged into Pan-Western, the Issuer will pledge
at least 99% of the Capital Stock of Pan-Western to the Senior Secured
Notes Trustee; (v) in the event that Pan-Sino is merged into the Issuer,
the Issuer will assume Pan-Sino's obligations under the Pan-Sino
Pledge Agreement; (v) by Pan-Western of the Luannan Facility Notes issued by
the Joint Ventures; and (vi) by the Company of 100% of the Capital Stock
of the Issuer. Individually, and in the aggregate, the pledges of the
Capital Stock of each of PEC, Pan-Sino and Pan-Western do not constitute a
"substantial portion" (as defined in Rule 3-10 of Regulation S-X promulgated
under the Securities Act) of the collateral securing the Exchange Notes and
the Exchange Notes Guarantee. Separate financial statements of each of
the PEC, Pan-Sino and Pan-Western are not presented in this Prospectus
because the Company and the Issuer believe that such disclosure is not
material to a prospective purchaser of the Exchange Notes.
Investors should consider carefully all the information set forth under
"Risk Factors" prior to making any decision to invest in the Exchange Notes.
The following chart details, in summary form, the corporate structure of
Panda International and its subsidiaries. See Appendix G, "Ownership Structure
of the Issuer, the Company, Panda International and Certain of Their
Subsidiaries."
[Panda International Organizational Subsidiary Chart here]
Notes: Intermediate entities with no significant assets or
liabilities have been excluded from the above chart except for the
entity mentioned in note (1).
(1) Panda Funding Corporation ("PFC"), a wholly-owned subsidiary
of Panda Interfunding Corporation ("PIC"), is the issuer of the
Series A Bonds. See "Description of Other Indebtedness -- The PFC
Bonds."
PRIOR OFFERING
On April 22, 1997 (the "Issue Date"), the Issuer issued $155,200,000
aggregate principal amount of its Old Notes in a private placement under
Section 4(2) of the Securities Act and Rule 144A and Regulation S promulgated
thereunder (the "Prior Offering"). The Old Notes were sold to Donaldson,
Lufkin & Jenrette. (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 Notes (a "Shelf
Registration Statement") or to effect a registered exchange offer for the Old
Notes pursuant to which the holders of the Old Notes would be offered the
opportunity to exchange their Old Notes for registered Exchange Notes. 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 150 days after the
Issue Date, the Issuer and the Company, jointly and severally, shall be liable
to pay liquidated damages, during the first 90-day period commencing on the
151st day following the Issue Date in an amount equal to $.05 per week per
$1,000 principal amount of Exchange Notes, with such amount increasing by an
additional $.05 per week per $1,000 principal amount of Exchange Notes for each
subsequent 90-day period, up to a maximum of $.50 per week per $1,000 principal
amount of Old Notes. The Registration Statement with respect to the Exchange
Offer was declared effective by the Commission on , 1997, thereby
avoiding the aforementioned Liquidated Damages.
THE EXCHANGE OFFER
The Issuer is making the following Exchange Offer to holders of all Old
Notes presently outstanding:
The Exchange Offer For each $1,000 principal amount of Old Notes
tendered, a holder will be entitled to receive $1,000
principal amount of Exchange Notes. As of the date of
this Prospectus, $155,200,000 principal amount of Old
Notes is outstanding. The terms of the Exchange
Notes are substantially identical to the terms of the
Old Notes, except that the Exchange Notes (i) will
have been registered under the Securities Act, and
(ii) holders of the Exchange Notes will not be
entitled to certain rights of holders of the Old
Notes 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 Notes who are eligible to tender
their Old Notes for exchange in the Exchange Offer
and fail to do so. See "The Exchange Offer --
Termination of Certain Rights" and "Description of
the Exchange Notes, the Exchange Notes Guarantee, the
Issuer Loan, the Shareholder Loans and the Collateral
Documents - Old Notes Registration Rights."
Expiration Date The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, unless extended
in the Issuer's sole discretion. See "The Exchange
Offer -- Expiration Date; Extensions; Termination;
Amendments."
Withdrawal of Tenders Tenders of Old Notes 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
Notes and Accrued
Interest on the Old
Notes The Exchange Notes will bear interest from the
date of their issuance. Interest on the Old Notes
accepted for exchange will accrue thereon to, but not
including, the date of issuance of the Exchange Notes
and will be paid together with the first interest
payment on the Exchange Notes issued in exchange
therefor.
Conditions of the
Exchange Offer The Exchange Offer is subject to certain
customary conditions, which may be waived by the
Issuer. The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of Old Notes
being tendered or accepted for exchange. Old Notes
may be tendered only in integral multiples of $1,000.
See "The Exchange Offer -- Conditions of the Exchange
Offer."
Procedures for Tendering
Old Notes Each holder of Old Notes 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 Notes 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 the Exchange Notes
acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the
person receiving such Exchange Notes (whether or not
such person is the registered holder of such Exchange
Notes), that neither the holder of such Exchange
Notes 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 Notes and that neither the holder of such
Exchange Notes 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 Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender Old Notes 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 Notes who wish to tender their
Old Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes, 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
Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Acceptance of the Old
Notes and Delivery of
the Exchange Notes Upon satisfaction or waiver of the conditions of
the Exchange Offer, the Issuer will accept for
exchange any and all Old Notes which are properly
tendered and not withdrawn prior to the Expiration
Date. The Exchange Notes 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 Notes for
Exchange; Delivery of Exchange Notes."
Certain Federal Income
Tax Considerations For discussion of certain federal income tax
consequences of the exchange of the Old Notes, see
"Certain Income Tax Considerations of the Exchange
Offer."
Effect on Holders who
Retain Old Notes Holders of the Old Notes who do not tender their
Old Notes in the Exchange Offer will continue to hold
such Old Notes and will be entitled to all the rights
and benefits, and will be subject to all limitations
applicable thereto, under the Exchange Notes
Indenture. All Old Notes not exchanged in the
Exchange Offer will continue to be subject to the
restrictions on transfer provided for in the Old
Notes and the Exchange Notes Indenture. To the
extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market, if any, for
the Old Notes not so tendered could be adversely
affected. See "Risk Factors -- Consequences of
Failure to Exchange Old Notes."
Rights of Dissenting
Holders Holders of Old Notes do not have any appraisal rights.
See "The Exchange Offer - Terms of the Exchange Offer."
Exchange Agent Bankers Trust Company. See "The Exchange Offer
-- The Exchange Agent."
Terms of the Exchange Notes
The Exchange Offer applies to $155,200,000 aggregate principal amount of Old
Notes. The form and terms of the Exchange Notes are substantially identical to
the terms of the Old Notes, except that the Exchange Notes (i) 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 Notes will not be entitled to certain rights of holders of the Old
Notes 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 Notes who are eligible to tender their Old Notes for exchange in
the Exchange Offer and fail to do so. See "Exchange Offer -- Termination of
Certain Rights." The Exchange Notes will evidence the same debt as the Old
Notes which they replace and will be issued under, and be entitled to the
benefits of, the Exchange Notes Indenture.
Issuer Panda Global Energy Company, a Cayman
Islands company (the "Issuer").
Guarantor Panda Global Holdings, Inc., a
Delaware corporation (the "Company").
Securities Offered $155,200,000 aggregate principal
amount of 12-1/2% Registered Senior
Secured Notes due 2004 (the "Exchange
Notes").
Maturity Date April 15, 2004.
Interest Rate Cash interest on the Exchange Notes
will accrue at a rate of
12-1/2% per annum and will be payable
semi-annually in arrears on each
April 15 and October 15, commencing
October 15, 1997.
Repayment of Principal Commencing on October 15, 2000 and
through the payment date of October
15, 2003, 15.4% of the aggregate
outstanding principal amount of the
Exchange Notes (assuming all
outstanding Old Notes are tendered
and accepted for exchange pursuant to
the Exchange Offer) will be repaid
semi-annually on the dates and in the
amounts indicated in the table set
forth below under "Description of the
Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral
Documents--Ranking, Maturity,
Interest and Principal of the
Exchange Notes."
Ranking The Exchange Notes will be senior
obligations of the Issuer ranking
senior in right of payment to all
subordinated Indebtedness of the
Issuer and pari passu with all other
Senior Indebtedness of the Issuer.
Exchange Notes The Exchange Notes will be secured by
Collateral the Exchange Notes Collateral (herein
so called). The Exchange Notes
Collateral consists of pledges and a
security interest in certain assets
of the Issuer and its Subsidiaries,
including, a pledge of (i) at least
90% of the Capital Stock of Pan-Sino,
(ii) 99% of the Capital Stock of Pan-
Western, (iii) the Issuer Note,
(iv) the Luannan Facility Notes and
the granting of a security interest
in certain funds of the Issuer and
its Subsidiaries maintained by the
Exchange Notes Trustee and (v)100% of
the Capital Stock of the Issuer.
The Exchange Notes The Company, as primary obligor and
Guarantee not merely as surety, will
irrevocably, fully and
unconditionally guarantee on a senior
secured basis the performance and
punctual payment when due, whether at
stated maturity, by acceleration or
otherwise, of all obligations of the
Issuer under the Exchange Notes
Indenture and the Exchange Notes,
whether for principal, premium, if
any, and interest (including
Liquidated Damages and Additional
Amounts, if any), on the Exchange
Notes, expenses, indemnification or
otherwise.
The Exchange Notes The Company's obligations under the
Guarantee Collateral Exchange Notes Guarantee will be
secured by the Exchange Notes
Guarantee Collateral (herein so
called). The Exchange Notes Guarantee
Collateral consists of a pledge of
100% of the Capital Stock of the
Company and of pledges and a security
interest in certain assets of the
Company and its Subsidiaries,
including: (i) a pledge of 100% of
the Capital Stock of PEC, which
indirectly owns (a) 100% of the
Rosemary Facility and (b) 100% of the
lessee under a long-term leveraged
lease of the Brandywine Facility, and
(ii) the granting of a security
interest in certain funds of the
Company established and maintained by
the Company Indenture Trustee.
Optional Redemption The Exchange Notes will be redeemable
at the option of the Issuer, in whole
or in part, at any time on or after
April 15, 2002, at the redemption
prices set forth below under
"Description of the Exchange Notes,
the Exchange Notes Guarantee, the
Issuer Loan, the Shareholder Loans
and the Collateral Documents--
Redemption." In addition, prior to
April 15, 2000, the Issuer may redeem
up to $51,733,000 of the originally
issued principal amount of Existing
Notes at the redemption price set
forth under "Description of the
Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral
Documents--Redemption" with the Net
Cash Proceeds of one or more Public
Equity Offerings by the Company,
Panda International or any direct or
indirect parent of the Company;
provided that (i) the proceeds of
such offering used for the purposes
of the optional redemption are
contributed as equity to the Issuer
and (ii) at least $103,467,000 of the
aggregate outstanding principal
amount of Existing Notes would remain
outstanding immediately after giving
effect to such redemption.
Mandatory Redemption Upon the occurrence of certain events
of loss or expropriation with respect
to the Luannan Facility described
below, the outstanding Existing Notes
(together with, under certain limited
circumstances, any additional Senior
Indebtedness of the Issuer
outstanding at the time) will be
redeemed pro rata, at the redemption
prices set forth below under
"Description of the Exchange Notes,
the Exchange Notes Guarantee, the
Issuer Loan, the Shareholder Loans
and the Collateral Documents--
Redemption."
Redemption at Option of Upon the occurrence of certain
Holders Indentures Events of Default relating
to Shareholder Loan events of
default, or if the Luannan Facility
Construction Cost is less than the
Projected Luannan Facility
Construction Cost by more than $1.0
million, the Issuer will be obligated
to make an offer to redeem pro rata a
portion of the outstanding Exchange
Notes (assuming all outstanding Old
Notes are tendered and accepted for
exchange pursuant to the Exchange
Offer) with certain amounts at the
redemption prices set forth below
under "Description of the Exchange
Notes, the Exchange Notes Guarantee,
the Issuer Loan, the Shareholder
Loans and the Collateral Documents--
Redemption," and "Description of the
Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral
Documents -- Certain Covenants --
Indentures Events of Default.."
Change of Control Upon a Change of Control, holders of
the Exchange Notes will have the
right to require the Issuer to
repurchase their Exchange Notes, in
whole or in part, at the purchase
price set forth below under
"Description of the Exchange Notes,
the Exchange Notes Guarantee, the
Issuer Loan, the Shareholder Loans
and the Collateral Documents--Change
of Control."
Asset Sale Proceeds The Company and the Issuer will be
obligated in certain circumstances,
to use a portion of the net cash
proceeds of certain sales or other
dispositions of assets, to make
offers to purchase Exchange Notes in
the amounts and at the redemption
prices set forth below under
"Description of the Exchange Notes,
the Exchange Notes Guarantee, the
Issuer Loan, the Shareholder Loans
and the Collateral Documents--Certain
Covenants--Disposition of Proceeds of
Asset Sales."
Principal Covenants The Indentures, with respect to the
Company and its Subsidiaries, will
contain certain restrictive
covenants, including, without
limitation, (i) limitations on
investments, loans and advances, (ii)
limitations on dividends and other
payments, (iii) limitations on
transactions with Affiliates, (iv)
limitations on additional
indebtedness, (v) limitations on
liens, (vi) limitations on agreements
restricting payments, (vii)
limitations on capital expenditures,
(viii) limitations on line of
business and Permitted Projects and
(ix) limitations on sale and
leaseback transactions. In addition,
the Indentures will limit the ability
of Company and the Issuer to
consolidate, merge or sell all or
substantially all of their assets.
Certain Accounts In accordance with the Exchange Notes
Indenture, certain funds, including
the Capitalized Interest Fund and the
Debt Service Reserve Fund, will be
established. The Issuer will have
limited rights of withdrawal under
the above funds in accordance with
terms and conditions set forth in the
Exchange Notes Indenture.
Capitalized Interest Upon the Issue Date, the Issuer
Fund deposited approximately $48.1 million
into the Capitalized Interest Fund.
Through the Capitalized Interest
Expiration Date (October 15, 1999),
interest payments on the Exchange
Notes will be provided from the
Capitalized Interest Fund.
Debt Service Reserve Upon the Issue Date, the Issuer
Fund deposited $9.7 million in the Debt
Service Reserve Fund as a reserve for
payments on the Exchange Notes.
Transfer of Exchange Based upon their view of
Notes interpretations provided to third
parties by the staff of the
Commission, the Issuer and the
Company believe that the Exchange
Notes 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 Notes
directly from the Issuer or (iii) a
broker-dealer who acquired Old Notes
as a result of market making or other
trading activities) without
registration under the Securities
Act, provided that such Exchange
Notes 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
Notes. Each broker-dealer who
receives Exchange Notes for its own
account pursuant to the Exchange
Offer must notify the Company and the
Issuer that it has acquired Exchange
Notes for its own account (which
notification must be made in the
applicable location in the Letter of
Transmittal that is delivered by such
broker-dealer along with such broker-
dealer's Old Notes to be exchanged
pursuant to the Exchange Offer), and
must acknowledge that it will deliver
a prospectus in connection with any
resale of such Exchange Notes. 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 Notes received in
exchange for Old Notes where such Old
Notes 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
270 consecutive 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 so long as they notify the
Issuer in writing within 30 business
days after the consummation of the
Exchange Offer that they have acquired
Exchange Notes for their own account.
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 Notes 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 Notes 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"
Registration Rights The Exchange Offer is intended to
satisfy certain rights under the
Registration Rights Agreement, which
rights terminate upon the
consummation of the Exchange Offer.
Therefore, the holders of Exchange
Notes are not entitled to any
exchange or registration rights with
respect to the Exchange Notes. In
addition, such exchange and
registration rights will terminate as
to holders of Old Notes who are
eligible to tender their Old Notes
for exchange in the Exchange Offer
and fail to do so. See "The Exchange
Offer -- Termination of Certain
Rights" and "Description of the
Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral
Documents -- Old Notes Registration
Rights."
Use of Proceeds There will be no cash proceeds to the
Issuer or the Company from the
exchange of Exchange Notes for Old
Notes pursuant to the Exchange Offer.
Risk Factors
Investment in the Exchange Notes involves substantial risks. See "Risk
Factors."
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA OF THE COMPANY
Presented below is summary historical consolidated financial data for the
Company as of and for each of the years in the three-year period ended December
31, 1996 and as of and for the three months ended March 31, 1996 and 1997, which
have been derived from the Company's financial statements. Also presented is
unaudited pro forma consolidated financial data as of March 31, 1997, for the
year ended December 31, 1996 and for the three months ended March 31, 1997. The
unaudited pro forma 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 Rosemary Partnership project debt and
to fund a portion of the acquisition of Ford Motor Credit Company's ("Ford
Credit") limited partner interest in the Rosemary Partnership and (ii) the
issuance of the Series A Bonds and the application of the net proceeds thereof
(a) to fund a capitalized interest fund, a debt service reserve fund and a
company expense fund relating to the Series A Bonds, (b) to fund the remaining
portion of the acquisition of Ford Credit's limited partner interest in the
Rosemary Partnership and (c) to make a distribution to the Company's parent.
These transactions are reflected in the historical balance sheet data as of
December 31, 1996 and March 31, 1997. The unaudited pro forma statement of
operations data reflect such adjustments as if the transactions had occurred as
of January 1, 1996. Additionally, the unaudited pro forma financial data give
effect to the issuance of $155.2 million par value of Old Notes (issued at a
discount for proceeds of $145.0 million) and the application of the proceeds
thereof to fund the Capitalized Interest Fund and the Debt Service Reserve Fund
established with respect to the Old Notes, to make shareholder loans and equity
contributions to the Joint Ventures and to pay the transaction fees, commissions
and expenses incurred in connection with the Prior Offering. The unaudited pro
forma balance sheet data reflect such adjustments as if the transactions
occurred as of March 31, 1997. The unaudited pro forma statement of operations
data reflect such adjustments as if the transactions had occurred as of January
1, 1996. As required by the Securities and Exchange Commission, the unaudited
pro forma statement of operations data do not reflect the extraordinary loss on
early extinguishment of debt. Such extraordinary loss is reflected in the
historical statement of operations data for the year ended December 31, 1996.
The unaudited pro forma financial data do not purport to be indicative of the
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. The information in this table should be read in conjunction with
the information contained under the captions "Capitalization," "Unaudited Pro
Forma Consolidated Financial Data of the Company" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations of the Company"
and with the consolidated financial statements of the Company, including the
notes thereto, included elsewhere herein. Dollar amounts are presented in
thousands.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31
-------------------------------------------- --------------------------------
Pro Forma Pro Forma
1994 1995 1996 1996 1996 1997 1997
-------- -------- -------- -------- ------- -------- --------
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Electric capacity and energy sales .............. $ 30,664 $ 29,859 $ 32,274 $ 32,274 $ 8,015 $ 17,330 $ 17,330
Steam and chilled water sales ................... 650 473 502 502 122 130 130
Interest income ................................. 603 895 1,518 8,882 186 430 1,652
-------- -------- -------- -------- ------- -------- --------
Total revenue .............................. 31,917 31,227 34,294 41,658 8,323 17,890 19,112
Plant operating expenses ........................ 8,940 9,348 12,050 12,050 2,442 8,261 8,261
Development and administrative expenses ......... 1,779 2,550 5,187 5,187 803 2,395 2,395
Interest expense ................................ 11,018 11,716 19,414 43,492 3,185 10,802 14,427
Depreciation .................................... 4,208 4,210 5,532 5,421 1,053 2,949 2,949
Amortization - Debt issuance costs .............. 600 554 494 1,287 141 174 347
Amortization - Partnership formation costs ...... 533 533 533 533 133 -- --
-------- -------- -------- -------- ------- -------- --------
Total expenses ............................. 27,078 28,911 43,210 67,970 7,757 24,581 28,379
Income (loss) before minority interest .......... 4,839 2,316 (8,916) (26,312) 566 (6,691) (9,267)
Minority interest ............................... (5,700) (5,048) (2,405) -- (1,719) -- --
-------- -------- -------- -------- ------- -------- --------
Net loss before extraordinary item .............. (861) (2,732) (11,321) $(26,312) (1,153) (6,691) $ (9,267)
======== ========
Extraordinary loss on early
extinguishment of debt ......................... -- -- (21,336) -- --
-------- -------- -------- ------- --------
Net loss ................................... $ (861) $ (2,732) $(32,657) $(1,153) $(6,691)
======== ======== ======== ======= ========
EBITDA .......................................... $ 21,198 $ 19,329 $ 17,057 $ 24,421 $ 5,078 $ 7,234 $ 8,456
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31
------------------------------ ------------------------------
Pro Forma
1994 1995 1996 1996 1997 1997
-------- -------- -------- -------- -------- --------
(Unaudited) (Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash and other current assets .................... $ 15,639 $ 11,339 $ 36,626 $ 16,807 $ 32,665 $ 32,665
Power plant and equipment (net) .................. 96,136 220,145 268,725 242,466 269,532 269,532
Reserves and escrow deposits, and other
assets ........................................... 15,477 15,471 40,119 15,320 40,079 190,844
-------- -------- -------- -------- -------- --------
Total assets ................................ $127,252 $246,955 $345,470 $274,593 $342,276 $493,041
======== ======== ======== ======== ======== ========
Current liabilities .............................. $ 12,531 $ 18,457 $ 19,667 $ 22,823 $ 13,939 $ 13,939
Long-term debt (including capital
lease obligation) less current portion ..... 106,343 234,608 427,319 256,145 431,323 576,348
</TABLE>
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA OF THE ISSUER
The following table sets forth summary consolidated financial data of the
Issuer as of December 31, 1994, 1995 and 1996 and for the period from inception
(July 20, 1994) through December 31, 1994 and the years ended December 31, 1995
and 1996, and as of and for the three months ended March 31, 1996 and 1997.
Although the Issuer was formed on March 10, 1997, a subsidiary of the Issuer,
formed on July 20, 1994, is considered the Issuer's predecessor. The information
presented below, which reflects the operations of the predecessor, has been
derived from the Issuer's financial statements. Because the Issuer has been and
continues to be in the development stage since formation, it has no operating
revenues. The data should be read in conjunction with the Issuer's financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
See "Capitalization," "Unaudited Consolidated Pro Forma Financial Data of the
Company," "Selected Financial Data of the Issuer" and "Selected Financial Data
of the Company." Dollar amounts are presented in thousands.
<TABLE>
<CAPTION>
Period From
Inception Year Ended Three Months Ended
through December 31, March 31,
December 31, --------------------- ---------------------
1994 1995 1996 1996 1997
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (Unaudited)
General and administrative expenses ............................ $ 203 $ 444 $ 1,654 $ 266 $ 555
----- ------- ------- ------- -------
Net loss .............................................. $ 203 $ 444 $ 1,654 $ 266 $ 555
===== ======= ======= ======= =======
<CAPTION>
December 31, March 31,
--------------------------------- ---------------------
1994 1995 1996 1996 1997
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (Unaudited)
Cash ......................................................... $ 101 $ 6 $ 506 $ 6 $ 6
Development costs ............................................ 428 1,059 3,292 1,550 6,614
----- ------- ------- ------- -------
Total assets .......................................... $ 529 $ 1,065 $ 3,798 $ 1,556 $ 6,620
===== ======= ======= ======= =======
Advances from Panda International ............................ $ 732 $ 1,712 $ 6,099 $ 2,468 $ 9,476
Shareholder's deficit ........................................ (203) (647) (2,301) (912) (2,856)
----- ------- ------- ------- -------
Total liabilities and shareholder's deficit ........... $ 529 $ 1,065 $ 3,798 $ 1,556 $ 6,620
===== ======= ======= ======= =======
</TABLE>
Independent Engineers' and Consultants' Reports
The Independent Engineers' and Consultants' Reports, and the summaries
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.
In providing its conclusions set forth in the Independent Engineers' or
Consultants' Reports, each Independent Engineer or Consultant made certain
assumptions (which are fully set forth in the text of each report). Although
the author of each Report believes that the use of these assumptions in its
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 and projections contained in the Independent Engineers' and
Consultants' Reports may not be indicative of future events. 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
Independent Engineers' or Consultants' Reports or if the assumptions used in
formulating the conclusions presented prove to be incorrect, the Issuer's
ability to make payments on the Exchange Notes, may be materially and
adversely affected. Engineers' and Consultants' Reports not attached as
appendices to this Prospectus are exhibits to the Registration Statement of
which this Prospectus forms a part. All such reports should be read carefully
in conjunction with the summaries thereof in this Prospectus. See "Disclosure
Regarding Forward-Looking Statements" and "Risk Factors -- Reliance upon
Projections and Underlying Assumptions Contained in Engineers' and
Consultants' Reports."
Any projections of future operations and economic results thereof
contained in the Independent Engineers' and Consultants' Reports have not
been prepared in accordance with published guidelines of the Securities and
Exchange Commission, the American Institute of Certified Public Accountants,
any regulatory or professional agency or body or generally accepted
accounting principles. Deloitte & Touche LLP, the Issuer's and 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. See "Risk Factors--Reliance upon Projections and
Underlying Assumptions Contained in Engineers' and Consultants' Reports."
Consolidating Financial Analyst's Pro Forma Report
ICF Resources, Incorporated ("ICF") has prepared a report, dated April
11, 1997, and updated June 6, 1997 (as updated, the "Consolidated Pro
Forma Report"), that contains a summary consolidation of the pro forma
financial projections (the "Consolidated Pro Forma") for the Luannan
Facility, the Rosemary Facility and the Brandywine Facility contained in the
Luannan Engineering Report (as defined below), the Rosemary Engineering
Report and the Brandywine Pro Forma Report, respectively, each of which is
summarized herein. The Consolidated Pro Forma Report is attached hereto as
Appendix C 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 "Luannan Pro Forma") prepared by Parsons
Brinckerhoff Energy Services, Inc. ("Parsons Brinckerhoff"), which are
contained in the Luannan Engineering Report, the pro forma financial
projections (the "Rosemary Pro Forma") prepared by Burns & McDonnell
Engineering Company, Inc. ("Burns & McDonnell"), which are contained in the
Rosemary Engineering Report, and the pro forma financial projections (the
"Brandywine Pro Forma") prepared by ICF, which are contained in the
Brandywine Pro Forma Report.
The Consolidated Pro Forma Report presents the "Company Debt Service
Coverage Ratio," which reflects the relationship between the total cash flow
available for Company debt service (i.e., cash flow from the Luannan
Facility, the Rosemary Facility and the Brandywine Facility after paying
Project-level operating expenses, rent and debt service and debt service on
the Series A Bonds (and the Series A-1 Bonds exchanged therefor), making
additions to reserves required for Project-level financings and the Series A
Bonds, providing distributions to third-party equity interest-holders and
providing for certain Company-level items) and Company debt service (i.e.,
the cash debt service on the Exchange Notes net of releases from the
Capitalized Interest Fund).
Consolidated Summary Projected Consolidated Financial Data
(Projections relating to the Luannan Facility are based on an exchange rate of
RMB 8.5 = $1.00)
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations Data:
Capacity Revenue:
Rosemary $25,382 $25,382 $23,568 $23,568 $23,568 $23,568 $23,568 $23,568 $23,568 $18,123 $18,123
Brandywine 21,932 21,420 37,940 38,759 48,960 49,739 50,358 50,387 50,253 50,543 52,639
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Capacity 47,314 46,802 61,508 62,327 72,528 73,307 73,926 73,955 73,821 68,666 70,762
Revenue
Energy & Other Revenue:
Rosemary 3,850 5,768 7,734 10,010 12,462 13,872 15,692 17,793 20,571 20,283 20,004
Brandywine 23,495 25,141 26,057 27,092 30,647 33,340 31,954 30,419 33,464 35,545 35,763
Luannan - - 18,038 46,110 49,040 51,266 53,372 55,230 56,472 58,074 60,060
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Revenue 74,659 77,712 113,337 145,540 164,677 171,785 174,944 177,397 184,328 182,568 186,590
EBITDA:
Rosemary 19,552 19,965 18,442 18,770 19,169 19,318 19,593 19,835 20,232 14,442 14,142
Brandywine 17,994 17,731 34,342 35,359 46,802 47,955 47,955 47,252 47,429 48,105 49,811
Luannan - - 10,956 27,632 28,937 29,384 29,538 30,352 30,502 30,961 31,751
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total EBITDA 37,546 37,696 63,740 81,761 94,908 96,656 97,086 97,439 98,163 93,507 95,704
Cash Available for
Consolidated Debt 39,321 34,139 59,564 79,437 91,382 96,050 96,798 96,733 95,818 90,618 95,132
Service
Project & PFC Net Debt 34,956 30,593 46,768 45,890 55,441 57,433 58,224 57,645 57,454 51,576 56,811
Service
Cash Available for
Company Debt 5,697 221 9,494 28,856 29,883 33,702 34,849 36,434 37,646 30,550 26,961
Service
Senior Secured Notes
Cash Interest Payment 9,323 19,400 19,400 19,400 19,056 18,394 17,334 16,031 14,453 12,759 11,469
Principal Payment (1) - - - 1,650 4,400 8,000 9,900 12,000 14,500 10,700 9,200
Less: Capitalized (9,323) (19,400) (19,400) - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Interest Fund Release
Senior Secured Notes
Net Debt Service - - - 21,050 23,456 26,394 27,234 28,031 28,953 23,459 20,669
Balance Sheet Data:
Consolidated Cash and
Restricted Cash $81,207 $60,635 $55,795 $68,601 $81,381 $92,120 $101,603 $110,839 $117,544 $130,822 $145,679
Consolidated Long- 584,812 592,266 590,749 588,305 573,343 551,661 525,814 495,781 460,547 433,032 399,857
Term Debt (2)
Key Credit Statistics:
Company Debt Service (3) (3) (3) 1.37x 1.27x 1.28x 1.28x 1.30x 1.30x 1.30x 1.30x
Coverage Ratio
</TABLE>
Notes:
(1) Assumes outstanding balance of Senior Secured Notes is refinanced in
2004 at an equivalent coupon rate and repaid over nine years.
(2) Consolidated long-term debt includes Rosemary Bonds, Brandywine Facility
Lease, Series A Bonds and Senior Secured Notes.
(3) Effectively 1.0x Company Debt Service Coverage Ratio since Capitalized
Interest Fund Release equals Cash Interest Payment on Senior Secured
Notes.
Luannan Engineering Report
Parsons Brinckerhoff Energy Services, Inc. ("Parsons
Brinckerhoff") has prepared a report, dated April 11, 1997, and updated
June 6, 1997, evaluating the technical, environmental and economic
aspects of the Luannan Facility (the "Luannan Engineering Report").
The Luannan Engineering Report is attached hereto as Appendix D and
should be read in its entirety by all prospective investors.
Parsons Brinckerhoff has reviewed the engineering, cost, construction
schedule, approvals, contracts and financial performance estimates
for completion, technological risk, variations from practices typical
in the industry and the ability of the Luannan Facility to perform as
intended. Its principal conclusions include the following:
- The design of the thermal power plant of the Luannan Facility
(the "Plant") is based on current, proven technology and is in
conformance with engineering practice and industry standards in
the People's Republic of China. Specifically, the proposed Plant
will be similar in design to other thermal power plants designed
by Hebei Electric Power Design Institute which are presently
operating in China.
- The construction schedule is reasonable and achievable. The
Luannan EPC Contractor should be able to meet the agreed
construction schedule and pass all performance tests as
stipulated within 28 months. This schedule has been found
comparable to similar projects in China.
- The Luannan EPC Contractor is an established and reputable
construction company with both international and domestic
experience in manufacturing and installing equipment for similar
power generation projects. The Luannan EPC Contractor's boiler
manufacturing facility performs quality control to ISO standards
and has achieved ASME certification. The Luannan EPC Contractor's
list of achievements includes 16 coal fired power plants in China
plus five international power plant installations completed on a
turnkey basis.
- The budgeted costs of $118.8 million to develop and construct the
Luannan Facility are reasonable and represent a realistic and
attainable project cost. Most project costs are denominated in
U.S. dollars; however, for steam and heat network, land and water
use rights, and transmission line, which are denominated in RMB,
an exchange rate of RMB 8.30 to $1.00 was used.
- Based upon the proposed equipment and design criteria, the design
lives of the main components of the Plant are sufficient for the
intended modes of operation of the Luannan Facility and should
meet the expected Plant performance criteria. With proper design,
careful, periodic maintenance and operation of the Plant within
design parameters, a useful life of 20 years should be easily
achievable.
- Based on the review of the various government approvals, the
Joint Ventures have obtained the key approvals required from the
various governmental agencies which are required to commence
construction of the Plant. They have also identified the
necessary permits that will be required in due course during the
construction and operation. There is no reason to believe that
those licenses and consents not yet received will not be granted.
- Based on the review of the various business agreements and their
amendments, the major contracts, including the Luannan Power
Purchase Agreement, the Luannan EPC Contract, the Luannan O&M
Contract, the Luannan Transmission Facilities Construction
Agreement and the Luannan Coal Supply Agreements, are technically
reasonable and are consistent with each other and the assumptions
used in the financial analysis.
- The technical performance requirements, performance testing and
obligations of the parties identified in the Luannan EPC Contract
are reasonable and achievable. The Luannan EPC Contract has the
necessary protective terms and conditions and is comparable to
other turnkey projects in the United States. EPC contracts in
China are more rigorous than in the U.S. on government approvals,
design stages, and guarantee issues and less stringent on
environmental issues.
- This assessment has concluded that, from an environmental point
of view, the Plant is feasible and is capable of meeting the
relevant emissions and discharge limits required by the
applicable Chinese standards if all environmental protection and
control measures recommended by the Environmental Impacts
Assessment ("EIA") are implemented.
- The ash handling system uses appropriate environmental protection
measures and the ash disposal plan is reasonable and achievable
based on the expected quality of the coal and its expected ash
content as summarized in the Luannan Coal Consultant's Report.
The EIA indicates the effluent quality will comply with the
national environmental standard.
- The operation and maintenance contractor selected for the Luannan
Facility is Duke/Fluor Daniel. Duke/Fluor Daniel, a joint venture
between Duke Power and Fluor Daniel, has domestic and
international experience with coal-fired power plants and has the
necessary experience and capability to fulfill the Luannan O&M
Contract. The Luannan O&M Contract contains incentives and
penalties in the contract price adjustment clause which should
provide the Luannan O&M Contractor reasonable initiative toward
achieving excellence in Plant operational performance.
Requirements for developing operations plans are contained in
Section 2.10 of the Luannan O&M Contract. The Joint Ventures have
review and approval authority for all operations plans developed
by the Luannan O&M Contractor.
- The Luannan Facility can be expected to operate commercially
throughout the term of the Luannan Power Purchase Agreement.
There is a large number of coal-fired plants currently in
operation in the United States that have been in service for well
over 30 years.
- The Plant is capable of meeting the required performance and
availability levels while operating in the modes agreed in the
Luannan Power Purchase Agreement. The design of the Plant and the
net dependable capacity performance guaranteed by the Luannan EPC
Contractor of 102 MW insures that the contractual amount in the
Luannan Power Purchase Agreement can be met and exceeded during
the peak hours. Maximum Plant output of 106 MW will further
exceed the stipulated amount. The actual performance and
availability of the Plant will depend on the successful operation
and maintenance of the facility throughout the Plant's life.
- The projected dispatch targets for the Plant, as specified by the
Luannan Power Purchase Agreement, are achievable and consistent
with the design criteria and equipment for the Plant.
- The projected O&M costs and capital expenditures for major
maintenance are reasonable and representative of the planned
operations of the Luannan Facility. The Joint Ventures and the
Luannan O&M Contractor have the responsibility for establishing
the full-time manpower requirements of the Luannan Facility.
- Under the Luannan Power Purchase Agreement, North China Power
Company is obligated to purchase electricity for a period of 20
years beginning on the commercial operation date. The useful life
of the Luannan Facility will extend beyond this 20-year period.
- On the basis of the financial analyses presented in Chapter 12 of
the Luannan Engineering Report, Parsons Brinckerhoff is of the
opinion that, in the base case (as described in Section 12.7 of
the Luannan Engineering Report), the projected operating revenues
are adequate to pay the projected operating and maintenance
expenses, pay the local and federal taxes, provide a minimum of
2.02 and average of 2.19 annual debt service coverage for the
Shareholder Loans during the repayment period of 10 years, and
provide equity distributions to Pan-Western throughout the 20-
year term of the Luannan Power Purchase Agreement. For the
financial analysis and projections an exchange rate assumption of
$1.00=RMB 8.50 was used.
- Five sensitivity cases were developed to test the Luannan
Facility's performance under operating assumptions different from
the base case. As shown in Section 12.8 of the Luannan
Engineering Report, the selected changes did not yield debt
coverage ratios significantly different from that in the base
case.
Luannan Coal Consultant's Report
Marston & Marston, Inc. (the "Luannan Coal Consultant") has
prepared a report dated April 11, 1997, and updated June 6, 1997,
reviewing the availability of coal and arrangements for the transportation
of coal to the Luannan Facility (the "Luannan Coal Consultant's Report").
The Luannan Coal Consultant's Report is attached hereto as Appendix E
and should be read in its entirety by all prospective investors.
Subject to the information contained and the assumptions made in the
Luannan Coal Consultant's Report, the Luannan Coal Consultant offers the
following conclusion:
- Although the Luannan Facility can not be assessed by the usual
Western standards because the data to do such an assessment is
not readily available, it is reasonable to believe that a coal
resource of the appropriate quality is available, at a locally
competitive price in sufficient quantity to operate the Luannan
Facility successfully, taking into consideration the local
environment. The fuel supply strategy, coal supply agreements
and the coal transportation agreement are appropriate for the
conditions and situation as it exists in China. Given that cost
of the fuel supply is a pass-through arrangement in the Luannan
Power Purchase Agreement, the risk exposure for the Luannan
Facility will be minimal in terms of the delivered fuel price.
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering Old Notes for the Exchange Notes offered hereby, holders of Old Notes
should consider carefully the following factors as well as the other matters
described in this Prospectus. The terms of the Exchange Notes are
substantially identical to the terms of the Old Notes, and the Exchange Notes
will evidence the same debt as the Old Notes which they replace. Accordingly,
the following factors may be generally applicable to the Old Notes as well as
to the Exchange Notes.
Consequences of Failure to Exchange Old Notes
Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as described in the legend thereon,
as a consequence of the issuance of the Old Notes 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 Notes
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 Notes under the
Securities Act. Upon consummation of the Exchange Offer, certain rights of
holders of Old Notes who are eligible to tender their Old Notes for exchange in
the Exchange Offer and fail to do so will terminate. To the extent Old Notes
are tendered and accepted in the Exchange Offer, the trading market, if any,
for the Old Notes not so tendered could be adversely affected. See "The
Exchange Offer -- Termination of Certain Rights" and "Description of the
Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder
Loans and the Collateral Documents -- Old Notes Registration Rights."
Financial Risks
Substantial Leverage
The Issuer, the Company and their subsidiaries are and will continue to be
highly leveraged. As of March 31, 1997, the Company's total consolidated long-
term indebtedness (including capital lease obligation) was $431.3 million, its
total consolidated assets were $342.3 million and its consolidated
shareholder's deficit was $103.0 million. As of such date, on a pro-forma
consolidated basis, after giving effect to the issuance of the Old Notes and
the application of the proceeds therefrom, the Company's total consolidated
long-term indebtedness would have been $576.3 million, its total consolidated
assets would have been $493.0 million and its consolidated shareholder's
deficit would have been $103.0 million. The Company's Project-level
indebtedness related to the Rosemary Facility and the Brandywine Facility is
collateralized by the assets of the underlying Projects (including, in the case
of the Brandywine Facility, obligations relating to the long-term lease) and a
pledge of the equity interests in the entities which own or lease those
facilities (such entities, together with other entities which are directly or
indirectly owned by PIC and which directly or indirectly own a Project,
collectively referred to as "Project Entities" and individually as a "Project
Entity"). If a lender were to foreclose on a Project's assets (or, in the case
of the Brandywine Facility, if the lessor were to terminate the lease), there
can be no assurance that the related Project Entities would maintain any
interest in the Project or receive any compensation upon a sale of the related
assets. In addition, the Series A Bonds are collateralized, among other things,
by the stock of intermediate entities which, directly or indirectly, own the
Project Entities that own the Rosemary Facility and the lessee of the
Brandywine Facility. If a lender were to foreclose on its security interest in
the equity interests of a Project Entity or one of the intermediate entities,
or if a lessor were to terminate a lease, the value of the Company's interest
in the affected Project could be effectively eliminated. In addition to the
foreclosure and lease termination 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 Issuer
and its ability to make payments of interest and principal on the Exchange
Notes when due and the ability of the Company to make payments under the
Exchange Notes Guarantee when due. See "Capitalization," "Unaudited Pro Forma
Consolidated Financial Data" and "Description of Other Indebtedness."
Dependence on Distributions
The ability of the Issuer to make payments on the Exchange Notes and the
ability of the Company to make payments under the Exchange Notes Guarantee will
depend almost entirely upon the financial performance of the Luannan Facility,
when constructed and operational, as well as the financial performance of the
two Projects owned or leased by indirect wholly-owned subsidiaries of the
Company that are currently in operation, the Rosemary Facility and the
Brandywine Facility, and the ability of the intermediate entities that own or
lease such Projects to make distributions to the Issuer or the Company, as the
case may be. The failure of a Project to perform as expected or the inability
of one or more of the intermediate entities to make distributions to the Issuer
or the Company, as the case may be, could have a material and adverse effect on
the ability of the Issuer to make payments on the Exchange Notes or the ability
of the Company to perform under the Exchange Notes Guarantee, respectively.
Each of the Projects is subject to a number of financial, operating and
regulatory risks that could materially and adversely affect its performance,
and the ability of the intermediate entities to make distributions is subject
to a number of contractual and legal restrictions. For example, under Chinese
law, dividends may be paid by the Joint Ventures only from after-tax income
(determined according to Chinese accounting principles) and generally may be
paid only on an annual basis unless approval for more frequent distributions is
granted. See "--Considerations Relating to the PRC--Substantial Dependence on
Debt Service from Joint Ventures; Restrictions on Payment of Dividends" below.
Distributions which the Company may receive with respect to the Rosemary
Facility and the Brandywine Facility would not be sufficient by themselves to
enable the Company, through payments under the Exchange Notes Guarantee, to
provide sufficient funds to satisfy the Issuer's payment obligations under the
Exchange Notes. Therefore, unless the Luannan Facility is completed during the
time period currently anticipated by the Issuer, the ability of the Issuer to
meet its payment obligations under the Exchange Notes would be materially and
adversely affected.
Refinancing
A substantial percentage (84.6%) of the original aggregate principal
amount of the Exchange Notes will be due and payable on April 15, 2004 in a
lump sum. In order to be able to pay such amount when due, the Issuer will
have to obtain funds to make such payment from additional borrowings or other
sources. There can be no assurance that the Issuer will be able to obtain such
funds in amounts sufficient to pay such principal amount when due and on terms
and conditions that are satisfactory to the Issuer. See "Description of the
Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder
Loans and the Collateral Documents--Ranking, Maturity, Interest and Principal
of the Exchange Notes."
Rights of Minority Shareholder in Indirect Subsidiary of Issuer
Pursuant to (i) the articles of association of Pan-Western Energy
Corporation LLC, a Cayman Islands exempted company ("Pan-Western"), an indirect
subsidiary of the Issuer which owns an approximately 88% interest in each of
the Joint Ventures, and (ii) a shareholders agreement among Pan-Western and its
two shareholders, Pan-Sino Energy Development Company LLC, a Cayman Islands
exempted company ("Pan-Sino"), and Chinamac (Singapore) Pte Ltd, a Singapore
company ("Chinamac"), which is an affiliate of CMC (as described below), the
unanimous consent of both Pan-Sino and Chinamac is required for the taking of
various actions by Pan-Western, including any merger, consolidation or
dissolution involving Pan-Western, any sale, lease, transfer or other
disposition of all or a substantial part of Pan-Western's assets, any amendment
to the Pan-Western charter documents, any modification of the transfer
restrictions on Pan-Western shares and the declaration of dividends. Pan-Sino
is a 95.5%-owned subsidiary of the Issuer which, in turn, owns a 99% interest
in Pan-Western. Chinamac owns a 1% interest in Pan-Western. The Issuer has
requested that Chinamac agree to waive its rights to require unanimous consent
for the taking of any of the foregoing actions in the event of a default under
the Issuer Loan. While Chinamac has indicated its preliminary agreement to the
Issuer's request, there can be no assurance that Chinamac ultimately will give
its consent to waive such rights. In the event that Chinamac does not waive
such rights, if the Exchange Notes Trustee were to foreclose on the 99%
interest in Pan-Western which is pledged as part of the collateral for Exchange
Notes, the Exchange Notes Trustee, or any purchaser of the pledged interest in
Pan-Western pursuant to a foreclosure sale, would be unable to take various
actions that are subject to unanimous consent rights, including the sale of all
or a substantial part of Pan-Western's assets and the payment of dividends,
without the consent of Chinamac. See "--Considerations Relating to the PRC--
Legal and Regulatory Considerations" and "Business of the Issuer, the Company,
Panda International and Their Subsidiaries--The Issuer, the Company and Panda
International."
Additional Indebtedness
The Indentures permit the Issuer and its Subsidiaries to incur additional
indebtedness under certain circumstances. The Company Indenture permits the
Company and its Subsidiaries also to incur additional indebtedness under
certain circumstances. Additionally, the loan agreements pursuant to which a
portion of the proceeds of the Prior Offering will be loaned by the Issuer,
through an intermediate entity, to the Joint Ventures (the "Shareholder Loan
Agreements") permit the Joint Ventures to incur additional indebtedness under
certain circumstances. The Rosemary Indenture contains provisions permitting
the Rosemary Partnership to incur additional indebtedness under certain
circumstances. In addition, PFC may issue additional bonds under certain
circumstances as permitted under the PFC Indenture. The issuance of additional
indebtedness by the Issuer, the Company, the Joint Ventures, the Rosemary
Partnership, PFC or any other subsidiary of the Issuer or the Company would
create additional potential claims against the issuers of such debt and the
assets which secure such debt, including interests in the Luannan Facility, the
Rosemary Facility and the Brandywine Facility, as the case may be, and could
result in a reduction in the cash available for distribution by the entities
that own interests in such Projects upstream, thus reducing the cash available
to make payments on the Exchange Notes and the cash available to make payments
under the Exchange Notes Guarantee. See "Description of the Exchange Notes, the
Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the
Collateral Documents--Certain Covenants--Limitations on Debt," "Description of
Other Indebtedness--The PFC Bonds," and "Description of Other Indebtedness--The
Rosemary Bonds."
Effective Subordination of Exchange Notes and Exchange Notes Guarantee
The Exchange Notes and the Exchange Notes Guarantee will be the exclusive
obligations of the Issuer and the Company, respectively, and not of the Project
Entities which own or operate the Rosemary Facility or the Brandywine Facility,
the Joint Ventures or any other affiliate of the Issuer. The Project Entities
and the Joint Ventures are highly leveraged and their debt agreements restrict
their ability to pay dividends, make distributions or otherwise transfer funds,
through intermediate entities, to the Company. The restrictions in such
agreements generally require that, prior to the payment of dividends,
distributions or other transfers, Project Entities and the Joint Ventures
provide for the payment of other obligations, including operating expenses,
debt service and the funding of reserves. The Project Entities and the Joint
Ventures are separate and distinct legal entities and have no obligation to pay
any amounts due pursuant to the Exchange Notes or to make any funds available
therefor, whether by dividends, loans or other payments, and do not guarantee
the payment of the Exchange Notes. Thus, payments on the Exchange Notes are
effectively subordinated to the payment of all obligations of the Project
Entities and the Joint Ventures. In addition, the Company's right to receive
any assets of the Project Entities or the Joint Ventures upon their liquidation
or reorganization will be effectively subordinated to the claims of such
Project Entities' or Joint Ventures' creditors (including trade creditors and
holders of other debt issued by such Project Entity). As of March 31, 1997, the
Project Entities had approximately $338.6 million of indebtedness and other
liabilities (including payments on the long-term lease for the Brandywine
Facility), which is effectively senior to obligations of the Company under the
Exchange Notes Guarantee. See "Description of Other Indebtedness--The Rosemary
Bonds" and "Description of Other Indebtedness--The Brandywine Financing."
Similarly, the Company is highly leveraged as a result of the issuance of
the Series A Bonds by PFC, which are collateralized in part by all of the
issued and outstanding shares of PIC. The PFC Indenture restricts the ability
of PIC to pay dividends, make distributions or otherwise transfer funds,
through PEC, to the Company. PIC and PFC are separate and distinct legal
entities and have no obligation to pay any amounts due pursuant to the Exchange
Notes or to make any funds available therefor, whether by dividends, loans or
other payments, and do not guarantee payment of the Exchange Notes. Thus,
payments on the Exchange Notes are also effectively subordinated to the payment
of all obligations of PFC. In addition, the Company's right to receive any
assets of PIC upon its liquidation or reorganization will be effectively
subordinated to the claims of PFC's creditors (including holders of the Series
A Bonds). As of March 31, 1997, PFC had approximately $106.6 million of
indebtedness and other liabilities, which is effectively senior to the
obligations of the Company under the Exchange Notes Guarantee. See "Description
of Other Indebtedness--The PFC Bonds."
Default on Project-level Debt; Enforcement of Rights
If a Project Entity fails to generate cash flows sufficient to service its
debt, such Project Entity could default on its indebtedness or the payment of
its lease obligations or breach a related covenant. If a Project Entity were to
default in the payment of any such obligation or in the performance of any such
covenant, the obligees thereunder would be permitted to accelerate the maturity
of such indebtedness or terminate such lease, which could terminate
distributions to the Company from such Project Entity and adversely affect the
ability of the Company to perform under the Exchange Notes Guarantee. In such
circumstances, Holders of the Exchange Notes may be forced to accelerate the
maturity of the Exchange Notes 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 Notes. See "--
Financial Risks--Substantial Leverage" and "--Financial Risks--Effective
Subordination of Exchange Notes" above and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company."
Addition of Projects to PIC Project Portfolio
Pursuant to the PIC Additional Projects Contract, additional Projects, if
any, developed by Panda International or its affiliates will be transferred to
the PIC Project Portfolio if certain conditions are satisfied, and it is likely
that additional series of Pooled Project Bonds will be issued under the PFC
Indenture to finance debt or equity investments in such Projects, which
additional series will rank pari passu with the currently outstanding Series A
Bonds. If the Rosemary Facility or the Brandywine Facility (which already have
been transferred to the PIC Project Portfolio), or additional Projects, if any,
to be transferred to the PIC Project Portfolio in the future do not perform up
to expectations, their inclusion in the PIC Project Portfolio could weaken the
overall performance of the PIC Project Portfolio and reduce the cash flow
available from PIC to the Company, thereby impairing the ability of the Company
to perform under the Exchange Notes Guarantee. While it is the Company's belief
that diversification of the PIC Project Portfolio will reduce the risks
associated with poor performance by any one Project or a small portion of the
PIC Project Portfolio, there can be no assurance that this will be the case.
See "Description of Other Indebtedness--The PFC Bonds."
Addition of Projects to the Issuer or the Company
Additional Projects, if any, developed by Panda International or its
affiliates which are not eligible for transfer to the PIC Project Portfolio
may, at the election of Panda International or its affiliates, be transferred
to the Issuer or the Company, provided that, if additional indebtedness is to
be issued by the Issuer or the Company with respect to any such additional
Project, certain conditions are satisfied. If any such Projects transferred in
the future to the Issuer or the Company do not perform up to expectations,
their inclusion in the Issuer or the Company, as the case may be, could weaken
the overall performance of the Issuer or the Company, thereby adversely
affecting the ability of the Issuer to make payments on the Exchange Notes or
impairing the ability of the Company to perform under the Exchange Notes
Guarantee.
Repurchase of Exchange Notes Upon a Change of Control
Upon the occurrence of a Change of Control, if certain minimum debt
service coverage ratios are not maintained, the Issuer must offer to purchase
all of the Exchange Notes outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any (including
Liquidated Damages and Additional Amounts, if any) to the date of purchase.
There can be no assurance that the Issuer will have available funds sufficient
to fund the purchase of the Exchange Notes 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 Exchange Notes delivered by
Holders seeking to accept the Issuer's repurchase offer, an event of default
would occur under the Indentures. The definition of Change of Control includes
an event by which all or substantially all of the assets of the Company, the
Issuer or Panda International are sold, leased, exchanged or otherwise
transferred. There is little case law interpreting "all or substantially all"
in the context of an indenture. Because there is no precise established
definition of this phrase, there may be uncertainty as to whether a Change of
Control has occurred as a result of any particular sale, lease, exchange or
transfer of the assets by the Company, the Issuer or Panda International. Any
such uncertainty may adversely affect the enforceability of the Change of
Control provisions of the Exchange Notes Indenture. See "Description of the
Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder
Loans and the Collateral Documents--Change of Control."
Reliance upon Projections and Contained in Engineers'
and Consultants' Reports
Included as Appendices D and E hereto are reports of engineers and
consultants concerning the Luannan Facility. Summaries of the reports of
engineers and consultants concerning the Rosemary Facility and the Brandywine
Facility are contained herein. See "Description of the Projects--The Rosemary
Facility--Independent Engineers' and Consultants' Reports" and "Description of
the Projects--The Brandywine Facility--Independent Engineers' and Consultants'
Reports." Included as Appendix C is the Consolidated Pro Forma Report, a
summary consolidation of the projections contained in the Rosemary Engineering
Report, the Brandywine Pro Forma Report and the Luannan Engineering Report. The
terms of the Exchange Notes have been structured on the basis of the
prospective financial information contained in such reports. For the purpose of
preparing the information 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 the electric generating
capacity of and the electric energy produced by the Luannan Facility, the
Rosemary Facility and the Brandywine Facility, the costs of obtaining fuel for
such facilities, the number of hours that the facilities will be dispatched,
the cost to complete, and anticipated completion date of, the Luannan Facility,
and other matters and contingencies that are not within the control of the
Issuer, the Company or their affiliates and the outcomes of which are difficult
to predict. The engineers' and consultants' reports contain discussions of the
assumptions used in preparing the projections and potential investors should
review the 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. 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 ability of the
Issuer to make payments on the Exchange Notes and the ability of the Company to
meet its obligations under the Exchange Notes Guarantee could be materially and
adversely affected.
All projections of future operations and the economic results thereof
included in the engineers' and consultants' reports have been reviewed and
accepted by the Issuer on the basis of present knowledge and assumptions that
the Issuer believes to be reasonable. These projections have not been prepared
in accordance with published guidelines of the Securities and Exchange
Commission, the American Institute of Certified Public Accountants, any
regulatory or professional agency or body or generally accepted accounting
principles. Deloitte & Touche LLP, the Issuer's independent accountants, has
neither examined nor compiled any projections and, accordingly, does not
express an opinion or any other form of assurance with respect thereto. After
the issuance of the Exchange Notes, no engineer or other consultant will
provide the Holders of the Exchange Notes with revised projections or report
any difference between the projections and the actual operating results
achieved by the Projects.
Project Risks
Construction Risk
The construction of any Project, including the Luannan Facility, 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. For
example, Tangshan City, approximately 45 kilometers from where the Luannan
Facility will be located, experienced an earthquake with a force of 7.8 on the
Richter scale in July 1976. Any of these events or other unanticipated events
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 "--Financial Risks--Default on Project-level Debt;
Enforcement of Rights" above.
While preliminary construction work on the Luannan Facility has commenced,
full construction activity with respect to the Luannan Facility and
construction of the Luannan Transmission Facilities has not yet commenced.
Construction of the Luannan Facility and the Luannan Transmission Facilities
could be delayed or could experience significant cost overruns as a result of
one or more of the risks described in the previous paragraph. None of the
Issuer, the Company, Panda International or the Luannan County Government is
obligated to provide any additional funding to cover any cost overrun. North
China Power Company is not obligated to begin making payments for electric
energy deliveries under the Luannan Power Purchase Agreement until the Luannan
Facility is considered to be in commercial operation for purposes of such
agreement. There can be no assurance that any cost overrun or delay in
achieving commercial operation for purposes of the Luannan Power Purchase
Agreement will not have a material adverse effect on the Joint Ventures and,
therefore, on the Issuer and its ability to meet its obligations to make
payments of principal and interest on the Exchange Notes when due. See "--
Considerations Relating to the PRC--Legal and Regulatory Considerations" below.
In the event of certain delays in completion of the Luannan Facility which are
not excused by force majeure or in the event that the Luannan Facility fails to
meet the guaranteed performance levels under the Luannan EPC Contract, the
Luannan EPC Contractor is obligated under the terms of the Luannan EPC Contract
to pay liquidated damages to the Joint Ventures and the Joint Ventures are
entitled to subtract the amount of such damages from the 10% retainage of the
Luannan EPC Contract Price and to collect damage payments under certain
guarantees. Liquidated damages, however, are limited to 35% of the Luannan EPC
Contract Price. There is no assurance that the amount of such damages will be
sufficient to pay all costs of the Joint Ventures resulting from the event
giving rise to such damages. See "Description of the Projects--The Luannan
Facility--Engineering, Procurement and Construction Contract" and "Description
of Principal Documents Relating to the Luannan Facility--Engineering,
Procurement and Construction Contract--Price and Payment; Security." If North
China Power Company fails to complete the Luannan Transmission Facilities in
time to receive electric power from the Luannan Facility, North China Power
Company is liable to the Joint Ventures for any resulting loss or damage, but
any recoveries (to the extent, if any, awarded and collected) might not be
sufficient to compensate the Joint Ventures for all losses, including
consequential damages. See "--Considerations Relating to the PRC--Legal and
Regulatory Considerations" below.
Start-up Risks
The commencement of commercial operations of the Luannan Facility or
another 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 Issuer or the Company losing its indirect
ownership interest in a Project. 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, to attain certain operating levels by specified
dates or 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. See "--Financial Risks--Default on Project-Level Debt; Enforcement
of Rights" above.
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 (whether due to misuse, unexpected degradation or design or
manufacturing defects), failure to keep on hand adequate supplies of spare
parts, operation error, labor disputes, catastrophic events such as fires,
floods, earthquakes and other similar events and the need to comply with the
directions of the relevant government authority or utility. Although the
Rosemary Facility, the Brandywine Facility and the Luannan 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.
The Rosemary Power Purchase Agreement and the Brandywine Power Purchase
Agreement provide for a reduction in capacity payments in the event of an
outage or unavailability. North China Power Company will only be required to
pay for electric energy actually generated by the Luannan Facility and has no
obligation to pay for capacity or any electric energy not generated by the
Luannan Facility even if due to an event of force majeure declared by either
party under the Luannan Power Purchase Agreement or to increase subsequent
purchases from the Luannan Facility once an event of force majeure no longer
exists in order to make up for electricity not purchased during the
continuation of such event of force majeure. Moreover, during peak hours, the
Luannan Facility may be subject to penalties if certain minimum generation
requirements are not met. See "Description of Principal Documents Relating to
the Luannan Facility--Power Purchase Agreement." The occurrence or continuance
of any of the events described above could increase the cost of operating the
Rosemary Facility, the Brandywine Facility or the Luannan Facility, reduce the
payments due from the purchaser under the relevant power purchase agreement or
otherwise adversely affect the financial condition of any of such Projects.
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 or operating such Project might be unable to service the Project-level
obligations. A default under such Project-level obligations by the Project
Entities could result in the Company losing its indirect ownership or leasehold
interest in such Project. See "--Additional Indebtedness--Default on Project-
Level Debt; Enforcement of Rights" above. Furthermore, in the event of a major
casualty or loss involving a Project, casualty insurance proceeds, to the
extent not applied to repair such Project, would be applied first to satisfy
Project-level obligations, and it is unlikely (unless such Project-level
obligations are less than the maximum insurance proceeds payable) that any such
insurance proceeds would be available for mandatory redemption of the Exchange
Notes.
The Luannan Facility does not have an operating history. The Joint
Ventures and the Brandywine Partnership have, respectively, obtained warranties
in limited amounts and for limited periods relating to the Luannan Facility and
its major equipment from the Luannan EPC Contractor and suppliers of such
equipment and relating to the Brandywine Facility and its major equipment from
Raytheon and suppliers of such equipment. However, there can be no assurance
that any of such warranties will be sufficient or effective under all
circumstances or that the issuer of the warranty will have adequate capital
resources to meet its warranty obligations. In addition, the warranties
generally are limited to an obligation to repair or replace defective equipment
and do not cover revenues lost while the equipment is out of service.
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 Rosemary Facility for
dispatch on a daily basis at full capacity, partial capacity or off-line. The
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 permits PEPCO to dispatch at its sole discretion a substantial
portion of the Brandywine Facility's capacity. While availability-based
capacity payments and other fixed payments under the power purchase agreements
relating to the Rosemary Facility and the Brandywine Facility 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 Rosemary
Facility, or the anticipated level, in the case of the Brandywine Facility. See
"Description of the Projects--The Rosemary Facility--Sale of Capacity and
Electricity" and "Description of the Projects--The Brandywine Facility--Sale of
Capacity, Electricity and Steam."
Under the Luannan Power Purchase Agreement, North China Power Company is
required to purchase and take all net electrical output delivered by the
Luannan Facility during specified peak hours without any dispatch limitations.
The levels of dispatch during other hours (and thus the revenues that the
Luannan Facility will receive for electric energy generated during such hours)
are specified in the Luannan Power Purchase Agreement and the related technical
details (i.e., ramp rates, seasonal adjustments, etc.) will be set forth in an
Interconnection Dispatch Agreement to be negotiated with the Tangshan Power
Supply Bureau of North China Power Company shortly prior to the commercial
operation date under the Luannan Power Purchase Agreement. Those negotiations
may result in changes to the dispatch rights under the Luannan Power Purchase
Agreement, and the levels of dispatch that were assumed in connection with the
preparation of the Luannan Engineering Report. There can be no assurance that
the Interconnection Dispatch Agreement as finally negotiated will not change
the provisions of the Luannan Power Purchase Agreement, including dispatch
rights and penalties relating thereto. See "Summary--Independent Engineers' and
Consultants' Reports--Luannan Engineering Report," "Description of the Projects-
- -The Luannan Facility--Sales of Power" and "Description of Principal Documents
Relating to the Luannan Facility--Power Purchase Agreement" and Appendix D
hereto.
Dependence on, or Lack of, Fixed Payments
The Rosemary Facility and the Brandywine Facility are dependent on
capacity payments due from VEPCO and PEPCO, respectively, under their
respective power purchase agreements to meet their fixed obligations. In the
case of the 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 Rosemary
Partnership are subject to rebate or reduction and, in certain circumstances,
the Rosemary Partnership may be required to pay liquidated damages to VEPCO.
See "Description of the Projects--The Rosemary Facility--Sale of Capacity and
Electricity." In the case of the 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 starting in 2006 depending on when
and whether PEPCO's system peak load exceeds 5,697 MW during 1997, 1998 or
1999. See "Description of the Projects--The Brandywine Facility--Sale of
Capacity, Electricity and Steam."
Unlike the Rosemary Power Purchase Agreement and the Brandywine Power
Purchase Agreement, the Luannan Power Purchase Agreement does not require North
China Power Company to make any fixed capacity payments. Instead, the Luannan
Power Purchase Agreement provides that North China Power Company shall purchase
all electricity generated by the Luannan Facility and delivered at specified
levels during specified periods. If, after taking into account permitted
outages, the Luannan Facility does not deliver a specified minimum quantity of
electric energy during peak hours, certain of the Joint Ventures will have to
compensate North China Power Company and, in certain events, after the
expiration of applicable cure periods, North China Power Company may terminate
the Luannan Power Purchase Agreement. See "Description of the Projects--The
Luannan Facility--Sales of Power" and "Description of Principal Documents
Relating to the Luannan Facility--Power Purchase Agreement."
Fuel Related Pricing
Payments related to electric energy purchases by VEPCO and PEPCO under the
Rosemary Power Purchase Agreement and the Brandywine Power Purchase Agreement,
respectively, 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 Supply Agreement
and the Brandywine Gas Agreement. Nevertheless, the Rosemary Facility and the
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 these two
Projects. See "Description of the Projects--The Rosemary Facility--Sale of
Capacity and Electricity" and "--Gas Supply and Fuel Management" and "--The
Brandywine Facility--Sale of Capacity, Electricity and Steam" and "--Gas Supply
and Fuel Management."
The Luannan Facility will obtain the coal required for its operation from
the Luannan Coal Suppliers. The price paid by the Joint Ventures for such coal
will be determined periodically on the basis of market prices, which are
currently subject to partial government control and supervision. While the
Luannan Power Purchase Agreement provides for electricity prices based on the
recovery of the Joint Ventures' cost of obtaining coal, changing conditions in
the coal market could result in a substantial increase in the price the Joint
Ventures are required to pay for such coal. There can be no assurance that the
electricity tariffs will fully reflect any such increased coal prices. The Coal
Supply Agreement with Kailuan Coal does not contain any provision governing the
resolution of a dispute between the parties with respect to the price of coal.
See "Description of the Projects--The Luannan Facility--Coal Supply" and
"Description of Principal Documents Relating to the Luannan Facility--Coal
Supply Agreements."
Regulatory Disallowance
The Rosemary Power Purchase Agreement contains a clause known as a
"regulatory disallowance" provision, which requires the 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 Rosemary Partnership could be materially and adversely
affected and, consequently, the Company's ability to meet its obligations under
the Exchange Notes Guarantee could be materially and adversely affected. See
"Description of the Projects--The Rosemary Facility--Sale of Capacity and
Electricity." See also Appendix B, "The Electric Power Industry in the United
States and United States Regulation."
Fuel Supply Risks
The Rosemary Partnership has contracted for most of its natural gas
supplies and transportation services on an interruptible basis because the
Rosemary Partnership has assumed that the 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 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 Rosemary Facility and the
Brandywine Facility to be reasonable, if a power purchaser were to
significantly increase its dispatch of a facility, unless the facility were to
arrange for additional firm supply and transportation of natural gas or were to
use alternate fuel, 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 Rosemary Facility--Gas Supply and Fuel Management" and "--Gas
Transportation," "--The Brandywine Facility--Gas Supply and Fuel Management"
and "--Gas Transportation."
If natural gas supply or transportation is not available to the Rosemary
Facility or the Brandywine Facility, each such facility can operate utilizing
No. 2 fuel oil. The 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 Rosemary Partnership purchases its fuel oil supply on a spot
market basis. The Brandywine Facility has on-site storage for two million
gallons of fuel oil, which is enough fuel oil to operate the facility at full
load for approximately six days. Under its fuel management plan, the Brandywine
Partnership will endeavor to enter into fuel oil supply and transportation
agreements by October 10 of each year that will provide it with access to
adequate fuel oil supplies for the immediately succeeding winter season
(November through March). 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 Rosemary Facility--Fuel Oil" and "--The
Brandywine Facility--Fuel Oil."
The Rosemary Partnership owns a 10.26 mile pipeline which is located
under, over and upon properties owned by private and governmental landowners
pursuant to easements and encroachment agreements. Several of the easements and
encroachment agreements contain provisions allowing the underlying interest
owner to cause the 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
pipeline to be removed, but do not require such owner to provide an alternate
location or share the cost of relocating the pipeline. The Issuer does not
expect that the pipeline will be required to be removed pursuant to these
easements or, if it were required to be removed, that relocating the pipeline
from these two easement tracts would significantly interfere with the supply of
natural gas to the Rosemary Partnership. However, there can be no assurance
that the Rosemary Partnership could relocate the pipeline, if required to do
so, without incurring significant expenses or, if the pipeline could not be
relocated, that the Rosemary Partnership could make arrangements for the
delivery of a supply of fuel which would be adequate to assure the availability
of the Rosemary Facility for dispatch by VEPCO. See "Description of the
Projects--The Rosemary Facility--Rosemary Pipeline."
The Rosemary Gas Supply Agreement and the Rosemary Fuel Management
Agreement expire on November 30, 2005. The firm transportation contracts the
Rosemary Partnership has entered into with Transcontinental Gas Pipe Line
Corporation ("Transco"), Texas Gas Transmission Corporation ("Texas Gas") and
CNG Transmission Corporation ("CNG") expire on November 1, 2006. Certain other
contracts providing for interruptible transmission services for the 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
Rosemary Partnership will be able to enter into replacement contracts or fuel
transportation arrangements on terms no less favorable to the Rosemary
Partnership than those contained in the current agreements. The failure to
extend such terms or to enter into replacement contracts or fuel transportation
arrangements is an event of default under the Rosemary Indenture. See
"Description of the Projects--The Rosemary Facility--Gas Supply and Fuel
Management," "--The Rosemary Facility--Gas Transportation" and "Description of
Other Indebtedness--The Rosemary Financing."
The Luannan Coal Supply Agreement among two of the Joint Ventures and
Kailuan Coal, which is expected to supply up to 300,000 metric tons per year of
the projected 450,000 metric ton annual coal demand of the Luannan Facility,
provides that Kailuan Coal may terminate the agreement if the national energy
policies of the PRC change such that the rules governing the allocation of coal
restrict its ability to make sales of coal under terms and conditions similar
to those set forth in such agreement. While the Luannan Facility is located in
a region of the PRC that has numerous coal mines, in the event that the Luannan
Coal Supply Agreement with Kailuan Coal is terminated under such circumstances,
there can be no assurance that the Joint Ventures would be able to enter into
one or more replacement agreements on satisfactory terms.
Moreover, the prices to be paid by the Joint Ventures for coal from the
various coal suppliers, including Kailuan Coal, are to be determined
periodically on the basis of prevailing prices, which are currently partially
subject to government control and supervision. While the Luannan Power Purchase
Agreement provides for electricity prices based on the recovery of the Joint
Ventures' cost of obtaining coal, changing conditions in the coal market could
result in a substantial increase in the prices the Joint Ventures are required
to pay for such coal. There can be no assurance that electricity tariffs would
always fully reflect any such increased coal prices.
Dependence on Third Parties and Concentration of Customers
The nature of the 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 or coal 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, or any event or circumstance that reduces or
suspends the payment obligation of the other party to an agreement or affects
such party's ability or willingness to meet its obligations, could adversely
affect the Issuer's ability to make payments of interest and principal on the
Exchange Notes when due or the Company's ability to meet its obligations under
the Exchange Notes Guarantee, as the case may be. The other parties to each
Project agreement have the right to terminate or withhold payments or
performance under such agreements 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 can be
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.
In the case of the Luannan Facility, the primary source of revenues will
be payments for electricity by North China Power Company under the Luannan
Power Purchase Agreement and by the local industrial and commercial customers
under the contracts to supply steam and hot water (collectively, the "Luannan
Heat Supply Contracts"). In addition, one of the Joint Ventures will receive
revenues from the sale of heat, steam and hot water from the other Joint
Ventures, and another Joint Venture will receive revenues from the sale of
heat, steam and hot water, principal and interest payments paid by North China
Power Company on funds lent to it for construction of the Luannan Transmission
Facilities, and, as currently contemplated by the Joint Ventures, land rental
usage fees from the other Joint Ventures. Accordingly, the Joint Ventures'
operations and their ability to pay interest and principal on the Shareholder
Loans and to have sufficient earnings to pay dividends could be adversely
affected by any occurrence or circumstance that reduces or suspends payment
obligations of North China Power Company under the Luannan Transmission
Facilities Loan or the Luannan Power Purchase Agreement or interrupts purchases
of steam and hot water under the Luannan Heat Supply Contracts and certain
other contracts relating to the sale of heat and steam among the Joint Ventures
including one or more of the events described under "Operating Risks" above, or
otherwise affects such purchasers' ability or willingness to meet their
obligations under the Luannan Power Purchase Agreement and the Luannan Heat
Supply Contracts, respectively. In addition, a breach by North China Power
Company or such steam or hot water purchasers of their obligations under the
Luannan Power Purchase Agreement or the Luannan Heat Supply Contracts, could
also adversely affect the Joint Ventures' ability to pay the Shareholder Loans
and have sufficient earnings to pay dividends. North China Power Company's or
such steam or hot water purchasers' ability to meet their obligations under the
Luannan Power Purchase Agreement or the Luannan Heat Supply Contracts,
respectively, will be dependent on their financial condition generally.
Considerations Relating to the PRC
Political and Economic Considerations
The Luannan Facility is located in the People's Republic of China and is
subject to significant political, economic and social uncertainties. The
economy of the PRC has historically been a planned economy subject to five-year
and annual plans adopted by Central Government authorities. Although most
production assets in the PRC are still owned ultimately by the government of
the PRC, the level of direct control the government of the PRC exercises over
the economy is being gradually relaxed. Since 1978, the government of the PRC
has generally pursued policies that have encouraged economic reform and foreign
investment. In October 1992, the 14th Congress of the Communist Party of China
declared that the PRC would adopt a "socialist market economy" in which a
market-oriented economy would be allowed to develop while the PRC government
would continue to set economic targets and guide growth through macro-
regulations. The concept of a socialist market economy was incorporated in the
PRC's Constitution in March 1993 and reaffirmed in the PRC's Ninth Five-Year
Economic and Social Development Plan adopted in early 1996. The PRC government
has, however, implemented various policies from time to time to restrain the
rate of economic growth, control inflation and otherwise regulate economic
expansion. There can be no assurance that the PRC government will continue to
pursue a policy of economic reform, especially in the event of a change in
leadership or unforeseen circumstances causing social or political disruption.
Further austerity measures and credit restrictions or social or political
disruptions may adversely affect the business and prospects of the Joint
Ventures and their ability to perform their respective contractual obligations,
including the ability of the Joint Ventures to make payments of principal and
interest on the Shareholder Loans and their ability to pay dividends.
Impairment of the Joint Ventures' ability to make payments on the Shareholder
Loans or to distribute dividends could materially and adversely affect the
ability of the Issuer to meets its obligations to pay interest and principal on
the Exchange Notes when due.
In recent years, the PRC economy has experienced periods of rapid economic
expansion. This growth has also been accompanied by rising inflation, which
reached an annual rate of 21.7% in 1994. The PRC government has implemented
policies from time to time to restrain the rate of such economic growth and
control inflation in order to achieve coordinated economic development. In July
1993, the Central Government began implementation of a number of austerity
measures to control economic growth and curb inflation, including increasing
interest rates on bank loans and deposits and postponing certain planned price
reforms. While inflation has since moderated, to a rate of 6.1% in 1996, there
can be no assurance that such austerity measures will continue or that, if
continued, they will not result in future severe dislocations in the PRC
economy. Although certain components of the power rate calculation are required
to be adjusted annually, subject to the approval of the Pricing Approval
Authority (as hereinafter defined), to reflect local inflation in order to
mitigate the Luannan Facility's exposure to inflation risks, during periods of
high inflation governmental authorities could seek to restrain price increases.
High inflation thus could inhibit governmental approval of increases in power
rates.
The Luannan Facility is also exposed to political considerations in
respect of its majority ownership by foreign investment enterprises of an
important resource in the economy of the region. Pursuant to the Equity Joint
Venture Law of the PRC, joint venture enterprises generally shall not be
subject to nationalization or expropriation. The Equity Joint Venture Law of
the PRC, however, provides that under certain circumstances involving a
national emergency, in order to meet public interest requirements, the PRC
government may expropriate a joint venture enterprise in accordance with legal
procedures, but appropriate compensation must be paid.
Governmental Control of Currency Conversion and Exchange Rate Risks
Each Joint Venture will receive all its revenues, and expects to pay the
major portion of its operating costs, in Renminbi ("RMB"). The Joint Ventures,
however, must convert a significant portion of their revenues into U.S. dollars
for the payment of amounts due under the Shareholder Loans, off-shore expenses
(if any), and distributions to Pan-Western. Recent foreign exchange regulations
of the PRC, which took effect on July 1, 1996, allow foreign investment
enterprises ("FIEs") (such as the Joint Ventures) to obtain their foreign
exchange directly from authorized banks and financial institutions which have
been given access by the People's Bank of China (the "PBOC") to the national
interbank foreign exchange market, the China Foreign Exchange Trading Center
("CFETC"). FIEs may also continue to obtain foreign exchange from official
foreign exchange adjustment centers ("Swap Centers") under the new regulations.
Although the new foreign exchange regulations enable the Joint Ventures to have
access to the national foreign exchange markets (either through the Swap
Centers or through the CFETC), any remittance of foreign currency funds for
repayments of principal and interest on external borrowings of FIEs is subject
to verification by the State Administration of Foreign Exchange of the PRC (the
"SAFE"). No assurance can be given that an adequate amount of foreign currency
will be available in the Swap Centers or the CFETC at all times in future
periods or that SAFE will verify such repayments in a timely manner. In the
event of shortages of foreign currencies, the Joint Ventures may be unable to
convert sufficient Renminbi into foreign currencies to enable them to make
sufficient U.S. dollar-denominated payments and dividend distributions to
enable Pan-Western to meet its payment obligations with respect to the Issuer
Note (as defined below). See "Business of the Issuer, The Company, Panda
International and Their Subsidiaries--The Joint Ventures" and "Foreign Exchange
System in the PRC and Exchange Rate Information."
Although certain components of the power rate calculation, including
certain financing expenses, are subject to adjustments intended, among other
things, to mitigate the Luannan Facility's exposure to currency risks, there
can be no assurance that the relevant government agency will approve any such
adjustments, and significant exchange rate fluctuations during the period
between adjustments may adversely affect the Joint Ventures' ability to make
U.S. dollar payments to Pan-Western with respect to interest and principal on
the Shareholder Loans and dividend distributions in an aggregate amount
sufficient to enable Pan-Western to meet its payment obligations with respect
to the Issuer Note. Although North China Power Company is obligated to use its
best efforts to obtain required approvals to repay the Luannan Transmission
Facilities Loan in U.S. dollars, there can be no assurance that it will be able
to obtain such approvals. If such approvals are not obtained, the parties have
agreed to permit North China Power Company to borrow and repay the Luannan
Transmission Facilities Loan in Renminbi, in which case the parties have agreed
to negotiate an arrangement for an equitable allocation of any currency
exchange costs related to repayments of the Luannan Transmission Facilities
Loan. However, there can be no assurance that any such negotiations will be
satisfactorily concluded. Thus, the Joint Ventures may bear all or a portion of
the currency exchange risk on the Luannan Transmission Facilities Loan.
There was a significant devaluation of the Renminbi on January 1, 1994 in
connection with the replacement of the official exchange rate with a new
managed floating rate foreign exchange system. Since then, the Renminbi has
from time to time appreciated against the U.S. dollar. A devaluation of the
Renminbi against the U.S. dollar after the commercial operation date for the
Luannan Facility may adversely affect the ability of the Joint Ventures to make
payments to Pan-Western sufficient for Pan-Western to satisfy its obligations
with respect to the Issuer Note, as more revenues would be needed by the Joint
Ventures to meet their payment obligations under the Shareholder Loan
Agreements and pay dividends and the Joint Ventures may not be able to increase
power rates sufficiently to offset such effects. See also "--Governmental
Regulation of Power Rates" below.
Legal and Regulatory Considerations
The Joint Ventures have been formed to undertake separate aspects of the
Luannan Facility. Under PRC law and regulations, the development of a power
plant and the formation of a Sino-foreign joint venture require approvals of
certain governmental authorities in the province in which the power plant and
the joint venture are located and, if the total investment (including equity
contributions to the joint venture and expected borrowings of the joint
venture) exceeds certain thresholds (denominated in U.S. dollars), the approval
of certain Central Government authorities is required. Such thresholds vary by
province, municipality and special economic zone. In the case of Hebei
Province, where the Joint Ventures are located, provincial governmental
authorities have authority to approve the development of a power plant and the
establishment of any Sino-foreign joint venture entity the total investment in
which does not exceed $30.0 million, pursuant to a guideline issued by the
Central Government in 1988. HPPC and Hebei COFTEC, the provincial approval
authorities for the development of power plants and the establishment of Sino-
foreign joint ventures, respectively, have advised that the approval of the
formation of the Joint Ventures is within their respective approval authority
limits because the total investment (including equity contributions and
borrowings) of each Joint Venture is less than $30.0 million. As a result of
this $30.0 million approval limitation, a cost overrun might result in a
requirement for one or more of the Joint Ventures to seek additional
governmental approvals, including possibly Central Governmental approvals.
There is no assurance that any such additional approvals, if required, could be
obtained.
Chinese law governing the appropriate approval levels for foreign
investment in power plants is not fully developed and there can be no assurance
that Central Government authorities will agree with the foregoing position
concerning the appropriate approval authority for the formation of the Joint
Ventures and the Luannan Facility. Recently, the Central Government has
reiterated its policy against dividing large projects into several small
projects in order to keep within provincial approval limits. There can be no
assurance that the Central Government authorities will not characterize the
Luannan Facility as one project requiring Central Government approval. Projects
and joint ventures using foreign investment not approved in accordance with the
limits of authority set forth by the Central Government are null and void. Any
approvals or licenses issued in reliance on a project or joint venture approval
which is null and void (as well as any contracts signed by such a joint
venture) would not be legally effective, and approvals or licenses to be
obtained in the future with respect to such a project or joint venture would
not be processed. Furthermore, although authority for specific approvals
generally is vested in particular government organizations, as discussed above,
the approval process typically involves consultation with all relevant
government organizations, whose opinions are solicited before an approval is
issued. Therefore, additional government departments or their provincial
counterparts may also have opportunities to intervene in the approval process.
The Issuer has been advised by Cai, Zhang & Lan, Chinese counsel to the
Issuer, Pan-Western and the Joint Ventures, that, because each Joint Venture is
technically viable and operational by itself, has its own clearly defined
business scope and purpose, and has followed proper procedures for all required
approvals, each Joint Venture will be treated as a separate company, each
project in respect of which each Joint Venture has been established will be
treated as a separate project for approval purposes and Central Government
approval is not required. Based on the opinion of its Chinese counsel and
advice from HPPC, Hebei COFTEC and the County Partners, the Issuer believes
that all government approvals required to date to form the Joint Ventures and
develop the Luannan Facility have been obtained.
Additional governmental approvals will be required to commence full
construction activity upon the giving of notice to proceed, during the course
of construction and upon the commencement of operation of the Luannan Facility.
The Company believes that such approvals will be obtained; however, there can
be no assurances that such approvals will be obtained in a timely manner.
Potential delay or inability to complete construction of the Luannan Facility
and operate the Luannan Facility when constructed could adversely and
materially affect the ability of the Issuer to meet required payments of
principal and interest on the Exchange Notes.
Each of the Joint Ventures holds a business license from the SAIC which
expires on June 30, 1997. In the opinion of Cai, Zhang & Lan, the Joint
Ventures' respective business licenses were properly issued by the SAIC and are
currently valid. Cai, Zhang & Lan have advised the Issuer that certain capital
contributions required to be made to the Joint Ventures under PRC
administrative regulations were not made in a timely manner and, as a result,
the SAIC has administrative discretion to revoke the Joint Ventures' business
licenses. While the Issuer and the Joint Ventures believe it is unlikely that
the SAIC would act to revoke the Joint Ventures' business licenses on this
basis prior to the expiration of the term of the business licenses, there can
be no assurances in this regard. The required capital contributions to the
Joint Ventures were made with a portion of the proceeds of the Old Notes.
Following the making of such requisite capital contributions, the Joint
Ventures believes that the business licenses will be renewed for substantially
longer terms.
Each of the Joint Ventures has guaranteed the obligations of the other
Joint Ventures with respect to their Shareholder Loans pursuant to the Joint
Venture Guarantees. Cai, Zhang & Lan has advised the Issuer that each such
Joint Venture Guarantee is a valid and enforceable obligation of the maker;
however, the inapplicability of a regulation of a central governmental
authority requiring approval of certain guarantees of off-shore financings is
not free from doubt. If this regulation were deemed applicable, the
enforceability of the Joint Venture Guarantees would be subject to question
unless such approval was obtained. The Joint Venture Guarantees are payable in
Renminbi. See "--Governmental Control of Currency Conversion and Exchange Rate
Risks."
In an attempt to separate the regulatory and commercial functions of the
electric power industry, the PRC State Council formally approved the
establishment of the State Power Corporation of China ("SP") in January 1997.
The SP is a state-owned legal entity with funds provided directly by the State
Council. It will serve as the PRC's principal investor in and/or operator of
wholly or partially state-owned power-related assets in China. It will also be
responsible for the operation of interregional transmission facilities and the
development of a national power grid. After the establishment of the SP, the
MOEP will continue to exercise the regulatory function over the Chinese
electricity industry, but the MOEP's enterprise management function and its
function to operate state assets will be turned over to the SP. As part of the
reform, provincial power bureaus will also need to transfer their regulatory
functions to other departments of the local government and become subsidiaries
of the SP. It has been reported that the MOEP itself will also be dissolved and
its regulatory function will be transferred to the China Electricity Council,
the SPC and the State Economic and Trade Commission. There can be no assurance
as to what impact this reform will have on the Luannan Facility.
As the PRC legal system continues to develop, changes to existing laws,
regulations and policies (or in the application thereof), the adoption of new
laws and the pre-emption of local regulations by national laws may adversely
affect the Joint Ventures. Although the PRC government has introduced new laws
and regulations since January 1, 1994 to modernize its securities, tax and
secured lending systems, China does not yet possess a comprehensive body of
business law. Furthermore, experience in the enforcement of contractual rights
by foreign parties through legal or arbitration proceedings in China is
developing. The Joint Ventures' activities in China are by law subject, in
certain cases, to administrative review and approval by various national and
local agencies of the PRC government. While the Issuer believes that all
necessary approvals have been obtained for the entering into and performance of
the Luannan Project Documents (including the mechanism in a pricing document
(the "Pricing Document" which is separate from, but incorporated by reference
in, the Luannan Power Purchase Agreement) for setting the power sales tariff
from time to time), such contracts are as yet untested in the PRC legal system.
Although the Issuer believes that the support of the Hebei Provincial
Government, Hebei COFTEC, North China Power, the Luannan County Government and
China National Machinery Import & Export Corporation, a state-owned PRC trading
company ("CMC") which, through an affiliate, owns a 1% interest in Pan-Western,
will benefit the operations of the Joint Ventures in connection with
administrative review and the receipt of any approvals which may be required in
the future, there can be no assurance that such approvals will be forthcoming
when necessary or desirable.
Governmental Regulation of Power Rates
Similar to electric power companies in other countries, the Joint
Ventures, North China Power Company and North China Power are subject to
governmental and electric power grid regulation in virtually all aspects of
their operations, including the amount and timing of electricity generation and
dispatch, the setting of power rates, performance of scheduled maintenance and
compliance with power grid control directives. Rates for electricity produced
by power plants wholly-owned by the MOEP are set by the MOEP and the relevant
price department of the State Planning Commission ("SPC"), and most electricity
has historically been purchased at such rates. Power rates for power utilized
within a specific region and produced by power plants not owned by the MOEP are
set on the basis of discussions between the power plants and the relevant
provincial price bureau. In the case of the Luannan Facility, the Hebei
Provincial Price Bureau has delegated its authority to the Tangshan Municipal
Price Bureau (the "Pricing Approval Authority"). The delegation letter,
however, makes it clear that the Hebei Provincial Bureau can revoke such
delegation at any time if it is necessary for the consistency of the state's
electric tariff policy.
Project electricity prices will be based on factors such as covering the
Joint Ventures' construction, operating and financing costs and providing for a
rate of return on investment in the Joint Ventures based on availability
factors and specific hours of operation. Certain components of the power rate
calculation are subject to annual adjustment to reflect local and U.S.
inflation and foreign exchange rate fluctuations. The electricity price to be
paid under the Luannan Power Purchase Agreement is provided in the Pricing
Document, which, except for the pricing formula, has been approved by the
Pricing Approval Authority. The formula provided in the Pricing Document sets
forth the basis for future pricing adjustments and has been acknowledged by the
Pricing Approval Authority. However, such an acknowledgment does not constitute
a guarantee or promise by the Pricing Approval Authority to approve a price
application calculated in accordance with the formula, and there can be no
assurance that future price applications by any Joint Venture will be so
approved.
The power price formula acknowledged by the Pricing Approval Authority
provides for adjustment of the annual depreciation amount according to changes
in a Chinese price index. The Joint Ventures believe that the annual
depreciation amount should be adjusted according to changes in the U.S. dollar-
Renminbi exchange rate. Since the Luannan Power Purchase Agreement was
executed, the Chinese price index has changed by a greater amount than the
change in the exchange rates, resulting in an electric price slightly higher
than would have been the case if depreciation were adjusted according to
changes in those exchange rates. However, a significant devaluation of the
Renminbi against the U.S. dollar (unless offset by inflation in China) could
result in a lower electric price (in U.S. dollar terms) unless the power price
formula is modified so that depreciation is adjusted according to changes in
these exchange rates. The Joint Ventures have requested such a modification of
the power price formula and believe it will be implemented.
Although the Joint Ventures have the right to request a determination of a
new power rate whenever they determine that changes in the price components
require a new determination, and it is anticipated that they will apply
annually for changes in such rates, the actual prices for electricity are
subject to the approval of the Pricing Approval Authority. Neither the Issuer
nor the Joint Ventures have any experience in applying for electricity prices
determined in accordance with the pricing formula incorporated in the Pricing
Document. Use of such a pricing formula to establish electricity prices is a
recent development in the Chinese power industry. Although the Issuer, based on
discussions with the Pricing Approval Authority, believes that the pricing
formula will be applied to permit recovery of all Luannan Facility costs and
anticipated returns, there can be no assurance that the Joint Ventures will be
able to charge rates that will generate sufficient revenues to enable the Joint
Ventures to meet their obligations to pay principal of and interest on the
Shareholder Loans when due and make distributions to Pan-Western sufficient in
the aggregate to enable Pan-Western to satisfy its obligations with respect to
the Issuer Note and to make distributions to the Issuer which are in turn
sufficient for the Issuer to pay interest and principal on the Exchange Notes,
when due, or that any application for an increase in the power rate will be
approved by the Pricing Approval Authority.
The Law of Electric Power (the "Power Law") of the PRC, which was adopted
by the NPC in late 1995 and which took effect on April 1, 1996, provides that
the proper approval authority for certain tariffs relating to inter-provincial
grids (such as the Jing-Jin-Tang Grid) is the relevant price department of the
SPC. No implementing regulations under this provision have been adopted. It is
therefore not possible to predict the extent, if any, to which the ministries
or bureaus of the Central Government, such as MOEP or the SPC, might seek to
assert authority over pricing approvals relating to the Luannan Facility. The
Issuer has been advised by Cai, Zhang & Lan, Chinese counsel to the Issuer, Pan-
Western and the Joint Ventures, that the Pricing Document, which was approved
by the Pricing Approval Authority on October 18, 1995, continues to be valid
because it was obtained prior to the effectiveness of the Power Law and should
be binding on any future regulator. However, there can be no assurance that
Central Government authorities will not take a different position.
Limited Information
There can be no assurance as to the reliability of the sources from which
information contained in this Prospectus concerning the PRC, Hebei Province,
Beijing, Tianjin and Tangshan municipalities, North China Power, North China
Power Company and the other Chinese parties described herein has been taken.
Official statistics in the PRC may also be produced on a basis different from
that used in other, more developed countries. Due to doubts about the
reliability of available official and public information, the data relating to
the PRC contained in this Prospectus may be inaccurate and may not be reliable.
Uncertain Enforcement of Foreign Judgments
Experience with respect to the implementation, interpretation and
enforcement of business law in the PRC is limited. More specifically, there has
been only a limited number of situations in which a foreign party has sought
judicial enforcement of contracts against a Chinese entity in a PRC court or
through arbitration proceedings in China. In addition, the means for
enforcement of monetary judgments in the PRC are not fully developed and may be
affected by a predilection to favor Chinese entities in disputes with foreign
parties. The Joint Venture Agreements in respect of the Joint Ventures are
governed by PRC law and the parties thereto have submitted to arbitration in
China. Other Luannan Project Documents (including the Luannan Power Purchase
Agreement and the Luannan EPC Contract but excluding the Luannan Operations and
Maintenance Agreement) are also governed by PRC law. The parties to the Luannan
EPC Contract may agree to submit disputes thereunder to arbitration in China if
the amount of a dispute does not exceed $1.0 million; either party also may
submit a dispute to the International Court of Arbitration of the International
Chamber of Commerce ("ICC") for binding arbitration to be held in Singapore.
The Luannan Power Purchase Agreement similarly provides that disputes not
resolved by mutual discussion shall be settled by binding arbitration in
Singapore before the International Court of Arbitration of the ICC. It is
unclear whether an arbitration award resulting from an arbitration proceeding
between two Chinese legal persons conducted outside of China is enforceable in
China. Consequently, there can be no assurance that the Joint Ventures would be
able to obtain effective enforcement in a timely manner of the principal
Luannan Project Documents against any Chinese party or that Pan-Western would
be able to obtain enforcement, in a timely manner, of the obligations of the
Joint Ventures under the Shareholder Loan Agreements or the undertakings by
each Joint Venture to fully and unconditionally and irrevocably guarantee to
Pan-Western the prompt payment and performance by each other Joint Venture of
their individual obligations to Pan-Western pursuant to any debt obligation now
or hereafter due.
Substantial Dependence on Debt Service from Joint Ventures; Restrictions on
Payment of Dividends
The ability of the Issuer to make payments on the Exchange Notes will
depend substantially upon the financial performance of the Joint Ventures and
the ability of the Joint Ventures to make principal and interest payments under
the Shareholder Loans through bank accounts maintained in the PRC and to
distribute dividends.
Under Chinese law, the Joint Ventures may pay a dividend only from net
income after taxes. Dividend distributions to equity joint venture partners are
limited to the net income of the joint venture as determined according to
Chinese accounting principles. Accordingly, the Joint Ventures may be precluded
from paying a dividend to Pan-Western in a fiscal year even though they may
generate cash flow in that year, or have accumulated a surplus sufficient to
make such a payment. Generally, distributions are determined on an annual
basis; however, special permission may be granted for quarterly distributions
(with appropriate retention for applicable withholding) with an annual
reconciliation of actual amounts available for such distributions. The Joint
Ventures intend to request approval to make quarterly distributions; however,
there is no assurance that such approval will be granted. Even if an approval
is granted, it may be limited to a particular amount and may not permit
subsequent quarterly dividends without additional approvals. If the Joint
Ventures are unable to pay dividends because of the absence of net income after
taxes or if the payment of dividends is restricted by the annual limitation,
the ability of the Issuer to obtain the revenues that it requires to pay
interest and principal on the Exchange Notes when due may be impaired. See "--
Considerations Relating to the PRC--Governmental Control of Currency Conversion
and Exchange Rate Risks" above.
The PRC levies a withholding tax on payments of interest in respect of
foreign exchange loans, including bonds and notes, made to foreign
corporations; this withholding tax will apply to the payment of interest by the
Joint Ventures to Pan-Western on the Shareholder Loans. The current rate of
such withholding tax is 20% of the gross amount of the interest. However, the
withholding tax charged on interest paid by the Joint Ventures to Pan-Western
on the Shareholder Loans will be 10% pursuant to certain provisional
regulations intended to encourage foreign investments in coastal economic open
zones in the PRC. Due to the nature of these provisional regulations, there can
be no assurance that the reduction in the rate of the withholding tax will
continue through the term of the Shareholder Loans. A change in the rate of the
withholding tax to 20% would decrease the net amount of funds to be received by
Pan-Western from the Joint Ventures in repayment of the Shareholder Loans and
could have a material adverse effect on the ability of the Issuer to pay
interest and principal on the Exchange Notes when due. See "Business of the
Issuer, The Company, Panda International and Their Subsidiaries--The Issuer,
the Company and Panda International."
Amendment of Shareholder Loan Agreements
The Issuer and the Joint Ventures intend that the terms of the Shareholder
Loan Agreements between Pan-Western and the Joint Ventures will be amended
after the closing of the Prior Offering to modify the interest rate and the
principal amortization schedule. The Issuer and the Joint Ventures intend to
file such amendments with the Tangshan branch of SAFE. The Issuer and the Joint
Ventures believe that such amendments should be accepted for filing by SAFE.
However, there can be no assurances that SAFE will accept for filing the
amendments to the Shareholder Loan Agreements, and the Shareholder Loan
Agreements may not be amended without such filing. If amendments are not
accepted for filing, the interest rate and principal amortization schedule
would remain as in the existing Shareholder Loan Agreements and the ability of
the Issuer to obtain the revenues that it requires to pay interest and
principal on the Exchange Notes when due may be impaired.
U.S. 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. In April 1996
the FERC issued a rule requiring utilities to offer wholesale customers and
suppliers open access on their transmission lines on a basis that is comparable
to the utilities' own use of the lines. In addition, a number of bills have
been introduced in the United States Congress 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.
On November 12, 1996, the SCC issued an order that would require VEPCO to
file a report on its efforts to renegotiate its contracts with non-utility
generators, which includes the Rosemary Facility. Such report must be filed on
or before June 1, 1997 and quarterly thereafter. VEPCO has not yet responded to
that order but previously 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 filed a request with the SCC for
permission to institute a formal QF monitoring program under which certain
facilities (including the 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. On October 10, 1996, the SCC staff, pursuant to the SCC's
directive, filed a legal memorandum with the SCC discussing VEPCO's proposal in
which the staff argued that the SCC has the legal authority to implement a QF
monitoring program. On December 18, 1996, the SCC staff filed a report
recommending that the SCC adopt a QF monitoring program for all QFs that have a
power purchase agreement with VEPCO. The program would direct VEPCO to collect,
audit and analyze calendar year operating information, including actual annual
operating results and a copy of meter calibration results, to be submitted by
all such QFs by May 1 of the following year. VEPCO would report annually to the
SCC the results of its compliance evaluation. On December 30, 1996, VEPCO filed
a response in support of the Staff Report. See "--Maintaining Qualifying
Facility Status" below.
VEPCO has been 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 Rosemary Partnership and VEPCO, the
Rosemary Partnership anticipates that VEPCO will closely monitor the Rosemary
Partnership's compliance with the Rosemary Power Purchase Agreement and
vigorously enforce its rights thereunder. Because the capacity and energy
payments that the Rosemary Partnership receives from VEPCO under the Rosemary
Power Purchase Agreement constitute major sources of revenue for the Rosemary
Partnership, a termination of the Rosemary Power Purchase Agreement would, in
the absence of another source of funds, terminate the Rosemary Partnership's
ability to service its Project-level debt and to make distributions, through
intermediate entities, to the Company. Such termination could adversely affect
the ability of the Company to meet its obligations under the Exchange Notes
Guarantee. See Appendix B, "The Electric Power Industry in the United States
and United States Regulation--Federal Energy Regulation."
Maintaining Qualifying Facility Status
PURPA and the regulations promulgated thereunder provide Qualifying
Facilities such as the Rosemary Facility and the 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 Domestic 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 Rosemary Partnership and the Brandywine
Partnership could be materially and adversely affected. For discussions of the
steam sales arrangements that permit the Rosemary Facility and the Brandywine
Facility to maintain their QF status, see "Description of the Projects--The
Rosemary Facility--Steam and Chilled Water Sales" and "Description of the
Projects--The Brandywine Facility--Sale of Capacity, Electricity and Steam."
On February 18, 1997, The Bibb Company ("Bibb") announced that it would
sell the textile mill that purchases steam and chilled water from the Rosemary
Facility to WestPoint Stevens, Inc. ("WestPoint"). The closing of the sale was
reported in the news media on February 21, 1997, but the Rosemary Partnership
has not received formal notice of such sale from Bibb or WestPoint. The
contract pursuant to which the Rosemary Partnership has been selling steam and
chilled water to Bibb cannot be assigned by Bibb without the consent of the
Rosemary Partnership. The Rosemary Partnership has continued to sell steam and
chilled water to the purchaser in substantially the same amounts as it sold
prior to the announcement of the sale. While the Issuer expects that Bibb will
seek to assign the contract to WestPoint, there can be no assurance that it
will do so. Additionally, if WestPoint were to fail to purchase and use the
minimum quantity of steam necessary for the Rosemary Facility to satisfy the
Qualifying Facility criteria, the Rosemary Facility could continue to satisfy
the Qualifying Facility criteria if a distilled water facility or other thermal
operation were installed at the 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 Rosemary Partnership would
have or be able to obtain the funds necessary to install such a facility. See
"Description of the Projects--The Rosemary Facility--Steam and Chilled Water
Sales" and Appendix B, "The Electric Power Industry in the United States and
United States Regulation--State Regulations."
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 Rosemary Partnership and the Brandywine Partnership have
indemnified third parties against the consequences of each Project's storage or
emission of hazardous and toxic materials. While the Issuer believes that the
Rosemary Facility's and the 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
Domestic Projects. There can be no assurance that each Domestic 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 Appendix B, "The Electric
Power Industry in the United States and United States Regulation--Environmental
Regulation."
With respect to the Luannan Facility, the Joint Ventures are subject to
the environmental protection laws and regulations of the PRC and the government
of Hebei Province, which currently impose base-level discharge fees for various
polluting substances and graduated schedules of fees for the discharge of waste
substances in excess of applicable standards, require the payment of fines for
violations of laws, regulations or decrees and provide for the possible closure
of any facility which fails to comply with orders requiring it to cease or cure
certain activities causing environmental damage. The Joint Ventures believe
that the planned environmental protection systems and facilities of the Luannan
Facility will be in compliance with applicable environmental protection
requirements. However, there can be no assurance that the Central Government or
the government of Hebei Province will not impose new, stricter regulations
which would require additional expenditures by the Joint Ventures for
environmental protection or compliance.
Certain Other Regulatory Risks Relating to Projects in the United States
Regulatory Approvals
Projects in the United States 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 Domestic 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 Appendix B, "The Electric Power Industry in the United States
and United States Regulation."
Gas Transportation Regulation
The various gas transportation agreements for the 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 Domestic 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 Rosemary Facility--Gas Transportation" and "-
- -The Brandywine Facility--Gas Transportation." See also Appendix B, "The
Electric Power Industry in the United States and United States Regulation--
Natural Gas Regulation."
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 Issuer believes that the U.S. 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 Rosemary Facility and
the Brandywine Facility have been obtained. If future levels of dispatch of the
Rosemary Facility exceed the levels allowed under the facility's existing
operating permits (which is projected to be the case; see the Rosemary
Engineering Report), additional equipment designed to control air emissions
would have to be installed in order for the facility to maintain compliance
with such permits. While the 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 U.S. 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.
Absence of Market for the Exchange Notes
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in April 1997 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 Notes has not developed to date.
There is currently no established market for the Exchange Notes and the
Exchange Notes will not be eligible for trading in the PORTAL Market. The
Issuer does not intend to list the Exchange Notes or the Old Notes on a
securities exchange or seek approval for quotation through any automated dealer
quotation system. There can be no assurance that a market for the Exchange
Notes will develop or as to the ability of holders of the Exchange Notes to
sell their Exchange Notes or the price at which such holders would be able to
sell their Exchange Notes. If a market for the Exchange Notes does not
develop, purchasers may be unable to resell the Exchange Notes for an extended
period of time, if at all. Consequently, a purchaser may not be able to
liquidate the investment readily, and the Exchange Notes may not be readily
accepted as collateral for loans. If a market for the Exchange Notes were to
develop, the Exchange Notes 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 Issuer and its subsidiaries.
The liquidity of, and trading market for, the Exchange Notes 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 Issuer.
Control by Principal Stockholders
The Issuer is a wholly-owned indirect subsidiary of Panda International.
Robert and Janice Carter, members of their family and Carter family trusts
collectively own approximately 38.8% of the outstanding shares of common stock
of Panda International. In addition, W. M. Huffman (who is related to Mr.
Carter by marriage), members of Mr. Huffman's family and Huffman family trusts
and partnerships own approximately 18.5% of the outstanding shares of common
stock of Panda International. 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 Huffmans, if they were 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. See
"Management -- Stock Ownership of Panda International."
BUSINESS OF THE ISSUER, THE COMPANY, PANDA INTERNATIONAL AND THEIR SUBSIDIARIES
The Issuer, the Company and Panda International
The Issuer is a wholly-owned subsidiary of the Company, organized in the
Cayman Islands on March 10, 1997. The Company is a wholly-owned subsidiary of
Panda International, organized in Delaware on March 7, 1997. Each of the Issuer
and the Company has been organized for the purposes of (i) investing in and
holding direct and indirect interests in entities engaged in the development,
construction, ownership, operation and management of 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 of any of the above, including the entering into of indentures,
contracts and other agreements entered into in connection with the purposes
described in clauses (i) and (ii) above.
The Company and its affiliates are engaged in the development,
acquisition, construction, ownership and operation of electric power generation
facilities in the United States and internationally. Panda International was
formed as part of a corporate transaction 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. Upon the formation of the Company, PEC became a wholly-
owned subsidiary of the Company. PEC was organized in 1982 by Robert and Janice
Carter, who are the Chairman of the Board and Chief Executive Officer, and the
Executive Vice President, Treasurer and Secretary, respectively, of Panda
International and the Company. See "Management."
The principal business strategy of the Company and its affiliates is to
use their experience in developing, constructing, financing and managing
electric power generation facilities to provide low-cost electricity and
electric generating capacity. The Company and its affiliates expect to expand
their presence in the electric power industry by implementing this strategy in
the United States and certain other countries. The Company and its affiliates
have placed into commercial operation facilities with electric generating
capacity of approximately 410 MW, each of which is owned or leased under a long-
term lease. In addition, Panda International has executed power purchase
agreements relating to four potential Projects (including the Luannan Facility,
in which the Issuer indirectly owns approximately an 83% interest) with a
combined electric generating capacity of approximately 750 MW. See "Description
of the Projects." The Company and its affiliates generally hold their interests
in Projects that are being developed outside of the United States through
intermediate entities (such as the Issuer, Pan-Sino and Pan-Western) organized
in tax-favorable jurisdictions (such as the Cayman Islands), which in turn hold
interests in entities (such as the Joint Ventures) organized in the country
where the Projects will be located (such as China and as proposed in Nepal).
U.S. Projects are generally held in limited partnerships with general and
limited partners organized as Delaware corporations that are indirect
subsidiaries of the Company. For descriptions of the independent power industry
in the United States and the PRC, see Appendix B hereto. See also "Risk Factors-
- -Project Risks" and "Description of the Projects."
With 77 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, project operation and maintenance, environmental
matters, law and finance and accounting. The Company believes that this team's
scope of expertise allows it to compete effectively for cogeneration and
private power development and acquisition opportunities.
The Company 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. China is
a strategic target market for the Company and its affiliates as they continue
to expand into international power generation. The Company's strategy in China
is fostered through its business alliance with CMC. The Company considers its
relationship with CMC to be an important factor in its dealings with agencies
of the central, provincial and local governments in the PRC.
The ownership structure of Panda International and certain of its
subsidiaries is shown in Appendix G.
There were 11,401,212 shares of Common Stock of Panda International
outstanding at March 31, 1997. 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 March 31, 1997:
(i) there were outstanding options to acquire 1,209,000 shares of Common Stock
of Panda International (options for 1,050,000 shares being fully vested and for
159,000 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 181,500 shares of Common Stock of Panda International. See
"Description of the Projects -- The Panda-Rosemary Facility -- Cash Flow
Participation."
The principal executive offices of the Issuer, Panda International and the
Company are located at 4100 Spring Valley Road, Suite 1001, Dallas, Texas
75244. The telephone number at such offices is (972) 980-7159.
The Issuer owns 95.5% of the issued and outstanding stock of Pan-Sino. The
remaining interest in Pan-Sino is owned by National Development and Research
Corporation, a Texas corporation ("NDR"). Pursuant to a shareholder agreement,
NDR's ownership interest in Pan-Sino can increase from 4.5% to a maximum of 10%
(and the Issuer's equity interest therein can thereby be reduced to 90%) as a
result of the collective efforts of NDR, Panda International and its affiliates
to develop and achieve financial closing of additional Projects in the PRC. Any
such change in the equity interest held by the Issuer in Pan-Sino would
correspondingly affect the cash-flow interest of the Issuer in Pan-Sino with
respect to the payment of dividends by Pan-Sino. The right of the Issuer to
receive interest payments with respect to the Issuer Note would not be affected
by a reduction in the Issuer's equity interest in Pan-Sino, however, because
the Issuer Note represents direct obligations of Pan-Western to the Issuer and
has priority in right of payment to equity distributions.
Pan-Sino owns a 99% equity interest in Pan-Western. The remaining 1%
interest in Pan-Western is owned by Chinamac. Pan-Western owns an 87.92% equity
interest in each of four equity joint venture companies (individually, a "Joint
Venture" and collectively, the "Joint Ventures") organized under the laws of
the People's Republic of China (the "PRC" or "China"): Tangshan Panda Heat and
Power Co., Ltd. ("Tangshan Panda"), Tangshan Pan-Western Heat and Power Co.,
Ltd. ("Tangshan Pan-Western"), Tangshan Cayman Heat & Power Co., Ltd.
("Tangshan Cayman") and Tangshan Pan-Sino Heat Co., Ltd. ("Tangshan Pan-Sino").
Luannan County Heat and Power Plant ("Luannan Heat and Power"), Tangshan
Luanhua (Group) Co. ("Luanhua Co.") and Luannan County Heat Company ("Luannan
Heat Company") own the remaining interests in Tangshan Panda, Tangshan Pan-
Western and Tangshan Pan-Sino, respectively. Each of Luannan Heat and Power
and Luanhua Co. owns a 6.04% equity interest in Tangshan Cayman.
The Joint Ventures
The Joint Ventures have been formed to undertake separate aspects of the
Luannan Facility. Each Joint Venture has a total investment of less than $30.0
million. Under Chinese law, a Sino-foreign joint venture in Hebei province with
a total investment of less than $30.0 million does not require approval of the
Central Government. The Issuer has been advised by its Chinese counsel that
each Joint Venture will be treated as a separate project for approval purposes
and that Central Government approval is not required. Chinese law with respect
to the appropriate approval levels for foreign-invested power plants is
developing and there can be no assurance that Central Government authorities
will not seek to assert jurisdiction over some aspect of the Luannan Facility.
The Issuer, based on the opinion of its counsel and advice from Hebei COFTEC,
believes that all required government approvals to form the Joint Ventures and
develop the Luannan Facility have been obtained. See "Risk Factors--
Considerations Relating to the PRC--Legal and Regulatory Considerations."
Tangshan Panda and Tangshan Pan-Western will each construct, own and
operate a 50 MW coal-fired cogeneration power unit. Tangshan Cayman will own
water rights, water wells, pipelines, production facilities and certain steam
production facilities from which it will sell heat, steam and hot water to
Tangshan Panda and Tangshan Pan-Western. In addition, Tangshan Cayman will sell
steam and hot water to Tangshan Pan-Sino on a wholesale basis. Tangshan Pan-
Sino will engage in retail distribution of steam and hot water to commercial
and industrial users and will own the land use rights, the Luannan Facility
buildings and certain off-site property, the majority of which will be leased
to the other Joint Ventures. In addition, Tangshan Pan-Sino will make certain
loans in connection with the construction of the Luannan Transmission
Facilities.
The proceeds from the sale of the Old Notes, less amounts to be deposited
in the Capitalized Interest Fund and the Debt Service Reserve Fund established
with respect to the Old Notes and net of transaction fees, commissions and
expenses incurred in connection with the Prior Offering, plus interest earnings
to be received by the Issuer, will be loaned by the Issuer to Pan-Western by
means of one or more loans, each evidenced by a promissory note from Pan-
Western to the Issuer (collectively, the "Issuer Note"). Pan-Western will use
such amount to make Shareholder Loans in the aggregate amount of $71.3 million
and JV Equity Contributions in the aggregate amount of $41.8 million to the
Joint Ventures. The Joint Ventures will also receive equity contributions from
the County Partners in the aggregate amount of $5.7 million, which corresponds
to the amount to be paid to the County Partners from the proceeds of the Prior
Offering for water and land use rights (including previously constructed wells)
with respect to property on which the Luannan Facility will be situated. The
funds from the Shareholder Loans and the JV Equity Contributions will be used
by the Joint Ventures to finance the development and construction of the
Luannan Facility. Through the Capitalized Interest Expiration Date, interest on
the Exchange Notes will be provided from the Capitalized Interest Fund funded
by the Issuer from a portion of the proceeds of the Prior Offering. After the
Capitalized Interest Expiration Date, pursuant to the Shareholder Loan
Agreements, the Joint Ventures will be required to make principal and interest
payments on the Shareholder Loans to Pan-Western. Pan-Western will be required
to make principal and interest payments on the Issuer Note and the Issuer, in
turn, will be required to make principal and interest payments on the Exchange
Notes. Immediately upon receiving each payment from the Joint Ventures, Pan-
Western will pay the full amount of such payment to the Issuer. The Issuer Note
represents a direct obligation of Pan-Western to the Issuer and has priority in
right of payment to equity distributions. Any dividends paid by the Joint
Ventures will be payable 87.92% to Pan-Western and 12.08% to the County
Partners in accordance with their respective equity ownership interests in the
Joint Ventures. Any dividends paid by Pan-Western will be payable 99% to Pan-
Sino and 1% to Chinamac in accordance with their respective equity ownership
interests in Pan-Western. Any dividends paid by Pan-Sino will be payable 95.5%
to the Issuer and 4.5% to NDR in accordance with their respective equity
ownership interests in Pan-Sino, which percentages are subject to change as
described above, subject to limitations on payment of dividends as provided in
the Indentures. See "Risk Factors--Considerations Relating to the PRC--
Substantial Dependence on Debt Service from Joint Ventures; Restrictions on
Payment of Dividends" and "Description of the Exchange Notes, the Guarantors,
the Issuer Loan, the Shareholder Loans and the Collateral Documents--Certain
Covenants--Limitation on Restricted Payments."
PEC, PIC, PIC Entities and Project Entities
In addition to its ownership interest in the Issuer, the Company owns all
of the issued and outstanding stock of PEC which, in turn, owns all of the
issued and outstanding stock of Panda Interfunding Corporation, a Delaware
corporation ("PIC") and 100% of the entities that own the Kathleen Facility,
which is currently in development and the subject of litigation in various
state and federal forums. The outcome of such litigation will determine whether
construction of the Kathleen Facility is initiated and completed. See
"Description of the Projects--Other Projects Under Development by Panda
International--The Kathleen Facility." Pursuant to arrangements with GE Capital
under the Brandywine Financing Documents, the Kathleen Facility will be
required to be transferred to the PIC Project Portfolio if the Kathleen
Facility reaches Financial Closing or Commercial Operations. See "Legal
Proceedings--Heard Proceedings."
PIC has direct wholly-owned subsidiaries ("PIC Entities"), including Panda
Interholding Corporation, a Delaware corporation ("Interholding"). Under the
terms of the indenture executed in connection with the issuance of the Series A
Bonds (the "PFC 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 PIC, distributions from Project Entities. Other
PIC Entities may be established in the future and each will be directly wholly-
owned by PIC. 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 terms of the PFC 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.
Administrative and Development Services
Panda International provides various administrative, construction
management and operations and maintenance services to the Company and its
subsidiaries pursuant to an Administrative Services Agreement, which covers the
provision of such services to the Rosemary, Brandywine and Luannan Facilities
and to future Projects once they reach Financial Closing, and a Development
Services Agreement, which covers the provision of such services to Projects in
the development stage prior to Financial Closing. Such services are invoiced at
Panda International's reasonable cost, including a reasonable allocation of
related overhead expenses. Each agreement was entered into in April 1997 and
has a term which expires on March 31, 2007. Under the Development Services
Agreement, Panda International has the right to receive reimbursement for its
prior expenditures in connection with development of the Luannan Facility, its
proposed hydroelectric project in Nepal and other Projects in development, to
the extent of funds available in the Issuer Equity Distribution Fund, subject
to certain limitations. See "Description of the Projects--The Panda of Nepal
Facility" and "Description of the Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-
- -The Funds--The Issuer Funds."
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 Prior Offering were used by the Issuer:
(i) to make a deposit in the Capitalized Interest Fund in the approximate
amount of $48.1 million; (ii) to make a deposit in the Debt Service Reserve
Fund in the amount of $9.7 million; (iii) to pay transaction fees, commissions
and expenses incurred in connection with the Prior Offering estimated to be
approximately $6.8 million; and (iv) to make a deposit in the Luannan Facility
Construction Fund estimated to be in the amount of $80.4 million. This amount
has been used, and interest thereon and other income expected to be received by
the Issuer during construction, will be used, by the Issuer to make the Issuer
Loan to Pan-Western. Pan-Western has used and will use (in the case of interest
and other income expected to be received during construction) the proceeds of
the Issuer Loan to make the JV Equity Contributions and the Shareholder Loans
to each of the four Joint Ventures. The Joint Ventures will use the proceeds of
the JV Equity Contributions and Shareholder Loans, together with capital
contributions from the County Partners in the amount of $5.7 million, to
develop and construct the Luannan Facility.
CAPITALIZATION
The following table sets forth the capitalization of the Issuer and its
consolidated subsidiaries as of march 31, 1997, as adjusted to give pro forma
effect to the issuance of the Old Notes and the application of the estimated net
proceeds therefrom as described in "use of proceeds."
March 31, 1997
-------------------------
(in thousands)
ACTUAL AS ADJUSTED
------- ---------
Advances from Panda International .............. $ 9,476 $ 9,476
Long-term debt:
Old Notes due 2004 .................... -- 145,025
Minority interest (1) .......................... -- 5,740
Shareholder's deficit .......................... (2,856) (2,856)
------- ---------
Total capitalization .................. $ 6,620 $ 157,385
======= =========
The following table sets forth the capitalization of the
Company and its consolidated subsidiaries as of March 31, 1997, as adjusted to
give pro forma effect to the issuance of the Old Notes and the application of
the estimated net proceeds therefrom as described in "Use of Proceeds".
March 31, 1997
-----------------------
(in thousands)
Short-term debt and current portion of long-term debt: ACTUAL AS ADJUSTED
--------- ---------
Current portion of Rosemary Bonds due 2016 .. $ 5,502 $ 5,502
Long-term debt:
Old Notes due 2004 ................................. -- 145,025
Series A Bonds due 2012 ............................ 105,309 105,309
Brandywine capital lease obligation ................ 222,869 222,869
Rosemary Bonds due 2016, less current portion ...... 103,145 103,145
--------- ---------
Total long-term debt, including capital lease
obligation ....................................... 431,323 576,348
Minority interest (1) ................................ -- 5,740
Shareholder's deficit ................................ (102,986) (102,986)
--------- ---------
Total capitalization ............................... $ 333,839 $ 484,604
========= =========
- ------------------
NOTE:
(1) MINORITY INTEREST REFLECTS CAPITAL CONTRIBUTIONS BY THE COUNTY PARTNERS TO
THE JOINT VENTURES.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following unaudited pro forma consolidated financial data are derived
from the historical consolidated financial statements of the Company set forth
elsewhere herein. The unaudited pro forma consolidated financial data give
effect to 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
Rosemary Partnership's project debt and to fund a portion of the acquisition of
Ford Credit's limited partner interest in the Rosemary Partnership. In
addition, the unaudited pro forma consolidated financial data give effect to
the issuance of $105.5 million in aggregate principal amount of the Series A
Bonds and the application of the net proceeds thereof to (a) fund the PIC Debt
Service Reserve Fund, the PIC Capitalized Interest Fund and the PIC Company
Expense Fund, (b) to fund the remaining portion of the acquisition of Ford
Credit's limited partner interest in the Rosemary Partnership and (c) to make a
distribution to the Company's parent. As a result of the acquisition of Ford
Credit's limited partner interest, the Company owns 100% of the Rosemary
Partnership and accordingly, the acquisition 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 above
transactions, which occurred on July 31, 1996, are reflected in the historical
consolidated balance sheets of the Company as of December 31, 1996 and March
31, 1997. The unaudited pro forma consolidated statement of operations data for
the year ended December 31, 1996 reflect such adjustments as if such
transactions had occurred as of January 1, 1996.
Additionally, the unaudited pro forma consolidated financial data give
effect to the issuance of $155.2 million par value of Old Notes (issued at a
discount for proceeds of $145.0 million) in the Prior Offering and the
application of the proceeds thereof to fund the Capitalized Interest Fund and
the Debt Service Reserve Fund established with respect to the Old Notes, to
make shareholder loans and equity contributions to the Joint Ventures and to
pay the transaction fees, commissions and expenses incurred in connection with
the Prior Offering. The unaudited pro forma consolidated balance sheet data
reflect such adjustments as if the transactions occurred as of March 31, 1997.
The unaudited pro forma consolidated statement of operations data reflect such
adjustments as if such transactions had occurred as of January 1, 1996.
As required by the Securities and Exchange Commission, the unaudited
pro forma consolidated statement of operations data do not reflect the
extraordinary loss on early extinguishment of debt. Such extraordinary loss is
reflected in the historical consolidated statement of operations of the Company
for the year ended December 31, 1996 presented elsewhere herein. The unaudited
pro forma consolidated financial data should be read in conjunction with the
notes thereto and the historical consolidated financial statements of the
Company, and the notes thereto, included elsewhere herein.
The unaudited pro forma consolidated financial data do not purport to be
indicative of the 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.
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ROSEMARY PIC PRIOR PRO
HISTORICAL OFFERING OFFERING OFFERING FORMA
-------- ------- -------- -------- --------
Revenue:
<S> <C> <C> <C> <C> <C>
Electric capacity and energy sales ................. $ 32,274 $ -- $ -- $ -- $ 32,274
Steam and chilled water sales ...................... 502 -- -- -- 502
Interest income .................................... 1,518 -- -- 7,364(G) 8,882
-------- ------- -------- -------- --------
Total revenue .................... 34,294 -- -- 7,364 41,658
EXPENSES:
Plant operating expenses ........................... 12,050 -- -- -- 12,050
Development and administrative expenses ............ 5,187 -- -- -- 5,187
Interest expense ................................... 19,414 749(A) 5,557 (C) 17,772(H) 43,492
Depreciation ....................................... 5,532 -- (111)(E) -- 5,421
Amortization - Debt issuance costs ................. 494 (164)(B) 108 (D) 849(I) 1,287
Amortization - Partnership formation costs ......... 533 -- -- -- 533
-------- ------- -------- -------- --------
Total expenses ................... 43,210 585 5,554 18,621 67,970
-------- ------- -------- -------- --------
Loss before minority interest ...................... (8,916) (585) (5,554) (11,257) (26,312)
Minority interest .................................. (2,405) -- 2,405 (F) -- --
-------- ------- -------- -------- --------
Net loss before extraordinary item $(11,321) $ (585) $ (3,149) $(11,257) $(26,312)
======== ======= ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRIOR
HISTORICAL OFFERING PRO FORMA
-------- ------- ---------
<S> <C> <C> <C>
REVENUE:
Electric capacity and energy sales ....... $ 17,330 $ -- $ 17,330
Steam and chilled water sales ............ 130 -- 130
Interest income .......................... 430 1,222(G) 1,652
-------- ------- --------
Total revenue .............. 17,890 1,222 19,112
EXPENSES:
Plant operating expenses ................. 8,261 -- 8,261
Development and administrative expenses .. 2,395 -- 2,395
Interest expense ......................... 10,802 3,625(H) 14,427
Depreciation ............................. 2,949 -- 2,949
Amortization - Debt issuance costs ....... 174 173(I) 347
Amortization - Partnership formation costs -- -- --
-------- ------- --------
Total expenses ............. 24,581 3,798 28,379
-------- ------- --------
Net loss ................................. $ (6,691) $(2,576) $ (9,267)
======== ======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(in thousands)
ASSETS
<TABLE>
<CAPTION>
Prior Pro
Historical Offering Forma
--------- -------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 1,198 $ -- $ 1,198
Restricted cash--current ................................ 15,115 -- 15,115
Accounts receivable ..................................... 9,220 -- 9,220
Fuel oil, spare parts and supplies ...................... 6,898 -- 6,898
Other current assets .................................... 234 -- 234
--------- -------- ---------
Total current assets ............................. 32,665 -- 32,665
Plant and equipment:
Electric generating facilities .......................... 289,097 -- 289,097
Furniture and fixtures .................................. 496 -- 496
Less: accumulated depreciation .......................... (29,488) -- (29,488)
Development costs ....................................... 9,427 -- 9,427
--------- -------- ---------
Total plant and equipment, net ................... 269,532 -- 269,532
Debt service reserves and escrow deposits .......................... 32,548 143,941(J) 176,489
Debt issuance costs, net ........................................... 7,531 6,824(K) 14,355
--------- -------- ---------
Total assets ..................................... $ 342,276 $150,765 $ 493,041
========= ======== =========
<CAPION>
LIABILITIES AND SHAREHOLDER'S DEFICIT
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ...................................... $ -- $ -- $ --
Interest and letter of credit fees ...................... 2,505 -- 2,505
Operating expenses and other ............................ 5,932 -- 5,932
Current portion of long-term debt .......................... 5,502 -- 5,502
---------- -------- ---------
Total current liabilities ........................... 13,939 -- 13,939
Long-term debt, less current portion .................................. 208,454 145,025(L) 353,479
Capital lease obligation .............................................. 222,869 -- 222,869
Minority interest ..................................................... -- 5,740(M) 5,740
Commitments and contingencies ......................................... -- -- --
Shareholder's deficit ................................................. (102,986) -- (102,986)
--------- -------- ---------
Total liabilities and
shareholder's deficit .......................... $ 342,276 $150,765 $ 493,041
========= ======== =========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
(A)The adjustment represents the net effect of (i) the inclusion of $5,605 of
interest expense related to the Rosemary Bonds at an interest rate of 8
5/8% and (ii) the elimination of actual interest expense of $4,856 related
to the Rosemary Partnership's project debt which was refinanced with the
Rosemary Bonds.
(B)The adjustment represents the net effect of (i) the inclusion of $115 of
amortization of debt issue costs related to the Rosemary Bonds and (ii) the
elimination of $279 of actual amortization of debt issue costs related to
the Rosemary Partnership's project debt which was refinanced with the
Rosemary Bonds.
(C)The adjustment represents the net effect of (i) the inclusion of $7,156 of
interest expense related to the Series A Bonds at an interest rate of
11 5/8%, and (ii) the elimination of actual interest expense of $1,599
related to the Trust Company of the West ("TCW") indebtedness which was
repaid with a portion of the proceeds from the Series A Bonds.
(D)The adjustment represents the net effect of (i) the inclusion of $158 of
amortization of debt issue costs related to the Series A Bonds and (ii) the
elimination of $50 of actual amortization of debt issue costs related to
the TCW indebtedness which was repaid with a portion of the proceeds from
the Series A Bonds.
(E)The adjustment represents the reduction in depreciation expense resulting
from the acquisition of Ford Credit's limited partnership interest in the
Rosemary Partnership. The acquisition was accounted for using the purchase
method of accounting. The excess of minority interest over the purchase
price (approximately $3,800) was allocated to plant and equipment.
Depreciation is recorded on a straight line basis and assumes a remaining
useful life of 20 years.
(F)The adjustment represents the removal of minority interest resulting from
the acquisition of Ford Credit's limited partnership interest in the
Rosemary Partnership.
(G)The adjustment represents the interest income from reserve balances at an
assumed average rate of 6.7%.
(H)The adjustment represents interest cost on $155,200 par value of Old Notes
(issued at a discount for proceeds of $145,025) at a yield of 14%, reduced
by the amount of such interest that is capitalized during construction of
the Luannan Facility, assuming full construction activity commenced on
January 1, 1996. The amount of capitalized interest is determined by
applying the interest rate to the weighted average balance of construction
in progress during the period.
(I)The adjustment represents amortization of estimated debt issue costs of
$6,824 from the issuance of the Old Notes over a life of 7 years to
maturity of the Old Notes, reduced by the amount of such amortization that
is capitalized during construction of the Luannan Facility. The amount of
capitalized amortization is determined by applying the percentage of total
interest cost which is capitalized during the period to the total
amortization for the period.
(J)The adjustment represents the application of the net proceeds from the
issuance of the Old Notes (after payment of debt issue costs) and from the
capital contributions by the County Partners in the Joint Ventures to fund
the Capitalized Interest Fund and the Debt Service Reserve Fund and to make
shareholder loans and equity contributions to the Joint Ventures.
(K)The adjustment represents the debt issue costs estimated to be incurred in
connection with the issuance of the Old Notes.
(L)The adjustment represents the gross proceeds from issuance of the Old
Notes.
(M)The adjustment represents the capital contributions by the County Partners
in the Joint Ventures.
SELECTED FINANCIAL DATA OF THE ISSUER
The following table sets forth selected consolidated financial data of the
Issuer as of December 31, 1994, 1995 and 1996 and March 31, 1996 and 1997, and
for the period from inception (July 20, 1994) through December 31, 1994, the
years ended December 31, 1995 and 1996, the three months ended March 31, 1996
and 1997 and the period from inception through March 31, 1997. Although the
Issuer was formed on March 10, 1997, a subsidiary of the Issuer, formed on July
20, 1994, is considered the Issuer's predecessor. The information presented
below, which reflects the operations of the predecessor, has been derived from
the Issuer's financial statements. Because the Issuer has been and continues to
be in the development stage since formation, it has no operating revenues.
Because the Issuer has no fixed charges, presentation of the ratio of earnings
to fixed charges is not applicable. The data should be read in conjunction with
the Issuer's financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Dollar amounts are presented in thousands.
<TABLE>
<CAPTION>
Period From Period From
Inception Year Ended Three Months Ended Inception
through December 31, March 31, through
December 31, ------------------- ----------------- March 31,
1994 1995 1996 1996 1997 1997
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (Unaudited) (Unaudited)
General and administrative expenses .............. $203 $444 $1,654 $266 $555 $2,856
---- ---- ------ ---- ---- ------
Net loss ................................ $203 $444 $1,654 $266 $555 $2,856
==== ==== ====== ==== ==== ======
<CAPTION>
December 31, March 31,
--------------------------------- ---------------------
1994 1995 1996 1996 1997
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (Unaudited)
Cash ......................................................... $ 101 $ 6 $ 506 $ 6 $ 6
Development costs ............................................ 428 1,059 3,292 1,550 6,614
----- ------- ------- ------- -------
Total assets .......................................... $ 529 $ 1,065 $ 3,798 $ 1,556 $ 6,620
===== ======= ======= ======= =======
Advances from Panda International ............................ $ 732 $ 1,712 $ 6,099 $ 2,468 $ 9,476
Shareholder's deficit ........................................ (203) (647) (2,301) (912) (2,856)
----- ------- ------- ------- -------
Total liabilities and shareholder's deficit ........... $ 529 $ 1,065 $ 3,798 $ 1,556 $ 6,620
===== ======= ======= ======= =======
</TABLE>
SELECTED FINANCIAL DATA OF THE COMPANY
(in thousands, except ratios)
Presented below are selected consolidated financial data for the Company as
of and for each of the years in the five-year period ended December 31, 1996,
and as of and for the three months ended March 31, 1996 and 1997, which have
been derived from the Company's financial statements. The selected 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 of the Company" and the consolidated
financial statements of the Company, including the notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31
------------------------------------------------------------ ----------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue: (Unaudited) (Unaudited)
Electric capacity and energy sales: ...... $ 29,537 $ 29,856 $ 30,664 $ 29,859 $ 32,274 $ 8,015 $ 17,330
Steam and chilled water sales ............ 624 618 650 473 502 122 130
Interest income .......................... 562 365 603 895 1,518 186 430
--------- --------- --------- --------- --------- --------- ---------
Total revenue ................... 30,723 30,839 31,917 31,227 34,294 8,323 17,890
EXPENSES:
Plant operating expenses ................. 7,534 7,676 8,940 9,348 12,050 2,442 8,261
Development and administrative expenses .. 1,608 2,434 1,779 2,550 5,187 803 2,395
Interest expense ......................... 11,478 11,066 11,018 11,716 19,414 3,185 10,802
Depreciation ............................. 4,177 4,282 4,208 4,210 5,532 1,053 2,949
Amortization-- Debt issuance costs ....... 436 502 600 554 494 141 174
Amortization-- Partnership formation costs 533 533 533 533 533 133 --
--------- --------- --------- --------- --------- --------- ---------
Total expenses .................. 25,766 26,493 27,078 28,911 43,210 7,757 24,581
Income (loss) before taxes and minority
interest ............................ 4,957 4,346 4,839 2,316 (8,916) 566 (6,691)
Minority interest ........................ (5,249) (5,474) (5,700) (5,048) (2,405) (1,719) --
Provision for income taxes ............... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary items . (292) (1,128) (861) (2,732) (11,321) (1,153) (6,691)
Extraordinary loss, net(1) ............... -- -- -- -- (21,336) -- --
--------- --------- --------- --------- --------- --------- ---------
Net loss ........................ $ (292) $ (1,128) $ (861) $ (2,732) $ (32,657) $ (1,153) $ (6,691)
========= ========= ========= ========= ========= ========= =========
OTHER DATA:
EBITDA ................................... $ 21,581 $ 20,729 $ 21,198 $ 19,329 $ 17,057 $ 5,078 $ 7,234
Ratio of earnings to fixed charges(2) .... 1.42x 1.38x 1.32x (2) (2) (2) (2)
<CAPTION>
DECEMBER 31, MARCH
------------------------------------------------------------ ----------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: (Unaudited) (Unaudited)
Cash and other current assets ............ $ 15,167 $ 14,084 $ 15,639 $ 11,339 $ 36,636 $ 16,807 $ 32,665
Power plant and equipment (net) .......... 96,529 93,815 96,136 220,145 268,725 242,466 269,532
Reserves and escrow deposits,
and other assets .................... 15,778 15,650 15,477 15,471 40,119 15,320 40,079
--------- --------- --------- --------- --------- --------- ---------
Total assets .................... $ 127,474 $ 123,549 $ 127,252 $ 246,955 $ 345,470 $ 274,593 $ 342,276
========= ========= ========= ========= ========= ========= =========
Current liabilities ...................... $ 9,735 $ 11,252 $ 12,531 $ 18,457 $ 19,667 22,823 $ 13,939
Long-term debt (including capital lease
obligation), less current portion ... 103,200 89,454 106,343 234,608 427,319 256,145 431,323
Minority interest ........................ 33,346 34,479 35,588 36,836 -- 38,233 --
Shareholder's deficit .................... (18,807) (20,636) (27,210) (42,946) (101,516) (42,608) (102,986)
--------- --------- --------- --------- --------- --------- ---------
Total liabilities and
shareholder's deficit ........ $ 127,474 $ 123,549 $ 127,252 $ 246,955 $ 345,470 $ 274,593 $ 342,276
========= ========= ========= ========= ========= ========= =========
</TABLE>
Notes (in thousands):
(1) In 1996, there was an extraordinary loss from early extinguishment of debt
of $21,336.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before minority interest, taxes and extraordinary
items plus fixed charges exclusive of capitalized interest. Fixed charges
consist of interest expense, capitalized interest and amortization of debt
issuance costs. Earnings were insufficient to cover fixed charges in 1995 by
$3,477, in 1996 by $19,971 and in the three months ended March 31, 1996 and
1997 by $2,271 and $6,691, respectively. In 1994, 1995 and 1996 and the
three months ended March 31, 1996, fixed charges included capitalized
interest of $803, $5,793, $11,055 and $2,837, respectively, related to the
Brandywine Facility. This capitalized interest was funded by additional
borrowings under the Brandywine construction loan facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE ISSUER
The Issuer's financial results of operations include no revenues and only
general and administrative expenses allocated from Panda International for
certain accounting, legal, insurance and consulting services. These expenses
increased in 1995 compared to the period in 1994 primarily due to twelve months
in 1995 versus less than six months in 1994 and the increased administrative
assistance in 1995 for performing these services. In addition, the increase in
these expenses for 1996 compared to 1995, and the increase for the three months
ended March 31, 1997 over the same period in 1996, is primarily due to the
increased administrative assistance consisting of legal and consulting services
performed to finalize certain agreements for the Luannan Facility.
Panda International also incurred development costs on behalf of the
Issuer. These development costs have been capitalized and primarily consist of
engineering, legal and other third-party costs directly related to the Luannan
Facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
(in thousands)
General
The Company operates two completed electric power generation facilities in
the United States: the Rosemary Facility, which began commercial operations in
December 1990 and is owned by an indirect subsidiary of the Company, and the
Brandywine Facility, which began commercial operations in October 1996 and is
leased under a long-term lease by an indirect subsidiary of the Company. The
Company also owns an approximately 83% indirect equity interest in the Luannan
Facility in China, for which preliminary construction activity commenced in
December 1996 and for which full construction activity commenced upon the
issuance of the Old Notes. The historical operating results of the Company
primarily represent the revenue and expenses of the Rosemary Facility. Certain
development expenses for the Rosemary Facility, the Brandywine Facility, the
Kathleen Facility and the Luannan 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 PIC 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 PIC Project
Portfolio (at Panda International's historical cost) only upon reaching
Financial Closing or achieving Commercial Operations and meeting the other
conditions for transfer to the PIC Project Portfolio pursuant to the PIC
Additional Projects Contract.
The consolidated historical and pro forma financial statements of the
Company included in this Prospectus reflect the financial data of the entities
that held interests in the Rosemary Facility, the Brandywine Facility, the
Kathleen Facility and the Luannan Facility during the periods presented. In
March 1997, these interests were transferred to the Company by Panda
International and recorded at Panda International's historical cost. The
Company was incorporated on March 7, 1997 and was not in existence during these
historical periods; however, the entities that currently own such interests are
indirect subsidiaries of the Company. Such entities are collectively the
predecessor entities of the Company. Thus, references herein to historical and
pro forma 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 information of the predecessor entities during the periods presented.
See "Description of the Projects," "Description of Other Indebtedness" and
Appendix B, "The Electric Power Industry in the PRC and the United States" for
a description of the Rosemary Facility, the Brandywine Facility and the Luannan
Facility and the various contracts, regulatory matters and financing
arrangements relating thereto.
Results of Operations
The Company's revenues from electric power generation are derived from
long-term contracts which include both a fixed capacity payment and a variable
energy payment. The capacity payments, which are based upon the specified power
generating capacity of a project, are designed to cover fixed costs and to
provide an acceptable return on equity. The energy payments, which are based on
actual electricity output, are designed to cover variable costs including fuel
costs and variable operating expenses incurred in connection with electricity
output. Accordingly, the impact of price fluctuations on the results of
operations is generally not material. The extent to which a facility is
dispatched (i.e., required to deliver electricity), and therefore the actual
electricity output for a given period, are subject to the discretion of the
power purchaser, with certain limitations. The capacity payments are the
predominant source of revenue for the Company. The Company believes that it can
meet its liquidity requirements solely from the capacity payments in the
unlikely event that its facilities are not dispatched at all. See "--Liquidity
and Capital Resources."
First Quarter 1997 compared to 1996
The Company recorded a net loss of $6,691 in the first quarter of 1997 on
revenues of $17,890 compared to net income before minority interest of $566 on
revenues of $8,323 during the same period in 1996. The increase in revenues in
the 1997 period was primarily caused by operations of the Brandywine Facility
(which commenced on October 31, 1996), partially offset by a decrease in
revenues at the Rosemary Facility, and by increased interest income. The 1997
period reflects operations of both the Rosemary and Brandywine facilities,
whereas the 1996 period includes only the Rosemary Facility. For the 1997 and
1996 periods, capacity revenues for the Rosemary Facility were $6,900 and
$7,418, respectively, reflecting a contractual decrease of $518. Energy
revenues for the Rosemary Facility for the 1997 and 1996 periods were $175 and
$597, respectively. The decrease in energy revenues for the Rosemary Facility
is attributable to lower dispatch hours at that facility compared to the 1996
period. During the first quarter of 1997, the Rosemary Facility was dispatched
42 hours as compared to 135 hours in the 1996 period. Capacity revenues and
energy revenues from Potomac Electric Power Company for the Brandywine Facility
for the first quarter of 1997 were $5,035 and $2,546, respectively. The
Brandywine Facility was dispatched 777 hours during this period. Additionally,
the Brandywine Facility had energy revenues of $2,674 from the sale of natural
gas and fuel oil to other purchasers. Plant operating expenses, which included
fuel cost, operation and maintenance expense, insurance and property taxes,
increased to $8,261 (46% of revenues) in the 1997 period from $2,442 (29% of
revenues) in 1996, primarily due to low margins obtained on the sale of natural
gas and fuel oil to other purchasers.
Project development and administrative expenses were $2,395 (13% of
revenues) and $803 (10% of revenues) for the 1997 and 1996 periods,
respectively. The increase in 1997 was primarily attributable to increased
development activity for the Luannan Project, additional administrative
activities related to the commencement of commercial operations at the
Brandywine Facility and higher administrative costs required to support the
increased size and complexity of the Company's operations.
Interest expense increased to $10,802 (60% of revenues) in the 1997
period from $3,185 (38% of revenues) in 1996 as a result of the increase in
outstanding indebtedness from the issuance of $111.4 million original principal
amount of first mortgage bonds for the Rosemary Facility (the "Rosemary
Bonds"), $105.5 million original principal amount of pooled project bonds
("Series A Bonds"), and the capital lease financing for the Brandywine
Facility. The impact of such new indebtedness was partially offset by the
refinancing of the taxable revenue bonds issued in 1989 for the Rosemary
Facility and the repayment of other term loan financing on July 31, 1996 from
portions of the proceeds of the Rosemary Bonds and the Series A Bonds.
Depreciation, amortization of debt issue costs and amortization of
partnership formation costs amounted to $3,122 (17% of revenues) in the 1997
period and $1,327 (16% of revenues) in 1996. The increase was primarily
attributable to depreciation for the Brandywine Facility in 1997.
For the 1996 period, minority interest in net income was $1,719. There is
no minority interest in 1997 due to the Company's acquisition on July 31, 1996
of the minority interest holder's limited partnership interest in Panda-
Rosemary. As a result of this acquisition, the Company owns 100% of Panda-
Rosemary.
As a result of the various factors discussed above, the Company recorded
net losses of $6,691 and $1,153 for the 1997 and 1996 periods, respectively.
1996 compared to 1995
The Company recorded a net loss before taxes, minority interest and
extraordinary item of $8,916 in 1996 on revenues of $34,294 compared to net
income before taxes and minority interest of $2,316 on revenues of $31,227 in
1995. The 10% increase in revenues was primarily caused by the commencement of
commercial operations at the Brandywine Facility on October 31, 1996 and by
increased interest income. For 1996 and 1995, capacity revenues were $27,204
in both periods and energy revenues were $5,070 and $2,655, respectively.
Capacity revenues for the Brandywine Facility commenced in January 1997;
accordingly, capacity revenues for 1996 and 1995 relate only to the Rosemary
Facility. The increase in energy revenues is attributable to operations of the
Brandywine Facility for the last two months of 1996, partially offset by a
decrease in energy revenues at the Rosemary Facility which resulted from lower
dispatch hours at that facility compared to 1995. During 1996, the Rosemary
Facility was dispatched 635 hours as compared to 2,224 hours in 1995, resulting
in a decrease in energy revenues from that facility of $644. (The number of
dispatched hours in 1995 was unusually high, as explained below.) Plant
operating expenses, which included fuel cost, operation and maintenance
expense, insurance and property taxes related to the Rosemary Facility (and the
Brandywine Facility commencing October 31, 1996), increased from $9,348 (30% of
revenues) in 1995 to $12,050 (35% of revenues) during the same period in 1996,
primarily due to the inclusion of the costs of operating the Brandywine
Facility for two months in 1996. Because the Brandywine Facility earned no
capacity revenues during its period of operation in 1996, plant operating
expenses (and all other categories of expenses) were higher than normal as a
percentage of revenues. Another significant cause of the increased plant
operating expenses was the insurance deductible and other non-covered costs of
approximately $700 relating to hurricane damage sustained in September 1996 at
the Rosemary Facility as discussed below. Other factors contributing to the
increase in plant operating expenses at the Rosemary Facility included
additional scheduled maintenance costs and the fuel cost increases relating to
increased operation of the auxiliary boiler for steam and chilled water
production.
Project development and administrative expenses were $2,550 (8% of
revenues) and $5,187 (15% of revenues) for 1995 and 1996, respectively. The
increase in 1996 was primarily attributable to increased development activity
on the Luannan Facility and the commencement of commercial operations at the
Brandywine Facility on October 31, 1996.
Interest expense increased from $11,716 (38% of revenues) in 1995 to
$19,414 (57% of revenues) in 1996 as a result of the increase in outstanding
indebtedness under the TCW term loan which was partially offset by the
scheduled reduction in outstanding indebtedness under the taxable revenue bonds
issued in 1989 for the Rosemary Facility, and as a result of the increase in
outstanding indebtedness from the issuance of the Rosemary Bonds and the Series
A Bonds on July 31, 1996. The impact of such new indebtedness was partially
offset by the refinancing of the taxable revenue bonds issued in 1989 for the
Rosemary Facility and the repayment of the TCW term loan on July 31, 1996.
Additionally, commencement of commercial operations at the Brandywine Facility
resulted in the recognition of interest expense on the related debt for the
last two months of 1996. Prior to commercial operations, interest on the
Brandywine debt was capitalized.
Depreciation, amortization of debt issue costs and amortization of
partnership formation costs increased from $5,297 (17% of revenues) in 1995 to
$6,559 (19% of revenues) in 1996. The increase was primarily attributable to
the commencement of commercial operations at the Brandywine Facility on October
31, 1996.
On September 6, 1996, a transformer and two switches at the Rosemary
Facility sustained damage from a hurricane. A substitute transformer was
temporarily installed pending repair of the damaged transformer, which was
substantially completed during the first quarter of 1997. The Company
estimates the total cost to repair the Rosemary Facility (including substitute
transformer rental costs) at approximately $2,450, all of which is covered by
insurance except for deductible and certain non-covered items in the amount of
approximately $700. The impact on revenues was not material. Management
believes that this event will not have a material adverse effect on the
Company's financial condition or results of operations.
For 1996 and 1995, minority interest in net income was $2,405 and $5,048,
respectively. The decrease in 1996 was due to lower net income (before
minority interest and extraordinary item) in the Rosemary Partnership and the
acquisition on July 31, 1996 of the minority interest holder's limited
partnership interest as discussed below.
In connection with the issuance of the Rosemary Bonds and the Series A
Bonds, the Company refinanced the taxable revenue bonds issued in 1989 for the
Rosemary Facility and repaid the TCW term loan. The Company incurred an
extraordinary loss of $21,336 on the early extinguishment of these obligations.
Additionally, the Company acquired the minority interest holder's limited
partnership interest in the Rosemary Partnership for a purchase price of
approximately $34,256. As a result of this acquisition, the Company owns 100%
of the Rosemary Partnership. The acquisition was accounted for using the
purchase method of accounting. The excess of minority interest over the
purchase price (approximately $3.8 million) was allocated to plant and
equipment. Additionally, the Company advanced approximately $34,779 to Panda
International for project development and general corporate purposes.
As a result of the various factors discussed above, the Company recorded
net losses of $32,657 and $2,732 for 1996 and 1995 respectively.
1995 compared to 1994
The Company recorded income before taxes and minority interest of $2,316
on revenues of $31,227 in 1995 compared to $4,839 on revenues of $31,917 in
1994. The decrease in revenues was primarily the result of a scheduled
contractual decrease in capacity payments of $1,526, which was partially offset
by additional income generated due to an increase in the number of hours the
Rosemary Facility was dispatched by VEPCO and an increase in interest income.
The 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 1995 and 1994, capacity revenues were $27,204
and $28,730 and energy revenues were $2,655 and $1,934, respectively. For
approximately 1,200 of the dispatch hours in 1995, the Rosemary Facility used
natural gas provided directly by VEPCO under a special fueling arrangement
provided for in the Rosemary Power Purchase Agreement. The Rosemary Facility's
margin on energy sales is lower when VEPCO supplies natural gas for the
Rosemary Facility than when the Rosemary Facility is dispatched under normal
energy pricing terms. However, overall margins at the Rosemary Facility are
increased in such circumstances (relative to not operating at all) by the
ability to provide steam and chilled water from the steam turbine offtake,
which reduces the operating costs of the auxiliary boilers.
Plant operating expenses, which included fuel cost, operations and
maintenance expense, insurance and property taxes related to the Rosemary
Facility, were $9,348 (30% of revenues) in 1995 as compared to $8,940 (28% of
revenues) in 1994, primarily due to additional maintenance expenses and fuel
related costs incurred due to the increase in the number of hours the Rosemary
Facility was dispatched by VEPCO. Project development and administrative
expense increased from $1,779 (6% of revenues) in 1994 to $2,550 (8% of
revenues) in 1995 primarily due to additional administrative expenses relating
to construction of the Brandywine Facility and development of the Luannan
Facility.
Interest expense was $11,716 (38% of revenues) in 1995 compared to $11,018
(35% of revenues) in 1994. The increase in 1995 was attributable to additional
borrowings. Depreciation, amortization of debt issue costs and amortization of
partnership formation costs were stable and collectively amounted to 17% of
revenues in 1995 and 1994.
In 1995, the Company recorded a net loss of $2,732 as compared to a net
loss of $861 in 1994. An allocation of $5,048 was made in 1995 for minority
interest, a decrease of $652 from 1994 as a result of the overall decrease in
net income of the Rosemary Partnership.
1994 compared to 1993
The Company's 1994 income before taxes and minority interest was $4,839 on
revenues of $31,917, compared to $4,346 on revenues of $30,839 in 1993. The
increase in revenues was primarily due to increased energy sales in 1994, as
compared to 1993, as a result of the Rosemary Facility being dispatched
approximately 764 hours in 1994 compared to 324 hours in 1993. For 1994 and
1993, capacity revenues were $28,730 and $28,888 and energy revenues were
$1,934 and $968, respectively. In addition, interest income increased slightly
in 1994 as short-term interest rates were higher than 1993 levels.
Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes related to the Rosemary
Facility, increased to $8,940 (28% of revenues) in 1994 from $7,676 (25% of
revenues) in 1993. The increase was primarily a result of increased fuel and
maintenance costs related to the increase in the number of hours the Rosemary
Facility was dispatched by VEPCO and a $257 increase in tariff rates for firm
transportation on the Transco pipeline through which gas is transported to the
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 Rosemary Facility. The amendment to the
formula resulted in lower energy margins in the spring, summer and fall
periods, when the 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.
Project development and administrative expenses decreased from $2,434 (8%
of revenues) in 1993 to $1,779 (6% of revenues) in 1994. The higher level of
such expenses in 1993 was primarily due to preliminary development costs
incurred in connection with the Brandywine Facility.
Interest expense was $11,018 (35% of revenues) in 1994 compared to $11,066
(36% of revenues) in 1993. Depreciation, amortization of debt issue costs and
amortization of partnership formation costs were stable and collectively
amounted to 17% of revenues in 1994 and 1993.
The Company recorded a net loss of $861 in 1994 as compared to a net loss
of $1,128 in 1993. The allocation for minority interest in 1994 was $5,700, an
increase of $226 from 1993 as the Rosemary Partnership's net income increased
slightly.
Liquidity and Capital Resources
To date, the Company and its subsidiaries have obtained cash from
operations of the Rosemary Facility and the Brandywine Facility, borrowings
under non-recourse project debt of the Rosemary Partnership and the Brandywine
Partnership, and the proceeds from the sale of the Series A Bonds. The Company
and its subsidiaries utilized this cash to refinance and acquire a 100%
interest in the Rosemary Facility, fund development and construction of the
Brandywine Facility, service their debt obligations, make distributions to
Panda International to fund Project development efforts and for general and
administrative expenses.
The principal future cash requirements of PIC will be the payment of its
obligations under the PIC Notes, thus enabling the issuer of the Series A
Bonds, a subsidiary of PIC, to satisfy its obligations under the Series A Bonds
and any future series of PFC Bonds. Semi-annual principal and interest payments
on the PIC Note that was issued in connection with the issuance of the Series A
Bonds totaled $7.0 million on February 20, 1997 and are expected to total $6.1
million on each August 20 and February 20 through February 20, 1999, after
which time scheduled payments will increase as more significant principal
amortization begins. The amount of principal payments generally increases over
time. See "Description of Other Indebtedness--The PFC Bonds."
The principal future cash requirements of the Issuer will be the payment
of the Exchange Notes. The Issuer expects to receive income sufficient for it
to satisfy its obligations under the Exchange Notes from the repayment of the
loan of the net proceeds of the Exchange Notes to Pan-Western and from
dividends from PIC.
Because substantially all of the Issuer's and the Company's operations are
conducted through their Project subsidiaries, the Issuer and the Company should
have no significant direct operating or administrative expenses. Panda
International performs certain accounting, legal, insurance and consulting
services for the Issuer and the Company. The cost of these services is
allocated to the Issuer and the Company through an intercompany charge.
The Company will rely almost exclusively on distributions from the Issuer
and PIC to meet its cash requirements. The ability of the Issuer and PIC to
make such distributions will depend upon the financial performance of the
Luannan Facility, the Rosemary Facility, the Brandywine Facility and any other
Project that may be added in the future to the PIC Project Portfolio and will
be subject to a number of limitations on distributions contained in the Project-
level debt agreements, the indenture relating to the PFC Bonds and the
Indentures.
The Issuer and the Company own an indirect equity interest in the Luannan
Facility, which has commenced construction. The Issuer expects that, upon the
successful completion of the Luannan Facility, the funds the Issuer derives
from the repayment of the loan to Pan-Western will constitute the majority of
the funds available to the Issuer to satisfy its obligations under the Exchange
Notes.
The Company also owns indirect equity interests in two operating Projects,
the Rosemary Facility and the Brandywine Facility. The majority of the
distributions available from the Rosemary Partnership and the Brandywine
Partnership are required to be used to service the Rosemary Bonds, to pay rent
with respect to the lease financing of the Brandywine Project and to service
the Series A Bonds; any funds available after paying all of such obligations
then due will be required to be paid by PIC as distributions to PEC, which
will, in turn, be required to pay such amounts to the Company, and will be
available to the Company to pay its obligations on the Exchange Notes, if
necessary.
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 and the Issuer adopted SFAS 121 in 1996 and such
adoption did not have a material impact on their financial position or results
of operations.
Impact of Inflation
Inflationary increases in the Issuer's and 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 ability of the Issuer and its subsidiaries
to recover fully all such increases. The Issuer, the Company and their
affiliates attempt, where possible, to obtain provisions in their 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 Issuer's or
the Company's financial position over the long-term.
THE EXCHANGE OFFER
Purpose and Effects of the Exchange Offer
The Old Notes were issued and sold by the Issuer on April 22, 1997 to the
Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently placed the Old Notes with Qualified Institutional 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 60 days after the Issue Date, (ii) to use
their best efforts to cause such registration statement to become effective no
later than 150 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 Notes the opportunity to exchange their Old Notes for a like principal
amount of Exchange Notes. This Registration Statement is intended to satisfy
the foregoing obligations of the Company and the Issuer under the Registration
Rights Agreement. See "Description of the Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the Shareholder Loans and the Collateral Documents-
- -Old Notes Registration Rights."
Following the consummation of the Exchange Offer, any holder of Old Notes
(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 Notes
pursuant to the Exchange Offer will not have any further registration rights
under the Registration Rights Agreement and its Old Notes will continue to be
subject to certain restrictions on transfer. See "Termination of Certain
Rights" and "Transfer Restrictions on Old Notes" below and "Risk Factors --
Consequences of Failure to Exchange Old Notes." Accordingly, the liquidity of
the market, if any, for any Old Notes 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 Issuer believes that Exchange Notes
issued in exchange for Old Notes 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 Notes 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 Notes. To comply
with the securities laws of certain jurisdictions, if applicable, the Exchange
Notes 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 Notes for its own account
in exchange for Old Notes, where such Old Notes 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 Notes. See "--Resales of Exchange Notes" below and
"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 Notes for each $1,000 principal amount of
outstanding Old Notes. As of the date of this Prospectus, $155,200,000
principal amount of the Old Notes is outstanding. The Exchange Notes will bear
interest from the date of their issuance. Interest on the Old Notes accepted
for exchange will accrue thereon to, but not including, the date of issuance of
the Exchange Notes and will be paid together with the first interest payment on
the Exchange Notes issued in exchange therefor.
The form and terms of the Exchange Notes will be identical to the form and
terms of the Old Notes, except that (i) the Exchange Notes 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 Notes will not be entitled to certain rights of the holders of
Old Notes under the Registration Rights Agreement, which will terminate as to
Old Notes tendered pursuant to the Exchange Offer upon the consummation of the
Exchange Offer. Such rights will also terminate as to holders of Old Notes who
are eligible to tender their Old Notes for exchange in the Exchange Offer but
fail to do so. See "Termination of Certain Rights" below and "Description of
the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the the
Shareholder Loans and the Collateral Documents--Old Notes Registration Rights."
The Exchange Notes will evidence the same debt as the Old Notes which they
replace and will be issued under, and be entitled to the same benefits as the
Old Notes pursuant to, the Indenture. See "Description of the Exchange Notes,
the Exchange Notes Guarantee, the Issuer Loan, the Shareholder Loans and the
Collateral Documents".
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 Notes 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 Notes 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 Notes for the purposes of receiving the Exchange Notes
from the Issuer. The Exchange Notes will be delivered as soon as practicable
after acceptance of the Old Notes, 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 Notes
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 Notes. Holders of Old Notes 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 Notes 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 Notes that
remain outstanding subsequent to the Expiration Date, and to the extent
permitted by applicable law, purchase Old Notes 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 Notes do not have any appraisal or dissenters' rights under
the Companies Law (Revised) of the Cayman Islands or the Exchange Note
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 ___________________, 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 Notes
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 Notes, (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 Notes, 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 Notes. Any amendment applicable to the Exchange Offer
will apply to all Old Notes tendered in the Exchange Offer, regardless of when
or in what order the Old Notes 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 Notes 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 Notes. 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 Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(i) 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 Issuer or any of its subsidiaries or affiliates;
(ii) any change, or any development involving a prospective change, in
the business or financial affairs of the Issuer 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;
(iii) 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;
(iv) 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;
(v) 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
(vi) 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 Notes in exchange for Exchange Notes.
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 Notes being tendered.
Procedures for Tendering
Only a registered holder of the Old Notes may tender such Old Notes 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 Notes 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 Notes, 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 NOTES 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 NOTES SHOULD BE SENT TO
THE ISSUER OR THE COMPANY.
Any beneficial owner whose Old Notes 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 to Registered Holder from Beneficial Owner" included with the
Letter of Transmittal.
Signatures on a Letter of Transmittal must be guaranteed unless the Old
Notes tendered pursuant thereto are (i) tendered by a registered holder of the
Old Notes 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, or by an entity that is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes 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 Notes. If the Letter of
Transmittal is signed by the registered holder and (a) the entire principal
amount of the holder's Old Notes is tendered or (b) untendered Old Notes are to
be issued to the registered holder, then the registered holder need not endorse
any certificates for tendered Old Notes or provide a separate bond power. In
any other case, the registered holder must transmit a separate bond power with
the Letter of Transmittal.
If the Letter of Transmittal or any Old Notes 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 Notes
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 Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account at
DTC. Although delivery of Old Notes 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 Notes 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 Notes. 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
Notes 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 Notes 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 Notes will represent to the
Issuer that, among other things, (i) the Exchange Notes to be acquired by the
holder and any beneficial owner(s) of such Old Notes ("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 Notes, (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 Notes, (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 Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes 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 Notes,"
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 Notes for
its own account in exchange for Old Notes, where such Old Notes 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 Notes. See "--Resales of Exchange Notes"
below and "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 Notes desires to tender such Old Notes and if the Old
Notes are not immediately available, or time will not permit such holder's Old
Notes 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:
(i) the tender for exchange is made by or through an Eligible
Institution;
(ii) 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 Notes and the principal
amount of Old Notes tendered for exchange, stating that tender is
being made thereby and guaranteeing that, within three Business Days
after the Expiration Date, the duly executed Letter of Transmittal
(or facsimile thereof), properly completed and validly executed,
together with the Old Notes in proper form for transfer (or
confirmation of book-entry transfer of such Old Notes 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
(iii)such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of
book-entry transfer of such Old Notes 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 Notes according to the
guaranteed delivery procedures set forth above.
Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon the terms and subject to the conditions of the Exchange Offer, the
Issuer will accept on the Expiration Date all Old Notes properly tendered in
the Exchange Offer and not withdrawn and will issue the Exchange Notes as soon
as practicable after the acceptance of the Old Notes. The Exchange Notes will
be issued in the form of a fully registered global bond which will be deposited
with, or on behalf of, DTC and registered in the name of its nominee. Holders
tendering Old Notes represented by a certificate must provide the Exchange
Agent with a DTC account number for delivery of the Exchange Notes issued in
exchange therefor. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted properly tendered Old Notes 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 Notes for the purpose
of receiving the Exchange Notes from the Issuer and transmitting the Exchange
Notes to each holder exchanging Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein, the
withdrawal of tendered Old Notes under circumstances permitting such withdrawal
as described herein or otherwise, or if Old Notes are submitted for a greater
principal amount than the holder thereof desires to exchange, any such
unaccepted or non-exchanged Old Notes will be returned, without expense, to the
tendering holder thereof (or, in the case of the Old Notes 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 Notes may be withdrawn at any time prior to the Expiration
Date. Thereafter, such tenders are irrevocable. To withdraw a tender of Old
Notes 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 Notes 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 Notes
to be withdrawn and (iv) specify the aggregate principal amount represented by
such withdrawn Old Notes. If Old Notes 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 Notes. Withdrawals of tenders of Old Notes may
not be rescinded, and any Old Notes withdrawn will thereafter be deemed not
validly tendered for purposes of the Exchange Offer; provided, however, that
withdrawn Old Notes may be re-tendered by again complying with the procedures
for tendering Old Notes 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 Notes or
incur any liability for failure to give any such notification.
Lost or Missing Certificates
If a holder of Old Notes desires to tender Old Notes pursuant to the
Exchange Offer, but such Old Notes have been mutilated, lost, stolen or
destroyed, such holder should telephone the Trustee at (800) 735-7777 for
information concerning the procedures for obtaining replacement certificates
for such Old Notes, arranging for indemnification or any other matter that
requires handling by the Trustee.
Termination of Certain Rights
Holders of Old Notes 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 Notes in exchange for Old Notes 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 Notes in the Exchange Offer and all holders who are eligible to
participate in the Exchange Offer and fail to do so. See "Description of the
Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the Shareholder
Loans and the Collateral Documents--Old Notes Registration Rights."
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):
Facsimile Transmission:
(615) 835-3701
Confirm by Telephone:
(615) 835-3572
By Overnight Courier
By Mail: By Hand Delivery: or Certified Mail:
BT Services Tennessee, Bankers Trust Company BT Services Tennessee,
Inc. Inc.
Reorganization Unit Corporate Trust & Agency Corporate Trust & Agency
Group Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Unit
Nashville, TN 37229- 123 Washington Street, 1st 648 Grassmere Park Road
2737 Floor
New York, NY 10006 Nashville, TN 37211
For Information Call:
(800) 735-7777
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 $260,000. 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 transfer
of Old Notes to it pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the transfer of Old Notes to the Issuer
pursuant to the Exchange Offer (including, without limitation, any transfer
taxes imposed as a result of the Exchange Notes or Old Notes not exchanged
being delivered to, or issued in the name of, any person other than the record
holder, or certificates being tendered that are recorded in the name of a
person other than the person signing the Letter of Transmittal), 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 Notes will be recorded at the carrying value of the Old
Notes, 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 Notes
The Old Notes that are not exchanged for Exchange Notes 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 Notes may be resold only (i) to
the Issuer (upon redemption thereof or otherwise), (ii) so long as the Old
Notes 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 Exchange Notes
With respect to resales of the Exchange Notes, 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, the Issuer or Panda Interholding) who exchanges Old
Notes for Exchange Notes will be allowed to resell the Exchange Notes acquired
in the Exchange Offer to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 thereof; provided that
(i) the Exchange Notes 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 Notes
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 Notes. In addition, each broker-dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market making activities or other
trading activities, must notify the Company and the Issuer that it has acquired
Exchange Notes for its own account (which notification must be made in the
applicable location in the Letter of Transmittal) and must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, 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 Notes 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 TAX CONSIDERATIONS OF THE EXCHANGE OFFER
United States Federal Income Taxation
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 Notes. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions, broker-
dealers, foreign corporations 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 Notes for the Old Notes pursuant to the
Exchange Offer should not be treated as an "exchange" for United States federal
income tax purposes because the Exchange Notes should not be considered to
differ materially in kind or extent from the Old Notes. The Exchange Notes
received by a holder should be treated as a continuation of the Old Notes 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 Notes for the
Exchange Notes pursuant to the Exchange Offer. If, however, the exchange of
the Old Notes for the Exchange Notes 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 Notes 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.
Certain Cayman Islands Tax Considerations
On the basis of the current legislation in the Cayman Islands, there is no
income, corporation, profits, capital gains or other form of taxation that
would be applicable to any holder of Old Notes who exchange such Old Notes for
Exchange Notes pursuant to the Exchange Offer (provided such holder does not
engage in trade in the Cayman Islands).
Certain PRC Taxation Considerations
The Issuer has been advised by Cai, Zhang & Lan, PRC legal counsel to the
Issuer, that there is no liability on the part of a Non-PRC holder of Old Notes
who exchanges such Old Notes for Exchange Notes pursuant to the Exchange Offer
for any income or withholding tax owing to the PRC, any provincial government
or any subdivision thereof.
DESCRIPTION OF THE PROJECTS
The following discussion provides certain summary information concerning
the Luannan Facility, the Rosemary Facility and the Brandywine Facility.
The Luannan Facility
The Luannan Facility will be comprised of two steam/electric generating
units, each nominally rated at 50 MW but with nameplate capability of up to 60
MW gross output under full condensing conditions. Two pulverized coal-fired
boilers, each delivering steam to drive a three stage extraction/condensing
steam turbine electric generating unit, will be utilized. Coal will be
delivered by truck to the site of the Luannan Facility from nearby mines.
Electric power generated by the Luannan Facility will be interconnected to the
local electricity grid network at 110 kV. In addition, steam will be extracted
from the steam turbines for distribution by pipeline to local industrial and
commercial users and also used to heat water for district heating use.
Electrostatic precipitators will be provided down stream of the boilers to
remove fly ash from the boiler flue gas. The fly ash will be mixed with water
and pumped by way of pipeline to an off-site dedicated ponding site for
disposal.
Sales of Power
The Luannan Facility will sell power to North China Power Company pursuant
to the Luannan Power Purchase Agreement. North China Power Company functions as
the commercial arm of North China Power while North China Power Administration
("NCPA") functions as the regulatory entity of the same group. North China
Power, which reports directly to MOEP, owns and operates the North China Power
Grid. The service area of North China Power encompasses four regions, including
the Beijing/Tianjin/Tangshan area. Beijing and Tianjin are among the largest
and most economically developed cities in China. The service area of North
China Power also includes Hebei Province, Shanxi Province and western Inner
Mongolia. North China Power owns most of the major power plants within its
service area and is reported to have had a total installed capacity of 25,140
MW in 1995 and to have generated power of 126.7 TWh in 1995. As both a
government and a commercial entity, North China Power regulates, manages and
owns the power assets in its territory including generation and distribution
facilities. The geographical extent of its service area makes North China Power
one of the largest power operating entities in China. The financial statements
of North China Power included in its 1995 annual report (which were prepared in
accordance with Chinese accounting principles) indicated total assets of North
China Power (excluding assets in Inner Mongolia) of RMB 70 billion ($8.4
billion) as of December 31, 1995, and revenue of approximately RMB 27.2 billion
($3.3 billion) (excluding its revenue generated from Inner Mongolia) for the
year then ended. North China Power also reported that it is ranked as one of
the top three government-owned enterprises (in terms of revenues) in China.
The Luannan Power Purchase Agreement is a 20-year agreement. The
electricity price is established through a formula provided in the Pricing
Document (which is separate from, but incorporated by reference in, the Luannan
Power Purchase Agreement). According to the formula contained in the Pricing
Document, the power price will be comprised of fixed and variable components
that may be adjusted, subject to the approval of the Pricing Approval Authority
to reflect changes in coal costs, depreciation of plant and equipment and
financing expenses. Certain components of the power price calculation may be
adjusted to reflect local and U.S. inflation and foreign exchange rate
fluctuation in order to mitigate the Luannan Facility's exposure to inflation
and currency risks. Although it is anticipated that the Luannan Facility will
apply annually for changes in rates, under the Luannan Power Purchase Agreement
it has the right to request a determination of a new power price whenever it
determines that changes in the price components require a new determination.
There are pass-through provisions in the pricing formula for increases or
decreases in the cost of coal against an index cost that is stipulated in the
Pricing Document, and the pricing formula also has provisions for pass-through
or make-whole calculations relating to certain construction capital cost items.
The tariff is paid in Renminbi and is required to be paid every 30 days by
North China Power Company. See "Risk Factors--Considerations Relating to the
PRC--Government Regulation of Power Rates."
Sales of Steam
The Issuer and the Company believe that the Luannan Facility will sell
approximately 349,680 tons per year of steam for process and the equivalent of
approximately 362,518 GJ/year of steam for heating to certain Luannan County
enterprises and local industries under several Luannan Heat Supply Contracts.
The Issuer believes that the Luannan Facility will be the single largest,
centralized heat supplier in Luannan County.
Engineering, Procurement and Construction Contract
Through competitive bidding, Harbin Power Engineering Company Limited (the
"Luannan EPC Contractor") has been selected as the engineering, procurement and
construction contractor for the Luannan Facility. The Luannan EPC Contractor
has extensive engineering, procurement and construction experience in the power
industry in the PRC and other countries. Chinese-manufactured equipment and
materials and Chinese labor will be utilized to the maximum extent possible in
order to lower the costs of the Luannan Facility and the sale price of
electricity.
The Luannan EPC Contract provides for a retainage of 10% of the Luannan
EPC Contract price until the completion of punch list items and other
deficiencies in accordance with the Luannan EPC Contract. The Luannan EPC
Contract also provides for liquidated damages or termination payments in a
maximum amount of 35% of the original Luannan EPC Contract Price. The CHEXIM
Guarantee is required under the Luannan EPC Contract and has been provided by
CHEXIM in respect of the Luannan EPC Contractor's obligations under the Luannan
EPC Contract to pay liquidated damages or termination payments in a maximum
amount of 35% of the original Luannan EPC Contract Price. In addition, Harbin
Power Equipment Company, a PRC company ("Harbin Power"), the parent company of
the Luannan EPC Contractor, has provided the Luannan EPC Guarantee for the
benefit of two of the Joint Ventures guaranteeing the payment and performance
of the Luannan EPC Contractor under the Luannan EPC Contract.
The Luannan EPC Contractor is a wholly-owned subsidiary of Harbin Power.
Harbin Power, a PRC company listed on the Hong Kong Stock Exchange, was
established in October 1994 through the restructuring of Harbin Power Plant
Equipment Group Corporation. Harbin Power, together with its subsidiaries, is
one of the largest manufacturers of power plant equipment in China. In 1995,
the annual designed production capacity of the facilities constructed by the
Luannan EPC Contractor and its affiliates was 3,000 MW of thermal power and
1,000 MW of hydro power. Harbin Power and its subsidiaries also provide a range
of engineering services for power stations, including turnkey construction of
power plants and the provision of engineering and technical advisory services.
Harbin Power's products have been exported to Pakistan, the Philippines, Canada
and other countries.
Export-Import Bank of China
CHEXIM was established in April 1994 by the State Council with the
sponsorship of the Ministry of Finance, the People's Bank of China and the
Ministry of Foreign Trade and Economic Cooperation of the PRC ("MOFTEC") as one
of the three policy banks in China. The principal business of CHEXIM includes,
under the direction of the PRC government, providing export and import credit
(including sellers' and buyers' credits) for the export and import of all
machinery and equipment, electric power products and equipment, providing
export insurance, export guarantees and export and import insurance and
undertaking any business approved and entrusted to it by relevant government
authorities of the PRC. At the end of 1995, CHEXIM's owner's equity amounted to
approximately RMB 138.0 million. CHEXIM extended sellers' credit loans of RMB
5.6 billion in 1995. Although CHEXIM has received from its inception various
subsidies, capital infusions and other forms of support, including the
adjustment of interest rates charged on loans made by CHEXIM, CHEXIM has
attempted to implement systems to achieve financial independence. Such systems
include the provision of bad loan reserves and the charging of insurance
premiums on loans made. Senior unsecured debt of CHEXIM currently has a debt
rating of A3 by Moody's.
Heat Network Construction
Two of the Joint Ventures entered into a construction agreement (the "Heat
Network Construction Agreement") on June 20, 1996 under which Tangshan
Engineering will build the heat and steam network of Luannan Heat and Power
(the "Network"). Under this agreement, the cost for construction of the
Network, which will consist of 12.1 kilometers of hot water pipeline, 8.78
kilometers of steam pipeline, heat exchange stations, heat control equipment
and civil construction, is approximately RMB 24.2 million ($2.9 million),
subject to escalation by the Chinese State Statistic Bureau Price Index.
Transmission Facilities Construction
North China Power Company has entered into the Luannan Transmission
Facilities Construction Agreement with one of the Joint Ventures for the
design, construction, interconnection, operation and maintenance of the Luannan
Transmission Facilities. One of the Joint Ventures has agreed to provide the
Luannan Transmission Facilities Loan through a financial intermediary in the
PRC to finance the construction of the Luannan Transmission Facilities. The
amount of such funds, which was specified at the U.S. dollar equivalent of
RMB 78.2 million (which as of April 4, 1997, would have been approximately $9.4
million), will be adjusted to reflect inflation in the PRC from December 31,
1994 to the date of issuance of the notice to North China Power Company to
proceed with preliminary design in order for such funds to be sufficient to
cover the construction cost of the Luannan Transmission Facilities. The Luannan
Transmission Facilities will be comprised of three newly constructed
substations, upgrades to both an existing substation and an existing switching
station and approximately 43 kilometers of new 110 kV transmission lines to
interconnect the Luannan Facility to the Jing-Jin-Tang Grid. In accordance with
the Luannan Transmission Facilities Construction Agreement, North China Power
Company has guaranteed that it will complete the construction of the Luannan
Transmission Facilities to receive the total electrical output of the Luannan
Facility within 18 months of receiving its notice to proceed.
Operations and Maintenance
Pursuant to the Luannan O&M Contract, operations and maintenance services
for the Luannan Facility will be provided by the Luannan O&M Contractor,
Duke/Fluor Daniel International Services. The Luannan O&M Contract provides for
a recovery of costs by the Luannan O&M Contractor plus incentive payments based
upon the performance of the Luannan Facility. The Luannan O&M Contractor is a
general partnership formed in 1994 by affiliates of Duke Power Company and
Fluor Corporation for the purposes of providing services to the solid fuel
power generation market. The Luannan O&M Contractor is actively engaged in the
operation and maintenance of electric generation facilities throughout the
world. Pursuant to the Luannan O&M Contract, almost all of the personnel will
be trained PRC technicians who will work under close supervision of the O&M
committees of the Joint Ventures and the Luannan O&M Contractor's managers.
Coal Supply
The Issuer expects that the Luannan Facility will use approximately
450,000 metric tons of coal per year. The principal fuel supply for the Luannan
Facility will come from the Qianjiaying Mine, which is owned and operated by
Kailuan Coal and is located 30 kilometers from the Luannan Facility. Kailuan
Coal, a state-owned coal mining company, has 5.0 billion metric tons of coal
reserves in the Tangshan area and produces approximately 18 million metric tons
of coal per year. The Qianjiaying Mine produced 3.67 million metric tons of
coal in 1996. Kailuan Coal has committed to supply up to 300,000 metric tons
per year of coal from the Qianjiaying Mine to the Luannan Facility for ten
years. Two of the Joint Ventures have also entered into coal supply agreements
with five other local coal mines (collectively with Kailuan Coal Mining
Administration, the "Luannan Coal Suppliers") to secure up to an additional
310,000 metric tons of coal per year for ten years. The Issuer and the Joint
Ventures believe that the foregoing fuel supply arrangements, at the end of
such ten-year period, can be extended, renewed or replaced.
Environmental Matters
Similar to electric power generation facilities in other countries, the
Luannan Facility is generally required by PRC environmental laws and
regulations to comply with a number of regulations relating to the health and
safety of personnel and the public. An environmental assessment study has been
conducted by Hebei Provincial Metallurgy and Energy Environmental Protection
Research Institute in compliance with Chinese environmental protection
standards. Based on this study, the Joint Ventures believe that the equipment
installed and technology employed in the Luannan Facility will be in compliance
with the relevant PRC environmental laws and regulations.
Governmental Approvals
Cai, Zhang & Lan, Chinese counsel to the Issuer and the Joint Ventures,
has advised the Company that all required governmental approvals have been
obtained with respect to the formation of the Joint Ventures based on the
opinion of its Chinese counsel and advice from the Hebei Provincial Planning
Commission, the Commission of Foreign Trade and Economic Cooperation of Hebei
Province and its Joint Venture partners. See "Risk Factors--Considerations
Relating to the PRC--Legal and Regulatory Considerations."
The Issuer believes that all other governmental approvals required for the
construction of the Luannan Facility that can be obtained at this stage of
development have been obtained based on the opinion of its Chinese counsel and
advice from the Hebei Provincial Planning Commission, the Commission of Foreign
Trade and Economic Cooperation of Hebei Province and its Joint Venture
partners. A construction permit will have to be obtained by the Luannan EPC
Contractor prior to the commencement of full construction activity with respect
to the Luannan Facility; however, the Issuer and the Joint Ventures believe
that the issuance of such a permit will be a matter of procedure rather than a
discretionary matter because the design criteria for the Luannan Facility has
already been approved.
Litigation
None of the Joint Ventures is currently involved in any litigation or
legal proceeding that could be expected to have a material adverse impact on
the Joint Ventures or their operations, or the Issuer or the Company.
Insurance
The Joint Ventures will provide and maintain a comprehensive insurance
program designed on a project-specific basis. The owner-controlled insurance
program will provide coverages for both property and casualty risks inherent in
the construction of a facility such as the Luannan Facility. The coverages and
their respective limits during the construction period will be:
Comprehensive third-party liability insurance $20.00 million
Construction and erection "all risk property,"
including flood and earthquake $90.00 million
Delay in start-up/advance loss of profits $38.25 million
Permanent insurance coverage will be arranged in amounts and limits as deemed
sufficient by the Independent Insurance Consultant for the Joint Ventures. The
Joint Ventures will be insured parties for third-party liability, property
damage and business interruption insurance, and the trustees under the
Indentures will be the loss payees for the property damage and business
interruption insurance.
The Rosemary Facility
The Rosemary Facility is a combined-cycle cogeneration facility located in
Roanoke Rapids, North Carolina, with a total electric generating capacity of
approximately 180 MW. The 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 WestPoint. The Rosemary
Facility uses No. 2 fuel oil as an alternate fuel in the event gas supplies or
transportation are curtailed. The Rosemary Facility was designed and
constructed by Hawker Siddeley and began commercial operations in December
1990. The 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 Appendix B, "United States Regulation--Federal Energy Regulation-
- -PURPA."
The 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 Rosemary Facility is being
dispatched, some of the steam produced by the HRSGs is sold to WestPoint and
some is used in two absorption chillers to supply chilled water for WestPoint.
When the facility is not being dispatched, two auxiliary boilers are available
to be used to produce steam for WestPoint and to direct steam to the absorption
chillers to supply chilled water for WestPoint. The design of the 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.
See "Description of Other Indebtedness--The Rosemary Bonds" for a
description of the financing agreements relating to the Rosemary Facility.
Sale of Capacity and Electricity
The 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 Rosemary Facility (i.e., require the
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 Rosemary Facility is
dispatched, subject to reductions under certain circumstances as described
below. Energy payments are calculated based on the actual electrical output
transmitted to VEPCO and are designed to compensate the Rosemary Partnership
for its cost of fuel and its variable operations and maintenance expense.
Monthly capacity payments throughout the term of the Rosemary Power
Purchase Agreement are calculated by multiplying the 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 Rosemary Facility's Dependable Capacity
was most recently determined to be 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 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 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 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 Rosemary Partnership as
having resulted from an event of force majeure, then beginning
the day after the Rosemary Partnership makes such designation,
capacity payments are suspended and prorated daily until the
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
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 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 Rosemary Facility is dispatched during
such period, without any loss of capacity payments for such
period.
During the period December 1, 1995 through November 30, 1996, the number
of forced outage days was 16, including 13 forced outage days attributable to
the damage caused by the hurricane in September 1996. From December 1, 1996
through March 26, 1997, the Rosemary Facility incurred no forced outage days.
The Rosemary Partnership is required to maintain the Rosemary Facility as
a QF. VEPCO may terminate the Rosemary Power Purchase Agreement within one year
after the loss of QF certification if the 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 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 Rosemary 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 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 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 Rosemary Partnership may be required to reduce
or repay capacity charges under the "regulatory disallowance" provision would
exist through 2005. See Appendix B, "The Electric Power Industry in the United
States and United States Regulation--Federal Energy Regulation--PURPA."
Steam and Chilled Water Sales
The Rosemary Partnership has been selling steam and chilled water to Bibb
for use in its textile manufacturing facility, located adjacent to the 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. On February 18, 1997, Bibb announced that it
would sell the textile facility to WestPoint. The closing of the sale was
reported in the news media on February 21, 1997, but the Rosemary Partnership
has not received formal notice of such sale from Bibb or WestPoint. The
Rosemary Steam Agreement cannot be assigned without the Rosemary Partnership's
consent. The Rosemary Partnership has continued to sell steam and chilled water
to the purchaser in substantially the same amounts as it sold prior to the
announcement of the sale. The following discussion of the Rosemary Steam
Agreement and the Rosemary Site Lease assumes that the sale of the textile
facility has closed and that WestPoint is the purchasing party under the
Rosemary Steam Agreement and the lessor under the Rosemary Site Lease.
Although WestPoint is not required to purchase a minimum quantity of steam
or chilled water, WestPoint has an irrevocable obligation to purchase all of
its steam and chilled water requirements from the Rosemary Facility to the
extent that the Rosemary Facility is able to supply such requirements. The
Rosemary Steam Agreement requires that the 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 45F chilled water for up to 8,000 hours per year. This
requirement is not currently met because the Rosemary Facility's actual
capacity to produce chilled water does not exceed 1,600 tons per year of
chilled water. However, when Bibb was the purchasing party under the Rosemary
Steam Agreement, because Bibb's chilled water requirements never exceeded 1,500
tons per year and, in most cases, were approximately 1,200 tons per year, the
Rosemary Facility never failed to satisfy Bibb's chilled water requirements.
Furthermore, the Rosemary Steam Agreement allows the Rosemary Partnership to
utilize, at its own expense, back-up electric chillers located at WestPoint's
textile mill to supply chilled water to meet WestPoint's demands. Finally, if
WestPoint's requirements were to exceed the Rosemary Facility's current
capacity to produce chilled water, the 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 to be between $700,000 and $800,000.
For these reasons, the Issuer does not believe that the current capacity
limitations of the absorption chillers will adversely affect the Rosemary
Partnership's rights under the Rosemary Steam Agreement. See "Risk Factors --
U.S. Industry Conditions; Restructuring Initiatives; Utility Responses --
Maintaining Qualifying Facility Status."
Site Lease
The 4.83 acre site on which the Rosemary Facility is located is leased to
the Rosemary Partnership by WestPoint 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. The payment of the Rosemary Bonds is secured by, among other things,
a lien on the Rosemary Partnership's leasehold interest in the Rosemary
Facility site. See "Description of Other Indebtedness--The Rosemary Bonds."
Gas Supply and Fuel Management
The 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 Rosemary Partnership. The Rosemary
Indenture provides that with certain limited exceptions the 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 Other Indebtedness--The Rosemary Bonds--
Partnership Distributions." NGC has agreed to deliver natural gas on a firm
basis to the Rosemary Partnership, at pipeline points near the Gulf of Mexico
or (at the Rosemary Partnership's request and using the Rosemary Partnership's
firm transportation arrangements) to the Rosemary Pipeline (as defined below),
up to the total contract quantity under the Firm Gas Transportation Agreements
(as defined below), which is currently the thermal equivalent of 3,075 Mcf of
natural gas per day. The firm natural gas supplied under the Rosemary Gas
Supply Agreement enables the Rosemary Partnership to have adequate natural gas
supplies available to meet its estimate of WestPoint's requirements for steam
and chilled water.
The price paid by the 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
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 Rosemary Partnership fails
to purchase the amount included in monthly estimates delivered to NGC, and such
failure is not excused by force majeure, the 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 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 Rosemary Fuel Management Agreement
include advising the Rosemary Partnership with respect to the negotiation of
natural gas and fuel oil purchase and transportation arrangements, arranging
for the delivery to the Rosemary Facility of natural gas or fuel oil,
endeavoring to make such arrangements on a "best cost" basis, managing the
communications among the Rosemary Facility and the Rosemary Partnership's
pipeline transporters and natural gas and fuel oil suppliers and advising and
assisting the Rosemary Partnership with respect to fuel oil inventory hedging
arrangements.
The 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 Rosemary Facility pursuant to
arrangements made by NGC; (ii) $0.03 per MMBtu of natural gas reserves owned by
the Rosemary Partnership and transported to the 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 Rosemary
Facility pursuant to arrangements made by NGC; (iv) $0.002 per gallon of fuel
oil purchased and delivered to the 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 Rosemary Partnership. The 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 Rosemary Partnership pays NGC an additional
amount equal to 60% of the difference in such prices.
Gas Transportation
The Rosemary Indenture provides that with certain limited exceptions the
Rosemary Partnership will not be permitted to make distributions to its
partners if the Firm Gas Transportation Agreements are not extended or replaced
on or before the end of their terms. See "Description of Other Indebtedness--
The Rosemary Bonds--Partnership Distributions."
The Rosemary Partnership has entered into firm gas transportation
contracts with each of Texas Gas Transmission Corporation ("Texas Gas") (the
"Texas Gas FT Agreement"), CNG Transmission Corporation ("CNG") (the "CNG FT
Agreement") and Transcontinental Gas Pipe Line Corporation ("Transco") (the
"Transco FT Agreement") that enable the Rosemary Partnership to have delivered
to the Rosemary Facility, on a firm basis, the thermal equivalent of 3,075 Mcf
of gas per day from gas production areas near the Gulf of Mexico. Each of the
Texas Gas FT Agreement, the CNG FT Agreement and the Transco FT Agreement
continue through October 31, 2006. Most of the critical terms and conditions of
the services provided to the Rosemary Partnership by Texas Gas, CNG and
Transco, including the rates, are found in the respective pipeline's gas
tariff, each of which are subject to review, approval and modification by the
FERC.
The 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 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 Rosemary Pipeline. Under the Columbia
Gulf IT Agreement, the 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.
Rosemary Pipeline
The Rosemary Partnership owns, and NCNG operates and maintains for the
Rosemary Partnership, a pipeline which runs for 10.26 miles through portions of
Halifax and Northampton counties, North Carolina (the "Rosemary Pipeline"). The
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 Rosemary Partnership has entered into a Pipeline Operating Agreement
with NCNG (the "Pipeline Operating Agreement"), pursuant to which NCNG has
agreed to operate the Rosemary Pipeline and provide certain natural gas
balancing services for the 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.
Several of the easements and encroachment agreements, pursuant to which
the Rosemary Partnership is granted the right to locate the Rosemary Pipeline,
contain provisions allowing the underlying interest owner to cause the 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 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 Issuer does not expect that the
Rosemary Pipeline will be required to be removed pursuant to these easements
or, if it were required to be removed, that relocating the Rosemary Pipeline
from these two easement tracts would significantly interfere with the supply of
natural gas to the Rosemary Facility for an extended period of time or, given
the ability of the Rosemary Facility to operate utilizing fuel oil,
significantly limit the availability of the Rosemary Facility for dispatch by
VEPCO. See "Risk Factors--Project Risks--Fuel Supply Risks."
Fuel Oil
The 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 Rosemary
Facility currently has on-site storage for approximately 2.0 million gallons of
fuel oil, a supply sufficient to operate the Rosemary Facility at full load for
approximately 168 hours. The Rosemary Partnership purchases fuel oil on a spot-
market basis.
Operations and Maintenance
The Rosemary Partnership purchases operations and maintenance services for
the Rosemary Facility from Panda Global Services pursuant to an operations and
maintenance agreement (the "Panda Global Rosemary O&M Agreement") under which
Panda Global Services will provide operations and maintenance services to the
Rosemary Facility through December 31, 2003. The Panda Global Rosemary O&M
Agreement provides for payment to Panda Global Services of a fixed monthly fee
of $130,000 per month during 1997, with annual adjustments based on changes in
the consumer price index for subsequent years. In addition, the agreement
includes bonus and penalty provisions.
Panda Global Services commenced performing operations and maintenance
services for the Rosemary Facility on January 1, 1997. Such services previously
were performed by University Technical Services, all of whose operations and
maintenance personnel at the Rosemary Facility remain as employees of Panda
Global Services.
Operating History
The following table contains a summary of certain levels of operating
performance achieved by the Rosemary Facility since the beginning of 1991:
1991 1992 1993 1994 1995 1996
Summer Dependable Capacity (MW) 161 161 165 165 165 165
Winter Dependable Capacity (MW) 192 198 198 198 198 198
Hours Under VEPCO Dispatch 1,174 377 324 764 2,224 635
Electric Energy Production 129.0 44.8 31.9 76.7 234.9 64.5
(GWH)
Steam Production (MM Lbs) 330.8 377.9 429.9 364.8 291.2 294.6
Chilled Water Production N/A 4.0 3.7 4.1 4.1 3.3
(MM Ton-hours)
Forced Outage Days* 12 1 16 12 18 16
________________________________
* Data for forced outage days for 1991 through 1996 is for the 12-month period
starting on December 1 of the prior year and ending on November 30 of the
year indicated.
The 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 Rosemary Partnership.
During 1995, the 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 Rosemary Facility the gas that would otherwise have been
transported to these unavailable plants. For approximately 1,200 of the 2,224
hours, the Rosemary Facility used natural gas provided directly by VEPCO under
this fueling arrangement. The 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 Rosemary
Partnership provides the fuel.
During 1996, the Rosemary Facility was dispatched a total of 635 hours.
This number reflects a more normal level of operation than the unusually high
1995 number. The number of dispatch hours for 1996 also reflects the
unavailability of the Rosemary Facility for 15 forced outage days during
September 1996 due to hurricane damage and cooler-than-normal weather in the
VEPCO service territory during the summer of 1996.
Recent Hurricane Damage Sustained
On September 6, 1996, a transformer and two switches at the Rosemary
Facility sustained damage from a hurricane. A substitute transformer was
temporarily installed pending repair of the damaged transformer, which was
substantially completed during the first quarter of 1997. The Company estimates
the total cost to repair the Rosemary Facility (including substitute
transformer rental costs) at approximately $2.45 million all of which is
covered by insurance except for deductible and certain non-covered items, which
the Company currently estimates to be in the aggregate amount of approximately
$650,000 to $725,000. The Company believes that this event will not have a
material adverse effect on the financial condition or operating results of the
Rosemary Partnership or its ability to make distributions to the Company
through the PIC Entities and PIC.
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 Rosemary Partnership arising out of a Credit, Term Loan and Security
Agreement (the "NNW Credit Agreement") entered into by PEC, PR Corp. and 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 NNW
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 Rosemary Partnership to the Rosemary Borrowers.
At the time the NNW Credit Agreement was entered into the aggregate equity
interest of PR Corp. and PRC II in the Rosemary Partnership was 10%. Following
the redemption of a 90% limited partner interest in the Rosemary Partnership
with a portion of the proceeds of the Rosemary Offering and the Series A
Offering, PR Corp. and PRC II, collectively, now own 100% of the equity
interest in the Rosemary Partnership.
The NNW Credit Agreement states that the parties intend that any financial
restructuring of the Rosemary Facility shall not materially affect the NNW Cash
Flow Participation, positively or negatively. The NNW 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 Rosemary Partnership under the Second Amended and Restated Letter of
Credit and Reimbursement Agreement dated as of January 6, 1992 among the
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 offering of the Rosemary Bonds
(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 the 90% limited partner interest. NNW
claims that it is entitled to receive 4.33% of distributions to the Rosemary
Borrowers following redemption of the limited partner 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 issuance of the
Rosemary Bonds 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, an 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 PIC through 2012 would be approximately $2.0
million on a net present value basis and the reduction in annual cash flows to
be received by PIC would be (i) approximately $231,000 during 1997, decreasing
to approximately $191,000 in 2004; (ii) in the range of approximately $451,000
to $465,000 per year during the years 2005 to 2008; and (iii) approximately
$447,000 in 2009, declining thereafter to approximately $369,000 in 2012. See
Appendix C, Consolidated Pro Forma Report.
Independent Engineers' and Consultants' Reports
The Rosemary Engineering Report and the Rosemary Fuel Consultant's Report,
and the following summaries thereof, contain forward-looking statements,
including projections, that involve risks and uncertainties. Actual results may
differ materially from those discussed in the forward-looking statements. See
"Disclosure Regarding Forward-Looking Statements" and "Risk Factors--Reliance
upon Projections and Underlying Assumptions Contained in Engineers' and
Consultants' Reports."
Rosemary Engineering Report. Burns & McDonnell has prepared a report,
dated April 11, 1997 and updated June 6, 1997 (the "Rosemary Engineering
Report"), concerning certain technical, environmental and economic aspects of
the Rosemary Facility. 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, 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 Rosemary Facility
since 1989. The Rosemary Engineering Report includes, among other things, a
review and assessment of the Rosemary Facility's equipment and operating
condition, a review of its operating history and projections of revenues,
expenses and debt service coverage for the Project during the period that the
Rosemary Bonds are scheduled to be outstanding (i.e., through February 15,
2016).
Burns & McDonnell has relied upon projections of the 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.
In preparing the Rosemary Engineering Report, Burns & McDonnell made
various assumptions regarding the validity and performance of contracts, the
operation and maintenance of the Rosemary Facility and, the effectiveness of
permits. These assumptions and the other assumptions contained in the Rosemary
Engineering Report are inherently subject to significant uncertainties and, if
actual conditions differ from those assumed, actual results will differ from
those projected, perhaps materially. Subject to the studies, analyses and
investigations of the Rosemary Facility they performed and the assumptions made
in the Rosemary Engineering Report, Burns & McDonnell offered the following
conclusions:
- The technology incorporated in the 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 Rosemary Facility implemented by the Rosemary
Partnership and Panda Global Services 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 Rosemary Facility. Burns & McDonnell
knows of no significant technical problems relating to the Rosemary
Facility that should be of concern to potential investors.
- The Rosemary 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. The recent change from
U-TECH to Panda Global Services as the operator should not have any
effect on the future operations and maintenance of the Rosemary
Facility because all the staff transferred to Panda Global Services.
- The 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.
- The 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 Rosemary Facility.
- The basis for the Rosemary Partnership's estimates of the cost of
operating and maintaining the Rosemary Facility is reasonable. The
expense projections prepared by the Rosemary Partnership and based on
projected levels of dispatch appear adequate to account for the
variable operation and maintenance expenses. The 1997 budgeted
allowance for overhauls of $276 per fired hour is appropriate.
- The Rosemary Facility's heat rate will average 9,100 Btu/kWh (HHV)
over the remaining initial term of the Rosemary Power Purchase
Agreement.
- Table I-1 of the Rosemary Engineering Report summarizes the projected
revenues and expenditures and debt coverage ratios of the Rosemary
Facility based upon the amortization schedule for the outstanding
Rosemary Bonds submitted to Burns & McDonnell by the Rosemary
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 Rosemary Bonds of 1.37:1 and an average
debt service coverage over the outstanding term of the Rosemary Bonds
of 1.58:1.
Rosemary Fuel Consultant's Report. Benjamin Schlesinger and Associates,
Inc. ("Schlesinger") has prepared a report, dated September 20, 1996, as
updated on April 11, 1997 and June 6, 1997 (as updated, the "Rosemary Fuel
Consultant's Report"), concerning the sufficiency of the fuel supply and
transportation arrangements entered into by the Rosemary Partnership with
respect to the Rosemary Facility. 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 Rosemary Facility with respect to both natural gas and
fuel oil, focusing on the appropriateness of the existing fuel arrangements and
the historical reliability of fuel supplies to the 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. Schlesinger also believes that the assumptions contained in the
Rosemary Fuel Consultant's Report are reasonable, but assumptions are
inherently subject to significant uncertainties and, if actual conditions
differ from those assumed, actual results will differ from those projected.
Subject to the information contained and the assumptions made in the
Rosemary Fuel Consultant's Report, Schlesinger offers the following
conclusions:
- The projections developed by Burns & McDonnell in the Rosemary
Engineering Report employ reasonably conservative assumptions with
respect to the Rosemary Partnership's fixed gas transportation costs
and the relationship of the Rosemary Partnership's variable fuel
costs to the energy price under the Rosemary Power Purchase
Agreement, and the Rosemary Engineering Report contains reasonable
assumptions concerning the revenue that the Rosemary Partnership may
receive by reselling transportation capacity that is excess to the
Rosemary Facility's average daily capacity utilization and/or
reselling gas using its excess transportation capacity.
- The Rosemary Facility's overall fuel supply plan remains reasonable
and appropriate given the Rosemary Facility's record of operation and
its energy payment structure. The Rosemary Partnership's contract
with Natural Gas Clearinghouse ("NGC") for fuel management services
lies at the heart of the Rosemary Facility's fuel supply plan. NGC
sells and delivers gas on a firm basis to satisfy the Rosemary
Facility's baseload fuel requirements to produce steam and chilled
water for sale to Bibb. Additionally, NGC buys and delivers gas and
low sulfur distillate fuel oil ("DFO") on a best efforts basis to
satisfy the Rosemary Facility'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 Rosemary Facility are insufficient to satisfy its total fuel
requirements on a daily basis. Provided VEPCO continues to dispatch
the Rosemary Facility principally as a summer peaker, the additional
fixed costs required to increase the Rosemary Facility's gas supply
or delivery reliability are not warranted from an economic or fuel
reliability perspective.
- The Rosemary Facility's energy revenues under its power sales
agreement reflect the Rosemary Facility's fuel plan. During the
months of January and February, when the Rosemary Facility 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 Rosemary Facility's actual fuel
consumed for dispatch operations has generally followed the seasonal
fuel availability structure assumed in the energy payment mechanism,
the energy payments and actual fuel costs are not directly linked,
i.e., the Rosemary Facility'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 Rosemary
Facility 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 Rosemary Facility is dispatched in
November, December and March, the months other than January and
February during which the Rosemary Facility is most likely to be
forced burn DFO. Although Schlesinger believes the existing fuel plan
to be reasonable and appropriate, Schlesinger recommends that the
Rosemary Partnership continue to monitor on an annual basis the
Rosemary Facility'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.
- Although the Rosemary Facility buys firm gas supply and delivery
services to satisfy only its baseload fuel requirements, the Rosemary
Facility has always had enough fuel to satisfy VEPCO's dispatch
requests. Moreover, from the start of commercial operations through
the end of 1995, the Rosemary Facility 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.
Schlesinger concludes that the Rosemary Facility's existing gas
supply and delivery arrangements provide an appropriate degree of gas
reliability for an electric peaking facility. In addition,
Schlesinger concludes that the Rosemary Facility'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 Rosemary Facility 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 the Rosemary Partnership
should continue to monitor projected dispatch for these months as
described above. Schlesinger reviewed the fuel supply and
transportation pricing projections used by Burns & McDonnell in the
Rosemary Engineering Report. Schlesinger concluded from its review
that the Rosemary Engineering Report employs reasonably conservative
assumptions for the costs of the Rosemary Facility's various gas
supply and transportation services, i.e., based on Schlesinger's
assessment of the fuel contracts and the cost of gas supply and
transportation services, Schlesinger believes that fuel delivered to
the Rosemary Facility is likely to cost less than the estimates
contained in the Rosemary Engineering Report.
- The Rosemary Facility's fuel supply and transportation contracts have
original terms of approximately 15 years and thus will need to be
extended or replaced. The Rosemary Facility 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. Schlesinger notes that the Rosemary
Engineering Report projects fuel costs through the year 2015 on the
basis of the existing fuel contracts and, based on the foregoing
conclusion, Schlesinger believes such projection to be reasonable.
The Brandywine Facility
The Brandywine Facility is a combined-cycle cogeneration facility located
in Brandywine, Maryland (near Washington, D.C.), with a total electric
generating capacity of 230 MW. The 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 Brandywine Facility was
constructed by Raytheon Engineers and Constructors, Inc. ("Raytheon"). Raytheon
has met its performance guarantees and the requirements for commercial
operations and substantial completion under the Brandywine EPC Agreement.
Pursuant to a power purchase agreement entered into in 1991 and amended in
1994, the Brandywine Partnership sells the capacity of, and energy produced by,
the Brandywine Facility to Potomac Electric Power Company ("PEPCO"), a utility
that serves the District of Columbia and parts of Maryland. The Brandywine
Facility commenced commercial operations under the Brandywine Power Purchase
Agreement on October 31, 1996. A merger of PEPCO and Baltimore Gas & Electric
Company ("BG&E"), a utility that serves other parts of Maryland, has been
publicly announced and is anticipated to close sometime in 1997. The term of
the Brandywine Power Purchase Agreement will expire on October 30, 2021.
The Brandywine Facility is currently leased by the Brandywine Partnership
pursuant to the Brandywine Facility Lease. The initial term of the Brandywine
Facility Lease is 20 years. 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 Brandywine Partnership may renew the Brandywine
Facility Lease for two consecutive five-year terms. Alternatively, the
Brandywine Partnership may purchase the Brandywine Facility at fair sales
market value at the end of the initial lease term or any renewal term. If the
Brandywine Partnership does not renew the Brandywine Facility Lease or purchase
the Brandywine Facility, it must surrender possession of the Brandywine
Facility. See "Description of Other Indebtedness--The Brandywine Financing--
Brandywine Facility Lease."
The 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 Appendix B, "The
Electric Power Industry in the United States and United States Regulation--
Federal Energy Regulation--PURPA."
Operations and Maintenance
The Brandywine Partnership purchases operations and maintenance services
from Ogden Brandywine Operations, Inc. ("Ogden Brandywine"), a subsidiary of
Ogden Corporation, pursuant to an Operation and Maintenance Agreement (the
"Brandywine O&M Agreement"). The Brandywine O&M Agreement is effective until
October 31, 1999, and may be extended thereafter by agreement of the parties.
In exchange for such services, Ogden Brandywine is 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 Brandywine Facility for dispatch.
Sale of Capacity, Electricity and Steam
The Brandywine Partnership sells 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 that expires in October 2021, 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 (including 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 has the right to dispatch the 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 require PEPCO to dispatch
all facilities obligated to deliver electricity to PEPCO based on economic
factors and without regard to the ownership of such facilities. PEPCO is
required to dispatch 99 MW of the Brandywine Facility's dependable capacity for
no fewer than 60 hours per week (Monday through Friday). The remaining portion
of the 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 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 Brandywine Facility's dependable capacity, the capacity rate and
other factors. Under the Brandywine Power Purchase Agreement, the Brandywine
Facility is 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 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 2014. The capacity
payment is subject to specified downward adjustments in contract years one,
two and four, and to specified upward adjustments in the fifth and 11th
through the 25th contract years. Capacity payments will be reduced if the
Brandywine Facility cannot maintain 88% equivalent availability, and will be
increased if it exceeds 92% equivalent availability. Capacity payments may also
be decreased commencing in 2006 depending on whether PEPCO's system peak load
exceeds 5,697 MW during 1997, 1998 or 1999 or later. Calculation of capacity
payments pursuant to these provisions of the Brandywine Power Purchase
Agreement is the subject of a dispute between the Brandywine Partnership and
PEPCO, as discussed below.
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 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.
The Brandywine Partnership has constructed a seven-mile long electric
transmission line to connect the Brandywine Facility and the transmission
facilities of PEPCO. Consolidated Rail Corporation entered into an agreement
with the Brandywine Partnership to provide transmission line easements for a
portion of the transmission line. The Brandywine Partnership transferred
ownership of the transmission line to PEPCO on October 30, 1996.
The Brandywine Partnership sells steam to the Brandywine Water Company
pursuant to a Steam Sales Agreement dated March 30, 1995 (the "Brandywine Steam
Agreement"). Brandywine Water Company is an indirect wholly-owned subsidiary of
the Company. The production and sale of thermal energy allows the Brandywine
Facility to achieve QF status. The Brandywine Steam Agreement continues until
October 31, 2021 and may be extended by agreement of the parties for additional
terms of five years. Brandywine Water Company fully and unconditionally agrees
to purchase all of the thermal energy produced by the Brandywine Facility and
has entered into a contract with the United States Navy to sell it distilled
water for heating and other industrial uses in a naval facility. The contract
is for a one-year term that commenced on 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. 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 Brandywine Facility will be able to remain a Qualifying Facility. PEPCO may
terminate the Brandywine Power Purchase Agreement, and it may be a default
under the Brandywine Financing Documents, under certain circumstances if the
Brandywine Facility ceases to be a QF, unless the Brandywine Partnership
receives all governmental and regulatory approvals necessary to continue
operating the Brandywine Facility without QF certification. See "Risk Factors--
Maintaining Qualifying Facility Status."
Disagreement With PEPCO Over Calculation of Capacity Payment
In late August 1996, the Brandywine Partnership and PEPCO commenced
discussions concerning commercial operation requirements of the Brandywine
Facility and conversion of the construction loan to long-term financing. During
these discussions, two disagreements arose between the Brandywine Partnership
and PEPCO as to how capacity payments should be calculated under the Brandywine
Power Purchase Agreement. PEPCO and the Brandywine Partnership are presently
attempting to resolve these disagreements but there are no assurances that such
efforts will be successful.
The Brandywine Partnership and PEPCO disagree as to the date on which the
yield to maturity on United States Treasury Bonds with a maturity of 12 years
("12-year T-Bonds") should be determined under a provision in the Brandywine
Power Purchase Agreement that requires capacity payments to be reduced if such
interest rate is less than 8%. Such provision states that the interest rate of
12-year T-Bonds is to be determined, and adjustments to capacity payments made,
as of the date that the interest rate for permanent financing for the
Brandywine Facility is designated pursuant to an executed commitment for such
financing. On October 6, 1994, the Brandywine Partnership entered into a
written commitment with GE Capital with respect to permanent financing for the
Brandywine Facility, which commitment designated an interest rate for such
financing. Accordingly, the Brandywine Partnership takes the position that
October 6, 1994 should be the date used to determine the interest rate of 12-
year T-Bonds under the Brandywine Power Purchase Agreement. The interest rate
for 12-year T-Bonds on such date was 7.94% per annum. PEPCO, on the other hand,
takes the position that since the interest rate designated in such commitment
was a floating rate, the date to be used for determining the interest rate of
12-year T-Bonds is the closing date of the conversion of the Brandywine
Construction Loan Facility to long-term financing in the form of a leveraged
lease, which occurred on December 30, 1996. The interest rate for 12-year T-
Bonds on such date was 6.36%.
To the extent that PEPCO's position with respect to the PEPCO interest
rate disagreement does not prevail, PEPCO claims that it is entitled to a
reduction in capacity payments under another provision of the Brandywine Power
Purchase Agreement that requires PEPCO to share equally in any "refinancing or
new or revised lease arrangements" savings. The Brandywine Partnership takes
the position that all transactions to be entered into at or near closing of the
Brandywine Financing Conversion were provided for under the Brandywine
Financing Documents and do not constitute a refinancing or new or revised lease
arrangements. In the event that the capacity payments were reduced pursuant to
this provision, the reduction would be significantly less than the reduction
claimed by PEPCO in connection with the PEPCO interest rate disagreement.
PEPCO and the Brandywine Partnership also disagree as to the determination
of PEPCO's system peak load which is the basis for reductions in capacity
payments under the Brandywine Power Purchase Agreement. Under such provision,
capacity payments are to be reduced, commencing in 2006, if PEPCO's system peak
load does not exceed 5,697 MW prior to 1998, and are reduced by a greater
amount if PEPCO's system peak load does not exceed such amount prior to 1999.
PEPCO and BG&E have announced their intention to merge during 1997 into a new
entity to be known as Constellation Energy Corporation ("Constellation"), and
PEPCO has asked the Brandywine Partnership to agree that peak load under the
Brandywine Power Purchase Agreement would be calculated on the basis of the pre-
merger PEPCO system and not the post-merger Constellation system. Peak load
based on the Constellation system would greatly exceed 5,679 MW during 1997.
However, PEPCO's position is that the parties intended to use the current PEPCO
system in calculating peak load and that the merger with BG&E should be
disregarded for such purpose. The Brandywine Partnership disagrees with such
position. The Brandywine Power Purchase Agreement does not contain any
provision requiring adjustments due to mergers or reorganizations. It is the
Brandywine Partnership's position that Constellation, as the successor of
PEPCO, would be substituted for PEPCO under the Brandywine Power Purchase
Agreement and the Constellation system should be used to calculate peak load.
The Brandywine Pro Forma and the Consolidated Pro Forma are prepared under
the assumption that PEPCO's system peak load (based on the pre-merger PEPCO
system) exceeds 5,697 MW during 1999 or thereafter, and accordingly, there is
the maximum reduction in capacity payments under this provision. ICF believes
that such assumption represents the most conservative presentation and is not
dependent upon the outcome of the current disagreement between Brandywine
Partnership and PEPCO regarding the basis for the determination of PEPCO's
system peak load. The Brandywine Pro Forma and the Consolidated Pro Forma are
also prepared under the assumption that the interest rate to be used for
purposes of the capacity payment adjustment is 6.36%, which represents PEPCO's
position. ICF believes that this assumption represents the most conservative
presentation of the disagreement. See "Prospectus Summary--Independent
Engineers' and Consultants' Reports--Consolidating Financial Analyst's Pro
Forma Report" and "--Independent Engineers' and Consultants' Reports--
Brandywine Pro Forma Report" below.
Gas Supply and Fuel Management
The Brandywine Partnership purchases both firm and interruptible natural
gas supply from CDC pursuant to the Gas Sales Agreement, dated March 30, 1995,
between the Brandywine Partnership and CDC (the "Brandywine Gas Agreement").
MCN Corporation ("MCN"), the parent corporation of CDC, has fully and
unconditionally guaranteed the payment and performance obligations of CDC under
the Brandywine Gas Agreement. The Brandywine Gas Agreement commenced October
31, 1996 and continues until October 31, 2011, and thereafter is automatically
renewed 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 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 firm transportation CDC receives from ANR Pipeline Company. The
commodity charge escalates annually while the demand charge and the ANR-related
charge increase 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 New York Mercantile Exchange 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 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 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 Brandywine Facility. In addition, the 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 Brandywine Partnership pays for but fails to take the
minimum quantities of Limited Dispatch Gas or Scheduled Dispatch Gas, the
Brandywine Partnership has the opportunity later to receive the quantities of
gas paid for but not taken.
The Brandywine Partnership also purchases fuel management services from
CDC pursuant to the Fuel Supply Management Agreement between CDC and the
Brandywine Partnership (the "Brandywine Fuel Management Agreement"). CDC's fuel
management responsibilities under the Brandywine Fuel Management Agreement
include advising the Brandywine Partnership with respect to the negotiation of
natural gas and fuel oil supply and transportation arrangements, arranging for
the delivery to the Brandywine Facility of natural gas or fuel oil, endeavoring
to make such arrangements on "best efforts" and "best competitive offer" basis
and advising the Brandywine Partnership with respect to fuel hedging
arrangements. MCN Investment Corp. (an affiliate of MCN and CDC) has guaranteed
CDC's payment and performance obligations under the Brandywine Fuel Management
Agreement.
Gas Transportation
The Brandywine Partnership and Columbia Gas have entered into a Precedent
Agreement (the "Columbia Precedent Agreement"), pursuant to which Columbia Gas
has constructed new pipeline facilities to expand its existing interstate
pipeline and provide the Brandywine Partnership with firm gas transportation
service. As of December 31, 1996, the Brandywine Partnership contributed
$6,772,590, plus applicable tax gross-up, toward the construction of Columbia
Gas' pipeline facilities.
The Brandywine Partnership purchases firm gas transportation service from
Columbia Gas pursuant to an Amended and Restated FTS Service Agreement (the
"Columbia Gas FT Agreement"). Service under the Columbia Gas FT Agreement
commenced on November 1, 1996 and continues until October 31, 2021, and year-to-
year thereafter unless terminated by either party upon six months' notice.
The Brandywine Partnership purchases from Cove Point LNG Limited
Partnership ("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 until October 31, 2021. Cove Point is obligated to provide the
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. In addition to the firm
transportation agreements, the Brandywine Partnership has entered into
interruptible transportation agreements with Columbia Gas and Cove Point under
which the Brandywine Partnership will receive 24,240 Dth per day and 30,000 Dth
per day, respectively, of interruptible transportation service on a month-to-
month basis.
The Brandywine Partnership purchases 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 until October 31,
2021, and thereafter will continue year-to-year unless terminated by either
party upon six months' written notice. WGL is obligated to provide the
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 Brandywine Facility,
provided that WGL only must use its best efforts to deliver transportation gas
to the 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
Brandywine Partnership release to WGL for its system use a quantity of gas
purchased by the Brandywine Partnership under the Brandywine Gas Agreement and
transported to the WGL system. Additionally, WGL sells and delivers gas to the
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.
Fuel Oil
The 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
Brandywine Facility has on-site storage for approximately two million gallons
of fuel oil, a supply sufficient to operate the Brandywine Facility at full
load for approximately six days.
Construction Contract
Pursuant to the Brandywine EPC Agreement, Raytheon agreed to construct the
Brandywine Facility (including the distilled water plant) for approximately
$122.0 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 was reduced as of the commencement of
commercial operations to 5% of the aggregate amount paid by the Brandywine
Partnership to Raytheon through that date, and thereafter the letter of credit
must be maintained at a level which is twice the cost of completing punch list
items remaining at final acceptance of the 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.
A dispute exists between the Brandywine Partnership and Raytheon as to the
specific date on which commercial operations for purposes of the Brandywine EPC
Agreement occurred and the amount of the early completion bonus to which
Raytheon is entitled. In addition, the Brandywine Partnership and Raytheon
disagree as to the number of force majeure days to which Raytheon is entitled
as a result of a January 1996 snowstorm during which construction work could
not be carried on, and as to the validity and number of owner-caused delay
days. Even in the event that an agreement on the number of such days is
reached, the Brandywine Partnership and Raytheon further disagree as to the
affect, if any, such delays would have on the amount of the bonus payable under
the Brandywine EPC Agreement for early completion of the facility.
Taking into account all of the foregoing issues with Raytheon, the
Brandywine Partnership believes that the total amount in dispute between the
Brandywine Partnership and Raytheon is less than $1.0 million. The bonus for
early achievement of the commercial operations date discussed above, if
ultimately determined to be owed, would be payable over time and funded from
cash flows from the operation of the Brandywine Facility which may otherwise
have been available for distributions.
Independent Engineers' and Consultants' Reports
The Brandywine Pro Forma Report, the Brandywine Engineering Report and the
Brandywine Fuel Consultant's Report, and the following summaries thereof,
contain forward-looking statements, including projections, that involve risks
and uncertainties. Actual results may differ materially from those discussed in
the forward-looking statements. See "Risk Factors--Reliance upon Projections
and Underlying Assumptions Contained in Engineers' and Consultants' Reports."
Brandywine Pro Forma Report. ICF has prepared a report, dated April 11,
1997 and updated June 6, 1997 (the "Brandywine Pro Forma Report"), presenting
its independent pro forma operating projections (the "Brandywine Pro Forma")
for the Brandywine Facility. In developing its projections, ICF reviewed the
Brandywine Facility's fuel supply and transportation contracts, the Brandywine
Facility Lease 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. 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 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 the
validity and performance of contracts, the operation and maintenance of the
Brandywine Facility, the effectiveness of permits and the maintenance of QF
status. 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.
Subject to the studies, analyses and investigations of the Brandywine
Facility performed by ICF, and the assumptions made in the Brandywine Pro
Forma, ICF offers the following conclusions:
- The financial projections in the Brandywine Pro Forma provide a
reasonable reflection of the Brandywine Facility's expected costs,
revenues and cash flows.
- 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 in
regard to the interest rate adjustment and the peak adjustment are
presented at the most conservative positions.
- Over the 20-year initial term of the Brandywine Facility Lease, the
Brandywine Facility's cash flow available for lease payments will
average approximately $46.5 million per year, reflecting a range of
$18.1 million in 1998 to $58.9 million in 2020.
- The estimated lease obligation coverage ratios (i.e., the ratio of
earnings before income taxes to lease payments) are presented in
Table ES-1 to the Brandywine Pro Forma Report. During the 20-year
term of the Brandywine Facility Lease, the Brandywine Facility's
lease coverage will range from 1.35:1 in 2012 to 1.75:1 in 2004, with
an average coverage ratio of 1.59:1.
Brandywine Engineering Report. Pacific Energy Services, Inc. ("PES") has
prepared a report, dated July 22, 1996, and updated April 11, 1997 and June
6, 1997 (as updated, the "Brandywine Engineering Report"), evaluating the
design, construction and expected operation of the Brandywine Facility. PES has
provided engineering services to approximately fifty power plants within the
last seven years. Such services include technical review, construction
monitoring, performance testing and certification and O&M audits. Approximately
one-half of these plants utilize combined-cycle combustion turbine technology
with cogeneration, as does the Brandywine Facility. PES has been involved with
the Brandywine Facility since it performed a due diligence review for GE
Capital in connection with the closing of the Brandywine Facility's
construction loan in April 1995 and has monitored construction of the
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 Brandywine Facility
and a review of significant project agreements. In providing its conclusions
set forth in the Brandywine Engineering Report, PES made certain assumptions.
The assumptions are inherently subject to significant uncertainties and, if
actual conditions differ from those assumed, actual results will differ from
those projected, perhaps materially.
PES has independently reviewed the project engineering, cost, construction
schedule, permits, contracts, O&M and performance estimates for completeness,
risk, variation from practices typical in the industry and the ability of the
Brandywine Facility to perform as intended. PES offers the following
conclusions:
- The Brandywine Facility is substantially complete, capable of meeting
all commercial operating requirements under the Brandywine Power
Purchase Agreement and the Brandywine Steam Agreement, and has
received or is expected to receive all necessary operating permits.
There is no reason to believe that any necessary operation permit not
yet received will not be obtained.
- The Brandywine Facility meets or exceeds all guarantees or design
conditions based on the information supplied during testing by
Raytheon, GE Power Systems, and others. Provided future operation and
maintenance are performed according to standard industry practices,
PES can find no technical constraints to prevent the Brandywine
Facility from being able to perform at a level consistent with that
anticipated in the Brandywine Pro Forma.
Brandywine Fuel Consultant's Report. C.C. Pace has prepared a report,
dated July 2, 1996, and updated April 11, 1997 and June 6, 1997 (as updated,
the "Brandywine Fuel Consultant's Report"), reviewing the sufficiency of the
fuel supply and transportation arrangements for the Brandywine Facility. 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
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
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. The assumptions are
inherently subject to significant uncertainties and, if actual conditions
differ from those assumed, actual results will differ from those projected.
Subject to the information contained and the assumptions made in the
Brandywine Fuel Consultant's Report, C.C. Pace offers the following
conclusions:
- All pipeline construction has been completed and all of the firm
natural gas transportation contracts of the Brandywine Partnership
are in effect.
- The Brandywine Facility's Fuel Management Plan is sufficient, if
followed, to assure that the Brandywine Facility will operate in a
manner to meet PEPCO electric dispatch orders while maintaining
compliance with all fuel supply contract and tariff obligations.
- PEPCO has approved the Brandywine Facility's Fuel Management Plan.
- The Brandywine Partnership has developed sufficient fuel oil
procurement procedures which are included in the Fuel Management
Plan.
- The Brandywine Partnership should be able to meet all oil needs at
the Brandywine Facility for the 1996-1997 winter heating season.
- CDC, an experienced gas supplier with reserves sufficient to support
the fixed-price portion of the Brandywine Gas Agreement, is required
annually under the Brandywine Gas Agreement 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 the Brandywine Partnership.
MCN also has substantial assets backing its corporate warranty of
CDC's gas supply obligations.
- 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.
- Gas transportation arrangements are in place for firm transportation
for 100% of the fuel supply requirements for Unit 1 for the term of
the Brandywine Power Purchase Agreement, subject to the obligation of
the Brandywine Partnership under limited circumstances to release to
WGL all of its firm gas supply. The regulatory approvals for these
arrangements have been received.
- There is a strong linkage between changes in the Brandywine
Facility's expected variable fuel-related costs and revenues. Several
potential delinkages are mitigated by significant initial positive
margins in energy payment components.
- 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
Investment Corp.
- The backup fuel plan provides the Brandywine Partnership the
capability to meet dispatch requirements, assuming firm fuel oil
supply and transportation contracts are in place before each heating
season and the Brandywine Facility's air permit allows use of fuel
oil.
- The pro forma modeling of the Brandywine Facility contained in the
Brandywine Pro Forma Report reflects the 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 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
Brandywine Power Purchase Agreement. These balancing provisions are
not contractual rights and there is no guarantee that these
provisions will continue over the entire pro forma modeling term.
Other Projects under Development by Panda International
The following are additional Projects that Panda International is
developing and that could become eligible for transfer to the PIC Project
Portfolio if the conditions for transfer set forth in the PIC Additional
Projects Contract are satisfied. Such Projects, if not required to be
transferred to the PIC Project Portfolio, may, at the election of Panda
International, be transferred to the Issuer or the Company if certain
conditions for transfer set forth in the Indentures are satisfied. There can be
no assurance that any Project under development will reach Financial Closing or
achieve Commercial Operations.
The Panda of Nepal Facility
An affiliate of Panda International has an ownership interest (expected to
be 75% following completion of financing) in 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. The Government
of Nepal issued a Certificate of Registration to the joint venture in June
1996. 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. A fixed price turnkey
engineering, procurement and construction contract for the project was signed
with China Gezhouba Construction Group Corporation in October 1996 and amended
and restated in December 1996. Panda International has received a commitment
letter from a multilateral agency to provide debt financing for this Project
and is currently negotiating the documents governing such financing, as well as
seeking additional financing for this Project. In order to assist in the
funding of this Project, Panda International is considering the transfer of
ownership of the applicable affiliate to the Issuer if certain conditions for
transfer set forth in the Indentures are satisfied; however, there can be no
assurance that such action will occur.
The Lapanga Facility
In August 1994, an affiliate of 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 that the 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 respective power purchase
agreements. 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 Kathleen Facility
The 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 a wholly-owned indirect subsidiary of the Company (the "Kathleen
Partnership") in an industrial park near Lakeland, Florida. The Kathleen
Partnership entered into a power purchase agreement with Florida Power
Corporation ("Florida Power") in 1991.
The Kathleen Partnership and Florida Power are engaged in litigation
before state and federal forums in Florida over the interpretation of the
Kathleen power purchase agreement, including whether the size of the Kathleen
Facility as designed by Panda International conforms with the power purchase
agreement. See "Legal Proceedings--Florida Power Proceedings." The outcome of
this litigation will determine whether construction of the Kathleen Facility is
initiated and completed. Pursuant to arrangements with GE Capital under the
documents relating to the financing of the Brandywine Facility, the entities
which are partners of the Kathleen Partnership must remain as subsidiaries of
PEC but will be required to be transferred to PIC, in which case the Kathleen
Facility would become part of the PIC Project Portfolio if, and within 180 days
after, the Kathleen Facility reaches the earlier of Financial Closing or
Commercial Operations.
FOREIGN EXCHANGE SYSTEM IN THE PRC AND EXCHANGE RATE INFORMATION
General
The PRC imposes control over its foreign currency reserves in part through
direct regulation of the conversion of Renminbi into foreign exchange and in
part through restrictions on foreign imports. The SAFE, under the supervision
of the PBOC, is responsible for matters relating to foreign exchange
administration and remittance of foreign exchange abroad. The Foreign Exchange
Control Regulations of the People's Republic of China, which took effect on
April 1, 1996, and which replaced the interim foreign exchange regulations
adopted in 1980, provide the basis for regulating foreign exchange transactions
in China. Other rules, regulations and implementation measures have also been
issued which further establish the legal framework for foreign exchange control
in China consistent with the PRC economic reform program.
The Administrative Regulations for the Settlement, Sale and Payment of
Foreign Exchange which took effect on July 1, 1996, allow FIEs (such as the
Joint Ventures) to obtain their foreign exchange through transactions either at
the Swap Centers or through the China Foreign Exchange Trading Center (the
"CFETC"), an inter-bank foreign exchange trading market. Swap Centers were
first established pursuant to the Provisions of the State Council for the
Encouragement of Foreign Investment, promulgated in October 1986, and were
designed to provide a controlled setting under which Renminbi could be
exchanged for foreign currencies at rates approaching market levels. In April
1994, the CFETC was created in Shanghai to coordinate foreign exchange
transactions nationwide among domestic enterprises according to standardized
rules and to replace the two-tier exchange rate system that consisted of the
official rate and the swap center rates. The CFETC and the Swap Centers are
regulated by government policies and are administered by the SAFE. It has been
indicated that Swap Centers will be unified with the CFETC in the future.
Under the new system, a distinction is made between current account items
such as interest payments on foreign loans and profit distributions to foreign
parties to a FIE and capital account items such as principal of foreign loans
and payment under guarantees. Chinese enterprises (including FIEs) are
permitted to buy foreign exchange from State-designated banks for interest
payments on foreign loans upon verification by SAFE of its authenticity and for
profit distributions on presentation of board resolutions regarding such
distributions. Purchase of foreign exchange from State-designated banks for
repayment of principal of foreign loans requires (i) the presentation of a
certificate of registration for foreign loans which can be obtained from SAFE,
the loan contract and notice of repayment from the creditor and (ii) an
application to SAFE for verification for such purchase. Chinese authorities
have termed the current system as one that allows free convertibility of
Renminbi for purposes of current account items.
Historical Exchange Rates
During the nine-year period from 1985 through the end of 1993, there was a
gradual but significant devaluation of the Renminbi against the U.S. dollar.
The official Renminbi to U.S. dollar exchange rate changed from an average of
RMB 3.20 to $1.00 in 1985, to RMB 5.81 to $1.00 at the end of 1993. Effective
January 1, 1994, a new unitary, managed floating-rate system was introduced in
China. As a result of the adoption of the new system, on January 1, 1994, the
official exchange rate for Renminbi was revalued from approximately RMB 5.8 to
$1.00 to approximately RMB 8.7 to $1.00. Since then, the exchange rate has
remained relatively stable (see table below).
Until December 31, 1993, the Noon Buying Rate (as defined in note 1 to the
table below) was closely related to the official rate, but varied significantly
from the rate available at Swap Centers. After January 1, 1994, and the
unification of the foreign currency exchange system, there has not been a
significant difference between the Noon Buying Rate and the PBOC Rate.
Currently, the PBOC sets and publishes daily a base exchange rate (the "PBOC
Rate") with reference primarily to the supply and demand of Renminbi against
the U.S. dollar on the CFETC during the prior day. The PBOC also takes into
account other factors such as the general conditions in the international
foreign exchange markets. Authorized banks and financial institutions are
allowed to quote buy and sell rates for Renminbi within a specified range
around the daily PBOC Rate. Currently, the PBOC allows Renminbi trading within
a range of 0.25% above and below the daily PBOC Rate. As of April 4, 1997, the
Noon Buying Rate was RMB 8.3268 to $1.00. As of April 4, 1997, the PBOC Rate
was RMB 8.2969 to $1.00.
The following table sets forth certain information concerning exchange
rates between Renminbi and U.S. dollars for the periods indicated:
Noon Buying Rate(1)
Period Period Average(2) High Low
End
(expressed in RMB per $)
1993 5.8145 5.7776 5.8245 5.7076
1994 8.6044 8.6402 8.7128 8.5999
1995 8.3374 8.3685 8.4600 8.2916
1996
First Quarter 8.3538 8.3407 8.3549 8.3292
Second Quarter 8.3421 8.3437 8.3542 8.3403
Third Quarter 8.3317 8.3363 8.3452 8.3330
Fourth Quarter 8.3284 8.3293 8.3317 8.3267
__________________________
Source: Federal Reserve Statistical Release, The Federal Reserve.
Notes:
(1) The Noon Buying Rate is the Noon Buying Rate in New York for cable
transfers payable in foreign currencies as certified for customs purposes
by the Federal Reserve Bank of New York.
(2) Determined by averaging the rates on the last business day of each month
during the years 1993 through 1995 and, with respect to each quarter of
1996, by averaging the rates on each Friday of the quarter, or if Friday
was not a day upon which a rate was available, then the next preceding day
upon which a rate was available.
Treatment of Domestic Enterprises and FIEs
Historically, purely domestic enterprises and FIEs (such as Sino-foreign
joint ventures and wholly foreign-owned companies) were subject to
substantially different treatment with respect to foreign exchange matters.
Recently, many of these distinctions have been eliminated.
In general, the PRC Foreign Exchange Control Regulations, which took
effect on April 1, 1996, require that domestic enterprises operating in the PRC
must price and sell their goods and services in the PRC in Renminbi. Any
foreign exchange revenues received by such enterprises must be sold to
authorized foreign exchange banks in the PRC. Under the new system, domestic
enterprises and institutions are permitted to buy foreign exchange from State-
designated banks at designated times on presentation of appropriate
documentation establishing the existence of import contracts or payment notes
from overseas financial institutions. Such enterprises also are permitted to
purchase foreign exchange for the import of certain products subject to quotas,
import permits and registration controls. FIEs are permitted to apply to
purchase foreign exchange for the payment of dividends that have been
authorized as payable in foreign currency. Conversion and payment are to be
effected on the basis of a written resolution on profit distribution passed by
the enterprise's board of directors and evidence that the enterprise has paid
all required PRC taxes.
On June 20, 1996, the PBOC issued a notice allowing all FIEs to use both
Swap Centers and designated foreign exchange banks to convert currencies.
Pursuant to this notice, which took effect on July 1, 1996, FIEs may open
foreign exchange accounts for current as well as capital transactions. The
capital transactions, however, remain subject to SAFE registration approval.
The SAFE has authority to establish ceilings on the total amount of foreign
currency amount that a FIE may maintain in its account for current
transactions. Such ceilings are to be set by reference to the level of foreign
capital actually invested in the enterprise and the foreign currency cash flow
needs of the enterprise.
If foreign debts of FIEs are properly filed for record with the SAFE or
its local branches, and a Foreign Debt Registration Certificate is obtained,
future repayment of principal and interest are subject to verification
processing by the SAFE or its local branches upon producing the Foreign Debt
Registration Certificate, the loan agreement and a lender's repayment notice. A
verification paper is then issued for conversion and purchase of foreign
exchange at authorized banks or the FIE may use its own foreign exchange to
make the payment. For interest payments, once the SAFE has verified that the
interest payment transaction is legitimate, the FIE may use its own foreign
exchange or may purchase foreign exchange at authorized banks to make the
payment.
DESCRIPTION OF PRINCIPAL DOCUMENTS RELATING TO THE LUANNAN FACILITY
The following is a description of selected provisions of certain
agreements relating to the Luannan Facility and should not be considered to be
a full statement of the terms and provisions of such agreements.
Power Purchase Agreement
An Electric Energy Purchase and Sales Agreement (the "Energy Purchase
Agreement") and an Interconnection Agreement (the "Interconnection Agreement")
among Tangshan Panda, Tangshan Pan-Western and North China Power Company were
each executed in September 1995 and amended by a Supplemental Agreement for
Interconnection Agreement and Electric Energy Purchase and Sales Agreement,
dated February 10, 1996 (the "Supplemental Agreement," collectively with the
Energy Purchase Agreement and Interconnection Agreement, the "Luannan Power
Purchase Agreement"), among Tangshan Panda, Tangshan Pan-Western and North
China Power Company. Tangshan Panda and Tangshan Pan-Western are jointly and
severally liable for the obligations of the seller under the Luannan Power
Purchase Agreement. The Luannan Power Purchase Agreement sets out the rights
and obligations of Tangshan Panda, Tangshan Pan-Western and North China Power
Company relating to, among other things, the development, construction,
operation and maintenance of the Luannan Facility; the setting of production
output and energy purchase requirements; risk allocation in the event of force
majeure and changes in the regulatory environment; events of default; rights of
termination and the consequences thereof; assignment and transfer of interest
thereunder; and dispute resolution.
Term. The Luannan Power Purchase Agreement has a term of 20 years from the
Luannan Commercial Operation Date.
Power Purchase. The Luannan Power Purchase Agreement divides each 24 hour
period into three eight-hour (which are not required to be consecutive hours)
delivery periods, Peak Hours, Non-Peak Hours and Trough Hours. Commencing on
the Luannan Commercial Operation Date, subject to the limitations on gross
generation amount during Non--Peak Hours and Trough Hours listed below,
Tangshan Panda and Tangshan Pan-Western agree to sell, and North China Power
Company agrees to purchase and take, all electric energy delivered to North
China Power Company from the Luannan Facility. Tangshan Panda and Tangshan Pan-
Western may not sell any electric energy directly to third parties without the
consent of North China Power Company. Unless otherwise requested by North China
Power Company, during Non-Peak Hours and Trough Hours, the Luannan Facility
will not operate beyond the gross generation amounts specified below on an
average basis for the entire eight-hour period (exceeding these limitations
during a period is permitted as long as the overall average gross generation
amount during the eight-hour period does not exceed these limitations). No
limitation on gross generation amount produced by the Luannan Facility will be
imposed during Peak Hours and the amount set forth below for Peak Hours is a
minimum, not a maximum, gross generation amount for the Luannan Facility. The
gross generation amounts for different periods are as follows, subject to
adjustments agreed by both parties:
As the first unit starts generation at the Luannan Commercial Operation
Date:
During Peak Hours (minimum) 400,000 kWh
During Non-Peak Hours (maximum) 260,000 kWh
During Trough Hours (maximum) 240,000 kWh
and as the second unit starts generation at the Luannan Commercial
Operation Date:
During Peak Hours (minimum) 800,000 kWh
During Non-Peak Hours (maximum) 520,000 kWh
During Trough Hours (maximum) 480,000 kWh
Peak Hours, Non-Peak Hours and Trough Hours in a particular day will be
determined by the dispatch department of North China Power.
Tangshan Panda and Tangshan Pan-Western are required to negotiate an
Interconnection Dispatch Agreement (the "Interconnection Dispatch Agreement")
with the Tangshan Power Supply Bureau of North China Power Company shortly
prior to the Luannan Commercial Operation Date. This Interconnection Dispatch
Agreement is expected to set out the specific details as to the dispatch of the
Luannan Facility and will be a part of the Luannan Power Purchase Agreement.
The provisions described above only set forth the basis for dispatch of the
Luannan Facility. The Issuer believes that the Interconnection Dispatch
Agreement will provide for the Luannan Facility to be dispatched at levels
represented by the maximums specified in the Luannan Power Purchase Agreement
for Non-Peak Hours and Trough Hours, and the Luannan Engineering Report was
prepared on this basis. North China Power Company is required to take all net
electrical output delivered by the Luannan Facility during Peak Hours without
any dispatch limitations. There are, however, no assurances that the
Interconnection Dispatch Agreement as finally negotiated will not make changes
to the provisions of the Luannan Power Purchase Agreement described herein
including dispatch rights and penalties relating thereto.
North China Power Company will not be required to pay Tangshan Panda and
Tangshan Pan-Western for any electric energy generated by the Luannan Facility
during Non-Peak Hours and Trough Hours that exceeds the generation amount
(based on the overall average gross generation amount during the eight hour
period) dispatched in Non-Peak Hours and Trough Hours, respectively, as
instructed by Tangshan Power Supply Bureau for such periods consistent with the
requirements of the Luannan Power Purchase Agreement and the Interconnection
Dispatch Agreement.
If the electric energy load delivered during Trough Hours exceeds the
maximum limitations set forth above, Tangshan Panda and Tangshan Pan-Western
will, unless such additional electric energy is required by North China Power
Company, compensate North China Power Company by paying North China Power
Company a peak adjustment compensation fee equivalent to five times the
applicable power price of the excess amount.
If the Luannan Facility does not deliver, during Peak Hours, the minimum
quantity of electric energy stipulated in the Luannan Power Purchase Agreement,
Tangshan Panda and Tangshan Pan-Western will compensate North China Power
Company, at five times the applicable power price, for the shortfall between
the actual amount of electric energy produced and the required electric energy
production. In addition, if North China Power Company's actions or inactions
cause the Luannan Facility to fail to deliver the required electric energy,
North China Power Company will pay to Tangshan Panda and Tangshan Pan-Western a
compensation fee to be calculated in accordance with the following formula:
(amount of required power to be delivered less actual power delivered) x
applicable power price.
Power Tariff. The electricity price to be charged under the Luannan Power
Purchase Agreement is provided in the Pricing Document, which is separate from,
but incorporated by reference in, the Luannan Power Purchase Agreement. The
electricity price is comprised of fixed and variable components that are
required to be adjusted according to an approved pricing formula to reflect
changes in the capital and operating costs of the Luannan Facility. Certain
components of the power price calculation may be adjusted to reflect either
Chinese or U.S. inflation, based upon specified indices. Adjustments are also
provided for foreign exchange rate fluctuation in order to mitigate the Luannan
Facility's exposure to currency risks. There are pass-through provisions in the
Pricing Document for increases or decreases in the cost of coal against a coal
market index set forth in the Pricing Document, and the Pricing Document also
has provisions for pass-through or make-whole calculations relating to certain
construction capital cost items. Under the Pricing Document, the Joint Ventures
have the right to request a determination of a new power price whenever they
determine that changes in the price components require a new determination;
however, it is anticipated that they will generally apply annually for changes
in rates. Although paid in Renminbi, certain components (foreign site managers'
salaries, operating, maintenance, engineering and training services, certain
foreign travel expense and insurance costs, certain financing expenses and
equipment engineering services) of the tariffs are calculated in U.S. dollars
as a result of the currency rate adjustments. Tariffs are required to be paid
every 30 days by North China Power Company. North China Power Company is
obligated to pay by the 15th day of the calendar month following the month for
which such payment is being made. Any failure by either party to make payments
will entitle the other party to receive accrued interest, to be paid with the
next scheduled payment. The interest rate applied for the delayed payment is
0.05% per day.
The Issuer and the Joint Ventures have no experience in applying for
electricity prices determined in accordance with the pricing formula
incorporated in the Pricing Document. Use of such a pricing formula to
establish electricity prices is a recent development in the Chinese power
industry. Although the Issuer, based on discussions with the Pricing Approval
Authority, believes that the pricing formula will be applied to permit recovery
of all Luannan Facility costs and anticipated returns, there can be no
assurance that the Joint Ventures will be able to charge rates that will
generate sufficient revenues to enable the Joint Ventures to repay the
principal of and interest on the Shareholder Loans when and as due, or that any
application for an increase in the power rate will be approved by the Pricing
Approval Authority. See "Risk Factors--Considerations Relating to the PRC--
Governmental Regulation of Power Rules."
Interconnection; Transmission Service. Commencing on the interconnection
date and continuing for the term of the Luannan Power Purchase Agreement, North
China Power Company's facilities will transmit electric energy delivered by the
Luannan Facility to the Jing-Jin-Tang Grid.
Commercial Operation of the Luannan Facility. In order to establish the
Luannan Commercial Operation Date, Tangshan Panda and Tangshan Pan-Western will
give North China Power Company ten days' prior written notice of their initial
72-hour test run of the Luannan Facility. To establish the Luannan Commercial
Operation Date, the Luannan Facility must generate electric power at full load
for a continuous 72 hour period. North China Power Company, Tangshan Panda and
Tangshan Pan-Western will sign a certificate establishing the Luannan
Commercial Operation Date on the day that the relevant test or additional test
of the Luannan Facility is successfully completed.
After the Luannan Commercial Operation Date, the Luannan Facility will be
normally dispatched by North China Power Company so as to allow the Luannan
Facility to operate in accordance with the Luannan Power Purchase Agreement.
Concurrently, North China Power Company agrees as follows: (a) the dispatch
load curve will provide for Non-Peak Hours of operation that permit the Luannan
Facility to have a ramp period such that the maximum capacity of the Luannan
Facility may be generated during all Peak Hour periods and (b) North China
Power Company will arrange frequency and voltage adjustments, but North China
Power Company may not dispatch the Luannan Facility's reactive power beyond the
capabilities of the Luannan Facility's equipment. The ramp rates of the
dispatched load curves of the Luannan Facility will not exceed the requirement
of the Jing-Jin-Tang Grid for generation units of the same type.
Outages; Maintenance of the Luannan Facility; Annual Overhaul. The
cumulative annual overhaul outage for the Luannan Facility will not exceed 55
days. Outages will be calculated on an actual time elapsed basis. The schedule
for such outages shall be set by North China Power Company in accordance with
the overall outage schedule for the Jing-Jin-Tang Grid. If the cumulative
maintenance down time for each electric generating unit of the Luannan Facility
exceeds 55 days in any year, Tangshan Panda and Tangshan Pan-Western will pay a
compensation fee to North China Power Company calculated as follows: (amount of
required power to be delivered per day after deduction of an internal usage
amount) x (maintenance time exceeding 55 days) x power price.
Responsibility for Breach of Contract. Failure by Tangshan Panda and
Tangshan Pan-Western to deliver the minimum amount of electric energy to North
China Power Company required by the Luannan Power Purchase Agreement will
entitle North China Power Company to declare a breach of contract. If, due to
North China Power Company's fault, Tangshan Panda and Tangshan Pan-Western are
not able to deliver power to North China Power Company as required under the
Luannan Power Purchase Agreement, Tangshan Panda and Tangshan Pan-Western will
have the right to declare a breach of contract. The defaulting party is
required to compensate the non-defaulting party for all of its actual direct
losses caused by such breach of contract. A delayed payment for power delivered
will be construed as a breach of contract if such delay has lasted more than 15
days. Late payments bear interest at the rate of 0.05% per day. The non-
defaulting party may elect to terminate the Luannan Power Purchase Agreement if
the defaulting party has neither taken action to cure 30 days after receipt of
written notice from the non-defaulting party of its declaration of breach of
contract (which cure may take a longer period as long as it is being pursued
with diligence) nor made any required payments (excluding amounts in good faith
dispute).
Force Majeure. Each party is excused from performance of its respective
obligations (except for payment obligations existing prior to the occurrence of
the force majeure event) under the Luannan Power Purchase Agreement if
performance of such obligations is adversely affected by an event of force
majeure, which includes any subsequent modifications or changes of laws,
regulations or rules made by the Central Government or any local government or
their agencies that directly or indirectly affects either party's performance
of such obligations. Each party is generally obligated to take reasonable steps
to restore its ability to perform, to limit the damage caused to the other
party and, under certain circumstances, to negotiate and execute an amendment
to the Luannan Power Purchase Agreement. Each party may unilaterally terminate
the Luannan Power Purchase Agreement if a force majeure is declared by the
other party and such party does not resume performance within 12 months of the
date of such declaration.
Termination. The parties may agree to terminate the Luannan Power Purchase
Agreement, provided such termination does not damage the PRC's and public
interests. Furthermore, the Luannan Power Purchase Agreement may be terminated
by North China Power Company if, prior to the Luannan Commercial Operation
Date, Tangshan Panda and Tangshan Pan-Western cease development of the Luannan
Facility for 12 consecutive months.
Governing Law and Dispute Resolution. The Luannan Power Purchase Agreement
is to be construed and governed by PRC law. Disputes arising under the Luannan
Power Purchase Agreement are to be attempted to be resolved by friendly
consultation between Tangshan Panda, Tangshan Pan-Western and North China Power
Company for a period of 30 days. In the event that the dispute cannot be
settled by mutual discussion within the 30 day period, the dispute shall be
settled by arbitration to be conducted in Singapore under the Rules of
Conciliation and Arbitration of the ICC. Each party to the arbitration will
appoint an arbitrator with the International Court of Arbitration of the ICC to
appoint a third. The decision rendered by the arbitral body will be final,
binding and unappealable. See "Risk Factors--Considerations Relating to the PRC-
- -Uncertain Enforcement of Foreign Judgments."
Waiver of Sovereign Immunity. Each party to the Luannan Power Purchase
Agreement waives any rights to immunity it may have with respect to its
obligations arising under the Luannan Power Purchase Agreement or relating
thereto.
Engineering, Procurement and Construction Contract
The Engineering, Procurement and Construction Contract, among the Luannan
EPC Contractor, Tangshan Panda and Tangshan Pan-Western, dated April 24, 1996,
as amended, provides that the Luannan EPC Contractor will provide design,
engineering, equipment and material procurement, support, construction, start-
up, performance testing and other services in order to make the Luannan
Facility fully operational on a fixed price, turnkey basis.
Basic Obligations. The Luannan EPC Contractor is responsible for
furnishing all equipment, services and materials for engineering, procurement,
construction, start-up and performance testing of the Luannan Facility. The
Luannan EPC Contractor is required to obtain the permits necessary to complete
its obligations and to conduct its activities in compliance with all applicable
approvals, laws and permits.
Tangshan Panda and Tangshan Pan-Western are responsible for, among other
things, providing the Luannan EPC Contractor with access to the site of the
Luannan Facility, providing any additional areas of land necessary to
accommodate the Luannan EPC Contractor, and supplying fuel oil and coal for
boiler fuel needed by the Luannan EPC Contractor to conduct performance testing
of the Luannan Facility. Tangshan Panda and Tangshan Pan-Western are
responsible for obtaining all spare parts required for the normal operation of
the Luannan Facility.
Price and Payment; Security. As payment for the performance of all of the
Luannan EPC Work, the Luannan EPC Contractor's other obligations under the
Luannan EPC Contract, and all costs in connection therewith, Tangshan Panda and
Tangshan Pan-Western have agreed to pay a purchase price of approximately $63.6
million which includes a contingency of approximately $3.0 million. Starting at
September 16, 1996, the price is increased at the pro-rated rate of 0.5% per
month through December 31, 1996. As of December 31, 1996, the price as so
increased was approximately $64.7 million. In December 1996, the Luannan EPC
Contract was amended to provide for the issuance of a limited notice to proceed
so that site work was commenced (upon payment of $2.0 million). An additional
$1.0 million was paid to the Luannan EPC Contractor before March 1, 1997 and an
additional $1.0 million was paid before March 31, 1997. The price as so
escalated is referred to herein as the "Luannan EPC Contract Price." The full
notice to proceed was given prior to May 1, 1997. No payment will be made for
the civil and installation portion of the Luannan EPC Work until the actual
completion of such portion exceeds the 10% down payment as described below. The
Luannan EPC Contractor will be entitled to payments on a monthly basis in
accordance with a milestone payment schedule, provided that, in the case of the
civil and installation portion of the Luannan EPC Work, payments will be made
for the Luannan EPC Work to be actually completed and, in the case of the
equipment portion of the Luannan EPC Work, payments will be made for the
percentage in such schedule of such equipment, and, provided further that the
Luannan EPC Contractor's invoice has not been disputed by Tangshan Panda and
Tangshan Pan-Western. Tangshan Panda and Tangshan Pan-Western will make a down
payment in an amount of 10% of the Luannan EPC Contract Price at the time of
giving the notice to proceed. Tangshan Panda and Tangshan Pan-Western, however,
will withhold 10% of such down payment and each progress payment made in
accordance with the Luannan EPC Contract as retainage (the "Retainage"). The
Luannan EPC Contractor will provide Tangshan Panda and Tangshan Pan-Western on
the Luannan Commercial Operation Dates of the first and second plants,
respectively, with a letter of credit each in the amount of 2.5% of the Luannan
EPC Contract Price to cover certain liabilities arising from warranties
provided under the Luannan EPC Contract. A portion of Retainage will be
returned by Tangshan Panda and Tangshan Pan-Western to the Luannan EPC
Contractor for the principal amount of such letters of credit. The remainder of
the Retainage will be held until completion of punch list items and other
deficiencies.
Schedule. The Luannan EPC Contractor is required to complete certain
milestones in accordance with a construction schedule (the "Construction
Schedule"). The Construction Schedule contemplates that the Luannan Facility
will be ready for commissioning 28 months following the issuance of a notice to
proceed (the "Guaranteed Commercial Operation Date"). If the Luannan EPC
Contractor fails to accomplish a milestone by the time contemplated in the
Construction Schedule and Tangshan Panda and Tangshan Pan-Western deliver
written notice of such failure to the Luannan EPC Contractor, the Luannan EPC
Contractor must either complete such milestone or provide Tangshan Panda and
Tangshan Pan-Western with a plan of recovery within 3 days after the receipt of
the notice setting forth how the Luannan EPC Contractor intends to achieve such
milestone within 15 days after the receipt of the notice. If the work necessary
to achieve such milestone cannot be achieved within such 15 days despite best
efforts by the Luannan EPC Contractor, its plan of recovery shall demonstrate
what special steps it will take to assure the earliest possible achievement of
such milestone (not to exceed 90 days).
If commercial operation of the Luannan Facility is not achieved by the
Guaranteed Commercial Operation Date, subject to any extension allowed under
the Luannan EPC Contract, the Luannan EPC Contractor shall pay Tangshan Panda
and Tangshan Pan-Western $50,000 per day for each subsequent day that
commercial operation is delayed after the Guaranteed Commercial Operation Date,
up to a maximum of $18.0 million. However, such penalties could well not be
sufficient to avoid a default on the Exchange Notes. See "Risk Factors -
Project Risks."
Early Completion Bonus. If the commercial operation of the Luannan
Facility occurs prior to the Guaranteed Commercial Operation Date, Tangshan
Panda and Tangshan Pan-Western shall pay the Luannan EPC Contractor, $12,500
per day as a bonus, for each day in the 15 day period preceding the Guaranteed
Commercial Operation Date in which commercial operation is achieved, and
$24,900 per day for each day in the next preceding 15 days in which commercial
operation is achieved. No additional early completion bonus shall be paid for
early completion more than 30 days prior to the Guaranteed Commercial Operation
Date.
Performance Guarantees. The Luannan EPC Contractor guarantees that (i) the
net dependable capacity ("Net Dependable Capacity") of the Luannan Facility
shall be (as corrected to design condition) at least 102,000 kW; (ii) the net
heat rate of the Luannan Facility operated at summer design conditions shall be
equal to, or less than 12,817 kJ/kWh (LHV); and (iii) the emission and noise
levels will meet the requirements of applicable laws and regulations. In the
event the Luannan EPC Contractor fails to meet any of the above guarantees, it
is required to pay liquidated damages as follows:
- $700/kW below 102,000 kW Net Dependable Capacity;
- $5,000 for each kJ/kWh in excess of the net heat rate guarantee if
such guaranteed heat rate is exceeded by more than 101%; and
- $700/kW where the Luannan Facility must operate at levels below
102,000 kW to meet certain emission requirements.
Liquidated damages for schedule delays and performance guarantees are
limited to 35% of the Luannan EPC Contract Price.
The Luannan EPC Contractor will also be paid bonuses for exceeding certain
performance guarantees in an amount of: (i) $550 per kW by which the Net
Dependable Capacity of the Luannan Facility exceeds 102,000 kW (not to exceed
$1.0 million); and (ii) $1,165 per kJ/kWh by which the net heat rate of the
Luannan Facility is less than 99% of 12,817 kJ/kWh (LHV) (not to exceed $1.0
million).
Adjustments to the Luannan EPC Contract Price and/or Construction
Schedule. Although the Luannan EPC Contractor has agreed to perform the Luannan
EPC Work for the Luannan EPC Contract Price in accordance with certain warranty
obligations, there may be circumstances in which the Luannan EPC Contractor is
entitled to an increase in the Luannan EPC Contract Price, or an extension of
the Construction Schedule. These circumstances include a change in law or a
force majeure event (as described below), changes in the Luannan EPC Work
requested by Tangshan Panda and Tangshan Pan-Western that have been agreed to
by the Luannan EPC Contractor or changes requested by the Luannan EPC
Contractor that have been approved by Tangshan Panda and Tangshan Pan-Western
which, in all cases, would be subject to the change order process set forth in
the Luannan EPC Contract. In addition, the Luannan EPC Contractor may be
entitled to an equitable adjustment of the Luannan EPC Contract Price and/or
the Construction Schedule in certain other circumstances, including a delay or
failure by Tangshan Panda and Tangshan Pan-Western to perform their non-payment
obligations under the Luannan EPC Contract, suspension of Luannan EPC Work by
Tangshan Panda and Tangshan Pan-Western and events of force majeure.
Testing. The Luannan EPC Contractor is required to provide Tangshan Panda
and Tangshan Pan-Western and any institution providing financing for the
construction of the Luannan Facility a detailed performance test procedure for
review and acceptance at least 180 days before the expected test date.
Performance testing of the Luannan Facility will not begin until Tangshan Panda
and Tangshan Pan-Western and any institution providing financing for the
construction of the Luannan Facility have accepted the test procedures. The
Luannan EPC Contractor must give 45 days' written notice prior to the start of
the performance tests.
Once the Luannan EPC Contractor has completed performance testing with
respect to the first plant or both plants and the first plant or both plants,
as the case may be, are capable of being operated safely, the Luannan EPC
Contractor may submit the performance testing reports together with a written
notice of commercial operation, to Tangshan Panda and Tangshan Pan-Western.
Within 15 business days of the receipt of such notice, Tangshan Panda and
Tangshan Pan-Western will either confirm that the requirements for commercial
operation have been met, or specify to the Luannan EPC Contractor the manner in
which the requirements for commercial operation have not been met. The Luannan
EPC Contractor may take appropriate corrective action and repeat the
performance tests if it fails any part of the original test, unless one year
has passed since the Guaranteed Commercial Operation Date.
Materials and Workmanship Warranty. The Luannan EPC Contractor warrants
that all equipment and other items furnished under the Luannan EPC Contract
will be new and of good quality and will conform to the kind and quality
specified in the Luannan EPC Contract. The Luannan EPC Contractor is obligated
to correct any Luannan EPC Work performed under the Luannan EPC Contract that,
at any time for a period of one year after final acceptance of the Luannan
Facility by Tangshan Panda and Tangshan Pan-Western or, if applicable, after
the date of the repair, proves to be improper or defective with regard to the
provisions of the Luannan EPC Contract in design, material or workmanship.
Engineering and Design Warranty. The Luannan EPC Contractor guarantees
that it will perform all construction surveying, engineering and design
services as of the final acceptance of the Luannan Facility in accordance with
sound engineering practice and the requirements of the Luannan EPC Contract,
and that the Luannan Facility will be free of all defects and deficiencies and
will be operational in compliance with the Luannan EPC Contract, the Luannan
Power Purchase Agreement and all applicable permits and laws. The Luannan EPC
Contractor will obtain from its subcontractors or vendors, guarantees and
warranties with respect to Luannan EPC Work performed and equipment used and
installed under the Luannan EPC Contract, which guarantees and warranties will
equal or exceed those provided by the Luannan EPC Contractor and will be made
available and assignable to Tangshan Panda and Tangshan Pan-Western for a
period of at least one year after the Luannan Commercial Operation Date.
Force Majeure. Any party to the Luannan EPC Contract is excused from
performance of its obligations under the Luannan EPC Contract for a force
majeure event. A force majeure event under the Luannan EPC Contract includes
events, conditions or circumstances beyond the reasonable control of, and
without the fault or negligence of, the party affected, that despite all
reasonable efforts of the party affected to prevent it, cause a material and
adverse delay or disruption in the performance of the Luannan EPC Contract.
Examples of force majeure events are various natural disasters, fires, war,
civil disturbances, riots and certain actions of a court or other legal
authority. Force majeure events do not include failure or inability to make
payment or strikes or labor disputes of vendors and the subcontractors of the
Luannan EPC Contractor.
Event of Default. The events of default applicable to the Luannan EPC
Contractor include, without limitation, failure to perform in accordance with
the Luannan EPC Contract, breach of any of the Luannan EPC Contractor's
covenants, agreements, representations or warranties (if not remedied within 90
days, of notice to the Luannan EPC Contractor), and certain insolvency or
bankruptcy events relating to the Luannan EPC Contractor.
The Luannan EPC Contractor may terminate the Luannan EPC Contract in
certain instances if the Luannan Facility is damaged or destroyed during
construction, other than as a result of the Luannan EPC Contractor's actions or
failure to act, and Tangshan Panda and Tangshan Pan-Western notify the Luannan
EPC Contractor that neither insurance proceeds nor any other adequate source of
funds will be made available for the repair or restoration of such damage.
Indemnification. The Luannan EPC Contractor has agreed to indemnify
Tangshan Panda and Tangshan Pan-Western for all claims, damages, losses,
liabilities and expenses (including court costs and reasonable attorneys' fees)
indirectly or directly arising out of, or resulting from, a negligent act or
omission of the Luannan EPC Contractor, or any subcontractor or vendor or
anyone directly or indirectly employed by any of them, or anyone for whose acts
any of them may be liable. The Luannan EPC Contractor has also agreed to
indemnify Tangshan Panda and Tangshan Pan-Western for certain claims and
expenses arising from allegations that the Luannan EPC Contractor infringed
upon intellectual property rights in its performance of the EPC Work. Tangshan
Panda and Tangshan Pan-Western have agreed to indemnify the Luannan EPC
Contractor and its officers, directors, agents, servants and employees from any
claims, suits, damages and costs directly resulting from the negligence or
willful misconduct by Tangshan Panda and Tangshan Pan-Western that materially
and adversely affect the Luannan EPC Contract, with the understanding that
Tangshan Panda and Tangshan Pan-Western are entitled to control and direct the
defense of any such claim or litigation.
Governing Law and Disputes. The Luannan EPC Contract is governed by the
laws of the PRC, exclusive of conflicts of laws provisions. Any dispute will be
initially settled through friendly consultation. If the parties do not reach an
amicable resolution within 30 days, either party may submit the dispute to the
International Court of Arbitration of the ICC, as the exclusive forum, for
binding arbitration to be held in Singapore. For convenience purposes, the
parties may mutually agree to hold arbitration in Beijing, China for disputes
with a value below $1.0 million. In each case the Rules of Conciliation and
Arbitration of the ICC shall govern the proceedings. See "Risk Factors--
Considerations Relating to the PRC--Uncertain Enforcement of Foreign
Judgments."
CHEXIM Guarantee. It is a requirement of the Luannan EPC Contract that
CHEXIM shall provide Tangshan Panda and Tangshan Pan-Western with the CHEXIM
Guarantee in an amount equal to 35% of the Luannan EPC Contract Price prior to
the closing of the Prior Offering. The amount of the CHEXIM Guarantee is
approximately $22.7 million. Tangshan Panda and Tangshan Pan-Western will have
the unconditional right to draw upon the CHEXIM Guarantee for payment of
liquidated damages or termination payments under the Luannan EPC Contract. The
CHEXIM Guarantee shall be a continuing guarantee of payment remaining in full
force and effect until six months after Tangshan Panda and Tangshan Pan-
Western's acceptance of the Luannan Commercial Operation Date.
Heat Network Construction Agreement
Tangshan Pan-Sino and Tangshan Engineering entered into the Heat Network
Construction Agreement on June 20, 1996 under which Tangshan Engineering will
build the Network. The cost for construction of the Network, which will consist
of 12.1 kilometers of hot water pipeline, 8.78 kilometers of steam pipeline,
heat exchange stations, heat control equipment and civil construction, is
approximately RMB 24.17 million ($2.9 million). The cost is subject to
escalation according to the Chinese State Statistic Bureau Price Index.
Transmission Facilities Construction Agreement
The Luannan Transmission Facilities Construction Agreement sets out the
rights and obligations of North China Power Company, as Luannan Transmission
Facilities Contractor, and Tangshan Pan-Sino, relating to, among other things,
price, the scope of work, the performance guarantees of the Luannan
Transmission Facilities Contractor and damages and remedies in connection
therewith.
Scope of Work. The Luannan Transmission Facilities Contractor is
responsible for the construction of the Luannan Transmission Facilities.
Total Construction Cost; Other Costs. Pursuant to separate contractual
arrangements, the Luannan Transmission Facilities Loan of RMB 78.2 million, to
be adjusted for inflation from December 31, 1994 to the date of issuance of the
notice to proceed with preliminary design (the "Total Transmission Facilities
Construction Cost"), will be made by Tangshan Pan-Sino to the Luannan
Transmission Facilities Contractor through a PRC financial institution, China
Information Trust and Investment Corp., for the construction cost of the
Luannan Transmission Facilities. As of March 10, 1997, the aggregate Total
Transmission Facilities Construction Cost was estimated to be approximately
RMB 83.7 million (approximately $10.1 million). The Total Transmission
Facilities Construction Cost will cover the cost of all work involved. The
Renminbi amount of the Total Transmission Facilities Construction Cost will be
converted into U.S. dollars on the date of the applicable loan advance at the
then-prevailing exchange rate as quoted by the SAFE. If North China Power
Company is not able to obtain approvals to borrow and repay the Luannan
Transmission Facilities Loan in U.S. dollars, it has the right to borrow and
repay the loan in Renminbi, in which event the parties have agreed to negotiate
an equitable allocation of the exchange rate risk. The Luannan Transmission
Facilities Loan will be made in accordance with the following schedule: 10%,
50% and 30% of the Total Transmission Facilities Construction Cost payable on
the date Tangshan Pan-Sino gives the Luannan Transmission Facilities Contractor
the notice to proceed with preliminary design under the Luannan Transmission
Facilities Construction Agreement and six months and 12 months after,
respectively, with the remainder payable upon completion of the Luannan
Facility. The loan will bear interest at the actual rate of interest charged by
international lenders to Tangshan Pan-Sino (excluding fees), but not to exceed
12% simple interest per annum. Principal and interest on all outstanding
amounts of the Transmission Facilities Loan will be amortized over a period of
ten years in 20 equal consecutive semi-annual payments commencing on the first
to occur of September 30th or March 31st immediately following the Luannan
Commercial Operation Date. Any amounts not paid when due shall bear default
interest from the date due at a rate of 18% per annum until paid. Pursuant to
the Luannan Transmission Facilities Construction Agreement, unless the scope of
work changes at the request of Tangshan Pan-Sino, or the Total Transmission
Facilities Construction Cost is adversely affected by an event of force majeure
provided thereunder, or a breach by Tangshan Pan-Sino of its obligations under
the Luannan Transmission Facilities Construction Agreement, no adjustment of
the Total Transmission Facilities Construction Cost shall be permitted
(excluding the index adjustment described above).
Performance Guarantees. The Luannan Transmission Facilities Contractor
guarantees that an adequate reverse supply of electric power to the Luannan
Facility will be supplied to satisfy the needs of the general contractor of the
Luannan Facility for test--runs of the Luannan Facility, that the work involved
will be completed in such a fashion that the Luannan Facility will be able to
transmit continuously and/or intermittently so as to meet the requirements of
the interconnecting system and that design, construction and installation of
the Luannan Transmission Facilities will be completed with new materials and in
a good and workmanlike manner in accordance with the standards for the same
category of transmission lines and substations adopted by North China Power.
Ownership; Maintenance. The Luannan Transmission Facilities Contractor
will own the Luannan Transmission Facilities after the completion of the
Luannan Transmission Facilities and, accordingly, perform all operations,
maintenance and repair of the Luannan Transmission Facilities during the term
of the Luannan Power Purchase Agreement
Damages. If Tangshan Pan-Sino breaches the Luannan Transmission Facilities
Construction Agreement, the Luannan Transmission Facilities Contractor will be
entitled to receive appropriate schedule relief required because of such
breach, and to any increased costs in performing the work involved resulting
from the breach.
If the Luannan Transmission Facilities Contractor fails to meet any of its
guarantees and the default has not been cured for 60 days, Tangshan Pan-Sino
may assume responsibility for completing all or any portion of the work
involved at the Luannan Transmission Facilities Contractor's expense, with
payments of expenses by Tangshan Pan-Sino for such work to be treated as loans
of a portion of the Total Transmission Facilities Construction Cost to the
Luannan Transmission Facilities Contractor. In the event that such expenses
exceed any balance not yet loaned on the Total Transmission Facilities
Construction Cost, the Luannan Transmission Facilities Contractor will promptly
pay or reimburse Tangshan Pan-Sino for such expenses.
In case of breach of contract, the breaching party shall be liable for
damages for loss to the other party. There are, however, no assurances that any
damages collected due to a breach by the Luannan Transmission Facilities
Contractor would be sufficient (or paid in time) to avoid a default on the
Shareholder Loans and, in turn, on the Issuer Note, and to enable the Issuer to
avoid a default on the Exchange Notes. See "Risk Factors - Project Risks."
Coal Supply Agreements
The Issuer expects that the Luannan Facility will use approximately
450,000 metric tons of coal per year. The principal fuel supplier for the
Luannan Facility is the Qianjiaying Mine, which is owned and operated by
Kailuan Coal, a state-owned coal mining company. The Qianjiaying Mine is
expected to supply up to 300,000 metric tons of coal per year. Tangshan Panda
and Tangshan Pan-Western will also purchase coal from the other local Luannan
Coal Suppliers to secure the remaining coal demand.
Each Luannan Coal Supplier will supply coal to Tangshan Panda and Tangshan
Pan-Western pursuant to its respective coal supply agreement (each, a "Luannan
Coal Supply Agreement" and collectively, the "Luannan Coal Supply Agreements").
The term of each Luannan Coal Supply Agreement is 10 years from the first
purchase of coal by Tangshan Panda and Tangshan Pan-Western. Each Luannan Coal
Supply Agreement sets out the rights and obligations of Tangshan Panda and
Tangshan Pan-Western and its respective Luannan Coal Supplier, relating to,
among other things, the quantity and quality of the supply of coal to Tangshan
Panda and Tangshan Pan-Western, the purchase price and termination.
Purchase and Sales of Coal. Tangshan Panda and Tangshan Pan-Western will
have the right to purchase up to 300,000 and 310,000 metric tons per year of
coal from, respectively, Kailuan Coal and the other Luannan Coal Suppliers.
Each Luannan Coal Supply Agreement sets forth the average quality of the coal
to be delivered to meet the specifications for total moisture, ash, sulfur,
heat value, coal size and fines. Tangshan Panda and Tangshan Pan-Western will
be entitled to reject any coal supplied by any Luannan Coal Supplier which does
not meet the pre-agreed acceptable limits or contains foreign substances.
Purchase Price. The price of coal sold by Kailuan Coal will be adjusted
yearly based on the average annual price in Renminbi per ton for coal sold by
Kailuan Coal for the preceding year under similar terms and conditions. The
price of coal sold by the other Luannan Coal Suppliers will be the average
monthly price in Renminbi per ton of coal sold by the mines regulated by the
Tangshan Municipal Coal Industry Bureau under similar terms and conditions.
With respect to the Luannan Coal Supply Agreement with Kailuan Coal, Tangshan
Panda and Tangshan Pan-Western will provide Kailuan Coal with an estimate of
its coal requirements. In emergency situations, either party may change
previously determined amounts upon at least 15 days' notice. The annually
adjusted price and the supply schedule will be reflected in the supply contract
to be entered into each year by the parties pursuant to such Luannan Coal
Supply Agreement.
Termination. Each Luannan Coal Supply Agreement may be terminated by each
party by notice to the other party if the other party materially breaches its
obligations and such breach is not cured within 60 days of receipt of notice of
such breach. The Luannan Coal Supply Agreement between Tangshan Panda, Tangshan
Pan-Western and Kailuan Coal provides that Kailuan Coal may terminate the
Luannan Coal Supply Agreement upon six months' notice if national energy
policies of the PRC change such that the rules governing the allocation of coal
restrict its ability to make sales of coal under terms and conditions similar
to those set forth in such Luannan Coal Supply Agreement.
Coal Transportation Agreement
The coal will be transported to the Site pursuant to a coal transportation
agreement (the "Luannan Coal Transportation Agreement"), among Tangshan Panda,
Tangshan Pan-Western and Luannan County State-Owned Transportation Company (the
"Carrier"), a PRC company owned and operated by Luannan County. The term of the
Luannan Coal Transportation Agreement is 10 years from the date of the first
truck delivery by the Carrier to the Luannan Facility. The Luannan Coal
Transportation Agreement sets out the rights and obligations of Tangshan Panda
and Tangshan Pan-Western and the Carrier, relating to, among other things, the
services and obligation of the Carrier and the payment obligations of Tangshan
Panda and Tangshan Pan-Western for such services.
Transportation of Coal. The Carrier will transport and deliver up to
500,000 tons of coal per year from the Luannan Coal Suppliers to Tangshan Panda
and Tangshan Pan-Western at the Luannan Facility. Unless a failure to deliver
coal results from a force majeure or breach by Tangshan Panda and Tangshan Pan-
Western, the Carrier will deliver all required coal shipments to Tangshan Panda
and Tangshan Pan-Western within 24 hours of the required scheduled delivery
date. If the Carrier fails to deliver coal within the time required, Tangshan
Panda and Tangshan Pan-Western may make alternate coal transportation
arrangements, and the Carrier will be responsible for any incremental costs
incurred by Tangshan Panda and Tangshan Pan-Western for such arrangements.
Price of Transportation. The price of transportation of coal shipped from
the Qianjiaying Mine to the Site by the Carrier will be RMB 15 per ton, subject
to annual adjustment based upon the market price for truck transportation
effective for the following year. If the parties cannot agree upon the adjusted
price, the average price of four truck carriers in the Tangshan region, two
selected by each party, shall be used.
Termination. The Luannan Coal Transportation Agreement may be terminated
by either party thereto by notice to the other party if the other party
materially breaches its obligations and such breach is not cured within 60 days
after receipt of notice of such breach.
Luannan Operations and Maintenance Agreement
The Joint Ventures and the Luannan O&M Contractor, Duke/Fluor Daniel
International Services, have entered into the Amended and Restated Luannan
Operations and Maintenance Agreement (the "Luannan Operations and Maintenance
Agreement") dated as of March 6, 1997. The Luannan Operations and Maintenance
Agreement has a ten-year term and provides, among other things, the
responsibilities and obligations of the Joint Ventures and the Luannan O&M
Contractor, including, among others, the scope of services, compensation,
payments of bonuses/penalties, termination and indemnity.
Scope of Services. The Luannan O&M Contractor will provide the operation,
maintenance and repair services necessary for the production and delivery of
electrical energy by the Luannan Facility in accordance with the requirements
of the Luannan Power Purchase Agreement including, without limitation,
developing a hiring schedule, preparing a list of recommended tools, spare
parts and equipment, providing maintenance and repair services and keeping
maintenance and operation records.
The responsibilities of the Luannan O&M Contractor prior to the Luannan
Commercial Operation Date will include, without limitation, reviewing and
consulting with the Joint Ventures regarding all plant design specifications,
assessing the available local labor force, developing plans for staffing and
training with respect to local labor, developing operating budgets, and
procuring tools, spare parts, chemicals and other materials. The Luannan O&M
Contractor will also provide operating personnel to assist in start-up and
testing of the Luannan Facility under the supervision of the Luannan EPC
Contractor. After the Luannan Commercial Operation Date, the Luannan O&M
Contractor will have complete on-site responsibility for the operations and
maintenance of the Luannan Facility. Among other things, the Luannan O&M
Contractor will (i) operate and maintain the Luannan Facility in accordance
with prudent utility practices, and as required by the Luannan Power Purchase
Agreement, and all applicable laws, permits, approvals, ordinances, rules,
regulations and orders, (ii) provide all management, administration,
supervision and staffing functions, (iii) procure materials, supplies,
consumables and outside services as per the approved budget and (iv) maintain
the Luannan Facility in good repair.
Service to be Performed by Joint Ventures. Among other things, the Joint
Ventures will monitor the operation of the Luannan Facility, provide office and
administrative space, provide and pay for all fuel and utilities, obtain
necessary permits and licenses, except those issued in the name of the Luannan
O&M Contractor or those the Luannan O&M Contractor is required to obtain,
provide and pay for all fuel required, and pay or reimburse the Luannan O&M
Contractor for all property or other taxes related to the Luannan Facility,
excluding income taxes of the Luannan O&M Contractor.
Insurance. The Luannan O&M Contractor will carry and maintain insurance
with specified minimums including worker's compensation and comprehensive
automobile liability insurance. The Joint Ventures will provide insurance with
specified minimums to cover general liability, builder's risk exposure and all
risk property insurance naming the Luannan O&M Contractor as an additional
insured and providing a waiver of subrogation in favor of the Luannan O&M
Contractor and designated subcontractors. The Joint Ventures will provide
coverage with a specified minimum for themselves and the Luannan O&M Contractor
against claims for third party bodily injury and death and third party property
damage.
Compensation. Prior to the Luannan Commercial Operation Date, the Luannan
O&M Contractor will be entitled to a fee of $250,000 per annum payable in
monthly installments and eligible for a start-up bonus of $500,000 based upon
mutually agreed-upon criteria.
After the Luannan Commercial Operation Date occurs, in addition to
reimbursements for the cost of the operation of the Luannan Facility, the
Luannan O&M Contractor will receive an annual operating fee of $500,000,
payable in equal monthly installments, adjusted annually in accordance with the
U.S. Consumer Price Index.
Bonuses/Penalties. The Luannan O&M Contractor's monthly installment of the
annual operating fee after the Luannan Commercial Operation Date may be
increased or decreased on the basis of several criteria, including certain
criteria designed to measure performance as illustrated by the following chart:
PEAK HOURS
BONUS PENALTY
$0.01 per kWh for amount of $0.05 per kWh for amount of
daily energy production daily energy production less
greater than 760,000 kWh of than 800,000 kWh of gross
net energy production. energy production.
NON-PEAK HOURS
BONUS PENALTY
$0.01 per kWh for amount of $0.01 per kWh for amount of
daily energy production daily energy production
greater than 504,000 kWh of greater than 560,000 kWh gross
gross energy production up to energy production.
a maximum of 16,000 kWh of
gross energy production.
TROUGH HOURS
BONUS PENALTY
$0.01 per kWh for amount of $0.05 per kWh for amount of
daily energy production above daily energy production above
464,000 kWh gross energy 480,000 kWh of gross energy
production up to a maximum of production.
16,000 kWh of gross energy
production.
The Luannan O&M Contractor's monthly installment of the annual operating
fee will also be adjusted based on the Luannan Facility's monthly heat rate as
follows: for each month the Luannan Facility's average heat rate is less than
base heat rate which is defined as an amount equal to 1.035 times the heat rate
(including process steam) of the final project test conducted by the Luannan
EPC Contractor averaged at 60 MW, 65 MW and full output of the Luannan
Facility, the Luannan O&M Contractor will receive an increase in the monthly
installment of the annual operation fee of $0.003/kWh times the net energy
produced for the month in kWh times the difference between the base heat rate
and the actual heat rate in Btu/kWh the quantity divided by the base heat rate.
For each month that the Luannan Facility's average heat rate is greater than
the base heat rate plus 400 Btu/kWh, the Luannan O&M Contractor will receive a
decrease in the monthly installment of the annual operation fee of $0.003/kWh
times the net energy produced for the month in kWh times the difference between
the actual heat rate in Btu/kWh and the base heat rate plus 400 Btu/kWh the
quantity divided by the base heat rate plus 400 Btu/kWh.
Termination. In addition to termination pursuant to the default of the
Luannan O&M Contractor, the Joint Ventures may terminate the contract for
convenience if the Luannan Power Purchase Agreement is terminated or if the
Luannan Facility is sold to a third party who intends to operate the Luannan
Facility. In the event of termination for convenience, in addition to payments
of all outstanding costs, reasonable costs in support of the termination and
reasonable severance costs, the Joint Ventures will also pay the Luannan O&M
Contractor $25,000 per month through the twenty-fourth month following the
Luannan Commercial Operation Date, $20,000 per month through the forty-eighth
month and $15,000 per month from the forty-ninth month through the original
term of the Luannan Operations and Maintenance Agreement. Either party may also
terminate the Luannan Operations and Maintenance Agreement for cause, in which
case no termination payment shall be made by the Joint Ventures.
Liability and Indemnity. Subject to certain specified insurance coverage
limits, the Joint Ventures bear the risk of physical loss or damage to the
Luannan Facility. The Luannan O&M Contractor and subcontractors have no
liability for loss or damage to property or the Luannan Facility. The Luannan
O&M Contractor agrees to defend and indemnify the Joint Ventures, any lenders
and North China Power Company and their respective directors, officers and
employees against, and hold them harmless from any claims resulting from or in
connection with Luannan O&M Contractor's performance, negligent performance, or
non-performance of its obligations hereunder except where such claims were
caused by the sole negligence or willful misconduct of the Joint Ventures, any
lenders or North China Power Company or any of their directors, officers and
employees respectively.
Subject to certain specified insurance coverage limits, the Joint Ventures
agree to defend and indemnify the Luannan O&M Contractor and its directors,
officers and employees against, and hold them harmless from (i) any claims
resulting from or in connection with the Joint Ventures' performance, negligent
performance, or non-performance of its obligations except where, such claims
were caused by the sole negligence or willful misconduct of the Luannan O&M
Contractor and its directors, officers and employees, and (ii) any claims
resulting from the Luannan O&M Contractor acting under the Luannan EPC
Contractor's supervision and direction, the Luannan EPC Contractor's
performance, negligent performance or non-performance of its obligations except
where such claims are caused by the Luannan O&M Contractor and its directors',
officers' and employees' failure to comply with directions of the Luannan EPC
Contractor and/or the sole negligence or willful misconduct of the Luannan O&M
Contractor and its directors, officers and employees.
Ownership of and legal responsibility and liability for any and all pre-
existing contamination shall remain with the Joint Ventures.
Force Majeure. Neither party shall be responsible or liable for, or
subjected to, any termination of the Luannan Operations and Maintenance
Agreement for, or deemed in breach of the Luannan Operations and Maintenance
Agreement as a result of, any delay or deficiency in the performance of its
obligations thereunder to the extent that such delay or deficiency is due to
circumstances beyond its reasonable control. "Force Majeure Event" is defined
under the Luannan Operations and Maintenance Agreement to mean any event that
is not foreseeable and for which the damages caused by the event are not
reasonably preventable by the party declaring force majeure and cannot be
overcome such that it adversely affects one party's performance of its
obligations under the Luannan Operations and Maintenance Agreement, including,
without limitation, unusually severe weather conditions, any natural disasters
such as fire or earthquakes, any labor difficulty not involving employees of
any parties thereto, war, inability to obtain fuel for the Luannan Facility,
riots, requirements, actions or failures to act on the part of governmental
authorities preventing performance, any modifications or changes in law or
regulations, inability despite due diligence to obtain required licenses or
approvals, and accident.
Governing Law/Disputes. The Luannan Operations and Maintenance Agreement
is governed by the law of the State of Texas, but any unresolved dispute
between the parties shall be settled by arbitration conducted in accordance
with the Commercial Rules of the American Arbitration Association in Dallas,
Texas.
Engineering and Design Contract
Tangshan Panda and Tangshan Pan-Western entered into an Engineering and
Design Contract (the "Engineering and Design Contract"), dated December 21,
1995, with Hebei Electric Power Survey and Design Institute (the "Design
Institute"). The Design Institute has agreed to perform all surveys, design and
engineering work including the preliminary design and construction drawings
(collectively, the "Services") necessary for Tangshan Panda and Tangshan Pan-
Western to obtain permits and construct the Luannan Facility in accordance with
PRC codes and regulations, and with the project design criteria detailed in the
Engineering and Design Contract (the "Project Design Criteria"). The
Engineering and Design Contract will be in effect until final acceptance of the
Luannan Facility by Tangshan Panda and Tangshan Pan-Western in accordance with
the Luannan EPC Contract. Tangshan Panda and Tangshan Pan-Western have assigned
their rights and benefits in, and delegated all of their obligations arising
under, the Engineering and Design Contract to the Luannan EPC Contractor.
Design Institute's Responsibilities. The Design Institute will accomplish
the preliminary design, construction drawings and their relevant government and
project approvals in accordance with current design codes and regulations in
China and in accordance with the Project Design Criteria. The Design Institute
will also be responsible for any modifications required by the relevant
government authorities after examination of the preliminary design. The Design
Institute will, subject to the allocation decisions made by the Luannan EPC
Contractor, provide on-site personnel on a 24 person/month basis to support the
construction efforts during the construction stage of the Luannan Facility. The
Design Institute will be responsible for paying any PRC taxes in connection
with the Services. The Design Institute guarantees that the preliminary design
and construction drawings will meet the requirements contained in the Project
Design Criteria and the Design Institute's feasibility study (including all
relevant government authorities' comments and approvals), with such changes
therein as Tangshan Panda and Tangshan Pan-Western and the Luannan EPC
Contractor may approve, for the design of the Luannan Facility, including power
output and thermal output, heat rate and emissions limits from such plants. If
there is any error or omission in the Services provided by the Design Institute
or any breach of guarantee described above, the Design Institute will perform
such additional Services and design work at its own expense, on request of
Tangshan Panda or Tangshan Pan-Western as may be deemed necessary to correct
such error or omission and the Design Institute will also be responsible for
the relevant loss/damage of Tangshan Panda and Tangshan Pan-Western.
Tangshan Panda's and Tangshan Pan-Western's Rights and Responsibilities.
Tangshan Panda and Tangshan Pan-Western will provide the Design Institute with
relevant information necessary to prepare and complete the preliminary design,
construction drawings and obtain relevant government approvals. If Tangshan
Panda and Tangshan Pan-Western fail to provide the Design Institute with the
required information in a timely manner, they will be responsible for the cost
of corrections to the preliminary design and the Luannan EPC Contractor will be
responsible for the cost of corrections to the construction drawings as
specified under the Engineering and Design Contract. Tangshan Panda and
Tangshan Pan-Western have the right to terminate the Engineering and Design
Contract in writing for any reason at any time.
Payments. Tangshan Panda and Tangshan Pan-Western will pay to the Luannan
EPC Contractor or to the Design Institute (with credit under the Luannan EPC
Contract) a lump sum price of RMB 7.0 million for the Services to be provided
by the Design Institute. Thirty percent of such lump sum price will be for the
preliminary design and the remainder for the construction drawings.
Contracts Between the Joint Ventures
Upon the closing of the Prior Offering, Tangshan Pan-Sino has commenced
action to acquire the rights to use all Luannan Facility land, the Luannan
Facility buildings and certain off-site property and will enter into leases to
permit the other Joint Ventures to use portions of such facilities.
Upon the closing of the Prior Offering, Tangshan Cayman has commenced
action to acquire water and land use rights and water wells. Tangshan Cayman
has entered into contracts with Tangshan Panda and Tangshan Pan-Western to sell
them heat, steam and hot water for use in their facilities. In addition,
Tangshan Cayman has entered into a contract to sell steam and hot water to
Tangshan Pan-Sino for further distribution to industrial users in Luannan
County.
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 at two, but the number may be increased or decreased
by the Board of Directors or the stockholders. Directors of the Issuer and the
Company are elected annually and each elected director holds office until a
successor is elected. Robert W. Carter and Brian G. Trueblood are the current
directors of each of the Issuer and the Company. Neither the Issuer nor the
Company has any employees.
The Articles of Association of the Issuer and the Certificate of
Incorporation and By-Laws of the Company provide that the Issuer and the
Company 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 Issuer or the
Company (as the case may be) or the Board of Directors of either of them 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 it or its
property, consent to the filing of such proceeding or admit in writing to its
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 its assets; (iii) amend the Articles of Association or Certificate of
Incorporation and By-Laws (as the case may be) to broaden the purposes of the
Issuer or the Company and in other respects; or (iv) authorize the Issuer or
the Company to engage in any activity other than those set forth in the
Articles of Association or Certificate of Incorporation and By-Laws (as the
case may be). The Articles of Association of the Issuer and the Certificate of
Incorporation and By-Laws of the Company provide 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 Company 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 Company 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 Company 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 subsidiaries of Panda
International. In March 1997, Brian G. Trueblood was elected as the Independent
Director of the Issuer and the Company. Mr. Trueblood also serves as the
Independent Director for PIC, Pan-Western and certain other subsidiaries of
Panda International.
The following table sets forth the names and ages of the directors and the
executive officers 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, 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 59 Director, Chairman of the Board and Chief
Executive Officer
Darol S. Lindloff 58 President
Janice Carter 55 Executive Vice President, Secretary and
Treasurer
William C. Nordlund 42 Executive Vice President, Finance
James D. (Pete) Wright 43 Senior Vice President, Project Finance and
Acquisitions
L. Stephen Rizzieri 41 Vice President and General Counsel
Brian G. Trueblood 36 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.
Darol S. Lindloff was appointed President of Panda International in
February 1997. Prior thereto, he served as Senior Vice President, Project
Development of Panda International from January 1996. He served as Vice
President of Panda International from January 1993 to January 1996 in the
capacities of Business Development, Technical Director and Project Development.
Mr. Lindloff served as Marketing Manager for PEC from October 1989 until
January 1993. From December 1987 to October 1989, Mr. Lindloff established a
regional office in Dallas for Southwest Research Institute (a research and
development company) and served as Regional Director. From January 1986 to
December 1987, Mr. Lindloff worked on the development of cogeneration
facilities for Hawker Siddeley Power Engineering, Inc. (a British engineering
company). During 1984 and 1985, he worked in the development of cogeneration
facilities for Central & Southwest Corporation's subsidiary, C&SW Energy, Inc.
(an energy company). Mr. Lindloff graduated from Southwestern University with a
Bachelor of Science degree in organic chemistry.
Janice Carter has been the Executive Vice President, Secretary, Treasurer
and a Director of Panda International since January 1995 and has served in such
capacities with PEC 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 Executive Vice President, Finance of
Panda International since February 1997. Prior thereto, he served as Senior
Vice President and General Counsel of Panda International since August 1996, 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.
James D. (Pete) Wright has served as Senior Vice President, Project
Finance and Acquisitions of Panda International 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.
L. Stephen Rizzieri has served as Vice President and General Counsel of
Panda International since February 1997. Prior thereto, he served as Deputy
General Counsel since April 1996. From 1993 until he joined Panda
International, he was Assistant General Counsel of ENSERCH Development
Corporation, the independent power development affiliate of ENSERCH
Corporation. From 1985 to 1993, Mr. Rizzieri served in various capacities with
Sunshine Mining Company and its affiliated companies, most recently as
Assistant General Counsel and Secretary. From 1981 to 1985, he served in
various capacities with Woods Petroleum Corporation (which was purchased by
Sunshine Mining Company in 1985) and its affiliates, most recently as President
of Woods Securities Corporation. In 1980, Mr. Rizzieri served as Deputy General
Counsel - Enforcement Division, Oklahoma Securities Commission. Mr. Rizzieri
earned a Bachelor of Arts degree from the State University of New York at
Geneseo and a Juris Doctor degree from the University of Oklahoma.
Brian G. Trueblood became the Independent Director of the Issuer and the
Company in March 1997. He has served since February 1997, and also from
September 1989 through August 1994, as a senior partner in the Dallas office of
Lucas Associates (an Atlanta-based executive search firm). From August 1994 to
February 1997, Mr. Trueblood served as Vice President of TNS Partners, Inc. (a
Dallas-based retained executive search firm). Mr. Trueblood received a Bachelor
of Science degree in general engineering from the United States Military
Academy. Mr. Trueblood also serves as the Independent Director of various other
subsidiaries of Panda International.
Executive and Board Compensation and Benefits
No cash or non-cash compensation has been paid 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 and 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.
Stock Ownership of Panda International
There were 11,401,212 shares of common stock of Panda International
outstanding at March 31, 1997. Of this amount, 4,418,957 shares (38.8%) are
owned by Robert and Janice Carter and members of their family and family
trusts. 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 March 31, 1997: (i) there were
outstanding options to acquire 1,209,000 shares of common stock of Panda
International (options for 1,050,000 shares being fully vested and for 159,000
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 181,500 shares of common stock of Panda
International. See "Description of the Projects--The Rosemary Facility--Cash
Flow Participation."
LEGAL PROCEEDINGS
Neither the Issuer nor the Company is a party to any legal
proceedings. Affiliates of the Issuer and the Company are claimants or
defendants in various legal proceedings which have arisen in the ordinary
course of business. The Issuer and the Company believe such claims and legal
actions, individually or in the aggregate, will not have a material adverse
effect on the business or financial condition of the Issuer or 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 Rosemary Partnership interest pursuant to
the terms of the NNW Credit Agreement. Pursuant to the NNW Credit Agreement,
NNW received a cash flow participation interest in distributions from the
Rosemary Partnership in the amount of 4.33% of PEC's own participation
interest. At the time the NNW Credit Agreement was entered into, the aggregate
equity interest in the 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 partner interest in the Rosemary Partnership in July 1996,
PEC owns an indirect 100% interest in the Rosemary Partnership.
Pursuant to the NNW Credit Agreement, the NNW Cash Flow Participation is
not to be affected either positively or negatively by "any financial
restructuring." It is the opinion of Panda International, the Issuer and the
Company that the redemption of Ford Credit's limited partner interest
constituted a "financial restructuring" within the meaning of that term in the
NNW Credit Agreement and that, as a result, the NNW Cash Flow Participation
remains equal to 0.433% of total cash flow distributions by the Rosemary
Partnership (based on the current debt structure). NNW is disputing this
position and asserts that, upon the restructuring, it became entitled to 4.33%
of PEC's distributions from the Rosemary Partnership. The declaratory judgment
petition seeks a determination that the NNW Cash Flow Participation is equal to
0.433%. The Issuer and the Company believe that a resolution of this dispute
and the declaratory judgment proceeding adverse to PEC would not have a
material adverse effect on the business or operations of the Issuer or the
Company. See "Description of the Projects--The Rosemary Facility--Cash Flow
Participation."
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 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 appealed 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 Issuer and the Company have 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 adverse effect on the business or operations of PEC, the
Issuer or the Company.
Brandywine Proceeding
On June 26, 1996, certain plaintiffs commenced a proceeding against the
Brandywine Partnership and one of its contractors (as well as other
subcontractors) 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
an effluent water pipeline, a contractor for the Brandywine Partnership, Flippo
Construction ("Flippo") (and its subcontractors) and the Brandywine Partnership
left their easement and inadvertently trespassed on to plaintiffs' property.
While on plaintiffs' property, Flippo (and its subcontractors) and the
Brandywine Partnership allegedly dug a deep and wide hole which extended
onto the plaintiff's property to locate a buried pipe. 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 $3.25 million in actual damages against each defendant plus
punitive damages aggregating $3.0 million against all defendants.
The Brandywine Partnership intends to vigorously contest this proceeding.
Panda International, the Issuer and the Company do not believe that the outcome
of this proceeding will have any material adverse effect on the financial
condition of the Issuer, the Company or the Brandywine Partnership. In the
opinion of Panda International, the Issuer and the Company, the contract
between the Brandywine Partnership and Flippo requires Flippo to hold the
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 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 sought a declaratory statement that the Kathleen Power Purchase
Agreement is not "available" to the Kathleen Partnership because the 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 Kathleen Partnership, Florida Power sought a declaratory statement that it
is only obligated to pay capacity payments under the power purchase agreement
relating to the Kathleen Facility for a term of 20 years rather than for the
entire 30-year term of the power purchase agreement. The Kathleen Partnership
filed a cross-petition seeking a declaratory statement that the milestone dates
in the power purchase agreement must be extended due to Florida Power's
improper actions and as a result of the delays in developing the Kathleen
Facility caused by Florida Power's petition and the ensuing proceeding before
the Florida PSC. The 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 power purchase agreement is not
available to the 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 power purchase agreement for 20 years. The
Florida PSC's decision also granted the Kathleen Partnership's cross-petition
insofar as it grants the Kathleen Partnership an 18-month extension to meet the
construction commencement milestone date and an 18-month extension to meet the
commercial operation milestone date. The Kathleen Partnership has appealed the
Florida PSC's order to the Florida Supreme Court. The parties' briefs have been
filed and oral argument in the case took place in February 1997. The parties
are presently awaiting the decision of 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.
DESCRIPTION OF OTHER INDEBTEDNESS
Series A Bonds
On July 31, 1996, Panda Funding Corporation, a Delaware corporation
("PFC"), which is an indirect wholly-owned subsidiary of the Company and a
direct wholly-owned subsidiary of PIC, consummated the offering and sale of a
series of Pooled Project Bonds (the "Series A Bonds") in the aggregate
principal amount of $105.5 million. The Series A Bonds were issued pursuant to
an indenture (the "PFC Indenture") among PFC, PIC and Bankers Trust Company, as
trustee. The proceeds of the sale of the Series A Bonds were used (a) to fund
deposits into certain reserve funds, (b) to redeem a limited partner interest
in the Rosemary Partnership formerly held by a third party, (c) to pay
transaction fees and expenses in connection with the offering of the Series A
Bonds and (d) to distribute approximately $61.2 million to Panda International,
of which approximately $26.4 million was used to prepay certain indebtedness
and the balance of which Panda International has used and intends to use for
the development of Projects and general corporate purposes. The following
description of the Series A Bonds and certain provisions of the PFC Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the PFC Indenture, a copy of which is included as an
exhibit to this Registration Statement.
PFC may issue additional series of Pooled Project Bonds pursuant to the
PFC Indenture, as supplemented by a supplemental indenture specific to such new
series of Pooled Project Bonds. Except for matters specific to each series of
Pooled Project Bonds, including principal amount, interest rate, permitted uses
of proceeds, payment frequency and amortization, each series of Pooled Project
Bonds will be governed by the same indenture provisions, and is secured by the
same collateral, as each other series of Pooled Project Bonds. In particular,
(i) each new series of Pooled Project Bonds will be subject to mandatory
redemption provisions comparable to the provisions applicable to the Series A
Bonds, (ii) each series of Pooled Project Bonds will rank on a parity with the
Series A Bonds, (iii) the payment of each series of Pooled Project Bonds will
be guaranteed by PIC pursuant to the PIC Guaranty, (iv) the security for each
new series of Pooled Project Bonds will consist of the same collateral that
secures the Series A Bonds and the rights of the holders of each series of
Pooled Project Bonds, as well as any other secured party, with respect to the
collateral are shared equally, and (v) each series of Pooled Project Bonds is
entitled to all of the benefits of the PFC Indenture, including the protection
afforded by the covenants contained therein.
Subject to certain conditions, including those set forth below, Panda
International and its affiliates (including the Issuer) are required by the PIC
Additional Projects Contract to transfer to PIC, or to certain wholly-owned
direct subsidiaries thereof, their interests in each Project for which a power
purchase agreement is entered into prior to July 31, 2001, and which has
reached Financial Closing or achieved Commercial Operations prior to July 31,
2006. Such additional transferred Projects will become part of the PIC Project
Portfolio and will serve as additional collateral security for the Pooled
Project Bonds. Panda International and its affiliates are required to transfer
their interests in a Project to the PIC Project Portfolio only if the principal
amount of additional series of Pooled Project Bonds that can be issued after
giving effect to the inclusion of the Project in the PIC Project Portfolio
equals or exceeds the amount of "Anticipated Additional Debt." Interests in a
Project will not be transferred if the Project has not reached Financial
Closing or achieved Commercial Operations. Additionally, except for the
Kathleen Project, which must be transferred to the PIC Project Portfolio if it
reaches Financial Closing, interests in a Project will not be transferred if:
(i) Panda International does not own a controlling interest in the Project;
(ii) the transfer would be prohibited under any Project-level financing, power
purchase or related agreement; or (iii) after giving effect to the issuance of
the additional series of Pooled Project Bonds in connection with the inclusion
of the Project in the PIC Project Portfolio (a) the rating of previously issued
Pooled Project Bonds is not reaffirmed by at least two rating agencies at a
rating equal to or higher than that in effect immediately prior to the issuance
of such additional series or (b) the projected PIC Debt Service Coverage Ratio
or the projected PIC 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 such Final Stated Maturity (each such period, a "Future Ratio
Determination Period"). The PIC Additional Projects Contract requires Panda
International to use commercially reasonable efforts to cause each Project to
meet the conditions for transfer to the PIC 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 PIC in respect of such
Project and may retain its interest in such Project or sell it to third
parties. The Luannan Facility is not currently eligible for transfer to the PIC
Project Portfolio.
"Anticipated Additional Debt," as that term is used in the PIC Additional
Projects Contract, means the original principal amount of an additional series
of Pooled Project Bonds proposed to be issued which is equal to the largest
principal amount of such series that will provide a projected PIC Debt Service
Coverage Ratio and a projected PIC Consolidated Debt Service Coverage Ratio (if
then applicable) of at least 1.7:1 and 1.25:1, respectively, for each PIC
Future Ratio Determination Period, as confirmed by the "Consolidating Engineer"
(as such term is used in the PIC Additional Projects Contract), assuming, in
respect of the additional series of Pooled Project 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 PIC Debt Service Coverage Ratio, PIC Cash Available for Distribution from
the PIC Project Portfolio and (b) in the case of the PIC Consolidated Debt
Service Coverage Ratio, PIC Cash Available from Operations (net of any reserve
requirements at both the Project and PIC debt levels) from the PIC Project
Portfolio (giving effect, in each case, to the transfer to the PIC Project
Portfolio of any Project in respect of which such additional series of Pooled
Project Bonds is proposed to be issued).
Other than through the issuance of additional series of Pooled Project
Bonds upon the addition of a Project to the PIC Project Portfolio, the PFC
Indenture prohibits PFC from incurring additional debt or becoming liable in
connection with a guaranty. PIC and its direct subsidiaries are prohibited from
incurring debt and becoming liable in connection with guaranties other than (i)
in the case of PIC, its guaranty and notes issued in connection with the Pooled
Project Bonds, (ii) in the case of PIC's direct subsidiaries, their guaranties
and notes issued in connection with the Pooled Project Bonds and certain
subordinated debt payable to PIC or another direct subsidiary of PIC, and (iii)
in the case of Project Entities, Project debt and certain guaranties.
In accordance with a registration rights agreement that was entered into
in connection with the Series A Offering, PFC, PIC and Interholding filed a
registration statement with the Securities and Exchange Commission with respect
to the exchange of Series A--1 Bonds for the Series A Bonds. The terms of the
Series A Bonds and the Series A-1 Bonds are substantially identical, except
that (i) the Series A-1 Bonds have been registered under the Securities Act and
(ii) holders of the Series A-1 Bonds are not entitled to certain rights of
holders of the Series A Bonds under the registration rights agreement, which
rights terminated upon the consummation of the exchange offer. Such rights also
terminated as to holders of Series A Bonds who are eligible to tender their
Series A Bonds for exchange in the exchange offer and failed to do so. The
registration statement became effective on February 14, 1997, and an offer to
exchange the Series A-1 Bonds for the Series A Bonds commenced thereafter.
Pursuant to such offer, Series A-1 Bonds were exchanged for Series A Bonds that
were validly tendered through March 20, 1997. All outstanding Series A Bonds
were tendered for exchange. All references in this Prospectus to the Series A
Bonds shall include the Series A--1 Bonds issued in exchange for Series A Bonds
in such exchange offer.
Interest and Principal Payments
The Series A Bonds bear interest at the rate of 11 5/8% per year from July
31, 1996, or from the most recent interest payment date to which interest has
been paid or provided for, payable semiannually on February 20 and August 20 of
each year, commencing February 20, 1997. Principal of the Series A Bonds is
payable in semiannual installments as follows:
Percentage of Percentage of
Payment Date Original Payment Date Original
Principal Principal
Amount Payable Amount Payable
February 20, 0.2045% February 20, 3.4687%
1997 2005
August 20, 0.0000% August 20, 3.5977%
1997 2005
February 20, 0.0000% February 20, 3.7820%
1998 2006
August 20, 0.0000% August 20, 2.8098%
1998 2006
February 20, 0.0000% February 20, 3.0076%
1999 2007
August 20, 0.5933% August 20, 4.8415%
1999 2007
February 20, 0.6129% February 20, 5.1145%
2000 2008
August 20, 0.0000% August 20, 5.0057%
2000 2008
February 20, 0.0000% February 20, 5.2949%
2001 2009
August 20, 1.3753% August 20, 5.5185%
2001 2009
February 20, 1.4691% February 20, 5.8300%
2002 2010
August 20, 2.2184% August 20, 5.7248%
2002 2010
February 20, 2.3565% February 20, 6.0590%
2003 2011
August 20, 2.9328% August 20, 6.4800%
2003 2011
February 20, 3.1031% February 20, 6.8808%
2004 2012
August 20, 3.2796% August 20, 8.4390%
2004 2012
PIC Guaranty; Collateral
All obligations of PFC with respect to the Series A Bonds and any future
additional series of Pooled Project Bonds are fully and unconditionally
guaranteed by PIC pursuant to the PIC Guaranty and guaranteed in a limited
amount by the PIC U.S. Entity. The obligations of PFC pursuant to the Pooled
Project Bonds, the obligations of PIC under the PIC Guaranty, and the
obligations of the PIC U.S. Entity under its guaranty are secured by (i) liens
on and security interests in substantially all of the assets of PIC and PFC,
(ii) pledges of all of the capital stock of PIC, PFC, the U.S. PIC Entity and
any future U.S. PIC Entity and (iii) a pledge of 60% of the capital stock of
the Non-U.S. PIC Entity and any future Non-U.S. PIC Entity. The rights of the
holders of the Series A Bonds and the rights of any holders of any future
additional series of Pooled Project Bonds with respect to the Pooled Project
Bond Collateral will be shared equally.
The source of payment for the Series A Bonds and all additional series of
Pooled Project Bonds, if any, will be the payments by PIC to PFC of principal,
premium, if any, and interest due under PIC Notes and payments, if any, by PIC
under the PIC Guaranty and by the PIC U.S. Entity under its guaranty. The
principal source of payments under PIC Notes is distributions to PIC through
the PIC Entities from the Project Entities that own Projects that are part of
the PIC Project Portfolio. Thus, the ability of PFC to make such payments
depends primarily upon the performance of the Projects in the PIC Project
Portfolio and the ability of the Project Entities to make distributions to the
PIC Entities and, ultimately, to PIC.
Ranking
The indebtedness evidenced by the Series A Bonds and any additional series
of Pooled Project Bonds constitute senior secured indebtedness of PFC. In order
for PFC to receive payments from PIC on the PIC Notes, the Projects in the PIC
Project Portfolio must generate sufficient operating cash flow to pay all
operating expenses, debt service and other reserve requirements and other
payment obligations to lenders and other Project creditors. Therefore, although
PFC and PIC have no secured indebtedness other than the Pooled Project Bonds,
the Exchange Notes are effectively subordinated to all liabilities of the
Project Entities incurred in respect of the Projects as well as to the
liabilities of PFC and PIC in respect of the Pooled Project Bonds. See "Risk
Factors--Financial Risks--Substantial Leverage" and "--Effective Subordination
of Exchange Notes and Exchange Notes Guarantee" and "Description of the
Exchange Notes, the Notes Guarantee, the Issuer Loan, the Shareholder Loans and
the Collateral Documents."
Certain Covenants
Limitations on Distributions. Subject to certain limited exceptions,
distributions may be made by PFC through to the guarantor only from, and to the
extent of, amounts then on deposit in the distribution funds established
pursuant to the PFC Indenture (the "PFC Distribution Funds"). Amounts may only
be deposited into the PFC Distribution Funds upon the satisfaction of the
following conditions: (i) amounts deposited in certain funds established
pursuant to the PFC 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 and (ii) no event or condition has occurred and is continuing
that constitutes a default of an event of default under the PFC Indenture,
(iii) PIC's debt service coverage ratio is equal to or greater than 1.4:1 for
the 12 months immediately preceding the month in which such distribution is to
occur and (iv) PIC's projected debt service coverage ratio is equal to or
greater than 1.4:1 for the 12 months immediately succeeding the month in which
such distribution is to occur.
Certain Other Covenants. The PFC Indenture contains numerous other
affirmative and negative covenants which restrict the activities of PFC and
PIC, including, but not limited to, the following:
(i) a prohibition against incurring debt (including guaranties of debt)
except as described above, 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 limitation on the permitted activities of PFC and PIC, including a
restriction against conducting any business other than business
conducted in connection with the issuance of Pooled Project Bonds, a
restriction against the creation, acquisition or purchase of any
subsidiary other than PIC Entities or any indirect subsidiary other
than the Project Entities and a restriction against merging or
consolidating with or into any person;
(iv) subject to certain exceptions, a covenant to maintain certain
minimum levels of ownership of the Projects in the PIC Project
Portfolio;
(v) a limitation on the ability of PIC and any PIC Entity to incur or
refinance Project-level debt, to enter into new project agreements
or to terminate, amend or modify certain project agreements unless
certain tests are satisfied;
(vi) a covenant to cause the Project Entities to distribute to the PIC
Entities and, ultimately, to PIC, all amounts that can be legally
distributed without contravention of any Project agreement;
(vii) a prohibition against selling, leasing or otherwise disposing of any
direct or indirect interests in Projects with a fair-market value in
excess of $2.0 million in the aggregate in any one year subject to
certain exceptions; and
(viii)covenants regarding compliance with laws, governmental regulations
and organizational documents, maintenance of existence and of
governmental approvals, pursuing rights to compensation upon the
occurrence of a casualty or condemnation, employee benefit plans,
affiliate transactions, payment of taxes, the preparation of various
reports and other matters.
Events of Default
Events of Default under the PFC Indenture include (i) the failure to pay
or cause to be paid principal of, premium, if any, or interest on any Pooled
Project Bond, (ii) any misrepresentation made by PFC or PIC under the PFC
Indenture that has resulted in a material adverse change, (iii) the breach by
Panda International, PIC, PFC or the PIC Entities of any covenant under the PFC
Indenture, (iv) certain events involving the bankruptcy, insolvency,
dissolution, receivership or reorganization of PIC, PFC or any PIC Entity; (v)
a final judgment or judgments for the payment of money in excess of $2.0
million against any of PIC, PFC or any PIC Entity; (vi) a default on certain
other debt of PIC, PFC or any PIC Entity and (vii) the cessation of liens on
certain collateral. Upon the occurrence of an event of default and after the
lapse of certain applicable cure periods, the trustee under the PFC Indenture
has the right, among other things, to accelerate the maturity of the Pooled
Project Bonds and to direct a collateral agent to realize upon the collateral
securing the payment of the Pooled Project Bonds and other secured obligations,
including the capital stock of PIC, PFC and the PIC Entities.
The Funds
The PFC Indenture established the following U.S. funds: (a) a debt service
fund, (b) a capitalized interest fund, (c) a debt service reserve fund, (d) a
company expense fund, (e) a distribution suspense fund, (f) a distribution
fund, (g) a mandatory redemption account, and (h) an extraordinary distribution
account. The PFC Indenture also established the following international funds:
(a) an international distribution suspense fund, (b) an international mandatory
redemption account, and (c) an international extraordinary distribution
account. All distributions or other amounts received by PIC, any PIC entity or
any person on behalf of PIC or any PIC Entity from or in connection with the
Projects that are in the PIC Project Portfolio, subject to certain exceptions,
are deposited in a locked account with the trustee (or, in the case of
distributions received from a PIC International Entity, in a separate locked
account with the International Collateral Agent) under the PFC Indenture.
Amounts in the locked account controlled by the trustee are distributed monthly
to the U.S. funds in the order listed above. Amounts in the locked account
controlled by the International Collateral Agent are distributed monthly to the
international funds in the order listed above.
Upon the issuance of the Series A Bonds, PFC deposited approximately $6.4
million into the U.S. debt service reserve fund, $0.3 million into the company
expense fund and $9.8 million into the capitalized interest fund established
under the PFC Indenture. The balances in those funds as of March 31, 1997, were
$7.1 million, $0.3 million and $9.2 million, respectively.
The U.S. debt service reserve fund may be drawn upon to pay principal of,
premium, if any, and interest on the Series A Bonds if funds otherwise
available for such payments are insufficient.
Rating
The Series A Bonds were rated Ba3 by Moody's. and BB- by Duff & Phelps.
There is no assurance that such ratings will be maintained.
The Rosemary Bonds
Concurrently with the closing of the offering of the Series A Bonds, Panda-
Rosemary Funding Corporation (the "Rosemary Issuer"), a wholly-owned subsidiary
of the 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 Pooled Project Bonds due 2016 (the "Rosemary Bonds"). The Rosemary
Bonds were issued pursuant to an indenture (the "Rosemary Indenture") among the
Rosemary Partnership, the Rosemary Issuer and Fleet National Bank, as trustee.
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.
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 November 15,
1996. Principal of the Rosemary Bonds is payable in quarterly installments as
follows:
Percentage Percentage
of Original of Original
Principal 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%
Collateral
All obligations of the Rosemary Issuer with respect to the Rosemary Bonds
are fully and unconditionally guaranteed by the Rosemary Partnership. The
obligations of the 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 Rosemary Partnership, including the
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 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
Rosemary Partnership to its partners only from, and to the extent of, amounts
then on deposit in the 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 Rosemary Facility has achieved a permitted alternative utility status. In
addition, except for certain limited exceptions, the Rosemary Partnership may
not make distributions unless (i) the average of the debt service coverage
ratios for the four quarterly 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 quarterly payment period and the next succeeding three
quarterly payment periods on the Rosemary Bonds is at least 1.2:1.
Notwithstanding the requirements of the immediately preceding sentence, the
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 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 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 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 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, 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 and certain other indebtedness ranking pari passu or subordinate
to the Rosemary Bonds, the proceeds of which are loaned to the Rosemary
Partnership. The debt permitted by the Rosemary Indenture to be incurred by the
Rosemary Issuer or the 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 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 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 Rosemary Partnership or the
Rosemary Issuer under the Rosemary Indenture which has resulted in a material
adverse change; (iii) the breach by the Rosemary Partnership or the Rosemary
Issuer of any covenant under the Rosemary Indenture or related collateral
documents; (iv) the bankruptcy or insolvency of the 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 Rosemary Partnership or
the Rosemary Issuer unless covered by indemnity or insurance; (vi) a default on
certain other debt of the Rosemary Partnership or the Rosemary Issuer; (vii)
the termination or expiration of certain Project agreements to which the
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 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 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 Rosemary Partnership).
The Funds
The deposit and disbursement agreement entered into simultaneously with
the Rosemary Indenture establishes the following funds: (a) a project revenue
fund, (b) an operating fund, (c) a debt service fund, (d) a property tax fund,
(e) a debt service reserve fund, (f) an overhaul fund, (g) a pollution control
finance fund, (h) a restoration fund, (i) a partnership distribution fund, and
(j) an additional permitted debt fund. All project revenues received by the
Rosemary Partnership and all revenue received by the Rosemary Issuer are to be
deposited into the project revenue fund. Amounts in the project revenue fund
are used to pay operating expenses related to the Rosemary Facility and then
are distributed to the other funds established pursuant to the Rosemary
Indenture in the priority listed above.
Upon the issuance of the Rosemary Bonds, the 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 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 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 were rated Baa3 by Moody's Investors Service, Inc. and
BBB- by Duff & Phelps Rating Co. Inc. There is no assurance that such ratings
will be maintained.
The Brandywine Financing
The Brandywine Partnership, Panda Brandywine Corporation, the general
partner of the Brandywine Partnership ("PBC"), and GE Capital entered into the
Construction Loan Agreement and Lease Commitment dated as of March 30, 1995
(the "Brandywine Loan Agreement"), pursuant to which GE Capital agreed, either
directly or indirectly through an owner trustee, to (i) provide construction
financing for the Brandywine Facility, (ii) issue letters of credit as security
for certain obligations of the Brandywine Partnership under the Brandywine
Power Purchase Agreement, (iii) lease the Brandywine Facility site from, and
immediately thereafter sublease the site to, the Brandywine Partnership, (iv)
upon substantial completion of the construction of the Brandywine Facility,
purchase the Brandywine Facility from the Brandywine Partnership and lease the
Brandywine Facility back to the Brandywine Partnership and (v) upon completion
of the construction of the Brandywine Facility, make certain equity loans to
the Brandywine Partnership or its partners. The following description of the
Brandywine Loan Agreement and the other Brandywine Financing Documents does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Brandywine Financing Documents, including definitions therein
not contained in this Prospectus.
Construction Loans
Construction of the Brandywine Facility is substantially complete. On
December 30, 1996, the Brandywine construction loan was converted to long-term
financing in the form of a leveraged lease (the "Brandywine Financing
Conversion"). In connection therewith, all amounts outstanding under the
Brandywine construction loan were repaid in full and the Brandywine Partnership
funded the completion account described below with funds that will be used to
complete construction of the Brandywine Facility.
Long-Term Financing
As to the Brandywine Financing Conversion, the Brandywine Partnership sold
the Brandywine Facility and leased the facility site to Fleet National Bank, as
owner trustee (the "Brandywine Owner Trustee"), for approximately $217.5
million. The Brandywine Owner Trustee financed the purchase of the Brandywine
Facility through an equity investment of $45.5 million from GE Capital and
loans aggregating $172.0 million from loan participants. The Brandywine Owner
Trustee then leased the Brandywine Facility and sub-leased the facility site
back to the Brandywine Partnership.
GE Capital has committed to provide certain letters of credit for the
account of the Brandywine Partnership and to make equity loans to the partners
of the Brandywine Partnership, as more fully described below. All of the assets
of the Brandywine Partnership and all of the ownership interests in the
Brandywine Partnership, as well as certain other collateral, are pledged to
secure the obligations of the Brandywine Partnership under the Brandywine
Financing Documents.
Brandywine Facility Lease
The Brandywine Partnership is a party to a Facility Lease with the
Brandywine Owner Trustee (the "Brandywine Facility Lease") pursuant to which it
leases the Brandywine Facility from the Brandywine Owner Trustee. The
Brandywine Facility Lease is a net lease and its initial term ends on December
30, 2016. Basic rent is payable quarterly on January 31, April 30, July 31 and
October 31, commencing January 31, 1997, as follows:
Quarterly
Basic Rent Payment Basic Rent ($)
1 0
2-5 2,610,509
6-9 2,602,976
10-13 4,993,980
14-17 5,165,114
18-21 6,816,268
22-25 6,984,563
26-29 6,976,747
30-33 6,864,048
34-37 6,900,548
38-41 7,047,103
42-45 7,517,816
46-49 7,632,159
50-53 7,821,232
54-57 8,303,090
58-61 8,980,537
62-65 10,109,363
66-69 10,463,802
70-73 10,684,854
74-77 10,292,055
78-80 9,429,196
In addition, and from time to time, the Brandywine Owner Trustee may
require the Brandywine Partnership to pay, as supplemental rent, (i) certain
agreed-upon amounts required to be paid to the Brandywine Owner Trustee
following a specified event of loss or event of regulation, after payment of
which the Brandywine Facility Lease would terminate and the Brandywine
Partnership would receive title to the Brandywine Facility; (ii) amounts owed
pursuant to certain tax change indemnity obligations; (iii) certain lender swap
breakage costs arising as a result of an event of default, loss or regulation;
(iv) interest on overdue rent payments; and (v) amounts owed as a result of
certain other obligations arising pursuant to the Brandywine Financing
Documents. Basic rent may also be reduced if GE Capital elects to consummate a
refinancing.
Reserve Accounts
In connection with the obligations of the Brandywine Partnership under the
Brandywine Financing Documents, various accounts were established for the
benefit of the Brandywine Owner Trustee, GE Capital and others.
The Brandywine Partnership funded the operation and maintenance reserve
account in the amount of $1.0 million. Until the balance of such reserve
account reaches $5.0 million (which amount is adjusted upward annually for
inflation after December 30, 2001), quarterly contributions of $125,000 in each
of the first eight calendar quarters and $375,000 for each of the next eight
calendar quarters are made to this reserve account out of funds available from
the project revenue account. Thereafter, contributions will be made out of
funds available in the project revenue account as necessary to maintain the
required balance. Subject to specified conditions, funds held in this reserve
account will be used to replenish a drawing under an operations and maintenance
letter of credit to be issued.
The Brandywine Partnership funded the rent reserve account in the amount
of $2.4 million. The balance in the rent reserve account must be maintained at
the greater of (i) $2.4 million and (ii) the sum of the next two payments of
basic rent.
The Brandywine Partnership funded the warranty maintenance reserve account
in the amount of $750,000. Subject to specified conditions, funds in this
reserve account will be used to satisfy warranty obligations to the
manufacturer of the Brandywine Facility's combustion and steam turbine
generators.
The Brandywine Partnership funded the completion account upon the closing
of the Brandywine Financing Conversion in the amount of $5.3 million. The
balance in the account as of March 31, 1997 is $3.6 million. Subject to
specified conditions, funds held in the completion account will be used to pay
costs and expenses incurred in connection with the construction and completion
of the Brandywine Facility.
If the Brandywine Partnership receives a notice from PEPCO that PEPCO has
determined that the Brandywine Partnership has failed to comply with its
obligation under the Brandywine Power Purchase Agreement to have a reliable
supply of fuel for the Brandywine Facility, then the Brandywine Partnership is
required to establish and fund a special payment account with 100% of the
excess, if any, of Brandywine distributable cash flow over required
contributions to the rent reserve account until such notice is rescinded or the
fuel default is cured. Subject to specified conditions, funds held in the
special payment account will be used to cure the fuel default.
In the event that funds in the project revenue account are insufficient to
pay letter of credit fees and rent, and to make the required contributions to
the reserve accounts, such payments and transfers may be made out of the
partnership security account and distribution reserve account. Subject to
specified conditions, funds held in the partnership security account may from
time to time be distributed to the partners of the Brandywine Partnership and
funds held in the distribution reserve account may from time to time be
transferred to the project revenue account.
Letters of Credit
GE Capital has issued and agreed to maintain certain outstanding stand-by
letters of credit and issue and maintain an additional letter of credit as
required for the account of the Brandywine Partnership in favor of PEPCO to
secure certain obligations of the Brandywine Partnership under the Brandywine
Power Purchase Agreement. The aggregate stated amount of all letters of credit
outstanding at any one time in connection with the Brandywine Facility Lease
cannot exceed a specified aggregate amount, currently $7.33 million. The
Brandywine Partnership is required 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 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 2.5% plus a base rate of the higher of (i) the base
commercial lending rate of Credit Suisse, New York or (ii) the overnight
federal funds rate plus 0.5%. The Brandywine Partnership is obligated to pay to
GE Capital an issuance fee of 1.75% of the stated amount of each letter of
credit upon initial issuance, 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.
Partnership Distributions
The Brandywine Participation Agreement places limitations on the ability
of the Brandywine Partnership to make distributions to its partners. Subject to
certain other conditions, the Brandywine Partnership may make distributions to
its partners only if: (i) all amounts then required to be deposited in certain
reserve accounts, including the reserve accounts described above, have been
deposited; (ii) all rent payments then due to the Brandywine Owner Trustee
under the Brandywine Facility Lease have been paid; (iii) the Brandywine
Facility meets an operating cash flow to basic rent 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 Brandywine Partnership and
PBC to take certain actions including, but not limited to, the following:
(i) a requirement that the Brandywine Partnership pay all of its
indebtedness and obligations under the Brandywine Financing
Documents and perform its obligations under the related project
documents;
(ii) a requirement that the Brandywine Partnership and PBC maintain their
current respective form of organization, that PBC remain the general
partner of the Brandywine Partnership and that the Brandywine
Facility be maintained as a QF;
(iii) a prohibition against mergers, sales of assets other than electric
power and steam, and certain acquisitions;
(iv) a prohibition against indebtedness other than under the Brandywine
Financing Documents;
(v) a prohibition against amending certain contracts without the consent
of a majority of the Brandywine Loan Participants and GE Capital;
(vi) a prohibition against entering into leases other than those
specifically contemplated by the Brandywine Financing Documents; and
(vii) 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 Kathleen Partnership and the
partners of that partnership) remain as subsidiaries of Panda
Interholding; provided, that the 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, subject
to certain restrictions in the Brandywine Participation Agreement,
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 Facility Lease contains certain events of default,
including but not limited to: (i) default in the payment of any rental amount
payable under the Brandywine Facility Lease; (ii) a misrepresentation contained
in any document furnished by or on behalf of the Brandywine Partnership or any
partner; (iii) a failure of the 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) a default in payment under any
indebtedness of the Brandywine Partnership or PBC or certain affiliates or in
the observance or performance of any covenant relating to such indebtedness;
(v) bankruptcy or insolvency of any party to or participant under any of the
Brandywine Financing Documents or other project agreements related to the
operation of the Brandywine Facility; (vi) a judgment or judgments in excess of
$150,000 being rendered against the Brandywine Partnership, Brandywine Water
Company or PBC and remaining in effect and unstayed for more than 30 days;
(vii) if PEC and Panda Interholding shall cease to own, directly or indirectly,
51% of PBC and Panda Energy Delaware; and (viii) the Brandywine Facility ceases
to be a QF. Upon an event of default under the Brandywine Financing Documents,
the Brandywine Owner Trustee may, in addition to other remedies, foreclose upon
or terminate the Brandywine Facility Lease.
Collateral
All obligations of the Brandywine Partnership under the Brandywine
Financing Documents to GE Capital and the Brandywine Owner Trustee, and in
turn, all obligations of the Brandywine Owner Trustee to the Brandywine Loan
Participants under the Brandywine Participation Agreement, are secured by (i) a
pledge of, and a security interest in, substantially all of the assets of the
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 Brandywine Partnership and (iii) pledges of all the capital
stock of PBC and Panda Energy Delaware, and all of the stock and all of the
assets of 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 Brandywine Facility. In addition, the Brandywine
Partnership has assigned its interest in the Brandywine Power Purchase
Agreement to the Brandywine Owner Trustee, to take effect if the Brandywine
Facility Lease terminates.
DESCRIPTION OF THE EXCHANGE NOTES,
THE EXCHANGE NOTES GUARANTEE,
THE ISSUER LOAN, THE SHAREHOLDER LOANS AND
THE COLLATERAL DOCUMENTS
The Exchange Notes will be issued under an indenture (the "Exchange Notes
Indenture") between Panda Global Energy Company (the "Issuer") and Bankers
Trust Company, as trustee (the "Exchange Notes Trustee") and will be
unconditionally guaranteed by Panda Global Holdings, Inc. (the "Company") as to
payment of principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any), by a guarantee (the "Exchange Notes
Guarantee") issued under an indenture (the "Company Indenture") between the
Company and Bankers Trust Company, as trustee (the "Company Indenture
Trustee"). The Exchange Notes Indenture and the Company Indenture are referred
to together herein as the "Indentures." The Exchange Notes Trustee and the
Company Indenture Trustee are referred to together herein as the "Trustees."
The following summaries of certain provisions of the Indentures, the Issuer
Loan Agreement, the Shareholder Loan Agreements and certain collateral
documents do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions thereof, including the
definitions therein of certain terms.
General
The Exchange Notes will be issued only in registered form, without
coupons, in denominations of $1,000 and integral multiples of $1,000.
Principal, premium, if any, and interest (including Liquidated Damages and
Additional Amounts, if any) on the Exchange Notes will be payable, and the
Exchange Notes will be transferable, at the corporate trust office or agency of
the Exchange Notes Trustee. In addition, interest may be paid by wire transfer
or check mailed to the Person entitled thereto as shown on the register for the
Exchange Notes, provided that all payments with respect to Global Notes (as
defined) and Certificated Securities (as defined), the Holders of which have
given wire transfer instructions to the Issuer, will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. The Exchange Notes will initially be represented by a
Global Note (the "Global Note") and will be deposited with, or on behalf
of, The Depository Trust Company (the "Depository") and registered in the name
of a nominee of the Depository. Except as set forth in "--Book-Entry, Delivery
and Form," owners of beneficial interests in such Global Note will not be
entitled to have Exchange Notes registered in their names, will not receive or
be entitled to receive physical delivery of Exchange Notes in definitive form
and will not be considered the owners or Holders thereof under the Exchange
Indenture. See "--Book-Entry, Delivery and Form." No service charge will be
made for any registration of transfer or exchange of the Exchange Notes, except
for any tax or other governmental charge that may be imposed in connection
therewith.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the Registered Exchange Notes issued in connection with
the Exchange Offer, will be treated as a single class of securities under the
Exchange Notes Indenture.
Ranking, Maturity, Interest and Principal of the Exchange Notes
The Exchange Notes, as well as the Old Notes (i.e., the Existing Notes)
will be senior obligations of the Issuer ranking senior in right of payment to
all subordinated Indebtedness of the Issuer and pari passu with all other
Senior Indebtedness of the Issuer. The Existing Notes will be secured by the
Exchange Notes Collateral. The aggregate principal amount of Existing Notes
will total $155,200,000. Subject to the satisfaction of the applicable
covenants by the Issuer and by the Company pursuant to the Company Indenture,
additional Senior Indebtedness may be issued by the Issuer from time to time
(whether pursuant to the Exchange Notes Indenture or pursuant to another
indenture), which additional Senior Indebtedness will share equally and ratably
in certain of the Exchange Notes Collateral. The Existing Notes will mature on
April 15, 2004. Notwithstanding the foregoing, the Issuer shall be obligated to
repay the Existing Notes by redeeming semi-annually on the dates and in the
amounts indicated in the following table, together with accrued and unpaid
interest (including Liquidated Damages and Additional Amounts, if any):
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000 $1,650,000
April 15, 2001 $2,200,000
October 15, 2001 $2,200,000
April 15, 2002 $4,000,000
October 15, 2002 $4,000,000
April 15, 2003 $4,950,000
October 15, 2003 $4,950,000
In accordance with the terms of the Exchange Notes Indenture, the Issuer shall
not be allowed to fulfill its obligation to repay such principal amounts
through the purchase of Existing Notes and the deposit thereof with the
Exchange Notes Trustee.
Cash interest on the Existing Notes will accrue at a rate of 12-1/2% per
annum and will be payable semi-annually in arrears on each April 15 and October
15, commencing October 15, 1997 to the Holders of record of Existing Notes at
the close of business on April 1 and October 1, respectively, immediately
preceding such interest payment date. Cash interest will accrue from the most
recent interest payment date to which interest has been paid or, if no interest
has been paid, from April 22, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Interest on overdue principal and on
overdue installments of interest will accrue at the rate of interest borne by
the Existing Notes.
The Existing Notes will be effectively subordinated to all Indebtedness
and other liabilities and commitments of all Subsidiaries of the Issuer,
including, without limitation, the Indebtedness of Pan-Western and the Joint
Ventures. Any right of the Issuer to receive assets of its Subsidiaries,
including, without limitation, assets of Pan-Western or any Joint Venture
pursuant to the terms of the Exchange Notes Collateral upon liquidation or
reorganization of any such entity (and the consequent right of the Holders of
the Existing Notes to participate in those assets) will be effectively
subordinated to the claims of that entity's creditors, except to the extent
that the Issuer is itself recognized as a creditor of such entity, in which
case the claims of the Issuer would still be subordinate to any security in the
assets of its Subsidiaries, including, without limitation, assets of Pan-
Western or any Joint Venture and any Indebtedness thereof senior to that held
by the Issuer. See "Risk Factors - Additional Indebtedness - Effective
Subordination of Exchange Notes and Exchange Notes Guarantee."
Exchange Notes Guarantee
The Company, under the terms of the Company Indenture, as primary obligor
and not merely as surety, will irrevocably, fully and unconditionally guarantee
on a senior secured basis the performance and punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all obligations of
the Issuer under the Exchange Notes Indenture and the Existing Notes, whether
for principal, premium, if any, and interest (including Liquidated Damages and
Additional Amounts, if any), on the Existing Notes, expenses, indemnification
or otherwise (all such obligations guaranteed by the Company referred to herein
as the "Exchange Notes Guarantee"). The Company has no material assets other
than the Capital Stock of PEC and the Issuer, and, accordingly, its ability to
perform under the Existing Notes Guarantee will be dependent on the financial
condition and results of operation of PEC and the Issuer. Subject to the
satisfaction of the applicable conditions, Indebtedness and additional
guarantees pari passu with the Exchange Notes Guarantee may be issued by the
Company from time to time (whether pursuant to the Company Indenture or
pursuant to another indenture), which additional Senior Indebtedness and
guarantees may share equally and ratably in certain of the Exchange Notes
Guarantee Collateral.
The Exchange Notes Guarantee is a continuing guarantee and shall (a)
remain in full force and effect until payment in full of all the Existing
Notes, (b) be binding upon the Company and its successors, transferees and
assigns and (c) inure to the benefit of and be enforceable by the Exchange
Notes Trustee, the Holders and their successors, transferees and assigns.
The Exchange Notes Guarantee will be effectively subordinated to all
Indebtedness and other liabilities and commitments of all Subsidiaries of the
Company, including, without limitation, the Indebtedness of PIC, PFC, the
Domestic Projects, the Joint Ventures and any Permitted Project. Any right of
the Company to receive assets of its Subsidiaries, including, without
limitation, assets of PIC, PFC, the Domestic Projects, the Joint Ventures or
any Permitted Project pursuant to the terms of the Exchange Notes Guarantee
Collateral upon liquidation or reorganization of any such entity (and the
consequent right of the holders of the Exchange Notes Guarantee to participate
in those assets) will be effectively subordinated to the claims of that
entity's creditors, except to the extent that the Company is itself recognized
as a creditor of such entity, in which case the claims of the Company would
still be subordinate to any security in the assets of its Subsidiaries,
including, without limitation, assets of PIC, PFC, the Domestic Projects, the
Joint Ventures or any Permitted Project and any Indebtedness thereof senior to
that held by the Company.
Redemption
Optional Redemption of Exchange Notes. The Exchange Notes will be
redeemable at the option of the Issuer (an "Exchange Notes Optional
Redemption"), in whole or in part, at any time on or after April 15, 2002, at
the redemption prices (expressed as a percentage of principal amount) set forth
below, plus accrued and unpaid interest, if any, to the redemption date, if
redeemed during the 12 month period beginning on April 15 of the years
indicated below:
Redemption
Year Price
2002 107.00%
2003 103.50%
2004 100.00%
In addition, prior to April 15, 2000, the Issuer may redeem up to
$51,733,000 of the aggregate outstanding issued principal amount of Existing
Notes at a redemption price equal to 113.0% of the principal amount of the
Existing Notes so redeemed, plus accrued and unpaid interest, if any, to the
redemption date with the Net Cash Proceeds of one or more Public Equity
Offerings by the Company, Panda International or any direct or indirect parent
of the Company; provided that (i) the proceeds of such offering used for the
purposes of the optional redemption are contributed as equity to the Issuer and
(ii) at least $103,467,000 of the originally issued principal amount of
Existing Notes would remain outstanding immediately after giving effect to such
redemption (any such redemption, an "Existing Notes Public Equity Offering
Redemption").
Mandatory Redemption. Upon the occurrence of certain events described
below, the outstanding Existing Notes (together with, as provided in paragraph
(vi) below, any additional Senior Indebtedness of the Issuer outstanding at the
time of such Mandatory Redemption) will be redeemed pro rata (a "Mandatory
Redemption"), at a redemption price equal to 100% of the principal amount of
the Existing Notes, together with accrued and unpaid interest, if any, to the
redemption date:
(i) Upon the occurrence of a Luannan Event of Loss or Luannan
Expropriation Event that is determined by the Issuer to render
the Luannan Facility incapable of being rebuilt, repaired or
restored so as to permit operation of the entire Luannan Facility
on a commercially feasible basis, all Luannan Casualty Proceeds
and all Luannan Expropriation Proceeds and repayments of the
Issuer Loan and the Shareholder Loans (resulting from such
Luannan Event of Loss or Luannan Expropriation Event or
otherwise) will be applied pro rata to the redemption of the
Existing Notes. The redemption date for such a Mandatory
Redemption may be any date during the 90-day period following the
date of the Issuer's determination that the Luannan Facility is
incapable of being rebuilt, repaired or restored (taking into
account the notice requirements set forth in the Indentures).
(ii) Upon the occurrence of a Luannan Event of Loss or Luannan
Expropriation Event that is determined by the Issuer to render a
portion of the Luannan Facility incapable of being rebuilt,
repaired or restored, but permits the remaining portion of the
Luannan Facility to be rebuilt, repaired or restored so as to
permit operation of the remaining portion of the Luannan Facility
on a commercially feasible basis (as confirmed by the Luannan
Facility Engineer pursuant to the Company Indentures), and if the
amount of the Luannan Casualty Proceeds or Luannan Expropriation
Proceeds and repayments of the Issuer Loan and the Shareholder
Loans resulting from such Luannan Event of Loss or Luannan
Expropriation Event exceeds $500,000 (after reduction for the
total cost of rebuilding, repairing or restoring the Luannan
Facility in accordance with the Indentures), the total amount of
such excess proceeds will be applied pro rata to the redemption
of the Existing Notes. The redemption date may be any date during
the 90-day period following the date of the Issuer's
certification to the Trustees of completion of the rebuilding,
repairing or restoration of the Luannan Facility (taking into
account the notice requirements set forth in the Indentures).
(iii) Upon the occurrence of a Luannan Event of Loss or a Luannan
Expropriation Event for which the Luannan Casualty Proceeds or
Luannan Expropriation Proceeds and repayments of the Issuer Loan
and the Shareholder Loans exceed the aggregate principal amount
of the outstanding Existing Notes, and any applicable interest
thereon, the Issuer may, at its option, determine not to rebuild,
repair or restore the Luannan Facility. Upon such a determination
by the Issuer, the outstanding Existing Notes will be redeemed,
in whole, but not in part. The amount of the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds and repayments of the
Issuer Loan and the Shareholder Loans resulting from such Luannan
Event of Loss or Luannan Expropriation Event will be applied to
the redemption of the Existing Notes. The redemption date may be
any date during the 90-day period following the date of the
Issuer's determination not to rebuild, repair or restore the
Luannan Facility (taking into account the notice requirements set
forth in the Indentures).
(iv) Upon the payment of performance liquidated damage payments under
the Luannan EPC Contract, the amount of performance liquidated
damages paid, which are required to be applied to payment of the
Issuer Loan and the Shareholder Loans, will be applied pro rata
to the redemption of the Existing Notes. The redemption date may
be any date during the 90-day period following the date of
receipt by the Issuer of any such repayment of the Issuer Loan
(taking into account the notice requirements set forth in the
Indentures).
(v) Upon the occurrence of a Domestic Project Event that results in
Domestic Project Event Proceeds, after the amounts of such
proceeds have been used to fulfill any and all mandatory
redemption or mandatory repayment obligations pursuant to (a) the
PFC Indenture and (b) the debt instrument or instruments
governing the project level financing of such Domestic Project,
any and all excess proceeds shall be applied pro rata to the
redemption of the Existing Notes. The redemption date may be any
date during the 90-day period following the date of the Issuer's
receipt of such proceeds from the Company (taking into account
the notice requirements set forth in the Indentures).
(vi) Upon the occurrence of a Permitted Project Event that results in
Permitted Project Event Proceeds, after the amounts of such
proceeds have been used to fulfill any and all mandatory
redemption or mandatory repayment obligations pursuant to, as the
case may be, the PFC Indenture or the debt instrument or
instruments governing the project level financing (or additional
Senior Indebtedness issued solely to finance such Permitted
Project) of such Permitted Project, any and all excess proceeds
shall be applied pro rata to the redemption of the Existing Notes
and, to the extent that the instrument governing any additional
Senior Indebtedness of the Company and the Issuer outstanding at
the date of the Mandatory Redemption so requires, to the
redemption of such additional Senior Indebtedness. The redemption
date may be any date during the 90-day period following the date
of the Company's or the Issuer's receipt of such proceeds from
such Permitted Project (taking into account the notice
requirements set forth in the Indentures).
Redemption at Option of Holders. Upon the occurrence of certain events
described below, the Issuer will be obligated to make an offer to redeem pro
rata the outstanding Existing Notes (a "Mandatory Redemption Offer") at a
redemption price equal to 100% of the principal amount of the Existing Notes,
together with accrued and unpaid interest, if any, to the redemption date:
(i) Upon the occurrence of an Approval Event of Default or a County
Partners Event of Default that has had or is reasonably likely to
have a Material Adverse Effect, the Issuer shall be obligated to
make a Mandatory Redemption Offer using any and all available
monies to effect such Mandatory Redemption Offer (such amounts to
include, but not be limited to, (a) all amounts in the Company
Funds, (b) all amounts in the Issuer Funds and (c) all amounts
available to the Issuer or the Company through the enforcement of
the Collateral). The redemption date for such a redemption may be
any date during the 90-day period following the date of the
Approval Event of Default or the County Partners Event of Default
(taking into account the notice requirements set forth in the
Indentures).
(ii) If the Luannan Facility Construction Cost is less than the
Projected Luannan Facility Construction Cost, after using such
excess funds to fund any deficits in the Issuer Funds, if any
excess funds are remaining and the amount of such excess funds
equals or exceeds $1.0 million, the Issuer shall be obligated to
use such excess funds to make a Mandatory Redemption Offer to the
Holders of the Existing Notes. The redemption date for such a
redemption may be any date during the 90-day period following the
date of the Issuer's final calculation of the Luannan Facility
Construction Cost (taking into account the notice requirements
set forth in the Exchange Notes Indenture).
Redemption for Taxation Reasons. The Existing Notes may be redeemed, at
the option of the Issuer or the Company, as the case may be, in whole but not
in part, at any time upon giving not less than 30 nor more than 60 days' notice
to the Holders (which notice shall be irrevocable), at a redemption price equal
to the principal amount thereof, together with accrued and unpaid interest and
premium, if any, to the date fixed by the Issuer or the Company, as the case
may be, for redemption (a "Tax Redemption Date") and all Additional Amounts
(see "--Withholding Taxes " below), if any, then due and which will become due
on the Tax Redemption Date as a result of the redemption or otherwise, if the
Issuer or the Company, as the case may be, determines that, as a result of (i)
any change in, or amendment to, the laws or treaties (or any regulations or
rulings promulgated thereunder) of the Cayman Islands or the United States (or
any political subdivision or taxing authority thereof) which change or
amendment becomes effective on or after the Closing Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change in application,
administration or interpretation becomes effective on or after the Closing
Date, the Issuer or the Company, as the case may be, is, or on the next
interest payment date would be, required to pay Additional Amounts, and the
Issuer or the Company, as the case may be, determines that such payment
obligation cannot be avoided by the Issuer or the Company, as the case may be,
taking reasonable measures. Notwithstanding the foregoing, no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Issuer or the Company, as the case may be, would be obligated to make
such payment or withholding if a payment in respect of the Existing Notes or
the Exchange Notes Guarantee, as the case may be, were then due. Prior to the
publication or, where relevant, mailing of any notice of redemption of the
Existing Notes pursuant to the foregoing, the Issuer or the Company, as the
case may be, will deliver to the Trustees an opinion of a tax counsel
reasonably satisfactory to the Trustees to the effect that the circumstances
referred to above exist. The Trustees shall accept such opinion as sufficient
evidence of the satisfaction of the conditions precedent described above, in
which event it shall be conclusive and binding on the Holders.
Selection and Notice. In the event that less than all of the Existing
Notes are to be redeemed at any time pursuant to an Optional Redemption or a
Public Equity Offering Redemption, selection of the Existing Notes for
redemption will be made by the Exchange Notes Trustee (i) in compliance with
the provisions of the Exchange Notes Indenture described herein under "--
Redemption" and (ii) in accordance with the requirements of the principal
national securities exchange, if any, on which any of the Existing Notes are
listed or, if none of the Existing Notes are then listed on a national
securities exchange, on a pro rata basis; provided that no Existing Notes of a
principal amount or principal amount at maturity, as the case may be, of $1,000
or less shall be redeemed in part and the Exchange Notes Trustee shall have
authority to give full effect to this proviso. Notice of redemption shall be
mailed by first-class mail at least 30 days but not more than 60 days before
the redemption date to each Holder of Existing Notes to be redeemed at its
registered address. If any Existing Note is to be redeemed in part only, the
notice of redemption that relates to such Existing Note shall state the portion
of the principal amount thereof to be redeemed. A new Existing Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Existing Note. On
and after the redemption date, interest will cease to accrue on Existing Notes
or portions thereof called for redemption as long as the Issuer has deposited
with the applicable paying agent for the Existing Notes on or prior to the
relevant redemption date funds in satisfaction of the applicable redemption
price pursuant to the Exchange Notes Indenture.
Limitation on Liability
The Indentures provide that no stockholder, officer or director of the
Company or any of its Subsidiaries will be personally liable for the payment of
principal, premium, if any, or interest (including Liquidated Damages and
Additional Amounts, if any) on the Existing Notes and the Exchange Notes
Guarantee.
Change of Control
In the event of a Change of Control (the date of such occurrence being the
"Change of Control Date"), the Issuer shall notify the Holders of the Existing
Notes in writing of such occurrence and shall make an offer to purchase (the
"Change of Control Offer"), on a business day (the "Change of Control Payment
Date") not later than 60 days following the Change of Control Date, all
Existing Notes then outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any (including
Liquidated Damages and Additional Amounts, if any), to the Change of Control
Payment Date (the "Change of Control Purchase Price"). Notice of a Change of
Control Offer shall be mailed by the Issuer to the Holders not less than 30
days nor more than 45 days before the Change of Control Payment Date. The
Change of Control Offer is required to remain open for at least 20 business
days.
There can be no assurance that the Issuer will have available funds
sufficient to fund the purchase of the Existing Notes, or, in the event that
the Issuer does not have available funds sufficient to fund the purchase of the
Existing Notes, that the Company will have available sufficient funds to
perform on the Existing Notes Guarantee, upon a Change of Control. In the event
that 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 Existing Notes delivered by the Noteholders (or the Company does not
have available sufficient funds to perform the Existing Notes Guarantee in
connection with the payment of the Change of Control Purchase Price by the
Issuer) seeking to accept the Change of Control Offer, an Indentures Event of
Default will occur. The definition of Change of Control includes an event by
which the Company, Panda International, the Issuer or any direct of indirect
parent of the Company sells, conveys, transfers or leases or otherwise disposes
of all or substantially all of the properties and assets of the Company and its
Subsidiaries, taken as a whole, subject to certain exceptions. There is little
case law interpreting the phrase "all or substantially all" in the context of
an indenture. Because there is no precise established definition of this
phrase, there may be uncertainty as to whether a Change of Control has occurred
as a result of any particular sale, conveyance, transfer, lease or other
disposition of assets of the Company and its Subsidiaries. Any such uncertainty
may adversely affect the enforceability of the Change of Control provisions of
the Exchange Note Indenture.
Description of the Exchange Notes Collateral
The Issuer's obligations under the Existing Notes (and, unless otherwise
specifically stated, any additional Senior Indebtedness of the Issuer hereafter
outstanding) are secured by the following, all of which, collectively,
constitutes the Exchange Notes Collateral:
The Pledge Agreements
The Issuer has executed a pledge agreement (the "Issuer Pledge Agreement")
in favor of the Exchange Notes Trustee providing for the pledge, to the
Exchange Notes Trustee, of (i) at least 90% of the Capital Stock of Pan-Sino
and (ii) the Issuer Note issued by Pan-Western. The Issuer Pledge Agreement
also provides that, (A) in the event that Pan-Sino is merged into Pan-Western,
the Issuer will pledge at least 99% of the Capital Stock of Pan-Western to the
Exchange Notes Trustee and (B) in the event that Pan-Sino is merged into the
Issuer, the Issuer will assume Pan-Sino's obligations under the Pan-Sino Pledge
Agreement.
Pan-Sino has executed a pledge agreement (the "Pan-Sino Pledge Agreement")
in favor of the Exchange Notes Trustee providing for the pledge, to the
Exchange Notes Trustee, of at least 99% of the Capital Stock of Pan-Western.
Pan-Western has executed a pledge agreement (the "Pan-Western Pledge
Agreement") in favor of the Exchange Notes Trustee providing for the pledge, to
the Exchange Notes Trustee, of the Luannan Facility Notes (such notes in the
aggregate amount of $71.253 million) issued by the Joint Ventures. The Pan-
Western Pledge Agreement will provide that Pan-Western will ensure that no
Person other than the Exchange Notes Trustee shall effect a security interest
in its assets or the assets of the Joint Ventures. Furthermore, so long as the
Existing Notes are outstanding, Pan-Western has agreed not to permit the Joint
Ventures to pledge their assets and Pan-Western will not pledge its equity
interests in the Joint Ventures, except in favor of the Exchange Notes Trustee.
Notwithstanding the foregoing, neither Pan-Western nor the Joint Ventures shall
be required to take any action that might jeopardize the characterization of
the Shareholder Loans as shareholder financing under PRC law or regulations.
The Company has executed a pledge agreement (the "Company Pledge
Agreement") in favor of the Exchange Notes Trustee providing for the pledge, to
the Exchange Notes Trustee, of 100% of the Capital Stock of the Issuer.
Individually, and in the aggregate, the pledges of the Capital Stock of
Pan-Western, Pan-Sino and the Issuer do not constitute a "substantial portion"
(as defined in Rule 3-10 of Regulation S-X promulgated under the Securities
Act) of the collateral securing the Existing Notes.
The Security Agreements
The Issuer has entered into a security agreement (the "Issuer Security
Agreement") with the Exchange Notes Trustee granting to it, for the benefit of
only the Holders of the Existing Notes, (i) a security interest in (a) the
Capitalized Interest Fund, (b) the Luannan Facility Construction Fund, (c) the
Debt Service Fund, (d) the Debt Service Reserve Fund and (e) Luannan Facility
Restoration Fund established pursuant to the Exchange Notes Indenture,
including all proceeds thereon and all documents evidencing all funds and
investments held therein and (ii) an assignment and security interest in all of
the Issuer's rights under the Issuer Loan Agreement.
The Issuer Security Agreement also provides for the granting to the
Exchange Notes Trustee, for the benefit of the Holders of the Existing Notes
(and any additional Senior Indebtedness of the Issuer) an equal and ratable
security interest in (i) the Issuer Revenue Fund, (ii) the Issuer Operating
Fund and (iii) the Issuer Equity Distribution Fund established pursuant to the
Exchange Notes Indenture, including all proceeds thereon and all documents
evidencing all funds and investments held therein.
Pan-Western has entered into a security agreement (the "Pan-Western
Security Agreement") with the Exchange Notes Trustee granting and assigning to
it a security interest in all (i) of the Pan-Western Funds established pursuant
to the Exchange Notes Indenture, including all proceeds thereon and all
documents evidencing all funds and investments held therein and (ii) of Pan-
Western's rights under the Shareholder Loan Agreements and the Joint Venture
Guarantees.
Pan-Sino has entered into a security agreement (the "Pan-Sino Security
Agreement") with the Exchange Notes Trustee granting and assigning to it a
security interest in the Pan-Sino Fund established pursuant to the Exchange
Notes Indenture, including all proceeds thereon and all documents evidencing
such fund and investments held therein.
The Issuer Pledge Agreement, the Pan-Sino Pledge Agreement, the Pan-
Western Pledge Agreement, certain sections of the Company Pledge Agreement, the
Issuer Security Agreement, the Pan-Western Security Agreement and the Pan-Sino
Security Agreement, collectively, constitute the Exchange Notes Collateral
Documents.
Description of the Exchange Notes Guarantee Collateral
The Company's obligations under the Exchange Notes Guarantee (and, unless
otherwise specifically stated, any additional Senior Indebtedness of the
Company hereafter outstanding) will be secured by the following, all of which,
collectively, constitutes the Exchange Notes Guarantee Collateral:
The Pledge Agreements and the Security Agreement
Panda International has executed a pledge agreement (the "Panda
International Pledge Agreement") in favor of the Company Indenture Trustee
providing for the pledge, to the Company Indenture Trustee, of 100% of the
Capital Stock of the Company.
Pursuant to the Company Pledge Agreement, the Company has pledged to the
Company Indenture Trustee 100% of the Capital Stock of PEC.
Individually, and in the aggregate, the pledges of the Capital Stock of
the Company and PEC do not constitute a "substantial portion" (as defined in
Rule 3-10 of Regulation S-X promulgated under the Securities Act) of the
collateral securing the Exchange Notes Guarantee.
The Company has entered into a security agreement (the "Company Security
Agreement") with the Company Indenture Trustee granting to it, for the benefit
of only the holders of the Exchange Notes Guarantee, (i) a security interest in
the Notes Guarantee Service Fund and the Notes Guarantee Service Reserve Fund
established pursuant to the Company Indenture, including all proceeds thereon
and all documents evidencing all funds and investments held therein and (ii) an
assignment and security interest in all of the Company's right, title and
interest in the U.S. Distribution Fund.
The Company Security Agreement also provides for the granting to the
Company Indenture Trustee, for the benefit of the holders of the Exchange Notes
Guarantee (and any additional Senior Indebtedness of the Company) an equal and
ratable security interest in (i) the Company Revenue Fund, (ii) the Company
Operating Fund and (iii) the Company Equity Distribution Fund established
pursuant to the Company Indenture, including all proceeds thereon and all
documents evidencing all funds and investments held therein.
Pursuant to an agreement among PIC, PEC and the Company, dated as of the
Closing Date (the "PEC Assignment and Pledge Agreement"), PIC has agreed that
any and all amounts that are deposited into the U.S. Distribution Fund (as
defined in the PFC Indenture) shall be transferred in same day funds to a
revenue account designated by PEC (the "PEC Revenue Account"). PEC and the
Company have assigned to the Company Indenture Trustee all of their right,
title and interest in and to the following: (i) PEC Revenue Account and all
amounts on deposit therein and (ii) to the extent available after the
fulfillment of any and all mandatory redemption and mandatory repayment
obligations, any and all excess Domestic Project Event Proceeds.
The Panda International Pledge Agreement, certain sections of the Company
Pledge Agreement, the Company Security Agreement and the PEC Assignment and
Pledge Agreement, collectively, constitute the Exchange Notes Guarantee
Collateral Documents (the Exchange Notes Collateral Documents and the Exchange
Notes Guarantee Collateral Documents, collectively, the "Collateral
Documents").
Description of Additional Collateral
Permitted Projects may be financed pursuant to the PFC Indenture, the
Company Indenture and the Exchange Notes Indenture. U.S. Permitted Projects may
be constructed, owned or operated pursuant to the PFC Indenture and U.S.
Permitted Projects may be developed, constructed, owned or operated pursuant to
the Company Indenture. Non-U.S. Permitted Projects may be constructed, owned or
operated pursuant to the PFC Indenture and may be developed, constructed, owned
or operated pursuant to the Exchange Notes Indenture. In practice, Non-U.S.
Permitted Projects are likely to be financed pursuant to the PFC Indenture or
the Exchange Notes Indenture if owning, constructing or operating a Permitted
Project pursuant to the terms of the Company Indenture would have adverse tax
consequences to the Company and its Subsidiaries. The Indentures and the PFC
Indenture provide for the pledging of or granting of a security interest in the
assets of Permitted Projects for the benefit of the Holders of the Existing
Notes or of holders of Indebtedness of the Company or its Subsidiaries.
Security interests in the assets of the Permitted Projects will be granted by
the Company or its relevant Subsidiary in the following manner:
The Issuer Pledge Agreement provides that, in the event that a Non-U.S.
Permitted Project is developed, constructed or owned pursuant to the provisions
of the Exchange Notes Indenture, at the point that the Issuer has expended in
excess of $2.5 million in the furtherance of the development of such Non-U.S.
Permitted Project, 100% of the Capital Stock of the Person that owns such Non-
U.S. Permitted Project will be pledged to the Exchange Notes Trustee (or, to
the extent that a Non-U.S. Permitted Project is not Wholly Owned by the Issuer
or its Subsidiary, the entire ownership interest in such Non-U.S. Permitted
Project held by the Issuer or such Subsidiary or group of Subsidiaries).
Notwithstanding the requirement of the preceding sentence, the Issuer Pledge
Agreement provides that, (i) in the event that the financing arrangements with
respect to a Non-U.S. Permitted Project requires the pledge of a Non-U.S.
Permitted Project's Capital Stock to secure Non-Recourse Debt, upon financial
closing, the Exchange Notes Trustee shall release such stock and allow for such
a pledge and (ii) the Issuer shall not be required to pledge the Capital Stock
of a Subsidiary if (A) such a pledge is contrary to the law of the jurisdiction
of domicile of the relevant Subsidiary or (B) such a pledge is not permitted
under the Project Documents of such Non-U.S. Permitted Project. In the event
that the Capital Stock of a Subsidiary that was not available for a pledge to
the Exchange Notes Trustee pursuant to clauses (i) and (ii) of the preceding
sentence becomes available at a subsequent date, the Issuer shall be required
to pledge promptly the Capital Stock of such Subsidiary to the Exchange Notes
Trustee. The Issuer Pledge Agreement also provides for the grant by the Issuer
of any and all right, title and interest of, to the extent available after the
fulfillment of any and all mandatory redemption and mandatory repayment
obligations, any and all excess Non-U.S. Permitted Project Event Proceeds to
the Exchange Notes Trustee.
The Company Pledge Agreement provides that, in the event that a U.S.
Permitted Project is developed, constructed or owned pursuant to the provisions
of the Company Indenture, at the point that the Company has expended in excess
of $2.5 million in the furtherance of the development of such U.S. Permitted
Project, 100% of the Capital Stock of the Person that owns such Permitted
Project will be pledged to the Company Indenture Trustee (or, to the extent
that a Permitted Project is not Wholly Owned by the Company or its Subsidiary,
the entire ownership interest in such U.S. Permitted Project held by the
Company or such Subsidiary). Notwithstanding the requirement of the preceding
sentence, the Company Pledge Agreement provides that (i) in the event that the
financing arrangements with respect to a U.S. Permitted Project require the
pledge of a U.S. Permitted Project's Capital Stock to secure Non-Recourse Debt,
upon financial closing, the Company Indenture Trustee shall release such stock
and allow for such a pledge and (ii) the Company shall not be required to
pledge the Capital Stock of a Subsidiary if such a pledge is not permitted
under the Project Documents of such U.S. Permitted Project. In the event that
the Capital Stock of a Subsidiary that was not available for a pledge to the
Company Indenture Trustee pursuant to clauses (i) and (ii) of the preceding
sentence becomes available at a subsequent date, the Company shall be required
to promptly pledge the Capital Stock of such Subsidiary to the Company
Indenture Trustee. The Company Pledge Agreement also provides for the grant by
the Company of any and all right, title and interest of, to the extent
available after the fulfillment of any and all mandatory redemption and
mandatory repayment obligations, any and all excess U.S. Permitted Project
Event Proceeds to the Company Indenture Trustee.
The PEC Assignment and Pledge Agreement provides that, (i) in the event
that a U.S. Permitted Project is constructed, owned or operated pursuant to the
provisions of the PFC Indenture, to the extent available after the fulfillment
of any and all mandatory redemption and mandatory repayment obligations, any
and all excess U.S. Permitted Project Event Proceeds shall be paid to PEC for
payment to the Company Indenture Trustee and (ii) in the event that a Non-U.S.
Permitted Project is constructed, owned or operated pursuant to the provisions
of the PFC Indenture, to the extent available after the fulfillment of any and
all mandatory redemption and mandatory repayment obligations, that any and all
excess Non-U.S. Permitted Project Event Proceeds will be deposited in the
International Distribution Fund and will be subject to certain restrictions on
distribution from such fund.
Funds that are created in connection with the issuance of future
Indebtedness by any of PFC, PIC, the Company or the Issuer shall not be pledged
as security for the Existing Notes or the Exchange Notes Guarantee but may be
pledged as security for such future Indebtedness.
The Funds
The Issuer Funds
In accordance with the terms and conditions of the Exchange Notes
Indenture, the Exchange Notes Trustee will establish and maintain the following
funds: (i) the Issuer Revenue Fund, (ii) the Capitalized Interest Fund, (iii)
the Luannan Facility Construction Fund, (iv) the Debt Service Fund, (v) the
Debt Service Reserve Fund, (vi) the Issuer Operating Fund, (vii) the Luannan
Facility Restoration Fund and (viii) the Issuer Equity Distribution Fund (the
"Issuer Funds"). The Issuer will have limited rights of withdrawal under the
Issuer Funds in accordance with the terms and conditions set forth in the
Exchange Notes Indenture. The Issuer Revenue Fund, the Issuer Operating Fund
and the Issuer Equity Distribution Fund will be for the use and benefit of the
holders of any and all securities or guarantees issued pursuant to the Exchange
Notes Indenture. The Capitalized Interest Fund, the Luannan Facility
Construction Fund, the Debt Service Fund, the Debt Service Reserve Fund and the
Luannan Facility Restoration Fund shall be for the exclusive use and benefit of
the Holders of the Existing Notes.
Issuer Revenue Fund. In accordance with the terms and conditions of the
Exchange Notes Indenture, the Issuer will be required to deposit all of the
following in the Issuer revenue fund (the "Issuer Revenue Fund"): (i) any and
all revenues received by the Issuer from any source, (ii) any and all income
from the investment of monies in any of the Issuer Funds, (iii) any and all
proceeds from the payment by Pan-Western of amounts due under the Issuer Loan
and any and all other payments by Pan-Western to the Issuer and (iv) in the
event that a Non-U.S. Permitted Project is developed, constructed or owned
pursuant to the provisions of the Exchange Notes Indenture, (A) any and all
revenues received by the Issuer from such Non-U.S. Permitted Project and (B) to
the extent available, any and all Non-U.S. Permitted Project Event Proceeds.
Additionally, unless transferred to the Luannan Facility Restoration Fund for
the rebuilding, repair or restoration of the Luannan Facility, all Luannan
Casualty Proceeds and Luannan Expropriation Proceeds will be deposited directly
into the Pan-Western Revenue Fund as a repayment of all or a portion of the
Shareholder Loans and then transferred to the Issuer Revenue Fund whereupon the
Issuer will segregate such amounts from all other amounts held in the Issuer
Revenue Fund.
Capitalized Interest Fund. Upon the closing of the Prior Offering and
payment by the Issuer of the fees and expenses incurred in connection with the
issuance of the Old Notes and the Exchange Notes Guarantee, the Issuer
deposited approximately $48.1 million into the capitalized interest fund (the
"Capitalized Interest Fund") to be invested in Dollar Permitted Investments.
Through the Capitalized Interest Expiration Date, interest payments on the
Existing Notes shall be made from the Capitalized Interest Fund.
Luannan Facility Construction Fund. After (i) the payment by the Issuer of
the fees and expenses incurred in connection with the issuance of the Old Notes
and the Exchange Notes Guarantee, (ii) the deposit by the Issuer of the
required funds into the Capitalized Interest Fund and (iii) the deposit by the
Issuer of the required funds into the Debt Service Reserve Fund (as defined
below), the balance of funds remaining from the proceeds of the Prior Offering
(estimated to be approximately $80.4 million) was deposited by the Issuer into
the Luannan Facility construction fund (the "Luannan Facility Construction
Fund") and such amount (including interest income received from Pan-Western
under the Issuer Loan and other amounts received from Pan-Western prior to the
Luannan Commercial Operation Date) was used to make the Issuer Loan.
Pursuant to the terms of the Exchange Notes Indenture and the Issuer Loan
Agreement, the principal amount of the Issuer Loan (and any and all interest
income thereon (and on any of the Issuer Funds) prior to the Luannan Commercial
Operation Date) will be advanced to Pan-Western in installments starting on the
Closing Date and ending on the date on which the last Joint Venture has a
payment obligation relating to the construction of the Luannan Facility (the
"Funding Period"). It is expected that during the Funding Period, Pan-Western
will, in the aggregate, advance from the proceeds of the Issuer Loan (i) in
accordance with the terms of the Shareholder Loan Agreements, $71,253,000 to
make the installment payments of the Shareholder Loans to the Joint Ventures
(during the Funding Period, in the aggregate, Tangshan Panda will receive
$17,880,000, Tangshan Pan-Western will receive $17,880,000, Tangshan Cayman
will receive $17,664,000 and Tangshan Pan-Sino will receive $17,829,000) and
(ii) in accordance with the Joint Venture Agreements, $41,763,000 to make
installment payments of its equity contributions (the "JV Equity
Contributions") to each of the Joint Ventures (during the Funding Period, in
the aggregate, Tangshan Panda will receive $10,480,000, Tangshan Pan-Western
will receive $10,480,000, Tangshan Cayman will receive $10,353,000 and Tangshan
Pan-Sino will receive $10,450,000).
Upon receipt of the JV Equity Contributions, each Joint Venture will,
prior to the disbursement of such monies to meet a Joint Venture contractual
obligation, effect the registration in the PRC of such monies as registered
capital of the Joint Ventures.
Monies will be disbursed from the Luannan Facility Construction Fund
(initially in the form of an installment of the Issuer Loan and upon receipt by
Pan-Western, either in the form of an installment of the Shareholder Loans or
as an installment of the JV Equity Contributions) to meet each of the Joint
Venture's payment obligations under the Luannan EPC Contract and to meet other
contractual obligations of the Joint Ventures under any of the Luannan Project
Documents or other Luannan Facility financing, construction and development
costs, including interest on the Shareholder Loans during construction. In
addition, upon the issuance of the Old Notes, Pan-Western provided as
Shareholder Loans approximately $5.74 million from the Luannan Facility
Construction Fund to Tangshan Pan-Sino and Tangshan Cayman which utilized a
portion of such funds for the purchase of water and land use rights, certain
water wells and pipelines, respectively, from the County Partners. Amounts also
have been disbursed from the Luannan Facility Construction Fund as a
Shareholder Loan to Tangshan Pan-Sino to finance the construction of the
Transmission Facilities.
Amounts will be disbursed periodically from the Luannan Facility
Construction Fund only upon the satisfaction of certain conditions that will
include, but not be limited to, the receipt by the Exchange Notes Trustee of
the following documents:
(i) a certificate from the Issuer, Pan-Western and the Luannan
Facility Engineer (delivered at least once a month whether or not
there is a disbursement pursuant to the Shareholder Loans) to the
effect that: (a) undisbursed funds in the Luannan Facility
Construction Fund (or other monies available to the Issuer, to
the extent that such monies have been segregated in a dedicated
account and a security interest in such account has been granted
to the Exchange Notes Trustee) together with any and all interest
earned on the Issuer Funds and the Pan-Western Funds are
reasonably expected to equal or exceed the amount necessary to
pay all project costs in connection with final completion of the
Luannan Facility; and (b) the Luannan Facility is being
constructed in accordance with the Approved Construction Budget
and Schedule or, if applicable, an Approved Completion Plan (each
such certificate, a "Luannan Facility Construction Schedule
Certificate");
(ii) prior to disbursing more than $15.0 million in the aggregate,
receipt by the Exchange Notes Trustee of a certificate from the
Issuer and Pan-Western certifying that the transfer of land from
the County Partners to the relevant Joint Venture has taken place
and has been legally recognized and recorded in accordance with
PRC law;
(iii) a current construction progress report and requisition
certificate from the Issuer and Pan-Western specifying project
costs that are due and payable or that are reasonably expected to
be due and payable within the next 30 days; and
(iv) an officer's certificate from the Issuer and Pan-Western to the
effect that: (a) no Issuer Loan Agreement Event of Default has
occurred and is continuing; (b) no Shareholder Loan Agreement
Event of Default has occurred and is continuing; and (c) the
representations and warranties in the Shareholder Loan Agreements
are true and correct in all material respects on the date thereof
as if made on such date, except as affected by the consummation
of the transactions contemplated thereby or to the extent
relating solely to an earlier date.
At any time, if (i) the Issuer and Pan-Western shall deliver an officer's
certificate certifying that (a) there does not exist as of the date of such
certificate a Shareholder Loan Agreement Event of Default, (b) all amounts
required to be paid as of such date under the Luannan Project Documents have
been paid and (c) the amount in the Luannan Facility Construction Fund and
estimated income on all Issuer Funds and the Pan-Western Funds through the
anticipated Luannan Commercial Operation Date exceed by an amount specified in
such certificate all reasonably foreseeable expenses (including an appropriate
contingency) in connection with final completion of the Luannan Project other
than the unreimbursed development costs paid to third parties incurred by
Affiliates of the Issuer in connection with the Luannan Facility and (ii) the
Luannan Facility Engineer shall deliver a certificate to the same effect as
clause (c) above, the Exchange Notes Trustee shall transfer to the Issuer
Equity Distribution Fund the lesser of (i) such excess and (ii) such
unreimbursed third-party costs.
Upon completion of the Luannan Facility, (i) the Issuer and Pan-Western
shall deliver an officer's certificate certifying that (a) the Luannan
Commercial Operation Date has occurred, (b) there does not exist as of the date
of such certificate a Shareholder Loan Agreement Event of Default, (c) all
amounts required to be paid as of such date under the Luannan Project Documents
have been paid and (d) an amount has been set aside in the Completion Sub-
Account sufficient to pay all reasonably foreseeable expenses in connection
with final completion of the Luannan Facility, and (ii) the Luannan Facility
Engineer shall deliver a certificate certifying that the Luannan Commercial
Operation Date has occurred and that the amount available in the Completion Sub-
Account is sufficient to complete the Luannan Facility. If, upon the occurrence
of the events described in clauses (i) and (ii) in the immediately preceding
sentence, excess funds remain in the Luannan Facility Construction Fund due to
the Luannan Facility Construction Cost being less than the Projected Luannan
Facility Construction Cost, the Issuer shall, first, fund any deficits in the
Issuer Funds and second, if any excess funds are remaining and the amount of
such excess funds equals or exceeds $1.0 million, be obligated to make a
Mandatory Redemption Offer as described above under "--Redemption--Redemption
at Option of Holders." In the event that there are excess funds following
completion of such Mandatory Redemption Offer, such funds shall be transferred
to the Issuer Revenue Fund.
Debt Service Fund. Amounts deposited in the debt service fund (the "Debt
Service Fund") shall be allocated among sub-funds of a Exchange Notes Principal
Account and an Exchange Notes Interest Account, which shall be established for
the Existing Notes based on the principal, premium, if any, and interest
(including Liquidated Damages and Additional Amounts, if any) due and payable
on the Existing Notes on the next principal or interest payment date falling on
or within six months following the relevant Monthly Date. Amounts on deposit in
such sub-funds shall be used to pay principal, premium, if any, and interest
(including Liquidated Damages and Additional Amounts, if any) due and payable
(whether at the stated maturity, call for redemption, by acceleration or
otherwise) on the Existing Notes. If monies in the Debt Service Fund exceed the
amount of money required by the Exchange Notes Indenture to be deposited
therein, such excess shall be transferred to the Issuer Revenue Fund.
Debt Service Reserve Fund. On the Closing Date, the Issuer deposited $9.7
million in the debt service reserve fund (the "Debt Service Reserve Fund") as a
reserve for payments on the Existing Notes.
After the Luannan Commercial Operation Date, the Debt Service Reserve
Requirement will increase to (A) the aggregate principal, premium, if any, of
payments due on the Existing Notes on the next semi-annual payment date and (B)
the aggregate cash interest payments (including Liquidated Damages and
Additional Amounts, if any) due on the Existing Notes on the next semi-annual
payment date. Amounts on deposit in the Debt Service Reserve Fund shall be used
to pay the principal, premium, if any, or interest (including Liquidated
Damages and Additional Amounts, if any) at any time due on the Existing Notes,
and to the extent that amounts on deposit in the Issuer Revenue Fund and the
Debt Service Fund are insufficient. In the event that the amount on deposit in
the Debt Service Reserve Fund exceeds the Debt Service Reserve Requirement at
any time, the excess shall be transferred to the Issuer Revenue Fund.
Issuer Operating Fund. Amounts deposited in the Issuer operating fund (the
"Issuer Operating Fund") shall be used by the Issuer for the payment of
expenses in connection with the Administrative Services Agreement and certain
other fees and expenses.
Luannan Facility Restoration Fund. All Luannan Casualty Proceeds and
Luannan Expropriation Proceeds, to the extent required by the Exchange Notes
Indenture to be used for the payment of the costs of rebuilding, repair or
restoration of any damaged Joint Venture Facility shall be transferred to the
Luannan Facility restoration fund (the "Luannan Facility Restoration Fund")
from the Issuer Revenue Fund. The Issuer may requisition amounts from the
Luannan Facility Restoration Fund for rebuilding, repair and restoration costs
in accordance with the requisition procedures set forth in the Exchange Notes
Indenture. Following the completion of any rebuilding, repair or restoration
and after giving effect to any retention in accordance with the Exchange Notes
Indenture (after reimbursing the Issuer for any unreimbursed amounts it has
expended in connection with the rebuilding, repair or restoration), if amounts
remaining in the Luannan Facility Restoration Fund exceed $2.5 million, such
amount will be applied, in certain instances, first, to the redemption of the
Issuer Loan and then to the pro rata redemption of the Existing Notes.
Issuer Equity Distribution Fund. All amounts on deposit in the Issuer
Revenue Fund after the transfer of monies therein to each of the other funds in
accordance with the Exchange Notes Indenture shall be transferred to the Issuer
equity distribution fund (the "Issuer Equity Distribution Fund"); provided,
however, that (i) withdrawals from the Issuer Equity Distribution Fund may only
be made in connection with payments to be made by the Issuer pursuant to the
Development Services Agreement and (ii) the Issuer may only make distributions
to its shareholders if (A) the Company is in compliance with the requirements
of the Limitation on Restricted Payments covenant of the Indentures and (B) the
Luannan Commercial Operation Date has occurred.
Issuer Flow of Funds. The Exchange Notes Trustee will, on the eighth day
of each month after the Luannan Commercial Operation Date (or, if such date is
not a business day, the next following business day) (a "Monthly Date"),
transfer or segregate money, to the extent then available in the Issuer Revenue
Fund and not segregated for any purpose, to the other funds as follows:
(i) to the Issuer Operating Fund, the amount estimated by the Issuer
to be needed for the payment of expenses of the Issuer including
expenses in connection with the Administrative Services Agreement
to be incurred during the next month;
(ii) to the Exchange Notes Interest Account of the Debt Service Fund,
an amount equal to the excess of (a) the sum of cash interest
payments (including Liquidated Damages and Additional Amounts, if
any) due and payable on all of the Existing Notes outstanding on
the next succeeding interest payment date falling on or within
six months following such Monthly Date over (b) the amount then
on deposit in such Exchange Notes Interest Account;
(iii) to the Exchange Notes Principal Account of the Debt Service Fund,
an amount equal to the excess of (a) the principal and premium,
if any, payments next due and payable on the Existing Notes
outstanding at the next succeeding principal payment date falling
on or within six months following such Monthly Date over (b) the
amount then on deposit in such Exchange Notes Principal Account;
(iv) to the Debt Service Reserve Fund, the excess of the Debt Service
Reserve Requirement over the amount in the Debt Service Reserve
Fund; and
(v) to the Issuer Equity Distribution Fund, any remainder; provided,
however, that (a) withdrawals from the Issuer Equity Distribution
Fund may only be made in connection with payments to be made by
the Issuer pursuant to the Development Services Agreement and (b)
the Issuer may only make distributions to its shareholders if (1)
the Company is in compliance with the requirements of the
Limitation on Restricted Payments covenant of the Indentures and
(2) the Luannan Commercial Operation Date has occurred.
The Company Funds
In accordance with the terms and conditions of the Company Indenture, the
Company Indenture Trustee will establish and maintain the following funds
(separately defined hereinbelow): (i) the Company Revenue Fund, (ii) the Notes
Guarantee Service Fund, (iii) the Notes Guarantee Service Reserve Fund, (iv)
the Company Operating Fund, (v) the Company Equity Distribution Fund and (vi)
such other funds, from time to time, as may be required pursuant to the terms
of the Company Indenture (the "Company Funds"). The Company will have limited
rights of withdrawal under the Company Funds in accordance with the terms and
conditions set forth in the Company Indenture. The Company Funds will, with the
exception of the Notes Guarantee Service Fund and the Notes Guarantee Service
Reserve Fund, be for the use and benefit of the holders of any and all
securities or guarantees issued pursuant to the Company Indenture. The Notes
Guarantee Service Fund and the Notes Guarantee Service Reserve Fund shall be
for the exclusive use and benefit of the holders of the Exchange Notes
Guarantee.
Company Revenue Fund. All of the following will be deposited in the
Company revenue fund (the "Company Revenue Fund"): (i) revenues received by the
Company from any source, (ii) income from the investment of monies in any of
the Company Funds, (iii) all amounts on deposit in the U.S. Distribution Fund
and (iv) in the event that a U.S. Permitted Project is constructed, owned or
operated pursuant to the provisions of the PFC Indenture or the Company
Indenture, any and all available revenues from such U.S. Permitted Project (in
the case of a U.S. Permitted Project pursuant to the PFC Indenture, such monies
will be required to flow through the U.S. Distribution Fund) and, to the extent
available, any and all Domestic Project Event Proceeds and U.S. Permitted
Project Event Proceeds.
Company Operating Fund. Amounts deposited in the Company operating fund
(the "Company Operating Fund") shall be used by the Company for the payment of
expenses in connection with the Administrative Services Agreement and certain
other fees and expenses.
Notes Guarantee Service Fund. To the extent that there are sufficient
amounts available in the Debt Service Fund of the Issuer to make the payments
equal to the principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any) due and payable on the Existing Notes
on the next principal or interest payment date(s) falling on or within six
months following the relevant Monthly Date, the Company shall have no
obligation to deposit monies into the Existing Notes guarantee service fund
(the "Notes Guarantee Service Fund"). However, to the extent that there are
insufficient amounts available in the Debt Service Fund of the Issuer to make
the payments equal to the principal, premium, if any, and interest (including
Liquidated Damages and Additional Amounts, if any) due and payable on the
Existing Notes on the next principal or interest payment date(s) falling on or
within six months following the relevant Monthly Date, the Company shall be
required to deposit monies into the Notes Guarantee Service Fund until such
time as the amounts on deposit in the Debt Service Fund and the Notes Guarantee
Service Fund, in the aggregate, are equal to the principal, premium, if any,
and interest (including Liquidated Damages and Additional Amounts, if any) due
and payable on the Existing Notes on the next principal or interest payment
date(s) falling on or within six months following the relevant Monthly Date.
Amounts deposited in the Notes Guarantee Service Fund shall be allocated
among sub-funds of a Existing Notes Guarantee principal account (the "Exchange
Notes Guarantee Principal Account") and Existing Notes Guarantee interest
account (the "Exchange Notes Guarantee Interest Account") which shall be
established for the Exchange Notes Guarantee based on the principal, premium,
if any, and interest (including Liquidated Damages and Additional Amounts, if
any) due and payable on the Existing Notes on the next principal or interest
payment date(s) falling on or within six months following the relevant Monthly
Date less the amount on deposit in the Debt Service Fund. In the event that
amounts on deposit in the Debt Service Fund of the Issuer are insufficient,
amounts on deposit in the sub-funds of the Notes Guarantee Service Fund shall
be used to pay principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any) due and payable (whether at the stated
maturity, call for redemption, by acceleration or otherwise) on the Existing
Notes. If at any time monies in the Notes Guarantee Service Fund exceed the
amount of money required by the Indentures to be deposited therein, such excess
shall be transferred to the Company Revenue Fund.
Notes Guarantee Service Reserve Fund. After the Luannan Commercial
Operation Date, in the event that the amounts on deposit in the Debt Service
Reserve Fund of the Issuer are not equal to or greater than the Debt Service
Reserve Requirement, the Company shall be obligated to deposit monies into the
Exchange Notes guarantee service reserve fund (the "Notes Guarantee Service
Reserve Fund"), until such time as the sum of (i) the monies in the Debt
Service Reserve Fund of the Issuer and (ii) the monies on deposit in the Notes
Guarantee Service Reserve Fund equal, in the aggregate, the Debt Service
Reserve Requirement. Amounts on deposit in the Notes Guarantee Service Reserve
Fund shall be used to pay the principal, premium, if any, or interest
(including Liquidated Damages and Additional Amounts, if any) due on the
Existing Notes, to the extent that the sum of the amounts on deposit in the
Issuer Revenue Fund, the Debt Service Fund, the Debt Service Reserve Fund and
the Company Revenue Fund are insufficient. If at any time the amount on deposit
in the Notes Guarantee Service Reserve Fund exceeds the Debt Service Reserve
Requirement, the excess shall be transferred to the Company Revenue Fund.
Company Equity Distribution Fund. All amounts on deposit in the Company
Revenue Fund after the transfer of monies therein to each of the other funds in
accordance with the Indentures shall be transferred to the Company equity
distribution fund (the "Company Equity Distribution Fund"); provided, however,
that (A) withdrawals from the Company Equity Distribution Fund may only be made
in connection with payments to be made by the Company pursuant to the
Development Services Agreement and (B) the Company may only make distributions
to its shareholders if (1) the Company is in compliance with the requirements
of the Limitation on Restricted Payments covenant of the Company Indenture and
(2) the Luannan Commercial Operation Date has occurred.
Company Flow of Funds. The Company Indenture Trustee will, on each Monthly
Date, transfer or segregate money, to the extent then available in the Company
Revenue Fund and not segregated for any purpose, to the other funds as follows:
(i) to the Company Operating Fund, the amount estimated by the
Company to be needed for the payment of expenses of the Company
including expenses in connection with the Administrative Services
Agreement to be incurred during the next month;
(ii) to the Exchange Notes Guarantee Interest Account of the Notes
Guarantee Service Fund, an amount equal to the excess (if any) of
(a) the sum of cash interest payments (including Liquidated
Damages and Additional Amounts, if any) due and payable on all of
the Existing Notes outstanding on the next succeeding interest
payment date falling on or within six months following such
Monthly Date over (b) the sum of (x) the amount then on deposit
in such Exchange Notes Guarantee Interest Account and (y) the
amounts on deposit in the Exchange Notes Interest Account of the
Debt Service Fund;
(iii) to the Exchange Notes Guarantee Principal Account of the Notes
Guarantee Service Fund, an amount equal to the excess (if any) of
(a) the principal and premium, if any, payments next due and
payable on the Existing Notes outstanding at the next succeeding
principal payment date falling on or within six months following
such Monthly Date over (b) the sum of (x) the amount then on
deposit in such Exchange Notes Guarantee Principal Account and
(y) the amounts on deposit in the Exchange Notes Principal
Account of the Debt Service Fund;
(iv) to the Notes Guarantee Service Reserve Fund, the excess (if any)
of the Debt Service Reserve Requirement over the amounts on
deposit in the Debt Service Reserve Fund; and
(v) to the Company Equity Distribution Fund, any remainder; provided,
however, that (a) withdrawals from the Company Equity
Distribution Fund may only be made in connection with payments to
be made by the Company pursuant to the Development Services
Agreement and (b) the Company may only make distributions to its
shareholders if (1) the Company is in compliance with the
requirements of the Limitation on Restricted Payments covenant of
the Indentures and (2) the Luannan Commercial Operation Date has
occurred.
The Pan-Western Funds
In accordance with the terms and conditions of the Exchange Notes
Indenture, the Exchange Notes Trustee will establish and maintain outside the
PRC the following funds: (i) the Pan-Western Revenue Fund, (ii) the Pan-Western
Operating Fund and (iii) the Pan-Western Equity Distribution Fund (the "Pan-
Western Funds"). Pan-Western will have limited rights of withdrawal under the
Pan-Western Funds in accordance with terms and conditions set forth in the
Exchange Notes Indenture.
The Pan-Western Revenue Fund. All of the following will be deposited in
the Pan-Western revenue fund (the "Pan-Western Revenue Fund"): (i) revenues
received by Pan-Western from any source, (ii) income from the investment of
monies in the Pan-Western Funds, (iii) proceeds from the payment by the Joint
Ventures of amounts due under the Shareholder Loans, (iv) proceeds from
payments received by Pan-Western on its business interruption insurance
policies maintained by it with respect to the Joint Ventures and (v)
distributions from the Joint Ventures to Pan-Western.
Pan-Western Operating Fund. Amounts deposited in the Pan-Western operating
fund (the "Pan-Western Operating Fund") shall be used by Pan-Western for the
payment of expenses in connection with the Administrative Services Agreement
and certain other fees and expenses.
Pan-Western Equity Distribution Fund. Amounts deposited in the Pan-Western
equity distribution fund (the "Pan-Western Equity Distribution Fund") shall be
allocated among sub-funds consisting of a Pan-Sino distribution account (the
"Pan-Sino Distribution Account") and a Chinamac distribution account (the
"Chinamac Distribution Account"). Pursuant to an agreement among Pan-Western,
Pan-Sino and Chinamac (the "Pan-Western Shareholders' Agreement"), the
shareholders of Pan-Western have agreed to cause Pan-Western to declare
distributions from the sub-funds immediately upon the availability of funds for
such purposes.
Pan-Western Flow of Funds. The Exchange Notes Trustee will, on each
Monthly Date after the Luannan Commercial Operation Date (or the next following
business day), transfer or segregate money, to the extent then available in the
Pan-Western Revenue Fund and not segregated for any purpose, to the other funds
as follows:
(i) to the Pan-Western Operating Fund, the amount estimated by Pan-
Western to be needed for the payment of expenses of Pan-Western
including those in connection with the Administrative Services
Agreement to be incurred during the next month;
(ii) to the payment of interest due and payable with respect to the
Issuer Loan, to the extent then due or to become due during the
next month;
(iii) to the payment of principal and premium, if any, payable with
respect to the Issuer Loan, to the extent then due or to become
due during the next month;
(iv) until such time as the Issuer Loan is repaid in full, to the
prepayment of principal, premium, if any, and interest, with
respect to the Issuer Loan, to the extent amounts are available
to make such prepayments; and
(v) to the Pan-Western Equity Distribution Fund, any remainder.
The Pan-Sino Fund and Flow of Funds
In accordance with the terms and conditions in the Exchange Notes
Indenture, the Exchange Notes Trustee will establish and maintain the Pan-Sino
Fund (the "Pan-Sino Fund"). Pan-Sino will have limited rights of withdrawal
under the Pan-Sino Fund in accordance with terms and conditions set forth in
the Exchange Notes Indenture.
The Pan-Sino Fund. All distributions to Pan-Sino from Pan-Western will be
deposited in the Pan-Sino Fund. Amounts deposited in the Pan-Sino Fund shall be
allocated among sub-funds of a NDR distribution account (the "NDR Distribution
Account") and an Issuer distribution account (the "Issuer Distribution
Account") in accordance with the equity interests of NDR and the Issuer in Pan-
Sino. Pursuant to an agreement among Pan-Sino, the Issuer and NDR (the "Pan-
Sino Shareholders' Agreement"), the shareholders of Pan-Sino have agreed (i) to
cause Pan-Sino to declare distributions immediately upon the availability of
funds for such purposes, (ii) that monies on deposit in the NDR Distribution
Account shall be deemed distributed by Pan-Sino to NDR and (iii) NDR shall
pledge all monies in the NDR Distribution Account to the Exchange Notes Trustee
until such time as the Exchange Notes Trustee shall release such funds in
accordance with the provisions described below.
Pan-Sino Flow of Funds. The Exchange Notes Trustee will, on each Monthly
Date after the Luannan Commercial Operation Date (or the next following
business day), transfer or segregate money, to the extent then available in the
Issuer Distribution Account and the NDR Distribution Account. Amounts on
deposit in the Issuer Distribution Account shall be transferred to the Issuer
Revenue Fund. Amounts on deposit in the NDR Distribution Account shall only be
released to NDR when and if (i) the Company is in compliance with the
requirements of the Limitation on Restricted Payments covenant of the
Indentures and (ii) the Luannan Commercial Operation Date has occurred.
Investment of Funds
The Exchange Notes Trustee or the Company Indenture Trustee, as the case
may be, shall invest, as directed by the Company or the Issuer, the monies on
deposit in the Company Funds, the Issuer Funds, the Pan-Western Funds and the
Pan-Sino Fund in Dollar Permitted Investments. The Exchange Notes Trustee and
the Company Indenture Trustee shall not be liable for any loss incurred other
than by reason of its respective willful misconduct or gross negligence. Any
income or gain realized from Dollar Permitted Investments with respect to
monies on deposit in any Company Fund, Pan-Sino Fund or Pan-Western Fund shall
be deposited, first, into the fund from which the monies invested came, until
the amount required to be held in such fund has been reached, and second, into
either the Company Revenue Fund (in the case of income earned on monies on
deposit in a Company Fund), the Issuer Revenue Fund (in the case of income
earned on monies on deposit in an Issuer Fund), or the Pan-Western Revenue Fund
(in the case of income earned on monies on deposit in a Pan-Western Fund).
During the Funding Period, any and all interest income earned on amounts on
deposits in the Issuer Funds shall be transferred to the Luannan Facility
Construction Fund. Losses on Dollar Permitted Investments shall be charged to
the applicable fund. Income or gain with respect to monies on deposit in the
Issuer Funds (other than the Luannan Facility Construction Fund which shall
remain in the Luannan Facility Construction Fund) shall be deposited into the
Issuer Revenue Fund.
Joint Venture China Accounts
The following seven accounts will be established within China for each
Joint Venture: (i) Registered Capital Account (denominated in U.S. dollars),
(ii) Foreign Debt Account (denominated in U.S. dollars), (iii) Foreign Debt
Repayment Account (denominated in U.S. dollars), (iv) Basic Settlement Account
(denominated in U.S. dollars), (v) RMB Revenue Account (denominated in
Renminbi), (vi) the Major Maintenance Reserve Account (denominated in Renminbi)
and (vii) RMB Checking Account (denominated in Renminbi) (the "Joint Venture
China Accounts"). During construction of the Luannan Facility, the Foreign Debt
Accounts and Registered Capital Accounts will receive funds from the Luannan
Facility Construction Fund. The funds will be registered with the SAFE as debt
under the Shareholder Loans or equity pursuant to the JV Company Equity
Contributions and will be used to pay the contractual obligations of the Joint
Ventures under the Luannan EPC Contract and to pay other Luannan Facility
financing, construction and development costs, including interest on the
Shareholder Loans during construction through the Capitalized Interest
Expiration Date. Payments to be denominated in U.S. dollars will be paid
directly from the Registered Capital Account or the Foreign Debt Account.
Expenditures to be denominated in Renminbi will be converted into Renminbi as
required and transferred to the RMB Checking Accounts for disbursement.
After the Luannan Commercial Operation Date, all revenues received by the
Joint Ventures from any source, including all proceeds from the sale of assets
of the Joint Ventures, shall be deposited in the RMB Revenue Accounts.
Transfers from a RMB Revenue Account will first be made to the RMB Checking
Account, for payment of the Joint Venture's operating expenses and taxes, if
any, and then, after conversion to U.S. dollars, to the Foreign Debt Repayment
Account in an amount equal to the next payment of interest and principal then
due under the Shareholder Loans and any additional reserves required pursuant
to the Shareholder Loan Agreements. Each Joint Venture will also pay to Pan-
Western from the Foreign Debt Repayment Account an administrative fee, for
which Pan-Western will invoice the Joint Ventures based on its costs.
Each Joint Venture will also establish a Major Maintenance Reserve
Account, denominated in Renminbi, and each Joint Venture has covenanted in the
applicable Shareholder Loan Agreement to deposit in its respective Major
Maintenance Reserve Account an amount determined by the Luannan Facility
Engineer to constitute the Major Maintenance Reserve Requirement for such Joint
Venture Facility for such month. The Major Maintenance Reserve Requirement for
each Joint Venture will be established periodically by the Luannan Facility
Engineer based on anticipated major maintenance requirements for the next five
years for each Joint Venture Facility. Funds may only be withdrawn from the
Major Maintenance Reserve Account by a Joint Venture to pay for the major
maintenance costs of its respective Joint Venture Facility upon a certification
of the Luannan Facility Engineer that after withdrawal of such funds for such
purpose, the amounts remaining in the Major Maintenance Reserve Account
(including anticipated future funding thereof) will be adequate to meet the
anticipated needs of the applicable Joint Venture Facility for major
maintenance for the next five years.
The remaining amounts will be retained in the RMB Revenue Account until
the Joint Ventures are able to pay a dividend to its shareholders which, under
PRC law, may only be made from net income as determined in accordance with PRC
generally accepted accounting principles. Pan-Western's share of any such
distribution will be transferred from the RMB Revenue Account (after conversion
to U.S. dollars) to the Basic Settlement Account, and then to the Pan-Western
Revenue Fund under the Exchange Notes Indenture. A pro rata amount will be
distributed from the RMB Revenue Accounts directly to the County Partners.
Certain Covenants
The Exchange Notes Indenture
Set forth below are certain covenants set forth in the Exchange Notes
Indenture.
Ranking. The Issuer will ensure that its obligations under each Existing
Note will at all times constitute general, direct, unsubordinated and
unconditional obligations of the Issuer ranking at all times at least pari
passu in priority of payment, in right of security and in all other respects
with the other Existing Notes and with all other unsubordinated Indebtedness of
the Issuer now or hereafter outstanding.
Use of Proceeds. The gross proceeds from the sale of the Old Notes were
used by the Issuer: (i) to make a deposit in the Capitalized Interest Fund in
the approximate amount of $48.1 million; (ii) to make a deposit in the Debt
Service Reserve Fund in the amount of $9.7 million; (iii) to pay transaction
fees, commissions and expenses incurred in connection with the Prior Offering,
estimated to be approximately $6.8 million, which amount includes fees and
expenses of the Initial Purchaser pursuant to the agreement between the Issuer
and the Initial Purchaser (the "Purchase Agreement"); and (iv) to make a
deposit in the Luannan Facility Construction Fund estimated to be in the amount
of $80.4 million. This amount has been used, and interest thereon and other
income expected to be received by the Issuer during construction will be used,
by the Issuer to make the Issuer Loan to Pan-Western. Pan-Western has used and
will use (in the case of interest and other income expected to be received
during construction) the proceeds of the Issuer Loan to make the JV Equity
Contributions and the Shareholder Loans to each of the four Joint Ventures. The
Joint Ventures will use the proceeds of the JV Equity Contributions and
Shareholder Loans, together with capital contributions from the County Partners
in the amount of $5.7 million, to develop and construct the Luannan Facility.
The Company Indenture
Set forth below are certain covenants set forth in the Company Indenture.
Ranking. The Company will ensure that its obligations under each Exchange
Notes Guarantee will at all times constitute general, direct, unsubordinated
and unconditional obligations of the Company ranking at all times at least pari
passu in priority of payment, in right of security and in all other respects
with the other Exchange Notes guarantees and with all other unsubordinated
Indebtedness of the Company now or hereafter outstanding.
The Indentures
Set forth below are certain covenants set forth in the Indentures.
Reporting. The Indentures provide that the Company and the Issuer will
furnish to the Trustees after the end of each fiscal year, a certificate of a
responsible officer of the Company, the Issuer, Pan-Western and Pan-Sino
stating that a review of the activities of the Company, the Issuer, Pan-Western
and Pan-Sino during the preceding fiscal year has been made under the
supervision of such responsible officer and further stating that, to the best
of such person's knowledge, the Company and the Issuer during the previous year
has kept, observed, performed and fulfilled each and every covenant and
condition contained in the Indentures, the Exchange Notes Guarantee and in the
Existing Notes and that such person has no reason to believe that any
Indentures Event of Default or any condition or event that with the giving of
notice or lapse of time or both would, unless cured or waived, become an
Indentures Event of Default, has occurred, or, if there has been a breach or
default in the fulfillment of any such obligation, specifying each such breach
or default known to such person and the remedies, if any, being taken to remedy
such situation and the Trustees will be fully protected in relying upon such
certificate.
Insurance. The Indentures provide that the Company shall maintain, and
shall cause each of its Subsidiaries to maintain, insurance of the types and in
the amounts that are customary and usual for a company in its respective line
of business. Prior to the Closing Date, the Company retained an Independent
Insurance Consultant, who certified to the Trustees that such insurance met the
standard of the preceding sentence. Thereafter, the Independent Insurance
Consultant shall annually review the insurance coverages of the Company and its
Subsidiaries and certify that such coverages remain customary and usual.
Limitation on Investments. The Indentures provide that the Company shall
not make and shall not permit any of its Subsidiaries to make, directly or
indirectly, any Investments, except: (i) Investments by the Company or any
Wholly Owned Subsidiary in or to any Wholly Owned Subsidiary and Investments or
loans in or to the Company or a Wholly Owned Subsidiary by any Subsidiary; (ii)
Investments represented by accounts receivable created or acquired in the
ordinary course of business; (iii) advances to employees in the ordinary course
of business; (iv) Investments under or pursuant to interest rate protection
agreements; (v) Investments, not exceeding $5.0 million in the aggregate, in
joint ventures, partnerships or Persons that are not Wholly Owned Subsidiaries,
provided that such Investments are made solely for the purpose of acquiring
businesses related to the Company's business; (vi) Restricted Payments
permitted by the covenant "Limitation on Restricted Payments"; (vii)
Investments in connection with any Permitted Project (including, without
limitation, Investments in Permitted Projects which are not Wholly Owned by the
Company or one of its Subsidiaries); (viii) any loan from a Subsidiary of the
Company to a Subsidiary of Panda International in an amount not in excess of
the amount of Restricted Payments which the Company would be permitted to make
at the time of such loan; and (ix) Dollar Permitted Investments.
Limitation on Restricted Payments. The Indentures provide that the
Company shall not make, and shall not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment, unless:
(a) no Indentures Event of Default shall have occurred and be
continuing at the time of or after giving effect to such
Restricted Payment;
(b) the Luannan Facility Engineer has certified that the Luannan
Facility Commercial Operation Date has occurred;
(c) the Debt Service Coverage Ratio of the Company for the
immediately preceding four fiscal quarters (or, if date of
determination is within the preceding four fiscal quarters
following the Luannan Commercial Operation Date, for such
shorter period) is greater than 1.4 to 1, as certified by the
Chief Financial Officer of the Company;
(d) the projected Debt Service Coverage Ratio of the Company for
the immediately succeeding four fiscal quarters is greater
than 1.4 to 1, as certified by the Chief Financial Officer of
the Company;
(e) the amount in the Debt Service Reserve Fund plus the amount in
the Notes Guarantee Service Reserve Fund equals or exceeds the
Debt Service Reserve Requirement; and
(f) immediately after giving effect to such Restricted Payment,
the aggregate of all Restricted Payments declared or made
after the date on which the Existing Notes are originally
issued does not exceed the sum of (1) 50% of the Company's
Consolidated Net Income (or in the event such Consolidated Net
Income shall be a deficit, minus 100% of such deficit if after
the 28th month following the Closing Date or 50% of such
deficit prior to such date) from the next fiscal quarter after
the Closing Date, plus (2) 100% of the aggregate Net Cash
Proceeds and the Fair Market Value of marketable securities
received by the Company from the issue or sale, after the date
on which the Existing Notes are originally issued, of Capital
Stock (other than Disqualified Stock) of the Company or any
Indebtedness or other securities of the Company convertible
into or exercisable for Capital Stock (other than Disqualified
Stock) of the Company which has been so converted or
exercised, as the case may be. For purposes of determining
under clause (2) above the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its
Fair Market Value.
The provisions of this covenant shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at such date
of declaration such payment would comply with the provisions of the Company
Indentures, (ii) the retirement of any shares of Capital Stock of the Company
in exchange for, or out of, the Net Cash Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of other shares of
Capital Stock of the Company (other than Disqualified Stock), (iii) the
redemption or retirement of Subordinated Indebtedness of the Issuer or the
Company in exchange for, by conversion into, or out of the Net Cash Proceeds
of, a substantially concurrent (x) sale or issuance of Capital Stock of the
Company or (y) incurrence of Subordinated Indebtedness of the Issuer that is
contractually subordinated in right of payment to the Existing Notes, that is
permitted to be incurred in accordance with the covenant described under
"Limitation on Indebtedness" below and that has the same or greater Weighted
Average Life to Maturity as the Indebtedness being redeemed or retired, (iv)
any payment made by the Company or a Subsidiary, directly or indirectly, to the
Issuer in order to enable the Issuer to pay principal, premium, if any, and
interest (including Liquidated Damages and Additional Amounts, if any) on the
Existing Notes, (v) any payment made by the Company or a Subsidiary, directly
or indirectly, to enable the issuer of any Permitted Indebtedness to pay
principal, premium, if any, and interest thereon, (vi) any dividend made by a
Subsidiary of the Company to its parent and (vii) payments made pursuant to the
Administrative Services Agreement and the Development Services Agreement. In
determining the amount of Restricted Payments permissible under clause (f)
above, amounts expended pursuant to clause (i) of this paragraph and loans
pursuant to clause (viii) of the covenant on "Limitation on Investments" shall
be included as Restricted Payments.
Limitation on Transactions with Affiliates. The Indentures provide that
the Company shall not, and shall not permit any Subsidiary, to conduct any
business or enter into any transaction or series of related transactions with
or for the benefit of any of their respective Affiliates (each an "Affiliate
Transaction"), except in good faith and on terms that are no less favorable to
the Company or such Subsidiary, as the case may be, than those that could have
been obtained in a comparable transaction on an arm's-length basis from a
Person not an Affiliate of the Company or such Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other market
value in excess of $500,000 shall be approved by the Board of Directors of the
Company, such approval to be evidenced by a Board Resolution stating that the
Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other market value in excess of $1.0 million, the Company or such Subsidiary,
as the case may be, shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be,
from a financial point of view, from an Independent Financial Advisor and file
the same with the Company Indenture Trustee. Notwithstanding the foregoing, the
restrictions set forth in this covenant shall not apply to (i) transactions
between the Company and any of its Wholly Owned Subsidiaries or among Wholly
Owned Subsidiaries of the Company, (ii) Restricted Payments permitted by the
Indentures, (iii) customary directors' fees, indemnification and similar
arrangements, consulting fees, employee salaries and bonuses or legal fees,
(iv) payments made pursuant to the Administrative Services Agreement or the
Development Services Agreement, (v) transactions between the Company or any of
its Wholly Owned Subsidiaries and a Permitted Project and (vi) any transaction
which would otherwise constitute an Affiliate Transaction but which has been
entered into prior to the Closing Date.
Limitation on Indebtedness. The Indentures provide that the Company and
its Subsidiaries will not create, incur, assume or suffer to exist any
Indebtedness, whether current or funded, or any other liability, except for (i)
Indebtedness evidenced by the Existing Notes, (ii) Indebtedness evidenced by
the Exchange Notes Guarantee, (iii) Permitted Indebtedness, (iv) Joint Venture
Permitted Indebtedness, (v) liabilities of the Company and the Issuer
representing fees, expenses and indemnities payable to the Trustees pursuant to
the Indentures, (vi) Domestic Project Permitted Indebtedness and (vii)
liabilities of the Issuer representing fees, expenses and indemnities payable
in connection with the issuance of Existing Notes and the Exchange Notes
Guarantee including, without limitation, such amounts payable to the Initial
Purchaser under the Purchase Agreement.
"Permitted Indebtedness" means:
(i) any and all Indebtedness of the Company and its Subsidiaries
outstanding as of the Closing Date;
(ii) Indebtedness of the Company which is owed to and held by a Wholly
Owned Subsidiary and Indebtedness of a Wholly Owned Subsidiary
which is owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly
Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
transfer of such Indebtedness (other than to the Company or a
Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by the Company or
by a Wholly Owned Subsidiary, as the case may be;
(iii) Non-Recourse Debt of a Subsidiary or group of Subsidiaries, the
proceeds of which are used to acquire, develop or construct a
Permitted Project by such Subsidiary or group of Subsidiaries;
(iv) Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
or refund, Indebtedness that was permitted by the Indentures to
be incurred or was outstanding as of the Closing Date;
(v) any additional Indebtedness incurred by the Company or its
Subsidiaries provided that the Chief Financial Officer of the
Company certifies at the time of incurrence of such Indebtedness
that the following conditions have been met:
(a) no Indentures Event of Default will occur and be continuing
after giving effect to the incurrence of such additional
Indebtedness;
(b) the minimum (or lowest) annual projected Debt Service
Coverage Ratio of the Company for the remaining term of the
Exchange Notes will not be less than 1.4 to 1;
(c) the minimum (or lowest) annual projected Consolidated Debt
Service Coverage Ratio of the Company for the remaining term
of the Exchange Notes will not be less than 1.15 to 1;
(d) the Rating Agencies shall have confirmed that there will be
no rating downgrade with respect to the Exchange Notes after
giving effect to the incurrence of such additional
Indebtedness;
(e) the Debt Service Coverage Ratio of the Company shall be, for
the immediately preceding four fiscal quarters, greater than
1.4 to 1;
(f) the amount in the Debt Service Reserve Fund plus the amount
in the Note Guarantee Service Reserve Fund equals or exceeds
the Debt Service Reserve Requirement;
(vi) any additional Indebtedness issued pursuant to one or more PFC
Indenture supplements, provided that, at the time of the creation
of such Indebtedness (other than the initial Series A Bonds and
any series of bonds issued solely in exchange for an equivalent
aggregate principal amount of outstanding bonds of another
series) the following conditions have been met:
(a) PIC provides an officer's certificate at the time of
incurrence of such Indebtedness to the Company Indenture
Trustee (supported by a certificate to the Company Indenture
Trustee from the Consolidating Financial Analyst) stating
that, after giving effect to the issuance of such
Indebtedness and the application of the proceeds therefrom,
the projected PIC Debt Service Coverage Ratio and the
projected PIC 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 PIC Future Ratio
Determination Period; and
(b) the rating of the outstanding Indebtedness in effect
immediately prior to the issuance of such additional
Indebtedness is reaffirmed by the Rating Agencies after
giving effect to the issuance of such additional
Indebtedness, provided, further, that a reaffirmation of the
rating of the outstanding Indebtedness shall not be required
if (1) neither PIC nor any or Subsidiary of the Company has
acquired (or is acquiring in connection with the issuance of
such additional Indebtedness), sold or otherwise disposed
of, since the last date upon which the Indebtedness 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 Permitted 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)
$50.0 million and (z) 25% of the aggregate principal amount
of the Indebtedness then outstanding and (2) the aggregate
principal amount of additional Indebtedness to be issued is
less than the lesser of (x) $50.0 million and (y) 25% of the
aggregate principal amount of the Indebtedness then
outstanding; and
(vii) in addition to the Indebtedness referred to in clauses (i)
through (vi), any other Indebtedness of the Company and its
Subsidiaries that, in the aggregate, does not exceed $10.0
million.
Limitation on Liens. The Indentures will provide that the Company shall
not, and shall not permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Lien of any kind upon any of its property or assets now
owned or hereafter acquired by it, except for:
(a) Liens existing as of the Closing Date and disclosed in the
Collateral Documents on the Closing Date and Liens created
by the Existing Notes, the Exchange Notes Indenture, the
Exchange Notes Guarantee, the Company Indenture and the
Collateral Documents;
(b) Permitted Liens on property and assets not constituting
Collateral;
(c) Liens to secure the payment of all or a part of the purchase
price of assets or property acquired or constructed in the
ordinary course of business after the date on which the
Existing Notes are originally issued, provided that (i) the
aggregate principal amount of Indebtedness secured by such
Liens shall not exceed the Fair Market Value of the assets
or property so acquired or constructed, shall be limited to
the asset or property at issue and shall not, in any event,
exceed $2.5 million, (ii) the Indebtedness secured by such
Liens shall have otherwise been permitted to be incurred
under the Indentures and (iii) such Liens shall not encumber
any other assets or property of the Company or any of its
Subsidiaries and shall attach to such assets or property
within 60 days of the construction or acquisition of such
assets or property;
(d) Liens on the assets or property of a Subsidiary of the
Company at the time such Subsidiary became a Subsidiary of
the Company and not incurred as a result of (or in
connection with or in anticipation of) such Subsidiary
becoming a Subsidiary of the Company, provided such Liens do
not extend to or cover any property or assets of the Company
or any of its Subsidiaries (other than the property or
assets so acquired);
(e) leases and subleases of real property of (i) any Material
Subsidiary (which leases and subleases are Non-Recourse Debt
other than to the Material Subsidiary which leases and uses
such asset), which do not interfere with the ordinary
conduct of the business of the Company or any of its
Material Subsidiaries, and which are made on customary and
usual terms applicable to similar properties or (ii) any
Subsidiary (which leases and subleases are Non-Recourse Debt
other than to the Subsidiary which leases and uses such
asset) that is not a Material Subsidiary;
(f) Liens incurred by a Subsidiary or group of Subsidiaries on
its or their assets to secure Non-Recourse Debt incurred in
conformity with the covenant "Limitation on Indebtedness",
provided that the Lien is created, provided for or
contemplated at the time of the initial incurrence of such
Indebtedness and does not extend to any assets or property
of the Company or any other Subsidiary (other than assets or
property directly related to the development, construction,
financing, ownership or operation by a Subsidiary or group
of Subsidiaries of a Permitted Project);
(g) Liens, not existing as of the Closing Date, but required or
permitted to be created at a later date pursuant to the
terms of the PFC Indenture, the Rosemary Indenture or the
Brandywine Facility Lease; and
(h) in addition to Liens permitted under clauses (a)-(g) above,
Liens securing an aggregate of $5.0 million of Indebtedness
or other obligations.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Indentures provide that the Company shall not, and shall not
permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or enter into any agreement with any Person
that would cause, any consensual encumbrance or restriction of any kind on the
ability of any Subsidiary of the Company to (i) pay dividends, in cash or
otherwise, or make any other distributions on its Capital Stock or any other
interest or participation in, or measured by, its profits owned by, or pay any
Indebtedness owed to, the Company or a Subsidiary of the Company, (ii) make any
loans or advances to the Company or any Subsidiary of the Company or (iii)
transfer any of its properties or assets to the Company or to any Subsidiary of
the Company, except, in each case, for such encumbrances or restrictions
existing under or contemplated by or by reason of (a) restrictions imposed by
applicable law, (b) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of the Company or any Subsidiary thereof,
(c) the Existing Notes, the Exchange Notes Guarantee, the Indentures and the
Collateral Documents, (d) any restrictions existing under agreements in effect
on the Closing Date, including, without limitation, restrictions under the PFC
Indenture, the Rosemary Indenture and the Brandywine Facility Lease, as such
are in effect on the Closing Date, (e) any restrictions, with respect to a
Subsidiary of the Company (and only to such Subsidiary) that is not a
Subsidiary of the Company on the Closing Date, in existence at the time such
Person becomes a Subsidiary of the Company (but not created in contemplation of
such Person becoming a Subsidiary), (f) any encumbrance imposed pursuant to the
terms of Non-Recourse Debt incurred in conformity with the covenant "Limitation
on Indebtedness" provided that such encumbrance in the written opinion of the
Chief Financial Officer of the Company (1) is required in order to obtain such
financing, (2) is customary for such financings and (3) applies only to the
assets of or revenues of the applicable Permitted Project and any Subsidiary
whose Capital Stock is pledged in connection with such financing or which is
established for the sole purpose of developing, owning, constructing, financing
or operating such Permitted Project and (g) any restrictions existing under any
agreement that refinances or replaces an agreement containing a restriction
permitted by clause (a) through (f), above; provided that the terms and
conditions of any such restrictions are not materially less favorable to the
Holders of the Existing Notes than those under or pursuant to the agreement
being replaced or the agreement evidencing the Indebtedness refinanced. Nothing
contained in this covenant shall prevent the Company or any of its Subsidiaries
from entering into any encumbrance permitted under the covenant described under
"Limitation on Liens" above or restricting the sale or other disposition of
assets or property securing Indebtedness evidenced by such agreement so long as
the Company complies with the covenant described under "Disposition of Proceeds
of Asset Sales" below.
Capital Expenditures. The Indentures provide that the Company will not
make, or permit any Subsidiary to make, any expenditure (by long-term or
operating lease or otherwise) for capital assets (both realty and personalty)
except for expenditures (i) contemplated by the Indentures (including, without
limitation, expenditures with respect to the Luannan Facility), (ii) required
or permitted by the PFC Indenture, the Rosemary Indenture or the Brandywine
Facility Lease, or (iii) subject to compliance with the provisions of
"Limitation on Investments," "Limitation on Indebtedness" and "Limitation on
Restricted Payments," expenditures in connection with the development,
construction or ownership of a Permitted Project.
Permitted Projects. The Indentures provide that to the extent that a
project fulfills the requirements of the PIC Additional Projects Contract, the
Company and its Subsidiaries may develop, construct, own, operate and finance
such project pursuant to the requirements of the PFC Indenture subject to
compliance with the terms of the Indentures. To the extent that a project does
not fulfill the requirements of the PIC Additional Projects Contract, the
Company and its Subsidiaries agree that such project may only be developed,
constructed, financed, owned and operated by the Company or one of its
Subsidiaries pursuant to the requirements of the Indentures and the Company
shall (i) maintain 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 (1) pursuant to the terms of a build-operate-
transfer arrangement at least ten years after the entering into of such
arrangement or (2) allowed pursuant to the other terms of the Indentures).
Limitation of Line of Business. The Indentures provide that the Company
shall not and shall not permit any Subsidiary to engage in any business,
enterprise or activity or enter into any material transaction other than the
development, construction, financing, ownership or operation of power
generating facilities and any and all activities related thereto.
Amendment of Articles of Association. The Indentures provide that the
Company shall not and shall not permit any Subsidiary to amend its respective
articles of association in any manner that is reasonably likely to have a
Material Adverse Effect.
Amendment of Project Documents. The Indentures provide that the Company
shall not and shall not permit any Subsidiary to amend or terminate any Project
Document if such amendment or termination is reasonably likely to have a
Material Adverse Effect.
Protection of Collateral by Company and its Subsidiaries. The Indentures
provide that the Company and its Subsidiaries will, from time to time, take all
action necessary or advisable (including, without limitation, executing and
delivering all such supplements and amendments, financing statements,
continuation statements, instruments of further assurance and other
instruments), to preserve and defend its title to the Collateral against the
claims of all persons and parties.
Performance of Obligations by Company, Subsidiaries and Trustees. The
Indentures provide that the Company and its Subsidiaries will, respectively,
punctually perform and observe all of its respective obligations and agreements
contained in the Collateral Documents, and will, in accordance with the
Indentures, the Issuer Loan Agreement and the Shareholder Loan Agreements,
diligently pursue its respective rights and remedies and cooperate with the
Trustees and the Noteholders in pursuing the same to the extent such rights
have been assigned by such Person to the Trustees, in each case for the benefit
of the Noteholders.
Taxes. The Indentures provide that the Company will cause the Issuer to
promptly pay when due any present or future stamp, court or documentary taxes
or any other excise or property taxes, charges or similar levies that arise in
any jurisdiction from the execution, delivery or registration of each Existing
Note or any other document or instrument referred to in the Indentures,
excluding (i) taxes imposed on or measured by the net income or capital of any
Noteholder by any jurisdiction or any political subdivision or taxing authority
thereof and (ii) any such taxes, charges or similar levies imposed by any
jurisdiction outside of the United States except those resulting from, or
required to be paid in connection with, the enforcement of such Existing Note
or any other such document or instrument following the occurrence of any
Indentures Event of Default.
The Company will, and will cause each of its Subsidiaries to, pay prior to
delinquency, all material taxes, assessments, and governmental levies except
such as are being contested in good faith and by appropriate proceedings or
where the failure to effect such payment will not have a Material Adverse
Effect.
Financial Statements. The Indentures provide that so long as any Existing
Notes are outstanding, the Company will furnish to the Trustees (i) unaudited
quarterly reports containing consolidated financial statements of the Company
and its Subsidiaries for each of the first three quarters of its fiscal year
and (ii) audited annual reports containing consolidated financial statements of
the Company and its Subsidiaries. Whether or not required by the Exchange Act
or the rules and regulations of the Commission thereunder, so long as any
Existing Notes are outstanding, the Company will furnish to the Holders of the
Existing Notes all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q, 10-K
and 8-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's independent public accountants. In addition, whether or not
required by the Exchange Act or the rules and regulations of the Commission
thereunder, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to investors who
request it in writing. In addition, the Company will agree, that, for so long
as any Existing Notes remain outstanding, the Company and the Issuer will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
Sale and Leaseback Transactions. The Indentures provide that the Company
will not, and will not permit any of its Subsidiaries to, enter into any sale
and leaseback transaction; provided that the Company or any Subsidiary may
enter into a sale and leaseback transaction if (i) the Company or such
Subsidiary could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the covenant "Limitation on Indebtedness" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant "Limitation on Liens," (ii) the Net
Cash Proceeds of such sale and leaseback transaction are at least equal to the
Fair Market Value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Company Indenture
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the proceeds of such transaction are applied
in compliance with, the covenant "Disposition of Proceeds of Asset Sales."
Delivery of Information and Reports under the Shareholder Loan Agreements.
The Indentures provide that the Issuer will deliver to the Exchange Notes
Trustee, at the expense of the Issuer, promptly upon receipt thereof, all
financial statements, reports, notices and certificates of the Joint Ventures.
Disposition of Proceeds of Asset Sales. The Indentures provide that the
Company shall not, and shall not permit any of its Subsidiaries to, make any
Asset Sale unless (i) such Asset Sale is for Fair Market Value and (ii) the
proceeds therefrom consist of at least 85% cash and/or Cash Equivalents (100%
in the case of lease payments). Within 365 days after the receipt of any Net
Cash Proceeds from an Asset Sale, the Company, or its Subsidiary, as the case
may be, may apply such Net Cash Proceeds to an Investment, the making of a
capital expenditure or the acquisition of other tangible assets. Any Net Cash
Proceeds from Asset Sales that are not applied or invested as provided in the
preceding sentence of this paragraph will be deemed to constitute Excess
Proceeds and the Company, or its Subsidiary, as the case may be, will be
required to make an Asset Sale Redemption Offer.
Merger, Consolidation, or Sale of Assets. The Indentures provide that the
Company and the Issuer shall not, in a single transaction or series of related
transactions, consolidate or merge with or into (whether or not the Company or
the Issuer is the surviving corporation), or directly and/or indirectly through
its Subsidiaries sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the Company's or the Issuer's properties or assets
determined on a consolidated basis for the Company and its Subsidiaries taken
as a whole in one or more related transactions, to another corporation, Person
or entity unless (i) the Company or the Issuer is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation or
merger (if other than the Company or the Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company or the Issuer) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition will have been
made assumes all the obligations of the Company or the Issuer, under the
Existing Notes, the Exchange Notes Guarantee and the Indentures pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustees; (iii)
immediately after such transaction no Indentures Event of Default exists; (iv)
the Company or the Issuer or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company or the Issuer), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness; and (v) the
Company delivers to the Trustees an Officers' Certificate and an Opinion of
Counsel addressed to the Trustees with respect to the foregoing matters;
provided, however, that the requirement set forth in clause (iv) above shall
not apply to a merger between the Company or the Issuer and any Wholly Owned
Subsidiary or to any merger between Wholly Owned Subsidiaries.
Indentures Events of Default
The following events constitute Indentures Events of Default:
(i) failure by the Issuer to pay the principal and premium, if any,
on any Existing Note when the same becomes due and payable,
whether by scheduled maturity or required prepayment or by
acceleration or otherwise;
(ii) failure by the Issuer to pay the interest (including Liquidated
Damages and Additional Amounts, if any) on any Existing Note when
the same becomes due and payable, whether by scheduled maturity
or required prepayment or by acceleration or otherwise, for 15 or
more days;
(iii) non-payment of any interest on, or any principal of, the Issuer
Loan by Pan-Western when the same becomes due and payable,
whether by scheduled maturity or required prepayment or by
acceleration or otherwise, for 30 or more days;
(iv) failure by the Company to pay any amount it is obligated to pay
to the Noteholders pursuant to the terms of the Exchange Notes
Guarantee, when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by acceleration or
otherwise;
(v) any representation or warranty made by the Company or any of its
Subsidiaries in, respectively, the Indentures, the Issuer Loan
Agreement or the Shareholder Loan Agreements or any
representation, warranty or statement in any certificate,
financial statement or other document furnished to the Trustees
by or on behalf of the Company or any of its Subsidiaries under
the Indentures, 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 or is reasonably likely to have a Material
Adverse Effect and the fact, event or circumstance shall continue
to be uncured for 30 or more days after the Company or any of its
Subsidiaries acquires notice of such inaccuracy; provided that if
the Company or any such Subsidiary commences efforts to cure such
fact, event or circumstance within such 30-day period, the
Company or any such Subsidiary may continue to effect such cure
of such fact, event or circumstance and such misrepresentation
shall not be deemed an Indentures Event of Default for an
additional 60 days so long as the Company or such Subsidiary, as
the case may be, is diligently pursuing such cure;
(vi) failure by the Company or any of its Material Subsidiaries to
perform or observe its covenants contained in the Indentures
relating to maintenance of existence, prohibition on fundamental
changes, disposition of assets, limitations on Indebtedness,
limitations on Liens or distributions;
(vii) failure by the Company or any of its Material Subsidiaries to
perform or observe any of the other covenants contained in the
Indentures or in the Collateral Documents (other than failures
described in paragraph (v) above) and such failure shall continue
uncured for 30 or more days (including, without limitation,
covenants with respect to insurance and amendments to Luannan
Project Documents or nature of business); provided that if the
Company or such Material Subsidiary commences efforts to cure
such default within such 30-day period, the Company or such
Material Subsidiary may continue to effect such cure of the
default and such default shall not be deemed an Indentures Event
of Default for an additional 60 days so long as the Company or
such Subsidiary is diligently pursuing the cure;
(viii)occurrence of certain events involving the bankruptcy,
insolvency, receivership or reorganization of the Company or any
of its Material Subsidiaries;
(ix) the entry of one or more final and non-appealable judgment or
judgments for the payment of money in excess of $1.0 million
(exclusive of judgment amounts fully covered by insurance or
indemnity) against the Company or any of its Material
Subsidiaries, which remains unpaid or unstayed for a period of 90
or more consecutive days;
(x) any Project Document (except as otherwise permitted under the
Indentures) shall terminate or cease to be valid and binding and
in full force and effect, or any third party thereto denies that
it has any liability or obligation under any such Project
Document and such third party ceases performance thereunder, or
any third party is in default under such Project Document
(subject to any applicable grace period), and in each case such
cessation or default has had or is reasonably likely to have a
Material Adverse Effect;
(xi) any Luannan Financing Agreement shall terminate or cease to be
valid and binding and in full force and effect;
(xii) with respect to a Domestic Project, or to the extent applicable,
any Permitted Project, the loss of QF Status, to the extent that
such loss of QF Status has had or is reasonably likely to have a
Material Adverse Effect;
(xiii)failure of any Joint Venture to perform or observe any of its
material covenants or obligations contained in any of the Luannan
Project Documents if such failure has had or is reasonably likely
to have a Material Adverse Effect;
(xiv) the occurrence of any event resulting in the payment of Domestic
Project Event Proceeds or Permitted Project Event Proceeds that
will result, in the opinion of the Consolidating Financial
Analyst, in the Company's failure to meet the following Debt
Service Coverage Ratios (after the application of such amounts as
are required to be applied pursuant to any and all mandatory
redemption or repayment obligations): (1) the minimum (or lowest)
annual projected Company Debt Service Coverage Ratio for the
remaining term of the Existing Notes will not be less than 1.4 to
1 and (2) the minimum (or lowest) annual projected Consolidated
Debt Service Coverage Ratio for the remaining term of the
Existing Notes will not be less than 1.15 to 1;
(xv) the Luannan Facility Construction Schedule Certificate shall at
any time contain a conclusion that the Luannan Facility is not
being constructed in accordance with the Approved Construction
Budget and Schedule or, if applicable, an Approved Completion
Plan;
(xvi) any of the Collateral Documents ceases to be effective or any
lien granted therein ceases to be a perfected lien to the
Trustees on the collateral described therein with the priority
purported to be created thereby; provided that the Company or the
Issuer, as the case may be, shall have 15 days to cure such
cessation or to furnish to the Trustees all documents or
instruments required to cure such cessation; or
(xvii)any default under the Issuer Loan Agreement and the Shareholder
Loan Agreements that has had or is reasonably likely to have a
Material Adverse Effect and any default under the PFC Indenture,
the Rosemary Indenture, the Brandywine Facility Lease and any
other default under any other agreement or instrument containing
Indebtedness of at least $2.5 million of a Domestic Project or a
Permitted Project, to the extent that any of the preceding
defaults is not waived.
The Indentures provide that upon the occurrence of an Indentures Event of
Default as specified in paragraph (viii) above, all interest, principal and
premium, if any (including Liquidated Damages and Additional Amounts, if any),
on the outstanding Existing Notes and Exchange Notes Guarantee shall become
automatically due and payable. In the case of other Indentures Events of
Default, each of the Trustees shall declare all interest, principal and
premium, if any (including Liquidated Damages and Additional Amounts, if any),
on the outstanding Existing Notes to be immediately due and payable if Holders
of at least 25% in aggregate principal amount of the Existing Notes then
outstanding have notified the Issuer and the Exchange Notes Trustee in writing
of the occurrence of an Indentures Event of Default.
Defeasance
The Company and the Issuer may at any time terminate all of their
obligations with respect to the Existing Notes ("defeasance"), except for
certain obligations, including those regarding any trust established for a
defeasance and obligations to register the transfer or exchange of the Existing
Notes, to replace mutilated, destroyed, lost or stolen Existing Notes and to
maintain agencies in respect of Existing Notes. The Company and the Issuer may
at any time terminate their obligations under certain covenants set forth in
the Indentures, some of which are described under "--Certain Covenants" above,
and any omission to comply with such obligations shall not constitute an
Indentures Event of Default with respect to the Existing Notes issued under the
Indentures ("covenant defeasance"). In order to exercise either defeasance or
covenant defeasance, the Issuer must irrevocably deposit in trust, for the
benefit of the Holders of the Existing Notes, with the Exchange Notes Trustee
money or U.S. government obligations, or a combination thereof, in such amounts
as will be sufficient to pay the principal, premium, if any, and interest
(including Liquidated Damages and Additional Amounts, if any) on the Existing
Notes to redemption or maturity and comply with certain other conditions,
including the delivery of an opinion as to certain tax matters.
Satisfaction and Discharge
The Indentures will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of
Existing Notes) as to all outstanding Existing Notes when either (a) all such
Existing Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Existing Notes which have been replaced or paid and Existing Notes
for whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust) have been delivered to the Exchange Notes Trustee
for cancellation; or (b)(i) all such Existing Notes not theretofore delivered
to the Exchange Notes Trustee for cancellation have or will (upon the mailing
of a notice or notices deposited with such trustees together with irrevocable
instructions to mail such notice or notices to Holders of the Existing Notes)
become due and payable and the Issuer has irrevocably deposited or caused to be
deposited with the Exchange Notes Trustee as trust funds in the trust for the
purpose an amount of money sufficient to pay and discharge the entire
indebtedness on the Existing Notes not theretofore delivered to the such
trustees for cancellation, for principal, premium, if any, and accrued interest
(including Liquidated Damages and Additional Amounts, if any) to the date of
such deposit; (ii) the Company and the Issuer have paid all sums payable by
them under the Indentures; and (iii) the Issuer has delivered irrevocable
instructions to the Exchange Notes Trustee to apply the deposited money toward
the payment of the Existing Notes at maturity or the redemption date, as the
case may be. In addition, the Issuer must deliver an Officers' Certificate and
an Opinion of Counsel stating that all conditions precedent to satisfaction and
discharge have been complied with.
Withholding Taxes
All payments made by the Issuer on the Existing Notes (whether or not in
the form of definitive Existing Notes) or payments made by the Company with
respect to the Exchange Notes Guarantee will be made without withholding or
deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the Cayman Islands, the United States or
any political subdivision thereof or any authority having power to tax therein
(each a "Tax Authority"), unless the withholding or deduction of such Taxes is
then required by law. If any deduction or withholding for, or on account of,
any Taxes of any Tax Authority, shall at any time be required on any payments
for, or on account of, any payments made by the Issuer with respect to the
Existing Notes, including payments of principal, redemption price, interest or
premium, or payments made by the Company with respect to the Exchange Notes
Guarantee, the Issuer or the Company, as the case may be, will pay such
additional amounts (the "Additional Amounts") as may be necessary in order that
the net amounts received in respect of such payments by the Holders of the
Existing Notes or the Trustees, as the case may be, after such withholding or
deduction, equal the respective amounts which would have been received in
respect of such payments in the absence of such withholding or deduction;
except that no such Additional Amounts will be payable with respect to:
(i) any payments on an Existing Note held by or on behalf of a Holder
or beneficial owner who is liable for such Taxes in respect of
such Existing Note by reason of the Holder or beneficial owner
having some connection with the Cayman Islands or the United
States (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment
in, or being physically present in, the Cayman Islands or the
United States) other than by the mere holding of such Existing
Note or enforcement of rights thereunder or the receipt of
payments in respect thereof;
(ii) any Taxes that are imposed or withheld where such withholding or
imposition is by reason of the failure of the Holder or
beneficial owner to comply with a request by the Issuer or the
Company, as the case may be, to satisfy any certification,
identification or other reporting requirement which the Holder or
beneficial owner is legally able to satisfy and which is required
or imposed by statute, treaty, regulation, or administrative
practices of the taxing jurisdiction as a precondition to
exemption from all or part of such Taxes; or
(iii) any Existing Note presented for payment (where presentation is
required) more than 30 days after the relevant payment is first
made available for payment to the Holder except to the extent
that the Holder would have been entitled to such Additional
Amounts on presenting such Existing Note for payment on the last
day of such period of 30 days.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Existing Note been the Holder of the Existing Note,
he would not have been entitled to payment of Additional Amounts by reason of
clauses (i) to (iii) inclusive above.
Upon request, the Issuer or the Company, as the case may be, will
provide the Trustees with documentation satisfactory to the Trustees
evidencing the payment of Additional Amounts. Copies of such documentation
will be made available to the Holders upon request.
The Issuer will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
Existing Notes or any other document or instrument referred to therein, or
the receipt of any payments with respect to the Existing Notes, excluding any
such taxes, charges or similar levies imposed by any jurisdiction outside of
the Cayman Islands, the United States of America or any jurisdiction in which
a Paying Agent is located, other than those resulting from, or required to be
paid in connection with, the enforcement of the Existing Notes or any other
such document or instrument following the occurrence of any Indentures Event
of Default with respect to the Existing Notes.
Amendments, Supplements and Waivers
Supplemental Indentures Without Consent. The Company, the Issuer and the
Trustees may from time to time and at any time enter into an indenture or
indentures supplemental to the Indentures for one or more of the following
purposes:
(i) to convey, transfer, assign, mortgage or pledge to the
Trustees as security for the Existing Notes or the Exchange
Notes Guarantee for any property or assets;
(ii) to evidence the succession of another corporation to the
Company or the Issuer, or successive successions, and the
assumption by the successor corporation of the covenants,
agreements and obligations of the Company and the Issuer
pursuant to the Indentures;
(iii) to add to the covenants of the Company and the Issuer such
further covenants, restrictions, conditions or provisions as
the Company or the Issuer may, in the written opinion of
independent legal counsel, consider to be for the protection
of the Noteholders, and to make the occurrence, or the
occurrence and continuance, of a default in any such
additional covenant, restriction, condition or provision an
Indentures Event of Default permitting the enforcement of all
or any of the several remedies provided in the Indentures, the
Existing Notes or in the Exchange Notes Guarantee as herein
set forth; provided, that in respect of any such additional
covenant, restriction, condition or provision such
supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such an Indentures
Event of Default or may limit the remedies available to the
Trustees upon such an Indentures Event of Default or may limit
the right of the Noteholders of a majority in aggregate
principal amount of the Existing Notes at the time outstanding
to waive such an Indentures Event of Default;
(iv) to cure any ambiguity or to cure, correct or supplement any
provision contained in the Indentures, the Exchange Notes
Guarantee or in the Existing Notes or in any supplemental
indenture that may be defective or inconsistent with any other
provision contained in the Indentures, the Exchange Notes
Guarantee or in the Existing Notes or in any supplemental
indenture; or to make such other provisions in regard to
matters or questions arising under the Indentures, the
Exchange Notes Guarantee, the Existing Notes or under any
supplemental indenture as the Company or the Issuer may, in
its written opinion, deem necessary or desirable and which,
any of the foregoing cases, shall not adversely affect the
interests of the Holders of Existing Notes and Exchange Notes
Guarantee in any material respect; and
(v) to evidence and provide for the acceptance of appointment of a
successor Trustee or Trustees with respect to the Existing
Notes or the Exchange Notes Guarantee.
The Trustees are authorized to join with the Company or the Issuer in the
execution of any such supplemental indenture or indentures, to make any further
appropriate agreements and stipulations that may be therein contained and to
accept the conveyance, transfer, assignment, mortgage or pledge of any property
thereunder, but the Trustees shall not be obligated to enter into any such
supplemental indenture that adversely affects the Trustees' own rights, duties
or immunities under the Indentures or otherwise.
Any supplemental indenture authorized by the provisions outlined above may
be executed without the consent of the Holders of any of the Existing Notes, or
the holders of the Exchange Notes Guarantee, as the case may be, at the time
outstanding.
Supplemental Indentures With Consent. With the consent of the Holders of
not less than 51% in the aggregate principal amount of each of the Existing
Notes or the holders of the Exchange Notes Guarantee, as the case may be, the
Company, the Issuer and the Trustees may from time to time and at any time,
enter into an indenture or indentures supplemental to the Indentures for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of, respectively, the Exchange Notes Indenture, the
Company Indenture or the Existing Notes, as the case may be, or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Existing Notes (including, without limitation, a supplemental indenture
changing the provisions of the Indentures with respect to Change of Control),
as the case may be; provided, that no such supplemental indenture will, without
the unanimous consent of the relevant Holders of all of the affected Existing
Notes or holders of the affected Exchange Notes Guarantee, as the case may be,
make certain "fundamental" changes to the terms, including: (i) modify certain
of the provisions of the Indentures or any Collateral Documents or the
provisions relating to the waiver of defaults or the making of modifications;
(ii) a change in the stated maturity of the principal (or, if the principal
thereof is payable in installments, the stated maturity of any such
installment) of or the dates on which interest is payable in respect of the
Existing Notes; (iii) a reduction in or cancellation of the principal amount of
or interest on the Existing Notes or a change in the obligation of the Issuer
to pay Liquidated Damages or Additional Amounts; (iv) a change in the currency
of payment of principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any) on the Existing Notes; (v) a reduction
in the above-stated percentage of aggregate principal amount of Existing Notes
necessary to modify or amend the Indentures or the Existing Notes or reduce the
quorum requirements or the percentages of votes required for the adoption of
any action at a meeting of Noteholders; (vi) any impairment of the right to
institute any proceedings for the enforcement of any payment on or with respect
to any Exchange Note; (vii) the release of all or any substantial portion of
the Collateral; (viii) except to the extent expressly permitted by the
Indentures or any of the Collateral Documents, permit the creation of any lien
prior to the lien of the Collateral Documents with respect to any of the
property pledged under the Collateral Documents or terminate the lien of the
Collateral Documents on any property pledged thereunder or deprive any Holder
of the security afforded by the lien of the Collateral Documents; or (ix) alter
or modify the Exchange Notes Guarantee.
Effect of Supplemental Indenture. Upon the execution of any supplemental
indenture pursuant to the provisions hereof, the Indentures, the Exchange Notes
Guarantee and the Existing Notes shall be and shall be deemed to be modified
and amended in accordance therewith and the respective rights, duties and
immunities under the Indentures of the Trustees, the Company, the Issuer and
the Holders of Existing Notes shall thereafter be determined, exercised and
enforced under the Indentures subject in all respects to such modifications and
amendments.
Regarding the Trustees
Bankers Trust Company will serve as the Exchange Notes Trustee under the
Exchange Notes Indenture and will act as collateral agent with respect to the
Exchange Notes Collateral.
Bankers Trust Company will serve as the Company Indenture Trustee under
the Company Indenture and will act as collateral agent with respect to the
Exchange Notes Guarantee Collateral.
Except during the continuance of an Indentures Event of Default, the
Trustees will perform only such duties as are specifically set forth in the
Indentures. During the existence of an Indentures Event of Default, the
Trustees are required to exercise such of the rights and powers vested in them
by the Indentures, 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. Subject to such provisions, the Trustees
will be under no obligation to exercise any of their rights or powers under the
Indentures at the request of any Holder of the Existing Notes or holder of the
Exchange Notes Guarantee, unless such Holder or holder shall have offered to
the Trustees security and indemnity satisfactory to them against any loss,
liability or expense.
The Company and its Subsidiaries may from time to time borrow money from,
and maintain deposit accounts and conduct certain banking transactions with,
the Trustees in the ordinary course of their business.
Old Notes Registration Rights
The holders of Old Notes have certain rights under the Registration Rights
Agreement, dated April 22, 1997, by and among the Issuer, the Company and the
Initial Purchaser, 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 the Issuer and the Company
(i) will file an Exchange Offer Registration Statement with the Commission on
or prior to 60 days after the Closing Date, (ii) will use their best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 150 days after the Closing Date, (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 on or prior to ten
business days after the date on which the Exchange Offer Registration Statement
is declared effective by the Commission, and use their best efforts to issue
Registered Exchange Notes in exchange for all Old Notes validly tendered and
not properly withdrawn in the Exchange Offer, and (iv) if obligated to file the
Shelf Registration Statement, the Issuer and the Company will file the Shelf
Registration Statement with the Commission on or prior to 60 days after such
filing obligation arises and use their respective best efforts to cause the
Shelf Registration Statement to be declared effective by the Commission on or
prior to 150 days after such obligation arises; provided that if the Issuer and
the Company have not consummated the Exchange Offer within 180 days of the
Closing 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 Closing
Date. The Issuer and the Company shall use their best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended
until the third anniversary of the Closing Date or such shorter period that
will terminate when all the Old Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement or are
eligible for sale pursuant to Rule 144(k) under the Securities Act. If (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, (b) any of such Registration Statements are not declared effective by
the Commission on or prior to the date specified above for such effectiveness
(the "Effectiveness Target Date"), (c) the Issuer and the Company fail to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter, subject to certain exceptions, ceases to
be effective for a period of five Business Days during periods when it is
required to be effective or (e) at any time when the Prospectus is required by
the Securities Act to be delivered in connection with sales of Old Notes, the
Issuer and the Company shall conclude, or the Holders of a majority in
principal amount of the affected Old Notes shall reasonably conclude, based on
advice of their counsel, and shall give notice to the Issuer and the Company,
that either (A) any event shall occur or fact exist as a result of which it is
necessary to amend or supplement the Prospectus in order that it will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading, or (B) it shall be necessary to
amend or supplement the Registration Statement or the Prospectus in order to
comply with the requirements of the Securities Act or the rules of the
Commission thereunder, and in the case of clause (A) or (B), the Registration
Statement is not appropriately amended by an effective post-effective
amendment, or the Prospectus is not amended or supplemented, in a manner
reasonably satisfactory to the Holders of Old Notes within five Business Days
after the Issuer and the Company shall so conclude or shall receive the above-
mentioned notice from Holders of Old Notes (each such event referred to in
clauses (a) through (e) above a "Registration Default"), then the Issuer (or
the Company pursuant to the Exchange Notes Guarantee) will pay liquidated
damages ("Liquidated Damages") to each Holder of Old Notes, with respect to the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $.05 per week per $1,000 principal amount of Old
Notes held by such Noteholder. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Old
Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50
per week per $1,000 principal amount of Old Notes. All accrued Liquidated
Damages will be paid by the Issuer and the Company to Global Note Noteholders
by wire transfer of immediately available funds or by federal funds check and
to Holders of Certificated Notes by mailing checks to their registered
addresses. Following the cure of all Registration Defaults applicable to any
particular Old Notes, the accrual of Liquidated Damages will cease. Any time
period for the taking of an action referred to in this paragraph will be tolled
for such period if the Issuer or the Company is prohibited by law from taking
the action in question during such period.
Noteholders will be required to make certain representations to the Issuer
and the Company (as described in the Exchange Offer Registration Statement) in
order to participate in the Exchange Offer and will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement, in order to have their Old
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth above.
The foregoing description of the Registration Rights Agreement is a
summary only and does not purport to be complete. This summary is qualified in
its entirety by reference to all provisions of the Registration Rights
Agreement.
A Noteholder who sells Old Notes pursuant to the Shelf Registration
Statement will generally be required to be named as a selling security holder
in the related prospectuses and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a Noteholder
(including certain indemnification obligations).
Certain Definitions
Set forth below is a summary of certain defined terms used in the
Indentures. Certain additional defined terms are contained in Appendix A,
"Defined Terms." Reference is made to the Indentures for the full definition of
all such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Affiliate" means with respect to any specified Person (other than the
County Partners which shall be deemed not to be an Affiliate), any other Person
which, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, (i) "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 "controlling", "controlled by" and "under common control with"
have meanings correlative to the foregoing or (ii) beneficial ownership of 10%
or more of the voting securities of a Person shall be deemed to be control;
provided, however, that an otherwise unaffiliated Person that holds a
beneficial ownership of 10% or more of a project level entity or entities in
which the Company or a Subsidiary holds a greater beneficial ownership interest
shall not be considered an Affiliate of the Company solely by reason of holding
such interest in such project level entity or entities.
"Approval Event of Default" means, pursuant to the Shareholder Loan
Agreements, any governmental approvals or permits (whether central, provincial,
municipal, local or otherwise) necessary for (a) the establishment of each of
the Joint Ventures, (b) the ownership, construction, maintenance, financing or
operation of each of the Joint Venture Facilities, (c) the setting or
adjustment of the electricity price for the Luannan Facility in accordance with
the method of calculation set forth in the attachments to the Pricing Document
or (d) the conversion or transfer of any foreign currency shall not be obtained
if and when required, or shall be modified, revoked or canceled, or a notice of
violations is issued under any governmental authorization on grounds of, or
illegality of, the absence of any required authorization, or any proceeding is
commenced by any governmental instrumentality for the purpose of modifying,
revoking or canceling any governmental authorization.
"Approved Completion Plan" means a plan (including budget and schedule)
prior to the Luannan Facility Commercial Operation Date to construct and
complete the Luannan Facility following a determination by the Luannan Facility
Engineer that the Luannan Facility will not achieve the Luannan Commercial
Operation Date within 28 months from the notice to proceed, using funds
available to the Issuer (from funds then remaining in the Luannan Facility
Construction Fund, the Completion Sub-Account, Luannan EPC Contract Liquidated
Damages (as defined in the Luannan EPC Contract), Luannan Event of Loss
Proceeds or Luannan Expropriation Proceeds or otherwise), which plan includes a
certificate by the Issuer (containing customary assumptions and qualifications)
together with a confirmation by the Luannan Facility Engineer (containing
customary assumptions and qualifications) that (i) funds available to the
Issuer are reasonably expected to be sufficient to fund the costs of reaching
the Luannan Commercial Operation Date and (ii) after reaching the Luannan
Commercial Operation Date, the Company's Debt Service Coverage Ratio will be,
for the immediately preceding four fiscal quarters, (1) prior to the six month
anniversary of the Luannan Commercial Operation Date, greater than 1 to 1, (2)
between the six month anniversary of the Luannan Commercial Operation Date and
the one year anniversary thereof, greater than 1.2 to 1 and (3) thereafter,
greater than 1.4 to 1.
"Approved Construction Budget and Schedule" means the construction budget
and schedule prepared by the Issuer (containing customary assumptions and
qualifications) approved as reasonable by the Luannan Facility Engineer prior
to the Closing Date, and as it thereafter may be amended by the Issuer if (i)
such amendment reflects a change order permitted under the Indentures or (ii)
such amendment reflects events of force majeure under the Luannan EPC Contract
(or Approved Completion Plan, if applicable), and the Issuer certifies (with
customary assumptions and qualifications), with the Luannan Facility Engineer's
concurrence, that such amendment is not reasonably likely to have a Material
Adverse Effect, or (iii) such amendment reflects change orders not covered in
the preceding clause (i); provided that the Luannan Facility Engineer certifies
(with customary assumptions and qualifications) that funds available to the
Issuer (from funds then remaining in the Luannan Facility Construction Fund,
the Completion Sub-Account, Luannan EPC Contract Liquidated Damages (as defined
in the Luannan EPC Contract), Luannan Event of Loss Proceeds or Luannan
Expropriation Proceeds or otherwise) are reasonably expected to be sufficient
to fund the costs of reaching the Luannan Commercial Operation Date.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease or other disposition to any Person other than the Company or a Wholly
Owned Subsidiary of the Company, in one transaction or a series of related
transactions, of any other property or asset (including, without limitation,
any contractual or other right) of the Company or any Subsidiary of the
Company, in each case, other than inventory in the ordinary course of business
(which shall include the sale of fuel, steam, energy and/or chilled and
distilled water) and other than such isolated transactions which do not exceed
$250,000 individually.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Capitalized Interest Expiration Date" means October 15, 1999.
"Capitalized Interest Fund" shall have the meaning set forth in
"Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer
Loan, the Shareholder Loans and the Collateral DocumentsThe FundsThe Issuer
FundsCapitalized Interest Funds."
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any property of which the discounted present value of the rental
obligations of such Person as lessee, in conformity with GAAP, is required to
be capitalized on the balance sheet of such Person, and "Capitalized Lease
Obligation" means the rental obligations, as aforesaid, under such lease.
"Cash Available for Company Debt Service" means, for any period, the sum
of (i) all cash distributions received by the Company (excluding any non-
recurring receipts) plus (ii) all cash distributions received by the Issuer
(excluding any non-recurring receipts) plus (iii) any and all other revenues
received by the Company and the Issuer (including all interest and fee income
but excluding any non-recurring receipts) plus (iv) all other cash payments
received by the Company and the Issuer in the ordinary course of business
including principal payments but excluding items which are non-recurring
receipts less (v) all cash operating costs of the Issuer and the Company
including trustee fees, Operating Lease Obligations and cash taxes, each of
(i), (ii), (iii), (iv) and (v) determined on a cash basis in accordance with
GAAP.
"Cash Available for Consolidated Debt Service" means, for any period, the
sum of (i) all consolidated revenue (including all interest and fee income but
excluding any insurance proceeds, other than business interruption proceeds,
and other similar non-recurring receipts) less (ii) all consolidated cash
operating expenses including trustee fees, Operating Lease Obligations of the
Company and its consolidated Subsidiaries and cash taxes (including withholding
taxes) plus (iii) all other cash proceeds received by the Company on a
consolidated basis in the normal course of business (excluding non-recurring
receipts but including principal on the Luannan Transmission Loan) plus
(iv) withdrawals of cash from any and all Subsidiary debt service reserves,
maintenance reserve funds and any and all other funds which restrict the
payment of money from a Subsidiary to its parent (excluding the PFC Debt
Service Reserve, the U.S. Distribution Fund, the International Distribution
Fund, and amounts distributable from the RMB Revenue Fund which were previously
not distributable) less (v) all additions of cash to any and all Subsidiary
debt service reserves, maintenance reserve funds and any and all other funds
which restrict the payment of money from a Subsidiary to its parent (excluding
the PFC Debt Service Reserve, the U.S. Distribution Fund, the International
Distribution Fund, and amounts which are not distributable from the RMB Revenue
Fund) less (vi) additional consolidated cash expenditures excluding payment of
Net Debt Service, each of (i), (ii), (iii), (iv), (v) and (vi) determined on a
cash basis in accordance with GAAP.
"Cash Available for Project Debt Service" means (i) the sum of all
revenues (including interest and fee income but excluding any insurance
proceeds, other than business interruption insurance proceeds, and other
similar non-recurring receipts) of such Domestic Project, Permitted Project or
Joint Venture for such period minus (ii) the aggregate amount of Operating and
Maintenance Costs of such Domestic Project, Permitted Project or Joint Venture
for such period plus (iii), in the case of the Luannan Facility, the principal
payments on the Luannan Transmission Loan for such period (each of (i), (ii)
and (iii) as determined on a cash basis in accordance with GAAP).
"Cash Equivalents" means, at any time (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System, whose rating is AA or higher
from Standard & Poor's Ratings Service or Aa2 or higher from Moody's Investors
Service, Inc., having combined capital and surplus and undivided profits of not
less than $500 million; (iii) commercial paper with a maturity of 180 days or
less issued by a corporation (except an Affiliate of the Company) organized
under the laws of any state of the United States or the District of Columbia
and having the highest rating obtainable from Standard & Poor's Ratings Service
or Moody's Investors Service, Inc.; and (iv) repurchase obligations for a term
of not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications
specified in clause (ii) above.
"Certificated Notes" shall have the meaning set forth in "Description, of
the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral DocumentsBook-Entry, Delivery and
FormDepository Procedures."
"Change of Control" means (i) the direct or indirect, sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company, Panda International, the Issuer or any direct or indirect parent of
the Company to any Person or entity or group of Persons or entities acting in
concert as a partnership or other group (a "Group of Persons") other than a
Related Party, (ii) the replacement of a majority of the Board of Directors of
the Company, Panda International, the Issuer or any direct or indirect parent
of the Company, over a two-year period, from the directors who constituted the
Board of Directors of such Person at the beginning of such period, and such
replacement shall not have been approved by the Board of Directors of such
Person as constituted at the beginning of such period or by the Board of
Directors of Panda International as constituted at the beginning of such
period, (iii) a Person or Group of Persons (other than Panda International or
any Related Party) shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company, Panda International, the Issuer or any direct or
indirect parent of the Company representing a percentage interest in the
combined voting power of the then outstanding securities of the Company, Panda
International, the Issuer or any direct or indirect parent of the Company
greater than that held by such entities' shareholders as of the Closing Date
and greater than 20% having the right to vote in the election of directors,
(iv) the Company, directly or indirectly ceases to hold (a) a 100% equity
interest in the Domestic Projects, (b) a 100% equity interest in the Issuer,
(c) a 90% equity interest in Pan-Sino or (d) the minimum required interest in a
Permitted Project, (v) Pan-Sino ceases to hold a 99% equity interest in Pan-
Western and (vi) Pan-Western ceases to hold a 85% equity interest in each of
the Joint Ventures.
"Company Indenture" means the trust indenture governing the terms of the
issuance of, from time to time, bonds, notes, indentures, guarantees and, as of
the Closing Date, the Exchange Notes Guarantee by the Company, dated as of the
Closing Date, between the Company and the Company Indenture Trustee.
"Company Indenture Trustee" means Bankers Trust Company in its capacity as
trustee under the Company Indenture, and any successor thereto under the terms
of the Company Indenture.
"Company Net Debt Service" means Net Debt Service of the Company plus Net
Debt Service of the Issuer.
"Consolidated Debt Service Coverage Ratio" means, as of the date of
determination, and, if the transaction giving rise to the need to calculate a
Consolidated Debt Service Coverage Ratio is an incurrence of Indebtedness or
the making of a Restricted Payment, calculated after giving effect on a pro
forma basis to such Indebtedness or Restricted Payment as if such Indebtedness
or Restricted Payment had been incurred or made as of the first day of such
period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, the ratio of
(i) Cash Available for Consolidated Debt Service divided by (ii) Consolidated
Net Debt Service; provided, however, with respect to the calculation of
projected Consolidated Debt Service Coverage Ratio, the remaining unpaid
balance of principal due on the Existing Notes at the Stated Maturity of the
Existing Notes ($131,250,000) shall be assumed to be repaid in semi-annual
repayments as per the following schedule:
Semi-annual Principal
Payment Date Amount Repaid
April 15, 2004 $ 6,000,000
October 15, 2004 $ 6,000,000
April 15, 2005 $ 7,250,000
October 15, 2005 $ 7,250,000
April 15, 2006 $ 5,350,000
October 15, 2006 $ 5,350,000
April 15, 2007 $ 4,600,000
October 15, 2007 $ 4,600,000
April 15, 2008 $ 7,450,000
October 15, 2008 $ 7,450,000
April 15, 2009 $ 7,250,000
October 15, 2009 $ 7,250,000
April 15, 2010 $ 5,650,000
October 15, 2010 $ 5,650,000
April 15, 2011 $ 5,350,000
October 15, 2011 $ 5,350,000
April 15, 2012 $16,750,000
October 15, 2012 $16,700,000;
provided further that the coupon rate on the Existing Notes repaid as per the
schedule above shall be the same coupon rate as that payable on the Closing
Date on the Existing Notes with interest expense due and payable on a semi-
annual basis. In the event that the remaining unpaid balance of principal due
on the Existing Notes at the Stated Maturity is less than $131,250,000, then
the amount of each semi-annual repayment shown above shall be deemed to equal
the amount of the semi-annual repayment shown above multiplied by a fraction
the numerator of which is the actual remaining unpaid balance of principal due
on the Existing Notes at the Stated Maturity and the denominator of which is
$131,250,000.
"Consolidated Income Tax Expense" means, for any period, as applied to the
Company, the provision for local, state, federal or foreign income taxes on a
consolidated basis for such period determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the sum of (a) the
total interest expense of the Company and its consolidated Subsidiaries for
such period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs and of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation, calculated in accordance with the effective interest method of
accounting, (ii) accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (v) interest actually paid by the
Company or any such Subsidiary under any guarantee of Indebtedness or other
obligation of any other Person and (vi) net costs associated with interest rate
agreements (including amortization of discounts) and currency agreements, plus
(b) all capitalized interest plus (c) dividends paid in respect of preferred
stock of the Company or any Subsidiary held by Persons other than the Company
or a Wholly Owned Subsidiary.
"Consolidated Net Debt Service" means the sum of (i)(a) Consolidated
Interest Expense less (b) non-cash Consolidated Interest Expense less (c)
scheduled withdrawals from the Capitalized Interest Fund (if applicable) less
(d) scheduled withdrawals from the PFC Capitalized Interest Fund (if
applicable) plus (ii) all payments of scheduled and overdue principal of, and
premium, if any, on Indebtedness on a consolidated basis plus (iii) without
duplication, all rental payments in respect of Capitalized Lease Obligations
paid, accrued, or scheduled to be paid or accrued by the Company and its
consolidated Subsidiaries.
"Consolidated Net Income" means, for any period, as applied to the
Company, the aggregate of the Net Income of the Company and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (i) all extraordinary gains or losses shall be
excluded; (ii) the Net Income of any Person in which the Company or any of its
Subsidiaries has a joint interest with a third party (which interest does not
cause the net income of such other Person to be consolidated into the net
income of the Company in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions paid, in cash, to the
Company or the Subsidiary, (iii) the net income of any Subsidiary of the
Company that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions shall be excluded to the extent
of such restriction or limitation, (iv) the net income (or loss) of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (v) any net gain or loss resulting from
an Asset Sale by the Company or any of its Subsidiaries other than in the
ordinary course of business shall be excluded and (vi) the cumulative effect of
a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and write-
ups of tangible assets of a going concern business made within 12 months after
the acquisition of such business) subsequent to the date of the Indentures in
the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (y) all Investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Investments allowed pursuant to the covenant "Limitation on Investments"), and
(z) all unamortized debt discount and expense and unamortized deferred charges
as of such date, all of the foregoing determined in accordance with GAAP.
"County Partners Event of Default" means a failure by the County Partners
to make their required equity contributions to the Joint Ventures.
"Debt Service Coverage Ratio" as of the date of determination, and, if the
transaction giving rise to the need to calculate Debt Service Coverage Ratio is
an incurrence of Indebtedness or the making of a Restricted Payment, calculated
after giving effect on a pro forma basis to such Indebtedness or Restricted
Payment as if such Indebtedness or Restricted Payment had been incurred or made
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, means:
(i) with respect to the Company, the ratio of (A) Cash Available for
Company Debt Service divided by (B) Company Net Debt Service;
(ii) with respect to PIC and the issuance of Indebtedness pursuant to
the PFC Indenture, the ratio of (A) PIC Cash Available for
Distribution during the relevant period to (B) PIC Debt Service
for such period; and
(iii) with respect to a Domestic Project, a Permitted Project or a
Joint Venture, the ratio of (A) Cash Available for Project Debt
Service to (B) Net Debt Service of such Domestic Project,
Permitted Project or Joint Venture;
provided, however, with respect to the calculation of projected Debt Service
Coverage Ratio, the remaining unpaid balance of principal due on the Existing
Notes after the Stated Maturity of the Existing Notes shall be assumed to be
repaid pursuant to the schedule and the proviso thereto as set forth in the
definition of Consolidated Debt Service Coverage Ratio.
"Debt Service Reserve Fund" shall have the meaning set forth in
"Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer
Loan, the Shareholder Loans and the Collateral DocumentsThe FundsThe Issuer
FundsDebt Service Reserve Fund."
"Debt Service Reserve Requirement" means (i) the aggregate principal,
premium, if any, of payments due on the Existing Notes on the next semi-annual
payment date and (ii) the aggregate cash interest payments (including
Liquidated Damages and Additional Amounts, if any) due on the Existing Notes on
the next semi-annual payment date.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Existing Notes.
"Dollar Permitted Investments" means any of the following securities: (i)
direct obligations of the Department of the Treasury of the United States of
America; (ii) obligations of any of the following federal agencies which
obligations represent full faith and credit of the United States of America,
including: Export-Import Bank, Farmers Home Administration, General Services
Administration, U.S. Maritime Administration, Small Business Administration,
Government National Mortgage Associate (GNMA), U.S. Department of Housing &
Urban Development (PHA's) and Federal Housing Administration; (iii) bonds,
notes or other evidences of indebtedness rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal Home Loan Bank, the Federal National
Mortgage Association or the Federal Home Loan Mortgage Corporation; (iv)
commercial paper rated in any one of the two highest rating categories by
Moody's or Standard & Poor's; (v) investment agreements with banks (foreign &
domestic), broker/dealers, and other financial institutions rated at the time
of bid in any one of the three highest rating categories by Moody's and
Standard & Poor's; (vi) repurchase agreements with banks (foreign & domestic),
broker/dealers, and other financial institutions rated at the time of bid in
any one of the three highest rating categories by Moody's and Standard &
Poor's, provided: (1) collateral is limited to (i), (ii) and (iii) above, (2)
the margin levels for collateral must be maintained at a minimum of 102%
including principal and interest, (3) the Trustees shall have a first perfected
security interest in the collateral, (4) the collateral will be delivered to a
third party custodian, designated by the Company, acting for the benefit of the
Trustees and all fees and expenses related to collateral custody will be the
responsibility of the Company, (5) the collateral must have been or will be
acquired at the market price and marked to market weekly and collateral level
shortfalls cured within 24 hours, (6) unlimited right of substitution of
collateral is allowed provided that substitution collateral must be permitted
collateral substituted at a current market price and substitution fees of the
custodian shall be paid by the Company; (vii) forward purchase agreements
delivering securities outlined in (i) and (iv) above with banks (foreign and
domestic), broker/dealers, and other financial institutions maintaining a long-
term rating on the day of bid no lower than investment grade by both Standard &
Poor's and Moody's (such rating may be at either the parent or subsidiary
level).
"Domestic Project" means either the Rosemary Facility or the Brandywine
Facility.
"Domestic Project Event" means the occurrence of any of the following: a
Rosemary Event of Eminent Domain, a Brandywine Event of Loss, a Rosemary Event
of Loss or a Rosemary Title Event.
"Domestic Project Event Proceeds" means the sum of any and all of the
following: Rosemary Eminent Domain Proceeds, Brandywine Event of Loss Proceeds,
Rosemary Casualty Proceeds and Rosemary Title Insurance Proceeds.
"Domestic Project Permitted Indebtedness" means, in addition to any
Indebtedness outstanding as of the Closing Date, (i) working capital debt and
letter of credit reimbursement obligations, provided that after giving effect
to such additional debt and obligations, (a) the minimum (or lowest) projected
Debt Service Coverage Ratio of the Domestic Project for any calendar year will
not be less than 1.5 to 1 and (b) the average projected Debt Service Coverage
Ratio of the Domestic Project for any calendar year will not be less than 1.7
to 1, (ii) purchase money or capital lease obligations incurred to finance
assets of the Domestic Project that are readily replaceable personal property
with a principal amount or capitalized portion not exceeding $1.0 million in
the aggregate outstanding at any time, (iii) trade accounts payable (other than
for borrowed money) due within 90 days arising, and accrued expenses incurred,
in the ordinary course of business of operating or maintaining the Domestic
Project.
"Domestic Projects" means the Rosemary Facility and the Brandywine
Facility.
"Excess Proceeds" means any Net Cash Proceeds from Asset Sales that are
not applied or invested to an investment, the making of a capital expenditure
or the acquisition of other tangible assets. On the earlier of (i) the 366th
day after an Asset Sale or (ii) such date as the Board of Directors of the
Company determines not to apply the Net Cash Proceeds relating to such Asset
Sale in the manner set forth above (or the Company determines not to cause its
Subsidiary to apply the Net Cash Proceeds in such a manner), if the aggregate
amount of Excess Proceeds exceeds $1.0 million, the Company or its Subsidiary,
as the case may be, shall be subject to the following requirements:
(1) in the event that the Company cannot then incur $1.00 of additional
Permitted Indebtedness pursuant to clause (v) of the definition of
"Permitted Indebtedness," the Company or its Subsidiary will be
required to make an offer to purchase (the "Asset Sale Redemption
Offer") from all Holders of Existing Notes and holders of
additional Senior Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Existing Notes and holders
of additional Senior Indebtedness equal to the Excess Proceeds at a
purchase price equal to 100% of the principal amount thereof plus
accrued and unpaid interest (including Liquidated Damages and
Additional Amounts, if any) thereon, if any, to the date of
purchase; in the event that there is additional Senior Indebtedness
outstanding at the time of the Asset Sale Redemption Offer, Excess
Proceeds shall be allocated to each issuance of Senior Indebtedness
in accordance with the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal amount of the
Existing and the denominator of which is the sum of the principal
amounts of all Senior Indebtedness which is subject to this
requirement or a similar requirement under such Senior
Indebtedness's governing instrument; and
(2) in the event that the Company can incur $1.00 of additional
Permitted Indebtedness pursuant to clause (v) of the definition of
"Permitted Indebtedness," the Company or its Subsidiary will be
required to make an Asset Sale Redemption Offer from all Holders of
Existing Notes and holders of additional Senior Indebtedness, up to
a maximum principal amount (expressed as a multiple of $1,000) of
Existing Notes and holders of additional Senior Indebtedness equal
to the Excess Proceeds (Excess Proceeds for purposes of this clause
(2) is limited to that amount of the Net Cash Proceeds that equals
the principal amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the asset being
sold) at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if any, to the
date of purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale Redemption
Offer, Excess Proceeds shall be allocated to each issuance of
Senior Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of which is the
principal amount of the Existing Notes and the denominator of which
is the sum of the principal amounts of all Senior Indebtedness
which is subject to this requirement or a similar requirement under
such Senior Indebtedness's governing instrument.
Upon completion of such Asset Sale Redemption Offer(s), the amount of
Excess Proceeds shall be reset at zero. Whenever Net Cash Proceeds in excess of
$1.0 million from any Asset Sale are received by the Issuer or the Company, as
the case may be, and such Net Cash Proceeds may, through the passage of time or
otherwise, be required to be applied to the purchase of Existing Notes pursuant
to this covenant, the Issuer or the Company, as the case may be, shall deposit
such Net Cash Proceeds with, respectively, the Exchange Notes Trustee or the
Company Indenture Trustee, as trust monies subject to disposition as provided
in this covenant and such Net Cash Proceeds shall be set aside by the Exchange
Notes Trustee or the Company Indenture Trustee pending application to the
purchase of Existing Notes. At the direction of the Company, such Net Cash
Proceeds shall be required to be invested by the Existing Notes Trustee or the
Company Indenture Trustee in Dollar Permitted Investments. The Company or its
relevant Subsidiary, as applicable, shall be entitled to any interest or
dividends accrued, earned or paid on such investments.
"Exchange Notes" shall mean the 12-1/2% Registered Senior Secured Notes
due 2004 of the Issuer.
"Exchange Notes Collateral" shall have the meaning set forth in
"Prospectus SummaryThe OfferingExchange Notes Collateral."
"Exchange Notes Collateral Documents" shall have the meaning set forth in
"Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer
Loan, the Shareholder Loans and the Collateral DocumentsDescription of the
Exchange Notes CollateralThe Security Agreements."
"Exchange Notes Guarantee" means the Exchange Notes Guarantee issued by
the Company under the terms of the Company Indenture.
"Exchange Notes Guarantee Collateral" shall have the meaning set forth in
"Prospectus SummaryThe Exchange OfferExchange Notes Guarantee Collateral."
"Exchange Notes Guarantee Collateral Documents" shall have the meaning set
forth in "Description of the Exchange Notes, the Exchange Notes Guarantee, the
Issuer Loan, the Shareholder Loans and the Collateral DocumentsDescription of
the Exchange Notes Guarantee CollateralThe Pledge Agreements and the Security
Agreement."
"Exchange Notes Indenture" means the trust indenture governing the terms
of issuance of the Exchange Notes, dated as of the Closing Date, by and between
the Issuer and the Exchange Notes Trustee.
"Exchange Notes Interest Account" shall have the meaning set forth in
"Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer
Loan, the Shareholder Loans and the Collateral DocumentsThe FundsThe Issuer
FundsDebt Service Fund."
"Exchange Notes Optional Redemption" shall have the meaning set forth in
"Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer
Loan, the Shareholder Loans and the Collateral DocumentsRedemptionOptional
Redemption of Exchange Notes."
"Exchange Notes Trustee" means the trustee under the Exchange Notes
Indenture.
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by the Board of Directors acting in good faith
and shall be evidenced by a Board Resolution delivered to the Trustees except
that any determination of Fair Market Value made with respect to any parcel of
real property shall be made by an independent appraiser.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of the
Indentures.
"Income Tax Expense" means, for any period, as applied to the Person in
question, the provision for local, state, federal or foreign income taxes for
such period determined in accordance with GAAP.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (B) evidenced by a note, debenture
or similar instrument or letters of credit (including a purchase money
obligation) or (C) for the payment of money relating to a capitalized lease
obligation or other obligation relating to the deferred purchase price of
property; (ii) any obligation secured by a Lien to which the property or assets
of such Person are subject, whether or not the obligations secured thereby
shall have been assumed by or shall otherwise be such Person's legal liability;
(iii) the maximum fixed repurchase price of any redeemable or putable
Disqualified Stock; (iv) contractual obligations to repurchase goods sold or
distributed; (v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the balance sheet;
(vi) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i) - (v); and (vii) any liability of
others of the kind described in clauses (i) - (vi) which the Person has
guaranteed or which is otherwise directly or indirectly its legal liability
"Indentures" means the Company Indenture and the Exchange Notes Indenture.
"Indentures Events of Default" shall have the meaning set forth in
"Description of the Exchange Notes, the Exchange Notes Guarantee, the Issuer
Loan, the Shareholder Loans and the Collateral DocumentsCertain
CovenantsIndentures Events of Default."
"Independent Financial Advisor" means an independent and internationally
recognized investment bank, accounting firm or engineering firm, as the case
may be, whose business regularly includes the rendering of valuation opinions
with respect to the assets at issue, chosen by the Company and reasonably
acceptable to the Company Indenture Trustee.
"Interest Expense" means, for any period, the sum of (a) the total
interest expense of the Person in question for such period as determined in
accordance with GAAP, including, without limitation, (i) amortization of debt
issuance costs or of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting, (ii) accrued interest,
(iii) noncash interest payments, (iv) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person and (vi) net
costs associated with interest rate agreements (including amortization of
discounts) and currency agreements, plus (b) capitalized interest plus
(c) dividends paid in respect of preferred stock of the Person in question,
held by Persons other than the Person in question.
"International Distribution Fund" means the fund described in Article IV
of the PFC Indenture and maintained in the name of PIC pursuant to such
Article, which such fund is entitled to distributions of monies from a Non-U.S.
Permitted Project to the extent that all obligations have been met by PFC, PIC
and the PIC International Entity (and any other PIC international entities)
under the PFC Indenture.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such person) or
capital contributions (excluding commission, travel, relocation and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Capital
Stock or other securities and all other items that are or would be classified
as investments on a balance sheet prepared in accordance with GAAP.
"Issue Date" shall mean April 22, 1997.
"Issuer Loan" means the outstanding indebtedness of Pan-Western to the
Issuer incurred by Pan-Western to enable it to make the Shareholder Loans and
to make the JV Equity Contributions and funded by the Issuer with the proceeds
of the Old Notes.
"Issuer Loan Agreement" means the Issuer Loan Agreement by and between the
Issuer and Pan-Western.
"Issuer Note" means one or more promissory notes issued by Pan-Western to
the Issuer evidencing its indebtedness to the Issuer.
"Joint Venture Facility" means the portion of the Luannan Facility to be
constructed or acquired by each Joint Venture (collectively, the "Joint Venture
Facilities").
"Joint Venture Guarantees" means collectively, the undertakings by
Tangshan Panda, each executed as of the 24th day of September, 1996, to
unconditionally and irrevocably guarantee to Pan-Western prompt payment and
performance by each of Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-
Sino of their individual obligations to Pan-Western pursuant to any debt
obligation then or thereafter due and owing by any such party to Pan-Western;
the undertakings by Tangshan Pan-Western, each executed as of the 24th day of
September, 1996, to unconditionally and irrevocably guarantee to Pan-Western
the prompt payment and performance by each of Tangshan Panda, Tangshan Cayman
and Tangshan Pan-Sino of their individual obligations to Pan-Western pursuant
to any debt obligation then or thereafter due and owing by any such party to
Pan-Western; the undertakings by Tangshan Cayman, each executed as of the 24th
day of September, 1996, to unconditionally and irrevocably guarantee to Pan-
Western the prompt payment and performance by each of Tangshan Panda, Tangshan
Pan-Western and Tangshan Pan-Sino of their individual obligations to Pan-
Western pursuant to any debt obligation then or thereafter due and owing by any
such party to Pan-Western; and the undertakings by Tangshan Pan-Sino, each
executed as of the 24th day of September, 1996, to unconditionally and
irrevocably guarantee to Pan-Western the prompt payment and performance by each
of Tangshan Panda, Tangshan Pan-Western and Tangshan Cayman of their individual
obligations to Pan-Western pursuant to any debt obligation then or thereafter
due and owing by any such party to Pan-Western.
"Joint Venture Permitted Indebtedness" means (i) the Shareholder Loans and
any additional loans from Pan-Western to the Joint Ventures, (ii) working
capital debt, provided that after giving effect to such additional debt, (a)
the minimum (or lowest) projected Debt Service Coverage Ratio for any calendar
year will not be less than 1.5 to 1 and (b) the average projected Debt Service
Coverage Ratio for any calendar year will not be less than 1.7 to 1 (provided
that working capital debt shall at no time exceed $1.0 million), (iii) purchase
money or capital lease obligations incurred to finance assets of the Joint
Ventures that are readily replaceable personal property with a principal amount
or capitalized portion not exceeding $1.0 million in the aggregate outstanding
at any time, (iv) trade accounts payable (other than for borrowed money) due
within 90 days arising, and accrued expenses incurred, in the ordinary course
of business of constructing, operating or maintaining the Joint Venture
Facility on customary terms, (v) interest or currency exchange rate protection
agreements, (vi) debt under the Joint Venture Guarantees of each Joint Venture
and any other guarantees of the obligations of the Joint Venture and (vii) any
debt to any other Joint Venture.
"JV Dollar Permitted Investments" means investments which are denominated
and payable in U.S. Dollars (a) with respect to funds in the China Accounts,
deposits denominated in U.S. Dollars maintained at, or certificates of deposit
insured, or obligations insured or guaranteed by, the Bank of China, The China
Construction Bank, the Communication Bank, the China Farmers Bank or China
International Trust and Investment Corporation, or any branch of a commercial
bank organized under the laws of the United States or any political subdivision
thereof having a combined capital and surplus of at least $500 million 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; and (b) with respect to any funds which the Joint
Venture may from time to time be allowed to invest outside of the PRC in
accordance with PRC laws and regulations, in Dollar Permitted Investments.
"JV Equity Contributions" shall mean the monies disbursed from the Luannan
Facility Construction Fund pursuant to the terms of the Issuer Loan and
contributed by Pan-Western, pursuant to the terms of the Joint Venture
Agreements, to each of the Joint Ventures as Pan-Western's equity contribution
to such Joint Venture.
"JV RMB Permitted Investments" means deposit accounts denominated and
payable in Renminbi to be maintained at, certificates of deposit issued, or
obligations issued or guaranteed by, one of the following policy or commercial
banks in the PRC: (i) the Bank of China, (ii) the China Construction Bank,
(iii) the Communication Bank, (iv) the China Farmers Bank, (v) the China
International Trust and Investment Corporation, (vi) any foreign bank or branch
of any foreign bank authorized and licensed to conduct business in the PRC,
including without limitation, the establishment and maintenance of Renminbi and
foreign currency accounts and exchange functions having a combined capital and
surplus of at least $500 million and having at least an investment grade rating
assigned to its long-term unsecured debt securities by each of Standard &
Poor's and Moody's.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any kind or nature
whatsoever. For purposes of the Indentures, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Person.
"Luannan Casualty Proceeds" means all Insurance Proceeds or other amounts
received by Pan-Western on account of any Luannan Event of Loss ("Insurance
Proceeds" means all amounts and proceeds (including instruments) in respect of
the proceeds of any casualty insurance policy covering any portion of the
Luannan Facility (except proceeds of business interruption insurance)).
"Luannan Commercial Operation Date" means that date by which both of the
following have occurred: (i) the Luannan Facility Engineer has certified that
the Luannan Facility has achieved commercial operations and (ii) the Commercial
Operation Date, as such term is used in the Interconnection Agreement, has
occurred.
"Luannan Event of Loss" means an event which causes all or a portion of
the Luannan Facility to be damaged, destroyed or rendered unfit for normal use
for any reason whatsoever, other than a Luannan Expropriation Event.
"Luannan Expropriation Event" means any compulsory transfer or taking or
transfer under threat of compulsory transfer or taking of any material part of
the Luannan Facility or any ownership interest or other rights in the Joint
Venture Companies by any governmental authority.
"Luannan Expropriation Proceeds" means any proceeds received by Pan-
Western as a result of the occurrence of a Luannan Expropriation Event.
"Luannan Facility Construction Cost" means the actual cost to complete the
construction of the Luannan Facility as certified by the Luannan Facility
Engineer following the Luannan Commercial Operation Date (and which total
includes amounts on deposit in the Completion Sub-Account).
"Luannan Facility Engineer" means Parsons Brinckerhoff, which previously
served as the Joint Ventures' project engineer, and any successor thereto under
the terms of the Indentures.
"Luannan Facility Notes" means shall mean the promissory notes issued by
the Joint Venture Companies to Pan-Western evidencing their indebtedness to Pan-
Western.
"Luannan Financing Agreements" means, collectively, the Shareholder Loan
Agreements, the Joint Venture Guarantees, the Issuer Loan Agreement, the Issuer
Note and the Luannan Facility Notes.
"Luannan Project Documents" means, collectively, the Luannan Power
Purchase Agreement, the Luannan EPC Contract, the Luannan Transmission
Facilities Construction Agreement, the Luannan Operations and Maintenance
Agreement, the Luannan Coal Supply Agreements, the Luannan Coal Transportation
Agreement, the Engineering and Design Contract and all other instruments,
agreements or other documents arising from or related to the Luannan Facility,
but shall not include any Luannan Financing Agreement.
"Major Maintenance Reserve Account" means the Major Maintenance Reserve
Account established by each Joint Venture on the Closing Date pursuant to the
Shareholder Loan Agreements.
"Major Maintenance Reserve Requirement" means the amount required to be
transferred to the Major Maintenance Reserve Account from the RMB Revenue
Account pursuant to the Shareholder Loan Agreements.
"Mandatory Redemption" shall have the meaning set forth in "Description of
the Exchange Notes, the Exchange Notes Guarantee, the Issuer Loan, the
Shareholder Loans and the Collateral Documents Redemption Mandatory
Redemption."
"Material Adverse Effect" means a material adverse change in the financial
condition with respect to the party or entity in question or any event or
occurrence which could reasonably be expected to materially and adversely
affect: (a) the operation of a Domestic Project; (b) the development,
construction or operation of a Material Permitted Project; (c) the development,
construction or operation of the Luannan Facility; (d) the ability of,
respectively, a Domestic Project, a Material Permitted Project or the Luannan
Facility to perform any of their material obligations under a Project Document;
(e) the ability of the Issuer to make payments of principal, premium, if any,
or interest (including Liquidated Damages and Additional Amounts, if any) on
the Existing Notes when due or (f) the ability of the Company to make payments
pursuant to the provisions of the Exchange Notes Guarantee.
"Material Subsidiary" means any Subsidiary which, at any date of
determination, is a "Significant Subsidiary" (as that term is defined in
Regulation S-X, as in effect on the Closing Date, issued under the Securities
Act).
"Net Cash Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, Panda International or any direct or indirect parent of the
Company, the aggregate net cash proceeds received by the Company, Panda
International or any direct or indirect parent of the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the Fair Market Value
thereof, as determined in good faith by the Board of Directors of such Person,
at the time of receipt); (b) in the case of any exchange, exercise, conversion
or surrender of outstanding securities of any kind for or into shares of
Capital Stock of the Company, Panda International or any direct or indirect
parent of the Company which is not Disqualified Stock, the net book value of
such outstanding securities on the date of such exchange, exercise, conversion
or surrender (plus any additional amount required to be paid by the holder to
the Company, Panda International or any direct or indirect parent of the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less
all expenses incurred by the Company, Panda International or any direct or
indirect parent of the Company in connection therewith).
"Net Debt Service" means the sum of (i) (a) Interest Expense less (b) non-
cash Interest Expense less (c) scheduled withdrawals from the Capitalized
Interest Fund (if applicable) less (d) scheduled withdrawals from the PFC
Capitalized Interest Fund (if applicable) plus (ii) all payments of scheduled
and overdue principal of, and premium, if any, on Indebtedness plus
(iii) without duplication, all rental payments in respect of Capitalized Lease
Obligations paid, accrued, or scheduled to be paid or accrued.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Non-PRC Holders" means beneficial owners of the Existing Notes who, or
which, are not residents of the PRC for PRC tax purposes and do not conduct
business activities in the PRC.
"Non-Recourse Debt" means Indebtedness of any Subsidiary or group of
Subsidiaries that is incurred to acquire, construct or develop a Permitted
Project or group of Permitted Projects provided that such Indebtedness is
without recourse to the Company or any Material Subsidiary or to any assets of
the Company or any such Material Subsidiary other than such Permitted Project
and the direct or indirect parent or parents that own such Permitted Project or
group of Permitted Projects and the income from and proceeds of such Permitted
Project or group of Permitted Projects.
"Non-U.S. Permitted Project" means a Permitted Project located outside the
United States.
"Operating and Maintenance Costs" means all amounts disbursed by or on
behalf of the Domestic Project, Permitted Project or Joint Ventures for
operation, maintenance, repair, or improvement of the Domestic Project,
Permitted Project or Joint Ventures, including, without limitation, premiums on
insurance policies, property, income and all other taxes to the extent paid,
and payments under the relevant operating and maintenance agreements, leases
(including Operating Lease Obligations), royalty and other land use agreements,
and any other payments required under the Project Documents, each as determined
on a cash basis in accordance with GAAP.
"Operating Lease Obligations" means any obligation of the Person in
question incurred or assumed under or in connection with any lease of real or
personal property which, in accordance with GAAP, is not required to be
classified and accounted for as a capital lease.
"Permitted Liens" means, with respect to any Person, any Lien arising by
reason of (a) any judgment, decree or order of any court, so long as such Lien
is being contested in good faith and is adequately bonded, any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (b)
taxes not yet delinquent or which are being contested in good faith; (c)
security for payment of workers' compensation or other insurance; (d) security
for the performance of tenders, contracts (other than contracts for the payment
of money) or leases; (e) deposits to secure public or statutory obligations, or
to secure permitted contracts for the purchase or sale of any currency entered
into in the ordinary course of business; (f) Liens imposed by operation of law
in favor of carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof; (g) security for surety or appeal bonds; and (h) easements, rights-of-
way, zoning and similar covenants and restrictions and other similar
encumbrances or title defects which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Company or any of its Subsidiaries.
"Permitted Project" means (i) any Project or group of Projects that
fulfills the requirements of the PIC Additional Projects Contract and which may
be developed, constructed or owned pursuant to the requirements of the PFC
Indenture and subject to compliance with the terms of the Company Indentures
and (ii) to the extent that a project does not fulfill the requirements of the
PIC Additional Projects Contract, any project or group of projects that may be
developed, owned and operated by the Company or one of its Subsidiaries
pursuant to the requirements of the Indentures and the Company shall (a)
maintain at least a 50% (direct or indirect) ownership or equivalent interest
in each project or (b)(x) at least a 25% (direct or indirect) ownership or
equivalent interest in each project not meeting the requirements of clause (i)
above and (y) 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).
"Permitted Project Document" means any and all documents executed in
connection with the development, construction, ownership and operation of a
Permitted Project.
"Permitted Project Event" means, with respect to any Permitted Project,
(i) an event which causes all or a portion of the facilities of a Permitted
Project to be damaged, destroyed or rendered unfit for normal use for any
reason whatsoever, (ii) any event involving the compulsory transfer or taking
or transfer under threat of compulsory taking of any material part of such
Permitted Project's assets or (iii) the existence of any defect of title or
lien or encumbrance on the any material part of the property of a Permitted
Project (provided that liens or covenants permitted by the covenant Limitation
on Liens shall be excluded from consideration) that entitles a Person to make a
claim under any title insurance policy in existence with respect to such
property.
"Permitted Project Event Proceeds" means the sum of any and all proceeds
payable upon occurrence of a Permitted Project Event.
"Permitted Project Power Purchase Agreement" means the power purchase
agreement of any Permitted Project.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount of such Permitted Refinancing Indebtedness does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date at least as late as the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Existing Notes such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Existing Notes on terms at least as favorable to
the Holders of Existing Notes as those contained in the documentation governing
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iv) if the Indebtedness being refinanced is Non-Recourse Debt, such
Permitted Refinancing Indebtedness shall also be Non-Recourse Debt; and (v)
such Indebtedness is incurred either by the Company or by the Subsidiary who is
the obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, or other business entity or government or agency or
political subdivision thereof (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"PFC Capitalized Interest Fund" means the capitalized interest fund
maintained pursuant to the PFC Indenture.
"PIC Cash Available for Distribution" means Total Cash Flow from all
Domestic Projects and Permitted Projects (owned, constructed or developed
pursuant to the PFC Indenture) on a consolidated basis less (i) regularly
scheduled payments of principal and interest on Domestic Project and Permitted
Projects (owned, constructed or developed pursuant to the PFC Indenture)
project level Indebtedness, (ii) additions to reserves required by the
instruments providing for project level Indebtedness, (iii) trustee's fees
under the PFC Indenture and (iv) the NNW Cash Flow Participation (as defined in
the PFC Indenture) plus interest earned on reserves required by the PFC
Indenture entered into by PIC, excluding, however, extraordinary financial
distributions and proceeds received as a result of mandatory redemption events
(pursuant to the PFC Indenture), that at the time of determination is available
to be legally distributed from the Domestic Projects and Permitted Projects
(owned, constructed or developed pursuant to the PFC Indenture) to PIC without
contravention of any agreement.
"PIC 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 PFC Indenture plus interest earned on
reserves required by the documents relating to the Pooled Project Bonds entered
into by PIC, and (iii) the NNW Cash Flow Participation, excluding, however,
"Extraordinary Financial Distributions" (as defined in the PFC Indenture) and
proceeds received as a result of "Mandatory Redemption Events" (as defined in
the PFC Indenture).
"PIC Consolidated Debt Service" means for purposes of the PFC Indenture,
for any period, PIC Debt Service plus scheduled principal and interest payments
on all Project Debt.
"PIC Consolidated Debt Service Coverage Ratio" means, as of any date of
determination, the ratio of (i) PIC 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 interests in more than four Projects,
then the PIC Consolidated Debt Service Coverage Ratio shall not be applied in
respect of any event or requirement.
"PIC Debt Service" means, for any period, scheduled principal, premium, if
any, and interest (including liquidated damages and additional amounts, if any)
payments on any and all Indebtedness issued pursuant to the PFC Indenture.
"PIC Debt Service Coverage Ratio" means for purposes of the PFC Indenture,
as of any date of determination, the ratio of (i) PIC Cash Available for
Distribution during the relevant period to (ii) PIC Debt Service for such
period.
"PIC Future Ratio Determination Period" means, 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 beginning with January 1 and ending with the Final Stated Maturity.
For purposes of this definition, "Final Stated Maturity" means the last stated
maturity date of any Indebtedness outstanding under the PFC Indenture.
"Power Purchase Agreements" means the Luannan Power Purchase Agreement,
the Brandywine Power Purchase Agreement, the Rosemary Power Purchase Agreement
and any Permitted Project Power Purchase Agreement.
"Project Document" means, collectively, the Luannan Project Documents, the
Luannan Financing Agreements, the Brandywine Project Documents, the Rosemary
Project Documents, the Administrative Services Agreement, the Development
Services Agreement, and any and all Permitted Project Documents.
"Projected Luannan Facility Construction Cost" means $118.8 million.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of the Company, Panda International or
any direct or indirect parent of the Company made on a primary basis by the
Company, Panda International or any direct or indirect parent of the Company
pursuant to a registration statement filed with and declared effective by the
Commission in accordance with the Securities Act or an underwritten offering of
Capital Stock (other than Disqualified Stock) of the Company, Panda
International or any direct or indirect parent of the Company made on a primary
basis by the Company, Panda International or any direct or indirect parent of
the Company pursuant to Rule 144A under the Securities Act.
"Related Party" means any Affiliate of the Company of which the Company,
Panda International or any direct or indirect parent of the Company holds 51%
or a more of the voting securities of such Person.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock), and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Subsidiary of the Company), (ii)
the purchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company or any of its Subsidiaries or (iii) the making of
any principal payment on, or the purchase, defeasance, repurchase, redemption
or other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness
which is subordinated in right of payment to the Existing Notes (other than
Indebtedness acquired in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of acquisition).
"Senior Indebtedness" means, under the Indentures and with respect to
either the Company or the Issuer, the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or
not allowable as a claim in such proceeding and including Liquidated Damages
and Additional Amounts, if any) and all other monetary obligations on any
Indebtedness (other than as otherwise provided in this definition), whether
outstanding on the Closing Date or thereafter created, incurred or assumed, and
whether at any time owing, actually or contingently, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall be subordinated or junior in right of payment to other
Indebtedness of such entity. Without limiting the generality of the foregoing,
with respect to the Issuer, "Senior Indebtedness" shall include the principal
of, premium, if any, and interest (including interest accruing after the filing
of a petition initiating any proceedings under any state, federal or foreign
bankruptcy laws whether or not allowable as a claim in such proceeding and
including Liquidated Damages and Additional Amounts, if any), and all other
monetary obligations of every kind and nature of the Issuer from time to time
owed to the Existing Noteholders under the Exchange Notes Indenture.
Notwithstanding the foregoing with respect to the Issuer, "Senior Indebtedness"
shall not include (i) Indebtedness that is by its terms subordinate or junior
in right of payment to any Indebtedness of the Issuer, (ii) Indebtedness which,
when incurred, is without recourse to the Issuer, (iii) any liability for
foreign, federal, state, local or other tax owed or owing by the Issuer to the
extent such liability constitutes Indebtedness, (iv) Indebtedness of the Issuer
to a Wholly Owned Subsidiary and (vi) that portion of any Indebtedness which at
the time of issuance is issued in violation of the Indentures.
"Shareholder Loan Agreement Permitted Liens" means (a) liens for any tax,
assessment or other governmental charge not yet due, due but payable without
penalty or being contested in good faith and by appropriate proceedings, (b)
retentions of title in favor of materialmen, workers or repairmen, or other
like liens arising in the ordinary course of business or in connection with the
construction of the Luannan Facility, (c) liens arising out of judgments or
awards so long as an appeal or proceeding for review is being prosecuted in
good faith, (d) mineral rights the use and enjoyment of which do not materially
interfere with the use and enjoyment of the Joint Venture Facility, (e) liens,
deposits or pledges to secure statutory obligations or performance of 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 the Joint
Venture's business and affecting property with a value not exceeding the
equivalent of $250,000 at any one time, (f) involuntary liens (including a lien
of an attachment, judgment or execution) securing a charge or obligation, on
any of the Joint Venture's property, real or personal, whether now or hereafter
owned with a value not exceeding the equivalent of $250,000 at any one time,
(g) rights of any party pursuant to any Luannan Project Document, (h) liens
securing workers' compensation, unemployment insurance or other social security
or pension obligations, (i) liens securing Indebtedness permitted pursuant to
the Shareholder Loan Agreement, (j) liens securing the purchase price of
property having an aggregate value not exceeding the equivalent of $1.0 million
at any one time and (k) liens securing other obligations not constituting debt
none of which could reasonably be expected to have a Material Adverse Effect.
"Shareholder Loan Agreements" means, collectively, the Shareholder Loan
Agreement by and among each Joint Venture and Pan-Western.
"Shareholder Loans" means the outstanding indebtedness of the Joint
Ventures to Pan-Western incurred to finance the development and construction of
the Luannan Facility and funded by Pan-Western with the proceeds of the Issuer
Loan.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof), (ii) any partnership (a) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such Person
or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof) and (iii) any Person
that either is a Permitted Project or owns an interest in a Permitted Project
(to the extent described in the second clauses (i) or (ii) of the definition of
Permitted Project).
"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 GAAP.
"Trustees" shall mean the trustees under the Company Indenture and the
Exchange Notes Indenture.
"U.S. Distribution Fund" means the fund described in Article IV of the PFC
Indenture and maintained in the name of PIC pursuant to such Article, which
such fund is entitled to distributions of monies from the Domestic Projects and
any Permitted Project located in the United States to the extent that all
obligations have been met by PFC and PIC under the PFC Indenture.
"U.S. Permitted Project" means a Permitted Project located within the
United States.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned" by any Person means a Subsidiary of such Person all of the
outstanding Capital Stock or other ownership interests of which (other than
directors' qualifying shares) shall at the time be owned by such Person or by
one or more Wholly Owned Subsidiaries of such Person.
Book-Entry, Delivery and Form
The Exchange Notes initially will be represented by a single, permanent
global certificate in definitive, fully registered form (the "Global Note").
The Global Note will be deposited with, or on behalf of, DTC and registered in
the name of a nominee of DTC. After the initial issuance of the Global Note,
Exchange Notes in certificated form will be issued in exchange for the Global
Note only as set forth in the Exchange Note Indenture.
Except as set forth below, the Global Note may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for
Existing Notes in certificated form except in the limited circumstances
described below. See "--Exchange of Book-Entry Exchange Notes for Certificated
Exchange Notes." In addition, transfer of beneficial interests in the Global
Note will be subject to the applicable rules and procedures of DTC and its
direct or indirect participants (including, if applicable, those of the
Euroclear System ("Euroclear") and Cedel Bank, S.A. ("CEDEL")), which may
change from time to time. The Existing Notes may be presented for registration
of transfer and exchange at the offices of the Registrar.
Depository Procedures
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Issuer that pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
designated Participants with portions of the principal amount of the Global
Note and (ii) ownership of such interests in the Global Note will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interests
in the Global Note).
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in the Global Note to such persons may
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in the Global Note to pledge
such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the Exchange Notes, see "--
Exchange of Book-Entry Exchange Notes for Certificated Exchange Notes."
Except as described below, owners of interests in the Global Note will not
have Exchange Notes registered in their names, will not receive physical
delivery of Exchange Notes in certificated form (the "Certificated Notes") and
will not be considered the registered owners or Holders thereof under the
Indentures for any purpose.
Exchange Notes originally purchased by or transferred to any purchasers
who elect to take physical delivery of their certificates instead of holding
their interest through the Global Note (collectively referred to herein as the
"Non-Global Purchasers") will be issued in the form of Certificated Notes. Upon
the transfer of any Certificated Note, such Certificated Note will, unless the
transferee requests Certificated Notes or the Global Note has previously been
exchanged in whole for Certificated Notes, be exchanged for an interest in the
Global Note. Upon the transfer of an interest in the Global Note, such interest
will, unless the transferee requests Certificated Notes, be represented by an
interest in the Global Note.
Payments in respect of the principal, premium, if any, and interest
(including Liquidated Damages and Additional Amounts, if any) on the Global
Note registered in the name of DTC or its nominee will be payable by the
Trustees to DTC or its nominee in its capacity as the registered Holder under
the Indentures. Under the terms of the Indentures, the Issuer and the Trustees
will treat the persons in whose names the Exchange Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Issuer, the Trustees nor any agent of the Issuer or the Trustees has or
will have any responsibility or liability for (i) any aspect of DTC's records
or any Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership
interests in the Global Note, or (ii) any other matter relating to the actions
and practices of DTC or any of its Participants or Indirect Participants.
DTC has advised the Issuer that its current practice, upon receipt of any
payment in respect of securities such as the Exchange Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the relevant
security such as the Global Note as shown on the records of DTC. Payments by
the Participants and the Indirect Participants to the beneficial owners of
Exchange Notes will be governed by standing instructions and customary
practices and will not be the responsibility of DTC, the Trustees or the
Issuer. Neither the Issuer nor the Trustees will be liable for any delay by DTC
or any of its Participants in identifying the beneficial owners of the Exchange
Notes, and the Issuer and the Trustees may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Exchange Notes for all purposes.
Except for trades involving only Euroclear and CEDEL participants, it is
expected that interests in the Global Note will trade in DTC's Same--Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same--day funds. Transfers between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Exchange Notes described herein, cross--market transfers between the
Participants in DTC, on the one hand, and Euroclear or CEDEL participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL, as the case may be, by its respective depositary;
however, such cross--market transactions will require delivery of instructions
to Euroclear or CEDEL, as the case may be, by the counterparty in such system
in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or CEDEL, as the case may
be, will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
Global Note in DTC, and making or receiving payment in accordance with normal
procedures for same--day fund settlement applicable to DTC. Euroclear
participants and CEDEL participants may not deliver instructions directly to
the depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in the Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear or CEDEL)
immediately following the settlement date of DTC. Cash received in Euroclear
or CEDEL as a result of sales of interests in the Global Note by or through a
Euroclear or CEDEL participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or CEDEL cash account only as of the business day for Euroclear or
CEDEL following DTC's settlement date.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder of Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Note are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such Participant or Participants has or have
given such direction. However, if there is an Indentures Event of Default, with
respect to the Exchange Notes, DTC reserves the right to exchange the Global
Note for Exchange Notes in certificated form, and to distribute such Exchange
Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Note among participants in DTC, Euroclear
and CEDEL, they are under no obligation to perform or to continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Issuer, the Company, the Initial Purchaser or the Trustees will have any
responsibility for the performance by DTC, Euroclear and CEDEL or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Book-Entry Exchange Notes for Certificated Exchange Notes
The Global Note is exchangeable for definitive Exchange Notes in
registered certificated form if (i) DTC (x) notifies the Issuer that it is
unwilling or unable to continue as depositary for the Global Note and the
Issuer thereupon fails to appoint a successor depositary or (y) has ceased to
be a clearing agency registered under the Exchange Act, (ii) the Issuer, at its
option, notifies the Trustees in writing that it elects to cause the issuance
of the Exchange Notes in certificated form or (iii) there shall have occurred
and be continuing an Indentures Event of Default with respect to the Exchange.
In addition, beneficial interests in the Global Note may be exchanged for
Certificated Notes upon request but only upon at least 20 days prior written
notice given to the Trustees by or on behalf of DTC in accordance with its
customary procedures. In all cases, Certificated Notes delivered in exchange
for the Global Note or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the depositary (in accordance with its customary procedures).
The Shareholder Loan Agreements
Each Joint Venture entered into a Shareholder Loan Agreement with Pan-
Western on September 24, 1996 and as amended on April 8, 1997 and April 11,
1997, pursuant to which the Shareholder Loans will be made. The Issuer may
cause Pan-Western and the Joint Ventures to further amend the Shareholder Loan
Agreements after the Closing Date in order to adjust the amortization of the
Shareholder Loans to reflect the terms of the Exchange Notes. The Shareholder
Loan Agreements provide, among other things, the rights and obligations of Pan-
Western and the Joint Ventures, as lender and borrowers, respectively,
including, without limitation, principal and interest payments, conditions
precedent, covenants, representations and warranties, events of default, breach
of contract and remedies. The summary description below is equally applicable
to each Shareholder Loan Agreement.
Payment of Principal and Interest
The Joint Venture will pay accrued interest until the first interest
payment date following the Commercial Operation Date semiannually at a rate of
13.75% per annum and thereafter monthly at a rate of 12.75% per annum.
Prepayments
Voluntary Prepayments. The Shareholder Loans will not be prepayable by the
Joint Venture without the consent of Pan-Western.
Mandatory Prepayments. If a Luannan Expropriation Event or a Luannan Event
of Loss shall occur, as soon as reasonably practicable, but no later than
fifteen (15) days after the date of receipt by the Joint Venture of any
proceeds in respect thereof, such Joint Venture shall make a reasonable good
faith determination as to whether (i) the Joint Venture Facility can be
rebuilt, repaired or restored to permit operation of the entire Luannan
Facility on a commercially feasible basis, and (ii) the proceeds thereof,
together with any other amounts that are available to commit to such
rebuilding, repair or restoration, are sufficient to pay for such rebuilding,
repair or restoration of the Joint Venture Facility. The determination of such
Joint Venture shall be evidenced by a certificate filed with Pan-Western which,
in the event such Joint Venture determines that the Joint Venture Facility can
be rebuilt, repaired or restored to permit operation of the entire Luannan
Facility or a portion thereof on a commercially feasible basis, shall also
certify that such proceeds, together with any other amounts that such Joint
Venture has available to commit to such rebuilding, repair or restoration, are
sufficient to pay the costs thereof, and shall also set forth a reasonable good
faith estimate by such Joint Venture of such costs. If the amount of such costs
exceeds $500,000, such certificate shall be accompanied by a Luannan Facility
Engineer's certificate, dated within five (5) days of the date of the Joint
Venture's certificate, stating that, based upon reasonable investigation and a
review of the determination made by the Joint Venture, the Luannan Facility
Engineer believes that the determination and the estimate of the total cost, if
any, set forth in the Joint Venture's certificate to be reasonable.
In the event that the Joint Venture determines not to rebuild, repair or
restore the Joint Venture Facility, all of the proceeds of such Luannan
Expropriation Event or Luannan Event of Loss shall be applied promptly to the
prepayment of the Shareholder Loan by the Joint Venture.
In the event that the determination is made to rebuild, repair or restore
the Joint Venture Facility, all of the proceeds of such Luannan Expropriation
Event or Luannan Event of Loss on deposit in the RMB Revenue Account shall be
transferred to the RMB Checking Account and, together with the amounts (if any)
on deposit in the Luannan Facility Construction Fund and such other amounts as
the Joint Venture has available for such rebuilding, repair or restoration
(which also shall be deposited in the Luannan Facility Construction Fund prior
to any disbursement for rebuilding, repair or restorations), used to pay the
costs of such rebuilding, repair or restoration, and any excess shall, upon
completion of such rebuilding, repair or restoration, be applied promptly to
the prepayment of the Shareholder Loan by the Joint Venture.
In addition to other amounts which shall be applied to the prepayment of
the Shareholder Loan as provided in the Shareholder Loan Agreement, the Joint
Venture shall apply promptly following receipt, (i) all Net Cash Proceeds from
the sale or other disposition of all or any part of the assets or other rights
of such Joint Venture, other than in the ordinary course of business (and
permitted pursuant to the terms of the Luannan Financing Agreements) having a
value, individually in excess of $100,000 and in the aggregate in any year, in
excess of $250,000, and (ii) performance liquidated damage payments which shall
have been made by the Luannan EPC Contractor to such Joint Venture under the
Luannan EPC Contract.
Certain Covenants of the Joint Venture
Repayment of Indebtedness. The Joint Venture shall repay all debt,
including without limitation, all sums due under the Shareholder Loan Agreement
and the other Luannan Financing Agreements, subject to any limitations
contained in the Luannan Financing Agreements.
Existence; Conduct of Business. Except as otherwise permitted by the
Shareholder Loan Agreement, the Joint Venture shall maintain and preserve its
existence as a Sino-foreign joint venture with limited liability and all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business, and engage only in the business contemplated by the Luannan
Financing Agreements and the Luannan Project Documents.
Use of Funds. The Joint Venture will use the proceeds of the Shareholder
Loan only for deposit in the accounts that such Joint Venture has established
pursuant to the Shareholder Loan Agreement pending disbursement for payment of
costs in connection with the Joint Venture Facility.
Compliance with Legal Requirements. The Joint Venture shall promptly and
diligently own, construct, maintain and operate its respective Joint Venture
Facility in compliance with all applicable legal requirements, and procure,
maintain and comply with or cause to be procured, maintained or complied with
all governmental approvals required for the ownership, construction, financing,
maintenance or operation of its respective Joint Venture Facility or any part
thereof at or before the time such governmental approvals become necessary for
the ownership, construction, financing, maintenance or operation of such Joint
Venture Facility as contemplated by the Luannan Project Documents, and except
that the Joint Venture may, at its expense and subject to certain conditions,
contest by appropriate proceedings conducted in good faith the validity or
application of any such legal requirements.
Operating Budget. The Joint Venture shall, on or before the anticipated
Luannan Commercial Operation Date, deliver to Pan-Western an annual operating
budget, certified by the Luannan Facility Engineer and in advance of each
calendar year thereafter, the Joint Venture shall adopt and deliver to Pan-
Western an annual operating budget, certified by the Luannan Facility Engineer.
Records and Financial Statements. The Joint Venture shall maintain
adequate books, accounts and records with respect to itself and its respective
Joint Venture Facility in compliance with the regulations of any governmental
authority having jurisdiction thereof, and provide Pan-Western with, among
other things, (a) as soon as available and in any event within 135 days after
the close of each fiscal year, audited financial statements of the Joint
Venture prepared in accordance with the PRC's generally accepted accounting
principles and certified by Arthur Andersen & Co. or such other comparable
independent accounting firm selected by Pan-Western and (b) as soon as
available and in any event within 90 days after the end of each quarterly
accounting period of its fiscal year, unaudited financial statements of the
Joint Venture.
Insurance. The Joint Venture shall maintain adequate insurance with
respect to its Joint Venture Facility based upon the advice of the Independent
Insurance Consultant.
Progress Report, Project Report and Project Budget. The Joint Venture
shall deliver to Pan-Western (i) within 30 days following the end of each
calendar quarter a quarterly status report describing in reasonable detail the
progress of the construction of its Joint Venture Facility, including without
limitation, the cost incurred to the end of such quarter and an estimate of the
time and cost required for completion of its Joint Venture Facility; (ii) prior
to the Luannan Commercial Operation Date, within 30 days following the end of
each calendar quarter, an update of the budget for the construction of its
Joint Venture Facility, including but not limited to an explanation or other
reconciliation of differences between such report and previous reports; (iii)
from and after the Luannan Commercial Operation Date, within 90 days following
the end of each calendar year an annual summary operating report, which shall
include, unless otherwise agreed to by Pan-Western, a numerical and narrative
assessment of (a) compliance with the annual operating budget, (b) statistical
data relating to the Joint Venture Facility, including heat rate, net
electrical and scheduled and unscheduled outages, (c) fuel deliveries and use,
(d) major maintenance activity, (e) casualty losses of value in excess of
$250,000 or the equivalent thereof in other currencies (whether or not covered
by insurance), (f) disputes with any other major project participant,
materialman, supplier or other person and any related claims against such Joint
Venture, (g) pricing information disclosed or made available pertaining to the
supply of coal and (h) compliance with governmental approvals; and (iv) all
progress reports provided by the Luannan EPC Contractor pursuant to the Luannan
EPC Contract and all progress reports prepared under the Luannan Power Purchase
Agreement.
Taxes; Increased Costs. The Joint Venture shall pay and discharge all
taxes and governmental charges or levies imposed on such Joint Venture or its
Joint Venture Facility. If any change of law subjects Pan-Western to any tax,
duty or other charge with respect to the Shareholder Loan or changes the basis
of taxation of payments by the Joint Venture to Pan-Western on the Shareholder
Loan (except for certain taxes or changes in the rate of taxation as set forth
in the Issuer Loan Agreement) or imposes on Pan-Western any other condition
directly related to the Shareholder Loan thereby increasing the cost to Pan-
Western of making, issuing, creating, renewing, participating in or maintaining
the Shareholder Loan or to reduce any amount receivable by Pan-Western under
the Shareholder Loan Agreement, then the Joint Venture will reimburse Pan-
Western for such increased costs or compensate Pan-Western for such reduced
amounts.
All payments made by the Joint Venture shall be made free and clear of,
and without deduction or withholding for any income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, imposed or
otherwise (or in the alternative, the initial interest rate established shall
include such charges in addition to the interest rate on the Issuer Loan)
levied by any governmental instrumentality, subject to certain limited
exceptions.
Registration of Shareholder Loans; Other Foreign Exchange Matters. The
Joint Venture will register each Shareholder Loan and maintain such
registration with the Tangshan Municipal Bureau for Exchange Control or any
successor entity.
Loan Payment Reserve. The final drawing under the Shareholder Loan by the
Joint Venture will be in an amount of $1.0 million which it will deposit in an
account, to be designated by Pan-Western, to be used as a reserve for the
payment of any amounts owing pursuant to the Shareholder Loan or the Luannan
Facility Note not paid when due; provided, however, to the extent that the
Joint Venture is obligated to make a performance bonus payment under the
Luannan EPC Contract, then the amount on deposit in the preceding debt service
reserve account shall be reduced by the amount of such performance bonus
payment.
Notices. The Joint Venture shall promptly provide to Pan-Western written
notice of (i) any Shareholder Loan Agreement Event of Default of which it has
knowledge, describing any action being taken or proposed to be taken with
respect to its Joint Venture Facility and (ii) any termination or event of
default or notice thereof under the Luannan Power Purchase Agreement.
Luannan Expropriation Event. The Joint Venture shall (i) promptly provide
Pan-Western with written notice of any Luannan Expropriation Event with respect
to its Joint Venture Facility, (ii) diligently pursue all its rights to
compensation, (iii) hold any Luannan Expropriation Proceeds received in respect
of such 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 Pan-Western and (iv) promptly
deposit all Luannan Expropriation Proceeds in the RMB Revenue Account. In
addition, the Joint Venture consents to the participation of Pan-Western in any
proceedings regarding a Luannan Expropriation Event.
Limitation on Indebtedness. The Joint Venture shall not create, or be
liable for any debt, except:
(i) the Shareholder Loan and additional loans from Pan-Western;
(ii) working capital debt; provided that after giving effect to such
additional debt, (a) the minimum (or lowest) projected Debt
Service Coverage Ratio for any calendar year will not be less
than 1.5 to 1 and (b) the average projected Debt Service Coverage
Ratio for any calendar year will not be less than 1.7 to 1;
provided, however, that working capital debt shall not at any
time exceed $1.0 million;
(iii) purchase money or capital lease obligations incurred to finance
assets of the Joint Venture that are readily replaceable personal
property with a principal amount or capitalized portion not
exceeding $1.0 million in the aggregate outstanding at any time;
(iv) trade accounts payable (other than for borrowed money) due within
90 days arising, and accrued expenses incurred, in the ordinary
course of business of constructing, operating or maintaining its
Joint Venture Facility on customary terms;
(v) interest or currency exchange rate protection agreements;
(vi) debt under the Joint Venture Guarantees and any other guarantees
of the obligations of the Joint Ventures; and
(vii) any debt to any other Joint Venture ((i) through (vii),
collectively "Joint Venture Permitted Indebtedness").
Limitation on Liens. The Joint Venture shall not create or permit to exist
any Lien other than Shareholder Loan Agreement Permitted Liens upon any assets
or properties of the Joint Venture, including, without limitation, the Joint
Venture Facility.
Nature of Business. The Joint Venture shall not amend or modify its
Articles of Association without the prior written consent of Pan-Western and
shall not engage in any business other than the ownership and operation of its
Joint Venture Facility.
Limitation on Sale or Lease of Facility Assets. The Joint Venture shall
not sell, lease, assign, transfer or otherwise dispose of the Joint Venture
Facility or other assets except (i) in the ordinary course of business to the
extent that such property is worn out or no longer useful or usable in
connection with the operation of the Joint Venture Facility 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 such lease or
transfer is required to comply with law or to obtain or maintain any
governmental approval, (ii) property with a fair market value of less than
$250,000 in any given year or $1.0 million in the aggregate since the date of
the Shareholder Loan Agreement, and (iii) the sale of electricity and steam in
accordance with the Luannan Project Documents.
Limitation on Merger, Consolidation, Liquidation, Dissolution. The Joint
Venture shall not merge or consolidate with or into any other Person, other
than any of the other Joint Ventures or other Sino-foreign joint ventures with
no material liabilities and no material activities unrelated to the Luannan
Facility, or liquidate, wind up, dissolve, or otherwise transfer or dispose of
all or any substantial part of its property, assets or business, or change its
legal form, or purchase or otherwise acquire any assets of any Person unless
such purchase or acquisition of assets is reasonably necessary for the
operation of the Joint Venture Facility or in the ordinary course of business.
Limitation on Contingent Liabilities. The Joint Venture shall not become
liable as a surety, guarantor, accommodation endorser or otherwise, for or upon
the obligation of any other Person; provided, however, that the Joint Venture
may guarantee or otherwise become liable in respect of any debt incurred by any
other Person (on its behalf) in connection with or relating to incurrence of
debt expressly permitted as described above in the section entitled "Limitation
on Indebtedness"; and provided, further, however, that this shall not be deemed
to prohibit (i) the acquisition of goods, supplies or merchandise in the normal
course of business on normal trade credit, or (ii) the endorsement of
negotiable instruments received in the normal course of business; or (iii) the
obligations under the Shareholder Loan Agreement and the Joint Venture
Guarantee to which the Joint Venture is a party, or any other guarantee of any
obligation of any other Joint Venture if such guarantee is required for the
development and construction of the Luannan Facility and is not contrary to any
legal requirement.
Limitation on Loans, Advances or Investments. The Joint Venture shall not
make or permit to remain outstanding any loans, extensions of credit or
advances to or investments in (whether by acquisition of any stocks, notes or
other securities or obligations) any Person except RMB Permitted Investments or
JV Dollar Permitted Investments or as expressly provided in the Luannan Project
Documents.
Immunity. In any proceedings in China or elsewhere in connection with any
of the Luannan Financing Agreements to which the Joint Venture is a party, the
Joint Venture shall not claim for itself or any of its assets immunity from
suit, execution, attachment or other legal process.
Limitations on Distributions. The Joint Venture shall not agree to any
restriction on its ability to pay dividends (excluding restrictions imposed by
law).
Limitation on Transactions With Affiliates. Except for the Luannan Project
Documents, the Joint Venture shall not directly or indirectly: (i) enter into
any transaction with any Person (including any affiliate) other than in the
ordinary course of business and on terms not less favorable to those available
from independent third parties or (ii) establish any sole and exclusive
purchasing or sales agency, or enter into any transaction whereby the Joint
Venture might receive less than the full commercial price (subject to normal
trade discounts) for electricity or pay more than the commercial price for
products of others.
Limitation on Partnerships; Subsidiaries. Except as contemplated by the
Luannan Project Documents, the Joint Venture shall not become a general or
limited partner in any partnership or a joint venturer in any joint venture,
acquire any ownership interest in any other Person or enter into any profit-
sharing or royalty agreement or other similar arrangement whereby the Joint
Venture's income or profits are, or might be, shared with any other Person, or
enter into any management contract or similar arrangement whereby its business
or operations are managed by any other Person (other than any agreement under
which the Joint Venture may provide operation and management, consulting or
other similar services) or form any subsidiary.
Limitation on Amendments. The Joint Venture shall not amend any of the
Luannan Project Documents without the prior written consent of Pan-Western.
Limitation on Assignment. Without the prior written consent of Pan-
Western, the Joint Venture shall not assign or otherwise transfer its rights
under any of the Luannan Project Documents to which it is a party or
governmental approvals to which it is a party to any Person.
Abandonment of Luannan Facility; Improper Use. The Joint Venture shall not
voluntarily cease or abandon the development, construction or operation of the
Joint Venture Facility or use, maintain, operate or occupy, or allow the use,
maintenance, operation or occupancy of, any portion of the site of the Luannan
Facility or facility for certain prohibited purposes.
Shareholder Loan Agreement Events of Default
The occurrence of any of the following events shall constitute a
Shareholder Loan Agreement Event of Default pursuant to the Shareholder Loan
Agreement:
(i) default in the payment of principal of or any interest on the
Shareholder Loan or other amount owed by the Joint Venture to Pan-
Western within 15 banking days after such amounts are due;
(ii) any representation or warranty confirmed or made in any Luannan
Project Documents by the Joint Venture or in any writing provided
by the Joint Venture in connection with the transactions
contemplated by the Shareholder Loan Agreement shall be found to
have been incorrect when made or deemed to be made; provided,
however, that no Shareholder Loan Agreement Event of Default
shall occur if within sixty (60) days after the date on which the
general manager of the Joint Venture has actual notice that such
incorrect statement has occurred, the Joint Venture shall deliver
in good faith, to Pan-Western an officer's certificate stating in
reasonable detail that either (a) the Joint Venture has
eliminated any adverse effect relating to such incorrect
statement or (b) the Joint Venture has taken action that it
reasonably believes will eliminate the adverse effect relating to
such incorrect statement within a reasonable specified time;
(iii) failure of the Joint Venture to perform or observe certain
affirmative covenants under the Shareholder Loan Agreement
(including but not limited to, repayment of indebtedness and use
of funds) and such defaults have not been remedied after the
expiration of the applicable grace period, if any;
(iv) failure of the Joint Venture to observe any of the negative
covenants under the Shareholder Loan Agreement (other than
limitation on liens) and such defaults have not been remedied
prior to the expiration of any applicable cure or grace period;
(v) default by the Joint Venture or any other party under any of the
Luannan EPC Contract, the Luannan EPC Guarantee, the Transmission
Facilities Construction Agreement, the Luannan Power Purchase
Agreement and the Financing Agreements to which the Joint Venture
is a party and such default shall continue unremedied after the
expiration of the applicable grace period, if any;
(vi) voluntary and involuntary bankruptcy or insolvency events of any
Joint Venture, North China Power Company, the Luannan EPC
Contractor or Harbin Power (if such involuntary bankruptcy has
not been dismissed within 60 days from the bringing of
involuntary bankruptcy);
(vii) entry of a final judgment or judgments against the Joint Venture
in the aggregate amount of $1.0 million (exclusive of judgment
amounts fully covered by insurance where the insured has admitted
liability) subject to customary payment, dismissal or stay
rights; or entry of a judgment in the form of an injunction or
similar form of relief requiring suspension or abandonment of
construction or operation of the Joint Venture Facility of such
Joint Venture on grounds of violation of a legal requirement and
failure of the Joint Venture to have such injunction stayed or
discharged within 90 days;
(viii)the Joint Venture shall default for a period beyond any
applicable grace period in the payment of any principal, interest
or other amount due under any agreement involving the borrowing
of money or the advance of credit and the outstanding amount
payable under all such agreements in the aggregate equals or
exceeds $250,000 in the aggregate;
(ix) any of the Luannan Project Documents, the Luannan Financing
Agreements or the Luannan EPC Guarantee shall have become
invalid, illegal, or unenforceable;
(x) the Joint Venture ceases to have the right to use the site of the
Luannan Facility in the manner contemplated by the Luannan
Project Documents (or to obtain sufficient water for its
operations);
(xi) the Joint Venture abandons the Joint Venture Facility or
otherwise ceases to pursue the operations of the Joint Venture
Facility in accordance with standard industry practice, or,
except as otherwise permitted by the terms of the Shareholder
Loan Agreement, the Joint Venture shall sell or otherwise dispose
of its interests in the Joint Venture Facility;
(xii) the Luannan Commercial Operation Date shall not have occurred by
December 31, 1999;
(xiii)any governmental approvals or permits (whether central,
provincial, municipal, local or otherwise) necessary for (a) the
establishment of the Joint Venture, (b) the ownership,
construction, maintenance, financing or operation of the Luannan
Facility, (c) the setting or adjustment of the electricity price
for the Luannan Facility in accordance with the method of
calculation set forth in the attachments to the Pricing Document
or (d) the conversion or transfer of any foreign currency shall
not be obtained if and when required, or shall be modified,
revoked or canceled, or a notice of violations is issued under
any governmental authorization on grounds of, or illegality of
the absence of any required authorization, or any proceeding is
commenced by any governmental instrumentality for the purpose of
modifying, revoking or canceling any governmental authorization
(an "Approval Event of Default");
(xiv) any adverse change in PRC law; and
(xv) the Joint Venture Facility is destroyed, or suffers an actual or
constructive total loss.
Description of Joint Venture Guarantees
Each of the Joint Ventures entered into Joint Venture Guarantees on
September 24, 1996 to unconditionally and irrevocably guarantee to Pan-Western
the prompt payment and performance by each of the other three Joint Ventures of
such Joint Venture's obligations to Pan-Western pursuant to its respective
Shareholder Loan Agreement.
The Issuer Loan Agreement
The Issuer has entered into the Issuer Loan Agreement with Pan-Western,
dated as of the Closing Date, pursuant to which the Issuer Loan will be made.
The Issuer Loan Agreement provides, among other things, the rights and
obligations of the Issuer and Pan-Western, as lender and borrower,
respectively, including, without limitation, principal and interest payments,
conditions precedent, covenants, representations and warranties, events of
default, breach of contract and remedies.
Payment of Principal and Interest
Pan-Western will pay to the Issuer accrued interest and principal on a
monthly basis according to a schedule that will be designed, ultimately, to
provide the Issuer sufficient funds for it to pay principal, premium, if any,
and interest when due on the Exchange Notes. The interest to be charged on the
Issuer Loan will be established based on the interest rate applicable to the
Exchange Notes.
Prepayments
Voluntary Prepayments. The Issuer Loan will not be repayable by Pan-
Western without the consent of the Issuer.
Mandatory Prepayments. After payment of principal and interest and certain
operating expenses, the Issuer Loan will require that Pan-Western use all
available funds to prepay the Issuer Loan.
Certain Covenants of Pan-Western
Repayment of Indebtedness. Pan-Western shall repay all debt, including
without limitation, all sums due under the Issuer Loan Agreement.
Existence; Conduct of Business. Except as otherwise permitted by the
Indentures, Pan-Western shall maintain and preserve its existence as a Cayman
Islands exempted company with limited liability and all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, and
engage only in the business contemplated by the Indentures, the Luannan
Financing Agreements and the Luannan Project Documents.
Use of Funds. Pan-Western will use the proceeds of the Issuer Loan only to
make (i) the Shareholder Loans and (ii) the JV Equity Contributions. Pan-
Western will advance monies to the Joint Ventures (whether in the form of
installments of the Shareholder Loans or installments of the JV Company Equity
Contributions) only in the manner contemplated by the Indentures and described
above under "--The Funds--The Issuer Funds."
Compliance with Legal Requirements. Pan-Western shall promptly and
diligently procure, maintain and comply with or cause to be procured,
maintained or complied with all governmental approvals required for financing
of the Joint Ventures and the transactions contemplated by the Luannan
Financing Documents, and except that Pan-Western may, at its expense and
subject to certain conditions, contest by appropriate proceedings conducted in
good faith the validity or application of any such legal requirements.
Operating Budget. Pan-Western shall deliver to the Issuer an annual
operating budget in advance of each calendar year.
Records and Financial Statements. Provisions with respect to records and
financial statements substantially mirror those of the comparable provision
within the Shareholder Loan Agreements. See above "--The Shareholder Loan
Agreements--Records and Financial Statements."
Progress Report, Project Report and Project Budget. Pan-Western, as soon
as practicable upon the receipt thereof, shall forward to the Issuer any and
all progress reports, project reports and project budgets that it receives from
the Joint Ventures.
Taxes; Increased Costs. Pan-Western shall pay and discharge all taxes and
governmental charges or levies imposed on it. If any change of law subjects the
Issuer to any tax, duty or other charge with respect to the Issuer Loan or
changes the basis of taxation of payments by Pan-Western to the Issuer on the
Issuer Loan (except for certain taxes or changes in the rate of taxation as set
forth in the Indentures) or imposes on the Issuer any other condition directly
related to the Issuer Loan thereby increasing the cost to the Issuer of making,
issuing, creating, renewing, participating in or maintaining the Issuer Loan or
to reduce any amount receivable by the Issuer under the Issuer Loan Agreement,
then Pan-Western will reimburse the Issuer for such increased costs or
compensate the Issuer for such reduced amounts.
All payments made by Pan-Western shall be made free and clear of, and
without deduction or withholding for any income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, imposed or
otherwise (or in the alternative, the initial interest rate established shall
include such charges in addition to the interest rate on the Exchange Notes)
levied by any governmental instrumentality, subject to certain limited
exceptions.
Notices. Provisions with respect to notices substantially mirror those of
the comparable provision within the Shareholder Loan Agreements. See above "--
The Shareholder Loan Agreements--Notices."
Luannan Expropriation Event. Upon notice from a Joint Venture of a Luannan
Expropriation Event, Pan-Western shall endeavor to participate in any
proceedings regarding such an event. In the event that Pan-Western receives
payments from a Joint Venture with respect to a Luannan Expropriation Event,
such proceeds shall be used to prepay the Issuer Loan.
Limitation on Indebtedness. Pan-Western shall not create, or be liable for
any Indebtedness, except the Issuer Loan and additional loans required by law
from the Issuer.
Limitation on Liens. Pan-Western shall not create or permit to exist any
lien other than as contemplated by the Indentures.
Nature of Business. Pan-Western shall not amend or modify its Articles of
Association without the consent of the Issuer and shall not engage in any
business other than owning its interest in the Joint Ventures.
Limitation on Sale or Lease of Assets. Pan-Western shall not sell, lease,
assign, transfer or otherwise dispose of its interests, equity or debt, in the
Joint Ventures other than as contemplated by the Indentures.
Limitation on Merger, Consolidation, Liquidation, Dissolution. Pan-Western
shall not merge or consolidate with or into any other Person, other than the
Issuer or Pan-Sino.
Limitation on Contingent Liabilities. Pan-Western shall not become liable
as a surety, guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person.
Limitation on Loans, Advances or Investments. Pan-Western shall not make
or permit to remain outstanding any loans, extensions of credit or advances to
or investments in (whether by acquisition of any stock, notes or other
securities or obligations) any Person except as expressly provided in the
Luannan Financing Documents, the Luannan Project Documents, or the Indentures.
Limitations on Distributions. Other than as contemplated by the
Indentures, Pan-Western shall not agree to any restriction on its ability to
pay dividends (excluding restrictions imposed by law).
Limitations on Transactions With Affiliates. Except for the Luannan
Financing Documents and the Luannan Project Documents, Pan-Western shall not
directly or indirectly enter into any transaction with any Person (including
any affiliate) other than in the ordinary course of business and on terms not
less favorable to those available from independent third parties.
Limitation on Partnerships; Subsidiaries. Except as contemplated by the
Luannan Financing Documents, the Luannan Project Documents or the Indentures,
Pan-Western shall not become a general or limited partner in any partnership or
a joint venturer in any joint venture, acquire any ownership interest in any
other Person or enter into any profit-sharing or royalty agreement or other
similar arrangement whereby Pan-Western's income or profits are, or might be,
shared with any other Person, or enter into any management contract or similar
arrangement whereby its business or operations are managed by any other Person.
Limitation on Amendments. Pan-Western shall not amend any of the Luannan
Financing Documents or the Luannan Project Documents without the consent of the
Issuer.
Limitation on Assignment. Without the prior written consent of the Issuer,
Pan-Western shall not assign or otherwise transfer its rights under any of the
Luannan Financing Documents or Luannan Project Documents to which it is a party
or governmental approvals to which it is a party to any Person.
Actions with Respect to the Joint Ventures. All matters under the
Shareholder Loan Agreements which require the consent or approval of Pan-
Western shall also require the written consent or approval of the Issuer.
Issuer Loan Agreement Events of Default
The occurrence of any of the following events shall constitute an Issuer
Loan Agreement Event of Default:
(i) default in the payment of principal of or any interest on the
Issuer Loan or other amount owed by Pan-Western to the Issuer
within 15 banking days after such amounts are due;
(ii) any representation or warranty confirmed or made in any Luannan
Financing Documents or the Luannan Project Documents by Pan-
Western or in any writing provided by Pan-Western in connection
with the transactions contemplated by the Issuer Loan Agreement
shall be found to have been incorrect when made or deemed to be
made; provided, however, that no Issuer Loan Agreement Event of
Default shall occur if within sixty (60) days after the date on
which Pan-Western has actual notice that such incorrect statement
has occurred, Pan-Western shall deliver in good faith, to the
Issuer an officer's certificate stating in reasonable detail that
either (a) Pan-Western has eliminated any adverse effect relating
to such incorrect statement or (b) Pan-Western has taken action
that it reasonably believes will eliminate the adverse effect
relating to such incorrect statement within a reasonable
specified time;
(iii) failure of Pan-Western to perform or observe certain affirmative
covenants under the Issuer Loan Agreement (including but not
limited to, repayment of indebtedness and use of funds) and such
defaults have not been remedied after the expiration of the
applicable grace period, if any;
(iv) failure of Pan-Western to observe any of the negative covenants
under the Issuer Loan Agreement and such defaults have not been
remedied prior to the expiration of any applicable cure or grace
period;
(v) voluntary and involuntary bankruptcy or insolvency events of Pan-
Western; subject to customary cure and replacement rights for
involuntary bankruptcy;
(vi) entry of a final judgment or judgments against Pan-Western in the
aggregate amount of $1.0 million (exclusive of judgment amounts
fully covered by insurance where the insured has admitted
liability) subject to customary payment, dismissal or stay
rights;
(vii) Pan-Western shall default for a period beyond any applicable
grace period in the payment of any principal, interest or other
amount due under any agreement involving the borrowing of money
or the advance of credit and the outstanding amount payable under
all such agreements in the aggregate equals or exceeds $500,000;
and
(viii)any Default under the Shareholder Loan Agreements.
PLAN OF DISTRIBUTION
Each Broker-Dealer that receives Exchange Notes 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 Notes. 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 Notes received in
exchange for Old Notes where such Old Notes were acquired as result of market
making activities or other trading activities. The Company and the Issuer
have agreed to make available for a period of up to 270 days a prospectus
meeting the requirements of the Securities Act to any Broker-Dealer for use in
connection with any such resale so long as they notify the Issuer or the
Company in writingwithin 30 business days after the consummation of the
Exchange Offer that they have acquired Exchange Notes for their own account. A
broker-dealer that delivers such a prospectus to a purchaser in connection with
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
_____________, 1997 (90 days from the date of this Prospectus), all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus. See "The Exchange Offer Procedures for Tendering."
Each holder of Old Notes who wishes to exchange such Old Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes 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 Notes), (ii) it has no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes 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 Notes by broker-dealers. Exchange Notes 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 Notes 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 Notes. Any broker-dealer that resells Exchange Notes 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 Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of Exchange Notes 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 Exchange Notes (including any brokers
or dealers) against certain liabilities, including liabilities under the
Securities Act, as set forth in the Registration Rights Agreement.
EXPERTS
Independent Accountants
The consolidated financial statements of the Issuer as of December 31,
1995 and 1996 and for the period from inception (July 20, 1994) through
December 31, 1994, for the years ended December 31, 1995 and 1996 and for the
period from inception (July 20, 1994) through December 31, 1996, and the
consolidated financial statements of the Company as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent accounts, as stated in their reports appearing herein. Deloitte &
Touche LLP has neither examined nor compiled the prospectie financial
information appearing in the Prospectus and 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 Forma of Panda
Global Holdings, Inc.," dated April 11, 1997, updated June 6, 1997 (the
"Consolidated Pro Forma Report"), included as Appendix C 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.
Luannan Facility
Parsons Brinckerhoff Energy Services, Inc. has prepared a report entitled
"Engineer's Review and Report--2x50 MW Coal-Fired Power Plant at Luannan,
China," dated April 11, 1997, and with an update report dated June 6, 1997 (as
updated, the "Luannan Engineering Report"), included as Appendix D to this
Prospectus. The Luannan Engineering Report is included herein in reliance on
such firm as experts in preparing engineering reports for similar projects. The
Luannan Engineering Report should be read in its entirety by all prospective
investors for information with respect to the Luannan Facility and the related
subjects discussed therein.
Marston & Marston has prepared a report entitled "Review of the Coal
Supply Arrangements for the Luannan Power Project of Panda Energy
International, Inc.," dated April 11, 1997, and with an update report dated
June 6, 1997 (as updated, the "Luannan Coal Consultant's Report"), included as
Appendix E to this Prospectus. The Luannan Coal Consultant's Report is included
herein in reliance on such firm as experts in analyzing the coal industry,
including coal supply and transportation arrangements for independent power
projects. The Luannan Coal Consultant's Report should be read in its entirety
by all prospective investors for information with respect to the Luannan
Facility and the related subjects discussed therein.
Rosemary Facility
Burns & McDonnell has prepared a report entitled "Panda-Rosemary
Cogeneration Project Condition Assessment Report," dated April 11, 1997, and
with an update report dated June 6, 1997 (as updated, the "Rosemary Engineering
Report"). The Rosemary Engineering Report is summarized herein in reliance upon
such firm as experts in preparing independent engineering reports for similar
projects. The Rosemary Engineering Report is filed as an exhibit to the
Registration Statement on Form S-1, filed with the Commission, of which this
Prospectus forms a part.
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, as updated on April 11, 1997
and as further updated June 6, 1997 (as updated, the "Rosemary Fuel
Consultant's Report"). The Rosemary Fuel Consultant's Report is summarized
herein in reliance upon such firm as experts in preparing fuel consultant's
reports for similar projects. The Rosemary Fuel Consultant's Report is filed as
an exhibit to the Registration Statement on Form S-1 filed with the Commission,
of which this Prospectus forms a part.
Brandywine Facility
ICF Resources Incorporated, a subsidiary of ICF Kaiser International, has
prepared a report entitled "Independent Panda-Brandywine Pro Forma
Projections," dated April 11, 1997, and with an update report dated June 6,
1997 (as updated, the "Brandywine Pro Forma Report"). The Brandywine Pro Forma
Report is summarized herein in reliance on such firm as experts in energy
economics and financial analysis. The Brandywine Pro Forma Report is filed as
an exhibit to the Registration Statement on Form S-1, filed with the
Commission, of which this Prospectus forms a part.
Pacific Energy Systems, Inc. has prepared a report entitled "Independent
Engineer's Report Panda-Brandywine Cogeneration Project," dated July 22, 1996,
as updated on April 11, 1997, and as further updated June 6, 1997 (as updated,
the "Brandywine Engineering Report"). The Brandywine Engineering Report is
summarized herein in reliance on such firm as experts in preparing independent
engineering reports for similar projects. The Brandywine Engineering Report is
filed as an exhibit to the Registration Statement on Form S-1, filed with the
Commission, of which this Prospectus forms a part.
C.C. Pace Resources, Inc. has prepared a report entitled "Panda-
Brandywine, L.P. Generating Facility Fuel Consultant's Report," dated July 2,
1996, as updated on April 11, 1997, and as further updated June 6, 1997 (as
updated, the "Brandywine Fuel Consultant's Report"). The Brandywine Fuel
Consultant's Report is summarized herein in reliance upon such firm as experts
in preparing fuel consultant's reports for similar projects. The Brandywine
Fuel Consultant's Report is filed as an exhibit to the Registration Statement
on Form S-1, filed with the Commission, of which this Prospectus forms a part.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes is being passed upon
for the Issuer, the Company and the Joint Ventures by Chadbourne & Parke LLP.
Certain legal matters with respect to PRC law are being passed upon for the
Issuer, the Company and the Joint Ventures by Cai, Zhang & Lan. Certain legal
matters with respect to the Cayman Islands law are being passed upon for the
Issuer and the Company by Maples & Calder.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF THE COMPANY:
Panda Global Holdings, Inc. and Subsidiaries Consolidated Financial Statements:
Independent Accountants' Report ..................................... F-3
Consolidated Balance Sheets as of December 31, 1995 and 1996 ........ F-4
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 .................................. F-5
Consolidated Statements of Shareholder's Deficit for the years
ended December 31, 1994, 1995 and 1996 ............................ F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 .................................. F-7
Notes to Consolidated Financial Statements for the years ended
December 31, 1994, 1995 and 1996 .................................. F-8
Panda Global Holdings, Inc. and Subsidiaries Unaudited Condensed
Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1996
and March 31, 1997 ................................................ F-21
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1997 .............................. F-22
Condensed Consolidated Statements of Shareholder's Deficit for
the three months ended March 31, 1997 ............................. F-23
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1997 .............................. F-24
Notes to Condensed Consolidated Financial Statements for the
three months ended March 31, 1996 and 1997 ........................ F-25
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS - CONTINUED
FINANCIAL STATEMENTS OF THE ISSUER:
Panda Global Energy Company and Subsidiaries Consolidated Financial Statements:
Independent Accountants' Report ...................................... F-27
Consolidated Balance Sheets as of December 31, 1995 and 1996 ........ F-28
Consolidated Statements of Operations for the period from
inception (July 20, 1994) through December 31, 1994, the
years ended December 31, 1995 and 1996, and the period
from inception through December 31, 1996 ........................... F-29
Consolidated Statements of Cash Flows for the period from
inception (July 20, 1994) through December 31, 1994, the
years ended December 31, 1995 and 1996, and the period
from inception through December 31, 1996 ........................... F-30
Consolidated Statements of Shareholder's Deficit for the
period from inception (July 20, 1994) through December
31, 1994 and the years ended December 31, 1995 and 1996 ............ F-31
Notes to Consolidated Financial Statements for the period
from inception (July 20, 1994) through December 31, 1994,
the years ended December 31, 1995 and 1996, and the
period from inception through December 31, 1996 .................... F-32
Panda Global Energy Company and Subsidiaries Unaudited
Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of December 31,
1996 and March 31, 1997 ............................................ F-34
Condensed Consolidated Statements of Operations and
Deficit Accumulated During the Development Stage for
the three months ended March 31, 1996 and 1997 and
for the period from inception (July 20, 1994) through
March 31, 1997 ..................................................... F-35
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1997 and for the
period from inception (July 20, 1994) through March 31, 1997 ....... F-36
Notes to Condensed Consolidated Financial Statements for
the three months ended March 31, 1996 and 1997 and for
the period from inception (July 20, 1994) through March 31, 1997 ... F-37
F-2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
of Panda Energy International, Inc.
We have audited the accompanying consolidated balance sheets of Panda Global
Holdings, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1996, and the related consolidated statements of operations, shareholder's
deficit and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1995
and 1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
April 9, 1997
F-3
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
1995 1996
------------- -------------
Current Assets:
Cash and cash equivalents ................. $ 1,166,385 $ 1,335,086
Restricted cash -- current ................ 1,876,142 17,809,921
Accounts receivable ....................... 5,199,999 9,402,685
Fuel oil, spare parts and supplies ........ 3,084,168 7,913,777
Other current assets ...................... 12,664 164,905
------------- -------------
Total current assets ................... 11,339,358 36,626,374
Plant and equipment:
Electric generating facilities ............ 105,168,094 288,716,711
Furniture and fixtures .................... 29,080 494,418
Less accumulated depreciation ............. (21,008,036) (26,539,539)
Construction in progress .................. 132,604,494 --
Development costs ......................... 3,350,924 6,053,361
------------- -------------
Total plant and equipment, net ......... 220,144,556 268,724,951
Restricted cash -- debt service
reserves and escrow deposits .............. 10,947,948 32,548,366
Debt issuance costs, net of accumulated
amortization of $3,169,285 and
$165,015, respectively .................... 3,990,655 7,570,521
Partnership formation costs, net of
accumulated amortization of $2,132,440
and $2,665,540 respectively ............... 533,100 --
------------- -------------
$ 246,955,617 $ 345,470,212
============= =============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ..................... $ 5,597,818 $ 660,167
Interest and letter of credit fees ..... 2,540,347 6,297,558
Operating expenses and other ........... 1,219,061 6,991,796
Current portion of long-term debt ......... 9,100,000 5,717,623
------------- -------------
Total current liabilities .............. 18,457,226 19,667,144
Long term debt, less current portion ......... 234,608,361 209,830,918
Capital lease obligation ..................... -- 217,488,645
Minority interest ............................ 36,835,666 --
Commitments and contingencies
(Notes 2, 5 and 8) ........................ -- --
Shareholder's deficit:
Common stock, par value $.01; 1,000
shares authorized, issued and
outstanding ............................ 10 10
Advances to parent ........................ (26,869,548) (52,782,940)
Accumulated deficit ....................... (16,076,098) (48,733,565)
------------- -------------
Total shareholder's deficit ............ (42,945,636) (101,516,495)
------------- -------------
$ 246,955,617 $ 345,470,212
============= =============
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Electric capacity and energy sales ........... $ 30,664,096 $ 29,858,475 $ 32,273,736
Steam and chilled water sales ................ 650,575 473,040 502,757
Interest income .............................. 602,783 895,268 1,518,006
------------ ------------ ------------
31,917,454 31,226,783 34,294,499
------------ ------------ ------------
Expenses:
Plant operating expenses ..................... 8,940,146 9,347,707 12,050,495
Project development and administrative ....... 1,779,349 2,550,376 5,187,348
Interest expense and letter of credit fees ... 11,017,418 11,715,929 19,414,012
Depreciation ................................. 4,208,314 4,209,453 5,531,502
Amortization of debt issuance costs .......... 600,382 554,311 493,799
Amortization of partnership formation costs .. 533,116 533,116 533,100
------------ ------------ ------------
27,078,725 28,910,892 43,210,256
------------ ------------ ------------
Income (loss) before minority interest
and extraordinary item ........................ 4,838,729 2,315,891 (8,915,757)
Minority interest ............................... (5,699,994) (5,047,580) (2,405,160)
------------ ------------ ------------
Loss before extraordinary item .................. (861,265) (2,731,689) (11,320,917)
Extraordinary item - loss on
early extinguishment of debt .................. -- -- (21,336,550)
------------ ------------ ------------
Net loss ........................................ $ (861,265) $ (2,731,689) $(32,657,467)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
Total
Common Advances Accumulated Shareholder's
Stock to Parent Deficit Deficit
-------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994 . $ 10 $ (8,152,454) $(12,483,144) $ (20,635,588)
Advances to parent ....... -- (5,712,475) -- (5,712,475)
Net loss ................. -- -- (861,265) (861,265)
-------- ------------ ------------ -------------
Balance, December 31, 1994 10 (13,864,929) (13,344,409) (27,209,328)
Advances to parent ....... -- (13,004,619) -- (13,004,619)
Net loss ................. -- -- (2,731,689) (2,731,689)
-------- ------------ ------------ -------------
Balance, December 31, 1995 10 (26,869,548) (16,076,098) (42,945,636)
Advances to parent ....... -- (25,913,392) -- (25,913,392)
Net loss ................. -- -- (32,657,467) (32,657,467)
-------- ------------ ------------ -------------
Balance, December 31, 1996 $ 10 $(52,782,940) $(48,733,565) $(101,516,495)
======== ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ......................................... $ (861,265) $ (2,731,689) $ (32,657,467)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on early extinguishment of debt .......... -- -- 21,336,550
Minority interest ............................. 5,699,994 5,047,580 2,405,160
Depreciation .................................. 4,208,314 4,209,453 5,531,502
Amortization of debt issuance costs ........... 600,382 554,311 493,799
Amortization of partnership formation costs ... 533,116 533,116 533,100
Amortization of loan discount and deferred
interest ..................................... -- 124,176 391,491
Changes in assets and liabilities:
Accounts receivable ........................... (2,454,524) 460,319 (4,202,686)
Fuel oil, spare parts and supplies ............ (33,698) 261,516 (4,829,609)
Other current assets .......................... 6,646 26,484 (152,241)
Accounts payable and accrued expenses ......... (114,382) (81,728) 9,529,946
------------ ------------- -------------
Net cash provided by operating activities 7,584,583 8,403,538 (1,620,455)
------------ ------------- -------------
INVESTING ACTIVITIES:
Restricted cash-current .......................... 2,847,429 695,684 (15,933,779)
Additions to plant and equipment ................. (5,045,085) (124,109,566) (62,881,838)
Acquisition of minority interest ................. -- -- (34,256,423)
Increase in restricted cash -- debt service
reserves and escrow deposits ................. (457,538) (747,655) (21,600,418)
------------ ------------- -------------
Net cash used in investing activities ...... (2,655,194) (124,161,537) (134,672,458)
------------ ------------- -------------
FINANCING ACTIVITIES:
Distributions to minority interest owner ......... (4,590,354) (3,800,279) (1,152,113)
Advances to parent ............................... (6,954,287) (13,004,619) (25,913,392)
Proceeds from long-term debt ..................... 16,534,706 147,541,291 299,677,926
Repayment of long-term debt ...................... (7,500,000) (17,500,000) (128,415,271)
Debt issuance costs .............................. (498,281) (334,391) (7,735,536)
------------ ------------- -------------
Net cash provided by (used in)
financing activities ...................... (3,008,216) 112,902,002 136,461,614
------------ ------------- -------------
Increase (decrease) in cash and cash equivalents .... 1,921,173 (2,855,997) 168,701
Cash and cash equivalents, beginning of period ...... 2,101,209 4,022,382 1,166,385
------------ ------------- -------------
Cash and cash equivalents, end of period ............ $ 4,022,382 $ 1,166,385 $ 1,335,086
============ ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized ........ $ 10,855,819 $ 11,799,297 $ 15,656,801
NON CASH INVESTING AND FINANCING ACTIVITIES:
Accrued construction costs ....................... $ 1,489,412 $ 5,597,818 $ 660,167
Interest cost .................................... -- 153,861 172,924
Debt discount .................................... 1,241,812 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Holdings, Inc. ("Panda Global", or collectively with its
subsidiaries the "Company"), a wholly owned subsidiary of Panda Energy
International, Inc. ("PEII"), was formed in March 1997 to hold the ownership
interests in four independent power projects which were formerly owned by other
wholly owned subsidiaries of PEII. The ownership interests were transferred to
the Company at PEII's historical cost. Because the transfers occurred between
entities under common control, the transactions have been accounted for in a
manner similar to a pooling of interests. Panda Global has two direct wholly
owned subsidiaries: Panda Energy Corporation ("PEC")( a Texas corporation) which
indirectly holds the Company's ownership interests in domestic projects, and
Panda Global Energy Company ("Global Cayman")(a Cayman Islands company), which
indirectly holds the Company's ownership interest in an international project
located in China.
PEC, through its wholly owned subsidiary Panda Interfunding Corporation
("PIC") and PIC's wholly owned subsidiary Panda Interholding Corporation
("Interholding"), holds the Company's ownership interests in the Rosemary
project and the Brandywine project (see Note 5). The entities holding such
ownership interests include the following: Panda Rosemary Corporation ("PRC"), a
91% 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), a 50%
limited partner in Panda-Brandywine; and Brandywine Water Company. The Company,
through its general and limited partnership interests, owns 100% of
Panda-Brandywine and, as of July 31, 1996, owns 100% of Panda-Rosemary. Prior to
July 31, 1996, the Company owned 10% of Panda-Rosemary (see Note 5). The
Rosemary and Brandywine projects are located in the United States. Other direct
or indirect wholly owned subsidiaries of PIC include Panda Funding Corporation
("PFC"), Panda-Rosemary Funding Corporation ("PRFC") and Panda Cayman
Interfunding Corporation ("PIC Cayman"), which have been formed to facilitate
the financing of the development and acquisition of independent power projects.
Additionally, PEC holds the Company's 100% ownership interest in the
Kathleen project (see Note 5) through its wholly owned subsidiaries.
Global Cayman (which collectively with its subsidiaries is a development
stage enterprise having no operating revenues) holds a 95.5% ownership interest
in Pan-Sino Energy Development Company LLC ("Pan-Sino")(a Cayman Islands
company), which in turn holds a 99% ownership interest in Pan-Western Energy
Corporation LLC ("Pan-Western")(a Cayman Islands company), which in turn owns an
approximately 88% interest in four joint venture companies (the "Joint Venture
Companies") organized under the laws of the People's Republic of China ("China")
to develop and construct an independent power project to be located in China
(see Note 5). The Joint Venture Companies are: Tangshan Panda Heat and Power
Company, Ltd. ("Tangshan Panda"), Tangshan Pan-Western Heat and Power Company,
Ltd. ("Tangshan Pan-Western"), Tangshan Cayman Heat and Power Company, Ltd.
("Tangshan Cayman") and Tangshan Pan-Sino Heat Company, Ltd. ("Tangshan
Pan-Sino").
Collectively, PEC, Pan-Sino and Pan-Western are the predecessors
of the Company.
All material intercompany accounts and transactions have been eliminated
in consolidation.
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 -- Restricted cash-current represents escrowed
cash which may be used to pay operating expenses and make debt payments and
distributions to partners pursuant to the trust indenture agreements.
F-8
<PAGE>
RESTRICTED CASH - 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 pursuant to the trust indenture agreements, or
as collateral for performance guarantees for projects under development or
construction.
FUEL OIL, SPARE PARTS AND SUPPLIES -- These items include fuel oil stored
on-site and various spare parts and supplies necessary for plant maintenance.
The items are valued at cost using the weighted average method, and are
expensed, as plant 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 under construction are
capitalized as construction in progress. Construction in progress balances are
transferred to electric generating facilities when the assets are ready for
their intended use. Capitalized interest was $803,254, $5,793,296 and
$11,055,172 during 1994, 1995 and 1996, respectively. Maintenance and repair
costs are charged to expense as incurred. Costs of developing new projects are
capitalized when the projects reach an advanced stage of development where the
execution of a power purchase agreement has occurred or is imminent. Such costs
include direct incremental amounts incurred for professional services, permits,
options, travel and other related costs. The continued capitalization is subject
to on-going risks related to successful completion, including legal, political,
siting, financing, construction, permitting and contract compliance. Development
costs are transferred to construction in progress when financing has been
obtained and construction activity has commenced, or are expensed at the time
the Company determines that a particular project will no longer be developed.
Other projects currently under development by PEII may be transferred to the
Company at PEII's historical cost when construction financing has been obtained
or when the completed projects have commenced commercial operations, subject to
certain limitations in the Company's indentures (see Note 6).
DEBT ISSUANCE COSTS -- The costs related to the issuance of debt are
capitalized and amortized using the effective interest method over the term 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 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. Management is not aware of any contingent liabilities that currently
exist with respect to environmental matters.
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 are recorded if environmental assessments and/or remedial efforts
become probable, and the costs reasonably estimable.
REVENUE RECOGNITION -- Revenue generated from the sale of electric
capacity and energy from the Rosemary and Brandywine projects is recognized
based on the amount billed under the power purchase agreements. The revenue
generated from the sale of electric capacity and energy from 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 "Accounting for Income Taxes" (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. PEII's policy is to allocate income tax expense or benefits to the Company
as if it filed a separate tax return.
F-9
<PAGE>
ALLOCATION OF ADMINISTRATIVE COSTS -- PEII performs certain accounting,
legal, insurance, and consulting services for the Company. These general and
administrative costs are generally allocated to the Company using the percentage
of time PEII personnel spent performing these services. The expenses allocated
were $1,003,353, $1,599,200 and $3,308,000 in 1994, 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.
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 of
certain long-lived assets if circumstances indicate that the carrying value of
those assets may not be recoverable. The Company adopted SFAS 121 in 1996 and
such adoption did not have a material impact on its financial position or
results of operations.
INTEREST COST -- Total interest cost incurred, including capitalized
interest, was $11,820,672, $17,509,225 and $30,469,184 in 1994, 1995 and 1996,
respectively.
3. ADVANCES TO PARENT
Advances to parent represent cash advances to the parent, allocations of
general and administrative expenses from the parent, and the excess of
liabilities assumed over the assets contributed on projects owned by the parent
and contributed in connection with the formation of the Company.
The advances to parent for the years ended December 31, 1994, 1995 and
1996 consist of the following:
Balance, January 1, 1994 ......................... $ 8,152,454
Cash advanced to parent, net ..................... 7,957,640
Administrative costs allocated from parent ...... (1,003,353)
Debt discount allocated from parent .............. (1,241,812)
------------
Balance, December 31, 1994 ....................... 13,864,929
Cash advanced to parent, net ..................... 14,603,819
Administrative costs allocated from parent ...... (1,599,200)
------------
Balance, December 31, 1995 ....................... 26,869,548
Cash advanced to parent, net ..................... 29,221,392
Administrative costs allocated from parent ....... (3,308,000)
------------
Balance, December 31, 1996 ....................... $ 52,782,940
============
The average balance of advances to parent was $11,009,000, $20,367,000 and
$39,826,000 during 1994, 1995 and 1996, respectively.
4. FUEL OIL, SPARE PARTS AND SUPPLIES
Fuel oil, spare parts and supplies are comprised of the following amounts:
1995 1996
---------- ----------
Fuel oil ..................... $1,182,310 $3,496,269
Spare parts and supplies ..... 1,901,858 4,417,508
---------- ----------
Total .............. $3,084,168 $7,913,777
========== ==========
F-10
<PAGE>
5. 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 gas-fired 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.
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
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. A financial institution has
provided a letter of credit for approximately $5 million guaranteeing
Panda-Rosemary's performance under the power purchase agreement. Steam and
chilled water are sold to a third party under a separate agreement which also
has a term of 25 years and expires December 2015. The Rosemary Project is
managed by PRC, the general partner, and is operated by an unrelated third party
through 1996.
On January 6, 1992, PRC contributed substantially all project assets and
liabilities and $216,553 in cash to Panda-Rosemary, in exchange for a 10%
combined general partnership and limited partnership interest. The assets and
liabilities were recorded at historical cost, resulting in $19,874,216 in
partners' deficit being contributed by PRC. An institutional investor
("Investor") contributed $30,948,987 in cash in exchange for a 90% limited
partnership interest. On July 31, 1996, the Company acquired the Investor's
limited partnership interest in Panda-Rosemary for a purchase price of
approximately $34.3 million. As a result of this acquisition, the Company owns
100% of Panda-Rosemary. The acquisition was accounted for using the purchase
method of accounting. The excess of minority interest over the purchase price
(approximately $3.8 million) was allocated to plant and equipment.
Prior to July 31, 1996, the Investor received percentage allocations of
income, expense, and cash flow which would decline over time if certain rate of
return requirements were achieved. For the duration of the Investor's
participation in Panda-Rosemary, the allocation to the Investor remained at 90%.
Prior to acquiring the Investor's 90% limited partnership interest on July
31, 1996, the Company controlled Panda-Rosemary through its one percent general
partner interest. As general partner, the Company has exclusive management
authority over the operations of Panda-Rosemary. Accordingly, Panda-Rosemary's
balance sheet as of December 31, 1995, and statements of operations and of cash
flows for the years ended December 31, 1994 and 1995 and for the period January
1, 1996 through July 31, 1996 (in addition to the post-acquisition period) have
been consolidated 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, Panda-Brandywine entered into a
power purchase agreement with Potomac Electric Power Company ("PEPCO") to build
a 230 megawatt gas-fired facility ("Brandywine Project"). The agreement requires
Panda-Brandywine to supply PEPCO with all available capacity from the facility
for the 25-year term of the agreement with a guaranteed dispatch level of at
least 60 hours per week for the first 15 years. The Brandywine Project, in
Brandywine, Maryland, constructed by Raytheon Engineers and Constructors, Inc.
under a fixed fee, turn-key contract was substantially completed and commenced
commercial operations in October, 1996. A construction loan commitment in the
amount of $215 million was provided by General Electric Capital Corporation
("GECC") in April, 1995. On December 30, 1996 the loan converted to a capital
lease with GECC in the amount of $217.5 million with a twenty year term and two
five year renewal options (see Note 6). GECC has provided letters of credit for
approximately $2.3 million guaranteeing Panda-Brandywine's performance under the
agreement. GECC has committed to increase the amount available under letters of
credit to a maximum of approximately $7.3 million under certain circumstances.
KATHLEEN PROJECT -- In 1991, through a wholly-owned subsidiary, the
Company entered into a 30-year power purchase agreement with Florida Power
Corporation ("Florida Power") to build a 75 megawatt gas-fired facility near
Lakeland, Florida ("Kathleen Project"). The Company and Florida Power are
engaged in litigation before various state and federal forums in Florida over
the interpretation of the Kathleen power purchase agreement (see Note 8). Actual
construction of the Kathleen Project has not yet commenced and is subject to the
outcome of the related litigation and the successful completion of financing.
F-11
<PAGE>
The Company has incurred development costs for the Kathleen Project of $2.8
million as of December 31, 1996, which are included in plant and equipment under
development costs in the accompanying balance sheet.
LUANNAN PROJECT -- In 1994, PEII entered into a preliminary letter of
intent with a subsidiary of the North China Power Group Company ("NCPGC") for
the purchase and sale of electric energy from two 50 megawatt coal-fired
cogeneration plants to be located in Luannan County, Tangshan Municipality,
Hebei Province, China ("Luannan Project"). On September 22, 1995, Tangshan Panda
and Tangshan Pan-Western (see Note 1) entered into a Power Purchase Agreement
with NCPGC for the purchase and sale of electric energy from the Luannan
Project. Under the terms of the 20-year agreement, all electrical output of the
project will be sold to NCPGC. The steam and hot water generated by
Tangshan-Cayman's facility within the project will be sold to the domestic
Chinese industrial and commercial markets by Tangshan Pan-Sino. The Luannan
Project will be constructed pursuant to a fixed-price, turnkey contract with
Harbin Power Engineering Company Limited, subject to escalation under certain
circumstances. Preliminary construction activity commenced in December 1996.
Commencement of full construction activity is subject to the successful
completion of financing. The Company has incurred development costs for the
Luannan Project of $3.3 million as of December 31, 1996, which are included in
plant and equipment under development costs in the accompanying balance sheet.
The Luannan Project is subject to political, regulatory and economic
uncertainties, risks of expropriation of property and cancellation or
modification of contract rights, foreign exchange restrictions, construction
risk, dependence on limited number of customers and other risks arising from
foreign governmental sovereignty.
6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION
Long-term debt and capital lease obligation of the Company as of December
31, 1995 and 1996 are summarized as follows:
1995 1996
------------- -------------
Taxable Revenue Bonds for Rosemary Project ..... $ 90,000,000 $ --
Construction Loan for Brandywine Project ....... 134,735,719 --
Term Loan with TCW, net of discount ............ 18,972,642 --
First Mortgage Bonds for Rosemary Project ...... -- 110,023,541
Series A Bonds ................................. -- 105,525,000
------------- -------------
Total long-term debt ........................... 243,708,361 215,548,541
Less current portion ........................... (9,100,000) (5,717,623)
------------- -------------
$ 234,608,361 $ 209,830,918
============= =============
Capital lease obligation for Brandywine Project $ -- $ 217,488,645
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
("Tax Bonds") issued by the Halifax Regional Economic Development Corporation
("Halifax"), a nonprofit corporation organized in North Carolina. In connection
with the issuance of first mortgage bonds for the Rosemary Project in July 1996
as discussed below, the Company refinanced the Tax Bonds and incurred a loss of
$13.3 million on the early extinguishment of that obligation. The Tax Bonds bore
interest at a fixed rate of 9.25% payable semiannually. Scheduled principal
payments began on October 1, 1991. Such principal and interest payments paid by
Panda-Rosemary to Halifax were used to make required payments on the Tax Bonds.
The Tax Bonds were fully guaranteed by an irrevocable, direct-pay letter
of credit issued by The Fuji Bank, Limited, Houston Agency ("Fuji"). The letter
of credit had a term equal to the term of the Tax Bonds and included annual fees
of .9375% for years 1-5, 1.3125% for years 6-10, and 1.6875% thereafter.
FIRST MORTGAGE BONDS -- In July 1996, Panda-Rosemary Funding Corporation
("PRFC"), a wholly-owned subsidiary of Panda-Rosemary, issued $111,400,000 of
first mortgage bonds ("Rosemary Bonds"). The Rosemary Bonds bear interest at a
fixed rate of 8-5/8% payable quarterly commencing November 15, 1996. Scheduled
principal payments are required quarterly commencing November 15, 1996, and will
continue through maturity on February 15, 2016. The Rosemary Bonds are subject
F-12
<PAGE>
to mandatory redemption prior to maturity under certain conditions. The Rosemary
Bonds are unconditionally guaranteed by Panda-Rosemary but are non-recourse to
the Company, and are secured by substantially all of the assets of
Panda-Rosemary as well as all of the outstanding capital stock of PRC, PRC II
and PRFC. The indenture contains certain covenants, including limitations on
distributions, additional debt and certain other transactions.
While amounts are outstanding under the Rosemary Bonds, all revenues of
Panda-Rosemary are paid to a collateral agent. Funds held by the collateral
agent are included in the accompanying consolidated balance sheets as restricted
cash-current. On a monthly 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 covenants. Additionally, the collateral agent withholds
funds to meet future debt service, maintenance and pollution control
requirements, if required under the indenture. These amounts are included in the
accompanying consolidated balance sheets as restricted cash-current and
restricted cash-debt service reserves and escrow deposits.
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. In July 1996, in connection
with the offering of Series A Bonds as discussed below, a portion of the
proceeds was used to retire all of the term loan debt. The Company incurred a
loss of $8 million on the early extinguishment of this obligation. The loan bore
interest at a rate of 13.5%, payable at a rate of 11.0%. The 2.5% interest not
payable currently was added to the principal balance of the loan.
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
allocating value to the warrants. The carrying value of the warrants is adjusted
annually to the redemption price. Such adjustment, which was allocated to the
Company from PEII until the debt was retired in July 1996, was $153,861 and
$172,924 in 1995 and 1996, respectively, and was recorded as interest expense in
the accompanying statement of operations.
SERIES A BONDS -- In July 1996, Panda Funding Corporation ("PFC"), a
wholly-owned subsidiary of the Company, issued $105,525,000 of pooled project
bonds ("Series A Bonds"). The Series A Bonds bear interest at a fixed rate of
11-5/8% payable semiannually commencing February 20, 1997. Scheduled principal
payments are required semiannually commencing February 20, 1997 and will
continue through maturity on August 20, 2012. The Series A Bonds are subject to
mandatory redemption prior to maturity under certain conditions. The Series A
Bonds are fully and unconditionally guaranteed by PIC and are guaranteed on a
limited basis by Interholding up to a maximum amount specified by the guarantee
agreement which approximates $25.1 million at December 31, 1996. Additionally,
the Series A Bonds are secured by (i) all of the capital stock of PFC, PIC and
Interholding, (ii) 60% of the capital stock of PIC Cayman, (iii) PIC's interest
in distributions from Interholding, and (iv) certain other collateral. The
Series A Bonds are effectively subordinated to the obligations of PIC's
subsidiaries under project-level financing arrangements. The indenture contains
certain covenants, including limitations on distributions, additional debt and
certain other transactions.
While amounts are outstanding under the Series A Bonds, all distributions
to PIC from Interholding and certain proceeds received from PIC Cayman will be
paid to a collateral agent. On a monthly basis, the collateral agent will remit
to PIC remaining funds available after satisfaction of PIC's debt service
obligations (including amounts withheld, if necessary, to meet future debt
service and reserve fund requirements as required by the indenture) provided
that PIC is in compliance with the debt covenants.
In connection with the issuance of the Series A Bonds, the Company
advanced approximately $34.8 million to PEII for project development and general
corporate purposes.
CONSTRUCTION LOAN AND CAPITAL LEASE -- On April 10, 1995, Panda-Brandywine
closed the initial funding of a $215 million construction loan commitment with
GECC. The construction loan bears an interest rate of the Eurodollar rate plus
2.5%. The construction loan provides for commitments under letters of credit
aggregating approximately $12.4 million of which approximately $5.4 million was
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 collateralized by the Brandywine Project.
The Brandywine Project commenced commercial operations on October 31,
1996. The construction loan was converted to long-term non-recourse financing of
$217.5 million in the form of a capital lease on December 30, 1996. To effect
F-13
<PAGE>
the lease financing, title to the Brandywine Project was transferred to a third
party trustee and leased back to Panda-Brandywine. The Brandywine facility lease
is a net lease with an initial term of 20 years and two five-year renewal
options. The documents governing the lease financing contain various affirmative
and negative covenants, including limitations on the ability of Panda-Brandywine
to make distributions to its partners. In connection with the capital lease
financing, GECC has provided letters of credit of approximately $2.3 million,
which may be increased to approximately $7.3 million under certain
circumstances. The letters of credit have an annual fee of 1.50% on any amounts
outstanding.
The future minimum lease commitments under the capital lease for the
Brandywine Project are as follows:
1997 ................................... $ 7,831,527
1998 ................................... 10,419,439
1999 ................................... 17,584,915
2000 ................................... 20,489,320
2001 ................................... 25,613,918
Thereafter ............................. 501,415,526
-------------
Total minimum lease payments ........... 583,354,645
Amounts representing interest .......... (365,866,000)
-------------
Present value of net minimum payments .. $ 217,488,645
=============
LONG-TERM DEBT MATURITIES -- The principal maturities of long-term
obligations, excluding the capital lease relating to the Brandywine Project, for
each of the five years succeeding December 31, 1996 and thereafter are as
follows:
1997 ......................... $ 5,717,623
1998 ......................... 5,816,974
1999 ......................... 5,926,269
2000 ......................... 6,024,598
2001 ......................... 7,229,603
Thereafter ................... 184,833,474
------------
$215,548,541
============
7. INCOME TAXES
A provision for income taxes for 1994, 1995 and 1996 has not been recorded
since operating losses were incurred for each year.
The Company has approximately $45 million of net operating loss
carryforwards at December 31, 1996, the benefits of which will be available to
the Company when realized by PEII. The net operating loss carryforwards will
expire during the years 2007 to 2011. PEII may become subject to a limitation on
the amount of net operating loss carryforwards which may be used annually to
offset income should certain changes in its ownership occur in the future.
Should PEII become subject to such a limitation, the amount of tax benefits
available to the Company could be reduced.
Deferred tax assets of approximately $4 million and $14 million as of
December 31, 1995 and 1996, 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. 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 will recognize the benefits only when reassessment demonstrates
that it is more likely than not that such benefits will be realized. 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.
F-14
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
In connection with a previous borrowing from Nova Northwest Inc. ("Nova"),
Nova received a cash flow participation interest in the distributions from the
Rosemary Project for the term of the Panda-Rosemary L.P. partnership agreement.
Such participation interest amounted to 4.33% of the Company's own participation
interest, which was 10% at the time the agreement was entered into. The Company
has filed an action with the District Court of Dallas County, Texas seeking a
declaratory judgment that Nova's cash flow participation is 0.433% of the
Company's 100% interest after the acquisition of the institutional investor's
90% limited partnership interest. Management believes that the resolution of
this dispute will not have a material effect on the financial position, results
of operations or cash flows of the Company. 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.
In 1995, Florida Power filed an action with the Florida Public Service
Commission ("Florida PSC") relating to the term of the power purchase agreement
for the Kathleen Project (see Note 5) and whether the Kathleen Project, as
designed, is eligible to execute the power purchase agreement pursuant to
Florida Power's bid solicitation and the Florida PSC's regulations. On May 20,
1996, the Florida PSC issued an order finding that: (1) the Kathleen Project, as
designed, did not comply with the power purchase agreement and the Florida PSC's
regulations; (2) the capacity payments under the power purchase agreement should
only extend for 20 years (as opposed to the 30 year stated term of the
agreement); and (3) the construction and commercial operation milestones should
be extended for an additional 18 months. The Company has appealed this ruling to
the Florida Supreme Court and will vigorously defend this action. Management
believes that the outcome of this litigation will not have a material effect on
the accompanying consolidated financial statements.
In August 1996, Panda-Brandywine and PEPCO commenced discussions
concerning commercial operational requirements of the Brandywine Project and
conversion of the construction loan to long-term financing in the form of a
lease. During these discussions, disagreements arose between Panda-Brandywine
and PEPCO with respect to certain provisions of the Brandywine Power Purchase
Agreement, one of which relates to the determination of the interest rate that
is the basis for reduction in capacity payments thereunder (the "PEPCO Interest
Rate Dispute"). PEPCO and Panda-Brandywine are presently attempting to resolve
these disagreements but there are no assurances that such efforts will be
successful. If the PEPCO Interest Rate Dispute is determined adversely to
Panda-Brandywine, the capacity payments paid by PEPCO under the Brandywine Power
Purchase Agreement (which commence in January 1997) will be less than originally
anticipated, thereby adversely affecting the revenues realized by
Panda-Brandywine, and consequently, reducing the amount of funds that would be
available for distribution to the Company.
Raytheon Engineers and Constructors, Inc. ("Raytheon") constructed the
Brandywine Project pursuant to a fixed-price, turnkey engineering, procurement
and construction contract (the "Brandywine EPC Agreement") with
Panda-Brandywine. Raytheon completed the construction and start-up of the
Brandywine Project and has met the requirements for commercial operations and
substantial completion under the Brandywine EPC Agreement, although the date on
which commercial operations were achieved and the entitlement of Raytheon to
certain early completion bonuses under the Brandywine EPC Agreement are the
subject of a dispute between Panda-Brandywine and Raytheon. The Company
estimates that the amount in dispute is less than $1 million and believes that
the resolution of this dispute will not have a material adverse effect upon the
financial position, results of operations or liquidity of the Company.
The Company has entered into various long-term contracts for the purchase
and transportation of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 10 to 25 years. The
Company's minimum purchase commitment under these contracts is 2.3 million
British thermal units of gas annually from October 31, 1996 through October 31,
2011. In the aggregate, such commitments are not at prices in excess of the
current market.
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, results of operations or cash
flows of the Company.
9. RELATED PARTY TRANSACTIONS
The Company purchases insurance coverage through an agency owned by a
major shareholder of PEII who is also a member of the board of directors of PEII
and a relative of PEII's chairman. The Company believes such coverage is on
terms that are no less favorable than reasonably available from unaffiliated
third parties. Total insurance purchases through this
F-15
<PAGE>
agency were $291,142, $298,728 and $754,388 for the years ended December 31,
1994, 1995 and 1996, respectively.
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, 1996 are as follows:
Carrying Value Fair Value
------------ ------------
Long-term debt, including current portion ... $215,548,541 $220,824,791
Capital lease obligation .................... $217,488,645 $217,488,645
The Rosemary Bonds and the Series A Bonds have limited trading. The fair
value of these bonds is estimated based on an April 1997 third party quotation,
adjusted to reflect changes in the yield of government securities with similar
maturities since December 31, 1996. The fair value of the capital lease
obligation equals the carrying value of the obligation because the lease
financing transaction, which closed on December 30, 1996, reflects the Company's
incremental borrowing rate at year end.
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 two
power sales contracts with two customers. The failure of these customers to
fulfill their contractual obligations could have a substantial negative impact
on the Company's revenue. However, the Company does not anticipate
non-performance by the customers under these contracts.
11. SUBSEQUENT EVENT
In April 1997, Global Cayman issued $155.2 million original principal
amount of senior secured notes ("Senior Secured Notes") to finance the
development and construction of the Luannan Project. The Senior Secured Notes,
which were issued at a discount for gross proceeds of $145.0 million, bear
interest at a fixed rate of 12 1/2% payable semiannually commencing October 15,
1997. Scheduled principal payments are required semiannually commencing October
15, 2000 and will continue through maturity on April 15, 2004. The Senior
Secured Notes are subject to mandatory redemption prior to maturity under
certain conditions. The Senior Secured Notes are secured by (i) a pledge of 100%
of the capital stock of Global Cayman, 99% of the capital stock of Pan-Western
and at least 90% of the capital stock of Pan-Sino, and (ii) a security interest
in certain funds of Global Cayman and its subsidiaries established under the
indenture. Additionally, the Senior Secured Notes are fully and unconditionally
guaranteed by Panda Global, whose guarantee (the "Senior Secured Notes
Guarantee") is secured by (i) a pledge of 100% of the capital stock of Panda
Global and PEC and (ii) a security interest in certain funds of Panda Global
established under the indenture. The Senior Secured Notes Guarantee is
effectively subordinated to the obligations of PIC and its subsidiaries under
the Series A Bonds and project-level financing arrangements. The indenture
contains certain covenants, including limitations on distributions, additional
debt and certain other transactions. Individually, and in the aggregate, the
pledges of the capital stock of PEC, Pan-Western and Pan-Sino do not constitute
a "substantial portion" (as defined in Rule 3-10 of Regulation S-X promulgated
under the Securities Act of 1933) of collateral for the Senior Secured Notes or
the Senior Secured Notes Guarantee. Separate financial statements of such
entities are not presented as they are not considered material. See Note 12 for
condensed consolidating financial information for the Company.
F-16
<PAGE>
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
As discussed in Note 11, the Senior Secured Notes issued in April 1997 by
Global Cayman are fully and unconditionally guaranteed by Panda Global.
Condensed consolidating financial information for the Company as of December 31,
1995 and 1996 and for the years ended December 31, 1994, 1995 and 1996 is as
follows:
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
Non-
Panda Panda Guar- Panda
Global Global antor Global
Energy Co. Holdings, Inc. Subsid- Elimi- Holdings, Inc.
(Issuer) (Guarantor) iaries nations Consolidated
----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ............. $ -- $ -- $ 1,166,385 $ -- $ 1,166,385
Restricted cash -- current ............ -- -- 1,876,142 -- 1,876,142
Accounts receivable ................... -- -- 5,199,999 -- 5,199,999
Fuel oil, spare parts and supplies .... -- -- 3,084,168 -- 3,084,168
Other current assets .................. -- -- 12,664 -- 12,664
----------- ------------- ------------- ------------- -------------
Total current assets ............... -- -- 11,339,358 -- 11,339,358
Plant and equipment:
Electric generating facility .......... -- -- 105,168,094 -- 105,168,094
Furniture and fixtures ................ -- -- 29,080 -- 29,080
Less accumulated depreciation ......... -- -- (21,008,036) -- (21,008,036)
Construction in progress .............. -- -- 132,604,494 -- 132,604,494
Development costs ..................... -- -- 3,350,924 -- 3,350,924
----------- ------------- ------------- ------------- -------------
Total plant and equipment, net ..... -- -- 220,144,556 -- 220,144,556
Investment in and advances to subsidiaries 1,065,063 -- -- (1,065,063) --
Restricted cash -- debt service reserves
and escrow deposits ................... -- -- 10,947,948 -- 10,947,948
Debt issuance costs ...................... -- -- 3,990,655 -- 3,990,655
Partnership formation costs, net ......... -- -- 533,100 -- 533,100
----------- ------------- ------------- ------------- -------------
$ 1,065,063 $ -- $ 246,955,617 $ (1,065,063) $ 246,955,617
=========== ============= ============= ============= =============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ................. $ -- $ -- $ 5,597,818 $ -- $ 5,597,818
Interest and letter of credit fees . -- -- 2,540,347 -- 2,540,347
Operating expenses and other ....... -- -- 1,219,061 -- 1,219,061
Current portion of long-term debt ..... -- -- 9,100,000 -- 9,100,000
----------- ------------- ------------- ------------- -------------
Total current liabilities .......... -- -- 18,457,226 -- 18,457,226
Long term debt, less current portion ..... -- -- 234,608,361 -- 234,608,361
Investment in and advances from affiliates 1,712,061 42,945,636 -- (44,657,697) --
Minority interest ........................ -- -- 36,835,666 -- 36,835,666
Shareholder's equity (deficit):
Common stock, par value
$.01; 1,000 shares authorized,
issued and outstanding ............. 2 10 10 (12) 10
Advances to parent .................... -- (26,869,548) (26,869,548) 26,869,548 (26,869,548)
Accumulated deficit ................... (647,000) (16,076,098) (16,076,098) 16,723,098 (16,076,098)
Total shareholder's equity (deficit) (646,998) (42,945,636) (42,945,636) 43,592,634 (42,945,636)
----------- ------------- ------------- ------------- -------------
$ 1,065,063 $ -- $ 246,955,617 $ (1,065,063) $ 246,955,617
=========== ============= ============= ============= =============
</TABLE>
F-17
<PAGE>
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
Non-
Panda Panda Guar- Panda
Global Global antor Global
Energy Co. Holdings, Inc. Subsid- Elimi- Holdings, Inc.
(Issuer) (Guarantor) iaries nations Consolidated
----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ............. $ -- $ -- $ 1,335,086 $ -- $ 1,335,086
Restricted cash -- current ............ -- -- 17,809,921 -- 17,809,921
Accounts and notes receivable ......... -- -- 9,402,685 -- 9,402,685
Fuel oil, spare parts and supplies .... -- -- 7,913,777 -- 7,913,777
Other current assets .................. -- -- 164,905 -- 164,905
----------- ------------- ------------- ------------- -------------
Total current assets ............... -- -- 36,626,374 -- 36,626,374
Plant and equipment:
Electric generating facility .......... -- -- 288,716,711 -- 288,716,711
Furniture and fixtures ................ -- -- 494,418 -- 494,418
Less accumulated depreciation ......... -- -- (26,539,539) -- (26,539,539)
Construction in progress .............. -- -- -- -- --
Development costs ..................... -- -- 6,053,361 -- 6,053,361
----------- ------------- ------------- ------------- -------------
Total plant and equipment, net ..... -- -- 268,724,951 -- 268,724,951
Investment in and advances to subsidiaries 3,798,781 -- -- (3,798,781) --
Restricted cash -- debt service reserves
and escrow deposits ................... -- -- 32,548,366 -- 32,548,366
Debt issuance costs ...................... -- -- 7,570,521 -- 7,570,521
Partnership formation costs, net ......... -- -- -- -- --
----------- ------------- ------------- ------------- -------------
$ 3,798,781 $ -- $ 345,470,212 $ (3,798,781) $ 345,470,212
=========== ============= ============= ============= =============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ................. $ -- $ -- $ 660,167 $ -- $ 660,167
Interest and letter of credit fees . -- -- 6,297,558 -- 6,297,558
Operating expenses and other ....... -- -- 6,991,796 -- 6,991,796
Current portion of long-term debt ..... -- -- 5,717,623 -- 5,717,623
----------- ------------- ------------- ------------- -------------
Total current liabilities .......... -- -- 19,667,144 -- 19,667,144
Long term debt, less current portion ..... -- -- 209,830,918 -- 209,830,918
Capital lease obligation ................. -- -- 217,488,645 -- 217,488,645
Investment in and advances from affiliates 6,099,779 101,516,495 -- (107,616,274) --
Minority interest ........................ -- -- -- -- --
Shareholder's equity (deficit):
Common stock, par value
$.01; 1,000 shares authorized,
issued and outstanding ........... 2 10 10 (12) 10
Advances (to) from parent ............. -- (52,782,940) (52,782,940) 52,782,940 (52,782,940)
Accumulated deficit ................... (2,301,000) (48,733,565) (48,733,565) 51,034,565 (48,733,565)
Total shareholder's equity(deficit) (2,300,998) (101,516,495) (101,516,495) 103,817,493 (101,516,495)
----------- ------------- ------------- ------------- -------------
$ 3,798,781 $ -- $ 345,470,212 $ (3,798,781) $ 345,470,212
=========== ============= ============= ============= =============
</TABLE>
F-18
<PAGE>
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Non-
Panda Panda Guar- Panda
Global Global antor Global
Energy Co. Holdings, Inc. Subsid- Elimi- Holdings, Inc.
(Issuer) (Guarantor) iaries nations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Electric capacity ......................... $ -- $ -- $ 30,664,096 $ -- $ 30,664,096
Steam and chilled water sales ............. -- -- 650,575 -- 650,575
Interest income ........................... -- -- 602,783 -- 602,783
Equity in loss of subsidiary .............. (203,000) (861,265) -- 1,064,265 --
------------ ------------ ------------ ------------ ------------
Total revenue .......................... (203,000) (861,265) 31,917,454 1,064,265 31,917,454
Expenses:
Plant operating expenses .................. -- -- 8,940,146 -- 8,940,146
Project development and administrative .... -- -- 1,779,349 -- 1,779,349
Interest expense and letter of credit fees -- -- 11,017,418 -- 11,017,418
Depreciation .............................. -- -- 4,208,314 -- 4,208,314
Amortization of debt issuance costs ....... -- -- 600,382 -- 600,382
Amortization of partnership formation costs -- -- 533,116 -- 533,116
------------ ------------ ------------ ------------ ------------
Total expenses ......................... -- -- 27,078,725 -- 27,078,725
------------ ------------ ------------ ------------ ------------
Income (loss) before minority interest ....... (203,000) (861,265) 4,838,729 1,064,265 4,838,729
Minority interest ............................ -- -- (5,699,994) -- (5,699,994)
------------ ------------ ------------ ------------ ------------
Net loss .................................. $ (203,000) $ (861,265) $ (861,265) $ 1,064,265 $ (861,265)
============ ============ ============ ============ ============
</TABLE>
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Non-
Panda Panda Guar- Panda
Global Global antor Global
Energy Co. Holdings, Inc. Subsid- Elimi- Holdings, Inc.
(Issuer) (Guarantor) iaries nations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Electric capacity ......................... $ -- $ -- $ 29,858,475 $ -- $ 29,858,475
Steam and chilled water sales ............. -- -- 473,040 -- 473,040
Interest income ........................... -- -- 895,268 -- 895,268
Equity in loss of subsidiary ............. (444,000) (2,731,689) -- 3,175,689 --
------------ ------------ ------------ ------------ ------------
Total revenue .......................... (444,000) (2,731,689) 31,226,783 3,175,689 31,226,783
------------ ------------ ------------ ------------ ------------
Expenses:
Plant operating expenses .................. -- -- 9,347,707 -- 9,347,707
Project development and administrative .... -- -- 2,550,376 -- 2,550,376
Interest expense and letter of credit fees -- -- 11,715,929 -- 11,715,929
Depreciation .............................. -- -- 4,209,453 -- 4,209,453
Amortization of debt issuance costs ....... -- -- 554,311 -- 554,311
Amortization of partnership formation costs -- -- 533,116 -- 533,116
------------ ------------ ------------ ------------ ------------
Total expenses ......................... -- -- 28,910,892 -- 28,910,892
------------ ------------ ------------ ------------ ------------
Income (loss) before minority interest ....... (444,000) (2,731,689) 2,315,891 3,175,689 2,315,891
Minority interest ............................ -- -- (5,047,580) -- (5,047,580)
------------ ------------ ------------ ------------ ------------
Net loss ..................................... $ (444,000) $ (2,731,689) $ (2,731,689) $ 3,175,689 $ (2,731,689)
============ ============ ============ ============ ============
</TABLE>
F-19
<PAGE>
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Non-
Panda Panda Guar- Panda
Global Global antor Global
Energy Co. Holdings, Inc. Subsid- Elimi- Holdings, Inc.
(Issuer) (Guarantor) iaries nations Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Electric capacity ........................... $ -- $ -- $ 32,273,736 $ -- $ 32,273,736
Steam and chilled water sales ............... -- -- 502,757 -- 502,757
Interest income ............................. -- -- 1,518,006 -- 1,518,006
Equity in loss of subsidiaries .............. (1,654,000) (32,657,467) -- 34,311,467 --
------------ ------------ ------------ ------------ ------------
Total revenue ............................ (1,654,000) (32,657,467) 34,294,499 34,311,467 34,294,499
Expenses:
Plant operating expenses .................... -- -- 12,050,495 -- 12,050,495
Project development and administrative ...... -- -- 5,187,348 -- 5,187,348
Interest expense and letter of credit fees .. -- -- 19,414,012 -- 19,414,012
Depreciation ................................ -- -- 5,531,502 -- 5,531,502
Amortization of debt issuance costs ......... -- -- 493,799 -- 493,799
Amortization of partnership formation costs . -- -- 533,100 -- 533,100
------------ ------------ ------------ ------------ ------------
Total expenses ........................... -- -- 43,210,256 -- 43,210,256
------------ ------------ ------------ ------------ ------------
Income (loss) before minority interest and
extraordinary item ........................ (1,654,000) (32,657,467) (8,915,757) 34,311,467 (8,915,757)
Minority interest .............................. -- -- (2,405,160) -- (2,405,160)
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary item ........ (1,654,000) (32,657,467) (11,320,917) 34,311,467 (11,320,917)
Extraordinary item - loss on debt extinguishment -- -- (21,336,550) -- (21,336,550)
------------ ------------ ------------ ------------ ------------
Net loss ....................................... $ (1,654,000) $(32,657,467) $(32,657,467) $ 34,311,467 $(32,657,467)
============ ============ ============ ============ ============
</TABLE>
F-20
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
DECEMBER 31 MARCH 31
1996 1997
------------- -------------
Current assets:
Cash and cash equivalents ................... $ 1,335,086 $ 1,198,071
Restricted cash -- current .................. 17,809,921 15,115,215
Accounts receivable ......................... 9,402,685 9,219,619
Fuel oil, spare parts and supplies .......... 7,913,777 6,897,908
Other current assets ........................ 164,905 234,585
------------- -------------
Total current assets ..................... 36,626,374 32,665,398
Plant and equipment:
Electric generating facilities .............. 288,716,711 289,097,164
Furniture and fixtures ...................... 494,418 496,202
Less: accumulated depreciation .............. (26,539,539) (29,488,416)
Development costs ........................... 6,053,361 9,426,582
------------- -------------
Total plant and equipment, net ........... 268,724,951 269,531,532
Restricted cash - debt service reserves
and escrow deposits .......................... 32,548,366 32,548,366
Debt issuance costs, net of accumulated
amortization of $165,015 and $338,822,
respectively ................................. 7,570,521 7,530,770
------------- -------------
$ 345,470,212 $ 342,276,066
============= =============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ....................... $ 660,167 $ --
Interest and letter of credit fees ....... 6,297,558 2,505,216
Operating expenses and other ............. 6,991,796 5,931,986
Current portion of long-term debt ........... 5,717,623 5,501,823
------------- -------------
Total current liabilities ............. 19,667,144 13,939,025
Long-term debt, less current portion ........... 209,830,918 208,454,461
Capital lease obligation ....................... 217,488,645 222,868,697
Commitments and contingencies (Note 4)
Shareholder's deficit:
Common stock, par value $.01; 1,000 shares
authorized, issued and outstanding .... 10 10
Advances to parent .......................... (52,782,940) (47,562,041)
Accumulated deficit ......................... (48,733,565) (55,424,086)
------------- -------------
Total shareholder's deficit .............. (101,516,495) (102,986,117)
------------- -------------
$ 345,470,212 $ 342,276,066
============= =============
See accompanying notes to condensed consolidated financial statements
F-21
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
1996 1997
------------ ------------
Revenue:
Electric capacity and energy sales ............ $ 8,015,442 $ 17,329,693
Steam and chilled water sales ................. 121,548 130,582
Interest income ............................... 185,672 429,727
------------ ------------
8,322,662 17,890,002
------------ ------------
Expenses:
Plant operating expenses ...................... 2,441,532 8,261,187
Project development and administrative ........ 803,433 2,395,022
Interest expense and letter of credit fees .... 3,184,745 10,801,629
Depreciation .................................. 1,053,220 2,948,878
Amortization of debt issuance costs ........... 140,907 173,807
Amortization of partnership formation costs ... 133,275 --
------------ ------------
7,757,112 24,580,523
------------ ------------
Income (loss) before minority interest ........... 565,550 (6,690,521)
Minority interest ................................ (1,718,948) --
------------ ------------
Net loss ......................................... $ (1,153,398) $ (6,690,521)
============ ============
See accompanying notes to condensed consolidated financial statements.
F-22
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT FOR THE
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
TOTAL
COMMON ADVANCES ACCUMULATED SHAREHOLDER'S
STOCK TO PARENT DEFICIT DEFICIT
--- ------------ ------------ -------------
Balance, January 1, 1997 $10 $(52,782,940) $(48,733,565) $(101,516,495)
Advances from parent .... -- 5,220,899 -- 5,220,899
Net loss ................ -- -- (6,690,521) (6,690,521)
--- ------------ ------------ -------------
Balance, March 31, 1997 . $10 $(47,562,041) $(55,424,086) $(102,986,117)
=== ============ ============ =============
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
------------ -----------
<S> <C> <C>
Operating activities:
Net loss .................................................. $ (1,153,398) $(6,690,521)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest ...................................... 1,718,948 --
Depreciation ........................................... 1,053,220 2,948,878
Amortization of debt issuance costs .................... 140,907 173,807
Amortization of partnership formation costs ............ 133,275 --
Amortization of loan discount and deferred interest .... 47,953 5,380,052
Changes in assets and liabilities:
Accounts receivable .................................... (660,500) 183,066
Fuel oil, spare parts and supplies ..................... 281,634 1,015,869
Other current assets ................................... (47,151) (69,680)
Accounts payable and accrued expenses .................. 2,623,451 (4,852,153)
------------ -----------
Net cash provided (used) by operating activities ....... 4,138,339 (1,910,682)
------------ -----------
Investing activities:
Restricted cash - current ................................. (4,843,722) 2,694,706
Additions to property, plant and equipment ................ (21,631,804) (4,415,625)
Restricted cash - debt service reserves and escrow deposits 76,776 --
------------ -----------
Net cash provided (used) by investing activities ....... (26,398,750) (1,720,919)
------------ -----------
Financing activities:
Distributions to minority interest owner .................. (321,124) --
Advances from parent ...................................... 1,490,607 5,220,899
Proceeds from long-term debt .............................. 21,488,220 --
Repayment of long-term debt ............................... -- (1,592,257)
Debt issuance costs ....................................... (199,498) (134,056)
------------ -----------
Net cash provided by financing activities .............. 22,458,205 3,494,586
------------ -----------
Increase (decrease) in cash and cash equivalents ............. 197,794 (137,015)
Cash and cash equivalents, beginning of period ............... 1,166,385 1,335,086
------------ -----------
Cash and cash equivalents, end of period ..................... $ 1,364,179 $ 1,198,071
============ ===========
NON-CASH OPERATING AND FINANCING ACTIVITIES:
Interest expense on capital lease obligation ................. $ -- $ 5,380,052
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-24
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Holdings, Inc. ("Panda Global", or collectively with its
subsidiaries the "Company"), a wholly owned subsidiary of Panda Energy
International, Inc. ("PEII"), was formed in March 1997 to hold the ownership
interests in four independent power projects which were formerly owned by other
wholly owned subsidiaries of PEII. The ownership interests were transferred to
the Company at PEII's historical cost. Because the transfers occurred between
entities under common control, the transactions have been accounted for in a
manner similar to a pooling of interests. The Company has two direct wholly
owned subsidiaries: Panda Energy Corporation ("PEC")( a Texas corporation) which
indirectly holds the Company's ownership interests in domestic projects, and
Panda Global Energy Company ("Global Cayman")(a Cayman Islands company) which
indirectly holds the Company's ownership interest in an international project
located in China.
PEC, through its wholly owned subsidiary Panda Interfunding Corporation
("PIC") and PIC's wholly owned subsidiary Panda Interholding Corporation
("Interholding"), holds the Company's ownership interests in the Rosemary
project and the Brandywine project. The entities holding such ownership
interests include the following: Panda Rosemary Corporation ("PRC"), a 91%
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), a 50%
limited partner in Panda-Brandywine; and Brandywine Water Company. The Company,
through its general and limited partnership interests, owns 100% of
Panda-Brandywine and, as of July 31, 1996, owns 100% of Panda-Rosemary. Prior to
July 31, 1996, the Company owned 10% of Panda-Rosemary. The Rosemary and
Brandywine projects are located in the United States. Other direct or indirect
wholly owned subsidiaries of PIC include Panda Funding Corporation ("PFC"),
Panda-Rosemary Funding Corporation ("PRFC") and Panda Cayman Interfunding
Corporation ("PIC Cayman"), which have been formed to facilitate the financing
of the development and acquisition of independent power projects.
Additionally, PEC holds the Company's 100% ownership interest in the
Kathleen project through its wholly owned subsidiaries.
Global Cayman (which collectively with its subsidiaries is a development
stage enterprise having no operating revenues) holds a 95.5% ownership interest
in Pan-Sino Energy Development Company LLC ("Pan-Sino")(a Cayman Islands
company), which in turn holds a 99% ownership interest in Pan-Western Energy
Corporation LLC ("Pan-Western")(a Cayman Islands company), which in turn owns an
approximately 88% interest in four joint venture companies (the "Joint Venture
Companies") organized under the laws of the People's Republic of China ("China")
to develop and construct an independent power project located in China. The
Joint Venture Companies, which currently have no material assets or operations,
are: Tangshan Panda Heat and Power Company, Ltd. ("Tangshan Panda"), Tangshan
Pan-Western Heat and Power Company, Ltd. ("Tangshan Pan-Western"), Tangshan
Cayman Heat and Power Company, Ltd. ("Tangshan Cayman") and Tangshan Pan-Sino
Heat Company, Ltd. ("Tangshan Pan-Sino").
Collectively, PEC, Pan-Sino and Pan-Western are the predecessors of the
Company.
All material intercompany accounts and transactions have been eliminated
in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated 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, 1996. The accompanying unaudited condensed consolidated
financial statements for the three months ended March 31, 1996 and 1997 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 three months ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. The amounts presented in the balance sheet as of
December 31, 1996 were derived from the Company's audited consolidated financial
statements.
ALLOCATION OF ADMINISTRATIVE COSTS -- PEII performs certain accounting,
legal, insurance, and consulting services for the
F-25
<PAGE>
Company. These general and administrative costs are generally allocated to the
Company using the percentage of time PEII personnel spent performing these
services. The expenses allocated were $532,000 and $1,110,000 for the three
months ended March 31, 1996 and 1997, 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.
3. POWER PROJECTS AND LONG-TERM DEBT
The Company has incurred development costs on the Kathleen Project of $2.8
million as of December 31, 1996 and March 31, 1997. The Company has incurred
development costs on the Luannan Project of $3.3 million and $6.6 million as of
December 31, 1996 and March 31, 1997, respectively. Such costs are included in
plant and equipment under development costs in the accompanying balance sheets.
4. COMMITMENTS AND CONTINGENCIES
In 1995, Florida Power filed an action with the Florida Public Service
Commission ("Florida PSC") relating to the term of the power purchase agreement
for the Kathleen Project and whether the Kathleen Project, as designed, is
eligible to execute the power purchase agreement pursuant to Florida Power's bid
solicitation and the Florida PSC's regulations. On May 20, 1996, the Florida PSC
issued an order finding that: (1) the Kathleen Project, as designed, did not
comply with the power purchase agreement and the Florida PSC's regulations; (2)
the capacity payments under the power purchase agreement should only extend for
20 years (as opposed to the 30 year stated term of the agreement); and (3) the
construction and commercial operation milestones should be extended for an
additional 18 months. The Company has appealed this ruling to the Florida
Supreme Court and will vigorously defend this action. Management believes that
the outcome of this litigation will not have a material effect on the
accompanying condensed consolidated financial statements.
In August 1996, Panda-Brandywine and PEPCO commenced discussions
concerning commercial operational requirements of the Brandywine Project and
conversion of the construction loan to long-term financing in the form of a
lease. During these discussions, disagreements arose between Panda-Brandywine
and PEPCO with respect to certain provisions of the Brandywine Power Purchase
Agreement which relate to the determination of the interest rate that is the
basis for reduction in capacity payments thereunder (the "PEPCO Interest Rate
Dispute"). PEPCO and Panda-Brandywine are presently attempting to resolve these
disagreements but there are no assurances that such efforts will be successful.
If the PEPCO Interest Rate Dispute is determined adversely to Panda-Brandywine,
the capacity payments paid by PEPCO under the Brandywine Power Purchase
Agreement will be less than originally anticipated, thereby adversely affecting
the revenues realized by Panda-Brandywine, and consequently, reducing the amount
of funds that would be available for distribution to the Company.
Raytheon Engineers and Constructors, Inc. ("Raytheon") constructed the
Brandywine Project pursuant to a fixed-price, turnkey engineering, procurement
and construction contract (the "Brandywine EPC Agreement") with
Panda-Brandywine. Raytheon completed the construction and start-up of the
Brandywine Project and has met the requirements for commercial operations and
substantial completion under the Brandywine EPC Agreement, although the date on
which commercial operations were achieved and the entitlement of Raytheon to
certain early completion bonuses under the Brandywine EPC Agreement are the
subject of a dispute between Panda-Brandywine and Raytheon. The Company
estimates that the amount in dispute is less than $1 million and believes that
the resolution of this dispute will not have a material adverse effect upon the
financial position, results of operations or liquidity of the Company.
5. SUBSEQUENT EVENT
In April 1997, Global Cayman issued $155.2 million original principal
amount of senior secured notes ("Senior Secured Notes") to finance the
development and construction of the Luannan Project. The Senior Secured Notes,
which were issued at a discount for gross proceeds of $145.0 million, bear
interest at a fixed rate of 12 1/2% payable semiannually commencing October 15,
1997. Scheduled principal payments are required semiannually commencing October
15, 2000 and will continue through maturity on April 15, 2004. The Senior
Secured Notes are subject to mandatory redemption prior to maturity under
certain conditions. The Senior Secured Notes are secured by (i) a pledge of 100%
of the capital stock of Global Cayman, 99% of the capital stock of Pan-Western
and at least 90% of the capital stock of Pan-Sino, and (ii) a security interest
in certain funds of Global Cayman and its subsidiaries established under the
indenture. Additionally, the Senior Secured Notes are fully and unconditionally
guaranteed by Panda Global, whose guarantee (the "Senior Secured Notes
Guarantee") is secured by (i) a pledge of 100% of the capital stock of Panda
Global and PEC and (ii) a security interest in certain funds of Panda Global
established under the indenture. The Senior Secured Notes Guarantee is
effectively subordinated to the obligations of PIC and its subsidiaries under
the Series A Bonds and project-level financing arrangements. The indenture
contains certain covenants, including limitations on distributions, additional
debt and certain other transactions. Individually, and in the aggregate, the
pledges of the capital stock of PEC, Pan-Western and Pan-Sino do not constitute
a "substantial portion" (as defined in Rule 3-10 of Regulation S-X promulgated
under the Securities Act of 1933) of collateral for the Senior Secured Notes or
the Senior Secured Notes Guarantee. Separate financial statements of such
entities are not presented as they are not considered material.
F-26
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
of Panda Energy International, Inc.
We have audited the accompanying consolidated balance sheets of Panda Global
Energy Company and subsidiaries (the "Company"), a development stage enterprise,
as of December 31, 1995 and 1996, and the related consolidated statements of
operations, cash flows and shareholder's deficit for the period from July 20,
1994 (date of inception) through December 31, 1994, the years ended December 31,
1995 and 1996 and the period from July 20, 1994 (date of inception) through
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1995
and 1996, and the results of their operations and their cash flows for the
period from July 20, 1994 (date of inception) through December 31, 1994, the
years ended December 31, 1995 and 1996, and the period from July 20, 1994 (date
of inception) through December 31, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
April 9, 1997
F-27
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1996
1995 1996
----------- -----------
ASSETS
Cash and cash equivalents ...................... $ 6,289 $ 506,289
Development costs .............................. 1,058,774 3,292,492
----------- -----------
Total assets ................................... $ 1,065,063 $ 3,798,781
=========== ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Liabilities:
Advances from parent ........................... $ 1,712,061 $ 6,099,779
Commitments and contingencies (Note 3) ......... -- --
Shareholder's deficit:
Common stock, par value $1: 50,000 shares
authorized; 2 shares issued and outstanding 2 2
Deficit accumulated during the development stage (647,000) (2,301,000)
----------- -----------
Total shareholder's deficit ................. (646,998) (2,300,998)
----------- -----------
Total liabilities and shareholder's deficit .... $ 1,065,063 $ 3,798,781
=========== ===========
See accompanying notes to consolidated financial statements.
F-28(A)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period from Inception (July 20, 1994) Through December 31, 1994,
the Years Ended December 31, 1995 and 1996,
and the Period from Inception Through December 31, 1996
<TABLE>
<CAPTION>
Inception Inception
Through Year Ended Year Ended Through
December 31 December 31 December 31 December 31
1994 1995 1996 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
General and administrative expenses $ 203,000 $ 444,000 $ 1,654,000 $ 2,301,000
--------- --------- ----------- -----------
Net loss .......................... $(203,000) $(444,000) $(1,654,000) $(2,301,000)
========= ========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-29(A)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period from Inception (July 20, 1994) Through December 31, 1994,
the Years Ended December 31, 1995 and 1996,
and the Period from Inception Through December 31, 1996
<TABLE>
<CAPTION>
Inception Inception
Through Year Ended Year Ended Through
December 31 December 31 December 31 December 31
1994 1995 1996 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ........................... $(203,000) $(444,000) $(1,654,000) $(2,301,000)
INVESTING ACTIVITIES:
Development costs .................. (428,486) (630,288) (2,233,718) (3,292,492)
FINANCING ACTIVITIES:
Capital contribution from parent ... 2 -- -- 2
Advances from parent ............... 732,773 979,288 4,387,718 6,099,779
--------- --------- ----------- -----------
Cash provided by financing activities 732,775 979,288 4,387,718 6,099,781
--------- --------- ----------- -----------
Increase (decrease) in cash ........ 101,289 (95,000) 500,000 506,289
Cash, beginning of period .......... -- 101,289 6,289 --
--------- --------- ----------- -----------
Cash, end of period ................ $ 101,289 $ 6,289 $ 506,289 $ 506,289
========= ========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30(A)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
For the Period from Inception (July 20, 1994) Through December 31, 1994
and the Years Ended December 31, 1995 and 1996
Deficit
Accumulated
During the
Number Common Development
of Shares Stock Stage
----------- ----------- -----------
Issuance of common stock, July 20, 1994 2 $ 2
Net loss .............................. $ (203,000)
----------- ----------- -----------
Balance, December 31, 1994 ............ 2 2 (203,000)
Net loss .............................. (444,000)
----------- ----------- -----------
Balance, December 31, 1995 ............ 2 2 (647,000)
Net loss .............................. (1,654,000)
----------- ----------- -----------
Balance, December 31, 1996 ............ 2 $ 2 $(2,301,000)
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-31(A)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
FROM INCEPTION (JULY 20, 1994) THROUGH DECEMBER 31, 1994,
THE YEARS ENDED DECEMBER 31, 1995 AND 1996,
AND THE PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Energy Company ("Global Cayman", or collectively with its
subsidiaries the "Company")(a Cayman Islands company) is a wholly owned
subsidiary of Panda Global Holdings, Inc. ("Panda Global"), which in turn is a
wholly owned subsidiary of Panda Energy International, Inc. ("PEII"). PEII is
engaged in the development, acquisition, ownership and operation of independent
power generation facilities and other energy-related projects worldwide. Global
Cayman was formed in March 1997 to hold PEII's indirect ownership interest in an
independent power project located in the People's Republic of China ("China").
The ownership interest was transferred to Global Cayman at PEII's historical
cost. Because the transfer occurred between entities under common control, the
transaction has been accounted for in a manner similar to a pooling of
interests.
Global Cayman holds a 95.5% ownership interest in Pan-Sino Energy
Development Company LLC ("Pan-Sino")(a Cayman Islands company), which in turn
holds a 99% ownership interest in Pan-Western Energy Corporation LLC
("Pan-Western")(a Cayman Islands company), which in turn owns an approximately
88% interest in four joint venture companies (the "Joint Venture Companies")
organized under the laws of China to develop and construct two 50 megawatt
coal-fired cogeneration plants (the "Luannan Project") to be located in Luannan
County, Tangshan Municipality, Hebei Province, China. Pan-Sino and Pan-Western
were formed on July 20, 1994 and are the Company's predecessor. The Joint
Venture Companies are: Tangshan Panda Heat and Power Company, Ltd. ("Tangshan
Panda"), Tangshan Pan-Western Heat and Power Company, Ltd. ("Tangshan
Pan-Western"), Tangshan Cayman Heat and Power Company, Ltd. ("Tangshan Cayman")
and Tangshan Pan-Sino Heat Company, Ltd. ("Tangshan Pan-Sino").
All material intercompany accounts and transactions have been eliminated
in consolidation.
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.
DEVELOPMENT STAGE ENTERPRISE -- The Company is in the development stage
and has no operating revenues. PEII has committed to provide the Company with
continued financial support until the Company obtains the financing necessary
for the continued development and construction of the Luannan Project.
Management is currently pursuing such financing and believes the Company can
obtain the necessary financing.
CASH -- Included in cash and cash equivalents are highly liquid
investments with original maturities of three months or less.
DEVELOPMENT COSTS -- Costs related to the development of the Luannan
Project have been capitalized. Such costs primarily consist of engineering,
legal and other costs directly related to the project. Such costs will be
depreciated using the straight-line method over the estimated useful lives of
the assets, generally twenty years. Depreciation will begin when the completed
facility is ready for its intended use.
F-30
<PAGE>
ALLOCATION OF ADMINISTRATIVE COSTS -- PEII performs certain accounting,
legal, insurance and consulting services for the Company. These general and
administrative costs are generally allocated to the Company using the percentage
of time PEII personnel spent performing these services. The expenses allocated
were $203,000, $444,000 and $1,654,000 in 1994, 1995 and 1996, respectively, and
are included in general and administrative expenses in the consolidated
statements of operations. Management believes the method used to allocate these
costs is reasonable.
INCOME TAXES -- On the basis of the current legislation in the Cayman
Islands, there is no income, corporation, profits, capital gains or other form
of taxation that would be of application to Global Cayman or its subsidiaries
and, accordingly, there is no withholding tax. In addition, Pan-Western, as an
exempted company, has obtained from the Cayman Islands Government an undertaking
that should the current legislation change, no taxation will be imposed upon the
profits of Pan-Western or any shareholders in Pan-Western for a twenty year
period commencing August, 1994.
3. LUANNAN PROJECT
In 1994, PEII entered into a preliminary letter of intent with a
subsidiary of the North China Power Group Company ("NCPGC") for the purchase and
sale of electric energy from the Luannan Project. On September 22, 1995,
Tangshan Panda and Tangshan Pan-Western (see Note 1) entered into a Power
Purchase Agreement with NCPGC for the purchase and sale of electric energy from
the Luannan Project. Under the terms of the 20-year agreement, all electrical
output of the project will be sold to NCPGC. The steam and hot water generated
by Tangshan-Cayman's facility within the project will be sold to the domestic
Chinese industrial and commercial markets by Tangshan Pan-Sino. The Luannan
Project will be constructed pursuant to a fixed-price, turnkey contract with
Harbin Power Engineering Company Limited, subject to escalation under certain
circumstances. Preliminary construction activity commenced in December 1996.
Commencement of full construction activity is subject to the successful
completion of financing.
The Luannan Project is subject to political, regulatory and economic
uncertainties, risks of expropriation of property and cancellation or
modification of contract rights, foreign exchange restrictions, construction
risk, dependence on limited number of customers and other risks arising from
foreign governmental sovereignty.
4. ADVANCES FROM PARENT
PEII has performed all project development and administrative activities
for the Company. The advances from parent reflect the net advances for such
costs incurred by PEII on the Company's behalf.
F-31
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1996 and March 31, 1997
(Unaudited)
December 31 March 31
1996 1997
----------- -----------
ASSETS
Cash and cash equivalents ........................ $ 506,289 $ 6,289
Development costs ................................ 3,292,492 6,613,923
----------- -----------
Total assets ..................................... $ 3,798,781 $ 6,620,212
=========== ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Liabilities:
Advances from parent ............................. $ 6,099,779 $ 9,476,210
Commitments and contingencies (Note 3) ........... -- --
Shareholder's deficit:
Common stock, par value $1: 50,000 shares
authorized; 2 shares issued and outstanding .. 2 2
Deficit accumulated during the development stage . (2,301,000) (2,856,000)
----------- -----------
Total shareholder's deficit ................... (2,300,998) (2,855,998)
----------- -----------
Total liabilities and shareholder's deficit ...... $ 3,798,781 $ 6,620,212
=========== ===========
See accompanying notes to condensed consolidated financial statements.
F-34(B)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE
For the Three Months Ended March 31, 1996 and 1997
and Inception (July 20, 1994) Through March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended March 31 Through
------------------------ March 31
1996 1997 1997
--------- ----------- -----------
<S> <C> <C> <C>
General and administrative expenses ..... $ 266,000 $ 555,000 $ 2,856,000
--------- ----------- -----------
Net loss ................................ (266,000) (555,000) (2,856,000)
Deficit accumulated during the
development stage, beginning of period (647,000) (2,301,000) --
--------- ----------- -----------
Deficit accumulated during the
development stage, end of period ..... $(913,000) $(2,856,000) $(2,856,000)
========= =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-35(B)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1997
and Inception (July 20, 1994) Through March 31, 1997
(Unaudited)
1996 1997 1997
--------- ----------- -----------
OPERATING ACTIVITIES:
Net loss ........................... $(266,000) $ (555,000) $(2,856,000)
INVESTING ACTIVITIES:
Development costs .................. (490,701) (3,321,431) (6,613,923)
FINANCING ACTIVITIES:
Capital contribution from parent ... -- -- 2
Advances from parent ............... 756,701 3,376,431 9,476,210
--------- ----------- -----------
Cash provided by financing activities 756,701 3,376,431 9,476,212
--------- ----------- -----------
Increase (decrease) in cash ........ -- (500,000) 6,289
Cash, beginning of period .......... 6,289 506,289 --
--------- ----------- -----------
Cash, end of period ................ $ 6,289 $ 6,289 $ 6,289
========= =========== ===========
See accompanying notes to condensed consolidated financial statements.
F-36(B)
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 AND THE
PERIOD FROM INCEPTION (JULY 20, 1994) THROUGH MARCH 31, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Energy Company ("Global Cayman", or collectively with its
subsidiaries the "Company")(a Cayman Islands company) is a wholly owned
subsidiary of Panda Global Holdings, Inc. ("Panda Global"), which in turn is a
wholly owned subsidiary of Panda Energy International, Inc. ("PEII"). PEII is
engaged in the development, acquisition, ownership and operation of independent
power generation facilities and other energy-related projects worldwide. Global
Cayman was formed in March 1997 to hold PEII's indirect ownership interest in an
independent power project located in the People's Republic of China ("China").
The ownership interest was transferred to Global Cayman at PEII's historical
cost. Because the transfer occurred between entities under common control, the
transaction has been accounted for in a manner similar to a pooling of
interests.
Global Cayman holds a 95.5% ownership interest in Pan-Sino Energy
Development Company LLC ("Pan-Sino")(a Cayman Islands company), which in turn
holds a 99% ownership interest in Pan-Western Energy Corporation LLC
("Pan-Western")(a Cayman Islands company), which in turn owns an approximately
88% interest in four joint venture companies (the "Joint Venture Companies")
organized under the laws of China to develop and construct two 50 megawatt
coal-fired cogeneration plants (the "Luannan Project") located in Luannan
County, Tangshan Municipality, Hebei Province, China. Pan-Sino and Pan-Western
were formed on July 20,1994 and are the Company's predecessor. The Joint Venture
Companies, which currently have no material assets or operations, are: Tangshan
Panda Heat and Power Company, Ltd. ("Tangshan Panda"), Tangshan Pan-Western Heat
and Power Company, Ltd. ("Tangshan Pan-Western"), Tangshan Cayman Heat and Power
Company, Ltd. ("Tangshan Cayman") and Tangshan Pan-Sino Heat Company, Ltd.
("Tangshan Pan-Sino").
All material intercompany accounts and transactions have been eliminated
in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
and should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1996. The accompanying unaudited
financial statements for the three months ended March 31, 1996 and 1997 include
all adjustments, consisting of normal recurring accruals, which management
considers necessary for a fair presentation of the results of operations for the
interim periods. The results of operations for the three months ended March 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. The amounts presented in the balance sheet as of
December 31, 1996 were derived from the Company's audited financial statements.
DEVELOPMENT STAGE ENTERPRISE -- The Company is in the development stage
and has no operating revenues. PEII has committed to provide the Company with
continued financial support until the Company obtains the financing necessary
for the continued development and construction of the Luannan Project. Such
financing was obtained in April 1997 (see Note 5).
CASH -- Included in cash and cash equivalents are highly liquid
investments with original maturities of three months or less.
DEVELOPMENT COSTS -- Costs related to the development of the Luannan
Project have been capitalized. Such costs primarily consist of engineering,
legal and other costs directly related to the project. Such costs will be
depreciated using the straight-line method over the estimated useful lives of
the assets, generally twenty years. Depreciation will begin when the completed
facility is ready for its intended use.
F-33
<PAGE>
ALLOCATION OF ADMINISTRATIVE COSTS -- PEII performs certain accounting,
legal, insurance and consulting services for the Company. 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
$266,000 and $555,000 for the three months ended March 31, 1996 and 1997,
respectively, and are included in general and administrative expenses in the
consolidated statements of operations. Management believes the method used to
allocate these costs is reasonable.
INCOME TAXES -- On the basis of the current legislation in the Cayman
Islands, there is no income, corporation, profits, capital gains or other form
of taxation that would be of application to Global Cayman or its subsidiaries
and, accordingly, there is no withholding tax. In addition, Pan-Western, as an
exempted company, has obtained from the Cayman Islands Government an undertaking
that should the current legislation change, no taxation will be imposed upon the
profits of Pan-Western or any shareholders in Pan-Western for a twenty year
period commencing August, 1994.
3. LUANNAN PROJECT
In 1994, PEII entered into a preliminary letter of intent with a
subsidiary of the North China Power Group Company ("NCPGC") for the purchase and
sale of electric energy from the Luannan Project. On September 22, 1995,
Tangshan Panda and Tangshan Pan-Western (see Note 1) entered into a Power
Purchase Agreement with NCPGC for the purchase and sale of electric energy from
the Luannan Project. Under the terms of the 20-year agreement, all electrical
output of the project will be sold to NCPGC. The steam and hot water generated
by Tangshan-Cayman's facility within the project will be sold to the domestic
Chinese industrial and commercial markets by Tangshan Pan-Sino. The Luannan
Project will be constructed pursuant to a fixed-price, turnkey contract with
Harbin Power Engineering Company Limited. Preliminary construction activity
commenced in December 1996. Full construction activity commenced after the
successful completion of financing in April 1997 (see Note 5).
The Luannan Project is subject to political, regulatory and economic
uncertainties, risks of expropriation of property and cancellation or
modification of contract rights, foreign exchange restrictions, construction
risk, dependence on limited number of customers and other risks arising from
foreign governmental sovereignty.
4. ADVANCES FROM PARENT
PEII has performed all project development and administrative activities
for the Company. The advances from parent reflect the Company's liability for
such costs incurred by PEII on the Company's behalf. Such advances may be
partially reimbursed during the construction period of the Luannan Project.
5. SUBSEQUENT EVENT
In April 1997, Global Cayman issued $155.2 million original principal
amount of senior secured notes ("Senior Secured Notes") to finance the
development and construction of the Luannan Project. The Senior Secured Notes,
which were issued at a discount for gross proceeds of $145.0 million, bear
interest at a fixed rate of 12 1/2% payable semiannually commencing October 15,
1997. Scheduled principal payments are required semiannually commencing October
15, 2000 and will continue through maturity on April 15, 2004. The Senior
Secured Notes are subject to mandatory redemption prior to maturity under
certain conditions. The Senior Secured Notes are secured by (i) a pledge of 100%
of the capital stock of Global Cayman, 99% of the capital stock of Pan-Western
and at least 90% of the capital stock of Pan-Sino, and (ii) a security interest
in certain funds of Global Cayman and its subsidiaries established under the
indenture. Additionally, the Senior Secured Notes are fully and unconditionally
guaranteed by Panda Global, whose guarantee (the "Senior Secured Notes
Guarantee") is secured by (i) a pledge of 100% of the capital stock of Panda
Global and PEC and (ii) a security interest in certain funds of Panda Global
established under the indenture. The Senior Secured Notes Guarantee is
effectively subordinated to the obligations of PIC and its subsidiaries under
the Series A Bonds and project-level financing arrangements. The indenture
contains certain covenants, including limitations on distributions, additional
debt and certain other transactions.
F-34
APPENDIX A
PART I - CERTAIN DEFINED TERMS
Unless the context requires otherwise, any reference in this
Prospectus to any agreement shall mean such agreement and all
schedules, exhibits and attachments thereto as amended,
supplemented or otherwise modified and in effect as of the date
of this Offering Memorandum. All terms defined herein used in the
singular shall have the same meanings when used in the plural and
vice versa.
Certain terms defined below are summaries of terms defined
in, and are defined more specifically in, the Project Documents
and the Indentures. Additional defined terms can be found in
"Description of the Exchange Notes, the Exchange Note Guarantees,
the Issuer Loan, the Shareholder Loans and the Collateral
Documents." Such summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to,
all of the provisions of the Project Documents and the
Indentures.
"1988 VEPCO Solicitation" means the solicitation of bids
conducted by VEPCO in 1988 for electricity generation payment
rates from several non-utility generation plants.
"1990 Clean Air Act Amendments" means Public Law 101-549,
enacted November 15, 1990, which amended the Clean Air Act (42
U.S.C. 7401 et seq.). The 1990 Clean Air Act Amendments have
been codified into the Clean Air Act.
"Accredited Investors" has the meaning ascribed to such term
under Rule 501(a)(1), (2), (3) or (7) of Regulation D of the
Securities Act.
"Additional Amounts" means the additional amounts as
described in "Description of the Notes, the Guarantees, the
Issuer Loan, the Shareholder Loans and the Collateral Documents-
Withholding Taxes."
"Administrative Services Agreement" means the administrative
services agreement between Panda International and the Company,
dated as of the Closing Date.
"AFR" means the applicable federal rate set periodically by
the IRS.
"Anticipated Additional Debt" means the original principal
amount of an additional series of Pooled Project Bonds proposed
to be issued by PFC which is equal to the largest principal
amount of such series that will provide a projected PIC Debt
Service Coverage Ratio and a projected PIC Consolidated Debt
Service Coverage Ratio (if then applicable) of at least 1.7:1 and
1.25:1, respectively, for each PIC Future Ratio Determination
Period, as confirmed in each case by a certificate from the
Consolidating Financial Analyst, assuming, in respect of the
additional series of Pooled Project 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 PIC Debt Service
Coverage Ratio, PIC Cash Available for Distribution and (b) in
the case of the PIC Consolidated Debt Service Coverage Ratio, PIC
Cash Available from Operations (net of any reserve requirements
under Project-level debt and PIC-level debt) from the PIC Project
Portfolio (giving effect, in each case, to the transfer to the
PIC Project Portfolio of any Project in respect of which such
additional series of Pooled Project Bonds is proposed to be
issued); in making this analysis, the Consolidating Financial
Analyst is required to use generally accepted financial analysis
methods and generally follow the methods used to calculate the
amount of the offering of the Series A Bonds.
"BG&E" means Baltimore Gas & Electric Company, a Maryland
corporation.
"Bibb" means The Bibb Company, a Delaware corporation.
"BOT" means foreign investment through build-operate-
transfer, a method that has been utilized in the PRC to finance
the development of the PRC's electric power industry.
"Brandywine Effluent Agreement" means the Treated Effluent
Water Purchase Agreement dated as of September 13, 1994 between
the Brandywine 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
and Credit Suisse, New York branch, as amended, supplemented or
otherwise modified from time to time in accordance with the terms
of such agreement and the Brandywine Participation Agreement.
"Brandywine Engineering Report" means the report entitled
"Panda-Brandywine Cogeneration Project" Independent Engineer's
Report prepared by PES, dated July 22, 1996, as updated on March
10, 1997, evaluating the design, construction and expected
operation of the Brandywine Facility.
"Brandywine EPC Agreement" means the Amended and Restated
Turnkey Cogeneration Facility Agreement, dated as of March 30,
1995, between Raytheon and the Brandywine Partnership.
"Brandywine Event of Loss Proceeds" means proceeds of
casualty insurance or condemnation awards or the like, payable
with respect to a Brandywine Event of Loss (net of costs of
obtaining such proceeds or awards) to the extent not used to
replace or repair the Brandywine Facility and for other required
payments under the Brandywine Facility Lease.
"Brandywine Event of Loss" means an Event of Loss as defined
in the Brandywine Participation Agreement.
"Brandywine Facility" means the Brandywine Partnership's 230
MW natural gas-fired, combined-cycle cogeneration facility in
Brandywine, Prince George's County, Maryland.
"Brandywine Facility Lease" means the Facility Lease, dated
December 18, 1996, between Panda-Brandywine Partnership and Fleet
National Bank, as Owner Trustee, pursuant to which the Panda-
Brandywine Partnership leases the Brandywine Facility.
"Brandywine Financing" means the transactions set out in the
Brandywine Financing Documents and described in this Offering
Memorandum in the section entitled "Description of Other
Indebtedness-The Brandywine Financing."
"Brandywine Financing Conversion" means the conversion, on
December 30, 1996, of the Brandywine construction loan to a long-
term leveraged lease pursuant to the Brandywine Financing
Documents.
"Brandywine Financing Documents" means the Brandywine
Participation Agreement, the Brandywine Facility Lease and
certain other agreements relating to the Brandywine Financing.
"Brandywine Fuel Consultant" means C.C. Pace.
"Brandywine Fuel Consultant's Report" means the report
entitled
"Panda-Brandywine, L.P. Generating Facility Fuel Consultant's
Report" prepared by the Brandywine Fuel Consultant, dated July 2,
1996, as updated on March 10, 1997, analyzing the sufficiency of
the fuel supply and transportation arrangements for the
Brandywine Facility.
"Brandywine Fuel Management Agreement" means the Fuel Supply
Management Agreement, dated March 30, 1995, between CDC and the
Brandywine Partnership.
"Brandywine Gas Agreement" means the Gas Sales Agreement,
dated as of March 30, 1995, between the Brandywine Partnership
and CDC.
"Brandywine Loan Agreement" means the Construction Loan
Agreement and Lease Commitment, dated as of March 30, 1995, among
GE Capital, the 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 Brandywine Partnership and Ogden
Brandywine.
"Brandywine Owner Trustee" means Fleet National Bank, as
owner trustee in connection with the lease of the Brandywine
Facility.
"Brandywine Participation Agreement" means the Participation
Agreement, dated as of December 18, 1996, among the Brandywine
Partnership, PBC, GE Capital, Fleet National Bank, as owner
trustee and security agent, First Security Bank, National
Association, as indenture trustee, Credit Suisse, as
administrative agent, and the loan participants party thereto.
"Brandywine Partnership" means Panda-Brandywine, L.P., a
Delaware limited partnership.
"Brandywine Partnership Agreement" means the Agreement of
Limited Partnership of Panda-Brandywine, L.P., dated as of March
25, 1991, between PEC and PBC as amended, supplemented or
otherwise modified from time to time.
"Brandywine Power Purchase Agreement" means the Power
Purchase Agreement, dated August 9, 1991, as amended September
16, 1994, between the Brandywine Partnership and PEPCO.
"Brandywine Pro Forma" means the pro forma financial
projections prepared by ICF 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 April 11, 1997, and updated June 6, 1997, presenting
an independent assessment of the Brandywine Pro Forma.
"Brandywine Project Documents" means, collectively, the
Brandywine Power Purchase Agreement, the Brandywine EPC
Agreement, the Brandywine O & M Agreement, the Brandywine Steam
Agreement, the Brandywine Gas Agreement, the Raytheon Parent
Guaranty, the Brandywine Effluent Agreement, the Brandywine
Partnership Agreement and each Additional Project Document.
"Brandywine Steam Agreement" means the Steam Sales
Agreement, dated March 30, 1995, between Brandywine Water Company
and the Brandywine Partnership.
"Brandywine Water Company" means Brandywine Water Company, a
Delaware corporation.
"Burns & McDonnell" means Burns & McDonnell Engineering
Company, Inc., a Missouri corporation.
"Capitalized Interest Fund" shall have the meaning set forth
under "Description of the Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the Shareholder Loans and the
Collateral DocumentsThe FundsCapitalized Interest Fund."
"Carrier" means Luannan County State-Owned Transportation
Company, a PRC company owned and operated by Luannan County.
"Cautionary Statements" means the important factors that
could cause actual results to differ materially from the Issuer's
expectations reflected in this Offering Memorandum that are
disclosed in "Risk Factors," in the assumptions made by the
Independent Engineers and Consultants and contained in their
reports and elsewhere in this Offering Memorandum.
"C.C. Pace" means C.C. Pace Resources, Inc., a Virginia
corporation.
"CDC" means Cogen Development Company, a Michigan
corporation.
"Central Government" means the Central Government of the PRC.
"CEOZ Notice" means the Notice to Expand the Scope of
Coastal Economic Open Zone promulgated by the State Council of
the PRC on March 18, 1988.
"CERCLA" means the United States Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
"CFETC" means the national interbank foreign exchange market
in the PRC, also known as the China Foreign Exchange Trading
Center.
"CHEXIM" means the Export-Import Bank of China, a company
organized under the laws of the PRC.
"CHEXIM Guarantee" means the Guarantee dated July 9, 1996
provided by CHEXIM as required pursuant to the Luannan EPC
Contract in respect of the payment of liquidated damages and
termination payments up to a maximum amount of 35% of the Luannan
EPC Contract Price.
"China" means the People's Republic of China.
"Chinamac" means Chinamac (Singapore) Pte Ltd, a Singapore
corporation and a wholly-owned subsidiary of CMC.
"Clean Air Act" means the United States Federal Clean Air
Act, as amended.
"Clean Water Act" means the United States Federal Clean
Water Act, as amended.
"Closing Date" means the April 22, 1997, the date on which
the Old Notes were issued and sold to the Initial Purchaser.
"CMC" means China National Machinery Import & Export
Corporation, a PRC corporation.
"CNG" means CNG Transmission Corporation, a Delaware
corporation.
"CNG FT Agreement" means the Services Agreement Applicable
to Transportation of Natural Gas Under Rate Schedule FT (X-74
Assignment), dated as of August 20, 1996, between CNG and the
Rosemary Partnership.
"CNPC" China National Power Corporation.
"Code" means the United States Internal Revenue Code of
1986, as amended.
"COFTEC" means, with respect to a province or county of the
PRC, the Commission of Foreign Trade and Economic Cooperation of
such province or county.
"Collateral Documents" means the Exchange Notes Collateral
Documents and the Exchange Notes Guarantee Collateral Documents.
"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
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 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 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 Brandywine
Partnership and Columbia Gas.
"Commercial Operations" means, for purposes of the PIC
Additional Projects Contract, 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 Securities and Exchange Commission of
the United States.
"Company" means Panda Global Holdings, Inc., a Delaware
corporation and the owner of 100% of the Issuer, and its
successors pursuant to the terms of the Company Indentures.
"Consolidated Pro Forma" means the summary consolidation of
the Rosemary Pro Forma, the Brandywine Pro Forma and the Luannan
Pro Forma.
"Consolidated Pro Forma Report" means the report entitled
"Summary of the Consolidated Pro Forma of Panda Global Holdings,
Inc." prepared by ICF, dated April 11, 1997, and updated June 6,
1997, containing the Consolidated Pro Forma.
"Consolidating Financial Analyst" means ICF, or its
successor (any such successor shall be a firm of national
reputation with expertise in engineering and financial analysis),
which such party may rely, to the extent necessary for purposes
of performing its duties under the Indentures, on the reports of
the Luannan Facility Engineer, the Brandywine Facility
independent engineer, the Rosemary Project independent engineer
or other qualified consultants.
"Constellation" means Constellation Energy Corporation.
"Construction Schedule" means the construction schedule set
forth in the Luannan EPC Contract.
"Consultants" means the Rosemary Fuel Consultant, the
Brandywine Fuel Consultant, the Luannan Coal Consultant, the
Consolidating Financial Analyst and the Independent Insurance
Consultant or their respective successors.
"Consultants' Reports" means the Consolidated Pro Forma
Report, the Rosemary Fuel Consultant's Report, the Brandywine
Fuel Consultant's Report, the Luannan Engineering Report and the
Luannan Coal Consultant's Report.
"County Partners" means Luannan Heat and Power, Luanhua Co.
and Luannan Heat Company, all of which are business entities
owned or related to the Luannan County Government or its
subdivisions.
"Cove Point" means Cove Point LNG Limited Partnership, a
Delaware limited partnership.
"Cove Point FT Agreement" means that certain FTS Service
Agreement, dated March 30, 1995, between the Brandywine
Partnership and Cove Point.
"Debt Service Reserve Fund" shall have the meaning set forth
under "Description of the Exchange Notes, the Exchange Notes
Guarantee, the Issuer Loan, the Shareholder Loans and the
Collateral DocumentsThe FundsDebt Service Reserve Fund."
"Design Institute" means Hebei Electric Power Survey and
Design Institute.
"Development Services Agreement" means the development
services agreement between Panda International and the Company,
dated as of the Closing Date.
"Dispatch Centers" means, collectively, dispatch centers
operated by the Power Bureaus.
"Dispatch Regulations" means the Regulations on the
Administration of Electric Power Dispatch to Networks and Grids
of the PRC.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Energy Policy Act" means the United States Energy Policy
Act of 1992.
"Energy Purchase Agreement" means the Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, among
North China Power Company, Tangshan Panda and Tangshan Pan-
Western.
"Engineering and Design Contract" means the Engineering and
Design Contract, dated December 21, 1995, among the Design
Institute, Tangshan Panda and Tangshan Pan-Western.
"Equity Joint Venture Law of the PRC" means the Law of the
People's Republic of China on Joint Ventures Using Chinese and
Foreign Investment, adopted on July 1, 1979 by the National
People's Congress, as amended.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"EWG" means an Exempt Wholesale Generator under Section 32
of PUHCA.
"Exchange Act" means the United States Securities and
Exchange Act of 1934, as amended.
"Exchange Agent" shall mean Bankers Trust Company as
Exchange Agent for the Exchange Offer.
"Exchange Offer Registration Statement" shall have the
meaning set forth in "Prospectus Summary--Prior Offering."
"FERC" means the Federal Energy Regulatory Commission of
the United States.
"FIEs" means foreign investment enterprises in the PRC.
"Financial Closing" means closing of the initial
construction or long-term project financing of a Project.
"Firm Gas Transportation Agreements" means (i) the Texas Gas
FT Agreement, the CNG FT Agreement and the Transco FT Agreement,
as they may exist at any time, (ii) any firm transportation
agreement that replaces any such agreement pursuant to a
specified conversion election by the Rosemary Partnership and
(iii) any other firm agreement having a term (including all
renewal or extension periods) greater than one year entered into
by the Rosemary Partnership to transport natural gas supplied
under the Rosemary Gas Supply Agreement.
"First Amendment" means the amendment dated September 16,
1994, to the Brandywine Power Purchase Agreement.
"Flippo" means Flippo Construction, a District of Columbia
corporation.
"Florida Power" means Florida Power Corporation, a Florida
corporation.
"Florida PSC" means the Florida Public Service Commission.
"Force Majeure Event" has the meaning ascribed to such term
under the Luannan Operations and Maintenance Agreement.
"Ford Credit" means Ford Motor Credit Company, a Delaware
corporation.
"Foreign Debt Registration Certificate" means the
certificate issued to FIEs by SAFE which evidences proper filing
of foreign debts in the PRC.
"FPA" means the United States Federal Power Act, as amended.
"Funding Period" means, with respect to the Issuer Loan
Agreement, the period of time beginning with the Closing Date and
ending on the date when the last Joint Venture has a payment
obligation relating to the construction of the Luannan Facility.
"GE Capital" means General Electric Capital Corporation, a
New York corporation.
"GNPIPD" means the Gross National Product Implicit Price
Deflator.
"Guaranteed Commercial Operation Date" means 28 months
following the issuance of the Notice to Proceed pursuant to the
Luannan EPC Contract.
"Harbin Power" means Harbin Power Equipment Company, a
company organized under the laws of the PRC.
"Heard Defendants" means the Heard Energy Corporation,
collectively with certain individual former PEC officers,
employees and advisors who are involved in litigation with PEC.
"Heat Network Construction Agreement" means the Construction
Agreement of the Heat and Steam Network, dated June 20, 1996,
between Tangshan Pan-Sino and Tangshan Engineering.
"HPPC" means the Hebei Provincial Planning Commission.
"HRSG" means heat recovery steam generator.
"ICC" means the International Chamber of Commerce.
"ICF" means ICF Resources, Incorporated, a Delaware
corporation.
"Independent Engineers" means Burns & McDonnell with respect
to the Rosemary Facility and PES with respect to the Brandywine
Facility, or their respective successors.
"Independent Engineers' Reports" means the Rosemary
Engineering Report and the Brandywine Engineering Report.
"Independent Insurance Consultant" means Sedgwick, PLC, a
corporation incorporated in accordance with the laws of the
United Kingdom, or its successor.
"Initial Purchaser" shall mean Donaldson, Lufkin & Jenrette,
the initial purchaser of the Old Notes.
"Interconnection Agreement" means the General
Interconnection Agreement, dated September 22, 1995, between
North China Power Company, Tangshan Panda and Tangshan Pan-
Western, as supplemented by the Supplemental Agreement.
"Interholding" means Panda Interholding Corporation, a
Delaware corporation.
"IRS" means the United States Internal Revenue Service.
"Issuer" means Panda Global Energy Company, a Cayman Islands
exempted company.
"Jing-Jin-Tang Grid" means North China Power's Beijing--
Tianjin--Tangshan Regional Power Network, to which the
electricity generated by the Luannan Facility will be transmitted
for distribution.
"Joint Venture Agreements" means, collectively, the joint
venture contracts in respect of Tangshan Panda, Tangshan Pan-
Western, Tangshan Cayman and Tangshan Pan-Sino.
"Joint Ventures" means, collectively, Tangshan Panda,
Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-Sino.
"Kathleen Facility" means the natural gas-fired, combined-
cycle cogeneration facility to be located near Lakeland, Florida,
that is being developed by PEC.
"Kathleen Partnership" means Panda-Kathleen, L.P., a
Delaware limited partnership.
"Kailuan Coal" means Kailuan Coal Mining Administration, one
of the Luannan Coal Suppliers.
"Liquidated Damages" means the amount payable as liquidated
damages under the terms of the Registration Rights Agreements, as
described in "Description of the Notes, the Guarantees, the
Issuer Loan, the Shareholder Loans and the Collateral Documents."
"Luanhua Co." means Tangshan Luanhua (Group) Co., a company
organized under the laws of the PRC.
"Luannan Coal Consultant" means Marston & Marston.
"Luannan Coal Consultant's Report" means the report prepared
by the Luannan Coal Consultant entitled "Review of the Coal
Supply Arrangements for the Luannan Power Project of Panda Energy
International, Inc." dated March 10, 1997.
"Luannan Coal Suppliers" means, collectively, Kailuan Coal
Mining Administration, Luannan County Coal Mine, Liu Guantun Coal
Mine, Le Ting County Coal Mine, Zunhua Coal Mine and Chang Li
County Coal Mine.
"Luannan Coal Supply Agreements" means, collectively, the
coal supply agreements entered into among Tangshan Panda,
Tangshan Pan-Western and the Luannan Coal Suppliers.
"Luannan Coal Transportation Agreement" means the coal
transportation agreement, dated March 6, 1996, among the Carrier,
Tangshan Panda and Tangshan Pan-Western.
"Luannan County Government" means the government of Luannan
County, Tangshan Municipality, Hebei Province, PRC.
"Luannan Engineering Report" means the report entitled
"Engineer's Review and Report Panda Energy International, Inc.
2x50 MW Coal-Fired Power Plant at Luannan, China" prepared by
Parsons Brinckerhoff, dated March 10, 1997, evaluating the
design, construction and expected operational and financial
performance of the Luannan Facility.
"Luannan EPC Contract" means the Engineering, Procurement
and Construction Contract, dated as of April 24, 1996 among the
Luannan EPC Contractor, Tangshan Panda and Tangshan Pan-Western,
as the same may from time to time be amended, supplemented or
otherwise modified.
"Luannan EPC Contract Price" means the price that the Joint
Ventures have agreed to pay to the Luannan EPC Contractor under
the Luannan EPC Contract.
"Luannan EPC Contractor" means Harbin Power Engineering
Company Limited, a company organized under the laws of the PRC,
and a wholly-owned subsidiary of Harbin Power.
"Luannan EPC Guarantee" means (i) the corporate guarantee
provided by Harbin Power for the benefit of Tangshan Panda and
Tangshan Pan-Western, guaranteeing the liabilities and
obligations of the Luannan EPC Contractor under the Luannan EPC
Contract and (ii) the Guarantee, dated July 9, 1996, provided by
CHEXIM as required pursuant to the Luannan EPC Contract in
respect of the payment of liquidated damages and termination
payments up to a maximum amount of 35% of the Luannan EPC
Contract Price.
"Luannan EPC Work" means the design, engineering,
procurement, construction, startup, and performance testing of
the Plant.
"Luannan Facility" means the Plant, the related steam and
hot water generation and distribution facility and other related
facilities to be located in Luannan County, Tangshan
Municipality, Hebei Province, China.
"Luannan Heat and Power" means Luannan County Heat and Power
Plant, a company organized under the laws of the PRC.
"Luannan Heat Company" means Luannan County Heat Company,
Ltd., a company organized under the laws of the PRC.
"Luannan Heat Supply Contracts" means the contracts to
supply steam and hot water to various PRC industrial and
commercial users that have been assigned by Luannan Heat and
Power to Tangshan Pan-Sino.
"Luannan Interconnection Dispatch Agreement" means the
agreement to be negotiated among Tangshan Power Supply Bureau of
North China Power Company, Tangshan Panda and Tangshan Pan-
Western shortly prior to the Luannan Commercial Operation Date
concerning specific details as to the dispatch of the Luannan
Facility.
"Luannan O&M Contractor" means Duke/Fluor Daniel
International Services, a partnership whose partners are Duke
Coal Project Services Pacific, Inc., a Nevada corporation, and
Fluor Daniel Asia, Inc., a California corporation.
"Luannan Operations and Maintenance Agreement" means the
Amended and Restated Operation and Maintenance Agreement, dated
as of March 6, 1997, among the Joint Ventures and the Luannan O&M
Contractor.
"Luannan Power Purchase Agreement" means, collectively, the
Energy Purchase Agreement, the General Interconnection Agreement
and the Supplemental Agreement (and, after execution thereof, the
Interconnection Dispatch Agreement).
"Luannan Pro Forma" means the pro forma financial
projections prepared by Parsons Brinckerhoff and contained in the
Luannan Engineering Report.
"Luannan Transmission Facilities" means three new
substations, the upgrades of both an existing substation and an
existing switching station and approximately 43 km of 110 KV
transmission lines to interconnect the Plant to the Jing-Jin-Tang
Grid.
"Luannan Transmission Facilities Construction Agreement"
means the Transmission Facilities Construction Agreement among
North China Power Company, Tangshan Panda and Tangshan Pan-
Western, dated February 10, 1996, as assigned by Tangshan Panda
and Tangshan Pan-Western to Tangshan Pan-Sino on July 11, 1996.
"Luannan Transmission Facilities Contractor" means North
China Power Company as the contractor pursuant to the Luannan
Transmission Facilities Construction Agreement.
"Luannan Transmission Facilities Loan" means the loan made
by Tangshan Pan-Sino to the Transmission Facilities Contractor
through a PRC financial intermediary for the construction cost of
the Luannan Transmission Facilities, in the amount of RMB
78,218,000, to be adjusted for inflation from December 31, 1994
to the date of issuance of the notice to proceed with preliminary
design and for accrued interest during the construction period.
"Marston & Marston" means Marston & Marston, Inc., a
Missouri corporation.
"MCN" means MCN Corporation, a Michigan corporation.
"MOEP" means the Ministry of Electric Power of the PRC.
"MOFTEC" means the Ministry of Foreign Trade and Economic
Cooperation of the PRC.
"Moody's" means Moody's Investors Service, Inc.
"NCNG" means North Carolina Natural Gas Corporation, a
Delaware corporation.
"NCPA" means the North China Power Administration.
"NCUC" means the North Carolina Utilities Commission.
"NDR" means National Development and Research Corporation, a
Texas corporation.
"NEA" means the Nepal Electricity Authority.
"Network" means the heat and steam network of Luannan Heat
and Power which will consist of 12.1 kilometers of hot water
pipeline, 8.78 kilometers of steam pipeline, heat exchange
stations, heat control equipment and civil construction.
"NGC" means Natural Gas Clearinghouse, a Colorado
partnership.
"NNW" means NNW, Inc., formerly known as Nova Northwest,
Inc., an Oregon corporation.
"NNW Cash Flow Participation" means NNW's cash flow
participation interest in distributions from the Rosemary
Partnership.
"NNW Credit Agreement" means the Credit, Term Loan and
Security Agreement, dated August 31, 1993, among PEC, Panda
Rosemary Corporation, a Delaware corporation, PRC II and NNW.
"Non-Global Purchasers" means foreign purchasers, Accredited
Investors or QIBs who elect to take physical delivery of their
certificates instead of holding their interest through a Global
Note.
"Non-payment Default" means any non-payment default with
respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may then be accelerated immediately.
"Noon Buying Rate" means the noon buying rate in New York
City for cable transfers in foreign currencies as certified for
customs purposes by the Federal Reserve Bank of New York.
"North China Power" means North China Power Group, a
regional grid administrative agency in northern China whose
jurisdiction covers Beijing, Tianjin, Hebei Province, Shanxi
Province and western Inner Mongolia.
"North China Power Company" means North China Power Group
Company, a company organized under the laws of the PRC and the
business arm of North China Power.
"Noteholders" or "Holders" means the persons in whose names
Existing Notes are registered on the Registrars' books.
"NPC" means the National People's Congress, the highest
legislative body of the PRC.
"NPDES" means the National Pollutant Discharge Elimination
System.
"O&M" means operations and maintenance services.
"Offering" means the offering of the Old Notes pursuant to
an offering memorandum dated April 11, 1997.
"Ogden Brandywine" means Ogden Brandywine Operations, Inc.,
a subsidiary of Ogden Power Corporation.
"OID" means Original Issue Discount.
"Old Notes" means the 12-1/2% Senior Secured Notes due 2004 of
the Issuer issued to the Initial Purchaser on April 22, 1997.
"Pan-Sino" means Pan-Sino Energy Development Company LLC, a
Cayman Islands exempted company.
"Pan-Western" means Pan-Western Energy Corporation LLC, a
Cayman Islands exempted company.
"Panda Global Rosemary O&M Agreement" means the operations
and maintenance agreement pursuant to which the Rosemary
Partnership purchases O&M services for the Rosemary Facility from
Panda Global Services.
"Panda Global Services" means Panda Global Services, Inc., a
Delaware corporation and an indirect wholly-owned subsidiary of
Panda International.
"Panda International" means Panda Energy International,
Inc., a Texas corporation.
"Parsons Brinckerhoff" means Parsons Brinckerhoff Energy
Services, Inc., a Delaware corporation.
"PBC" means Panda Brandywine Corporation, a Delaware
corporation.
"PBOC" means People's Bank of China.
"PBOC Rate" means the official RMB-foreign currency exchange
rate determined by the People's Bank of China.
"Peak Hours" means one of the three eight-hour delivery
periods designated by the Luannan Power Purchase Agreement.
"PEC" means Panda Energy Corporation, a Texas corporation.
"PEPCO" means Potomac Electric Power Company, a District of
Columbia and Virginia corporation.
"PES" means Pacific Energy Services, Inc., an Oregon
corporation.
"PFC" means Panda Funding Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of the
Company.
"PFC Bonds" means any series of bonds issued under the PFC
Indenture.
"PFC Indenture" means the Trust Indenture, dated as of July
31, 1996, among PFC, PIC and Bankers Trust Company, as trustee,
providing for the issuance from time to time of the Pooled
Project Bonds in one or more series.
"PFC Registration Statement" means the Registration
Statement on Form S-1, filed by PFC and certain of its affiliates
with the Commission which became effective on February 14, 1997.
"PIC" means Panda Interfunding Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of the
Company.
"PIC Additional Projects Contract" means the Additional
Projects Contract, dated as of July 31, 1996, among Panda
International, PEC and PIC.
"PIC Capitalized Interest Fund" shall mean the respective
capitalized interest fund established under the PFC Indenture.
"PIC Company Expense Fund" shall mean the company expense
fund established under the PFC Indenture.
"PIC Debt Service Reserve Fund" shall mean the respective
debt service reserve fund established under the PFC Indenture.
"PIC Entity" or "PIC 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 are owned directly by PIC, other than
directors' qualifying shares mandated by applicable law and (iii)
through which PIC owns indirect interests in Project Entities.
"PIC Guaranty" means the unconditional guaranty of the
Series A Bonds and each other series of Pooled Project Bonds by
PIC.
"PIC International Entities" means PIC Entities that,
through Project Entities, own Projects that are not U.S.
Projects.
"PIC Notes" means any promissory note evidencing loans from
PFC to PIC of the proceeds of the offering of the Series A Bonds
and each other series of Pooled Project Bonds.
"PIC Project Portfolio" means the portfolio of Projects
owned directly or indirectly by PIC.
"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, which agreement was assigned by PEC and PR Corp. to, and
assumed by, the Rosemary Partnership.
"Plant" means the 2x50 MW coal-fired cogeneration plant to
be constructed by the Joint Ventures in Luannan County, Tangshan
Municipality, Hebei Province, China.
"Pooled Project Bonds" means the Series A Bonds and certain
additional series of bonds issued pursuant to the PFC Indenture.
"PORTAL" means the Private Offerings, Resale and Trading
Through Automatic Linkages market.
"Power Bureaus" means, collectively, all power bureaus of
each level of the administration of the PRC.
"Power Law" means the Law of Electric Power of the PRC,
effective as of April 1, 1996.
"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.
"Pricing Approval Authority" means the Tangshan Municipal
Price Bureau.
"Pricing Document" means the document or documents (issued
by the Pricing Approval Authority) determining the price for
electric energy delivered, retail price and principles for
adjustment.
"Prior Offering" shall mean the offering of Old Notes
consummated on April 22, 1997.
"Project" means a power generation facility or any activity
relating thereto.
"Project Debt" means any indebtedness created, incurred or
assumed by a Project Entity or secured by the assets of a
Project, including the Rosemary Bonds.
"Project Design Criteria" means the Chinese codes and
regulations, and the project design criteria detailed in the
Engineering and Design Contract.
"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) the
direct or indirect owner of a Project or (b) 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.
"Prospectus" shall mean the prospectus forming a part of the
Registration Statement.
"Provincial Power Bureaus" means, collectively, the eight
independent provincial and two special administrative power
bureaus of the PRC.
"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 United States Public Utility Holding
Company Act of 1935, as amended.
"Purchase Agreement" shall mean the purchase agreement dated
April 11, 1997, whereby the Initial Purchaser agreed to purchase
the Old Notes.
"PURPA" means the United States Public Utility Regulatory
Policies Act of 1978, as amended.
"QF" means Qualifying Facility.
"QIB" means qualified institutional buyer, as such term is
defined under Rule 144A of the Securities Act.
"Qualifying Facility" or "QF Status" 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 Standard & Poor's, Moody's, and Duff
& Phelps. "Reaffirmed by the Rating Agencies," or words to
similar effect, means two or three of such agencies have
reaffirmed the rating of the Indebtedness at issue.
"Raytheon" means Raytheon Engineers and Constructors, Inc.
"Raytheon Parent Guaranty" means the Parent Guaranty dated
as of March 30, 1995 executed by Raytheon Company in favor of the
Brandywine Partnership.
"RCRA" means the United States Resource Conservation and
Recovery Act of 1976.
"Regional Power Groups" means, collectively, the five
interprovincial power groups of China.
"Registration Rights Agreement" shall have the meaning set
forth in "Prospectus Summary--Prior Offering".
"Registration Statement" shall have the meaning set forth in
"Available Information."
"Reimbursement Agreement" means the Second Amended and
Restated Letter of Credit and Reimbursement Agreement, dated as
of January 6, 1992, among the Rosemary Partnership, The Fuji
Bank, Limited, and certain other banks party thereto, which was
terminated in July 1996.
"Renminbi" or "RMB" means Renminbi, the legal tender
currency of China.
"Retainage" means the withholding by Tangshan Panda and
Tangshan Pan-Western of 10% of the Luannan EPC Contract Price.
"Rosemary Bonds" means the 8 5/8% First Mortgage Bonds due
2016 of Panda-Rosemary Funding Corporation.
"Rosemary Borrowers" means Panda-Rosemary Funding
Corporation, PR Corp. and PRC II.
"Rosemary Casualty Proceeds" means Casualty Proceeds as
defined in the Rosemary Indenture.
"Rosemary Eminent Domain Proceeds" means Eminent Domain
Proceeds as defined in the Rosemary Indenture.
"Rosemary Engineering Report" means the report entitled
"Panda-Rosemary Cogeneration Project Condition Assessment Report
prepared by Burns & McDonnell, dated April 11, 1997, and updated
June 6, 1997, concerning certain technical, environmental and
economic aspects of the Rosemary Facility.
"Rosemary Event of Eminent Domain" means an Event of Eminent
Domain as defined in the Rosemary Indenture.
"Rosemary Event of Loss" means an Event of Loss as defined
in the Rosemary Indenture.
"Rosemary Facility" means the 180 MW natural gas-fired,
combined-cycle cogeneration facility of the Rosemary Partnership
located in Roanoke Rapids, North Carolina.
"Rosemary Fuel Consultant" means Benjamin Schlesinger and
Associates, Inc.
"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 the Rosemary
Fuel Consultant, dated September 20, 1996, as updated on April
11, 1997, and June 6, 1997, analyzing the sufficiency of the fuel
supply and transportation arrangements for the Rosemary Facility.
"Rosemary Fuel Management Agreement" means the Fuel Supply
Management Agreement, dated October 10, 1990, between the
Rosemary Partnership and NGC, as amended.
"Rosemary Gas Supply Agreement" means the Gas Purchase
Contract, dated April 12, 1990, between the Rosemary Partnership
and NGC, as amended.
"Rosemary Indenture" means the trust indenture governing the
terms of issuance from time to time of debt securities in one or
more series, dated as of July 31, 1996, among Panda-Rosemary
Funding Corporation, the Rosemary Partnership and Fleet National
Bank, as trustee.
"Rosemary Issuer" means Panda-Rosemary Funding Corporation,
a Delaware corporation.
"Rosemary Offering" means the offering of the Rosemary
Bonds.
"Rosemary Partnership" means Panda-Rosemary, L.P., a
Delaware limited partnership.
"Rosemary Pipeline" means the 10.26 mile gas pipeline owned
by the Rosemary Partnership.
"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
Rosemary Partnership.
"Rosemary Pro Forma" means the pro forma financial
projections prepared by Burns & McDonnell that are contained in
the Rosemary Engineering Report.
"Rosemary Project Document" means, collectively, the
Rosemary Power Purchase Agreement, the Rosemary EPC Agreement,
the Rosemary O&M Agreement, the Rosemary Steam Agreement, the
Rosemary Fuel Management Agreement, the Rosemary Gas Supply
Agreement, the Rosemary Site Lease and (as each of the following
is defined in the Rosemary Indenture) and each Additional Project
Document.
"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 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
Rosemary Partnership on January 3, 1990.
"Rosemary Title Event" means a Title Event as defined in the
Rosemary Indenture.
"Rosemary Title Insurance Proceeds" means Title Insurance
Proceeds as defined in the Rosemary Indenture.
"SAFE" means the State Administration of Foreign Exchange of
the PRC.
"SAIC" means the State Administration of Industry and
Commerce of the PRC.
"SCC" means the State Corporation Commission of the
Commonwealth of Virginia, or any successor agency.
"SEC" means the Securities and Exchange Commission of the
United States.
"Securities Act" means the United States Securities Act of
1933, as amended.
"Series A Bonds" means the 11 5/8% Pooled Project Bonds,
Series A due 2012 of Panda Funding Corporation.
"Series A Offering" means the offering of the Series A
Bonds.
"Series A-1 Bonds" means they 11-5/8% Pooled Project Bond,
series A-1 due 2012 of Panda Funding Corporation, exchanged for
the Series A Bonds of Panda Funding Corporation.
"Services" means the services to be performed by the Design
Institute pursuant to the Engineering and Design Contract.
"Shelf Registration Statement" shall have the meaning set
forth in "Prospectus Summary--Prior Offering."
"SFV" means Straight Fixed-Variable transportation rates.
"SP" means the State Power Corporation of China.
"SPC" means the State Planning Commission of the PRC.
"Standard & Poor's" means Standard & Poor's Ratings Service.
"Superfund" means the United States Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended.
"Supplemental Agreement" means the Supplemental Agreement
for General Interconnection Agreement and Electric Energy
Purchase and Sales Agreement, dated February 10, 1996, among
North China Power Company, Tangshan Panda and Tangshan Pan-
Western.
"Swap Centers" means the official foreign exchange swap
markets of the PRC.
"Tangshan Cayman" means Tangshan Cayman Heat & Power Co.,
Ltd., a Sino-foreign equity joint venture.
"Tangshan Engineering" means Tangshan Heat and Engineering
Company, a company organized under the laws of the PRC.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co., Ltd.,
a Sino-foreign equity joint venture.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat and
Power Co., Ltd., a Sino-foreign equity joint venture.
"Tangshan Panda" means Tangshan Panda Heat and Power Co.,
Ltd., a Sino-foreign equity joint venture.
"Taxes" means any present or future taxes, duties,
assessments or governmental charges of whatever nature.
"Texas Gas" means Texas Gas Transmission Corporation.
"Texas Gas FT Agreement" means the Gas Transportation
Agreement, dated August 1, 1996, between Texas Gas and the
Rosemary Partnership.
"Total Transmission Facilities Construction Cost" means the
U.S. dollar equivalent of RMB 78,218,000, to be adjusted for
inflation from December 31, 1994, to the date of issuance of the
notice to proceed with preliminary design in relation to the
construction of the Luannan Transmission Facilities.
"Transco" means Transcontinental Gas Pipe Line Corporation,
a Delaware corporation.
"Transco FT Agreement" means the Service Agreement, dated
July 26, 1996, effective as of August 20, 1996, between the
Rosemary Partnership and Transco.
"Treasury" means the United States Department of Treasury.
"Treasury Regulations" means regulations issued by the
United States Department of Treasury.
"Trough Hours" means one of the three eight-hour delivery
periods designated by the Luannan Power Purchase Agreement.
"U.S. dollars," "dollars," or "$" means United States
dollars, legal currency of the United States of America.
"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.
"United States" or "U.S." means the United States of
America.
"United States Holder" or "U.S. Holder" means a holder of a
Note who is (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate or trust, the
income of which is subject to United States federal income
taxation regardless of its source or (iv) a trust which is
subject to the supervision of a court within the United States
and the control of a United States fiduciary as described in
Section 7701(a)(30) of the Code.
"VEPCO" means Virginia Electric and Power Company, a
Virginia public service corporation (including North Carolina
Power).
"WestPoint" means WestPoint Stevens, Inc., a Delaware
corporation.
"WGL" means 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 Brandywine
Partnership and WGL.
APPENDIX A
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.
"Available" means the status of a major piece of equipment
which is capable of service, whether or not it is actually in
service.
"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.
"Cogeneration" means the simultaneous 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.
"Dispatch" means for purposes of this Offering Memorandum,
dispatching a plant means directing such plant to produce power
under the appropriate power sales agreement.
"GJ" means gigajoule; one billion Joules.
"GWH" means gigawatt hour; one million kWh.
"Installed Capacity" means the full-load continuous rating
of a generator, prime mover or other electrical equipment under
specified conditions as designated by the manufacturers.
"kJ" means kilojoule; 1000 Joules and equals .947817 Btu
(international).
"kV" means kilovolt; 1,000 volts.
"kW" means kilowatt; 1,000 watts.
"kWh" means kilowatt-hour; the basic unit of electric energy
equal to one kilowatt of power supplied to or taken from an
electrical circuit steadily for one hour.
"LHV" means lower heating value.
"Load" means with respect to a power generating plant or a
generator, the extent to which it is being used at a particular
time.
"Metric Ton" means 1,000 kilograms or 2204.6 pounds.
"MM" means thousand.
"MW" means megawatt; one million watts.
"MWh" means megawatt hour; one thousand kWh.
"Net Dependable Capacity" means the tested or demonstrated
output of the facility in kilowatts, measured at the output (high
voltage side) of the main transformers.
"Outage" means an interruption that fully or partially
curtails the electric generating facility's output of
electricity.
"Transmission Line" means an electrical connection between
two points on a power system for the purpose of transferring high
voltage electrical energy between the points. Generally, a
transmission line consists of large wires or conductors held
aloft by towers.
"TW" means terawatt; one billion kW.
"TWh" means terawatt-hour; one billion kWh. One thousand
GWh. TWh is typically used as a measure of the annual energy
output of a region or country.
"Watt" means the electric unit of real power or rate of
doing work. The unit of power in the international system (SI),
expressed as the Watt, is the power required to do work at the
rate of one Joule per second.
THE ELECTRIC POWER INDUSTRY AND REGULATION
IN THE PRC
AND THE
UNITED STATES
The information in this Section has been derived from various
government and private publications and obtained in
communications with various PRC governmental agencies and has not
been prepared or independently verified by the Joint Ventures,
the Issuer, the Company or the Initial Purchaser or any of their
respective affiliates. Capitalized terms used in this Appendix B
and not otherwise defined herein have the meanings assigned in
the glossary included as Appendix A hereto.
General
Since 1978, the PRC government has been implementing market-
oriented economic reforms in an effort to revitalize the PRC's
economy and improve its citizens' standard of living. The reforms
have marked a shift from a more rigid, centrally-planned economy
to a more mixed economy in which market forces play an increased
role and the government has a reduced role. State-owned
enterprises still constitute the largest sector of the economy,
but implementation of the economic reforms has led to, among
other things, the delegation to managers of enterprises of more
decision-making powers and responsibilities regarding matters
such as production, marketing, use of funds and employment of
staff. It has also led to the conversion of selected State-owned
enterprises into joint stock limited companies which issue shares
to the public and private investors (including their employees);
the gradual reduction of PRC government control over producer
prices; and the designation of certain coastal areas and cities
as special economic development zones with greater local
autonomy. The PRC government has also implemented policies
designed to attract foreign investment and technology. The PRC
government's reforms have resulted in significant economic
growth. The gross domestic product of China increased
significantly during the period 1980 to 1995.
The China Power Market
At the end of 1995, China had an aggregate installed electric
power generation capacity of approximately 217,220 MW, making
China's electric power generation capacity the third largest in
the world. In 1995, about 17,323 MW of installed capacity was
added. China's electric power industry produced approximately
1,007 TWh of electricity in 1995. This represents an addition of
nearly 80 TWh from 1994, making China's electricity industry one
of the fastest growing in the world. Despite its size, China's
electric power system is inadequate to meet current and expected
demand, and the consequent shortage is one of the major obstacles
to economic growth in the PRC. In addition, as of October 1994,
approximately 120 million people did not yet have access to
electricity.
Developments in the PRC's Power Industry
Under the PRC's Eighth Five-Year Plan (1991-1995), increasing
demands for electricity resulted in the rapid increase in the
PRC's total annual electricity generation. A total of 65,747 MW
of electric power generating capacity was installed during the
four-year period from 1992-1995, representing an average annual
increase of more than 16,000 MW. Notwithstanding such increase,
the PRC's average annual growth rate for installed electric
generating capacity between 1992 and 1995 (approximately 10.4%)
did not keep pace with the average annual growth rate of the
PRC's GDP. The following table sets forth figures for installed
capacity, increases in installed capacity, electricity generation
and percentage increases in electric power generation in China
for the years 1986 to 1995.
<TABLE>
<CAPTION>
Increase in
Installed Installed Electricity Increase in
Capacity Capacity Generation Electricity
<C> <C> <C> <C> <C>
Year (MW) (MW) (TWh) (%)
1986 93,818.5 6,795.3 449.6 9.5
1987 102,897.0 9,078.5 497.3 10.6
1988 115,497.1 12,600.1 545.2 9.6
1989 126,638.6 11,141.5 584.8 7.3
1990 137,890.0 11,251.4 621.2 6.3
1991 151,473.1 13,583.1 677.5 9.0
1992 166,532.4 15,059.3 754.2 11.3
1993 182,910.7 16,378.3 836.4 10.9
1994 199,897.2 16,986.5 927.9 10.9
1995 217,220.0 17,322.8 1,007.0 8.5
</TABLE>
(estimated)
(1)
__________________
Source: Ministry of Electric Power, Electric Power Industry in
China (1995).
(1) Based on various published statements from MOEP officials.
Based on statements by the Ministry of Electric Power (the
"MOEP"), China will need an average of approximately 16,600 MW of
new electric generating capacity annually through the year 2000
(or an aggregate of approximately 83,000 MW of new electric
generating capacity in the Ninth Five-Year Plan period ending
2000). MOEP estimates that approximately $20 billion of overseas
investment will be needed to reach the MOEP's target of
increasing installed capacity to 290,000 MW by 2000.
Electric Power and Other Regulation
The Joint Ventures, North China Power Company and North
China Power are subject to governmental and electric power grid
regulation in virtually all aspects of their operations,
including the amount and timing of electricity generation and
dispatch, the setting of power rates, the performance of
scheduled maintenance and compliance with power grid control
directives. Moreover, the conversion of the revenues of the
Joint Ventures into U.S. dollars is subject to the foreign
exchange regulations of the PRC, which are administered by State
Administration of Foreign Exchange of the PRC (the "SAFE"). See
"Risk Factors - Considerations Relating to the PRC-Government
Control of Currency Conversion and Exchange Rate Risks."
Regulation of the Electric Power Industry; General
The PRC's electric power industry is regulated primarily by
the MOEP in conjunction with the SPC and other governmental
agencies. For foreign investments in electric power projects in
the PRC, such governmental agencies include the Ministry of
Foreign Trade and Economic Cooperation of the PRC (the "MOFTEC"),
the SPC, the SAFE, the State Administration of Industry and
Commerce of the PRC (the "SAIC") and certain other agencies.
Certain functions of the MOEP are expected to be transferred in
the near future to the State Power Corporation of China ("SP")
which was formally approved in January 1997. See "Central
Governmental Authorities - Ministry of Electric Power" below.
The regulatory and approval authorities of the Central
Governmental agencies are delegated to local provincial or city
governmental agencies performing similar functions if the total
amount of such foreign-invested projects does not exceed certain
thresholds (denominated in U.S. dollars). See "Risk
Factors-Considerations Relating to the PRC-Legal and Regulatory
Considerations."
Central Governmental Authorities
The structure of the PRC political system is based on the
PRC Constitution and is headed by the National People's Congress
("NPC"), which is the highest legislative body, and the State
Council, which is the highest executive body charged with the
implementation and administration of the laws and decisions made
by the NPC. In addition, the SPC is in charge of formulating
national long-term, medium-term and annual economic plans based
on the industrial policy of the PRC.
State Council
The State Council is responsible for the integration of all
activities and policies of its component commissions and
ministries, as well as provincial and local governments. Rules
and regulations of the State Council and its commissions and
ministries preempt all legislation, rules or regulations enacted
by provincial and local governments. Thirty-eight ministries and
commissions, the General Office of the State Council, the
People's Bank of China (the "PBOC"), the State Auditing
Administration and a number of other bureaus and administrations
are currently under the direct authority of the State Council.
The agencies described below are the primary Central Governmental
agencies vested with authority to regulate foreign investment in
the electric power industries in the PRC.
In 1985, the State Council revised a number of its policies
with the intention of fostering the rapid development of the
electric power industry, including (i) allowing local governments
to invest in the development of power plants in their areas,
(ii) loaning funds to the local and provincial Power Bureaus for
the development of local and provincial power plants and
(iii) encouraging the utilization of foreign capital by
permitting foreign participation in the development and
management of power plants in China.
State Planning Commission
The SPC is responsible for coordinating the foreign
investment plans submitted by the provincial planning
departments, and formulating national long-term, medium-term and
annual foreign investment plans based on the industrial policy of
the PRC. The SPC has authority to approve the project proposal
and the feasibility study of foreign investment enterprises
("FIEs") with total investment of over $10 million, or $30
million in certain cases, except that FIEs with total investment
of over $100 million must also obtain final approval from the
State Council. The SPC is also responsible for coordinating the
Renminbi and foreign exchange funds required for the
construction, production and operation of FIEs.
Ministry of Electric Power
As the ministry responsible for the electric power industry,
the MOEP is responsible for formulating development strategies
and policies for the electric power industry in the PRC,
including investment, technical, and major production and
consumption policies. In addition to formulating electric power
industry planning in collaboration with the SPC and other
governmental agencies, the MOEP (i) coordinates the development
of the electric power industry, (ii) supervises the
implementation of related national policies, decrees and plans
and (iii) provides services to electric power enterprises. The
MOEP shares certain of its administrative responsibilities with
the China Nuclear Industry Corporation and the Ministry of Water
Resources with respect to nuclear-powered and hydro-powered
electricity generating facilities, respectively. In addition to
these regulatory and administrative functions, the MOEP is also
in charge of the overall financial management of the power
industry, including consolidating the profits and taxes and
approving the budgets of all the regional power entities
annually. The MOEP owns China's State-owned power generating
assets on behalf of the State, other than those owned by
companies not directly managed by the MOEP and a few smaller
units directly owned by local governments.
In an attempt to separate the regulatory and commercial
functions of the electric power industry, the PRC State Council
formally approved the establishment of the SP in January 1997.
The SP is a state-owned legal entity with funds provided directly
by the State Council. It will serve as the PRC's principal
investor in and/or operator of wholly or partially state-owned
facilities in China. It will also be responsible for the
operation of interregional transmission facilities and the
development of a national power grid. After the establishment of
the SP, the MOEP will continue to exercise the regulatory
function over the Chinese electricity industry, but the MOEP's
enterprise management function and its function to operate state
assets will be turned over to the SP. As part of the reform,
provincial power bureaus will also need to transfer their
regulatory functions to other departments of the local government
and become subsidiaries of the SP. It has been reported that the
MOEP itself will also be dissolved and its regulatory function
will be transferred to the China Electricity Council. The
organization and establishment work of the SP is expected to be
completed before the end of June 1997. There can be no assurance
as to what impact this reform will have on the Luannan Facility.
Ministry of Foreign Trade and Economic Cooperation
The MOFTEC controls all affairs pertaining to foreign
economic relations and trade through the implementation of
principles and policies of the medium and long-term foreign trade
development plans. Its aim is to foster international
multilateral and bilateral economic and technological cooperation
by utilizing foreign funds, organizing import and export of
technology, and generating construction projects abroad. On a
national level, the main responsibility of the MOFTEC consists of
controlling and coordinating foreign trade activities in the
provinces, autonomous regions and municipalities, as well as in
various departments under the State Council. The MOFTEC has the
authority to approve organizational documents of FIEs with total
investments exceeding the $10 million or $30 million threshold.
State Administration of Industry and Commerce
The SAIC is in charge of the registration of, and issuance
of business licenses to, FIEs. It has the authority to conduct
annual inspections of FIEs to ensure that their business
activities have been carried out in accordance with their
approved business scope and the applicable laws and regulations.
State Administration of Foreign Exchange
The SAFE is responsible for administration of foreign
exchange in the PRC. It formulates and oversees the
implementation of foreign exchange regulations applicable to
FIEs. The relevant approval authorities consult the SAFE in
respect of foreign exchange matters relating to FIEs. The SAFE is
also responsible for administrating the Swap Centers and issuing
permits to FIEs for access to the Swap Centers as well as for
monitoring the interbank system.
Local Governments
Administratively, the PRC is divided into 23 provinces, four
municipalities with provincial level authority (Beijing,
Shanghai, Tianjin and Chongqing) and five autonomous regions. At
the local level, administrative entities derive their authority
from, and are accountable to, the National People's Congresses at
the provincial and municipal levels. Provincial and local
congresses and governments are permitted to enact legislation,
rules and regulations designed for local conditions, provided
that such legislation does not contravene the Constitution or the
laws or regulations adopted by the Central Government of the PRC.
The local provincial and county equivalents of the Central
Government approval authorities discussed above play a
corresponding role in the approval process where the total
investment and other conditions of proposed FIEs fall within the
prescribed limits of delegated approval authority. In this
regard, the provincial and county planning departments and
economic departments have the authority to approve the project
proposal and the feasibility study and the provincial and county
Commissions of Foreign Trade and Economic Cooperation ("COFTECs")
have the authority to approve the organizational documents of
FIEs.
Regional, Provincial and Local Power Bureaus
The MOEP directly oversees the five interprovincial power
groups (the "Regional Power Groups") and the eight independent
provincial and two special administrative region power bureaus
("Provincial Power Bureaus") in China. The Regional Power Groups
(i) manage their respective regional power grids, (ii) dispatch
the power plants connected to such grids either directly or
indirectly through lower level power bureaus, and (iii) supervise
the power bureaus at lower administrative levels. The Regional
Power Groups also act through power companies which develop,
construct, own and operate certain power plants and transmission
facilities within their respective territories. The key personnel
of the Regional Power Groups are appointed by the MOEP and the
key personnel of the Provincial Power Bureaus are appointed by
the provincial governments in consultation with the MOEP.
A similar structure exists for the Provincial Power Bureaus
under the Regional Power Groups and the Provincial Power Bureaus
directly managed by the MOEP. Each Provincial Power Bureau
manages its provincial power grid and dispatches the power plants
connected to such grid to meet local demand. Many Provincial
Power Bureaus also act through power companies which operate
certain power plants and certain transmission facilities within
their respective provinces. Cities and counties directly under
the administration of the provinces may have power bureaus
(together with the Regional Power Groups and the Provincial Power
Bureaus, the "Power Bureaus") which perform, under the
administration of the Power Bureau at the next higher level of
government, similar functions within their respective
jurisdictions.
Investment in the Electric Power Industry
The Ninth Five-Year Plan contemplates that power generating
capacity in the PRC nationwide will be increased on average by
16,600 MW annually, representing an annual increase of about 7%
in power generation. By the year 2000, the total power generating
capacity nationwide is expected to reach 290,000 MW with an
expected annual power generation of 1,400 billion kWh. In order
to achieve these goals, it is estimated that 20% of the required
investment in the expansion of the power sector will have to come
from abroad. As stated above, prior to 1985 virtually all
investment in China's electric power industry was financed by the
Central Government. In 1985, the Central Government began to
implement a policy of using a variety of ways and financing
methods to develop the PRC's electric power industry, including
foreign investment through independent power projects and build-
operate-transfer ("BOT") approaches. To date, the primary means
of foreign investment in the PRC's electric power industry has
been debt financing of State-owned plants with a small amount of
equity investment in independent or BOT projects.
With appropriate Central Government approvals, Regional
Power Groups and Provincial Power Bureaus may form directly
managed power companies, which may develop, construct, own and
operate power plants in their respective territories. North China
Power Company was formed by North China Power in 1993 to serve as
North China Power's business arm. At least two-thirds of the
installed capacity in China at the end of 1995 was attributed to
power plants managed by the MOEP directly or indirectly through
such power companies. The remainder was attributed to power
plants owned and operated by the China Huaneng Group, the State
Energy Investment Corporation, the China Power Investment
Corporation, local government investment institutions and, to a
much lesser extent, foreign investors.
Rate Setting Mechanisms
Rates for electricity produced by power plants that the MOEP
directly or indirectly manages are generally set by the Central
Government, thus most electricity has historically been purchased
from power plants at such rates. For certain power plants with
local government, China Huaneng Group or foreign investment, such
as the Luannan Facility, rates are set on the basis of
discussions between such power plants and the relevant provincial
pricing bureau.
In the case of power plants managed by the MOEP, customers
purchase electricity from the Power Bureaus of each level of the
administration of the PRC at rates determined by the Central
Government, which vary according to the category and location of
the user. The rates set by the Central Government have
traditionally been maintained at a low level, requiring the
subsidization of the electric power industry by the Central
Government. One of the stated goals of the MOEP, which has also
been restated in the Power Law (as described below), is to reform
power pricing to be consistent with the development of the market
economy. The MOEP has commenced the trial implementation in
several cities of a time-sharing pricing policy which charges
consumers higher rates for peak load periods and lower rates for
off-peak load periods. North China Power has adopted a similar
program in its service area. Allowing the market to influence the
setting of power rates is intended to provide incentives for
greater efficiency in energy production, reduction of energy use
per unit of industrial output and promotion of conservation
technologies. See "Risk Factors - Considerations Relating to the
PRC-Governmental Regulation of Power Rates."
Transmission and Dispatch
The main system for the dispatch, transmission and
distribution of electric power in China consists of the five
interprovincial power grids managed by their respective Regional
Power Groups and the eight provincial and two autonomous region
power grids managed by the Provincial Power Bureaus. The table
below shows the aggregate installed capacity of the power plants
connected to the grids managed by such Power Bureaus and the
total electricity generated on those grids in 1994.
1994
1994 Total
Installed Electricity
Grid Capacity Generation
(MW) (TWh)
East China Power Bureau 31,673.2 164.358
Central China Power Bureau 27,602.2 132.041
North China Power Bureau 27,146.4 140.087
Northeast Power Bureau 26,534.4 124.531
Guangdong Provincial Bureau 19,009.7 73.916
Shandong Provincial Bureau 11,518.2 67.183
Northwest Power Bureau 11,483.0 60.423
Sichuan Provincial Bureau 10,095.3 47.328
Fujian Provincial Bureau 4,960.3 21.605
Guangxi Provincial Bureau 4,230.8 16.854
Yunnan Provincial Bureau 4,082.9 16.939
Guizhou Provincial Bureau 3,253.8 15.206
Xinjiang Autonomous Region Bureau 2,865.1 10.617
Hainan Provincial Bureau 1,057.3 2.869
Tibet Autonomous Region Bureau 166.7 0.357
(each a "Power Bureau")
Source: Ministry of Electric Power, Electric Power Industry in
China (1995)
China's energy sources, such as coal and potential
hydroelectric resources, are principally located in the western,
northern and central inland provinces, but its high electricity
consumption regions are located in the eastern and southern
coastal areas. As a result of plans to develop large power plants
in areas with significant energy sources, the expansion of
China's electricity transmission capabilities is of major
importance. China plans to interconnect the North China Power
Grid with the Northeast Power Grid around 2000. In 2003, with the
expected completion of the first phase of the Three Gorges
Project, the Central China Power Grid is expected to be
interconnected on the east with the East China Power Grid and on
the west with the Sichuan Power Grid. A unified national power
grid is planned for completion sometime between 2010 and 2020.
All electricity produced in China is dispatched by the Power
Bureaus, except for that generated by units not connected to a
grid. The grids and the electric power dispatch to each grid are
administered by dispatch centers ("Dispatch Centers") operated by
the Power Bureaus. Prior to November 1993, such electric power
dispatch had been carried out pursuant to MOEP guidelines. In
order to achieve more efficient and rational dispatch of electric
power, the State Council issued, with effect from November 1,
1993, the Regulations on the Administration of Electric Power
Dispatch to Networks and Grids (the "Dispatch Regulations"). The
Dispatch Regulations are the first nationwide regulations in
China governing the dispatch of electric power. Under the
Dispatch Regulations, Dispatch Centers were established at each
of five levels: the National Dispatch Center, the Dispatch
Centers of the Regional Power Groups, the Dispatch Centers of the
Provincial Power Bureaus, the Dispatch Centers of the Power
Bureaus of municipalities under provinces and the Dispatch
Centers of the county Power Bureaus. Dispatch Centers are charged
with setting production levels for the various power plants
connected to the grid. To effect this determination, each power
plant receives on a daily basis from its local Dispatch Center an
expected hour-by-hour output schedule for the following day,
based on expected demand, the weather and other factors.
The Dispatch Regulations provide that the Dispatch Centers
must dispatch electric power according to, among other things,
(i) power supply agreements entered into between a Power Bureau
and certain large or primary electricity customers, where such
agreements take into account the electric power generation and
consumption plans formulated annually by the Central Government
and set forth in the State Plan, (ii) agreements entered into
between a Dispatch Center and each power plant subject to its
dispatch, (iii) interconnection agreements between Power Bureaus
and (iv) actual conditions of the grid, including equipment
capabilities and safety reserve margins.
Peak and Seasonal Demands
The demand for electric power in China goes through fairly
predictable daily and other periodic cycles. Peak periods of
power use are during the day, from approximately 8:00 a.m. to
10:00 p.m., when industrial and commercial use is highest. Power
demand moderates from approximately 10:00 p.m. to 8:00 a.m. for a
number of reasons, including the fact that multiple shifts are
not routine in Chinese factories and that the residential demand
for electricity is relatively low. Because China has a
significant shortage of electricity generating capacity, the
Dispatch Centers restrict certain users' access to electricity
during peak periods of demand. As a result, the peak load in
China does not reflect the extent of the total demand for power.
China does, however, have enough generating capacity to meet all
demand during off-peak periods. While power plants operate at
less than full capacity during off-peak periods, virtually all
available power plants operate at full capacity during peak
periods, subject to grid-wide safety reserve margins.
Because the combustion of coal provides most of China's
space-heating needs and because air conditioning is not yet
prevalent in most regions of China, seasonal variations in the
demand for electricity are less than in countries such as the
United States.
Electricity Sources
The table below sets forth for each of the years 1993 and
1994 the amount of electricity generated in the PRC by type of
power plant in absolute terms, as well as a percentage of total
gross production.
Actual
1993 1994
TWh % TWh %
Thermal(1) 685.9 83.0 747.0 80.5
Hydroelectric power
(including pumped 150.6 17.0 166.8 18.0
storage) (2)
Nuclear 14.1 1.5
Total gross production 836.5 100.0 927.9 100.0
production
Source: Ministry of Electric Power, Electric Power Industry in
China (1995)
(1) Predominant fuel is coal; includes for 1993 an insignificant
amount of electricity generated by nuclear power plants.
(2) Pumped storage facilities pump water into reservoirs using
electricity generated during off-peak periods. The water is
released to generate hydroelectric power during peak demand
periods.
China is the world's largest producer of coal. China
depended on the consumption of coal for the supply of
approximately 75% of its primary energy needs in 1994, a higher
percentage than most developed countries. Coal is used in China
not only for generation of electricity, coking and other
industrial applications, but is also widely used for residential
and commercial cooking and heating. Because of China's extensive
domestic coal resources and its desire to minimize dependence on
foreign sources for energy, it is expected that coal will remain
the main energy source for electricity generation in China for
the foreseeable future.
A small portion of the coal and oil used in the generation
of electricity is allocated to power plants by the Central
Government in accordance with the State Plan. Pursuant to price
reforms introduced in the beginning of 1994, allocated coal is
generally sold at prices negotiated between the supplier and
purchaser subject to certain limitations of price currently
imposed by the Central Government.
Much of the coal used in the electric power industry must be
transported from relatively isolated inland coal mines by rail to
the coast for forwarding to the population and industrial centers
concentrated in China's coastal areas. Railway transportation
capability is generally insufficient to satisfy China's
industrial and commercial transportation needs. As a result,
railway transportation is allocated by the Central Government at
set prices.
PRC Electric Power Law
Given the importance of the continued rapid expansion of
China's power industry, the NPC adopted the Law of Electric Power
on December 28, 1995 (the "Power Law"). The Power Law, which
became effective on April 1, 1996, provides the legislative basis
for the regulation of China's electric power sector. It contains
guidelines in areas such as the generation, supply and use of
electric power, pricing and tariffs and regulatory supervision.
Under the Power Law, the appropriate administrative
department of the State Council is authorized within the scope of
its authority to supervise the electric power industry throughout
the country, and relevant departments of the State Council are
authorized within the scope of their respective authority to
supervise the electric power enterprises. While electric power
development planning will be carried out according to the needs
of the national economy, the Power Law also provides that each
administrative department of the local government at or above the
county level will be responsible for the supervision and control
of the electric power industry within its administrative region.
The Power Law states that independent power companies shall
be granted grid access upon their request, and provides that the
on-grid price of electricity shall be implemented on the basis of
"the same price for the same quality on the same grid." The Power
Law lists the criteria to be applied in the determination of
tariffs as including reasonable compensation for costs,
reasonable profits, inclusion of taxes in accordance with law,
firm adherence to the principle of equitable sharing of burdens,
and promoting electric power construction. The law delineates the
approval process for on-grid tariffs and makes a distinction
between the approvals required for regional/provincial level and
independent grids. Central Government approval is required for
tariffs on regional/provincial grids but no such approval is
specifically required for independent grids. The Power Law
reiterates the Central Government's position that entities
involved in the construction of power plants, power generation
and grid operation are autonomous and assume sole responsibility
for their own profits and losses. See "Risk
Factors-Considerations Relating to the PRC - Governmental
Regulation of Power Rates."
Because of its recent promulgation and in light of the fact
that the related implementing regulations (including provisions
concerning appropriate tariff setting authorities) have not yet
been published, there can be no assurance as to the effect the
Power Law and its implementation rules will have on the Luannan
Facility.
Joint Venture Formation Approval
The formation of the Joint Ventures and the construction and
operation of the Luannan Facility are subject to various
governmental approvals. Under PRC law and regulations, the
formation of a Sino-foreign joint venture requires the approval
of certain governmental authorities in the province in which the
joint venture is located, and, if the total investment (including
equity contributions to the joint venture and expected borrowings
of the joint venture) exceeds certain thresholds (denominated in
U.S. dollars), the approval of certain Central Government
authorities is required. Such thresholds vary by province,
municipality and special economic zone. In the case of Hebei
Province, where the Joint Ventures are located, provincial
governmental authorities have authority to approve the
establishment of any Sino-foreign joint venture entity the total
investment of which does not exceed $30 million in accordance
with a guideline issued in 1988 by the Central Government which
is currently in effect. The Hebei Provincial Planning Commission
(the "HPPC") and Hebei COFTEC, the provincial approval
authorities for the development of power plants and the formation
of Sino-foreign joint ventures, respectively, have advised that
the approval of the formation of the Joint Ventures is within
their approval authority because the total investment (including
equity contributions and borrowings) of each Joint Venture is
less then $30 million.
The Issuer has been advised by Cai, Zhang & Lan, Chinese
counsel to the Issuer and the Joint Ventures, that, because each
Joint Venture is technically viable and operational by itself,
has its own clearly defined business scope and purpose, and has
followed proper procedures for all required approvals, each Joint
Venture will be treated as a separate company, each project in
respect of which each Joint Venture has been established will be
treated as a separate project for approval purposes and Central
Government approval is not required. Based on the opinion of its
counsel and advice from the HPPC, Hebei COFTEC and the County
Partners, the Issuer believes that all required government
approvals to form the Joint Ventures and all required
governmental approvals that can be obtained to date to develop
the Luannan Facility have been obtained. See "Risk
Factors-Considerations Relating to the PRC - Legal and Regulatory
Considerations."
HEBEI PROVINCE, BEIJING AND TIANJIN
Economic Development
Hebei Province
The Luannan Facility will be located in Luannan County,
Tangshan City, Hebei Province, PRC. Luannan County is situated in
the area that is frequently referred to as Beijing-Tianjin-
Tangshan triangle, an important economic and political center in
the PRC. Hebei Province is located on the North China seaboard
and has an area of 187,700 square kilometers. Its population in
1995 was 64.3 million, representing approximately 3% of the total
population of the PRC. Shijiazhuang, the provincial capital, is
an industrial center and a rail-highway hub approximately 270
kilometers southwest of Beijing. Hebei Province is an important
coal producing province and is also adjacent to China's largest
coal producing and exporting province, Shanxi. The major rail and
highway routes for transporting coal from Shanxi Province all
pass through Hebei Province.
Hebei Province borders Beijing on three sides. The
industrial and economic growth of these two large urban centers
has positively influenced the development of Hebei Province.
Situated in northeastern Hebei Province, along its 487-kilometer
coastline, is Qinhuangdao, China's largest and one of the world's
largest coal ports.
In 1996, foreign investment in Hebei rose 58.4% to reach
$1.24 billion, making Hebei the fastest growing of China's 17
coastal provinces. Exports amounted to $3.46 billion, a 13%
increase over 1995. By 2000, exports are expected to rise to
$6.5 billion.
Beijing
Beijing has an area of 16,808 square kilometers and at the
end of 1996 had a population of 12.6 million, representing
approximately 1% of the total population of the PRC. Beijing is
composed of ten central districts and eight surrounding counties,
which are bordered by Hebei Province and Tianjin Municipality.
Beijing is one of three municipalities supervised directly by the
Central Government of the PRC, occupying the same administrative
level as a province, the others being Tianjin and Shanghai.
Beijing is the capital of the PRC and the Central
Government, the State Council and various ministries and
commissions are located in the city. As the capital, Beijing
enjoys a well-developed infrastructure with respect to
transportation, finance, culture and education. Beijing's urban
development is among the most advanced in China.
Beijing has developed a comprehensive industrial base, leading
the country in the fields of electronics, organic chemistry,
textiles, metallurgy, machinery and construction of educational
and cultural facilities. The total GDP generated within Beijing
in 1996 was approximately RMB 160.7 billion, representing an
increase of 9.1% over 1995. In 1996, the total foreign investment
amounted to $2.26 billion, representing an increase of 14.1% over
1995. The total value of exports was approximately $2.1 billion
in 1996.
Tianjin
Tianjin has an area of 11,305 square kilometers and at the
end of 1995 had a population of 9.4 million, representing
approximately 0.8% of the total population of the PRC. The
municipality is bordered by Hebei Province, Beijing and the sea.
Tianjin is one of three municipalities supervised directly by the
Central Government, occupying the same administrative level as a
province, the others being Beijing and Shanghai.
Tianjin is an industrial and commercial gateway and
transportation hub of Northern China. Benefiting from a 153-km
long coastline, the municipality is rich in oil and natural gas
resources. Tianjin's port, Xingang, is one of the largest man-
made seaports in China and is a major trading port in Northern
China. The city has been designated the state center for research
into and production of microcomputers and it is among the
national leaders in production of chemicals and textiles.
In 1996, Tianjin's total GDP was RMB 110.2 billion,
representing an increase of approximately 14.3% over the previous
year. Gross industrial output was approximately RMB 211 billion,
representing an increase of 22.7% over 1995, and total value of
exports was $4.05 billion.
Power Supply and Demand
By the end of 1995, the installed capacity of North China
Power was 25,140 MW and the annual power generation was 126.7
TWh. The Beijing-Tianjin-Tangshan Power Network had installed
capacity of 11,647 MW, of which 10, 964 MW was comprised of
thermal power and 683 MW was hydropower. Demand for electricity
in Beijing, Tianjin and northern China is expected to grow by 10%
during the Ninth Five-Year Plan (1996-2000). In 1996, the HPPC
indicated that Hebei needed to increase installed power
generating capacity by more than 1,000 MW annually over the next
five years.
Hebei Province
Most of Hebei Province's electricity is generated by coal-
fired power plants. Because of its proximity to major coal
fields, Hebei Province's per unit cost of electricity generation
is relatively low. The tables below show the major power plants
in operation and under development in Hebei Province:
Facilities in Operation
Operational Additional
Plant Capacity (MW) Planned
Capacity (MW)
Douhe Power Plant 1,550 1,200
Zhangjiakou Power Plant 1,200 1,200
Xingtai Power Plant 1,290 1,255
Matou Power Plant 1,000
Shang'an Power Plant 700 700
Xibaipo Power Plant 600 600
Qinhuangdao Power Plant 1,000 300
Weishui Power Plant 106
Total 7,446 5,255
Facilities under Development
Projected Projected
Plant Operational Completion Date
Capacity (MW)
Zhanhewan Pumped Storage 1,000 2005
Station
Sanhe Power Plant 600-700 2000
Hanfeng Power Plant 660 2001
Total 2,260 - 2,360
Beijing
The fuel sources and per unit generating costs for power
plants serving Beijing are similar to those for Hebei Province.
The table shows the major power plants in operation and under
development in Beijing.
Facilities in Operation
Operational Additional
Plant Capacity (MW) Planned
Capacity (MW)
Shiginhshan Cogeneration Plant 800
Facilities under Development
Projected Projected
Plant Operational Completion
Capacity (MW) Date
Shisanling Pumped Storage 800 1997
Station
Gaobeidian Power Plant 660 1999
Total 1,460
Tianjin
The fuel sources and per unit generating costs for power
plants serving Tianjin are similar to those for Hebei Province.
The table shows the major power plants in operation in Tianjin.
Facilities in Operation
Operational Additional
Plant Capacity (MW) Planned
Capacity (MW)
Dagang 1,280 300
Junliangcheng 950
Total 2,230 300
THE ELECTRIC POWER INDUSTRY IN THE UNITED STATES
AND UNITED STATES REGULATION
The Independent Power Industry in the United States
The United States independent power industry expanded
rapidly in the 1980s following the enactment of The Public
Utility Regulatory Policies Act of 1978 ("PURPA"). 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 in the United States will be approximately 45,000 MW.
For a discussion of the movement to restructure the electric
utility industry, see "Federal Energy Regulation" below.
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.
Project subsidiaries of the Company located in the United
States 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 located in the United
States 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
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. The Rosemary Facility and the Brandywine
Facility are QFs. If built, the 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, most types of QFs are exempt
from most provisions of the Public Utility Holding Company Act of
1935, as amended ("PUHCA"), and from most provisions of the
Federal Power Act, as amended (the "FPA"), while all QFs are
exempt 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 rates if the
rates 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 Assocs.,
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 Assocs., 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, Panda International 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 and its affiliates endeavor to develop their
U.S. Projects, monitor compliance by the U.S. Projects with
applicable regulations and choose their 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 Panda International'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, Panda International 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 U.S. Projects in which Panda International 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 U.S. Project to rate regulation as a public
utility under the FPA and state law and could result in Panda
International 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 Panda International's remaining
U.S. 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 U.S. Project were to lose its QF status (because, for
example, it lost its steam customer), Panda International 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 U.S. Project. For instance,
Panda International 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 Securities and Exchange
Commission (the "SEC") or a no-action letter from the SEC, 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 Panda International'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 Panda International, or a change in the results of
operations of Panda International. Loss of QF status on a
retroactive basis could lead to, among other things, fines and
penalties being levied against Panda International 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 Panda International's
Project Portfolio were to lose its QF status, Panda International
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 an SEC 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 SEC of certain of its financing transactions.
As discussed above, most types of QFs are exempt from most
of the provisions of PUHCA. A foreign utility company is also
exempt from most of the provisions of PUHCA if certain notice and
other requirements are satisfied.
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
Panda International's project portfolio were to lose its QF
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 QFs. There is strong
Congressional support for grandfathering contracts of existing
QFs 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 federal
court of appeals has held in one instance that 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. See Freehold
Cogeneration Assocs., L.P. v. Board of Regulatory Comm'rs of New
Jersey, 44 F.3d 1178 (3rd Cir.), cert. denied sub nom., Jersey
Central Power and Light Co. v. Freehold Cogeneration Assocs.,
L.P., 116 S. Ct. 68 (1995). 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 Rosemary Facility, the 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 Rosemary Facility and
the Rosemary Pipeline both be owned by the Rosemary Partnership,
that the Rosemary Partnership not transport gas for or sell or
deliver gas to any other entity, that all electricity generated
at the Rosemary Facility be sold to an electric utility and that
all thermal energy produced at the Rosemary Facility be sold only
to the textile mill to which steam and chilled water from the
Rosemary Facility are currently delivered. On February 18, 1997,
The Bibb Company (""Bibb"") announced that it would sell the
textile mill to WestPoint Stevens, Inc. (""WestPoint""). The
closing of the sale was reported in the news media on February
21, 1997, but the Rosemary Partnership has not received formal
notice of such sale from Bibb or WestPoint. If, in fact, Bibb is
no longer the owner of the textile mill, the Rosemary Partnership
is 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 - U.S. Industry
Conditions; Restructuring Initiatives; Utility Responses -
Maintaining Qualifying Facility Status" and "Description of the
Projects - The Rosemary Facility - Steam and Chilled Water
Sales."
Natural Gas Regulation
The Company has an indirect 100% interest in and operates
two natural gas-fired cogeneration projects in the United States,
one of which is owned and one of which is under a long term lease
financing arrangement. The cost of natural gas (other than debt
costs) is ordinarily the largest expense of a gas-fired 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 gas transportation arrangements for
the U.S. Projects owned by Panda International.
Environmental Regulations
The development, construction and operation of power
projects in the United States 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 Panda International and its domestic
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 Panda International and its domestic
subsidiaries. In most cases, analogous state laws also exist that
may impose similar, and in some cases more stringent,
requirements on Panda International and its domestic
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.
Panda International believes that the Rosemary Facility and the
Brandywine Facility are in compliance with federal performance
standards mandated for such plants under the Clean 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. Panda International
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. Panda
International believes that the Brandywine Facility does not make
any discharges of wastewater for which the Brandywine Facility is
required to have an NPDES permit. 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, which have been
obtained for the Rosemary Facility and the Brandywine Facility.
Panda International believes that the operation of the Rosemary
Facility and the Brandywine Facility complies with the
requirements of their stormwater discharge permits. The Clean
Water Act also restricts discharges of fill materials to
wetlands. The Rosemary Facility obtained approval for discharges
in connection with its construction.
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. Panda
International 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.
APPENDIX C
Summary of the
Consolidated Pro Forma of
Panda Global Holdings, Inc.
Prepared for:
Panda Energy International, Inc.
Prepared by:
ICF Resources Incorporated,
A Subsidiary of ICF Kaiser International
April 11, 1997
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
Global Holdings, Inc. (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"), the Panda-
Brandywine cogeneration project (the "Brandywine Project"),
and Pan-Western Energy Corporation LLC ("Pan-Western") which
includes the Panda-Luannan cogeneration project (the
"Luannan Project") (collectively, the "Projects"). In
preparing the Consolidated Pro Forma, ICF has relied on the
independent reports described below by Burns & McDonnell,
the independent engineer for the Rosemary Project, by ICF
and Pacific Energy Systems, Inc. ("PES"), the independent
consultant and independent engineer, respectively, for the
Brandywine Project and by Parsons Brinckerhoff Energy
Systems, Inc. ("Parsons Brinckerhoff"), the independent
engineer for the Luannan Project. The terms of the Panda
Funding Corporation ("PFC") Series A Bonds (including
principal and interest, amortization schedule, debt service
reserve fund, capitalized interest, and coverage ratio) are
represented in the pro forma in a manner that we understand
to be consistent with the terms of the indenture. This
report, provided for use in the offering memorandum for the
offering by Panda Global Energy Company of its Senior
Secured Notes due 2004 (the "Senior Secured Notes"),
describes the Consolidated Pro Forma and explains how it was
derived.
Background
The Rosemary Project
The Rosemary Project is a 180 MW gas-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 26, 2015.
Burns & McDonnell, the independent engineer for the Rosemary
Project since 1989, has prepared pro forma financial
projections (the "Rosemary Pro Forma"), which are presented
in Panda-Rosemary Cogeneration Project Condition Assessment
Report dated April 11, 1997 (as so supplemented, 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-fired cogeneration
project operating in Brandywine, Maryland. According to
PES, construction was substantially complete as of October
31, 1996, when commencement of commercial operations
occurred. Since the commercial operations date, the
Brandywine Project began selling electricity to Potomac
Electric Power Company ("PEPCO") pursuant to a 25-year Power
Purchase Agreement whose initial term expires on October 30,
2021.
ICF has prepared pro forma financial projections for the
Brandywine Project's operations (the "Brandywine Pro
Forma"), which are presented in Independent Panda-Brandywine
Pro Forma Projections dated April 11, 1997 (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 the PES report,
Independent Engineers' Report: Panda-Brandywine Cogeneration
Project dated July 22, 1996, and supplemented by an Update
Report dated April 11, 1997 (as so supplemented 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.
The Brandywine Pro Forma Report presents two potential
scenarios regarding the resolution of disagreements with
PEPCO concerning certain adjustments to Brandywine's
capacity payments. The "Base Case" represents the most
conservative assessment (i.e., the lowest capacity payments)
while the "Sensitivity Case" represents a reasonable "middle
ground" scenario regarding the ultimate resolution of these
disagreements.(1) 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.
The Luannan Project
The Luannan Project is a 2x50 MW pulverized coal-fired
thermal power plant being developed in Luannan County,
Tangshan Municipality, Hebei Province in the People's
Republic of China (the "PRC"). It is comprised of four joint
venture companies (the "JV Cos.") owned by Pan-Western and
certain affiliates of Luannan County. Limited construction
of the plant began in December 1996, and full construction
will commence upon completion of this Panda Global Energy
Company offering. Inasmuch as Parsons Brinckerhoff has
indicated that the Luannan Project's 28-month construction
timetable is reasonable and achievable, it should begin
commercial operations by August 1999. The Luannan Project
will sell power to the North China Power Group Company under
a 20-year Power Purchase Agreement.
Parsons Brinckerhoff, the independent engineer for the
Luannan Project, has prepared pro forma financial
projections (the "Luannan Pro Forma"), which are presented
in Engineer's Review and Report: 2x50 MW Coal-Fired Power
Plant at Luannan, China, dated April 11, 1997 (the "Luannan
Engineering Report").(2) The Luannan Engineering Report
contains the primary assumptions underlying, and the
conclusions drawn from, the Luannan Pro Forma. ICF has
reviewed the Luannan Engineering Report only to the extent
necessary to incorporate the results of the Luannan Pro
Forma in the Consolidated Pro Forma, and has made no
independent investigation of the conclusions or the
assumptions contained therein.
Results
The attached table presents the Consolidated Pro Forma. The
information set forth in the table reflects the issuance of
Senior Secured Notes due 2004 in an aggregate principal
amount of $155.2 million at an assumed 12 1/2 percent
interest rate. The gross proceeds from the issuance of the
Senior Secured Notes are assumed to be approximately $145.0
million.
Revenues and operating expenses were taken from the Rosemary
Pro Forma, Brandywine Pro Forma (Base Case), and Luannan Pro
Forma to calculate EBITDA at each project and on a
consolidated basis. The consolidated EBITDA is adjusted to
create Cash Available for Consolidated Debt Service, by
accounting for interest income at the project-level as well
as at the PFC/PIC and Company/Issuer levels, project-level
reserve contributions, and other adjustments. The other
adjustments are comprised of trustee fees associated with
PFC and the Issuer, other cash expenditures at the project-
level, cash principal receipts on the Luannan transmission
facilities loan and PRC income and withholding taxes.
Trustee fees for PFC are based on estimates provided by
Bankers Trust Company, the PFC trustee. Interest income is
based on an estimated 4.5 percent interest factor on annual
reserve balances. Interest income on the PFC debt service
reserve is assumed to be monetized in 1997 with net proceeds
of approximately $4 million. In 1997, the Company/Issuer is
projected to have Cash Available for Consolidated Debt
Service of approximately $39.3 million. This figure
averages approximately $79.5 million between 1997 and 2007.
Cash Available for Consolidated Debt Service is further
adjusted to create Cash Available for Company Debt Service,
by accounting for debt service at the Projects and for the
PFC Series A Bonds, contributions to PFC/PIC-level reserves,
distributions to minority interests and others. In 1997,
the Company/Issuer is projected to have Cash Available for
Company Debt Service of approximately $5.7 million. This
figure averages approximately $24.9 million between 1997 and
2007.
The Consolidated Pro Forma also presents "Consolidated Cash
and Restricted Cash" balances including capitalized interest
funds as well as debt service reserves at the Projects,
PFC/PIC and at the Company/Issuer levels. "Consolidated Long-
Term Debt" is also presented as described in footnote 9
attached to the Consolidated Pro Forma.
The Consolidated Pro Forma also provides a Company Debt
Service Coverage Ratio defined as the ratio of Cash
Available for Company Debt Service to Issuer Net Cash Debt
Service. The Company Debt Service Coverage Ratio averages
1.30x between 2000 and 2007 with a maximum of 1.37x and a
minimum of 1.27x.
Please refer to the footnotes to the Consolidated Pro Forma
included herewith for a discussion of certain other
variables that may affect the Company Debt Service Coverage
Ratio.
Respectfully Submitted,
/s/ ICF Resources Incorporated
_______________________________
(1) The names of the two scenarios are not meant to imply any
independent assessment by ICF regarding the ultimate
resolution of Panda's disagreements with PEPCO.
(2) As indicated in the Luannan Engineering Report, the
Luannan Pro Forma uses an exchange rate of US$ 1.00 = RMB 8.50.
PANDA GLOBAL CONSOLIDATED CASH FLOW STATEMENT ($ in 000s)
<TABLE>
<CAPTION>
PROJECTED FYE DECEMBER 31,
-------------------------------------------
1997 1998 1999 2000
------- ------- -------- --------
<S> <C> <C> <C> <C>
CAPACITY REVENUE
Rosemary $25,382 $25,382 $ 23,568 $ 23,568
Brandywine 21,932 21,420 37,940 38,759
------- ------- -------- --------
Total Capacity Revenue 47,314 46,802 61,508 62,327
AS A % OF TOTAL REVENUE 63.4% 60.2% 54.3% 42.8%
ENERGY & OTHER REVENUE(1)
Rosemary 3,850 5,768 7,734 10,010
Brandywine 23,495 25,141 26,057 27,092
Luannan 0 0 18,038 46,110
------- ------- -------- --------
TOTAL REVENUE 74,659 77,712 113,337 145,540
OPERATING EXPENSES
Rosemary 9,680 11,185 12,860 14,808
Brandywine 27,433 28,831 29,655 30,493
Luannan (2) 0 0 7,082 18,478
------- ------- -------- --------
TOTAL OPERATING EXPENSES 37,113 40,016 49,597 63,779
EBITDA
Rosemary 19,552 19,965 18,442 18,770
Brandywine 17,994 17,731 34,342 35,359
Luannan 0 0 10,956 27,632
------- ------- -------- --------
TOTAL EBITDA 37,546 37,696 63,740 81,761
Plus: Interest Income 8,175 988 1,738 3,509
Less: Additions to Project Reserves (4,299) (4,470) (5,690) (5,431)
Less: Other Adjustments (3) (2,102) (76) (224) (401)
------- ------- -------- --------
CASH AVAILABLE FOR CONSOLIDATED DEBT SERVICE 39,321 34,139 59,564 79,437
PROJECT & PFC DEBT SERVICE
Rosemary (4) 14,693 14,627 13,314 13,242
Brandywine (5) 10,442 10,412 19,976 20,660
PFC (6) 12,242 12,242 13,479 12,094
Less: PFC Capitalized Interest Fund Draw (2,421) (6,689) 0 (107)
------- ------- -------- --------
TOTAL PROJECT & PFC NET DEBT SERVICE 34,956 30,593 46,768 45,890
Less: PFC/PIC Reserve Additions 1,358 (3,311) (2,100) (475)
Less: Luannan & NNW Minority Interests and Others (7) (26) (14) (1,202) (4,216)
------- ------- -------- --------
CASH AVAILABLE FOR COMPANY DEBT SERVICE 5,697 221 9,494 28,856
SENIOR SECURED NOTES NET DEBT SERVICE
Interest Payment 9,323 19,400 19,400 19,400
Less: Issuer Capitalized Interest Fund Draw (9,323) (19,400) (19,400) 0
Principal Payment (8) 0 0 0 1,650
------- ------- -------- --------
TOTAL ISSUER NET CASH DEBT SERVICE 0 0 0 21,050
BALANCE SHEET DATA:
Consolidated Cash and Restricted Cash $81,207 $60,635 $ 55,795 $ 68,601
Consolidated Long-Term Debt (9) 584,812 592,266 590,749 588,305
CREDIT STATISTICS
------- ------- -------- --------
Company Debt Service Coverage Ratio (10) (11) (11) (11) 1.37x
------- ------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
PROJECTED FYE DECEMBER 31,
-------------------------------------------
2001 2002 2003 2004
------- ------- -------- --------
<S> <C> <C> <C> <C>
CAPACITY REVENUE
Rosemary $ 23,568 $ 23,568 $ 23,568 $ 23,568
Brandywine 48,960 49,739 50,358 50,387
------- ------- -------- --------
Total Capacity Revenue 72,528 73,307 73,926 73,955
AS A % OF TOTAL REVENUE 44.0% 42.7% 42.3% 41.7%
ENERGY & OTHER REVENUE (1)
Rosemary 12,462 13,872 15,692 17,793
Brandywine 30,647 33,340 31,954 30,419
Luannan 49,040 51,266 53,372 55,230
------- ------- -------- --------
TOTAL REVENUE 164,677 171,785 174,944 177,397
OPERATING EXPENSES
Rosemary 16,861 18,122 19,667 21,526
Brandywine 32,806 35,124 34,357 33,554
Luannan (2) 20,103 21,883 23,834 24,878
------- ------- -------- --------
TOTAL OPERATING EXPENSES 69,769 75,129 77,858 79,958
EBITDA
Rosemary 19,169 19,318 19,593 19,835
Brandywine 46,802 47,955 47,955 47,252
Luannan 28,937 29,384 29,538 30,352
------- ------- -------- --------
TOTAL EBITDA 94,908 96,656 97,086 97,439
Plus: Interest Income 3,958 4,334 4,720 4,992
Less: Additions to Project Reserves (6,209) (3,708) (3,850) (3,160)
Less: Other Adjustments (3) (1,275) (1,232) (1,157) (2,538)
------- ------- -------- --------
CASH AVAILABLE FOR CONSOLIDATED DEBT SERVICE 91,382 96,050 96,798 96,733
PROJECT & PFC DEBT SERVICE
Rosemary (4) 13,164 13,057 12,943 12,825
Brandywine (5) 27,265 27,939 27,907 27,456
PFC (6) 15,011 16,437 17,374 17,364
Less: PFC Capitalized Interest Fund Draw 0 0 0 0
------- ------- -------- --------
TOTAL PROJECT & PFC NET DEBT SERVICE 55,441 57,433 58,224 57,645
Less: PFC/PIC Reserve Additions (2,216) (1,184) (459) 84
Less: Luannan & NNW Minority Interests and Others (7) (3,842) (3,733) (3,266) (2,739)
------- ------- -------- --------
CASH AVAILABLE FOR COMPANY DEBT SERVICE 29,883 33,702 34,849 36,434
SENIOR SECURED NOTES NET DEBT SERVICE
Interest Payment 19,056 18,394 17,334 16,031
Less: Issuer Capitalized Interest Fund Draw 0 0 0 0
Principal Payment (8) 4,400 8,000 9,900 12,000
------- ------- -------- --------
TOTAL ISSUER NET CASH DEBT SERVICE 23,456 26,394 27,234 28,031
BALANCE SHEET DATA:
Consolidated Cash and Restricted Cash $ 81,381 $ 92,120 $101,603 $110,839
Consolidated Long-Term Debt (9) 573,343 551,661 525,814 495,781
CREDIT STATISTICS
------- ------- -------- --------
Company Debt Service Coverage Ratio (10) 1.27x 1.28x 1.28x 1.30x
------- ------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
PROJECTED FYE DECEMBER 31,
-------------------------------
2005 2006 2007
------- ------- --------
<S> <C> <C> <C>
CAPACITY REVENUE
Rosemary $ 23,568 $ 18,123 $ 18,123
Brandywine 50,253 50,543 52,639
------- ------- --------
Total Capacity Revenue 73,821 68,666 70,762
AS A % OF TOTAL REVENUE 40.0% 37.6% 37.9%
ENERGY & OTHER REVENUE (1)
Rosemary 20,571 20,283 20,004
Brandywine 33,464 35,545 35,763
Luannan 56,472 58,074 60,060
------- ------- --------
TOTAL REVENUE 184,328 182,568 186,590
OPERATING EXPENSES
Rosemary 23,907 23,964 23,985
Brandywine 36,288 37,984 38,592
Luannan (2) 25,970 27,113 28,309
------- ------- --------
TOTAL OPERATING EXPENSES 86,165 89,061 90,886
EBITDA
Rosemary 20,232 14,442 14,142
Brandywine 47,429 48,105 49,811
Luannan 30,502 30,961 31,751
------- ------- --------
TOTAL EBITDA 98,163 93,507 95,704
Plus: Interest Income 5,302 5,602 6,032
Less: Additions to Project Reserves (5,166) (6,035) (4,135)
Less: Other Adjustments (3) (2,480) (2,457) (2,469)
------- ------- --------
CASH AVAILABLE FOR CONSOLIDATED DEBT SERVICE 95,818 90,618 95,132
PROJECT & PFC DEBT SERVICE
Rosemary (4) 12,669 8,710 8,534
Brandywine (5) 27,602 28,188 30,071
PFC (6) 17,183 14,677 18,206
Less: PFC Capitalized Interest Fund Draw 0 0 0
------- ------- --------
TOTAL PROJECT & PFC NET DEBT SERVICE 57,454 51,576 56,811
Less: PFC/PIC Reserve Additions 1,387 (7,087) (5,531)
Less: Luannan & NNW Minority Interests and Others (7) (2,106) (1,406) (5,829)
------- ------- --------
CASH AVAILABLE FOR COMPANY DEBT SERVICE 37,646 30,550 26,961
SENIOR SECURED NOTES NET DEBT SERVICE
Interest Payment 14,453 12,759 11,469
Less: Issuer Capitalized Interest Fund Draw 0 0 0
Principal Payment (8) 14,500 10,700 9,200
------- ------- --------
TOTAL ISSUER NET CASH DEBT SERVICE 28,953 23,459 20,669
BALANCE SHEET DATA:
Consolidated Cash and Restricted Cash $117,544 $130,822 $145,679
Consolidated Long-Term Debt (9) 460,547 433,032 399,857
CREDIT STATISTICS
------- ------- --------
Company Debt Service Coverage Ratio (10) 1.30x 1.30x 1.30x
------- ------- --------
</TABLE>
FOOTNOTES
- ---------------
(1) Other Revenue is comprised of revenue generated from the sale of steam,
chilled and hot water and firm transportation capacity release at
Brandywine.
(2) For the purposes of consolidation, Operating Expenses at Luannan exclude
management fees payable to the Issuer.
(3) Other Adjustments include PIC and Issuer trustee fees, certain capital
expenditures at Rosemary and Brandywine, Luannan transmission facilities
loan principal payments and PRC income and withholding taxes.
(4) Represents debt service for the year ended February 15 in the year
immediately following the year presented per the PFC indenture.
(5) Represents debt service for the year ended January 31 in the year
immediately following the year presented per the PFC indenture.
(6) Represents debt service for the year ended February 20 in the year
immediately following the year presented per the PFC indenture.
(7) Other is comprised of undistributable cash flow in excess of net income at
Luannan.
(8) Assumes outstanding balance of the Senior Secured Notes is refinanced in
2004 at an equivalent coupon rate and repaid over nine years.
(9) Consolidated long-term debt includes Rosemary First Mortgage Bonds,
Brandywine GECC Lease, PFC Pooled Project Bonds-Series, and the Senior
Secured Notes.
(10) Company Debt Service Coverage Ratio = Cash Available for Company Debt
Service / Total Issuer Net Cash Debt Service.
(11) Effectively 1.0x Company Debt Service Coverage Ratio since Issuer
Capitalized Interest Fund Draw equals Interest Payment on the Senior
Secured Notes.
[ICF Kaiser Letterhead]
Officer's Certificate
I, Theodore Breton, of ICF Resources Incorporated, DO
HEREBY CERTIFY that:
Since April 11, 1997, to our knowledge, no event affecting
our reports entitled "Independent Panda-Brandywine Pro Forma
Projections," dated April 11, 1997 and "Summary of the
Consolidated Pro Forma of Panda Global Holdings, Inc." dated
April 11, 1997 (the "Pro Forma Reports") or the matters referred
to therein has occurred which makes untrue or incorrect in any
material respect, as the date hereof, any information or
statement contained in the Pro Forma Reports or in the Prospectus
relating to the offering of 12-1/2% Registered Senior Secured
Notes due 2004 by Panda Global Energy Company (the "Prospectus")
under the captions "Summary - Independent Engineers' and
Consultants' Reports - Consolidating Financial Analyst's Pro
Forma Report," "Description of the Projects - The Rosemary
Facility - Independent Engineers' and Consultants' Reports -
Rosemary Engineering Report," "Description of the Projects - The
Brandywine Facility - Disagreement with PEPCO Over Calculation of
Capacity Payment," "Description of the Projects - The Brandywine
Facility - Independent Engineers' and Consultants' Reports -
Brandywine Pro Forma Report," "Description of the Projects - The
Brandywine Facility - Independent Engineers' and Consultants'
Reports - Brandywine Fuel Consultants' Report," "Independent
Engineers and Consultants - Consolidated Pro Forma" and
"Independent Engineers and Consultants - Brandywine Facility" in
the Prospectus.
WITNESS my hand this 6th day of June 1997.
By: /s/ Theodore R. Breton
Name: Theodore R. Breton
Title: Vice President
Appendix D
Engineer's Review and Report
Panda Energy International, Inc.
2X50 MW Coal-Fired
Power Plant at Luannan,
China
April 11, 1997
PARSONS BRINCKERHOFF ENERGY SERVICES, INC.
0.0 EXECUTIVE SUMMARY 1
1.0 PROJECT DESCRIPTION AND OVERVIEW 4
1.1 PARTICIPATING PARTIES 4
1.2 PROJECT DESCRIPTION 4
2.0 SITE CONDITIONS 4
2.1 GENERAL DESCRIPTION 4
2.2 FUEL TRANSPORTATION 5
2.3 WATER RESOURCE 5
2.4 HYDROMETEOROLOGY 6
2.4.1 METEOROLOGICAL CONDITIONS 6
2.4.2 THE EFFECT OF WATER FLOOD ON THE PLANT SITE 7
2.5 REGIONAL GEOLOGICAL OVERVIEW 7
2.5.1 NATURAL GEOLOGY 7
2.5.2 TOPOGRAPHY 7
2.5.3 REGIONAL GEOLOGICAL STRUCTURES 7
2.5.4 STRATIGRAPHY 8
2.5.5 FAULT STRUCTURES AND EARTHQUAKE 8
2.5.6 PLANT SITE 2 GEOTECHNICAL CONDITIONS 9
2.5.7 GROUND WATER 9
2.5.8 DESIGN CONSIDERATIONS 9
2.5.9 SITE SEISMICITY AND RELATED DESIGN CONSIDERATIONS 10
2.6 ASH STORAGE SITES 10
2.7 ASSESSMENT OF SITE SUITABILITY 11
3.0 DESCRIPTION OF FACILITY DESIGN 11
3.1 MECHANICAL EQUIPMENT AND SYSTEMS 12
3.1.1 STEAM TURBINE GENERATOR 12
3.1.2 BOILER / FIRING CYCLE 12
3.1.3 MAIN STEAM SYSTEM 14
3.1.4 EXTRACTION STEAM SYSTEM 14
3.1.5 AUXILIARY STEAM SYSTEM 15
3.1.6 CONDENSATE AND FEEDWATER SYSTEMS 15
3.1.7 COOLING WATER SYSTEM 15
3.1.8 FIRE PROTECTION SYSTEM 16
3.1.9 COAL HANDLING SYSTEM 17
3.2 CIVIL/STRUCTURAL SYSTEM 17
3.2.1 CIVIL DESIGN 18
3.2.2 STRUCTURAL DESIGN 18
3.2.3 ARCHITECTURAL DESIGN 18
3.3 ELECTRICAL AND CONTROL SYSTEMS 18
3.3.1 STEP-UP TRANSFORMERS 19
3.3.2 PLANT SWITCHYARD 19
3.3.3 UTILITY INTERCONNECTION 19
3.3.4 OFF-SITE TRANSMISSION LINES 20
3.3.5 OFF-SITE SUBSTATIONS 20
3.3.6 AUXILIARY/START-UP POWER 20
3.3.7 REVENUE METERING 20
3.3.8 CONTROL SYSTEMS 22
3.3.9 DISPATCH/SCADA/COMMUNICATIONS 23
3.4 WATER SUPPLY AND DISPOSAL 23
3.4.1 WATER WELLS FOR THE POWER PLANT 23
3.4.2 WASTE WATER DISCHARGE 24
3.4.3 STORM DRAINAGE 24
3.4.4 MAKE-UP WATER 24
3.5 ASH HANDLING SYSTEM 25
3.5.1 FLY ASH SYSTEM 25
3.5.2 BOTTOM ASH SYSTEM 25
3.6 ASSESSMENT OF FACILITY DESIGN 25
4.0 ASSESSMENT OF EXPECTED PERFORMANCE 26
4.1 START-UP AND COMMISSION 27
5.0 ASSESSMENT OF DESIGN TO SIMILAR PLANTS 27
6.0 ASSESSMENT OF ABILITY OF PLANT TO MEET CONTRACTUAL
REQUIREMENTS 27
6.1 ELECTRICAL REQUIREMENTS 27
6.2 STEAM REQUIREMENTS 28
7.0 ASSESSMENT OF ECONOMIC LIFE OF THE PLANT 29
8.0 DESCRIPTION OF ENVIRONMENTAL ISSUES 29
8.1 PROJECT ENVIRONMENTAL STANDARDS 30
8.1.1 ENVIRONMENTAL QUALITY STANDARDS: 30
8.1.2 EFFLUENT AND EMISSION STANDARDS: 30
8.2 ASSESSMENT OF ENVIRONMENTAL IMPACT 30
9.0 GOVERNMENT APPROVALS AND BUSINESS AGREEMENTS 32
9.1 GENERAL DESCRIPTION 32
9.2 GOVERNMENT APPROVALS 32
9.3 BUSINESS AGREEMENTS 35
9.4 ASSESSMENT OF SUPPORT DOCUMENTS 36
10.0 PROJECT SCHEDULE 36
11.0 REVIEW OF EPC CONTRACTOR AND AGREEMENT 36
11.1 ASSESSMENT OF MANPOWER AND STAFFING 36
11.2 EVALUATION OF THE EPC CONTRACTOR'S EXPERIENCE 37
11.3 EVALUATION OF EPC CONTRACT TERMS 37
12.0 FINANCIAL PERFORMANCE ASSESSMENT 38
12.1 LEVEL OF POWER PRODUCTION 39
12.1.1 POWER PURCHASE AGREEMENT 39
12.1.2 HEAT SALE AGREEMENT AND ASSUMPTIONS 42
12.2 POWER TARIFFS 43
12.2.1 PLANNED WHOLESALE ELECTRIC ENERGY PRICE 43
12.2.2 FUTURE PRICE ADJUSTMENTS AND "PASSTHROUGH" PROVISIONS 46
12.2.3 HEAT SALE PRICE AGREEMENT 47
12.2.4 INTERCONNECTION AND LOAN AGREEMENTS 47
12.3 REVIEW OF PROJECT COSTS 48
12.4 REVIEW OF OPERATING EXPENSES 51
12.5 REVIEW OF RESERVE REQUIREMENTS 51
12.5.1 EQUIPMENT MAINTENANCE & OVERHAUL RESERVE 51
12.5.2 DEBT SERVICE RESERVE 53
12.5.3 WELFARE RESERVE FOR CHINESE EMPLOYEES 53
12.5.4 OTHER CHINESE RESERVE REQUIREMENTS 53
12.6 THE FINANCIAL PLAN 53
12.6.1 ESTIMATED SOURCES AND USES OF FUNDS 53
12.6.2 SHAREHOLDER LOAN ASSUMPTIONS 54
12.6.3 REPAYMENT OF PAN-WESTERN SHAREHOLDER LOANS 54
12.7 CONSOLIDATED OPERATING RESULTS -- BASE CASE 54
12.7.1 OPERATING REVENUES 55
12.7.2 OPERATING EXPENSES 56
12.7.3 DEPRECIATION AND TAXES 56
12.7.4 DISCUSSION OF DEBT COVERAGE RATIOS 57
12.7.5 DISTRIBUTION TO PAN-WESTERN EQUITY ACCOUNT 57
12.8 SUMMARY OF SENSITIVITY ANALYSIS 58
12.9 INDIVIDUAL JOINT VENTURE COMPANIES OPERATING RESULTS
-- BASE CASE 58
0.0 EXECUTIVE SUMMARY
Panda Energy International, Inc. has requested Parsons
Brinckerhoff Energy Services, Inc., to provide an Engineer's
Report for certain of its affiliated companies (the "JV Cos." or
"Owner") involved in the development, construction, ownership and
operation of the Luannan Thermal Power Plant (the "Plant") and
Steam Distribution System to be located near Tangshan City, China
(the "Project"). This report, to be included in the Offering
Circular prepared for the offering by Panda Global Energy Company
of its Senior Secured Notes due 2004, offers the following
opinions concerning the adequacy of the technical, environmental
and economic aspects of the project:
The design of the Plant is based on current, proven technology
and is in conformance with engineering practice and industry
standards in the People's Republic of China. Specifically the
proposed Plant will be similar in design to other thermal power
plants designed by the Hebei Electric Power Design Institute
which are presently operating in China.
The construction schedule is reasonable and achievable. The
Engineering, Procurement and Construction (EPC) Contractor should
be able to meet the agreed construction schedule and pass all
performance tests as stipulated within 28 months. This schedule
has been found comparable to similar projects in China.
The EPC Contractor is an established and reputable construction
company with both international and domestic experience in
manufacturing and installing equipment for similar power
generation projects. The Contractor's boiler manufacturing
facility performs quality control to ISO standards and has
achieved ASME certification. The Contractor's list of
achievements include 16 coal fired power plants in China plus 5
international power plant installations completed on a turn-key
basis.
The budgeted costs of $118.8 million to develop and construct the
Luannan Facility are reasonable and represent a realistic and
attainable project cost. Most project costs are denominated in
US dollars, however, for steam and heat network, land and water
use rights, and transmission line which are denominated in RMB,
an exchange rate of US $1 = RMB 8.30 was used.
The EPC Contract price which includes a contingency amount of
approximately 5% and the general contingency amount of
approximately 4% (exclusive of any Contractor's contingency)
contained in the Project Budget should provide sufficient funds
to complete the Project.
Based upon the proposed equipment and design criteria, the design
lives of the main components of the Plant are sufficient for the
intended modes of operation of the Project and should meet the
expected Plant performance criteria. With proper design,
careful, periodic maintenance and operation of the Plant within
design parameters, a useful life of 20 years should be easily
achievable.
Based on the review of the various Government Approvals, the JV
Cos. have obtained the key approvals required from the various
governmental agencies which are required to commence construction
of the plant. They have also identified the necessary permits
that will be required in due course during the construction and
operation. There is no reason to believe that those licenses and
consents not yet received will not be granted.
Based on the review of the various Business Agreements and their
amendments, the major contracts including the Power Purchase
Agreement, EPC Contract, Operation and Maintenance Agreement,
Transmission Line EPC Contract and Coal Supply Agreements are
technically reasonable and are consistent with each other and the
assumptions used in the financial analysis.
The technical performance requirements, performance testing and
obligations of the parties identified in the EPC Contract are
reasonable and achievable. The EPC contract has the necessary
protective terms and conditions and is comparable to other turn-
key projects in the United States. The EPC contracts in China
are more rigorous than in US on government approvals, design
stages, and guarantee issues and less stringent on environmental
issues.
This assessment has concluded that, from an environmental point
of view, the Plant is feasible and is capable of meeting the
relevant emissions and discharge limits required by the
applicable Chinese Standards if all environmental protection and
control measures recommended by the Environmental Impacts
Assessment (EIA) are implemented.
The ash handling system uses appropriate environmental protection
measures and the ash disposal plan is reasonable and achievable
based on the expected quality of the coal and its expected ash
content as summarized in the Marston & Marston Coal Consultant's
Report. The EIA indicates the effluent quality will comply with
the national environmental standard.
The Operation and Maintenance Contractor (Operator) selected for
the Project is Duke/Fluor Daniel. Duke/Fluor Daniel, a joint
venture between Duke Power and Fluor Daniel, has domestic and
international experience with coal-fired power plants and has the
necessary experience and capability to fulfill the O&M Agreement.
The O&M Agreement contains incentives and penalties in the
Contract Price Adjustment clause which should provide the
Operator reasonable initiative toward achieving excellence in
plant operational performance. Requirements for developing
operations plans are contained in Section 2.10 of the O&M
Agreement. The Owner has review and approval authority for all
operations plans developed by the O&M Contractor.
The Project can be expected to operate commercially throughout
the term of the Power Purchase Agreement. There is a large
number of coal-fired plants currently in operation in the United
States that have been in service for well over 30 years.
The Plant is capable of meeting the required performance and
availability levels while operating in the modes agreed in the
Power Purchase Agreement. The design of the Plant and the Net
Dependable Capacity performance guaranteed by the EPC Contractor
of 102 MW insures that the contractual amount in the Power
Purchase Agreement can be met and exceeded during the Peak hours.
Maximum Plant output of 106 MW will further exceed the stipulated
amount. The actual performance and availability of the Plant
will depend on the successful operation and maintenance of the
facility throughout the Plant's life.
The projected dispatch targets for the Plant, as specified by the
Power Purchase Agreement, are achievable and consistent with the
design criteria and equipment for the Plant.
The projected O&M costs and capital expenditures for major
maintenance are reasonable and representative of the planned
operations of the Project. The Owner and Operator have the
responsibility for establishing the full time manpower
requirements of the Facility.
Under the Power Purchase Agreement, North China Power Group
Company (NCPGC) is obligated to purchase electricity for a period
of 20 years beginning on the Commercial Operation Date. The
useful life of the Project will extend beyond this 20-year
period.
On the basis of the financial analyses presented in Chapter 12,
we are of the opinion that, in the base case, the projected
operating revenues are adequate to pay the projected operating
and maintenance expenses, pay the local and federal taxes,
provide a minimum of 2.02 and average of 2.19 annual debt service
coverage for the Pan-Western Shareholder Loans during the
repayment period of 10 years, and provide equity distribution to
Pan-Western throughout the 20 year term of the Power Purchase
Agreement. For the financial analysis and projections an
exchange rate assumption of US $1 = RMB 8.50 was used.
Five sensitivity cases were developed to test the Project's
performance under operating assumptions different from the base
case. As shown in Section 12.8, the selected changes did not
yield debt coverage ratios significantly different from that in
the base case.
1.0 PROJECT DESCRIPTION AND OVERVIEW
1.1 PARTICIPATING PARTIES
Certain affiliated entities owned indirectly by Panda Energy
International, Inc. are developing a 2X50 MW pulverized coal-
fired thermal power plant in Luannan County, Tangshan City,
Hebei Province in the People's Republic of China. The
Project, commonly known as the "Panda Luannan Project" is
comprised of joint venture companies between the Pan-Western
Energy Corp., LLC. ("Pan-Western"), a Cayman Islands Company
and certain affiliates of Luannan County.
Pan-Western will issue the Shareholder Loans and make equity
contributions to the JV Cos. for financing the construction
of the project.
The Pan-Sino Energy Development Corporation, an indirectly
owned subsidiary of Panda, owns 99% of Pan-Western. ChinaMac
(Singapore), PTE. Ltd. owns 1% of Pan-Western. Pan-Western
owns 88% of the JV Cos. and the remaining 12% ownership of
the joint venture is held by affiliates of Luannan County.
The Central Government of the People's Republic of China owns
the Qianjiaying Coal Mine from which the majority of the coal
for the power plant will be supplied. The balance of coal
supply will be from five County owned mines. The Central
Government controls the North China Power Group Company which
will purchase the plant electrical output. The Central
Government indirectly controls the Tangshan Price Bureau
which sets the local tariffs and costs for other key
commodities.
1.2 PROJECT DESCRIPTION
The Project is in Luannan County which is part of Tangshan
City in Hebei Province. The site is approximately 210 km
northeast of Beijing and only 100 km from the port cities of
Tianjin and Quinhuandao. The county has a population of
550,000 and Tangshan City has 6.7 million. The region
requires power to meet the current demand. Considerable
growth of this demand is anticipated as is the overall
economic development in the region.
2.0 SITE CONDITIONS
2.1 GENERAL DESCRIPTION
The Plant site (number 2, as designated in the Plant
Feasibility Study), which was selected for the proposed
project, is on the north side of Bensi Road, approximately 1
km west of the village of Gujiaying in Luannan County.
Luannan County is in the southeast part of Tangshan City in
northeastern Hebei Province. Luannan County has a total
area of 1270 sq km and a population of 550,000. The terrain
in this area is coastal plains flanked with low mountains in
the north.
The plant site was chosen from four proposed locations. The
selection criteria considered engineering, geology,
hydrometeorology, and transmission access. The site
selection was made in a review meeting on February 10, 1993
with the Engineering Consulting Institute - Hebei Province.
Other advantages of this site include good access to heating
networks and the highest ground elevation among the four
proposed sites. The Plant is above the flood plain.
According to residents, the town of Bengchen near the site
has never been flooded.
The Plant area will occupy nonirrigated farmland which
presently produces peanuts, corn, sesame, etc. The yield of
crops from this site is lower than the surrounding irrigated
land.
There are no village-owned enterprises, military
installations, places of historic interest or scenic
features in the area which would be negatively affected by a
power plant.
2.2 FUEL TRANSPORTATION
The fuel (coal) will be transported from the Kailuan Coal
Administration and local County owned mines to the Plant by
trucks. A 1.5 km access road connects the Plant to the
outer ring road of the town. The Tangshan-Luannan highway
is approximately 2 km north of the Plant site and connects
with the outer ring road of the town. The plant is located
approximately 30 km from the Qianjiaying coal mines. The
coal will be delivered to the site where the weight will be
checked, a quality sample will be taken and then it will be
unloaded.
2.3 WATER RESOURCE
The Plant uses a natural draft cooling tower with a
recirculating cooling water system. The water requirement
including circulating water, boiler make-up, district
heating network make-up and domestic water is approximately
980 m3/h. The local water resource administration office
has approved the pumping of water from nine local water
wells to the Plant. Seven wells will furnish the water
required with 2 wells on stand-by.
The Feasibility Study contains the test results of eight
samples of the groundwater from the wells and indicates the
water is potable and suitable for industrial purposes.
2.4 HYDROMETEOROLOGY
2.4.1 Meteorological Conditions
Luannan County is 2.5 to 35 m above sea level with a
declination from north to south. The land is rather smooth
and is traversed by four rivers running from north to south
into the Bohai Sea.
The County is located in the warm temperature zone with semi-
moist to monsoon climate.
The main meteorological data are as follows:
(1) Annual mean atmospheric temperature 10.7 degrees C,
(51 degrees F)
(2) Extreme max. atmospheric temperature 38.6 degrees C,
(101 degrees F)
(3) Extreme min. atmospheric temperature -21.7 degrees C, (-7
degrees F)
(4) Average temperature of the coldest month -10.9 degrees C,
(12 degrees F)
(5) Annual mean rainfall 653.3 mm, (25.7 in)
(6) Annual average evaporate capacity 1752.0 mm, (68.9 in)
(7) Annual maximum rainfall 978.8 mm, (38.5 in)
(8) Daily maximum rainfall 236.5 mm, (9.3 in)
(9) Maximum hourly rainfall 69.7 mm, (2.7 in)
(10) Maximum wind speed 19 m/s, (42.5 mph)
(11) Annual average wind speed 2.7 m/s, (6.0 mph)
(12) Annual average relative humidity 65%
(13) Maximum depth of frozen ground 77 cm, (30.3 in)
(14) Maximum thickness of accumulated snow 23 cm, (9.1 in)
2.4.2 The Effect of Water Flood on the Plant Site
The general elevation of the Plant is 17 m. The rain
records of Luannan County and a survey and
investigation of the site indicate the proposed plant
area has never flooded. From an analysis of the water
flows in the area and calculations of the mean
rainfall, it is concluded that the site will not be
affected by a one hundred year flood. Results of the
analysis and calculations are detailed in the
Feasibility Study on Thermal Power Plant -
Hydrometerology Report.
2.5 REGIONAL GEOLOGICAL OVERVIEW
2.5.1 Natural Geology
Luannan County is located in the east part of Hebei
province about 43 km southeast of Tangshan City. The
county has eight naturally formed rivers; Xiaoqinghe,
Yihe (Xinluanhe), Beihe, Munute, Xiaochinlunghe,
Suanlunghe, Xiaozanmenhe and Yaoijiahe. Each is
seasonal. The rainy season is concentrated between
June and September, producing about 82.7% of the annual
precipitation. The yearly average precipitation is
653.3 mm (25.7 in). The annual temperature is -21.70C
(-70F) minimum, 38.60C (1010F) maximum and 10.70C
(510F) average.
2.5.2 Topography
Luannan County is situated at the southern foot of
Yansan Mountain. Two area rivers form a 3.5 km wide,
Class 1 terrace running north to south. The terrace
elevation is 13 - 18 m with the toe of the terrace at
about 3 m. The flood plane is at elevation 10 m. The
terrain generally slopes down from north toward south.
2.5.3 Regional Geological Structures
The Plant site is located at the south rim of Yansan
Mountain fold zone at the southeast part of the
Tangshan subsidence block. It is adjoined by
Sanhaiguan upheaval block on the east side and Leting
subsidence block on the south. The great Ninghe-
Changli fault is located about 3 km south of the plant
site and 14 km east is the Luanxian-Leting Fault.
These faults form the demarcation lines for the three
subsidence blocks.
2.5.4 Stratigraphy
According to "Hebei Province Luannan County Master Plan
Geotechnical Investigation Report," the crust of the
Luannan area had been in rising and upheaval states
ever since Precambrian era. Due to weathering and
erosions, the area is void of Paleozoic and Mesozoic
alluvial deposits. A tertiary strata was deposited on
the Precambrian gneiss beginning at the end of Mesozoic
era and through the early Neozoic era as the crust in
the area subsided. The tertiary stratum now consists of
cemented fluvial/lucustine deposits, uncemented gravel,
mudstone, and sandstone, etc. The depth of the
tertiary stratum is about 150-250 m. The Quaternary
stratum consists mainly of diluvial deposits, fluvial
deposits and lacustrine sediments. The thickness of
these deposits are about 350 m.
2.5.5 Fault Structures and Earthquake
According to a geoseismic evaluation report by the
State Seismic Bureau for a 220 kV electric power
substation located 1.5 km south of Luannan county town,
the Ninthe-Changli rift is a large scale, deep cut,
hidden fault running NEE. The total length is about
120 km. The fault plane tilts toward the southeast at
35 to 650. The tilt angle is steep at the higher
elevations on the plane and flatter at the lower
elevations. The faults had been formed in Mesozoic era
and were dormant for a period during Cretaceous and
early Tertiary era. It became active again the middle
of Oligocene. Historically, earthquakes occurred only
at the east and south sections of this fault; a
Magnitude 4 in 1567 and Magnitude 5 in 1805.
Recently, there have been small shocks scattered along
this fault line. After a Magnitude 7.8 earthquake in
the Tangshan area, it is believed that long term
cumulated stresses in the area have been relieved. An
earthquake of more than Magnitude 6 it is not believed
likely over the next 50 years. According to the
"Seismic (Damage) Intensity Map of China (1990)," the
baseline seismic intensity at Luannan area is level 7.
This level is based on the Chinese scale which is a 12
degree system.
Section 4.2.4.2.4 of the Scope of Work contained in the
EPC Contract describes the design criteria to meet the
requirements of UBC Seismic Zone 4. Zone 4 is the
highest Zone in the US and is based on the logarithmic
Richter Scale which has a high rating of 8.0 and over.
Zone 4 covers areas where major damage potential exists
from earthquakes, i.e., California.
According to the report prepared by Sedgwick Insurance
and Risk Management Consultants (China) Limited and
Sedgwick Construction Asia Limited, the insurance
provider, there is adequate earthquake insurance
available and this insurance will be provided at the
time of construction.
2.5.6 Plant Site 2 Geotechnical Conditions
The Gujiaying Plant Site, Plant Site 2, is located
about 2.5 km west of Luannan County seat, at the west
side of Gujiaying town and at the north side of Benxi
Highway. The site is on a Class 1 Terrace of Luanhe
River. The Plant area is flanked with a sand dune on
the north, Benxi Highway on the south and farming roads
to the east and west. The site is essentially flat at
elevations between 16.4 and 16.7 m. It has the highest
elevations in the vicinity of the county seat.
During the 7.8 Magnitude earthquake in the Tangshan
area in 1978, the area south of Plant Site 2 suffered
some blowouts of sand and/or water. No trace of
liquefaction was observed at the ground surface of
Plant Site 2. Each of the other sites exhibited more
severe effects of the quake.
In summary, the Plant Site 2 at Gujiaying, situated at
about 3 km north of Ninghe-Changli fault offers
relatively stable ground for plant structures. The
plant site is acceptable from an engineering geology
point of view. The soil is slightly soft. The
subsurface soil allows a bearing capacity of 120-140
kPa.
2.5.7 Ground Water
The groundwater table was placed at 1.95 - 5.2 m depth,
at elevation 11.78 to 15.03 m, with a relatively steep
gradient. The water table is high in the south and low
in the north. This gradient is in the reverse
direction of ground water flow in this general area.
The anomaly is explained by the proximity of rice
paddies southeast and west of the plant site. The
ground has high permeability allowing seasonal
irrigation water to influence the local water table
levels. Sample analysis indicates HCO3-Ca type water,
with a PH value of 7.68. This type of water has no
corrosive effect on concrete.
2.5.8 Design Considerations
The number of soil samples and standard penetration
tests were limited. The soil bearing capacities
derived from laboratory tests varied significantly from
those of the standard penetration tests. Construction
experience in the area indicates soil bearing
capacities which also differ from test results. An
evaluation of the specific conditions at the placement
site of an individual structure is required.
Appropriate bearing capacities can then be employed in
establishing the structure design. Section 4.2.3 of
the Scope of Work document describes the EPC
Contractor's responsibilities for performing the
necessary on-site subsurface investigations and for
supplying all the geotechnical information required in
the design of the Plant.
2.5.9 Site Seismicity and Related Design Considerations
The site is located in a Design Intensity 7 zone. In
the plant area, the soils include loose to medium dense
sand stratum, loose to medium dense medium sand
stratum, and plastic to liquid plastic silt stratum to
a depth of 0 to 15 m. Bed rock is at a depth of 500 to
600 m. The soil is classified Type III, Intermediary
Soft Soil.
In some Plant areas, some soil strata have the
potential for liquefaction of medium grade to
insignificant grade during an earthquake. Field
investigation found no trace of liquefaction at Plant
Site 2 resulting from the Tangshan earthquake. The
Preliminary Design Document states that the
liquefaction phenomena does not appear at each layer of
the stratum in the Plant site when the earthquake
seismic intensity magnitude is 7.
2.6 ASH STORAGE SITES
Two sites were investigated and compared for possible
selection as ash storage yards for the thermal power plants.
One site is located at Dupingtuo and the other at
Xinzhuangzi. Each site has a planned capacity for 20 years
of ash storage. There are no major facilities such as
roads, water wells or communications lines to be removed in
either of the two available ash storage sites.
The Dupingtuo Ash Yard was selected as the best location for
storage of ash from the plant. This site is located on the
north side of Bengsi Road, about 4.3 km away from the site
and the site permit has been received. The following
considerations contributed to the selection:
- The terrain of the Dupingtuo site is smooth and open
with a ground level of about 17 m.
- As farmland, this site is less productive in crop
yields than Xinzhuangzi.
- The Xinzhuangzi site is located on the Ninghe-Changli
rift zone making it less unfavorable for the
construction of dams.
- The local Water Conservancy Bureau indicates the
Xinzhuangzi site elevation is below the ten year flood
level, whereas the Dupingtuo site will not be affected
by flooding.
- The ash slurry route from the Dupingtuo site to the
Plant is preferable to the route from the Xinzhuangzi
site.
- Cities near the Xinzhuangzi Ash Yard will be more
negatively impacted in the winter and spring by flying
ash than the Cities near the Dupingtuo site.
2.7 ASSESSMENT OF SITE SUITABILITY
Given the general area which will receive electric power for
the grid and steam for district heating, Plant Site 2 was
selected as the best site from four considered. The site is
relatively level; above flood elevation; will occupy
nonirrigated farmland with lower crop yield than surrounding
irrigated land; and there are no features of historic
interest or scenic beauty in the area which would be
negatively impacted by the Project.
Roads for the transportation of coal from nearby mines are
relatively good. A minimum amount of road construction for
highway access will be required.
There is adequate water to operate the plant from nine local
water wells.
Although the site is located in an area which has been
affected by earthquakes, it is generally agreed that the
earth stresses have been released and a plant designed for a
7 degree tumbler will be suitable. The soil in the area has
good bearing capacity. For these reasons, the plant site is
acceptable from an engineering point of view.
3.0 DESCRIPTION OF FACILITY DESIGN
The EPC Contractor will design, construct, and provide
Project equipment in accordance with the requirements in the
Scope of Work of the EPC contract. The Scope of Work
defines the conceptual design and prescribes the technical
requirements for the Project. The conceptual design is
based on a Feasibility Study on Luannan Thermal Power Plant
of Tangshan Panda Heat and Power Co., Ltd. by Hebei Electric
Power Design Institute (HDI), dated October 1994.
The electrical output from the Project is determined by the
plant capability and the General Interconnect Agreement with
its Supplements. The Plant design will be capable of
producing 106 MW net of the 47 metric tons per hour of steam
extraction.
The steam output from the Project is determined by the plant
capability and contractual arrangements.
The Project is expected to be implemented in accordance with
the protection guidelines and requirements of the
Environmental Impact Report as Approved by the Hebei
Provincial Environmental Protection Bureau dated 7/5/95.
Based upon the proposed equipment and design criteria, the
Project should meet expected plant performance criteria
contained in the EPC Contract and comply with the
contractual agreements for steam and electric energy.
3.1 MECHANICAL EQUIPMENT AND SYSTEMS
3.1.1 Steam Turbine Generator
Each of the two identical steam turbine generators is a
condensing extraction unit nominally rated at 50 MW at
3000 RPM capable of producing 60 MW gross under full
condensing conditions. The steam turbine consists of a
high pressure and a low pressure casing. The
extraction steam from the high pressure casing is used
for industrial steam processes while exhaust steam from
the low pressure casing is piped to a heat exchanger
that generates hot water for district heating.
Extraction points from both the high pressure and the
low pressure casings are provided for condensate and
feedwater heating.
3.1.2 Boiler / Firing Cycle
Each unit boiler uses a balanced draft design with two
forced draft (FD) fans and two induced draft (ID) fans.
The boiler is a natural circulating drum type, dry
bottom, with economizer, air heater, and superheater.
The boiler is rated for 255 metric tons/hr steam flow
at Maximum Continuous Rating (MCR) with a coal
consumption of 39.14 metric tons/hr based on the worst-
case coal as supplied from the Kailuan Coal
Administration's Qianjiaying Mine, and a coal
consumption of 40 metric tons/hr based on coal supplied
from typical county owned mines. Parsons Brinckerhoff
has reviewed the coal contracts and determined, of the
six contracts, coal from the Qianjiaying Mine has the
lowest heat value specification i.e., 4,600
kilocalories per kilogram, average and 4,300
kilocalories per kilogram, minimum. Marston & Marston,
the Coal Consultant has estimated the coal quality to
range from 4,600 to 4,700 kilocalories per kilogram
with an ash content of 34-35% which should be adequate
to provide the expected performance of the Plant.
Steam sootblowers are provided on each boiler to remove
soot and slag deposits that accumulate on heat transfer
surfaces.
Pulverized coal is the main fuel. The boilers utilize
an indirect firing system. A pulverized coal storage
silo is provided for each unit. Two ball mills, each
having a pulverizing capacity of 22.5 metric tons/hr
with worst-case coal (i.e. 1.15 capacity reserve
factor), are provided for each unit. Ball mill design
capacity is based on operating each boiler at MCR with
worst-case coal and includes sufficient margin for coal
quality transient conditions. Each ball mill has a
dedicated coal bunker that receives raw crushed coal
from a belt conveyor. A coal feeder delivers the coal
from the bunker to the ball mill. Pre-heated air is
supplied to the ball mill where the coal is partially
dried and pulverized. The heated air also conveys the
coal into a pulverized coal separator to remove
oversize coal particles. The pulverized coal is then
passed through a cyclone separator and transferred into
the pulverized coal storage silo. Air with some
entrapped coal particles is removed from the cyclone
separator with the aid of mill exhausters (2 per unit)
and delivered to the burners. A fan and dedicated,
pulverized coal feeder transfers and meters the
pulverized coal from the coal storage silo to the coal
burners in the boiler units. A screw conveyor is used
to transfer pulverized coal from one unit's pulverized
coal silo to the other. This allows the operation of
both boilers utilizing any three of the four mills.
The burner arrangement on the boilers is a tangentially
fired design with two coal burners at each corner of
each boiler unit. An oil ignition fueled by light
diesel oil (stored on site) serves as the ignition
source for each coal burner.
Combustion air is supplied by the FD fans. Air from
these fans passes through a regenerative type air pre-
heater and then is distributed to the windbox, to the
burners and to the pulverizers. An air pre-heater by-
pass is provided to admit tempering air for temperature
control. Gaseous combustion products are extracted
from the boiler units by the ID fans.
Electrostatic precipitators are provided downstream of
the air pre-heater to remove fly ash from the boiler
flue gas. The fly ash is collected in hoppers for
further handling and disposal, which is consistent with
current Chinese environmental standards.
3.1.3 Main Steam System
The main steam system conveys the high pressure,
superheated steam from the boiler steam outlet to the
turbine stop valve.
A steam dump system is provided for diverting steam
around the steam turbine to the condenser to
effectively enable the plant to operate at the trough
period load. The steam dump system capacity will be 15
%- 30% of the steam turbine generator (STG) flow and
will be designed consistent with the boiler
manufacturer's boiler turndown capabilities.
3.1.4 Extraction Steam System
The extraction steam system consists of six stages of
condensate/feedwater heating. The first two high
pressure (HP) stages receive steam from high pressure
extraction points located on the STG HP casing to heat
feedwater in the high pressure feedwater heaters. A
third stage, which comes from the crossover between the
HP and low pressure (LP) steam turbine casings,
supplies steam for industrial use and also feeds the
deaerator. The fourth and sixth stages supply steam to
the condensate (low pressure feedwater) heaters and the
gland steam condenser. The fifth stage supplies steam
to the district heating system and also feeds one of
the three low pressure heaters. All low pressure steam
extraction points are located on the LP steam turbine
casing.
3.1.5 Auxiliary Steam System
The auxiliary steam system consists of one oil fired
auxiliary boiler capable of satisfying the steam
demands for cold start-up of one unit using oil stored
on-site.
3.1.6 Condensate and Feedwater Systems
Steam exhausted from the turbine into the condenser
becomes condensate. Two condensate pumps are provided
to pump the condensate from the condenser hotwell to
the low pressure feedwater heaters and the deaerators.
The feedwater heaters are of the vertical design. The
condensate passes first through a gland steam condenser
and then through the three LP heaters. From the third
LP heater, the condensate enters the deaerating heater
where dissolved oxygen and other gases are removed from
the condensate. The condensate is then collected and
stored in the deaerator storage tank as the water
supply for the boiler feed pumps. Extraction steam
condensate from the two LP heaters near the deaerator
is pumped into the condensate stream and to the
deaerators. The remaining LP heater and the gland
steam condenser are drained into the condenser. An
emergency drain is provided on each feedwater heater
and is activated on heater high level for routing flow
back to the condenser to provide protection from water
induction to the turbine.
The boiler feed pumps transfer water to the boiler drum
via an economizer. Water leaving the boiler feedwater
pumps flows through two high pressure feedwater heaters
to preheat the feedwater. The feedwater then passes
through the economizer where it is heated by the flue
gas leaving the furnace. After leaving the economizer,
the feedwater enters the steam drum. High pressure
feedwater heater extraction steam condensate is
cascaded (drained) to the deaerator or in emergency, is
routed to the condenser.
3.1.7 Cooling Water System
A circulating water system common to both units,
provides cooling water to the condensers and other
auxiliary equipment. There are four circulating water
pumps receiving suction from a common header tied to
the discharge of the cooling tower. A single, natural
draft cooling tower provides sufficient heat removal
capacity to serve both units. The discharge piping of
the circulating water pumps is cross tied to serve both
units and has a common return header to the cooling
tower. Each pump has a motor operated butterfly valve
on the discharge line.
An auxiliary cooling water system is also provided to
satisfy plant auxiliary cooling water requirements for
generators, coolers, pump and motor bearings, air
compressors, etc. Two booster pumps supply the
auxiliary cooling water requirements by taking suction
from the circulating water system.
3.1.8 Fire Protection System
The Preliminary Design documents describe the design
philosophy of, "fire prevention first and the combining
of prevention with fire fighting".
Luannan County town is 2.5 km from the proposed plant
site. Since this distance requires less than five
minutes driving time, the Luannan Fire Brigade will
provide personnel and equipment for fire fighting at
the Plant site. A fire engine with water tank will be
provided to the Luannan Fire Brigade by the project.
A fire fighting water system will be installed at the
Plant site which will include a 800 mwater storage tank
and two fire pumps. One fire pump is for operation and
the other is standby. The tank also provides potable
water for human consumption. An additional water
storage tank is to be installed on top of the main
power building. Start-up of the fire pump, controls a
valve on the roof tank inlet to ensure flow and
pressure during fire fighting. Maximum fire water
consumption is 234 m/hr. Maximum pressure is
calculated at 702 kPa.
Automatic COfire extinguishing systems will be
installed in the switchgear room and other identified
electrical locations. Additionally, all buildings in
the Power Plant will be equipped with fire
extinguishers according to applicable codes.
As described in the scope of work document for the EPC
contractor, an underground fire water pipeline will
loop around the power block and feed the plant
hydrants, building sprinklers and water deluge systems.
Automatic water spray systems will be installed in the
coal corridors, in the vicinity of the oil tanks, main
oil pipes in the main power building and at the
transformers.
The design of the fire protection system will be in
accordance with Chinese local and national codes and
standards, and, where applicable, the Uniform Fire Code
and NFPA 850, Recommended Practice for Fire Protection
for Fossil Fueled Steam and Combustion Turbine Electric
Generating Plants.
Fire monitoring, detection and alarm systems will be
furnished in the control rooms, cable flat, cable
shaft, battery room, relay room, and other key
locations to provide for early warning and personnel
safety. The fire safety control system will be
monitored in the electrical control room. Automatic
protection systems will operate after confirmation of
the alarm by the operator.
3.1.9 Coal Handling System
Raw coal is delivered by truck to the Plant. The coal
is weighed at the plant by a dynamic truck scale to
determine the amount of coal being delivered. The
trucks unload the coal in the coal unloading trough.
The trough is located along both sides of the coal
stock yard and is the same length as the stock yard.
Two gantry cranes with five ton buckets are installed
on rails above the coal stock yard and coal unloading
troughs. The dual gantry cranes are acceptable from an
engineering standpoint and typical of the design used
for Chinese coal-fired power plants of this size. Two
bulldozers and a truck loader will serve as backup coal
feeding equipment to the gantry cranes during emergency
conditions. The stock yard is divided into two equal
areas. Coal unloaded in the troughs is delivered by
the gantry crane onto a belt conveyor which transports
the coal to the transfer house where it is crushed
before being delivered to the raw coal storage bunkers
via belt conveyors or stacked by the gantry crane in
the coal stock yard.
A twin belt conveyor system, each rated at 100 % of
Plant requirement, transports the coal to the crusher
house. The coal passes through coal screens and
crushers (depending on size), a series of magnetic
separators, and is directly fed into the coal bunkers
on each boiler. A coal feeder at the discharge of each
coal bunker feeds coal to a ball mill for
pulverization.
The coal handling equipment and systems should be
adequate to provide for efficient plant production ,
even using the worst-case coal described above.
3.2 CIVIL/STRUCTURAL SYSTEM
Plant designs addressing Civil, Structural and Architectural
requirements are to be consistent with the applicable
Chinese Standards for Coal Fired Power Plants. The general
layout of the plant follows a design philosophy of
functional groupings. There are three general groupings of
buildings, structures and equipment. The first group
includes the high voltage switchyard area, main transformers
and the control building. The second group includes the
turbine buildings, boilers, draft fans, precipitators and
chimney. The third group includes the coal storage and
supply systems.
3.2.1 Civil Design
The design incorporates considerations for the type of
soils encountered at the Plant site. Where key building
foundations are to be placed, the sub-soils will be
extensively reworked and/or replaced with suitable base
material. Site grading allows for proper drainage.
Roadways are included in the design to provide access
to equipment and buildings for maintenance and
operation.
3.2.2 Structural Design
Designs for Plant structures and buildings includes
considerations for basic structure loading, equipment
access and earthquake stresses. General specifications
for concrete steel and masonry are included for each
major construction or structure type. The materials
have been chosen consistent with their intended
application. Corrosion resistant materials are
specified where appropriate.
3.2.3 Architectural Design
Building architecture is generally consistent with the
intended functions. The designs include features to
maximize natural lighting, facilitate the flow of
operations personnel and provide fire barriers to
improve personnel safety. Additional considerations
have been given to building surface finishes to improve
the building aesthetics. Ceramic tile, brick and
terrazzo finishes are specified for select Plant areas.
3.3 ELECTRICAL AND CONTROL SYSTEMS
The Plant electrical and control systems conceptual design
is consistent with present Chinese power plant design. Off
site transmission, substation, protection and communication
systems are described in the Feasibility Study and are
provided through the loan agreement between the NCPGC and
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-
Western Heat and Power Co., Ltd. dated 2/10/1996.
3.3.1 Step-Up Transformers
The electrical plant will consist of two nominal 50 MW
generators (60 MW maximum output) capable of producing
a minimum of 51 MW net power to the electrical grid. A
75 MVA rated Generator Step-Up Transformer will
increase the output from each generator from 10.5 kV to
110 kV for connection to the high voltage switchyard.
3.3.2 Plant Switchyard
The high voltage switchyard electrical equipment will
include 110 kV rated SF-6 gas insulated circuit
breakers, current and potential transformers, manual
air break switches, surge arresters, metering and
protection equipment. As dictated by the North China
Power Administration, a double bus arrangement will be
used in the switchyard to connect the generators to the
transmission lines exiting the plant.
Each generator/step-up transformer will be connected to
a bus in the switchyard by a single, 110 kV circuit
breaker. In normal operation, this scheme is adequate
to supply all of the output from the plant to the grid.
However, a failure of a generator breaker will create
an outage for the associated generator until the
problem is corrected or the breaker is replaced. This
contingency will have an impact on plant availability.
To mitigate the effects from such contingency, the
initial spare parts purchase should include this
equipment in order that it will be readily available on
site.
3.3.3 Utility Interconnection
Arrangements have been made with NCPGC for the
construction of required facilities to adequately
interconnect the Plant with the utility grid. Approval
Notice Document-Huabeidianshe [1995] No. 65, dated July
13, 1995 and Approval Comments Document Huabeidianjishe
[1995] No. 75, dated August 24, 1995 describes the
size, location and other requirements of the proposed
interconnection facilities at the plant site. These
documents also provide for the construction of a new 5
km double circuit 110 kV transmission line which will
connect the proposed plant with a new substation to be
constructed at Ningtuo.
3.3.4 Off-Site Transmission Lines
Arrangements have been made with NCPGC for construction
of additional off-site transmission lines required to
adequately deliver power from the Plant to area
substations. Approval Notice Document-Huabeidianshe
[1995] No. 65, dated July 13, 1995 and Approval
Comments Document Huabeidianjishe [1995] No. 75, dated
August 24, 1995 provide for NCPGC to construct three
additional double circuit 110 kV transmission lines
necessary to tie in various substations. From Ningtuo,
18 km of 110 kV transmission line will be constructed
to the new Changing substation, 12 km of 110 kV
transmission line will be constructed to the new
Sijezhuang substation and 8 km of 110 kV transmission
line will be constructed to the existing 2 x 110 kV
Bengcheng switching station.
3.3.5 Off-Site Substations
Adequate arrangements have been made with NCPGC for the
construction of new off-site substations and increasing
the capacity of existing substations. Approval Notice
Document-Huabeidianshe [1995] No. 65, dated July 13,
1995 and Approval Comments Document Huabeidianjishe
[1995] No. 75, dated August 24, 1995 describe the
necessary off-site substation improvements. Three new
2 x 40 MVA substations will be constructed at Ningtuo,
Changning and Sijezhuang. Modifications will be made
to existing Yangling substation and Bencheng switching
station. Additionally, changes to the communication
systems at the Bengcheng switching station and system
dispatch center and system protection and relay
requirements are also described in these documents.
3.3.6 Auxiliary/Start-Up Power
Each generator will have an auxiliary transformer
connected to the output terminals which will adequately
supply plant electrical service. Each auxiliary
transformer is capable of supplying the electrical
needs of the entire Plant. Additional redundancy to
the Plant electrical service is achieved by a start-up
transformer served from the high voltage switchyard.
3.3.7 Revenue Metering
Revenue metering located at the point of
Interconnection between the power plants and the
utility grid will measure electrical energy provided to
the grid. Readings from these meters will also be
transmitted to the dispatch office of the Tangshan
Power Supply Bureau of the Grid. Testing and
calibration of the revenue meters will be by a
qualified inspection agency approved by both the Owner
and the NCPGC.
3.3.8 Control Systems
A Distributed Control System (DCS) manufactured by
Siemens and imported into China for assembly and
delivery will provide integrated modulating control,
sequential control and data acquisition from plant
systems. The DCS system design includes provisions for
1500 Input/Output (I/O) and 300 spare I/O points, for a
total of 1800 points.
The following functions are included in the DCS:
Data Acquisition System (DAS)
Furnace Safety Supervisory System (FSSS)
Continuous Control System (CCS)
Sequence of Events Recording (SOE)
Interlock Protection System
The Boiler Controls and the Turbine Controls being
furnished will be upgraded from the standard Chinese
design to interface with the DCS and accommodate data
transmission to the DCS.
The Coal Handling System as well as the Bottom and Fly
Ash Handling Systems will be controlled locally with
Programmable Logic Controllers (PLC's) and interfaced
with the DCS system.
The Demineralizer System and the Sampling and Chemical
Injection System will be controlled locally. The
systems will interface with the DCS for monitoring.
To accommodate operating personnel trained in Chinese
plants of similar design, control for both units will
be performed using a two control room scheme. The
Steam Turbine and Boiler Controls will be located in
one control room and the Generator and Switchyard
controls in another control room.
The following DCS equipment will be located in the
Steam Turbine and Boiler Controls room:
One operator's station (with 2 CRTs and 1 printer)
per boiler.
One operator's station (with 1 CRT and 1 printer)
per turbine.
One operator's station (with 1 CRT and 1 printer)
for balance of plant.
The following DCS equipment will be located in the
Generator and Switchyard Controls room:
One operator's station (with 1 CRT and printer)
for the electrical system.
These systems and configurations have been used before
at plants of similar size and technology and should be
adequate for Plant control.
3.3.9Dispatch/SCADA/Communications
The output electrical power from the proposed Plant(s)
will be dispatched by the Tangshan Power Supply
Bureau's Dispatch Department according to the terms and
conditions contained in Article Two of the Electric
Energy Purchase and Sales Agreement, dated September
22, 1995.
The SCADA of the operating utility will interface with
the plant DCS for monitoring, controlling and obtaining
data.
Telecommunications will be achieved through redundant
paths using microwave, fiberoptic and hard wire
systems. A power line carrier used primarily for relay
applications is also available for other communication
needs. These systems should be more than adequate for
Plant communications.
3.4 WATER SUPPLY AND DISPOSAL
3.4.1 Water Wells for the Power Plant
The Plant water requirement is 980 m3/h (4,508 gpm).
The water source for plant water use is from ground
water. There are seven production wells nearby with a
total capacity of 993 m3/ hr (4,568 gpm) and two backup
wells which increase the total water capacity to 1,263
m/ hr (5,810 gpm), which is adequate for the
requirements of the Plant. The wells are located
approximately two miles west of the Plant in the
Quaternary aquifer.
The Quaternary aquifer is a medium water-rich aquifer
and contains four sets of water-bearing strata as
follows.
a) At 0 - 25 m deep, with a yield of about 3 to 5 t/h
(13.8-23.0 gpm) water.
b) At 25 - 160 m deep, with a yield of about 20-30 t/h
(92.0-138.0 gpm) water.
c) At 160 - 250 m deep, with a yield of about 10-20 t/h
(46.0-92.0 gpm) water.
d) At 250 - 350 m deep, with a yield of about 5-10 t/h
(23.0-46.0 gpm) water.
The aquifers are fed by the side slopes of the mountain
to the north and seepage from various other sources.
The hydraulic gradient of the ground water is about 5%.
The Hydraulic Bureau of Luannan County stated that the
water from shallow upper aquifers are reserved for
irrigation.
3.4.2 Waste Water Discharge
Waste water discharges from the Plant include: Boiler
room and steam turbine room discharge, coal wash water,
domestic waste water and ash yard discharge. Domestic
waste water will be treated and discharged according to
national standards. Production waste water will be re-
used as practical for flush water for the ash and coal
handling systems. The proposed design should
adequately handle the waste water discharge anticipated
from a plant of this size.
Processing of the Plant waste water is detailed in the
Hebei Environmental Protection Bureau Approval on the
Environmental Impact Report.
3.4.3 Storm Drainage
In accordance with the Environmental Impacts Assessment
Report prepared by Hebei Environmental Protection
Research Institute; a dry climate exists in the Plant
area and rainfall from minor or medium rainfall events
will be evaporated. Only severe and extreme rainfall
events will result in significant runoff.
Surface water for the Plant will drain into the Little
Qinglong River.
3.4.4 Make-up Water
Ground water from local water wells will serve as an
adequate source for boiler make-up water. Water from
the wells flows into raw water storage tanks in the
water treatment area and is pumped to a dual train
mixed bed demineralizer system. The demineralizer
water treating system supplies the make-up water needs
for both units. After being treated and demineralized,
the make-up water is pumped to the boiler deaerating
water heater. At the deaerator, the make-up water
supplements the feedwater supply to the boiler to make-
up for steam losses (such as those caused by boiler
blowdown).
3.5 ASH HANDLING SYSTEM
3.5.1 Fly Ash System
The fly ash disposal system to be furnished is a wet
ash disposal system. Fly ash collected in the
electrostatic precipitator hoppers is discharged into a
sealed mixing drum at the bottom of each hopper. Two
low pressure water pumps supply the water for mixing
with the fly ash in the six precipitator hopper mixing
drums. The slurry created in the mixing drums is
pumped to an ash slurry sump. One slurry sump is
provided to serve both units 1 and 2 at the plant.
Three sets of two ash slurry pumps (total of 6) are
provided to pump the ash slurry to the retention pond.
Normally only one set of pumps is operating and the
other two sets are in stand-by mode. One ash retention
pond will be constructed to handle the ash slurry from
both units.
3.5.2 Bottom Ash System
The bottom ash system to be furnished is a wet ash
disposal system. Bottom ash is removed from the bottom
ash hopper by a scraper chain conveyor and transported
into a crusher. The crusher reduces the size of the
ash and a high pressure hydroejector transports the ash
slurry to the ash slurry sump. The bottom ash is mixed
with the fly ash in the slurry sump and pumped to the
ash retention pond. The proposed ash handling systems
should be capable of adequately disposing of the ash
from the Plant based on the 34-35% ash content coal
from the mines as described in the Marston & Marston
Coal Report.
3.6 ASSESSMENT OF FACILITY DESIGN
The design criteria contained in the Scope of Work of the
EPC contract with its addendum define a plant which is
specified to be consistent with Chinese National Codes and
Standards. The Preliminary Design is complete and approved
by the North China Power Administration. The detail design
will be completed under the EPC contract.
4.0 ASSESSMENT OF EXPECTED PERFORMANCE
It is anticipated that the steam turbine-generator will be
sized and designed by the Chinese in accordance with the
performance requirements specified in the EPC contract and
in accordance with Chinese design standards. These
standards, typically, have been adopted from relatively
early Russian or other east-European nation's standards and
guidelines under some kind of a license agreement. The
prevailing practice was to design steam turbine-generators
(STG) with margins which in today's conditions, would be
considered substantial. A typical STG would be able to
operate on a continuous basis, at a steam flow (valves wide
open - VWO - condition) up to 5-10 percent greater than the
rated flow (i.e. flow required to meet guaranteed
performance) and at a steam pressure up to 10 percent higher
than the rated pressure. These parameters would lead to an
increase in the STG power output up to 10-15 percent over
the guaranteed output. It has been customary to size the
generator and its auxiliaries to match the steam turbine
maximum output.
There are other operating conditions which if changed, can
lead to increases in steam turbine output. For example, if
the extraction steam flow to the district heat exchangers is
assumed shut off, the steam turbine output will increase and
additional electric power can be generated up to the maximum
continuous rating of the generator (60 MW gross). A similar
situation will result when feedwater/condensate heater(s)
are taken out of service and the corresponding extractions
are shut-off. If such operating conditions are assumed to
occur coincidentally, further increase to the STG electrical
power generating capability is likely with the generator
rating being the limiting factor.
The Net Dependable Capacity performance guaranteed by the
EPC Contractor for this plant is 102 MW (51 MW each unit).
Given the possible design and operating combinations and
approaches described above, and with the equipment ratings
described in the Preliminary Design documents, the gross
electric power producing capability should achieve the 58-60
MW maximum output stipulated. The pro forma projections
reflect a net maximum output of 106 MW which is achievable
and a reasonable basis for the 20-year operating period.
The guaranteed heat rate at design conditions is 12,156
BTU/kWh (LHV) which should be achievable under full load
output conditions. The pro forma projections have assumed a
higher levelized heat rate of 13,402 BTU/kWh (HHV), (12,764
BTU/kWh (LHV)) which factors in the off peak and trough
period load factors and 2-1/2% degradation of the plant.
This heat rate should be achievable with proper operations
and maintenance of the facility.
Articles 11, 12, 13 and 14 of the EPC contract contain the
required warranties and guarantees.
4.1 START-UP AND COMMISSION
Section 3.0 of the Scope of Work in the EPC contract
contains the performance and testing requirements for the
plant. Plant Acceptance Testing is specified for 72 hours
for verifying Net Dependable Capacity, Heat Rate, Plant
Emissions and Noise. Plant Reliability and Operational
Testing is specified for 240 hours for verifying
Availability, Ramp Rates, Startup Rates and Dispatch Level.
Additionally, Article 10 of the EPC contract describes the
EPC contractor's responsibilities for performance testing
and final acceptance.
5.0 ASSESSMENT OF DESIGN TO SIMILAR PLANTS
The proposed Luannan Thermal Power Plant will be similar in
design, construction and operation to other plants designed
by the Hebei Electric Power Design Institute. Specifically,
Parson Brinckerhoff visited and inspected for design and
construction purposes, two coal fired power plants in China
which were designed by HDI. One is currently operating at
Hepo using two 50 MW units and the other is under
construction at Hengshui with two 300 MW units.
HDI has completed the preliminary design for the Plant and
will work for the EPC Contractor in the completion of the
detail design for this project. Parsons Brinckerhoff has
reviewed the preliminary design and determined it is
adequate and reasonable. In addition, Parsons Brinckerhoff
will review the detail design and monitor construction of
the Plant.
6.0 ASSESSMENT OF ABILITY OF PLANT TO MEET CONTRACTUAL
REQUIREMENTS
6.1 ELECTRICAL REQUIREMENTS
The nameplate rating of each generator is 50 MW, however,
during peak periods generator output can be increased as
described in Section 4.0. With 4 MW of plant auxiliary
loads, the 51 MW described in the Scope of Work and
guaranteed by the EPC Contractor will be available at the
grid interconnection. The revenue generated by the sale of
this electrical energy may be estimated using the contract
purchase levels to estimate the total kWh to be purchased on
a yearly basis.
With a gross production of 58 MW and a 8.5 % load loss
factor (4.93 MW auxiliary load), 53.07 MW remain for sale
during the 8 hour peak period.
Additionally, 29.74 MW (65% of the 50 MW contractual
agreement less 8.5% of load loss factor) for 8 hours during
the non-peak period, and 27.45 MW (60% of the 50 MW
contractual agreement less 8.5% of load loss factor) for 8
hours during the trough period are available for sale
(reference Article 2.1 of the Power Purchase Agreement).
The following table provides Parsons Brinckerhoff's
reasonable estimate of output during each daily period
taking into account the steam requirements:
53.07 MW x 8 hours = 424,560 kWh - Peak period
29.74 MW x 8 hours = 237,904 kWh - Non-peak period
27.45 MW x 8 hours = 219,600 kWh - Trough period
Total daily kWh 882,064 kWh
882,064 kWh x 310 days/year = 273,439,840 kWh / year
Assuming $.0603 / kWh, the total annual revenue from the
first 50 MW unit will be $16,488,422. The second unit, to
be brought on line simultaneously, will double the revenue
to $32,976,844 annually.
The operation of the Plant must obey the dispatch control of
the electrical grid and conform to the peak regulation
dispatch practice of the grid as stipulated in Article Three
of the General Interconnection Agreement. Using the utility
grid demand profile of the Beijing-Tianjin-Tangshan Regional
Grid dated September 4, 1995 and a trapezoidal approximation
of the demand curve, the daily demand may be estimated.
Calculations with this methodology and 310 days/year yield
an annual unit production of 318,254,992 kWh/year. If the
Plant is dispatched in accordance with the electrical demand
curve, the projected total annual revenue will be
$38,381,552.
6.2 STEAM REQUIREMENTS
The Project will sell thermal energy as steam and hot water
to the Luannan County and local industrial users as
specified in the Feasibility Study and the approval of the
Preliminary Design. The Project will initially sell 47
metric tons/hour (approximately 184,000 million kilocalories
per year) of steam to the local industries. Additionally,
the project will sell 36 metric tons/hour (approximately
100,000 million kilocalories per year) of steam for the
production of hot water to the County for its schools,
hospitals and other facilities. Both steam and hot water
have been properly reflected in the pro forma projections
and the Plant is capable of producing these quantities of
steam and hot water when at the maximum expected output of
106 MW. The JV Partner, Luannan County, has negotiated
steam contracts or agreements with each of the individual
factories. The JV Cos. will directly bill all steam users.
47 metric tons/hour X 7440 hours/year = 349,680 metric tons/year
36 metric tons/hour X 3650 hours/year = 131,400 metric tons/year
Total = 481,080 metric tons/year
Assuming a 1995 price of $5.39/metric ton for the industrial
steam heat load and $4.99/metric ton for the district
heating load, the total annual revenue will be $2,540,461.
7.0 ASSESSMENT OF ECONOMIC LIFE OF THE PLANT
Substantially all Government approvals have been granted for
the 20-year joint venture Project, therefore the useful life
of the plant is considered to be 20 years. With proper
design, careful, periodic maintenance and operation of the
plant within design parameters, a useful life of 20 years
should be easily achievable. For comparison, there is a
large number of coal-fired plants currently in operation in
the United States that have been in service for well over 30
years.
To achieve maximum useful life, it is essential to have in
place by the time the plant is commissioned, a well-defined
maintenance and operating plan including a comprehensive set
of operating procedures. Careful record-keeping of all
outages whether planned or unplanned, outage causes and
corrective actions should be an integral requirement of the
plant operating procedures to be performed by Duke/Fluor
Daniel. Audits of plant operations by an independent
auditor should be considered.
8.0 DESCRIPTION OF ENVIRONMENTAL ISSUES
In 1992, the Provincial Government authorized the Hebei
Provincial Metallurgy & Energy Environmental Protection
Research Institute (EEPRI) to conduct an environmental
impact assessment of the proposed Luannan Power Plant. In
June 1993, the Hebei Environmental Protection Department
(HEPD) gathered experts to evaluate and subsequently approve
the Luannan Thermal Electric Power Plant Environmental
Impact Assessment Report. The original Environmental Report
was amended in May 1995 to address environmental changes in
recent years and the expansion of the facility. The 255
page Environmental Report evaluated air, surface water,
ground water, waste water and noise according to standards
approved by the Hebei Environmental Protection Department
and the Tangshan City Environmental Protection Department
(TCEPD).
8.1 PROJECT ENVIRONMENTAL STANDARDS
The approved environmental standards which apply to the
Project are as follows:
8.1.1 Environmental Quality Standards:
Environmental Air: Code BG3095-82 (air quality), Class
II standard.
Surface water: GB3838-88 (surface water quality)
Category V standard.
Surface water: GB5084-92 (irrigation water quality)
Category II standard.
Ground water: GB/T14848-93 (ground water quality).
Noise: GB12348-90 (industrial and commercial noise
standard) Category IV standard.
8.1.2 Effluent and Emission Standards:
Air emission--GB13223-91 (coal-fired electric power
plant air emission standard).
Waste water effluent--GB8978-88 (combined sewer
discharge standard) Class II standard.
Plant noise--GB12348-90, (industrial and commercial
noise standard) Category IV standard.
Parsons Brinckerhoff believes the Project can achieve
each of these standards.
8.2 ASSESSMENT OF ENVIRONMENTAL IMPACT
The Environmental Site Assessment as reported in the
Environmental Impact Assessment Report appears to have been
conducted in a manner consistent with industry standards
using comparable industry protocols for similar studies.
The Environmental Report was prepared with the assistance of
HEPD, TCEPD, Luannan County Environmental Protection
Department, Hebei Electric Power Design Institute and the
Luannan County Thermal Electric Power Planning Commission.
Although we have not performed an independent site
assessment, we are of the opinion that the conclusions which
EEPRI reached were supported by the data and reports which
we reviewed.
From the view point of environmental protection, the site
plan fully considers the needs of the employees' daily
activities and working conditions, centralizes the air
emission sources, and provides proper design for noise
consideration. The site plan also isolates potential
problems. For example, the entrance for material is located
at the northeast corner of the site, and the coal pile is
located north of the site, therefore, avoiding the
prevailing wind effects, and minimizing noise and dust
impacts on the project area. The cooling tower is located
at the eastern part of the site and is connected to other
work areas with a sky-walk, therefore minimizing the water
and noise impacts on the employees and their working
environment. The boiler room is located at the western part
of the site; this arrangement provides a convenient location
for steam emission and minimizes the steam noise impacts.
Additionally, the engineering analysis indicates that the
plant environmental protection facilities and the effluent
quality complies with the national standards for air,
surface water, ground water, noise, and waste water
effluent. These standards were listed earlier in this
section.
Data from the Environmental Impacts Assessment Report (EIA)
prepared by Hebei Provincial Metallurgy and Energy
Environmental Protection Research Institute and calculations
prepared by Panda Energy International, Inc., indicate air
emissions will be below the limits set by the World Bank for
sulfur dioxide and slightly above the limits for nitrous
oxide and particulate emissions.
Particulate emissions from the facility will exceed the
World Bank Guidelines because of limitations on guaranteed
efficiency of Chinese electrostatic precipitator technology.
However, these guidelines are not applicable to this project
and emissions calculations in the Preliminary Design
Documents are below the requirements of Chinese Standards.
Neither the Preliminary Design Documents nor the EIA
stipulate a requirement for nitrous oxide emission control
in China. Calculations for nitrous oxide emissions may be
updated when burner design is completed.
The planned facility will replace 91 coal-fired boilers in
the area. The majority of these 91 boilers do not have any
ash removal facilities and they have short stacks. Those
having ash removal facilities are equipped with low-
efficiency precipitators. These 91 boilers are the major
pollutant contributors to the area. Due to the closure of
these 91 coal fired boilers, the net impact to the area is
very positive. The ground level particulate concentration
is reduced below Chinese standards and close to the World
Bank Guidelines.
In summary, the Plant will enhance electrical service, help
relieve the deficient supply and will promote economic
development for the area. Centralizing thermal production
and winter heating will also improve the air quality in the
area.
This assessment has concluded that, from the environmental
point of view, the plant is feasible and will meet
applicable Chinese Standards if all environmental protection
and control measures recommended by the EIA are implemented.
9.0 GOVERNMENT APPROVALS AND BUSINESS AGREEMENTS
9.1 GENERAL DESCRIPTION
The Project has been under consideration for a number of
years. As the Project has developed, Business Agreements
have been made and Government Approvals have been obtained.
9.2 GOVERNMENT APPROVALS
A list of Government Approvals for the Project design and
construction are as follows:
- Project Proposal Approvals (#682, #683 and #684 dated
9/26/94 and #470 dated 5/29/96) by Hebei Provincial
Planning Commission.
- Project Feasibility Study Approvals (#144, #145 and #146
dated 2/28/95 and #471 dated 5/29/96) by Hebei Provincial
Planning Commission.
- Project Feasibility Study Approval (#10) by North China
Power Administration of the Ministry of Electric Power
(2/16/95).
- Project Heat Network Feasibility Study Approval (#57) by
Tangshan Municipal Planning Commission (4/11/95).
- Environmental Impact Approval (#150) by Hebei Provincial
Environmental Protection Bureau (7/5/95). Environmental
Impact Approval Supplements: An Official Reply to the
"Report on Environmental Impact Assessment for Luannan
Thermal Power Plant (2nd edition)" by Hebei Environmental
Protection Bureau, J. H. G. H. (1996) No. 318, dated
September 9, 1996.
- Interconnection Design Approval (#65) by North China
Power Administration of the Ministry of Electric Power
(7/13/95).
- Water Usage (#11) by Tangshan Municipal Water Usage
Bureau (8/13/94).
- Joint Venture Approvals (#253 and #254) by Tangshan
Municipal Bureau for Foreign Trade and Economic
Cooperation (9/20/95). Certificate of Foreign Invested
Enterprise of Tangshan Panda Heat and Power Co., Ltd.
(No. 0153758) and Certificate of Foreign Invested
Enterprise of Tangshan Pan-Western Heat and Power Co.,
Ltd. (No. 0153759) issued by the Hebei Provincial
People's Government under Approvals (#078 and #079) dated
(9/20/95).
- Joint Venture Approvals (#123) dated 5/14/96 for the
Tangshan Cayman Heat and Power Co., Ltd. and (#134) dated
6/7/96 for the Tangshan Pan-Sino Heat Co., Ltd. issued by
Tangshan Municipal Bureau for Foreign Trade and Economic
Relations. Certificate of Foreign Invested Enterprise of
Tangshan Cayman Heat and Power Co., Ltd. (No. 0255737,
approval #040 dated 5/14/96) and Certificate of Foreign
Invested Enterprise of Tangshan Pan-Sino Heat Co., Ltd.
(No. 0255740, approval # 044 dated 6/07/96) issued by the
Hebei Provincial People's Government.
- Public "Right-Of-Way and Road Usage" (Transportation)
Approvals by the Luannan County Bureau of Transportation:
Coal Transportation Approval (8/18/94)
Ash Transportation Approval (1/10/95)
- Steam Price Approval by Luannan County Price Bureau
(8/13/94).
- Approvals (#5) by the Tangshan Office of the Hebei
Provincial Construction and Planning Commission (6/23/95)
for Land Sites, Transportation and Roads, Water usage and
Electricity Usage.
- Business License of the Tangshan Pan-Western Heat and
Power Co., Ltd. (Reg. No. 000512) and Business License
of Tangshan Panda Heat and Power Co., Ltd. (Reg. No.
000511) issued by the State Administration of Industry
and Commerce (9/22/95). Business License of Tangshan
Cayman Heat and Power Co., Ltd. (Reg. No. 000665) and
Business License of Tangshan Pan-Sino Heat Co., Ltd.
(Reg. No. 000666) issued by the State Administration of
Industry and Commerce (6/13/96).
9.3 BUSINESS AGREEMENTS
Following is a list of the Business Agreements for the
Project:
- Joint Venture Contracts (9/3/94 and 9/4/94).
- Joint Venture Articles of Association (9/3/94 and
9/4/94).
- General Interconnection Agreement with North China Power
Group Co. (9/22/95).
- Supplemental Agreement for General Interconnection
Agreement and Electric Energy Purchase and Sales
Agreement with North China Power Group Company (2/10/96).
- Construction Agreement attachment to the General
Interconnection Agreement (2/10/96).
- Loan Agreement with the North China Power Group Company
to finance the construction of the transmission
facilities through a financial intermediary in the PRC
(2/10/96).
- Power Price and Pass-Thru Price Adjustment Formula
Approval by Tangshan Municipal Price Control Bureau
(10/18/95).
- Coal Supply Allocation Commitment from the Qianjiaying
Coal Mine (11/94) and Confirmation of Commitment by
Kailuan Mining Administration of the Ministry of Coal
Industry (3/7/95).
- Coal Supply Agreements:
- with Kailuan Coal Mining Administration for 300,000
tons/year (2/3/96)
- with Luannan County Coal Mine for 70,000 tons/year
(2/2/96)
- with Liu Guantun Coal Mine for 70,000 tons/year
(2/2/96)
- with Le Ting County Coal Mine for 60,000 tons/year
(2/2/96)
- with Zunhua Coal Mine for 60,000 tons/year (2/2/96)
- with Chang Li County Coal Mine for 50,000 tons/year
(2/2/96)
- Coal Transportation Agreement (3/6/96).
- Agreement on Land Contribution with Luannan Partners
(9/7/94).
- Agreement to Expand Power Plant with Luannan Partners by
Additional 50 MW (9/7/94). This agreement expands the
Plant capacity from the original 50 MW to the present 100
MW.
- Operation and Maintenance Agreement between JV Cos. and
Duke/Fluor Daniel International Services, Inc. (6/26/96).
- Engineering, Procurement and Construction (EPC) Contract
(4/24/96) and Amendment No. 1 (7/5/96), No. 2 (9/14/96),
and No. 3 (12/17/96).
9.4 ASSESSMENT OF SUPPORT DOCUMENTS
Based on our review of the various Government Approvals and
Business Agreements, we are of the opinion that the JV Cos.
have obtained the key governmental approvals required from
the various governmental agencies which are necessary to
construct and operate the Project.
We are not aware of any technical circumstances that would
prevent the issuance of the remaining approvals.
10.0 PROJECT SCHEDULE
The construction schedule is 28 months and is suitable for
similar projects in China. The governing factor is the lead
time required for major equipment manufacturing. The
critical path is the main turbine building, which must be
finished before the delivery of the major equipment which
will be installed in the turbine building. Based on our
review of the Project Schedule and the EPC Contractor's
experience, the 28 month schedule should be achievable.
11.0 REVIEW OF EPC CONTRACTOR AND AGREEMENT
11.1 ASSESSMENT OF MANPOWER AND STAFFING
The EPC Contractor shall submit a detail manpower plan as
specified in Section 5.0 of the Scope of Work document.
However, the staffing information required for the
construction of the plant is not available from the EPC
Contractor as this time. The EPC Contract specifies the
Contractor's responsibilities and warranties with respect to
vendors and subcontractors. Since civil work is a major
portion of the contract, Harbin will identify and owner will
approve the Civil Contractor and other Substantial
Contractors prior to starting the project as described in
Article 2 of EPC Contract. Parsons Brinckerhoff believes
the staffing of the project by the EPC Contractor will be
adequately provided.
Article 3 of the EPC Contract describes the Contractors
responsibilities for engineering and construction of the
project. China has a large supply of general labor. Harbin
is expected to employ unskilled labor from within Luannan
County, however, the skilled labors (welders, electricians,
etc.), for the most part, will have to be provided by Harbin
or their subcontractors. The skilled labor requirement
should be available within the Tianjin-Tangshan-Beijing
triangle.
11.2 EVALUATION OF THE EPC CONTRACTOR'S EXPERIENCE
HPE is a well known Chinese power contractor and has both
international and domestic experience in manufacturing and
installing equipment for similar power generation projects.
HPE's technical brochure includes 16 coal fired power plants
in its list of Chinese achievements. HPE has supplied main
or all equipment and provided technical services for these
plants. Of these 16, Pingwei, Zhujiang, Tieling, Mawan,
Shuangyashan, Diaquing and Dengfeng power stations were
completed as turnkey projects. Additionally, HPE has
completed international power plant installations on a turn-
key basis in Pakistan at Guddu, Jamshoro and Kotri; Angat
Hydraulic, Philippines; and Hiep Phuoc, Viet Nam.
The No. 2 Hebei Power Construction Company (2HPCC) has been
selected by HPE to be the construction subcontractor for the
Luannan Thermal Power Plant. 2HPCC has completed the
construction of No. 1 unit at the 1200 MW Hengshui Power
Plant in December, 1995. This first unit, 300 MW coal-
fired, was completed in 24 months. In addition to the
facilities visited at Hepo and Hengshui, 2HPCC has completed
power plants and cogeneration plants at 8 other locations in
China during the last 10 years.
Portions of the project will be subcontracted out to local
contractors. Owner has given the EPC Contractor a Limited
Notice to Proceed and has allocated the necessary
expenditures to cover this preliminary work. Given HPE's
track record, We believe they have the ability to follow the
Chinese construction standards and enough capacity and
manpower to complete the project as the EPC contractor and
meet the performance and schedule requirements of the EPC
Contract.
11.3 EVALUATION OF EPC CONTRACT TERMS
The Liquidated Damages (L.D.s) are capped at 35% of the
contract price plus 10% retention. The total of 45% is the
largest known percentage from a Chinese contractor compared
to the customary 10% total. The terms in the irrevocable
bank guarantee (letter of credit) are strong enough to cover
the interest and penalty risk of Owner.
In addition, a performance bond in the form of the Parent
Guarantee will be issued by the parent corporation of the
EPC Contractor. The terms in the guarantee are suitable to
replace the bid security with given assumptions that (1) the
parent company has enough assets, (2) the Chinese government
will allow such a flow of money when due, and (3) Changes
are regulated and managed.
The contract has the necessary clauses and is comparable to
the other turnkey projects in the US. The EPC contracts in
China are more rigorous than in the US on the government
approvals, design stages, and guarantee issues, and less
rigorous on environmental issues. With the arbitration
location outside of China for disputes over $1,000,000 US,
the risks of Owner are limited. The China factor becomes
important when the laws and regulations change and there is
no contract clause to effectively protect the Owner.
Parsons Brinckerhoff believes the EPC Contract has adequate
protection for the Owner in terms of L.D.s, Parent Guarantee
and other requirements.
12.0 FINANCIAL PERFORMANCE ASSESSMENT
We have reviewed the financial assumptions and projections
with respect to the Plant's performance and revenue-
generating capability and the operating, maintenance and
capital costs of the Project. This chapter contains the
financial analysis based on such assumptions and a
discussion of their reasonableness.
The Project will be composed of four separate joint venture
companies. Each has its distinct scope of business and
asset ownership of the Project. However the financial
performance of the Project is presented as a consolidated
entity, since the payment and performance obligations of
each joint venture company under their shareholder loan
agreement will be cross-guaranteed by the other joint
venture companies. This chapter will include a section on
the operating results of each of the four joint venture
companies.
Among the many assumptions that are critical to the
financial viability of the Project are the level of power
production, power tariffs, capital costs, operating
expenses, maintenance costs, reserve requirements, and tax
rates. On the basis of such assumptions, we have prepared a
pro forma statement to forecast the operating revenues and
expenses, net income, and cash flow of the Project on an
annual basis throughout the contract period.
This chapter includes the following sections:
- level of power production
- power tariffs
- review of project costs
- review of operating expenses
- review of reserve requirements
- the financing plan
- consolidated operating results -- base case
- summary of sensitivity analysis
- individual joint venture companies operating results
-- base case
12.1 LEVEL OF POWER PRODUCTION
The financial analysis is based on the assumption that the
NCPGC will purchase electricity and the Luannan County
customers will purchase thermal energy produced by the
Plant. The contractual terms of power purchase and sales
agreement are thus used as the basis of power production
projections in the analysis.
12.1.1 Power Purchase Agreement
We reviewed the Power Purchase Agreement dated
September 1995. The Agreement provides for the sale of
electric energy generated by the Plant for the contract
period of 20 years. The key provisions as defined in
the Agreement are summarized as follows, which then
become important assumptions used in projecting power
output from the Plant:
- The Power Purchase Agreement establishes a
commercial operation period of 20 years for the
Plant. The Joint Venture Companies are responsible
for the operation and maintenance of the Plant
during the contract period.
- Starting on the Commercial Operation Date and
throughout the 20-year term, subject to the
limitations on the gross generation levels, the
Joint Venture Companies agree to sell, and NCPGC
agrees to purchase and take, all electric energy
delivered to NCPGC from the Plant. The gross
generation levels in different time periods, subject
to adjustments agreed by both parties, are presented
in Table 12.1. We believe that the Plant operating
assumptions presented in Table 12.1 are reasonable
and that the Project will be capable of achieving
these parameters throughout the 20-year term of the
Power Purchase Agreement.
- The Joint Venture Companies will be paid for the
delivered electric energy at or over the minimum
output level during the Peak Hours at the applicable
energy price. NCPGC is required to purchase the
electricity output below the maximum levels as
specified in Table 12.1 during the Non-Peak and
Trough hours.
- The Agreement specifies that the cumulative annual
overhaul outage for the Plant, including the forced
outages, will not exceed 55 days. Outages will be
calculated on an actual time elapsed basis. During
the 55 days, the Joint Venture Companies will not be
penalized for the failure to produce or deliver
electric energy. As a result of this agreement,
this financial analysis assumes that the Plant will
run 310 days each year to generate and deliver
electricity to NCPGC. It is reasonable to expect
the Project will be capable of meeting this 310 day
requirement throughout the 20-year term of the Power
Purchase Agreement.
Table 12.1 Plant Operating Assumptions
<TABLE>
<CAPTION>
PEAK HOUR NON-PEAK TROUGH TOTAL
HOUR HOUR
<S> <C> <C> <C> <C>
Contractual minimum maximum maximum 1,800,000
Gross 800,000 520,000 480,000
Generation kWh kWh kWh kWh
Limit/Day
Plant Gross 116MW 100MW 100MW --
Output
Capacity
Percent Load 100% 65% 60% --
Load Loss 8.5% 8.5% 8.5% --
Factor
Net Output 106,140 59,475 54,900 220,516
(kW)
Average 8 8 8 24
Hours/Day
Net Output/Day 849,120 475,800 439,200 1,764,120
(kWh) (above (below (below
contrac- contrac- contrac-
tual tual tual
minumum) maximum) maximum)
Annual Running 310 310 310 310
Days
Annual Net 263,227 147,498 136,152 546,877
Output MWh MWh MWh MWh*
Steam Output 47 47 47 349,680
tons/hour tons/hour tons/hour tons/year
310 310 310
days/year days/year days/year
Heat Output 36 36 36 131,400
tons/hour tons/hour tons/hour tons/year
5 5 5
months/ months/ months/
year year year
</TABLE>
*: Equivalent to 100 MW for 5,469 hours.
This Report contains a separate review of the
operational capacity of the Plant in Chapter 6, which
verifies the Joint Venture Companies' ability to meet
the terms of the Power Purchase Agreement to produce
and deliver power as scheduled.
Based on the contractual commitments set forth in the
Power Purchase Agreement and the technical assessment
of the Plant's operating performance, the Plant
Operating Assumptions presented in Table 12.1 are used
to calculate the annual electricity power output, which
remains constant throughout the 20-year contract
period.
12.1.2 Heat Sale Agreement and Assumptions
The Joint Venture Companies will sell thermal energy of
industrial steam and district heat to Luannan County
and other local industries.
A Steam Heat Supply Agreement for hot water consumption
was signed in October 1996 by the Luannan County Heat
Company and the Joint Venture Companies. The Agreement
specified that the County Heat Company will purchase a
minimum of 362,518 gigajoules per year, or about
131,400 tons of hot water per year, from the Joint
Venture Companies for consumption by the local
residents.
Table 12.2 lists the steam customers who have signed
individual heat supply agreements with the Joint
Venture Companies and specified their requests for
steam consumption levels:
Table 12.2 List of Thermal Energy Customers
Name of Customer Use in Summer Use in Winter
(metric tons / (metric tons /
hour) hour)
1 Tangshan Shanfeng 6 0
Fodder Co.
2 Paper Board Factory of 28 30
Yiteng Paper Co.
3 County Textile Mill 4 5
4 County Canned Food 4 5
Factory
5 County Asbestos Tile 7 8
Factory
6 Seal Fodder Factory 6 0
Total Steam Requested 55 tons 48 tons
Per Hour:
The Plant's design heat energy output, according to the
"Feasibility Study on Luannan Thermal Power Plant" by
Hebei Electric Power Design Institute dated October
1994, is an average of 47 tons of steam and 36 tons of
district heat per hour. The design steam output of 47
tons per hour would be less than the requested total
amount specified in the heat supply agreements.
However, the Joint Venture Companies will not be
obligated according to the agreements in place to
provide the full amount of requested thermal energy.
There are no punitive damage provisions in the heat
sale agreement if and when the Joint Venture Companies
deliver thermal energy below the requested amount.
It is therefore reasonable to assume in the financial
analysis that the Plant will provide as much as 47 tons
per hour of steam for 310 days per year, and 36 tons
per hour of heat for 5 months of winter each year. At
this level of steam and heat production, the Project
should be able to produce the 106 MW of output during
peak hours. The financial analysis also assumes that
this level of thermal energy production will remain
constant throughout the contract period.
12.2 POWER TARIFFS
12.2.1 Planned Wholesale Electric Energy Price
The electricity prices used in the financial analysis
are based on the Planned Wholesale Power Price that was
proposed by the Joint Venture Companies for the Project
financial evaluation purposes and agreed to by the
Tangshan Municipal Price Bureau (the Pricing Approval
Authority), as specified in the Power Purchase
Agreement. The Pricing Approval Authority also accepted
the Joint Venture Companies' proposed pricing formulae
to adjust the Planned Wholesale Power Price in the
future to reflect changes in the cost adjustment
factors in order to mitigate the Project's exposure to
inflation and currency risks.
Based on the estimated production cost, plus tax and a
profit margin that is set by the Chinese government
regulations on joint-venture developments, the Joint
Venture Companies estimated the Planned Wholesale Power
Price in 1995 cost by using the following cost
categories:
Table 12.3 Cost Components for Wholesale Power Price
A. Unit Generation Cost
-- Direct Material Costs (including depreciation on
plant and equipment)
-- Direct Labor Costs
-- Management Costs
-- Administrative Costs
B. Financial Expenses, including long term debt interest and
working capital interest
C. Unit Reserves, including equipment maintenance & overhaul,
welfare reserve for Chinese employees
D. Unit Taxes, including central and local taxes, real estate
tax, and stamp tax
E. Unit Profit (Tax-affected), including return on equity,
profit deferral & recovery, interest on profit deferral, and
income taxes on profit.
The estimated pre-VAT Planned Wholesale Price of 0.5126
yuan (6.0 US cents1) per kWh in 1995 cost was then
increased to 0.5997 yuan (7.1 US cents1) per kWh to
include the 17 percent VAT. Based on the pre-VAT
price, the financial analysis projects the Initial
Wholesale Price for 1999 by using the following cost
adjustment assumptions in the complex pricing
adjustment formulae accepted by the Pricing Approval
Authority:
- Coal Escalation Assumption: 10% annual increase
from 1995 to 2003, 4% annual increase from 2004 to
2018.
- Chinese Consumer Price Index Assumption: 10% from
1995 to 2003, 6% from 2004 to 2008, 4% from 2009 to
2018.
- US$ Exchange Rate Assumption (US dollar to RMB):
1:8.5 from 1995 to 2018, which was consistently used
throughout the projections.
- US Inflation Adjustment Assumption: 3.0% annual
increase from 1995 to 2018.
- Total Investment Cost Adjustment, which represents a
one-time adjustment factor for the difference
between the estimated total investment cost of $105
million as agreed in the Power Purchase Agreement
and $119 million as the final project cost presented
in the Offering Circular.
Other cost adjustment factors include profit deferral /
recovery adjustment and interest on profit deferral
adjustment. These two adjustment methods were proposed
by the Joint Venture Companies and agreed to by the
Pricing Approval Authority in the Power Purchase
Agreement in order to stabilize power price throughout
the contract period. The pre-VAT Initial Wholesale
Price, based on the above cost adjustment assumptions,
is projected to be 0.6320 yuan (or 7.4 US cents1) per
kilowatt hour in 1999, the first year of commercial
operation.
In this analysis, the projected pre-VAT energy sale
prices are compared with other power tariffs in China
that were made available to the Engineer. The existing
research, without giving detailed information,
indicates that electricity tariffs in China had been
set artificially low by the central, provincial and
local governments2,3, as illustrated in Table 12.4:
Table 12.4 China's Electricity Prices in International
Context4
(US cents/kWh at current exchange rates, 1994 - 1995)
New Plant 3.5 cents per kilowatt hour
Beijing 3.3 - 6.4
Shanghai 5.0
Guangdong IPPs 7.5 - 9.0
Average China 2.6
Average OECD Countries 8.1
Luannan 1995 Wholesale Price 6.0
Luannan Projected 1999 Initial Price 7.4
Although the Project's pre-VAT energy prices (6.0 US
cents in 1995 and 7.4 US cents in 1999) are higher
than most other rates currently reported for plants in
China, it is lower than that reported for some
Independent Power Plants (IPPs, or foreign invested
power projects) in Guangdong Province in southern China
and certainly lower than that of the developed
countries in the Organization for Economic Cooperation
and Development.
Similarly high rates have been reported even within the
North China Power Grid. As an innovative method to
regulate power consumption, time-of-use tariffs were
employed in Hebei Province, within which the Plant is
located. According to the 1995 James Dorian report,
the highest rate charged during peak times since
November 1994 was 6.4 cents per kilowatt hour.
Meanwhile, tariff controls have been eliminated for
electricity sales by power plants that are foreign
built or financed to attract foreign investment. The
independent author concluded that the potentially large
private investments will only occur with electricity
prices being at least double the present levels of
about 3 US cents per kWh. James Dorian also quoted a
Taiwan publication in estimating the economic cost to
the power consumers of about 17 cents per kWh for
shortages throughout China on average, which is more
than double the Plant's Initial Planned Price of 7.4
cents for 1999. The Project's electricity sale prices,
increasing from 7.4 US cents per kilowatt hour in 1999,
to 11.1 in 2009 and 12.4 in 2018 should not be viewed
as unreasonable and unacceptable in the context of
chronic power shortage in China, particularly in the
rapidly developing region of Beijing-Tianjin-Tangshan.
12.2.2 Future Price Adjustments and "Passthrough"
Provisions
During the contract period, the Joint Venture Companies
are authorized by the Power Purchase Agreement to apply
for price adjustments for approval by the Pricing
Approving Authority. The Joint Venture Companies will
propose cost adjustments based on the price adjustment
formulae to provide for parity of the escalation of the
operating expenses to the revenues. This contractual
arrangement ensures a "passthrough" of the potential
cost escalation to the energy purchasers. In other
words, the energy price will go up or down, depending
on the changes in the various cost items in the future.
For example, if the Chinese Consumer Price Index (CPI)
goes up, the energy price will go up by the weighted
adjustments of the CPI factor applicable to the
construction capital costs and the Chinese O&M costs,
thus the energy sale revenues will be increased to
offset cost increases based on the Chinese CPI.
Thirty days prior to the Commercial Operation Date, the
Joint Venture Companies will apply for an Initial
Wholesale Price to be adjusted from the 1995 Planned
Wholesale Price. The Pricing Approval Authority will
review the application for accuracy in the employment
of the price adjustment formulae. Upon approval by the
Authority before the Commercial Operation Date, the
Initial Wholesale Price will become the "Price for
Electric Power Delivered". All future price adjustment
applications will be processed in the same manner.
12.2.3 Heat Sale Price Agreement
The Pricing Approval Authority reviewed the Joint
Venture Companies application for heat sale price, and
agreed to set the base heat sale price as 15 yuan per
gigajoules, equivalent to $5.39 per metric ton of
industrial steam and $4.99 per metric ton of district
heat in 1995 cost. The Price Bureau requests the Joint
Venture Companies to obtain the approval of the actual
heat sale price prior to the commercial operation.
Because there is no complex pricing formulae set up for
heat sale as that for electricity power price, this
financial analysis conservatively adjusts the base heat
sale prices by 50 percent of the projected Chinese CPI
annual changes.
12.2.4 Interconnection and Loan Agreements
The NCPGC and the Joint Venture Companies signed the
General Interconnection Agreement on September 22, 1995
in which both parties agreed to interconnect the Plant
to the Beijing-Tianjin-Tangshan Regional Grid. The
Loan Agreement of February 10, 1996 as amended sets
forth the terms under which the Joint Venture Companies
will lend through the required intermediate lending
institutes to the NCPGC 83,693,260 yuans (equivalent to
$10.1 million) for the construction of the Transmission
Line which includes the designated inflation costs
specified in the Loan Agreement. In addition, NCPGC
will be required to pay the Joint Venture Companies
approximately $2.1 million for capitalized interest
which will be added to the principal of the loan during
the construction period. The NCPGC is obliged by the
contractual terms to annually repay the Joint Venture
Companies the loan principal and accrued interest over
the period of 10 years in mortgage style. It is
therefore reasonable to assume that the Joint Venture
Companies will receive the principal and interest
payments immediately following the Commercial Operation
Date of the Plant. The Loan Agreement requires the
repayment to be made in US Dollars. This pro forma
analysis conservatively assumes loan repayments will be
made from RMB revenues, which will be converted to US
dollars, and thus may be subject to convertibility
limitations and RMB devaluation risks, because of the
existing regulatory limitations on NCPGC to repay loans
in US Dollars. A sensitivity test of RMB devaluation
is presented in Section 12.8.
12.3 REVIEW OF PROJECT COSTS
The project costs listed in Table 12.5 address major
categories of expected costs to implement the Project. The
costs associated with each category are reasonable. The
total budgeted amount represents a realistic and attainable
project cost as provided in Table 12.5. Remarks and
explanations are additionally provided.
Table 12.5 Project Cost Estimates
_________________________________________________________________
EPC Contract Allocation:
Thermal System $22,483,000
Coal Handling System $924,000
Ash Handling System $2,449,000
Water Treatment System $1,528,000
Feedwater System $3,390,000
Electrical System $5,239,000
I&C Systems $2,893,000
Service Water System $155,000
Auxiliary Plant Systems $1,156,000
Equipment Structures & $11,087,000
Buildings
Site Infrastructure & $4,185,000
Civil Work
Miscellaneous Buildings $1,654,000
Subtotal for Systems and $57,143,000
Equipment
Start-up & Testing $960,000
Engineering & Design $840,000
Construction Support $1,681,000
EPC Costs Escalation $1,113,450
EPC Contingency $3,001,830
EPC Contract Allocation $64,739,280
Total(1)
Transmission Project: (2) $10,083,525
Steam & Heat Network: (3) $2,912,048
Builders Risk Insurance $819,000
Total Construction Costs $78,553,855
Land Use Rights: (4) $5,378,715
Water Use Rights: (4) $361,446
Engineering Costs: $1,950,000
Interest During Construction $13,330,000
(5)
Financing & Legal Costs: $4,350,865
Project Management Costs: $3,700,000
Fuel, Spare Parts & Other $2,750,000
Equip. (6):
Debt Service Reserve $4,000,000
Project Contingency: (7) $4,380,120
Project Total: $118,755,000
Most project costs listed above are US dollar
denominated, however, for steam and heat network, land
and water use rights, and transmission line which are
denominated in RMB, an exchange rate of US $1 = RMB
8.30 was used.
________________________________________________________________
Notes:
(1) EPC Contract Allocation: Based on PB experience with other
projects in China, the allocation is reasonable. The turn-
key contract scope will be completed with Harbin Power
Engineering Co. LTD at approximately $64.7 million,
including an escalation of $1.1 million per EPC Contract
Amendment No. 3, and a contingency of $3.0 million.
(2) Transmission Project: Funds are allocated for
interconnection with the North China Power Grid as a loan to
the North China Power Group Company. The quantity was
established and requested by the NCPGC and indicated in the
Loan Agreement by NCPGC.
(3) Process Steam and Heat Network: Funds are allocated for a
steam and hot water system to provide process steam and hot
water to local industrial and a residential heating loop.
The cost quoted was established by the municipality.
(4) Land and Water Use Rights: Land and water well use rights
payments will be made to area agencies for property and
rights of way. Property rights must be for the plant, ash
pond, ash slurry pipeline and associated service roads. The
prices have been negotiated with and agreed to by the area
officials.
(5) Interest during construction for Shareholder Loans is based
on an average interest rate of 12% per year.
(6) The total of $2,750,000 for Fuel, Spare Parts & other
Equipment is within the anticipated range of allocations for
other projects similar in size and technology.
(7) The Joint Venture Companies allocated $4.4 million as
project contingency. The total contingency of $7.4 million
including the $3.0 million EPC Contract construction
contingency, equivalent to 6.2% of total project cost, is
adequate based on market uncertainties in material costs,
labor, and equipment availability as well as other
fluctuating cost factors inherent in China's expanding
economy.
We have reviewed both construction draw-down schedule and the
milestone activity provided in the EPC Contract and believe that
both are reasonable and achievable.
12.4 REVIEW OF OPERATING EXPENSES
A comparison was made between the annual fuel and operation and
maintenance cost of the proposed plant and the same expenditures
for similar US plants. This comparison is based on 1995 dollars
and was made to review the projected production expenses. The
average of five years production costs as recorded by the Utility
Data Institute for twelve coal-fired power plants of
approximately 120 MW size in the US are used in the comparison
below:
PRODUCTION COST COMPARISON
Description Luannan Average of High/Low of
Thermal US Plants US Plants
Power Plant
O&M Cost 12.20 11.94 25.16/4.24
$/Net MWhr
Fuel Cost 12.20 18.39 25.57/8.30
$/Net MWhr
12.5 REVIEW OF RESERVE REQUIREMENTS
This section describes the various reserve requirements and
assesses the adequacy of the reserve estimates made by the
Joint Venture Companies.
12.5.1 Equipment Maintenance & Overhaul Reserve
An estimated overhaul cost of $1,000,000/turbine
provided by Siemens for a similar international project
was used in this estimate. Additionally, "Combustion",
a periodical by Combustion Engineering, Inc., a
division of ABB, lists $8.75/kW to $13.00/kW as
industry standards used for determining system reserve
margin. An average of $10.875/kW was used for this
estimate giving a reserve margin of $1,087,500. The
methodology used to determine the reserve figure and
the allocated cost appears reasonable and justifiable
for this project.
To maintain the productive capacity and operational
efficiency of the Plant during the 20-year period, the
overhaul reserve will begin to be funded in the first
year of operation and be fully funded with $3.0 million
in the fourth year of operation. Expenses to cover
major overhaul activities will be drawn from the
reserve, towards which additional deposits will be made
to maintain the $3.0 million fund each year which is
reflected in the pro forma projection.
12.5.2 Debt Service Reserve
The off-shore debt service reserve will be funded with
$4 million before the Commercial Operation Date as part
of the total project cost. The reserve will be
credited towards equity accounts at the end of the
Shareholder Loans' 10-year term.
12.5.3 Welfare Reserve for Chinese Employees
A deposit of 10 percent of the total annual wages for
Chinese employees is funded in the welfare reserve each
year, as required by the Chinese Joint Venture law.
For the 500 Chinese workers employed at the Plant, this
reserve would have about $157,700 by end of 2000 and
$5.8 million at the end of the contract period.
12.5.4 Other Chinese Reserve Requirements
The Chinese Joint Venture law requires two other after-
tax reserves to be set up by the Joint Venture
Companies: the General Reserve Fund and the Enterprise
Expansion Fund. Each reserve is funded at the sole
discretion of the JV Cos.' Board of Directors and is
expected to be funded with approximately 50,000 RMB per
year. Each reserve would have about $5,900 by end of
2000 and $118,000 at the end of the contract period.
12.6 THE FINANCIAL PLAN
12.6.1 Estimated Sources and Uses of Funds
The Joint Venture Companies projected the uses and
sources of funds for the development of the Project.
The sources for the project total cost of $118.8
million would be $47.5 million from equity
contributions and $71.3 million of Shareholder Loans
from Pan-Western. The equity contributions by the
Luannan County would largely be in the form of land and
sites required for the Project development. The total
construction costs of $78.6 million would be the
largest user of the funds. The interest payment during
construction is $13.3 million. Table 12.6 summarizes
the estimated sources and uses of funds as proposed in
the Financial Plan.
__________________________________________________________
<TABLE>
<CAPTION>
Table 12.6 SOURCES AND USES OF FUNDS
(1996 US$ in thousands)
Funds Percentage of
Sources or Uses
<S> <C> <C>
Sources
Sponsor Equity $ 47,502 40.0%
Contributions
-- Panda Contribution 41,762 35.2
-- Luannan County 5,740 4.8
Contribution
Pan-Western Shareholder 71,253 60.0
Loan Proceeds
Total Sources of Funds $118,755 100.0%
Uses
Construction Costs $78,555 66.2%
-- Harbin EPC Contract 64,739 54.6
-- Transmission Line 10,084 8.5
Project Loan
-- Steam & Heat Network 2,912 2.4
-- Builder's Risk Insurance 819 0.7
Land & Well Costs 5,740 4.8
Engineering Costs 1,950 1.6
Interest During 13,330 11.2
Construction
Financing & Legal Costs 4,351 3.7
Project Management Costs 3,700 3.1
Fuel, Spare Parts & Other 2,750 2.3
Equip.
Reserves & Contingency 8,380 7.1
Total Uses of Funds $118,755 100.0%
</TABLE>
Most project costs listed above are US dollar
denominated, however, for steam and heat network, land and
water use rights, and transmission line which are
denominated in RMB, an exchange rate of US $1 = RMB 8.30 was
used.
___________________________________________________________
12.6.2 Shareholder Loan Assumptions
The Pan-Western Shareholder Loans, $71.3 million in
total, were amortized by a variable method in this
financial analysis. The loan is amortized over the
debt term of 10 year at the annual interest rate of
13.89%. The total principal and interest payment each
year is approximately $13.5 million. Other assumptions
used in the Financial Plan include:
- Debtors
JV1 - Tangshan Panda Heat and Power Co., Ltd.
JV2 - Tangshan Pan-Western Heat and Power Co., Ltd.
JV3 - Tangshan Cayman Heat and Power Co., Ltd.
JV4 - Tangshan Pan-Sino Heat Co., Ltd.
- Aggregate Principal Amount
$71,253,000, payable semi-annually
- Interest Rate
13.89% per annum
- Maturity
2009
12.6.3 Repayment of Pan-Western Shareholder Loans
The repayment of the $71.3 million Shareholder Loans is
the obligation of the four joint venture companies that
make up the Project. The four joint venture companies
are required, under their shareholder loan agreements,
to distribute their cash flow available for debt
service to the repayment of the annual principal and
interest payment of approximately $13.5 million.
12.7 CONSOLIDATED OPERATING RESULTS -- BASE CASE
We have reviewed the estimates and projections of the
operating capabilities of the Plant, the estimates of
capital and operating costs for the Project, the estimated
debt service requirements, and the estimated depreciation
and taxes payable by the JV Cos. On the basis of such
data, we have compiled a pro forma summary table (Exhibit 12-
1) to project the consolidated operating results of the four
joint venture companies as in the base case. The results of
sensitivity analysis will be summarized and presented in
Section 12.8. An exchange rate of US $1 = RMB 8.50 was used
consistently throughout the projections.
12.7.1 Operating Revenues
The annual electric energy output is assumed to be
546,877 MWh, which is conservatively assumed to remain
constant throughout the contract period. We believe
this output is achievable and that there is a
possibility that the annual output might exceed this
level, since the Plant can sell more power to the NCPGC
to meet high demand during the peak period without any
penalty, and the Joint Venture Companies expect the
Plant to incur less than 55 days of overhaul outage
each year. The pre-VAT unit sale price of 7.4 US cents
per kilowatt hour in 1999 gradually increases to 11.1
cents per kilowatt hour in 2009 and to 12.4 cents in
2018. The annual electric energy revenue thus grows
from $42.9 million in 2000, to $60.7 million in 2009,
and to $67.7 million in 2018.
The heat energy operating revenue is determined by the
amount of steam and heat to be delivered by the Plant
to the local thermal energy users. Based on the design
capacity of the Plant as presented in the Feasibility
Study by the Hebei Electric Power Design Institute (see
Section 12.1.2), this financial analysis
conservatively assumes that the annual output would be
about 350,000 metric tons of industrial steam and
131,400 metric tons of district heat. We believe these
output levels are reasonable based on the assumed
annual electric energy output assumptions listed above.
Both output levels also conservatively remain constant
throughout the operating period. At the sale prices of
$6.55 per ton for steam and $6.07 per ton for district
heat in 1999, the total annual thermal energy revenue
is estimated at $3.2 million in 2000, $4.4 million in
2009, and $5.3 million in 2018.
The operating revenues also include the transmission
loan interest payments from the NCPGC at an estimated
interest rate of 12.0% per year. The total interest
payment from the transmission loan over its ten-year
term is about $9.4 million.
The on-shore reserves are conservatively assumed to
earn interest revenues at a reinvestment rate of 5
percent per annum. The on-shore interest earning
accounts include the overhaul reserve, Chinese Employee
Welfare Reserve, Chinese General Reserve, Chinese
Enterprise Reserve, and the un-distributable cash
account. The total interest earnings from on-shore
reserves is about $20.9 million.
The total operating revenue estimated for the contract
period is about $1,265 million.
12.7.2 Operating Expenses
The operating expenses assumed for the Plant's
operation include the costs to deliver coal, water
costs for both water usage and water treatment,
supplies and spare parts, utilities, labor,
administration costs, and real estate and stamp taxes.
The cost categories are affected by the projected
annual increases in Chinese CPI and coal escalation
factors from 1999 to 2019 as presented in Section
12.2.1. Exhibit 12-1 shows that the annual total
operating expenses will be about $19.4 million in 2000,
$31.8 million in 2009, and $44.7 million in 2018. In
each year, 50 percent or more of the annual operating
cost is required to purchase and deliver the coal. The
next biggest item of expense is the labor and
management cost. We believe these operating expense
assumptions are reasonable.
The total operating expenses estimated for the contract
period is about $642.0 million.
12.7.3 Depreciation and Taxes
As estimated by the Joint Venture Companies, the
depreciable basis for the Project is 90% of $102.7
million of equipment, buildings and depreciable land
(built-upon land that is allowed for depreciation by
Chinese laws), accounting for approximately 86% of the
total project cost. Book depreciation is straight-line
method over the 20-year period, with an assumption that
buildings and land will depreciate on a 20-year basis,
and the equipment will depreciate on a twelve-year
basis. The annual depreciation, a deductible expense
for tax purposes, is approximately $7 million to $8
million from 2000 to 2011, $5 million in 2012, and $2
million to $1 million from 2013 to 2018. The
depreciation schedule and taxes payable to the local
and federal government as reflected in the pro forma
was estimated by the Joint Venture Companies based on
the advice of their Chinese accounting and legal
counsels. The advisors had provided a separate report
to the Joint Venture Companies on current Chinese laws
and regulations applicable to a Sino-foreign venture
such as the Project.
12.7.4 Discussion of Debt Coverage Ratios
To calculate the Pan-Western Shareholder Loan debt
service coverage ratios, Exhibit 12-1 presents the
income statement and cash flow statement for the
Project during the payment period of the Shareholder
Loans. The net income after tax will fund the Chinese
Employee Welfare Reserve, the Chinese General Reserve,
and the Chinese Enterprise Expansion Reserve, as
required by the Chinese Joint Venture law. This
financial analysis also assumes that NCPGC will meet
the requirements of the Interconnection and Loan
Agreements and pay to the Joint Venture Companies the
annual principal payments on the Transmission Project
Loan. The total after-tax cash flow available for
debt service increases from $28.7 million in 2000 to
$30.3 million in 2008.
On the basis of our financial analyses of the proposed
Project and the assumptions set forth in this Report,
we are of the opinion that, in the base case, the
projected operating revenues are adequate to pay the
projected operating and maintenance expenses and to
provide an average of 2.19 and minimum of 2.02 after-
tax annual debt service coverage for the Shareholder
Loans during the payment period. The lowest coverage
ratio of 2.02 occurs in the first year of repayment
period.
12.7.5 Distribution to Pan-Western Equity Account
After the payments of debt services and funding for
overhaul reserve, the Joint Venture Companies
calculated the un-distributable cash flow, which
reflects the difference between Net Distributable
Earnings and Net Cash Flow, plus interest and reserve
income from the off-shore debt service reserve account.
The remaining cash flow after adjustment for the un-
distributable cash flow is cash flow distributable to
equity accounts. As shown in Exhibit 12-1, cash flow
to Pan-Western equity account totals $321.6 million for
the contract period.
12.8 SUMMARY OF SENSITIVITY ANALYSIS
Five sensitivity cases were run in order to test the
viability of the Project under operating assumptions
different from the base case. Case I assumes the Plant
would generate 102 MW, instead of 106 MW of net output.
Case II assumes an annual devaluation of 5 percent for RMB
throughout the contract period. Case III assumes a higher
annual Chinese CPI change rates, and Case IV assumes a lower
Chinese CPI change rates throughout the contract period.
Case V assumes a higher coal escalation factor throughout
the contract period. As shown in the following table,
changes in the selected operating assumptions did not yield
minimum and average debt coverage ratios significantly
different from that in the base case.
SUMMARY OF SENSITIVITY ANALYSIS
Minimum Debt Average Debt
Coverage Coverage
Base Case 2.02 2.19
Case I 102 MW net output 1.98 2.15
(base case: 106 MW)
Case II RMB devaluation = 5 percent / year 2.01 2.20
(base case: 0 percent)
Case III Higher Chinese CPI change per year: 2.12 2.64
20% from 1995 to 2018
Case IV Lower Chinese CPI change per year: 1.95 2.02
0% from 1995 to 2018
Case V Coal escalation factors: 20% from 2.02 2.19
1995 to 2018
12.9 INDIVIDUAL JOINT VENTURE COMPANIES OPERATING RESULTS -- BASE CASE
For information purposes this section highlights the
business make-up and operating results of the four joint
venture companies. It should be noted that the assumptions
and the consolidated pro forma presented in previous
sections should be regarded as the best financial indicators
for the Project as a whole, since the payment and
performance obligations of each joint venture company under
their shareholder loan agreement will be cross-guaranteed by
the other joint venture companies.
The joint venture companies' share of the Project's scope of
business and asset ownership is reflected in the following
chart:
Scope of Business Assets
JV1 Unit 1 thermal system , -- Boiler, precipitator & other
manufacturing and sale of ancillary equipment. Steam
electricity, sale of its turbine, generator, transformer
products & services at a & switch gear, control system,
profit, 1 x 50 MW. coal handling system.
JV2 Unit 2 thermal system , -- Boiler, precipitator & other
manufacturing and sale of ancillary, equipment. Steam
electricity, sale of its turbine, generator, transformer
products & services at a & switch gear, control system,
profit, 1 x 50 MW. coal handling system.
JV3 Manufacture & sell hot water -- Water wells & water supply
and steam to local heat system, water storage systems,
network. Construction, water treatment systems,
management and operation of a steam/water handling &
water supply system and steam condensing system, cooling
and heat production facility. towers, commercial steam
Sale of its products & services production system.
at a profit.
JV4 Distribution & sale of hot -- Local steam and hot water
water & steam to industrial & distribution system, land,
commercial markets. social buildings, investment,
Construction, management & offsite ash-disposal land and
operation of local steam and ash slurry pipeline.
hot water network. Sale of its
products and services at a
profit.
Each individual joint venture company's cash flow and income
statements are presented in Exhibits 12-2 to 12-5. JV1 and
JV2 in total collect 100% of electricity sales revenue. JV3
collects 50% of thermal energy sales revenue, while JV4
receives 50% of thermal energy revenue and 100% of the
transmission line loan repayment from NCPGC. Each company
also received 25% of the interest earnings on the on-shore
reserves.
The four companies are responsible for the operating
expenses that correspond to their share of business scope
and assets. Each company distributes net cash available,
after paying all applicable expenses and taxes, for the
repayment of the senior debt. After the debt service
payment the remaining cash will become available for equity
accounts.
_______________________________
1 Based on an exchange rate of US $1 = 8.50 RMB.
2 "Energy in China", James P. Dorian, Financial Times Energy
Publishing, 1995.
3 "Financing China's Electricity", JS Adams, AMCD (Publishers)
Ltd., England, 1996
4 "Financing China's Electricity", JS Adams, AMCD (Publishers)
Ltd., England, 1996
1 EXHIBIT 12-1
<TABLE>
<CAPTION>
2 CONSOLIDATED INCOME/
3 CASH FLOW STATEMENTS 1 2 3 4 5 6
4 -- BASE CASE UNITS 1999 2000 2001 2002 2003 2004
5 (5 months)
<S> <C> <C> <C> <C> <C> <C> <C>
6 PERFORMANCE
7 Net Electrical Output kw hrs/y 227,865,500 546,877,200 546,877,200 546,877,200 546,877,200 546,877,200
8 Net Steam Production tons/yr 145,700 349,680 349,680 349,680 349,680 349,680
9 Net Hot Water Production tons/yr 54,750 131,400 131,400 131,400 131,400 131,400
10
11 PRICING
12 Pre-VAT Electric Energy Price US$/kw h 0.074 0.078 0.083 0.087 0.091 0.094
13 Steam Price US$/ton 6.552 6.879 7.223 7.584 7.963 8.202
14 Hot Water Price US$/ton 6.065 6.369 6.687 7.021 7.373 7.594
15
16 REVENUES
17 Electric Energy Revenue 16,751,240 42,867,885 45,635,533 47,691,675 49,618,451 51,363,730
18 Steam Revenue 954,565 2,405,504 2,525,779 2,652,068 2,784,671 2,868,212
19 Hot Water Revenue 332,079 836,840 878,682 922,616 968,747 997,809
20 T-Line Interest Payments from NCPGC 609,444 1,427,937 1,340,421 1,242,403 1,132,622 1,009,668
21 Interest Income (On-shore Reserves) 0 92,694 262,613 410,447 570,687 652,861
22 TOTAL OPERATING REVENUES US $ 18,647,329 47,630,860 50,643,028 52,919,209 55,075,178 56,892,280
23
24 OPERATING EXPENSES
25 Coal Delivered 3,978,244 10,502,565 11,552,822 12,708,104 13,978,914 14,538,071
26 Water Usage 139,831 369,154 406,069 446,676 491,344 520,824
27 Supplies, Spare Parts, Consumable 610,042 1,610,510 1,771,561 1,948,717 2,143,589 2,272,204
28 Utilities 129,185 341,049 375,154 412,670 453,936 481,173
29 Project Management Fees & Expenses 351,722 869,456 895,539 922,405 950,078 978,580
30 Other Labor & Management Costs 1,170,747 2,993,804 3,193,306 3,409,763 3,644,779 3,816,692
31 Administrative Costs 993,056 2,514,639 2,655,863 2,807,901 2,971,738 3,098,415
32 Real Estate Tax 53,992 129,580 129,580 129,580 129,580 129,580
33 Stamp Tax 6,605 16,984 18,178 19,192 20,205 20,930
34 TOTAL OPERATING EXPENSES US $ 7,433,423 19,347,740 20,998,072 22,805,009 24,784,163 25,856,470
35
36 INCOME STATEMENT
37 EBITDA 11,213,905 28,283,120 29,644,956 30,114,200 30,291,015 31,035,810
38 - Depreciation 3,013,732 7,256,393 7,312,643 7,345,456 7,376,706 7,449,417
39 - Interest on Shareholder Loan 4,123,438 9,552,356 8,982,045 8,334,616 7,599,642 6,765,283
40 EBT (PRE-TAX INCOME) 4,076,736 11,474,371 13,350,267 14,434,127 15,314,667 16,821,110
41 - Local Income Taxes (Luannan) 0 0 7,287 9,697 12,352 266,706
42 - Federal Income Taxes (China) 25,451 99,978 1,110,573 1,228,020 1,333,873 2,667,060
43 NET INCOME 4,051,285 11,374,393 12,232,407 13,196,410 13,968,442 13,887,344
44 - Employee Welfare Res. (on-shore) 59,355 156,698 172,368 189,605 208,565 221,079
45 - General Reserve (on-shore) 2,451 5,882 5,882 5,882 5,882 5,882
46 - E'prise Exp. Reserve (on-shore) 2,451 5,882 5,882 5,882 5,882 5,882
47 NET DISTRIBUTABLE EARNINGS US $ 3,987,028 11,205,930 12,048,275 12,995,041 13,748,112 13,654,501
48
49 CASH FLOW STATEMENT
50 Net Distributable Earnings 3,987,028 11,205,930 12,048,275 12,995,041 13,748,112 13,654,501
51 + Depreciation 3,013,732 7,256,393 7,312,643 7,345,456 7,376,706 7,449,417
52 + Interest on Shareholder Loan 4,123,438 9,552,356 8,982,045 8,334,616 7,599,642 6,765,283
53 + T-Line Principal Payments from NCPGC 289,406 729,302 816,818 914,836 1,024,617 1,147,571
54 NET CASH AVAILABLE FOR SHAREHOLDER LOAN 11,413,603 28,743,981 29,159,781 29,589,949 29,749,076 29,016,771
55 - Interest on Shareholder Loan 4,123,438 9,552,356 8,982,045 8,334,616 7,599,642 6,765,283
56 - Principal of Shareholder Loan 1,513,522 3,976,085 4,513,736 5,124,088 5,816,974 6,603,550
57 CASH FLOW AFTER SHAREHOLDER LOAN 5,776,643 15,215,540 15,664,000 16,131,245 16,332,461 15,647,939
58 +/- Debt Service Reserve (Off-Shore) 0 0 0 0 0 0
59 +/- Overhaul Reserve (on-shore) (1,087,500) (1,165,800) (1,249,738) (996,962) (1,000,000) (926,768)
60 NET CASH FLOW 4,689,143 14,049,740 14,414,263 15,134,283 15,332,461 14,721,170
61 UNDISTRIBUTABLE CASH FLOW (702,115) (2,843,810) (2,365,988) (2,139,242) (1,584,348) (1,066,670)
62 PAN-WESTERN DISTRIBUTION US $ 3,505,234 9,851,801 10,592,356 11,424,715 12,086,785 12,004,485
63 LUANNAN COUNTY DISTRIBUTION US $ 481,794 1,354,129 1,455,918 1,570,326 1,661,327 1,650,015
64
65 AFTER-TAX SHAREHOLDER LOAN COVERAGE
66 Debt service Coverage Ratio (DSCR) 2.02 2.12 2.16 2.20 2.22 2.17
67 Minimum DSCR 2.02
68 Average DSCR 2.19
<PAGE>
1 EXHIBIT 12-1 (Continued)
2 CONSOLIDATED INCOME/
3 CASH FLOW STATEMENTS 7 8 9 10 11 12
4 -- BASE CASE UNITS 2005 2006 2007 2008 2009 2010
5
6 PERFORMANCE
7 Net Electrical Output kw hrs/y 546,877,200 546,877,200 546,877,200 546,877,200 546,877,200 546,877,200
8 Net Steam Production tons/yr 349,680 349,680 349,680 349,680 349,680 349,680
9 Net Hot Water Production tons/yr 131,400 131,400 131,400 131,400 131,400 131,400
10
11 PRICING
12 Pre-VAT Electric Energy Price US$/kw h 0.096 0.099 0.102 0.106 0.111 0.114
13 Steam Price US$/ton 8.448 8.702 8.963 9.232 9.416 9.605
14 Hot Water Price US$/ton 7.821 8.056 8.298 8.547 8.718 8.892
15
16 REVENUES
17 Electric Energy Revenue 52,490,315 53,972,291 55,835,920 57,978,501 60,732,794 62,118,770
18 Steam Revenue 2,954,258 3,042,886 3,134,172 3,228,197 3,292,761 3,358,617
19 Hot Water Revenue 1,027,744 1,058,576 1,090,333 1,123,043 1,145,504 1,168,414
20 T-Line Interest Payments from NCPGC 871,960 717,726 544,985 351,514 134,827 0
21 Interest Income (On-shore Reserves) 708,593 726,564 702,898 831,817 762,081 797,495
22 TOTAL OPERATING REVENUES US $ 58,052,869 59,518,043 61,308,309 63,513,072 66,067,968 67,443,296
23
24 OPERATING EXPENSES
25 Coal Delivered 15,119,594 15,724,378 16,353,353 17,007,487 17,687,786 18,395,298
26 Water Usage 552,074 585,198 620,310 657,529 683,830 711,183
27 Supplies, Spare Parts, Consumable 2,408,536 2,553,049 2,706,231 2,868,605 2,983,350 3,102,684
28 Utilities 510,043 540,646 573,084 607,469 631,768 657,039
29 Project Management Fees & Expenses 1,007,937 1,038,175 1,069,321 1,101,400 1,134,442 1,168,476
30 Other Labor & Management Costs 3,997,517 4,187,745 4,387,899 4,598,529 4,764,395 4,936,354
31 Administrative Costs 3,231,145 3,370,243 3,516,043 3,668,900 3,795,706 3,926,986
32 Real Estate Tax 129,580 129,580 129,580 129,580 129,580 129,580
33 Stamp Tax 21,478 22,139 22,924 23,801 24,858 25,512
34 TOTAL OPERATING EXPENSES US $ 26,977,904 28,151,153 29,378,746 30,663,300 31,835,715 33,053,111
35
36 INCOME STATEMENT
37 EBITDA 31,074,966 31,366,890 31,929,563 32,849,772 34,232,253 34,390,184
38 - Depreciation 7,521,010 7,597,012 7,676,663 7,724,401 7,760,137 7,847,617
39 - Interest on Shareholder Loan 5,818,101 4,742,840 3,522,181 2,136,463 572,814 0
40 EBT (PRE-TAX INCOME) 17,735,855 19,027,038 20,730,719 22,988,907 25,899,302 26,542,567
41 - Local Income Taxes (Luannan) 282,583 304,204 332,133 369,316 776,979 796,277
42 - Federal Income Taxes (China) 2,825,826 3,042,039 3,321,328 3,693,165 4,156,112 4,257,354
43 NET INCOME 14,627,446 15,680,795 17,077,258 18,926,426 20,966,211 21,488,936
44 - Employee Welfare Res. (on-shore) 234,344 248,404 263,309 279,107 290,272 301,882
45 - General Reserve (on-shore) 5,882 5,882 5,882 5,882 5,882 5,882
46 - E'prise Exp. Reserve (on-shore) 5,882 5,882 5,882 5,882 5,882 5,882
47 NET DISTRIBUTABLE EARNINGS US $ 14,381,338 15,420,625 16,802,184 18,635,554 20,664,175 21,175,289
48
49 CASH FLOW STATEMENT
50 Net Distributable Earnings 14,381,338 15,420,625 16,802,184 18,635,554 20,664,175 21,175,289
51 + Depreciation 7,521,010 7,597,012 7,676,663 7,724,401 7,760,137 7,847,617
52 + Interest on Shareholder Loan 5,818,101 4,742,840 3,522,181 2,136,463 572,814 0
53 + T-Line Principal Payments from NCPGC 1,285,279 1,439,513 1,612,254 1,805,725 1,123,562 0
54 NET CASH AVAILABLE FOR SHAREHOLDER LOAN 29,005,728 29,199,990 29,613,283 30,302,143 17,570,401 29,022,906
55 - Interest on Shareholder Loan 5,818,101 4,742,840 3,522,181 2,136,463 572,814 0
56 - Principal of Shareholder Loan 7,496,490 8,510,173 9,660,929 10,967,290 7,070,163 0
57 CASH FLOW AFTER SHAREHOLDER LOAN 15,691,137 15,946,978 16,430,172 17,198,390 9,927,424 29,022,906
58 +/- Debt Service Reserve (Off-Shore) 0 0 4,000,000 0 0 0
59 +/- Overhaul Reserve (on-shore) (993,495) (1,041,183) (1,091,160) (0) (1,143,536) (1,198,425)
60 NET CASH FLOW 14,697,642 14,905,794 19,339,012 17,198,390 8,783,888 27,824,481
61 UNDISTRIBUTABLE CASH FLOW (316,304) 514,831 (2,536,828) 1,437,164 (670,000) (6,649,192)
62 PAN-WESTERN DISTRIBUTION US $ 12,643,491 13,557,191 14,771,802 16,383,626 18,167,108 18,616,458
63 LUANNAN COUNTY DISTRIBUTION US $ 1,737,847 1,863,435 2,030,383 2,251,928 2,497,067 2,558,830
64
65 AFTER-TAX SHAREHOLDER LOAN COVERAGE
66 Debt service Coverage Ratio (DSCR) 2.18 2.20 2.25 2.31 2.30
67 Minimum DSCR 2.02
68 Average DSCR 2.19
<PAGE>
1 EXHIBIT 12-1 (Continued)
2 CONSOLIDATED INCOME/
3 CASH FLOW STATEMENTS 13 14 15 16 17 18
4 -- BASE CASE UNITS 2011 2012 2013 2014 2015 2016
5
6 PERFORMANCE
7 Net Electrical Output kw hrs/y 546,877,200 546,877,200 546,877,200 546,877,200 546,877,200 546,877,200
8 Net Steam Production tons/yr 349,680 349,680 349,680 349,680 349,680 349,680
9 Net Hot Water Production tons/yr 131,400 131,400 131,400 131,400 131,400 131,400
10
11 PRICING
12 Pre-VAT Electric Energy Price US$/kw h 0.108 0.111 0.113 0.116 0.118 0.121
13 Steam Price US$/ton 9.797 9.993 10.193 10.397 10.605 10.817
14 Hot Water Price US$/ton 9.070 9.251 9.436 9.625 9.818 10.014
15
16 REVENUES
17 Electric Energy Revenue 59,024,783 60,526,304 61,982,143 63,394,575 64,765,964 66,098,766
18 Steam Revenue 3,425,789 3,494,305 3,564,191 3,635,475 3,708,184 3,782,348
19 Hot Water Revenue 1,191,782 1,215,618 1,239,930 1,264,729 1,290,024 1,315,824
20 T-Line Interest Payments from NCPGC 0 0 0 0 0 0
21 Interest Income (On-shore Reserves) 1,131,786 1,467,767 1,673,718 1,695,550 1,786,134 1,807,558
22 TOTAL OPERATING REVENUES US $ 64,774,140 66,703,993 68,459,982 69,990,329 71,550,305 73,004,496
23
24 OPERATING EXPENSES
25 Coal Delivered 19,131,110 19,896,354 20,692,208 21,519,896 22,380,692 23,275,920
26 Water Usage 739,631 769,216 799,984 831,984 865,263 899,874
27 Supplies, Spare Parts, Consumable 3,226,791 3,355,863 3,490,097 3,629,701 3,774,889 3,925,885
28 Utilities 683,320 710,653 739,079 768,643 799,388 831,364
29 Project Management Fees & Expenses 1,203,530 1,239,636 1,276,825 1,315,130 1,354,583 1,395,221
30 Other Labor & Management Costs 5,114,633 5,299,468 5,491,104 5,689,794 5,895,804 6,109,407
31 Administrative Costs 4,062,900 4,203,617 4,349,308 4,500,153 4,656,337 4,818,055
32 Real Estate Tax 129,580 129,580 129,580 129,580 129,580 129,580
33 Stamp Tax 24,832 25,540 26,244 26,944 27,643 28,342
34 TOTAL OPERATING EXPENSES US $ 34,316,327 35,629,926 36,994,428 38,411,825 39,884,181 41,413,647
35
36 INCOME STATEMENT
37 EBITDA 30,457,813 31,074,068 31,465,554 31,578,505 31,666,124 31,590,849
38 - Depreciation 7,939,297 5,383,615 1,747,421 1,773,584 1,785,975 1,819,575
39 - Interest on Shareholder Loan 0 0 0 0 0 0
40 EBT (PRE-TAX INCOME) 22,518,517 25,690,453 29,718,133 29,804,921 29,880,149 29,771,274
41 - Local Income Taxes (Luannan) 675,555 770,714 891,544 894,148 896,404 893,138
42 - Federal Income Taxes (China) 3,668,418 4,194,684 4,859,044 4,875,943 4,893,891 4,881,361
43 NET INCOME 18,174,543 20,725,055 23,967,545 24,034,830 24,089,853 23,996,775
44 - Employee Welfare Res. (on-shore) 313,958 326,516 339,577 353,160 367,286 381,978
45 - General Reserve (on-shore) 5,882 5,882 5,882 5,882 5,882 5,882
46 - E'prise Exp. Reserve (on-shore) 5,882 5,882 5,882 5,882 5,882 5,882
47 NET DISTRIBUTABLE EARNINGS US $ 17,848,820 20,386,774 23,616,204 23,669,906 23,710,802 23,603,033
48
49 CASH FLOW STATEMENT
50 Net Distributable Earnings 17,848,820 20,386,774 23,616,204 23,669,906 23,710,802 23,603,033
51 + Depreciation 7,939,297 5,383,615 1,747,421 1,773,584 1,785,975 1,819,575
52 + Interest on Shareholder Loan 0 0 0 0 0 0
53 + T-Line Principal Payments from NCPGC 0 0 0 0 0 0
54 NET CASH AVAILABLE FOR SHAREHOLDER LOAN 25,788,117 25,770,389 25,363,625 25,443,490 25,496,778 25,422,608
55 - Interest on Shareholder Loan 0 0 0 0 0 0
56 - Principal of Shareholder Loan 0 0 0 0 0 0
57 CASH FLOW AFTER SHAREHOLDER LOAN 25,788,117 25,770,389 25,363,625 25,443,490 25,496,778 25,422,608
58 +/- Debt Service Reserve (Off-Shore) 0 0 0 0 0 0
59 +/- Overhaul Reserve (on-shore) (1,255,950) (1,301,164) (1,348,006) (0) (1,396,534) (1,446,809)
60 NET CASH FLOW 24,532,167 24,469,225 24,015,619 25,443,490 24,100,244 23,975,798
61 UNDISTRIBUTABLE CASH FLOW (6,683,347) (4,082,451) (399,415) (1,773,584) (389,441) (372,766)
62 PAN-WESTERN DISTRIBUTION US $ 15,691,962 17,923,228 20,762,412 20,809,625 20,845,580 20,750,833
63 LUANNAN COUNTY DISTRIBUTION US $ 2,156,859 2,463,546 2,853,791 2,860,281 2,865,223 2,852,200
64
65 AFTER-TAX SHAREHOLDER LOAN COVERAGE
66 Debt service Coverage Ratio (DSCR)
67 Minimum DSCR 2.02
68 Average DSCR 2.19
<PAGE>
1 EXHIBIT 12-1 (Continued)
2 CONSOLIDATED INCOME/
3 CASH FLOW STATEMENTS 19 20 21
4 -- BASE CASE UNITS 2017 2018 2019 Total
5 (7 months)
6 PERFORMANCE
7 Net Electrical Output kw hrs/y 546,877,200 546,877,200 319,011,700 10,937,544,000
8 Net Steam Production tons/yr 349,680 349,680 203,980 6,993,600
9 Net Hot Water Production tons/yr 131,400 131,400 76,650 2,628,000
10
11 PRICING
12 Pre-VAT Electric Energy Price US$/kw h 0.122 0.124 0.124 n/a
13 Steam Price US$/ton 11.033 11.254 11.254 n/a
14 Hot Water Price US$/ton 10.214 10.418 10.418 n/a
15
16 REVENUES
17 Electric Energy Revenue 66,870,713 67,713,091 39,499,303 1,146,932,749
18 Steam Revenue 3,857,995 3,935,155 2,295,507 64,900,636
19 Hot Water Revenue 1,342,140 1,368,983 798,574 22,577,991
20 T-Line Interest Payments from NCPGC 0 0 0 9,383,509
21 Interest Income (On-shore Reserves) 1,828,201 1,849,776 1,092,460 20,851,700
22 TOTAL OPERATING REVENUES US $ 73,899,050 74,867,004 43,685,843 1,264,646,585
23
24 OPERATING EXPENSES
25 Coal Delivered 24,206,957 25,175,235 14,685,554 358,510,541
26 Water Usage 935,869 973,303 590,471 13,589,617
27 Supplies, Spare Parts, Consumable 4,082,920 4,246,237 2,576,050 59,287,510
28 Utilities 864,618 899,203 545,517 12,555,002
29 Project Management Fees & Expenses 1,437,078 1,480,190 889,347 23,079,070
30 Other Labor & Management Costs 6,330,887 6,560,539 3,923,382 95,516,551
31 Administrative Costs 4,985,506 5,158,896 3,067,171 76,352,576
32 Real Estate Tax 129,580 129,580 75,588 2,591,599
33 Stamp Tax 28,883 29,458 17,184 477,877
34 TOTAL OPERATING EXPENSES US $ 43,002,297 44,652,641 26,370,264 641,960,343
35
36 INCOME STATEMENT
37 EBITDA 30,896,753 30,214,364 17,315,579 622,686,242
38 - Depreciation 1,889,167 1,970,734 1,149,595 111,340,150
39 - Interest on Shareholder Loan 0 0 0 62,149,779
40 EBT (PRE-TAX INCOME) 29,007,585 28,243,630 16,165,985 449,196,313
41 - Local Income Taxes (Luannan) 870,228 847,309 484,980 10,381,553
42 - Federal Income Taxes (China) 4,770,111 4,658,709 2,424,898 66,987,838
43 NET INCOME 23,367,246 22,737,612 13,256,107 371,826,922
44 - Employee Welfare Res. (on-shore) 397,257 413,147 250,642 5,768,509
45 - General Reserve (on-shore) 5,882 5,882 3,431 117,647
46 - E'prise Exp. Reserve (on-shore) 5,882 5,882 3,431 117,647
47 NET DISTRIBUTABLE EARNINGS US $ 22,958,225 22,312,701 12,998,602 365,823,119
48
49 CASH FLOW STATEMENT
50 Net Distributable Earnings 22,958,225 22,312,701 12,998,602 365,823,119
51 + Depreciation 1,889,167 1,970,734 1,149,595 111,340,150
52 + Interest on Shareholder Loan 0 0 0 62,149,779
53 + T-Line Principal Payments from NCPGC 0 0 0 12,188,882
54 NET CASH AVAILABLE FOR SHAREHOLDER LOAN 24,847,392 24,283,434 14,148,197 538,951,644
55 - Interest on Shareholder Loan 0 0 0 62,149,779
56 - Principal of Shareholder Loan 0 0 0 71,253,000
57 CASH FLOW AFTER SHAREHOLDER LOAN 24,847,392 24,283,434 14,148,197 405,548,865
58 +/- Debt Service Reserve (Off-Shore) 0 0 0 4,000,000
59 +/- Overhaul Reserve (on-shore) (1,498,894) 1,447,145 0 (18,694,780)
60 NET CASH FLOW 23,348,498 25,730,580 14,148,197 390,854,085
61 UNDISTRIBUTABLE CASH FLOW (390,273) (3,417,879) (1,149,595) (37,581,253)
62 PAN-WESTERN DISTRIBUTION US $ 20,183,944 19,616,425 11,427,846 321,616,907
63 LUANNAN COUNTY DISTRIBUTION US $ 2,774,281 2,696,276 1,570,756 44,206,212
64
65 AFTER-TAX SHAREHOLDER LOAN COVERAGE
66 Debt service Coverage Ratio (DSCR) n/a
67 Minimum DSCR 2.02
68 Average DSCR 2.19
</TABLE>
1 EXHIBIT 12-2
<TABLE>
<CAPTION>
2 JV1 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 1 2 3 4 5 6
4 % OF 1999 2000 2001 2002 2003 2004
5 TOTAL (5 months)
<S> <C> <C> <C> <C> <C> <C> <C>
6 REVENUES
7 Electric Energy Revenue 50% 8,375,620 21,433,943 22,817,766 23,845,837 24,809,225 25,681,865
8 Steam Revenue 0% 0 0 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 0 23,173 65,653 102,612 142,672 163,215
12 TOTAL OPERATING REVENUES 8,375,620 21,457,116 22,883,420 23,948,449 24,951,897 25,845,080
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 1,989,122 5,251,283 5,776,411 6,354,052 6,989,457 7,269,035
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 203,347 536,837 590,520 649,572 714,530 757,401
18 Utilities 45% 58,133 153,472 168,819 185,701 204,271 216,528
19 Project Management Fees 30% 105,516 260,837 268,662 276,722 285,023 293,574
20 Other Labor & Management 30% 371,009 950,374 1,015,448 1,086,131 1,162,956 1,218,701
21 Administrative Costs 30% 297,917 754,392 796,759 842,370 891,521 929,525
22 Real Estate and Stamp Taxes 40% 24,239 58,626 59,103 59,509 59,914 60,204
23 TOTAL OPERATING EXPENSES 3,049,284 7,965,819 8,675,722 9,454,057 10,307,672 10,744,968
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (754,653) (1,777,426) (1,723,315) (1,658,588) (1,584,472) (1,504,289)
27 Water Usage Payment (to JV 3) (565,270) (1,452,849) (1,557,487) (1,671,369) (1,795,384) (1,884,071)
28 Site Lease Payment (to JV 4) (111,111) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL (1,431,034) (3,496,941) (3,547,468) (3,596,624) (3,646,522) (3,655,027)
30
31 INCOME STATEMENT
32 EBITDA 3,895,302 9,994,356 10,660,230 10,897,768 10,997,703 11,445,085
33 - Depreciation 33% 994,531 2,394,610 2,413,172 2,424,000 2,434,313 2,458,308
34 - Interest on S/H Loan 1,034,722 2,397,038 2,253,926 2,091,462 1,907,030 1,697,658
35 EBT (Pre-tax Income) 1,866,048 5,202,708 5,993,132 6,382,306 6,656,360 7,289,119
36 - Local Income Taxes (Luannan) 0 0 0 0 0 109,337
37 - Federal Income Taxes (China) 0 0 449,485 478,673 499,227 1,093,368
38 Net Income 1,866,048 5,202,708 5,543,647 5,903,633 6,157,133 6,086,415
39 - Employee Welfare Res. (on-shore) 40% 23,742 62,679 68,947 75,842 83,426 88,432
40 - General Reserve (on-shore) 40% 980 2,353 2,353 2,353 2,353 2,353
41 - E'prise Exp. Reserve (on-shore) 40% 980 2,353 2,353 2,353 2,353 2,353
42 NET DISTRIBUTABLE EARNINGS 1,840,346 5,135,323 5,469,994 5,823,085 6,069,001 5,993,277
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 1,840,346 5,135,323 5,469,994 5,823,085 6,069,001 5,993,277
46 + Depreciation 33% 994,531 2,394,610 2,413,172 2,424,000 2,434,313 2,458,308
47 + Interest on S/H Loan 1,034,722 2,397,038 2,253,926 2,091,462 1,907,030 1,697,658
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 3,869,599 9,926,971 10,137,092 10,338,548 10,410,344 10,149,243
50 - Interest on S/H Loan (1,034,722) (2,397,038) (2,253,926) (2,091,462) (1,907,030) (1,697,658)
51 - Principal of S/H Loan (379,798) (997,746) (1,132,662) (1,285,822) (1,459,693) (1,657,074)
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (362,500) (388,600) (416,579) (332,321) (333,333) (308,923)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (252,233) (1,008,264) (863,931) (805,857) (641,287) (492,311)
56 PAN-WESTERN DISTRIBUTION US$ 1,617,957 4,514,769 4,808,997 5,119,421 5,335,621 5,269,047
57 LUANNAN COUNTY DISTRIBUTION US$ 222,388 620,555 660,996 703,664 733,381 724,230
<PAGE>
1 EXHIBIT 12-2 (Continued)
2 JV1 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 7 8 9 10 11 12
4 % OF 2005 2006 2007 2008 2009 2010
5 TOTAL
6 REVENUES
7 Electric Energy Revenue 50% 26,245,158 26,986,145 27,917,960 28,989,250 30,366,397 31,059,385
8 Steam Revenue 0% 0 0 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 177,148 181,641 175,725 207,954 190,520 199,374
12 TOTAL OPERATING REVENUES 26,422,306 27,167,787 28,093,685 29,197,204 30,556,918 31,258,759
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 7,559,797 7,862,189 8,176,676 8,503,743 8,843,893 9,197,649
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 802,845 851,016 902,077 956,202 994,450 1,034,228
18 Utilities 45% 229,519 243,291 257,888 273,361 284,296 295,667
19 Project Management Fees 30% 302,381 311,453 320,796 330,420 340,333 350,543
20 Other Labor & Management 30% 1,277,370 1,339,125 1,404,139 1,472,594 1,526,076 1,581,534
21 Administrative Costs 30% 969,343 1,011,073 1,054,813 1,100,670 1,138,712 1,178,096
22 Real Estate and Stamp Taxes 40% 60,423 60,688 61,002 61,352 61,775 62,037
23 TOTAL OPERATING EXPENSES 11,201,679 11,678,834 12,177,392 12,698,343 13,189,534 13,699,753
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (1,412,101) (1,306,887) (1,186,742) (1,045,815) (884,866) (833,809)
27 Water Usage Payment (to JV 3) (1,977,509) (2,075,965) (2,179,722) (2,289,081) (2,373,288) (2,460,644)
28 Site Lease Payment (to JV 4) (266,667) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL (3,656,277) (3,649,519) (3,633,131) (3,601,563) (3,524,821) (3,561,120)
30
31 INCOME STATEMENT
32 EBITDA 11,564,350 11,839,434 12,283,163 12,897,299 13,842,562 13,997,886
33 - Depreciation 33% 2,481,933 2,507,014 2,533,299 2,549,052 2,560,845 2,589,714
34 - Interest on S/H Loan 1,459,976 1,190,153 883,845 536,117 143,740 0
35 EBT (Pre-tax Income) 7,622,441 8,142,267 8,866,019 9,812,129 11,137,977 11,408,172
36 - Local Income Taxes (Luannan) 114,337 122,134 132,990 147,182 334,139 342,245
37 - Federal Income Taxes (China) 1,143,366 1,221,340 1,329,903 1,471,819 1,670,697 1,711,226
38 Net Income 6,364,738 6,798,793 7,403,126 8,193,128 9,133,141 9,354,701
39 - Employee Welfare Res. (on-shore) 40% 93,738 99,362 105,323 111,643 116,109 120,753
40 - General Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
41 - E'prise Exp. Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
42 NET DISTRIBUTABLE EARNINGS 6,266,295 6,694,725 7,293,097 8,076,779 9,012,327 9,229,243
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 6,266,295 6,694,725 7,293,097 8,076,779 9,012,327 9,229,243
46 + Depreciation 33% 2,481,933 2,507,014 2,533,299 2,549,052 2,560,845 2,589,714
47 + Interest on S/H Loan 1,459,976 1,190,153 883,845 536,117 143,740 0
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 10,208,204 10,391,892 10,710,240 11,161,949 11,716,912 11,818,956
50 - Interest on S/H Loan (1,459,976) (1,190,153) (883,845) (536,117) (143,740) (0)
51 - Principal of S/H Loan (1,881,145) (2,135,516) (2,424,283) (2,752,097) (1,774,164) 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (331,165) (347,061) (363,720) (0) (381,179) (399,475)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 1,000,000 0 0 0
55 +/- Undistributable Cash Flow (269,623) (24,437) (745,296) 203,044 (405,502) (2,190,239)
56 PAN-WESTERN DISTRIBUTION US$ 5,509,073 5,885,732 6,411,796 7,100,778 7,923,274 8,113,977
57 LUANNAN COUNTY DISTRIBUTION US$ 757,222 808,993 881,301 976,001 1,089,053 1,115,265
<PAGE>
1 EXHIBIT 12-2 (Continued)
2 JV1 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 13 14 15 16 17 18
4 % OF 2011 2012 2013 2014 2015 2016
5 TOTAL
6 REVENUES
7 Electric Energy Revenue 50% 29,512,392 30,263,152 30,991,072 31,697,288 32,382,982 33,049,383
8 Steam Revenue 0% 0 0 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 282,946 366,942 418,430 423,888 446,533 451,890
12 TOTAL OPERATING REVENUES 29,795,338 30,630,094 31,409,501 32,121,175 32,829,515 33,501,273
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 9,565,555 9,948,177 10,346,104 10,759,948 11,190,346 11,637,960
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 1,075,597 1,118,621 1,163,366 1,209,900 1,258,296 1,308,628
18 Utilities 45% 307,494 319,794 332,586 345,889 359,725 374,114
19 Project Management Fees 30% 361,059 371,891 383,047 394,539 406,375 418,566
20 Other Labor & Management 30% 1,639,043 1,698,679 1,760,523 1,824,658 1,891,170 1,960,148
21 Administrative Costs 30% 1,218,870 1,261,085 1,304,792 1,350,046 1,396,901 1,445,417
22 Real Estate and Stamp Taxes 40% 61,765 62,048 62,329 62,610 62,889 63,169
23 TOTAL OPERATING EXPENSES 14,229,382 14,780,294 15,352,748 15,947,590 16,565,703 17,208,001
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (843,550) (572,009) (185,663) (188,443) (189,760) (193,330)
27 Water Usage Payment (to JV 3) (2,551,266) (2,645,278) (2,742,811) (2,843,996) (2,948,972) (3,057,884)
28 Site Lease Payment (to JV 4) (266,667) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL (3,661,483) (3,483,954) (3,195,141) (3,299,106) (3,405,399) (3,517,881)
30
31 INCOME STATEMENT
32 EBITDA 11,904,473 12,365,845 12,861,613 12,874,479 12,858,414 12,775,390
33 - Depreciation 33% 2,619,968 1,776,593 576,649 585,283 589,372 600,460
34 - Interest on S/H Loan 0 0 0 0 0 0
35 EBT (Pre-tax Income) 9,284,505 10,589,252 12,284,964 12,289,197 12,269,042 12,174,930
36 - Local Income Taxes (Luannan) 278,535 317,678 368,549 368,676 368,071 365,248
37 - Federal Income Taxes (China) 1,392,676 1,588,388 1,842,745 1,843,380 1,840,356 1,826,240
38 Net Income 7,613,294 8,683,187 10,073,670 10,077,141 10,060,614 9,983,443
39 - Employee Welfare Res. (on-shore) 40% 125,583 130,606 135,831 141,264 146,914 152,791
40 - General Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
41 - E'prise Exp. Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
42 NET DISTRIBUTABLE EARNINGS 7,483,005 8,547,874 9,933,134 9,931,172 9,908,994 9,825,946
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 7,483,005 8,547,874 9,933,134 9,931,172 9,908,994 9,825,946
46 + Depreciation 33% 2,619,968 1,776,593 576,649 585,283 589,372 600,460
47 + Interest on S/H Loan 0 0 0 0 0 0
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 10,102,973 10,324,467 10,509,783 10,516,454 10,498,366 10,426,406
50 - Interest on S/H Loan (0) (0) (0) (0) (0) (0)
51 - Principal of S/H Loan 0 0 0 0 0 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (418,650) (433,721) (449,335) (0) (465,511) (482,270)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (2,201,318) (1,342,872) (127,314) (585,283) (123,861) (118,190)
56 PAN-WESTERN DISTRIBUTION US$ 6,578,756 7,514,946 8,732,810 8,731,085 8,711,587 8,638,575
57 LUANNAN COUNTY DISTRIBUTION US$ 904,249 1,032,929 1,200,324 1,200,087 1,197,407 1,187,371
<PAGE>
1 EXHIBIT 12-2 (Continued)
2 JV1 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 19 20 21
4 % OF 2017 2018 2019 TOTAL
5 TOTAL (7 months)
6 REVENUES
7 Electric Energy Revenue 50% 33,435,357 33,856,545 19,749,652 573,466,374
8 Steam Revenue 0% 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 457,050 462,444 273,115 5,212,925
12 TOTAL OPERATING REVENUES 33,892,407 34,318,989 20,022,767 578,679,299
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 12,103,478 12,587,618 7,342,777 179,255,271
16 Water Usage 0% 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 1,360,973 1,415,412 858,683 19,762,503
18 Utilities 45% 389,078 404,641 245,482 5,649,751
19 Project Management Fees 30% 431,123 444,057 266,804 6,923,721
20 Other Labor & Management 30% 2,031,685 2,105,877 1,260,562 30,577,802
21 Administrative Costs 30% 1,495,652 1,547,669 920,151 22,905,773
22 Real Estate and Stamp Taxes 40% 63,385 63,615 37,109 1,227,790
23 TOTAL OPERATING EXPENSES 17,875,375 18,568,889 10,931,569 266,302,610
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (200,724) (209,390) (122,144) (18,377,978)
27 Water Usage Payment (to JV 3) (3,170,882) (3,288,119) (1,975,612) (47,507,458)
28 Site Lease Payment (to JV 4) (266,667) (266,667) (155,556) (5,333,333)
29 TOTAL (3,638,273) (3,764,177) (2,253,312) (71,218,769)
30
31 INCOME STATEMENT
32 EBITDA 12,378,759 11,985,923 6,837,885 241,157,920
33 - Depreciation 33% 623,425 650,342 379,366 36,742,250
34 - Interest on S/H Loan 0 0 0 15,595,667
35 EBT (Pre-tax Income) 11,755,334 11,335,581 6,458,519 188,820,004
36 - Local Income Taxes (Luannan) 352,660 340,067 193,756 4,255,604
37 - Federal Income Taxes (China) 1,763,300 1,700,337 968,778 25,835,302
38 Net Income 9,639,374 9,295,177 5,295,986 158,729,098
39 - Employee Welfare Res. (on-shore) 40% 158,903 165,259 100,257 2,307,403
40 - General Reserve (on-shore) 40% 2,353 2,353 1,373 47,059
41 - E'prise Exp. Reserve (on-shore) 40% 2,353 2,353 1,373 47,059
42 NET DISTRIBUTABLE EARNINGS 9,475,765 9,125,212 5,192,984 156,327,576
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 9,475,765 9,125,212 5,192,984 156,327,576
46 + Depreciation 33% 623,425 650,342 379,366 36,742,250
47 + Interest on S/H Loan 0 0 0 15,595,667
48 + T-Line Principal Payments 0% 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 10,099,191 9,775,554 5,572,350 208,665,493
50 - Interest on S/H Loan (0) (0) (0) (15,595,667)
51 - Principal of S/H Loan 0 0 0 (17,880,000)
52 ADJUSTMENTS 0
53 +/- Overhaul Reserve (on-shore) 33% (499,631) 482,382 0 (6,231,593)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 1,000,000
55 +/- Undistributable Cash Flow (123,794) (1,132,724) (379,366) (13,630,656)
56 PAN-WESTERN DISTRIBUTION US$ 8,330,710 8,022,518 4,565,461 $ 137,436,890
57 LUANNAN COUNTY DISTRIBUTION US$ 1,145,055 1,102,694 627,522 $ 18,890,687
</TABLE>
1 EXHIBIT 12-3
<TABLE>
<CAPTION>
2 JV2 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 1 2 3 4 5 6
4 % of 1999 2000 2001 2002 2003 2004
5 Total (5 months)
<S> <C> <C> <C> <C> <C> <C> <C>
6 REVENUES
7 Electric Energy Revenue 50% 8,375,620 21,433,943 22,817,766 23,845,837 24,809,225 25,681,865
8 Steam Revenue 0% 0 0 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 0 23,173 65,653 102,612 142,672 163,215
12 TOTAL OPERATING REVENUES 8,375,620 21,457,116 22,883,420 23,948,449 24,951,897 25,845,080
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 1,989,122 5,251,283 5,776,411 6,354,052 6,989,457 7,269,035
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 203,347 536,837 590,520 649,572 714,530 757,401
18 Utilities 45% 58,133 153,472 168,819 185,701 204,271 216,528
19 Project Management Fees 30% 105,516 260,837 268,662 276,722 285,023 293,574
20 Other Labor & Management 30% 371,009 950,374 1,015,448 1,086,131 1,162,956 1,218,701
21 Administrative Costs 30% 297,917 754,392 796,759 842,370 891,521 929,525
22 Real Estate and Stamp Taxes 40% 24,239 58,626 59,103 59,509 59,914 60,204
23 TOTAL OPERATING EXPENSES 3,049,284 7,965,819 8,675,722 9,454,057 10,307,672 10,744,968
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (754,653) (1,777,426) (1,723,315) (1,658,588) (1,584,472) (1,504,289)
27 Water Usage Payment (to JV 3) (565,270) (1,452,849) (1,557,487) (1,671,369) (1,795,384) (1,884,071)
28 Site Lease Payment (to JV 4) (111,111) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL (1,431,034) (3,496,941) (3,547,468) (3,596,624) (3,646,522) (3,655,027)
30
31 INCOME STATEMENT
32 EBITDA 3,895,302 9,994,356 10,660,230 10,897,768 10,997,703 11,445,085
33 - Depreciation 33% 994,531 2,394,610 2,413,172 2,424,000 2,434,313 2,458,308
34 - Interest on S/H Loan 1,034,722 2,397,038 2,253,926 2,091,462 1,907,030 1,697,658
35 EBT (Pre-tax Income) 1,866,048 5,202,708 5,993,132 6,382,306 6,656,360 7,289,119
36 - Local Income Taxes (Luannan) 0 0 0 0 0 109,337
37 - Federal Income Taxes (China) 0 0 449,485 478,673 499,227 1,093,368
38 Net Income 1,866,048 5,202,708 5,543,647 5,903,633 6,157,133 6,086,415
39 - Employee Welfare Res. (on-shore) 40% 23,742 62,679 68,947 75,842 83,426 88,432
40 - General Reserve (on-shore) 40% 980 2,353 2,353 2,353 2,353 2,353
41 - E'prise Exp. Reserve (on-shore) 40% 980 2,353 2,353 2,353 2,353 2,353
42 NET DISTRIBUTABLE EARNINGS 1,840,346 5,135,323 5,469,994 5,823,085 6,069,001 5,993,277
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 1,840,346 5,135,323 5,469,994 5,823,085 6,069,001 5,993,277
46 + Depreciation 33% 994,531 2,394,610 2,413,172 2,424,000 2,434,313 2,458,308
47 + Interest on S/H Loan 1,034,722 2,397,038 2,253,926 2,091,462 1,907,030 1,697,658
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 3,869,599 9,926,971 10,137,092 10,338,548 10,410,344 10,149,243
50 - Interest on S/H Loan (1,034,722) (2,397,038) (2,253,926) (2,091,462) (1,907,030) (1,697,658)
51 - Principal of S/H Loan (379,798) (997,746) (1,132,662) (1,285,822) (1,459,693) (1,657,074)
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (362,500) (388,600) (416,579) (332,321) (333,333) (308,923)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (252,233) (1,008,264) (863,931) (805,857) (641,287) (492,311)
56 PAN-WESTERN DISTRIBUTION US$ 1,617,957 4,514,769 4,808,997 5,119,421 5,335,621 5,269,047
57 LUANNAN COUNTY DISTRIBUTION US$ 222,388 620,555 660,996 703,664 733,381 724,230
<PAGE>
1 EXHIBIT 12-3 (Continued)
2 JV2 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 7 8 9 10 11 12
4 % of 2005 2006 2007 2008 2009 2010
5 Total
6 REVENUES
7 Electric Energy Revenue 50% 26,245,158 26,986,145 27,917,960 28,989,250 30,366,397 31,059,385
8 Steam Revenue 0% 0 0 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 177,148 181,641 175,725 207,954 190,520 199,374
12 TOTAL OPERATING REVENUES 26,422,306 27,167,787 28,093,685 29,197,204 30,556,918 31,258,759
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 7,559,797 7,862,189 8,176,676 8,503,743 8,843,893 9,197,649
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 802,845 851,016 902,077 956,202 994,450 1,034,228
18 Utilities 45% 229,519 243,291 257,888 273,361 284,296 295,667
19 Project Management Fees 30% 302,381 311,453 320,796 330,420 340,333 350,543
20 Other Labor & Management 30% 1,277,370 1,339,125 1,404,139 1,472,594 1,526,076 1,581,534
21 Administrative Costs 30% 969,343 1,011,073 1,054,813 1,100,670 1,138,712 1,178,096
22 Real Estate and Stamp Taxes 40% 60,423 60,688 61,002 61,352 61,775 62,037
23 TOTAL OPERATING EXPENSES 11,201,679 11,678,834 12,177,392 12,698,343 13,189,534 13,699,753
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (1,412,101) (1,306,887) (1,186,742) (1,045,815) (884,866) (833,809)
27 Water Usage Payment (to JV 3) (1,977,509) (2,075,965) (2,179,722) (2,289,081) (2,373,288) (2,460,644)
28 Site Lease Payment (to JV 4) (266,667) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL (3,656,277) (3,649,519) (3,633,131) (3,601,563) (3,524,821) (3,561,120)
30
31 INCOME STATEMENT
32 EBITDA 11,564,350 11,839,434 12,283,163 12,897,299 13,842,562 13,997,886
33 - Depreciation 33% 2,481,933 2,507,014 2,533,299 2,549,052 2,560,845 2,589,714
34 - Interest on S/H Loan 1,459,976 1,190,153 883,845 536,117 143,740 0
35 EBT (Pre-tax Income) 7,622,441 8,142,267 8,866,019 9,812,129 11,137,977 11,408,172
36 - Local Income Taxes (Luannan) 114,337 122,134 132,990 147,182 334,139 342,245
37 - Federal Income Taxes (China) 1,143,366 1,221,340 1,329,903 1,471,819 1,670,697 1,711,226
38 Net Income 6,364,738 6,798,793 7,403,126 8,193,128 9,133,141 9,354,701
39 - Employee Welfare Res. (on-shore) 40% 93,738 99,362 105,323 111,643 116,109 120,753
40 - General Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
41 - E'prise Exp. Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
42 NET DISTRIBUTABLE EARNINGS 6,266,295 6,694,725 7,293,097 8,076,779 9,012,327 9,229,243
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 6,266,295 6,694,725 7,293,097 8,076,779 9,012,327 9,229,243
46 + Depreciation 33% 2,481,933 2,507,014 2,533,299 2,549,052 2,560,845 2,589,714
47 + Interest on S/H Loan 1,459,976 1,190,153 883,845 536,117 143,740 0
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 10,208,204 10,391,892 10,710,240 11,161,949 11,716,912 11,818,956
50 - Interest on S/H Loan (1,459,976) (1,190,153) (883,845) (536,117) (143,740) (0)
51 - Principal of S/H Loan (1,881,145) (2,135,516) (2,424,283) (2,752,097) (1,774,164) 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (331,165) (347,061) (363,720) (0) (381,179) (399,475)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 1,000,000 0 0 0
55 +/- Undistributable Cash Flow (269,623) (24,437) (745,296) 203,044 (405,502) (2,190,239)
56 PAN-WESTERN DISTRIBUTION US$ 5,509,073 5,885,732 6,411,796 7,100,778 7,923,274 8,113,977
57 LUANNAN COUNTY DISTRIBUTION US$ 757,222 808,993 881,301 976,001 1,089,053 1,115,265
<PAGE>
1 EXHIBIT 12-3 (Continued)
2 JV2 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 13 14 15 16 17 18
4 % of 2011 2012 2013 2014 2015 2016
5 Total
6 REVENUES
7 Electric Energy Revenue 50% 29,512,392 30,263,152 30,991,072 31,697,288 32,382,982 33,049,383
8 Steam Revenue 0% 0 0 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 282,946 366,942 418,430 423,888 446,533 451,890
12 TOTAL OPERATING REVENUES 29,795,338 30,630,094 31,409,501 32,121,175 32,829,515 33,501,273
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 9,565,555 9,948,177 10,346,104 10,759,948 11,190,346 11,637,960
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 1,075,597 1,118,621 1,163,366 1,209,900 1,258,296 1,308,628
18 Utilities 45% 307,494 319,794 332,586 345,889 359,725 374,114
19 Project Management Fees 30% 361,059 371,891 383,047 394,539 406,375 418,566
20 Other Labor & Management 30% 1,639,043 1,698,679 1,760,523 1,824,658 1,891,170 1,960,148
21 Administrative Costs 30% 1,218,870 1,261,085 1,304,792 1,350,046 1,396,901 1,445,417
22 Real Estate and Stamp Taxes 40% 61,765 62,048 62,329 62,610 62,889 63,169
23 TOTAL OPERATING EXPENSES 14,229,382 14,780,294 15,352,748 15,947,590 16,565,703 17,208,001
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (843,550) (572,009) (185,663) (188,443) (189,760) (193,330)
27 Water Usage Payment (to JV 3) (2,551,266) (2,645,278) (2,742,811) (2,843,996) (2,948,972) (3,057,884)
28 Site Lease Payment (to JV 4) (266,667) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL (3,661,483) (3,483,954) (3,195,141) (3,299,106) (3,405,399) (3,517,881)
30
31 INCOME STATEMENT
32 EBITDA 11,904,473 12,365,845 12,861,613 12,874,479 12,858,414 12,775,390
33 - Depreciation 33% 2,619,968 1,776,593 576,649 585,283 589,372 600,460
34 - Interest on S/H Loan 0 0 0 0 0 0
35 EBT (Pre-tax Income) 9,284,505 10,589,252 12,284,964 12,289,197 12,269,042 12,174,930
36 - Local Income Taxes (Luannan) 278,535 317,678 368,549 368,676 368,071 365,248
37 - Federal Income Taxes (China) 1,392,676 1,588,388 1,842,745 1,843,380 1,840,356 1,826,240
38 Net Income 7,613,294 8,683,187 10,073,670 10,077,141 10,060,614 9,983,443
39 - Employee Welfare Res. (on-shore) 40% 125,583 130,606 135,831 141,264 146,914 152,791
40 - General Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
41 - E'prise Exp. Reserve (on-shore) 40% 2,353 2,353 2,353 2,353 2,353 2,353
42 NET DISTRIBUTABLE EARNINGS 7,483,005 8,547,874 9,933,134 9,931,172 9,908,994 9,825,946
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 7,483,005 8,547,874 9,933,134 9,931,172 9,908,994 9,825,946
46 + Depreciation 33% 2,619,968 1,776,593 576,649 585,283 589,372 600,460
47 + Interest on S/H Loan 0 0 0 0 0 0
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 10,102,973 10,324,467 10,509,783 10,516,454 10,498,366 10,426,406
50 - Interest on S/H Loan (0) (0) (0) (0) (0) (0)
51 - Principal of S/H Loan 0 0 0 0 0 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (418,650) (433,721) (449,335) (0) (465,511) (482,270)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (2,201,318) (1,342,872) (127,314) (585,283) (123,861) (118,190)
56 PAN-WESTERN DISTRIBUTION US$ 6,578,756 7,514,946 8,732,810 8,731,085 8,711,587 8,638,575
57 LUANNAN COUNTY DISTRIBUTION US$ 904,249 1,032,929 1,200,324 1,200,087 1,197,407 1,187,371
<PAGE>
1 EXHIBIT 12-3 (Continued)
2 JV2 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 19 20 21
4 % of 2017 2018 2019 Total
5 Total (7 months)
6 REVENUES
7 Electric Energy Revenue 50% 33,435,357 33,856,545 19,749,652 573,466,374
8 Steam Revenue 0% 0 0 0 0
9 Hot Water Revenue 0% 0 0 0 0
10 T-Line Interest Payments 0% 0 0 0 0
11 Interest Income on On-Shore Reserve 25% 457,050 462,444 273,115 5,212,925
12 TOTAL OPERATING REVENUES 33,892,407 34,318,989 20,022,767 578,679,299
13
14 OPERATING EXPENSES
15 Coal Delivered 50% 12,103,478 12,587,618 7,342,777 179,255,271
16 Water Usage 0% 0 0 0 0
17 Supplies, Spare Parts, Consumable 33% 1,360,973 1,415,412 858,683 19,762,503
18 Utilities 45% 389,078 404,641 245,482 5,649,751
19 Project Management Fees 30% 431,123 444,057 266,804 6,923,721
20 Other Labor & Management 30% 2,031,685 2,105,877 1,260,562 30,577,802
21 Administrative Costs 30% 1,495,652 1,547,669 920,151 22,905,773
22 Real Estate and Stamp Taxes 40% 63,385 63,615 37,109 1,227,790
23 TOTAL OPERATING EXPENSES 17,875,375 18,568,889 10,931,569 266,302,610
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Payment (to JV 3) (200,724) (209,390) (122,144) (18,377,978)
27 Water Usage Payment (to JV 3) (3,170,882) (3,288,119) (1,975,612) (47,507,458)
28 Site Lease Payment (to JV 4) (266,667) (266,667) (155,556) (5,333,333)
29 TOTAL (3,638,273) (3,764,177) (2,253,312) (71,218,769)
30
31 INCOME STATEMENT
32 EBITDA 12,378,759 11,985,923 6,837,885 241,157,920
33 - Depreciation 33% 623,425 650,342 379,366 36,742,250
34 - Interest on S/H Loan 0 0 0 15,595,667
35 EBT (Pre-tax Income) 11,755,334 11,335,581 6,458,519 188,820,004
36 - Local Income Taxes (Luannan) 352,660 340,067 193,756 4,255,604
37 - Federal Income Taxes (China) 1,763,300 1,700,337 968,778 25,835,302
38 Net Income 9,639,374 9,295,177 5,295,986 158,729,098
39 - Employee Welfare Res. (on-shore) 40% 158,903 165,259 100,257 2,307,403
40 - General Reserve (on-shore) 40% 2,353 2,353 1,373 47,059
41 - E'prise Exp. Reserve (on-shore) 40% 2,353 2,353 1,373 47,059
42 NET DISTRIBUTABLE EARNINGS 9,475,765 9,125,212 5,192,984 156,327,576
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 9,475,765 9,125,212 5,192,984 156,327,576
46 + Depreciation 33% 623,425 650,342 379,366 36,742,250
47 + Interest on S/H Loan 0 0 0 15,595,667
48 + T-Line Principal Payments 0% 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 10,099,191 9,775,554 5,572,350 208,665,493
50 - Interest on S/H Loan (0) (0) (0) (15,595,667)
51 - Principal of S/H Loan 0 0 0 (17,880,000)
52 ADJUSTMENTS 0
53 +/- Overhaul Reserve (on-shore) 33% (499,631) 482,382 0 (6,231,593)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 1,000,000
55 +/- Undistributable Cash Flow (123,794) (1,132,724) (379,366) (13,630,656)
56 PAN-WESTERN DISTRIBUTION US$ 8,330,710 8,022,518 4,565,461 $ 137,436,890
57 LUANNAN COUNTY DISTRIBUTION US$ 1,145,055 1,102,694 627,522 $ 18,890,687
</TABLE>
1 EXHIBIT 12-4
<TABLE>
<CAPTION>
2 JV3 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 1 2 3 4 5 6
4 % OF 1999 2000 2001 2002 2003 2004
5 TOTAL (5 months)
<S> <C> <C> <C> <C> <C> <C> <C>
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0 0 0
8 Steam Revenue 50% 477,283 1,202,752 1,262,890 1,326,034 1,392,336 1,434,106
9 Hot Water Revenue 50% 166,040 418,420 439,341 461,308 484,373 498,905
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserves 25% 0 23,173 65,653 102,612 142,672 163,215
12 TOTAL OPERATING REVENUES 643,322 1,644,345 1,767,884 1,889,954 2,019,381 2,096,226
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0 0 0
16 Water Usage 100% 139,831 369,154 406,069 446,676 491,344 520,824
17 Supplies, Spare Parts, Consumable 33% 203,347 536,837 590,520 649,572 714,530 757,401
18 Utilities 10% 12,919 34,105 37,515 41,267 45,394 48,117
19 Project Management Fees 30% 105,516 260,837 268,662 276,722 285,023 293,574
20 Other Labor & Management 30% 371,009 950,374 1,015,448 1,086,131 1,162,956 1,218,701
21 Administrative Costs 30% 297,917 754,392 796,759 842,370 891,521 929,525
22 Real Estate and Stamp Taxes 10% 6,060 14,656 14,776 14,877 14,979 15,051
23 TOTAL OPERATING EXPENSES 1,136,599 2,920,354 3,129,749 3,357,615 3,605,746 3,783,193
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue (from JV 1 & 2) 1,509,307 3,554,852 3,446,629 3,317,176 3,168,943 3,008,578
27 Water Usage Revenue (from JV 1 & 2) 1,130,539 2,905,698 3,114,973 3,342,738 3,590,767 3,768,142
28 Site Lease Payment (to JV 4) (111,111) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL 2,528,735 6,193,883 6,294,936 6,393,247 6,493,044 6,510,054
30
31 INCOME STATEMENT
32 EBITDA 2,035,458 4,917,874 4,933,071 4,925,586 4,906,679 4,823,086
33 - Depreciation 25% 753,433 1,814,098 1,828,161 1,836,364 1,844,176 1,862,354
34 - Interest on S/H Loan 1,022,222 2,368,080 2,226,697 2,066,196 1,883,992 1,677,150
35 EBT (Pre-tax Income) 259,803 735,695 878,213 1,023,026 1,178,510 1,283,582
36 - Local Income Taxes (Luannan) 0 0 0 0 0 19,254
37 - Federal Income Taxes (China) 0 0 65,866 76,727 88,388 192,537
38 Net Income 259,803 735,695 812,347 946,299 1,090,122 1,071,791
39 - Employee Welfare Res. (on-shore) 10% 5,936 15,670 17,237 18,960 20,857 22,108
40 - General Reserve (on-shore) 10% 245 588 588 588 588 588
41 - E'prise Exp. Reserve (on-shore) 10% 245 588 588 588 588 588
42 NET DISTRIBUTABLE EARNINGS 253,377 718,849 793,933 926,162 1,068,089 1,048,507
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 253,377 718,849 793,933 926,162 1,068,089 1,048,507
46 + Depreciation 25% 753,433 1,814,098 1,828,161 1,836,364 1,844,176 1,862,354
47 + Interest on S/H Loan 1,022,222 2,368,080 2,226,697 2,066,196 1,883,992 1,677,150
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 2,029,033 4,901,028 4,848,791 4,828,722 4,796,257 4,588,011
50 - Interest on S/H Loan (1,022,222) (2,368,080) (2,226,697) (2,066,196) (1,883,992) (1,677,150)
51 - Principal of S/H Loan (375,210) (985,693) (1,118,979) (1,270,289) (1,442,059) (1,637,055)
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (362,500) (388,600) (416,579) (332,321) (333,333) (308,923)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (15,723) (439,806) (292,602) (233,754) (68,784) 83,624
56 PAN-WESTERN DISTRIBUTION US$ 222,759 631,983 697,994 814,244 939,021 921,805
57 LUANNAN COUNTY DISTRIBUTION US$ 30,618 86,866 95,939 111,918 129,068 126,702
<PAGE>
1 EXHIBIT 12-4 (Continued)
2 JV3 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 7 8 9 10 11 12
4 % OF 2005 2006 2007 2008 2009 2010
5 TOTAL
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0 0 0
8 Steam Revenue 50% 1,477,129 1,521,443 1,567,086 1,614,099 1,646,381 1,679,308
9 Hot Water Revenue 50% 513,872 529,288 545,167 561,522 572,752 584,207
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserves 25% 177,148 181,641 175,725 207,954 190,520 199,374
12 TOTAL OPERATING REVENUES 2,168,149 2,232,372 2,287,977 2,383,574 2,409,653 2,462,889
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0 0 0
16 Water Usage 100% 552,074 585,198 620,310 657,529 683,830 711,183
17 Supplies, Spare Parts, Consumable 33% 802,845 851,016 902,077 956,202 994,450 1,034,228
18 Utilities 10% 51,004 54,065 57,308 60,747 63,177 65,704
19 Project Management Fees 30% 302,381 311,453 320,796 330,420 340,333 350,543
20 Other Labor & Management 30% 1,277,370 1,339,125 1,404,139 1,472,594 1,526,076 1,581,534
21 Administrative Costs 30% 969,343 1,011,073 1,054,813 1,100,670 1,138,712 1,178,096
22 Real Estate and Stamp Taxes 10% 15,106 15,172 15,250 15,338 15,444 15,509
23 TOTAL OPERATING EXPENSES 3,970,124 4,167,102 4,374,695 4,593,500 4,762,021 4,936,796
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue (from JV 1 & 2) 2,824,202 2,613,774 2,373,483 2,091,630 1,769,732 1,667,619
27 Water Usage Revenue (from JV 1 & 2) 3,955,018 4,151,930 4,359,444 4,578,162 4,746,577 4,921,287
28 Site Lease Payment (to JV 4) (266,667) (266,667) (266,667) (266,667) (266,667) (266,667)
29 TOTAL 6,512,553 6,499,037 6,466,261 6,403,125 6,249,642 6,322,239
30
31 INCOME STATEMENT
32 EBITDA 4,710,579 4,564,307 4,379,543 4,193,199 3,897,275 3,848,332
33 - Depreciation 25% 1,880,253 1,899,253 1,919,166 1,931,100 1,940,034 1,961,904
34 - Interest on S/H Loan 1,442,338 1,175,775 873,168 529,641 142,004 0
35 EBT (Pre-tax Income) 1,387,988 1,489,279 1,587,210 1,732,458 1,815,237 1,886,427
36 - Local Income Taxes (Luannan) 20,820 22,339 23,808 25,987 54,457 56,593
37 - Federal Income Taxes (China) 208,198 223,392 238,082 259,869 272,286 282,964
38 Net Income 1,158,970 1,243,548 1,325,320 1,446,603 1,488,494 1,546,870
39 - Employee Welfare Res. (on-shore) 10% 23,434 24,840 26,331 27,911 29,027 30,188
40 - General Reserve (on-shore) 10% 588 588 588 588 588 588
41 - E'prise Exp. Reserve (on-shore) 10% 588 588 588 588 588 588
42 NET DISTRIBUTABLE EARNINGS 1,134,359 1,217,531 1,297,813 1,417,516 1,458,291 1,515,506
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 1,134,359 1,217,531 1,297,813 1,417,516 1,458,291 1,515,506
46 + Depreciation 25% 1,880,253 1,899,253 1,919,166 1,931,100 1,940,034 1,961,904
47 + Interest on S/H Loan 1,442,338 1,175,775 873,168 529,641 142,004 0
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 4,456,950 4,292,560 4,090,146 3,878,257 3,540,328 3,477,410
50 - Interest on S/H Loan (1,442,338) (1,175,775) (873,168) (529,641) (142,004) (0)
51 - Principal of S/H Loan (1,858,420) (2,109,717) (2,394,996) (2,718,850) (1,752,731) 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (331,165) (347,061) (363,720) (0) (381,179) (399,475)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 1,000,000 0 0 0
55 +/- Undistributable Cash Flow 309,333 557,525 (160,450) 787,750 193,876 (1,562,429)
56 PAN-WESTERN DISTRIBUTION US$ 997,283 1,070,404 1,140,985 1,246,222 1,282,070 1,332,371
57 LUANNAN COUNTY DISTRIBUTION US$ 137,076 147,127 156,828 171,293 176,220 183,134
<PAGE>
1 Exhibit 12-4 (Continued)
2 JV3 Income and Cash Flow Statements
3 -- Base Case 13 14 15 16 17 18
4 % OF 2011 2012 2013 2014 2015 2016
5 TOTAL
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0 0 0
8 Steam Revenue 50% 1,712,894 1,747,152 1,782,095 1,817,737 1,854,092 1,891,174
9 Hot Water Revenue 50% 595,891 607,809 619,965 632,364 645,012 657,912
10 T-Line Interest Payments 0% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserves 25% 282,946 366,942 418,430 423,888 446,533 451,890
12 TOTAL OPERATING REVENUES 2,591,732 2,721,903 2,820,490 2,873,989 2,945,637 3,000,975
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0 0 0
16 Water Usage 100% 739,631 769,216 799,984 831,984 865,263 899,874
17 Supplies, Spare Parts, Consumable 33% 1,075,597 1,118,621 1,163,366 1,209,900 1,258,296 1,308,628
18 Utilities 10% 68,332 71,065 73,908 76,864 79,939 83,136
19 Project Management Fees 30% 361,059 371,891 383,047 394,539 406,375 418,566
20 Other Labor & Management 30% 1,639,043 1,698,679 1,760,523 1,824,658 1,891,170 1,960,148
21 Administrative Costs 30% 1,218,870 1,261,085 1,304,792 1,350,046 1,396,901 1,445,417
22 Real Estate and Stamp Taxes 10% 15,441 15,512 15,582 15,652 15,722 15,792
23 TOTAL OPERATING EXPENSES 5,117,972 5,306,069 5,501,203 5,703,644 5,913,667 6,131,561
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue (from JV 1 & 2) 1,687,101 1,144,018 371,327 376,887 379,520 386,660
27 Water Usage Revenue (from JV 1 & 2) 5,102,531 5,290,557 5,485,621 5,687,991 5,897,945 6,115,769
28 Site Lease Payment (to JV 4) (266,667) (266,667) (266,667) (266,667) (266,667) (266,667)
29 Total 6,522,965 6,167,908 5,590,281 5,798,211 6,010,798 6,235,762
30
31 INCOME STATEMENT
32 EBITDA 3,996,725 3,583,743 2,909,568 2,968,557 3,042,768 3,105,176
33 - Depreciation 25% 1,984,824 1,345,904 436,855 443,396 446,494 454,894
34 - Interest on S/H Loan 0 0 0 0 0 0
35 EBT (Pre-tax Income) 2,011,901 2,237,839 2,472,713 2,525,161 2,596,274 2,650,282
36 - Local Income Taxes (Luannan) 60,357 67,135 74,181 75,755 77,888 79,508
37 - Federal Income Taxes (China) 301,785 335,676 370,907 378,774 389,441 397,542
38 Net Income 1,649,758 1,835,028 2,027,624 2,070,632 2,128,945 2,173,232
39 - Employee Welfare Res. (on-shore) 10% 31,396 32,652 33,958 35,316 36,729 38,198
40 - General Reserve (on-shore) 10% 588 588 588 588 588 588
41 - E'prise Exp. Reserve (on-shore) 10% 588 588 588 588 588 588
42 NET DISTRIBUTABLE EARNINGS 1,617,186 1,801,200 1,992,490 2,034,139 2,091,040 2,133,857
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 1,617,186 1,801,200 1,992,490 2,034,139 2,091,040 2,133,857
46 + Depreciation 25% 1,984,824 1,345,904 436,855 443,396 446,494 454,894
47 + Interest on S/H Loan 0 0 0 0 0 0
48 + T-Line Principal Payments 0% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 3,602,010 3,147,103 2,429,346 2,477,535 2,537,534 2,588,751
50 - Interest on S/H Loan (0) (0) (0) (0) (0) (0)
51 - Principal of S/H Loan 0 0 0 0 0 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 33% (418,650) (433,721) (449,335) (0) (465,511) (482,270)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (1,566,174) (912,182) 12,480 (443,396) 19,017 27,376
56 PAN-WESTERN DISTRIBUTION US$ 1,421,765 1,583,542 1,751,717 1,788,333 1,838,358 1,876,001
57 LUANNAN COUNTY DISTRIBUTION US$ 195,421 217,658 240,773 245,806 252,682 257,856
<PAGE>
1 EXHIBIT 12-4 (Continued)
2 JV3 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 19 20 21
4 % OF 2017 2018 2019 TOTAL
5 TOTAL (7 months)
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0
8 Steam Revenue 50% 1,928,997 1,967,577 1,147,753 32,450,318
9 Hot Water Revenue 50% 671,070 684,492 399,287 11,288,996
10 T-Line Interest Payments 0% 0 0 0 0
11 Interest Income on On-Shore Reserves 25% 457,050 462,444 273,115 5,212,925
12 TOTAL OPERATING REVENUES 3,057,118 3,114,513 1,820,155 48,952,239
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0
16 Water Usage 100% 935,869 973,303 590,471 13,589,617
17 Supplies, Spare Parts, Consumable 33% 1,360,973 1,415,412 858,683 19,762,503
18 Utilities 10% 86,462 89,920 54,552 1,255,500
19 Project Management Fees 30% 431,123 444,057 266,804 6,923,721
20 Other Labor & Management 30% 2,031,685 2,105,877 1,260,562 30,577,802
21 Administrative Costs 30% 1,495,652 1,547,669 920,151 22,905,773
22 Real Estate and Stamp Taxes 10% 15,846 15,904 9,277 306,948
23 TOTAL OPERATING EXPENSES 6,357,610 6,592,143 3,960,501 95,321,863
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue (from JV 1 & 2) 401,448 418,781 244,289 36,755,955
27 Water Usage Revenue (from JV 1 & 2) 6,341,764 6,576,239 3,951,224 95,014,916
28 Site Lease Payment (to JV 4) (266,667) (266,667) (155,556) (5,333,333)
29 TOTAL 6,476,545 6,728,353 4,039,957 126,437,538
30
31 INCOME STATEMENT
32 EBITDA 3,176,053 3,250,723 1,899,611 80,067,913
33 - Depreciation 25% 472,292 492,683 287,399 27,835,038
34 - Interest on S/H Loan 0 0 0 15,407,263
35 EBT (Pre-tax Income) 2,703,761 2,758,040 1,612,213 36,825,613
36 - Local Income Taxes (Luannan) 81,113 82,741 48,366 870,303
37 - Federal Income Taxes (China) 405,564 413,706 241,832 5,143,536
38 Net Income 2,217,084 2,261,593 1,322,014 30,811,774
39 - Employee Welfare Res. (on-shore) 10% 39,726 41,315 25,064 576,851
40 - General Reserve (on-shore) 10% 588 588 343 11,765
41 - E'prise Exp. Reserve (on-shore) 10% 588 588 343 11,765
42 NET DISTRIBUTABLE EARNINGS 2,176,182 2,219,102 1,296,264 30,211,393
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 2,176,182 2,219,102 1,296,264 30,211,393
46 + Depreciation 25% 472,292 492,683 287,399 27,835,038
47 + Interest on S/H Loan 0 0 0 15,407,263
48 + T-Line Principal Payments 0% 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 2,648,474 2,711,785 1,583,663 73,453,694
50 - Interest on S/H Loan (0) (0) (0) (15,407,263)
51 - Principal of S/H Loan 0 0 0 (17,664,000)
52 ADJUSTMENTS 0
53 +/- Overhaul Reserve (on-shore) 33% (499,631) 482,382 0 (6,231,593)
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 1,000,000
55 +/- Undistributable Cash Flow 27,340 (975,065) (287,399) (4,939,444)
56 PAN-WESTERN DISTRIBUTION US$ 1,913,211 1,950,944 1,139,623 $ 26,560,636
57 LUANNAN COUNTY DISTRIBUTION US$ 262,971 268,157 156,641 $ 3,650,757
</TABLE>
1 EXHIBIT 12-5
<TABLE>
<CAPTION>
2 JV4 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 1 2 3 4 5 6
4 % OF 1999 2000 2001 2002 2003 2004
5 TOTAL (5 months)
<S> <C> <C> <C> <C> <C> <C> <C>
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0 0 0
8 Steam Revenue 50% 477,283 1,202,752 1,262,890 1,326,034 1,392,336 1,434,106
9 Hot Water Revenue 50% 166,040 418,420 439,341 461,308 484,373 498,905
10 T-Line Interest Payments 100% 609,444 1,427,937 1,340,421 1,242,403 1,132,622 1,009,668
11 Interest Income on On-Shore Reserves 25% 0 23,173 65,653 102,612 142,672 163,215
12 TOTAL OPERATING REVENUES 1,252,766 3,072,283 3,108,305 3,132,357 3,152,003 3,105,894
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0 0 0
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 0% 0 0 0 0 0 0
18 Utilities 0% 0 0 0 0 0 0
19 Project Management Fees 10% 35,172 86,946 89,554 92,241 95,008 97,858
20 Other Labor & Management 10% 57,719 142,682 146,963 151,372 155,913 160,590
21 Administrative Costs 10% 99,306 251,464 265,586 280,790 297,174 309,842
22 Real Estate and Stamp Taxes 10% 6,060 14,656 14,776 14,877 14,979 15,051
23 TOTAL OPERATING EXPENSES 198,257 495,748 516,879 539,280 563,073 583,341
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue 0 0 0 0 0 0
27 Water Usage Revenue 0 0 0 0 0 0
28 Site Lease Payment (from JV 1, 2, & 3) 333,333 800,000 800,000 800,000 800,000 800,000
29 TOTAL 333,333 800,000 800,000 800,000 800,000 800,000
30
31 INCOME STATEMENT
32 EBITDA 1,387,843 3,376,534 3,391,426 3,393,077 3,388,930 3,322,553
33 - Depreciation 9% 271,236 653,075 658,138 661,091 663,904 670,448
34 - Interest on S/H Loan 1,031,771 2,390,200 2,247,497 2,085,496 1,901,590 1,692,816
35 EBT (Pre-tax Income) 84,836 333,259 485,792 646,490 823,437 959,290
36 - Local Income Taxes (Luannan) 0 0 7,287 9,697 12,352 28,779
37 - Federal Income Taxes (China) 25,451 99,978 145,737 193,947 247,031 287,787
38 Net Income 59,385 233,281 332,767 442,845 564,054 642,724
39 - Employee Welfare Res. (on-shore) 10% 5,936 15,670 17,237 18,960 20,857 22,108
40 - General Reserve (on-shore) 10% 245 588 588 588 588 588
41 - E'prise Exp. Reserve (on-shore) 10% 245 588 588 588 588 588
42 NET DISTRIBUTABLE EARNINGS 52,960 216,435 314,354 422,708 542,021 619,440
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 52,960 216,435 314,354 422,708 542,021 619,440
46 + Depreciation 9% 271,236 653,075 658,138 661,091 663,904 670,448
47 + Interest on S/H Loan 1,031,771 2,390,200 2,247,497 2,085,496 1,901,590 1,692,816
48 + T-Line Principal Payments 100% 289,406 729,302 816,818 914,836 1,024,617 1,147,571
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 1,645,372 3,989,013 4,036,807 4,084,132 4,132,132 4,130,274
50 - Interest on S/H Loan (1,031,771) (2,390,200) (2,247,497) (2,085,496) (1,901,590) (1,692,816)
51 - Principal of S/H Loan (378,715) (994,900) (1,129,432) (1,282,155) (1,455,529) (1,652,347)
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 0% 0 0 0 0 0 0
54 +/- Debt Service Reserve (off-shore 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (181,926) (387,477) (345,524) (293,773) (232,991) (165,671)
56 PAN-WESTERN DISTRIBUTION US$ 46,560 190,281 276,367 371,628 476,523 544,586
57 LUANNAN COUNTY DISTRIBUTION US$ 6,400 26,154 37,987 51,080 65,498 74,853
<PAGE>
1 EXHIBIT 12-5 (Continued)
2 JV4 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 7 8 9 10 11 12
4 % OF 2005 2006 2007 2008 2009 2010
5 TOTAL
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0 0 0
8 Steam Revenue 50% 1,477,129 1,521,443 1,567,086 1,614,099 1,646,381 1,679,308
9 Hot Water Revenue 50% 513,872 529,288 545,167 561,522 572,752 584,207
10 T-Line Interest Payments 100% 871,960 717,726 544,985 351,514 134,827 0
11 Interest Income on On-Shore Reserves 25% 177,148 181,641 175,725 207,954 190,520 199,374
12 TOTAL OPERATING REVENUES 3,040,109 2,950,098 2,832,962 2,735,089 2,544,480 2,462,889
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0 0 0
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 0% 0 0 0 0 0 0
18 Utilities 0% 0 0 0 0 0 0
19 Project Management Fees 10% 100,794 103,818 106,932 110,140 113,444 116,848
20 Other Labor & Management 10% 165,408 170,370 175,481 180,746 186,168 191,753
21 Administrative Costs 10% 323,114 337,024 351,604 366,890 379,571 392,699
22 Real Estate and Stamp Taxes 10% 15,106 15,172 15,250 15,338 15,444 15,509
23 TOTAL OPERATING EXPENSES 604,422 626,384 649,268 673,114 694,627 716,808
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue 0 0 0 0 0 0
27 Water Usage Revenue 0 0 0 0 0 0
28 Site Lease Payment (from JV 1, 2, & 3) 800,000 800,000 800,000 800,000 800,000 800,000
29 TOTAL 800,000 800,000 800,000 800,000 800,000 800,000
30
31 INCOME STATEMENT
32 EBITDA 3,235,687 3,123,714 2,983,694 2,861,975 2,649,854 2,546,081
33 - Depreciation 9% 676,891 683,731 690,900 695,196 698,412 706,286
34 - Interest on S/H Loan 1,455,811 1,186,758 881,324 534,588 143,330 0
35 EBT (Pre-tax Income) 1,102,985 1,253,225 1,411,471 1,632,191 1,808,111 1,839,795
36 - Local Income Taxes (Luannan) 33,090 37,597 42,344 48,966 54,243 55,194
37 - Federal Income Taxes (China) 330,895 375,968 423,441 489,657 542,433 551,939
38 Net Income 739,000 839,661 945,685 1,093,568 1,211,435 1,232,663
39 - Employee Welfare Res. (on-shore) 10% 23,434 24,840 26,331 27,911 29,027 30,188
40 - General Reserve (on-shore) 10% 588 588 588 588 588 588
41 - E'prise Exp. Reserve (on-shore) 10% 588 588 588 588 588 588
42 NET DISTRIBUTABLE EARNINGS 714,389 813,644 918,178 1,064,481 1,181,231 1,201,298
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 714,389 813,644 918,178 1,064,481 1,181,231 1,201,298
46 + Depreciation 9% 676,891 683,731 690,900 695,196 698,412 706,286
47 + Interest on S/H Loan 1,455,811 1,186,758 881,324 534,588 143,330 0
48 + T-Line Principal Payments 100% 1,285,279 1,439,513 1,612,254 1,805,725 1,123,562 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 4,132,370 4,123,646 4,102,656 4,099,990 3,146,535 1,907,584
50 - Interest on S/H Loan (1,455,811) (1,186,758) (881,324) (534,588) (143,330) (0)
51 - Principal of S/H Loan (1,875,780) (2,129,424) (2,417,368) (2,744,247) (1,769,104) 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 0% 0 0 0 0 0 0
54 +/- Debt Service Reserve (off-shore) 25% 0 0 1,000,000 0 0 0
55 +/- Undistributable Cash Flow (86,391) 6,181 (885,786) 243,326 (52,871) (706,286)
56 PAN-WESTERN DISTRIBUTION US$ 628,062 715,323 807,225 935,848 1,038,491 1,056,133
57 LUANNAN COUNTY DISTRIBUTION US$ 86,327 98,321 110,953 128,632 142,740 145,165
<PAGE>
1 EXHIBIT 12-5 (Continued)
2 JV4 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 13 14 15 16 17 18
4 % OF 2011 2012 2013 2014 2015 2016
5 TOTAL
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0 0 0
8 Steam Revenue 50% 1,712,894 1,747,152 1,782,095 1,817,737 1,854,092 1,891,174
9 Hot Water Revenue 50% 595,891 607,809 619,965 632,364 645,012 657,912
10 T-Line Interest Payments 100% 0 0 0 0 0 0
11 Interest Income on On-Shore Reserves 25% 282,946 366,942 418,430 423,888 446,533 451,890
12 TOTAL OPERATING REVENUES 2,591,732 2,721,903 2,820,490 2,873,989 2,945,637 3,000,975
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0 0 0
16 Water Usage 0% 0 0 0 0 0 0
17 Supplies, Spare Parts, Consumable 0% 0 0 0 0 0 0
18 Utilities 0% 0 0 0 0 0 0
19 Project Management Fees 10% 120,353 123,964 127,682 131,513 135,458 139,522
20 Other Labor & Management 10% 197,506 203,431 209,534 215,820 222,294 228,963
21 Administrative Costs 10% 406,290 420,362 434,931 450,015 465,634 481,806
22 Real Estate and Stamp Taxes 10% 15,441 15,512 15,582 15,652 15,722 15,792
23 TOTAL OPERATING EXPENSES 739,590 763,268 787,729 813,000 839,109 866,083
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue 0 0 0 0 0 0
27 Water Usage Revenue 0 0 0 0 0 0
28 Site Lease Payment (from JV 1, 2, & 3) 800,000 800,000 800,000 800,000 800,000 800,000
29 TOTAL 800,000 800,000 800,000 800,000 800,000 800,000
30
31 INCOME STATEMENT
32 EBITDA 2,652,142 2,758,635 2,832,761 2,860,989 2,906,528 2,934,892
33 - Depreciation 9% 714,537 484,525 157,268 159,623 160,738 163,762
34 - Interest on S/H Loan 0 0 0 0 0 0
35 EBT (Pre-tax Income) 1,937,606 2,274,110 2,675,493 2,701,366 2,745,791 2,771,131
36 - Local Income Taxes (Luannan) 58,128 68,223 80,265 81,041 82,374 83,134
37 - Federal Income Taxes (China) 581,282 682,233 802,648 810,410 823,737 831,339
38 Net Income 1,298,196 1,523,653 1,792,580 1,809,916 1,839,680 1,856,658
39 - Employee Welfare Res. (on-shore) 10% 31,396 32,652 33,958 35,316 36,729 38,198
40 - General Reserve (on-shore) 10% 588 588 588 588 588 588
41 - E'prise Exp. Reserve (on-shore) 10% 588 588 588 588 588 588
42 NET DISTRIBUTABLE EARNINGS 1,265,623 1,489,825 1,757,446 1,773,423 1,801,775 1,817,283
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 1,265,623 1,489,825 1,757,446 1,773,423 1,801,775 1,817,283
46 + Depreciation 9% 714,537 484,525 157,268 159,623 160,738 163,762
47 + Interest on S/H Loan 0 0 0 0 0 0
48 + T-Line Principal Payments 100% 0 0 0 0 0 0
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 1,980,160 1,974,351 1,914,714 1,933,046 1,962,512 1,981,045
50 - Interest on S/H Loan (0) (0) (0) (0) (0) (0)
51 - Principal of S/H Loan 0 0 0 0 0 0
52 ADJUSTMENTS
53 +/- Overhaul Reserve (on-shore) 0% 0 0 0 0 0 0
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 0 0 0
55 +/- Undistributable Cash Flow (714,537) (484,525) (157,268) (159,623) (160,738) (163,762)
56 PAN-WESTERN DISTRIBUTION US$ 1,112,685 1,309,794 1,545,076 1,559,122 1,584,047 1,597,682
57 LUANNAN COUNTY DISTRIBUTION US$ 152,938 180,031 212,370 214,301 217,727 219,601
<PAGE>
1 EXHIBIT 12-5 (Continued)
2 JV4 INCOME AND CASH FLOW STATEMENTS
3 -- BASE CASE 19 20 21
4 % OF 2017 2018 2019 Total
5 TOTAL (7 months)
6 REVENUES
7 Electric Energy Revenue 0% 0 0 0 0
8 Steam Revenue 50% 1,928,997 1,967,577 1,147,753 32,450,318
9 Hot Water Revenue 50% 671,070 684,492 399,287 11,288,996
10 T-Line Interest Payments 100% 0 0 0 9,383,509
11 Interest Income on On-Shore Reserves 25% 457,050 462,444 273,115 5,212,925
12 TOTAL OPERATING REVENUES 3,057,118 3,114,513 1,820,155 58,335,748
13
14 OPERATING EXPENSES
15 Coal Delivered 0% 0 0 0 0
16 Water Usage 0% 0 0 0 0
17 Supplies, Spare Parts, Consumable 0% 0 0 0 0
18 Utilities 0% 0 0 0 0
19 Project Management Fees 10% 143,708 148,019 88,935 2,307,907
20 Other Labor & Management 10% 235,832 242,907 141,696 3,783,146
21 Administrative Costs 10% 498,551 515,890 306,717 7,635,258
22 Real Estate and Stamp Taxes 10% 15,846 15,904 9,277 306,948
23 TOTAL OPERATING EXPENSES 893,937 922,719 546,625 14,033,259
24
25 INTERCOMPANY EXPENSES/REVENUES
26 Water Capacity Revenue 0 0 0 0
27 Water Usage Revenue 0 0 0 0
28 Site Lease Payment (from JV 1, 2, & 3) 800,000 800,000 466,667 16,000,000
29 TOTAL 800,000 800,000 466,667 16,000,000
30
31 INCOME STATEMENT
32 EBITDA 2,963,181 2,991,794 1,740,197 60,302,489
33 - Depreciation 9% 170,025 177,366 103,464 10,020,614
34 - Interest on S/H Loan 0 0 0 15,551,182
35 EBT (Pre-tax Income) 2,793,156 2,814,427 1,636,734 34,730,693
36 - Local Income Taxes (Luannan) 83,795 84,433 49,102 1,000,042
37 - Federal Income Taxes (China) 837,947 844,328 245,510 10,173,698
38 Net Income 1,871,415 1,885,666 1,342,121 23,556,953
39 - Employee Welfare Res. (on-shore) 10% 39,726 41,315 25,064 576,851
40 - General Reserve (on-shore) 10% 588 588 343 11,765
41 - E'prise Exp. Reserve (on-shore) 10% 588 588 343 11,765
42 NET DISTRIBUTABLE EARNINGS 1,830,513 1,843,175 1,316,371 22,956,573
43
44 CASH FLOW STATEMENT
45 Net Distributable Earnings 1,830,513 1,843,175 1,316,371 22,956,573
46 + Depreciation 9% 170,025 177,366 103,464 10,020,614
47 + Interest on S/H Loan 0 0 0 15,551,182
48 + T-Line Principal Payments 100% 0 0 0 12,188,882
49 CASH AVAILABLE FOR SHAREHOLDER LOAN 2,000,538 2,020,541 1,419,834 60,717,251
50 - Interest on S/H Loan (0) (0) (0) (15,551,182)
51 - Principal of S/H Loan 0 0 0 (17,829,000)
52 ADJUSTMENTS 0
53 +/- Overhaul Reserve (on-shore) 0% 0 0 0 0
54 +/- Debt Service Reserve (off-shore) 25% 0 0 0 1,000,000
55 +/- Undistributable Cash Flow (170,025) (177,366) (103,464) (5,380,496)
56 PAN-WESTERN DISTRIBUTION US$ 1,609,313 1,620,445 1,157,300 $ 20,182,491
57 LUANNAN COUNTY DISTRIBUTION US$ 221,200 222,730 159,071 $ 2,774,081
</TABLE>
[PARSONS BRINCKERHOFF ENERGY SERVICES, INC. LETTERHEAD]
PARSONS BRINCKERHOFF ENERGY SERVICES, INC.
Officer's Certificate
I, R. J. Bednarz, of Parsons Brinckerhoff Energy Services, Inc.
DO HEREBY CERTIFY that:
Since April 11, 1997, no event affecting our report entitled
"2x50 MW Coal-Fired Power Plant at Luannan, China" dated April
11, 1997 (the "Engineer's Report") or the matters referred to
therein has occurred (i) which makes untrue or incorrect in any
material respect, as the date hereof, any information or
statement contained in the Engineer's Report or in the Prospectus
relating to the offering of 12-1/2% Registered Senior Secured
Notes due 2004 by Panda Global Energy Company (the "Prospectus")
under the captions "Summary - Independent Engineers' and
Consultants' Reports - Consolidating Financial Analyst's Pro
Forma Report," Summary - Independent Engineers' and Consultants'
Reports - Luannan Engineering Report," and Independent Engineers
and Consultants - Luannan Facility" in the Prospectus 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 Engineer's Report or in the Prospectus under the captions
set forth above, in the light of the circumstances under which
they were made, not misleading.
WITNESS my hand this 6th day of June 1997.
By: /s/
Name:
Title:
APPENDIX E
REVIEW OF THE
COAL SUPPLY ARRANGEMENTS
FOR
THE LUANNAN POWER PROJECT
OF
PANDA ENERGY INTERNATIONAL, INC.
April 11, 1997
This copy of our report was prepared for inclusion in the
Offering Circular relating to the offering by Panda Global Energy
Company of its Senior Secured Notes due 2004 and does not include
the listed appendices. (See Table of Contents).
REVIEW OF THE COAL SUPPLY ARRANGEMENTS FOR
THE LUANNAN POWER PROJECT OF PANDA ENERGY INTERNATIONAL, INC.
PREFACE
The data contained in this report is based primarily on verbal
communication which was translated from Chinese to English and
vice versa. The only hard data Marston saw was in the form of
Preliminary Feasibility Studies for the two new shaft and mine
areas to be constructed and one mine plan showing the initial
development work and drill hole locations. Other data given to
Marston regarding coal quality is contained in the attached
appendices.
The Observations and Conclusions given here are drawn from
discussions with people in responsible positions, as set out in
the following list.
1.Luannan County Government Vice Magistrate Li He
2.Tangshan Municipal Coal Mine Industry Bureau, Manager Han Wen Xu
3.Kailuan Coal Mine Administration, Deputy Director Yang Zhong
4.Qianjiaying Coal Mine, Chief Engineer Zhang Pu Tian
5.Linguantun Coal Mine, Chief Engineer Yao Yaoguang
6.LeTing Coal Mine, Vice Manager Xu Zi Li Engineer Tao Zhi Hong
7.Chang Li Coal Mine, Manager Zhang Zuo Xiang
8.Luannan Coal Mine, Manager Du Yang Fang Engineer Gao Guo Bao
9.Zunhua Coal Mine, Vice Manager Liu Qing Hua
We were accompanied by Mr. Xue Shu Xing and Mr. Zhao (former
Luannan Mine Manager) who provided general information and
comments on operations in the Tangshan area.
TABLE OF CONTENTS
PAGE
1.0 SUMMARY AND CONCLUSIONS 1-1
2.0 BACKGROUND 2-1
3.0 BASIC DATA PROVIDED BY PANDA 3-1
4.0 COAL PRODUCTION AND RESERVES 4-1
5.0 COAL QUALITY 5-1
6.0 COAL TRANSPORT 6-1
7.0 PANDA FUEL SUPPLY STRATEGY 7-1
This copy of the report does not incorporate the appendices
listed below which include the Field Notes taken by Larry Pituley
during his China Site Visit (Appendix 1) and copies of Data
provided by Panda Energy International, Inc. which is listed in
Section 3.0 of this report (Appendix 2).
APPENDICES
APPENDIX 1 - Field Notes
APPENDIX 2 - Data Provided by Panda Energy International, Inc.
1.0 SUMMARY AND CONCLUSIONS
Following are Marston's observations and conclusions with regard
to coal reserves, coal quality and reliability of coal supply and
coal transportation in the Tangshan Region of Hebei Province, The
Peoples Republic of China, as a fuel supply for the proposed
Luannan power plant. This report has been prepared for use in
the Offering Circular relating to the offering by Panda Global
Energy Company of its Senior Secured Notes due 2004. These
conclusions are subject to the limitations and constraints under
which this review was conducted and should be judged and used
accordingly:
Overall Conclusion
Although this project can not be assessed by the usual Western
standards because the data to do such an assessment is not
readily available, it is reasonable to believe that a coal
resource of the appropriate quality is available, at a locally
competitive price in sufficient quantity to operate Panda's
proposed Luannan Power plant successfully, taking into
consideration the local environment. The fuel supply strategy,
coal supply agreements and the coal transportation agreement are
appropriate for the conditions and situation as it exists in
China. Given that cost of the fuel supply is a pass-through
arrangement in the Power Purchase Agreement, the risk exposure
for the project will be minimal in terms of the delivered fuel
price.
Reserves
Marston believes that the remaining coal reserves in the Tangshan
coal field are adequate to provide a long-term supply even though
the area has been mined for more than 100 years. The reserves may
be overstated but at 7.6 billion tonnes even a 50% error would
still leave ample reserves for the 20 year time frame Panda is
concerned about. The expectation with reserves, in Marstons'
opinion, is that in 20 years the remaining reserves will be
deeper and more expensive to mine, rather than be in short
supply.
The Chinese government does not permit the disclosure of the
methods for calculating coal reserves. Even if the methods and
standards were made known, the provinces and local coal regions
do not necessarily conform to the central government's standards
and regulations. Disclosure that the local agencies have their
own standards would not be politically astute. The Cultural
Revolution (1966 to 1976) destroyed a lot of the old records and
discouraged constructive work. Records kept during the Cultural
Revolution were poor to non-existent.
By Western standards, Chinese mine operators do not have the
funds to do extensive drilling and geologic assessment in most
cases. The local attitude is that the coal seams in the region
are fairly consistent and the general geologic structure, though
complex, is well known and understood.
The two mines sinking new shafts have had feasibility studies
done by the Provincial Capital Coal Mine Institute. The two
studies had different formats but they appeared to be fairly
detailed.
The large tonnage Kailuan mines are mining in deeper coal
reserves. They are generally 600-meters or greater in depth. At
those depths, only limited drilling is done to confirm the
presence of coal seams. This is evidenced by the plans observed
for the development of one of the smaller mines. The smaller
mines are working shallower structures or have re-entered old,
large-scale mines to clean up the leavings. Some of the smaller
mines are now going after some coal which is in excess of 600
meters in depth.
Quality
Marston believes Panda has a good understanding of what the coal
quality range is going to be for the coals delivered to the
Luannan power plant from the mines in the Tangshan Region. It is
important to design the power plant stockpile and feed system to
cope with the quality variability and to establish operating
procedures for managing the expected variability. Panda is aware
of these needs and has initiated control systems to handle it. It
is not realistic to expect the system in the Tangshan Region,
which is producing 21 million tonnes per year, to change because
of a single customer using 450,000 tonnes per year.
Coal product quality will vary. One hundred and seventeen years
of mining coal in this area has taught the operators that a given
coal seam within a geologic structure is usually very consistent.
However, the amount of out of seam dilution will vary
significantly. In recent times, China has had a shortage of coal
for domestic consumption and as a result, the political and
economic system has dictated that "if it's black, bring it to the
surface and use it". Therefore, the material coming out of the
mines typically is high in ash and is used in its raw state.
The mine managers quite openly admit that they mix bone coal with
higher grade coal (>5000 kcal/kg) since this product will sell
and is acceptable in the marketplace. From what Marston observed
of coal loaded in trucks, it is quite soft, friable and fine-
grained. This type of coal would be difficult to upgrade without
a wash plant. There has been no financial incentive to the mine
operators to separate the higher grade (lower ash) seams since
the state doesn't pay any premium for better quality, and the
newly instituted free market has not matured enough for the
consumers to pay a premium for better quality. As the Chinese
get more international exposure, and experience revenue benefits
from quality control, there will be changes, but over a period of
time.
In summary, it is reasonable to expect that a coal supply with
4,600 to 4,700 kilocalories per kilogram and 33-34% ash, will be
available from the Tangshan coal field for the life of the
facility.
Reliability Of Supply
The whole Luannan/Tangshan district needs power to satisfy its
industrial ambitions. The Luannan County government, who is
Panda's partner in the venture, is development oriented and will
make sure that the plant has the required coal supply even if it
has to come from mines other than the contracted ones. This, in
Marston's opinion gives more comfort to the reliability of the
supply issue than long-term western style contracts, which are
new to the Chinese coal industry.
Indications are that free market prices are increasing as more
and more free-market coal is being sold. Since the Power
Purchase Agreement for electricity sales has a pass-through
arrangement on the fuel supply cost and the local political-
management system will help control fuel-supply costs, then the
risk to the power plant investors should be minimal.
Transportation
Panda has executed a Coal Transportation agreement at locally
competitive rates. There appears to be a reasonable amount of
competition in the trucking business and plenty of local
entrepreneurs willing to bid on this type of business. The
condition of the roads could be an issue as far as rates are
concerned, but they are not severe enough to present a risk to
the deliverability of the coal. Parts of the road system do need
repair work, and with more heavy traffic this situation will be
aggravated.
On Site Management
Another plus is Panda's on site manager, Mr. John Zamlen, who has
operated coal fired power plants for five years. He has a good
understanding of local conditions and is rapidly establishing a
good relationship with the Chinese people involved. In China
this is very important.
2.0 BACKGROUND
In late 1994, Panda Energy International, Inc. ("Panda") formed
joint ventures in China and entered into a Power Purchase
Agreement with the North China Power Grid to supply 100 megawatts
of power to be generated by a new 100 MW power plant (2 X 50 MW
units) to be built in Luannan County, Hebei Province.
Panda has the Luannan County Government as a partner in it's
joint venture companies, Tangshan Panda Heat and Power Company,
Ltd. and Pan-Western Heat and Power Company Ltd. The North China
Power Group Co. is the electricity transmission agency for the
northern part of China.
Hebei province is the province which surrounds the municipalities
of Beijing and Tianjin. It reaches to the east coast of China
and is the center of a growing industrial region. Tangshan City
is located about 180 kilometers by road to the east of Beijing.
The town of Luannan, which is the seat of Luannan County and the
site of the proposed power plant is about 40 kilometers southeast
of Tangshan City. The Tangshan City location has access to port
cities in the area. See Figure 1.
Tangshan City is in the center of the Tangshan coal basin which
has been the source of energy and raw materials for its
industrial base. The predecessor of the Kailuan Coal Mining
Administration was established in 1878 and currently produces
about 18 million tonnes of coal per year. The region was
occupied by the Japanese during World War II, during which time
the Japanese expanded the coal mining operations and shipped the
coal to Japan.
Given the proximity of these coal fields to Panda's proposed
power plant at Luannan, coal produced in the Tangshan region was
selected by Panda to be the most advantageous source of fuel for
the power plant.
[FIGURE 1
PROJECT LOCATION MAP]
In January of 1997 Panda engaged Marston & Marston, Inc.
("Marston") to provide such consulting services, as may be
requested by Panda, for Panda's proposed power plant to be
constructed in Luannan County and other power projects using coal
as a fuel. The initial assignment was to visit the coal mines
contracted to supply the proposed power plant and to assess the
local conditions pertaining to transporting the coal by trucks
from the mines to the power plant. These contracts were entered
into by Panda as the result of a study done in the December 1995
- - January 1996 time frame by Anderson & Schwab, Inc. and
specifically Robert E. Golkosky (now with Marston). This most
recent site visit by L.J. Pituley of Marston & Marston, Inc. took
place from January 22, through January 29, 1997.
Marston was also requested to prepare this summary report as
outlined in Panda's memo of January 21, 1997 to Robert E.
Golkosky of Marston.
3.0 BASIC DATA PROVIDED BY PANDA
In preparing this report, Marston relied, in part, on the
following data and material provided by Panda:
- - A report prepared by Robert E. Golkosky of Anderson & Schwab,
Inc. (now with Marston) dated March 29, 1996 including copies
of Coal Supply Agreements with 6 mines.
- - A memo titled "Clarification from Tangshan Municipal Coal
Industry Bureau", signed by Han Wan-xu, Tangshan Municipal
Coal Industry Bureau and dated February 10, 1996. Under
official seal.
- - A memo from the Kailuan Coal Mining Administration titled
"Clarification of Coal Reserves and Production of Kailuan
Coal Mining Administration" dated March 7, 1996. Under
official seal.
- - A certified translation of a signed copy of the Coal
Transportation Agreement between Luannan County State-Owned
Transportation Company owned and operated by Luannan County
and Tangshan Panda Heat and Power Co. Ltd. And Tangshan Pan-
Western Heat and Power Co. Ltd.
- - A letter from John R. Zamlen General Manager of Pan-Western
Energy Corp. on Tangshan Panda Heat and Power Co. Ltd.
Letterhead to Mr. Zhao Xiucheng, General Manager, Luannan
County Heat and Power Plant.
- - Analytical results and discussion of the above mentioned spot
sample by the Harbin Power System Engineering and Research
Institute dated December 9, 1996 and an English translation
dated January 16, 1997.
- - Daily Qianjiaying Mine heating values of coal produced during
the months of October and November 1995.
- - Luannan Thermal Power Plant, a General Discussion on Coal
Supply, Quality Control and Management prepared by J.R.
Zamlen dated October 9, 1996.
An information packet on the Kailuan mining area produced by the
Kailuan Coal Mining Administration.
4.0 COAL PRODUCTION AND RESERVES
General
China as a country reportedly produces in the order of 1.2 to 1.3
billion tonnes of raw coal per year. Only a small percentage of
the total is upgraded by washing or by coal processing for the
internal coking operations and for export. Thermal coal for
domestic consumption is not upgraded beyond screening and hand
picking of waste rock off the product conveyor belts.
Coal transportation in China is mainly by railroad and the
railroad system is inadequate to deliver coal from the producing
regions to the consuming industrial areas in the quantities
required. While China exports a small amount of coal from the
northern producing areas it also imports coal to the southern
industrial areas. Locally, truck transportation is used.
The Tangshan coal field covers an area of some 670 square
kilometers and contains some 7.6 billion tonnes of geological
reserves down to a depth of 1000 meters (3281 feet). See Figure
2. The field consists of three basins, two of which Kaiping and
Chi Zhoushan are being commercially exploited and the third
smaller block Jiyu is not yet developed. It lies to the
southeast of the two larger structures.
The coal field is all of the same geological formation but
erosion has removed some of the anticlinal structures thus
creating the separate basins. Within the basins the structures
range from gently dipping monoclines to steeply dipping (nearly
vertical) and faulted complex structures. The general strike of
the anticlines and synclines is NE - SW.
While the seams lens out in places and thicken in other places
there are consistently six mineable seams over a large part of
the area. A coal seam that is 0.7 meters thick or more is
considered to be mineable.
Differing underground mining methods are used to cope with the
geologic structures present in the area, however an overall
mining coal recovery at 50% of the geologic reserve is based on a
long history of mining in the area. Longwall mining operations
report 80 to 90% coal recovery from panels.
By token of the same long history, the Chinese have found that
the coal quality, when all seams are blended together is
relatively consistent. In the mining process not all seams are
always mined in the same proportion and this leads to some
substantial swings in the ash content of the coal on a day to day
basis.
Projections for future coal quality based on limited drill
results and on the historic quality of the coal that has been
produced. Some blending takes place to eliminate very low heat
content coal by blending it with the higher heat content coal.
Annual production from the Tangshan coal field is 21 million
tonnes. Six million tonnes is clean coal and is utilized for
coking, gas production and export. Note that the main rail line
from Datong, and Beijing to the coal port of Qinhuangdao
straddles the Tangshan coal field. Wash plant reject and the raw
coal is used for thermal power generation in North and East
China.
Locally coal is distributed by truck and trailer units of varying
sizes up to about 15 tonnes in combined capacity.
[FIGURE 2
MAP OF TANGSHAN BASIN COAL MINE LOCATIONS]
Kailuan Coal Mining Administration
This Administration, owned by the Central Government, operates
ten major mines in the Tangshan coal field and produces some 18
million tonnes of coal per year. The Kailuan Coal Mining
Administration has under its control approximately 72% of the
total 7.6 billion tonnes of geological coal reserve in the
Tangshan coal fields, or 5.0 billion tonnes. See Appendix 2.
Reserves are re-estimated on an annual basis.
The Qianjiaying Coal Mine is one of the larger Kailuan mines with
1995 production of 3.34 million tonnes and 1996 production of
3.67 million tonnes of 4700 kilo calories/kilogram, heat content
and 34 to 35% ash coal. This mine has six longwall faces. Five
of these faces are equipped with mechanical shearers and one is
semi-mechanical. The mine has available to it nine mechanical
shearers and one more is on order. The mining operation is 600
meters below sea level and does not have any serious water,
temperature or roof control problems according to mine
management. The mine operates seven days per week with two
production shifts and one maintenance shift. The mine only shuts
down for 3 days every December for equipment checking and major
maintenance.
All the coal produced at the Qianjiaying mine goes for thermal
power generation with as much as one third of the production
being sold on the free market. Up to 300,000 tonnes per year,
some 70% of the total annual requirement for the proposed Luannan
power plant is contracted to be supplied by this mine.
Tangshan Municipal Coal Industry Bureau
The Tangshan Municipal Coal Industry Bureau controls some 546
million tonnes of mineable coal reserves. See Appendix 2. This
organization consists of more than 180 individual mines ranging
in annual individual production up to 80,000 tonnes per year.
These mines are locally owned and not owned by the Central
Government. One new mine under development will have production
capability of up to 300,000 tonnes per year while another mine is
to sink a second shaft which will increase its production
capability to 210,000 tonnes per year. These mines operate in
the shallower leavings of former larger scale mines and in
structurally complex areas. These mines generally operate in the
50 to 300 meter depth range but the larger proposed mine is
planning to mine coal down to 660 meters. The current combined
annual production of these mines is some 4 million tonnes per
year of a variable coal quality product.
These smaller mines utilize a variety of mining methods but most
are labor intensive. Some of these mines can increase production
fairly quickly but others can not as they are producing at
capacity. Of the five mines that have contracts with Panda two
are expanding their capacity, two can increase their production
and one is at its production limit. All these mines say that the
Panda power plant will have first priority for their coal
production.
The five mines visited by Marston in this jurisdiction stated
that they do not have any water, methane or roof control problems
nor geological structural problems.
The present combined production capacity of the five mines is
400,000 tonnes annually. When the two new shafts are completed
by late 1998 or early 1999 the combined production capacity will
be 750,000 tonnes per year. A number of these operations have
other producing mines of similar coal quality that they could
call on in case of unforseen problems at the contracted mines.
These mines jointly will be able to provide the 150,000 tonnes or
more if required annually, for the Panda power plant in addition
to the 300,000 tonnes contracted for from Kailuan's Qianjiaying
Mine.
5.0 COAL QUALITY
As indicated earlier in the report mine forecasts of future coal
quality are based on limited drill hole information and on
historic records of coal quality. The Qianjiaying mine is mining
the continuation of known seams and carries a small risk of any
radical quality change. Moreover, the five smaller mines are
mining the edges of seams that have been mined before or
structurally difficult areas in the proximity of previously mined
areas and should not encounter any great quality surprises.
There will be day to day variations because of variations in
seams being mined but the long term average (month to month)
should not change more than 5% up or down from the committed heat
content of the As Received coal supply.
On a mine by mine basis the situation is as follows:
Qianjiaying Mine: The 1995 heat content was 4,500 kiloCal/kg and
the 1996 heat content was 4,700 kiloCal/kg at a 34% to 35% ash
level. Mine management expressed the opinion that to increase
the heat content to 4,750 kiloCal/kg in 1997 is not very
realistic. It is most probable that the mine will be able to
meet its long term commitment to Panda to supply 4,600 kiloCal/kg
coal at a 35% to 36% ash level on an As Received basis.
Tangshan Liu Guantun Mine: From the analysis given for each seam
in the new mine feasibility study the seam ash content varies
from 18% to 23.7% on an As Received basis. If one takes an
average ash level of 22% and 7% total moisture then the heat
content of 5,595 kiloCal/kg is possible on an all seams blended
basis. How much dilution or in seam rock will be added during
the mining process is unknown although the mine staff insist
dilution is less than 1%. In summary it is likely that the
contract heat content of 4,900 kiloCal/kg and 30% ash will be
achieved or even exceeded.
LeTing County Coal Mine: The current mine production produces a
heat content of 4,600 kiloCal/kg and 38% ash however coal from
the new shaft area mine is expected to be some 5,400 kiloCal/kg
at 28.9% ash on an As Received basis. This seems to be a high
ash level for 7.59 meters of coal with an ash level of 17% and
1.6 meters of 31% ash, as stated in a preliminary feasibility
study. One can only assume that in-seam partings and dilution
make up the extra ash content in the proposed product quality.
In any event the contract heat content of 4,900 kiloCal/kg should
be readily achievable.
Chang Li County Coal Mine: The heat content of the current
production was given as ranging between 4,000 and 4,500
kiloCal/kg and 34 to 40% ash on an As Received basis. The owners
have two other mines one of which produces 4,500 to 4,700
kiloCal/kg coal and the third mine has the same coal quality as
the first mine.
This mine may not be able to meet the average quality of 4,900
kiloCal/kg and will have some difficulty in staying above the
minimum 4,400 kiloCal/kg. It is likely to be the least
consistent coal supplier.
Luannan County Coal Mine: The quality of the coal produced in
the last two years has an ash content variation of 26% to 36% and
averages on a partially air dried basis about 31% ash and 5,000
kiloCal/kg heat content. This mine, with careful management,
should be a good coal supplier for the power plant as it can meet
the contract specification.
Zunhau Coal Mine: The coal quality was stated as being 25% to
26% ash and 4,500 to 5,000 kiloCal/kg. This appears to be
inconsistent with the reported quality of all the other mines in
the area. With a 25% to 26% ash level the heat content should be
over 5,000. The mine should fall into the heat content zone
between 4,400 and 4,900 kiloCal/kg as specified in the contract.
In summary, it is reasonable to expect that a coal supply with
4,600 to 4,700 kiloCal/kg and 33% to 34% ash, for the power plant
will be available from the Tangshan coal field for the life of
the facility.
Other Coal Analyses
Moisture: The total moisture ranges between 6% and 10% depending
on precipitation and length of time in the stockpile. The
inherent moisture varies from 0.6% to more than 2% but on average
for freshly mined coal is less than 1.0%.
Sulphur: As a generalization the thinner seams (less than 1
meter) have a higher sulfur content consequently the impact on
the blended coal is minimized. The sulphur values in the
analysis we have had access to range from 0.3% to 4.53% in
individual seams. An average sulphur content of 1.25% is a
reasonable number for a long term coal supply. Mines producing
from a number of thin coal seams should be monitored very closely
to make sure they do not exceed the sulphur specification.
Volatiles: The volatile content on a dry ash free basis is in
excess of 30%. On an air dried basis the volatiles vary from a
low of 20% to values in the 38% range. It is not possible to
establish a volatile value for 33% to 35% ash coal from the data
we have available to us.
Sodium Oxide: As a percentage of the ash the value is less than
one percent and quite frequently less than one half of one
percent.
Chlorine: From the limited information available the chlorine
content is low with a range of 0.035% to 0.10%. This is based on
one set of average analyses for a mine with 7 seams.
6.0 COAL TRANSPORT
Since the power plant is located near the Tangshan coal field it
is reasonable to haul the coal from the mines to the plant with
trucks.
There appears to be a good supply of coal hauling trucks in the
area with ownership ranging from individuals to small companies
and the local County government.
The shortest coal haul from the Qianjiaying mine is approximately
28 kilometers, which is also the largest tonnage, and the longest
haul distance, approximately 48 kilometers is from the LeTing
mine.
The road system in the area is reasonable and most of the roads
are paved.
A coal trucking contract has been negotiated and executed with
Luannan County State - owned Transportation Company. A normal
cost of trucking in the area as of January 1997 is 0.3 RMB Yuan
(approximately $0.036 US) per tonne kilometer but bad road
conditions in some areas have pushed the price up to 0.35 to 0.4
RMB Yuan per tonne kilometer. The trucking company is
responsible for any coal loss. The time of Marston's visit was
also the high demand season for coal in this area.
7.0 PANDA FUEL SUPPLY STRATEGY
Panda developed a fuel supply strategy that focuses on providing
a stable, long-term coal supply consisting of the following
elements.
Utilize coal from the Tangshan coal field which has a long
history of producing good quality coal and has coal reserves that
will continue to be exploited for many years into the future. In
other words a stable long-term coal supply.
The close proximity of the coal field to the proposed power plant
site allows Panda to take advantage of the local trucking
opportunity and eliminates the risk of transporting by railroad,
a system that is overloaded and not dependable.
An assessment was made of the mines in the area and the decision
was made to negotiate a long-term supply contract with a major
State owned and operated mine (1996 production 3.67 million
tonnes) for up to 70% of the power plants fuel requirement. For
the other 30% of the fuel requirement Panda negotiated contracts
with five independent mines, some of which operate more than one
mine. Panda has built into the contracts the opportunity to pick
and choose the better quality coal being produced from the
individual mines at any given time.
The price of the coal is to be determined annually for the
Kailuan contract and monthly for the Tangshan Coal Industry
Bureau Mines, based on the prevailing market price, for a given
quality of coal, in the Tangshan area.
Specific conditions of the coal supply contracts are as follows:
A. Kailuan Coal Administration Mine Contract
The Buyer has the right to determine the tonnage to be purchased
up to 300,000 annual tonnes. Buyer and Seller agree that the
primary mine to supply coal for Panda is the Qianjiaying Mine.
The Seller also represents that sufficient reserves and
production capability exist within the Kailuan Coal Mining
Administration.
The Buyer is to provide to the Seller annual and monthly
tonnage requirements in approximately equal monthly amounts.
Buyer and Seller will meet every November to mutually
determine the market price, shipping schedule and other
conditions for a coal supply contract for the following year.
Effective with the first purchase of coal, the Agreement shall
continue for a term of ten years.
Coal quality specifications with Average Quality and
Acceptable Limits are spelled out for Total Moisture, Ash,
Sulphur, Heat Value Top Size and Fines for acceptance by the
buyer. The Seller will sample the coal and have analysis
performed and the Buyer can dispute the analysis if a significant
difference exists. A third party independent analysis shall be
binding. Buyer has the right to reject and suspend coal
deliveries that do not meet specifications. Weight is to be
determined by Sellers certified scales. Market price shall be
the average annual price in RMB Yuan per Kilo calorie for coal
sold by the Seller for the following year under similar terms and
conditions.
Payments by the Buyer are to be made within 5 to 15 days
after the end of each month. The agreement is governed by the
laws of the Peoples Republic of China. Either party can
terminate the agreement if the other party materially breaches
the contract and does not cure the breach within 60 days. Lender
Approval, Peoples Republic of China National Energy Policy
changes and certain Force Majuere clauses for circumstances
beyond the reasonable control of either party are included.
B. Tangshan Coal Industry Bureau Mine Contracts
Buyer has the right to buy up to a set tonnage from each
mine for a period of ten years at market prices. Buyer will
notify Seller prior to the first day of each month of the
requirements for the following month.
Coal Quality Specifications with Average Quality and
Acceptable Limits are spelled out for total Moisture, Ash,
Sulphur, Heat Value, Coal Size and Fines for acceptance by the
Buyer.
Buyer and Seller will analyze coal samples collected at the
Buyer's facilities. In case of dispute an independent third
party analysis will be binding. Buyer can reject coal outside
the Acceptable Limits and the Supplier shall replace it with
acceptable quality. Weight of the coal sold and purchased shall
be determined by certified scales maintained by the Seller. A
dispute mechanism is in place.
Market Price shall be the average monthly price in RMB Yuan
per tonne for coal sold by mines regulated by the Tangshan
Municipal Coal Industry Bureau under similar terms and
conditions. The Market Price is based on heating value and if
the quality shipped varies significantly from the average Quality
specification the Buyer and Seller will discuss the reasons for
the variation.
Payment shall be made by the Buyer including adjustments
within 15 days of each month end. Buyer will pay an annual
Reservation Fee of between 400,000 RMB Yuan and 560,000 RMB Yuan
per year which shall be applied against coal purchased over the
Current year. The Buyer is not committed to any minimum monthly
take.
The Agreement is governed by the laws of the Peoples
Republic of China. Either party can terminate the agreement if
the other party breaches the contract and does not cure the
breach within 60 days. Buyer upon notice to Seller can terminate
the agreement due to non-approval by the Lenders. Notices or
other communications shall be in writing.
C. Coal Transportation Agreement
The agreement is with the Luannan County State-Owned
Transportation Company ("Carrier") owned and operated by the
Luannan County is for 10 years from the date of the first truck
deliveries for up to 500,000 tonnes per year. Buyer will provide
monthly delivery schedules which can be adjusted weekly. Failure
to deliver by the Carrier allows the Buyer to make alternate
arrangements and incremental costs shall be to the Carriers
account. The Buyer is reimbursable by the Carrier for weight
differences greater than four tenths of one percent between the
Suppliers' and Buyers' scales.
The first year of coal deliveries shall be at 15 RMB Yuan
per tonne and the price will then be negotiated annually.
Payments to Carrier shall be within 15 days after each month end.
The Carrier represents that it owns and operates a
sufficient number of trucks to supply the Buyer's coal
requirements. If necessary the Carrier will supplement its truck
fleet. The Carrier is responsible for all licenses, permits and
for meeting all government obligations.
The Agreement is subject to the laws of the Peoples Republic
of China. Either party may terminate the agreement under certain
conditions. Subject to the Buyer obtaining its Lender's approval
the agreement can be canceled. Notices are to be in writing.
The fuel supply strategy, coal supply agreements and the coal
transportation agreement are appropriate for the conditions and
situation as it exists in China. Given that cost of the fuel
supply is a pass-through arrangement in the Power Purchase
Agreement, the risk exposure for the project will be minimal in
terms of the delivered fuel price.
Future Central Government actions cannot be definitively forecast
but current indications are that power supply development is an
important factor in the country's development plan.
[Marston & Marston Letterhead]
MARSTON & MARSTON, INC.
Officer's Certificate
I, Richard Marston, of Marston & Marston, Inc., DO HEREBY
CERTIFY that:
Since April 11, 1997, no event affecting our report entitled
"Review of the Coal Supply Arrangements for the Luannan Power
Project of Panda Energy International" dated April 11, 1997 (the
"Fuel Consultant's Report") or the matters referred to therein
has occurred (i) which makes untrue or incorrect in any material
respect, as the date hereof, any information or statement
contained in the Fuel Consultant's Reports or in the Prospectus
relating to the offering of 12-1/2% Registered Senior Secured
Notes due 2004 by Panda Global Energy Company (the "Prospectus")
under the captions ""Summary - Independent Engineer's and
Consultant's Reports - Luannan Engineering Reports," "Summary -
Independent Engineers' and Consultants' Reports - Luannan Coal
Consultant's Report," and "Independent Engineers and Consultants
- - Luannan Facility" 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 captions set forth above,
in the light of the circumstances under which they were made, not
misleading.
WITNESS my hand this 6th day of June 1997.
By: /s/ Richard R. Marston
Name: Richard R. Marston, P.E.
Title: Vice President & General Counsel
APPENDIX G
OWNERSHIP STRUCTURE OF THE ISSUER, THE COMPANY,
PANDA INTERNATIONAL AND CERTAIN OF THEIR SUBSIDIARIES
PANDA ENERGY
INTERNATIONAL, INC.
("PANDA INTERNATIONAL")
PANDA GLOBAL
____________ HOLDINGS, INC. _______________
| 100% (THE "COMPANY") 100% |
Panda Energy Panda Global
Corporation Energy Company
(Texas) (the "Issuer")
("PEC") |
| |
Panda Interfunding Pan-Sino
Corporation Energy Development
("PIC") Company, LLC*
| ("Pan-Sino")
___________|_____________ |
| 100% | 100% |
Panda Interholding Panda Funding Pan-Western Energy
Corporation Corporation Corporation LLC**
("Interholding") ("PFC") ("Pan-Western")
| |
|_____________________________|____________________ |
| 100% | 100% | 100% | 100% | 100% |
Panda- PRC II Panda Panda Brandywine |
Rosemary Corporation Brandywine Energy Water |
Corporation ("PRC II") Corporation Corp. Company |
("PR Corp.") ("PBC") (Delaware) |
| | | | |
_____|_____________|____ ____|____________|___ |
Panda-Rosemary, L.P.*** Panda-Brandywine, L.P. |
(the "Rosemary (the "Brandywine |
Partnership") Partnership") |
| |
| _______________________________|____
_________|____________ | | | |
Panda-Rosemary Funding 87.92% | 87.92% | 87.92% | 87.92% |
Corporation Tangshan Tangshan Tangshan Tangshan
("the "Rosemary Issuer") Panda Pan- Cayman Pan-Sino
(a "Joint (a "Joint (a "Joint (a "Joint
Venture") Venture") Venture") Venture")
| | | |
12.08% | 12.08% | 12.08% | 12.08% |
|___________|___________|__________|
| |
Luannan County Partners
(the "County Partners")
* The remaining 4.5% equity interest in Pan-Sino is
owned by NDR. This equity interest can increase to a
maximum of 10%.
** The remaining 1% equity interest in Pan-Western is
owned by Chinamac.
*** NNW, Inc. holds a cash flow participation in the
distributions from the Rosemary Partnership (which the
Issuer believes is 0.433% and would increase to 1.732%
after 2008 based on projected distributions). See
"Description of the Projects-The Rosemary Facility-Cash
Flow Participation" and "Legal Proceedings-NNW, Inc.
Proceeding."
No dealer, salesman or other person has
been authorized to give any
information or to make any $155,200,000
representations not contained in this
Prospectus, and, if given or made,
such information or representations [ L O G O ]
must not be relied upon as having been
authorized by the Company or the
Issuer. This does not constitute an
offer to sell, or a solicitation of an OFFER TO EXCHANGE
offer to buy, the securities offered
hereby in any jurisdiction where, or 12-1/2% Registered Senior Secured
to any person to whom, it is unlawful Notes due 2004
to make such offer or solicitation. which have been registered under the
The delivery of this Prospectus at any Securities Act
time and any sale made hereunder does for any and all outstanding
not imply that the information 12-1/2% Senior Secured Notes due 2004
contained herein is correct as of any of
time subsequent to the date hereof. PANDA GLOBAL ENERGY COMPANY
Fully and Unconditionally Guaranteed
Enforcement of Civil Liabilities i By PANDA GLOBAL HOLDINGS, INC.
Defined Terms i
Available Information i
Disclosure Regarding
Forward-Looking Statements ii PROSPECTUS
Prospectus Summary 1
Risk Factors 21
Business of The Issuer, The Company,
Panda International and Their The Exchange Agent is:
Subsidiaries 42 BANKERS TRUST COMPANY
Use of Proceeds 45
Capitalization 46 Facsimile Transmission:
Unaudited Pro Forma Consolidated (615) 835-3701
Financial Data of the Company 47 Confirm by Telephone:
Selected Financial Data of the (615) 835-3572
Issuer 51
Selected Financial Data of the By Overnight Courier or Certified Mail:
Company 52 BT Services Tennessee, Inc.
Management's Discussion and Corporate Trust & Agency Group
Analysis of Financial Condition Reorganization Unit
and Results of Operations of the 648 Grassmere Park Road
Issuer 53 Nashville, TN 37211
Management's Discussion and
Analysis of Financial Condition By Hand Delivery:
and Results of Operations of the Bankers Trust Company
Company 53 Corporate Trust & Agency Group
The Exchange Offer 58 Receipt & Delivery Window
Certain Tax Considerations of the 123 Washington Street, 1st Floor
Exchange Offer 66 New York, NY 10006
Description of the Projects 68
Foreign Exchange System in the PRC By Mail:
and Exchange Rate BT Services Tennessee, Inc.
Information 91 Reorganization Unit
Description of Principal Documents P. O. Box 292737
Relating to the Luannan Facility 93 Nashville, TN 37229-2737
Management 107
Legal Proceedings 109
Description of Other Indebtedness 112
Description of the Exchange _________________, 1997
Notes, the Exchange Notes
Guarantee, the Issuer Loan, the
Shareholder Loans and the
Collateral Documents 125
Plan of Distribution 187
Experts 188
Legal Matters 189
Index to Financial Statements F-1
Certain Defined Terms A-1
The Electric Power Industry and
Regulation in the PRC and the United
States B-1
Consolidated Pro Forma Report C-1
Luannan Engineering Report D-1
Luannan Coal Consultant's Report E-1
Ownership Structure of the Issuer,
the Company,Panda International
and Certain of Their Subsidiaries G-1
Until _________, 1997 (90 days after the
date of this Prospectus), all dealers
effecting transactions in the
securities offered hereby, whether or
not participating in this
distribution, may be required to
deliver a Prospectus. This delivery
requirement is in addition to the
obligations to dealers to deliver a
Prospectus when acting as underwriters
with respect to their unsold
allotments or subscriptions.
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 12-1/2% Registered Senior Secured Notes
due 2004 of Panda Global Energy Company (the "Registrant") covered by this
Registration Statement, all of which will be paid by the Registrant and
Panda Global Holdings, Inc. (a "Co-Registrant"):
Securities and Exchange Commission Registration Fee $ 43,947
Accounting Fees and Expenses 30,000
Legal Fees and Expenses 60,000
Exchange Agent and Trustee Fees and Expenses 15,000
Independent Engineers' Fees and Expenses 25,000
Fuel Consultants' Fees and Expenses 15,000
Miscellaneous 11,053
--------
Total $200,000
========
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation of the Co-Registrant provides 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 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.
The Articles of Association of the Registrant provide that the directors,
any independent director, the officers and any trustee for the time being
acting in relation to any of the affairs of the company and their heirs,
executors, administrators and personal representatives respectively shall be
indemnified out of the assets of the Registrant from and against all
actions, proceedings, costs, charges, losses, damages and expenses which
they or any of them shall or may incur or sustain by reason of any act done
or omitted in or about the execution of their duty in their respective
offices or trusts except such (if any) as they shall incur or sustain by or
through their own willful neglect or default respectively and no such
director, independent director, officer or trustee shall be answerable for
the acts, receipts, neglects or defaults of any other director, officer or
trustee or for joining in any receipt for the sake of conformity or for the
solvency or honesty of any banker or other persons with whom any monies or
effects belonging to the Registrant may be lodged or deposited for safe
custody or for any insufficiency of any security upon which any monies of
the Registrant may be invested or for any other loss or damage due to any
such cause as aforesaid or which may happen in or about the execution of his
office or trust unless the same shall happen through the willful neglect or
default of such director, independent director, officer or trustee.
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 March 10, 1997, the Registrant issued one (1) common share (U.S. $1.00
par value) to Mr. Anthony B. Travers, a Cayman Islands resident, and one (1)
common share (U.S. $1.00 par value) to Ms. Sophia Dilbert, a Cayman Islands
resident, for the consideration of $10 each. Exemption from United States
registration of such common shares is claimed under Section 4(2) of the
Securities Act and because such transactions were performed entirely in the
Cayman Islands.
On March 10, 1997, the Co-Registrant issued 1,000 shares of common stock,
$.01 par value, to Panda Energy International, Inc., a Texas corporation,
for the consideration of $1,000. Exemption from registration of such shares
of common stock is claimed under Section 4(2) of the Securities Act.
Senior Secured Notes and Guarantee
On April 22, 1997, the Registrant issued and sold for cash, at 93.444% of
aggregate principal amount, to Donaldson, Lufkin & Jenrette Securities
Corporation, $155,200,000 aggregate principal amount of its 12-1/2% Senior
Secured Notes due 2004 (the "Old Notes"). Donaldson, Lufkin & Jenrette
Securities Corporation subsequently sold the Old Notes to qualified
institutional buyers and institutional accredited investors. The Old Notes
are fully and unconditionally guaranteed by Panda Global Holdings, Inc., the
Co-Registrant. The Registrant paid total commissions and underwriting
discounts equal to $4,359,753 to Donaldson, Lufkin & Jenrette Securities
Corporation in connection with such transaction. Exemption from the
registration of the Old Notes and the guarantee thereof is claimed under
Section 4(2) of the Securities Act, and Rule 144A and Regulation S
promulgated thereunder.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit
Number Exhibit Description
3.01 Memorandum of Association of Panda Global Energy Company. (2)
3.02 Articles of Association of Panda Global Energy Company. (2)
3.03 Certificate of Incorporation of Panda Global Holdings, Inc. (2)
3.04 Bylaws of Panda Global Holdings, Inc. (2)
4.01 Trust Indenture dated July 31, 1996, among Panda Funding
Corporation, Panda Interfunding Corporation and Bankers Trust
Company, as Trustee. (1)
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. (1)
4.03 Second Supplemental Indenture to Trust Indenture, dated January 6,
1997, among Panda Funding Corporation, Panda Interfunding
Corporation and Bankers Trust Company, as Trustee. (1)
4.04 Form of 11-5/8% Pooled Project Bonds, Series A due 2012 of Panda
Funding Corporation. (1)
4.05 Form of 11-5/8% Pooled Project Bonds, Series A-1 due 2012 of Panda
Funding Corporation. (1)
4.06 Registration Rights Agreement, dated July 31, 1996, among Panda
Funding Corporation, Panda Interfunding Corporation and Jefferies
& Company Inc. (1)
4.07 Collateral Agency Agreement, dated July 31, 1996, among Panda
Interfunding Corporation, Panda Funding Corporation and Bankers
Trust Company, as Trustee and Collateral Agent. (1)
4.08 Subrogation and Contribution Agreement, dated July 31, 1996, among
Panda Interfunding Corporation, Panda Funding Corporation and
Panda Interholding Corporation and each PIC U.S. Entity that is a
signatory thereto. (1)
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. (1)
4.10 Trust Indenture, dated April 22, 1997, between Panda Global Energy
Company and Bankers Trust Company, as Trustee. (2)
4.11 First Supplemental Indenture between Panda Global Energy Company
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
4.12 Trust Indenture, dated April 22, 1997, between Panda Global
Holdings, Inc. and Bankers Trust Company, as Trustee. (2)
4.13 First Supplemental Indenture between Panda Global Holdings, Inc.
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
4.14 Registration Rights Agreement among Panda Global Energy Company,
Panda Global Holdings, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, dated April 22, 1997. (2)
4.15 Form of 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company. (2)
4.16 Form of 12-1/2% Registered Senior Secured Note due 2004 of Panda
Global Energy Company. (2)
5.00 Legal Opinion of Chadbourne & Parke LLP, counsel for the
Registrant and Co-Registrant. (3)
10.01 PIC Loan Agreement, dated July 31, 1996, between Panda Funding
Corporation, as Lender, and Panda Interfunding Corporation, as
Borrower. (1)
10.02 Loan Agreement, dated July 31, 1996, between Panda Interfunding
Corporation, as Lender, and Panda Cayman Interfunding Company, as
Borrower. (1)
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. (1)
10.04 Security Agreement, dated July 31, 1996, between Panda
Interfunding Corporation and Bankers Trust Company, as Collateral
Agent. (1)
10.05 Security Agreement, dated July 31, 1996, between Panda Funding
Corporation and Bankers Trust Company, as Collateral Agent. (1)
10.06 Security Agreement, dated July 31, 1996, between Panda Cayman
Interfunding Company, as Debtor, and Panda Interfunding
Corporation, as Secured Party. (1)
10.07 Stock Pledge Agreement (Panda Interfunding Corporation Stock),
dated July 31, 1996, between Panda Energy Corporation and Bankers
Trust Company, as Collateral Agent. (1)
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. (1)
10.09 Trust Indenture, dated July 31, 1996, among Panda-Rosemary Funding
Corporation, Panda-Rosemary, L.P. and Fleet National Bank, as
Trustee. (1)
10.10 First Supplemental Indenture to Trust Indenture, dated July 31,
1996, among Panda-Rosemary Funding Corporation, Panda-Rosemary,
L.P. and Fleet National Bank, as Trustee. (1)
10.11 Form of 8-5/8% First Mortgage Bonds due 2016 of Panda-Rosemary
Funding Corporation. (1)
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. (1)
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, all as named therein. (1)
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. (1)
10.15 Security Agreement, dated July 31, 1996, by Panda-Rosemary, L.P.
to Fleet National Bank, as Collateral Agent. (1)
10.16 Security Agreement, dated July 31, 1996, by Panda-Rosemary Funding
Corporation to Fleet National Bank, as Collateral Agent. (1)
10.17 General Partner Pledge and Security Agreement, dated July 31,
1996, by Panda-Rosemary Corporation to Fleet National Bank, as
Collateral Agent. (1)
10.18 Limited Partner Pledge and Security Agreement, dated July 31,
1996, by PRC II Corporation to Fleet National Bank, as Collateral
Agent. (1)
10.19 Stock Pledge and Security Agreement, dated July 31, 1996, by Panda
Interholding Corporation to Fleet National Bank, as Collateral
Agent. (1)
10.20 Stock Pledge and Security Agreement, dated July 31, 1996, by Panda-
Rosemary, L.P. to Fleet National Bank, as Collateral Agent. (1)
10.21 Partnership Guaranty, dated July 31, 1996, by Panda-Rosemary, L.P.
in favor of Fleet National Bank, as Trustee. (1)
10.22 Reimbursement Agreement, dated July 31, 1996, between Panda-
Rosemary, L.P., Panda-Rosemary Funding Corporation and Bayerische
Vereinsbank AG, New York Branch. (1)
10.23 Irrevocable Direct Pay Letter of Credit issued by Bayerische
Vereinsbank AG. (1)
10.24 Construction Loan Agreement and Lease Commitment, dated March 30,
1996, between Panda-Brandywine, L.P. and General Electric Capital
Corporation. (1)
10.24.1 Participation Agreement, dated December 18, 1996, among Panda-
Brandywine, L.P., Panda Brandywine Corporation, General Electric
Capital Corporation, Fleet National Bank, First Security Bank,
National Association, and Credit Suisse. (1)
10.24.2 Letter of Credit Reimbursement Agreement, dated December 18, 1996,
among Panda-Brandywine, L.P., Panda Brandywine Corporation and
General Electric Capital Corporation. (1)
10.24.3 Equity Loan Facility Letter Agreement, dated December 18, 1996,
among Panda Brandywine Corporation, Panda Energy Corporation and
General Electric Capital Corporation. (1)
10.25 Bill of Sale and Severance Agreement, dated December 30, 1996,
between Panda-Brandywine, L.P., as Seller, and Fleet National
Bank, Owner Trustee, as Buyer. (1)
10.26 Facility Lease, dated December 18, 1996, between Fleet National
Bank, as Owner Trustee, and Panda-Brandywine, L.P. (1)
10.27 Steam Lease, dated as of December 18, 1996, between Panda-
Brandywine, L.P. and Brandywine Water Company. (1)
10.28 Amended and Restated Security Deposit Agreement, dated December
18, 1996, among Panda-Brandywine, L.P., Panda Brandywine
Corporation, General Electric Capital Corporation, Fleet National
Bank, Credit Suisse and First Security Bank, National Association.
(1)
10.29 Amended and Restated Deed of Trust and Security Agreement, dated
December 18, 1996, by Panda-Brandywine, L.P. to Chicago Title
Insurance Company, Trustee for the benefit of Fleet National Bank,
as Security Agent, Beneficiary. (1)
10.30 Amended and Restated Steam Lessee Security Agreement, dated
December 18, 1996, by Brandywine Water Company in favor of Fleet
National Bank, as Security Agent. (1)
10.31 Amended and Restated Security Agreement, dated December 18, 1996,
by Panda-Brandywine, L.P. in favor of Fleet National Bank, as
Security Agent. (1)
10.32 Amended and Restated Trust Agreement, dated December 18, 1996,
between General Electric Capital Corporation, as Owner
Participant, and Fleet National Bank, as Owner Trustee. (1)
10.33 Amended and Restated General Partner Pledge Agreement, dated
December 18, 1996, by Panda Brandywine Corporation to Fleet
National Bank, as Security Agent. (1)
10.34 Amended and Restated Limited Partner Pledge Agreement, dated
December 18, 1996, by Panda Energy Corporation to Fleet National
Bank, as Security Agent. (1)
10.35 Amended and Restated Stock Pledge Agreement, dated December 18,
1996, by Panda Interholding Corporation to Fleet National Bank, as
Security Agent. (1)
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. (1)
10.37 Power Purchase and Operating Agreement, dated January 24, 1989,
between Panda Energy Corporation and Virginia Electric and Power
Company. (1)
10.38 Amendment No. 1 to Power Purchase and Operating Agreement, dated
October 24, 1989, between Panda Energy Corporation and Virginia
Electric and Power Company. (1)
10.39 Amendment No. 2 to Power Purchase and Operating Agreement, dated
July 30, 1993, between Panda-Rosemary, L.P. and Virginia Electric
and Power Company. (1)
10.40 Fuel Supply Management Agreement, dated October 10, 1990, between
Panda-Rosemary Corporation and Natural Gas Clearinghouse. (1)
10.41 Amendment No. 1 to Fuel Supply Management Agreement, dated March
5, 1991, between Panda-Rosemary Corporation and Natural Gas
Clearinghouse. (1)
10.42 Gas Purchase Contract, dated April 12, 1990, between Panda-
Rosemary Corporation and Natural Gas Clearinghouse. (1)
10.43 Amendment of Gas Purchase Contract between Panda-Rosemary
Corporation and Natural Gas Clearinghouse. (1)
10.44 Pipeline Operating Agreement, dated February 14, 1990, between
Panda Energy Corporation, Panda-Rosemary Corporation and North
Carolina Natural Gas Corporation. (1)
10.45 Amendment No. 1 to Pipeline Operating Agreement, dated May 7,
1990, between Panda Energy Corporation, Panda-Rosemary Corporation
and North Carolina Natural Gas Corporation. (1)
10.46 Assignment Agreement, dated June 15, 1990, between Panda Energy
Corporation and Panda-Rosemary Corporation. (1)
10.47 Amendment No. 2 to Pipeline Operating Agreement, dated November
19, 1991, among Panda Energy Corporation, Panda-Rosemary
Corporation and North Carolina Natural Gas Corporation. (1)
10.48 Real Property Lease and Easement Agreement, dated June 9, 1989,
between The Bibb Company and Panda-Rosemary Corporation. (1)
10.49 First Amendment to Real Property Lease and Easement Agreement,
dated October 1, 1989, between The Bibb Company and Panda-Rosemary
Corporation. (1)
10.50 Second Amendment to Real Property Lease and Easement Agreement,
dated January 31, 1990, between The Bibb Company and Panda-
Rosemary Corporation. (1)
10.51 Leasehold and Real Property Assignment and Assumption Agreement,
dated January 6, 1992, between Panda-Rosemary Corporation and
Panda-Rosemary, L.P. (1)
10.52 Third Amendment to Real Property Lease and Easement Agreement,
dated March 15, 1996, between The Bibb Company and Panda-Rosemary,
L.P. (1)
10.53 Cogeneration Energy Supply Agreement, dated January 12, 1989,
between Panda Energy Corporation and The Bibb Company. (1)
10.54 First Amendment to Cogeneration Energy Supply Agreement, dated
October 1, 1989, between Panda Energy Corporation, Panda-Rosemary
Corporation and The Bibb Company. (1)
10.55 Service Agreement, dated July 26, 1996, between Transcontinental
Gas Pipe Line Corporation and Panda-Rosemary, L.P. (1)
10.55.1 Form of Amendment to Service Agreement, effective January 1, 1997,
between Transcontinental Gas Pipe Line Corporation and Panda-
Rosemary, L.P. (1)
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. (1)
10.57 Gas Transportation Agreement, dated August 1, 1996, between Texas
Gas Transmission Corporation and Panda-Rosemary, L.P. (1)
10.58 Assignment and Assumption Agreement, dated May 15, 1989, between
Panda Energy Corporation and Panda-Rosemary Corporation. (1)
10.59 Bill of Sale and Assignment and Assumption Agreement, dated
January 6, 1992, between Panda-Rosemary Corporation and Panda-
Rosemary, L.P. (1)
10.60 Assignment and Assumption Agreement, dated January 6, 1992,
between Panda Energy Corporation and Panda-Rosemary Corporation.
(1)
10.61 Power Purchase Agreement, dated August 9, 1991, between Panda-
Brandywine, L.P. and Potomac Electric Power Company. (1)
10.62 First Amendment to Power Purchase Agreement, dated September 16,
1994, between Panda-Brandywine, L.P. and Potomac Electric Power
Company. (1)
10.62.1 Present Assignment of Power Purchase Agreement, dated December 18,
1996, by Panda-Brandywine, L.P. to Fleet National Bank, as Owner
Trustee, for the benefit of General Electric Capital Corporation,
as Owner Participant. (1)
10.62.2 Amended and Restated Consent and Agreement, dated December 30,
1996, among Potomac Electric Power Company, Panda-Brandywine,
L.P., Fleet National Bank, as Security Agent and Owner Trustee,
General Electric Capital Corporation, as the issuer of the Letters
of Credit, the Interest Hedging Counterparty and Owner
Participant, First Security Bank, National Association, as
Indenture Trustee, and Credit Suisse, as Administrative Agent. (1)
10.63 Amended and Restated Turnkey Cogeneration Facility Agreement,
dated March 30, 1995, between Panda-Brandywine, L.P. and Raytheon
Engineers & Constructors, Inc. (1)
10.64 Raytheon Parent Guaranty, dated May 18, 1994, between Raytheon
Company and Panda-Brandywine, L.P. (1)
10.65 Steam Sales Agreement, dated March 30, 1995, between Panda-
Brandywine, L.P. and Brandywine Water Company. (1)
10.66 Gas Sales Agreement, dated March 30, 1995, between Cogen
Development Company and Panda Brandywine, L.P. (1)
10.67 Precedent Agreement, dated February 25, 1994, between Columbia Gas
Transmission Corporation and Panda-Brandywine, L.P. (1)
10.68 Amending Agreement, dated March 24, 1995, between Columbia Gas
Transmission Corporation and Panda-Brandywine, L.P. (1)
10.69 Amended and Restated FTS Service Agreement, dated March 23, 1995,
between Columbia Gas Transmission Corporation and Panda-
Brandywine, L.P. (1)
10.70 FTS Service Agreement, dated of as March 30, 1995, between Cove
Point LNG Limited Partnership and Panda-Brandywine, L.P. (1)
10.71 Gas Transportation and Supply Agreement, dated November 10, 1994,
between Panda-Brandywine, L.P. and Washington Gas Light Company.
(1)
10.72 Amended and Restated Site Lease, dated December 18, 1996, between
Panda-Brandywine, L.P. and Fleet National Bank, as Owner Trustee.
(1)
10.73 Amended and Restated Site Sublease, dated December 18, 1996,
between Fleet National Bank, Owner Trustee, as Sublessor, and
Panda-Brandywine, L.P., as Sublessee. (1)
10.74 Purchase Agreement, dated July 26, 1996, between Panda Funding
Corporation and Jefferies & Company, Inc. (1)
10.75 Additional Projects Contract, dated July 31, 1996, among Panda
Energy International, Inc., Panda Energy Corporation, and Panda
Interfunding Corporation. (1)
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. (1)
10.77 Non-Petition Agreement, dated July 31, 1996, among Panda Funding
Corporation, Panda Interholding Corporation, Panda Interfunding
Corporation and Panda (Cayman) Interfunding Company. (1)
10.78 Joint Venture Contract for Tangshan Panda Heat and Power Co.,
Ltd., dated September 4, 1994, between Luannan County Heat & Power
Plant and Pan-Western Energy Corp., LLC, as amended July 19, 1996
and November 18, 1996, respectively. (2)
10.79 Joint Venture Contract for Tangshan Pan-Western Heat and Power
Co., Ltd., dated September 3, 1994, between Tangshan Luanhua Co.
(Group) and Pan-Western Energy Corp., LLC, as amended July 19,
1996 and November 18, 1996, respectively. (2)
10.80 Joint Venture Contract for Tangshan Cayman Heat and Power Co.,
Ltd., dated May 11, 1996, between Luannan County Heat & Power
Plant and Pan-Western Energy Corp., LLC, as amended July 19, 1996
and November 18, 1996, respectively. (2)
10.81 Joint Venture Contract for Tangshan Pan-Sino Heat Co., Ltd., dated
May 28, 1996, between Luannan County Heat Company and Pan-Western
Energy Corp., LLC, as amended July 19, 1996 and November 18, 1996,
respectively. (2)
10.82 Coal Supply Agreement between Tangshan Panda Heat and Power Co.,
Ltd. and Kailuan Coal Mining Administration, dated February 3,
1996. (2)
10.83 General Interconnection Agreement between North China Power Group
Company, Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-
Western Heat and Power Co., Ltd., dated September 22, 1995. (2)
10.84 Electric Energy Purchase and Sales Agreement between North China
Power Group Company, Tangshan Panda Heat and Power Co., Ltd. and
Tangshan Pan-Western Heat and Power Co., Ltd., dated September 22,
1995. (2)
10.85 Supplemental Agreement for General Interconnection and Electric
Energy Purchase and Sales Agreement Between North China Power
Group Company, Tangshan Panda Heat and Power Co., Ltd. and
Tangshan Pan-Western Heat and Power Co., Ltd. dated February 10,
1996. (2)
10.86 Construction Agreement between North China Power Group Company,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Western
Heat and Power Co., Ltd., dated February 10, 1996. (2)
10.87 Loan Agreement between North China Power Group Company, Tangshan
Panda Heat and Power Co., Ltd. and Tangshan Pan-Western Heat and
Power Co., Ltd., dated February 10, 1996, as amended June 18,
1996. (2)
10.88 Agency Contract for Entrusted Loan between China Information Trust
and Investment Corporation, Tangshan Panda Heat and Power Co.,
Ltd. and Tangshan Pan-Western Heat and Power Co. Ltd., dated June
18, 1996, as amended July 17, 1996. (2) (4)
10.89 Transfer of Loan Agreement among Tangshan Panda Heat and Power
Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd. and
Tangshan Pan-Sino Heat Co., Ltd. (2)
10.90 Engineering, Procurement and Construction Contract among Tangshan
Panda Heat and Power Co., Ltd., Tangshan Pan-Western Heat and
Power Co., Ltd. and Harbin Power Engineering Company Limited,
dated April 24, 1996, as amended July 4, 1996, September 14, 1996
and December 17, 1996, respectively. (2) (4)
10.91 Engineering and Design Contract among Hebei Electric Power Survey
and Design Institute, Tangshan Panda Heat and Power Company, Ltd.
and Tangshan Pan-Western Heat and Power Company, Ltd., dated
December 21, 1995, as amended June 21, 1996. (2)
10.92 Guaranty by China Harbin Power Equipment Group Company, dated July
16, 1996. (2)
10.93 Performance Guarantee by The Export-Import Bank of China, dated
January 3, 1997. (2)
10.94 Amended and Restated Operation and Maintenance Agreement between
Tangshan Heat and Power Co., Ltd., Tangshan Pan-Western Heat and
Power Co., Ltd., Tangshan Cayman Heat and Power Co., Ltd.,
Tangshan Pan-Sino Heat Co., Ltd. and Duke/Fluor Daniel
International Services, dated March 6, 1997. (2) (4)
10.95 Construction Agreement of Heat and Steam Network between Tangshan
Pan-Sino Heat Co., Ltd. and Tangshan Heat and Engineering Company,
dated June 20, 1996. (2)
10.96 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Panda Heat and Power
Co., Ltd., April 1, 1997 (2) (4)
10.97 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Pan-Western Heat and
Power Co., Ltd., April 1, 1997 (2) (4)
10.98 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Cayman Heat and Power
Co., Ltd., April 1, 1997 (2) (4)
10.99 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Pan-Sino Heat and
Power Co., Ltd., April 1, 1997 (2) (4)
10.100 Water, Heat, Steam and Hot Water Supply and Usage Agreement
between Tangshan Cayman Heat and Power Company, Ltd., and Tangshan
Panda Heat and Power Company, Ltd., dated October 3, 1996. (2) (4)
10.101 Water, Heat, Steam and Hot Water Supply and Usage Agreement
between Tangshan Cayman Heat and Power Company, Ltd. and Tangshan
Pan-Western Heat and Power Company, Ltd., dated October 3, 1996.
(2) (4)
10.102 Steam for Process and Heating Water Sales Agreement between
Tangshan Cayman Heat and Power Company, Ltd., and Tangshan Pan-
Sino Heat Company, Ltd., dated October 16, 1996. (2)
10.103 Articles of Association of Tangshan Panda Heat and Power Co., Ltd.
between Luannan County Heat & Power Plant and Pan-Western Energy
Corp., LLC dated September 4, 1994. (2)
10.104 Articles of Association for Tangshan Pan-Western Heat and Power
Co., Ltd., between Tangshan Luanhua Co. (Group) and Pan-Western
Energy Corp., LLC, dated September 3, 1994. (2)
10.105 Articles of Association for Tangshan Cayman Heat and Power Co.,
Ltd., between Luannan County Heat & Power Plant and Pan-Western
Energy Corp., LLC, dated May 11, 1996. (2)
10.106 Articles of Association for Tangshan Pan-Sino Heat Co., Ltd.,
between Luannan County Heat Company and Pan-Western Energy Corp.,
LLC, dated May 28, 1996. (2)
10.107 Application Regarding Power Price among Tangshan Panda Heat and
Power Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd.,
and Tangshan Municipal Price Bureau dated October 17, 1995, as
amended October 18, 1995 and May 8, 1996, respectively. (2) (4)
10.108 Administrative Services Agreement between Panda Energy
International, Inc. and Panda Global Holdings, Inc. dated April
22, 1997. (2)
10.109 Development Services Agreement between Panda Energy International,
Inc. and Panda Global Holdings, Inc. dated April 22, 1997. (2)
10.110 Form of Purchase Agreement among Donaldson, Lufkin & Jenrette
Securities Corporation, Panda Global Energy Company, Panda Global
Holdings, Inc. and Panda Energy International, Inc., dated April
11, 1997. (2)
10.111 Form of Issuer Loan Agreement between Panda Global Energy Company
and Pan-Western Energy Corporation, LLC, dated April 22, 1997. (2)
10.112 Form of Issuer Note of Pan-Western Energy Corporation, LLC, dated
April 22, 1997. (2)
10.113 Registered Capital Contribution and Agency Agreement among
Tangshan Panda Heat and Power Company, Ltd., Tangshan Pan-Western
Heat and Power Company, Ltd., Tangshan Cayman Heat and Power
Company, Ltd., Tangshan Pan-Sino Heat Company, Ltd., Luannan
County Heat and Power Plant, Tangshan Luanhua (Group) Co., Luannan
County Heat Company and Pan-Western Energy Corporation, LLC, dated
March 26, 1997. (2)
10.114 Form of Account Agreement among Panda Interfunding Corporation,
Panda Energy Corporation and Panda Global Holdings, Inc., dated
April 22, 1997. (2)
10.115 Form of Pledge Agreement between Panda Global Energy Company and
Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.116 Form of Pledge Agreement between Pan-Sino Energy Development
Company, LLC and Bankers Trust Company, as Trustee, dated April
22, 1997. (2)
10.117 Form of Pledge Agreement between Pan-Western Energy Corporation,
LLC and Bankers Trust Company, as Trustee, dated April 22, 1997.
(2)
10.118 Form of Pledge Agreement between Panda Global Holdings, Inc. and
Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.119 Form of Cash Collateral Agreement between Panda Global Energy
Company and Bankers Trust Company, as Trustee, dated April 22,
1997. (2)
10.120 Form of Cash Collateral Agreement between Pan-Western Energy
Corporation, LLC and Bankers Trust Company, as Trustee, dated
April 22, 1997. (2)
10.121 Form of Cash Collateral Agreement between Pan-Sino Energy
Development Company, LLC and Bankers Trust Company, as Trustee,
dated April 22, 1997. (2)
10.122 Form of Pledge Agreement between Panda Energy International, Inc.
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.123 Form of Cash Collateral Agreement between Panda Global Holdings,
Inc. and Bankers Trust Company, as Trustee, dated April 22, 1997.
(2)
10.124 Form of Cash Collateral Agreement Between Panda Energy Corporation
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.125 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Cayman Heat
and Power Co., Ltd., dated September 24, 1996. (2)
10.126 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Western
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.127 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Sino Heat
Co., Ltd., dated September 24, 1996. (2)
10.128 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Pan-
Sino Heat Co., Ltd., dated September 24, 1996. (2)
10.129 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Panda
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.130 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Cayman
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.131 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Panda Heat
and Power Co., Ltd., dated September 24, 1996. (2)
10.132 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Pan-Sino
Heat Co. Ltd., dated September 24, 1996. (2)
10.133 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Pan-Western
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.134 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Cayman Heat and
Power Co., Ltd., dated September 24, 1996. (2)
10.135 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Pan-Western Heat and
Power Co., Ltd., dated September 24, 1996. (2)
10.136 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Panda Heat and
Power Co., Ltd., dated September 24, 1996. (2)
12.00 Computation of Ratio of Earnings to Fixed Charges. (2)
21.00 Subsidiaries of Registrant and Co-Registrant. (2)
23.01 Consent of Deloitte & Touche LLP. (2)
23.02 Consent of Chadbourne & Parke LLP (contained in their Legal
Opinion filed as Exhibit 5.00). (3)
23.03 Consent of ICF Resources, Incorporated. (2)
23.04 Consent of Burns & McDonnell Engineering Company, Inc. (2)
23.05 Consent of Benjamin Schlesinger and Associates, Inc. (2)
23.06 Consent of Pacific Energy Systems, Inc. (2)
23.07 Consent of C.C. Pace Resources, Inc. (2)
23.08 Consent of Parsons Brinckerhoff Energy Services, Inc. (2)
23.09 Consent of Marston & Marston, Inc. (2)
23.10 Consent of Maples & Calder. (2)
23.11 Consent of Cai, Zhang & Lan. (2)
24.00 Powers of Attorney (contained in the signature pages in Part II of
this Registration Statement). (2)
25.00 Statement of Eligibility of Trustee under Indenture on Form T-1.
(2)
27.00 Financial Data Schedule. (2)
99.01 Form of Transmittal Letter. (3)
99.02 Form of Notice of Guaranteed Delivery. (3)
99.03 Independent Engineer's Report of Burns & McDonnell Engineering
Company, Inc., dated April 11, 1997, as updated June 6, 1997. (2)
99.04 Independent Fuel Consultant's Report of Benjamin Schlesinger and
Associates, Inc., dated September 20, 1996, as updated April 11, 1997
and June 6, 1997, respectively. (2)
99.05 Independent Engineer's Report of Pacific Energy Systems, Inc.,
dated July 22, 1996, as updated April 11, 1997 and June 6, 1997,
respectively. (2)
99.06 Independent Fuel Consultant's Report of C.C. Pace Resources, Inc.,
dated July 2, 1996, as updated April 11, 1997 and June 6, 1997,
respectively. (2)
99.07 Independent Engineer's Report of ICF Resources Incorporated,
dated April 11, 1997, as updated June 6, 1997, respectively. (2)
________________________
(1) Previously filed as an exhibit to the Registration Statement on Form
S-1 (Registration No. 333-19445) of Panda Funding Corporation, Panda
Interfunding Corporation and Panda Interholding Corporation
(affiliates of the Registrant and Co-Registrant), and incorporated
herein by reference.
(2) Filed herewith.
(3) To be filed by amendment.
(4) The Registrant and the Co-Registrant have sought confidential
treatment for certain information identified in these exhibits.
(b) Financial Statement Schedules: None.
Item 17. Undertakings
(a) The undersigned Registrant and each 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 the 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 the 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 the Co-
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant or the 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,
Panda Global Energy Company has duly caused this Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on June 11, 1997.
PANDA GLOBAL ENERGY COMPANY
(Registrant)
By: /s/ Robert W. Carter
Robert W. Carter, Chairman of the
Board, Chief Executive Officer and
Director
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 on Form S-1 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 Officer and Director June 11, 1997
Robert W. Carter (Principal Executive Officer)
Executive Vice President
/s/ Janice Carter Secretary and Treasurer June 11, 1997
Janice Carter (Principal Financial and
Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Panda Global Holdings, Inc. has duly caused this Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on June 11, 1997.
PANDA GLOBAL HOLDINGS, INC.
(Co-Registrant)
By: /s/ Robert W. Carter
Robert W. Carter, Chairman of the
Board ,Chief Executive Officer and
Director
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 on Form S-1 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 Officer and Director June 11, 1997
Robert W. Carter (Principal Executive Officer)
Executive Vice President
/s/ Janice Carter Secretary and Treasurer June 11, 1997
Janice Carter (Principal Financial and
Accounting Officer)
INDEX TO EXHIBITS
Exhibit
Number Exhibit Description
3.01 Memorandum of Association of Panda Global Energy Company. (2)
3.02 Articles of Association of Panda Global Energy Company. (2)
3.03 Certificate of Incorporation of Panda Global Holdings, Inc. (2)
3.04 Bylaws of Panda Global Holdings, Inc. (2)
4.01 Trust Indenture dated July 31, 1996, among Panda Funding
Corporation, Panda Interfunding Corporation and Bankers Trust
Company, as Trustee. (1)
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. (1)
4.03 Second Supplemental Indenture to Trust Indenture, dated January 6,
1997, among Panda Funding Corporation, Panda Interfunding
Corporation and Bankers Trust Company, as Trustee. (1)
4.04 Form of 11-5/8% Pooled Project Bonds, Series A due 2012 of Panda
Funding Corporation. (1)
4.05 Form of 11-5/8% Pooled Project Bonds, Series A-1 due 2012 of Panda
Funding Corporation. (1)
4.06 Registration Rights Agreement, dated July 31, 1996, among Panda
Funding Corporation, Panda Interfunding Corporation and Jefferies
& Company Inc. (1)
4.07 Collateral Agency Agreement, dated July 31, 1996, among Panda
Interfunding Corporation, Panda Funding Corporation and Bankers
Trust Company, as Trustee and Collateral Agent. (1)
4.08 Subrogation and Contribution Agreement, dated July 31, 1996, among
Panda Interfunding Corporation, Panda Funding Corporation and
Panda Interholding Corporation and each PIC U.S. Entity that is a
signatory thereto. (1)
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. (1)
4.10 Trust Indenture, dated April 22, 1997, between Panda Global Energy
Company and Bankers Trust Company, as Trustee. (2)
4.11 First Supplemental Indenture between Panda Global Energy Company
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
4.12 Trust Indenture, dated April 22, 1997, between Panda Global
Holdings, Inc. and Bankers Trust Company, as Trustee. (2)
4.13 First Supplemental Indenture between Panda Global Holdings, Inc.
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
4.14 Registration Rights Agreement among Panda Global Energy Company,
Panda Global Holdings, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, dated April 22, 1997. (2)
4.15 Form of 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company. (2)
4.16 Form of 12-1/2% Registered Senior Secured Note due 2004 of Panda
Global Energy Company. (2)
5.00 Legal Opinion of Chadbourne & Parke LLP, counsel for the
Registrant and Co-Registrant. (3)
10.01 PIC Loan Agreement, dated July 31, 1996, between Panda Funding
Corporation, as Lender, and Panda Interfunding Corporation, as
Borrower. (1)
10.02 Loan Agreement, dated July 31, 1996, between Panda Interfunding
Corporation, as Lender, and Panda Cayman Interfunding Company, as
Borrower. (1)
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. (1)
10.04 Security Agreement, dated July 31, 1996, between Panda
Interfunding Corporation and Bankers Trust Company, as Collateral
Agent. (1)
10.05 Security Agreement, dated July 31, 1996, between Panda Funding
Corporation and Bankers Trust Company, as Collateral Agent. (1)
10.06 Security Agreement, dated July 31, 1996, between Panda Cayman
Interfunding Company, as Debtor, and Panda Interfunding
Corporation, as Secured Party. (1)
10.07 Stock Pledge Agreement (Panda Interfunding Corporation Stock),
dated July 31, 1996, between Panda Energy Corporation and Bankers
Trust Company, as Collateral Agent. (1)
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. (1)
10.09 Trust Indenture, dated July 31, 1996, among Panda-Rosemary Funding
Corporation, Panda-Rosemary, L.P. and Fleet National Bank, as
Trustee. (1)
10.10 First Supplemental Indenture to Trust Indenture, dated July 31,
1996, among Panda-Rosemary Funding Corporation, Panda-Rosemary,
L.P. and Fleet National Bank, as Trustee. (1)
10.11 Form of 8-5/8% First Mortgage Bonds due 2016 of Panda-Rosemary
Funding Corporation. (1)
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. (1)
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, all as named therein. (1)
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. (1)
10.15 Security Agreement, dated July 31, 1996, by Panda-Rosemary, L.P.
to Fleet National Bank, as Collateral Agent. (1)
10.16 Security Agreement, dated July 31, 1996, by Panda-Rosemary Funding
Corporation to Fleet National Bank, as Collateral Agent. (1)
10.17 General Partner Pledge and Security Agreement, dated July 31,
1996, by Panda-Rosemary Corporation to Fleet National Bank, as
Collateral Agent. (1)
10.18 Limited Partner Pledge and Security Agreement, dated July 31,
1996, by PRC II Corporation to Fleet National Bank, as Collateral
Agent. (1)
10.19 Stock Pledge and Security Agreement, dated July 31, 1996, by Panda
Interholding Corporation to Fleet National Bank, as Collateral
Agent. (1)
10.20 Stock Pledge and Security Agreement, dated July 31, 1996, by Panda-
Rosemary, L.P. to Fleet National Bank, as Collateral Agent. (1)
10.21 Partnership Guaranty, dated July 31, 1996, by Panda-Rosemary, L.P.
in favor of Fleet National Bank, as Trustee. (1)
10.22 Reimbursement Agreement, dated July 31, 1996, between Panda-
Rosemary, L.P., Panda-Rosemary Funding Corporation and Bayerische
Vereinsbank AG, New York Branch. (1)
10.23 Irrevocable Direct Pay Letter of Credit issued by Bayerische
Vereinsbank AG. (1)
10.24 Construction Loan Agreement and Lease Commitment, dated March 30,
1996, between Panda-Brandywine, L.P. and General Electric Capital
Corporation. (1)
10.24.1 Participation Agreement, dated December 18, 1996, among Panda-
Brandywine, L.P., Panda Brandywine Corporation, General Electric
Capital Corporation, Fleet National Bank, First Security Bank,
National Association, and Credit Suisse. (1)
10.24.2 Letter of Credit Reimbursement Agreement, dated December 18, 1996,
among Panda-Brandywine, L.P., Panda Brandywine Corporation and
General Electric Capital Corporation. (1)
10.24.3 Equity Loan Facility Letter Agreement, dated December 18, 1996,
among Panda Brandywine Corporation, Panda Energy Corporation and
General Electric Capital Corporation. (1)
10.25 Bill of Sale and Severance Agreement, dated December 30, 1996,
between Panda-Brandywine, L.P., as Seller, and Fleet National
Bank, Owner Trustee, as Buyer. (1)
10.26 Facility Lease, dated December 18, 1996, between Fleet National
Bank, as Owner Trustee, and Panda-Brandywine, L.P. (1)
10.27 Steam Lease, dated as of December 18, 1996, between Panda-
Brandywine, L.P. and Brandywine Water Company. (1)
10.28 Amended and Restated Security Deposit Agreement, dated December
18, 1996, among Panda-Brandywine, L.P., Panda Brandywine
Corporation, General Electric Capital Corporation, Fleet National
Bank, Credit Suisse and First Security Bank, National Association.
(1)
10.29 Amended and Restated Deed of Trust and Security Agreement, dated
December 18, 1996, by Panda-Brandywine, L.P. to Chicago Title
Insurance Company, Trustee for the benefit of Fleet National Bank,
as Security Agent, Beneficiary. (1)
10.30 Amended and Restated Steam Lessee Security Agreement, dated
December 18, 1996, by Brandywine Water Company in favor of Fleet
National Bank, as Security Agent. (1)
10.31 Amended and Restated Security Agreement, dated December 18, 1996,
by Panda-Brandywine, L.P. in favor of Fleet National Bank, as
Security Agent. (1)
10.32 Amended and Restated Trust Agreement, dated December 18, 1996,
between General Electric Capital Corporation, as Owner
Participant, and Fleet National Bank, as Owner Trustee. (1)
10.33 Amended and Restated General Partner Pledge Agreement, dated
December 18, 1996, by Panda Brandywine Corporation to Fleet
National Bank, as Security Agent. (1)
10.34 Amended and Restated Limited Partner Pledge Agreement, dated
December 18, 1996, by Panda Energy Corporation to Fleet National
Bank, as Security Agent. (1)
10.35 Amended and Restated Stock Pledge Agreement, dated December 18,
1996, by Panda Interholding Corporation to Fleet National Bank, as
Security Agent. (1)
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. (1)
10.37 Power Purchase and Operating Agreement, dated January 24, 1989,
between Panda Energy Corporation and Virginia Electric and Power
Company. (1)
10.38 Amendment No. 1 to Power Purchase and Operating Agreement, dated
October 24, 1989, between Panda Energy Corporation and Virginia
Electric and Power Company. (1)
10.39 Amendment No. 2 to Power Purchase and Operating Agreement, dated
July 30, 1993, between Panda-Rosemary, L.P. and Virginia Electric
and Power Company. (1)
10.40 Fuel Supply Management Agreement, dated October 10, 1990, between
Panda-Rosemary Corporation and Natural Gas Clearinghouse. (1)
10.41 Amendment No. 1 to Fuel Supply Management Agreement, dated March
5, 1991, between Panda-Rosemary Corporation and Natural Gas
Clearinghouse. (1)
10.42 Gas Purchase Contract, dated April 12, 1990, between Panda-
Rosemary Corporation and Natural Gas Clearinghouse. (1)
10.43 Amendment of Gas Purchase Contract between Panda-Rosemary
Corporation and Natural Gas Clearinghouse. (1)
10.44 Pipeline Operating Agreement, dated February 14, 1990, between
Panda Energy Corporation, Panda-Rosemary Corporation and North
Carolina Natural Gas Corporation. (1)
10.45 Amendment No. 1 to Pipeline Operating Agreement, dated May 7,
1990, between Panda Energy Corporation, Panda-Rosemary Corporation
and North Carolina Natural Gas Corporation. (1)
10.46 Assignment Agreement, dated June 15, 1990, between Panda Energy
Corporation and Panda-Rosemary Corporation. (1)
10.47 Amendment No. 2 to Pipeline Operating Agreement, dated November
19, 1991, among Panda Energy Corporation, Panda-Rosemary
Corporation and North Carolina Natural Gas Corporation. (1)
10.48 Real Property Lease and Easement Agreement, dated June 9, 1989,
between The Bibb Company and Panda-Rosemary Corporation. (1)
10.49 First Amendment to Real Property Lease and Easement Agreement,
dated October 1, 1989, between The Bibb Company and Panda-Rosemary
Corporation. (1)
10.50 Second Amendment to Real Property Lease and Easement Agreement,
dated January 31, 1990, between The Bibb Company and Panda-
Rosemary Corporation. (1)
10.51 Leasehold and Real Property Assignment and Assumption Agreement,
dated January 6, 1992, between Panda-Rosemary Corporation and
Panda-Rosemary, L.P. (1)
10.52 Third Amendment to Real Property Lease and Easement Agreement,
dated March 15, 1996, between The Bibb Company and Panda-Rosemary,
L.P. (1)
10.53 Cogeneration Energy Supply Agreement, dated January 12, 1989,
between Panda Energy Corporation and The Bibb Company. (1)
10.54 First Amendment to Cogeneration Energy Supply Agreement, dated
October 1, 1989, between Panda Energy Corporation, Panda-Rosemary
Corporation and The Bibb Company. (1)
10.55 Service Agreement, dated July 26, 1996, between Transcontinental
Gas Pipe Line Corporation and Panda-Rosemary, L.P. (1)
10.55.1 Form of Amendment to Service Agreement, effective January 1, 1997,
between Transcontinental Gas Pipe Line Corporation and Panda-
Rosemary, L.P. (1)
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. (1)
10.57 Gas Transportation Agreement, dated August 1, 1996, between Texas
Gas Transmission Corporation and Panda-Rosemary, L.P. (1)
10.58 Assignment and Assumption Agreement, dated May 15, 1989, between
Panda Energy Corporation and Panda-Rosemary Corporation. (1)
10.59 Bill of Sale and Assignment and Assumption Agreement, dated
January 6, 1992, between Panda-Rosemary Corporation and Panda-
Rosemary, L.P. (1)
10.60 Assignment and Assumption Agreement, dated January 6, 1992,
between Panda Energy Corporation and Panda-Rosemary Corporation.
(1)
10.61 Power Purchase Agreement, dated August 9, 1991, between Panda-
Brandywine, L.P. and Potomac Electric Power Company. (1)
10.62 First Amendment to Power Purchase Agreement, dated September 16,
1994, between Panda-Brandywine, L.P. and Potomac Electric Power
Company. (1)
10.62.1 Present Assignment of Power Purchase Agreement, dated December 18,
1996, by Panda-Brandywine, L.P. to Fleet National Bank, as Owner
Trustee, for the benefit of General Electric Capital Corporation,
as Owner Participant. (1)
10.62.2 Amended and Restated Consent and Agreement, dated December 30,
1996, among Potomac Electric Power Company, Panda-Brandywine,
L.P., Fleet National Bank, as Security Agent and Owner Trustee,
General Electric Capital Corporation, as the issuer of the Letters
of Credit, the Interest Hedging Counterparty and Owner
Participant, First Security Bank, National Association, as
Indenture Trustee, and Credit Suisse, as Administrative Agent. (1)
10.63 Amended and Restated Turnkey Cogeneration Facility Agreement,
dated March 30, 1995, between Panda-Brandywine, L.P. and Raytheon
Engineers & Constructors, Inc. (1)
10.64 Raytheon Parent Guaranty, dated May 18, 1994, between Raytheon
Company and Panda-Brandywine, L.P. (1)
10.65 Steam Sales Agreement, dated March 30, 1995, between Panda-
Brandywine, L.P. and Brandywine Water Company. (1)
10.66 Gas Sales Agreement, dated March 30, 1995, between Cogen
Development Company and Panda Brandywine, L.P. (1)
10.67 Precedent Agreement, dated February 25, 1994, between Columbia Gas
Transmission Corporation and Panda-Brandywine, L.P. (1)
10.68 Amending Agreement, dated March 24, 1995, between Columbia Gas
Transmission Corporation and Panda-Brandywine, L.P. (1)
10.69 Amended and Restated FTS Service Agreement, dated March 23, 1995,
between Columbia Gas Transmission Corporation and Panda-
Brandywine, L.P. (1)
10.70 FTS Service Agreement, dated of as March 30, 1995, between Cove
Point LNG Limited Partnership and Panda-Brandywine, L.P. (1)
10.71 Gas Transportation and Supply Agreement, dated November 10, 1994,
between Panda-Brandywine, L.P. and Washington Gas Light Company.
(1)
10.72 Amended and Restated Site Lease, dated December 18, 1996, between
Panda-Brandywine, L.P. and Fleet National Bank, as Owner Trustee.
(1)
10.73 Amended and Restated Site Sublease, dated December 18, 1996,
between Fleet National Bank, Owner Trustee, as Sublessor, and
Panda-Brandywine, L.P., as Sublessee. (1)
10.74 Purchase Agreement, dated July 26, 1996, between Panda Funding
Corporation and Jefferies & Company, Inc. (1)
10.75 Additional Projects Contract, dated July 31, 1996, among Panda
Energy International, Inc., Panda Energy Corporation, and Panda
Interfunding Corporation. (1)
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. (1)
10.77 Non-Petition Agreement, dated July 31, 1996, among Panda Funding
Corporation, Panda Interholding Corporation, Panda Interfunding
Corporation and Panda (Cayman) Interfunding Company. (1)
10.78 Joint Venture Contract for Tangshan Panda Heat and Power Co.,
Ltd., dated September 4, 1994, between Luannan County Heat & Power
Plant and Pan-Western Energy Corp., LLC, as amended July 19, 1996
and November 18, 1996, respectively. (2)
10.79 Joint Venture Contract for Tangshan Pan-Western Heat and Power
Co., Ltd., dated September 3, 1994, between Tangshan Luanhua Co.
(Group) and Pan-Western Energy Corp., LLC, as amended July 19,
1996 and November 18, 1996, respectively. (2)
10.80 Joint Venture Contract for Tangshan Cayman Heat and Power Co.,
Ltd., dated May 11, 1996, between Luannan County Heat & Power
Plant and Pan-Western Energy Corp., LLC, as amended July 19, 1996
and November 18, 1996, respectively. (2)
10.81 Joint Venture Contract for Tangshan Pan-Sino Heat Co., Ltd., dated
May 28, 1996, between Luannan County Heat Company and Pan-Western
Energy Corp., LLC, as amended July 19, 1996 and November 18, 1996,
respectively. (2)
10.82 Coal Supply Agreement between Tangshan Panda Heat and Power Co.,
Ltd. and Kailuan Coal Mining Administration, dated February 3,
1996. (2)
10.83 General Interconnection Agreement between North China Power Group
Company, Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-
Western Heat and Power Co., Ltd., dated September 22, 1995. (2)
10.84 Electric Energy Purchase and Sales Agreement between North China
Power Group Company, Tangshan Panda Heat and Power Co., Ltd. and
Tangshan Pan-Western Heat and Power Co., Ltd., dated September 22,
1995. (2)
10.85 Supplemental Agreement for General Interconnection and Electric
Energy Purchase and Sales Agreement Between North China Power
Group Company, Tangshan Panda Heat and Power Co., Ltd. and
Tangshan Pan-Western Heat and Power Co., Ltd. dated February 10,
1996. (2)
10.86 Construction Agreement between North China Power Group Company,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Western
Heat and Power Co., Ltd., dated February 10, 1996. (2)
10.87 Loan Agreement between North China Power Group Company, Tangshan
Panda Heat and Power Co., Ltd. and Tangshan Pan-Western Heat and
Power Co., Ltd., dated February 10, 1996, as amended June 18,
1996. (2)
10.88 Agency Contract for Entrusted Loan between China Information Trust
and Investment Corporation, Tangshan Panda Heat and Power Co.,
Ltd. and Tangshan Pan-Western Heat and Power Co. Ltd., dated June
18, 1996, as amended July 17, 1996. (2) (4)
10.89 Transfer of Loan Agreement among Tangshan Panda Heat and Power
Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd. and
Tangshan Pan-Sino Heat Co., Ltd. (2)
10.90 Engineering, Procurement and Construction Contract among Tangshan
Panda Heat and Power Co., Ltd., Tangshan Pan-Western Heat and
Power Co., Ltd. and Harbin Power Engineering Company Limited,
dated April 24, 1996, as amended July 4, 1996, September 14, 1996
and December 17, 1996, respectively. (2) (4)
10.91 Engineering and Design Contract among Hebei Electric Power Survey
and Design Institute, Tangshan Panda Heat and Power Company, Ltd.
and Tangshan Pan-Western Heat and Power Company, Ltd., dated
December 21, 1995, as amended June 21, 1996. (2)
10.92 Guaranty by China Harbin Power Equipment Group Company, dated July
16, 1996. (2)
10.93 Performance Guarantee by The Export-Import Bank of China, dated
January 3, 1997. (2)
10.94 Amended and Restated Operation and Maintenance Agreement between
Tangshan Heat and Power Co., Ltd., Tangshan Pan-Western Heat and
Power Co., Ltd., Tangshan Cayman Heat and Power Co., Ltd.,
Tangshan Pan-Sino Heat Co., Ltd. and Duke/Fluor Daniel
International Services, dated March 6, 1997. (2) (4)
10.95 Construction Agreement of Heat and Steam Network between Tangshan
Pan-Sino Heat Co., Ltd. and Tangshan Heat and Engineering Company,
dated June 20, 1996. (2)
10.96 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Panda Heat and Power
Co., Ltd., April 1, 1997 (2) (4)
10.97 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Pan-Western Heat and
Power Co., Ltd., April 1, 1997 (2) (4)
10.98 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Cayman Heat and Power
Co., Ltd., April 1, 1997 (2) (4)
10.99 Amended and Restated Shareholder Loan Agreement between Pan-
Western Energy Corporation, LLC and Tangshan Pan-Sino Heat and
Power Co., Ltd., April 1, 1997 (2) (4)
10.100 Water, Heat, Steam and Hot Water Supply and Usage Agreement
between Tangshan Cayman Heat and Power Company, Ltd., and Tangshan
Panda Heat and Power Company, Ltd., dated October 3, 1996. (2) (4)
10.101 Water, Heat, Steam and Hot Water Supply and Usage Agreement
between Tangshan Cayman Heat and Power Company, Ltd. and Tangshan
Pan-Western Heat and Power Company, Ltd., dated October 3, 1996.
(2) (4)
10.102 Steam for Process and Heating Water Sales Agreement between
Tangshan Cayman Heat and Power Company, Ltd., and Tangshan Pan-
Sino Heat Company, Ltd., dated October 16, 1996. (2)
10.103 Articles of Association of Tangshan Panda Heat and Power Co., Ltd.
between Luannan County Heat & Power Plant and Pan-Western Energy
Corp., LLC dated September 4, 1994. (2)
10.104 Articles of Association for Tangshan Pan-Western Heat and Power
Co., Ltd., between Tangshan Luanhua Co. (Group) and Pan-Western
Energy Corp., LLC, dated September 3, 1994. (2)
10.105 Articles of Association for Tangshan Cayman Heat and Power Co.,
Ltd., between Luannan County Heat & Power Plant and Pan-Western
Energy Corp., LLC, dated May 11, 1996. (2)
10.106 Articles of Association for Tangshan Pan-Sino Heat Co., Ltd.,
between Luannan County Heat Company and Pan-Western Energy Corp.,
LLC, dated May 28, 1996. (2)
10.107 Application Regarding Power Price among Tangshan Panda Heat and
Power Co., Ltd., Tangshan Pan-Western Heat and Power Co., Ltd.,
and Tangshan Municipal Price Bureau dated October 17, 1995, as
amended October 18, 1995 and May 8, 1996, respectively. (2) (4)
10.108 Administrative Services Agreement between Panda Energy
International, Inc. and Panda Global Holdings, Inc. dated April
22, 1997. (2)
10.109 Development Services Agreement between Panda Energy International,
Inc. and Panda Global Holdings, Inc. dated April 22, 1997. (2)
10.110 Form of Purchase Agreement among Donaldson, Lufkin & Jenrette
Securities Corporation, Panda Global Energy Company, Panda Global
Holdings, Inc. and Panda Energy International, Inc., dated April
11, 1997. (2)
10.111 Form of Issuer Loan Agreement between Panda Global Energy Company
and Pan-Western Energy Corporation, LLC, dated April 22, 1997. (2)
10.112 Form of Issuer Note of Pan-Western Energy Corporation, LLC, dated
April 22, 1997. (2)
10.113 Registered Capital Contribution and Agency Agreement among
Tangshan Panda Heat and Power Company, Ltd., Tangshan Pan-Western
Heat and Power Company, Ltd., Tangshan Cayman Heat and Power
Company, Ltd., Tangshan Pan-Sino Heat Company, Ltd., Luannan
County Heat and Power Plant, Tangshan Luanhua (Group) Co., Luannan
County Heat Company and Pan-Western Energy Corporation, LLC, dated
March 26, 1997. (2)
10.114 Form of Account Agreement among Panda Interfunding Corporation,
Panda Energy Corporation and Panda Global Holdings, Inc., dated
April 22, 1997. (2)
10.115 Form of Pledge Agreement between Panda Global Energy Company and
Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.116 Form of Pledge Agreement between Pan-Sino Energy Development
Company, LLC and Bankers Trust Company, as Trustee, dated April
22, 1997. (2)
10.117 Form of Pledge Agreement between Pan-Western Energy Corporation,
LLC and Bankers Trust Company, as Trustee, dated April 22, 1997.
(2)
10.118 Form of Pledge Agreement between Panda Global Holdings, Inc. and
Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.119 Form of Cash Collateral Agreement between Panda Global Energy
Company and Bankers Trust Company, as Trustee, dated April 22,
1997. (2)
10.120 Form of Cash Collateral Agreement between Pan-Western Energy
Corporation, LLC and Bankers Trust Company, as Trustee, dated
April 22, 1997. (2)
10.121 Form of Cash Collateral Agreement between Pan-Sino Energy
Development Company, LLC and Bankers Trust Company, as Trustee,
dated April 22, 1997. (2)
10.122 Form of Pledge Agreement between Panda Energy International, Inc.
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.123 Form of Cash Collateral Agreement between Panda Global Holdings,
Inc. and Bankers Trust Company, as Trustee, dated April 22, 1997.
(2)
10.124 Form of Cash Collateral Agreement Between Panda Energy Corporation
and Bankers Trust Company, as Trustee, dated April 22, 1997. (2)
10.125 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Cayman Heat
and Power Co., Ltd., dated September 24, 1996. (2)
10.126 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Western
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.127 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Panda Heat and Power Co., Ltd. and Tangshan Pan-Sino Heat
Co., Ltd., dated September 24, 1996. (2)
10.128 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Pan-
Sino Heat Co., Ltd., dated September 24, 1996. (2)
10.129 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Panda
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.130 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Western Heat and Power Co., Ltd. and Tangshan Cayman
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.131 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Panda Heat
and Power Co., Ltd., dated September 24, 1996. (2)
10.132 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Pan-Sino
Heat Co. Ltd., dated September 24, 1996. (2)
10.133 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Cayman Heat and Power Co., Ltd. and Tangshan Pan-Western
Heat and Power Co., Ltd., dated September 24, 1996. (2)
10.134 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Cayman Heat and
Power Co., Ltd., dated September 24, 1996. (2)
10.135 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Pan-Western Heat and
Power Co., Ltd., dated September 24, 1996. (2)
10.136 Form of Guarantee between Pan-Western Energy Corporation, LLC,
Tangshan Pan-Sino Heat Co., Ltd. and Tangshan Panda Heat and
Power Co., Ltd., dated September 24, 1996. (2)
12.00 Computation of Ratio of Earnings to Fixed Charges. (2)
21.00 Subsidiaries of Registrant and Co-Registrant. (2)
23.01 Consent of Deloitte & Touche LLP. (2)
23.02 Consent of Chadbourne & Parke LLP (contained in their Legal
Opinion filed as Exhibit 5.00). (3)
23.03 Consent of ICF Resources, Incorporated. (2)
23.04 Consent of Burns & McDonnell Engineering Company, Inc. (2)
23.05 Consent of Benjamin Schlesinger and Associates, Inc. (2)
23.06 Consent of Pacific Energy Systems, Inc. (2)
23.07 Consent of C.C. Pace Resources, Inc. (2)
23.08 Consent of Parsons Brinckerhoff Energy Services, Inc. (2)
23.09 Consent of Marston & Marston, Inc. (2)
23.10 Consent of Maples & Calder. (2)
23.11 Consent of Cai, Zhang & Lan. (2)
24.00 Powers of Attorney (contained in the signature pages in Part II of
this Registration Statement). (2)
25.00 Statement of Eligibility of Trustee under Indenture on Form T-1.
(2)
27.00 Financial Data Schedule. (2)
99.01 Form of Transmittal Letter. (3)
99.02 Form of Notice of Guaranteed Delivery. (3)
99.03 Independent Engineer's Report of Burns & McDonnell Engineering
Company, Inc., dated April 11, 1997, as updated June 6, 1997. (2)
99.04 Independent Fuel Consultant's Report of Benjamin Schlesinger and
Associates, Inc., dated September 20, 1996, as updated April 11, 1997
and June 6, 1997, respectively. (2)
99.05 Independent Engineer's Report of Pacific Energy Systems, Inc.,
dated July 22, 1996, as updated April 11, 1997 and June 6, 1997,
respectively. (2)
99.06 Independent Fuel Consultant's Report of C.C. Pace Resources, Inc.,
dated July 2, 1996, as updated April 11, 1997 and June 6, 1997,
respectively. (2)
99.07 Independent Engineer's Report of ICF Resources Incorporated,
dated April 11, 1997, as updated June 6, 1997, respectively. (2)
________________________
(1) Previously filed as an exhibit to the Registration Statement on Form
S-1 (Registration No. 333-19445) of Panda Funding Corporation, Panda
Interfunding Corporation and Panda Interholding Corporation
(affiliates of the Registrant and Co-Registrant), and incorporated
herein by reference.
(2) Filed herewith.
(3) To be filed by amendment.
(4) The Registrant and the Co-Registrant have sought confidential
treatment for certain information identified in these exhibits.
EXHIBIT 3.01
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
PANDA GLOBAL ENERGY COMPANY
1. The name of the Company is Panda Global Energy Company.
2. The Registered Office of the Company shall be at the offices
of Maples and Calder, P.O. Box 309, Grand Cayman Islands, British
West Indies or at such other place as the Directors may from time
to time decide.
3. The objects for which the Company is established are
unrestricted and shall include, but without limitation, the
following:
(i) (a) To carry on the business of an investment company and
to act as promoters and entrepreneurs and to carry on business as
financiers, capitalists, concessionaires, merchants, brokers,
traders, dealers, agents, importers and exporters and to
undertake and carry on and execute all kinds of investment,
financial, commercial, mercantile, trading and other operations.
(b) To carry on whether as principals, agents or otherwise
howsoever the business of realtors, developers, consultants,
estate agents or managers, builders, contractors, engineers,
manufacturers, dealers in or vendors of all types of property
including services.
(ii) To exercise and enforce all rights and powers conferred by
or incidental to the ownership of any shares, stock, obligations
or other securities including without prejudice to the generality
of the foregoing all such powers of veto or control as may be
conferred by virtue of the holding by the Company of some special
proportion of the issued or nominal amount thereof to provide
managerial and other executive, supervisory and consultant
services for or in relation to any company in which the Company
is interested upon such terms as may be thought fit.
(iii) To purchase or otherwise acquire, to sell, exchange,
surrender, lease, mortgage, charge, convert, turn to account,
dispose of and deal with real and personal property and rights of
all kinds and, in particular, mortgages, debentures, produce,
concessions, options, contracts, patents, annuities, licences,
stocks, shares, bonds, policies, book debts, business concerns,
undertakings, claims, privileges and choses in action of all
kinds.
(iv) To subscribe for, conditionally or unconditionally, to
underwrite, issue on commission or otherwise, take, hold, deal in
and convert stocks, shares and securities of all kinds and to
enter into partnership or into any arrangement for sharing
profits, reciprocal concessions or cooperation with any person or
company and to promote and aid in promoting, to constitute, form
or organise any company, syndicate or partnership of any kind,
for the purpose of acquiring and undertaking any property and
liabilities of the Company or of advancing, directly or
indirectly, the objects of the Company or for any other purpose
which the Company may think expedient.
(v) To stand surety for or to guarantee, support or secure the
performance of all or any of the obligations or any person, firm
or company whether or not related or affiliated to the Company in
any manner and whether by personal covenant or by mortgage,
charge or lien upon the whole or any part of the undertaking,
property and assets of the Company, both present and future,
including its uncalled capital or by any such method and whether
or not the Company shall receive valuable consideration therefor.
(vi) To engage in or carry on any other lawful trade, business or
enterprise which may at any time appear to the Directors of the
Company capable of being conveniently carried on in conjunction
with any of the aforementioned businesses or activities or which
may appear to the Directors of the Company likely to be
profitable to the Company.
In the interpretation of this Memorandum of Association in
general and of this Clause 3 in particular no object, business or
power specified or mentioned shall be limited or restricted by
reference to or inference from any other object, business or
power, or the name of the Company, or by the juxtaposition of two
or more objects, businesses or powers and that, in the event of
any ambiguity in this clause or elsewhere in this Memorandum of
Association, the same shall be resolved by such interpretation
and construction as will widen and enlarge and not restrict the
objects, businesses and powers of and exercisable by the Company.
4. Except as prohibited or limited by the Companies Law (1995
Revision), the Company shall have full power and authority to
carry out any object and shall have and be capable of from time
to time and at all times exercising any and all of the powers at
any time or from time to time exercisable by a natural person or
body corporate in doing in any part of the world whether as
principal, agent, contractor or otherwise whatever may be
considered by it necessary for the attainment of its objects and
whatever else may be considered by it as incidental or conducive
thereto or consequential thereon, including, but without in any
way restricting the generality of the foregoing, the power to
make any alterations or amendments to this Memorandum of
Association and the Articles of Association of the Company
considered necessary or convenient in the manner set out in the
Articles of Association of the Company, and the power to do any
of the following acts or things, viz:
to pay all expenses of and incidental to the promotion, formation
and incorporation of the Company; to register the Company to do
business in any other jurisdiction; to sell, lease or dispose of
any property of the Company; to draw, make, accept, endorse,
discount, execute and issue promissory notes, debentures, bills
of exchange, bills of lading, warrants and other negotiable or
transferable instruments; to lend money or other assets and to
act as guarantors; to borrow or raise money on the security of
the undertaking or on all or any of the assets of the Company
including uncalled capital or without security; to invest monies
of the Company in such manner as the Directors determine; to
promote other companies; to sell the undertaking of the Company
for cash or any other consideration; to distribute assets in
specie to Members of the Company; to make charitable or
benevolent donations; to pay pensions or gratuities or provide
other benefits in cash or kind to Directors, officers, employees,
past or present and their families; to carry on any trade or
business and generally to do all acts and things which, in the
opinion of the Company or the Directors, may be conveniently or
profitably or usefully acquired and dealt with, carried on,
executed or done by the Company in connection with the business
aforesaid PROVIDED THAT the Company shall only carry on the
business for which a licence is required under the laws of the
Cayman Islands when so licensed under the terms of such laws.
5. The liability of each Member is limited to the amount from
time to time unpaid on such Member's shares.
6. The share capital of the Company is US$50,000.00 divided
into 50,000 shares of a nominal or par value of US$1.00 each with
power for the Company insofar as is permitted by law, to redeem
or purchase any of its shares and to increase or reduce the said
capital subject to the provisions of the Companies Law (1995
Revision) and the Articles of Association and to issue any part
of its capital, whether original, redeemed or increased with or
without any preference, priority or special privilege or subject
to any postponement of rights or to any conditions or
restrictions and so that unless the conditions of issue shall
otherwise expressly declare every issue of shares whether
declared to be preference or otherwise shall be subject to the
powers hereinbefore contained.
7. If the Company is registered as exempted, its operations
will be carried on subject to the provisions of Section 192 of
the Companies Law (1995 Revision) and, subject to the provisions
of the Companies Law (1995 Revision) and the Articles of
Association, it shall have the power to register by way of
continuation as a body corporate limited by shares under the laws
or any jurisdiction outside the Cayman Islands and to be
deregistered in the Cayman Islands.
WE the several persons whose names and addresses are subscribed
are desirous of being formed into a company in pursuance of this
Memorandum of Association and we respectively agree to take the
number of shares in the capital of the Company set opposite our
respective names.
Dated the 10th March, 1997
SIGNATURE, ADDRESSES and NUMBER OF SHARES
DESCRIPTION OF SUBSCRIBER TAKEN BY EACH
/s/
A.B. Travers, Attorney-at-Law One
P.O.Box 309
Grand Cayman, B.W.I.
/s/
Sophia Dilbert, Attorney-at-Law One
P.O. Box 309
Grand Cayman, B.W.I.
/s/
Witness to the above signatures
P.O. Box 309
Grand Cayman, B.W.I.
I, Anthony Ian Goddard Asst. Registrar of Companies in and for
the Cayman Islands DO HEREBY CERTIFY that this is a true and
correct copy of the Memorandum of Association of this Company
duly incorporated on the 10 day of March, 1997.
/s/ Anthony Ian Goddard
Asst. Registrar of Companies
EXHIBIT 3.02
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
Restated
ARTICLES OF ASSOCIATION
OF
PANDA GLOBAL ENERGY COMPANY
Adopted by Special Resolution dated 19th March 1997
1. In these Articles Table A in the Schedule to the Statute
does not apply and, unless there be something in the subject or
context inconsistent therewith,
"Affiliate" means, 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.
"Articles" means these Articles as originally
framed or as from time to time
altered by Special Resolution.
"The Auditors" means the persons for the time
being performing the duties of
auditors of the Company.
"The Company" means the above named Company.
"debenture" means debenture stock, mortgages,
bonds and any other such securities
of the Company whether constituting
a charge on the assets of the
Company or not.
"The Directors" means the directors for the time
being of the Company, but does not
include the Independent Director.
"dividend" includes bonus.
"Member" shall bear the meaning as ascribed
to it in the Statute.
"month" means calendar month.
"paid-up" means paid-up and/or credited as
paid-up.
"The registered office" means the registered office for the
time being of the Company.
"Seal" means the common seal of the
Company and includes every
duplicate seal.
"Secretary" includes an Assistant Secretary and
any person appointed to perform the
duties of Secretary of the Company.
"Share" includes a fraction of a share.
"Special Resolution" has the same meaning as in the
Statute and includes a resolution
approved in writing as described
therein, provided that it shall be
required to be passed by a
unanimous vote of all Members.
"Statute" means the Companies Law of the
Cayman Islands as amended and every
statutory modification or re-
enactment thereof for the time
being in force.
"written" and include all modes of representing
"in writing" or reproducing words in visible
form.
Words importing the singular number only include the plural
number and vice versa.
Words importing the masculine gender only include the
feminine gender.
Words importing persons only include corporations.
2. The business of the Company may be commenced as soon after
incorporation as the Directors shall see fit, notwithstanding
that part only of the shares may have been allotted.
3. The Directors may pay, out of the capital or any other
monies of the Company, all expenses incurred in or about the
formation and establishment of the Company including the expenses
of registration.
CERTIFICATES FOR SHARES
4. Certificates representing shares of the Company shall be in
such form as shall be determined by the Directors. Such
certificates shall be under seal. All certificates for shares
shall be consecutively numbered or otherwise identified and shall
specify the shares to which they relate. The name and address of
the person to whom the shares represented thereby are issued,
with the number of shares and date of issue, shall be entered in
the register of Members of the Company. All certificates
surrendered to the Company for transfer shall be cancelled and no
new certificate shall be issued until the former certificate for
a like number or shares shall have been surrendered and
cancelled. The Directors may authorise certificates to be issued
with the seal and authorised signature(s) affixed by some method
or system of mechanical process.
5. Notwithstanding Article 4 of these Articles, if a share
certificate be defaced, lost or destroyed, it may be renewed on
payment of a fee of one dollar (US$1.00) or such less sum and on
such terms (if any) as to evidence and indemnity and the payment
of the expenses incurred by the Company in investigating
evidence, as the Directors may prescribe.
ISSUE OF SHARES
6. Subject to the provisions, if any, in that behalf in the
Memorandum of Association and to any direction that may be given
by the Company in general meeting and without prejudice to any
special rights previously conferred on the holders of existing
shares, the Directors may allot, issue, grant options over or
otherwise dispose of shares of the Company (including fractions
of a share) with or without preferred, deferred or other special
rights or restrictions, whether in regard to dividend, voting,
return of capital or otherwise and to such persons, at such times
and on such other terms as they think proper.
7. The Company shall maintain a register of its Members and
every person whose name is entered as a Member in the register of
Members shall be entitled without payment to receive within two
months after allotment or lodgement of transfer (or within such
other period as the conditions of issue shall provide) one
certificate for all his shares or several certificates each for
one or more of his shares upon payment of fifty cents (US$0.50)
for every certificate after the first or such less sum as the
Directors shall from time to time determine provided that in
respect of a share or shares held jointly by several persons the
Company shall not be bound to issue more than one certificate and
delivery of a certificate for a share to one of the several joint
holders shall be sufficient delivery to all such holders.
TRANSFER OF SHARES
8. The instrument of transfer of any share shall be in writing
and shall be executed by or on behalf of the transferor and the
transferor shall be deemed to remain the holder of a share until
the name of the transferee is entered in the register in respect
thereof.
9. The Directors may in their absolute discretion decline to
register any transfer of shares without assigning any reason
therefor. If the Directors refuse to register a transfer they
shall notify the transferee within two months of such refusal.
10. The registration of transfers may be suspended at such time
and for such periods as the Directors may from time to time
determine, provided always that such registration shall not be
suspended for more than forty-five days in any year.
REDEEMABLE SHARES
11. (a) Subject to the provisions of the Statute and the
Memorandum of Association, shares may be issued on the terms that
they are, or at the option of the Company or the holder are, to
be redeemed on such terms and in such manner as the Company,
before the issue of the shares, may be Special Resolution
determine.
(b) Subject to the provisions of the Statute and the Memorandum
of Association, the Company may purchase its own shares
(including fractions of a share), including any redeemable
shares, provided that the manner of purchase has first been
authorized by the Company in general meeting and may make payment
therefor in any manner authorised by the Statute, including out
of capital.
VARIATION OF RIGHTS OF SHARES
12. If at any time the share capital of the Company is divided
into different classes of shares, the rights attached to any
class (unless otherwise provided by the terms of issue of the
shares of that class) may, whether or not the Company is being
wound-up, be varied with the consent in writing of the holders of
three-fourths of the issued shares of that class, or with the
sanction of a special resolution passed at a general meeting of
the holders of the shares of that class.
The provisions of these Articles relating to general
meetings shall apply to every such general meeting of the holders
of one class of shares except that the necessary quorum shall be
one (1) person holding or representing by proxy at least one-
third of the issued shares of the class and that any holder of
shares of the class present in person or by proxy may demand a
poll.
13. The rights conferred upon the holders of the shares of any
class issued with preferred or other rights shall not, unless
otherwise expressly provided by the terms of issue of the shares
of that class, be deemed to be varied by the creation or issue of
further shares ranking pari passu therewith.
COMMISSION ON SALE OF SHARES
14. The Company may in so far as the Statute from time to time
permits pay a commission to any person in consideration of his
subscribing or agreeing to subscribe whether absolutely or
conditionally for any shares of the Company. Such commissions
may be satisfied by the payment of cash or the lodgement of fully
or partly paid-up shares or partly in one way and partly in the
other. The Company may also on any issue of shares pay such
brokerage as may be lawful.
NON-RECOGNITION OF TRUSTS
15. No person shall be recognised by the Company as holding any
share upon any trust and the Company shall not be bound by or be
compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future, or partial interest
in any share, or any interest in any fractional part of a share,
or (except only as is otherwise provided by these Articles or the
Statute) any other rights in respect of any share except an
absolute right to the entirety thereof in the registered holder.
LIEN OF SHARES
16. The Company shall have a first and paramount lien and charge
on all shares (whether fully paid-up or not) registered in the
name of a Member (whether solely or jointly with others) for all
debts, liabilities or engagements to or with the Company (whether
presently payable or not) by such Member or his estate, either
alone or jointly with any other person, whether a Member or not,
but the Directors may at any time declare any share to be wholly
or in part exempt from the provisions of this Article. The
registration of a transfer of any such share shall operate as a
waiver of the Company's lien (if any) thereon. The Company's
lien (if any) on a share shall extend to all dividends or other
monies payable in respect thereof.
17. The Company may sell, in such manner as the Directors think
fit, any shares on which the Company has a lien, but no sale
shall be made unless a sum in respect of which the lien exists is
presently payable, nor until the expiration of fourteen days
after a notice in writing stating and demanding payment of such
part of the amount in respect of which the lien exists as is
presently payable, has been given to the registered holder or
holders for the time being of the share, or the person, of which
the Company has notice, entitled thereto by reason of his death
or bankruptcy.
18. To give effect to any such sale the Directors may authorise
some person to transfer the shares sold to the purchaser thereof.
The purchaser shall be registered as the holder of the shares
comprised in any such transfer, and he shall not be bound to see
to the application of the purchase money, nor shall his title to
the shares be affected by any irregularity or invalidity in the
proceedings in reference to the sale.
19. The proceeds of such sale shall be received by the Company
and applied in payment of such part of the amount in respect of
which the lien exists as is presently payable and the residue, if
any, shall (subject to a like lien for sums not presently payable
as existed upon the shares before the sale) be paid to the person
entitled to the shares at the date of the sale.
CALL ON SHARES
20. (a) The Directors may from time to time make calls upon the
Members in respect of any monies unpaid on their shares (whether
on account of the nominal value of the shares or by way of
premium or otherwise) and not by the conditions of allotment
thereof made payable at fixed terms, provided that no call shall
exceed one-fourth of the nominal value of the share or be payable
at less than one month from the date fixed for the payment of the
last preceding call, and each Member shall (subject to receiving
at least fourteen days notice specifying the time or times of
payment) pay to the Company at the time or times so specified the
amount called on the shares. A call may be revoked or postponed
as the Directors may determine. A call may be made payable by
installments.
(b) A call shall be deemed to have been made at the time when
the resolution of the Directors authorising such call was passed.
(c) The joint holders of a share shall be jointly and severally
liable to pay all calls in respect thereof.
21. If a sum called in respect of a share is not paid before or
on a day appointed for payment thereof, the persons from whom the
sum is due shall pay interest on the sum from the day appointed
for payment thereof to the time of actual payment at such rate
not exceeding ten per cent per annum as the Directors may
determine, but the Directors shall be at liberty to waive payment
of such interest either wholly or in part.
22. Any sum which by the terms of issue of a share becomes
payable on allotment or at any fixed date, whether on account of
the nominal value of the share or by way of premium or otherwise,
shall for the purposes of these Articles be deemed to be a call
duly made, notified and payable on the date on which by the terms
of issue the same becomes payable, and in the case of non-payment
all the relevant provisions of these Articles as to payment of
interest forfeiture or otherwise shall apply as if such sum had
become payable by virtue of a call duly made and notified.
23. The Directors may, on the issue of shares, differentiate
between the holders as to the amount of calls or interest to be
paid and the times of payment.
24. (a) The Directors may, if they think fit, receive from any
Member willing to advance the same, all or any part of the monies
uncalled and unpaid upon any shares held by him, and upon all or
any of the monies so advanced may (until the same would but for
such advances, become payable) pay interest at such rate not
exceeding (unless the Company in general meeting shall otherwise
direct) seven per cent (7%) per annum, as may be agreed upon
between the Directors and the Member paying such sum in advance.
(b) No such sum paid in advance of calls shall entitle the
Member paying such sum to any portion of a dividend declared in
respect of any period prior to the date upon which such sum
would, but for such payment, become presently payable.
FORFEITURE OF SHARES
25. (a) If a Member fails to pay any call or instalment of a
call or to make any payment required by the terms of issue on the
day appointed for payment thereof, the Directors may, at any time
thereafter during such time as any part of the call, instalment
or payment remains unpaid, give notice requiring payment of so
much of the call, instalment or payment as is unpaid, together
with any interest which may have accrued and all expenses that
have been incurred by the Company by reason of such non-payment.
Such notice shall name a day (not earlier than the expiration of
fourteen days from the date of giving of the notice) on or before
which the payment required by the notice is to be made, and shall
state that, in the event of non-payment at or before the time
appointed the shares in respect of which such notice was given
will be liable to be forfeited.
(b) If the requirements of any such notice as aforesaid are not
complied with, any share in respect of which the notice has been
given may at any time thereafter, before the payment required by
the notice has been made, be forfeited by a resolution of the
Directors to that effect. Such forfeiture shall include all
dividends declared in respect of the forfeited share and not
actually paid before the forfeiture.
(c) A forfeited share may be sold or otherwise disposed of on
such terms and in such manner as the Directors think fit and at
any time before a sale or disposition the forfeiture may be
cancelled on such terms as the Directors think fit.
26. A person whose shares have been forfeited shall cease to be
a Member in respect of the forfeited shares, but shall,
notwithstanding, remain liable to pay to the Company all monies
which, at the date of forfeiture were payable by him to the
Company in respect of the shares together with interest thereon,
but his liability shall cease if and when the Company shall have
received payment in full of all monies whenever payable in
respect of the shares.
27. A certificate in writing under the hand of one Director or
the Secretary of the Company that a share in the Company has been
duly forfeited on a date stated in the declaration shall be
conclusive evidence of the fact therein stated as against all
persons claiming to be entitled to the share. The Company may
receive the consideration given for the share on any sale or
disposition thereof and may execute a transfer of the share in
favour of the person to whom the share is sold or disposed of and
he shall thereupon be registered as the holder of the share and
shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by
any irregularity or invalidity in the proceedings in reference to
the forfeiture, sale or disposal of the share.
28. The provisions of these Articles as to forfeiture shall
apply in the case of non-payment of any sum which, by the terms
of issue of a share, becomes payable at a fixed time, whether on
account of the nominal value of the share or by way of premium as
if the same had been payable by virtue of a call duly made and
notified.
REGISTRATION OF EMPOWERING INSTRUMENTS
29. The Company shall be entitled to charge a fee not exceeding
one dollar (US$1.00) on the registration of every probate,
letters of administration, certificate of death or marriage,
power of attorney, notice in lieu of distringas, or other
instrument.
TRANSMISSION OF SHARES
30. In case of the death of a Member, the survivor or survivors
where the deceased was a joint holder, and the legal personal
representatives of the deceased where he was a sole holder, shall
be the only persons recognised by the Company as having any title
to his interest in the shares, but nothing herein contained shall
release the estate of any such deceased holder from any liability
in respect of any shares which had been held by him solely or
jointly with other persons.
31. (a) Any person becoming entitled to a share in consequence
of the death or bankruptcy or liquidation or dissolution of a
Member (or in any other way than by transfer) may, upon such
evidence being produced as may from time to time be required by
the Directors and subject as hereinafter provided, elect either
to be registered himself as holder of the share or to make such
transfer of the share to such other person nominated by him as
the deceased or bankrupt person could have made and to have such
person nominated by him as the deceased or bankrupt person could
have made and to have such person registered as the transferee
thereof, but the Directors shall, in either case, have the same
right to decline or suspend registration as they would have had
in the case of a transfer of the share by that Member before his
death or bankruptcy as the case may be.
(b) If the person so becoming entitled shall elect to be
registered himself as holder he shall deliver or send to the
Company a notice in writing signed by him stating that he so
elects.
32. A person becoming entitled to a share by reason of the death
or bankruptcy or liquidation or dissolution of the holder (or in
any other case than by transfer) shall be entitled to the same
dividends and other advantages to which he would be entitled if
he were the registered holder of the share, except that he shall
not, before being registered as a Member in respect of the share,
be entitled in respect of it to exercise any right conferred by
membership in relation to meetings of the Company PROVIDED
HOWEVER that the Directors may at any time give notice requiring
any such person to elect either to be registered himself or to
transfer the share and if the notice is not complied with within
ninety days the Directors may thereafter withhold payment of all
dividends, bonuses or other monies payable in respect of the
share until the requirements of the notice have been complied
with.
AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF
LOCATION OF REGISTERED OFFICE & ALTERATION OF CAPITAL
33. (a) Subject to and in so far as permitted by the provisions
of the Statute and the provisions of Article 75 of these Articles
of Association, the Company may from time to time by ordinary
resolution alter or amend its Memorandum of Association otherwise
than with respect to its name and objects and may, without
restricting the generality of the foregoing:
(i) increase the share capital by such sum to be divided into
shares of such amount or without nominal or par value as the
resolution shall prescribe and with such rights, priorities and
privileges annexed thereto, as the Company in general meeting may
determine.
(ii) Consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
(iii) By subdivision of its existing shares or any of them
divide the whole or any part of its share capital into shares of
smaller amount than is fixed by the Memorandum of Association or
into shares without nominal or par value;
(iv) Cancel any shares which at the date of the passing of the
resolution have not been taken or agreed to be taken by any
person.
(b) All new shares created hereunder shall be subject to the
same provisions with reference to the payment of calls, liens,
transfer, transmission, forfeiture and otherwise as the shares in
the original share capital.
(c) Subject to the provisions of the Statute and to the
provisions of Article 75 of these Articles of Association, the
Company may be special resolution change its name or alter its
objects.
(d) Without prejudice to Article 11 hereof and subject to the
provisions of the Statute the Company may be Special Resolution
reduce its share capital and any capital redemption reserve fund.
(e) Subject to the provisions of the Statute the Company may be
resolution of the Directors change the location of its registered
office but under no circumstances shall the registered office of
the Company be located in the United States.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
34. For the purpose of determining Members entitled to notice of
or to vote at any meeting of Members or any adjourning thereof,
or Members entitled to receive payment of any dividend, or in
order to make a determination of Members for any other proper
purpose, the Directors of the Company may provide that the
register of Members shall be closed for transfers for a stated
period but not to exceed in any case forty (40) days. If the
register of Members shall be so closed for the purpose of
determining Members entitled to notice of or to vote at a meeting
of Members such register shall be so closed for at least ten (10)
days immediately preceding such meeting and the record date for
such determination shall be the date of the closure of the
register of Members.
35. In Lieu of or apart from closing the register of Members,
the Directors may fix in advance a date as the record date for
any such determination of Members entitled to notice of or to
vote at a meeting of the Members and for the purpose of
determining the Members entitled to receive payment of any
dividend the Directors may, at or within 90 days prior to the
date of declaration of such dividend fix a subsequent date as the
record date for such determination.
36. If the register of Members is not so closed and no record
date is fixed for the determination of Members entitled to notice
of or to vote at a meeting of Members or Members entitled to
receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the
Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of Members. When
a determination of Members entitled to vote at any meeting of
Members has been made as provided in this section, such
determination shall apply to any adjournment thereof.
GENERAL MEETING
37. (a) Subject to paragraph (c) hereof, the Company shall
within one year of its incorporation and in each year of its
existence thereafter hold a general meeting as its annual general
meeting and shall specify the meeting as such in the notices
calling it. The annual general meeting shall be held at such
time and place as the Directors shall appoint, but under no
circumstances shall it be held in the United States, and if no
other time and place is prescribed by them, it shall be held at
the registered office on the second Wednesday in December of each
year at ten o'clock in the morning.
(b) At these meetings the report of the Directors (if any) shall
be presented.
(c) If the Company is exempted as defined in the Statute it may
but shall not be obliged to hold an annual general meeting.
38. (a) The Directors may whenever they think fit, and they
shall on the requisition of Members of the Company holding at the
date of the deposit of the requisition not less than one-tenth of
such of the paid-up capital of the Company as at the date of the
deposit carries the right of voting at general meetings of the
Company, proceed to convene a general meeting of the Company.
(b) The requisition must state the objects of the meeting and
must be signed by the requisitionists and deposited at the
Registered Office of the Company and may consist of several
documents in like form each signed by one or more
requisitionists.
(c) If the Directors do not within twenty-one days from the date
of the deposit of the requisition duly proceed to convene a
general meeting, the requisitionists, or any of them representing
more than one-half of the total voting rights of all of them, may
themselves convene a general meeting, but any meeting so convened
shall not be held after the expiration of three months after the
expiration of the said twenty-one days.
(d) A general meeting convened as aforesaid by requisitionists
shall be convened in the same manner as nearly as possible as
that in which general meetings are to be convened by Directors.
NOTICE OF GENERAL MEETINGS
39. At least five days' notice shall be given of an annual
general meeting or any other general meeting. Every notice shall
be exclusive of the day on which it is given or deemed to be
given and of the day for which it is given and shall specify the
place, the day and the hour of the meeting and the general nature
of the business and shall be given in manner hereinafter
mentioned or in such other manner if any as may be prescribed by
the Company PROVIDED that a general meeting of the Company shall,
whether or not the notice specified in this regulation has been
given and whether or not the provisions of Article 38 have been
complied with, be deemed to have been duly convened if it is so
agreed:
(a) in the case of a general meeting called as an annual general
meeting by all the Members entitled to attend and vote thereat or
their proxies; and
(b) in the case of any other general meeting by a majority in
number of the Members having a right to attend and vote at the
meeting, being a majority together holding not less than seventy-
five per cent (75%) in nominal value or in the case of shares
without nominal or par value seventy-five per cent (75%) of the
shares in issue, or their proxies.
40. The accidental omission to give notice of a general meeting
to, or the non-receipt of notice of a meeting by any person
entitled to receive notice shall not invalidate the proceedings
of that meeting.
PROCEEDINGS AT GENERAL MEETING
41. No business shall be transacted at any general meeting
unless a quorum of Members is present at the time when the
meeting proceeds to business; two (2) Members present in person
or by proxy shall be a quorum provided always that if the Company
has one shareholder of record the quorum shall be that one (1)
Member present in person or by proxy.
42. A resolution (including a Special Resolution) in writing (in
one or more counterparts) signed by all Members for the time
being entitled to receive notice of and to attend and vote at
general meetings (or being corporations by their duly authorised
representatives) shall be as valid and effective as if the same
had been passed at a general meeting of the Company duly convened
and held.
43. If within half an hour from the time appointed for the
meeting a quorum is not present, the meeting, if convened upon
the requisition of Members, shall be dissolved and in any other
case it shall stand adjourned to the same day in the next week at
the same time and place or to such other time or such other place
as the directors may determine and if at the adjourned meeting a
quorum is not present within half an hour from the time appointed
for the meeting the Members present shall be a quorum.
44. The Chairman, if any, of the Board of Directors shall
preside as Chairman at every general meeting of the company, or
if there is no such Chairman, or if he shall not be present
within fifteen minutes after the time appointed for the holding
of the meeting, or is unwilling to act, the Directors present
shall elect one of their number to be Chairman of the meeting.
45. If at any general meeting no Director is willing to act as
Chairman or if no Director is present within fifteen minutes
after the time appointed for holding the meeting, the Members
present shall choose one of their number to be Chairman of the
meeting.
46. The Chairman may, with the consent of any general meeting
duly constituted hereunder, and shall if so directed by the
meeting, adjourn the meeting from time to time and from place to
place, but no business shall be transacted at any adjourned
meeting other than the business left unfinished at the meeting
from which the adjournment took place. When a general meeting is
adjourned for thirty days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting;
save as aforesaid it shall not be necessary to give any notice of
an adjournment or of the business to be transacted at an
adjourned general meeting.
47. At any general meeting a resolution put to the vote of the
meeting shall be decided on a show of hands unless a poll is,
before or on the declaration of the result of the show of hands,
demanded by the Chairman or any other Member present in person or
by proxy.
48. Unless a poll be so demanded a declaration by the Chairman
that a resolution has on a show of hands been carried, or carried
unanimously, or by a particular majority, or lost, and an entry
to that effect in the Company's Minute Book containing the
Minutes of the proceedings of the meeting shall be conclusive
evidence of that fact without proof of the number or proportion
of the votes recorded in favour of or against such resolution.
49. The demand for a poll may be withdrawn.
50. Except as provided in Article 52, if a poll is duly demanded
it shall be taken in such manner as the Chairman directs and the
result of the poll shall be deemed to be the resolution of the
general meeting at which the poll was demanded.
51. In the case of an equality of votes, whether on a show of
hands or on a poll, the Chairman of the general meeting at which
the show of hands takes place or at which the poll is demanded,
shall be entitled to a second or casting vote.
52. A poll demanded on the election of a Chairman or on a
question of adjournment shall be taken forthwith. A poll
demanded on any other question shall be taken at such time as the
Chairman of the general meeting directs and any business other
than that upon which a poll has been demanded or is contingent
thereon may be proceeded with pending the taking of the poll.
53. Subject to any rights or restrictions for the time being
attached to any class or classes of shares, on a show of hands
every Member of record present in person or by proxy at a general
meeting shall have one vote and on a poll every Member of record
present in person or by proxy shall have one vote for each share
registered in his name in the register.
54. In the case of joint holders of record the vote of the
senior who tenders a vote, whether in person or by proxy, shall
be accepted to the exclusion of the votes of the other joint
holders, and for this purpose seniority shall be determined by
the order in which the names stand in the register of Members.
55. A Member of unsound mind, or in respect of whom an order has
been made by any court, having jurisdiction in lunacy, may vote,
whether on a show of hands or on a poll, by his committee,
receiver, curator bonis, or other person in the nature of
committee, receiver, curator bonis, or other person in the nature
of a committee, receiver or curator bonis appointed by that
court, and any such committee, receiver, curator bonis or other
persons may vote by proxy.
56. No Member shall be entitled to vote at any general meeting
unless he is registered as a shareholder of the Company on the
record date for such meeting nor unless all calls or other sums
presently payable by him in respect of shares in the Company have
been paid.
57. No objection shall be raised to the qualification of any
voter except at the general meeting or adjourned general meeting
at which the vote objected to is given or tendered and every vote
not disallowed at such general meeting shall be valid for all
purposes. Any such objection made in due time shall be referred
to the Chairman of the general meeting whose decision shall be
final and conclusive.
58. On a poll or on a show of hands votes may be given either
personally or by proxy.
PROXIES
59. The instrument appointing a proxy shall be in writing and
shall be executed under the hand of the appointor or of his
attorney duly authorised in writing, or, if the appointor is a
corporation under the hand of an officer or attorney duly
authorised in that behalf. A proxy need not be a Member of the
Company.
60. The instrument appointing a proxy shall be deposited at the
registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting no
later than the time for holding the meeting, or adjourned meeting
provided that the Chairman of the Meeting may at his discretion
direct that an instrument of proxy shall be deemed to have been
duly deposited upon receipt of telex, cable or telecopy
confirmation from the appointor that the instrument of proxy duly
signed is in the course of transmission to the Company.
61. The instrument appointing a proxy may be in any usual or
common form and may be expressed to be for a particular meeting
or any adjournment thereof or generally until revoked. An
instrument appointing a proxy shall be deemed to include the
power to demand or join or concur in demanding a poll.
62. A vote given in accordance with the terms of an instrument
of proxy shall be valid notwithstanding the previous death or
insanity of the principal or revocation of the proxy or of the
authority under which the proxy was executed, or the transfer of
the share in respect of which the proxy is given provided that no
intimation in writing of such death, insanity, revocation or
transfer as aforesaid shall have been received by the Company at
the registered office before the commencement of the general
meeting, or adjourned meeting at which it is sought to use the
proxy.
63. Any corporation which is a Member of record of the Company
may in accordance with its Articles or in the absence of such
provision by resolution of its Directors or other governing body
authorise such person as it thinks fit to act as its
representative at any meeting of the Company or of any class of
Members of the Company, and the person so authorised shall be
entitled to exercise the same powers on behalf of the corporation
which he represents as the corporation could exercise if it were
an individual Member of record of the Company.
64. Shares of its own stock belonging to the Company or held by
it in a fiduciary capacity shall not be voted, directly or
indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given
time.
DIRECTORS
65. (a) There shall be a General Board of Directors consisting
of one person (exclusive of Alternate Directors) PROVIDED HOWEVER
that the Company may from time to time by ordinary resolution
increase or reduce the limits in the number of Directors. The
first Directors of the Company shall be determined in writing by,
or appointed by a resolution of, the subscribers of the
Memorandum of Association or a majority of them.
(b) In addition to the General Board of Directors, at all
times the Company shall have one (1) individual designated as the
"Independent Director" who shall be elected as provided in these
Articles 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: (i) a direct or indirect legal or beneficial
owner in the Company or any of its Affiliates or a member of the
immediate family of any such owner; (ii) a creditor, supplier,
officer, director, promoter, underwriter, manager or contractor
of the Company 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, who is
employed by the Company (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 Company 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.
The Independent Director shall be entitled to all rights and
benefits of a director of the Company in respect of
indemnification by the Company as provided in these Articles and
the laws of the Cayman Islands. The Independent Director shall
also be subject to all duties imposed on a director of the
Company by the laws of the Cayman Islands.
66. The remuneration to be paid to the Directors and the
Independent Director shall be such remuneration as the Directors
shall determine. Such remuneration shall be deemed to accrue
from day to day. The Directors and the Independent Director
shall also be entitled to be paid their travelling, hotel and
other expenses properly incurred by them in going to, attending
and returning from meetings of the Directors, or any committee of
the Directors, or general meetings of the Company, or otherwise
in connection with the business of the Company, or to receive a
fixed allowance in respect thereof as may be determined by the
Directors from time to time, or a combination partly of one such
method and partly the other.
67. The Directors may by resolution award special remuneration
to any Director or Independent Director of the Company
undertaking any special work or services for, or undertaking any
special mission on behalf of, the Company other than his ordinary
routine work as a Director or Independent Director. Any fees
paid to a Director who is also counsel or solicitor to the
Company, or otherwise serves it in a professional capacity shall
be in addition to his remuneration as a Director.
68. A Director of alternate Director (but not the Independent
Director) may hold any other office or place of profit under the
Company (other than the office of Auditor) in conjunction with
his office of Director for such period and on such terms as to
remuneration and otherwise as the Directors may determine.
69. A Director or alternate Director (but not the Independent
Director) may act by himself or his firm in a professional
capacity for the Company and he or his firm shall be entitled to
remuneration for professional services as if he were not a
Director or alternate Director.
70. A shareholding qualification for Directors (but not the
Independent Director) may be fixed by the Company in general
meeting, but unless and until so fixed no qualification shall be
required.
71. A shareholding qualification for Directors (but not the
Independent Director) of the Company may be or become a Director
or other Officer of or otherwise interested in any company
promoted by the Company or in which the Company may be interested
as shareholder or otherwise and no such Director of alternate
Director shall be accountable to the Company for any remuneration
or other benefits received by him as a Director or Officer of, or
from his interest in, such other company.
72. No person shall be disqualified from the office of Director
of alternate Director or prevented by such office from
contracting with the Company, either as vendor, purchaser or
otherwise, nor shall any such contract or any contract or
transaction entered into by or on behalf of the Company in which
any Director or alternate Director shall be in any way interested
be or be liable to be avoided, nor shall any Director or
alternate Director so contracting or being so interested by
liable to account to the Company for any profit realised by any
such contract or transaction by reason of such Director holding
office or of the fiduciary relation thereby established. A
Director (or his alternate Director in his absence) shall be at
liberty to vote in respect of any contract or transaction in
which he is so interested as aforesaid PROVIDED HOWEVER that the
nature of the interest of any Director or alternate Director
appointed by him at or prior to its consideration and any vote
thereon. This Article 72 shall not apply to the Independent
director to the extent that it is inconsistent with the
provisions of Article 65(b).
73. A general notice that a Director or alternate Director is a
shareholder of any specified firm or company and is to be
regarded as interested in any transaction with such firm or
company shall be sufficient disclosure under Article 72 and after
such general notice it shall not be necessary to give special
notice relating to any particular transaction.
ALTERNATE DIRECTORS
74. Subject to the exception contained in Article 82, a director
who expects to be unable to attend Directors' Meetings because of
absence, illness or otherwise may appoint any person to be an
alternate Director to act in his stead and such appointee whilst
he holds office as an alternate Director shall, in the event of
absence therefrom of his appointor, be entitled to attend
meetings of the Directors and to vote thereat and to do, in the
place and stead of his appointor, any other act or thing which
his appointor is permitted or required to do by virtue of his
being a Director as if the alternate Director were the appointor,
other than appointment of an alternate to himself, and he shall
ipso facto vacate office if and when his appointor ceases to be a
Director or removes the appointee from office. Any appointment
or removal under this Article shall be effected by notice in
writing under the hand of the Director making the same.
POWERS AND DUTIES OF DIRECTORS AND MEMBERS
75. (a) Subject to paragraph (b) hereof, the business of the
Company shall be managed by the General Board of Directors (or a
sole Director if only one is appointed) who may pay all expenses
incurred in promoting, registering and setting up the Company,
and may exercise all such powers of the Company as are not, from
time to time by the Statute, or by these Articles, or such
regulations, being not inconsistent with the aforesaid, as may be
prescribed by the Company in general meeting required to be
exercised by the Company in general meeting PROVIDED HOWEVER that
no regulations made by the Company in general meeting shall
invalidate any prior act of the Directors which would have been
valid if that regulation had not been made.
(b) The Company shall not, without the affirmative vote or
written consent of all of the Directors of the Company and the
Independent Director:
(i) Make any assignment for the benefit of creditors, apply for
the appointment of a custodian, receiver or trustee for the
Company or any of the Company's property or admit in writing the
Company's inability to pay its debts generally as they become
due;
(ii) Engage in any business or activity other than as set forth
in Clause 3 of the Memorandum of Association;
(iii) Present an application for the winding up of any
subsidiary; or
(iv) Authorize the Company, or any officer or agent of the
Company on behalf of the Company, to vote, in the Company'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 to the Independent Director under these Articles of
Association, to authorize such subsidiary (A) to amend its
memorandum or articles of association in such a manner as to
broaden the business purpose of such subsidiary, otherwise to
affect adversely the existence of such subsidiary as a single-
purpose, independent entity or to modify any provision relating
to the Independent Director, the requirement of the approval of
the Independent Director in relation to the undertaking of an
action by such subsidiary or the requirement of unanimous
approval by the shareholders or members in relation to the
undertaking of an action by such subsidiary or (B) to take any
action in substance similar to the actions set forth in
Article 75(b)(i)-(iii) or in Article 75(c) of these Articles of
Association with respect to the bankruptcy, insolvency,
dissolution, liquidation, consolidation, merger, sale of assets,
engaging in business or activity, amendment to the memorandum of
association or presenting an application for winding up a
subsidiary of such subsidiary.
(c) The Company shall not, without a unanimous vote or unanimous
written consent of all the Members:
(i) present an application for the winding up of the Company or
consent to any other bankruptcy or similar proceedings or to the
filing of any such proceedings in relation to the Company;
(ii) commence the dissolution, liquidation, consolidation, merger
or sale of all or substantially all of the assets of the
Company; or
(iii) amend Clauses 3 or 4 of the Memorandum of Association.
(d) In no circumstance shall the Independent Director be
entitled to consider or vote on any matter proposed at any
meeting of the General Board of Directors or committee thereof,
or consent to action on any such matter, other than the matters
set forth in paragraph (b) of this Article 75. For all other
matters a quorum shall be determined without taking the
Independent Director into account.
76. The Directors may from time to time and at any time by
powers of attorney appoint any company, firm, person or body of
persons, whether nominated directly or indirectly by the
Directors, to be the attorney or attorneys of the Company for
such purpose and with such powers, authorities and discretions
(not exceeding those vested in or exercisable by the Directors
under these Articles) and for such period and subject to such
conditions as they may think fit, and any such powers of attorney
may contain such provisions for the protection and convenience of
persons dealing with any such attorneys as the Directors may
think fit and may also authorise any such attorney to delegate
all or any of the powers, authorities and discretions vested in
him.
77. All cheques, promissory notes, drafts, bills of exchange and
other negotiable instruments and all receipts for monies paid to
the Company shall be signed, drawn, accepted, endorsed or
otherwise executed as the case may be in such manner as the
Directors shall from time to time by resolution determine.
78. The Directors shall cause minutes to be made in books
provided for the purpose:
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors (including those represented
thereat by an alternate or by proxy) present at each meeting of
the Directors and of any committee of the Directors and, if
present thereat, of the name of the Independent Director; and
(c) of all resolutions and proceedings at all meetings of the
Company and of the Directors and of committees of Directors.
79. The Directors on behalf of the Company may pay a gratuity or
pension or allowance on retirement to any Director who has held
any other salaried office or place of profit with the Company or
to his widow or dependants and may make contributions to any fund
and pay premiums for the purchase or provision of any such
gratuity, pension or allowance.
80. The Directors may exercise all the powers of the Company to
borrow money and to mortgage or charge its undertaking, property
and uncalled capital or any part thereof and to issue debentures,
debenture stock and other securities whether outright or as
security for any debt, liability or obligation of the Company or
of any third party.
MANAGEMENT
81. (a) The Directors may from time to time provide for the
management of the affairs of the Company in such manner as they
shall think fit and the provisions contained in the three next
following paragraphs shall be without prejudice tot he general
powers conferred by this paragraph.
(b) The Directors from time to time and at any time may
establish any committees, local boards or agencies for managing
any of the affairs of the Company and may appoint any persons to
be members of such committees or local boards or any managers or
agents and may fix their remuneration.
(c) The Directors from time to time and at any time may delegate
to any such committee, local board, manager or agent any of the
powers, authorities and discretions for the time being vested in
the Directors and may authorise the members for the time being of
any such local board, or any of them to fill up any vacancies
therein and to act notwithstanding vacancies and any such
appointment or delegation may be made on such terms and subject
to such conditions as the Directors may think fit and the
Directors may at any time remove any person so appointed and may
annul or vary any such delegation, but no person dealing in good
faith and without notice of any such annulment or variation shall
be affected thereby.
(d) Any such delegates as aforesaid may be authorised by the
Directors to subdelegate all or any of the powers, authorities,
and discretions for the time being vested in them.
MANAGING DIRECTORS
82. The Directors may, from time to time, appoint one or more of
their body (but not an alternate Director) to the office of
Managing Director for such term and at such remuneration (whether
by way of salary, or commission, or participation in profits, or
partly in one way and partly in another) as they may think fit
but his appointment shall be subject to termination ipso facto if
he ceases from any cause to be a Director and no alternate
Director appointed by him can act in his stead as a Director or
Managing Director.
83. The Directors may entrust to and confer upon a Managing
Director any of the powers exercisable by them upon such terms
and conditions and with such restrictions as they may think fit
and either collaterally with or to the exclusion of their own
powers and may from time to time revoke, withdraw, alter or vary
all or any of such powers.
PROCEEDINGS OF DIRECTORS
84. Except as otherwise provided by these Articles, the
Directors shall meet together for the despatch of business,
convening, adjourning and otherwise regulating their meetings as
they think fit. Questions arising at any meeting shall be
decided by a majority of votes of the Directors and alternate
Directors present at a meeting at which there is a quorum, the
vote of an alternate Director not being counted if his appointor
be present at such meeting. In case of an equality of votes, the
Chairman shall have a second or casting vote.
85. A Director of alternate Director may, and the Secretary on
the requisition of a Director of alternate Director shall, at any
time summon a meeting of the Directors by at least two days'
notice in writing to every Director and alternate Director which
notice shall set forth the general nature of the business to be
considered unless notice is waived by all the Directors (or their
alternates) either at, before or after the meeting is held and
PROVIDED FURTHER if notice is given in person, by cable, telex or
telecopy the same shall be deemed to have been given on the day
it is delivered to the Directors or transmitting organisation as
the case may be. The provisions of Article 40 shall apply
mutatis mutandis with respect to notices of meetings of
Directors.
86. The quorum necessary for the transaction of the business of
the Directors may be fixed by the Directors and unless so fixed
shall be two, a Director and his appointed alternate Director
being considered only one person for this purpose, PROVIDED
ALWAYS that if there shall at any time be only a sole Director
the quorum shall b one. For the purposes of this Article an
alternate Director or proxy appointed by a Director shall be
counted in a quorum at a meeting at which the Director appointing
him is not present.
87. The continuing Directors may act notwithstanding any vacancy
in their body, but if and so long as their number is reduced
below the number fixed by or pursuant to these Articles as the
necessary quorum of Directors the continuing directors or
Director may act for the purpose of increasing the number of
Directors to that number, or of summoning a general meeting of
the Company, but for no other purpose.
88. The Directors may elect a Chairman of their Board and
determine the period for which he is to hold office; but if no
such Chairman is elected, or if at any meeting the Chairman is
not present within five minutes after the time appointed for
holding the same, the Directors present may choose one of their
number to be Chairman of the meeting.
89. The Directors may delegate any of their powers to committees
consisting of such member or members of the Board of Directors
(including Alternate Directors in the absence of their
appointors) as they think fir; any committee so formed shall in
the exercise of the powers so delegated conform to any
regulations that may be imposed on it by the Directors.
90. A committee may meet and adjourn as it thinks proper.
Questions arising at any meeting shall be determined by a
majority of votes of the members present, and in the case of an
equality of votes the Chairman shall have a second or casting
vote.
91. All acts done by any meeting of the Directors or of a
committee of Directors (including any person acting as an
alternate Director) shall, notwithstanding that it be afterwards
discovered that there was some defect in the appointment of any
Director or alternate Director, or that they or any of them were
disqualified, be as valid as if every such person had been duly
appointed and qualified to be a Director or alternate Director as
the case may be.
92. Members of the Board of Directors or of any committee
thereof may participate in a meeting of the Board or of such
committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other and
participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. A resolution in
writing (in one or more counterparts), signed by all the
Directors for the time being or all the members of a committee of
Directors (an alternate Director being entitled to sign such
resolution on behalf of his appointor) shall be as valid and
effectual as if it had been passed at a meeting of the Directors
or committee as the case may be duly convened and held.
93. (a) A Director may be presented at any meetings of the
Board of Directors by a proxy appointed by him in which event the
presence or vote of the proxy shall for all purposes be deemed to
be that of the Director.
(b) The provisions of Articles 59 and 62 shall mutatis mutandis
apply to the appointment of proxies by Directors.
VACATION OF OFFICE OF DIRECTOR
94. (i) The office of a Director shall be vacated:
(a) if he gives notice in writing to the Company that he resigns
the office of Director;
(b) if he absents himself (without being represented by proxy or
an alternate Director appointed by him) from three consecutive
meetings of the Board of Directors without special leave of
absence from the Directors, and they pass a resolution that he
has by reason of such absence vacated office;
(c) if he dies, become bankrupt or makes any arrangement or
composition with his creditors generally;
(d) if he is found a lunatic or becomes of unsound mind.
(ii) The office of the Independent Director shall be vacated:
(a) if he gives notice in writing to the Company that he resigns
the office of Independent Director;
(b) if he dies, becomes bankrupt or makes any arrangement or
composition with his creditors generally;
(c) if he is found a lunatic or becomes of unsound mind.
APPOINTMENT AND REMOVAL OF DIRECTORS
95. The Company may by ordinary resolution appoint any person to
be a Director or Independent Director and may in like manner
remove any Director or Independent Director and may in like
manner appoint another person in his stead.
96. (a) The Directors shall have power at any time and from
time to time to appoint any person to be a Director, either to
fill a casual vacancy or as an addition to the existing Directors
but so that the total amount of Directors (exclusive of alternate
Directors) shall not at any time exceed the number fixed in
accordance with these Articles.
(b) The Directors shall, subject to Article 65(b), have power to
appoint the first Independent Director and to appoint any person
to fill the vacancy if the Independent Director resigns or is
removed in accordance with these Articles.
PRESUMPTION OF ASSENT
97. A Director of the Company who is present at a meeting of the
Board of Directors at which action on any Company matter is taken
shall be presumed to have assented to the action taken unless his
dissent shall be entered in the Minutes of the meeting or unless
he shall file his written dissent from such action with the
person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered
mail to such person immediately after the adjournment of the
meeting. such right to dissent shall not apply to a Director who
voted in favour of such action.
SEAL
98. The Seal shall only be used by the authority of the
Directors or of a committee of the Directors authorised by the
Directors in that behalf and every instrument to which the Seal
has been affixed shall be signed by one person who shall be
either a Director or the Secretary or Secretary-Treasurer or some
person appointed by the Directors for the purpose.
PROVIDED THAT the Company may have for use in any place or places
outside the Cayman Islands except the United States, a duplicate
seal or seals each of which shall be a facsimile of the Common
Seal of the Company and, if the Directors so determine, with the
addition on its face of the name of every place where it is to be
used.
PROVIDED FURTHER THAT a Director, Secretary or other officer or
representative or attorney may without further authority of the
Directors affix the Seal of the Company over his signature alone
to any document of the Company required to be authenticated by
him under Seal or to be filed with the Registrar of Companies in
the Cayman Islands or elsewhere wheresoever.
OFFICERS
99. The Company may have a President, a Secretary or Secretary-
Treasurer appointed by the Directors who may also from time to
time appoint such other officers as they consider necessary, all
for such terms, at such remuneration and to perform such duties,
and subject to such provisions as to disqualification and removal
as the Directors from time to time prescribe.
DIVIDENDS, DISTRIBUTIONS AND RESERVE
100. Subject to the Statute, the Directors may from time to time
declare dividends (including interim dividends) and distributions
on shares of the Company outstanding and authorise payment of the
same out of the funds of the Company lawfully available therefor.
101. The Directors may, before declaring any dividends or
distributions, set aside such sums as they think proper as a
reserve or reserves which shall at the discretion of the
Directors, be applicable for any purpose of the Company and
pending such application may, at the like discretion, be employed
in the business of the Company.
102. No dividend or distribution shall be payable except out of
the profits of the Company, realised or unrealised, or out of the
share premium account or as otherwise permitted by the Statute.
103. Subject to the rights of persons, if any, entitled to shares
with special rights as to dividends or distributions, if
dividends or distributions are to be declared on a class of
shares they shall be declared and paid according to the amounts
paid or credited as paid on the shares of such class outstanding
on the record date for such dividend or distribution as
determined in accordance with these Articles but no amount paid
or credited as paid on a share in advance of calls shall be
treated for the purpose of this Article as paid on the share.
104. The Directors may deduct from any dividend or distribution
payable to any Member all sums of money (if any presently payable
by him to the Company on account of calls or otherwise.
105. The Directors may declare that any dividend or distribution
be paid wholly or partly by the distribution of specific assets
and in particular of paid up shares, debentures, or debenture
stock of any other company or in any one or more of such ways
and where any difficulty arises in regard to such distribution,
the Directors may settle the same as they think expedient and in
particular may issue fractional certificates and fix the value
for distribution of such specific assets or any part thereof and
may determine that cash payments shall be made to any Members
upon the footing of the value so fixed in order to adjust the
rights of all Members and may vest any such specific assets in
trustees as may seem expedient to the Directors.
106. Any dividend, distribution, interest or other monies payable
in cash in respect of shares may be paid by cheque or warrant
sent through the post directed to the registered address of the
holder or, in the case of joint holders, to the holder who is
first named on the register of Members or to such person and to
such address as such holder or joint holders may in writing
direct. Every such cheque or warrant shall be made payable to
the order of the person to whom it is sent. Any one of two or
more joint holders may give effectual receipts for any dividends,
bonuses, or other monies payable in respect of the share held by
them as joint holders.
107. No dividend or distribution shall bear interest against the
Company.
CAPITALISATION
108. The Company may upon the recommendation of the Directors by
ordinary resolution authorise the Directors to capitalise any sum
standing to the credit of any of the Company's reserve accounts
(including share premium account and capital redemption reserve
fund) or any sum standing to the credit of profit and loss
account or otherwise available for distribution and to
appropriate such sum to Members in the proportions in which such
sum would have been divisible amongst them had the same been a
distribution of profits by way of dividend and to apply such sum
on their behalf in paying up in full unissued shares for
allotment and distribution credited as fully paid up to and
amongst them in the proportion aforesaid. In such event the
Directors shall do all acts and things required to give effect to
such capitalisation, with full power to the Directors to make
such provisions as they think fit for the case of shares becoming
distributable in fractions (including provisions whereby the
benefit of fractional entitlements accrue to the Company rather
than to the Members concerned). The Directors may authorise any
person to enter on behalf of all of the Members interested into
an agreement with the Company providing for such capitalisation
and matters incidental thereto and any agreement made under such
authority shall be effective and binding on all concerned.
BOOKS OF ACCOUNT
109. The Directors shall cause proper books of account to be kept
with respect to:
(a) all sums of money received and expended by the Company and
the matters in respect of which the receipt or expenditure takes
place;
(b) all sales and purchases of goods by the Company;
(c) the assets and liabilities of the Company.
Proper books shall not be deemed to be kept if there are not kept
such books of account as are necessary to give a true and fair
view of the state of the Company's affairs and to explain its
transactions.
110. The Directors shall from time to time determine whether and
to what extent and at what times and places and under what
conditions or regulations the accounts and books of the Company
or any of them shall be open to the inspection of Members not
being Directors and no Member (not being a Director) shall have
any right of inspecting any account or book or document of the
Company except as conferred by Statute or authorised by the
Directors or by the Company in general meeting.
111. The Directors may from time to time cause to be prepared and
to be laid before the Company in general meeting profit and loss
accounts, balance sheets, group accounts (if any) and such other
reports and accounts as may be required by law.
AUDIT
112. The Company may at any annual general meeting appoint an
Auditor or Auditors of the Company who shall hold office until
the next annual general meeting and may fix his or their
remuneration.
113. The Directors may before the first annual general meeting
appoint an Auditor or Auditors of the Company who shall hold
office until the first annual general meeting unless previously
removed by an ordinary resolution of the Members in general
meeting in which case the Members at that meeting may appoint
Auditors. The Directors may fill any casual vacancy in the
office of Auditor but while any such vacancy continues the
surviving or continuing Auditor or Auditors, if any, may act.
The remuneration of any Auditor appointed by the Directors under
this Article may be fixed by the Directors.
114. Every Auditor of the Company shall have a right of access at
all times to the books and accounts and vouchers of the Company
and shall be entitled to require from the Directors and Officers
of the Company such information and explanation as may be
necessary for the performance of the duties of the auditors.
115. Auditors shall at the next annual general meeting following
their appointment and at any other time during their term of
office, upon request of the Directors or any general meeting of
the Members, make a report on the accounts of the Company in
general meeting during their tenure of office.
NOTICES
116. Notices shall be in writing and may be given by the Company
to any Member either personally or by sending it by post, cable,
telex or telecopy to him or to his address as shown in the
register of Members, such notice, if mailed, to be forwarded
airmail if the address be outside the Cayman Islands.
117. (a) Where a notice is sent by post, service of the notice
shall be deemed to be effected by properly addressing, pre-paying
and posting a letter containing the notice, and to have been
effected at the expiration of sixty hours after the letter
containing the same is posted as aforesaid.
(b) Where a notice is sent by cable, telex, or telecopy, service
of the notice shall be deemed to be effected by properly
addressing, and sending such notice through a transmitting
organisation and to have been effected on the day the same is
sent as aforesaid.
118. A notice may be given by the Company to the joint holders of
record of a share by giving the notice to the joint holder first
named on the register of Members in respect of the share.
119. A notice may be given by the Company to the person or
persons which the Company has been advised are entitled to a
share or shares in consequence of the death or bankruptcy of a
Member by sending it through the post as aforesaid in a pre-paid
letter addressed to them by name, or by the title of
representatives of the deceased, or trustee of the bankrupt, or
by any like description at the address supplied for that purpose
by the persons claiming to be so entitled, or at the option of
the Company by giving the notice in any manner in which the same
might have been given if the death or bankruptcy had not
occurred.
120. Notice of every general meeting shall be given in any manner
hereinbefore authorised to:
(a) every person shown as a Member in the register of Members as
of the record date for such meeting except that in the case of
joint holders the notice shall be sufficient if given to the
joint holder first named in the register of Members.
(b) every person upon whom the ownership of a share devolves by
reason of his being a legal personal representative or a trustee
in bankruptcy of a Member of record where the Member of record
but for his death or bankruptcy would be entitled to receive
notice of the meeting; and
No other person shall be entitled to receive notices of general
meetings.
WINDING UP
121. If the Company shall be wound up the liquidator may, with
the sanction of a Special Resolution of the Company and any other
sanction required by the Statute, divide amongst the Members in
specie or kind the whole or any part of the assets of the Company
(whether they shall consist of property of the same kind or not)
and may for such purpose set such value as he deems fair upon any
property to be divided as aforesaid and may determine how such
division shall be carried out as between the Members or different
classes of Members. The liquidator may with the like sanction,
vest the whole or any part of such assets in trustees upon such
trusts for the benefit of the contributories as the liquidator,
with the like sanction, shall think fit, but so that no Member
shall be compelled to accept any shares or other securities
whereon there is any liability.
122. If the Company shall be wound up, and the assets available
for distribution amongst the Members as such shall be
insufficient to repay the whole of the paid-up capital, such
assets shall be distributed so that, as nearly as may be, the
losses shall be borne by the Members in proportion to the capital
paid up, or which ought to have been paid up, at the commencement
of the winding up on the shares held by them respectively. And
if in a winding up the assets available for distribution amongst
the Members shall be more than sufficient to repay the whole of
the capital paid up at the commencement of the winding up, the
excess shall be distributed amongst the Members in proportion to
the capital paid up at the commencement of the winding up on the
shares held by them respectively. This Article is to be without
prejudice to the rights of the holders of shares issued upon
special terms and conditions.
INDEMNITY
123. The Directors, the Independent Director and officers for the
time being of the Company and any trustee for the time being
acting in relation to any of the affairs of the Company and their
heirs, executors, administrators and personal representatives
respectively shall be indemnified out of the assets of the
Company from and against all actions, proceedings, costs,
charges, losses, damages and expenses which they or any of them
shall or may incur or sustain by reason of any act done or
omitted in or about the execution of their duty in their
respective offices of trusts, except such (if any) as they shall
incur or sustain by or through their own wilful neglect or
default respectively and no such Director, Independent Director,
officer or trustee shall be answerable for the acts, receipts,
neglects or defaults of any other Director, officer or trustee or
for joining in any receipt for the sake of conformity or for the
solvency of honesty of any banker or other persons with whom any
monies or effects belonging to the Company may be lodged or
deposited for safe custody or for any insufficiency of any
security upon which any monies of the Company may be invested or
for any other loss or damage due to any such cause as aforesaid
or which may happen in or about the execution of his office or
trust unless the same shall happen through the wilful neglect or
default of such Director, Independent Director, Officer or
trustee.
FINANCIAL YEAR
124. Unless the Directors otherwise prescribe, the financial year
of the Company shall end on 31st December in each year and,
following the year of incorporation, shall begin on 1st January
in each year.
AMENDMENTS OF ARTICLES
125. Subject to the Statute and the provisions of Article 75(c),
the Company may at any time and from time to time by Special
Resolution alter or amend these Articles in whole or in part.
TRANSFER BY WAY OF CONTINUATION
126. If the Company is exempted as defined in the Statute, it
shall, subject to the provisions of the Statute and with the
approval of a Special Resolution, have the power to register by
way of continuation as a body corporate under the laws of any
jurisdiction outside the Cayman Islands and to be deregistered in
the Cayman Islands.
EXHIBIT 3.03
CERTIFICATE OF INCORPORATION
OF
PANDA GLOBAL HOLDINGS, INC.
FIRST: The name of the Corporation is Panda Global
Holdings, Inc.
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 on its own behalf or 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 of 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 Jerry Sanders, Panda Energy International, Inc.,
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244.
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 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 Global Holdings, Inc., or any of
its Affiliates. As used in this Certificate of
Incorporation, the term "Affiliate" shall mean, with
respect to any person or entity that, indirectly 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.
The undersigned, being the incorporator named above, for the
purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, does make this
certificate, hereby declaring and certifying that this is her act
and deed and the facts herein stated are true, and accordingly
had hereunto set her hand this 7th day of March, 1997.
Jerry Sanders, Paralegal
EXHIBIT 3.04
February 25, 1997
BY-LAWS
OF
PANDA GLOBAL HOLDINGS, INC.
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
Section 1(a) or Section 1(b), sixty (60) days; and
(ii) with respect to claims arising under
Section 1(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 4.10
TRUST INDENTURE
dated as of April 22, 1997
between
PANDA GLOBAL ENERGY COMPANY
and
BANKERS TRUST COMPANY, AS TRUSTEE
Providing for the Issuance from Time to Time of Senior
Securities 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 1
SECTION 1.1 Definitions; Construction 1
SECTION 1.2 Compliance Certificates and Opinions 2
SECTION 1.3 Form of Documents Delivered to Trustee 3
SECTION 1.4 Acts of Holders 4
SECTION 1.5 Notices, etc. to Trustee and the Issuer 5
SECTION 1.6 Notices to Holders; Waiver 6
SECTION 1.7 Effect of Headings 6
SECTION 1.8 Successors and Assigns 6
SECTION 1.9 Severability Clause 6
SECTION 1.10 Benefits of Indenture 6
SECTION 1.11 GOVERNING LAW 7
SECTION 1.12 Appointment of Agent for Service of Process 7
SECTION 1.13 Execution in Counterparts 7
SECTION 1.14 Conflict with Trust Indenture Act 7
ARTICLE II
THE DEBT SECURITIES 8
SECTION 2.1 Form of Security 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 8
SECTION 2.4 Authentication and Delivery of Securities 10
SECTION 2.5 Form 11
SECTION 2.6 Execution and Authentication of Securities 12
SECTION 2.7 Temporary Securities 12
SECTION 2.8 Registration, Restrictions on Transfer
and Exchange 13
SECTION 2.9 Book-Entry Provisions for Global Securities 18
SECTION 2.10 Mutilated, Destroyed, Lost and Stolen
Securities 20
SECTION 2.11 Payment of Principal, Premium and Interest;
Rights to Payments Preserved 20
SECTION 2.12 Persons Deemed Owners 22
SECTION 2.13 Cancellation 22
SECTION 2.14 Dating of Securities; Computation of Interest 22
SECTION 2.15 Source of Payments Limited; Rights and
Liabilities of the Issuer 22
SECTION 2.16 Allocation of Principal and Interest 22
SECTION 2.17 Parity of Securities 22
SECTION 2.18 References to Interest Deemed to Include
Liquidated Damages and Additional Amounts 23
ARTICLE III
APPOINTMENT OF TRUSTEE AS DEPOSITARY
AGENT AND COLLATERAL AGENT; ESTABLISHMENT
OF FUNDS 23
SECTION 3.1 Acceptance of Appointment of Trustee as
Depositary Agent and Collateral Agent 23
SECTION 3.2 Security Interest 24
SECTION 3.3 Establishment of Funds and Sub-Accounts 25
ARTICLE IV
THE FUNDS 26
SECTION 4.1 Issuer Revenue Fund 26
SECTION 4.2 Senior Secured Notes Debt Service Fund 28
SECTION 4.3 Senior Secured Notes Debt Service
Reserve Fund 29
SECTION 4.4 Senior Secured Notes Capitalized
Interest Fund 30
SECTION 4.5 Luannan Facility Construction Fund 30
SECTION 4.6 Issuer Operating Fund 33
SECTION 4.7 Issuer Equity Distribution Fund 33
SECTION 4.8 Luannan Facility Restoration Fund 34
SECTION 4.9 Pan-Western Revenue Fund
SECTION 4.10 Pan-Western Operating Fund
SECTION 4.11 Pan-Western Equity Distribution Fund
SECTION 4.12 Pan-Sino Fund
SECTION 4.13 Investment of Funds
SECTION 4.14 Paymen of Deficiencies; Invasion of Funds
SECTION 4.15 Resignation and Removal of Project Engineer;
Appointment of Successor; Payment of Fees
and Expenses 41
SECTION 4.16 Disposition of Accounts and Funds Upon
Retirement of Securities 43
SECTION 4.17 Procedures for Review by Project Engineer of
Projections 43
ARTICLE V
IMMUNITY OF INCORPORATORS, STOCKHOLDERS
OFFICERS AND DIRECTORS 43
SECTION 5.1 Liability of the Issuer Solely Corporate 43
ARTICLE VI
SATISFACTION AND DISCHARGE; DEFEASANCE 44
SECTION 6.1 Satisfaction and Discharge of Indenture 44
SECTION 6.2 Application of Trust Money 45
SECTION 6.3 Satisfaction, Discharge and Defeasance of
Securities of any Series 45
ARTICLE VII
COVENANTS 49
SECTION 7.1 Payment of Securities 49
SECTION 7.2 Delivery of Officers' Certificates 49
SECTION 7.3 Maintenance of Existence, Properties, Etc. 49
SECTION 7.4 Compliance with Laws 51
SECTION 7.5 Payment of Taxes 51
SECTION 7.6 Books and Records 51
SECTION 7.7 Right of Inspection 51
SECTION 7.8 Use of Proceeds 51
SECTION 7.9 Reporting Requirements 52
SECTION 7.10 Maintenance of Insurance 52
SECTION 7.11 Limitation on Restricted Payments 56
SECTION 7.12 Limitation on Indebtedness 57
SECTION 7.13 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries 57
SECTION 7.14 Capital Expenditures 58
SECTION 7.15 Permitted Projects 58
SECTION 7.16 Limitation of Line of Business 59
SECTION 7.17 Protection of Collateral by Company and its
Subsidiaries 59
SECTION 7.18 Performance of Obligations by Company,
Subsidiaries and Trustees 59
SECTION 7.19 Sale and Leaseback Transactions 59
SECTION 7.20 Delivery of Information and Reports under the
Shareholder Loan Agreements 60
SECTION 7.21 Disposition of Proceeds of Asset Sales 60
SECTION 7.22 Merger, Consolidation, or Sale of Assets 60
SECTION 7.23 Limitations on Liens 61
SECTION 7.24 Transactions with Affiliates 62
SECTION 7.25 Limitation on Investments 62
SECTION 7.26 Investment Company Act 63
SECTION 7.27 Public Utility Holding Company Act 63
SECTION 7.28 Purchase of Securities Upon a Change of
Control 63
SECTION 7.29 Ranking 65
SECTION 7.30 Collateral Documents 65
ARTICLE VIII
REDEMPTION OF SECURITIES 65
SECTION 8.1 Applicability of Article 65
SECTION 8.2 Election to Redeem; Notice to Trustee 65
SECTION 8.3 Optional Redemption; Mandatory Redemption;
Selection of Securities to be Redeemed 66
SECTION 8.4 Notice of Redemption 66
SECTION 8.5 Securities Payable on Redemption Date 67
SECTION 8.6 Securities Redeemed in Part 67
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES 68
SECTION 9.1 Events of Default 68
SECTION 9.2 Enforcement of Remedies 71
SECTION 9.3 Specific Remedies 72
SECTION 9.4 Judicial Proceedings Instituted by Trustee 73
SECTION 9.5 Holders May Demand Enforcement of Rights
by Trustee 75
SECTION 9.6 Control by Holders 75
SECTION 9.7 Waiver of Past Defaults 75
SECTION 9.8 Holder May Not Bring Suit Except Under Certain
Conditions 76
SECTION 9.9 Undertaking to Pay Court Costs 76
SECTION 9.10 Right of Holders to Receive Payment Not to
be Impaired 77
SECTION 9.11 Application of Monies Collected by Trustee 77
SECTION 9.12 Waiver of Appraisement, Valuation, Stay, Right
to Marshaling 78
SECTION 9.13 Remedies Cumulative; Delay or Omission
Not a Waiver 78
SECTION 9.14 Disqualification; Conflicting Interests 79
SECTION 9.15 Preferential Collection of Claims Against
the Issuer 79
ARTICLE X
CONCERNING THE TRUSTEE 79
SECTION 10.1 Certain Rights and Duties of Trustee 79
SECTION 10.2 Trustee Not Responsible for Recitals, Etc. 82
SECTION 10.3 Trustee and Others May Hold Securities 82
SECTION 10.4 Monies Held by Trustee or Paying Agent 82
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 83
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 88
SECTION 10.13 Trustee Risk 89
SECTION 10.14 Trustee May Perform Certain Duties Through
Affiliates 89
ARTICLE XI
HOLDERS' MEETINGS 89
SECTION 11.1 Purposes for Which Holders' Meetings
May Be Called 89
SECTION 11.2 Call of Meetings by Trustee 89
SECTION 11.3 The Issuer, 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 92
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 95
SECTION 12.4 Execution of Supplemental Indentures 95
SECTION 12.5 Effect of Supplemental Indentures 95
SECTION 12.6 Reference in Securities to Supplemental
Indentures 95
SECTION 12.7 Compliance with Trust Indenture Act 95
Exhibit A - Form of Legend for Global Securities
Exhibit B - Certificate to be Delivered upon Exchange
or Registration of Transfer of Securities
Exhibit C - Form of Certificate to be Delivered in
Connection with Transfers to Institutional
Accredited Investors.
Exhibit D - Form of Certificate to be Delivered in
Connection with Regulation S Transfers
Exhibit E - Form of Issuer Pledge Agreement
Exhibit F - Form of Pan-Sino Pledge Agreement
Exhibit G - Form of Pan-Western Pledge Agreement
Exhibit H - Form of Company Pledge Agreement of Issuer Stock
Exhibit I - Form of Issuer Cash Collateral Agreement
Exhibit J - Form of Pan-Sino Cash Collateral Agreement
Exhibit K - Form of Pan-Western Cash Collateral Agreement
Appendix A - Definitions
_______________________________
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Trust Indenture
TRUST INDENTURE (this "Indenture"), dated as of April
22, 1997, between PANDA GLOBAL ENERGY COMPANY, a Cayman Islands
exempted company, (the "Issuer"), its executive office and
mailing address being at c/o Panda Energy International, Inc.,
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244, and
Bankers Trust Company, a New York 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, the Issuer has duly authorized the execution
and delivery of this Indenture to provide for the issuance from
time to time of its debentures, notes, bonds or other evidences
of indebtedness (herein generally called the "Securities"), to be
issued in one or more series; and
WHEREAS, all acts necessary to make the Securities,
when authorized and executed by the Issuer and authenticated and
delivered by the Trustee, valid and binding legal obligations of
the Issuer, and to make this Indenture a valid and binding
agreement, in accordance with the terms of this Indenture and the
Securities, 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 Securities 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 Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION I.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 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) 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) (i) pronouns having a masculine or feminine gender
shall be deemed to include the other and (ii) "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 I.2 Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Indenture, upon
any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer
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, and in the case of an Officer's
Certificate delivered pursuant to Section 4.1(b), no 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; and
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
SECTION I.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 the Issuer
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 in the exercise of reasonable care should
know 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 the Issuer, 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 I.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 Securities voting in favor thereof, either in person
or by proxies duly appointed in writing, at any meeting of
Holders of Securities 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 the Issuer. 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 and the Issuer
if made in the manner provided in this Section. The record of
any meeting of Holders of Securities shall be proved in the
manner provided in Section 11.6.
(b) The principal amount and serial numbers of
Securities 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 Security (i) shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the transfer thereof or the exchange
therefor or in lieu thereof (including any transfer or exchange
of a Security involving removal of a Private Placement Legend),
whether or not notation of such Act is made upon such Security,
and (ii) shall be valid notwithstanding that such Act is taken in
connection with the transfer of such Security to any other
Person, including the Issuer 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 Securities for the Act contemplated by such
instruments, any such instrument executed and delivered by or on
behalf of a Holder of Securities may be revoked with respect to
any or all of such Securities 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) Securities of any series authenticated and
delivered after any Act of Holders may, and, if required by the
Trustee or the Issuer, shall, bear a notation in the form
approved by the Issuer and satisfactory to the Trustee as to any
action taken by such Act of Holders. If the Issuer shall so
determine, new Securities of any series so modified as to
conform, in the opinion of the Issuer, to such action, may be
prepared and executed by the Issuer and upon Issuer Order
authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series.
The Issuer 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 Securities have concurred
in any Act under this Indenture, Securities that are owned by the
Issuer, or any Affiliate of the Issuer, 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 Securities that a Responsible Officer of the Trustee
has actual knowledge are so owned as conclusively evidenced by
the Security Register shall be so disregarded. The Issuer shall
furnish the Trustee, upon request from time to time, with a
written list of such Affiliates. Securities 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 Securities and that the pledgee is not an Affiliate of
the Issuer. 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. Securities that are owned by
a Holder which is not an Affiliate of the Issuer 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 Securities to the Issuer or an Affiliate of
the Issuer 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 I.5 Notices, etc. to Trustee and the Issuer.
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 Issuer 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 the Issuer by the Trustee
for such purpose, or
(b) the Issuer by the Trustee, by any Holder 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 Issuer 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 by the Issuer
for such purpose.
SECTION I.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 I.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 I.8 Successors and Assigns. All covenants,
agreements, representations and warranties in this Indenture by
the Trustee and the Issuer shall bind and inure to the benefit of
and be enforceable by their respective successors and assigns,
whether so expressed or not.
SECTION I.9 Severability Clause. In case any
provision in this Indenture or the Securities shall be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION I.10 Benefits of Indenture. Nothing in this
Indenture or the Securities, expressed or implied, shall give to
any Person, other than the parties hereto and their respective
successors, assigns and the Holders of Securities, any benefit or
any legal or equitable right, remedy or claim under this
Indenture.
SECTION I.11 GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK. THE ISSUER HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY 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 TRUST INDENTURE
AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE ISSUER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
SECTION I.12 Appointment of Agent for Service of
Process. By the execution and delivery of this Indenture, the
Issuer irrevocably designates, appoints and empowers CT
Corporation Systems, at 1633 Broadway, New York, N.Y. 10019 as
its authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such action,
suit or proceeding in the State of New York.
SECTION I.13 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 I.14 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, the Issuer 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 DEBT SECURITIES
SECTION II.1 Form of Security to Be Established by
Series Supplemental Indenture. Subject to Section 2.5, the
Securities of each series shall be substantially in the form
established in the Series Supplemental Indenture relating to the
Securities of such series; provided, however, that each such
Security shall bear the applicable legends specified in
Section 2.8 and Section 2.9.
SECTION II.2 Form of Trustee's Authentication. The
Trustee's certificate of authentication on all Securities shall
be in substantially the following form:
This Security is one of the series of Securities
referred to in the within-mentioned Indenture.
Bankers Trust Company, as Trustee
By:
Authorized Signatory
SECTION II.3 Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities 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 7.12.
The Securities may be issued in one or more series.
Prior to the issuance of the Securities of a series, there shall
be established herein or in one or more Series Supplemental
Indentures:
(a) the title of the Securities of such series (which
shall distinguish the Securities of such series from all
other Securities) and the form or forms of Securities of
such series;
(b) any limit upon the aggregate principal amount of
the Securities of such series that may be authenticated and
delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of
such series pursuant to Sections 2.7, 2.8, 2.9, 2.10 or 8.6
and except for Securities 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
Securities 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 Securities of such series shall be dated, if other
than as provided in Section 2.14(a);
(d) the rate or rates at which the Securities 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 Securities of such series shall be payable,
(ii) Securities of such series may be surrendered for
registration of transfer or exchange and (iii) notices and
demands to or upon the Issuer in respect of the Securities
of such series and this Indenture may be served;
(f) the right, if any, of the Issuer to redeem
Securities 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
Securities of such series may be so redeemed, in whole or in
part, at the option of the Issuer;
(g) the obligation, if any, of the Issuer to redeem,
purchase or repay Securities 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 Securities of such
series shall be redeemed, purchased or repaid, in whole or
in part, pursuant to such obligations and any sinking fund
or other analogous fund or provision relating thereto;
(h) the capitalized interest requirement, if any
(including how any amounts in any additional capitalized
interest fund in respect of such capitalized interest
requirement are to be applied), and any debt service reserve
requirement, if any, with respect to the Securities of such
series;
(i) if other than denominations of $1,000 and integral
multiples of $1,000 in excess thereof, the denominations in
which Securities of such series shall be issuable;
(j) the restrictions or limitations, if any, on the
transfer or exchange of the Securities of such series;
(k) any requirements that the Issuer issue a new
series of Securities registered under the Securities Act in
exchange for the Securities of such series;
(l) any deletions from, modifications of or additions
to the Events of Default or covenants of the Issuer with
respect to the Securities of 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 the Securities of other series, any change in the right
of the Trustee or Holders to declare the principal of, and
premium, if any, and interest on, the Securities of such
series due and payable and any additions to the definitions
currently set forth in this Indenture;
(m) if applicable, a designation of the use of the
proceeds of the Securities of such series;
(n) any other terms of the Securities of such series
(which terms shall not be inconsistent with the provisions
of this Indenture).
SECTION II.4 Authentication and Delivery of
Securities. Subject to Section 2.3, at any time and from time to
time after the execution and delivery of this Indenture, the
Issuer may deliver Securities of any series executed by the
Issuer to the Trustee for authentication, together with an Issuer
Order for the authentication and delivery of such Securities, and
the Trustee shall thereupon authenticate and make available for
delivery such Securities in accordance with such Issuer Order,
without any further action by the Issuer. No Security shall be
entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security
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 Securities shall be
conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered thereunder. In
authenticating such Securities and accepting the additional
responsibilities under this Indenture in relation to such
Securities, 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 Securities of such series;
(b) Officer's Certificates of the Issuer
(i) certifying as to resolutions of the Board of Directors
of the Issuer by or pursuant to which the terms of the
Securities of such series were established, and
(ii) certifying that all conditions precedent under this
Indenture to the Trustee's authentication and delivery of
such Securities have been complied with;
(c) an Opinion of Counsel to the effect that (i) the
form or forms and the terms of such Securities 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, (ii) the Securities of such series, when
authenticated and made available for delivery by the Trustee
and issued by the Issuer in the manner and subject to any
conditions specified in such Opinion of Counsel, will
constitute legal, valid and binding obligations of the
Issuer enforceable against the Issuer 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 Securities 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
(d) such other documents and evidence with respect to
the Issuer as the Trustee may reasonably request.
Prior to the authentication and delivery of a series of
Securities, 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 Security shall
have been authenticated and delivered hereunder but never issued
and sold by the Issuer, and the Issuer shall deliver such
Security 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 Security has never been issued and
sold by the Issuer, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and
delivered hereunder and shall never have been or be entitled to
the benefits hereof.
SECTION II.5 Form. The definitive Securities 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 Securities, as
evidenced by their execution of such Securities.
Except as indicated in the next succeeding paragraph or in a
Series Supplemental Indenture, Securities shall be issued
initially in the form of one or more permanent global Securities
(each being herein called a "Global Security") deposited with the
Trustee, as custodian for the Depository, duly executed by the
Issuer 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
Securities 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.
Securities originally issued and sold in reliance on any
exemption from registration under the Securities Act other than
Rule 144A shall be issued, and Securities originally offered and
sold in reliance on Rule 144A may be issued, in the form of
permanent certificated bonds in registered form ("Physical
Securities").
The Securities 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 Securities, as evidenced by their
execution of the Securities. Any portion of the text of any
Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security. The
Securities may also have set forth on the reverse side thereof a
form of assignment and forms to elect purchase by the Issuer
pursuant to Section 7.28.
SECTION II.6 Execution and Authentication of
Securities. The Securities shall be executed on behalf of the
Issuer by its Chief Executive Officer, its President or one of
its Executive Vice Presidents. The signature of any such
officers on the Securities may be manual or facsimile.
Upon receipt of a Issuer Order, the Trustee shall
authenticate and make available for delivery Securities of the
applicable series that are printed, lithographed, typewritten,
photocopied or otherwise produced, in any denomination authorized
hereunder.
Securities bearing the manual or facsimile signatures
of individuals who were, at the time such signatures were
affixed, the proper officers of the Issuer, shall bind the
Issuer, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the
date of such Securities.
SECTION II.7 Temporary Securities. Upon original
issuance of Securities of a series or pending the preparation of
definitive Securities of any series, the Issuer may execute, and
upon Issuer Order the Trustee shall authenticate and make
available for delivery, Securities or temporary Securities, 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 Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the
Issuer will cause definitive Securities of such series to be
prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities of
such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such
series at the office or agency of the Issuer, for such purpose or
at the Place of Payment, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary
Securities of any series, the Issuer shall execute, and the
Trustee shall authenticate and make available for delivery, in
exchange therefor, definitive Securities of such series of
authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Securities
of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such
series.
SECTION II.8 Registration, Restrictions on Transfer
and Exchange. (a) Registration, Transfer and Exchange. The
Issuer 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 the
Issuer may prescribe and the requirements and restrictions on
transfer set forth in this Section and Section 2.9, shall provide
for the registration of Securities and for the registration of
transfers and exchanges of Securities. 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 Securities and transfers and exchanges of
Securities as herein provided.
If a Person other than the Trustee is appointed by the
Issuer as Security Registrar, the Issuer 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 Securities and the principal amounts and numbers of such
Securities.
Subject to the provisions of this Section and
Section 2.9, upon due presentation for registration of transfer
of any Securities of any series at any such office, the Issuer
shall execute and the Trustee shall authenticate and deliver in
the name of the designated transferee or transferees a new
Security or Securities of like tenor and of any authorized
denomination and of a like aggregate principal amount.
Furthermore, any Holder of a Global Security shall, by
acceptance of such Global Security, be deemed to have agreed that
transfers of beneficial interests in such Global Security 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 Security shall be required to be reflected
in a book-entry.
Subject to this Section and Section 2.9, at the option
of the Holder, Securities of any series may be exchanged for
other Securities of the same series of like tenor and of any
authorized denominations and of a like aggregate principal
amount. Securities to be exchanged shall be surrendered at any
office or agency maintained by the Trustee for the purpose as
provided in this Section 2.8 and the Issuer shall execute, and
the Trustee shall authenticate and deliver in exchange therefor,
the Securities of the applicable series which the Holder making
the exchange shall be entitled to receive, bearing numbers not
contemporaneously or previously outstanding.
All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Issuer, evidencing the same debt, and entitled to the same
security and benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security 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 Issuer, 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 Securities 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 Securities, 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 Security
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 Securities 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 Payment Date of any installment of principal of or payment of
interest on the Securities of such series and ending on the
Payment Date of such installment of principal or payment of
interest or (b) to issue, register the transfer of or exchange
any Physical Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security selected for
redemption in part.
Notwithstanding anything herein to the contrary, any
transfer of the Securities 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 Securities shall
bear the following legend (the "Private Placement Legend"):
"THE [INSERT NAME OF SECURITY] (OR ITS PREDECESSOR)
EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE [INSERT NAME OF SECURITY]
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE [INSERT NAME OF SECURITY]
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE [INSERT NAME OF
SECURITY] EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE ISSUER THAT: (A) SUCH [INSERT NAME OF SECURITY]
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1)(a) INSIDE THE UNITED STATES TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND, BASED UPON AN OPINION OF COUNSEL
IF THE ISSUER SO REQUESTS), (2) TO THE ISSUER OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE [INSERT NAME OF
SECURITY] EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
(i) Upon the transfer, exchange or
replacement of Securities bearing the Private Placement
Legend, the Trustee shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is
hereby authorized to deliver Securities 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 Security has been sold pursuant
to an effective registration statement under the Securities
Act. Upon the transfer, exchange or replacement of
Securities not bearing the Private Placement Legend, the
Trustee shall deliver Securities that do not bear the
Private Placement Legend. By its acceptance of any Security
bearing the Private Placement Legend, each Holder of such a
Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture.
(ii) As a special condition to registration of
transfer or exchange of any Securities 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
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 Securities
in the form of Physical Securities, such Physical
Securities shall be accompanied, in the sole
discretion of the Issuer, by the following
additional information and documents, as
applicable:
(1) if such Physical
Security 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
Security 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
Security 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 (the "Transferee
Certificate") and an Opinion of Counsel to
the effect that such transfer is in
compliance with the Securities Act; or
(4) if such Physical
Security 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 (the
"Transferor Certificate") for Regulation S
Transfers (substantially 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
Security 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
Security 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 Security for a beneficial
interest in a Global Security, such Physical
Security shall be accompanied, in the sole
discretion of the Issuer, by the following
additional information and documents:
(1) a certification,
substantially in the form of Exhibit B
hereto, that such Physical Security 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 Security to
reflect an increase in the aggregate
amount of the Securities represented by
the Global Security;
whereupon the Trustee shall cancel such
Physical Security 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 Securities
represented by the Global Security to be increased
accordingly. If no Global Security is then
Outstanding, the Issuer shall issue and the
Trustee shall upon Issuer Order authenticate a new
Global Security in the appropriate amount.
(C) Any Person having a beneficial
interest in a Global Security may upon request to
the Security Registrar exchange such beneficial
interest for a Physical Security. 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 Security 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 (substantially 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 Security to be reduced and,
following such reduction, the Issuer will execute
and, upon receipt of a Issuer Order, the Trustee
will authenticate and deliver to the transferee a
Physical Security. Securities issued in exchange
for a beneficial interest in a Global Security
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 Securities to the Persons in
whose names such Physical Securities are so
registered.
SECTION II.9 Book-Entry Provisions for Global
Securities. Each Global Security shall (i) be registered in the
name of the Depository for such Global Security 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 Security held on their behalf by the Depository, or
the Trustee as its custodian, or under such Global Security, and
the Depository may be treated by the Issuer, the Security
Registrar, the Trustee and any agent of the Issuer, the Security
Registrar or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Issuer, the Security
Registrar, the Trustee or any agent of the Issuer, 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 Security.
Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to
the Depository, its successors or their respective nominees.
Interests of beneficial owners in a Global Security may be
transferred or exchanged for Physical Securities in accordance
with the rules and procedures of the Depository and the
provisions of this Section and Section 2.8. In addition,
Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in a Global Security
if, and only if, either (a) the Depository notifies the Issuer
that it is unwilling or unable to continue as depositary for the
Global Security and a successor depositary is not appointed by
the Issuer within 90 days of such notice, (b) the Issuer
determines not to have the Securities represented by the Global
Security 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 Securities, beneficial owners holding
interests representing a majority of the principal amount of
Securities of such series represented by a Global Security advise
the Trustee through the Depository in writing that the
continuation of the book-entry system with respect to the
Securities of such series is no longer in such beneficial owners'
best interests.
In connection with the transfer of an entire Global
Security to beneficial owners pursuant to this Section, the
Global Securities shall be deemed to be surrendered to the
Trustee for cancellation, and the Issuer shall execute, and the
Trustee shall upon Issuer Order authenticate and deliver, to each
beneficial owner identified by the Depository, in exchange for
its beneficial interest in the Global Security, an equal
aggregate principal amount of Physical Securities of authorized
denominations.
The Holder of a Global Security 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 Securities.
Notwithstanding anything to the contrary in this
Section 2.9, an applicable Series Supplemental Indenture may
amend, modify or supplement the provisions of this Section 2.9 as
to the Securities issued hereunder and thereunder.
SECTION II.10 Mutilated, Destroyed, Lost and Stolen
Securities. If (a) any mutilated Security is surrendered to the
Trustee or the Issuer and the Security Registrar and the Trustee
receive evidence to their satisfaction of the destruction, loss
or theft of any Security, and (b) there is delivered to the
Issuer, 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
the Issuer, the Security Registrar or the Trustee that such
Security has been acquired by a bona fide purchaser, the Issuer
shall execute and upon the Issuer's written request by Issuer
Order the Trustee shall authenticate and make available for
delivery, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Security, and at the cost of the Holder
of the Security, a new Security of the same series and of like
tenor and principal amount bearing a number not then outstanding.
If, after the delivery of such new Security, a bona fide
purchaser of the original Security in lieu of which such new
Security was issued presents for payment such original Security,
the Issuer, the Security Registrar and the Trustee shall be
entitled to recover such new Security 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 the Issuer, the
Security Registrar or the Trustee in connection therewith.
Notwithstanding the foregoing, in case any such
mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Issuer, upon satisfaction of
the conditions set forth in clauses (a) and (b) of the preceding
paragraph may, instead of issuing a new Security, pay such
Security.
Upon the issuance of any new Security under this
Section, the Issuer 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 Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute a
contractual obligation of the Issuer and, whether or not the
destroyed, lost or stolen Security shall be at any time
enforceable by anyone, shall be entitled to all the benefits and
security of this Indenture, and the Collateral Documents equally
and proportionately with any and all other Securities duly issued
hereunder (subject to the rights of the Issuer 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 Securities.
SECTION II.11 Payment of Principal, Premium and
Interest; Rights to Payments Preserved. Principal of, and
premium (if any) and interest on, any Security that is payable,
and punctually paid or duly provided for, at any Stated Maturity
or any applicable Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date
for such payment. All payments relating to the Securities of any
series shall be made at the Place or Places of Payment for the
Securities of such series, 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 Securities of such
series, except for the final installment of principal payable
with respect to a Security, which shall be payable as provided in
Section 8.5 (in the case of Securities redeemed or prepaid) or
(in the case of Securities matured) upon presentation and
surrender of such Security at the Place of Payment.
Any amount in respect of any Security of any series
that is payable, but is not punctually paid or duly provided for,
on the related Payment Date shall forthwith cease to be payable
to the Holder of such Security on the relevant Regular Record
Date and such defaulted amount may be paid by the Issuer as
provided below:
The Issuer may elect to make payment of all or any
portion of such defaulted amount to the Person in whose name
such Security (or its Predecessor Security) is registered at
the close of business on a Special Record Date for the
payment of such defaulted amount, which shall be fixed by
the Issuer in the following manner. At least twenty (20)
days prior to the date of proposed payment the Issuer shall
notify the Trustee and the Paying Agent in writing of the
Special Record Date and the aggregate defaulted amount
proposed to be paid on each Security 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
aggregate defaulted amount 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 amount as provided in this
paragraph. The Special Record Date for the payment of such
defaulted amount 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
the Issuer, cause notice of the proposed payment of such
defaulted amount and the Special Record Date therefor to be
mailed, first class postage prepaid, to each Holder of a
Security 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 amount and the Special Record Date therefor having
been mailed as aforesaid, such defaulted amount shall be
paid to the Persons in whose names the Securities of such
series (or their respective Predecessor Securities) are
registered on such Special Record Date.
Subject to the foregoing provisions of this Section,
each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to receive unpaid amounts of principal,
premium (if any), and accrued interest that were carried by such
other Security.
SECTION II.12 Persons Deemed Owners. Subject to
Section 2.11, prior to due presentment of a Security for
registration of transfer, the Person in whose name any Security
is registered shall be deemed to be the owner of such Security
for the purpose of receiving payment of principal of, premium (if
any), and interest on, such Security and for all other purposes
whatsoever, whether or not such Security is overdue, regardless
of any notice to anyone to the contrary.
SECTION II.13 Cancellation. All Securities
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. The Issuer may at any time deliver to the Trustee
for cancellation any Securities previously authenticated and
delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the
Trustee shall be destroyed and certification of their destruction
shall be delivered to the Issuer.
SECTION II.14 Dating of Securities; Computation of
Interest. Except as otherwise provided in the Series
Supplemental Indenture relating to the Securities of a series:
(a) Each Security of a series shall be dated the date
of its authentication.
(b) Interest on the Securities of such series shall be
computed on the basis of a 360-day year consisting of twelve
30-day months.
SECTION II.15 Source of Payments Limited; Rights and
Liabilities of the Issuer. All payments of principal and
interest and any other payments to be made in respect of the
Securities and this Indenture shall be made only from the
revenues and assets of (i) the Issuer and (ii) the Collateral,
the payments therefrom and the income and proceeds received by
the Trustee therefrom. Each Holder, by its acceptance of a
Security, agrees that (a) the Trustee shall not be liable to any
Holder for any amounts payable under any Security or for any
liability under this Indenture and (b) recourse shall be
otherwise limited in accordance with Article V.
SECTION II.16 Allocation of Principal and Interest.
Each payment of principal of and premium, if any, and interest on
each Security shall be applied, first, to the payment of accrued
but unpaid interest on such Security (including 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
Security then due (including any overdue installment of
principal) thereunder.
SECTION II.17 Parity of Securities. All Securities of
a series issued and Outstanding hereunder rank on a parity with
each other Security of the same series and with all Securities of
each other series and each Security of a series shall constitute
senior indebtedness of the Issuer and, except as set forth below
in this Section 2.17, shall be secured equally and ratably by
this Indenture and the Collateral Documents with each other
Security of the same series and with all Securities 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, except as set forth below in this
Section 2.17, each Security of a series shall be entitled to the
same benefits and security in this Indenture and the Collateral
Documents as each other Security of the same series and with all
Securities of each other series. The Senior Secured Notes Debt
Service Fund, the Senior Secured Notes Debt Service Reserve Fund,
the Luannan Facility Construction Fund, the Senior Secured Notes
Capitalized Interest Fund, the Luannan Facility Restoration Fund,
the Pan-Western Revenue Fund, the Pan-Western Operating Fund, the
Pan-Western Equity Distribution Fund, the Pan-Sino Fund, the
Subaccounts and all cash, payments, moneys, instruments,
securities and investments held from time to time therein shall
be for the exclusive use and benefit of the Holders of the Senior
Secured Notes and, accordingly, shall not secure or otherwise
benefit any other Securities or the Holders thereof.
SECTION II.18 References to Interest Deemed to Include
Liquidated Damages and Additional Amounts. References in this
Indenture to interest on any Security shall be deemed to include
any Liquidated Damages and any Additional Amounts payable in
respect of such Security.
ARTICLE III
APPOINTMENT OF TRUSTEE AS DEPOSITARY
AGENT AND COLLATERAL AGENT; ESTABLISHMENT OF FUNDS
SECTION III.1 Acceptance of Appointment of Trustee as
Depositary Agent and Collateral Agent. (a) The Trustee is
hereby appointed and agrees to act as depositary agent and
collateral agent under this Indenture and the Collateral
Documents and to accept all securities, cash, payments, other
amounts and Dollar Permitted Investments to be delivered to or
held by the Trustee pursuant to the terms of this Indenture and
the Collateral Documents. The Trustee shall hold and safeguard
the Collateral during the term of this Indenture and shall treat
the cash, instruments and securities in the Collateral as moneys,
instruments and securities pledged by the Issuer to the Trustee
on behalf of the Holders to be held in the custody of the
Trustee, in trust in accordance with the provisions of this
Indenture and the Collateral Documents. In performing its
functions and duties under this Indenture, the Trustee shall act
solely as agent for the Holders 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 Issuer.
(b) The Issuer shall not 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 Indenture, and to
direct the investment of moneys held in the Funds as permitted by
Section 4.13.
(c) All Funds shall be under the exclusive dominion
and control of the Trustee. Except as expressly provided herein,
the Issuer and any Affiliate thereof shall not have any right to
withdraw monies from any Fund. The Issuer hereby irrevocably
authorizes the Trustee to deposit monies into, and withdraw and
transfer monies from, each Fund in accordance with the terms of
this Indenture.
(d) Notwithstanding any provision to the contrary in
the Collateral Documents or the other Transaction Documents to
which it is a party, the Trustee shall not have any duties or
responsibilities regarding the Collateral, except those expressly
set forth in this Indenture, the Collateral Documents and the
other Transaction Documents to which it is a party, or any
fiduciary relationship with any Holder of Securities, and no
implied covenants, functions or responsibilities shall be read
into this Indenture, the Collateral Documents or the other
Transaction Documents to which it is a party or otherwise exist
against the Trustee.
(e) The Trustee will give notices to the Holders of
Securities of any action taken by it to enforce its rights under
any Collateral 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 Trustee determines upon advice
of counsel that failure to take immediate action would be
detrimental to the interests of the Holders of Securities in
which event such notice shall be given promptly after the taking
of such action.
SECTION III.2 Security Interest. As collateral
security for the prompt and complete payment and performance when
due of all its obligations with respect to the Securities, the
Issuer has, pursuant to the Collateral Documents, pledged,
assigned, hypothecated and transferred to the Trustee for the
benefit of the Holders of all Securities, and hereby grants to
the Trustee for the benefit of the Holders of all Securities, a
first-priority Lien on, and security interest in and to, the
Issuer Revenue Fund, the Issuer Operating Fund, the and the
Issuer Equity Distribution Fund and (b) all cash, payments,
moneys, instruments, securities and investments held therein. As
additional collateral security for the prompt and complete
payment and performance when due of all its obligations with
respect to the Senior Secured Notes, the Issuer, has, or the
Issuer has caused its relevant Subsidiary to, pursuant to the
Collateral Documents, pledged, assigned, hypothecated and
transferred to the Trustee for the benefit of the Holders of the
Senior Secured Notes only, and hereby grants to the Trustee for
the benefit of the Holders of the Senior Secured Notes only, a
first-priority Lien on, and security interest in and to, (i) the
Senior Secured Notes Capitalized Interest Fund, the Luannan
Facility Construction Fund, the Senior Secured Notes Debt Service
Fund, the Senior Secured Notes Debt Service Reserve Fund, the
Luannan Facility Restoration Fund, the Pan-Western Revenue Fund,
the Pan-Western Operating Fund, the Pan-Western Equity
Distribution Fund, the Pan-Sino Fund and each Subaccount and (ii)
all cash, payments, moneys, instruments, securities and
investments held therein. Each Fund and each Subaccount shall at
all times be in the exclusive possession of, and under the
exclusive domain and control of, the Trustee.
SECTION III.3 Establishment of Funds and Sub-Accounts.
The Issuer shall establish with the Trustee twelve (12) special,
segregated trust accounts (collectively, the "Funds"), to be
named as follows:
(a) Panda Global Energy -- Revenue (the "Issuer
Revenue Fund");
(b) Panda Global Energy -- Operating (the "Issuer
Operating Fund");
(c) Panda Global Energy -- Distribution (the "Issuer
Equity Distribution Fund");
(d) Panda Global Energy -- Senior Secured Notes Debt
Service (the "Senior Secured Notes Debt Service Fund");
(e) Panda Global Energy -- Senior Secured Notes Debt
Service Reserve (the "Senior Secured Notes Debt Service
Reserve Fund");
(f) Panda Global Energy -- Senior Secured Notes
Capitalized Interest (the "Senior Secured Notes Capitalized
Interest Fund");
(g) Panda Global Energy -- Construction (the "Luannan
Facility Construction Fund");
(h) Panda Global Energy -- Restoration (the "Luannan
Facility Restoration Fund");
(i) Pan-Western -- Revenue (the "Pan-Western Revenue
Fund");
(j) Pan-Western -- Operating (the "Pan-Western
Operating Fund");
(k) Pan-Western -- Distribution (the "Pan-Western
Equity Distribution Fund"); and
(l) Pan-Sino (the "Pan-Sino Fund").
The Trustee shall establish the following sub-accounts within the
following Funds (collectively, the "Subaccounts"), to be named as
follows:
(i) within the Senior Secured Notes Debt Service
Fund, (1) Panda Global Energy -- Principal (the "Senior
Secured Notes Principal Account") and (2) Panda Global
Energy -- Interest (the "Senior Secured Notes Interest
Account");
(ii) within the Luannan Facility Construction Fund,
Luannan Facility -- Construction Completion (the "Completion
Sub-Account");
(iii) within the Pan-Western Equity Distribution
Fund, (1) Pan-Western -- Pan-Sino Distribution (the "Pan-
Sino Distribution Account") and (2) Pan-Western -- Chinamac
Distribution (the "Chinamac Distribution Account"); and
(iv) within the Pan-Sino Fund, (1) Pan-Sino -- NDR
Distribution (the "NDR Distribution Account") and (2) Pan-
Sino -- Issuer Distribution (the "Issuer Distribution
Account").
The Trustee shall maintain the Funds and the Subaccounts at all
times until the termination of this Indenture except that, if at
any time no Senior Secured Notes remain Outstanding, the Trustee
may upon written request of the Issuer terminate the Senior
Secured Notes Capitalized Interest Fund, the Luannan Facility
Construction Fund, the Senior Secured Notes Debt Service Fund,
the Senior Secured Notes Debt Service Reserve Fund, the Luannan
Facility Restoration Fund, the Pan-Western Revenue Fund, the Pan-
Western Operating Fund, the Pan-Western Equity Distribution Fund,
the Pan-Sino Fund and the Subaccounts and return all cash,
payments, moneys, instruments, securities and investments held
therein to the Issuer.
All cash, payments, moneys, instruments, securities and
investments from time to time held in each Fund or Subaccount
shall be held (i) in the name of the Trustee and (ii) in the
custody of the Trustee for the purposes and on the terms set
forth in this Indenture. Additional funds and sub-funds may be
established and created from time to time in accordance with this
Indenture and any Series Supplemental Indenture.
ARTICLE IV
THE FUNDS
SECTION IV.1 Issuer Revenue Fund. (a) The Issuer
shall deliver (or cause to be delivered) to the Trustee as soon
as practicable after receipt the following amounts for deposit in
the Issuer Revenue Fund in accordance with this Section 4.1(a):
(i) any and all revenues received by the Issuer from any source,
(ii) after the Luannan Commercial Operations Date (other than
with respect to income from the investment of moneys in the
Completion Sub-Account which income shall be returned to such
account), any and all income from the investment of monies in any
of the Issuer Funds, (iii) any and all proceeds from the payment
by Pan-Western of amounts due under the Issuer Loan (except that
prior to the Luannan Commercial Operation Date all payments
received by the Issuer pursuant to the Issuer Loan Agreement
shall be deposited into the Luannan Facility Construction Fund)
and any and all other payments by Pan-Western to the Issuer, (iv)
in the event that a Non-U.S. Permitted Project is developed,
constructed or owned pursuant to the provisions of this
Indenture, (A) any and all available revenues received from such
Non-U.S. Permitted Project and (B) to the extent available, any
and all Permitted Project Event Proceeds from any Non-U.S.
Permitted Project and (v) all other amounts collected or received
by the Trustee under the Collateral Documents. Additionally,
unless transferred to the Luannan Facility Restoration Fund for
the rebuilding, repair or restoration of the Luannan Facility,
all Luannan Casualty Proceeds and Luannan Expropriation Proceeds
will be deposited by the Joint Ventures directly into the Pan-
Western Revenue Fund as a repayment of all or a portion of the
Shareholder Loans and then transferred to the Issuer Revenue Fund
whereupon the Issuer will segregate such amounts from all other
amounts held in the Issuer Revenue Fund. The Issuer hereby
agrees and confirms that it has irrevocably instructed Pan-
Western to make all payments owing to the Issuer directly to the
Trustee for deposit into the Issuer Revenue Fund. If,
notwithstanding the foregoing, any amounts required to be
deposited in the Issuer Revenue Fund are remitted directly to the
Issuer (or any Affiliate of the Issuer), the Issuer shall (or
shall cause any such Affiliate to) hold such payments in trust
for the Trustee and shall promptly remit such payments to the
Trustee for deposit in the Issuer Revenue Fund (or in such other
Fund as provided for below), in the form received, with any
necessary endorsements.
(b) The Issuer hereby irrevocably authorizes the
Trustee, on each Monthly Date, from the moneys then on deposit in
the Issuer Revenue Fund, to make the transfers specified in an
Officer's Certificate delivered to the Trustee at least two (2)
days prior to such Monthly Date (or such fewer days in advance as
may be acceptable to the Trustee) in the following order of
priority:
first, to the Issuer Operating Fund, the amount
certified to be the excess (if any) of (i) the Issuer's good
faith estimate of the aggregate amount payable by the Issuer
prior to the next succeeding Monthly Date in respect of
expenses incurred by the Issuer in connection with the
ordinary course of its business (including expenses in
connection with the Administrative Services Agreement) over
(ii) the aggregate of the amounts previously transferred to
the Issuer Operating Fund for the payment of such expenses
and not so applied;
second, to the Senior Secured Notes Interest Account of
the Senior Secured Notes Debt Service Fund, the amount
certified to be equal to the excess (if any) of (i) the
interest on the Senior Secured Notes Outstanding that is due
and payable on the first Interest Payment Date following the
Capitalized Interest Expiration Date and, thereafter, on
each Interest Payment Date falling on, or within six months
after, such Monthly Date over (ii) the moneys then on
deposit in such Senior Secured Notes Interest Account;
third, to the Senior Secured Notes Principal Account of
the Senior Secured Notes Debt Service Fund, the amount
certified to be equal to the excess (if any) of (i) the sum
of the principal of, and premium (if any) on, the Senior
Secured Notes Outstanding that is due and payable on the
Principal Payment Date falling on, or within six months
after, such Monthly Date over (ii) the moneys then on
deposit in such Senior Secured Notes Principal Account;
fourth, to the Senior Secured Notes Debt Service
Reserve Fund, the excess (if any) of (i) the Debt Service
Reserve Requirement over (ii) the moneys then on deposit in
the Senior Secured Notes Debt Service Reserve Fund; and
fifth, to the Issuer Equity Distribution Fund, any
balance remaining in the Issuer Revenue Fund.
If an Event of Default shall have occurred and be
continuing or in connection with any Monthly Date the Issuer
shall have failed to deliver an Officers' Certificate setting
forth the amounts to be transferred pursuant to clauses first
through fifth above, then, based upon its own calculations, the
Trustee shall make the transfers set forth in clauses second
through fourth above only in accordance with the priorities
indicated.
Upon receipt of any cash proceeds resulting from
liquidation of the Collateral, the Trustee shall, first, deposit
such cash proceeds into the Issuer Revenue Fund, second, pay to
itself the Trustee Claims then due and payable and, third, based
upon its own calculations, make the transfers set forth in
clauses second through fourth above in accordance with the
priorities indicated.
(c) In the event that the Issuer issues Securities
hereunder after the date hereof and, in connection therewith,
establishes, pursuant to a Series Supplemental Indenture, any
additional debt service fund, debt service reserve fund,
construction fund, capitalized interest fund or other similar
funds, the initial funding of such additional funds shall be from
the proceeds of the Securities issued pursuant to such Series
Supplemental Indenture, if applicable. After the initial funding
of such funds, priority and source of payment for such additional
funds will be as follows:
(i) if additional amounts are required to be
transferred to any construction fund or capitalized interest
fund, such amounts may only be transferred to such funds
from amounts available in the Issuer Equity Distribution
Fund as provided in such Series Supplemental Indenture or
from amounts available from funds which are dedicated solely
to the Project being constructed;
(ii) amounts that are required to be
transferred to any debt service fund will be withdrawn from
the Issuer Revenue Fund and will be transferred ratably, on
a parity with and only in proportion to the aggregate amount
of principal and interest due on each class of Outstanding
Securities with the amounts described above in clauses
second and third of subsection (b) of this Section 4.1; and
(iii) amounts that are required to be
transferred to any debt service reserve fund will be
withdrawn from the Issuer Revenue Fund and will be
transferred ratably, on a parity with and only in proportion
to the amount of additional contributions then required to
be made to each such debt service reserve fund with the
amount described above in clause fourth of subsection (b) of
this Section 4.1.
SECTION IV.2 Senior Secured Notes Debt Service Fund.
(a) The Issuer hereby irrevocably authorizes the Trustee, from
the moneys then on deposit in the Senior Secured Notes Interest
Account of the Senior Secured Notes Debt Service Fund, to pay
interest (including Liquidated Damages and Additional Amounts, if
any) due and payable (whether at the stated maturity, call for
redemption, by acceleration or otherwise) on the Senior Secured
Notes.
(b) The Issuer hereby irrevocably authorizes the
Trustee, from the moneys then on deposit in the Senior Secured
Notes Principal Account of the Senior Secured Notes Debt Service
Fund to pay principal and premium, if any, due and payable
(whether at the stated maturity, call for redemption, by
acceleration or otherwise) on the Senior Secured Notes and to pay
any deficiency in Senior Secured Notes Interest Account pursuant
to Section 4.14.
(c) In the event that, on any Monthly Date, after
giving effect to all transfers required to be made on such date
pursuant to Section 4.1(b), the moneys on deposit in the Senior
Secured Notes Debt Service Fund exceed the moneys required to be
on deposit therein on such Monthly Date pursuant to Section
4.1(b), on the next Monthly Date, prior to making transfers
pursuant to Section 4.1(b), the Trustee shall transfer such
excess moneys to the Issuer Revenue Fund.
SECTION IV.3 Senior Secured Notes Debt Service Reserve
Fund. (a) On the Closing Date, from the proceeds of the
Offering, the Trustee will deposit $9,700,000 in the Senior
Secured Notes Debt Service Reserve Fund as a reserve for payments
on the Senior Secured Notes. Upon the Luannan Commercial
Operation Date, the amount required to be on deposit in the
Senior Secured Notes Debt Service Reserve Fund shall increase to
the Debt Service Reserve Requirement. The Issuer hereby
irrevocably authorizes the Trustee, as provided in Section 4.14
of this Indenture, to use the moneys in the Senior Secured Notes
Debt Service Reserve Fund 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 Senior Secured Notes.
(b) On any Payment Date that amounts have been
requisitioned in accordance with Section 4.14 and amounts are to
be withdrawn from the Senior Secured Notes Debt Service Reserve
Fund in accordance with this Indenture, the Trustee shall
withdraw the moneys on deposit in the Senior Secured Notes Debt
Service Reserve Fund and shall apply the moneys withdrawn from
the Senior Secured Notes Debt Service Reserve Fund to the
payments of such principal, premium, if any, or interest
(including Liquidated Damages and Additional Amounts, if any)
then due and payable with respect to the Senior Secured Notes.
(c) A determination as to the moneys held in the
Senior Secured Notes Debt Service Reserve Fund and the then
current Debt Service Reserve Requirement shall be made by the
Issuer one day prior to each Payment Date and immediately
following any withdrawal of amounts in the Senior Secured Notes
Debt Service Reserve Fund pursuant to clause (b) above and
Section 4.14. As soon as practicable and in no event later than
15 days prior to each Payment Date, the Issuer shall deliver to
the Trustee and the Company an Officer's Certificate setting
forth such determination and the then current Debt Service
Reserve Requirement and the Trustee and the Company shall confirm
such determination and Debt Service Reserve Requirement. If such
determination, as confirmed by the Trustee, indicates that the
amount of the moneys held in the Senior Secured Notes Debt
Service Reserve Fund exceeds the then current Debt Service
Reserve Requirement, on the next succeeding Monthly Date prior to
making the distributions pursuant to Section 4.1(b), the Trustee
shall transfer such excess moneys held in the Senior Secured
Notes Debt Service Reserve Fund to the Issuer Revenue Fund. If
such determination, as confirmed by the Trustee, indicates that
the amount of the moneys held in the Senior Secured Notes Debt
Service Reserve Fund is less than the then current Debt Service
Reserve Requirement, the Issuer shall immediately notify the
Company of such insufficiency.
SECTION IV.4 Senior Secured Notes Capitalized Interest
Fund. (a) On the Closing Date, the Issuer shall deposit
$48,122,778 in the Senior Secured Notes Capitalized Interest
Fund. The Issuer hereby irrevocably authorizes the Trustee to,
through and including the Capitalized Interest Expiration Date,
use the moneys in the Senior Secured Notes Capitalized Interest
Fund for the payment, when due and payable (whether at the Stated
Maturity or upon redemption or by acceleration or otherwise), of
interest on the Senior Secured Notes.
(b) Through and including the Capitalized Interest
Expiration Date, on any date that amounts of interest on the
Senior Secured Notes are due and payable (or if such day is not a
Business Day, then on the next Business Day), the Trustee shall
withdraw the moneys on deposit in the Senior Secured Notes
Capitalized Interest Fund and remit such moneys to the Holders of
the Senior Secured Notes.
(c) In the event that moneys in the Senior Secured
Notes Capitalized Interest Fund exceeds the aggregate amount of
the remaining interest payments on the Senior Secured Notes
through and including the Capitalized Interest Expiration Date
(as certified by a firm of independent certified public
accountants of recognized national standing), the Trustee shall
transfer such excess moneys from the Senior Secured Notes
Capitalized Interest Fund to the Luannan Facility Construction
Fund.
(d) In the event that after the Capitalized Interest
Expiration Date there are moneys remaining in the Senior Secured
Notes Capitalized Interest Fund such excess moneys shall be
utilized in the following manner: (i) if the Luannan Commercial
Operation Date has not occurred, the Trustee shall transfer such
excess moneys from the Senior Secured Notes Capitalized Interest
Fund to the Luannan Facility Construction Fund, (ii) if the
Luannan Commercial Operation Date recently occurred and the
Issuer is required, pursuant to Section 4.5(f), to deposit moneys
into the Completion Sub-Account, the Trustee shall transfer such
excess moneys to the Completion Sub-Account and (iii) if the
Luannan Commercial Operation Date has occurred and the Completion
Sub-Account has been fully funded, the Trustee shall transfer
such excess moneys to the Issuer Revenue Fund.
SECTION IV.5 Luannan Facility Construction Fund. (a)
After the deposit of the required funds into the Senior Secured
Notes Capitalized Interest Fund and the Senior Secured Notes Debt
Service Reserve Fund pursuant to Sections 4.4 and 4.3
respectively, and the payment of the expenses of the Offering,
$6,688,956, the balance of the funds remaining from the proceeds
of the Offering, $80,513,354, will be deposited into the Luannan
Facility Construction Fund and such amount (together with
interest income received thereon, interest income received on the
Issuer Funds (as described below in Section 4.13) and from Pan-
Western under the Issuer Loan and other amounts received from Pan-
Western prior to the Luannan Commercial Operation Date) will be
used to make the Issuer Loan. Such funds will, prior to being
lent to Pan-Western in accordance with the terms of the Issuer
Loan, be invested in Dollar Permitted Investments pursuant to
Section 4.13.
(b) Pursuant to the terms of this Indenture and the
Issuer Loan Agreement, the principal amount of the Issuer Loan
(and any and all interest income thereon (and on any of the
Issuer Funds pursuant to Section 4.13) prior to the Luannan
Commercial Operation Date) after deposit into the Luannan
Facility Construction Fund will be advanced to Pan-Western in
installments commencing on or after the Closing Date and ending
on the date on which the last Joint Venture has a payment
obligation relating to the construction of the Luannan Facility
(the "Funding Period"). Subject to the provisions of clauses
(c), (d), (e) and (f) below, moneys shall be disbursed from the
Luannan Facility Construction Fund during the Funding Period only
to, pursuant to the terms of this Indenture, the Issuer Loan
Agreement and the Shareholder Loan Agreements, pay or reimburse
Qualified Construction Costs.
(c) Notwithstanding anything in clauses (a) and (b)
above to the contrary, amounts may be disbursed from the Luannan
Facility Construction Fund only upon the receipt by the Trustee
of the following documents:
(i) on the first of each month a certificate from
the Issuer, Pan-Western and the Luannan Facility Engineer
(delivered at least once a month whether or not there is a
disbursement pursuant to the Issuer Loan Agreement or the
Shareholder Loan Agreements) to the effect that:
(A) undisbursed funds in the Luannan
Facility Construction Fund (or other monies available
to the Issuer, to the extent that such monies have been
segregated in a dedicated account and a security
interest in such account has been granted to the
Trustee) together with any and all interest earned on
the Issuer Funds and the Pan-Western Funds are
reasonably expected to equal or exceed the amount
necessary to pay all project costs in connection with
final completion of the Luannan Facility;
(B) the Luannan Facility is being
constructed in accordance with the Luannan EPC Contract
and the Approved Construction Budget and Schedule or,
if applicable, an Approved Completion Plan (each such
certificate, a "Luannan Facility Construction Schedule
Certificate");
(C) the requested payments or
reimbursements are Qualified Construction Costs;
(ii) a current construction progress report and
requisition certificate from the Issuer and Pan-Western
specifying project costs that are due and payable or that
are reasonably expected to be due and payable within the
next 30 days; and
(iii) an officer's certificate from the Issuer
and Pan-Western to the effect that: (a) no Event of Default
has occurred and is continuing; (b) no event of default
pursuant to the Issuer Loan Agreement has occurred and is
continuing; (c) no Event of Default pursuant to the
Shareholder Loan Agreements has occurred and is continuing;
and (d) the representations and warranties in the Issuer
Loan Agreement and the Shareholder Loan Agreements are true
and correct in all material respects on the date thereof as
if made on such date, except as affected by the consummation
of the transactions contemplated thereby or to the extent
relating solely to an earlier date.
(d) Notwithstanding anything in clause (c) above to
the contrary, prior to disbursing from the Luannan Facility
Construction Fund more than $15,000,000 in the aggregate, the
Trustee shall have received a certificate from the Issuer and Pan-
Western certifying that the transfer of land from the County
Partners to the relevant Joint Venture has taken place and has
been legally recognized and recorded in accordance with PRC law.
(e) Notwithstanding anything in clauses (a), (b) and
(c) above, at any time, if (i) the Issuer and Pan-Western shall
deliver an officer's certificate certifying that (A) there does
not exist as of the date of such certificate a Shareholder Loan
Agreement Event of Default, (B) all amounts required to be paid
as of such date under the Luannan Project Documents have been
paid and (C) the amount in the Luannan Facility Construction Fund
and estimated income on all Issuer Funds and the Pan-Western
Funds through the anticipated Luannan Commercial Operation Date
exceed by an amount specified in such certificate all reasonably
foreseeable expenses (including an appropriate contingency) in
connection with final completion of the Luannan Facility other
than the unreimbursed development costs paid to third parties
incurred by Affiliates of the Issuer in connection with the
Luannan Facility and (ii) the Luannan Facility Engineer shall
deliver a certificate to the same effect as clause (e)(i)(C) of
this Section 4.5, the Senior Secured Notes Trustee shall transfer
to the Issuer Equity Distribution Fund the lesser of (1) such
excess and (2) such unreimbursed third-party costs.
Notwithstanding anything herein or in any Transaction Document to
the contrary, (i) the aggregate amount of moneys transferred to
the Issuer Equity Distribution Account for unreimbursed third-
party costs prior to the Closing Date may not exceed $7,396,707
and (ii) no funds shall be paid to any Affiliate of the Issuer as
a reimbursement for development costs incurred prior to the date
of this Indenture except pursuant to this clause and the
Development Services Agreement.
(f) Upon completion of the Luannan Facility, (i) the
Issuer and Pan-Western shall deliver an officer's certificate
certifying that (a) the Luannan Commercial Operation Date has
occurred, (b) there does not exist as of the date of such
certificate a Shareholder Loan Agreement Event of Default, (c)
all amounts required to be paid as of such date under the Luannan
Project Documents have been paid and (d) an amount has been set
aside in the Completion Sub-Account sufficient to pay all
reasonably foreseeable expenses in connection with the completion
of the Luannan Facility, and (ii) the Luannan Facility Engineer
shall deliver a certificate certifying that the Luannan
Commercial Operation Date has occurred and that the amount
available in the Completion Sub-Account is sufficient to pay all
reasonably foreseeable expenses in connection with the completion
of the Luannan Facility. If, upon the occurrence of the events
described in clauses (i) and (ii) in the immediately preceding
sentence, excess funds remain in the Luannan Facility
Construction Fund due to the Luannan Facility Construction Cost
being less than the Projected Luannan Facility Construction Cost,
the Issuer shall, first, fund any deficits in the Issuer Funds
and second, if any excess funds are remaining and the amount of
such excess funds equals or exceeds $1,000,000, be obligated to
make a Mandatory Redemption Offer pursuant to Section 2.5(c)(ii)
of the First Supplemental Indenture. In the event that there are
excess funds following completion of such Mandatory Redemption
Offer or in the event there are excess moneys and no Mandatory
Redemption Event is required, such funds shall be transferred to
the Issuer Revenue Fund.
SECTION IV.6 Issuer Operating Fund. The Issuer hereby
irrevocably authorizes the Trustee, from the moneys then on
deposit in the Issuer Operating Fund, (a) to make the transfers
in respect of expenses incurred by the Issuer in connection with
the Administrative Services Agreement and in the ordinary course
of its business specified in an Officer's Certificate delivered
to the Trustee at least two (2) days prior to the date on which
such transfers are to be made (or such fewer days in advance as
may be acceptable to the Trustee) and (b) to cure any deficiency
remaining in an Issuer Fund on any Payment Date after giving
effect to any transfer made on such date pursuant to Section
4.14.
SECTION IV.7 Issuer Equity Distribution Fund. (a)
The Issuer hereby irrevocably authorizes the Trustee, from the
moneys then on deposit in the Issuer Equity Distribution Fund,
(i) to pay any deficiency in an Issuer Fund pursuant to Section
4.14 and (ii) to make a transfer to the Issuer (including for
payments under the Development Services Agreement) of the amount
specified in an Officer's Certificate delivered to the Trustee at
least two (2) days prior to any Monthly Date.
(b) Each Officer's Certificate delivered to the
Trustee pursuant to clause (a) of this Section 4.7 requesting a
transfer of moneys on deposit in the Issuer's Equity Distribution
Fund shall contain certifications as follows:
(i) no Event of Default or event of
default pursuant to any of the Issuer Loan Agreement,
the Company Indenture or the Shareholder Loan
Agreements has occurred and is continuing;
(ii) the representations and warranties in
this Indenture, the Issuer Loan Agreement and the
Shareholder Loan Agreements are true and correct in all
material respects on the date thereof as if made on
such date, except as affected by the consummation of
the transactions contemplated thereby or to the extent
relating solely to an earlier date;
(iii) that the Issuer is, and, after
giving effect to the transfer requested in such
certificate, will be, in compliance with any applicable
requirement of Section 7.11;
(iv) the amount in the Senior Secured
Notes Debt Service Reserve Fund plus the amount in the
Company's Notes Guarantee Service Reserve Fund equals
or exceeds the Debt Service Reserve Requirement;
(v) if the Officer's Certificate
requesting a transfer relates to a transfer in
connection with a payment pursuant to the Development
Services Agreement, such certificate contains an
accounting of the costs being reimbursed and to which
Project such costs are to be allocated; and
(vi) if the Officer's Certificate
requesting a transfer relates to a transfer in
connection with the project development activities of
the Issuer, such certificate contains an accounting of
the costs being paid and to which Project such costs
are to be allocated.
SECTION IV.8 Luannan Facility Restoration Fund. (a)
In the event that pursuant to Section 2.6(a) of the First
Supplemental Indenture hereto, the Issuer has determined to
rebuild, repair or restore the Luannan Facility to permit
operation of all or a portion of the Luannan Facility on a
Commercially Feasible Basis, upon delivery to the Trustee of an
Officer's Certificate certifying that the Luannan Facility will
be rebuilt, repaired or restored to permit operation of all or a
portion of the Luannan Facility on a Commercially Feasible Basis,
the Trustee shall withdraw and transfer the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may be,
and the related repayments of the Issuer Loan and the Shareholder
Loans segregated in the Issuer Revenue Fund to the Luannan
Facility Restoration Fund. Amounts held in the Luannan Facility
Restoration Fund shall be applied solely for the payment of the
costs of rebuilding, repair or restoration of the Luannan
Facility as set forth below. If the amount initially deposited
in the Luannan Facility Restoration Fund with respect to any
Luannan Event of Loss or Luannan Expropriation Event, as the case
may be, exceeds $500,000 per Luannan Event of Loss or Luannan
Expropriation Event, the Issuer shall deliver to the Trustee (x)
a restoration budget (the "Restoration Budget") prepared by the
Issuer identifying all costs reasonably anticipated to be
incurred in connection with the rebuilding, repair or
restoration, together with a statement of uses of proceeds of the
Luannan Facility 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 Luannan Facility Restoration Fund based on the
percentage of rebuilding, repair or restoration completed. As
provided for in Section 2.6 of the First Supplemental Indenture,
the Luannan Facility Engineer shall be required to certify that
the decision of the Issuer to rebuild and that the Restoration
Budget and Restoration Progress Payments Schedule is reasonable
and achievable. Any revision to a Restoration Budget or a
Progress Payments Schedule shall be accompanied by a certificate
from the Luannan Facility Engineer certifying to such revisions
in the same manner as the Luannan Facility Engineer is required
to certify such documents initially (as described in Section 2.6
of the First Supplemental Indenture).
(b) Before any withdrawal and transfer may be made
from the Luannan Facility Restoration Fund, there shall be filed
with the Trustee with respect to each Disbursement Date:
(i) a requisition from the Issuer (a
"Restoration Requisition"), dated not more than two (2) 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 Issuer; and
(ii) if the amount of Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may
be, and the related repayments of the Issuer Loan and the
Shareholder Loans initially deposited in the Luannan
Facility Restoration Fund with respect to any Luannan Event
of Loss or Luannan Expropriation Event, as the case may be,
exceeds $500,000, a certificate of an Authorized
Representative of the Luannan Facility Engineer dated not
more than two (2) days prior to the Disbursement Date
approving of the withdrawal and transfer requested to be
made certifying (A) that the Luannan Facility is being
restored in accordance with the Restoration Budget and the
Restoration Progress Payments Schedule and (B) undisbursed
funds in the Luannan Facility Restoration (or other monies
available to the Issuer, to the extent that such monies have
been segregated in a dedicated account and a security
interest in such account has been granted to the Trustee)
are reasonably expected to equal or exceed the amount
necessary to pay all costs in connection with the
restoration of the Luannan Facility.
(c) On the Disbursement Date referred to in Section
4.8(b) following receipt of the documents described in Sections
4.8(b)(i) and (ii) above, the Trustee shall withdraw and transfer
from the Luannan Facility Restoration Fund and shall remit to the
Joint Ventures the amount set forth in the Restoration
Requisition, and thereafter the Joint Ventures shall remit to the
applicable payees any amounts the Joint Ventures receive.
(d) Upon completion of any rebuilding, repair or
restoration of the Luannan Facility, there shall be filed with
the Trustee (i) an Officer's Certificate certifying the
completion of the rebuilding, repair or restoration of the
Luannan Facility and the amount, if any, required in its opinion
to be retained in the Luannan Facility Restoration Fund for the
payment of any remaining costs of rebuilding, repair or
restoration not then due and payable or the liability for payment
which is being contested or disputed by the Issuer or any of the
Joint Ventures and for the payment of reasonable contingencies
following completion of the rebuilding, repair or restoration and
(ii) if the amount of Luannan Casualty Proceeds or Luannan
Expropriation Proceeds, as the case may be, and the related
repayments of the Issuer Loan and the Shareholder Loans initially
deposited in the Luannan Facility Restoration Fund in respect of
such Luannan Event of Loss or Luannan Expropriation Event, as the
case may be, exceeded $500,000, a certificate of an Authorized
Representative of the Luannan Facility Engineer stating that
completion of the rebuilding, repair or restoration of the
Luannan Facility has occurred and concurring with the amounts to
be retained in the Luannan Facility Restoration Fund. Upon
receipt of the documents described in Sections 4.8(b)(i) and (ii)
above and clauses (i) and (ii) hereof, the Trustee shall transfer
the amount, if any, remaining in the Luannan Facility Restoration
Fund in excess of the amounts, if any, to remain in the Luannan
Facility Restoration Fund as stated in the Officer's Certificate,
first, to the Issuer to the extent of any amounts the Issuer has
expended in connection with such rebuilding, repair or
restoration (as set forth in such Officer's Certificate) and not
previously reimbursed and second, segregate the remainder in the
Luannan Facility Restoration Fund from any other amounts therein
and if such amount exceeds $2,500,000, the Trustee shall transfer
such moneys so segregated to the Issuer Revenue Fund no later
than one Business Day prior to the Redemption Date, as instructed
by the Issuer Order delivered by the Issuer to the Trustee, for
the redemption of the Senior Secured Notes outstanding in whole
or in part in accordance with the Article VIII and Section 2.5(b)
of the First Supplemental Indenture. If the remaining amount
segregated in the Luannan Facility Restoration Fund is less than
$2,500,000, the Trustee shall transfer such amount, first, to the
Senior Secured Notes Debt Service Reserve Fund until the amounts
held in such fund equals the then current Debt Service Reserve
Requirement, and second, to the Issuer Revenue Fund. Thereafter,
upon receipt of an Officer's Certificate certifying payment of
all costs of rebuilding, repair or restoration of the Luannan
Facility and a certificate of an Authorized Representative of the
Luannan Facility Engineer concurring with such certification, the
Trustee shall transfer any amounts remaining in the Luannan
Facility Restoration Fund pursuant to Section 4.8(d)(i) above in
the same order and manner as described in the immediately
preceding sentence.
SECTION IV.9 Pan-Western Revenue Fund. (a) The
Issuer shall cause Pan-Western to deliver (or cause to be
delivered) to the Trustee as soon as practicable after receipt
the following amounts for deposit in the Pan-Western Revenue Fund
in accordance with this Section 4.9: (i) any and all revenues and
other moneys received by Pan-Western from any source, (ii) income
from the investment of monies in the Pan-Western Revenue Fund,
the Pan-Western Operating Fund and the Pan-Western Equity
Distribution Fund, (iii) proceeds from the payment by the Joint
Ventures of amounts due under the Shareholder Loans, (iv)
proceeds from payments received by Pan-Western on its business
interruption insurance policies maintained by it with respect to
the Joint Ventures and (v) distributions from the Joint Ventures
to Pan-Western.
(b) The Issuer, on Pan-Western's behalf, hereby
irrevocably authorizes the Trustee, on each Monthly Date, from
the moneys then on deposit in the Pan-Western Revenue Fund, to
make the transfers specified in an Officer's Certificate
delivered to the Trustee at least two (2) days prior to such
Monthly Date (or such fewer days in advance as may be acceptable
to the Trustee) in the following order of priority:
first, to the Pan-Western Operating Fund, the amount
certified to be the excess (if any) of (i) Pan-Western's
good faith estimate of the aggregate amount payable by Pan-
Western prior to the next succeeding Monthly Date in respect
of expenses incurred by Pan-Western in connection with the
ordinary course of its business (including expenses in
connection with the Administrative Services Agreement) over
(ii) the aggregate of the amounts previously transferred to
the Pan-Western Operating Fund for the payment of such
expenses and not so applied;
second, to the payment of interest due and payable with
respect to the Issuer Loan, to the extent then due or to
become due during the next month;
third, to the payment of principal and premium, if any,
payable with respect to the Issuer Loan, to the extent then
due or to become due during the next month;
fourth, until such time as the Issuer Loan is repaid in
full, to the prepayment of principal and premium, if any,
and interest (to the extent not accounted for in clause
second above) with respect to the Issuer Loan, to the extent
amounts are available to make such prepayments; and
fifth, to the Pan-Western Equity Distribution Fund, any
remainder.
SECTION IV.10 Pan-Western Operating Fund. The Issuer,
on Pan-Western's behalf, hereby irrevocably authorizes the
Trustee, from the moneys then on deposit in the Pan-Western
Operating Fund, (a) to make the transfers in respect of expenses
incurred by Pan-Western in connection with the Administrative
Services Agreement and in the ordinary course of its business
specified in an Officer's Certificate delivered to the Trustee at
least two (2) days prior to the date on which such transfers are
to be made (or such fewer days in advance as may be acceptable to
the Trustee) and (b) to cure any deficiency remaining in a Fund
on any Monthly Date after giving effect to any transfer made on
such date pursuant to Section 4.14.
SECTION IV.11 Pan-Western Equity Distribution Fund.
The Issuer, on Pan-Western's behalf, hereby irrevocably
authorizes the Trustee, from the moneys then on deposit in the
Pan-Western Equity Distribution Fund, to pay any deficiency in a
fund pursuant to Section 4.14. Amounts deposited in the Pan-
Western Equity Distribution Fund shall be allocated among the Pan-
Sino Distribution Account and the Chinamac Distribution Account
in accordance with the equity interests of Pan-Sino and Chinamac
in Pan-Western. Pursuant to the April 11, 1997 Pan-Western
Shareholders' Agreement, the shareholders of Pan-Western have
agreed to cause Pan-Western to declare distributions from the sub-
funds immediately upon the availability of funds for such
purposes.
SECTION IV.12 Pan-Sino Fund. (a) The Issuer, on Pan-
Western's behalf, hereby irrevocably authorizes the Trustee to
deposit all distributions pursuant to an Officer's Certificate to
Pan-Sino from Pan-Western in the Pan-Sino Fund. Amounts
deposited in the Pan-Sino Fund shall be allocated among the NDR
Distribution Account and the Issuer Distribution Account in
accordance with the equity interests of NDR and the Issuer in Pan-
Sino. Pursuant to the Pan-Sino Shareholders Agreement, the
shareholders of Pan-Sino have agreed (i) to cause Pan-Sino to
declare distributions immediately upon the availability of funds
for such purposes, (ii) that monies on deposit in the NDR
Distribution Account shall be deemed distributed by Pan-Sino to
NDR and (iii) NDR shall pledge all monies in the NDR Distribution
Account to the Senior Secured Notes Trustee until such time as
the Senior Secured Notes Trustee shall release such funds in
accordance with the provisions described in clause (b) below.
(b) The Issuer, on Pan-Sino's behalf, hereby
authorizes the Senior Secured Notes Trustee, on each Monthly Date
after the Luannan Commercial Operation Date (or the next
following business day), to transfer or segregate money, to the
extent then available in the Issuer Distribution Account and the
NDR Distribution Account. Amounts on deposit in the Issuer
Distribution Account shall be transferred to the Issuer Revenue
Fund. Amounts on deposit in the NDR Distribution Account shall
only be released to NDR when and if (i) the Company is in
compliance with the requirements of Section 7.11 of the Company
Indenture and (ii) the Luannan Commercial Operation Date has
occurred. Pursuant to the Pan-Sino Cash Collateral Agreement,
the Trustee is authorized to pay any deficiency in a fund
pursuant to Section 4.14.
SECTION IV.13 Investment of Funds. (a) Monies held
in any Fund created by or pursuant to this Indenture shall be
invested and reinvested by the Trustee, as directed in writing by
the Issuer, in Dollar Permitted Investments; provided, however,
that at any time when an Event of Default shall have occurred and
be continuing, the Trustee shall only select investments to be
made by the Trustee in a manner such that, in the reasonable
opinion of the Issuer, 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 Dollar Permitted Investments or
other such investments allowed pursuant to clause (a) hereof are
redeemed prior to the maturity thereof, the Trustee shall not be
liable for any penalties relating thereto.
(c) Any income or gain realized from Dollar Permitted
Investments with respect to monies on deposit in any Fund shall
be deposited, first, into the Fund from which the monies invested
came, until the amount required to be held in such fund has been
reached, and second, with respect to the Issuer Funds, if the
Luannan Commercial Operation Date has not occurred, into the
Luannan Facility Construction Fund and, if the Luannan Commercial
Operation Date has occurred, into the Issuer Revenue Fund. With
respect to the Pan-Western Operating Fund, the Pan-Western
Revenue Fund and the Pan-Western Equity Distribution Fund any
income and gain realized from Dollar Permitted Investments with
respect to moneys on deposit in such funds shall be deposited
into the Pan-Western Revenue Fund. With respect to the Pan-Sino
Fund, any income or gain realized from Dollar Permitted
Investments with respect to monies on deposit in such fund shall
be re-deposited into such Fund. With respect to the Completion
Sub-Account, any income or gain realized from Dollar Permitted
Investments shall be deposited into the Completion Sub-Account.
Any loss shall be charged to the applicable Fund. The Trustee
shall not 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.
(d) Monies of any Fund that are invested in a Dollar
Permitted Investment shall be deemed, for all purposes of this
Indenture, to be on deposit in such Fund in an amount equal to
the lesser of (i) the face amount of such Dollar Permitted
Investment and (ii) the purchase price thereof. Accrued and
unpaid interest or profit in any Dollar Permitted Investment
shall not be deemed to be on deposit in any Fund until such
interest or profit is actually paid and received by the Trustee,
whereupon such interest or profit shall be deposited in the
appropriate Fund.
(e) The Issuer hereby expressly authorizes the Trustee
to sell or make any transfer or withdrawal required or
contemplated by this Indenture and neither the Trustee nor any
Secured Party shall have any liability by reason of any loss
suffered upon the sale or disposition of a Dollar Permitted
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.
(f) Without limitation of the preceding sentence, if
the Trustee shall receive instructions from an Authorized
Representative of the Issuer regarding the sale or other
disposition of Dollar Permitted Investment, then the Trustee
shall make such sales and dispositions in accordance with such
instructions before making any other necessary sales or
dispositions.
SECTION IV.14 Payment Deficiencies; Invasion of Funds.
(a) If, on any Payment Date with respect to the Senior Secured
Notes, the moneys available to the Issuer in the Senior Secured
Notes Interest Account is not sufficient to pay in full the
interest (including Liquidated Damages and Additional Amounts, if
any) with respect to the Senior Secured Notes, the Trustee shall
obtain funds for the correction of such insufficiency by
withdrawing moneys or notifying the Company Indenture Trustee and
obtaining moneys from the Company Indenture Trustee (the Company
Indenture Trustee shall provide such moneys pursuant to the terms
of the Company Indenture and the Senior Secured Notes Guarantee)
in the following manner and order or priority:
first, by notifying the Company Indenture Trustee of
such insufficiency and obtaining moneys for the correction
of such insufficiency from the Company Indenture Trustee
(the Company Indenture Trustee shall obtain such moneys by
withdrawing moneys from the Notes Guarantee Interest Account
of the Notes Guarantee Service Fund, until the balance
therein is zero);
second, from the Senior Secured Notes Principal
Account, until the balance therein is zero;
third, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining moneys for the
correction of such insufficiency from the Company Indenture
Trustee (the Company Indenture Trustee shall obtain such
moneys by withdrawing moneys from the Notes Guarantee
Principal Account of the Notes Guarantee Service Fund, until
the balance therein is zero);
fourth, from the Issuer Equity Distribution Fund, until
the balance therein is zero;
fifth, from the Pan-Western Equity Distribution Fund,
until the balance therein is zero;
sixth, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining moneys for the
correction of such insufficiency from the Company Indenture
Trustee (the Company Indenture Trustee shall obtain such
moneys by withdrawing moneys from the Company Equity
Distribution Fund, until the balance therein is zero);
seventh, from the Senior Secured Notes Debt Service
Reserve Fund, until the balance therein is zero;
eighth, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining moneys for the
correction of such insufficiency from the Company Indenture
Trustee (the Company Indenture Trustee shall obtain such
moneys by withdrawing moneys from the Notes Guarantee
Service Reserve Fund, until the balance therein is zero);
ninth, from the Pan-Sino Fund, until the balance
therein is zero;
tenth, from the Pan-Western Operating Fund, until the
balance therein is zero;
eleventh, from the Issuer Operating Fund, until the
balance therein is zero; and
twelfth, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining such moneys for
the correction of such insufficiency from the Company
Indenture Trustee (the Company Indenture Trustee obtain such
by withdrawing moneys from the Company Operating Fund, until
the balance therein is zero).
(b) If, on any Payment Date with respect to the Senior
Secured Notes, the moneys available to the Issuer in the Senior
Secured Notes Principal Account is not sufficient to pay in full
the principal, and premium, if any with respect to the Senior
Secured Notes, the Trustee shall obtain funds for the correction
of such insufficiency by withdrawing moneys or notifying the
Company Indenture Trustee and obtaining moneys from the Company
Indenture Trustee (the Company Indenture Trustee shall provide
such moneys pursuant to the terms of the Company Indenture and
the Senior Secured Notes Guarantee) in the following manner and
order or priority:
first, by notifying the Company Indenture Trustee of
such insufficiency and obtaining moneys for the correction
of such insufficiency from the Company Indenture Trustee
(the Company Indenture Trustee shall obtain such moneys by
withdrawing moneys from the Notes Guarantee Principal
Account of the Notes Guarantee Service Fund, until the
balance therein is zero);
second, from the Issuer Equity Distribution Fund, until
the balance therein is zero;
third, from the Pan-Western Equity Distribution Fund,
until the balance therein is zero;
fourth, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining moneys for the
correction of such insufficiency from the Company Indenture
Trustee (the Company Indenture Trustee shall obtain such
moneys by withdrawing moneys from the Company Equity
Distribution Fund, until the balance therein is zero);
fifth, from the Senior Secured Notes Debt Service
Reserve Fund, until the balance therein is zero;
sixth, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining moneys for the
correction of such insufficiency from the Company Indenture
Trustee (the Company Indenture Trustee shall obtain such
moneys by withdrawing moneys from the Notes Guarantee
Service Reserve Fund, until the balance therein is zero);
seventh, from the Pan-Sino Fund, until the balance
therein is zero;
eighth, from the Pan-Western Operating Fund, until the
balance therein is zero;
ninth, from the Issuer Operating Fund, until the
balance therein is zero; and
tenth, by notifying the Company Indenture Trustee of
such continuing insufficiency and obtaining such moneys for
the correction of such insufficiency from the Company
Indenture Trustee (the Company Indenture Trustee obtain such
by withdrawing moneys from the Company Operating Fund, until
the balance therein is zero).
SECTION IV.15 Resignation and Removal of Project
Engineer; Appointment of Successor; Payment of Fees and Expenses.
(a) In case at any time any Project Engineer shall fail to be
independent (within the meaning specified in the definition of
"Eligible Successor" in Appendix A) from the Issuer or any
Affiliate of the Issuer or shall become incapable of acting or
otherwise fails to perform the functions of the Project 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 Project 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
Securities, considered as one class) remove the Project Engineer
by written instrument, one copy of which instrument shall be
delivered to the Project Engineer and one copy of which
instrument shall be delivered to the Issuer.
(b) Subject to the proviso below, the Issuer may at
any time remove the Project Engineer by delivering written notice
of such removal to a Responsible Officer of the Trustee and to
the Project Engineer; provided, that the Issuer may not remove
any Project Engineer if such Project Engineer has served as the
Project Engineer for a period of less than twelve (12) months
immediately preceding such proposed removal, unless such Project
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 the Issuer or any Affiliate of the
Issuer or such Project Engineer shall become incapable of acting
or otherwise fails to perform the functions of the Project
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 Project Engineer or
its property or its affairs for the purpose of rehabilitation,
conservation or liquidation. Any removal of a Project Engineer
by the Issuer pursuant to this Section 4.15(b) shall not be
effective until the applicable Eligible Successor accepts its
appointment in accordance with Section 4.15(d).
(c) Upon giving or receiving written notice of the
removal or resignation of any Project Engineer, the Issuer shall
promptly appoint a successor from among the applicable Eligible
Successors by written instrument executed by order of the Issuer,
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 Project Engineer appointed under
this Section shall execute, acknowledge and deliver to the Issuer
and the Trustee an instrument accepting such appointment. Such
instrument shall include a statement that such Project 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 the Issuer and any Affiliate of the Issuer.
Such Project Engineer shall further state in such instrument
that, if at the time of its appointment it is currently providing
any services to the Issuer 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 Domestic Projects, the Joint Ventures
and any Permitted Projects in accordance with the terms of this
Indenture.
(e) To the extent not provided for out of the Issuer
Operating Fund, for so long as any of the Securities shall remain
Outstanding, the Issuer covenants and agrees to pay to the
Project 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 the
Issuer with the Project 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 the Issuer.
(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 Project Engineer or Eligible
Successor hereunder.
SECTION IV.16 Disposition of Accounts and Funds Upon
Retirement of Securities. Except as provided in Section 3.3,
after payment in full of (i) the principal of and premium, if
any, and interest on all the Securities 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 Funds
established in, or pursuant to, Section 3.3 shall be paid to the
Issuer.
SECTION IV.17 Procedures for Review by Project
Engineer of Projections. Whenever this Indenture provides for
any review or determination to be made by the Project Engineer,
such review shall be based upon such investigation and
assumptions that the Project Engineer determines is reasonable
under the circumstances.
ARTICLE V
IMMUNITY OF INCORPORATORS, STOCKHOLDERS
OFFICERS AND DIRECTORS
SECTION V.1 Liability of the Issuer Solely Corporate.
No recourse shall be had for the payment of the principal,
premium, if any, or the interest (including Liquidated Damages
and Additional Amounts, if any), on any Collateral 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 the
Securities, against any stockholder, officer, or director, as
such, past, present or future, of the Issuer or any of its
Subsidiaries, 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 Securities are limited as
provided in Section 2.15 and that the Issuer's obligations under
the Securities are solely corporate obligations of the Issuer,
and that no personal liability whatsoever shall attach to, or be
incurred by, any stockholder, officer, or director, past, present
or future, of the Issuer or any of its subsidiaries, because of
the indebtedness hereby authorized or under or by reason of any
of the obligations, covenants, promises or agreements contained
in the Securities 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, and the issue of Securities and
no judgment for any deficiency upon the obligations of the Issuer
contained in the Securities shall be obtainable by the Holders,
the Trustee against any stockholder, officer, or director, past,
present or future, of the Issuer; provided, however, that nothing
herein or in the Securities 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 Collateral 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 to proceed against any such
Person with respect to the enforcement of such obligations.
ARTICLE VI
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION VI.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Issuer Request cease to be of further
effect (except as hereinafter expressly provided), and the
Trustee, at the expense of the Issuer, shall execute instruments
in form and substance satisfactory to the Trustee and the Issuer
acknowledging satisfaction and discharge of this Indenture, when:
(a) either
(i) all Securities theretofore authenticated
and delivered (other than (A) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 2.10 and (B) Securities deemed
to have been paid in accordance with Section 6.3(a)) have
been delivered to the Trustee for cancellation; or
(ii) (A) all Securities not theretofore
delivered to the Trustee for cancellation have or will (upon
the mailing of a notice or notices deposited with the
Trustee together with irrevocable instructions to mail such
notice or notices to Holders of such Securities) become due
and payable and shall be deemed to have been paid in
accordance with Section 6.3(a); and
(B) all sums due and payable hereunder have been
paid; and
(b) the Issuer 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 Issuer Request, acknowledge in
writing the satisfaction and discharge of this Indenture and take
all other action reasonably requested by the Issuer 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 Securities 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 the Issuer and the
Trustee under this Indenture and the Securities shall survive to
the extent provided in such Section until all such Securities
have actually been repaid in full; provided, however, that the
obligations of the Issuer 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 assign, transfer and
turn over to or upon the order of the Issuer, any and all money,
securities and other property then held by the Trustee for the
benefit of the Holders, 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).
SECTION VI.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 Securities and this
Indenture, to the payment, either directly or through any Paying
Agent (including the Issuer acting as its own Paying Agent), to
the Holders of the Securities 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 Liquidated Damages and Additional
Amounts), 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) the Issuer 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 the Issuer
from time to time upon Issuer 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 VI.3 Satisfaction, Discharge and Defeasance of
Securities of any Series.
(a) The Issuer shall be deemed to have paid and
discharged the entire indebtedness on all the Outstanding
Securities 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 Securities,
as it relates to such Outstanding Securities of such series,
shall no longer be in effect (and the Trustee, at the expense of
the Issuer, shall at Issuer Request execute instruments in form
and substance satisfactory to the Trustee and the Issuer
acknowledging the same), except as to:
(i) the rights of Holders of Securities 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,
(including Liquidated Damages and Additional Amounts, if
any) on the Outstanding Securities of such series on the
Payment Date of such principal or installment of principal
or of such interest (to and including the Redemption Date,
if any, irrevocably designated by the Issuer pursuant to
subparagraph (viii) of this Section 6.3(a));
(ii) the rights and obligations of the Issuer
and the Trustee under this Article and with respect to such
Securities of such series under Sections 2.7, 2.8, 2.9,
2.10, 2.11, 2.12, 2.13 and 2.16 and, if the Issuer 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) the Issuer'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) the Issuer 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 Securities 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, together with irrevocable written instructions
to the Trustee to apply such monies and/or U.S. Government
Obligations to pay when due, the principal of (and premium,
if any) and each installment of principal (and premium, if
any) and interest, if any, (including Liquidated Damages and
Additional Amounts, if any) on the Outstanding Securities of
such series on each Payment Date of such principal or
installment of principal or such interest (to and including
the Redemption Date, if any, irrevocably designated by the
Issuer 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 Securities 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) the Issuer 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 the Issuer'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 the Issuer 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 Issuer 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 the Issuer
under either such statute, and either (x) the trust funds
will no longer remain the property of the Issuer (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 the
Issuer, (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 the Issuer 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, (including
Liquidated Damages and Additional Amounts, if any) on the
Outstanding Securities of a series to and including a
Redemption Date on which all of the Outstanding Securities
of such series are eligible for optional redemption and on
which all of the Outstanding Securities 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 Issuer Request that the
Trustee give notice of such redemption in the name and at
the expense of the Issuer not less than 30 nor more than 60
days prior to such Redemption Date in accordance with
Section 8.4; and
(ix) the Issuer 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 Securities
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 Securities of any
series (but the conditions set forth in subparagraphs (vii) and
(ix) thereof are not satisfied), (y) the Issuer has delivered to
the Trustee an Opinion of Counsel to the effect that the Holders
of the Outstanding Securities 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 Securities 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) the Issuer 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 Securities 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 Securities of such
series, except as otherwise expressly provided herein the
Issuer shall be released from its covenants and other
obligations contained in Article VII and Section 2.17 of
this Indenture 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 Securities of such series;
(ii) the occurrence of any event specified in
clause (c), (d), (e), (f), (g), and (j) of Section 9.1 shall
not constitute an Event of Default with respect to the
Securities of such series;
(iii) the Securities 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 Securities have concurred in
any Act under this Indenture with respect to any covenant or
obligation from which the Issuer has 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 Securities of such series pursuant
to subparagraph (ii) above (or the consequences thereof);
and
(iv) the Securities of such series shall cease
to be secured by or to be entitled to any benefit under the
Collateral 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 Securities 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 the Issuer of its obligations with respect to
the payment of the principal of (and premium, if any) or
interest, if any, (including Liquidated Damages and Additional
Amounts, if any) on the Outstanding Securities of such series.
In furtherance of the foregoing, it is understood and agreed
that:
(A) satisfaction by the Issuer of the
conditions necessary to achieve the consequences
specified in this Section 6.3(b) with respect to any
series of Securities shall not be construed to preclude
the Issuer from achieving the consequences specified in
Section 6.3(a) with respect to such Securities 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
Securities are Securities with respect to which the
conditions described in this Section 6.3(b) have been
satisfied, the Trustee shall, upon receipt of a Issuer
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
Except as otherwise specified in a Series Supplemental
Indenture with respect to a particular series of Securities, the
Issuer hereby covenants and agrees that so long as this Indenture
is in effect and any Securities remain Outstanding:
SECTION VII.1 Payment of Securities. The Issuer shall
promptly pay the principal of, premium, if any and interest on
(including Liquidated Damages and Additional Amounts, if any) the
Securities on the dates and in the manner provided in this
Indenture and in the Securities.
SECTION VII.2 Delivery of Officers' Certificates.
Prior to 10:00 am., New York City time, at least two (2) days
prior to each Monthly Date and each Payment Date, the Issuer
shall deliver to the Trustee an Officer's Certificate of the
Issuer, setting forth the information required pursuant to
Article IV in order to enable the Trustee to effect transfers and
withdrawals from the Funds contemplated under such Article to be
made on such Monthly Date or Payment Date.
SECTION VII.3 Maintenance of Existence, Properties,
Etc. (a) Except as otherwise provided in the Issuer Pledge
Agreement, the Company shall, and shall cause each of its
Subsidiaries to, preserve and maintain its legal existence and
form.
(b) The Company shall preserve and maintain, and shall
cause each of its Subsidiaries 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 this Indenture and the Transaction Documents,
except to the extent failure to do so could not reasonably be
expected to have a Material Adverse Effect.
(c) The Company shall, and shall cause each of its
Subsidiaries 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 have a Material Adverse
Effect, and (ii) do or cause to be done all things necessary to
comply with its organizational documents and agreements.
(d) The Company shall not and shall not permit any of
its Subsidiaries to, modify, amend or terminate their respective
articles of association or other organizational documents in a
manner that is reasonably likely to have a Material Adverse
Effect.
(e) The Company shall not and shall not permit any
Subsidiary to amend or terminate any Project Document if such
amendment or termination is reasonably likely to have a Material
Adverse Effect. Upon any amendment or termination of a
Transaction Document, the Issuer shall deliver an Officer's
Certificate to the Trustee certifying that such amendment or
termination has taken place and that it is not reasonably likely
to have a Material Adverse Effect.
(f) (i) The Issuer will maintain in the Borough of
Manhattan, The City of New York, an office or agency (which
may be an office of the Trustee, Registrar or co-registrar)
where Securities may be presented for registration of
transfer or exchange and where notices and demands to or
upon the Issuer in respect of the Securities and this
Indenture may be served. The Issuer will give prompt
written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices
and demands may be made or served at the Corporate Trust
Office of the Trustee.
(ii) The Issuer may also from time to time designate
one or more other offices or agencies where the Securities
may be presented or surrendered for any or all such purposes
and may from time to time rescind such designations;
provided, however, that no such designation or rescission
shall in any manner relieve the Issuer of its obligations to
maintain an office or agency in the Borough of Manhattan,
The City of New York for such purposes. The Issuer will
give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location
of any such other office or agency.
(iii) The Issuer hereby designates the office of the
Trustee as one such office or agency of the Issuer.
SECTION VII.4 Compliance with Laws. The Company 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 the Company or its Subsidiaries, except,
with respect to a Domestic Project or a U.S. Permitted Project,
any Requirements of Law or Governmental Approvals that are the
subject of a Good Faith Contest and, with respect to the Luannan
Facility or a Non-U.S. Permitted Project, such Non-U.S. Permitted
Project and the Luannan Facility shall not knowingly violate any
Requirements of Law or fail to comply with or obtain Governmental
Approvals. In the event that the Luannan Facility or a Non-U.S.
Permitted Project is knowingly in violation of any Requirements
of Law or Government Approval, such Person shall correct such
situation within thirty (30) days, or such shorter time as may be
required by such Requirement of Law or Governmental Approval.
SECTION VII.5 Payment of Taxes. The Issuer shall
promptly pay when due any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges
or similar levies that arise in any jurisdiction from the
execution, delivery or registration of any Senior Secured Note or
any other document or instrument referred to in the Indentures or
receipt of any payments with respect to any Senior Secured Note,
excluding any such taxes, charges or similar levies imposed by
any jurisdiction outside of the Cayman Islands, the United States
and any jurisdiction in which a Paying Agent is located except
those resulting from, or required to be paid in connection with,
the enforcement of such Senior Secured Note or any other such
document or instrument following the occurrence of any Default.
The Company will, and will cause each of its Subsidiaries to, pay
prior to delinquency, all material taxes, assessments, and
governmental levies except such as are being contested in good
faith and by appropriate proceedings or where the failure to
effect such payment will not have a Material Adverse Effect.
SECTION VII.6 Books and Records. The Issuer shall,
and shall cause each of its Subsidiaries to, at all times keep
proper books of account and records, in accordance with good
accounting practices, concerning its business and financial
affairs.
SECTION VII.7 Right of Inspection. Subject to
requirements of applicable Government Rules and upon reasonable
notice from the Trustee, the Company shall, and shall cause each
of its Subsidiaries to, permit the Trustee, or any agents or
representatives thereof, and the Consolidating Financial Analyst
from time to time during normal business hours to conduct
reasonable inspections and examinations at all reasonable times
of the books and records of the Company, any of its Subsidiaries
and each Domestic Project, Permitted Project and the Luannan
Facility and, if requested by the Trustee or the Consolidating
Financial Analyst, as the case may be, the Issuer 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 its Projects.
SECTION VII.8 Use of Proceeds. The Issuer shall use
the proceeds from the sale of Securities issued hereunder solely
for the purposes specified in the applicable Series Supplemental
Indenture.
SECTION VII.9 Reporting Requirements. (a) The Issuer
will furnish to the Trustee as soon as practicable and in any
event within 30 days after the end of each fiscal year, a
certificate of a Responsible Officer of the Issuer, Pan-Western
and Pan-Sino stating (i) that a review of the activities of the
Issuer, Pan-Western and Pan-Sino during the preceding fiscal year
has been made under the supervision of such Responsible Officer,
(ii) that to the best of such Person's knowledge, the Issuer, Pan-
Western and Pan-Sino during the previous year have kept,
observed, performed and fulfilled each and every covenant and
condition contained in this Indenture and the Senior Secured
Notes and that (iii) such Person has no reason to believe that
any Event of Default or event of default pursuant to the Issuer
Loan Agreement or the Shareholder Loan Agreements or any
condition or event that with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default or an event of default pursuant to the Issuer Loan
Agreement or the Shareholder Loan Agreements, has occurred, or,
if there has been a breach or default in the fulfillment of any
such obligation, specifying each such breach or default known to
such Person and the remedies, if any, being taken to remedy such
situation.
(b) Pursuant to the Company Indenture, the Company
Indenture Trustee shall furnish to the Trustee (i) unaudited
quarterly reports containing consolidated financial statements of
the Company and its Subsidiaries for each of the first three
quarters of its fiscal year and (ii) audited annual reports
containing consolidated financial statements of the Company and
its Subsidiaries. Whether or not required by the Exchange Act or
the rules and regulations of the Commission thereunder, the
Company will furnish to the Holders of the Securities all
quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q, 10-
K and 8-K (and within the time periods specified by such rules or
regulations for such filings) if the Company were required to
file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by
the Company's independent public accountants; provided that the
Company will file a copy of all such information and reports with
the Commission for public availability (unless the Commission
will not accept such a filing) and make such information
available to investors who request it in writing; provided
further, the Company will agree that the Company will, and will
cause the Issuer to, furnish to the Holders and to securities
analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
(c) The Issuer shall file with the Trustee and the SEC
and transmit to Holders of Securities, such information,
documents and other reports, and such summaries thereof, as may
be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act.
SECTION VII.10 Maintenance of Insurance. (a) The
Company shall maintain, and shall cause each of its Subsidiaries
to maintain, insurance of the types and in the amounts that are
customary and usual for a company in its respective line of
business.
(b) Within 30 days following the commercial operation
date of a Permitted Project (and within 30 days of the Luannan
Commercial Operation Date), the Company shall provide, or shall
cause its relevant Subsidiary to provide, certificates of
insurance to the Trustee, evidencing such insurance coverage at
the time the covered risks will come into existence during the
course of operation.
(c) The Trustee shall be named as sole loss payee,
under a standard lenders loss payable clause, without
contribution, under insurance policies required herein where
applicable. The Trustee shall be added as an additional insured
with respect to the coverage required herein, where applicable,
and such insurance shall be primary without right of contribution
of any other insurance or self-insurance carried by or on behalf
of the Trustee, with respect to its interest as such in the
Luannan Facility and each policy shall contain a severability-of-
interests or cross-liability provision. Insurance policies
required herein, where applicable, shall be endorsed with an
agreed amount clause or waiver of co-insurance.
(d) The insurance carried in accordance with Schedule
7.10, where applicable, shall be endorsed as follows:
(i) All insurers shall waive all rights of
subrogation against the Trustee 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 or material change is made in the
coverage which affects the interests of the Trustee
such cancellation or change shall not be effective as
to the Trustee for thirty (30) days, except for
nonpayment of premium, which shall be ten (10) days,
after receipt by the Trustee of written notice from
such insurer of such cancellation or change.
(e) Upon procurement by the Company and each of its
Subsidiaries of the insurance required pursuant to this Section
7.10, the Company and each of its Subsidiaries shall furnish to
the Trustee certification of all required insurance. Such
certification by the Company and each of its Subsidiaries 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 Trustee, the Company and each of its Subsidiaries
will promptly furnish to the Trustee copies of all insurance
policies, binders and cover notes or other evidence of such
insurance relating to the Domestic Projects, any Permitted
Project and the Luannan Facility.
(f) Within ten (10) days after the certification
referred to in Section 7.10(e) above, the Company and each of its
Subsidiaries shall furnish to the Trustee a report of its
insurance broker stating that all premiums then due have been
paid and a certificate of the Independent Insurance Consultant
stating that, in the opinion of the Independent Insurance
Consultant, the insurance then carried and maintained is in
accordance with the terms hereof.
(g) If at any time any of the insurance required
hereunder shall no longer be available on commercially reasonable
terms, the Company and each of its Subsidiaries 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 Company and each
of its Subsidiaries shall deliver to the Trustee a certificate of
the Independent 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 7.10, 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 affected Domestic
Project, Permitted Project or the Luannan Facility 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 7.10 shall not
constitute an Event of Default, and the Company and each of its
Subsidiaries shall be deemed to be in full compliance with such
requirements, if such failure is due to insurance not being
available on commercially reasonable terms and the Company and
its relevant Subsidiary or Subsidiaries have complied with this
clause (g) in respect of such failure.
(h) The loss, if any, under any insurance required to
be carried under this Section 7.10 shall be adjusted with the
insurance companies or otherwise collected, including the filing
in a timely manner of appropriate proceedings, by the Company and
each of its Subsidiaries, subject to the approval of the
Independent Insurance Consultant if such loss as per each injured
is in excess of $500,000. In addition, the Company and each of
its Subsidiaries shall take all other steps necessary, or if such
loss as per each injured is in excess of $500,000 the steps
requested by the Independent Insurance Consultant, to collect
from insurers any loss covered by any of the insurance policies
required hereunder. All such policies shall provide that the
loss, if any, under such insurance shall be adjusted and paid as
provided in this Section 7.10.
(i) The Company and each of its Subsidiaries shall
promptly notify the Trustee of any loss covered by any insurance
required by this Section 7.10 in excess of $500,000. The Company
and each of its Subsidiaries 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 Permitted Project Event, Domestic
Project Event or Luannan Event of Loss or pertaining to the
settlement, compromise or arbitration of any claim on account of
any Luannan Event of Loss, Domestic Project Event or Permitted
Project Event. The Company may, and may cause each of its
Subsidiaries, in its reasonable judgment, to compromise, settle
or consent to the settlement of any proceeding arising out of any
Luannan Event of Loss, 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 relevant Project Engineer and the Independent
Insurance Consultant; provided, further, that if an Event of
Default has occurred and is continuing, the Company will not nor
will it permit any of its Subsidiaries to settle, compromise or
consent to the settlement of any proceeding arising out of such a
Domestic Project Event, Permitted Project Event or Luannan Event
of Loss without the prior written consent of the Trustee.
(j) No provision of this Section 7.10 or any other
provision of this Indenture shall impose on the Trustee any duty
or obligation to verify the existence or adequacy of the
insurance coverages maintained by the Company or any of its
Subsidiaries nor shall the Trustee be responsible for any
representations or warranties made by or on behalf of the Company
or any of its Subsidiaries to any insurance company or
underwriter.
(k) The Company and each of its Subsidiaries hereby
waives any and every claim for recovery from 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
Company and each of its Subsidiaries, as appropriate, 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.
(l) With respect to any Domestic Project, Permitted
Project and the Luannan Facility, the Company shall cause, or
shall cause its relevant Subsidiary to cause, each operation and
maintenance contractor to procure and maintain in full force and
effect at all times, or shall procure and maintain on behalf of
such operation and maintenance contractor, liability and worker's
compensation insurance for coverage and limits not less than what
is currently required in each operations and maintenance
agreement with respect to such Domestic Project, Permitted
Project or Luannan Facility.
(m) Notwithstanding anything to the contrary set forth
in this Section 7.10 (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 Independent Insurance Consultant.
(n) The Company and each of its Subsidiaries will
comply, or cause compliance, at all times with the insurance
requirements contained in any of the Transaction Documents.
(o) Prior to the date of this Indenture, the Company
shall retain an Independent Insurance Consultant who shall
provide a written certificate to the Company Indenture Trustee on
or prior to the date of this Indenture and the Company Indenture
Trustee shall provide such certificate to the Trustee, that the
insurance that has been obtained with respect to the Company and
each of its Subsidiaries meets the standards specified in this
Section 7.10.
(p) The Independent Insurance Consultant shall (i)
annually review the proposed insurance coverages of the Company
and its Subsidiaries and on or prior to November 15 of each year
shall provide a written certificate to the Trustee specifying
that such insurance meets the standard specified in this Section
7.10 and (ii) on or prior to February 15 of each year provide a
written certificate to the Trustee confirming that the Company
has obtained the insurance coverages the Company proposed to
obtain and which were specified in the Independent Insurance
Consultant's certificate to the Trustee of the preceding November
15.
SECTION VII.11 Limitation on Restricted Payments. The
Company shall not make, and shall not permit any of its
Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless:
(a) no Event of Default shall have occurred and be
continuing at the time of or after giving effect to such
Restricted Payment;
(b) the Luannan Facility Engineer has certified that
the Luannan Facility Commercial Operation Date has occurred;
(c) the Debt Service Coverage Ratio of the Company for
the immediately preceding four fiscal quarters (or, if date of
determination is within the preceding four fiscal quarters
following the Luannan Commercial Operation Date, for such shorter
period) is greater than 1.4 to 1, as certified by the Chief
Financial Officer of the Company;
(d) the projected Debt Service Coverage Ratio of the
Company for the immediately succeeding four fiscal quarters is
greater than 1.4 to 1, as certified by the Chief Financial
Officer of the Company;
(e) the amount in the Senior Secured Notes Debt
Service Reserve Fund plus the amount in the Company's Notes
Guarantee Service Reserve Fund equals or exceeds the Debt Service
Reserve Requirement; and
(f) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or
made after the date on which the Senior Secured Notes are
originally issued does not exceed the sum of (1) 50% of the
Company's Consolidated Net Income (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit if after the 28th month following the Closing Date or 50%
of such deficit prior to such date) from the next fiscal quarter
after the Closing Date, plus (2) 100% of the aggregate Net Cash
Proceeds and the Fair Market Value of marketable securities
received by the Company from the issue or sale, after the date of
this Indenture, of Capital Stock (other than Disqualified Stock)
of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable for Capital Stock (other
than Disqualified Stock) of the Company which has been so
converted or exercised, as the case may be. For purposes of
determining under clause (2) above the amount expended for
Restricted Payments, cash distributed shall be valued at the face
amount thereof and property other than cash shall be valued at
its Fair Market Value.
The provisions of this covenant shall not prohibit (i)
the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment
would comply with the provisions of this Indenture, (ii) the
retirement of any shares of Capital Stock of the Company in
exchange for, or out of, the Net Cash Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other
than Disqualified Stock), (iii) the redemption or retirement of
subordinated Indebtedness of the Issuer or the Company in
exchange for, by conversion into, or out of the Net Cash Proceeds
of, a substantially concurrent (x) sale or issuance of Capital
Stock of the Company or (y) incurrence of subordinated
Indebtedness of the Issuer that is contractually subordinated in
right of payment to the Senior Secured Notes, that is permitted
to be incurred in accordance with Section 7.12 and that has the
same or greater Weighted Average Life to Maturity as the
Indebtedness being redeemed or retired, (iv) any payment made by
the Company or a Subsidiary, directly or indirectly, to the
Issuer in order to enable the Issuer to pay principal, premium,
if any, and interest (including Liquidated Damages and Additional
Amounts, if any) on the Senior Secured Notes, (v) any payment
made by the Company or a Subsidiary, directly or indirectly, to
enable the issuer of any Permitted Indebtedness to pay principal,
premium, if any, and interest thereon, and (vi) any dividend made
by a Subsidiary of the Company to its parent and (vii) payments
made pursuant to the Administrative Services Agreement or the
Development Services Agreement. In determining the amount of
Restricted Payments permissible under clause (f) above, amounts
expended pursuant to clause (i) of this paragraph and loans
pursuant to Section 7.25(viii) shall be included as Restricted
Payments.
SECTION VII.12 Limitation on Indebtedness. The
Company and its Subsidiaries will not create, incur, assume or
suffer to exist any Indebtedness, whether current or funded, or
any other liability, except for (i) Indebtedness evidenced by the
Senior Secured Notes, (ii) Indebtedness evidenced by the Senior
Secured Notes Guarantee, (iii) Permitted Indebtedness, (iv) Joint
Venture Permitted Indebtedness, (v) liabilities of the Company
and the Issuer representing fees, expenses and indemnities
payable to the Trustee pursuant to this Indenture, (vi) Domestic
Project Permitted Indebtedness and (vii) liabilities of the
Issuer representing fees, expenses and indemnities payable in
connection with the issuance of Senior Secured Notes including,
without limitation, such amounts payable to the Initial Purchaser
of the Senior Secured Notes.
SECTION VII.13 Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries. The Company shall
not, and shall not permit any Subsidiary of the Company to,
directly or indirectly, create or otherwise cause or suffer to
exist or enter into any agreement with any Person that would
cause, any consensual encumbrance or restriction of any kind on
the ability of any Subsidiary of the Company to (i) pay
dividends, in cash or otherwise, or make any other distributions
on its Capital Stock or any other interest or participation in,
or measured by, its profits owned by, or pay any Indebtedness
owed to, the Company or a Subsidiary of the Company, (ii) make
any loans or advances to the Company or any Subsidiary of the
Company or (iii) transfer any of its properties or assets to the
Company or to any Subsidiary of the Company, except, in each
case, for such encumbrances or restrictions existing under or
contemplated by or by reason of (a) restrictions imposed by
applicable law, (b) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of the
Company or any Subsidiary thereof, (c) the Senior Secured Notes,
the Senior Secured Notes Guarantee, the Indentures and the
Collateral Documents, (d) any restrictions existing under
agreements in effect on the date of this Indenture, including,
without limitation, restrictions under the PFC Indenture, the
Rosemary Indenture and the Brandywine Facility Lease, as such are
in effect on the date hereof, (e) any restrictions, with respect
to a Subsidiary of the Company (and only to such Subsidiary) that
is not a Subsidiary of the Company on the date of this Indenture,
in existence at the time such Person becomes a Subsidiary of the
Company (but not created in contemplation of such Person becoming
a Subsidiary), (f) any encumbrance imposed pursuant to the terms
of Non-Recourse Debt incurred in conformity with Section 7.12
provided that such encumbrance in the written opinion of the
Chief Financial Officer of the Company (1) is required in order
to obtain such financing, (2) is customary for such financings
and (3) applies only to the assets of or revenues of the
applicable Permitted Project and any Subsidiary whose Capital
Stock is pledged in connection with such financing or which is
established for the sole purpose of developing, owning,
constructing, financing or operating such Permitted Project and
(g) any restrictions existing under any agreement that refinances
or replaces an agreement containing a restriction permitted by
clause (a) through (f), above; provided that the terms and
conditions of any such restrictions are not materially less
favorable to the Holders of the Senior Secured Notes than those
under or pursuant to the agreement being replaced or the
agreement evidencing the Indebtedness refinanced. Nothing
contained in this covenant shall prevent the Company or any of
its Subsidiaries from entering into any encumbrance permitted
under Section 7.23 or restricting the sale or other disposition
of assets or property securing Indebtedness evidenced by such
agreement so long as the Company complies with Section 7.21.
SECTION VII.14 Capital Expenditures. The Company
shall not make, or permit any Subsidiary to make, any expenditure
(by long-term or operating lease or otherwise) for capital assets
(both realty and personalty) except for expenditures (i)
contemplated by this Indenture (including, without limitation,
expenditures with respect to the Luannan Facility), (ii) required
or permitted by the PFC Indenture, the Rosemary Indenture or the
Brandywine Facility Lease, or (iii) subject to compliance with
Sections 7.11, 7.12 and 7.25, expenditures in connection with the
development, construction or ownership of a Permitted Project.
SECTION VII.15 Permitted Projects. To the extent that
a project fulfills the requirements of the PIC Additional
Projects Contract, the Company and its Subsidiaries may develop,
construct, own, operate and finance such project pursuant to the
requirements of the PFC Indenture subject to compliance with the
terms of the Indentures. To the extent that the PIC Additional
Projects Contract is no longer a valid and binding agreement or a
project does not fulfill the requirements of the PIC Additional
Projects Contract, the Company and its Subsidiaries agree that
such project may only be developed, constructed, financed, owned
and operated by the Company or one of its Subsidiaries pursuant
to the requirements of the Indentures and the Company shall (i)
maintain 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;
provided that this Section 7.15 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 (1) pursuant to the
terms of a build-operate-transfer arrangement at least ten years
after the entering into of such arrangement or (2) allowed
pursuant to the other terms of this Indenture.
SECTION VII.16 Limitation of Line of Business. The
Company shall not and shall not permit any Subsidiary to engage
in any business, enterprise or activity or enter into any
material transaction other than the development, construction,
financing, ownership or operation of power generating facilities
and any and all activities related thereto.
SECTION VII.17 Protection of Collateral by Company and
its Subsidiaries. The Company shall, and shall cause each of its
Subsidiaries to, from time to time, take all action necessary or
advisable (including, without limitation, executing and
delivering all such supplements and amendments, financing
statements, continuation statements, instruments of further
assurance and other instruments), to preserve and defend its
title to the Collateral against the claims of all persons and
parties.
SECTION VII.18 Performance of Obligations by Company,
Subsidiaries and Trustees. The Company shall, and shall cause
each of its Subsidiaries to, punctually perform and observe all
of their respective obligations and agreements contained in the
Collateral Documents, and will, in accordance with the
Indentures, the Issuer Loan Agreement and the Shareholder Loan
Agreements, diligently pursue their respective rights and
remedies and cooperate with the Trustee and the Holders in
pursuing the same to the extent such rights have been assigned by
such Person to the Trustee, in each case for the benefit of the
Holders.
SECTION VII.19 Sale and Leaseback Transactions. The
Company shall not, and shall not permit any of its Subsidiaries
to, enter into any sale and leaseback transaction; provided that
the Company or any Subsidiary may enter into a sale and leaseback
transaction if (i) the Company or such Subsidiary could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to
Section 12 and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 7.23, (ii) the Net Cash Proceeds of such sale
and leaseback transaction are at least equal to the Fair Market
Value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the proceeds of such
transaction are applied in compliance with, Section 7.21.
SECTION VII.20 Delivery of Information and Reports
under the Shareholder Loan Agreements. The Issuer shall deliver
to the Trustee, at the expense of the Issuer, promptly upon
receipt thereof, all financial statements, reports, notices and
certificates of the Joint Ventures.
SECTION VII.21 Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any Asset Sale unless (i) such Asset Sale
is for Fair Market Value and (ii) the proceeds therefrom consist
of at least 85% cash and/or Cash Equivalents (100% in the case of
lease payments). Within 365 days after the receipt of any Net
Cash Proceeds from an Asset Sale, the Company, or its Subsidiary,
as the case may be, may apply such Net Cash Proceeds to an
Investment, the making of a capital expenditure or the
acquisition of other tangible assets. Any Net Cash Proceeds from
Asset Sales that are not applied or invested as provided in the
preceding sentence of this paragraph will be deemed to constitute
Excess Proceeds and the Company, or its Subsidiary, as the case
may be, will be required to make an Asset Sale Redemption Offer.
SECTION VII.22 Merger, Consolidation, or Sale of
Assets. The Company shall not and shall cause the Issuer not to,
in a single transaction or series of related transactions,
consolidate or merge with or into (whether or not the Company or
the Issuer is the surviving corporation), or directly and/or
indirectly through its Subsidiaries sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of
the Company's or the Issuer's properties or assets determined on
a consolidated basis for the Company and its Subsidiaries taken
as a whole in one or more related transactions, to another
corporation, Person or entity unless (i) the Company or the
Issuer is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other
than the Company or the Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition will
have been made is a corporation organized or existing under the
laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company or the
Issuer) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been
made assumes all the obligations of the Company or the Issuer,
under the Senior Secured Notes and the Indentures pursuant to a
supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Event of
Default exists; (iv) the Company or the Issuer or the entity or
Person formed by or surviving any such consolidation or merger
(if other than the Company or the Issuer), or to which such sale,
assignment, transfer, lease, conveyance or other disposition will
have been made (A) will have Consolidated Net Worth immediately
after the transaction equal to or greater than the Consolidated
Net Worth of the Company or the Issuer, as the case may be,
immediately preceding the transaction and (B) will, at the time
of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness; and (v) the Company delivers to
the Trustee an Officers' Certificate and an Opinion of Counsel
addressed to the Trustee with respect to the foregoing matters;
provided, however, that the requirement set forth in clause (iv)
above shall not apply to a merger between the Company or the
Issuer and any Wholly Owned Subsidiary, to any merger between
Wholly Owned Subsidiaries, to any merger between Pan-Sino and Pan-
Western or to any merger between Pan-Sino and the Issuer.
SECTION VII.23 Limitations on Liens. The Company
shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Lien of any kind
upon any of its property or assets now owned or hereafter
acquired by it, except for:
(a) Liens existing as of the date of this Indenture
and disclosed in either the Offering Memorandum or the Collateral
Documents on the date hereof or Liens permitted by the Indentures
and the Collateral Documents, none of which are material and are
required to have been disclosed in the Offering Memorandum and
was not so disclosed and Liens created by the Senior Secured
Notes, this Indenture, the Senior Secured Notes Guarantee and the
Company Indenture and the Collateral Documents;
(b) Permitted Liens on property and assets not
constituting Collateral;
(c) Liens to secure the payment of all or a part of
the purchase price of assets or property acquired or constructed
in the ordinary course of business after the date on which the
Senior Secured Notes are originally issued, provided that (i) the
aggregate principal amount of Indebtedness secured by such Liens
shall not exceed the Fair Market Value of the assets or property
so acquired or constructed, shall be limited to the asset or
property at issue and shall not, in any event, exceed $2,500,000,
(ii) the Indebtedness secured by such Liens shall have otherwise
been permitted to be incurred under this Indenture and (iii) such
Liens shall not encumber any other assets or property of the
Company or any of its Subsidiaries and shall attach to such
assets or property within 60 days of the construction or
acquisition of such assets or property;
(d) Liens on the assets or property of a Subsidiary of
the Company at the time such Subsidiary became a Subsidiary of
the Company and not incurred as a result of (or in connection
with or in anticipation of) such Subsidiary becoming a Subsidiary
of the Company, provided such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries
(other than the property or assets so acquired);
(e) Leases and subleases of real property of (i) any
Material Subsidiary (which leases and subleases are Non-Recourse
Debt other than to the Material Subsidiary which leases and uses
such asset), which do not interfere with the ordinary conduct of
the business of the Company or any of its Material Subsidiaries,
and which are made on customary and usual terms applicable to
similar properties or (ii) any Subsidiary (which leases and
subleases are Non-Recourse Debt other than to the Subsidiary
which leases and uses such asset) that is not a Material
Subsidiary;
(f) Liens incurred by a Subsidiary or group of
Subsidiaries on its or their assets to secure Non-Recourse Debt
incurred in conformity with Section 7.12, provided that the Lien
is created, provided for or contemplated at the time of the
initial incurrence of such Indebtedness and does not extend to
any assets or property of the Company or any other Subsidiary
(other than assets or property directly related to the
development, construction, financing, ownership or operation by a
Subsidiary or group of Subsidiaries of a Permitted Project);
(g) Liens, not existing as of the date of this
Indenture, but required or permitted to be created at a later
date pursuant to the terms of the PFC Indenture, the Rosemary
Indenture or the Brandywine Facility Lease; and
(h) in addition to Liens permitted under clauses (a)-
(g) above, Liens securing an aggregate of $5,000,000 of
Indebtedness or other obligations.
SECTION VII.24 Transactions with Affiliates. The
Company shall not, and shall not permit any Subsidiary, to
conduct any business or enter into any Affiliate Transaction,
except in good faith and on terms that are no less favorable to
the Company or such Subsidiary, as the case may be, than those
that could have been obtained in a comparable transaction on an
arms'-length basis from a Person not an Affiliate of the Company
or such Subsidiary. All Affiliate Transactions (and each series
of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value
in excess of $500,000 shall be approved by the Board of Directors
of the Company, such approval to be evidenced by a Board
Resolution stating that the Board of Directors has determined
that such transaction complies with the foregoing provisions. If
the Company or any Subsidiary of the Company enters into an
Affiliate Transaction (or a series of related Affiliate
Transactions which are similar or part of a common plan)
involving aggregate payments or other market value in excess of
$1,000,000, the Company or such Subsidiary, as the case may be,
shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of
related transactions to the Company or the relevant Subsidiary,
as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee;
provided that the restrictions set forth in this covenant shall
not apply to (i) transactions between the Company and any of its
Wholly Owned Subsidiaries or among Wholly Owned Subsidiaries of
the Company, (ii) Restricted Payments permitted by the
Indentures, (iii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries and
bonuses or legal fees, (iv) payments made pursuant to the
Administrative Services Agreement or the Development Services
Agreement (v) transactions between the Company or any of its
Wholly-Owned Subsidiaries and a Permitted Project and (vi) any
transaction which would otherwise constitute an Affiliate
Transaction but which has been entered into prior to the date of
this Indenture.
SECTION VII.25 Limitation on Investments. The Company
shall not make and shall not permit any of its Subsidiaries to
make, directly or indirectly, any Investments, except: (i)
Investments by the Company or any Wholly Owned Subsidiary in or
to any Wholly Owned Subsidiary and Investments or loans in or to
the Company or a Wholly Owned Subsidiary by any Subsidiary; (ii)
Investments represented by accounts receivable created or
acquired in the ordinary course of business; (iii) advances to
employees in the ordinary course of business; (iv) Investments
under or pursuant to interest rate protection agreements; (v)
Investments, not exceeding $5,000,000 in the aggregate, in joint
ventures, partnerships or Persons that are not Wholly Owned
Subsidiaries, provided that such Investments are made solely for
the purpose of acquiring or developing businesses related to the
Company's business; (vi) Restricted Payments permitted by Section
7.11; (vii) Investments in connection with any Permitted Project
(including, without limitation, Investments in Permitted Projects
which are not Wholly Owned by the Company or one of its
Subsidiaries); (viii) any loan from a Subsidiary of the Company
to a Subsidiary of Panda International in an amount not in excess
of the amount of Restricted Payments which the Company would be
permitted to make at the time of such loan; and (ix) Dollar
Permitted Investments.
SECTION VII.26 Investment Company Act. The Company
shall not, and shall not permit any Subsidiary of the Company to,
take or consent to any action that would result in the
requirement that either the Company or any Subsidiary of the
Company be registered as an "investment company" under the
Investment Company Act.
SECTION VII.27 Public Utility Holding Company Act.
The Company shall not, and shall not permit any Subsidiary of the
Company to, take or consent to any action that would result in
the Company or any Subsidiary of the Company 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 VII.28 Purchase of Securities Upon a Change of
Control. (a) Upon the occurrence of a Change of Control, the
Issuer shall be obligated to make an offer to purchase (a "Change
of Control Offer") all of the then Outstanding Securities, in
whole or in part, from the Holders of such Securities 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
Securities, plus accrued and unpaid interest, if any (including
Liquidated Damages and Additional Amounts, if any), to the Change
of Control Payment Date (as defined below), in accordance with
the procedures set forth in paragraphs (b), (c) and (d) of this
Section. The Issuer shall, subject to the provisions described
below, be required to purchase all Securities properly tendered
into the Change of Control Offer and not withdrawn. 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 times and otherwise
in substantial compliance with the requirements applicable to a
Change of Control Offer to be made by the Issuer and purchases
all Securities 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 less than 30 days nor more than 45 days prior
to any Change of Control Payment Date, the Issuer shall give to
the Trustee in the manner provided in Section 1.5 and each Holder
of the Securities 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 the Issuer to
repurchase such Holder's Securities, 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
Payment 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 Security, or portion thereof, not
tendered or accepted for payment will continue to accrue and
pay interest;
(v) that unless the Issuer 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 Security, or portion thereof,
accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control
Payment Date; and
(vi) the instructions a Holder must follow in order
to have such Holder's Securities repurchased in accordance
with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased will
be required to surrender such Securities 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 Securities) and
principal amount of the Securities 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 Securities purchased. Holders whose Securities are
purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities
surrendered.
On the Change of Control Purchase Date, the Issuer
shall (i) accept for payment Securities 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 Securities or portions thereof
so tendered, and (iii) deliver or cause to be delivered to the
Trustee the Securities so accepted. The Paying Agent shall
promptly mail or deliver to Holders of the Securities so tendered
payment in an amount equal to the purchase price for the
Securities, and the Issuer shall execute and the Trustee shall
authenticate and mail or make available for delivery to such
Holders a new Security equal in principal amount to any
unpurchased portion of the Security which any such Holder did not
surrender for purchase. The Issuer 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) The Issuer 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 the Issuer is
required to purchase Securities as described in this Section.
SECTION VII.29 Ranking. The Issuer will ensure that
its obligations under each Senior Secured Notes will at all times
constitute general, direct, unsubordinated and unconditional
obligations of the Issuer ranking at all times at least pari
passu in priority of payment, in right of security and in all
other respects with the other Senior Secured Notes and with all
other unsubordinated Indebtedness of the Issuer now or hereafter
outstanding.
SECTION VII.30 Collateral Documents. None of the
Company or any of its respective Subsidiaries will amend, waive
or modify, or take or refrain from taking any action which has
the effect of amending, waiving or modifying, any provision of
the Collateral Documents to the extent that such amendment,
waiver, modification or action would have a Material Adverse
Effect on the rights of the Trustee or the Holders of Securities
(as provided in the Collateral Documents), provided that the
Collateral Documents may be amended, waived or modified pursuant
to the terms of the applicable Collateral Document.
ARTICLE VIII
REDEMPTION OF SECURITIES
SECTION VIII.1 Applicability of Article. Securities
of any series that are subject to redemption before their Stated
Maturity (or, if the principal of the Securities 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 VIII.2 Election to Redeem; Notice to Trustee.
The election of the Issuer to redeem any Securities shall be
evidenced by a Issuer Order. If the Issuer determines or is
required to redeem any Securities, the Issuer 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 Issuer Order specifying
the date on which such redemption shall occur (the "Redemption
Date") and the series and principal amount of Securities to be
redeemed or prepaid. Upon receipt of any such Issuer 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
Securities. In the case of any redemption of Securities pursuant
to an election of the Issuer that is subject to a condition
specified in the terms of such Securities or in the Series
Supplemental Indenture relating thereto, the Issuer shall furnish
the Trustee with an Officer's Certificate and, if applicable,
Opinion of Counsel as to compliance with such restriction or
condition.
SECTION VIII.3 Optional Redemption; Mandatory
Redemption; Selection of Securities to be Redeemed.
(a) The Securities of any series shall not be subject
to optional redemption at the option of the Issuer unless
otherwise provided in the Series Supplemental Indenture relating
thereto or pursuant to this Section. The Securities of any
series may be subject to mandatory redemption, pursuant to a
Mandatory Redemption Event, if so provided in the Series
Supplemental Indenture relating thereto or pursuant to this
Section.
(b) If less than all the Securities of any series are
to be redeemed pursuant to paragraph (a) of this Section, the
particular Securities 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 Securities of such
series not previously called for redemption by such method as the
Trustee in its sole discretion shall deem fair and appropriate.
(c) The Trustee shall promptly notify the Issuer in
writing of the Securities selected for redemption and, in the
case of any Securities to be redeemed in part, the principal
amount thereof to be redeemed.
(d) For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the
redemption of Securities shall relate, in the case of any
Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities that has been
or is to be redeemed.
SECTION VIII.4 Notice of Redemption. Except as
otherwise specified in the Series Supplemental Indenture relating
to the Securities of a series to be redeemed, notice of
redemption shall be given in the manner provided in Section 1.6
to the Holders of Securities 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 Securities of
any series are to be redeemed in whole, (i) the identification of
the particular Securities of such series to be redeemed in whole,
or (ii) the portion of the principal amount of each Security of
such series to be redeemed in part, and a statement that, on and
after the Redemption Date, upon surrender of such Security, a new
Security or Securities 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
Securities are to be surrendered for payment of the amount in
respect of such redemption.
Notice of redemption of Securities to be redeemed at
the election of the Issuer shall be given by the Issuer or, at
the Issuer's request, by the Trustee in the name and at the
expense of the Issuer. The Trustee shall be given a copy of the
form of notice of redemption of the Securities at the time the
Issuer delivers to the Trustee the Issuer Order relating to such
redemption pursuant to Section 8.2.
SECTION VIII.5 Securities 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 Securities or portions thereof so to be redeemed,
on the Redemption Date shall become due and payable, and from and
after such date such Securities or portions thereof shall cease
to bear interest, except as otherwise provided in the last
sentence in this Section. Upon surrender of any such Security
for redemption in accordance with such notice, an amount in
respect of such Security or portion thereof shall be paid as
provided therein; provided, however, that any payment of interest
on any Security the Payment Date of which is on or prior to the
Redemption Date, shall be payable to the Holder of such Security
or one or more Predecessor Securities, registered as such at the
close of business on the related Regular Record Date according to
the terms of such Security and subject to the provisions of
Section 2.11. If any Security 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
Security.
SECTION VIII.6 Securities Redeemed in Part. (a) In
the event that less than all of the Securities are to be
redeemed, selection of such Securities for redemption will be
made by the Trustee in accordance with the requirements of the
principal national securities exchange, if any, on which such
Securities are listed or, if such Securities are not then listed
on a national securities exchange, on a pro rata basis; provided
that no Securities of a principal amount or principal amount at
maturity, as the case may be, of $1,000 or less shall be redeemed
in part and the Trustee shall have authority to give full effect
to this proviso.
(b) Any Security that is to be redeemed only in part
shall be surrendered at a Place of Payment therefor (with, if the
Issuer or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Issuer
and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the Issuer shall
execute, and the Trustee shall authenticate and make available
for delivery to the Holder of such Security without service
charge, a new Security or Securities 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 Security so
surrendered.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION IX.1 Events of Default. Except as otherwise
provided in a Series Supplemental Indenture with respect to a
particular series, 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) failure by the Issuer to pay the principal and
premium, if any, on any Security when the same becomes due
and payable, whether by scheduled maturity or required
prepayment or by acceleration or otherwise;
(b) failure by the Issuer to pay the interest
(including Liquidated Damages and Additional Amounts, if
any) on any Security when the same becomes due and payable,
whether by scheduled maturity or required prepayment or by
acceleration or otherwise, for 15 or more days;
(c) non-payment of any interest on, or any
principal of, the Issuer Loan by Pan-Western when the same
becomes due and payable, whether by scheduled maturity or
required prepayment or by acceleration or otherwise, for 30
or more days;
(d) failure by the Company to pay any amount it is
obligated to pay pursuant to the terms of any Security (as
defined in the Company Indenture), when the same becomes due
and payable, whether by scheduled maturity or required
prepayment or by acceleration or otherwise;
(e) any agreement, representation or warranty made
by the Company or any of its Subsidiaries in, respectively,
the Indentures, the Issuer Loan Agreement or the Shareholder
Loan Agreements or any representation, warranty or statement
in any certificate, financial statement or other document
furnished to the Trustees by or on behalf of the Company or
any of its Subsidiaries under the Indentures, 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 or is
reasonably likely to have a Material Adverse Effect and the
fact, event or circumstance shall continue to be uncured for
30 or more days after the Company or any of its Subsidiaries
acquires notice of such inaccuracy; provided that if the
Company or any such Subsidiary commences efforts to cure
such fact, event or circumstance within such 30-day period,
the Company or any such Subsidiary may continue to effect
such cure of such fact, event or circumstance and such
misrepresentation shall not be deemed an Event of Default
for an additional 60 days so long as the Company or such
Subsidiary, as the case may be, is diligently pursuing such
cure;
(f) failure by the Company or any of its Material
Subsidiaries to perform or observe its covenants contained
in the Indentures relating to maintenance of existence,
prohibition on fundamental changes, disposition of assets,
limitations on Indebtedness, limitations on Liens or
distributions;
(g) failure by the Company or any of its Material
Subsidiaries to perform or observe any of the other
covenants contained in the Indentures or in the Collateral
Documents (other than failures described in paragraph
(f) above) and such failure shall continue uncured for 30 or
more days (including, without limitation, covenants with
respect to insurance and amendments to Luannan Project
Documents or nature of business); provided that if the
Company or such Material Subsidiary commences efforts to
cure such default within such 30-day period, the Company or
such Material Subsidiary 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
such Subsidiary is diligently pursuing the cure;
(h) the Company or any Material Subsidiary 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 Effect and
which, prior to such cure, would not reasonably be expected
to result in a Material Adverse Effect), 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;
(i) a proceeding or case shall be commenced
without the application or consent of the Company or any
Material Subsidiary 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 Effect
and which, prior to such cure, would not reasonably be
expected to result in a Material Adverse Effect), 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;
(j) the entry of one or more final and non-
appealable judgment or judgments for the payment of money in
excess of $1,000,000 (exclusive of judgment amounts fully
covered by insurance or indemnity) against the Company or
any of its Material Subsidiaries, which remains unpaid or
unstayed for a period of 90 or more consecutive days;
(k) any Project Document (except as otherwise
permitted under this Indenture) shall terminate or cease to
be valid and binding and in full force and effect, or any
third party thereto denies that it has any liability or
obligation under any such Project Document and such third
party ceases performance thereunder, or any third party is
in default under such Project Document (subject to any
applicable grace period), and in each case such cessation or
default has had or is reasonably likely to have a Material
Adverse Effect;
(l) any Luannan Financing Agreement shall
terminate or cease to be valid and binding and in full force
and effect;
(m) with respect to a Domestic Project, or to the
extent applicable, any Permitted Project, the loss of QF
Status, to the extent that such loss of QF Status has had or
is reasonably likely to have a Material Adverse Effect;
(n) failure of any Joint Venture to perform or
observe any of its material covenants or obligations
contained in any of the Luannan Project Documents if such
failure has had or is reasonably likely to have a Material
Adverse Effect;
(o) the occurrence of any event resulting in the
payment of Domestic Project Event Proceeds or Permitted
Project Event Proceeds that will result, in the opinion of
the Consolidating Financial Analyst, in the Company's
failure to meet the following Debt Service Coverage Ratios
(after the application of such amounts as are required to be
applied pursuant to any and all mandatory redemption or
repayment obligations): (1) the minimum (or lowest) annual
projected Debt Service Coverage Ratio of the Company for the
remaining term of the Senior Secured Notes will not be less
than 1.4 to 1 and (2) the minimum (or lowest) annual
projected Consolidated Debt Service Coverage Ratio for the
remaining term of the Senior Secured Notes will not be less
than 1.15 to 1;
(p) the Luannan Facility Construction Schedule
Certificate shall at any time contain a conclusion that the
Luannan Facility is not being constructed in accordance with
the Approved Construction Budget and Schedule or, if
applicable, an Approved Completion Plan;
(q) any of the Collateral Documents ceases to be
effective or any lien granted therein ceases to be a
perfected lien to the Trustees on the collateral described
therein with the priority purported to be created thereby;
provided that the Company or the Issuer, as the case may be,
shall have 15 days to cure such cessation or to furnish to
the Trustees all documents or instruments required to cure
such cessation; or
(r) any default under the Issuer Loan Agreement
and the Shareholder Loan Agreements that has had or is
reasonably likely to have a Material Adverse Effect and any
default under the PFC Indenture, the Rosemary Indenture, the
Brandywine Facility Lease and any other default under any
other agreement or instrument containing Indebtedness of at
least $2,500,000 of a Domestic Project or a Permitted
Project, to the extent that any of the preceding defaults is
not waived.
SECTION IX.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
the Company or any Material Subsidiary described in
Section 9.1(h) or 9.1(i), the entire principal amounts of
the Outstanding Securities, all interest accrued and unpaid
thereon, premium, if any, and all other amounts payable
under the Securities 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 other than as
referred to in clause (h) or (i) above, upon the written
direction of the Holders of not less than 25% in aggregate
principal amount of all series of Outstanding Securities
(considered as one class), by notice to the Issuer, the
Trustee shall declare the entire principal amount of the
Securities Outstanding, all interest accrued and unpaid
thereon, premium, if any, and all other amounts payable
under the Securities 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 Security, 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 (e) or (f) above shall have occurred and be
continuing, the Trustee may, but shall not be obligated to,
accelerate the maturity of the Securities 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 Securities (and
all other amounts payable under the Securities and this
Indenture) 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
Securities, by written notice to the Issuer 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 (including
Liquidated Damages and Additional Amounts, if any) on the
Securities (other than interest that shall have become due
by such declaration of acceleration);
(ii) the principal of any Securities that have become
due other than by such declaration of acceleration,
including any Securities 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 Securities 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 Securities 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 Securities (and all
other amounts payable under the Securities and this
Indenture) 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 IX.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 may 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 Trustee in its discretion may determine, the
Collateral or the Trustee's rights in and to the security as an
entirety, or in any such portions as the Holders of a majority in
aggregate principal amount of all series of Outstanding
Securities (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 IX.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 Securities, 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 Securities, 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 Securities 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
Securities 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 Securities or of this Indenture)
allowed in any equity, receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other judicial
proceedings relating to the Issuer or any obligor on the
Securities (within the meaning of the Trust Indenture Act), the
creditors of the Issuer or any such obligor, the Collateral or
any other property of the Issuer 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 Securities, 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 Issuer or any such
obligor, the Collateral or any other property of the Issuer 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 Securities.
All proofs of claim, rights of action and rights to assert claims
under this Indenture or under any of the Securities may be
enforced by the Trustee without the possession of the Securities
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 Securities 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 Issuer 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 IX.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 Securities (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 (or any other amounts due under the Securities or this
Indenture) on, the Securities, or 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 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 Collateral 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 IX.6 Control by Holders. The Holders of not
less than a majority in aggregate principal amount of all series
of Outstanding Securities (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 IX.7 Waiver of Past Defaults. The Holders of
not less than a majority in aggregate principal amount of all
series of Outstanding Securities (considered as one class) may on
behalf of the Holders of all Securities waive any past Default
and its consequences except that only the Holders of all
Securities 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 Security then outstanding, or
(b) in respect of a covenant or provision hereof that under
Article XII cannot be modified or amended without the consent of
the Holder of each Security 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 IX.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 Collateral 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 25% in aggregate principal
amount of all series of Outstanding Securities (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 Securities (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 Securities to (x) 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 Securities, (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 IX.9 Undertaking to Pay Court Costs. All
parties to this Indenture, and each Holder by his acceptance of a
Security, 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 Securities (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 (including
Liquidated Damages and Additional Amounts, if any), any of the
Securities, on or after the respective due dates expressed
therein or, in the case of redemption, on or after the Redemption
Date.
SECTION IX.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 (or any
other amounts due under the Securities or this Indenture), such
Security, on or after the respective due dates expressed in such
Security (or, in case of redemption, on the Redemption Date fixed
for such Security), 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 IX.11 Application of Monies Collected by
Trustee. Following the application of monies as provided herein,
any money collected or to be applied by the Trustee pursuant to
this Article in respect of the Securities 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
Securities of such series (other than monies at the time required
to be held for the payment of specific Securities 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 Securities 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
Collateral 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 Collateral Documents and of the enforcement of
any remedies hereunder and all other amounts due the Trustee
hereunder or under any other Collateral Documents or Transaction
Documents;
SECOND: in case the unpaid principal amount of the
Outstanding Securities of such series or any of them shall not
have become due, to the payment of any interest in default
(including Liquidated Damages and Additional Amounts, if any), in
the order of the maturity of the payments thereof, with interest
at the rates specified in the respective Securities 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 Securities of such series shall have become due and
any such Securities shall not have been paid in full, to the
payment of the whole amount then due and unpaid upon the
Outstanding Securities of such series for principal, premium, if
any, and interest, together with interest at the respective rates
specified in the Securities 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 Trustee (to be applied pursuant to the terms and conditions
of this Indenture), 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 Securities
of any series to be made pursuant to clauses "SECOND" and "THIRD"
of this Section (other than payments using moneys in the Senior
Secured Notes Debt Service Fund, Senior Secured Notes Debt
Service Reserve Fund, the Senior Secured Notes Capitalized
Interest Fund, the Luannan Facility Restoration Fund, the Luannan
Facility Construction Fund, the Pan-Sino Fund and the Pan-Western
Funds (all of such preceding funds, pursuant to the Collateral
Documents being for the exclusive use and benefit of the holders
of the Senior Secured Notes), and moneys which are on deposit in
any additional debt service fund and debt service reserve fund,
all of which such funds shall be for the exclusive use and
benefit of the Holders of the Securities to which such funds
relate) shall be made ratably to the Holders of Securities of
such series entitled thereto, without discrimination or
preference, based upon the ratio of the unpaid principal amount
of the Securities 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 Securities of such series.
SECTION IX.12 Waiver of Appraisement, Valuation, Stay,
Right to Marshaling. To the full extent it may lawfully do so,
the Issuer, 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 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 the Trustee 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 IX.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 the Issuer or to be an acquiescence
therein.
SECTION IX.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 IX.15 Preferential Collection of Claims
Against the Issuer. If and when the Trustee shall be or become a
creditor of the Issuer (or any other obligor upon the
Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims
against the Issuer (or any such other obligor).
ARTICLE X
CONCERNING THE TRUSTEE
SECTION X.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 Securities 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 the
Issuer mentioned herein shall be sufficiently evidenced by
an Officer's Certificate in the name of the Issuer, a Issuer
Request or a Issuer Order (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 Securities 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 Securities hereunder and after
the curing or waiving of all Events of Default with respect
to such series of Securities, 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 Securities 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
Securities (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 the
Issuer and if paid by the Trustee, shall be repaid by the
Issuer 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) The Trustee 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 of the Trustee has received a written
notice or a certificate from an Authorized Representative of
the Issuer stating that an Event of Default has occurred.
The Trustee 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 Collateral Document or any other Transaction Document to
which it is a party, the Trustee 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 Collateral 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.
(j) 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.
(k) 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 Securities (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.
(l) 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 the
Issuer.
(m) Every provision of this Indenture that in any
manner relates to the Trustee is subject to this Section 10.
(n) The rights of the Holders to communicate with
other holders with respect to their rights under this
Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided
by the Trust Indenture Act.
(o) Every Holder of Securities by receiving and
holding the same, agrees with the Issuer and the Trustee
that neither the Issuer nor the Trustee nor any agent of any
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 and that
the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request under Section
10.1(n).
SECTION X.2 Trustee Not Responsible for Recitals, Etc.
The recitals contained herein, in the Securities 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 the Issuer 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 Securities or any other Transaction Document
to which it is a party. The Trustee shall not be accountable for
the use or application by the Issuer or any Paying Agent other
than the Trustee of any of the Securities or of the proceeds of
such Securities.
SECTION X.3 Trustee and Others May Hold Securities.
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 Securities and may otherwise interact with the Issuer or any
other obligor of the Securities with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar or
such other Authorized Agent.
SECTION X.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 the Issuer to pay
thereon.
SECTION X.5 Compensation of Trustee and Its Lien. For
so long as any of the Securities or any indebtedness under this
Indenture shall remain outstanding, the Issuer covenants and
agrees 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 the Issuer 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 the Issuer
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. The Issuer also covenants and agrees to indemnify the
Trustee (in its individual capacity and in its capacity as
Trustee), its officers, directors, employees, employees and
agents for, and to hold each such person harmless against, any
loss, liability, claim, damage or expense incurred without gross
negligence or willful misconduct 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, but not limited to, 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 the
Issuer 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 Securities upon
all property and monies held or collected by the Trustee and the
Trustee shall have the right to satisfy such obligations of the
Issuer from all such property or monies if not otherwise paid by
the Issuer. 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(h) or 9.1(i), the Holders by their acceptance of the
Securities hereby agree that such compensation and expenses of
the Trustee are intended to constitute expenses of administration
under the Bankruptcy Code or any similar federal or state law for
the relief of debtors.
SECTION X.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 X.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 X.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 Securities by giving written notice to the
Issuer and by giving written notice (at the expense of the
Issuer) of such resignation to the Holders of the Securities
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 the Issuer 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,
(x) the Issuer may remove the Trustee by written
instrument, in duplicate, executed by order of the
Board of Directors of the Issuer, or (y) subject to the
requirements of Section 315(e) of the Trust Indenture
Act, any Holder who has been a bona fide Holder of a
Security or Securities 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 Securities 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 the Issuer, 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, the Issuer 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
thirty (30) 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 Security or Securities 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 X.9 Acceptance of Appointment by Successor
Trustee. Any successor Trustee appointed under Section 10.8
shall execute, acknowledge and deliver to the Issuer and to its
predecessor Trustee with respect to any or all applicable series
of Securities an instrument in form and substance satisfactory to
the Issuer 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 the
Issuer 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, the Issuer
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 Securities of one or more (but not
all) series, the Issuer, the predecessor Trustee and each
successor Trustee with respect to the Securities 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 Securities 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
Securities 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 Securities of any series, the Issuer shall
give notice of the succession of such Trustee hereunder to the
Holders of Securities in the manner provided in Section 1.6. If
the Issuer 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 the
Issuer.
SECTION X.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 X.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
Securities of any series in the related Series Indenture
Supplement, an office or agency where Securities 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
Securities or this Indenture may be served. Such office or
agency shall be initially at the corporate trust office of the
Trustee. 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 Issuer to the Trustee and by the Trustee, at the
expense of the Issuer, 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 Securities remain Outstanding, the
Trustee may appoint an Authenticating Agent or Agents with
respect to the Securities of one or more series which shall be
authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon original issuance,
exchange, registration of transfer or partial redemption thereof
or pursuant to Section 2.10, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the
Trustee hereunder (it being understood that wherever reference is
made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent). If an
appointment of an Authenticating Agent with respect to the
Securities of one or more series shall be made pursuant to this
Section, the Securities of such series may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
This Security is one of the series of Securities
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 Securities 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 two (2)
days thereafter notice of any default by any obligor
upon the Securities 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 the
Issuer. The Issuer 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), the Issuer 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. The Issuer shall give written notice of any such
appointment to all Holders as their names and addresses appear on
the Security Register.
SECTION X.12 Reports by Trustee. On or before May 15
in every year, so long as any Securities 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 Securities
are listed. The Issuer shall promptly notify the Trustee in
writing if the Securities become listed on any stock exchange,
and the Trustee shall comply with Section 313(d) of the Trust
Indenture Act.
SECTION X.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 X.14 Trustee May Perform Certain Duties
Through Affiliates. The Trustee shall be entitled to perform its
rights and obligations hereunder through any of its Affiliates or
through any of its branch offices or agencies.
ARTICLE XI
HOLDERS' MEETINGS
SECTION XI.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 the Issuer 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 Securities under any other provision
of this Indenture or under applicable law.
SECTION XI.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 Securities of such series.
SECTION XI.3 The Issuer, Holders May Call Meeting. In
case the Issuer 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 Securities (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 the Issuer or the Holders of such Securities 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 XI.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 Securities 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 Securities
by a Holder of one or more such Securities. 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 Issuer and its counsel.
SECTION XI.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 Securities and
of the appointment of proxies, and in regard to the appointment
and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall think fit. 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 Securities 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 the Issuer or by Holders as provided in
Section 11.3, in which case the Issuer 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 Securities 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 Securities 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
Security 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 Securities 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 Securities 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 Securities represented at the
meeting may adjourn such meeting with the same effect, for all
intents and purposes, as though a quorum had been present.
SECTION XI.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 Securities of such
series or of their representatives by proxy and the serial
numbers and principal amounts of the Securities 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 Securities 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 Issuer 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 XII.1 Supplemental Indentures Without Consent
of Holders. Without the consent of the Holders of any
Securities, the Issuer 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 Securities of
any series permitted by Sections 2.1 and 2.3;
(b) to convey, transfer, assign, mortgage or pledge to
the Trustee as security for the Securities, any property or
assets;
(c) to evidence the succession of another entity to
the Company or the Issuer, or successive successions, and
the assumption by the successor entity of the covenants,
agreements and obligations of the Company and the Issuer
pursuant to the Indentures;
(d) to evidence the succession of a new Trustee
hereunder pursuant to Section 10.9;
(e) to add to the covenants of the Issuer such further
covenants, restrictions, conditions or provisions as the
Issuer may, in the written opinion of independent legal
counsel, consider to be for the protection of the Security
Holders, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenant,
restriction, condition or provision an Event of Default
permitting the enforcement of all or any of the several
remedies provided herein or in the Securities; provided,
that in respect of any such additional covenant,
restriction, condition or provision such supplemental
indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an
immediate enforcement upon such an Event of Default or may
limit the remedies available to the Trustee upon such an
Event of Default or may limit the right of the Security
Holders of a majority in aggregate principal amount of the
Securities at the time outstanding to waive such an Event of
Default;
(f) to cure any ambiguity or to cure, correct or
supplement any provision contained herein or in any
supplemental indenture that may be defective or inconsistent
with any other provision contained in the Indentures, the
Securities or in the Senior Secured Notes or in any
supplemental indenture or in the Trust Indenture Act; or to
make such other provisions in regard to matters or questions
arising under the Indentures, the Securities, the Senior
Secured Notes or under any supplemental indenture as the
Issuer or the Issuer may, in its written opinion, deem
necessary or desirable; and which, in any of the foregoing
cases, shall not adversely affect the interests of the
Holders of the Securities of any series or the Holders.
(g) to permit or facilitate the issuance of Securities
in uncertificated form;
(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
Securities registered under the Securities Act in exchange
for a series of Securities if such exchange is contemplated
by any registration rights agreement entered into in
connection with the issuance of a series of Securities or
any other exchange securities pursuant to any other
agreement to register any series of Securities under the
Securities Act, and to make such other changes in this
Indenture or the Transaction Documents as the Board of
Directors of the Issuer determines are necessary or
appropriate in connection therewith, provided such action
shall not adversely affect the interests of the Holders of
Securities of any series in any material respect;
(j) 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.
The Trustee is authorized to join with the Issuer in
the execution of any such supplemental indenture or indentures,
to make any further appropriate agreements and stipulations that
may be therein contained and to accept the conveyance, transfer,
assignment, mortgage or pledge of any property thereunder, but
the Trustee shall not be obligated to enter into any such
supplemental indenture that adversely affects the Trustee's own
rights, duties or immunities under the Indentures or otherwise.
SECTION XII.2 Supplemental Indenture with Consent of
Holders. With the consent of the Holders of not less than 51% in
aggregate principal amount of all series of Outstanding
Securities (considered as one class) by Act of said Holders
delivered to the Issuer and the Trustee, the Issuer when
authorized by a resolution of the Board of Directors of the
Issuer 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 (including a supplemental indenture changing the
provisions of Section 7.28); provided, however, that if there
shall be Securities 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 51% in aggregate principal amount of the Outstanding
Securities 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 Security directly affected thereby,
(a) change the Stated Maturity of any Security (or, if
the principal thereof is payable in installments, the
Payment Date of any such installment), or Payment Date of
any payment of interest thereon, or the dates or
circumstances of payment or premium, if any, on, any
Security, or change or cancel the principal amount thereof
or the interest thereon (including Liquidated Damages and
Additional Amounts, if any) or any premium payable upon the
redemption thereof, or change the place of payment where, or
the coin or currency in which, any Security or the premium,
if any, or the interest thereon (including Liquidated
Damages and Additional Amounts, if any) is payable, or
impair the right to institute suit for the enforcement of
any such payment of principal or interest on or after the
Payment Date 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 Securities, 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 Collateral Documents, pari passu with the Lien
of the Collateral Documents with respect to any of the
property pledged under the Collateral Documents or terminate
the Lien of the Collateral Documents of any property pledged
thereunder or deprive any Holder of the security afforded by
the Lien of the Collateral Documents, except to the extent
expressly permitted by this Indenture or any of the
Collateral Documents;
(c) release all or any substantial portion of the
Collateral;
(d) reduce the percentage in principal amount of the
Outstanding Securities, 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; or
(e) modify any of the provisions of Section 9.7 or of
this Section.
A supplemental indenture that changes or eliminates any
covenant or other provisions of this Indenture which has
expressly been included solely for the benefit of one or more
particular series of Securities, or which modifies the rights of
the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the
rights under this Indenture of the Holders of Securities of any
other series.
Upon receipt by the Trustee of Board Resolutions of the
Issuer 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.
SECTION XII.3 Documents Affecting Immunity or
Indemnity. If in the opinion of the Issuer, 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 XII.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 the Issuer enforceable against the Issuer
in accordance with its terms, subject to customary exceptions.
SECTION XII.5 Effect of Supplemental Indentures. Upon
the execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture, and the Securities shall be
and shall be deemed to be modified and amended in accordance
therewith and the respective rights, duties and immunities under
this Indenture of the Trustee, the Issuer and the Holders of
Securities shall thereafter be determined, exercised and enforced
under this Indenture subject in all respects to such
modifications and amendments.
SECTION XII.6 Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Issuer, bear a notation
in form approved by the Issuer and the Trustee as to any matter
provided for in such supplemental indenture and, in such case,
suitable notation may be made upon Outstanding Securities after
proper presentation and demand. If the Issuer shall so
determine, new Securities so modified as to conform, in the
opinion of the Issuer and the Trustee, to any such supplemental
indenture may be prepared and executed by the Issuer, and
authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION XII.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.
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 GLOBAL ENERGY COMPANY
By:_________________________________
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
By:_________________________________
Name:
Title:
EXHIBIT A
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security 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 SECURITY IS A GLOBAL SECURITY 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 SECURITY IS NOT EXCHANGEABLE
FOR SECURITIES 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 SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY 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 SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
SECURITY 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 SECURITIES
Re: [insert title of Securities]
(the "Securities"), of the Issuer
This Certificate relates to $______ principal amount of
Securities held in the form of a beneficial interest in a Global
Security or a Physical Security by ________________ (the
"Transferor").
The Transferor:
has requested by written order that the Security Registrar
deliver in exchange for its beneficial interest in the Global
Security held by the Depository a Physical Security or Physical
Securities in definitive, registered form of authorized
denominations and in an aggregate principal amount equal to its
beneficial interest in such Global Security (or the portion
thereof indicated above); or
has requested that the Security Registrar by written order
exchange or register the transfer of a Physical Security or
Physical Securities.
In connection with such request and in respect of each
such Security, the Transferor does hereby certify that the
Transferor is familiar with the Indenture relating to the above
captioned Securities and the restrictions on transfers thereof as
provided in Section 2.8 of such Indenture, and that the transfer
of these Securities does not require registration under the
Securities Act of 1933, as amended (the "Securities Act") because
*:
Such Security 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 Security 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 Security 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 Security is being transferred in reliance on
Regulation S under the Securities Act.
Such Security is being transferred in reliance on
Rule 144A under the Securities Act.
Such Security 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: ________________________
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: Indenture (the "Indenture")
relating to [insert title of Securities]
Ladies and Gentlemen:
In connection with our proposed purchase of [insert title of
Securities] Panda Global Energy Company (the "Issuer"), 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
Securities 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 Securities
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 Securities
have not been registered under the Securities Act, and that the
Securities 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 Securities, we
will do so only (A) to the Issuer, (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 Securities from us a notice advising such purchaser
that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of
Securities, we will be required to furnish to you and the Issuer,
such certification, legal opinions and other information as you
and the Issuer may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We
further understand that the Securities 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 Securities, 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 Securities 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 Issuer 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: [insert title of Securities]
of Panda Global Energy Company (the "Issuer")
Ladies and Gentlemen:
In connection with our proposed sale of $_____ aggregate
principal amount of the Securities, 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 Securities 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 Securities.
You and the Issuer 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 Issuer Pledge Agreement -
See Exhibit 10.115 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
EXHIBIT F
[Form of Pan-Sino Pledge Agreement -
See Exhibit 10.116 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
EXHIBIT G
[Form of Pan-Western Pledge Agreement -
See Exhibit 10.117 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
EXHIBIT H
[Form of Company Pledge Agreement of Issuer Stock -
See Exhibit 10.118 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
EXHIBIT I
[Form of Issuer Cash Collateral Agreement -
See Exhibit 10.119 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
EXHIBIT J
[Form of Pan-Sino Cash Collateral Agreement -
See Exhibit 10.121 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
EXHIBIT K
[Form of Pan-Western Cash Collateral Agreement -
See Exhibit 10.120 to the Registration Statement
on Form S-1 to which this exhibit is attached.]
APPENDIX A [to issuer indenture]
The definitions stated herein shall equally apply to
both the singular and plural form of the terms defined.
"Account Agreement" means the agreement dated April 22,
1997, among PIC, PEC and the Company.
"Accredited Investors" has the meaning ascribed to such
term under Rule 501(a)(1), (2), (3) or (7) of Regulation D of the
Securities Act.
"Act" shall have the meaning ascribed thereto in
Section 1.4(a) of this Indenture.
"Additional Amounts" means any deduction or withholding
for, or on account of, any Taxes of any Tax Authority, on any
payments made by the Issuer with respect to the Senior Secured
Notes, including payments of principal, redemption price,
interest or premium, or payments made by the Company with respect
to the Senior Secured Note Guarantee.
"Administrative Services Agreement" means the
administrative services agreement between Panda International and
the Company, dated as of the date of this Indenture.
"Affiliate Transaction" means the conduct of any
business or entering into any transaction or series of related
transactions by the Company with or for the benefit of any of
their respective Affiliates.
"Affiliate" means with respect to any specified Person
(other than the County Partners which shall be deemed not to be
an Affiliate), any other Person which, directly or indirectly,
controls, is controlled by or is under direct or indirect common
control with, such specified Person. For the purposes of this
definition, (i) "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
"controlling", "controlled by" and "under common control with"
have meanings correlative to the foregoing or (ii) beneficial
ownership of 10% or more of the voting securities of a Person
shall be deemed to be control; provided, however, that an
otherwise unaffiliated Person that holds a beneficial ownership
of 10% or more of a project level entity or entities in which the
Company or a Subsidiary holds a greater beneficial ownership
interest shall not be considered an Affiliate of the Company
solely by reason of holding such interest in such project level
entity or entities.
"Agent Members" shall have the meaning ascribed thereto
in Section 2.9 of the Indenture.
"Applicable Rules shall have the meaning ascribed
thereto in Section 2.4(b)(i) of the First Supplemental Indenture
to this Indenture.
"Approval Event of Default" means, pursuant to the
Shareholder Loan Agreements, any governmental approvals or
permits (whether central, provincial, municipal, local or
otherwise) necessary for (a) the establishment of each of the
Joint Ventures, (b) the ownership, construction, maintenance,
financing or operation of each of the Joint Venture Facilities,
(c) the setting or adjustment of the electricity price for the
Luannan Facility in accordance with the method of calculation set
forth in the attachments to the Pricing Document or (d) the
conversion or transfer of any foreign currency shall not be
obtained if and when required, or shall be modified, revoked or
canceled, or a notice of violations is issued under any
governmental authorization on grounds of, or illegality of, the
absence of any required authorization, or any proceeding is
commenced by any governmental instrumentality for the purpose of
modifying, revoking or canceling any governmental authorization.
"Approved Completion Plan" means a plan (including
budget and schedule) prior to the Luannan Commercial Operation
Date to construct and complete the Luannan Facility following a
determination by the Luannan Facility Engineer that the Luannan
Facility will not achieve the Luannan Commercial Operation Date
within 28 months from the notice to proceed, using funds
available to the Issuer (from funds then remaining in the Luannan
Facility Construction Fund, the Completion Sub-Account, Luannan
EPC Contract Liquidated Damages (as defined in the Luannan EPC
Contract), Luannan Casualty Proceeds or Luannan Expropriation
Proceeds or otherwise), which plan includes a certificate by the
Issuer (containing customary assumptions and qualifications)
together with a confirmation by the Luannan Facility Engineer
(containing customary assumptions and qualifications) that (i)
funds available to the Issuer are reasonably expected to be
sufficient to fund the costs of reaching the Luannan Commercial
Operation Date and (ii) after reaching the Luannan Commercial
Operation Date, the Company's Debt Service Coverage Ratio will
be, for the immediately preceding four fiscal quarters, (1) prior
to the six month anniversary of the Luannan Commercial Operation
Date, greater than 1 to 1, (2) between the six month anniversary
of the Luannan Commercial Operation Date and the one year
anniversary thereof, greater than 1.2 to 1 and (3) thereafter,
greater than 1.4 to 1.
"Approved Construction Budget and Schedule" means the
construction budget and schedule prepared by the Issuer
(containing customary assumptions and qualifications) approved as
reasonable by the Luannan Facility Engineer prior to the Closing
Date, and as it thereafter may be amended by the Issuer if (i)
such amendment reflects a change order permitted under the
Indentures or (ii) such amendment reflects events of force
majeure under the Luannan EPC Contract (or Approved Completion
Plan, if applicable), and the Issuer certifies (with customary
assumptions and qualifications), with the Luannan Facility
Engineer's concurrence, that such amendment is not reasonably
likely to have a Material Adverse Effect, or (iii) such amendment
reflects change orders not covered in the preceding clause (i);
provided that the Luannan Facility Engineer certifies (with
customary assumptions and qualifications) that funds available to
the Issuer (from funds then remaining in the Luannan Facility
Construction Fund, the Completion Sub-Account, Luannan EPC
Contract Liquidated Damages (as defined in the Luannan EPC
Contract), Luannan Casualty Proceeds or Luannan Expropriation
Proceeds or otherwise) are reasonably expected to be sufficient
to fund the costs of reaching the Luannan Commercial Operation
Date.
"April 11, 1997 Pan-Western Shareholders' Agreement"
means the shareholders' agreement among Pan-Western, Chinamac and
Pan-Sino, dated as of April 11, 1997.
"Asset Sale" means any direct or indirect sale,
conveyance, transfer, lease or other disposition to any Person
other than the Company or a Wholly Owned Subsidiary of the
Company, in one transaction or a series of related transactions,
of any other property or asset (including, without limitation,
any contractual or other right) of the Company or any Subsidiary
of the Company, in each case, other than inventory in the
ordinary course of business (which shall include the sale of
fuel, steam, energy and/or chilled and distilled water) and other
than such isolated transactions which do not exceed $250,000
individually.
"Asset Sale Redemption Offer" shall have the meaning
ascribed thereto in the definition of Excess Proceeds in this
Appendix A.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present
value (discounted at the rate of interest implicit in such
transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback
transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Authenticating Agent" means any Person acting as
Authenticating Agent under this Indenture pursuant to Section
10.11 thereof.
"Authorized Agent" means any Paying Agent,
Authenticating Agent or Security Registrar or other agent
appointed by the Company or the Trustee, as the case may be, in
accordance with this Indenture to perform any function that this
Indenture authorizes the Trustee or such agent to perform.
"Authorized Representative" means as to the Company or
the Consolidating Financial Analyst, 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" means 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 Securities.
"Bibb" means The Bibb Company, a Delaware corporation.
"Board of Directors" means, 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" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Issuer to have been adopted by the Board of Directors of the
Issuer and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Brandywine Effluent Agreement" means the Treated
Effluent Water Purchase Agreement dated as of September 13, 1994
between the Brandywine 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
and Credit Suisse, New York branch, as amended, supplemented or
otherwise modified from time to time in accordance with the terms
of such agreement and the Brandywine Participation Agreement.
"Brandywine EPC Agreement" means the Amended and
Restated Turnkey Cogeneration Facility Agreement, dated as of
March 30, 1995, between Raytheon Engineers and Constructors, Inc.
and the Brandywine Partnership.
"Brandywine Event of Loss" means an Event of Loss as
defined in the
Brandywine Participation Agreement.
"Brandywine Event of Loss Proceeds" means proceeds of
casualty insurance or condemnation awards or the like, payable
with respect to a Brandywine Event of Loss (net of costs of
obtaining such proceeds or awards) to the extent not used to
replace or repair the Brandywine Facility and for other required
payments under the Brandywine Facility Lease.
"Brandywine Facility" means the Brandywine
Partnership's 230 MW natural
gas-fired, combined-cycle co-generation facility in Brandywine,
Prince George's County, Maryland.
"Brandywine Facility Lease" means the Facility Lease,
dated December 18, 1996, between the Brandywine Partnership and
Fleet National Bank, as Owner Trustee (as such term is defined
therein), pursuant to which the Brandywine Partnership leases the
Brandywine Facility.
"Brandywine Gas Agreement" means the Gas Sales
Agreement, dated as of March 30, 1995, between the Brandywine
Partnership and Cogen Development Company.
"Brandywine Financing Documents" means the Brandywine
Participation Agreement, the Brandywine Facility Lease and
certain other agreements relating to the Brandywine Financing.
"Brandywine O&M Agreement" means the Operations and
Maintenance Agreement, dated November 21, 1994, as amended on
December 7, 1994, between the Brandywine Partnership and Ogden
Brandywine Operations, Inc.
"Brandywine Participation Agreement" means the
Participation Agreement, dated as of December 18, 1996, among the
Brandywine Partnership, PBC, GE Capital, Fleet National Bank, as
owner trustee and security agent, First Security Bank, National
Association, as indenture trustee, Credit Suisse, as
administrative agent, and the loan participants party thereto.
"Brandywine Partnership" means Panda-Brandywine, L.P.,
a Delaware limited partnership.
"Brandywine Partnership Agreement" means the Agreement
of Limited Partnership of Panda-Brandywine, L.P., dated as of
March 25, 1991, between PEC-Delaware and PBC as amended,
supplemented or otherwise modified from time to time.
"Brandywine Power Purchase Agreement" means the Power
Purchase Agreement, dated August 9, 1991, as amended September
16, 1994, between the Brandywine Partnership and PEPCO.
"Brandywine Project Documents" means, collectively, the
Brandywine Power Purchase Agreement, the Brandywine EPC
Agreement, the Brandywine O&M Agreement, the Brandywine Steam
Agreement, the Brandywine Gas Agreement, the Raytheon Parent
Guaranty, the Brandywine Effluent Agreement, the Brandywine
Partnership Agreement and each Additional Project Document (as
defined in the PFC Indenture).
"Brandywine Steam Agreement" means the Steam Sales
Agreement, dated March 30, 1995, between Brandywine Water Company
and the Brandywine Partnership.
"Business Day" means 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 is located, are authorized or required to
be closed.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (iii)
in the case of a partnership, partnership interests (whether
general or limited) and (iv) any other interest or participation
that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing
Person.
"Capitalized Interest Expiration Date" means
October 15, 1999.
"Capitalized Lease" is defined to mean, as applied to
any Person, any lease of any property of which the discounted
present value of the rental obligations of such Person as lessee,
in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person, and "Capitalized Lease Obligation"
means the rental obligations, as aforesaid, under such lease.
"Capitalized Lease Obligation" shall have the meaning
ascribed thereto in the definition of Capitalized Lease.
"Carrier" means Luannan County State-Owned
Transportation Company, a PRC company owned and operated by
Luannan County.
"Cash Available for Company Debt Service" means, for
any period, the sum of (i) all cash distributions received by the
Company (excluding any non-recurring receipts) plus (ii) all cash
distributions received by the Issuer (excluding any non-recurring
receipts) plus (iii) any and all other revenues received by the
Company and the Issuer (including all interest and fee income but
excluding any non-recurring receipts) plus (iv) all other cash
payments received by the Company and the Issuer in the ordinary
course of business including principal payments but excluding
items which are non-recurring receipts less (v) all cash
operating costs of the Issuer and the Company including trustee
fees, Operating Lease Obligations and cash taxes, each of (i),
(ii), (iii), (iv) and (v) determined on a cash basis in
accordance with GAAP.
"Cash Available for Consolidated Debt Service" means,
for any period, the sum of (i) all consolidated revenue
(including all interest and fee income but excluding any
insurance proceeds, other than business interruption proceeds,
and other similar non-recurring receipts) less (ii) all
consolidated cash operating expenses including trustee fees,
Operating Lease Obligations of the Company and its consolidated
Subsidiaries and cash taxes (including withholding taxes) plus
(iii) all other cash proceeds received by the Company on a
consolidated basis in the normal course of business (excluding
non-recurring receipts but including principal on the Luannan
Transmission Facilities Loan) plus (iv) withdrawals of cash from
any and all Subsidiary debt service reserves, maintenance reserve
funds and any and all other funds which restrict the payment of
money from a Subsidiary to its parent (excluding the PFC Debt
Service Reserve, the U.S. Distribution Fund, the International
Distribution Fund, and amounts distributable from the RMB Revenue
Fund which were previously not distributable) less (v) all
additions of cash to any and all Subsidiary debt service
reserves, maintenance reserve funds and any and all other funds
which restrict the payment of money from a Subsidiary to its
parent (excluding the PFC Debt Service Reserve, the U.S.
Distribution Fund, the International Distribution Fund, and
amounts which are not distributable from the RMB Revenue Fund)
less (vi) additional consolidated cash expenditures excluding
payment of Net Debt Service, each of (i), (ii), (iii), (iv), (v)
and (vi) determined on a cash basis in accordance with GAAP.
"Cash Available for Project Debt Service" means (i) the
sum of all revenues (including interest and fee income but
excluding any insurance proceeds, other than business
interruption insurance proceeds, and other similar non-recurring
receipts) of such Domestic Project, Permitted Project or Joint
Venture for such period minus (ii) the aggregate amount of
Operating and Maintenance Costs of such Domestic Project,
Permitted Project or Joint Venture for such period plus (iii), in
the case of the Luannan Facility, the principal payments on the
Luannan Transmission Facilities Loan for such period (each of
(i), (ii) and (iii) as determined on a cash basis in accordance
with GAAP).
"Cash Equivalents" means, at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System, whose
rating is AA or higher from Standard & Poor's or Aa2 or higher
from Moody's, having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper
with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and
having the highest rating obtainable from Standard & Poor's or
Moody's; and (iv) repurchase obligations for a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above.
"Certificated Notes" means definitive Senior Secured
Notes in registered certificated form issued pursuant to this
Indenture to Accredited Investors or QIBs who elect to take
physical delivery of their securities.
"Change of Control" means (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially
all of the assets of the Company, Panda International, the Issuer
or any direct or indirect parent of the Company to any Person or
entity or group of Persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than a
Related Party, (ii) the replacement of a majority of the Board of
Directors of the Company, Panda International, the Issuer or any
direct or indirect parent of the Company, over a two-year period,
from the directors who constituted the Board of Directors of such
Person at the beginning of such period, and such replacement
shall not have been approved by the Board of Directors of such
Person as constituted at the beginning of such period or by the
Board of Directors of Panda International as constituted at the
beginning of such period, (iii) a Person or Group of Persons
(other than Panda International or any Related Party) shall, as a
result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company, Panda International,
the Issuer or any direct or indirect parent of the Company
representing a percentage interest in the combined voting power
of the then outstanding securities of the Company, Panda
International, the Issuer or any direct or indirect parent of the
Company greater than that held by such entities' shareholders as
of the Closing Date and greater than 20% having the right to vote
in the election of directors, (iv) the Company, directly or
indirectly, ceases to hold (a) a 100% equity interest in the
Domestic Projects, (b) a 100% equity interest in the Issuer, (c)
a 90% equity interest in Pan-Sino or (d) the minimum required
interest in a Permitted Project, (v) Pan-Sino ceases to hold a
99% equity interest in Pan-Western and (vi) Pan-Western ceases to
hold a 85% equity interest in each of the Joint Ventures;
provided however that notwithstanding the foregoing, a merger
between the Issuer and Pan-Sino or between Pan-Sino and Pan-
Western shall not be a change of control.
"Change of Control Date" means the date of an
occurrence of a Change of Control.
"Change of Control Notice" has the meaning ascribed
thereto in Section 7.28 of the Company Indenture.
"Change of Control Offer" has the meaning ascribed to
it in Section 7.28 of the Company Indenture.
"Change of Control Payment Date" has the meaning
ascribed thereto in Section 7.28 of the Company Indenture.
"Change of Control Purchase Price" shall have the
meaning ascribed thereto in Section 7.28 of the Company
Indenture.
"Chinamac" means Chinamac (Singapore) Pte Ltd, a
Singapore Corporation.
"Chinamac Distribution Account" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Closing Date" means the date on which the Senior
Secured Notes and the Note Guarantees will be issued and sold to
the Initial Purchaser.
"Code" means the United States Internal Revenue Code of
1986, as amended.
"Collateral" means all of the interests granted to the
Trustee pursuant to the Collateral Documents.
"Collateral Documents" means the Account Agreement, the
Company Cash Collateral Agreement, the Panda International Pledge
Agreement, the Company Pledge Agreement, the PEC Assignment and
Pledge Agreement and the PEC Cash Collateral Agreement.
"Commercially Feasible Basis" shall mean that,
following a Luannan Event of Loss or an Luannan Expropriation
Event, (i) the sum of the proceeds of the business interruption
insurance, the moneys held in the Debt Service Fund, any amounts
that the Issuer and its Affiliates and the County Partners are
irrevocably committed to contribute and the anticipated revenues
of the Luannan Facility during the estimated period of
rebuilding, repair or restoration will be sufficient to pay all
facility restoration costs, Debt Service and O&M Costs of the
Luannan Facility during the estimated period of rebuilding,
repair or restoration and (ii) the Luannan Facility upon being
rebuilt, repaired or restored can reasonably be expected to
produce revenues adequate to pay all Debt Service and O&M Costs
over the remaining terms of the Securities Outstanding having the
longest Stated Maturity, taking into account any change in
projected operating results due to the impairment of any portion
of the Luannan Facility.
"Commission" means the Securities and Exchange
Commission of the United States.
"Company" means Panda Global Holdings, Inc., a Delaware
corporation.
"Company Cash Collateral Agreement" means the agreement
dated as of April 22, 1997, between the Company and the Trustee.
"Company Equity Distribution Fund" has the meaning
ascribed thereto in Section 3.3 of the Company Indenture.
"Company Funds" means the Company Revenue Fund, the
Senior Secured Notes Guarantee Service Fund, the Notes Guarantee
Service Reserve Fund, the Company Operating Fund, the Company
Equity Distribution Fund and such other funds, from time to time,
as may be required pursuant to the terms of the Company
Indenture.
"Company Indenture" means the trust indenture governing
the terms of the issuance of the Senior Secured Notes Guarantee,
dated as of April 22, 1997, by and between the Company and the
Company Indenture Trustee.
"Company Indenture Trustee" means Bankers Trust
Company, a New York banking corporation, as trustee under the
Company Indenture.
"Company Net Debt Service" means Net Debt Service of
the Company plus Net Debt Service of the Issuer.
"Company Operating Fund" has the meaning ascribed
thereto in Section 3.3 of the Company Indenture.
"Company Pledge Agreement" means the agreement dated as
of April 22, 1997, made by the Company in favor of the Trustee
pledging the stock of the Issuer.
"Company Request" and "Company Order" means,
respectively, a written request or order signed in the name of
the Company by its Chief Executive Officer, its President or one
of its Executive Vice Presidents, and by its Treasurer,
Secretary, or one of its Assistant Treasurers or Assistant
Secretaries, and delivered to the Trustee.
"Company Revenue Fund" has the meaning ascribed thereto
in Section 3.3 of the Company Indenture.
"Company Security Agreement" means the security
agreement dated April 22, 1997 between the Company and the
Company Indenture Trustee.
"Completion Sub-Account" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Consolidated Debt Service Coverage Ratio" means, as of
the date of determination, and, if the transaction giving rise to
the need to calculate a Consolidated Debt Service Coverage Ratio
is an incurrence of Indebtedness or the making of a Restricted
Payment, calculated after giving effect on a pro forma basis to
such Indebtedness or Restricted Payment as if such Indebtedness
or Restricted Payment had been incurred or made as of the first
day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, the ratio of (i) Cash
Available for Consolidated Debt Service divided by (ii)
Consolidated Net Debt Service; provided, however, with respect to
the calculation of projected Consolidated Debt Service Coverage
Ratio, the remaining unpaid balance of principal due on the
Senior Secured Notes at the Stated Maturity of the Senior Secured
Notes ($131,250,000) shall be assumed to be repaid in semi-annual
repayments as per the following schedule:
Semi-annual Principal
Payment Date Amount Repaid
April 15, 2004 $
6,000,000
October 15, 2004 $
6,000,000
April 15, 2005 $
7,250,000
October 15, 2005 $
7,250,000
April 15, 2006 $
5,350,000
October 15, 2006 $
5,350,000
April 15, 2007 $
4,600,000
October 15, 2007 $
4,600,000
April 15, 2008 $
7,450,000
October 15, 2008 $
7,450,000
April 15, 2009 $
7,250,000
October 15, 2009 $
7,250,000
April 15, 2010 $
5,650,000
October 15, 2010 $
5,650,000
April 15, 2011 $
5,350,000
October 15, 2011 $
5,350,000
April 15, 2012 $16,750,000
October 15, 2012 $16,700,000
;
provided further that the coupon rate on the Senior Secured Notes
repaid as per the schedule above shall be the same coupon rate as
that payable on the Closing Date on the Senior Secured Notes with
interest expense due and payable on a semi-annual basis. In the
event that the remaining unpaid balance of principal due on the
Senior Secured Notes at the Stated Maturity is less than
$131,250,000, then the amount of each semi-annual repayment shown
above shall be deemed to equal the amount of the semi-annual
repayment shown above multiplied by a fraction the numerator of
which is the actual remaining unpaid balance of principal due on
the Senior Secured Notes at the Stated Maturity and the
denominator of which is $131,250,000.
"Consolidated Income Tax Expense" means, for any
period, as applied to the Company, the provision for local,
state, federal or foreign income taxes on a consolidated basis
for such period determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period,
the sum of (a) the total interest expense of the Company and its
consolidated Subsidiaries for such period as determined in
accordance with GAAP, including, without limitation, (i)
amortization of debt issuance costs and of original issue
discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the
effective interest method of accounting, (ii) accrued interest,
(iii) noncash interest payments, (iv) commissions, discounts and
other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (v) interest actually paid by the
Company or any such Subsidiary under any guarantee of
Indebtedness or other obligation of any other Person and (vi) net
costs associated with interest rate agreements (including
amortization of discounts) and currency agreements, plus (b) all
capitalized interest plus (c) dividends paid in respect of
preferred stock of the Company or any Subsidiary held by Persons
other than the Company or a Wholly Owned Subsidiary.
"Consolidated Net Debt Service" means the sum of (i)(a)
Consolidated Interest Expense less (b) non-cash Consolidated
Interest Expense less (c) scheduled withdrawals from the Senior
Secured Notes Capitalized Interest Fund (if applicable) less (d)
scheduled withdrawals from the PFC Capitalized Interest Fund (if
applicable) less (e) scheduled withdrawals from any additional
capitalized interest fund established pursuant to either of the
Indentures (if applicable) plus (ii) all payments of scheduled
and overdue principal of, and premium, if any, on Indebtedness on
a consolidated basis plus (iii) without duplication, all rental
payments in respect of Capitalized Lease Obligations paid,
accrued, or scheduled to be paid or accrued by the Company and
its consolidated Subsidiaries.
"Consolidated Net Income" means, for any period, as
applied to the Company, the aggregate of the Net Income of the
Company and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided, however,
that (i) all extraordinary gains or losses shall be excluded;
(ii) the Net Income of any Person in which the Company or any of
its Subsidiaries has a joint interest with a third party (which
interest does not cause the net income of such other Person to be
consolidated into the net income of the Company in accordance
with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid, in cash, to the Company or the
Subsidiary, (iii) the net income of any Subsidiary of the Company
that is subject to any restriction or limitation on the payment
of dividends or the making of other distributions shall be
excluded to the extent of such restriction or limitation, (iv)
the net income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded, (v) any net gain or loss resulting
from an Asset Sale by the Company or any of its Subsidiaries
other than in the ordinary course of business shall be excluded
and (vi) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any
Person as of any date, the sum of (i) the consolidated equity of
the common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out
of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-
ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such
business) subsequent to the date of the Indentures in the book
value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except in each case, Investments allowed pursuant
to the covenant "Limitation on Investments"), and (z) all
unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Consolidating Financial Analyst" means ICF Resources
Incorporated, a Florida corporation, or its Eligible Successor,
which party may rely, to the extent necessary for purposes of
performing its duties under this Indenture, on the reports of the
Luannan Facility Engineer, the Brandywine Facility independent
engineer, the Rosemary Project independent engineer or other
qualified consultants.
"Construction Schedule" means the construction schedule
set forth in the Luannan EPC Contract.
"County Partners" means Luannan County Heat and Power
Plant, Tangshan Luanhua (Group) Co. and Luannan County Heat
Company, Ltd., all of which are companies organized under the
laws of the PRC.
"County Partners Event of Default" means a failure by
the County Partners to make their required equity contributions
to the Joint Ventures.
"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 Securities (including
any mandatory sinking fund payment) due and payable during such
period and (ii) all interest on the Securities due and payable
during such period.
"Debt Service Coverage Ratio" as of the date of
determination, and, if the transaction giving rise to the need to
calculate Debt Service Coverage Ratio is an incurrence of
Indebtedness or the making of a Restricted Payment, calculated
after giving effect on a pro forma basis to such Indebtedness or
Restricted Payment as if such Indebtedness or Restricted Payment
had been incurred or made on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day
of such period, means:
(i) with respect to the Company, the ratio
of (A) Cash Available for Company Debt Service
divided by (B) Company Net Debt Service;
(ii) with respect to PIC and the issuance of
Indebtedness pursuant to the PFC Indenture, the
ratio of (A) PIC Cash Available for Distribution
during the relevant period to (B) PIC Debt Service
for such period; and
(iii) with respect to a Domestic Project,
a Permitted Project or a Joint Venture, the ratio
of (A) Cash Available for Project Debt Service to
(B) Net Debt Service of such Domestic Project,
Permitted Project or Joint Venture;
provided, however, with respect to the calculation of projected
Debt Service Coverage Ratio, the remaining unpaid balance of
principal due on the Senior Secured Notes after the Stated
Maturity of the Senior Secured Notes shall be assumed to be
repaid pursuant to the schedule and the proviso thereto as set
forth in the definition of Consolidated Debt Service Coverage
Ratio.
"Debt Service Reserve Requirement" means (i) the
aggregate principal, premium, if any, of payments due on the
Senior Secured Notes on the next semi-annual payment date and
(ii) the aggregate cash interest payments (including Liquidated
Damages and Additional Amounts, if any) due on the Senior Secured
Notes on the next semi-annual payment date.
"Default" means, as used in relation to the Indenture,
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" means The Depository Trust Company, its
nominees and their respective successors.
"Development Services Agreement" means the development
services agreement between Panda International and the Company,
dated as of the date of this Indenture.
"Disbursement Date" shall mean the date specified in a
Restoration Requisition as the date on which moneys are requested
by the Issuer to be withdrawn and transferred from the Fund to
which such Restoration Requisition relates for the purpose set
forth in such Requisition.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Senior Secured Notes.
"Dollar Permitted Investments" means any of the
following securities: (i) direct obligations of the Department
of the Treasury of the United States of America; (ii) obligations
of any of the following federal agencies, which obligations
represent the full faith and credit of the United States of
America, including: Export-Import Bank, Farmers Home
Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government
National Mortgage Association (GNMA), U.S. Department of Housing
& Urban Development (PHA's) and Federal Housing Administration;
(iii) bonds, notes or other evidences of indebtedness rated "AAA"
by Standard & Poor's and "Aaa" by Moody's and issued by the
Federal Home Loan Bank, the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation; (iv) commercial
paper rated in any one of the two highest rating categories by
Moody's or Standard & Poor's; (v) investment agreements with
banks (foreign and domestic), broker/dealers, and other financial
institutions rated at the time of bid in any one of the three
highest rating categories by Moody's and Standard & Poor's; (vi)
repurchase agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the
time of bid in any one of the three highest rating categories by
Moody's and Standard & Poor's, provided: (1) collateral is
limited to (i), (ii) and (iii) above, (2) the margin levels for
collateral must be maintained at a minimum of 102% including
principal and interest, (3) the Trustees shall have a first
perfected security interest in the collateral, (4) the collateral
will be delivered to a third party custodian, designated by the
Company, acting for the benefit of the Trustees and all fees and
expenses related to collateral custody will be the responsibility
of the Company, (5) the collateral must have been or will be
acquired at the market price and marked to market weekly and
collateral level shortfalls cured within 24 hours, (6) unlimited
right of substitution of collateral is allowed provided that
substitution collateral must be permitted collateral substituted
at a current market price and substitution fees of the custodian
shall be paid by the Company; (vii) forward purchase agreements
delivering securities outlined in (i) and (iv) above with banks
(foreign and domestic), broker/dealers, and other financial
institutions maintaining a long-term rating on the day of bid no
lower than investment grade by both Standard & Poor's and Moody's
(such rating may be at either the parent or subsidiary level).
"Dollars" and "$" means lawful money of the United
States.
"Domestic Project" means either the Rosemary Facility
or the Brandywine Facility.
"Domestic Project Event" means the occurrence of any of
the following: a Rosemary Event of Eminent Domain, a Brandywine
Event of Loss, a Rosemary Event of Loss or a Rosemary Title
Event.
"Domestic Project Event Proceeds" means the sum of any
and all of the following: Rosemary Eminent Domain Proceeds,
Brandywine Event of Loss Proceeds, Rosemary Casualty Proceeds and
Rosemary Title Insurance Proceeds.
"Domestic Project Permitted Indebtedness" means, in
addition to any Indebtedness outstanding as of the Closing Date,
(i) working capital debt and letter of credit reimbursement
obligations, provided that after giving effect to such additional
debt and obligations, (a) the minimum (or lowest) projected Debt
Service Coverage Ratio of the Domestic Project for any calendar
year will not be less than 1.5 to 1 and (b) the average projected
Debt Service Coverage Ratio of the Domestic Project for any
calendar year will not be less than 1.7 to 1, (ii) purchase money
or capital lease obligations incurred to finance assets of the
Domestic Project that are readily replaceable personal property
with a principal amount or capitalized portion not exceeding $1.0
million in the aggregate outstanding at any time, and (iii) trade
accounts payable (other than for borrowed money) due within 90
days arising, and accrued expenses incurred, in the ordinary
course of business of operating or maintaining the Domestic
Project.
"Domestic Projects" means the Rosemary Facility and the
Brandywine Facility.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Eligible Successor" means any nationally recognized
independent engineering firm or any nationally recognized
independent consulting firm with expertise in engineering and
financial analysis that is selected by the Company 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 4.8(d) of the Company 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 the
Company or any Affiliate thereof or (ii) was, or will be
connected as a promoter, underwriter, voting trustee, director,
officer or employee of the Company or any Affiliate thereof.
"Member" means (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 the
Company 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.
"Energy Purchase Agreement" means the Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, among
North China Power Company, Tangshan Panda and Tangshan Pan-
Western.
"Engineering and Design Contract" means the Engineering
and Design Contract, dated December 21, 1995, among the Design
Institute, Tangshan Panda and Tangshan Pan-Western.
"Event of Default" as used in relation to the Indenture
shall have the meaning ascribed thereto in Section 9.1 of this
Indenture.
"Excess Proceeds" means any Net Cash Proceeds from
Asset Sales that are not applied or invested to an investment,
the making of a capital expenditure or the acquisition of other
tangible assets. On the earlier of (i) the 366th day after an
Asset Sale or (ii) such date as the Board of Directors of the
Company determines not to apply the Net Cash Proceeds relating to
such Asset Sale in the manner set forth above (or the Company
determines not to cause its Subsidiary to apply the Net Cash
Proceeds in such a manner), if the aggregate amount of Excess
Proceeds exceeds $1.0 million, the Company or its Subsidiary, as
the case may be, shall be subject to the following requirements:
(1) in the event that the Company cannot then incur
$1.00 of additional Permitted Indebtedness pursuant to clause (v)
of the definition of "Permitted Indebtedness," the Company or its
Subsidiary will be required to make an offer to purchase (the
"Asset Sale Redemption Offer") from all Holders of Senior Secured
Notes and holders of additional Senior Indebtedness, up to a
maximum principal amount (expressed as a multiple of $1,000) of
Senior Secured Notes and holders of additional Senior
Indebtedness equal to the Excess Proceeds at a purchase price
equal to 100% of the principal amount thereof plus accrued and
unpaid interest (including Liquidated Damages and Additional
Amounts, if any) thereon, if any, to the date of purchase; in the
event that there is additional Senior Indebtedness outstanding at
the time of the Asset Sale Redemption Offer, Excess Proceeds
shall be allocated to each issuance of Senior Indebtedness in
accordance with the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal amount of the
Senior Secured Notes and the denominator of which is the sum of
the principal amounts of all Senior Indebtedness which is subject
to this requirement or a similar requirement under such Senior
Indebtedness's governing instrument; and
(2) in the event that the Company can incur $1.00 of
additional Permitted Indebtedness pursuant to clause (v) of the
definition of "Permitted Indebtedness," the Company or its
Subsidiary will be required to make an Asset Sale Redemption
Offer to all Holders of Senior Secured Notes and holders of
additional Senior Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Senior Secured Notes and
holders of additional Senior Indebtedness equal to the Excess
Proceeds (Excess Proceeds for purposes of this clause (2) is
limited to that amount of the Net Cash Proceeds that equals the
principal amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the asset being
sold) at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if any, to the
date of purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale Redemption
Offer, Excess Proceeds shall be allocated to each issuance of
Senior Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of which is the
principal amount of the Senior Secured Notes and the denominator
of which is the sum of the principal amounts of all Senior
Indebtedness which is subject to this requirement or a similar
requirement under such Senior Indebtedness's governing
instrument.
Upon completion of such Asset Sale Redemption Offer(s),
the amount of Excess Proceeds shall be reset at zero. Whenever
Net Cash Proceeds in excess of $1.0 million from any Asset Sale
are received by the Issuer or the Company, as the case may be,
and such Net Cash Proceeds may, through the passage of time or
otherwise, be required to be applied to the purchase of Senior
Secured Notes pursuant to this covenant, the Issuer or the
Company, as the case may be, shall deposit such Net Cash Proceeds
with, respectively, the Senior Secured Notes Trustee or the
Company Indenture Trustee, as trust monies subject to disposition
as provided in this covenant and such Net Cash Proceeds shall be
set aside by the Senior Secured Notes Trustee or the Company
Indenture Trustee pending application to the purchase of Senior
Secured Notes. At the direction of the Company, such Net Cash
Proceeds shall be required to be invested by the Senior Secured
Notes Trustee or the Company Indenture Trustee in Dollar
Permitted Investments. The Company or its relevant Subsidiary, as
applicable, shall be entitled to any interest or dividends
accrued, earned or paid on such investments.
"Exchange Act" means the United States Securities and
Exchange Act of 1934, as amended.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting in
good faith and shall be evidenced by a Board Resolution delivered
to the Trustees, except that any determination of Fair Market
Value made with respect to any parcel of real property shall be
made by an independent appraiser.
"Federal Bankruptcy Code" means Title 11 of the United
States Code or any other federal bankruptcy code hereafter in
effect.
"Final Stated Maturity" means the last stated maturity
date of any Indebtedness outstanding under the PFC Indenture.
"Funding Period" means, with respect to this Indenture
and the Issuer Loan Agreement, the period of time beginning with
the Closing Date and ending on the date when the last Joint
Venture has a payment obligation relating to the construction of
the Luannan Facility.
"Funds" shall have the meaning ascribed thereto in
Section 3.3 of this Indenture.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date of the Indentures.
"GAAP Reserves" means, 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 Effect.
"Government Authority" means 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" means 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 Government 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 Government
Authority, whether now or hereafter in effect.
"Governmental Approval" means (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
Government Authority required to be obtained or made.
"Guarantee" by any Person means any guarantee, surety,
note or other obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing in any manner any
Indebtedness 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 Indebtedness 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 Indebtedness 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.
"Holders" or "Noteholders" means a Persons in whose
name a Security is registered in the Security Register.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a capitalized lease obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Indentures" means the Company Indenture and this
Indenture.
"Independent Financial Advisor" means an independent
and internationally recognized investment bank, accounting firm
or engineering firm, as the case may be, whose business regularly
includes the rendering of valuation opinions with respect to the
assets at issue, chosen by the Company and reasonably acceptable
to the Company Indenture Trustee.
"Independent Insurance Consultant" means Sedgwick,
James of Tennessee, Inc., a corporation incorporated in
accordance with the laws of the State of Tennessee, or its
successor.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette
Securities Corporation.
"Institutional Accredited Investor" means 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.
"Interconnection Agreement" means the General
Interconnection Agreement, dated September 22, 1995, between
North China Power Company, Tangshan Panda and Tangshan Pan-
Western, as supplemented by the Supplemental Agreement.
"Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Interest Payment Date" means, with respect to any
Security, the date specified in such Security as the date on
which an installment of interest on (including any Liquidation
Damages or Additional Amounts) such Security is due and payable.
"Internal Revenue Service" or "IRS" means the Internal
Revenue Service of the United States.
"International Distribution Fund" means the fund
described in Article IV of the PFC Indenture and maintained in
the name of PIC pursuant to such Article, which such fund is
entitled to distributions of monies from a Non-U.S. Permitted
Project to the extent that all obligations have been met by PFC,
PIC and the PIC International Entity (and any other PIC
international entities) under the PFC Indenture.
"Investment Company Act" means the Investment Company
Act of 1940, as amended.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including
Affiliates) in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances (other
than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such
person) or capital contributions (excluding commission, travel,
relocation and similar advances to officers and employees made in
the ordinary course of business), purchases or other acquisitions
for consideration of Indebtedness, Capital Stock or other
securities and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Issuer" means Panda Global Energy Company, a Cayman
Islands exempted company.
"Issuer Cash Collateral Agreement" means the agreement
dated as of April 22, 1997, between the Issuer and the Trustee.
"Issuer Distribution Account" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Issuer Equity Distribution Fund" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Issuer Funds" means the funds described in Section
3.3(a)-(h) of this Indenture.
"Issuer Loan" means the outstanding indebtedness of Pan-
Western to the Issuer incurred by Pan-Western to enable it to
make the Shareholder Loans and to make the JV Equity
Contributions and funded by the Issuer with the proceeds of the
Senior Secured Notes.
"Issuer Loan Agreement" means the Issuer Loan Agreement
by and between the Issuer and Pan-Western, dated the date of this
Indenture.
"Issuer Note" means one or more promissory notes issued
by Pan-Western to the Issuer evidencing its indebtedness to the
Issuer.
"Issuer Operating Fund" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Issuer Pledge Agreement" means the agreement dated as
of April 22, 1997, made by the Issuer in favor of the Trustee
pledging the stock of the Pan-Sino.
"Issuer Order" means a written order of the Issuer,
signed by its Chief Executive Officer, President or any Executive
Vice President and by its Treasurer, Secretary, any Assistant
Treasurer or any Assistant Secretary.
"Issuer Revenue Fund" has the meaning ascribed thereto
in Section 3.3 of this Indenture.
"Issuer's Securities" means any debentures, notes,
bonds, Guarantees or other evidences of indebtedness issued under
this Indenture and any Series Supplemental Indentures thereto.
"Jing-Jin-Tang Grid" means North China Power's
Beijing-Tianjin-Tangshan Regional Power Network, to which the
electricity generated by the Luannan Facility will be transmitted
for distribution.
"Joint Venture Agreements" means, collectively, the
joint venture contracts in respect of Tangshan Panda, Tangshan
Pan-Western, Tangshan Cayman and Tangshan Pan-Sino.
"Joint Venture Facility" means the portion of the
Luannan Facility to be constructed or acquired by each Joint
Venture (collectively, the "Joint Venture Facilities").
"Joint Venture Guarantees" means collectively, the
undertakings by Tangshan Panda, each executed as of the 24th day
of September, 1996, to unconditionally and irrevocably guarantee
to Pan-Western prompt payment and performance by each of Tangshan
Pan-Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Pan-Western pursuant to any debt
obligation then or thereafter due and owing by any such party to
Pan-Western; the undertakings by Tangshan Pan-Western, each
executed as of the 24th day of September, 1996, to
unconditionally and irrevocably guarantee to Pan-Western the
prompt payment and performance by each of Tangshan Panda,
Tangshan Cayman and Tangshan Pan-Sino of their individual
obligations to Pan-Western pursuant to any debt obligation then
or thereafter due and owing by any such party to Pan-Western; the
undertakings by Tangshan Cayman, each executed as of the 24th day
of September, 1996, to unconditionally and irrevocably guarantee
to Pan-Western the prompt payment and performance by each of
Tangshan Panda, Tangshan Pan-Western and Tangshan Pan-Sino of
their individual obligations to Pan-Western pursuant to any debt
obligation then or thereafter due and owing by any such party to
Pan-Western; and the undertakings by Tangshan Pan-Sino, each
executed as of the 24th day of September, 1996, to
unconditionally and irrevocably guarantee to Pan-Western the
prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Cayman of their individual
obligations to Pan-Western pursuant to any debt obligation then
or thereafter due and owing by any such party to Pan-Western.
"Joint Venture Permitted Indebtedness" means (i) the
Shareholder Loans and any additional loans from Pan-Western to
the Joint Ventures, (ii) working capital debt, provided that
after giving effect to such additional debt, (a) the minimum (or
lowest) projected Debt Service Coverage Ratio for any calendar
year will not be less than 1.5 to 1 and (b) the average projected
Debt Service Coverage Ratio for any calendar year will not be
less than 1.7 to 1 (provided that working capital debt shall at
no time exceed $1.0 million), (iii) purchase money or capital
lease obligations incurred to finance assets of the Joint
Ventures that are readily replaceable personal property with a
principal amount or capitalized portion not exceeding $1.0
million in the aggregate outstanding at any time, (iv) trade
accounts payable (other than for borrowed money) due within 90
days arising, and accrued expenses incurred, in the ordinary
course of business of constructing, operating or maintaining the
Joint Venture Facility on customary terms, (v) interest or
currency exchange rate protection agreements, (vi) debt under the
Joint Venture Guarantees of each Joint Venture and any other
guarantees of the obligations of the Joint Venture and (vii) any
debt to any other Joint Venture.
"Joint Ventures" means, collectively, Tangshan Panda,
Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-Sino.
"JV Equity Contributions" shall mean the monies
disbursed from the Luannan Facility Construction Fund pursuant to
the terms of the Issuer Loan and contributed by Pan-Western,
pursuant to the terms of the Joint Venture Agreements, to each of
the Joint Ventures as Pan-Western's equity contribution to such
Joint Venture.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of the Indentures, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Liquidated Damages" means the amount payable as
liquidated damages under the terms of the Registration Rights
Agreement, the Senior Secured Notes Guarantee, the Issuer Loan,
the Shareholder Loans and the Collateral Documents.
"Luannan Casualty Proceeds" means all Insurance
Proceeds or other amounts received by Pan-Western on account of
any Luannan Event of Loss ("Insurance Proceeds" means all amounts
and proceeds (including instruments) in respect of the proceeds
of any casualty insurance policy covering any portion of the
Luannan Facility (except proceeds of business interruption
insurance)).
"Luannan Coal Suppliers" means, collectively, Kailuan
Coal Mining Administration, Luannan County Coal Mine, Liu Guantun
Coal Mine, Le Ting County Coal Mine, Zunhua Coal Mine and Chang
Li County Coal Mine.
"Luannan Coal Supply Agreements" means, collectively,
the coal supply agreements entered into among Tangshan Panda,
Tangshan Pan-Western and the Luannan Coal Suppliers.
"Luannan Coal Transportation Agreement" means the coal
transportation agreement, dated March 6, 1996, among the Carrier,
Tangshan Panda and Tangshan Pan-Western.
"Luannan Commercial Operation Date" means that date by
which both of the following have occurred: (i) the Luannan
Facility Engineer has certified that the Luannan Facility has
achieved commercial operations and (ii) the Commercial Operation
Date, as such term is used in the Interconnection Agreement, has
occurred.
"Luannan EPC Contract" means the Engineering,
Procurement and Construction Contract, dated as of April 24,
1996, among the Luannan EPC Contractor, Tangshan Panda and
Tangshan Pan-Western, as the same may from time to time be
amended, supplemented or otherwise modified.
"Luannan EPC Contractor" means Harbin Power Engineering
Company Limited, a company organized under the laws of the PRC,
and a wholly-owned subsidiary of Harbin Power Equipment Company,
a company organized under the laws of the PRC.
"Luannan Event of Loss" means an event which causes all
or a portion of the Luannan Facility to be damaged, destroyed or
rendered unfit for normal use for any reason whatsoever, other
than a Luannan Expropriation Event.
"Luannan Expropriation Event" means any compulsory
transfer or taking or transfer under threat of compulsory
transfer or taking of any material part of the Luannan Facility
or any ownership interest or other rights in the Joint Ventures
by any governmental authority.
"Luannan Expropriation Proceeds" means any proceeds
received by Pan-Western as a result of the occurrence of a
Luannan Expropriation Event.
"Luannan Facility" means the Plant, the related steam
and hot water generation and distribution facility and other
related facilities to be located in Luannan County, Tangshan
Municipality, Hebei Province, China.
"Luannan Facility Construction Cost" means the actual
cost to complete the construction of the Luannan Facility as
certified by the Luannan Facility Engineer following the Luannan
Commercial Operation Date (and which total includes amounts on
deposit in the Completion Sub-Account).
"Luannan Facility Construction Fund" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Luannan Facility Construction Schedule Certificate"
means a certificate from the Issuer, Pan-Western and the Luannan
Facility Engineer (delivered at least once a month whether or not
there is a disbursement pursuant to the Shareholder Loans) to the
effect that: (a) undisbursed funds in the Luannan Facility
Construction Fund (or other monies available to the Issuer, to
the extent that such monies have been segregated in a dedicated
account and a security interest in such account has been granted
to the Senior Secured Notes Trustee) together with any and all
interest earned on the Issuer Funds and the Pan-Western Funds are
reasonably expected to equal or exceed the amount necessary to
pay all costs in connection with final completion of the Luannan
Facility; and (b) the Luannan Facility is being constructed in
accordance with the Approved Construction Budget and Schedule or,
if applicable, an Approved Completion Plan.
"Luannan Facility Engineer" means Parsons Brinckerhoff
Energy Services, Inc., which previously served as the Joint
Ventures' project engineer, and any successor thereto under the
terms of the Indentures.
"Luannan Facility Notes" means the promissory notes
issued by the Joint Ventures to Pan-Western, evidencing their
indebtedness to Pan-Western.
"Luannan Facility Restoration Fund" has the meaning
ascribed thereto in Section 3.3 of this Indenture
"Luannan Financing Agreements" means, collectively, the
Shareholder Loan Agreements, the Joint Venture Guarantees, the
Issuer Note and the Luannan Facility Notes.
"Luannan O&M Contractor" means Duke/Fluor Daniel
International Services, a partnership whose partners are Duke
Coal Project Services Pacific, Inc., a Nevada corporation, and
Fluor Daniel Asia, Inc., a California corporation.
"Luannan Operations and Maintenance Agreement" means
the Amended and Restated Operation and Maintenance Agreement,
dated as of March 6, 1997, among the Joint Ventures and the
Luannan O&M Contractor.
"Luannan Power Purchase Agreement" means, collectively,
the Energy Purchase Agreement, the Interconnection Agreement and
the supplemental agreement thereto (and, after execution thereof,
the related interconnection dispatch agreement).
"Luannan Project Documents" means, collectively, the
Luannan Power Purchase Agreement, the Luannan EPC Contract, the
Luannan Transmission Facilities Construction Agreement, the
Luannan Operations and Maintenance Agreement, the Luannan Coal
Supply Agreements, the Luannan Coal Transportation Agreement, the
Engineering and Design Contract and all other instruments,
agreements or other documents arising from or related to the
Luannan Facility, but shall not include any Luannan Financing
Agreement.
"Luannan Transmission Facilities" means three new
substations, the upgrades of both an existing substation and an
existing switching station and approximately 43 km of 110 KV
transmission lines to interconnect the Plant to the Jing-Jin-Tang
Grid.
"Luannan Transmission Facilities Contractor" means
North China Power Company, as the contractor pursuant to the
Luannan Transmission Facilities Construction Agreement.
"Luannan Transmission Facilities Construction
Agreement" means the Transmission Facilities Construction
Agreement among North China Power Company, Tangshan Panda and
Tangshan Pan-Western, dated February 10, 1996, as assigned by
Tangshan Panda and Tangshan Pan-Western to Tangshan Pan-Sino on
July 11, 1996.
"Luannan Transmission Facilities Loan" means the loan
made by Tangshan Pan-Sino to the Luannan Transmission Facilities
Contractor through a PRC financial intermediary for the
construction cost of the Luannan Transmission Facilities, in the
amount of RMB 78,218,000, to be adjusted for inflation from
December 31, 1994 to the date of issuance of the notice to
proceed with preliminary design and for accrued interest during
the construction period.
"Mandatory Redemption Event" has the meaning ascribed
thereto in the PFC Indenture.
"Mandatory Redemption Offer" means an offer which the
Issuer is obligated to make upon the occurrence of certain events
to redeem pro rata the outstanding Senior Secured Notes at a
redemption price equal to 100% of the principal amount of the
Senior Secured Notes, together with accrued and unpaid interest,
if any, to the redemption date.
"Material Adverse Effect" means a material adverse
change in the financial condition with respect to the party or
entity in question or any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the operation of a Domestic Project; (b) the development,
construction or operation of a Permitted Project which is, or is
owned by, a Material Subsidiary; (c) the development,
construction or operation of the Luannan Facility; (d) the
ability of, respectively, a Domestic Project, a Permitted Project
which is, or is owned by, a Material Subsidiary or the Luannan
Facility to perform any of their material obligations under a
Project Document; (e) the ability of the Issuer to make payments
of principal, premium, if any, or interest (including Liquidated
Damages and Additional Amounts, if any) on the Senior Secured
Notes when due or (f) the ability of the Company to make payments
pursuant to the provisions of the Senior Secured Notes Guarantee.
"Material Subsidiary" means any Subsidiary which, at
any date of determination, is a "Significant Subsidiary" (as that
term is defined in Regulation S-X, as in effect on the Closing
Date, issued under the Securities Act).
"Member" shall have the meaning ascribed thereto in the
definition of "Eligible Successor" in Appendix A hereof.
"monies" means, with respect to any Fund, cash and
Dollar Permitted Investments on deposit in such Account or Fund.
"Monthly Date" means the 15th day of each calendar
month, on which the Trustee is authorized to withdraw and
transfer monies from the Company Revenue Fund pursuant to Section
4.1(b) of the Company Indenture.
"Moody's" means Moody's Investors Service, Inc.
"NDR" means National Development and Research
Corporation, a Texas corporation.
"NDR Distribution Account" means a NDR distribution
account into which amounts from the Pan-Sino Fund shall be
allocated, in accordance with the equity interest of NDR in Pan-
Sino.
"Net Cash Proceeds" means (a) in the case of any sale
of Capital Stock by the Company, Panda International or any
direct or indirect parent of the Company, the aggregate net cash
proceeds received by the Company, Panda International or any
direct or indirect parent of the Company, after payment of
expenses, commissions and the like incurred in connection
therewith, whether such proceeds are in cash or in property
(valued at the Fair Market Value thereof, as determined in good
faith by the Board of Directors of such Person, at the time of
receipt); (b) in the case of any exchange, exercise, conversion
or surrender of outstanding securities of any kind for or into
shares of Capital Stock of the Company, Panda International or
any direct or indirect parent of the Company which is not
Disqualified Stock, the net book value of such outstanding
securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the
holder to the Company, Panda International or any direct or
indirect parent of the Company upon such exchange, exercise,
conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares and less all
expenses incurred by the Company, Panda International or any
direct or indirect parent of the Company in connection
therewith).
"Net Debt Service" means the sum of (i) (a) Interest
Expense less (b) non-cash Interest Expense less (c) scheduled
withdrawals from the Senior Secured Notes Capitalized Interest
Fund (if applicable) less (d) scheduled withdrawals from the PFC
Capitalized Interest Fund (if applicable) less (e) scheduled
withdrawals from any additional capitalized interest fund
established pursuant to either of the Indentures (if applicable)
plus (ii) all payments of scheduled and overdue principal of, and
premium, if any, on Indebtedness plus (iii) without duplication,
all rental payments in respect of Capitalized Lease Obligations
paid, accrued, or scheduled to be paid or accrued.
"Net Income" means, with respect to any Person for any
period, the net income (loss) of such Person determined in
accordance with GAAP.
"Network" means the heat and steam network of Luannan
Heat and Power which will consist of 12.1 kilometers of hot water
pipeline, 8.78 kilometers of steam pipeline, heat exchange
stations, heat control equipment and civil construction.
"NGC" means Natural Gas Clearinghouse, a Colorado
partnership.
"NNW Cash Flow Participation" means NNW's cash flow
participation interest in distributions from the Rosemary
Partnership.
"Non-Recourse Debt" means Indebtedness of any
Subsidiary or group of Subsidiaries that is incurred to acquire,
construct or develop a Permitted Project or group of Permitted
Projects provided that such Indebtedness is without recourse to
the Company or any Material Subsidiary or to any assets of the
Company or any such Material Subsidiary other than such Permitted
Project and the direct or indirect parent or parents that own
such Permitted Project or group of Permitted Projects and the
income from and proceeds of such Permitted Project or group of
Permitted Projects.
"Non-U.S. Permitted Project" means a Permitted Project
located outside the United States.
"North China Power" means North China Power Group, a
regional grid administrative agency in northern China whose
jurisdiction covers Beijing, Tianjin, Hebei Province, Shanxi
Province and western Inner Mongolia.
"North China Power Company" means North China Power
Group Company, a company organized under the laws of the PRC and
the business arm of North China Power.
"Note Custodian" means the Trustee, as custodian with
respect to the Global Notes, or any successor entity thereto.
"Notes Guarantee Interest Account" has the meaning
ascribed thereto in Section 3.3 of the Company Indenture.
"Notes Guarantee Principal Account" has the meaning
ascribed thereto in Section 3.3 of the Company Indenture.
"Notes Guarantee Service Fund" has the meaning ascribed
thereto in Section 3.3 of the Company Indenture.
"Notes Guarantee Service Reserve Fund" has the meaning
ascribed thereto in Section 3.3 of the Company Indenture.
"Offering Memorandum" means the confidential Offering
Memorandum dated April 11, 1997, with respect to the Senior
Secured Notes and the Senior Secured Notes Guarantee.
"O&M" means operations and maintenance services.
"O&M Contractor" means Duke/Fluor Daniel International
Services, a partnership organized and existing under the laws of
Nevada, whose partners are Duke Coal Project Services Pacific,
Inc., a Nevada corporation and Fluor Daniel Asia, Inc., a
California corporation.
"Offering Memorandum" means the confidential Offering
Memorandum dated April 11, 1997, with respect to the Senior
Secured Notes and the Senior Secured Notes Guarantee.
"Offering" means the offering of the Senior Secured
Notes pursuant to the Offering Memorandum.
"Officer's Certificate" means a certificate satisfying
the requirements of Section 1.2 of the Indenture of an Authorized
Representative of the Company or the Issuer, as is appropriate to
the context, and signed by the chief executive officer,
president, any executive vice president or any vice president and
by the treasurer, an assistant treasurer, the secretary or an
assistant secretary of the Company or the Issuer, as is
appropriate to the context, and delivered to the Trustee.
"Operating and Maintenance Costs" means all amounts
disbursed by or on behalf of the Domestic Project, Permitted
Project or Joint Ventures for operation, maintenance, repair, or
improvement of the Domestic Project, Permitted Project or Joint
Ventures, including, without limitation, premiums on insurance
policies, property, income and all other taxes to the extent
paid, and payments under the relevant operating and maintenance
agreements, leases (including Operating Lease Obligations),
royalty and other land use agreements, and any other payments
required under the Project Documents, each as determined on a
cash basis in accordance with GAAP.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Operation and Maintenance Agreement" means the Amended
and Restated Operation and Maintenance Agreement, dated as of
March 6, 1997, between the Joint Ventures and the O&M Contractor.
"Opinion of Counsel" means a written opinion of counsel
satisfying the requirements of Section 1.3 of this Indenture for
any reason either expressly referred to in this Indenture, or
otherwise, which counsel and opinion shall be reasonably
satisfactory to the Trustee and which may include, without
limitation, counsel for the Company, whether or not such counsel
is an employee of the Company.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities or portions thereof deemed to have
been paid within the meaning of Section 6.3(a) of this
Indenture; and
(iii) Securities that have been exchanged for other
securities or securities in lieu of which other Securities
have been authenticated and delivered pursuant to this
Indenture other than any Securities in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities constitute
valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of Securities 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, Securities owned by the Company or an
Affiliate of the Company shall be disregarded and deemed not to
be outstanding as provided in Section 1.4(f) of this Indenture.
"Pan-Sino" means Pan-Sino Energy Development Company
LLC, a Cayman Islands exempted company.
"Pan-Sino Cash Collateral Agreement" means the
agreement dated as of April 22, 1997, between Pan-Sino and the
Trustee.
"Pan-Sino Distribution Account" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Pan-Sino Fund" has the meaning ascribed thereto in
Section 3.3 of this Indenture.
"Pan-Sino Pledge Agreement" means the agreement dated
as of April 2, 1997, made by Pan-Sino in favor of the Trustee
pledging the stock of Pan-Western.
"Pan-Sino Shareholders' Agreement" means the agreement
among Pan-Sino, the Issuer and NDR, dated as of April 22, 1997.
"Pan-Western" means Pan-Western Energy Corporation LLC,
a Cayman Islands exempted company.
"Pan-Western Cash Collateral Agreement" means the
agreement dated as of April 22, 1997, between Pan-Western and the
Trustee.
"Pan-Western Equity Distribution Fund" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Pan-Western Funds" means the Pan-Western Revenue Fund,
the Pan-Western Operating Fund and the Pan-Western Equity
Distribution Fund.
"Pan-Western Operating Fund" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Pan-Western Pledge Agreement" means the agreement
dated as of April 22, 1997, made by Pan-Western in favor of the
Trustee pledging the promissory notes under the Shareholder Loan
Agreements.
"Pan-Western Revenue Fund" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Panda International" means Panda Energy International,
Inc., a Texas corporation.
"Panda International Pledge Agreement" means the
agreement dated as of April 22, 1997, made by Panda International
in favor of the Trustee pledging the stock of the Company.
"Panda International Pledge Agreement" means a pledge
agreement executed by Panda International in favor of the Company
Indenture Trustee providing for the pledge, to the Company
Indenture Trustee, of 100% of the Capital Stock of the Company.
"Paying Agent" means any Person acting as Paying Agent
pursuant to Section 10.11 of the Indenture.
"Payment Date" means a Principal Payment Date or an
Interest Payment Date.
"PBC" means Panda Brandywine Corporation, a Delaware
corporation.
"PEC" means Panda Energy Corporation, a Texas
corporation.
"PEC Assignment and Pledge Agreement" means the
agreement dated as of April 22, 1997, made by the Company in
favor of the Trustee pledging the stock of PEC.
"PEC Cash Collateral Agreement" means the agreement
dated as of April 22, 1997, between PEC and the Trustee.
"PEC-Delaware" means Panda Energy Corporation, a
Delaware corporation.
"Permitted Indebtedness" means:
(i) any and all indebtedness of the Company
and its Subsidiaries outstanding as of the Closing
Date;
(ii) Indebtedness of the Company which is
owed to and held by a Wholly Owned Subsidiary and
Indebtedness of a Wholly Owned Subsidiary which is
owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any
transfer or such Indebtedness (other than to the
Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the incurrence
of such Indebtedness by the Company or by a Wholly
Owned Subsidiary, as the case may be;
(iii) Non-Recourse Debt of a Subsidiary
or group of Subsidiaries, the proceeds of which
are used to acquire, develop or construct a
Permitted Project by such Subsidiary or group of
Subsidiaries;
(iv) Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, or
refund, Indebtedness that was permitted by the
Indentures to be incurred or was outstanding as of
the Closing Date;
(v) any additional Indebtedness incurred by
the Company or its Subsidiaries provided that the
Chief Financial Officer of the Company certifies
that at the time of incurrence of such
Indebtedness that the following conditions have
been met:
(a) no Event of Default will occur
and be continuing after giving effect to the
incurrence of such additional Indebtedness;
(b) the minimum (or lowest) annual
projected Debt Service Coverage Ratio of the
Company for the remaining term of the Senior
Secured Notes will not be less than 1.4 to 1;
(c) the minimum (or lowest) annual
projected Consolidated Debt Service Coverage
Ratio of the Company for the remaining term
of the Senior Secured Notes will not be less
than 1.15 to 1;
(d) the Rating Agencies shall have
confirmed that there will be no rating
downgrade with respect to the Senior Secured
Notes after giving effect to the incurrence
of such additional Indebtedness;
(e) the Debt Service Coverage
Ratio of the Company shall be, for the
immediately preceding four fiscal quarters,
greater than 1.4 to 1;
(f) the amount in the Debt Service
Reserve Fund plus the amount in the Note
Guarantee Service Reserve Fund equals or
exceeds the Debt Service Reserve Requirement;
(vi) any additional Indebtedness issued
pursuant to one or more PFC Indenture supplements,
provided that, at the time of the creation of such
Indebtedness (other than the initial Series A
Bonds and any series of bonds issued solely in
exchange for an equivalent aggregate principal
amount of outstanding bonds of another series) the
following conditions have been met:
(a) PIC provides an officer's
certificate at the time of incurrence of such
Indebtedness to the Company Indenture Trustee
(supported by a certificate to the Company
Indenture Trustee from the Consolidating
Financial Analyst) stating that, after giving
effect to the issuance of such Indebtedness
and the application of the proceeds
therefrom, the projected PIC Debt Service
Coverage Ratio and the projected PIC
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 PIC Future Ratio Determination
Period; and
(b) the rating of the outstanding
Indebtedness in effect immediately prior to
the issuance of such additional Indebtedness
is reaffirmed by the Rating Agencies after
giving effect to the issuance of such
additional Indebtedness, provided, further,
that a reaffirmation of the rating of the
outstanding Indebtedness shall not be
required if (1) neither PIC nor any
Subsidiary of the Company has acquired (or is
acquiring in connection with the issuance of
such additional Indebtedness), sold or
otherwise disposed of, since the last date
upon which the Indebtedness 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
Permitted Projects with respect to which the
sum of (w) the aggregate purchase price 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) $50.0 million and (z) 25% of
the aggregate principal amount of the
Indebtedness then outstanding and (2) the
aggregate principal amount of additional
Indebtedness to be issued is less than the
lesser of (x) $50.0 million and (y) 25% of
the aggregate principal amount of the
indebtedness then outstanding; and
(vii) in addition to the Indebtedness
referred to in clauses (i) through (vi), any other
Indebtedness of the Company and its Subsidiaries
that, in the aggregate, does not exceed $10.0
million.
"Permitted Liens" means, with respect to any Person,
any Lien arising by reason of (a) any judgment, decree or order
of any court, so long as such Lien is being contested in good
faith and is adequately bonded, any appropriate legal proceedings
which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated
or the period within which such proceedings may be initiated
shall not have expired; (b) taxes not yet delinquent or which are
being contested in good faith; (c) security for payment of
workers' compensation or other insurance; (d) security for the
performance of tenders, contracts (other than contracts for the
payment of money) or leases; (e) deposits to secure public or
statutory obligations, or to secure permitted contracts for the
purchase or sale of any currency entered into in the ordinary
course of business; (f) Liens imposed by operation of law in
favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business for sums which are not yet delinquent
or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof; (g)
security for surety or appeal bonds; and (h) easements, rights-of-
way, zoning and similar covenants and restrictions and other
similar encumbrances or title defects which, in the aggregate,
are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the business
of the Company or any of its Subsidiaries.
"Permitted Project" means (i) any Project or group of
Projects that fulfills the requirements of the PIC Additional
Projects Contract and which may be developed, constructed or
owned pursuant to the requirements of the PFC Indenture and
subject to compliance with the terms of the Company Indenture and
this Indenture and (ii) to the extent that a project does not
fulfill the requirements of the PIC Additional Projects Contract,
or such requirements are no longer in effect, any project or
group of projects that may be developed, owned and operated by
the Company or one of its Subsidiaries pursuant to the
requirements of the Indentures and the Company shall (a) maintain
at least a 50% (direct or indirect) ownership or equivalent
interest in each project or (b)(x) at least a 25% (direct or
indirect) ownership or equivalent interest in each project not
meeting the requirements of clause (i) above and (y) 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).
"Permitted Project Document" means any and all
documents executed in connection with the development,
construction, ownership and operation of a Permitted Project.
"Permitted Project Event" means, with respect to any
Permitted Project, (i) an event which causes all or a portion of
the facilities of a Permitted Project to be damaged, destroyed or
rendered unfit for normal use for any reason whatsoever, (ii) any
event involving the compulsory transfer or taking or transfer
under threat of compulsory taking of any material part of such
Permitted Project's assets or (iii) the existence of any defect
of title or lien or encumbrance on the any material part of the
property of a Permitted Project (provided that liens or covenants
permitted by the covenant Limitation on Liens shall be excluded
from consideration) that entitles a Person to make a claim under
any title insurance policy in existence with respect to such
property.
"Permitted Project Event Proceeds" means the sum of any
and all proceeds payable upon occurrence of a Permitted Project
Event.
"Permitted Project Power Purchase Agreement" means the
power purchase agreement of any Permitted Project.
"Permitted Refinancing Indebtedness" means any
Indebtedness of the Company or any of its Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, other Indebtedness
of the Company or any of its Subsidiaries; provided that: (i) the
principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity
date at least as late as the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the Senior Secured Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the
Senior Secured Notes on terms at least as favorable to the
Holders of Senior Secured Notes as those contained in the
documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iv) if the
Indebtedness being refinanced is Non-Recourse Debt, such
Permitted Refinancing Indebtedness shall also be Non-Recourse
Debt; and (v) such Indebtedness is incurred either by the Company
or by the Subsidiary which is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company, or
other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing
business of any such entity or substantially all of the assets of
any such entity, subdivision or business).
"PFC" means Panda Funding Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of the
Company.
"PFC Capitalized Interest Fund" means the capitalized
interest fund maintained pursuant to the PFC Indenture.
"PFC Debt Service Reserve" has the meaning ascribed
thereto in the PFC Indenture.
"PFC Indenture" means the Trust Indenture, dated as of
July 31, 1996, among PFC, PIC and Bankers Trust Company, as
trustee, providing for the issuance from time to time of the
Pooled Project Securities in one or more series.
"PFC Registration Statement" means the Registration
Statement on Form S-1, filed by PFC and certain of its affiliates
with the Commission, which became effective on February 14, 1997.
"Physical Securities" shall have the meaning ascribed
thereto in Section 2.5 of this Indenture.
"PIC" means Panda Interfunding Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of the
Company.
"PIC Additional Projects Contract" means the Additional
Projects Contract, dated as of July 31, 1996, among Panda
International, PEC and PIC.
"PIC Cash Available for Distribution" means Total Cash
Flow from all Domestic Projects and Permitted Projects (owned,
constructed or developed pursuant to the PFC Indenture) on a
consolidated basis less (i) regularly scheduled payments of
principal and interest on Domestic Project and Permitted Projects
(owned, constructed or developed pursuant to the PFC Indenture)
project level Indebtedness, (ii) additions to reserves required
by the instruments providing for project level Indebtedness,
(iii) trustee's fees under the PFC Indenture and (iv) the NNW
Cash Flow Participation (as defined in the PFC Indenture) plus
interest earned on reserves required by the PFC Indenture entered
into by PIC, excluding, however, extraordinary financial
distributions and proceeds received as a result of mandatory
redemption events (pursuant to the PFC Indenture), that at the
time of determination is available to be legally distributed from
the Domestic Projects and Permitted Projects (owned, constructed
or developed pursuant to the PFC Indenture) to PIC without
contravention of any agreement.
"PIC Cash Available from Operations" means, for any
period, Total Cash Flow from all Project Entities on a
consolidated basis prior to all PIC Consolidated Debt Service,
less (i) additions to reserves required by project agreements,
(ii) trustee's fees under the PFC Indenture plus interest earned
on reserves required by the documents relating to the Pooled
Project Bonds entered into by PIC, and (iii) the NNW Cash Flow
Participation, excluding, however, "Extraordinary Financial
Distributions" (as defined in the PFC Indenture) and proceeds
received as a result of "Mandatory Redemption Events" (as defined
in the PFC Indenture).
"PIC Consolidated Debt Service" means, for purposes of
the PFC Indenture, for any period, the PIC Debt Service plus
scheduled principal and interest payments on all Project debt (as
such term is defined in the PFC Indenture).
"PIC Consolidated Debt Service Coverage Ratio" means,
as of any date of determination, the ratio of (i) PIC Cash
Available from Operations during the relevant period to (ii) PIC
Consolidated Debt Service for such period; provided, however,
that at any time that PIC holds interests in more than four
Projects, then the PIC Consolidated Debt Service Coverage Ratio
shall not be applied in respect of any event or requirement.
"PIC Debt Service" means, for any period, scheduled
principal, premium, if any, and interest (including liquidated
damages and additional amounts, if any) payments on any and all
Indebtedness issued pursuant to the PFC Indenture.
"PIC Debt Service Coverage Ratio" means, for purposes
of the PFC Indenture, as of any date of determination, the ratio
of (i) PIC Cash Available for Distribution during the relevant
period to (ii) PIC Debt Service for such period.
"PIC Future Ratio Determination Period" means, 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 beginning with January 1 and ending with the
Final Stated Maturity. For purposes of this definition, "Final
Stated Maturity" means the last stated maturity date of any
Indebtedness outstanding under the PFC Indenture.
"Place of Payment" when used with respect to the
Securities of any series means the office or agency maintained
pursuant to Section 10.11 of this Indenture and such other place
or places, if any, where the principal of, and premium, if any,
and interest on (including any Liquidated Damages or Additional
Amounts) the Securities of such series are payable as specified
in the Series Supplemental Indenture setting forth the terms of
the Securities of such series.
"Plant" means the 2x50 MW coal-fired cogeneration plant
to be constructed by the Joint Ventures in Luannan County,
Tangshan Municipality, Hebei Province, China.
"Pooled Project Securities" means the Series A Bonds
and certain additional series of bonds issued pursuant to the PFC
Indenture.
"Power Purchase Agreements" means the Luannan Power
Purchase Agreement, the Brandywine Power Purchase Agreement, the
Rosemary Power Purchase Agreement and any Permitted Project Power
Purchase Agreement.
"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.
"Predecessor Securities" with respect to any particular
Security, means any previous Security evidencing all or a portion
of the same debt as that evidenced by such particular Security;
for the purposes of this definition, any Security authenticated
and delivered under Section 2.11 of this Indenture in lieu of a
lost, destroyed or stolen Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Security.
"Pricing Approval Authority" means the Tangshan
Municipal Price Bureau.
"Pricing Document" means the document or documents
(issued by the Pricing Approval Authority) determining the price
for electric energy delivered, retail price and principles for
adjustment.
"Principal Payment Date" means, with respect to any
Security, the date specified in such Security as the date on
which an installment of principal on such Security is due and
payable.
"Private Placement Legend" means the legend initially
set forth on the Securities in the form set forth in
Section 2.8(b) of this Indenture.
"Project" means a power generation facility or any
activity relating thereto.
"Project Documents" means, collectively, the Luannan
Project Documents, the Luannan Financing Agreements, the
Brandywine Project Documents, the Rosemary Project Documents, the
Administrative Services Agreement, the Development Services
Agreement, and any and all Permitted Project Documents.
"Project Engineer" means a nationally recognized
engineering firm that is "independent" (as defined in the
definition of Eligible Successors) and provides engineering
services for any Permitted Project, any Domestic Project or the
Luannan Facility.
"Projected Luannan Facility Construction Cost" means
$118.8 million.
"Public Equity Offering" means an underwritten public
offering of Capital Stock (other than Disqualified Stock) of the
Company, Panda International or any direct or indirect parent of
the Company made on a primary basis by the Company, Panda
International or any direct or indirect parent of the Company
pursuant to a registration statement filed with and declared
effective by the Commission in accordance with the Securities Act
or an underwritten offering of Capital Stock (other than
Disqualified Stock) of the Company, Panda International or any
direct or indirect parent of the Company made on a primary basis
by the Company, Panda International or any direct or indirect
parent of the Company pursuant to Rule 144A under the Securities
Act.
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended.
"Purchase Agreement" means the agreement dated April
11, 1997, among the Issuer, the Company, Panda International and
the Initial Purchaser.
"PURPA" means the United States Public Utility
Regulatory Policies Act of 1978, as amended.
"QF" means Qualifying Facility.
"QIB" means Qualified Institutional Buyer.
"Qualified Capital Stock" means, as to any Person, any
and all Capital Stock of such Person other than Disqualified
Capital Stock.
"Qualified Construction Costs" shall mean the following
costs, expenses and payments which are or have been incurred by
the Joint Ventures with respect to, and prior to, final
completion of the Luannan Facility:
i) costs of labor (including benefits and
overhead), materials and equipment incurred in
connection with the construction of, and procurement
and installation of equipment to be installed in, the
Luannan Facility;
(ii) accounting, architectural, engineering,
construction management, construction monitoring and
disbursement expenses and fees, legal, insurance,
planning, testing, surveying and other development
expenses and fees and initial fuel, spare parts and
other equipment supply incurred in connection with the
planning, testing, development, financing, construction
and start-up of the Luannan Facility and in connection
with the obtaining of all necessary or appropriate
Governmental Approvals related thereto;
(iii) other reasonable costs and expenses
incurred by a Joint Venture in connection with the
construction of, and procurement and installation of
equipment to be installed in, the Luannan Facility and
approved by the Luannan Facility Engineer;
(iv) all payment obligations of the Joint
Ventures under or in connection with the Luannan EPC
Contract;
(v) costs incurred in connection with the
construction of, and procurement and installation of
equipment to be installed in, the Luannan Transmission
Facilities, as provided in the Luannan Transmission
Facilities Loan;
(vi) costs incurred in connection with the
Steam and Heat Network.
(vii) costs incurred in connection with
the purchase of land use rights and water rights, and
certain water wells and pipelines, respectively, from
the County Partners in an amount not to exceed
$5,740,000;
(viii) any and all interest payable on or
reserves established with respect to the Shareholder
Loans pursuant to the Shareholder Loan Agreements.
"Qualified Institutional Buyer" has the meaning
attributed thereto in Rule 144A under the Securities Act.
"Qualifying Facility Status" or "QF Status" 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 Standard & Poor's, Moody's, and
Duff & Phelps. "Reaffirmed by the Rating Agencies," or words to
similar effect, means two or three of such agencies have
reaffirmed or improved the rating of the Indebtedness at issue.
"Raytheon Parent Guaranty" means the Parent Guaranty
dated as of March 30, 1995 executed by Raytheon Company in favor
of the Brandywine Partnership.
"Redemption Date" shall have the meaning ascribed
thereto in Section 8.2 of this Indenture.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of April 22, 1997, among the Issuer,
the Company and the Initial Purchaser.
"Regular Record Date", for the Stated Maturity of any
Securities of a series, or for the Stated Maturity of any
installment of principal thereof or payment of interest thereon,
means 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
Securities of such series or in the form of Securities of such
series attached to the Series Supplemental Indenture relating to
the Securities of such series.
"Regulation S" means Regulation S under the Securities
Act.
"Regulation S Global Notes" means the Senior Secured
Notes issued under this Indenture pursuant to Regulation S.
"Related Party" means any Affiliate of the Company of
which the Company, Panda International or any direct or indirect
parent of the Company holds 51% or more of the voting securities
of such Person.
"Renminbi" or "RMB" means Renminbi, the legal tender
currency of China.
"Requirements of Law" means, 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 the Company, any Subsidiary,
the Domestic Projects, any Permitted Projects or the Luannan
Facility and PIC, 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, means any officer in the corporate trust and agency
group (or any successor group) of the Trustee including without
limitation, any managing director, vice president, assistant vice
president, assistant treasurer, 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.
"Restoration Budget" has the meaning ascribed thereto
in Section 4.8 of this Indenture.
"Restoration Progress Payments Schedule" has the
meaning ascribed thereto in Section 4.8 of this Indenture.
"Restoration Requisition" has the meaning ascribed
thereto in Section 4.8 of this Indenture.
"Restricted Payment" means any of the following: (i)
the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company or any Subsidiary of
the Company or any payment made to the direct or indirect holders
(in their capacities as such) of Capital Stock of the Company or
any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to
purchase Capital Stock (other than Disqualified Stock), and (y)
in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any
of its Subsidiaries or (iii) the making of any principal payment
on, or the purchase, defeasance, repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment,
of any Indebtedness which is subordinated in right of payment to
the Senior Secured Notes (other than Indebtedness acquired in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year
of the date of acquisition).
"RMB Revenue Funds" means the revenue funds maintained
by each Joint Venture and denominated in RMB.
"Rosemary Casualty Proceeds" means Casualty Proceeds as
defined in the Rosemary Indenture.
"Rosemary Eminent Domain Proceeds" means Eminent Domain
Proceeds as defined in the Rosemary Indenture.
"Rosemary Event of Eminent Domain" means an Event of
Eminent Domain as defined in the Rosemary Indenture.
"Rosemary Event of Loss" means an Event of Loss as
defined in the Rosemary Indenture.
"Rosemary Facility" means the 180 MW natural gas-fired,
combined-cycle cogeneration facility of the Rosemary Partnership
located in Roanoke Rapids, North Carolina.
"Rosemary Fuel Management Agreement" means the Fuel
Supply Management Agreement, dated October 10, 1990, between the
Rosemary Partnership and NGC, as amended.
"Rosemary Gas Supply Agreement" means the Gas Purchase
Contract, dated April 12, 1990, between the Rosemary Partnership
and NGC, as amended.
"Rosemary Indenture" means the trust indenture
governing the terms of issuance from time to time of debt
securities in one or more series, dated as of July 31, 1996,
among Panda-Rosemary Funding Corporation, the Rosemary
Partnership and Fleet National Bank, as trustee.
"Rosemary Partnership" means Panda-Rosemary, L.P., a
Delaware limited partnership.
"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 Rosemary Partnership.
"Rosemary Project Documents" means, collectively, the
Rosemary Power Purchase Agreement, the Rosemary EPC Agreement,
the Rosemary O&M Agreement, the Rosemary Steam Agreement, the
Rosemary Fuel Management Agreement, the Rosemary Gas Supply
Agreement, the Rosemary Site Lease (as each of the following is
defined in the Rosemary Indenture) and each Additional Project
Document (as defined in the PFC Indenture).
"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 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 Rosemary Partnership on January 3, 1990.
"Rosemary Title Event" means a Title Event as defined
in the Rosemary Indenture.
"Rosemary Title Insurance Proceeds" means Title
Insurance Proceeds as defined in the Rosemary Indenture.
"Rule 144A" means Rule 144A of the Securities Act.
"Rule 144A Global Notes" means the Senior Second Notes
issued under this Indenture pursuant to Rule 144A.
"S&P" means Standard & Poor's Ratings Service.
"Secured Party" and "Secured Parties" shall have the
meanings ascribed thereto in the relevant Collateral Documents.
"Securities" or "Security" shall have the meaning
ascribed thereto in the recitals to this Indenture.
"Securities Act" means the United States Securities Act
of 1933, as amended.
"Security Register" shall have the meaning ascribed
thereto in Section 2.8(a) of the Indenture.
"Security Registrar" means any Person acting as
Security Registrar pursuant to Section 2.8 or 10.11 of this
Indenture.
"SEC" means the Securities and Exchange Commission of
the United States.
"Senior Indebtedness" means, under the Indentures and
with respect to either the Company or the Issuer, the principal
of, premium, if any, and interest (including interest accruing
after the filing of a petition initiating any proceeding under
any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding and including Liquidated
Damages and Additional Amounts, if any) and all other monetary
obligations on any Indebtedness (other than as otherwise provided
in this definition), whether outstanding on the Closing Date or
thereafter created, incurred or assumed, and whether at any time
owing, actually or contingently, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall be subordinated or junior
in right of payment to other Indebtedness of such entity. Without
limiting the generality of the foregoing, with respect to the
Issuer, "Senior Indebtedness" shall include the principal of,
premium, if any, and interest (including interest accruing after
the filing of a petition initiating any proceedings under any
state, federal or foreign bankruptcy laws whether or not
allowable as a claim in such proceeding and including Liquidated
Damages and Additional Amounts, if any), and all other monetary
obligations of every kind and nature of the Issuer from time to
time owed to the Noteholders under this Indenture.
Notwithstanding the foregoing with respect to the Issuer, "Senior
Indebtedness" shall not include (i) Indebtedness that is by its
terms subordinate or junior in right of payment to any
Indebtedness of the Issuer, (ii) Indebtedness which, when
incurred, is without recourse to the Issuer, (iii) any liability
for foreign, federal, state, local or other tax owed or owing by
the Issuer to the extent such liability constitutes Indebtedness,
(iv) Indebtedness of the Issuer to a Wholly Owned Subsidiary and
(v) that portion of any Indebtedness which at the time of
issuance is issued in violation of the Indentures.
"Senior Secured Notes" means the Initial Senior Secured
Notes and the Registered Senior Secured Notes (as such terms are
defined in the Senior Secured Notes Supplemental Indenture)
issued by the Issuer under this Indenture on the date hereof.
"Senior Secured Notes Capitalized Interest Fund" has
the meaning ascribed thereto in Section 3.3 of this Indenture.
"Senior Secured Notes Collateral" means the Issuer
Pledge Agreement, the Pan-Sino Pledge Agreement, the Pan-Western
Pledge Agreement, the Company Pledge Agreement, the Issuer Cash
Collateral Agreement, the Pan-Western Cash Collateral Agreement
and the Pan-Sino Cash Collateral Agreement.
"Senior Secured Notes Debt Service Fund" has the
meaning ascribed thereto in Section 3.3 of this Indenture.
"Senior Secured Notes Debt Service Reserve Fund" has
the meaning ascribed thereto in Section 3.3 of this Indenture.
"Senior Secured Notes Guarantee" means the Initial
Senior Secured Notes Guarantee and the Registered Senior Secured
Notes Guarantee (as such terms are defined in the Senior Secured
Notes Supplemental Indenture) issued by the Company on the date
of this Indenture under the terms of the Company Indenture.
"Senior Secured Notes Interest Account" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Senior Secured Notes Principal Account" has the
meaning ascribed thereto in Section 3.3 of this Indenture.
"Senior Secured Notes Supplemental Indenture" means the
first Series Supplemental Indenture to this Indenture.
"Series A Bonds" means the 11-5/8% Pooled Project
Bonds, Series A due 2012 of PFC, issued pursuant to the PFC
Indenture.
"Series Supplemental Indenture" means an indenture
supplemental to the Indenture entered into by the Company and the
Trustee for the purpose of establishing the title, form and terms
of the Securities of any series; "Series Supplemental Indentures"
means each and every Series Supplemental Indenture.
"Shareholder Loan Agreements" means, collectively, the
Shareholder Loan Agreement by and among each Joint Venture and
Pan-Western.
"Shareholder Loans" means the outstanding indebtedness
of the Joint Ventures to Pan-Western incurred to finance the
development and construction of the Luannan Facility and funded
by Pan-Western with the proceeds of the Issuer Loan.
"Special Record Date" for the payment of any defaulted
principal or interest means a date fixed by the Company pursuant
to Section 2.11 of this Indenture.
"Standard & Poor's" means Standard & Poor's Ratings
Service.
"Stated Maturity" means, with respect to any security,
the date specified in such security as the fixed date on which
the final payment of principal of such security is due and
payable, including pursuant to any mandatory redemption provision
(but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency).
"Subaccounts" has the meaning ascribed thereto in
Section 3.3 of this Indenture.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof), (ii) any partnership (a) the
sole general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof) and
(iii) any Person that either is a Permitted Project or owns an
interest in a Permitted Project (to the extent described in
clauses (a) or (b) of the definition of Permitted Project).
"Tangshan Cayman" means Tangshan Cayman Heat & Power
Co., Ltd., a Sino-foreign equity joint venture.
"Tangshan Engineering" means Tangshan Heat and
Engineering Company, a company organized under the laws of the
PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.,
Ltd., a Sino-foreign equity joint venture.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture.
"Tax Authority" means the Cayman Islands, the United
States or any political subdivision thereof or any authority
having power to tax therein.
"Taxes" means any present or future taxes, duties,
assessments or governmental charges of whatever nature.
"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
GAAP.
"Transaction Documents" means, collectively, the
Collateral Documents, the Purchase Agreement, the Senior Secured
Notes, the Senior Secured Notes Guarantee, the Indentures, the
Shareholder Loan Agreements, the Luannan Project Documents, the
Luannan Financing Agreements, the Brandywine Financing Documents,
the Brandywine Project Documents and the Rosemary Project
Documents, together with any other document, instrument or
agreement now or hereafter entered into in connection with the
Indentures, the Senior Secured Notes, the indebtedness evidenced
thereby or the Collateral, as such documents, instruments or
agreements may be amended, modified or supplemented from time to
time.
"Transfer" means a sale, transfer, assignment,
exchange, hypothecation, pledge or other disposition and, when
used as a verb, shall have a correlative meaning.
"Transfer Restricted Securities" means each Senior
Secured Note until the earliest to occur of (i) the date on which
it is exchanged in the Exchange Offer for a Rule 144A Global Note
which may be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the
Securities Act, (ii) the date on which such Senior Secured Note
has been sold or otherwise disposed of in accordance with the
Shelf Registration Statement, (iii) the date on which such Senior
Secured Note is disposed of by a broker-dealer as contemplated by
the Exchange Offer Registration Statement (including delivery of
the prospectus contained therein) and (iv) the date on which such
Senior Secured Note is distributed to the public pursuant to Rule
144 under the Securities Act. "Exchange Offer", "Shelf
Registration Statement" and "Exchange Offer Registration
Statement" have the meanings ascribed to them in the Registration
Rights Agreement.
"Transferee Certificate" shall have the meaning
ascribed thereto in Section 2.8(b)(ii)(A)(3) of this Indenture.
"Transferor Certificate" Shall have the meaning
ascribed thereto in Section 2.8(b)(ii)(A)(4) of this Indenture.
"Treasury" means the United States Department of
Treasury.
"Trust Indenture Act" means 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" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939,
as so amended.
"Trustee" means Bankers Trust Company, a New York
banking corporation, as trustee under this Indenture, and any
successor thereto under the terms of this Indenture.
"Trustee Claims" means claims made by the Trustee for
monies owed pursuant to this Indenture and other Transaction
Documents.
"U.S. Distribution Fund" means the fund described in
Article IV of the PFC Indenture and maintained in the name of PIC
pursuant to such Article, which fund is entitled to distributions
of monies from the Domestic Projects and any Permitted Project
located in the United States to the extent that all obligations
have been met by PFC and PIC under the PFC Indenture.
"U.S. dollars," "dollars," or "$" means United States
dollars, legal currency of the United States of America.
"U.S. Government Obligations" means 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. Permitted Project" means a Permitted Project
located within the United States.
"United States" or "U.S." means the United States of
America.
"Weighted Average Life to Maturity" means, when applied
to any Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" by any Person means a
Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors'
qualifying shares) shall at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person.
EXHIBIT 4.11
FIRST SUPPLEMENTAL INDENTURE
dated as of April 22, 1997
to
TRUST INDENTURE
dated as of April 22, 1997
among
PANDA GLOBAL ENERGY COMPANY
and
BANKERS TRUST COMPANY, AS TRUSTEE
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 2
ARTICLE II
THE TERMS OF THE SENIOR SECURED NOTES 2
Section 2.1 Senior Secured Notes 2
Section 2.2 Interest and Principal 2
Section 2.3 Book Entry, Delivery and Form 3
Section 2.4 Transfer and Exchange 5
Section 2.5 Redemption 11
Section 2.6 Luannan Expropriation Event; Luannan
Event of Loss 14
Section 2.7 Withholding Taxes 17
Section 2.8 Calculation of Original Issue Discount 18
ARTICLE III
MISCELLANEOUS 18
Section 3.1 Use of Proceeds 18
SECTION 3.2 Closing Costs 19
Section 3.3 Execution of Supplemental Indenture 19
Section 3.4 Concerning the Trustee 19
Section 3.5 Project Engineer 19
Section 3.6 Counterparts 19
Section 3.7 Governing Law 19
Exhibit A Form of Certificate for Exchange or Registration of
Transfer from Rule 144A Global Note to Regulation S
Global Note
Exhibit B Certificate for Exchange or Registration of Transfer
from Regulation S Global Note to Rule 144A Global
Note
Exhibit C Form of Certificate for Exchange or Registration of
Transfer of Certificated Notes
Exhibit D Certificate for Exchange or Registration of Transfer
from Rule 144A Global Note or Regulation S Permanent
Global Note to Certificated Note
Exhibit E Certificate for Exchange or Registration of Transfer
from Certificated Note to Rule 144A Global Note or
Regulation S Permanent Global Note
Exhibit F Form of Face of Certificate Note
Exhibit G Form of Face of Rule 144A Global Note
Exhibit H Form of Face of Regulation S Global Note
Exhibit I Form of Face of Registered Global Note
Exhibit J Form of Reverse of Senior Secured Note
FIRST SUPPLEMENTAL INDENTURE, dated as of April 22, 1997, to
the Trust Indenture, dated as of April 22, 1997 (the "Original
Indenture"), between PANDA GLOBAL ENERGY COMPANY, a Cayman
Islands corporation (the "Issuer"), its executive office and
mailing address being at c/o Panda Energy International, Inc.,
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244 and
BANKERS TRUST COMPANY, a New York banking corporation (the
"Trustee"), its corporate trust office and mailing address being
at 4 Albany Street, New York, New York 10006.
WHEREAS, the Issuer and the Trustee have heretofore executed
and delivered the Original Indenture to provide for the issuance
from time to time of the Issuer's Securities (as defined in
Appendix A to 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 Issuer 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 Securities of any
series as permitted by Sections 2.1, 2.3 and 12.1 of the Original
Indenture;
WHEREAS, the Issuer (i) desires the issuance of Securities
to be designated as hereinafter provided and (ii) has requested
the Trustee to enter into this supplement to the Original
Indenture (the "First Supplemental Indenture", collectively with
the Original Indenture, the "Indenture") for the purpose of
establishing the designation, form, terms and provisions of such
Securities;
WHEREAS, all action on the part of the Issuer necessary to
authorize the issuance of such Securities under the Original
Indenture and this First Supplemental Indenture has been duly
taken; and
WHEREAS, all acts and things necessary to make such
Securities, when executed by the Issuer and authenticated and
delivered by the Trustee as provided in the Original Indenture,
the legal, valid and binding obligations of the Issuer, 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 Securities have
in all respects been duly authorized, and the Issuer, 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 Securities.
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 Securities, and in consideration of the acceptance of
such Securities 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
Capitalized terms not otherwise defined herein shall have
the meanings set forth in the Appendix A to 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 SENIOR SECURED NOTES
Section 2.1 Senior Secured Notes. (i) There is hereby
created an initial series of notes designated 12 1/2% Senior
Secured Notes due 2004, in the aggregate principal amount of
$155,200,000 (the "Initial Senior Secured Notes"), pursuant to
the Original Indenture. In addition, there is hereby created a
subsequent series of notes designated 12 1/2% Registered Senior
Secured Notes due 2004, in the aggregate principal amount not to
exceed $155,200,000 (the "Registered Senior Secured Notes"),
pursuant to the Original Indenture (the Initial Senior Secured
Notes and the Registered Senior Secured Notes, collectively, the
"Senior Secured Notes").
(ii) The Senior Secured Notes will mature on April 15,
2004.
(iii) The Initial Senior Secured Notes shall be
issued in the form of one or more Rule 144A Global Notes
substantially in the form of Exhibit G hereto and one or more
Regulation S Global Notes substantially in the form of Exhibit H
hereto; the Registered Senior Secured Notes shall be issued in
the form of one or more Registered Global Notes substantially in
the form of Exhibit I hereto; and Certificated Notes issued in
exchange for beneficial interests in Global Notes may be issued
in the same denominations as such beneficial interests
substantially in the form of Exhibit F.
Section 2.2 Interest and Principal. (a) Each Senior
Secured Note 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
each Senior Secured Note, a form of which is attached hereto.
Accrued but unpaid interest on any Initial Senior
Secured Note that is exchanged for a Registered Senior Secured
Note pursuant to the Registration Rights Agreement shall be paid
on or before the first Interest Payment Date on the Registered
Senior Secured Notes.
The Issuer shall be obligated to repay the Senior
Secured Notes by redeeming semi-annually on the dates and in the
amounts indicated in the following table, together with accrued
and unpaid interest (including Liquidated Damages and Additional
Amounts, if any):
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000 $1,650,000
April 15, 2001 $2,200,000
October 15, 2001 $2,200,000
April 15, 2002 $4,000,000
October 15, 2002 $4,000,000
April 15, 2003 $4,950,000
October 15, 2003 $4,950,000
In accordance with the terms of the Original Indenture, the
Issuer shall not be allowed to fulfill its obligation to repay
such principal amounts through the purchase of Senior Secured
Notes and the deposit thereof with the Trustee.
(b) Cash interest on the Senior Secured Notes will
accrue at a rate of 12 1/2% per annum and will be payable semi-
annually in arrears on each April 15 and October 15, commencing
October 15, 1997 to the Holders of record of Senior Secured Notes
at the close of business on April 1 and October 1, respectively,
immediately preceding such interest payment date. Cash interest
will accrue from the most recent interest payment date to which
interest has been paid or, if no interest has been paid, from
April 22, 1997. Interest will be computed on the basis of a 360-
day year of twelve 30-day months. Interest on overdue principal
and on overdue installments of interest will accrue at the rate
of interest borne by the Senior Secured Notes.
(c) The Initial Senior Secured Notes and the
Registered Senior Secured Notes shall be considered collectively
as a single class of Securities for all purposes of the
Indenture.
Section 2.3 Book Entry, Delivery and Form. (a) Rule
144A Global Notes. Initial Senior Secured Notes offered and sold
within the United States to qualified institutional buyers as
defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be
issued initially in the form of Rule 144A Global Notes, which
shall be deposited on behalf of the purchasers of the Initial
Senior Secured Notes represented thereby with the Depositary at
its New York office, and registered in the name of the Depositary
or a nominee of the Depositary, duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided.
(b) Regulation S Global Notes. Initial Senior Secured
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global
Note, (the "Regulation S Temporary Global Note") which shall be
deposited on behalf of the purchasers of the Initial Senior
Secured Notes represented thereby with the Trustee, at its New
York office, as custodian for the Depositary, and registered in
the name of the Depositary or the nominee of the Depositary, duly
executed by the Issuer and authenticated by the Trustee as
hereinafter provided. The Regulation S Temporary Global Note
will be registered in the name of a nominee of DTC for credit to
the subscribers' respective accounts at the Euroclear System
("Euroclear") and Cedel Bank, S.A. ("CEDEL"). Beneficial
interests in the Regulation S Temporary Global Note may be held
only through Euroclear or CEDEL. The "40-day restricted period"
(as defined in Regulation S, the "Restricted Period") shall be
terminated upon the receipt by the Trustee of (i) confirmation
from the Depositary that it has received certification of non-
United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note
(except to the extent of any beneficial owners thereof who
acquired an interest therein pursuant to another exemption from
registration under the Securities Act and who will take delivery
of a beneficial ownership interest in a Rule 144A Global Note,
all as contemplated by Section 2.4(b)(ii) hereof), and (ii) an
Officers' Certificate from the Issuer. Following the termination
of the 40-day restricted period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for
beneficial interests in one or more permanent global notes
(collectively, the "Regulation S Permanent Global Note" and,
together with the Regulation S Temporary Global Note, the
"Regulation S Global Note" (the Regulation S Global Note, the
Registered Global Note and the Rule 144A Global Note,
collectively being the "Global Notes") upon delivery to DTC of
certification of compliance with the transfer restrictions
applicable to the Initial Senior Secured Notes and pursuant to
Regulation S as provided in the Original Indenture.
Simultaneously with the authentication of Regulation S Permanent
Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. During the Restricted Period, beneficial interests
in the Regulation S Temporary Global Note may be held only
through Euroclear or CEDEL (as indirect participants in DTC),
unless transferred to a person that takes delivery in the form of
an interest in the corresponding Rule 144A Global Note in
accordance with the certification requirements described in
Section 2.4 herein.
(c) Certificated Notes. Senior Secured Notes
originally purchased by or transferred to institutional
Accredited Investors or QIBs who elect to take physical delivery
of their certificates instead of holding their interest through a
Global Note (collectively referred to herein as the "Non-Global
Purchasers") will be issued in the form of Certificated Notes.
Upon the transfer to a QIB, an institutional Accredited Investor
or a foreign purchaser of any Certificated Note initially issued
to a Non-Global Purchaser, such Certificated Note will, unless
the transferee requests Certificated Notes or the Global Notes
have previously been exchanged in whole for Certificated Notes,
be exchanged for an interest in the Rule 144A Global Notes or the
Regulation S Global Notes, as the case may be, or after delivery
of the Registered Global Note to the Depositary, the Registered
Global Note. Upon the transfer of an interest in a Global Note,
such interest will, unless the transferee requests Certificated
Notes, be represented by an interest in the applicable Global
Note.
(d) Book-Entry Provisions. In addition to the
provisions of Section 2.4 of the Original Indenture, investors in
the Rule 144A Global Note and the Registered Global Note may hold
their interests therein directly through DTC, if they are
participants in such system ("Participant"), or indirectly
through organizations (including Euroclear and CEDEL) which are
participants in such system. Investors in the Regulation S
Global Note shall initially hold their interests therein through
Euroclear or CEDEL, if they are participants in such systems, or
indirectly through organizations which are participants in such
systems. After the expiration of the Restricted Period (but not
earlier), investors may also hold interests in the Regulation S
Global Note through organizations other than Euroclear and CEDEL
that are Participants in the DTC system. Euroclear and CEDEL
will hold interests in the Regulation S Global Note on behalf of
their participants through customers' securities accounts in
their respective names on the books of their respective
depositaries, which are Morgan Guaranty Trust Company of New
York, Brussels office, as operator or Euroclear, and Citibank,
N.A., as operator of CEDEL. The depositaries, in turn, will hold
such interests in the Regulation S Global Note in customers'
securities accounts in the depositaries' names on the books of
DTC. All interests in a Global Note, including those held
through Euroclear or CEDEL, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or
CEDEL may also be subject to the procedures and requirements of
such system.
(e) Registered Senior Secured Notes. On or prior to
the date that the Exchange Offer (as defined in the Registration
Rights Agreement) is Consummated (as defined in the Registration
Rights Agreement), the Issuer may deliver Registered Senior
Secured Notes executed by the Issuer to the Trustee for
authentication together with an Issuer Order for the
authentication and delivery of such Registered Senior Secured
Notes, and the Trustee in accordance with such Issuer Order shall
authenticate and deliver such Registered Senior Secured Notes as
provided in the Original Indenture.
(f) Registered Global Notes. On the date that the
Exchange Offer (as defined in the Registration Rights Agreement)
is Consummated (as defined in the Registration Rights Agreement),
the Issuer will deposit on behalf of the purchasers of the Senior
Secured Notes represented thereby with the Depositary at its New
York office, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Issuer and
authenticated by the Trustee, one or more Registered Global Notes
in exchange for an equivalent denomination of Rule 144A Global
Notes.
Section 2.4 Transfer and Exchange. (a) Exchange of
Book-Entry Senior Secured Notes for Certificated Notes. A Global
Note is exchangeable for definitive Senior Secured Notes in
registered certificated form if (i) DTC (x) notifies the Issuer
that it is unwilling or unable to continue as depositary for the
Global Note and the Issuer thereupon fails to appoint a successor
depositary or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuer, at its option, notifies
the Trustees in writing that it elects to cause the issuance of
the Senior Secured Notes in certificated form or (iii) there
shall have occurred and be continuing an Event of Default with
respect to the Senior Secured Notes. Beneficial interests in a
Global Note may be exchanged for Certificated Notes upon request
but only upon at least 20 days prior written notice given to the
Trustees by or on behalf of DTC in accordance with its customary
procedures. Certificated Notes delivered in exchange for any
Global Note or beneficial interests therein shall be registered
in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its
customary procedures) and will bear, in the case of the Rule 144A
Global Note, the Private Placement Legend and, in the case of the
Regulation S Global Note, the legend set forth in bold type on
the cover of the Offering Memorandum, in each case.
(b) Transfer and Exchange of Global Notes. The
transfer and exchange of Global Notes or beneficial interests
therein shall be effected through the Depositary, in accordance
with this First Supplemental Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer
comparable to those set forth herein and therein to the extent
required by the Securities Act. Beneficial interests in a Global
Note may be transferred to Persons who take delivery thereof in
the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the
applicable legends specified in Sections 2.8 and 2.9 of the
Original Indenture. Transfers of beneficial interests in the
Global Notes to Persons required to take delivery thereof in the
form of an interest in another Global Note shall be permitted as
follows:
(i) If, at any time, an owner of a beneficial
interest in a Rule 144A Global Note deposited with the
Depositary (or the Trustee as custodian for the Depositary)
wishes to transfer its interest in such Rule 144A Global
Note to a Person who is required or permitted to take
delivery thereof in the form of an interest in a
Regulation S Global Note, such owner shall, subject to the
rules and procedures of the Depositary that are applicable
to such a transfer or exchange (the "Applicable Rules"),
exchange or cause the exchange of such interest for an
equivalent beneficial interest in a Regulation S Global Note
as provided in this Section 2.4(b)(i). Upon receipt by the
Trustee of (1) instructions given in accordance with the
Applicable Procedures from any Agent Member directing the
Trustee to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal
to the beneficial interest in the Rule 144A Global Note to
be exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information regarding
the participant account of the Depositary to be credited
with such increase and (3) a certificate in the form of
Exhibit A attached hereto given by the owner of such
beneficial interest stating that the transfer of such
interest has been made in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to
and in accordance with Rule 903 or Rule 904 of Regulation S,
then the Trustee, as Security Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate
principal amount at maturity of the applicable Rule 144A
Global Note and to increase or cause to be increased the
aggregate principal amount at maturity of the applicable
Regulation S Global Note by the principal amount at maturity
of the beneficial interest in the Rule 144A Global Note to
be exchanged, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the Regulation S Global Note equal to
the reduction in the aggregate principal amount at maturity
of the Rule 144A Global Note, and to debit, or cause to be
debited, from the account of the Person making such exchange
or transfer the beneficial interest in the Rule 144A Global
Note that is being exchanged or transferred; provided that
during the Restricted Period, transferees can only accept
this transfer through Euroclear or Cedel.
(ii) If, prior to the expiration of the
Restricted Period, an owner of a beneficial interest in a
Regulation S Global Note deposited with the Depositary (or
with the Trustee as custodian for the Depositary) wishes to
transfer its interest in such Regulation S Global Note to a
Person who is required or permitted to take delivery thereof
in the form of an interest in a Rule 144A Global Note, such
owner shall, subject to the Applicable Procedures, exchange
or cause the exchange of such interest for an equivalent
beneficial interest in a Rule 144A Global Note as provided
in this Section 2.4(b)(ii). Upon receipt by the Trustee of
(1) written instructions, or such other form of instructions
as is customary, from the Depositary, directing the Trustee,
as Security Registrar, to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to
the beneficial interest in the Regulation S Global Note to
be exchanged, such instructions to contain information
regarding the participant account with the Depositary to be
credited with such increase, (2) a written order given in
accordance with the Applicable Procedures containing
information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit B
attached hereto given by the owner of such beneficial
interest stating (A) if the transfer is pursuant to Rule
144A, that the Person transferring such interest in a
Regulation S Global Note reasonably believes that the Person
acquiring such interest in a Rule 144A Global Note is a QIB
and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable
blue sky or securities laws of any state of the United
States, (B) that the transfer complies with the requirements
of Rule 144 under the Securities Act and any applicable blue
sky or securities laws of any state of the United States or
(C) if the transfer is pursuant to any other exemption from
the registration requirements of the Securities Act, that
the transfer of such interest has been made in compliance
with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the
requirements of the exemption claimed, such statement to be
supported by an Opinion of Counsel from the transferee or
the transferor in form reasonably acceptable to the Issuer
and to the Security Registrar, then the Trustee, as Security
Registrar, shall instruct the Depositary to reduce or cause
to be reduced the aggregate principal amount at maturity of
such Regulation S Global Note and to increase or cause to be
increased the aggregate principal amount at maturity of the
applicable Rule 144A Global Note by the principal amount at
maturity of the beneficial interest in the Regulation S
Global Note to be exchanged, and the Trustee, as Security
Registrar, shall instruct the Depositary, concurrently with
such reduction, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the applicable Rule 144A Global Note
equal to the reduction in the aggregate principal amount at
maturity of such Regulation S Global Note and to debit or
cause to be debited from the account of the Person making
such transfer the beneficial interest in the Regulation S
Global Note that is being transferred; provided that, on and
after the termination of the Restricted Period, no
certification shall be required with respect to such
transfers.
(iii) On the date the Exchange Offer is
consummated, beneficial interests in the Rule 144A Global
Note will be exchanged for equivalent beneficial interests
in the Registered Global Note.
(c) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented by a Holder to the Security
Registrar with a request (x) to register the transfer of the
Certificated Notes or (y) to exchange such Certificated Notes for
an equal principal amount of Certificated Notes of other
authorized denominations, the Security Registrar shall register
the transfer or make the exchange as requested; provided,
however, that the Certificated Notes presented or surrendered for
register of transfer or exchange (i) shall be duly endorsed or
accompanied by a written instruction of transfer in form
satisfactory to the Security Registrar duly executed by such
Holder or by his attorney, duly authorized in writing and (ii) in
the case of a Certificated Note that is a Transfer Restricted
Security, such request shall be accompanied by the following
additional information and documents, as applicable:
(i) if such Transfer Restricted Security is
being delivered to the Security Registrar by a Holder for
registration in the name of such Holder, without transfer,
or such Transfer Restricted Security is being transferred to
the Issuer, a certification to that effect from such Holder
(in substantially the form of Exhibit C hereto);
(ii) if such Transfer Restricted Security is
being transferred to a QIB in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from such Holder (in substantially the form of
Exhibit C hereto); or
(iii) if such Transfer Restricted Security is
being transferred in reliance on any other exemption from
the registration requirements of the Securities Act
(including Rule 904 thereunder), a certification to that
effect from such Holder (in substantially the form of
Exhibit C hereto) and an Opinion of Counsel from such Holder
or the transferee reasonably acceptable to the Issuer and to
the Security Registrar to the effect that such transfer is
in compliance with the Securities Act.
(d) Transfer of a Beneficial Interest in a Rule 144A
Global Note or Regulation S Permanent Global Note for a
Certificated Note.
(i) Any Person having a beneficial interest in
any Global Note may upon request, subject to the Applicable
Procedures, exchange such beneficial interest for a
Certificated Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial interest
in any Global Note, and, in the case of a Transfer
Restricted Security, the following additional information
and documents:
(A) if such beneficial interest is
being transferred to the Person designated by the
Depositary as being the beneficial owner, a
certification to that effect from such Person (in
substantially the form of Exhibit D hereto);
(B) if such beneficial interest is
being transferred to a QIB in accordance with Rule 144A
under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit D hereto); or
(C) if such beneficial interest is
being transferred in reliance on any other exemption
from the registration requirements of the Securities
Act (including Rule 904 thereunder), a certification to
that effect from the transferor (in substantially the
form of Exhibit D hereto) and an Opinion of Counsel
from the transferee or the transferor reasonably
acceptable to the Issuer and to the Security Registrar
to the effect that such transfer is in compliance with
the Securities Act:
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the
Depositary and the Note Custodian, cause the aggregate
principal amount of Rule 144A Global Notes or Regulation S
Permanent Global Notes, as applicable, to be reduced
accordingly and, following such reduction, the Issuer shall
execute and the Trustee shall authenticate and deliver to
the transferee a Certificated Note in the appropriate
principal amount.
(ii) Certificated Notes issued in exchange for a
beneficial interest in any Global Note pursuant to this
Section 2.4(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall
deliver such Certificated Notes to the Persons in whose
names such Notes are so registered. Following any such
issuance of Certificated Notes, the Trustee, as Security
Registrar, shall instruct the Depositary to reduce or cause
to be reduced the aggregate principal amount at maturity of
the applicable Global Note to reflect the transfer.
(e) Transfer and Exchange of a Certificated Note for a
Beneficial Interest in a Global Note. Holders of Certificated
Notes may offer, resell, pledge or otherwise transfer such
Certificated Notes only pursuant to an effective registration
statement under the Securities Act, inside the United States to a
QIB in a transaction meeting the requirements of Rule 144A, in a
transaction meeting the requirements of Rule 144 under the
Securities Act, outside the United States in a transaction
meeting the requirements of Rule 904 under the Securities Act or
to the Issuer, in each case in compliance with any applicable
securities laws of any State of the United States or any other
applicable jurisdiction.
When Certificated Notes are presented by a Holder to
the Security Registrar with a request (x) to register the
transfer of the Certificated Notes or (y) to exchange such
Certificated Notes for an equal principal amount of Certificated
Notes of other authorized denominations, the Security Registrar
shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided,
however, that the Certificated Notes presented or surrendered for
register of transfer or exchange (i) shall be duly endorsed or
accompanied by a written instruction of transfer in form
satisfactory to the Security Registrar duly executed by such
Holder or by his attorney, duly authorized in writing, which
instructions, if applicable, shall direct the Trustee (A) to
cancel any Certificated Note being exchanged for another
Certificated Note or a beneficial interest in a Global Note in
accordance with Section 2.13 of the Original Indenture, and (B)
to make, or to direct the Security Registrar to make, an
endorsement on the appropriate Global Note to reflect an increase
in the aggregate principal amount of the Senior Secured Notes
represented by such Global Note and (ii) such request shall be
accompanied by the following additional information and
documents, as applicable:
(i) if such Certificated Note is being
delivered to the Security Registrar by a Holder for
registration in the name of such Holder, without transfer, a
certification to that effect from such Holder (in
substantially the form of Exhibit E hereto); or
(ii) if such Certificated Note is being
transferred to a QIB in accordance with Rule 144A, pursuant
to Rule 144 under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 904
under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit E hereto).
(f) Legends. (i) Except as permitted by the
following paragraphs (ii), (iii) and (iv), each Note certificate
evidencing Global Notes and Certificated Notes (and all Senior
Secured Notes issued in exchange therefor or substitution thereof
other than Registered Senior Secured Notes) shall bear the
applicable legend specified in Sections 2.8 and 2.9 of the
Original Indenture.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Note) pursuant to Rule 144
or pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Security
Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Certificated
Note that does not bear the Private Placement Legend
and rescind any restriction on the transfer of such
Transfer Restricted Security upon receipt of a
certification from the transferring Holder
substantially in the form of Exhibit C hereto; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
Private Placement Legend, but shall continue to be
subject to the provisions of Section 2.4(b) and (c)
hereof; provided, however, that with respect to any
request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a
Certificated Note that does not bear the Private
Placement Legend which request is made in reliance upon
Rule 144, the Holder thereof shall certify in writing
to the Security Registrar that such request is being
made pursuant to Rule 144, such certification to be
substantially in the form of Exhibit E hereto.
(iii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Note) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to Rule 144A
or Rule 144 under the Securities Act) in which the Holder or
the transferee provides an Opinion of Counsel to the Issuer
and the Security Registrar in form and substance reasonably
acceptable to the Issuer and the Security Registrar (which
Opinion of Counsel shall also state that the transfer
restrictions contained in the applicable legend specified in
Sections 2.8 and 2.9 of the Original Indenture are no longer
applicable):
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Security
Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Certificated
Note that does not bear the Private Placement Legend
and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
Private Placement Legend, but shall continue to be
subject to the provisions of Section 2.4(b) and (c)
hereof.
(g) Registration Rights. Pursuant to a Registration
Rights Agreement, dated the date hereof, the Company, the Issuer
and the Initial Purchaser have agreed to exchange the Initial
Senior Secured Notes and the Initial Senior Secured Notes
Guarantee for an equal principal amount of Registered Senior
Secured Notes and Registered Senior Secured Notes Guarantees on
the terms and conditions contained in such agreement.
Section 2.5 Redemption. The Senior Secured Notes are
subject to redemption on the terms set forth in Article VIII of
the Original Indenture. In addition, the Senior Secured Notes
are subject to optional redemption and mandatory redemption on
the terms set forth below:
(a) Optional Redemption by Issuer. (i) The Senior
Secured Notes shall be redeemable at the option of the Issuer (a
"Senior Secured Notes Optional Redemption"), in whole or in part,
at any time on or after April 15, 2002, at the redemption prices
(expressed as a percentage of principal amount) set forth below,
plus accrued and unpaid interest, if any, to the redemption date,
if redeemed during the 12 month period beginning on April 15 of
the years indicated below:
Redemption
Year Price
2002 107.00%
2003 103.50%
2004 100.00%
(ii) Prior to April 15, 2000, the Issuer may redeem up
to $51,733,000 of the originally issued principal amount of
Senior Secured Notes at a redemption price equal to 113.0%
of the principal amount of the Senior Secured Notes so redeemed,
plus accrued and unpaid interest, if any, to the redemption date
with the Net Cash Proceeds of one or more Public Equity Offerings
by the Company, Panda International or any direct or indirect
parent of the Company; provided that (i) the proceeds of such
offering used for the purposes of the optional redemption are
contributed as equity to the Issuer and (ii) at least
$103,467,000 of the originally issued principal amount of Senior
Secured Notes would remain outstanding immediately after giving
effect to such redemption (any such redemption, a "Senior Secured
Notes Public Equity Offering Redemption").
(b) Mandatory Redemption. Upon the occurrence of
certain events described below, the outstanding Senior Secured
Notes (together with, as provided in paragraph (vi) below, any
additional Senior Indebtedness of the Issuer outstanding at the
time of such Mandatory Redemption), will be redeemed (a
"Mandatory Redemption") pro rata, at a redemption price equal to
100% of the principal amount thereof, together with accrued and
unpaid interest (including Liquidated Damages and Additional
Amounts, if any), if any, to the redemption date:
(i) Upon the occurrence of a Luannan Event of
Loss or Luannan Expropriation Event that is determined by
the Issuer to render the Luannan Facility incapable of being
rebuilt, repaired or restored so as to permit operation of
the entire Luannan Facility on a Commercially Feasible
Basis, all Luannan Casualty Proceeds and all Luannan
Expropriation Proceeds and repayments of the Issuer Loan and
the Shareholder Loans (resulting from such Luannan Event of
Loss or Luannan Expropriation Event or otherwise) will be
applied pro rata to the redemption of the Senior Secured
Notes. The redemption date for such a Mandatory Redemption
may be any date during the 90-day period following the date
of the Issuer's determination that the Luannan Facility is
incapable of being rebuilt, repaired or restored (taking
into account the notice requirements set forth in the
Original Indenture).
(ii) Upon the occurrence of a Luannan Event of
Loss or Luannan Expropriation Event that is determined by
the Issuer to render a portion of the Luannan Facility
incapable of being rebuilt, repaired or restored, but
permits the remaining portion of the Luannan Facility to be
rebuilt, repaired or restored so as to permit operation of
the remaining portion of the Luannan Facility on a
Commercially Feasible Basis (as confirmed by the Luannan
Facility Engineer pursuant to the Original Indenture and
Section 2.6 herein), and if the amount of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
resulting from such Luannan Event of Loss or Luannan
Expropriation Event exceeds $500,000 (after reduction for
the total cost of rebuilding, repairing or restoring the
Luannan Facility in accordance with the Original Indenture),
the total amount of such excess proceeds will be applied pro
rata to the redemption of the Senior Secured Notes. The
redemption date may be any date during the 90-day period
following the date of the Issuer's certification to the
Trustee of completion of the rebuilding, repairing or
restoration of the Luannan Facility (taking into account the
notice requirements set forth in the Original Indenture).
(iii) Upon the occurrence of a Luannan Event of
Loss or a Luannan Expropriation Event for which the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
exceed the aggregate principal amount of the outstanding
Senior Secured Notes, and any applicable interest (including
Liquidated Damages and Additional Amounts, if any) thereon,
the Issuer may, at its option, determine not to rebuild,
repair or restore the Luannan Facility. Upon such a
determination, such Luannan Casualty Proceeds or Luannan
Expropriation Proceeds and repayments of the Issuer Loan and
the Shareholder Loans resulting from such Luannan Event of
Loss or Luannan Expropriation Event must be used to redeem,
in whole, but not in part, the outstanding Senior Secured
Notes. The redemption date may be any date during the 90-
day period following the date of the Issuer's determination
not to rebuild, repair or restore the Luannan Facility
(taking into account the notice requirements set forth in
the Original Indenture).
(iv) Upon the payment of performance liquidated
damage payments under the Luannan EPC Contract, the amount
of performance liquidated damages paid, which are required
to be applied to payment of the Issuer Loan and the
Shareholder Loans, will be applied pro rata to the
redemption of the Senior Secured Notes. The redemption date
may be any date during the 90-day period following the date
of receipt by the Issuer of any such repayment of the Issuer
Loan (taking into account the notice requirements set forth
in the Original Indenture).
(v) Upon the occurrence of a Domestic Project
Event that results in Domestic Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill any
and all mandatory redemption or mandatory repayment
obligations pursuant to (a) the PFC Indenture and (b) the
debt instrument or instruments governing the project level
financing of such Domestic Project, any and all excess
proceeds shall be applied pro rata to the redemption of the
Senior Secured Notes. The redemption date may be any date
during the 90-day period following the date of the Issuer's
receipt of such proceeds from the Company (taking into
account the notice requirements set forth in the Original
Indenture).
(vi) Upon the occurrence of a Permitted Project
Event that results in Permitted Project Event Proceeds,
after the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to, as the case may be, the PFC
Indenture or the debt instrument or instruments governing
the project level financing (or additional Senior
Indebtedness issued solely to finance such Permitted
Project) of such Permitted Project, any and all excess
proceeds shall be applied pro rata to the redemption of the
Senior Secured Notes and, to the extent that any other
instrument governing any additional Senior Indebtedness of
the Company and the Issuer outstanding at the date of the
Mandatory Redemption so requires, to the redemption of such
additional Senior Indebtedness. The redemption date may be
any date during the 90-day period following the date of the
Company's or the Issuer's receipt of such proceeds from such
Permitted Project (taking into account the notice
requirements set forth in the Original Indenture).
(c) Redemption at Option of Holders. Upon the
occurrence of certain events described below, the Issuer shall be
obligated to make an offer to redeem pro rata the outstanding
Senior Secured Notes at a redemption price equal to 100% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the redemption date:
(i) Upon the occurrence of an Approval Event of
Default or a County Partners Event of Default that has had
or is reasonably likely to have a Material Adverse Effect,
the Issuer shall be obligated to make a Mandatory Redemption
Offer using any and all available monies to effect such
Mandatory Redemption Offer (such amounts to include, but not
be limited to, all amounts in the Company Funds, all amounts
in the Issuer Funds and all amounts available to the Issuer
or the Company through the enforcement of the Collateral).
The redemption date for such a redemption may be any date
during the 90-day period following the date of the Approval
Event of Default or the County Partners Event of Default
(taking into account the notice requirements set forth in
the Original Indenture).
(ii) If the Luannan Facility Construction Cost
is less than the Projected Luannan Facility Construction
Cost, after using such excess funds to fund any deficits in
the Issuer Funds, and if any excess funds are remaining and
the amount of such excess funds equals or exceeds
$1,000,000, the Issuer shall be obligated to use such excess
funds to make a Mandatory Redemption Offer to the Holders of
the Senior Secured Notes. The redemption date for such a
redemption may be any date during the 90-day period
following the date of the Issuer's final calculation of the
Luannan Facility Construction Cost (taking into account the
notice requirements set forth in the Original Indenture).
(d) Redemption for Taxation Reasons. The Senior
Secured Notes may be redeemed, at the option of the Issuer or the
Company, as the case may be, in whole but not in part, at any
time upon giving not less than 30 nor more than 60 days' notice
to the Holders (which notice shall be irrevocable), at a
redemption price equal to the principal amount thereof, together
with accrued and unpaid interest and premium, if any, to the date
fixed by the Issuer or the Company, as the case may be, for
redemption (a "Tax Redemption Date") and all Additional Amounts,
if any, then due and which shall become due on the Tax Redemption
Date as a result of the redemption or otherwise, if the Issuer or
the Company, as the case may be, determines that, as a result of
(i) any change in, or amendment to, the laws or treaties (or any
regulations or rulings promulgated thereunder) of the Cayman
Islands or the United States (or any political subdivision or
taxing authority thereof) which change or amendment becomes
effective on or after the date hereof; or (ii) any change in
position regarding the application, administration or
interpretation of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent
jurisdiction) which change in application, administration or
interpretation becomes effective on or after the date hereof, the
Issuer or the Company, as the case may be, is, or on the next
interest payment date would be, required to pay Additional
Amounts, and the Issuer or the Company, as the case may be,
determines that such payment obligation cannot be avoided by the
Issuer or the Company, as the case may be, taking reasonable
measures.
Notwithstanding the foregoing, no such notice of
redemption shall be given earlier than 90 days prior to the
earliest date on which the Issuer or the Company, as the case may
be, would be obligated to make such payment or withholding if a
payment in respect of the Senior Secured Notes or the Senior
Secured Notes Guarantee, as the case may be, were then due. Prior
to the publication or, where relevant, mailing of any notice of
redemption of the Senior Secured Notes pursuant to the foregoing,
the Issuer or the Company, as the case may be, shall deliver to
the Trustee or the Company Indenture Trustee, as the case may be,
an opinion of a tax counsel reasonably satisfactory to such
trustee or trustees to the effect that the circumstances referred
to above exist. The Trustee or the Company Indenture Trustee, as
the case may be, shall accept such opinion as sufficient evidence
of the satisfaction of the conditions precedent described above,
in which event it shall be conclusive and binding on the Holders.
Section 2.6 Luannan Expropriation Event; Luannan Event
of Loss. (a) If a Luannan Event of Loss, or a Luannan
Expropriation Event shall occur the Issuer shall, or shall cause
the Joint Ventures to, diligently pursue all rights to
compensation against the appropriate party as set forth below
and, as soon as reasonably practicable, but no later than fifteen
(15) days after the date of receipt by any Joint Venture, Pan-
Western or the Issuer of Luannan Casualty Proceeds or Luannan
Expropriation Proceeds, as the case may be, the Issuer shall make
a reasonable good faith determination as to whether (i) the
Luannan Facility can be rebuilt, repaired or restored to permit
operation of the entire Luannan Facility or a portion thereof on
a Commercially Feasible Basis, and (ii) the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may be,
together with any related repayments of the Issuer Loan and the
Shareholder Loans and any other amounts that the Issuer and its
Affiliates and the County Partners in their sole discretion are
willing to commit to such rebuilding, repair or restoration are
sufficient to permit such rebuilding, repair or restoration of
the Luannan Facility. The determination of the Issuer shall be
evidenced by an Officer's Certificate filed with the Trustee
which, in the event the Issuer determines that the Luannan
Facility can be rebuilt, repaired or restored to permit operation
of the entire Luannan Facility or a portion thereof on a
Commercially Feasible Basis and that the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may be,
together with any related repayments of the Issuer Loan and the
Shareholder Loans and any other amounts that the Issuer and its
Affiliates and the County Partners in their sole discretion are
willing to commit to such rebuilding, repair or restoration are
sufficient, shall also, if required pursuant to Section 4.8 of
the Original Indenture, contain a Restoration Budget and
Restoration Progress Payments Schedule prepared by the Issuer
detailing reasonable good faith estimates of the total cost of
such rebuilding, repair or restoration. The Officer's
Certificate shall be accompanied by a certificate of an
Authorized Representative of the Luannan Facility Engineer 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 Issuer, the Luannan Facility
Engineer believes the determination and the estimate of the total
cost, if any, set forth in the Officer's Certificate to be
reasonable and, if such Officer's Certificate also contains a
Restoration Budget and Progress Payments Schedule, that such
Restoration Budget and Progress Payments Schedule are reasonable
and achievable.
(b) In the event that a determination is made pursuant
to clause (a) above with respect to the Luannan Facility:
(i) that the Luannan Facility cannot be rebuilt,
repaired or restored to permit operation of the entire
Luannan Facility on a Commercially Feasible Basis or that
the Luannan Casualty Proceeds or Luannan Expropriation
Proceeds together with any related repayments of the Issuer
Loan and the Shareholder Loans and any other amounts that
the Issuer and its Affiliates and the County Partners in
their sole discretion are willing to commit to such
rebuilding, repair or restoration are not sufficient to
permit such rebuilding, repair or restoration, then, unless
clause (iii) below hereof applies, the Trustee shall apply
all of the Luannan Casualty Proceeds or Luannan
Expropriation Proceeds, as the case may be and related
repayments of the Issuer Loan and the Shareholder Loans
segregated in the Issuer Revenue Fund in accordance with
Section 4.1(a) of the Original Indenture to redeem the
Senior Secured Notes Outstanding in accordance with Section
2.5(b)(i);
(ii) that the Luannan Facility can be rebuilt,
repaired or restored to permit operation of the entire
Luannan Facility on a Commercially Feasible Basis and
that the Luannan Casualty Proceeds or Luannan
Expropriation Proceeds together with any other related
repayments of the Issuer Loan and the Shareholder Loans
and any other amounts that the Issuer and its
Affiliates and the County Partners in their sole
discretion are willing to commit to such rebuilding,
repair or restoration are sufficient to permit such
rebuilding, repair or restoration, all of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds, as
the case may be, and the related repayments of Issuer
Loan and the Shareholder Loans segregated in the Issuer
Revenue Fund in accordance with Section 4.1(a), shall
be transferred from the Issuer Revenue Fund and,
together with any repayment of the Issuer Loan and the
Shareholder Loans, shall be deposited in the
Restoration Fund in accordance with Section 4.8. Upon
completion of any rebuilding, repair or restoration of
the Luannan Facility, the excess, if any, of the
remaining Luannan Casualty Proceeds or Luannan
Expropriation Proceeds, as the case may be and the
related repayments of the Issuer Loan and the
Shareholder Loans over the amounts to be retained in
the Luannan Restoration Fund in accordance with Section
4.8(d) of the Original Indenture, shall be distributed
in accordance with Section 4.8(d) of the Original
Indenture.
(iii) that the Luannan Facility can only be
rebuilt, repaired or restored to permit operation of a
portion of the Luannan Facility on a Commercially
Feasible Basis and that the Luannan Casualty Proceeds
or Luannan Expropriation Proceeds together with any
related repayments of the Issuer Loan and the
Shareholder Loans and any other amounts that the Issuer
and its Affiliates and the County Partners in their
sole discretion are willing to commit to such
rebuilding, repair or restoration are sufficient to
permit such rebuilding, repair or restoration, all of
the Luannan Casualty Proceeds or Luannan Expropriation
Proceeds, as the case may be, and the related
repayments of the Issuer Loan and the Shareholder Loans
and together with such other amounts that the Issuer
and its Affiliates and the County Partners in their
sole discretion are willing to commit to such
rebuilding, repair or restoration as segregated in the
Issuer Revenue Fund in accordance with Section 4.1(a)
of the Original Indenture shall be transferred from the
Issuer Revenue Fund and deposited in the Luannan
Facility Restoration Fund in accordance with Section
4.8 of the Original Indenture. Upon completion of any
rebuilding, repair or restoration of the Luannan
Facility, the excess, if any, of the remaining Luannan
Casualty Proceeds or Luannan Expropriation Proceeds, as
the case may be, and the related repayments of the
Issuer Loan and the Shareholder Loans over the amounts
to be retained in the Luannan Facility Restoration Fund
in accordance with Section 4.8(d) of the Original
Indenture, shall be distributed in accordance with
Section 4.8(d) of the Original Indenture.
(c) Notwithstanding any other provision of this
Section 2.6, in the event the Luannan Casualty Proceeds or
Luannan Expropriation Proceeds, as the case may be, from a
Luannan Event of Loss or a Luannan Expropriation Event do not
exceed $500,000 in the aggregate, the Issuer shall not have to
comply with the provisions of the third sentence of clause (a)
hereof requiring the delivery of a certificate of an Authorized
Representative of the Luannan Facility Engineer and the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds (segregated
in the Issuer Revenue Fund in accordance with Section 4.1(a) of
the Original Indenture), as the case may be, shall be paid to the
Joint Ventures for payment of the cost of rebuilding, repair or
restoration.
(d) In the event that the Luannan Casualty Proceeds or
Luannan Expropriation Proceeds and the related repayments of the
Issuer Loan and the Shareholder Loans from a Luannan Event of
Loss or a Luannan Expropriation Event, as the case may be,
exceeds the principal amount of the Senior Secured Notes
Outstanding, and any applicable interest thereon (including
Liquidated Damages and Additional Amounts, if any), the Issuer,
at its option, may determine not to rebuild, repair or restore
the Luannan Facility. Upon delivery of an Officer's Certificate
to the Trustee certifying that the Issuer will not rebuild,
repair or restore the Luannan Facility, all Luannan Casualty
Proceeds or Luannan Expropriation Proceeds (segregated in the
Issuer Revenue Fund in accordance with Section 4.1(a) of the
Original Indenture), as the case may be, shall be distributed in
accordance with Article 4 and the Trustee shall redeem the Senior
Secured Notes Outstanding in whole, but not in part, in
accordance with Section 2.5(b)(iii).
(e) If a Luannan Event of Loss or Luannan
Expropriation Event shall occur, the Issuer shall (A) diligently
pursue all its rights to compensation against any Person with
respect to such Luannan Event of Loss or Luannan Expropriation
Event and, with respect to a Luannan Event of Loss (1)
compromise, settle or consent to the settlement of any claim
against any Person with respect to such Luannan Event of Loss in
accordance with the provisions of Section 7.10 of the Senior
Secured Notes Indenture and (2) hold all Luannan Casualty
Proceeds (including instruments) received in respect of any
Luannan 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 Trustee segregated from other funds of the Issuer
and promptly deposit all such Luannan Casualty Proceeds in the
Issuer Revenue Fund, segregated from all other moneys pending the
determination pursuant to clause (a) hereof.
Section 2.7 Withholding Taxes. (a) All payments made
by the Issuer on the Senior Secured Notes (whether or not in the
form of definitive Senior Secured Notes) or payments made by the
Company with respect to the Senior Secured Notes Guarantee shall
be made without withholding or deduction for, or on account of,
any present or future taxes, duties, assessments or governmental
charges of whatever nature (collectively, "Taxes") imposed or
levied by or on behalf of the Cayman Islands, the United States
or any political subdivision thereof or any authority having
power to tax therein (each a "Tax Authority"), unless the
withholding or deduction of such Taxes is then required by law.
If any deduction or withholding for, or on account of, any Taxes
of any Tax Authority, shall at any time be required on any
payments for, or on account of, any payments made by the Issuer
with respect to the Senior Secured Notes, including payments of
principal, redemption price, interest or premium, or payments
made by the Company with respect to the Senior Secured Notes
Guarantee, the Issuer or the Company, as the case may be, will
pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of
such payments by the Holders of the Senior Secured Notes or the
Trustees, as the case may be, after such withholding or
deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such
withholding or deduction; except that no such Additional Amounts
will be payable with respect to:
(i) any payments on a Senior Secured Note held
by or on behalf of a Holder or beneficial owner who is
liable for such Taxes in respect of such Senior Secured Note
by reason of the Holder or beneficial owner having some
connection with the Cayman Islands or the United States
(including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Cayman
Islands or the United States) other than by the mere holding
of such Senior Secured Note or enforcement of rights
thereunder or the receipt of payments in respect thereof;
(ii) any Taxes that are imposed or withheld
where such withholding or imposition is by reason of the
failure of the Holder or beneficial owner to comply with a
request by the Issuer or the Company, as the case may be, to
satisfy any certification, identification or other reporting
requirement which the Holder or beneficial owner is legally
able to satisfy and which is required or imposed by statute,
treaty, regulation, or administrative practices of the
taxing jurisdiction as a precondition to exemption from all
or part of such Taxes; or
(iii) any Senior Secured Note presented for
payment (where presentation is required) more than 30 days
after the relevant payment is first made available for
payment to the Holder except to the extent that the Holder
would have been entitled to such Additional Amounts on
presenting such Senior Secured Note for payment on the last
day of such period of 30 days.
Additional Amounts shall not be payable where, had the beneficial
owner of the Senior Secured Note been the Holder of the Senior
Secured Note, he would not have been entitled to payment of
Additional Amounts by reason of Sections 2.7(a)(i)-(iii) herein.
(b) Upon request, the Issuer or the Company, as the
case may be, shall provide the Trustees with documentation
satisfactory to the Trustees evidencing the payment of Additional
Amounts. Copies of such documentation will be made available to
the Holders upon request.
Section .8 Calculation of Original Issue Discount.
The Issuer shall file with the Trustee promptly at the end of
each calendar year a written notice specifying the amount of
original issue discount (including daily rates and accrual
periods) accrued on the Senior Secured Notes as of the end of
such year, if any.
ARTICLE III
MISCELLANEOUS
Section III.1 Use of Proceeds. The proceeds from the
sale of the Senior Secured Notes will be used by the Issuer: (a)
to make a deposit in the Senior Secured Notes Capitalized
Interest Fund in the amount of $48,122,778; (b) to make a deposit
in the Senior Secured Notes Debt Service Reserve Fund in the
amount of $9,700,000; (c) to pay certain closing costs (including
transaction fees, commissions and expenses) incurred in
connection with the Offering of the Senior Secured Notes and
related Senior Secured Notes Guarantee, of $6,688,956 (which
amount includes fees and expenses of the Initial Purchaser
pursuant to the agreement between the Issuer and the Initial
Purchaser); and (d) to make a deposit in the Luannan Facility
Construction Fund in the amount of $80,513,354. This amount,
plus interest thereon and other income expected to be received by
the Issuer during construction, will be used by the Issuer to
make the Issuer Loan to Pan-Western. Pan-Western will use the
proceeds of the Issuer Loan to make the JV Equity Contributions
and the Shareholder Loans to each of the four Joint Ventures.
The Joint Ventures will use the proceeds of the JV Equity
Contributions and Shareholder Loans, together with capital
contributions from the County Partners in the amount of $5.7
million, to develop and construct the Luannan Facility.
Section III.2 Closing Costs. Upon Closing the Company
will pay the costs referred to in Section 3.1(c) and will deliver
to the Trustee an Officer's Certificate certifying as to the
closing costs incurred and paid.
Section III.3 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.4 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 Issuer, 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.5 Project Engineer. The Issuer has
appointed Parsons Brinkerhoff as the Luannan Facility Engineer.
Section III.6 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.7 Governing Law. THIS FIRST SUPPLEMENTAL
INDENTURE AND THE SENIOR SECURED NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE ISSUER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF ANY 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
TRUST INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE
ISSUER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section III.8 Appointment of Agent for Service of
Process. By the execution and delivery of this First
Supplemental Indenture, the Issuer irrevocably designates,
appoints and empowers CT Corporation Systems, at 1633 Broadway,
New York, N.Y. 10019 as its authorized agent to receive for and
on its behalf service of any summons, complaint or other legal
process in any such action, suit or proceeding in 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 GLOBAL ENERGY COMPANY
By:
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
By:
Name:
Title:
Exhibit A
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of Panda
Global Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, among the Issuer, Bankers Trust Company, as
trustee, and the First Supplemental Indenture thereto, dated
April 22, 1997 (collectively, the "Indenture"). Capitalized
terms used but not defined herein shall have the meanings given
to them in the Indenture.
This letter relates to $_______ principal amount of
Notes which are evidenced by one or more Rule 144A Global Notes
(CUSIP No. _________) and held with the Depositary in the name of
____________________________ (the "Transferor"). The Transferor
has requested a transfer of such beneficial interest in the Notes
to a Person who will take delivery thereof in the form of an
equal principal amount of Notes evidenced by one or more
Regulation S Global Notes (CUSIP No. _________), which amount,
immediately after such transfer, is to be held with the
Depositary.
In connection with such request and in respect of such
Notes, the Transferor hereby certifies that such transfer has
been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance
with Rule 903 or Rule 904 under the United States Securities Act
of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was
originated, the transferee was outside the United
States or the Transferor and any person acting on
its behalf reasonably believed and believes that
the transferee was outside the United States; or
(b) the transaction was executed in, on or
through the facilities of a designated offshore
securities market and neither the Transferor nor
any person acting on its behalf knows that the
transaction was prearranged with a buyer in the
United States;
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest
being transferred as described above is to be held with the
Depositary.
Upon giving effect to this request to exchange a
beneficial interest in a Rule 144A Global Note for a beneficial
interest in a Regulation S Global Note, the resulting beneficial
interest shall be subject to the restrictions on transfer
applicable to Regulation S Global Notes pursuant to the Indenture
and the Securities Act and, if such transfer occurs prior to the
end of the 40-day restricted period associated with the initial
offering of Notes, the additional restrictions applicable to
transfers of interest in the Regulation S Temporary Global Note.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
__________________________
[Insert Name of Transferor]
By:______________________
Name:
Title:
Dated: ,
Exhibit B
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplement Indenture thereto, dated April
22, 1997 (collectively, the "Indenture"). Capitalized terms used
but not defined herein shall have the meanings given to them in
the Indenture.
This letter relates to $_______ principal amount of
Notes which are evidenced by one or more Regulation S Global
Notes (CUSIP No. _______) and held with the Depositary in the
name of ____________________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest
in the Notes to a Person who will take delivery thereof in the
form of an equal principal amount of Notes evidenced by one or
more Rule 144A Global Notes (CUSIP No. _______), to be held with
the Depositary.
In connection with such request and in respect of such
Notes, the Transferor hereby certifies that:
[CHECK ONE]
such transfer is being effected pursuant to and in
accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further
certifies that the Notes are being transferred to a
Person that the Transferor reasonably believes is
purchasing the Notes for its own account, or for one or
more accounts with respect to which such Person
exercises sole investment discretion, and such Person
and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A;
or
such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
such transfer is being effected pursuant to an
effective registration statement under the Securities
Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and such Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United
States.
Upon giving effect to this request to exchange a
beneficial interest in Regulation S Global Notes for a beneficial
interest in Rule 144A Global Notes, the resulting beneficial
interest shall be subject to the restrictions on transfer
applicable to Rule 144A Global Notes pursuant to the Indenture
and the Securities Act.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Rule 144A or Regulation S under the
Securities Act.
__________________________
[Insert Name of Transferor]
By:
Name:
Title:
Dated: _____________, _____
Exhibit C
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED NOTES
Re: 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplement Indenture thereto, dated April
22, 1997 (collectively, the "Indenture"). Capitalized terms used
but not defined herein shall have the meanings given to them in
the Indenture.
In connection with such request and in respect of the
Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Notes"), the Holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being acquired for the
Transferor's own account, without transfer;
or
the Surrendered Notes are being transferred to the
Issuer;
or
the Surrendered Notes are being transferred
pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Notes
for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred
pursuant to an effective registration statement under
the Securities Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
__________________________
[Insert Name of Transferor]
By:________________________
Name:
Title:
Dated: _____________, _____
Exhibit D
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM GLOBAL NOTE TO CERTIFICATED NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of the Panda
Global Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplemental Indenture thereto, dated
April 22, 1997 (collectively, the "Indenture"). Capitalized
terms used but not defined herein shall have the meanings given
to them in the Indenture.
This letter relates to $_______ principal amount of
Notes which are evidenced by one or more [Rule 144A Global Notes
(CUSIP No. _______)] [Regulation S Permanent Global Note (CUSIP
No. _______)] [Registered Global Note (CUSIP No._____)] and held
with the Depositary in the name of ____________________________
(the "Transferor"). The Transferor has requested a transfer of
such beneficial interest in the Notes to a Person who will take
delivery thereof in the form of an equal principal amount of
Notes evidenced by one or more Certificated Notes (CUSIP No.
________), which Notes, immediately after such transfer, are to
be delivered to the transferor at the address set forth below.
In connection with such request and in respect of the
Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Notes"), the Holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred to the
beneficial owner of such Notes;
or
the Surrendered Notes are being transferred
pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Notes
for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred
pursuant to an effective registration statement under
the Securities Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Rule 144A or Regulation S under the
Securities Act.
__________________________
[Insert Name of Transferor]
By:
Name:
Title:
Dated: _____________, _____
__________________________
[Address of Transferor]
__________________________
Exhibit E
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM CERTIFICATED NOTE TO GLOBAL NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of the Panda
Global Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplement Indenture thereto, dated April
22, 1997 (collectively, the "Indenture"). Capitalized terms used
but not defined herein shall have the meanings given to them in
the Indenture.
In connection with such request and in respect of the
Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Notes"), the Holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred to the
beneficial owner of such Notes;
or
the Surrendered Notes are being transferred
pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Notes
for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 904 under the Securities
Act;
or
the Surrendered Notes are being transferred
pursuant to an effective registration statement under
the Securities Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Rule 144A or Regulation S under the
Securities Act.
__________________________
[Insert Name of Transferor]
By:
Name:
Title:
Dated: _____________, _____
cc: Imperial Credit Industries, Inc.
EXHIBIT F
FORM OF FACE OF CERTIFICATED NOTE
[THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE ISSUER THAT: (A) SUCH NOTE MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION; AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.]
[ABOVE LEGEND TO BE INCLUDED ON TRANSFER RESTRICTED SECURITIES
ONLY]
PANDA GLOBAL ENERGY COMPANY
12-1/2% SENIOR SECURED NOTES DUE 2004
[Principal amount] No. [serial number]
Nominal unit value: [ ] Cusip No. [ ]
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby promises to
pay to ___________________, or registered assigns on each date
(each a "Principal Payment Date") set forth on the schedule
attached hereto as Schedule A (the "Amortization Schedule") the
principal sum corresponding to such Principal Payment Date set
forth on the Amortization Schedule, or on such earlier date as
the entire principal hereof may become due in accordance with the
provisions hereof. The Issuer further unconditionally promises
to pay interest (including Liquidated Damages and Additional
Amounts, if any) in arrears on April 15 and October 15 of each
year, commencing October 15, 1997, on any outstanding portion of
the unpaid principal amount hereof at 12-1/2% per annum to the
person in whose name this Note is registered on the April 1 and
October 1, respectively, next preceding such Interest Payment
Date. Interest (including Liquidated Damages and Additional
Amounts, if any) shall accrue from and including the most recent
date to which interest has been paid or duly provided for, or, if
no interest has been paid or duly provided for, from the date of
original issuance, until payment of said principal sum has been
made or duly provided for. Such payments shall be made
exclusively 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.
The statements in the legend set forth above, if any,
are an integral part of the terms of this Note and by acceptance
hereof the holder of this Note agrees to be subject to and bound
by the terms and provisions set forth in such legend, if any.
This Certificated Note is issued in respect of an issue
of U.S.$155,200,000 aggregate principal amount of 12-1/2% Senior
Secured Notes due 2004 of the Issuer and is governed by the Trust
Indenture dated as of April 22, 1997 and the First Supplemental
Indenture dated as of April 22, 1997 (the "Indenture"), between
the Issuer and Bankers Trust Company, as trustee (the "Trustee"),
the terms of which Indenture are incorporated herein by
reference. This Certificated Global Note shall, except as
otherwise stated in the Indenture, be entitled to the same
benefits as other Notes under the Indenture.
Reference is made to the further provisions set forth
under the Terms and Conditions of the Notes endorsed on the
reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: ___________________________________
Name:
Title:
Certificate of Authentication
This is one of the Certificated Notes described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: ___________________________________
Authorized Officer
Schedule A
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT G
FORM OF FACE OF RULE 144A GLOBAL NOTE
CUSIP NO. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT: (A) SUCH NOTE MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION; AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby
promises to pay to Cede & Co. ("CEDE"), or registered
assigns on each date (each a "Principal Payment Date")
set forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall be
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Regulation S Global Note (as defined in
the Indenture referred to below) is increased following
a transfer of a portion or portions hereof for a
resulting portion or portions of the Regulation S
Global Note, (iii) adding the aggregate principal
amount by which the aggregate principal amount of the
Regulation S Global Note is decreased following a
transfer of a portion or portions of the Regulation S
Global Note for a resulting portion or portions hereof
and (iv) adding the aggregate principal amount of any
Certificated Notes canceled upon transfer or exchange
for a resulting portion or portions hereof, on April
15, 2004, or on such earlier date as the principal
hereof may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Liquidated Damages and
Additional Amounts, if any) in arrears on April 15 and
October 15 of each year, commencing October 15, 1997,
on any outstanding portion of the unpaid principal
amount hereof at 12-1/2% per annum to the person in
whose name this Note is registered on the April 1 and
October 1, respectively, next preceding such Interest
Payment Date. Interest (including Liquidated damages
and Additional Amounts, if any) shall accrue from and
including the most recent date to which interest has
been paid or duly provided for, or, if no interest has
been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being the
Rule 144A Global Note (as defined in the Indenture
referred to below) deposited with DTC acting as
depositary, and registered in the name of CEDE, a
nominee of DTC, CEDE, as holder of record of this Rule
144A Global Note, shall be entitled to receive payments
of principal, premium and interest (including
Liquidated Damages and Additional Amounts, if any),
other than principal, premium and interest due at the
maturity date, by wire transfer of immediately
available funds. Such payment shall be made 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.
The statements set forth in the legend set forth above
are an integral part of the terms of this Rule 144A
Global Note and by acceptance hereof each holder of
this Rule 144A Global Note agrees to be subject to and
bound by the terms and provisions set forth in such
legend.
This Rule 144A Global Note is issued in respect of an
issue of U.S.$155,200,000 principal amount of 12-1/2%
Senior Secured Notes due 2004 of the Issuer and is
governed by the Trust Indenture dated as of April 22,
1997 and the First Supplemental Indenture dated as of
April 22, 1997 (the "Indenture"), between the Issuer
and Bankers Trust Company, as trustee (the "Trustee"),
the terms of which Indenture are incorporated herein by
reference. This Rule 144A Global Note shall, except as
otherwise stated in the Indenture, be entitled to the
same benefits as other Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Rule 144A Global Note in
accordance with the terms of the Indenture as a whole
or in part without charge upon request of such holder
for Certificated Notes, or a portion or portions of the
Regulation S Global Note, upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Rule 144A
Global Note for Certificated Notes, or a portion or
portions of the Regulation S Global Note, or upon any
exchange or transfer of Certificated Notes or a portion
or portions of the Regulation S Global Note for an
interest in this Rule 144A Global Note, in accordance
with the terms of the Indenture, this Rule 144A Global
Note shall be endorsed on Schedule A hereto to reflect
the change of the principal amount evidenced hereby as
provided for in the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: __________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is the Rule 144A Global Note described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: _______________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes or of this Rule 144A
Regulation S Global Note
Global Note
exchanged or
transferred for,
or issued in
exchange for or
upon transfer of,
an interest in
this Rule 144A
Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT H
FORM OF FACE OF REGULATION S GLOBAL NOTE
Cusip No. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
THE SENIOR SECURED NOTES (AND SENIOR SECURED NOTES GUARANTEE)
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THE
SENIOR SECURED NOTES (AND SENIOR SECURED NOTES
GUARANTEE) OFFERED HEREBY ARE BEING OFFERED AND SOLD
ONLY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), TO A LIMITED
NUMBER OF INSTITUTIONAL ACCREDITED INVESTORS (AS
DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) AND OUTSIDE THE
UNITED STATES IN RELIANCE ON REGULATION S UNDER THE
SECURITIES ACT. PROSPECTIVE PURCHASERS ARE HEREBY
NOTIFIED THAT SELLERS OF THE SENIOR SECURED NOTES MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
FOR CERTAIN RESTRICTIONS ON THE OFFER, SALE, RESALE AND
DELIVERY OF THE SENIOR SECURED NOTES, SEE "NOTICE TO
INVESTORS."
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands company
(the "Issuer"), for value received, hereby promises to
pay to Cede & Co. ("CEDE"), or its registered assigns
on each date (each a "Principal Payment Date"), set
forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Rule 144A Global Note (as defined in the
Indenture referred to below) is increased following a
transfer of a portion or portions hereof for a
resulting portion or portions of the Rule 144A Global
Note, (iii) adding the aggregate principal amount by
which the aggregate principal amount of the Rule 144A
Global Note is decreased following a transfer of a
portion or portions of the Rule 144A Global Note for a
resulting portion or portions hereof and (iv) adding
the aggregate principal amount of any Certificated
Notes canceled upon transfer or exchange for a
resulting portion or portions hereof, on October 15,
2004, or on such earlier date as the principal hereof
may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Liquidated Damages and
Additional Amounts, if any) in arrears on April 15 and
October 15 of each year, commencing October 15, 1997,
on any outstanding portion of the unpaid principal
amount hereof at 12-1/2% per annum to the person in whose
name this Note is registered on the April 1 and October
1, respectively, next preceding such Interest Payment
Date. Interest (including Liquidated Damages and
Additional Amounts, if any) shall accrue from and
including the most recent date to which interest has
been paid or duly provided for, or, if no interest has
been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being the
Regulation S Global Note (as defined in the Indenture
referred to below) deposited with DTC acting as
depositary, and registered in the name of CEDE, a
nominee of DTC, CEDE, as holder of record of this
Regulation S Global Note, shall be entitled to receive
payments of principal and interest (including
Liquidated Damages and Additional Amounts, if any),
other than principal, premium and interest due at the
maturity date, by wire transfer of immediately
available funds. Such payment shall be made 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.
This Regulation S Global Note is issued in respect of
an issue of U.S.$155,200,000 principal amount of 12-1/2%
Senior Secured Notes due 2004 of the Issuer and is
governed by the Trust Indenture dated as of April 22,
1997 and the First Supplemental Indenture dated as of
April 22, 1997 (collectively, the "Indenture"), between
the Issuer and Bankers Trust Company, as trustee (the
"Trustee"), the terms of which Indenture are
incorporated herein by reference. This Regulation S
Global Note shall in all respects be entitled to the
same benefits as other Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Regulation S Global Note in
accordance with the terms of the Indenture as a whole
or in part without charge upon request of such holder
for Certificated Notes upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Regulation S
Global Note for Certificated Notes or a portion or
portions of the Rule 144A Global Note, or upon any
exchange or transfer of Certificated Notes or a portion
or portions of the Rule 144A Global Note for an
interest in this Regulation S Global Note, in
accordance with the terms of the Indenture, this
Regulation S Global Note shall be endorsed on Schedule
A hereto to reflect the change of the principal amount
evidenced hereby as provided for in the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: ____________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is the Regulation S Global Note described in the within-
mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: ________________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes or Rule of this
144A Global Note Regulation S
exchanged or Global Note
transferred for,
or issued in
exchange for or
upon transfer
of, an interest
in this
Regulation S
Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT I
FORM OF FACE OF REGISTERED GLOBAL NOTE
CUSIP NO. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby
promises to pay to Cede & Co. ("CEDE"), or registered
assigns on each date (each a "Principal Payment Date")
set forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall be
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Regulation S Global Note (as defined in
the Indenture referred to below) is increased following
a transfer of a portion or portions hereof for a
resulting portion or portions of the Regulation S
Global Note, (iii) adding the aggregate principal
amount by which the aggregate principal amount of the
Regulation S Global Note is decreased following a
transfer of a portion or portions of the Regulation S
Global Note for a resulting portion or portions hereof
and (iv) adding the aggregate principal amount of any
Certificated Notes canceled upon transfer or exchange
for a resulting portion or portions hereof, on April
15, 2004, or on such earlier date as the principal
hereof may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Additional Amounts, if any) in
arrears on April 15 and October 15 of each year,
commencing October 15, 1997, on any outstanding portion
of the unpaid principal amount hereof at 12-1/2% per annum
to the person in whose name this Note is registered on
the April 1 and October 1, respectively, next preceding
such Interest Payment Date. Interest (including
Additional Amounts, if any) shall accrue from and
including the most recent date to which interest has
been paid or duly provided for, or, if no interest has
been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being a
Global Note (as defined in the Indenture referred to
below) deposited with DTC acting as depositary, and
registered in the name of CEDE, a nominee of DTC, CEDE,
as holder of record of this Global Note, shall be
entitled to receive payments of principal, premium and
interest (including Liquidated Damages and Additional
Amounts, if any), other than principal, premium and
interest due at the maturity date, by wire transfer of
immediately available funds. Such payment shall be
made 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.
This Global Note is issued in respect of an issue of
U.S.$155,200,000 principal amount of 12-1/2% Senior
Secured Notes due 2004 of the Issuer and is governed by
the Trust Indenture dated as of April 22, 1997 and the
First Supplemental Indenture dated as of April 22, 1997
(the "Indenture"), between the Issuer and Bankers Trust
Company, as trustee (the "Trustee"), the terms of which
Indenture are incorporated herein by reference. This
Global Note shall, except as otherwise stated in the
Indenture, be entitled to the same benefits as other
Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Global Note in accordance with
the terms of the Indenture as a whole or in part
without charge upon request of such holder for
Certificated Notes, or a portion or portions of the
Regulation S Global Note, upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Global Note for
Certificated Notes, or a portion or portions of the
Regulation S Global Note, or upon any exchange or
transfer of Certificated Notes or a portion or portions
of the Regulation S Global Note for an interest in this
Global Note, in accordance with the terms of the
Indenture, this Global Note shall be endorsed on
Schedule A hereto to reflect the change of the
principal amount evidenced hereby as provided for in
the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: __________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is a Global Note described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY, as Trustee
By: _______________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes, Rule 144A of this Global
Global Note or Note
Regulation S
Global Note
exchanged or
transferred for,
or issued in
exchange for or
upon transfer of,
an interest in
this Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT J
[FORM OF REVERSE OF NOTES]
TERMS AND CONDITIONS
Aggregate Principal Amount of all Notes: U.S.$155,200,000
Interest Rate: 12-1/2%
Interest Payment Dates: April 15 and October 15
(commencing October 15, 1997)
Maturity Date: April 15, 2004
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below
unless otherwise indicated.
(_) Interest. Panda Global Energy Company (the
"Issuer"), promises to pay interest on the unpaid
principal amount of this Senior Secured Note at the
rate of 12-1/2% per annum, which interest shall be payable
in cash semiannually in arrears on each April 15 and
October 15, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest
Payment Date shall be October 15, 1997. Interest on
this Senior Secured Note will accrue from the most
recent date to which interest has been paid or, if no
interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
(_) Method of Payment. On each Interest Payment Date
the Issuer will pay interest to the Person who is the
Holder of record of this Senior Secured Note as of the
close of business on April 1 or October 1 immediately
preceding such Interest Payment Date, even if this
Senior Secured Note is cancelled after such record date
and on or before such Interest Payment Date.
Principal, premium, if any, and interest (including
Liquidated Damages and Additional Amounts, if any) on
this Senior Secured Note will be payable at the
corporate trust office of the Trustee or, in the event
the Senior Secured Notes do not remain in book-entry
form, at the option of the Issuer, payment of interest
may be made by wire transfer or check mailed to the
Holder of this Senior Secured Note at its address set
forth in the register of Holders of Senior Secured
Notes; provided that all payments with respect to the
Global Notes and Certificated Notes, the Holders of
which have given wire transfer instructions to Panda
Global Holdings, Inc. (the "Company") at least 10
Business Days prior to the applicable payment date,
will be required to be made by wire transfer of
immediately available funds to the accounts specified
by the Holders thereof. Such payment shall be in such
coin or currency of the United States of America as at
the time of payment is legal tender for payment of
public and private debts.
(_) Paying Agent and Registrar. Initially, Bankers
Trust Company, the Trustee under a Trust Indenture,
will act as Paying Agent and Registrar. The Issuer may
change any Paying Agent or Registrar without notice to
any Holder. The Issuer or the Company or any other of
the Issuer's or the Company's Subsidiaries may act in
any such capacity.
(_) Indenture. The Issuer issued the Senior Secured
Notes under a Trust Indenture dated as of April 22,
1997, as supplemented by the First Supplemental
Indenture thereto dated as of April 22, 1997
(collectively, the "Indenture") between the Issuer and
the Trustee. The Company has issued the Senior Secured
Notes Guarantee under a Trust Indenture dated as of
April 22, 1997, as supplemented by the First
Supplemental Indenture thereto dated as of April 22,
1997 (collectively, the "Company Indenture" and
together with the Indenture, the "Indentures") between
the Company and the Trustee. The terms of the Senior
Secured Notes and the Senior Secured Notes Guarantee
include those stated in the Indentures and those made
part of the Indentures by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code
77aaa-77bbbb). The Senior Secured Notes and the
Senior Secured Notes Guarantee are subject to all such
terms, and Holders are referred to the applicable
Indenture and such Act for a statement of such terms.
The Senior Secured Notes are senior secured obligations
of the Issuer equal in an aggregate principal amount to
$155,200,000 and will mature on April 15, 2004.
(_) Ranking. The Senior Secured Notes will be senior
obligations of the Issuer ranking senior in right of
payment to all subordinated Indebtedness of the Issuer
and pari passu with all other Senior Indebtedness of
the Issuer. The Senior Secured Notes are secured by
security interests in the Collateral in favor of the
Noteholders acting through the Trustee pursuant to the
Collateral Documents. Subject to the satisfaction of
the applicable covenants by the Issuer, additional
Senior Indebtedness may be issued by the Issuer from
time to time, which additional Senior Indebtedness will
share equally and ratably in certain of the Collateral.
The Senior Secured Notes are effectively subordinated
to all Indebtedness and other liabilities and
commitments of all Subsidiaries of the Issuer. Any
right of the Issuer to receive assets of its
Subsidiaries, pursuant to the terms of the Collateral
Documents upon liquidation or reorganization of any
such entity (and the consequent right of the Holders of
the Senior Secured Notes to participate in those
assets) will be effectively subordinated to the claims
of that entity's creditors, except to the extent that
the Issuer is itself recognized as a creditor of such
entity, in which case the claims of the Issuer would
still be subordinate to any security in the assets of
its Subsidiaries, and any Indebtedness thereof, senior
to that held by the Issuer.
(_) Optional Redemption. (_) The Senior Secured
Notes are not redeemable at the Issuer's option prior
to April 15, 2002. From and after April 15, 2002, the
Senior Secured Notes will be subject to redemption at
the option of the Issuer, in whole or in part at the
redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and
unpaid interest (including Liquidated Damages and
Additional Amounts, if any) thereon to the applicable
redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated
below:
Year Percentage
2002 107.00%
2003 103.50%
2004 100.00%
(_) Notwithstanding the provisions of clause (a) of
this Paragraph 6, prior to April 15, 2000 the Issuer
may, at its option, on any one or more occasions,
redeem up to $51,733,000 of the aggregate principal
amount of the Senior Secured Notes at a redemption
price equal to 113.0% of the principal amount thereof,
plus accrued and unpaid interest, if any, (including
Liquidated Damages and Additional Amounts, if any)
thereon to the redemption date, with the Net Cash
Proceeds of one or more Public Equity Offerings by the
Company, Panda Energy International, Inc. or any direct
or indirect parent of the Company; provided that (i)
such Net Cash Proceeds used for the purposes of the
optional redemption are contributed as equity to the
Issuer and (ii) at least $103,467,000 of the originally
issued principal amount of Senior Secured Notes must
remain outstanding immediately after giving effect to
such redemption.
(_) Mandatory Redemption. Upon the occurrence of
events described below, the outstanding Senior Secured
Notes (together with, as provided in clause (vi) below,
any additional Senior Indebtedness of the Issuer
outstanding at the time of such Mandatory Redemption),
will be redeemed pro rata within 90 days of the
occurrence of such events (as more particularly
specified in the Indenture), at a redemption price
equal to 100% of the principal amount thereof, together
with accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any), if any, to the
redemption date:
(i) Upon the occurrence of a Luannan Event of Loss
or Luannan Expropriation Event that is determined by
the Issuer to render the Luannan Facility incapable of
being rebuilt, repaired or restored so as to permit
operation of the entire Luannan Facility on a
Commercially Feasible Basis, all Luannan Casualty
Proceeds and all Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
(resulting from such Luannan Event of Loss or Luannan
Expropriation Event or otherwise) will be applied pro
rata to the redemption of the Senior Secured Notes.
(ii) Upon the occurrence of a Luannan Event of Loss or
Luannan Expropriation Event that is determined by the
Issuer to render a portion of the Luannan Facility
incapable of being rebuilt, repaired or restored, but
permits the remaining portion of the Luannan Facility
to be rebuilt, repaired or restored so as to permit
operation of the remaining portion of the Luannan
Facility on a Commercially Feasible Basis (as confirmed
by the Luannan Facility Engineer) such excess proceeds
will be applied pro rata to the redemption of the
Senior Secured Notes.
(iii) Upon the occurrence of a Luannan Event of Loss
or a Luannan Expropriation Event for which the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
exceed the aggregate principal amount of the
outstanding Senior Secured Notes, and any applicable
interest thereon, the Issuer may, at its option,
determine not to rebuild, repair or restore the Luannan
Facility. Upon such a determination by the Issuer, the
outstanding Senior Secured Notes will be redeemed, in
whole, but not in part. The amount of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
resulting from such Luannan Event of Loss or Luannan
Expropriation Event will be applied to the redemption
of the Senior Secured Notes.
(iv) Upon the payment of performance liquidated damage
payments under the Luannan EPC Contract, the amount of
performance liquidated damages paid, which are required
to be applied to payment of the Issuer Loan and the
Shareholder Loans, will be applied pro rata to the
redemption of the Senior Secured Notes.
(v) Upon the occurrence of a Domestic Project Event
that results in Domestic Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to (a) the PFC Indenture and (b)
the debt instrument or instruments governing the
project level financing of such Domestic Project, any
and all excess proceeds shall be applied pro rata to
the redemption of the Senior Secured Notes.
(vi) Upon the occurrence of a Permitted Project Event
that results in Permitted Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to, as the case may be, the PFC
Indenture or the debt instrument or instruments
governing the project level financing (or additional
Senior Indebtedness issued solely to finance such
Permitted Project) of such Permitted Project, any and
all excess proceeds shall be applied pro rata to the
redemption of the Senior Secured Notes; and, to the
extent that the instrument governing any additional
Senior Indebtedness of the Company and the Issuer
outstanding at the date of the Mandatory Redemption so
requires, to the redemption of such additional Senior
Indebtedness.
(_) Redemption at Option of Holder. (_) Upon the
occurrence of events described below, the Issuer will
be obligated to make an offer (a "Mandatory Redemption
Offer") to redeem pro rata the outstanding Senior
Secured Notes within 90 days of the occurrence of such
events (as more particularly described in the
Indenture) at a redemption price equal to 100% of the
principal amount thereof, together with accrued and
unpaid interest, if any, (including Liquidated Damages
and Additional Amounts, if any) to the redemption date:
(i) Upon the occurrence of an Approval Event of
Default or a County Partners Event of Default that has
had or is reasonably likely to have a Material Adverse
Effect, the Issuer shall be obligated to make a
Mandatory Redemption Offer using any and all available
monies to effect such Mandatory Redemption Offer (such
amounts to include, but not be limited to, (a) all
amounts in the Company Funds, (b) all amounts in the
Issuer Funds and (c) all amounts available to the
Issuer or the Company through the enforcement of the
Collateral).
(ii) If the Luannan Facility Construction Cost is less
than the Projected Luannan Facility Construction Cost,
after using such excess funds to fund any deficits in
the Issuer Funds, if any excess funds are remaining and
the amount of such excess funds equals or exceeds $1.0
million, the Issuer shall be obligated to use such
excess funds to make a Mandatory Redemption Offer to
the Holders of the Senior Secured Notes.
(_) Upon the occurrence of a Change of Control, each
Holder of Senior Secured Notes shall have the right to
require the Issuer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such
Holder's Senior Secured Notes pursuant to the offer
described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid
interest, if any, (including Liquidated Damages and
Additional Amounts, if any) thereon to the date of
purchase (the "Change of Control Purchase Price") in
accordance with paragraphs (b), (c) and (d) of Section
7.28 of the Indenture. The Issuer will mail a notice
to each Holder describing the transaction or
transactions that constitute the Change of Control and
offering to repurchase Senior Secured Notes pursuant to
the procedures required by the Indenture and described
in such notice. The Issuer will comply with the
requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in
connection with the repurchase of the Senior Secured
Notes as a result of a Change of Control.
(_) On the earlier of (i) the 366th day after an Asset
Sale by the Company or any of its Subsidiaries or (ii)
such date as the Board of Directors of the Company
determines not to apply the Net Cash Proceeds relating
to such Asset Sale to an investment, the making of a
capital expenditure or the acquisition of other
tangible assets (or the Company determines not to cause
its Subsidiary to apply the Net Cash Proceeds in such a
manner), if the aggregate amount of Excess Proceeds
exceeds $1.0 million, the Company or its Subsidiary, as
the case may be, shall be subject to the following
requirements:
(_) in the event that the Company cannot then
incur $1.00 of additional Permitted Indebtedness
pursuant to clause (v) of the definition of "Permitted
Indebtedness" in Appendix A of the Indenture the
Company or its Subsidiary will be required to make an
offer to purchase (the "Asset Sale Redemption Offer")
from all Holders of Senior Secured Notes and holders of
additional Senior Indebtedness, up to a maximum
principal amount (expressed as a multiple of $1,000) of
Senior Secured Notes and holders of additional Senior
Indebtedness equal to the Excess Proceeds at a purchase
price equal to 100% of the principal amount thereof
plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if
any, to the date of purchase; in the event that there
is additional Senior Indebtedness outstanding at the
time of the Asset Sale Redemption Offer, Excess
Proceeds shall be allocated to each issuance of Senior
Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of
which is the principal amount of the Senior Secured
Notes and the denominator of which is the sum of the
principal amounts of all Senior Indebtedness which is
subject to this requirement or a similar requirement
under such Senior Indebtedness's governing instrument;
and
(_) in the event that the Company can incur $1.00
of additional Permitted Indebtedness pursuant to clause
(v) of the definition of "Permitted Indebtedness," the
Company or its Subsidiary will be required to make an
Asset Sale Redemption Offer from all Holders of Senior
Secured Notes and holders of additional Senior
Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Senior Secured
Notes and holders of additional Senior Indebtedness
equal to the Excess Proceeds (Excess Proceeds for
purposes of this clause (2) is limited to that amount
of the Net Cash Proceeds that equals the principal
amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the
asset being sold) at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid
interest (including Liquidated Damages and Additional
Amounts, if any) thereon, if any, to the date of
purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale
Redemption Offer, Excess Proceeds shall be allocated to
each issuance of Senior Indebtedness in accordance with
the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal
amount of the Senior Secured Notes and the denominator
of which is the sum of the principal amounts of all
Senior Indebtedness which is subject to this
requirement or a similar requirement under such Senior
Indebtedness's governing instrument.
(_) Redemption for Taxation Reasons. The Senior
Secured Notes may be redeemed, at the option of the
Issuer or the Company, as the case may be, in whole but
not in part, at a redemption price equal to the
principal amount thereof, together with accrued and
unpaid interest and premium, if any, (including
Liquidated Damages and Additional amounts, if any), to
the Tax Redemption Date, if the Issuer or the Company,
as the case may be, determines that, as a result of (i)
any change in, or amendment to, the laws or treaties
(or any regulations or rulings promulgated thereunder)
of the Cayman Islands or the United States (or any
political subdivision or taxing authority thereof)
which change or amendment becomes effective on or after
the date of the Indenture, (ii) any change in position
regarding the application, administration or
interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change in
application, administration or interpretation becomes
effective on or after the date of the Indenture, the
Issuer or the Company, as the case may be, is, or on
the next interest payment date would be, required to
pay Additional Amounts, and the Issuer or the Company,
as the case may be, determines that such payment
obligation cannot be avoided by the Issuer or the
Company, as the case may be, taking reasonable
measures.
(_) Notice of Redemption. Notice of redemption
(other than a Change of Control Offer) will be mailed
at least 30 days but not more than 60 days before the
redemption date to each Holder whose Senior Secured
Notes are to be redeemed at its registered address.
Notice of a Change of Control Offer shall be mailed by
the Company or Issuer to the Holders not less than 30
days nor more than 45 days before the Change of Control
Payment Date. Senior Secured Notes in denominations
larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000, unless all of the Senior
Secured Notes held by a Holder are to be redeemed. On
and after the redemption date interest ceases to accrue
on the aggregate principal amount of the Senior Secured
Notes called for redemption.
(_) Denominations, Transfer, Exchange. The Senior
Secured Notes may be issued initially in the form of
one or more fully registered Global Senior Secured
Notes. The Senior Secured Notes may also be issued in
registered form without coupons in minimum
denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Secured Notes may be
registered and Senior Secured Notes may be exchanged as
provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents
and the Issuer may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture.
The Issuer need not exchange or register the transfer
of any Senior Secured Note or portion of a Senior
Secured Note selected for redemption. Also, it need
not (i) register the transfer or exchange of any Senior
Secured Notes during any period (a) beginning at the
opening of business on a Business Day 15 days before
the day of any selection of Senior Secured Notes for
redemption and ending at the close of business on the
day of selection or (b) beginning at the opening of
business on a Business Day 15 days before an Interest
Payment Date and ending on the close of business on
such Interest Payment Date or (ii) register the
transfer or exchange of any Senior Secured Note
selected for redemption in whole or in part, except the
unredeemed portion of any Senior Secured Note being
redeemed in part.
(_) Persons Deemed Owners. The registered Holder of
a Senior Secured Note may be treated as its owner for
all purposes.
(_) Amendment, Supplement and Waiver. (_) Without
the consent of the Holders of any Senior Secured Notes,
the Indenture may be amended or supplemented (i) to
establish the form and terms of Securities of
additional series; (ii) to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the
Senior Secured Notes, any property or assets; (iii) to
evidence the assumption by a successor entity to the
Company or the Issuer, and the assumption by such
successor entity of the covenants, agreements and
obligations of the Company and the Issuer pursuant to
the Indentures; (iv) to evidence the succession of a
new Trustee; (v) in certain circumstances, to add
further covenants, restrictions, conditions or
provisions for the protection of the Holders, and
related Events of Default for the breach thereof; (vi)
to cure any ambiguity, defect or inconsistency in the
Indenture, any Supplemental Indenture, or the Senior
Secured Notes which shall not adversely affect the
interests of the Holders; (vii) to permit or facilitate
the issuance of Senior Secured Notes in uncertificated
form; (viii) to comply with any requirement of the SEC
to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; (ix) to
provide for the issuance of a new series of Securities
registered under the Securities Act in exchange for the
Senior Secured Notes; (x) to make any other change that
does not adversely affect the interest of the Holders
of any series in any material respect.
(_) Subject to certain exceptions, the Indenture or the
Senior Secured Notes may be amended or supplemented
with the consent of the Holders of not less than a 51%
in aggregate principal amount of all series of
Outstanding Securities (considered as one class) or if
such amendment or supplement shall directly affect the
rights of less than all series, the consent of the
Holders of not less than a 51% in aggregate principal
amount of all series so directly affected (considered
as one class) (including a supplemental indenture
changing the provisions of the Indenture with respect
to change of control). The consent of the Holder of
each Outstanding Security directly affected thereby, is
required to:
(i) change the Stated Maturity, Senior Secured Note
Payment Date, Senior Secured Note principal amount, or
the interest thereon or any premium payable, place of
payment, impair the right to institute suit for the
enforcement of any payments, change the dates or the
amounts of payments to be made through the operation of
the sinking fund or make certain other changes
effecting the amount and timing of payments;
(ii) permit the creation or termination of Liens on
property pledged under the Collateral Documents or
deprive any Holder of the security afforded by the Lien
of the Collateral Documents, except, in each case, to
the extent expressly permitted by this Indenture or any
of the Collateral Documents; (iii) release all or any
substantial portion of the Collateral; (iv) reduce the
percentage in principal amount of the Outstanding
Securities, or reduce the requirements with respect to
quorum or voting; (v) modify any of the provisions of
Section 9.7 of the Senior Secured Notes Indenture; or
(vi) amend, change or modify the obligation of the
Issuer to make and consummate a Change of Control
Offer, or any of the provisions or definitions with
respect thereto.
(_) Defaults and Remedies. Events of Default include:
(i) failure by the Issuer to pay the
principal and premium, if any, on any Security when the
same becomes due and payable, whether by scheduled
maturity or required prepayment or by acceleration or
otherwise; (ii) failure by the Issuer to pay the
interest (including Liquidated Damages and Additional
Amounts, if any) on any Security when the same becomes
due and payable, whether by scheduled maturity or
required prepayment or by acceleration or otherwise,
for 15 or more days; (iii) non-payment of any interest
on, or any principal of, the Issuer Loan by Pan-Western
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise, for 30 or more days; (iv)
failure by the Company to pay any amount it is
obligated to pay pursuant to the terms of any Security,
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise; (v) any agreement,
representation or warranty made by the Company or any
of its Subsidiaries in, respectively, the Indentures,
the Issuer Loan Agreement or the Shareholder Loan
Agreements or any representation, warranty or statement
in any certificate, financial statement or other
document furnished to the Trustees by or on behalf of
the Company or any of its Subsidiaries under the
Indentures, 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
or is reasonably likely to have a Material Adverse
Effect and the fact, event or circumstance shall
continue to be uncured for 30 or more days after the
Company or any of its Subsidiaries acquires notice of
such inaccuracy; provided that if the Company or any
such Subsidiary commences efforts to cure such fact,
event or circumstance within such 30-day period, the
Company or any such Subsidiary may continue to effect
such cure of such fact, event or circumstance and such
misrepresentation shall not be deemed an Event of
Default for an additional 60 days so long as the
Company or such Subsidiary, as the case may be, is
diligently pursuing such cure; (vi) failure by the
Company or any of its Material Subsidiaries to perform
or observe its covenants contained in the Indentures
relating to maintenance of existence, prohibition on
fundamental changes, disposition of assets, limitations
on Indebtedness, limitations on Liens or distributions;
(vii) failure by the Company or any of its Material
Subsidiaries to perform or observe any of the other
covenants contained in the Indentures or in the
Collateral Documents and such failure shall continue
uncured for 30 or more days (including, without
limitation, covenants with respect to insurance and
amendments to Luannan Project Documents or nature of
business); provided that if the Company or such
Material Subsidiary commences efforts to cure such
default within such 30-day period, the Company or such
Material Subsidiary 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 such Subsidiary is diligently pursuing
the cure; (viii) certain events of bankruptcy or
insolvency involving the Company or any Material
Subsidiary; (ix) the entry of one or more final and non-
appealable judgment or judgments for the payment of
money in excess of $1.0 million (exclusive of judgment
amounts fully covered by insurance or indemnity)
against the Company or any of its Material
Subsidiaries, which remains unpaid or unstayed for a
period of 90 or more consecutive days; (x) any Project
Document (except as otherwise permitted under this
Indenture) shall terminate or cease to be valid and
binding and in full force and effect, or any third
party thereto denies that it has any liability or
obligation under any such Project Document and such
third party ceases performance thereunder, or any third
party is in default under such Project Document
(subject to any applicable grace period), and in each
case such cessation or default has had or is reasonably
likely to have a Material Adverse Effect; (xi) any
Luannan Financing Agreement shall terminate or cease to
be valid and binding and in full force and effect;
(xii) with respect to a Domestic Project, or to the
extent applicable, any Permitted Project, the loss of
QF Status, to the extent that such loss of QF Status
has had or is reasonably likely to have a Material
Adverse Effect; (xiii) failure of any Joint Venture to
perform or observe any of its material covenants or
obligations contained in any of the Luannan Project
Documents if such failure has had or is reasonably
likely to have a Material Adverse Effect; (xiv) the
occurrence of any event resulting in the payment of
Domestic Project Event Proceeds or Permitted Project
Event Proceeds that will result, in the opinion of the
Consolidating Financial Analyst, in the Company's
failure to meet the following Debt Service Coverage
Ratios (after the application of such amounts as are
required to be applied pursuant to any and all
mandatory redemption or repayment obligations): (1) the
minimum (or lowest) annual projected Company Debt
Service Coverage Ratio for the remaining term of the
Senior Secured Notes will not be less than 1.4 to 1 and
(2) the minimum (or lowest) annual projected
Consolidated Debt Service Coverage Ratio for the
remaining term of the Senior Secured Notes will not be
less than 1.15 to 1; (xv) the Luannan Facility
Construction Schedule Certificate shall at any time
contain a conclusion that the Luannan Facility is not
being constructed in accordance with the Approved
Construction Budget and Schedule or, if applicable, an
Approved Completion Plan; (xvi) any of the Collateral
Documents ceases to be effective or any lien granted
therein ceases to be a perfected lien to the Trustees
on the collateral described therein with the priority
purported to be created thereby; provided that the
Company or the Issuer, as the case may be, shall have
15 days to cure such cessation or to furnish to the
Trustees all documents or instruments required to cure
such cessation; or (xvii) any default under the Issuer
Loan Agreement and the Shareholder Loan Agreements that
has had or is reasonably likely to have a Material
Adverse Effect and any default under the PFC Indenture,
the Rosemary Indenture, the Brandywine Facility Lease
and any other default under any other agreement or
instrument containing Indebtedness of at least $2.5
million of a Domestic Project or a Permitted Project,
to the extent that any of the preceding defaults is not
waived. If any Event of Default (other than an Event
of Default described in clause (viii) above) occurs and
is continuing, the Trustee shall declare all interest,
principal and premium (including Liquidated Damages and
Additional Amounts, if any) on the Senior Secured Notes
to be immediately due and payable, if the Holders of at
least 25% in principal amount of the then outstanding
Senior Secured Notes have notified the Issuer and the
Trustees in writing. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the
Company, any of its Material Subsidiaries, all
outstanding Senior Secured Notes will become due and
payable without further action or notice. Holders of
the Senior Secured Notes may not enforce the Indenture
or the Senior Secured Notes except as provided in the
Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding
Senior Secured Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may
withhold from Holders of the Senior Secured Notes
notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the
payment of principal or interest) if it determines that
withholding notice is in their interest.
(_) Trustee Dealings with Issuer. The Indenture
contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer or
the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in
respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or
resign.
(_) No Recourse Against Others. No director, officer,
or stockholder of the Issuer, as such, shall have any
liability for any obligations of the Issuer under the
Senior Secured Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Senior
Secured Notes, by accepting a Senior Secured Note,
waives and releases all such liability. The waiver and
release are part of the consideration for issuance of
the Senior Secured Notes. Such waiver may not be
effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such
a waiver is against public policy.
(_) Authentication. This Senior Secured Note shall
not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
(_) GOVERNING LAW. THIS SENIOR SECURED NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. THE ISSUER HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY 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 SENIOR SECURED NOTE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS. THE ISSUER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(_) Abbreviations. Customary abbreviations may be
used in the name of a Holder or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
(_) Additional Rights of Holders of Transfer
Restricted Securities. In addition to the rights
provided to Holders of Senior Secured Notes under the
Indenture, Holders of Transferred Restricted Securities
shall have all the rights set forth in the Registration
Rights Agreement dated as of the date of the Indenture,
between the Company and the parties named on the
signature pages thereof (the "Registration Rights
Agreement").
(_) Collateral Documents. As provided in the
Indenture and the Collateral Documents and subject to
certain limitations set forth therein, the Obligations
of the Issuer and the Company under the Indentures and
the Collateral Documents are secured by the Collateral
as provided in the Collateral Documents. Each Secured
Party, by accepting a Senior Secured Note, agrees to be
bound to all the terms and provisions of, and is
entitled to the benefits of, the Collateral Documents,
as the same may be amended from time to time. The
Liens created under the Collateral Documents shall be
released upon the terms and subject to the conditions
set forth in the Indentures and the Collateral
Documents.
(_) Senior Secured Notes Guarantee. This Senior
Secured Note is entitled to the benefits of the Senior
Secured Notes Guarantee of the Company. Upon the terms
and subject to the conditions set forth in the
Indentures and the Senior Secured Notes Guarantee, the
Company has unconditionally guaranteed on a senior
secured basis that the principal of, and premium, if
any (including Liquidated Damages and Additional
Amounts, if any), and interest on the Senior Secured
Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise,
and interest on overdue principal, and premium, if any,
and (to the extent permitted by law) interest on any
interest, if any, on the Senior Secured Notes and all
other Obligations of the Issuer to the Secured Parties
or the Trustee under the Senior Secured Notes or the
Indenture (including fees, expenses or other
obligations) will be promptly paid in full or
performed.
(_) CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security
Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Senior Secured Notes and
the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No
representation is made as to the accuracy of such
numbers either as printed on the Senior Secured Notes
or as contained in any notice of redemption and
reliance may be placed only on the other identification
numbers placed thereon.
The Issuer will furnish to any Holder upon written
request and without charge a copy of the Indenture.
Requests may be made to:
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Attention: General Counsel
ASSIGNMENT FORM
To assign this Senior Secured Note, fill in the form below:
(I) or (we) assign and transfer this Security to
(Insert assignee's Social Security or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Issuer. The
agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Secured Note
purchased by the Issuer pursuant to Section 2.5(c) of
the First Supplemental Indenture or Section 7.21 or
7.28 of the Indenture, check the appropriate box below:
Section 2.5(c) Section 7.21 Section 7.28
If you want to elect to have only part of the Senior
Secured Note purchased by the Issuer pursuant to
Section 2.5(c) of the First Supplemental Indenture or
Section 7.21 or 7.28 of the Indenture, state the
principal amount at maturity you elect to have
purchased: $______________
Date: Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR SECURED NOTES
[To be attached to Global Senior Secured Note]
The following exchanges of a part of this Global Senior Secured
Note for definitive Senior Secured Notes have been made:
Date of Amount of Amount of Principal Signature of
Exchange decrease increase in Amount of authorized
in Principal this Global officer of
Principal Amount Note Trustee
Amount of this following or Note
of this Global Note such decrease Custodian
Global (or increase)
Note
SCHEDULE I
Form of Senior Secured Notes Guarantee
Senior Secured Notes Guarantee
The Company, as primary obligor and not merely as
surety, hereby irrevocably, fully and unconditionally guarantees
on a senior secured basis to each Holder of a Senior Secured Note
authenticated and delivered by the Senior Secured Notes Trustee
and to the Trustee and their successors and assigns, irrespective
of the validity and enforceability of the Indentures, the Senior
Secured Notes or the obligations of the Company and the Issuer
hereunder or thereunder: (a) the performance and punctual payment
when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Issuer under the Senior
Secured Notes Indenture and the Senior Secured Notes, whether for
principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes, expenses, indemnification or otherwise; and (b) in case of
any extension of time of payment or renewal of any Senior Secured
Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Company shall be obligated to pay the same
immediately.
The Company hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Secured Notes or the
Indentures, the absence of any action to enforce the same, any
waiver or consent by any Holder with respect to any provisions
hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge
or defense of a guarantor. The Company hereby waives diligence,
presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Senior
Secured Notes Guarantee shall not be discharged except by
complete performance of the obligations contained in the Senior
Secured Notes and the Indentures. If any Holder or the Trustee
is required by any court or otherwise to return to the Company,
or any custodian, trustee, liquidator or other similar official
acting in relation to the Company, any amount paid by either to
the Trustee or such Holder, this Senior Secured Notes Guarantee,
to the extent theretofore discharged, shall be reinstated in full
force and effect. The Company agrees that it shall not be
entitled to any right of subrogation in relation to the Holders
of the Senior Secured Notes Guarantee in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
This is a continuing Guarantee and shall remain in full
force and effect and shall be binding upon the Company and its
respective successors and assigns to the extent set forth in the
Indenture until full and final payment of all of the Issuer's
obligations under the Senior Secured Notes and the Senior Secured
Notes Indenture and shall inure to the benefit of the Trustee and
the Holders of Senior Secured Notes Guarantee and their
successors and assigns and, in the event of any transfer or
assignment of rights by any Holder of the Senior Secured Notes
Guarantee or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms
and conditions hereof. Notwithstanding the foregoing, if the
Company and the Issuer satisfy the provisions of Section 6.3 of
the Indentures the Company shall be released of its obligations
hereunder. This is a Guarantee of payment and not a guarantee of
collection.
This Senior Secured Notes Guarantee shall not be valid
or obligatory for any purpose until the certificate of
authentication on the Senior Secured Note upon which this Senior
Secured Notes Guarantee is noted shall have been executed by the
Senior Secured Notes Trustee under the Senior Secured Notes
Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings
given in the Indentures unless otherwise indicated.
PANDA GLOBAL HOLDINGS, INC.
By:_____________________________
Name:
Title:
This is one of the Senior Secured
Notes referred to in the within-
mentioned Indenture:
BANKERS TRUST COMPANY,
as Trustee
By_________________________________
Authorized Signatory
_______________________________
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
EXHIBIT 4.12
TRUST INDENTURE
dated as of April 22, 1997
between
PANDA GLOBAL HOLDINGS, INC.
and
BANKERS TRUST COMPANY, AS TRUSTEE
Providing for the Issuance from Time to Time of Senior
Securities 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 1
SECTION 1.1 Definitions; Construction 1
SECTION 1.2 Compliance Certificates and Opinions 2
SECTION 1.3 Form of Documents Delivered to Trustee 3
SECTION 1.4 Acts of Holders 4
SECTION 1.5 Notices, etc. to Trustee and the Company 5
SECTION 1.6 Notices to Holders; Waiver 6
SECTION 1.7 Effect of Headings 6
SECTION 1.8 Successors and Assigns 6
SECTION 1.9 Severability Clause 6
SECTION 1.10 Benefits of Indenture 6
SECTION 1.11 GOVERNING LAW AND SUBMISSION TO JURISDICTION 7
SECTION 1.12 Execution in Counterparts 7
SECTION 1.13 Conflict with Trust Indenture Act 7
ARTICLE II
THE DEBT SECURITIES 7
SECTION 2.1 Form of Security to Be Established by Series
Supplemental Indenture 7
SECTION 2.2 Form of Trustee's Authentication 8
SECTION 2.3 Amount Unlimited; Issuable in Series 8
SECTION 2.4 Authentication and Delivery of Securities 10
SECTION 2.5 Form 11
SECTION 2.6 Execution and Authentication of Securities 12
SECTION 2.7 Temporary Securities 12
SECTION 2.8 Registration, Restrictions on Transfer and
Exchange 12
SECTION 2.9 Book-Entry Provisions for Global Securities 18
SECTION 2.10 Mutilated, Destroyed, Lost and Stolen Securities 19
SECTION 2.11 Payment of Principal, Premium and Interest;
Rights to Payments Preserved 20
SECTION 2.12 Persons Deemed Owners 21
SECTION 2.13 Cancellation 21
SECTION 2.14 Dating of Securities; Computation of Interest 22
SECTION 2.15 Source of Payments Limited; Rights and
Liabilities of the Company 22
SECTION 2.16 Allocation of Principal and Interest 22
SECTION 2.17 Parity of Securities 22
SECTION 2.18 References to Interest Deemed to Include
Liquidated Damages and Additional Amounts 22
ARTICLE III
APPOINTMENT OF TRUSTEE AS DEPOSITARY
AGENT AND COLLATERAL AGENT; ESTABLISHMENT OF FUNDS 23
SECTION 3.1 Acceptance of Appointment of Trustee as
Depositary Agent and Collateral Agent 23
SECTION 3.2 Security Interest 24
SECTION 3.3 Establishment of Funds and Sub-Accounts 24
ARTICLE IV
THE FUNDS 25
SECTION 4.1 Company Revenue Fund 25
SECTION 4.2 Notes Guarantee Service Fund 27
SECTION 4.3 Notes Guarantee Service Reserve Fund 28
SECTION 4.4 Company Operating Fund 29
SECTION 4.5 Company Equity Distribution Fund 29
SECTION 4.6 Investment of Funds 30
SECTION 4.7 Payment Deficiencies; Invasion of Funds 30
SECTION 4.8 Resignation and Removal of Consolidating
Financial Analyst; Appointment of Successor;
Payment of Fees and Expenses 31
SECTION 4.9 Disposition of Accounts and Funds Upon
Retirement of Securities 33
SECTION 4.10 Procedures for Review by Consolidating
Financial Analyst of Projections 33
ARTICLE V
IMMUNITY OF INCORPORATORS, STOCKHOLDERS
OFFICERS AND DIRECTORS 33
SECTION 5.1 Liability of the Company Solely Corporate 33
ARTICLE VI
SATISFACTION AND DISCHARGE; DEFEASANCE 34
SECTION 6.1 Satisfaction and Discharge of Indenture 34
SECTION 6.2 Application of Trust Money 35
SECTION 6.3 Satisfaction, Discharge and Defeasance of
Securities of any Series 36
ARTICLE VII
COVENANTS 39
SECTION 7.1 Payment of Securities 39
SECTION 7.2 Delivery of Officers' Certificates 39
SECTION 7.3 Maintenance of Existence, Properties, Etc. 40
SECTION 7.4 Compliance with Laws 40
SECTION 7.5 Payment of Taxes 40
SECTION 7.6 Books and Records 41
SECTION 7.7 Right of Inspection 41
SECTION 7.8 Use of Proceeds 41
SECTION 7.9 Reporting Requirements 41
SECTION 7.10 Maintenance of Insurance 42
SECTION 7.11 Limitation on Restricted Payments 45
SECTION 7.12 Limitation on Indebtedness 46
SECTION 7.13 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries 47
SECTION 7.14 Capital Expenditures 47
SECTION 7.15 Permitted Projects 48
SECTION 7.16 Limitation of Line of Business 48
SECTION 7.17 Protection of Collateral by Company and its
Subsidiaries 48
SECTION 7.18 Performance of Obligations by Company,
Subsidiaries and Trustees 48
SECTION 7.19 Sale and Leaseback Transactions 48
SECTION 7.20 Delivery of Information and Reports under the
Shareholder Loan Agreements 49
SECTION 7.21 Disposition of Proceeds of Asset Sales 49
SECTION 7.22 Merger, Consolidation, or Sale of Assets 49
SECTION 7.23 Limitations on Liens 50
SECTION 7.24 Transactions with Affiliates 51
SECTION 7.25 Limitation on Investments 51
SECTION 7.26 Investment Company Act 52
SECTION 7.27 Public Utility Holding Company Act 52
SECTION 7.28 Purchase of Securities Upon a Change of Control 52
SECTION 7.29 Ranking 54
SECTION 7.30 Collateral Documents 54
SECTION 7.31 Expenses of the Offering 54
ARTICLE VIII
REDEMPTION OF SECURITIES 55
SECTION 8.1 Applicability of Article 55
SECTION 8.2 Election to Redeem; Notice to Trustee 55
SECTION 8.3 Optional Redemption; Mandatory Redemption;
Selection of Securities to be Redeemed 55
SECTION 8.4 Notice of Redemption 56
SECTION 8.5 Securities Payable on Redemption Date 56
SECTION 8.6 Securities Redeemed in Part 57
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES 57
SECTION 9.1 Events of Default 57
SECTION 9.2 Enforcement of Remedies 60
SECTION 9.3 Specific Remedies 62
SECTION 9.4 Judicial Proceedings Instituted by Trustee 62
SECTION 9.5 Holders May Demand Enforcement of Rights by
Trustee 64
SECTION 9.6 Control by Holders 64
SECTION 9.7 Waiver of Past Defaults 65
SECTION 9.8 Holder May Not Bring Suit Except Under Certain
Conditions 65
SECTION 9.9 Undertaking to Pay Court Costs 65
SECTION 9.10 Right of Holders to Receive Payment Not to be
Impaired 66
SECTION 9.11 Application of Monies Collected by Trustee 66
SECTION 9.12 Waiver of Appraisement, Valuation, Stay, Right
to Marshaling 67
SECTION 9.13 Remedies Cumulative; Delay or Omission
Not a Waiver 67
SECTION 9.14 Disqualification; Conflicting Interests 68
SECTION 9.15 Preferential Collection of Claims Against the
Company 68
ARTICLE X
CONCERNING THE TRUSTEE 68
SECTION 10.1 Certain Rights and Duties of Trustee 68
SECTION 10.2 Trustee Not Responsible for Recitals, Etc. 71
SECTION 10.3 Trustee and Others May Hold Securities 71
SECTION 10.4 Monies Held by Trustee or Paying Agent 71
SECTION 10.5 Compensation of Trustee and Its Lien 71
SECTION 10.6 Right of Trustee to Rely on Officer's
Certificates and Opinions of Counsel 72
SECTION 10.7 Persons Eligible for Appointment As Trustee 73
SECTION 10.8 Resignation and Removal of Trustee; Appointment
of Successor 73
SECTION 10.9 Acceptance of Appointment by Successor Trustee 74
SECTION 10.10 Merger, Conversion or Consolidation of Trustee 75
SECTION 10.11 Maintenance of Offices and Agencies 75
SECTION 10.12 Reports by Trustee 77
SECTION 10.13 Trustee Risk 77
SECTION 10.14 Trustee May Perform Certain Duties Through
Affiliates 78
ARTICLE XI
HOLDERS' MEETINGS 78
SECTION 11.1 Purposes for Which Holders' Meetings May Be
Called 78
SECTION 11.2 Call of Meetings by Trustee 78
SECTION 11.3 The Company, Holders May Call Meeting 78
SECTION 11.4 Persons Entitled to Vote at Meeting 79
SECTION 11.5 Determination of Voting Rights; Conduct and
Adjournment of Meeting 79
SECTION 11.6 Counting Votes and Recording Action of Meeting 80
ARTICLE XII
SUPPLEMENTAL INDENTURES 80
SECTION 12.1 Supplemental Indentures Without Consent of
Holders 80
SECTION 12.2 Supplemental Indenture with Consent of
Holders 82
SECTION 12.3 Documents Affecting Immunity or Indemnity 83
SECTION 12.4 Execution of Supplemental Indentures 83
SECTION 12.5 Effect of Supplemental Indentures 84
SECTION 12.6 Reference in Securities to Supplemental
Indentures 84
SECTION 12.7 Compliance with Trust Indenture Act 84
Exhibit A - Form of Legend for Global Securities
Exhibit B - Certificate to be Delivered upon Exchange
or Registration of Transfer of Securities
Exhibit C - Form of Certificate to be Delivered in
Connection with Transfers to Institutional
Accredited Investors
Exhibit D - Form of Certificate to be Delivered in
Connection with Regulation S Transfers
Exhibit E - Panda International Pledge Agreement
Exhibit F - Company Pledge Agreement
Exhibit G - Company Security Agreement
Exhibit H - PEC Assignment and Pledge Agreement
Appendix A - Definitions
TRUST INDENTURE (this "Indenture"), dated as of April
22, 1997, between PANDA GLOBAL HOLDINGS, INC., a Delaware
corporation (the "Company"), its executive office and mailing
address being at c/o Panda Energy International, Inc., 4100
Spring Valley Road, Suite 1001, Dallas, Texas 75244, and Bankers
Trust Company, a New York 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, the Company has duly authorized the execution
and delivery of this Indenture to provide for the issuance from
time to time of its debentures, notes, bonds, Guarantees or other
evidences of indebtedness (herein generally called the
"Securities"), to be issued in one or more series; and
WHEREAS, all acts necessary to make the Securities,
when authorized and executed by the Company and authenticated and
delivered by the Trustee, valid and binding legal obligations of
the Company, and to make this Indenture a valid and binding
agreement, in accordance with the terms of this Indenture and the
Securities, 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 Securities 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 Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION I.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 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) 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) (i) pronouns having a masculine or feminine gender
shall be deemed to include the other and (ii) "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 I.2 Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Indenture, upon
any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company
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, and in the case of an Officer's
Certificate delivered pursuant to Section 4.1(b), no 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; and
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
SECTION I.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 the Company
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 in the exercise of reasonable care should
know 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 the Company, 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 I.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 Securities voting in favor thereof, either in person
or by proxies duly appointed in writing, at any meeting of
Holders of Securities 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 the Company. 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 and the Company
if made in the manner provided in this Section. The record of
any meeting of Holders of Securities shall be proved in the
manner provided in Section 11.6.
(b) The principal amount and serial numbers of
Securities 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 Security (i) shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the transfer thereof or the exchange
therefor or in lieu thereof (including any transfer or exchange
of a Security involving removal of a Private Placement Legend),
whether or not notation of such Act is made upon such Security,
and (ii) shall be valid notwithstanding that such Act is taken in
connection with the transfer of such Security to any other
Person, including the Company 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 Securities for the Act contemplated by such
instruments, any such instrument executed and delivered by or on
behalf of a Holder of Securities may be revoked with respect to
any or all of such Securities 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) Securities of any series authenticated and
delivered after any Act of Holders may, and, if required by the
Trustee or the Company, shall, bear a notation in the form
approved by the Company and satisfactory to the Trustee as to any
action taken by such Act of Holders. If the Company shall so
determine, new Securities of any series so modified as to
conform, in the opinion of the Company, to such action, may be
prepared and executed by the Company and upon Company Order
authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series.
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. 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 Securities have concurred
in any Act under this Indenture, Securities that are owned by the
Company, or any Affiliate of the Company, 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 Securities that a Responsible Officer of the Trustee
has actual knowledge are so owned as conclusively evidenced by
the Security Register shall be so disregarded. The Company shall
furnish the Trustee, upon request from time to time, with a
written list of such Affiliates. Securities 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 Securities and that the pledgee is not an Affiliate of
the Company. 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. Securities that are owned by
a Holder which is not the Company 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 Securities to the
Company 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 I.5 Notices, etc. to Trustee and the Company.
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 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 the Company by the
Trustee for such purpose, or
(b) the Company by the Trustee, by any Holder 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 Company 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 by
the Company for such purpose.
SECTION I.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 I.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 I.8 Successors and Assigns. All covenants,
agreements, representations and warranties in this Indenture by
the Trustee and the Company shall bind and inure to the benefit
of and be enforceable by their respective successors and assigns,
whether so expressed or not.
SECTION I.9 Severability Clause. In case any
provision in this Indenture or the Securities shall be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION I.10 Benefits of Indenture. Nothing in this
Indenture or the Securities, expressed or implied, shall give to
any Person, other than the parties hereto and their respective
successors, assigns and the Holders of Securities, any benefit or
any legal or equitable right, remedy or claim under this
Indenture.
SECTION I.11 GOVERNING LAW AND SUBMISSION TO
JURISDICTION. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY 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 TRUST INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION I.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 I.13 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, the Company 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 DEBT SECURITIES
SECTION II.1 Form of Security to Be Established by
Series Supplemental Indenture. Subject to Section 2.5, the
Securities of each series shall be substantially in the form
established in the Series Supplemental Indenture relating to the
Securities of such series; provided, however, that each such
Security shall bear the applicable legends specified in
Section 2.8 and Section 2.9 or, in the case of a Security which
is a Guarantee, shall be affixed to the security to which it
relates and such related security shall bear the applicable
legends specified in Section 2.8 and Section 2.9.
SECTION II.2 Form of Trustee's Authentication. The
Trustee's certificate of authentication on all Securities shall
be in substantially the following form:
This Security is one of the series of Securities
referred to in the within-mentioned Indenture.
Bankers
Trust Company, as Trustee
By:
Authorized Signatory
SECTION II.3 Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities 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 7.12.
The Securities may be issued in one or more series.
Prior to the issuance of the Securities of a series, there shall
be established in one or more Series Supplemental Indentures:
(a) the title of the Securities of such series (which
shall distinguish the Securities of such series from all
other Securities) and the form or forms of Securities of
such series;
(b) any limit upon the aggregate principal amount of
the Securities of such series that may be authenticated and
delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of
such series pursuant to Sections 2.7, 2.8, 2.9, 2.10 or 8.6
and except for Securities 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
Securities 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 Securities of such series shall be dated, if other
than as provided in Section 2.14(a);
(d) the rate or rates at which the Securities 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 Securities of such series shall be payable,
(ii) Securities 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 Securities
of such series and this Indenture may be served;
(f) the right, if any, of the Company to redeem
Securities 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
Securities of such series may be so 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 Securities 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 Securities of such
series shall be redeemed, purchased or repaid, in whole or
in part, pursuant to such obligations and any sinking fund
or other analogous fund or provision relating thereto;
(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, with respect to the Securities of such series;
(i) if other than denominations of $1,000 and integral
multiples of $1,000 in excess thereof, the denominations in
which Securities of such series shall be issuable;
(j) the restrictions or limitations, if any, on the
transfer or exchange of the Securities of such series;
(k) any requirements that the Company issue a new
series of Securities registered under the Securities Act in
exchange for the Securities of such series;
(l) any deletions from, modifications of or additions
to the Events of Default or covenants of the Company with
respect to the Securities of 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 the Securities of other series, any change in the right
of the Trustee or Holders to declare the principal of, and
premium, if any, and interest on, the Securities of such
series due and payable and any additions to the definitions
currently set forth in this Indenture;
(m) if applicable, a designation of the use of the
proceeds of the Securities of such series;
(n) if the Securities are a Senior Secured Note
Guarantee, the terms of such Senior Secured Note Guarantee
and the applicable information specified in this Section 2.3
with respect to the securities or other obligations to which
such Senior Secured Note Guarantee relates; and
(o) any other terms of the Securities of such series
(which terms shall not be inconsistent with the provisions
of this Indenture).
SECTION II.4 Authentication and Delivery of
Securities. 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 Securities of any series executed by the
Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such
Securities, and the Trustee shall thereupon authenticate and make
available for delivery such Securities in accordance with such
Company Order, without any further action by the Company. No
Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on
such Security 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 Securities shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and
delivered thereunder. In authenticating such Securities and
accepting the additional responsibilities under this Indenture in
relation to such Securities, 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 Securities of such series;
(b) Officer's Certificates 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
Securities of such series were established, and
(ii) certifying that all conditions precedent under this
Indenture to the Trustee's authentication and delivery of
such Securities have been complied with;
(c) an Opinion of Counsel to the effect that (i) the
form or forms and the terms of such Securities 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, (ii) the Securities 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, 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 Securities 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
(d) such other documents and evidence with respect to
the Company as the Trustee may reasonably request.
Prior to the authentication and delivery of a series of
Securities, 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 Security shall
have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in
Section 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 Security has never been issued and
sold by the Company, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and
delivered hereunder and shall never have been or be entitled to
the benefits hereof.
SECTION II.5 Form. The definitive Securities 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 Securities, as
evidenced by their execution of such Securities.
Except as indicated in the next succeeding paragraph or in a
Series Supplemental Indenture, Securities shall be issued
initially in the form of one or more permanent global Securities
(each being herein called a "Global Security") deposited with the
Trustee, as custodian for the Depository, duly executed by the
Company and authenticated by the Trustee as hereinafter provided,
and each shall bear, or, in the case of Securities which are
Guarantees, shall be affixed to the security to which it relates
and such related security 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 Securities 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.
Securities originally issued and sold in reliance on any
exemption from registration under the Securities Act other than
Rule 144A shall be issued, and Securities originally offered and
sold in reliance on Rule 144A may be issued, in the form of
permanent certificated bonds in registered form ("Physical
Securities").
The Securities 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 Securities, as evidenced by their
execution of the Securities. Any portion of the text of any
Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security. The
Securities may also have set forth on the reverse side thereof a
form of assignment and forms to elect purchase by the Company
pursuant to Section 7.28.
SECTION II.6 Execution and Authentication of
Securities. The Securities shall be executed on behalf of the
Company by its Chief Executive Officer, its President or one of
its Executive Vice Presidents. The signature of any such
officers on the Securities may be manual or facsimile.
Upon receipt of a Company Order, the Trustee shall
authenticate and make available for delivery Securities of the
applicable series that are printed, lithographed, typewritten,
photocopied or otherwise produced, in any denomination authorized
hereunder.
Securities 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 Securities or did not hold such offices at the
date of such Securities.
SECTION II.7 Temporary Securities. Upon original
issuance of Securities of a series or pending the preparation of
definitive Securities of any series, the Company may execute, and
upon Company Order the Trustee shall authenticate and make
available for delivery, Securities or temporary Securities, 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 Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the
Company will cause definitive Securities of such series to be
prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities of
such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such
series at the office or agency of the Company, for such purpose
or at the Place of Payment, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary
Securities of any series, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, in
exchange therefor, definitive Securities of such series of
authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Securities
of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such
series.
SECTION II.8 Registration, Restrictions on Transfer
and Exchange.
(a) Registration, Transfer and Exchange. The Company
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 the Company may
prescribe and the requirements and restrictions on transfer set
forth in this Section and Section 2.9, shall provide for the
registration of Securities and for the registration of transfers
and exchanges of Securities. 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 Securities and transfers and exchanges of Securities
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 Securities and the principal amounts and numbers of such
Securities.
Subject to the provisions of this Section and
Section 2.9, upon due presentation for registration of transfer
of any Securities of any series at any such office, the Company
shall execute and the Trustee shall authenticate and deliver in
the name of the designated transferee or transferees a new
Security or Securities of like tenor and of any authorized
denomination and of a like aggregate principal amount.
Furthermore, any Holder of a Global Security shall, by
acceptance of such Global Security, be deemed to have agreed that
transfers of beneficial interests in such Global Security 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 Security shall be required to be reflected
in a book-entry.
Subject to this Section and Section 2.9, at the option
of the Holder, Securities of any series may be exchanged for
other Securities of the same series of like tenor and of any
authorized denominations and of a like aggregate principal
amount. Securities to be exchanged shall be surrendered at any
office or agency maintained by the Trustee for the purpose as
provided in this Section 2.8 and the Company shall execute, and
the Trustee shall authenticate and deliver in exchange therefor,
the Securities of the applicable series which the Holder making
the exchange shall be entitled to receive, bearing numbers not
contemporaneously or previously outstanding.
All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
security and benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security 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, 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 Securities 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 Securities, 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 Security
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 Securities 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 Payment Date of any installment of principal of or payment of
interest on the Securities of such series and ending on the
Payment Date of such installment of principal or payment of
interest or (b) to issue, register the transfer of or exchange
any Physical Security so selected for redemption in whole or in
part, except the unredeemed portion of any Security selected for
redemption in part.
Notwithstanding anything herein to the contrary, any
transfer of the Securities 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 Securities shall
bear the following legend or, in the case of a Security which is
a Guarantee, shall be affixed to a security that bears the
following legend (the "Private Placement Legend"):
"THE [INSERT NAME OF SECURITY] (OR ITS PREDECESSOR)
EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE [INSERT NAME OF SECURITY]
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE [INSERT NAME OF SECURITY]
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE [INSERT NAME OF
SECURITY] EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE ISSUER THAT: (A) SUCH [INSERT NAME OF SECURITY]
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1)(a) INSIDE THE UNITED STATES TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND, BASED UPON AN OPINION OF COUNSEL
IF THE ISSUER SO REQUESTS), (2) TO THE ISSUER OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE [INSERT NAME OF
SECURITY] EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
(i) Upon the transfer, exchange or
replacement of Securities bearing the Private Placement
Legend, the Trustee shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is
hereby authorized to deliver Securities 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 Security has been sold pursuant
to an effective registration statement under the Securities
Act. Upon the transfer, exchange or replacement of
Securities not bearing the Private Placement Legend, the
Trustee shall deliver Securities that do not bear the
Private Placement Legend. By its acceptance of any Security
bearing the Private Placement Legend, each Holder of such a
Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture.
(ii) As a special condition to registration of
transfer or exchange of any Securities 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
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 Securities
in the form of Physical Securities, such Physical
Securities shall be accompanied, in the sole
discretion of the Company, by the following
additional information and documents, as
applicable:
(1) if such Physical
Security 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
Security 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
Security 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 (the "Transferee
Certificate") and an Opinion of Counsel to
the effect that such transfer is in
compliance with the Securities Act; or
(4) if such Physical
Security 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 (the
"Transferor Certificate") for Regulation S
Transfers (substantially 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
Security 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
Security 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 Security for a beneficial
interest in a Global Security, such Physical
Security shall be accompanied, in the sole
discretion of the Company, by the following
additional information and documents:
(1) a certification,
substantially in the form of Exhibit B
hereto, that such Physical Security 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 Security to
reflect an increase in the aggregate
amount of the Securities represented by
the Global Security;
whereupon the Trustee shall cancel such
Physical Security 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 Securities
represented by the Global Security to be increased
accordingly. If no Global Security is then
Outstanding, the Company shall issue and the
Trustee shall upon Company Order authenticate a
new Global Security in the appropriate amount.
(C) Any Person having a beneficial
interest in a Global Security may upon request to
the Security Registrar exchange such beneficial
interest for a Physical Security. 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 Security 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 (substantially 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 Security to be reduced and,
following such reduction, the Company will execute
and, upon receipt of a Company Order, the Trustee
will authenticate and deliver to the transferee a
Physical Security. Securities issued in exchange
for a beneficial interest in a Global Security
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 Securities to the Persons in
whose names such Physical Securities are so
registered.
SECTION II.9 Book-Entry Provisions for Global
Securities. Each Global Security shall (i) be registered in the
name of the Depository for such Global Security or the nominee of
such Depository, (ii) delivered to the Trustee as custodian for
such Depository and (iii) bear, or in the case of a Security that
is a Guarantee, be affixed to the security to which it relates
and such related security shall 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 Security held on their behalf by the Depository, or
the Trustee as its custodian, or under such Global Security, and
the Depository may be treated by the Company, the Security
Registrar, the Trustee and any agent of the Company, the Security
Registrar or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Security
Registrar, the Trustee or any agent of the Company, 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 Security.
Transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to
the Depository, its successors or their respective nominees.
Interests of beneficial owners in a Global Security may be
transferred or exchanged for Physical Securities in accordance
with the rules and procedures of the Depository and the
provisions of this Section and Section 2.8. In addition,
Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in a Global Security
if, and only if, either (a) the Depository notifies the Company
that it is unwilling or unable to continue as depositary for the
Global Security and a successor depositary is not appointed by
the Company within 90 days of such notice, (b) the Company
determines not to have the Securities represented by the Global
Security 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 Securities, beneficial owners holding
interests representing a majority of the principal amount of
Securities of such series represented by a Global Security advise
the Trustee through the Depository in writing that the
continuation of the book-entry system with respect to the
Securities of such series is no longer in such beneficial owners'
best interests.
In connection with the transfer of an entire Global
Security to beneficial owners pursuant to this Section, the
Global Securities shall be deemed to be surrendered to the
Trustee for cancellation, and the Company 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 Security, an equal
aggregate principal amount of Physical Securities of authorized
denominations.
The Holder of a Global Security 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 Securities.
Notwithstanding anything to the contrary in this
Section 2.9, an applicable Series Supplemental Indenture may
amend, modify or supplement the provisions of this Section 2.9 as
to the Securities issued hereunder and thereunder.
SECTION II.10 Mutilated, Destroyed, Lost and Stolen
Securities. If (a) any mutilated Security 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 Security, 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 and their agents harmless, then, in the absence of notice to
the Company, the Security Registrar or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company
shall execute and upon the Company'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 Security, and at the cost of the Holder
of the Security, a new Security of the same series and of like
tenor and principal amount bearing a number not then outstanding.
If, after the delivery of such new Security, a bona fide
purchaser of the original Security in lieu of which such new
Security was issued presents for payment such original Security,
the Company, the Security Registrar and the Trustee shall be
entitled to recover such new Security 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 the Company, the
Security Registrar or the Trustee in connection therewith.
Notwithstanding the foregoing, in case any such
mutilated, destroyed, lost or stolen Security 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 Security, pay
such Security.
Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses connected therewith.
Every new Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute a
contractual obligation of the Company and, whether or not the
destroyed, lost or stolen Security shall be at any time
enforceable by anyone, shall be entitled to all the benefits and
security of this Indenture, and the Collateral Documents equally
and proportionately with any and all other Securities duly issued
hereunder (subject to the rights of the Company 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 Securities.
SECTION II.11 Payment of Principal, Premium and
Interest; Rights to Payments Preserved. Principal of, and
premium (if any) and interest on, any Security that is payable,
and punctually paid or duly provided for, at any Stated Maturity
or any applicable Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date
for such payment. All payments relating to the Securities of any
series shall be made at the Place or Places of Payment for the
Securities of such series, 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 Securities of such
series, except for the final installment of principal payable
with respect to a Security, which shall be payable as provided in
Section 8.5 (in the case of Securities redeemed or prepaid) or
(in the case of Securities matured) upon presentation and
surrender of such Security at the Place of Payment.
Any amount in respect of any Security of any series
that is payable, but is not punctually paid or duly provided for,
on the related Payment Date shall forthwith cease to be payable
to the Holder of such Security on the relevant Regular Record
Date and such defaulted amount may be paid by the Company as
provided below:
The Company may elect to make payment of all or any
portion of such defaulted amount to the Person in whose name such
Security (or its Predecessor Security) is registered at the close
of business on a Special Record Date for the payment of such
defaulted amount, which shall be fixed by the Company in the
following manner. At least twenty (20) days prior to the date of
proposed payment the Company shall notify the Trustee and the
Paying Agent in writing of the Special Record Date and the
aggregate defaulted amount proposed to be paid on each Security
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 aggregate defaulted amount 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 amount as provided in this paragraph. The Special
Record Date for the payment of such defaulted amount 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 the Company, cause notice of the proposed payment of
such defaulted amount and the Special Record Date therefor to be
mailed, first class postage prepaid, to each Holder of a Security
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
amount and the Special Record Date therefor having been mailed as
aforesaid, such defaulted amount shall be paid to the Persons in
whose names the Securities of such series (or their respective
Predecessor Securities) are registered on such Special Record
Date.
Subject to the foregoing provisions of this Section,
each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to receive unpaid amounts of principal,
premium (if any), and accrued interest that were carried by such
other Security.
SECTION II.12 Persons Deemed Owners. Subject to
Section 2.11, prior to due presentment of a Security for
registration of transfer, the Person in whose name any Security
is registered shall be deemed to be the owner of such Security
for the purpose of receiving payment of principal of, premium (if
any), and interest on, such Security and for all other purposes
whatsoever, whether or not such Security is overdue, regardless
of any notice to anyone to the contrary.
SECTION II.13 Cancellation. All Securities
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. The Company may at any time deliver to the Trustee
for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the
Trustee shall be destroyed and certification of their destruction
shall be delivered to the Company.
SECTION II.14 Dating of Securities; Computation of
Interest. Except as otherwise provided in the Series
Supplemental Indenture relating to the Securities of a series:
(a) Each Security of a series shall be dated the date
of its authentication.
(b) Interest on the Securities of such series shall be
computed on the basis of a 360-day year consisting of twelve
30-day months.
SECTION II.15 Source of Payments Limited; Rights and
Liabilities of the Company. All payments of principal and
interest and any other payments to be made in respect of the
Securities and this Indenture shall be made only from the
revenues and assets of (i) the Company and (ii) the Collateral,
the payments therefrom and the income and proceeds received by
the Trustee therefrom. Each Holder, by its acceptance of a
Security, agrees that (a) the Trustee shall not be liable to any
Holder for any amounts payable under any Security or for any
liability under this Indenture and (b) recourse shall be
otherwise limited in accordance with Article V.
SECTION II.16 Allocation of Principal and Interest.
Each payment of principal of and premium, if any, and interest on
each Security shall be applied, first, to the payment of accrued
but unpaid interest on such Security (including 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
Security then due (including any overdue installment of
principal) thereunder.
SECTION II.17 Parity of Securities. All Securities of
a series issued and Outstanding hereunder rank on a parity with
each other Security of the same series and with all Securities of
each other series and each Security of a series shall constitute
senior indebtedness of the Company and, except as set forth below
in this Section 2.17, shall be secured equally and ratably by
this Indenture and the Collateral Documents with each other
Security of the same series and with all Securities 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, except as set forth below in this
Section 2.17, each Security of a series shall be entitled to the
same benefits and security in this Indenture and the Collateral
Documents as each other Security of the same series and with all
Securities of each other series. The Notes Guarantee Service
Fund, the Notes Guarantee Service Reserve Fund, the Subaccounts
and all cash, payments, moneys, instruments, securities and
investments held from time to time therein shall be for the
exclusive use and benefit of the Holders of the Senior Secured
Notes Guarantee and, accordingly, shall not secure or otherwise
benefit any other Securities or the Holders thereof.
SECTION II.18 References to Interest Deemed to Include
Liquidated Damages and Additional Amounts. References in this
Indenture to interest on any Security shall be deemed to include
any Liquidated Damages and any Additional Amounts payable in
respect of such Security.
ARTICLE III
APPOINTMENT OF TRUSTEE AS DEPOSITARY
AGENT AND COLLATERAL AGENT; ESTABLISHMENT OF FUNDS
SECTION III.1 Acceptance of Appointment of Trustee as
Depositary Agent and Collateral Agent. (a) The Trustee is
hereby appointed and agrees to act as depositary agent and
collateral agent under this Indenture and the Collateral
Documents and to accept all securities, cash, payments, other
amounts and Dollar Permitted Investments to be delivered to or
held by the Trustee pursuant to the terms of this Indenture and
the Collateral Documents. The Trustee shall hold and safeguard
the Collateral during the term of this Indenture and shall treat
the cash, instruments and securities in the Collateral as moneys,
instruments and securities pledged by the Company to the Trustee
on behalf of the Holders to be held in the custody of the
Trustee, in trust in accordance with the provisions of this
Indenture and the Collateral Documents. In performing its
functions and duties under this Indenture, the Trustee shall act
solely as agent for the Holders 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 Company.
(b) The Company shall not 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 Indenture, and to
direct the investment of moneys held in the Funds as permitted by
Section 4.6.
(c) All Funds shall be under the exclusive dominion
and control of the Trustee. Except as expressly provided herein,
the Company and any Affiliate thereof shall not have any right to
withdraw monies from any Fund. The Company hereby irrevocably
authorizes the Trustee to deposit monies into, and withdraw and
transfer monies from, each Fund in accordance with the terms of
this Indenture.
(d) Notwithstanding any provision to the contrary in
the Collateral Documents or the other Transaction Documents to
which it is a party, the Trustee shall not have any duties or
responsibilities regarding the Collateral, except those expressly
set forth in this Indenture, the Collateral Documents and the
other Transaction Documents to which it is a party, or any
fiduciary relationship with any Holder of Securities, and no
implied covenants, functions or responsibilities shall be read
into this Indenture, the Collateral Documents or the other
Transaction Documents to which it is a party or otherwise exist
against the Trustee.
(e) The Trustee will give notices to the Holders of
Securities of any action taken by it to enforce its rights under
any Collateral 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 Trustee determines upon advice
of counsel that failure to take immediate action would be
detrimental to the interests of the Holders of Securities in
which event such notice shall be given promptly after the taking
of such action.
SECTION III.2 Security Interest. As collateral
security for the prompt and complete payment and performance when
due of all its obligations with respect to the Securities, the
Company, or PEC, as the case may be, has, pursuant to the
Collateral Documents, pledged, assigned, hypothecated and
transferred to the Trustee for the benefit of the Holders of all
Securities, and hereby grants to the Trustee for the benefit of
the Holders of all Securities, a first-priority Lien on, and
security interest in and to, the Company Revenue Fund, the
Company Operating Fund, the PEC Revenue Account and the Company
Equity Distribution Fund and (b) all cash, payments, moneys,
instruments, securities and investments held therein. As
additional collateral security for the prompt and complete
payment and performance when due of all its obligations with
respect to the Senior Secured Notes Guarantee, the Company has,
pursuant to the Collateral Documents, pledged, assigned,
hypothecated and transferred to the Trustee for the benefit of
the Holders of the Senior Secured Notes Guarantee only, and
hereby grants to the Trustee for the benefit of the Holders of
the Senior Secured Notes Guarantee only, a first-priority Lien
on, and security interest in and to, (i) the Notes Guarantee
Service Fund, the Notes Guarantee Service Reserve Fund and each
Subaccount and (ii) all cash, payments, moneys, instruments,
securities and investments held therein. Each Fund and each
Subaccount shall at all times be in the exclusive possession of,
and under the exclusive domain and control of, the Trustee.
SECTION III.3 Establishment of Funds and Sub-Accounts.
The Company shall establish with the Trustee six (6) special,
segregated trust accounts (collectively, the "Funds"), to be
named as follows:
(a) Panda Global Holdings -- Revenue (the "Company
Revenue Fund");
(b) Panda Global Holdings -- Operating (the "Company
Operating Fund");
(c) Panda Global Holdings -- Distribution (the
"Company Equity Distribution Fund");
(d) Panda Global Holdings -- Notes Guarantee Service
(the "Notes Guarantee Service Fund");
(e) Panda Global Holdings -- Notes Guarantee Service
Reserve (the "Notes Guarantee Service Reserve Fund"); and
(f) Panda Energy -- Revenue (the "PEC Revenue Fund").
The Trustee shall establish two (2) sub-accounts within the Notes
Guarantee Service Fund (collectively, the "Subaccounts"), to be
named as follows:
(i) Panda Global Holdings -- Notes Guarantee
Principal (the "Notes Guarantee Principal Account");
(ii) Panda Global Holdings -- Notes Guarantee Interest
(the "Notes Guarantee Interest Account");
The Trustee shall maintain the Funds and the Subaccounts at all
times until the termination of this Indenture except that, if at
any time no Senior Secured Notes remain Outstanding, the Trustee
may upon written request of the Company terminate the Notes
Guarantee Service Fund and the Notes Guarantee Service Reserve
Fund and the Subaccounts and return all cash, payments, moneys,
instruments, securities and investments held therein to the
Company.
All cash, payments, moneys, instruments, securities and
investments from time to time held in each Fund or Subaccount
shall be held (i) in the name of the Trustee and (ii) in the
custody of the Trustee for the purposes and on the terms set
forth in this Indenture. Additional funds and sub-funds may be
established and created from time to time in accordance with this
Indenture and any Series Supplemental Indenture.
ARTICLE IV
THE FUNDS
SECTION IV.1 Company Revenue Fund. (a) The Company
shall deliver (or cause to be delivered) to the Trustee as soon
as practicable after receipt the following amounts for deposit in
the Company Revenue Fund in accordance with this Section 4.1(a):
(i) revenues received by the Company from any source, (ii) all
principal, interest and other amounts derived from the investment
of monies in any of the Funds pursuant to Section 4.6, (iii) all
amounts on deposit in the PEC Revenue Fund as received from the
U.S. Distribution Fund, including revenues from any U.S.
Permitted Project that is constructed, owned or operated as
permitted by the provisions of the PFC Indenture, (iv) in the
event that a U.S. Permitted Project is constructed, owned or
operated as permitted by the provisions of this Indenture, any
and all available revenues from such U.S. Permitted Project, (v)
any and all available Domestic Project Event Proceeds and
Permitted Project Event Proceeds from any U.S. Permitted Project
and (vi) all other amounts collected or received by the Trustee
under the Collateral Documents. The Company hereby agrees and
confirms that it has irrevocably instructed PIC to transfer all
moneys in the U.S. Distribution Account directly to the Trustee
for deposit into the PEC Revenue Account and PEC to make all
payments owing to the Company directly to the Trustee for deposit
into the Company Revenue Fund. If, notwithstanding the
foregoing, any amounts required to be deposited in the Company
Revenue Fund are remitted directly to the Company (or any
Affiliate of the Company), the Company shall (or shall cause any
such Affiliate to) hold such payments in trust for the Trustee
and shall promptly remit such payments to the Trustee for deposit
in the Company Revenue Fund, in the form received, with any
necessary endorsements.
(b) The Company hereby irrevocably authorizes the
Trustee, on each Monthly Date, from the moneys then on deposit in
the Company Revenue Fund, to make the transfers specified in an
Officer's Certificate delivered to the Trustee at least two (2)
days prior to such Monthly Date (or such fewer days in advance as
may be acceptable to the Trustee) in the following order of
priority:
first, to the Company Operating Fund, the amount
certified to be the excess (if any) of (i) the Company's
good faith estimate of the aggregate amount payable by the
Company prior to the next succeeding Monthly Date in respect
of expenses incurred by the Company in connection with the
ordinary course of its business (including expenses in
connection with the Administrative Services Agreement) over
(ii) the aggregate of the amounts previously transferred to
the Company Operating Fund for the payment of such expenses
and not so applied;
second, to the Notes Guarantee Interest Account of the
Notes Guarantee Service Fund, the amount certified to be
equal to the excess (if any) of (i) the interest on the
Senior Secured Notes Outstanding that is due and payable on
the first Interest Payment Date following the Capitalized
Interest Expiration Date and, thereafter, on each Interest
Payment Date (as such term is defined in the Senior Secured
Notes Indenture) falling on, or within six months after,
such Monthly Date over (ii) the sum of (x) the moneys then
on deposit in such Notes Guarantee Interest Account and (y)
the moneys then on deposit in the Senior Secured Notes
Interest Account of the Issuer's Senior Secured Notes Debt
Service Fund;
third, to the Notes Guarantee Principal Account of the
Notes Guarantee Service Fund, the amount certified to be
equal to the excess (if any) of (i) the sum of the principal
of, and premium (if any) on, the Senior Secured Notes
Outstanding that is due and payable on the Principal Payment
Date falling on, or within six months after, such Monthly
Date over (ii) the sum of (x) the moneys then on deposit in
such Notes Guarantee Principal Account and (y) the moneys
then on deposit in the Senior Secured Notes Principal
Account of the Issuer's Senior Secured Notes Debt Service
Fund;
fourth, to the Notes Guarantee Service Reserve Fund,
the excess (if any) of (i) the Debt Service Reserve
Requirement over (ii) the moneys then on deposit in the
Issuer's Debt Service Reserve Fund after giving effect to
any payment on the Senior Secured Notes to be made on the
next Payment Date; and
fifth, to the Company Equity Distribution Fund, any
balance remaining in the Company Revenue Fund.
If an Event of Default shall have occurred and be
continuing or in connection with any Monthly Date the Company
shall have failed to deliver an Officers' Certificate setting
forth the amounts to be transferred pursuant to clauses first
through fifth above, then, based upon its own calculations, the
Trustee shall make the transfers set forth in clauses second
through fourth above only in accordance with the priorities
indicated.
Upon receipt of any cash proceeds resulting from
liquidation of the Collateral, the Trustee shall, first, deposit
such cash proceeds into the Company Revenue Fund, second, pay to
itself the Trustee Claims then due and payable and, third, based
upon its own calculations, make the transfers set forth in
clauses second through fourth above in accordance with the
priorities indicated.
(c) In the event that the Company issues Securities
hereunder after the date hereof and, in connection therewith,
establishes, pursuant to a Series Supplemental Indenture, any
additional debt service funds, debt service reserve funds,
construction funds, capitalized interest funds or other similar
funds, the initial funding of such additional funds shall be from
the proceeds of the Securities issued pursuant to such Series
Supplemental Indenture, if applicable. After the initial funding
of such funds, priority and source of payment for such additional
funds will be as follows:
(i) if additional amounts are required to be
transferred to any construction fund or capitalized interest
fund, such amounts may only be transferred to such funds
from amounts available in the Company Equity Distribution
Fund as provided in such Series Supplemental Indenture or
from amounts available from funds which are dedicated solely
to the Project being constructed;
(ii) amounts that are required to be
transferred to any debt service fund will be withdrawn from
the Company Revenue Fund and will be transferred ratably, on
a parity with and only in proportion to the aggregate amount
of principal and interest due on each class of Outstanding
Securities with the amounts described above in clauses
second and third of subsection (b) of this Section 4.1; and
(iii) amounts that are required to be
transferred to any debt service reserve fund will be
withdrawn from the Company Revenue Fund and will be
transferred ratably, on a parity with and only in proportion
to the amount of additional contributions then required to
be made to each such debt service reserve fund with the
amount described above in clause fourth of subsection (b) of
this Section 4.1.
SECTION IV.2 Notes Guarantee Service Fund. (a) If,
on any Interest Payment Date, the moneys on deposit in the Senior
Secured Notes Interest Account of the Issuer's Senior Secured
Notes Debt Service Fund are insufficient to pay the interest
(including Liquidated Damages and Additional Amounts, if any) on
the Senior Secured Notes Outstanding that is due and payable
(whether at the stated maturity, call for redemption, by
acceleration or otherwise) on such Interest Payment Date, the
Company hereby irrevocably authorizes the Trustee, from the
moneys then on deposit in the Notes Guarantee Interest Account of
the Notes Guarantee Service Fund, and upon receipt of
notification from the Issuer and the Senior Secured Notes
Indenture Trustee to the effect that an insufficiency in the
funds available in the Senior Secured Notes Interest Account of
the Senior Secured Notes Debt Service Fund exists, to obtain
funds for the payment of such interest by withdrawing moneys from
the Notes Guarantee Interest Account of the Notes Guarantee
Service Fund and transferring such moneys to the Senior Secured
Notes Indenture Trustee.
(b) If, on any Principal Payment Date, the moneys on
deposit in the Senior Secured Notes Principal Account of the
Issuer's Senior Secured Notes Debt Service Fund are insufficient
to pay the principal of, and premium (if any) on, the Senior
Secured Notes Outstanding that is due and payable (whether at the
stated maturity, call for redemption, by acceleration or
otherwise) on such Principal Payment Date, the Company hereby
irrevocably authorizes the Trustee, from the moneys then on
deposit in the Notes Guarantee Principal Account of the Notes
Guarantee Service Fund, and upon receipt of notification from the
Issuer and the Senior Secured Notes Indenture Trustee to the
effect that such an insufficiency in the Senior Secured Notes
Principal Account of the Senior Secured Notes Debt Service Fund
exists, to obtain funds for the payment of such principal and
premium by withdrawing moneys from the Notes Guarantee Principal
Account of the Notes Guarantee Service Fund and transferring such
moneys to the Senior Secured Notes Indenture Trustee and to pay
any deficiency in the Notes Guarantee Interest Account pursuant
to Section 4.7.
(c) In the event that, on any Monthly Date, after
giving effect to all transfers required to be made on such date
pursuant to Section 4.1(b), the moneys on deposit in the Notes
Guarantee Service Fund exceed the moneys required to be on
deposit therein on such Monthly Date pursuant to Section 4.1(b),
on the next Monthly Date, prior to making transfers pursuant to
Section 4.1(b), the Trustee shall transfer such excess moneys to
the Company Revenue Fund.
SECTION IV.3 Notes Guarantee Service Reserve Fund.
(a) If, on any Payment Date, the moneys on deposit in the Senior
Secured Notes Debt Service Reserve Fund are insufficient to pay
the principal of, and premium (if any) and interest (including
Liquidated Damages and Additional Amounts, if any) on, the Senior
Secured Notes Outstanding that is due and payable (whether at the
stated maturity, call for redemption, by acceleration or
otherwise) on such Payment Date, the Company hereby irrevocably
authorizes the Trustee, from the moneys then on deposit in the
Notes Guarantee Service Reserve Fund, and upon receipt of
notification from the Issuer and the Senior Secured Notes
Indenture Trustee to the effect that such an insufficiency in the
Senior Secured Notes Debt Service Reserve Fund exists, to obtain
funds for the payment of such principal, premium, if any and
interest (including Liquidated Damages and Additional Amounts, if
any) by withdrawing moneys from the Notes Guarantee Service
Reserve Fund and transferring such moneys to the Senior Secured
Notes Indenture Trustee.
(b) Upon notice from the Issuer of an insufficiency in
the amount of moneys then held in the Senior Secured Notes Debt
Service Reserve Fund (such determination to be made by the Issuer
and confirmed by the Senior Secured Notes Indenture Trustee
pursuant to Section 4.3(c) of the Senior Secured Notes
Indenture), on any Payment Date that amounts have been
requisitioned in accordance with Section 4.7 and amounts are to
be withdrawn from the Notes Guarantee Service Reserve Fund in
accordance with this Indenture, the Trustee shall withdraw the
moneys on deposit in the Notes Guarantee Service Reserve Fund and
shall apply the moneys withdrawn from the Notes Guarantee Service
Reserve Fund to the payments of such principal, premium, if any,
or interest (including Liquidated Damages and Additional Amounts,
if any) then due and payable.
(c) In the event that, on any Monthly Date, after
giving effect to all transfers required to be made on such date
pursuant to Sections 4.1(b), this Section 4.3 and 4.7, the sum of
the moneys on deposit in the Notes Guarantee Service Reserve Fund
and the Issuer's Senior Secured Notes Debt Service Reserve Fund
exceed the Debt Service Reserve Requirement, the Trustee shall
transfer such excess moneys in the Notes Guarantee Service
Reserve Fund to the Company Revenue Fund.
SECTION IV.4 Company Operating Fund. The Company
hereby irrevocably authorizes the Trustee, from the moneys then
on deposit in the Company Operating Fund, (a) to make the
transfers in respect of expenses incurred by the Company in
connection with the Administrative Services Agreement and in the
ordinary course of its business specified in an Officer's
Certificate delivered to the Trustee at least two (2) days prior
to the date on which such transfers are to be made (or such fewer
days in advance as may be acceptable to the Trustee) and (b) to
pay any deficiency in a fund pursuant to Section 4.7.
SECTION IV.5 Company Equity Distribution Fund. (a)
The Company hereby irrevocably authorizes the Trustee, from the
moneys then on deposit in the Company Equity Distribution Fund,
(i) to pay any deficiency in a fund pursuant to Section 4.7 and
(ii) to make a transfer to the Company (including for payments
under the Development Services Agreement) of the amount specified
in an Officer's Certificate delivered to the Trustee at least two
(2) days prior to any Monthly Date.
(b) Each Officer's Certificate delivered to the
Trustee pursuant to clause (a)(ii) of this Section 4.5 requesting
a transfer of moneys on deposit in the Company's Equity
Distribution Fund shall contain certifications as follows:
(i) no Event of Default, or event of
default pursuant to any of the Issuer Loan Agreement,
the Senior Secured Notes Indenture or the Shareholder
Loan Agreements has occurred and is continuing;
(ii) the representations and warranties in
this Indenture, the Issuer Loan Agreement and the
Shareholder Loan Agreements are true and correct in all
material respects on the date thereof as if made on
such date, except as affected by the consummation of
the transactions contemplated thereby or to the extent
relating solely to an earlier date;
(iii) that the Company is, and, after
giving effect to the transfer requested in such
certificate, will be, in compliance with any applicable
requirement of Section 7.11;
(iv) the amount in the Issuer's Senior
Secured Notes Debt Service Reserve Fund plus the amount
in the Notes Guarantee Service Reserve Fund equals or
exceeds the Debt Service Reserve Requirement;
(v) if the Officer's Certificate
requesting a transfer relates to a transfer in
connection with a payment pursuant to the Development
Services Agreement, such certificate contains an
accounting of the costs being reimbursed and to which
Project such costs are to be allocated; and
(vi) if the Officer's Certificate
requesting a transfer relates to a transfer in
connection with the project development activities of
the Company, such certificate contains an accounting of
the costs being paid and to which Project such costs
are to be allocated.
SECTION IV.6 Investment of Funds. (a) Monies held in
any Fund created by or pursuant to this Indenture shall be
invested and reinvested by the Trustee, as directed in writing by
the Company, in Dollar Permitted Investments; provided, however,
that at any time when an Event of Default shall have occurred and
be continuing, the Trustee shall only select investments to be
made by the Trustee in a manner such that, in the reasonable
opinion of the Company, 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 Dollar Permitted Investments or
other investments allowed pursuant to clause (a) hereof are
redeemed prior to the maturity thereof, the Trustee shall not be
liable for any penalties relating thereto.
(c) Any income or gain realized from Dollar Permitted
Investments with respect to monies on deposit in any Fund shall
be deposited, first, into the Fund from which the monies invested
came, until the amount required to be held in such fund has been
reached, and second, into the Company Revenue Fund; and any loss
shall be charged to the applicable Fund. The Trustee shall not
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.
(d) Monies of any Fund that are invested in a Dollar
Permitted Investment shall be deemed, for all purposes of this
Indenture, to be on deposit in such Fund in an amount equal to
the lesser of (i) the face amount of such Dollar Permitted
Investment and (ii) the purchase price thereof. Accrued and
unpaid interest or profit in any Dollar Permitted Investment
shall not be deemed to be on deposit in any Fund until such
interest or profit is actually paid and received by the Trustee,
whereupon such interest or profit shall be deposited in the
appropriate Fund.
(e) The Company hereby expressly authorizes the
Trustee to sell or make any transfer or withdrawal required or
contemplated by this Indenture and neither the Trustee nor any
Secured Party shall have any liability by reason of any loss
suffered upon the sale or disposition of a Dollar Permitted
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.
(f) Without limitation of the preceding sentence, if
the Trustee shall receive instructions from an Authorized
Representative of the Company regarding the sale or other
disposition of Dollar Permitted Investments, then the Trustee
shall make such sales and dispositions in accordance with such
instructions before making any other necessary sales or
dispositions.
SECTION IV.7 Payment Deficiencies; Invasion of Funds.
If, on any Payment Date with respect to the Senior Secured Notes,
the moneys available to the Issuer in the Issuer Funds is
insufficient to make a payment, whether with respect to
principal, premium, if any or interest (including Liquidated
Damages and Additional Amounts, if any) with respect to the
Senior Secured Notes, the Company will provide funds for the
correction of any such insufficiency by withdrawing moneys in the
following manner and order of priority:
first, upon notice from the Senior Secured Notes
Indenture Trustee of an insufficiency in the Issuer's Senior
Secured Notes Interest Account, from the Notes Guarantee
Interest Account of the Notes Guarantee Service Fund, until
the balance therein is zero;
second, upon notice from the Senior Secured Notes
Indenture Trustee of an insufficiency in the Issuer's Senior
Secured Notes Principal Account, from the Notes Guarantee
Principal Account of the Notes Guarantee Service Fund, until
the balance therein is zero;
third, upon notice from the Senior Secured Notes
Indenture Trustee that it has (a) a continuing inability to
make payment on the Senior Secured Notes in accordance with
the terms of the Senior Secured Notes Indenture and (b) has
used all of the moneys available in the Issuer Equity
Distribution Fund and the Pan-Western Equity Distribution
Fund, from the Company Equity Distribution Fund, until the
balance therein is zero;
fourth, upon notice from the Senior Secured Notes
Indenture Trustee that it has (a) a continuing inability to
make payment on the Senior Secured Notes in accordance with
the terms of the Senior Secured Notes Indenture and (b) has
used all of the moneys available in the Issuer's Senior
Secured Notes Debt Service Reserve Fund, from the Notes
Guarantee Service Reserve Fund, until the balance therein is
zero;
fifth, upon notice from the Senior Secured Notes
Indenture Trustee that it has (a) a continuing inability to
make payment on the Senior Secured Notes in accordance with
the terms of the Senior Secured Notes Indenture and (b) has
used all of the moneys available in the Pan-Sino Fund, the
Pan-Western Operating Fund and the Issuer Operating Fund,
from the Company Operating Fund, until the balance therein
is zero.
SECTION IV.8 Resignation and Removal of Consolidating
Financial Analyst; Appointment of Successor; Payment of Fees and
Expenses. (a) In case at any time any Consolidating Financial
Analyst shall fail to be independent (within the meaning
specified in the definition of "Eligible Successor" in Appendix
A) from the Company or any Affiliate of the Company or shall
become incapable of acting or otherwise fails to perform the
functions of the Consolidating Financial Analyst 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 Financial Analyst 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
Securities, considered as one class) remove the Consolidating
Financial Analyst by written instrument, one copy of which
instrument shall be delivered to the Consolidating Financial
Analyst and one copy of which instrument shall be delivered to
the Company.
(b) Subject to the proviso below, the Company may at
any time remove the Consolidating Financial Analyst by delivering
written notice of such removal to a Responsible Officer of the
Trustee and to the Consolidating Financial Analyst; provided,
that the Company may not remove any Consolidating Financial
Analyst if such Consolidating Financial Analyst has served as the
Consolidating Financial Analyst for a period of less than twelve
(12) months immediately preceding such proposed removal, unless
such Consolidating Financial Analyst's removal is due to its
failure to be independent (within the meaning specified in
Appendix A in the definition of "Eligible Successor") from the
Company or any Affiliate of the Company or such Consolidating
Financial Analyst shall become incapable of acting or otherwise
fails to perform the functions of the Consolidating Financial
Analyst 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 Financial Analyst or
its property or its affairs for the purpose of rehabilitation,
conservation or liquidation. Any removal of a Consolidating
Financial Analyst by the Company pursuant to this Section 4.8(b)
shall not be effective until the applicable Eligible Successor
accepts its appointment in accordance with Section 4.8(d).
(c) Upon giving or receiving written notice of the
removal or resignation of any Consolidating Financial Analyst,
the Company shall promptly appoint a successor from among the
applicable Eligible Successors by written instrument executed by
order of the Company, 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 Financial Analyst
appointed under this Section shall execute, acknowledge and
deliver to the Company and the Trustee an instrument accepting
such appointment. Such instrument shall include a statement that
such Consolidating Financial Analyst 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 the Company and any
Affiliate of the Company. Such Consolidating Financial Analyst
shall further state in such instrument that, if at the time of
its appointment it is currently providing any services to the
Company 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
Domestic Projects, the Joint Ventures and any Permitted Projects
in accordance with the terms of this Indenture.
(e) To the extent not provided for out of the Company
Operating Fund, for so long as any of the Securities shall remain
Outstanding, the Company covenants and agrees to pay to the
Consolidating Financial Analyst 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 the Company with the Consolidating Financial
Analyst, 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 the Company.
(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 Financial Analyst
or Eligible Successor hereunder.
SECTION IV.9 Disposition of Accounts and Funds Upon
Retirement of Securities. Except as provided in Section 3.3,
after payment in full of (i) the principal of and premium, if
any, and interest on all the Securities 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 Funds
established in, or pursuant to, Section 3.3 shall be paid to the
Company.
SECTION IV.10 Procedures for Review by Consolidating
Financial Analyst of Projections. Whenever this Indenture
provides for any review or determination to be made by the
Consolidating Financial Analyst, such review shall be based upon
such investigation and assumptions that the Consolidating
Financial Analyst determines is reasonable under the
circumstances. In addition, the Consolidating Financial Analyst
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 V.1 Liability of the Company Solely Corporate.
No recourse shall be had for the payment of the principal,
premium, if any, or the interest (including Liquidated Damages
and Additional Amounts, if any), on any Collateral 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 the
Securities, against any stockholder, officer, or director, as
such, past, present or future, of the Company or any of its
Subsidiaries, 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 Securities are limited as
provided in Section 2.15 and that the Company's obligations under
the Securities are solely corporate obligations of the Company,
and that no personal liability whatsoever shall attach to, or be
incurred by, any stockholder, officer, or director, past, present
or future, of the Company or any of its subsidiaries, because of
the indebtedness hereby authorized or under or by reason of any
of the obligations, covenants, promises or agreements contained
in the Securities 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, and the issue of Securities and
no judgment for any deficiency upon the obligations of the
Company contained in the Securities shall be obtainable by the
Holders, the Trustee against any stockholder, officer, or
director, past, present or future, of the Company; provided,
however, that nothing herein or in the Securities 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 Collateral
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 or the
Trustee to proceed against any such Person with respect to the
enforcement of such obligations.
ARTICLE VI
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION VI.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 the Company, shall execute instruments
in form and substance satisfactory to the Trustee and the Company
acknowledging satisfaction and discharge of this Indenture, when:
(a) either
(i) all Securities theretofore authenticated
and delivered (other than (A) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 2.10 and (B) Securities deemed
to have been paid in accordance with Section 6.3(a)) have
been delivered to the Trustee for cancellation; or
(ii) (A) all Securities not theretofore
delivered to the Trustee for cancellation have or will (upon
the mailing of a notice or notices deposited with the
Trustee together with irrevocable instructions to mail such
notice or notices to Holders of such Securities) become due
and payable and shall be deemed to have been paid in
accordance with Section 6.3(a); and
(B) all sums due and payable hereunder have been
paid; or
(iii) in the case of Securities which are
Guarantees, the issuer of the securities to which such
Guarantees relate shall have satisfied all conditions
required pursuant to the indenture under which such related
securities were issued, the effect of which is that such
indenture shall have been satisfied and discharged and shall
have ceased to be of further effect and Holders of such
related securities and such Guarantees shall have no further
claims for payments against the Company with respect to such
Guarantees; and
(b) 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 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 Securities 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 the Company and the
Trustee under this Indenture and the Securities shall survive to
the extent provided in such Section until all such Securities
have actually been repaid in full; provided, however, that the
obligations of the Company 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 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 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).
SECTION VI.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 Securities and this
Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent), to
the Holders of the Securities 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 Liquidated Damages and Additional
Amounts), 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) the Company 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 the Company
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 VI.3 Satisfaction, Discharge and Defeasance of
Securities of any Series.
(a) The Company shall be deemed to have paid and
discharged the entire indebtedness on all the Outstanding
Securities 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 Securities,
as it relates to such Outstanding Securities of such series,
shall no longer be in effect (and the Trustee, at the expense of
the Company, shall at Company Request execute instruments in form
and substance satisfactory to the Trustee and the Company
acknowledging the same), except as to:
(i) the rights of Holders of Securities 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,
(including Liquidated Damages and Additional Amounts, if
any) on the Outstanding Securities of such series on the
Payment Date of such principal or installment of principal
or of such interest (to and including the Redemption Date,
if any, irrevocably designated by the Company pursuant to
subparagraph (viii) of this Section 6.3(a));
(ii) the rights and obligations of the Company
and the Trustee under this Article and with respect to such
Securities of such series under Sections 2.7, 2.8, 2.9,
2.10, 2.11, 2.12, 2.13 and 2.16 and, if the Company 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) the Company'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) the Company 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 Securities 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, together with irrevocable written instructions
to the Trustee to apply such monies and/or U.S. Government
Obligations to pay when due, the principal of (and premium,
if any) and each installment of principal (and premium, if
any) and interest, if any, (including Liquidated Damages and
Additional Amounts, if any) on the Outstanding Securities of
such series on each Payment Date of such principal or
installment of principal or such interest (to and including
the Redemption Date, if any, irrevocably designated by the
Company 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 Securities 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) the Company 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 the Company'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 the Company 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 the Company
under either such statute, and either (x) the trust funds
will no longer remain the property of the Company (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 the
Company, (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 the Company 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, (including
Liquidated Damages and Additional Amounts, if any) on the
Outstanding Securities of a series to and including a
Redemption Date on which all of the Outstanding Securities
of such series are eligible for optional redemption and on
which all of the Outstanding Securities 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 the Company not less than 30 nor more than 60
days prior to such Redemption Date in accordance with
Section 8.4; and
(ix) 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 the Securities
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 Securities of any
series (but the conditions set forth in subparagraphs (vii) and
(ix) thereof are not satisfied), (y) the Company has delivered to
the Trustee an Opinion of Counsel to the effect that the Holders
of the Outstanding Securities 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 Securities 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) 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 which are
necessary to achieve the consequences specified in this
Section 6.3(b) with respect to such series of Securities 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 Securities of such
series, except as otherwise expressly provided herein the
Company shall be released from its covenants and other
obligations contained in Article VII and Section 2.17 of
this Indenture 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 Securities of such series;
(ii) the occurrence of any event specified in
clause (c), (d), (e), (f), (g), and (j) of Section 9.1 shall
not constitute a Default or an Event of Default with respect
to the Securities of such series;
(iii) the Securities 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 Securities have concurred in
any Act under this Indenture with respect to any covenant or
obligation from which the Company has 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 Securities of such series pursuant
to subparagraph (ii) above (or the consequences thereof);
and
(iv) the Securities of such series shall cease
to be secured by or to be entitled to any benefit under the
Collateral 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 Securities 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 the Company of its obligations with respect to
the payment of the principal of (and premium, if any) or
interest, if any, (including Liquidated Damages and Additional
Amounts, if any) on the Outstanding Securities of such series.
In furtherance of the foregoing, it is understood and agreed
that:
(A) satisfaction by the Company of the
conditions necessary to achieve the consequences
specified in this Section 6.3(b) with respect to any
series of Securities shall not be construed to preclude
the Company from achieving the consequences specified
in Section 6.3(a) with respect to such Securities 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
Securities are Securities 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
Except as otherwise specified in a Series Supplemental
Indenture with respect to a particular series of Securities, the
Company hereby covenants and agrees that so long as this
Indenture is in effect and any Securities remain Outstanding:
SECTION VII.1 Payment of Securities. The Company
shall promptly pay the principal of, premium, if any and interest
on (including Liquidated Damages and Additional Amounts, if any)
the Securities (including any amount with respect to any payment
pursuant to a Guarantee) on the dates and in the manner provided
in this Indenture and in the Securities.
SECTION VII.2 Delivery of Officers' Certificates.
Prior to 10:00 am., New York City time, at least two (2) days
prior to each Monthly Date and each Payment Date, the Company
shall deliver to the Trustee an Officer's Certificate of the
Company, setting forth the information required pursuant to
Article IV in order to enable the Trustee to effect transfers and
withdrawals from the Funds contemplated under such Article to be
made on such Monthly Date or Payment Date.
SECTION VII.3 Maintenance of Existence, Properties,
Etc. (a) Except as otherwise provided in the Issuer Pledge
Agreement, the Company shall, and shall cause each of its
Subsidiaries to, preserve and maintain its legal existence and
form.
(b) The Company shall preserve and maintain, and shall
cause each of its Subsidiaries to preserve and maintain, all of
its licenses, rights, privileges and franchises necessary for the
conduct of its business and the due performance of all of its
obligations under this Indenture and the Transaction Documents,
except to the extent failure to do so could not reasonably be
expected to have a Material Adverse Effect.
(c) The Company shall, and shall cause each of its
Subsidiaries 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 have a Material Adverse
Effect, and (ii) do or cause to be done all things necessary to
comply with its organizational documents and agreements.
(d) The Company shall not, and shall not permit any of
its Subsidiaries to, modify, amend or terminate their respective
articles of association or other organizational documents in a
manner that is reasonably likely to have a Material Adverse
Effect.
(e) The Company shall not, and shall not permit any
Subsidiary to, amend or terminate any Transaction Document if
such amendment or termination is reasonably likely to have a
Material Adverse Effect. Upon any amendment or termination of a
Transaction Document, the Company shall deliver an Officer's
Certificate to the Trustee certifying that such amendment or
termination has taken place and that it is not reasonably likely
to have a Material Adverse Effect.
SECTION VII.4 Compliance with Laws. The Company 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 the Company or its Subsidiaries, except,
with respect to a Domestic Project or a U.S. Permitted Project,
any Requirements of Law or Governmental Approvals that are the
subject of a Good Faith Contest and, with respect to the Luannan
Facility or a Non-U.S. Permitted Project, such Non-U.S. Permitted
Project and the Luannan Facility shall not knowingly violate any
Requirements of Law or fail to comply with or obtain Governmental
Approvals. In the event that the Luannan Facility or a Non-U.S.
Permitted Project is knowingly in violation of any Requirements
of Law or Government Approval, such Person shall correct of such
situation within thirty (30) days, or such shorter time as may be
required by such Requirement of Law or Governmental Approval.
SECTION VII.5 Payment of Taxes. The Company shall
cause the Issuer to promptly pay when due any present or future
stamp, court or documentary taxes or any other excise or property
taxes, charges or similar levies that arise in any jurisdiction
from the execution, delivery or registration of any Senior
Secured Note or any other document or instrument referred to in
the Indentures, or the receipt of payments with respect to any
Senior Secured Note, excluding any such taxes, charges or similar
levies imposed by any jurisdiction outside of the Cayman Islands,
the United States and any jurisdiction in which a Paying Agent is
located, except those resulting from, or required to be paid in
connection with, the enforcement of such Senior Secured Note or
any other such document or instrument following the occurrence of
any Default. The Company will, and will cause each of its
Subsidiaries to, pay prior to delinquency, all material taxes,
assessments, and governmental levies except such as are being
contested in good faith and by appropriate proceedings or where
the failure to effect such payment will not have a Material
Adverse Effect.
SECTION VII.6 Books and Records. The Company shall,
and shall cause each of its Subsidiaries to, at all times keep
proper books of account and records, in accordance with good
accounting practices, concerning its business and financial
affairs.
SECTION VII.7 Right of Inspection. Subject to
requirements of applicable Government Rules and upon reasonable
notice from the Trustee, the Company shall, and shall cause each
of its Subsidiaries to, permit the Trustee, or any agents or
representatives thereof, and the Consolidating Financial Analyst
from time to time during normal business hours to conduct
reasonable inspections and examinations at all reasonable times
of the books and records of the Company, any of its Subsidiaries
and each Domestic Project, Permitted Project and the Luannan
Facility and, if requested by the Trustee or the Consolidating
Financial Analyst, as the case may be, the Company 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 its Projects.
SECTION VII.8 Use of Proceeds. The Company shall use
the proceeds from the sale of Securities issued hereunder solely
for the purposes specified in the applicable Series Supplemental
Indenture.
SECTION VII.9 Reporting Requirements. (a) The
Company will furnish to the Trustee as soon as practicable and in
any event within 30 days after the end of each fiscal year, a
certificate of a Responsible Officer of the Company, the Issuer,
Pan-Western and Pan-Sino stating (i) that a review of the
activities of the Company, the Issuer, Pan-Western and Pan-Sino
during the preceding fiscal year has been made under the
supervision of such Responsible Officer, (ii) that to the best of
such Person's knowledge, the Company and the Issuer during the
previous year have kept, observed, performed and fulfilled each
and every covenant and condition contained in this Indenture, the
Senior Secured Notes Indenture, the Senior Secured Notes and the
Senior Secured Note Guarantee and that (iii) such Person has no
reason to believe that any Event of Default or any condition or
event that with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default, has
occurred, or, if there has been a breach or default in the
fulfillment of any such obligation, specifying each such breach
or default known to such Person and the remedies, if any, being
taken to remedy such situation.
(b) The Company shall furnish to the Trustee (i)
unaudited quarterly reports containing consolidated financial
statements of the Company and its Subsidiaries for each of the
first three quarters of its fiscal year and (ii) audited annual
reports containing consolidated financial statements of the
Company and its Subsidiaries. Whether or not required by the
Exchange Act or the rules and regulations of the Commission
thereunder, the Company will furnish to the Holders of the
Securities all quarterly and annual financial information that
would be required to be contained in a filing with the Commission
on Forms 10-Q, 10-K and 8-K (and within the time periods
specified by such rules or regulations for such filings) if the
Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's independent
public accountants; provided that the Company will file a copy of
all such information and reports with the Commission for public
availability (unless the Commission will not accept such a
filing) and make such information available to investors who
request it in writing; provided further, the Company will agree
that the Company will, and will cause the Issuer to, furnish to
the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
(c) The Company shall file with the Trustee and the
SEC and transmit to Holders of Securities such information,
documents and other reports, and such summaries thereof, as may
be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act.
SECTION VII.10 Maintenance of Insurance. (a) The
Company shall maintain, and shall cause each of its Subsidiaries
to maintain, insurance of the types and in the amounts that are
customary and usual for a company in its respective line of
business.
(b) Within 30 days following the commercial operation
date of a Permitted Project (and within 30 days of the Luannan
Commercial Operation Date), the Company shall provide
certificates of insurance to the Trustee, evidencing such
insurance coverage at the time the covered risks will come into
existence during the course of operation.
(c) The Trustee shall be named as sole loss payee,
under a standard lenders loss payable clause, without
contribution, under insurance policies required herein where
applicable. The Trustee shall be added as an additional insured
with respect to the coverage required herein, where applicable,
and such insurance shall be primary without right of contribution
of any other insurance or self-insurance carried by or on behalf
of the Trustee, with respect to its interest as such in the
Luannan Facility and each policy shall contain a severability-of-
interests or cross-liability provision. Insurance policies
required herein, where applicable, shall be endorsed with an
agreed amount clause or waiver of co-insurance.
(d) The insurance carried in accordance with Schedule
7.10, where applicable, shall be endorsed as follows:
(i) All insurers shall waive all rights of
subrogation against the Trustee 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 or material change is made in the
coverage which affects the interests of the Trustee
such cancellation or change shall not be effective as
to the Trustee for thirty (30) days, except for
nonpayment of premium, which shall be ten (10) days,
after receipt by the Trustee of written notice from
such insurer of such cancellation or change.
(e) Upon procurement by the Company and each of its
Subsidiaries of the insurance required pursuant to this Section
7.10, the Company and each of its Subsidiaries shall furnish to
the Trustee certification of all required insurance. Such
certification by the Company and each of its Subsidiaries 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 Trustee, the Company and each of its Subsidiaries
will promptly furnish to the Trustee copies of all insurance
policies, binders and cover notes or other evidence of such
insurance relating to the Domestic Projects, any Permitted
Project and the Luannan Facility.
(f) Within ten (10) days after the certification
referred to in Section 7.10(e) above, the Company and each of its
Subsidiaries shall furnish to the Trustee a report of its
insurance broker stating that all premiums then due have been
paid and a certificate of the Independent Insurance Consultant
stating that, in the opinion of the Independent Insurance
Consultant, the insurance then carried and maintained is in
accordance with the terms hereof.
(g) If at any time any of the insurance required
hereunder shall no longer be available on commercially reasonable
terms, the Company and each of its Subsidiaries 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 Company and each
of its Subsidiaries shall deliver to the Trustee a certificate of
the Independent 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 7.10, 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 affected Domestic
Project, Permitted Project or the Luannan Facility 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 7.10 shall not
constitute an Event of Default, and the Company and each of its
Subsidiaries shall be deemed to be in full compliance with such
requirements, if such failure is due to insurance not being
available on commercially reasonable terms and the Company and
its relevant Subsidiary or Subsidiaries have complied with this
clause (g) in respect of such failure.
(h) The loss, if any, under any insurance required to
be carried under this Section 7.10 shall be adjusted with the
insurance companies or otherwise collected, including the filing
in a timely manner of appropriate proceedings, by the Company and
each of its Subsidiaries, subject to the approval of the
Independent Insurance Consultant if such loss as per each injured
is in excess of $500,000. In addition, the Company and each of
its Subsidiaries shall take all other steps necessary, or if such
loss as per each injured is in excess of $500,000 the steps
requested by the Independent Insurance Consultant, to collect
from insurers any loss covered by any of the insurance policies
required hereunder. All such policies shall provide that the
loss, if any, under such insurance shall be adjusted and paid as
provided in this Section 7.10.
(i) The Company and each of its Subsidiaries shall
promptly notify the Trustee of any loss covered by any insurance
required by this Section 7.10 in excess of $500,000. The Company
and each of its Subsidiaries 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 Permitted Project Event, Domestic
Project Event or Luannan Event of Loss or pertaining to the
settlement, compromise or arbitration of any claim on account of
any Luannan Event of Loss, Domestic Project Event or Permitted
Project Event. The Company may, and may cause each of its
Subsidiaries, in its reasonable judgment, to compromise, settle
or consent to the settlement of any proceeding arising out of any
Luannan Event of Loss, 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 relevant Project Engineer and the Independent
Insurance Consultant; provided, further, that if an Event of
Default has occurred and is continuing, the Company will not nor
will it permit any of its Subsidiaries to settle, compromise or
consent to the settlement of any proceeding arising out of such a
Domestic Project Event, Permitted Project Event or Luannan Event
of Loss without the prior written consent of the Trustee.
(j) No provision of this Section 7.10 or any other
provision of this Indenture shall impose on the Trustee any duty
or obligation to verify the existence or adequacy of the
insurance coverages maintained by the Company or any of its
Subsidiaries nor shall the Trustee be responsible for any
representations or warranties made by or on behalf of the Company
or any of its Subsidiaries to any insurance company or
underwriter.
(k) The Company and each of its Subsidiaries hereby
waives any and every claim for recovery from 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
Company and each of its Subsidiaries, as appropriate, 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.
(l) With respect to any Domestic Project, Permitted
Project and the Luannan Facility, the Company shall cause each
operation and maintenance contractor to procure and maintain in
full force and effect at all times, or shall procure and maintain
on behalf of such operation and maintenance contractor, liability
and worker's compensation insurance for coverage and limits not
less than what is currently required in each operations and
maintenance agreement with respect to such Domestic Project,
Permitted Project or the Luannan Facility.
(m) Notwithstanding anything to the contrary set forth
in this Section 7.10 (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 Independent Insurance Consultant.
(n) The Company and each of its Subsidiaries will
comply, or cause compliance, at all times with the insurance
requirements contained in any of the Transaction Documents.
(o) Prior to the date of this Indenture, the Company
shall retain an Independent Insurance Consultant who shall
provide a written certificate to the Trustee on or prior to the
date of this Indenture, that the insurance that has been obtained
with respect to the Company and each of its Subsidiaries meets
the standards specified in this Section 7.10.
(p) The Independent Insurance Consultant shall (i)
annually review the proposed insurance coverages of the Company
and its Subsidiaries and on or prior to November 15 of each year
shall provide a written certificate to the Trustee specifying
that such insurance meets the standards specified in this Section
7.10 and (ii) on or prior to February 15 of each year provide a
written certificate to the Trustee confirming that the Company
has obtained the insurance coverages the Company proposed to
obtain and which were specified in the Independent Insurance
Consultant's certificate to the Trustee of the preceding November
15.
SECTION VII.11 Limitation on Restricted Payments. The
Company shall not make, and shall not permit any of its
Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless:
(a) no Event of Default shall have occurred and be
continuing at the time of or after giving effect to such
Restricted Payment;
(b) the Luannan Facility Engineer has certified that
the Luannan Facility Commercial Operation Date has occurred;
(c) the Debt Service Coverage Ratio of the Company for
the immediately preceding four fiscal quarters (or, if date of
determination is within the preceding four fiscal quarters
following the Luannan Commercial Operation Date, for such shorter
period) is greater than 1.4 to 1, as certified by the Chief
Financial Officer of the Company;
(d) the projected Debt Service Coverage Ratio of the
Company for the immediately succeeding four fiscal quarters is
greater than 1.4 to 1, as certified by the Chief Financial
Officer of the Company;
(e) the amount in the Issuer's Senior Secured Notes
Debt Service Reserve Fund plus the amount in the Notes Guarantee
Service Reserve Fund equals or exceeds the Debt Service Reserve
Requirement; and
(f) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or
made after the date on which the Senior Secured Notes are
originally issued does not exceed the sum of (1) 50% of the
Company's Consolidated Net Income (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit if after the 28th month following the Closing Date or 50%
of such deficit prior to such date) from the next fiscal quarter
after the Closing Date, plus (2) 100% of the aggregate Net Cash
Proceeds and the Fair Market Value of marketable securities
received by the Company from the issue or sale, after the date of
this Indenture, of Capital Stock (other than Disqualified Stock)
of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable for Capital Stock (other
than Disqualified Stock) of the Company which has been so
converted or exercised, as the case may be. For purposes of
determining under clause (2) above the amount expended for
Restricted Payments, cash distributed shall be valued at the face
amount thereof and property other than cash shall be valued at
its Fair Market Value.
The provisions of this covenant shall not prohibit (i)
the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment
would comply with the provisions of this Indenture, (ii) the
retirement of any shares of Capital Stock of the Company in
exchange for, or out of, the Net Cash Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other
than Disqualified Stock), (iii) the redemption or retirement of
Subordinated Indebtedness of the Issuer or the Company in
exchange for, by conversion into, or out of the Net Cash Proceeds
of, a substantially concurrent (x) sale or issuance of Capital
Stock of the Company or (y) incurrence of Subordinated
Indebtedness of the Issuer that is contractually subordinated in
right of payment to the Senior Secured Notes, that is permitted
to be incurred in accordance with Section 7.12 and that has the
same or greater Weighted Average Life to Maturity as the
Indebtedness being redeemed or retired, (iv) any payment made by
the Company or a Subsidiary, directly or indirectly, to the
Issuer in order to enable the Issuer to pay principal, premium,
if any, and interest (including Liquidated Damages and Additional
Amounts, if any) on the Senior Secured Notes, (v) any payment
made by the Company or a Subsidiary, directly or indirectly, to
enable the issuer of any Permitted Indebtedness to pay principal,
premium, if any, and interest thereon and (vi) any dividend made
by a Subsidiary of the Company to its parent and (vii) payments
made pursuant to the Administrative Services Agreement or the
Development Services Agreement. In determining the amount of
Restricted Payments permissible under clause (f) above, amounts
expended pursuant to clause (i) of this paragraph and loans
pursuant to Section 7.25(viii) shall be included as Restricted
Payments.
SECTION VII.12 Limitation on Indebtedness. The
Company and its Subsidiaries will not create, incur, assume or
suffer to exist any Indebtedness, whether current or funded, or
any other liability, except for (i) Indebtedness evidenced by the
Senior Secured Notes, (ii) Indebtedness evidenced by the Senior
Secured Note Guarantee, (iii) Permitted Indebtedness, (iv) Joint
Venture Permitted Indebtedness, (v) liabilities of the Company
and the Issuer representing fees, expenses and indemnities
payable to the Trustee pursuant to this Indenture, (vi) Domestic
Project Permitted Indebtedness and (vii) liabilities of the
Issuer representing fees, expenses and indemnities payable in
connection with the issuance of Senior Secured Notes including,
without limitation, such amounts payable to the Initial Purchaser
of the Senior Secured Notes.
SECTION VII.13 Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries. The Company shall
not, and shall not permit any Subsidiary of the Company to,
directly or indirectly, create or otherwise cause or suffer to
exist or enter into any agreement with any Person that would
cause, any consensual encumbrance or restriction of any kind on
the ability of any Subsidiary of the Company to (i) pay
dividends, in cash or otherwise, or make any other distributions
on its Capital Stock or any other interest or participation in,
or measured by, its profits owned by, or pay any Indebtedness
owed to, the Company or a Subsidiary of the Company, (ii) make
any loans or advances to the Company or any Subsidiary of the
Company or (iii) transfer any of its properties or assets to the
Company or to any Subsidiary of the Company, except, in each
case, for such encumbrances or restrictions existing under or
contemplated by or by reason of (a) restrictions imposed by
applicable law, (b) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of the
Company or any Subsidiary thereof, (c) the Senior Secured Notes,
the Senior Secured Note Guarantee, the Indentures and the
Collateral Documents, (d) any restrictions existing under
agreements in effect on the date of this Indenture, including,
without limitation, restrictions under the PFC Indenture, the
Rosemary Indenture and the Brandywine Facility Lease, as such are
in effect on the date hereof, (e) any restrictions, with respect
to a Subsidiary of the Company (and only to such Subsidiary) that
is not a Subsidiary of the Company on the date of this Indenture,
in existence at the time such Person becomes a Subsidiary of the
Company (but not created in contemplation of such Person becoming
a Subsidiary), (f) any encumbrance imposed pursuant to the terms
of Non-Recourse Debt incurred in conformity with Section 7.12
provided that such encumbrance in the written opinion of the
Chief Financial Officer of the Company (1) is required in order
to obtain such financing, (2) is customary for such financings
and (3) applies only to the assets of or revenues of the
applicable Permitted Project and any Subsidiary whose Capital
Stock is pledged in connection with such financing or which is
established for the sole purpose of developing, owning,
constructing, financing or operating such Permitted Project and
(g) any restrictions existing under any agreement that refinances
or replaces an agreement containing a restriction permitted by
clause (a) through (f), above; provided that the terms and
conditions of any such restrictions are not materially less
favorable to the Holders of the Senior Secured Notes than those
under or pursuant to the agreement being replaced or the
agreement evidencing the Indebtedness refinanced. Nothing
contained in this covenant shall prevent the Company or any of
its Subsidiaries from entering into any encumbrance permitted
under Section 7.23 or restricting the sale or other disposition
of assets or property securing Indebtedness evidenced by such
agreement so long as the Company complies with Section 7.21.
SECTION VII.14 Capital Expenditures. The Company
shall not make, or permit any Subsidiary to make, any expenditure
(by long-term or operating lease or otherwise) for capital assets
(both realty and personalty) except for expenditures (i)
contemplated by this Indenture (including, without limitation,
expenditures with respect to the Luannan Facility), (ii) required
or permitted by the PFC Indenture, the Rosemary Indenture or the
Brandywine Facility Lease, or (iii) subject to compliance with
Sections 7.11, 7.12 and 7.25, expenditures in connection with the
development, construction or ownership of a Permitted Project.
SECTION VII.15 Permitted Projects. To the extent that
a project fulfills the requirements of the PIC Additional
Projects Contract, the Company and its Subsidiaries may develop,
construct, own, operate and finance such project pursuant to the
requirements of the PFC Indenture subject to compliance with the
terms of the Indentures. To the extent that the PIC Additional
Project Contract is no longer a valid and binding agreement or a
project does not fulfill the requirements of the PIC Additional
Projects Contract, the Company and its Subsidiaries agree that
such project may only be developed, constructed, financed, owned
and operated by the Company or one of its Subsidiaries pursuant
to the requirements of the Indentures and the Company shall (i)
maintain 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;
provided that this Section 7.15 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 (1) pursuant to the
terms of a build-operate-transfer arrangement at least ten years
after the entering into of such arrangement or (2) allowed
pursuant to the other terms of this Indenture.
SECTION VII.16 Limitation of Line of Business. The
Company shall not and shall not permit any Subsidiary to engage
in any business, enterprise or activity or enter into any
material transaction other than the development, construction,
financing, ownership or operation of power generating facilities
and any and all activities related thereto.
SECTION VII.17 Protection of Collateral by Company and
its Subsidiaries. The Company shall, and shall cause each of its
Subsidiaries to, from time to time, take all action necessary or
advisable (including, without limitation, executing and
delivering all such supplements and amendments, financing
statements, continuation statements, instruments of further
assurance and other instruments), to preserve and defend its
title to the Collateral against the claims of all persons and
parties.
SECTION VII.18 Performance of Obligations by Company,
Subsidiaries and Trustees. The Company shall, and shall cause
each of its Subsidiaries to, punctually perform and observe all
of their respective obligations and agreements contained in the
Collateral Documents, and will, in accordance with the
Indentures, the Issuer Loan Agreement and the Shareholder Loan
Agreements, diligently pursue their respective rights and
remedies and cooperate with the Trustee and the Holders in
pursuing the same to the extent such rights have been assigned by
such Person to the Trustee, in each case for the benefit of the
Holders.
SECTION VII.19 Sale and Leaseback Transactions. The
Company shall not, and shall not permit any of its Subsidiaries
to, enter into any sale and leaseback transaction; provided that
the Company or any Subsidiary may enter into a sale and leaseback
transaction if (i) the Company or such Subsidiary could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to
Section 12 and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 7.23, (ii) the Net Cash Proceeds of such sale
and leaseback transaction are at least equal to the Fair Market
Value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the proceeds of such
transaction are applied in compliance with, Section 7.21.
SECTION VII.20 Delivery of Information and Reports
under the Shareholder Loan Agreements. The Company shall cause
the Issuer to deliver to the Trustee, at the expense of the
Issuer, promptly upon receipt thereof, all financial statements,
reports, notices and certificates of the Joint Ventures.
SECTION VII.21 Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any Asset Sale unless (i) such Asset Sale
is for Fair Market Value and (ii) the proceeds therefrom consist
of at least 85% cash and/or Cash Equivalents (100% in the case of
lease payments). Within 365 days after the receipt of any Net
Cash Proceeds from an Asset Sale, the Company, or its Subsidiary,
as the case may be, may apply such Net Cash Proceeds to an
Investment, the making of a capital expenditure or the
acquisition of other tangible assets. Any Net Cash Proceeds from
Asset Sales that are not applied or invested as provided in the
preceding sentence of this paragraph will be deemed to constitute
Excess Proceeds and the Company, or its Subsidiary, as the case
may be, will be required to make an Asset Sale Redemption Offer.
SECTION VII.22 Merger, Consolidation, or Sale of
Assets. The Company shall not and shall cause the Issuer not to,
in a single transaction or series of related transactions,
consolidate or merge with or into (whether or not the Company or
the Issuer is the surviving corporation), or directly and/or
indirectly through its Subsidiaries sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of
the Company's or the Issuer's properties or assets determined on
a consolidated basis for the Company and its Subsidiaries taken
as a whole in one or more related transactions, to another
corporation, Person or entity unless (i) the Company or the
Issuer is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other
than the Company or the Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition will
have been made is a corporation organized or existing under the
laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company or the
Issuer) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition will have been
made assumes all the obligations of the Company or the Issuer,
under the Senior Secured Notes, the Senior Secured Note Guarantee
and the Indentures pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustees; (iii) immediately after
such transaction no Event of Default exists; (iv) the Company or
the Issuer or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company or the
Issuer), or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to
or greater than the Consolidated Net Worth of the Company or the
Issuer, as the case may be, immediately preceding the transaction
and (B) will, at the time of such transaction and after giving
pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted
to incur at least $1.00 of additional Indebtedness; and (v) the
Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel addressed to the Trustee with respect to the
foregoing matters; provided, however, that the requirement set
forth in clause (iv) above shall not apply to a merger between
the Company or the Issuer and any Wholly Owned Subsidiary, to any
merger between Wholly Owned Subsidiaries, to any merger between
Pan-Sino and Pan-Western or to any merger between Pan-Sino and
the Issuer.
SECTION VII.23 Limitations on Liens. The Company
shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Lien of any kind
upon any of its property or assets now owned or hereafter
acquired by it, except for:
(a) Liens existing as of the date of this Indenture
and disclosed in either the Offering Memorandum or the Collateral
Documents on the date hereof or Liens permitted by the Indenture
and the Collateral Documents, none of which is required to have
been disclosed in the Offering Memorandum and was not so
disclosed and Liens created by the Senior Secured Notes, the
Senior Secured Notes Indenture, the Senior Secured Notes
Guarantee and this Indenture and the Collateral Documents;
(b) Permitted Liens on property and assets not
constituting Collateral;
(c) Liens to secure the payment of all or a part of
the purchase price of assets or property acquired or constructed
in the ordinary course of business after the date on which the
Senior Secured Notes are originally issued, provided that (i) the
aggregate principal amount of Indebtedness secured by such Liens
shall not exceed the Fair Market Value of the assets or property
so acquired or constructed, shall be limited to the asset or
property at issue and shall not, in any event, exceed $2,500,000,
(ii) the Indebtedness secured by such Liens shall have otherwise
been permitted to be incurred under this Indenture and (iii) such
Liens shall not encumber any other assets or property of the
Company or any of its Subsidiaries and shall attach to such
assets or property within 60 days of the construction or
acquisition of such assets or property;
(d) Liens on the assets or property of a Subsidiary of
the Company at the time such Subsidiary became a Subsidiary of
the Company and not incurred as a result of (or in connection
with or in anticipation of) such Subsidiary becoming a Subsidiary
of the Company, provided such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries
(other than the property or assets so acquired);
(e) Leases and subleases of real property of (i) any
Material Subsidiary (which leases and subleases are Non-Recourse
Debt other than to the Material Subsidiary which leases and uses
such asset), which do not interfere with the ordinary conduct of
the business of the Company or any of its Material Subsidiaries,
and which are made on customary and usual terms applicable to
similar properties or (ii) any Subsidiary (which leases and
subleases are Non-Recourse Debt other than to the Subsidiary
which leases and uses such asset) that is not a Material
Subsidiary;
(f) Liens incurred by a Subsidiary or group of
Subsidiaries on its or their assets to secure Non-Recourse Debt
incurred in conformity with Section 7.12, provided that the Lien
is created, provided for or contemplated at the time of the
initial incurrence of such Indebtedness and does not extend to
any assets or property of the Company or any other Subsidiary
(other than assets or property directly related to the
development, construction, financing, ownership or operation by a
Subsidiary or group of Subsidiaries of a Permitted Project);
(g) Liens, not existing as of the date of this
Indenture, but required or permitted to be created at a later
date pursuant to the terms of the PFC Indenture, the Rosemary
Indenture or the Brandywine Facility Lease; and
(h) in addition to Liens permitted under clauses (a)-
(g) above, Liens securing an aggregate of $5,000,000 of
Indebtedness or other obligations.
SECTION VII.24 Transactions with Affiliates. The
Company shall not, and shall not permit any Subsidiary, to
conduct any business or enter into any Affiliate Transaction,
except in good faith and on terms that are no less favorable to
the Company or such Subsidiary, as the case may be, than those
that could have been obtained in a comparable transaction on an
arms-length basis from a Person not an Affiliate of the Company
or such Subsidiary. All Affiliate Transactions (and each series
of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value
in excess of $500,000 shall be approved by the Board of Directors
of the Company, such approval to be evidenced by a Board
Resolution stating that the Board of Directors has determined
that such transaction complies with the foregoing provisions. If
the Company or any Subsidiary of the Company enters into an
Affiliate Transaction (or a series of related Affiliate
Transactions which are similar or part of a common plan)
involving aggregate payments or other market value in excess of
$1,000,000, the Company or such Subsidiary, as the case may be,
shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of
related transactions to the Company or the relevant Subsidiary,
as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee;
provided that the restrictions set forth in this covenant shall
not apply to (i) transactions between the Company and any of its
Wholly Owned Subsidiaries or among Wholly Owned Subsidiaries of
the Company, (ii) Restricted Payments permitted by the
Indentures, (iii) customary directors' fees, indemnification and
similar arrangements, consulting fees, employee salaries and
bonuses or legal fees, (iv) payments made pursuant to the
Administrative Services Agreement or the Development Services
Agreement, (v) transactions between the Company or any of its
Wholly Owned Subsidiaries and a Permitted Project and (vi) any
transaction which would otherwise constitute an Affiliate
Transaction but which has been entered into prior to the date of
this Indenture.
SECTION VII.25 Limitation on Investments. The Company
shall not make and shall not permit any of its Subsidiaries to
make, directly or indirectly, any Investments, except: (i)
Investments by the Company or any Wholly Owned Subsidiary in or
to any Wholly Owned Subsidiary and Investments or loans in or to
the Company or a Wholly Owned Subsidiary by any Subsidiary; (ii)
Investments represented by accounts receivable created or
acquired in the ordinary course of business; (iii) advances to
employees in the ordinary course of business; (iv) Investments
under or pursuant to interest rate protection agreements; (v)
Investments, not exceeding $5,000,000 million in the aggregate,
in joint ventures, partnerships or Persons that are not Wholly
Owned Subsidiaries, provided that such Investments are made
solely for the purpose of acquiring or developing businesses
related to the Company's business; (vi) Restricted Payments
permitted by Section 7.11; (vii) Investments in connection with
any Permitted Project (including, without limitation, Investments
in Permitted Projects which are not Wholly Owned by the Company
or one of its Subsidiaries); (viii) any loan from a Subsidiary of
the Company to a Subsidiary of Panda International in an amount
not in excess of the amount of Restricted Payments which the
Company would be permitted to make at the time of such loan; and
(ix) Dollar Permitted Investments.
SECTION VII.26 Investment Company Act. The Company
shall not, and shall not permit any Subsidiary of the Company to,
take or consent to any action that would result in the
requirement that either the Company or any Subsidiary of the
Company be registered as an "investment company" under the
Investment Company Act.
SECTION VII.27 Public Utility Holding Company Act.
The Company shall not, and shall not permit any Subsidiary of the
Company to, take or consent to any action that would result in
the Company or any Subsidiary of the Company 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 VII.28 Purchase of Securities Upon a Change of
Control. (a) Upon the occurrence of a Change of Control, the
Issuer shall be obligated to make an offer to purchase (a "Change
of Control Offer") all of the then Outstanding Securities, in
whole or in part, from the Holders of such Securities 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
Securities, plus accrued and unpaid interest, if any (including
Liquidated Damages and Additional Amounts, if any), to the Change
of Control Payment Date (as defined below), in accordance with
the procedures set forth in paragraphs (b), (c) and (d) of this
Section. The Issuer shall, subject to the provisions described
below, be required to purchase all Securities properly tendered
into the Change of Control Offer and not withdrawn. 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 times and otherwise
in substantial compliance with the requirements applicable to a
Change of Control Offer to be made by the Issuer and purchases
all Securities 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
Payment Date (as defined below).
(c) Not less than 30 days nor more than 45 days prior
to any Change of Control Payment Date, the Issuer shall give to
the Trustee in the manner provided in Section 1.5 and each Holder
of the Securities 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 the Issuer to
repurchase such Holder's Securities, 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
Payment 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 Security, or portion thereof,
not tendered or accepted for payment will continue to accrue
and pay interest;
(v) that unless the Issuer 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 Security, or portion thereof,
accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control
Payment Date; and
(vi) the instructions a Holder must follow in
order to have such Holder's Securities repurchased in
accordance with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased will
be required to surrender such Securities 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 Payment 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 Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
certificate number(s) (in the case of Physical Securities) and
principal amount of the Securities 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 Securities purchased. Holders whose Securities are
purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities
surrendered.
On the Change of Control Payment Date, the Issuer shall
(i) accept for payment Securities 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 Securities or portions thereof so tendered,
and (iii) deliver or cause to be delivered to the Trustee the
Securities so accepted. The Paying Agent shall promptly mail or
deliver to Holders of the Securities so tendered payment in an
amount equal to the purchase price for the Securities, and the
Issuer shall execute and the Trustee shall authenticate and mail
or make available for delivery to such Holders a new Security
equal in principal amount to any unpurchased portion of the
Security which any such Holder did not surrender for purchase.
The Issuer shall announce the results of a Change of Control
Offer on or as soon as practicable after the Change of Control
Payment Date. For purposes of this Section, the Trustee will act
as the Paying Agent.
(e) The Issuer 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 the Issuer is
required to purchase Securities as described in this Section.
SECTION VII.29 Ranking. The Company will ensure that
its obligations under each Senior Secured Notes Guarantee will at
all times constitute general, direct, unsubordinated and
unconditional obligations of the Company ranking at all times at
least pari passu in priority of payment, in right of security and
in all other respects with the other Senior Secured Notes
guarantees and with all other unsubordinated Indebtedness of the
Company now or hereafter outstanding.
SECTION VII.30 Collateral Documents. None of the
Company or any of its respective Subsidiaries will amend, waive
or modify, or take or refrain from taking any action which has
the effect of amending, waiving or modifying, any provision of
the Collateral Documents to the extent that such amendment,
waiver, modification or action would have a Material Adverse
Effect on the rights of the Trustee or the Holders of Securities
(as provided in the Collateral Documents), provided that the
Collateral Documents may be amended, waived or modified pursuant
to the terms of the applicable Collateral Document.
ARTICLE VIII
REDEMPTION OF SECURITIES
SECTION VIII.1 Applicability of Article. Securities
of any series that are subject to redemption before their Stated
Maturity (or, if the principal of the Securities 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 VIII.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Company Order. If the Company determines or is
required to redeem any Securities, the Company 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") and the series and principal amount of
Securities 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 Securities. In the case of any redemption
of Securities pursuant to an election of the Company that is
subject to a condition specified in the terms of such Securities
or in the Series Supplemental Indenture relating thereto, the
Company shall furnish the Trustee with an Officer's Certificate
and, if applicable, Opinion of Counsel as to compliance with such
restriction or condition.
SECTION VIII.3 Optional Redemption; Mandatory
Redemption; Selection of Securities to be Redeemed.
(a) The Securities of any series shall not be subject
to optional redemption at the option of the Company unless
otherwise provided in the Series Supplemental Indenture relating
thereto or pursuant to this Section. The Securities of any
series may be subject to mandatory redemption, pursuant to a
Mandatory Redemption Event, if so provided in the Series
Supplemental Indenture relating thereto or pursuant to this
Section.
(b) If less than all the Securities of any series are
to be redeemed pursuant to paragraph (a) of this Section, the
particular Securities 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 Securities of such
series not previously called for redemption by such method as the
Trustee in its sole discretion shall deem fair and appropriate.
(c) The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Securities to be redeemed in part, the principal
amount thereof to be redeemed.
(d) For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the
redemption of Securities shall relate, in the case of any
Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities that has been
or is to be redeemed.
SECTION VIII.4 Notice of Redemption. Except as
otherwise specified in the Series Supplemental Indenture relating
to the Securities of a series to be redeemed, notice of
redemption shall be given in the manner provided in Section 1.6
to the Holders of Securities 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 Securities of
any series are to be redeemed in whole, (i) the identification of
the particular Securities of such series to be redeemed in whole,
or (ii) the portion of the principal amount of each Security of
such series to be redeemed in part, and a statement that, on and
after the Redemption Date, upon surrender of such Security, a new
Security or Securities 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
Securities are to be surrendered for payment of the amount in
respect of such redemption.
Notice of redemption of Securities to be redeemed at
the election of the Company shall be given by the Company or, at
the Company's request, by the Trustee in the name and at the
expense of the Company. The Trustee shall be given a copy of the
form of notice of redemption of the Securities at the time the
Company delivers to the Trustee the Company Order relating to
such redemption pursuant to Section 8.2.
SECTION VIII.5 Securities 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 Securities or portions thereof so to be redeemed,
on the Redemption Date shall become due and payable, and from and
after such date such Securities or portions thereof shall cease
to bear interest, except as otherwise provided in the last
sentence in this Section. Upon surrender of any such Security
for redemption in accordance with such notice, an amount in
respect of such Security or portion thereof shall be paid as
provided therein; provided, however, that any payment of interest
on any Security the Payment Date of which is on or prior to the
Redemption Date, shall be payable to the Holder of such Security
or one or more Predecessor Securities, registered as such at the
close of business on the related Regular Record Date according to
the terms of such Security and subject to the provisions of
Section 2.11. If any Security 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
Security.
SECTION VIII.6 Securities Redeemed in Part. (a) In
the event that less than all of the Securities are to be
redeemed, selection of such Securities for redemption will be
made by the Trustee in accordance with the requirements of the
principal national securities exchange, if any, on which such
Securities are listed or, if such Securities are not then listed
on a national securities exchange, on a pro rata basis; provided
that no Securities of a principal amount or principal amount at
maturity, as the case may be, of $1,000 or less shall be redeemed
in part and the Trustee shall have authority to give full effect
to this proviso.
(b) Any Security 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 Security without service
charge, a new Security or Securities 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 Security so
surrendered.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION IX.1 Events of Default. Except as otherwise
provided in a Series Supplemental Indenture with respect to a
particular series, 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) failure by the Issuer to pay the
principal and premium, if any, on any Security (as such term
is defined in the Senior Secured Notes Indenture) when the
same becomes due and payable, whether by scheduled maturity
or required prepayment or by acceleration or otherwise;
(b) failure by the Issuer to pay the interest
(including Liquidated Damages and Additional Amounts, if
any) on any Security (as such term is defined in the Senior
Secured Notes Indenture) when the same becomes due and
payable, whether by scheduled maturity or required
prepayment or by acceleration or otherwise, for 15 or more
days;
(c) non-payment of any interest on, or any
principal of, the Issuer Loan by Pan-Western when the same
becomes due and payable, whether by scheduled maturity or
required prepayment or by acceleration or otherwise, for 30
or more days;
(d) failure by the Company to pay any amount
it is obligated to pay pursuant to the terms of any
Security, when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by acceleration
or otherwise;
(e) any agreement, representation or warranty
made by the Company or any of its Subsidiaries in,
respectively, the Indentures, the Issuer Loan Agreement or
the Shareholder Loan Agreements or any representation,
warranty or statement in any certificate, financial
statement or other document furnished to the Trustees by or
on behalf of the Company or any of its Subsidiaries under
the Indentures, 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 or is reasonably
likely to have a Material Adverse Effect and the fact, event
or circumstance shall continue to be uncured for 30 or more
days after the Company or any of its Subsidiaries acquires
notice of such inaccuracy; provided that if the Company or
any such Subsidiary commences efforts to cure such fact,
event or circumstance within such 30-day period, the Company
or any such Subsidiary may continue to effect such cure of
such fact, event or circumstance and such misrepresentation
shall not be deemed an Event of Default for an additional 60
days so long as the Company or such Subsidiary, as the case
may be, is diligently pursuing such cure;
(f) failure by the Company or any of its
Material Subsidiaries to perform or observe its covenants
contained in the Indentures relating to maintenance of
existence, prohibition on fundamental changes, disposition
of assets, limitations on Indebtedness, limitations on Liens
or distributions;
(g) failure by the Company or any of its
Material Subsidiaries to perform or observe any of the other
covenants contained in the Indentures or in the Collateral
Documents (other than failures described in paragraph
(f) above) and such failure shall continue uncured for 30 or
more days (including, without limitation, covenants with
respect to insurance and amendments to Luannan Project
Documents or nature of business); provided that if the
Company or such Material Subsidiary commences efforts to
cure such default within such 30-day period, the Company or
such Material Subsidiary 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
such Subsidiary is diligently pursuing the cure;
(h) the Company or any Material Subsidiary
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 Effect and
which, prior to such cure, would not reasonably be expected
to result in a Material Adverse Effect), 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;
(i) a proceeding or case shall be commenced
without the application or consent of the Company or any
Material Subsidiary 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 Effect
and which, prior to such cure, would not reasonably be
expected to result in a Material Adverse Effect), 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;
(j) the entry of one or more final and non-
appealable judgment or judgments for the payment of money in
excess of $1,000,000 (exclusive of judgment amounts fully
covered by insurance or indemnity) against the Company or
any of its Material Subsidiaries, which remains unpaid or
unstayed for a period of 90 or more consecutive days;
(k) any Project Document (except as otherwise
permitted under this Indenture) shall terminate or cease to
be valid and binding and in full force and effect, or any
third party thereto denies that it has any liability or
obligation under any such Project Document and such third
party ceases performance thereunder, or any third party is
in default under such Project Document (subject to any
applicable grace period), and in each case such cessation or
default has had or is reasonably likely to have a Material
Adverse Effect;
(l) any Luannan Financing Agreement shall
terminate or cease to be valid and binding and in full force
and effect;
(m) with respect to a Domestic Project, or to
the extent applicable, any Permitted Project, the loss of QF
Status, to the extent that such loss of QF Status has had or
is reasonably likely to have a Material Adverse Effect;
(n) failure of any Joint Venture to perform
or observe any of its material covenants or obligations
contained in any of the Luannan Project Documents if such
failure has had or is reasonably likely to have a Material
Adverse Effect;
(o) the occurrence of any event resulting in
the payment of Domestic Project Event Proceeds or Permitted
Project Event Proceeds that will result, in the opinion of
the Consolidating Financial Analyst, in the Company's
failure to meet the following Debt Service Coverage Ratios
(after the application of such amounts as are required to be
applied pursuant to any and all mandatory redemption or
repayment obligations): (1) the minimum (or lowest) annual
projected Debt Service Coverage Ratio of the Company for the
remaining term of the Senior Secured Notes will not be less
than 1.4 to 1 and (2) the minimum (or lowest) annual
projected Consolidated Debt Service Coverage Ratio for the
remaining term of the Senior Secured Notes will not be less
than 1.15 to 1;
(p) the Luannan Facility Construction
Schedule Certificate shall at any time contain a conclusion
that the Luannan Facility is not being constructed in
accordance with the Approved Construction Budget and
Schedule or, if applicable, an Approved Completion Plan;
(q) any of the Collateral Documents ceases to
be effective or any lien granted therein ceases to be a
perfected lien to the Trustees on the collateral described
therein with the priority purported to be created thereby;
provided that the Company or the Issuer, as the case may be,
shall have 15 days to cure such cessation or to furnish to
the Trustees all documents or instruments required to cure
such cessation; or
(r) any default under the Issuer Loan
Agreement and the Shareholder Loan Agreements that has had
or is reasonably likely to have a Material Adverse Effect
and any default under the PFC Indenture, the Rosemary
Indenture, the Brandywine Facility Lease and any other
default under any other agreement or instrument containing
Indebtedness of at least $2,500,000 of a Domestic Project or
a Permitted Project, to the extent that any of the preceding
defaults is not waived.
SECTION IX.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
the Company or any Material Subsidiary described in
Section 9.1(h) or 9.1(i), the entire principal amounts of
the Outstanding Securities, all interest accrued and unpaid
thereon, premium, if any, and all other amounts payable
under the Securities 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 other than as
referred to in clause (h) or (i) above, upon the written
direction of the Holders of not less than 25% in aggregate
principal amount of all series of Outstanding Securities
(considered as one class), by notice to the Company, the
Trustee shall declare the entire principal amount of the
Securities Outstanding, all interest accrued and unpaid
thereon, premium, if any, and all other amounts payable
under the Securities 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 Security, 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 (e) or (f) above shall have occurred and be
continuing, the Trustee may, but shall not be obligated to,
accelerate the maturity of the Securities 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 Securities (and
all other amounts payable under the Securities and this
Indenture) 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
Securities, by written notice to the Company 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 (including
Liquidated Damages and Additional Amounts, if any) on the
Securities (other than interest that shall have become due
by such declaration of acceleration);
(ii) the principal of any Securities that have become
due other than by such declaration of acceleration,
including any Securities 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 Securities 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 Securities 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 Securities (and all
other amounts payable under the Securities and this
Indenture) 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 IX.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 may 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 Trustee in its discretion may determine, the
Collateral or the Trustee's rights in and to the security as an
entirety, or in any such portions as the Holders of a majority in
aggregate principal amount of all series of Outstanding
Securities (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 IX.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 Securities, 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 Securities, 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 Securities 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
Securities 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 Securities 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
Securities (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
and any other amounts due the Trustee under Section 10.5. The
Trustee is hereby irrevocably appointed (and successive
respective Holders of the Securities, 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
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 Securities.
All proofs of claim, rights of action and rights to assert claims
under this Indenture or under any of the Securities may be
enforced by the Trustee without the possession of the Securities
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 Securities 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 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 IX.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 Securities (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 (or any other amounts due under the Securities or this
Indenture) on, the Securities, or 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 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 Collateral 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 IX.6 Control by Holders. The Holders of not
less than a majority in aggregate principal amount of all series
of Outstanding Securities (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 IX.7 Waiver of Past Defaults. The Holders of
not less than a majority in aggregate principal amount of all
series of Outstanding Securities (considered as one class) may on
behalf of the Holders of all Securities waive any past Default
and its consequences except that only the Holders of all
Securities 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 Security then outstanding, or
(b) in respect of a covenant or provision hereof that under
Article XII cannot be modified or amended without the consent of
the Holder of each Security 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 IX.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 Collateral 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 25% in aggregate principal
amount of all series of Outstanding Securities (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 Securities (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 Securities to (x) 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 Securities, (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 IX.9 Undertaking to Pay Court Costs. All
parties to this Indenture, and each Holder by his acceptance of a
Security, 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 Securities (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 (including
Liquidated Damages and Additional Amounts, if any), any of the
Securities, on or after the respective due dates expressed
therein or, in the case of redemption, on or after the Redemption
Date.
SECTION IX.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 (or any
other amounts due under the Securities or this Indenture), such
Security, on or after the respective due dates expressed in such
Security (or, in case of redemption, on the Redemption Date fixed
for such Security), 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 IX.11 Application of Monies Collected by
Trustee. Following the application of monies as provided herein,
any money collected or to be applied by the Trustee pursuant to
this Article in respect of the Securities 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
Securities of such series (other than monies at the time required
to be held for the payment of specific Securities 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 Securities 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
Collateral 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 Collateral Documents and of the enforcement of
any remedies hereunder and all other amounts due the Trustee
hereunder or under any other Collateral Documents or Transaction
Documents;
SECOND: in case the unpaid principal amount of the
Outstanding Securities of such series or any of them shall not
have become due, to the payment of any interest in default
(including Liquidated Damages and Additional Amounts, if any), in
the order of the maturity of the payments thereof, with interest
at the rates specified in the respective Securities 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 Securities of such series shall have become due and
any such Securities shall not have been paid in full, to the
payment of the whole amount then due and unpaid upon the
Outstanding Securities of such series for principal, premium, if
any, and interest, together with interest at the respective rates
specified in the Securities 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 Trustee (to be applied pursuant to the terms and conditions
of this Indenture), 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 Securities
of any series to be made pursuant to clauses "SECOND" and "THIRD"
of this Section (other than payments using moneys in the Notes
Guarantee Service Fund and the Notes Guarantee Service Reserve
Fund, and moneys which are on deposit in any additional debt
service fund and debt service reserve fund, all of which funds
shall be for the exclusive use and benefit of the Holders of the
Securities to which such Funds relate) shall be made ratably to
the Holders of Securities of such series entitled thereto,
without discrimination or preference, based upon the ratio of the
unpaid principal amount of the Securities 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 Securities of such
series.
SECTION IX.12 Waiver of Appraisement, Valuation, Stay,
Right to Marshaling. To the full extent it may lawfully do so,
the Company, 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 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 the Trustee 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 IX.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 the Company or to be an acquiescence
therein.
SECTION IX.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 IX.15 Preferential Collection of Claims
Against the Company. If and when the Trustee shall be or become
a creditor of the Company (or any other obligor upon the
Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE X
CONCERNING THE TRUSTEE
SECTION X.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 Securities 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 the
Company mentioned herein shall be sufficiently evidenced by
an Officer's Certificate in the name of the Company, a
Company Request or a Company Order (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 Securities 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 Securities hereunder and after
the curing or waiving of all Events of Default with respect
to such series of Securities, 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 Securities 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
Securities (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 the
Company and if paid by the Trustee, shall be repaid by the
Company 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) The Trustee 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 of the Trustee has received a written
notice or a certificate from a Responsible Officer of the
Company stating that an Event of Default has occurred. The
Trustee 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 Collateral Document or any other Transaction Document to
which it is a party, the Trustee 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 Collateral 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.
(j) 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.
(k) 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 Securities (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.
(l) 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 the
Company.
(m) Every provision of this Indenture that in any
manner relates to the Trustee is subject to this Section.
(n) The rights of the Holders to communicate with
other Holders with respect to their rights under this
Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided
by the Trust Indenture Act.
(o) Every Holder of Securities or coupons by receiving
and holding the same, agrees with the Company and the
Trustee that neither the Company nor the Trustee nor any
agent of any 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 and that
the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request under Section
10.1(n).
SECTION X.2 Trustee Not Responsible for Recitals, Etc.
The recitals contained herein, in the Securities 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 the Company 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 Securities or any other Transaction Document
to which it is a party. The Trustee shall not be accountable for
the use or application by the Company or any Paying Agent other
than the Trustee of any of the Securities or of the proceeds of
such Securities.
SECTION X.3 Trustee and Others May Hold Securities.
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 Securities and may otherwise interact with the Company or any
other obligor of the Securities with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar or
such other Authorized Agent.
SECTION X.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 the Company to pay
thereon.
SECTION X.5 Compensation of Trustee and Its Lien. For
so long as any of the Securities or any indebtedness under this
Indenture shall remain outstanding, the Company covenants and
agrees 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 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 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 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. The Company also covenants and agrees to indemnify the
Trustee (in its individual capacity and in its capacity as
Trustee), its officers, directors, employees, 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, but not
limited to, 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 the Company 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 Securities upon
all property and monies held or collected by the Trustee and the
Trustee shall have the right to satisfy such obligations of the
Company from all such property or monies if not otherwise paid by
the Company. 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(h) or 9.1(i), the Holders by their acceptance of the
Securities hereby agree that such compensation and expenses of
the Trustee are intended to constitute expenses of administration
under the Bankruptcy Code or any similar federal or state law for
the relief of debtors.
SECTION X.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 X.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 X.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 Securities by giving written notice to the
Company and by giving written notice (at the expense of the
Company) of such resignation to the Holders of the
Securities 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 the Company 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,
(x) the Company may remove the Trustee by written
instrument, in duplicate, executed by order of the
Board of Directors of the Company, or (y) subject to
the requirements of Section 315(e) of the Trust
Indenture Act, any Holder who has been a bona fide
Holder of a Security or Securities 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 Securities 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 the Company, 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, the Company 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
thirty (30) 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 Security or Securities 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 X.9 Acceptance of Appointment by Successor
Trustee. Any successor Trustee appointed under Section 10.8
shall execute, acknowledge and deliver to the Company and to its
predecessor Trustee with respect to any or all applicable series
of Securities an instrument in form and substance satisfactory to
the Company 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 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 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, 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 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 Securities of one or more (but not
all) series, the Company, the predecessor Trustee and each
successor Trustee with respect to the Securities 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 Securities 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
Securities 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 Securities of any series, the Company shall
give notice of the succession of such Trustee hereunder to the
Holders of Securities in the manner provided in Section 1.6. If
the Company 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 the
Company.
SECTION X.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 X.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
Securities of any series in the related Series Indenture
Supplement, an office or agency where Securities 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
Securities or this Indenture may be served. Such office or
agency shall be initially at the corporate trust office of the
Trustee. 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 to the Trustee and by the Trustee, at the
expense of the Company, 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 Securities remain Outstanding, the
Trustee may appoint an Authenticating Agent or Agents with
respect to the Securities of one or more series which shall be
authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon original issuance,
exchange, registration of transfer or partial redemption thereof
or pursuant to Section 2.10, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the
Trustee hereunder (it being understood that wherever reference is
made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent). If an
appointment of an Authenticating Agent with respect to the
Securities of one or more series shall be made pursuant to this
Section, the Securities of such series may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
This Security is one of the series of Securities
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 Securities 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 Securities 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 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 (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. The Company shall give written notice of any such
appointment to all Holders as their names and addresses appear on
the Security Register.
SECTION X.12 Reports by Trustee. On or before May 15
in every year, so long as any Securities 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 Securities
are listed. The Company shall promptly notify the Trustee in
writing if the Securities become listed on any stock exchange,
and the Trustee shall comply with Section 313(d) of the Trust
Indenture Act.
SECTION X.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 X.14 Trustee May Perform Certain Duties
Through Affiliates. The Trustee shall be entitled to perform its
rights and obligations hereunder through any of its Affiliates or
through any of its branch offices or agencies.
ARTICLE XI
HOLDERS' MEETINGS
SECTION XI.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 the Company 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 Securities under any other provision
of this Indenture or under applicable law.
SECTION XI.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 Securities of such series.
SECTION XI.3 The Company, 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 all series of Outstanding Securities (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 the Company or the Holders of such Securities 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 XI.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 Securities 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 Securities
by a Holder of one or more such Securities. The only persons who
shall be entitled to be present or to speak at any meeting of
Holders shall be the persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION XI.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 Securities and
of the appointment of proxies, and in regard to the appointment
and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall think fit. 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 Securities 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 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 Securities
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 Securities 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
Security 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 Securities 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 Securities 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 Securities represented at the
meeting may adjourn such meeting with the same effect, for all
intents and purposes, as though a quorum had been present.
SECTION XI.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 Securities of such
series or of their representatives by proxy and the serial
numbers and principal amounts of the Securities 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 Securities 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 XII
SUPPLEMENTAL INDENTURES
SECTION XII.1 Supplemental Indentures Without Consent of
Holders. Without the consent of the Holders of any Securities,
the Company, the Issuer 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 Securities of any
series permitted by Sections 2.1 and 2.3;
(b) to convey, transfer, assign, mortgage or pledge to the
Trustee as security for the Securities, any property or assets;
(c) to evidence the succession of another entity to the
Company or the Issuer, or successive successions, and the
assumption by the successor entity of the covenants, agreements
and obligations of the Company and the Issuer pursuant to the
Indentures;
(d) to evidence the succession of a new Trustee hereunder
pursuant to Section 10.9;
(e) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as the Company
may, in the written opinion of independent legal counsel,
consider to be for the protection of the Security Holders, and to
make the occurrence, or the occurrence and continuance, of a
default in any such additional covenant, restriction, condition
or provision an Event of Default permitting the enforcement of
all or any of the several remedies provided herein or in the
Securities; provided, that in respect of any such additional
covenant, restriction, condition or provision such supplemental
indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed
in the case of other defaults) or may provide for an immediate
enforcement upon such an Event of Default or may limit the
remedies available to the Trustee upon such an Event of Default
or may limit the right of the Security Holders of a majority in
aggregate principal amount of the Securities at the time
outstanding to waive such an Event of Default;
(f) to cure any ambiguity or to cure, correct or supplement
any provision contained herein or in any supplemental indenture
that may be defective or inconsistent with any other provision
contained in the Indentures, the Securities or in the Notes or in
any supplemental indenture or in the Trust Indenture Act; or to
make such other provisions in regard to matters or questions
arising under the Indentures, the Securities, the Notes or under
any supplemental indenture as the Company or the Issuer may, in
its written opinion, deem necessary or desirable; and which, in
any of the foregoing cases, shall not adversely affect the
interests of the Holders of the Securities of any series or the
Holders.
(g) to permit or facilitate the issuance of Securities in
uncertificated form;
(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
Securities registered under the Securities Act in exchange
for a series of Securities if such exchange is contemplated
by any registration rights agreement entered into in
connection with the issuance of a series of Securities or
any other exchange securities pursuant to any other
agreement to register any series of Securities under the
Securities Act, and to make such other changes in this
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
Securities of any series in any material respect;
(j) 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.
The Trustee is authorized to join with the Company in
the execution of any such supplemental indenture or indentures,
to make any further appropriate agreements and stipulations that
may be therein contained and to accept the conveyance, transfer,
assignment, mortgage or pledge of any property thereunder, but
the Trustee shall not be obligated to enter into any such
supplemental indenture that adversely affects the Trustee's own
rights, duties or immunities under the Indentures or otherwise.
SECTION XII.2 Supplemental Indenture with Consent of
Holders. With the consent of the Holders of not less than 51% in
aggregate principal amount of all series of Outstanding
Securities (considered as one class) by Act of said Holders
delivered to the Company and the Trustee, the Company when
authorized by a resolution of the Board of Directors of the
Company 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 (including a supplemental indenture changing the
provisions of Section 7.28); provided, however, that if there
shall be Securities 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 51% in aggregate principal amount of the Outstanding
Securities 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 Security directly affected thereby,
(a) change the Stated Maturity of any Security (or, if
the principal thereof is payable in installments, the
Payment Date of any such installment), or Payment Date of
any payment of interest thereon, or the dates or
circumstances of payment or premium, if any, on, any
Security, or change or cancel the principal amount thereof
or the interest thereon (including Liquidated Damages and
Additional Amounts, if any) or any premium payable upon the
redemption thereof, or change the place of payment where, or
the coin or currency in which, any Security or the premium,
if any, or the interest thereon (including Liquidated
Damages and Additional Amounts, if any) is payable, or
impair the right to institute suit for the enforcement of
any such payment of principal or interest on or after the
Payment Date 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 Securities, 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 Collateral Documents, pari passu with the Lien
of the Collateral Documents with respect to any of the
property pledged under the Collateral Documents or terminate
the Lien of the Collateral Documents of any property pledged
thereunder or deprive any Holder of the security afforded by
the Lien of the Collateral Documents, except to the extent
expressly permitted by this Indenture or any of the
Collateral Documents;
(c) release all or any substantial portion of the
Collateral;
(d) reduce the percentage in principal amount of the
Outstanding Securities, 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;
(e) modify any of the provisions of Section 9.7 or of
this Section; or
(f) alter or modify the Senior Secured Note Guarantee.
A supplemental indenture that changes or eliminates any
covenant or other provisions of this Indenture which has
expressly been included solely for the benefit of one or more
particular series of Securities, or which modifies the rights of
the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the
rights under this Indenture of the Holders of Securities of any
other series.
Upon receipt by the Trustee of Board Resolutions of the
Company 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.
SECTION XII.3 Documents Affecting Immunity or
Indemnity. If in the opinion of the Company, 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 XII.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 the Company enforceable against the Company
in accordance with its terms, subject to customary exceptions.
SECTION XII.5 Effect of Supplemental Indentures. Upon
the execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture and the Securities shall be and
shall be deemed to be modified and amended in accordance
therewith and the respective rights, duties and immunities under
this Indenture of the Trustee, the Company and the Holders of
Securities shall thereafter be determined, exercised and enforced
under this Indenture subject in all respects to such
modifications and amendments.
SECTION XII.6 Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Company, bear a
notation in form approved by the Company and the Trustee as to
any matter provided for in such supplemental indenture and, in
such case, suitable notation may be made upon Outstanding
Securities after proper presentation and demand. If the Company
shall so determine, new Securities so modified as to conform, in
the opinion of the Company 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 Securities.
SECTION XII.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.
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 GLOBAL HOLDINGS, INC.
By:_________________________________
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
By:_________________________________
Name:
Title:
EXHIBIT A
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security 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 SECURITY IS A GLOBAL SECURITY 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 SECURITY IS NOT EXCHANGEABLE
FOR SECURITIES 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 SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY 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 SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
SECURITY 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 SECURITIES
Re: [insert title of Securities]
(the "Securities"), of the Company
This Certificate relates to $______ principal amount of
Securities held in the form of a beneficial interest in a Global
Security or a Physical Security by ________________ (the
"Transferor").
The Transferor:
has requested by written order that the Security Registrar
deliver in exchange for its beneficial interest in the Global
Security held by the Depository a Physical Security or Physical
Securities in definitive, registered form of authorized
denominations and in an aggregate principal amount equal to its
beneficial interest in such Global Security (or the portion
thereof indicated above); or
has requested that the Security Registrar by written order
exchange or register the transfer of a Physical Security or
Physical Securities.
In connection with such request and in respect of each
such Security, the Transferor does hereby certify that the
Transferor is familiar with the Indenture relating to the above
captioned Securities and the restrictions on transfers thereof as
provided in Section 2.8 of such Indenture, and that the transfer
of these Securities does not require registration under the
Securities Act of 1933, as amended (the "Securities Act") because
*:
Such Security 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 Security 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 Security 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 Security is being transferred in reliance on
Regulation S under the Securities Act.
Such Security is being transferred in reliance on
Rule 144A under the Securities Act.
Such Security 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: ________________________
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: Indenture (the "Indenture")
relating to [insert title of Securities]
Ladies and Gentlemen:
In connection with our proposed purchase of [insert title of
Securities] Panda Global Holdings Inc. (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
Securities 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 Securities
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 Securities
have not been registered under the Securities Act, and that the
Securities 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 Securities, 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 Securities from us a notice advising such purchaser
that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of
Securities, 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 Securities 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 Securities, 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 Securities 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: [insert title of Securities]
of Panda Global Holdings, Inc. (the "Company")
Ladies and Gentlemen:
In connection with our proposed sale of $_____ aggregate
principal amount of the Securities, 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 Securities 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 Securities.
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]
_______________________________
*. Check applicable box
EXHIBIT E
PANDA INTERNATIONAL PLEDGE AGREEMENT
[See Exhibit 10.122 on Registration Statement on Form S-1]
EXHIBIT F
COMPANY PLEDGE AGREEMENT
[See Exhibit 10.118 on Registration Statement on Form S-1]
EXHIBIT G
COMPANY SECURITY AGREEMENT
[See Exhibit 10.123 on Registration Statement on Form S-1]
EXHIBIT H
PEC ASSIGNMENT AND PLEDGE AGREEMENT
[See Exhibit 10.124 on Registration Statement on Form S-1]
APPENDIX A [to Company Indenture]
The definitions stated herein shall equally apply to
both the singular and plural form of the terms defined.
"Account Agreement" means the agreement dated April 22,
1997, among PIC, PEC and the Company.
"Accredited Investors" has the meaning ascribed to such
term under Rule 501(a)(1), (2), (3) or (7) of Regulation D of the
Securities Act.
"Act" shall have the meaning ascribed thereto in
Section 1.4(a) of this Indenture.
"Additional Amounts" means any deduction or withholding
for, or on account of, any Taxes of any Tax Authority, on any
payments made by the Issuer with respect to the Senior Secured
Notes, including payments of principal, redemption price,
interest or premium, or payments made by the Company with respect
to the Senior Secured Note Guarantee.
"Administrative Services Agreement" means the
administrative services agreement between Panda International and
the Company, dated as of the date of this Indenture.
"Affiliate Transaction" means the conduct of any
business or entering into any transaction or series of related
transactions by the Company with or for the benefit of any of
their respective Affiliates.
"Affiliate" means with respect to any specified Person
(other than the County Partners which shall be deemed not to be
an Affiliate), any other Person which, directly or indirectly,
controls, is controlled by or is under direct or indirect common
control with, such specified Person. For the purposes of this
definition, (i) "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
"controlling", "controlled by" and "under common control with"
have meanings correlative to the foregoing or (ii) beneficial
ownership of 10% or more of the voting securities of a Person
shall be deemed to be control; provided, however, that an
otherwise unaffiliated Person that holds a beneficial ownership
of 10% or more of a project level entity or entities in which the
Company or a Subsidiary holds a greater beneficial ownership
interest shall not be considered an Affiliate of the Company
solely by reason of holding such interest in such project level
entity or entities.
"Agent Members" shall have the meaning ascribed thereto
in Section 2.9 of the Indenture.
"Applicable Rules shall have the meaning ascribed
thereto in Section 2.4(b)(i) of the First Supplemental Indenture
to the Senior Secured Notes Indenture.
"Approval Event of Default" means, pursuant to the
Shareholder Loan Agreements, any governmental approvals or
permits (whether central, provincial, municipal, local or
otherwise) necessary for (a) the establishment of each of the
Joint Ventures, (b) the ownership, construction, maintenance,
financing or operation of each of the Joint Venture Facilities,
(c) the setting or adjustment of the electricity price for the
Luannan Facility in accordance with the method of calculation set
forth in the attachments to the Pricing Document or (d) the
conversion or transfer of any foreign currency shall not be
obtained if and when required, or shall be modified, revoked or
canceled, or a notice of violations is issued under any
governmental authorization on grounds of, or illegality of, the
absence of any required authorization, or any proceeding is
commenced by any governmental instrumentality for the purpose of
modifying, revoking or canceling any governmental authorization.
"Approved Completion Plan" means a plan (including
budget and schedule) prior to the Luannan Commercial Operation
Date to construct and complete the Luannan Facility following a
determination by the Luannan Facility Engineer that the Luannan
Facility will not achieve the Luannan Commercial Operation Date
within 28 months from the notice to proceed, using funds
available to the Issuer (from funds then remaining in the Luannan
Facility Construction Fund, the Completion Sub-Account, Luannan
EPC Contract Liquidated Damages (as defined in the Luannan EPC
Contract), Luannan Casualty Proceeds or Luannan Expropriation
Proceeds or otherwise), which plan includes a certificate by the
Issuer (containing customary assumptions and qualifications)
together with a confirmation by the Luannan Facility Engineer
(containing customary assumptions and qualifications) that (i)
funds available to the Issuer are reasonably expected to be
sufficient to fund the costs of reaching the Luannan Commercial
Operation Date and (ii) after reaching the Luannan Commercial
Operation Date, the Company's Debt Service Coverage Ratio will
be, for the immediately preceding four fiscal quarters, (1) prior
to the six month anniversary of the Luannan Commercial Operation
Date, greater than 1 to 1, (2) between the six month anniversary
of the Luannan Commercial Operation Date and the one year
anniversary thereof, greater than 1.2 to 1 and (3) thereafter,
greater than 1.4 to 1.
"Approved Construction Budget and Schedule" means the
construction budget and schedule prepared by the Issuer
(containing customary assumptions and qualifications) approved as
reasonable by the Luannan Facility Engineer prior to the Closing
Date, and as it thereafter may be amended by the Issuer if (i)
such amendment reflects a change order permitted under the
Indentures or (ii) such amendment reflects events of force
majeure under the Luannan EPC Contract (or Approved Completion
Plan, if applicable), and the Issuer certifies (with customary
assumptions and qualifications), with the Luannan Facility
Engineer's concurrence, that such amendment is not reasonably
likely to have a Material Adverse Effect, or (iii) such amendment
reflects change orders not covered in the preceding clause (i);
provided that the Luannan Facility Engineer certifies (with
customary assumptions and qualifications) that funds available to
the Issuer (from funds then remaining in the Luannan Facility
Construction Fund, the Completion Sub-Account, Luannan EPC
Contract Liquidated Damages (as defined in the Luannan EPC
Contract), Luannan Casualty Proceeds or Luannan Expropriation
Proceeds or otherwise) are reasonably expected to be sufficient
to fund the costs of reaching the Luannan Commercial Operation
Date.
"April 11, 1997 Pan-Western Shareholders' Agreement"
means the shareholders' agreement among Pan-Western, Chinamac and
Pan-Sino, dated as of April 11, 1997.
"Asset Sale" means any direct or indirect sale,
conveyance, transfer, lease or other disposition to any Person
other than the Company or a Wholly Owned Subsidiary of the
Company, in one transaction or a series of related transactions,
of any other property or asset (including, without limitation,
any contractual or other right) of the Company or any Subsidiary
of the Company, in each case, other than inventory in the
ordinary course of business (which shall include the sale of
fuel, steam, energy and/or chilled and distilled water) and other
than such isolated transactions which do not exceed $250,000
individually.
"Asset Sale Redemption Offer" shall have the meaning
ascribed thereto in the definition of Excess Proceeds in this
Appendix A.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present
value (discounted at the rate of interest implicit in such
transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback
transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Authenticating Agent" means any Person acting as
Authenticating Agent under this Indenture pursuant to Section
10.11 thereof.
"Authorized Agent" means any Paying Agent,
Authenticating Agent or Security Registrar or other agent
appointed by the Company or the Trustee, as the case may be, in
accordance with this Indenture to perform any function that this
Indenture authorizes the Trustee or such agent to perform.
"Authorized Representative" means as to the Company or
the Consolidating Financial Analyst, 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" means 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 Securities.
"Bibb" means The Bibb Company, a Delaware corporation.
"Board of Directors" means, 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" means 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, and delivered to the Trustee.
"Brandywine Effluent Agreement" means the Treated
Effluent Water Purchase Agreement dated as of September 13, 1994
between the Brandywine 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
and Credit Suisse, New York branch, as amended, supplemented or
otherwise modified from time to time in accordance with the terms
of such agreement and the Brandywine Participation Agreement.
"Brandywine EPC Agreement" means the Amended and
Restated Turnkey Cogeneration Facility Agreement, dated as of
March 30, 1995, between Raytheon Engineers and Constructors, Inc.
and the Brandywine Partnership.
"Brandywine Event of Loss" means an Event of Loss as
defined in the
Brandywine Participation Agreement.
"Brandywine Event of Loss Proceeds" means proceeds of
casualty insurance or condemnation awards or the like, payable
with respect to a Brandywine Event of Loss (net of costs of
obtaining such proceeds or awards) to the extent not used to
replace or repair the Brandywine Facility and for other required
payments under the Brandywine Facility Lease.
"Brandywine Facility" means the Brandywine
Partnership's 230 MW natural
gas-fired, combined-cycle co-generation facility in Brandywine,
Prince George's County, Maryland.
"Brandywine Facility Lease" means the Facility Lease,
dated December 18, 1996, between the Brandywine Partnership and
Fleet National Bank, as Owner Trustee (as such term is defined
therein), pursuant to which the Brandywine Partnership leases the
Brandywine Facility.
"Brandywine Gas Agreement" means the Gas Sales
Agreement, dated as of March 30, 1995, between the Brandywine
Partnership and Cogen Development Company.
"Brandywine Financing Documents" means the Brandywine
Participation Agreement, the Brandywine Facility Lease and
certain other agreements relating to the Brandywine Financing.
"Brandywine O&M Agreement" means the Operations and
Maintenance Agreement, dated November 21, 1994, as amended on
December 7, 1994, between the Brandywine Partnership and Ogden
Brandywine Operations, Inc.
"Brandywine Participation Agreement" means the
Participation Agreement, dated as of December 18, 1996, among the
Brandywine Partnership, PBC, GE Capital, Fleet National Bank, as
owner trustee and security agent, First Security Bank, National
Association, as indenture trustee, Credit Suisse, as
administrative agent, and the loan participants party thereto.
"Brandywine Partnership" means Panda-Brandywine, L.P.,
a Delaware limited partnership.
"Brandywine Partnership Agreement" means the Agreement
of Limited Partnership of Panda-Brandywine, L.P., dated as of
March 25, 1991, between PEC-Delaware and PBC as amended,
supplemented or otherwise modified from time to time.
"Brandywine Power Purchase Agreement" means the Power
Purchase Agreement, dated August 9, 1991, as amended September
16, 1994, between the Brandywine Partnership and PEPCO.
"Brandywine Project Documents" means, collectively, the
Brandywine Power Purchase Agreement, the Brandywine EPC
Agreement, the Brandywine O&M Agreement, the Brandywine Steam
Agreement, the Brandywine Gas Agreement, the Raytheon Parent
Guaranty, the Brandywine Effluent Agreement, the Brandywine
Partnership Agreement and each Additional Project Document (as
defined in the PFC Indenture).
"Brandywine Steam Agreement" means the Steam Sales
Agreement, dated March 30, 1995, between Brandywine Water Company
and the Brandywine Partnership.
"Business Day" means 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 is located, are authorized or required to
be closed.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (iii)
in the case of a partnership, partnership interests (whether
general or limited) and (iv) any other interest or participation
that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing
Person.
"Capitalized Interest Expiration Date" means
October 15, 1999.
"Capitalized Lease" is defined to mean, as applied to
any Person, any lease of any property of which the discounted
present value of the rental obligations of such Person as lessee,
in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person, and "Capitalized Lease Obligation"
means the rental obligations, as aforesaid, under such lease.
"Capitalized Lease Obligation" shall have the meaning
ascribed thereto in the definition of Capitalized Lease.
"Carrier" means Luannan County State-Owned
Transportation Company, a PRC company owned and operated by
Luannan County.
"Cash Available for Company Debt Service" means, for
any period, the sum of (i) all cash distributions received by the
Company (excluding any non-recurring receipts) plus (ii) all cash
distributions received by the Issuer (excluding any non-recurring
receipts) plus (iii) any and all other revenues received by the
Company and the Issuer (including all interest and fee income but
excluding any non-recurring receipts) plus (iv) all other cash
payments received by the Company and the Issuer in the ordinary
course of business including principal payments but excluding
items which are non-recurring receipts less (v) all cash
operating costs of the Issuer and the Company including trustee
fees, Operating Lease Obligations and cash taxes, each of (i),
(ii), (iii), (iv) and (v) determined on a cash basis in
accordance with GAAP.
"Cash Available for Consolidated Debt Service" means,
for any period, the sum of (i) all consolidated revenue
(including all interest and fee income but excluding any
insurance proceeds, other than business interruption proceeds,
and other similar non-recurring receipts) less (ii) all
consolidated cash operating expenses including trustee fees,
Operating Lease Obligations of the Company and its consolidated
Subsidiaries and cash taxes (including withholding taxes) plus
(iii) all other cash proceeds received by the Company on a
consolidated basis in the normal course of business (excluding
non-recurring receipts but including principal on the Luannan
Transmission Facilities Loan) plus (iv) withdrawals of cash from
any and all Subsidiary debt service reserves, maintenance reserve
funds and any and all other funds which restrict the payment of
money from a Subsidiary to its parent (excluding the PFC Debt
Service Reserve, the U.S. Distribution Fund, the International
Distribution Fund, and amounts distributable from the RMB Revenue
Fund which were previously not distributable) less (v) all
additions of cash to any and all Subsidiary debt service
reserves, maintenance reserve funds and any and all other funds
which restrict the payment of money from a Subsidiary to its
parent (excluding the PFC Debt Service Reserve, the U.S.
Distribution Fund, the International Distribution Fund, and
amounts which are not distributable from the RMB Revenue Fund)
less (vi) additional consolidated cash expenditures excluding
payment of Net Debt Service, each of (i), (ii), (iii), (iv), (v)
and (vi) determined on a cash basis in accordance with GAAP.
"Cash Available for Project Debt Service" means (i) the
sum of all revenues (including interest and fee income but
excluding any insurance proceeds, other than business
interruption insurance proceeds, and other similar non-recurring
receipts) of such Domestic Project, Permitted Project or Joint
Venture for such period minus (ii) the aggregate amount of
Operating and Maintenance Costs of such Domestic Project,
Permitted Project or Joint Venture for such period plus (iii), in
the case of the Luannan Facility, the principal payments on the
Luannan Transmission Facilities Loan for such period (each of
(i), (ii) and (iii) as determined on a cash basis in accordance
with GAAP).
"Cash Equivalents" means, at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System, whose
rating is AA or higher from Standard & Poor's or Aa2 or higher
from Moody's, having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper
with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and
having the highest rating obtainable from Standard & Poor's or
Moody's; and (iv) repurchase obligations for a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above.
"Certificated Notes" means definitive Senior Secured
Notes in registered certificated form issued pursuant to the
Senior Secured Notes Indenture to Accredited Investors or QIBs
who elect to take physical delivery of their securities.
"Change of Control" means (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially
all of the assets of the Company, Panda International, the Issuer
or any direct or indirect parent of the Company to any Person or
entity or group of Persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than a
Related Party, (ii) the replacement of a majority of the Board of
Directors of the Company, Panda International, the Issuer or any
direct or indirect parent of the Company, over a two-year period,
from the directors who constituted the Board of Directors of such
Person at the beginning of such period, and such replacement
shall not have been approved by the Board of Directors of such
Person as constituted at the beginning of such period or by the
Board of Directors of Panda International as constituted at the
beginning of such period, (iii) a Person or Group of Persons
(other than Panda International or any Related Party) shall, as a
result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company, Panda International,
the Issuer or any direct or indirect parent of the Company
representing a percentage interest in the combined voting power
of the then outstanding securities of the Company, Panda
International, the Issuer or any direct or indirect parent of the
Company greater than that held by such entities' shareholders as
of the Closing Date and greater than 20% having the right to vote
in the election of directors, (iv) the Company, directly or
indirectly, ceases to hold (a) a 100% equity interest in the
Domestic Projects, (b) a 100% equity interest in the Issuer, (c)
a 90% equity interest in Pan-Sino or (d) the minimum required
interest in a Permitted Project, (v) Pan-Sino ceases to hold a
99% equity interest in Pan-Western and (vi) Pan-Western ceases to
hold a 85% equity interest in each of the Joint Ventures;
provided however that notwithstanding the foregoing, a merger
between the Issuer and Pan-Sino or between Pan-Sino and Pan-
Western shall not be a change of control.
"Change of Control Date" means the date of an
occurrence of a Change of Control.
"Change of Control Notice" has the meaning ascribed
thereto in Section 7.28 of this Indenture.
"Change of Control Offer" has the meaning ascribed to
it in Section 7.28 of this Indenture.
"Change of Control Payment Date" has the meaning
ascribed thereto in Section 7.28 of this Indenture.
"Change of Control Purchase Price" shall have the
meaning ascribed thereto in Section 7.28 of this Indenture.
"Chinamac" means Chinamac (Singapore) Pte Ltd, a
Singapore Corporation.
"Chinamac Distribution Account" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture.
"Closing Date" means the date on which the Senior
Secured Notes and the Note Guarantees will be issued and sold to
the Initial Purchaser.
"Code" means the United States Internal Revenue Code of
1986, as amended.
"Collateral" means all of the interests granted to the
Trustee pursuant to the Collateral Documents.
"Collateral Documents" means the Account Agreement, the
Company Cash Collateral Agreement, the Panda International Pledge
Agreement, the Company Pledge Agreement, the PEC Assignment and
Pledge Agreement and the PEC Cash Collateral Agreement.
"Commercially Feasible Basis" shall mean that,
following a Luannan Event of Loss or an Luannan Expropriation
Event, (i) the sum of the proceeds of the business interruption
insurance, the moneys held in the Debt Service Fund, any amounts
that the Issuer and its Affiliates and the County Partners are
irrevocably committed to contribute and the anticipated revenues
of the Luannan Facility during the estimated period of
rebuilding, repair or restoration will be sufficient to pay all
facility restoration costs, Debt Service and O&M Costs of the
Luannan Facility during the estimated period of rebuilding,
repair or restoration and (ii) the Luannan Facility upon being
rebuilt, repaired or restored can reasonably be expected to
produce revenues adequate to pay all Debt Service and O&M Costs
over the remaining terms of the Securities Outstanding having the
longest Stated Maturity, taking into account any change in
projected operating results due to the impairment of any portion
of the Luannan Facility.
"Commission" means the Securities and Exchange
Commission of the United States.
"Company" means Panda Global Holdings, Inc., a Delaware
corporation.
"Company Cash Collateral Agreement" means the agreement
dated as of April 22, 1997, between the Company and the Trustee.
"Company Equity Distribution Fund" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Company Funds" means the Company Revenue Fund, the
Senior Secured Notes Guarantee Service Fund, the Notes Guarantee
Service Reserve Fund, the Company Operating Fund, the Company
Equity Distribution Fund and such other funds, from time to time,
as may be required pursuant to the terms of this Indenture.
"Company Net Debt Service" means Net Debt Service of
the Company plus Net Debt Service of the Issuer.
"Company Operating Fund" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Company Pledge Agreement" means the agreement dated as
of April 22, 1997, made by the Company in favor of the Trustee
pledging the stock of the Issuer.
"Company Request" and "Company Order" means,
respectively, a written request or order signed in the name of
the Company by its Chief Executive Officer, its President or one
of its Executive Vice Presidents, and by its Treasurer,
Secretary, or one of its Assistant Treasurers or Assistant
Secretaries, and delivered to the Trustee.
"Company Revenue Fund" has the meaning ascribed thereto
in Section 3.3 of this Indenture.
"Completion Sub-Account" has the meaning ascribed
thereto in Section 3.3 of the Senior Secured Notes Indenture.
"Consolidated Debt Service Coverage Ratio" means, as of
the date of determination, and, if the transaction giving rise to
the need to calculate a Consolidated Debt Service Coverage Ratio
is an incurrence of Indebtedness or the making of a Restricted
Payment, calculated after giving effect on a pro forma basis to
such Indebtedness or Restricted Payment as if such Indebtedness
or Restricted Payment had been incurred or made as of the first
day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, the ratio of (i) Cash
Available for Consolidated Debt Service divided by (ii)
Consolidated Net Debt Service; provided, however, with respect to
the calculation of projected Consolidated Debt Service Coverage
Ratio, the remaining unpaid balance of principal due on the
Senior Secured Notes at the Stated Maturity of the Senior Secured
Notes ($131,250,000) shall be assumed to be repaid in semi-annual
repayments as per the following schedule:
Semi-annual Principal
Payment Date Amount Repaid
April 15, 2004 $ 6,000,000
October 15, 2004 $ 6,000,000
April 15, 2005 $ 7,250,000
October 15, 2005 $ 7,250,000
April 15, 2006 $ 5,350,000
October 15, 2006 $ 5,350,000
April 15, 2007 $ 4,600,000
October 15, 2007 $ 4,600,000
April 15, 2008 $ 7,450,000
October 15, 2008 $ 7,450,000
April 15, 2009 $ 7,250,000
October 15, 2009 $ 7,250,000
April 15, 2010 $ 5,650,000
October 15, 2010 $ 5,650,000
April 15, 2011 $ 5,350,000
October 15, 2011 $ 5,350,000
April 15, 2012 $16,750,000
October 15, 2012 $16,700,000;
provided further that the coupon rate on the Senior Secured Notes
repaid as per the schedule above shall be the same coupon rate as
that payable on the Closing Date on the Senior Secured Notes with
interest expense due and payable on a semi-annual basis. In the
event that the remaining unpaid balance of principal due on the
Senior Secured Notes at the Stated Maturity is less than
$131,250,000, then the amount of each semi-annual repayment shown
above shall be deemed to equal the amount of the semi-annual
repayment shown above multiplied by a fraction the numerator of
which is the actual remaining unpaid balance of principal due on
the Senior Secured Notes at the Stated Maturity and the
denominator of which is $131,250,000.
"Consolidated Income Tax Expense" means, for any
period, as applied to the Company, the provision for local,
state, federal or foreign income taxes on a consolidated basis
for such period determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period,
the sum of (a) the total interest expense of the Company and its
consolidated Subsidiaries for such period as determined in
accordance with GAAP, including, without limitation, (i)
amortization of debt issuance costs and of original issue
discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the
effective interest method of accounting, (ii) accrued interest,
(iii) noncash interest payments, (iv) commissions, discounts and
other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (v) interest actually paid by the
Company or any such Subsidiary under any guarantee of
Indebtedness or other obligation of any other Person and (vi) net
costs associated with interest rate agreements (including
amortization of discounts) and currency agreements, plus (b) all
capitalized interest plus (c) dividends paid in respect of
preferred stock of the Company or any Subsidiary held by Persons
other than the Company or a Wholly Owned Subsidiary.
"Consolidated Net Debt Service" means the sum of (i)(a)
Consolidated Interest Expense less (b) non-cash Consolidated
Interest Expense less (c) scheduled withdrawals from the Senior
Secured Notes Capitalized Interest Fund (if applicable) less (d)
scheduled withdrawals from the PFC Capitalized Interest Fund (if
applicable) less (e) scheduled withdrawals from any additional
capitalized interest fund established pursuant to either of the
Indentures (if applicable) plus (ii) all payments of scheduled
and overdue principal of, and premium, if any, on Indebtedness on
a consolidated basis plus (iii) without duplication, all rental
payments in respect of Capitalized Lease Obligations paid,
accrued, or scheduled to be paid or accrued by the Company and
its consolidated Subsidiaries.
"Consolidated Net Income" means, for any period, as
applied to the Company, the aggregate of the Net Income of the
Company and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided, however,
that (i) all extraordinary gains or losses shall be excluded;
(ii) the Net Income of any Person in which the Company or any of
its Subsidiaries has a joint interest with a third party (which
interest does not cause the net income of such other Person to be
consolidated into the net income of the Company in accordance
with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid, in cash, to the Company or the
Subsidiary, (iii) the net income of any Subsidiary of the Company
that is subject to any restriction or limitation on the payment
of dividends or the making of other distributions shall be
excluded to the extent of such restriction or limitation, (iv)
the net income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded, (v) any net gain or loss resulting
from an Asset Sale by the Company or any of its Subsidiaries
other than in the ordinary course of business shall be excluded
and (vi) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any
Person as of any date, the sum of (i) the consolidated equity of
the common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out
of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-
ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such
business) subsequent to the date of the Indentures in the book
value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except in each case, Investments allowed pursuant
to the covenant "Limitation on Investments"), and (z) all
unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Consolidating Financial Analyst" means ICF Resources
Incorporated, a Florida corporation, or its Eligible Successor,
which party may rely, to the extent necessary for purposes of
performing its duties under this Indenture, on the reports of the
Luannan Facility Engineer, the Brandywine Facility independent
engineer, the Rosemary Project independent engineer or other
qualified consultants.
"Construction Schedule" means the construction schedule
set forth in the Luannan EPC Contract.
"County Partners" means Luannan County Heat and Power
Plant, Tangshan Luanhua (Group) Co. and Luannan County Heat
Company, Ltd., all of which are companies organized under the
laws of the PRC.
"County Partners Event of Default" means a failure by
the County Partners to make their required equity contributions
to the Joint Ventures.
"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 Securities (including
any mandatory sinking fund payment) due and payable during such
period and (ii) all interest on the Securities due and payable
during such period.
"Debt Service Coverage Ratio" as of the date of
determination, and, if the transaction giving rise to the need to
calculate Debt Service Coverage Ratio is an incurrence of
Indebtedness or the making of a Restricted Payment, calculated
after giving effect on a pro forma basis to such Indebtedness or
Restricted Payment as if such Indebtedness or Restricted Payment
had been incurred or made on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day
of such period, means:
(i) with respect to the Company, the ratio
of (A) Cash Available for Company Debt Service
divided by (B) Company Net Debt Service;
(ii) with respect to PIC and the issuance of
Indebtedness pursuant to the PFC Indenture, the
ratio of (A) PIC Cash Available for Distribution
during the relevant period to (B) PIC Debt Service
for such period; and
(iii) with respect to a Domestic Project,
a Permitted Project or a Joint Venture, the ratio
of (A) Cash Available for Project Debt Service to
(B) Net Debt Service of such Domestic Project,
Permitted Project or Joint Venture;
provided, however, with respect to the calculation of projected
Debt Service Coverage Ratio, the remaining unpaid balance of
principal due on the Senior Secured Notes after the Stated
Maturity of the Senior Secured Notes shall be assumed to be
repaid pursuant to the schedule and the proviso thereto as set
forth in the definition of Consolidated Debt Service Coverage
Ratio.
"Debt Service Reserve Requirement" means (i) the
aggregate principal, premium, if any, of payments due on the
Senior Secured Notes on the next semi-annual payment date and
(ii) the aggregate cash interest payments (including Liquidated
Damages and Additional Amounts, if any) due on the Senior Secured
Notes on the next semi-annual payment date.
"Default" means, as used in relation to the Indenture,
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" means The Depository Trust Company, its
nominees and their respective successors.
"Development Services Agreement" means the development
services agreement between Panda International and the Company,
dated as of the date of this Indenture.
"Disbursement Date" shall mean the date specified in a
Restoration Requisition as the date on which moneys are requested
by the Issuer to be withdrawn and transferred from the Fund to
which such Restoration Requisition relates for the purpose set
forth in such Requisition.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Senior Secured Notes.
"Dollar Permitted Investments" means any of the
following securities: (i) direct obligations of the Department
of the Treasury of the United States of America; (ii) obligations
of any of the following federal agencies, which obligations
represent the full faith and credit of the United States of
America, including: Export-Import Bank, Farmers Home
Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government
National Mortgage Association (GNMA), U.S. Department of Housing
& Urban Development (PHA's) and Federal Housing Administration;
(iii) bonds, notes or other evidences of indebtedness rated "AAA"
by Standard & Poor's and "Aaa" by Moody's and issued by the
Federal Home Loan Bank, the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation; (iv) commercial
paper rated in any one of the two highest rating categories by
Moody's or Standard & Poor's; (v) investment agreements with
banks (foreign and domestic), broker/dealers, and other financial
institutions rated at the time of bid in any one of the three
highest rating categories by Moody's and Standard & Poor's; (vi)
repurchase agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the
time of bid in any one of the three highest rating categories by
Moody's and Standard & Poor's, provided: (1) collateral is
limited to (i), (ii) and (iii) above, (2) the margin levels for
collateral must be maintained at a minimum of 102% including
principal and interest, (3) the Trustees shall have a first
perfected security interest in the collateral, (4) the collateral
will be delivered to a third party custodian, designated by the
Company, acting for the benefit of the Trustees and all fees and
expenses related to collateral custody will be the responsibility
of the Company, (5) the collateral must have been or will be
acquired at the market price and marked to market weekly and
collateral level shortfalls cured within 24 hours, (6) unlimited
right of substitution of collateral is allowed provided that
substitution collateral must be permitted collateral substituted
at a current market price and substitution fees of the custodian
shall be paid by the Company; (vii) forward purchase agreements
delivering securities outlined in (i) and (iv) above with banks
(foreign and domestic), broker/dealers, and other financial
institutions maintaining a long-term rating on the day of bid no
lower than investment grade by both Standard & Poor's and Moody's
(such rating may be at either the parent or subsidiary level).
"Dollars" and "$" means lawful money of the United
States.
"Domestic Project" means either the Rosemary Facility
or the Brandywine Facility.
"Domestic Project Event" means the occurrence of any of
the following: a Rosemary Event of Eminent Domain, a Brandywine
Event of Loss, a Rosemary Event of Loss or a Rosemary Title
Event.
"Domestic Project Event Proceeds" means the sum of any
and all of the following: Rosemary Eminent Domain Proceeds,
Brandywine Event of Loss Proceeds, Rosemary Casualty Proceeds and
Rosemary Title Insurance Proceeds.
"Domestic Project Permitted Indebtedness" means, in
addition to any Indebtedness outstanding as of the Closing Date,
(i) working capital debt and letter of credit reimbursement
obligations, provided that after giving effect to such additional
debt and obligations, (a) the minimum (or lowest) projected Debt
Service Coverage Ratio of the Domestic Project for any calendar
year will not be less than 1.5 to 1 and (b) the average projected
Debt Service Coverage Ratio of the Domestic Project for any
calendar year will not be less than 1.7 to 1, (ii) purchase money
or capital lease obligations incurred to finance assets of the
Domestic Project that are readily replaceable personal property
with a principal amount or capitalized portion not exceeding $1.0
million in the aggregate outstanding at any time, and (iii) trade
accounts payable (other than for borrowed money) due within 90
days arising, and accrued expenses incurred, in the ordinary
course of business of operating or maintaining the Domestic
Project.
"Domestic Projects" means the Rosemary Facility and the
Brandywine Facility.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Eligible Successor" means any nationally recognized
independent engineering firm or any nationally recognized
independent consulting firm with expertise in engineering and
financial analysis that is selected by the Company 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 4.8(d) of this 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 the Company
or any Affiliate thereof or (ii) was, or will be connected as a
promoter, underwriter, voting trustee, director, officer or
employee of the Company or any Affiliate thereof. "Member" means
(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 the Company 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.
"Energy Purchase Agreement" means the Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, among
North China Power Company, Tangshan Panda and Tangshan Pan-
Western.
"Engineering and Design Contract" means the Engineering
and Design Contract, dated December 21, 1995, among the Design
Institute, Tangshan Panda and Tangshan Pan-Western.
"Event of Default" as used in relation to the Indenture
shall have the meaning ascribed thereto in Section 9.1 of this
Indenture.
"Excess Proceeds" means any Net Cash Proceeds from
Asset Sales that are not applied or invested to an investment,
the making of a capital expenditure or the acquisition of other
tangible assets. On the earlier of (i) the 366th day after an
Asset Sale or (ii) such date as the Board of Directors of the
Company determines not to apply the Net Cash Proceeds relating to
such Asset Sale in the manner set forth above (or the Company
determines not to cause its Subsidiary to apply the Net Cash
Proceeds in such a manner), if the aggregate amount of Excess
Proceeds exceeds $1.0 million, the Company or its Subsidiary, as
the case may be, shall be subject to the following requirements:
(1) in the event that the Company cannot then incur
$1.00 of additional Permitted Indebtedness pursuant to clause (v)
of the definition of "Permitted Indebtedness," the Company or its
Subsidiary will be required to make an offer to purchase (the
"Asset Sale Redemption Offer") from all Holders of Senior Secured
Notes and holders of additional Senior Indebtedness, up to a
maximum principal amount (expressed as a multiple of $1,000) of
Senior Secured Notes and holders of additional Senior
Indebtedness equal to the Excess Proceeds at a purchase price
equal to 100% of the principal amount thereof plus accrued and
unpaid interest (including Liquidated Damages and Additional
Amounts, if any) thereon, if any, to the date of purchase; in the
event that there is additional Senior Indebtedness outstanding at
the time of the Asset Sale Redemption Offer, Excess Proceeds
shall be allocated to each issuance of Senior Indebtedness in
accordance with the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal amount of the
Senior Secured Notes and the denominator of which is the sum of
the principal amounts of all Senior Indebtedness which is subject
to this requirement or a similar requirement under such Senior
Indebtedness's governing instrument; and
(2) in the event that the Company can incur $1.00 of
additional Permitted Indebtedness pursuant to clause (v) of the
definition of "Permitted Indebtedness," the Company or its
Subsidiary will be required to make an Asset Sale Redemption
Offer to all Holders of Senior Secured Notes and holders of
additional Senior Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Senior Secured Notes and
holders of additional Senior Indebtedness equal to the Excess
Proceeds (Excess Proceeds for purposes of this clause (2) is
limited to that amount of the Net Cash Proceeds that equals the
principal amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the asset being
sold) at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if any, to the
date of purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale Redemption
Offer, Excess Proceeds shall be allocated to each issuance of
Senior Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of which is the
principal amount of the Senior Secured Notes and the denominator
of which is the sum of the principal amounts of all Senior
Indebtedness which is subject to this requirement or a similar
requirement under such Senior Indebtedness's governing
instrument.
Upon completion of such Asset Sale Redemption Offer(s),
the amount of Excess Proceeds shall be reset at zero. Whenever
Net Cash Proceeds in excess of $1.0 million from any Asset Sale
are received by the Issuer or the Company, as the case may be,
and such Net Cash Proceeds may, through the passage of time or
otherwise, be required to be applied to the purchase of Senior
Secured Notes pursuant to this covenant, the Issuer or the
Company, as the case may be, shall deposit such Net Cash Proceeds
with, respectively, the Senior Secured Notes Trustee or the
Trustee, as trust monies subject to disposition as provided in
this covenant and such Net Cash Proceeds shall be set aside by
the Senior Secured Notes Trustee or the Trustee pending
application to the purchase of Senior Secured Notes. At the
direction of the Company, such Net Cash Proceeds shall be
required to be invested by the Senior Secured Notes Trustee or
the Trustee in Dollar Permitted Investments. The Company or its
relevant Subsidiary, as applicable, shall be entitled to any
interest or dividends accrued, earned or paid on such
investments.
"Exchange Act" means the United States Securities and
Exchange Act of 1934, as amended.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting in
good faith and shall be evidenced by a Board Resolution delivered
to the Trustees, except that any determination of Fair Market
Value made with respect to any parcel of real property shall be
made by an independent appraiser.
"Federal Bankruptcy Code" means Title 11 of the United
States Code or any other federal bankruptcy code hereafter in
effect.
"Final Stated Maturity" means the last stated maturity
date of any Indebtedness outstanding under the PFC Indenture.
"Funding Period" means, with respect to the Senior
Secured Notes Indenture and the Issuer Loan Agreement, the period
of time beginning with the Closing Date and ending on the date
when the last Joint Venture has a payment obligation relating to
the construction of the Luannan Facility.
"Funds" shall have the meaning ascribed thereto in
Section 3.3 of this Indenture.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date of the Indentures.
"GAAP Reserves" means, 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 Effect.
"Government Authority" means 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" means 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 Government 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 Government
Authority, whether now or hereafter in effect.
"Governmental Approval" means (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
Government Authority required to be obtained or made.
"Guarantee" by any Person means any guarantee, surety,
note or other obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing in any manner any
Indebtedness 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 Indebtedness 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 Indebtedness 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.
"Holders" or "Noteholders" means a Persons in whose
name a Security is registered in the Security Register.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a capitalized lease obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Indentures" means this Indenture and the Senior
Secured Notes Indenture.
"Independent Financial Advisor" means an independent
and internationally recognized investment bank, accounting firm
or engineering firm, as the case may be, whose business regularly
includes the rendering of valuation opinions with respect to the
assets at issue, chosen by the Company and reasonably acceptable
to the Trustee.
"Independent Insurance Consultant" means Sedgwick,
James of Tennessee, Inc., a corporation incorporated in
accordance with the laws of the State of Tennessee, or its
successor.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette
Securities Corporation.
"Institutional Accredited Investor" means 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.
"Interconnection Agreement" means the General
Interconnection Agreement, dated September 22, 1995, between
North China Power Company, Tangshan Panda and Tangshan Pan-
Western, as supplemented by the Supplemental Agreement.
"Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Interest Payment Date" means, with respect to any
Security, the date specified in such Security as the date on
which an installment of interest on (including any Liquidation
Damages or Additional Amounts) such Security is due and payable.
"Internal Revenue Service" or "IRS" means the Internal
Revenue Service of the United States.
"International Distribution Fund" means the fund
described in Article IV of the PFC Indenture and maintained in
the name of PIC pursuant to such Article, which such fund is
entitled to distributions of monies from a Non-U.S. Permitted
Project to the extent that all obligations have been met by PFC,
PIC and the PIC International Entity (and any other PIC
international entities) under the PFC Indenture.
"Investment Company Act" means the Investment Company
Act of 1940, as amended.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including
Affiliates) in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances (other
than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such
person) or capital contributions (excluding commission, travel,
relocation and similar advances to officers and employees made in
the ordinary course of business), purchases or other acquisitions
for consideration of Indebtedness, Capital Stock or other
securities and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Issuer" means Panda Global Energy Company, a Cayman
Islands exempted company.
"Issuer Cash Collateral Agreement" means the agreement
dated as of April 22, 1997, between the Issuer and the Trustee.
"Issuer Distribution Account" has the meaning ascribed
thereto in Section 3.3 of the Senior Secured Notes Indenture.
"Issuer Equity Distribution Fund" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture.
"Issuer Funds" means the funds described in Section
3.3(a)-(h) of the Senior Secured Notes Indenture.
"Issuer Loan" means the outstanding indebtedness of Pan-
Western to the Issuer incurred by Pan-Western to enable it to
make the Shareholder Loans and to make the JV Equity
Contributions and funded by the Issuer with the proceeds of the
Senior Secured Notes.
"Issuer Loan Agreement" means the Issuer Loan Agreement
by and between the Issuer and Pan-Western, dated the date of this
Indenture.
"Issuer Note" means one or more promissory notes issued
by Pan-Western to the Issuer evidencing its indebtedness to the
Issuer.
"Issuer Operating Fund" has the meaning ascribed
thereto in Section 3.3 of the Senior Secured Notes Indenture.
"Issuer Order" means a written order of the Issuer,
signed by its Chief Executive Officer, President or any Executive
Vice President and by its Treasurer, Secretary, any Assistant
Treasurer or any Assistant Secretary.
"Issuer Pledge Agreement" means the agreement dated as
of April 22, 1997, made by the Issuer in favor of the Trustee
pledging the stock of the Pan-Sino.
"Issuer Revenue Fund" has the meaning ascribed thereto
in Section 3.3 of the Senior Secured Notes Indenture.
"Issuer's Securities" means any debentures, notes,
bonds, Guarantees or other evidences of indebtedness issued under
the Senior Secured Notes Indenture and any Series Supplemental
Indentures thereto.
"Jing-Jin-Tang Grid" means North China Power's
Beijing-Tianjin-Tangshan Regional Power Network, to which the
electricity generated by the Luannan Facility will be transmitted
for distribution.
"Joint Venture Agreements" means, collectively, the
joint venture contracts in respect of Tangshan Panda, Tangshan
Pan-Western, Tangshan Cayman and Tangshan Pan-Sino.
"Joint Venture Facility" means the portion of the
Luannan Facility to be constructed or acquired by each Joint
Venture (collectively, the "Joint Venture Facilities").
"Joint Venture Guarantees" means collectively, the
undertakings by Tangshan Panda, each executed as of the 24th day
of September, 1996, to unconditionally and irrevocably guarantee
to Pan-Western prompt payment and performance by each of Tangshan
Pan-Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Pan-Western pursuant to any debt
obligation then or thereafter due and owing by any such party to
Pan-Western; the undertakings by Tangshan Pan-Western, each
executed as of the 24th day of September, 1996, to
unconditionally and irrevocably guarantee to Pan-Western the
prompt payment and performance by each of Tangshan Panda,
Tangshan Cayman and Tangshan Pan-Sino of their individual
obligations to Pan-Western pursuant to any debt obligation then
or thereafter due and owing by any such party to Pan-Western; the
undertakings by Tangshan Cayman, each executed as of the 24th day
of September, 1996, to unconditionally and irrevocably guarantee
to Pan-Western the prompt payment and performance by each of
Tangshan Panda, Tangshan Pan-Western and Tangshan Pan-Sino of
their individual obligations to Pan-Western pursuant to any debt
obligation then or thereafter due and owing by any such party to
Pan-Western; and the undertakings by Tangshan Pan-Sino, each
executed as of the 24th day of September, 1996, to
unconditionally and irrevocably guarantee to Pan-Western the
prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Cayman of their individual
obligations to Pan-Western pursuant to any debt obligation then
or thereafter due and owing by any such party to Pan-Western.
"Joint Venture Permitted Indebtedness" means (i) the
Shareholder Loans and any additional loans from Pan-Western to
the Joint Ventures, (ii) working capital debt, provided that
after giving effect to such additional debt, (a) the minimum (or
lowest) projected Debt Service Coverage Ratio for any calendar
year will not be less than 1.5 to 1 and (b) the average projected
Debt Service Coverage Ratio for any calendar year will not be
less than 1.7 to 1 (provided that working capital debt shall at
no time exceed $1.0 million), (iii) purchase money or capital
lease obligations incurred to finance assets of the Joint
Ventures that are readily replaceable personal property with a
principal amount or capitalized portion not exceeding $1.0
million in the aggregate outstanding at any time, (iv) trade
accounts payable (other than for borrowed money) due within 90
days arising, and accrued expenses incurred, in the ordinary
course of business of constructing, operating or maintaining the
Joint Venture Facility on customary terms, (v) interest or
currency exchange rate protection agreements, (vi) debt under the
Joint Venture Guarantees of each Joint Venture and any other
guarantees of the obligations of the Joint Venture and (vii) any
debt to any other Joint Venture.
"Joint Ventures" means, collectively, Tangshan Panda,
Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-Sino.
"JV Equity Contributions" shall mean the monies
disbursed from the Luannan Facility Construction Fund pursuant to
the terms of the Issuer Loan and contributed by Pan-Western,
pursuant to the terms of the Joint Venture Agreements, to each of
the Joint Ventures as Pan-Western's equity contribution to such
Joint Venture.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of the Indentures, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Liquidated Damages" means the amount payable as
liquidated damages under the terms of the Registration Rights
Agreement, the Senior Secured Notes Guarantee, the Issuer Loan,
the Shareholder Loans and the Collateral Documents.
"Luannan Casualty Proceeds" means all Insurance
Proceeds or other amounts received by Pan-Western on account of
any Luannan Event of Loss ("Insurance Proceeds" means all amounts
and proceeds (including instruments) in respect of the proceeds
of any casualty insurance policy covering any portion of the
Luannan Facility (except proceeds of business interruption
insurance)).
"Luannan Coal Suppliers" means, collectively, Kailuan
Coal Mining Administration, Luannan County Coal Mine, Liu Guantun
Coal Mine, Le Ting County Coal Mine, Zunhua Coal Mine and Chang
Li County Coal Mine.
"Luannan Coal Supply Agreements" means, collectively,
the coal supply agreements entered into among Tangshan Panda,
Tangshan Pan-Western and the Luannan Coal Suppliers.
"Luannan Coal Transportation Agreement" means the coal
transportation agreement, dated March 6, 1996, among the Carrier,
Tangshan Panda and Tangshan Pan-Western.
"Luannan Commercial Operation Date" means that date by
which both of the following have occurred: (i) the Luannan
Facility Engineer has certified that the Luannan Facility has
achieved commercial operations and (ii) the Commercial Operation
Date, as such term is used in the Interconnection Agreement, has
occurred.
"Luannan EPC Contract" means the Engineering,
Procurement and Construction Contract, dated as of April 24,
1996, among the Luannan EPC Contractor, Tangshan Panda and
Tangshan Pan-Western, as the same may from time to time be
amended, supplemented or otherwise modified.
"Luannan EPC Contractor" means Harbin Power Engineering
Company Limited, a company organized under the laws of the PRC,
and a wholly-owned subsidiary of Harbin Power Equipment Company,
a company organized under the laws of the PRC.
"Luannan Event of Loss" means an event which causes all
or a portion of the Luannan Facility to be damaged, destroyed or
rendered unfit for normal use for any reason whatsoever, other
than a Luannan Expropriation Event.
"Luannan Expropriation Event" means any compulsory
transfer or taking or transfer under threat of compulsory
transfer or taking of any material part of the Luannan Facility
or any ownership interest or other rights in the Joint Ventures
by any governmental authority.
"Luannan Expropriation Proceeds" means any proceeds
received by Pan-Western as a result of the occurrence of a
Luannan Expropriation Event.
"Luannan Facility" means the Plant, the related steam
and hot water generation and distribution facility and other
related facilities to be located in Luannan County, Tangshan
Municipality, Hebei Province, China.
"Luannan Facility Construction Cost" means the actual
cost to complete the construction of the Luannan Facility as
certified by the Luannan Facility Engineer following the Luannan
Commercial Operation Date (and which total includes amounts on
deposit in the Completion Sub-Account).
"Luannan Facility Construction Fund" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture.
"Luannan Facility Construction Schedule Certificate"
means a certificate from the Issuer, Pan-Western and the Luannan
Facility Engineer (delivered at least once a month whether or not
there is a disbursement pursuant to the Shareholder Loans) to the
effect that: (a) undisbursed funds in the Luannan Facility
Construction Fund (or other monies available to the Issuer, to
the extent that such monies have been segregated in a dedicated
account and a security interest in such account has been granted
to the Senior Secured Notes Trustee) together with any and all
interest earned on the Issuer Funds and the Pan-Western Funds are
reasonably expected to equal or exceed the amount necessary to
pay all costs in connection with final completion of the Luannan
Facility; and (b) the Luannan Facility is being constructed in
accordance with the Approved Construction Budget and Schedule or,
if applicable, an Approved Completion Plan.
"Luannan Facility Engineer" means Parsons Brinckerhoff
Energy Services, Inc., which previously served as the Joint
Ventures' project engineer, and any successor thereto under the
terms of the Indentures.
"Luannan Facility Notes" means the promissory notes
issued by the Joint Ventures to Pan-Western, evidencing their
indebtedness to Pan-Western.
"Luannan Facility Restoration Fund" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture
"Luannan Financing Agreements" means, collectively, the
Shareholder Loan Agreements, the Joint Venture Guarantees, the
Issuer Note and the Luannan Facility Notes.
"Luannan O&M Contractor" means Duke/Fluor Daniel
International Services, a partnership whose partners are Duke
Coal Project Services Pacific, Inc., a Nevada corporation, and
Fluor Daniel Asia, Inc., a California corporation.
"Luannan Operations and Maintenance Agreement" means
the Amended and Restated Operation and Maintenance Agreement,
dated as of March 6, 1997, among the Joint Ventures and the
Luannan O&M Contractor.
"Luannan Power Purchase Agreement" means, collectively,
the Energy Purchase Agreement, the Interconnection Agreement and
the supplemental agreement thereto (and, after execution thereof,
the related interconnection dispatch agreement).
"Luannan Project Documents" means, collectively, the
Luannan Power Purchase Agreement, the Luannan EPC Contract, the
Luannan Transmission Facilities Construction Agreement, the
Luannan Operations and Maintenance Agreement, the Luannan Coal
Supply Agreements, the Luannan Coal Transportation Agreement, the
Engineering and Design Contract and all other instruments,
agreements or other documents arising from or related to the
Luannan Facility, but shall not include any Luannan Financing
Agreement.
"Luannan Transmission Facilities" means three new
substations, the upgrades of both an existing substation and an
existing switching station and approximately 43 km of 110 KV
transmission lines to interconnect the Plant to the Jing-Jin-Tang
Grid.
"Luannan Transmission Facilities Contractor" means
North China Power Company, as the contractor pursuant to the
Luannan Transmission Facilities Construction Agreement.
"Luannan Transmission Facilities Construction
Agreement" means the Transmission Facilities Construction
Agreement among North China Power Company, Tangshan Panda and
Tangshan Pan-Western, dated February 10, 1996, as assigned by
Tangshan Panda and Tangshan Pan-Western to Tangshan Pan-Sino on
July 11, 1996.
"Luannan Transmission Facilities Loan" means the loan
made by Tangshan Pan-Sino to the Luannan Transmission Facilities
Contractor through a PRC financial intermediary for the
construction cost of the Luannan Transmission Facilities, in the
amount of RMB 78,218,000, to be adjusted for inflation from
December 31, 1994 to the date of issuance of the notice to
proceed with preliminary design and for accrued interest during
the construction period.
"Mandatory Redemption Event" has the meaning ascribed
thereto in the PFC Indenture.
"Mandatory Redemption Offer" means an offer which the
Issuer is obligated to make upon the occurrence of certain events
to redeem pro rata the outstanding Senior Secured Notes at a
redemption price equal to 100% of the principal amount of the
Senior Secured Notes, together with accrued and unpaid interest,
if any, to the redemption date.
"Material Adverse Effect" means a material adverse
change in the financial condition with respect to the party or
entity in question or any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the operation of a Domestic Project; (b) the development,
construction or operation of a Permitted Project which is, or is
owned by, a Material Subsidiary; (c) the development,
construction or operation of the Luannan Facility; (d) the
ability of, respectively, a Domestic Project, a Permitted Project
which is, or is owned by, a Material Subsidiary or the Luannan
Facility to perform any of their material obligations under a
Project Document; (e) the ability of the Issuer to make payments
of principal, premium, if any, or interest (including Liquidated
Damages and Additional Amounts, if any) on the Senior Secured
Notes when due or (f) the ability of the Company to make payments
pursuant to the provisions of the Senior Secured Notes Guarantee.
"Material Subsidiary" means any Subsidiary which, at
any date of determination, is a "Significant Subsidiary" (as that
term is defined in Regulation S-X, as in effect on the Closing
Date, issued under the Securities Act).
"Member" shall have the meaning ascribed thereto in the
definition of "Eligible Successor" in Appendix A hereof.
"monies" means, with respect to any Fund, cash and
Dollar Permitted Investments on deposit in such Account or Fund.
"Monthly Date" means the 15th day of each calendar
month, on which the Trustee is authorized to withdraw and
transfer monies from the Company Revenue Fund pursuant to Section
4.1(b) of this Indenture.
"Moody's" means Moody's Investors Service, Inc.
"NDR" means National Development and Research
Corporation, a Texas corporation.
"NDR Distribution Account" means a NDR distribution
account into which amounts from the Pan-Sino Fund shall be
allocated, in accordance with the equity interest of NDR in Pan-
Sino.
"Net Cash Proceeds" means (a) in the case of any sale
of Capital Stock by the Company, Panda International or any
direct or indirect parent of the Company, the aggregate net cash
proceeds received by the Company, Panda International or any
direct or indirect parent of the Company, after payment of
expenses, commissions and the like incurred in connection
therewith, whether such proceeds are in cash or in property
(valued at the Fair Market Value thereof, as determined in good
faith by the Board of Directors of such Person, at the time of
receipt); (b) in the case of any exchange, exercise, conversion
or surrender of outstanding securities of any kind for or into
shares of Capital Stock of the Company, Panda International or
any direct or indirect parent of the Company which is not
Disqualified Stock, the net book value of such outstanding
securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the
holder to the Company, Panda International or any direct or
indirect parent of the Company upon such exchange, exercise,
conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares and less all
expenses incurred by the Company, Panda International or any
direct or indirect parent of the Company in connection
therewith).
"Net Debt Service" means the sum of (i) (a) Interest
Expense less (b) non-cash Interest Expense less (c) scheduled
withdrawals from the Senior Secured Notes Capitalized Interest
Fund (if applicable) less (d) scheduled withdrawals from the PFC
Capitalized Interest Fund (if applicable) less (e) scheduled
withdrawals from any additional capitalized interest fund
established pursuant to either of the Indentures (if applicable)
plus (ii) all payments of scheduled and overdue principal of, and
premium, if any, on Indebtedness plus (iii) without duplication,
all rental payments in respect of Capitalized Lease Obligations
paid, accrued, or scheduled to be paid or accrued.
"Net Income" means, with respect to any Person for any
period, the net income (loss) of such Person determined in
accordance with GAAP.
"Network" means the heat and steam network of Luannan
Heat and Power which will consist of 12.1 kilometers of hot water
pipeline, 8.78 kilometers of steam pipeline, heat exchange
stations, heat control equipment and civil construction.
"NGC" means Natural Gas Clearinghouse, a Colorado
partnership.
"NNW Cash Flow Participation" means NNW's cash flow
participation interest in distributions from the Rosemary
Partnership.
"Non-Recourse Debt" means Indebtedness of any
Subsidiary or group of Subsidiaries that is incurred to acquire,
construct or develop a Permitted Project or group of Permitted
Projects provided that such Indebtedness is without recourse to
the Company or any Material Subsidiary or to any assets of the
Company or any such Material Subsidiary other than such Permitted
Project and the direct or indirect parent or parents that own
such Permitted Project or group of Permitted Projects and the
income from and proceeds of such Permitted Project or group of
Permitted Projects.
"Non-U.S. Permitted Project" means a Permitted Project
located outside the United States.
"North China Power" means North China Power Group, a
regional grid administrative agency in northern China whose
jurisdiction covers Beijing, Tianjin, Hebei Province, Shanxi
Province and western Inner Mongolia.
"North China Power Company" means North China Power
Group Company, a company organized under the laws of the PRC and
the business arm of North China Power.
"Note Custodian" means the Trustee, as custodian with
respect to the Global Notes, or any successor entity thereto.
"Notes Guarantee Interest Account" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Notes Guarantee Principal Account" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Notes Guarantee Service Fund" has the meaning ascribed
thereto in Section 3.3 of this Indenture.
"Notes Guarantee Service Reserve Fund" has the meaning
ascribed thereto in Section 3.3 of this Indenture.
"Offering Memorandum" means the confidential Offering
Memorandum dated April 11, 1997, with respect to the Senior
Secured Notes and the Senior Secured Notes Guarantee.
"O&M" means operations and maintenance services.
"O&M Contractor" means Duke/Fluor Daniel International
Services, a partnership organized and existing under the laws of
Nevada, whose partners are Duke Coal Project Services Pacific,
Inc., a Nevada corporation and Fluor Daniel Asia, Inc., a
California corporation.
"Offering Memorandum" means the confidential Offering
Memorandum dated April 11, 1997, with respect to the Senior
Secured Notes and the Senior Secured Notes Guarantee.
"Offering" means the offering of the Senior Secured
Notes pursuant to the Offering Memorandum.
"Officer's Certificate" means a certificate satisfying
the requirements of Section 1.2 of the Indenture of an Authorized
Representative of the Company or the Issuer, as is appropriate to
the context, and signed by the chief executive officer,
president, any executive vice president or any vice president and
by the treasurer, an assistant treasurer, the secretary or an
assistant secretary of the Company or the Issuer, as is
appropriate to the context, and delivered to the Trustee.
"Operating and Maintenance Costs" means all amounts
disbursed by or on behalf of the Domestic Project, Permitted
Project or Joint Ventures for operation, maintenance, repair, or
improvement of the Domestic Project, Permitted Project or Joint
Ventures, including, without limitation, premiums on insurance
policies, property, income and all other taxes to the extent
paid, and payments under the relevant operating and maintenance
agreements, leases (including Operating Lease Obligations),
royalty and other land use agreements, and any other payments
required under the Project Documents, each as determined on a
cash basis in accordance with GAAP.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Operation and Maintenance Agreement" means the Amended
and Restated Operation and Maintenance Agreement, dated as of
March 6, 1997, between the Joint Ventures and the O&M Contractor.
"Opinion of Counsel" means a written opinion of counsel
satisfying the requirements of Section 1.3 of this Indenture for
any reason either expressly referred to in this Indenture, or
otherwise, which counsel and opinion shall be reasonably
satisfactory to the Trustee and which may include, without
limitation, counsel for the Company, whether or not such counsel
is an employee of the Company.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities or portions thereof deemed to have
been paid within the meaning of Section 6.3(a) of this
Indenture; and
(iii) Securities that have been exchanged for other
securities or securities in lieu of which other Securities
have been authenticated and delivered pursuant to this
Indenture other than any Securities in respect of which
there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities constitute
valid obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of Securities 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, Securities owned by the Company or an
Affiliate of the Company shall be disregarded and deemed not to
be outstanding as provided in Section 1.4(f) of this Indenture.
"Pan-Sino" means Pan-Sino Energy Development Company
LLC, a Cayman Islands exempted company.
"Pan-Sino Cash Collateral Agreement" means the
agreement dated as of April 22, 1997, between Pan-Sino and the
Trustee.
"Pan-Sino Distribution Account" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture.
"Pan-Sino Fund" has the meaning ascribed thereto in
Section 3.3 of the Senior Secured Notes Indenture.
"Pan-Sino Pledge Agreement" means the agreement dated
as of April 2, 1997, made by Pan-Sino in favor of the Trustee
pledging the stock of Pan-Western.
"Pan-Sino Shareholders' Agreement" means the agreement
among Pan-Sino, the Issuer and NDR, dated as of April 22, 1997.
"Pan-Western" means Pan-Western Energy Corporation LLC,
a Cayman Islands exempted company.
"Pan-Western Cash Collateral Agreement" means the
agreement dated as of April 22, 1997, between Pan-Western and the
Trustee.
"Pan-Western Equity Distribution Fund" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture.
"Pan-Western Funds" means the Pan-Western Revenue Fund,
the Pan-Western Operating Fund and the Pan-Western Equity
Distribution Fund.
"Pan-Western Operating Fund" has the meaning ascribed
thereto in Section 3.3 of the Senior Secured Notes Indenture.
"Pan-Western Pledge Agreement" means the agreement
dated as of April 22, 1997, made by Pan-Western in favor of the
Trustee pledging the promissory notes under the Shareholder Loan
Agreements.
"Pan-Western Revenue Fund" has the meaning ascribed
thereto in Section 3.3 of the Senior Secured Notes Indenture.
"Panda International" means Panda Energy International,
Inc., a Texas corporation.
"Panda International Pledge Agreement" means the
agreement dated as of April 22, 1997, made by Panda International
in favor of the Trustee pledging the stock of the Company.
"Paying Agent" means any Person acting as Paying Agent
pursuant to Section 10.11 of the Indenture.
"Payment Date" means a Principal Payment Date or an
Interest Payment Date.
"PBC" means Panda Brandywine Corporation, a Delaware
corporation.
"PEC" means Panda Energy Corporation, a Texas
corporation.
"PEC Assignment and Pledge Agreement" means the
agreement dated as of April 22, 1997, made by the Company in
favor of the Trustee pledging the stock of PEC.
"PEC Cash Collateral Agreement" means the agreement
dated as of April 22, 1997, between PEC and the Trustee.
"PEC-Delaware" means Panda Energy Corporation, a
Delaware corporation.
"Permitted Indebtedness" means:
(i) any and all indebtedness of the Company
and its Subsidiaries outstanding as of the Closing
Date;
(ii) Indebtedness of the Company which is
owed to and held by a Wholly Owned Subsidiary and
Indebtedness of a Wholly Owned Subsidiary which is
owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any
transfer or such Indebtedness (other than to the
Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the incurrence
of such Indebtedness by the Company or by a Wholly
Owned Subsidiary, as the case may be;
(iii) Non-Recourse Debt of a Subsidiary
or group of Subsidiaries, the proceeds of which
are used to acquire, develop or construct a
Permitted Project by such Subsidiary or group of
Subsidiaries;
(iv) Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, or
refund, Indebtedness that was permitted by the
Indentures to be incurred or was outstanding as of
the Closing Date;
(v) any additional Indebtedness incurred by
the Company or its Subsidiaries provided that the
Chief Financial Officer of the Company certifies
that at the time of incurrence of such
Indebtedness that the following conditions have
been met:
(a) no Event of Default will occur
and be continuing after giving effect to the
incurrence of such additional Indebtedness;
(b) the minimum (or lowest) annual
projected Debt Service Coverage Ratio of the
Company for the remaining term of the Senior
Secured Notes will not be less than 1.4 to 1;
(c) the minimum (or lowest) annual
projected Consolidated Debt Service Coverage
Ratio of the Company for the remaining term
of the Senior Secured Notes will not be less
than 1.15 to 1;
(d) the Rating Agencies shall have
confirmed that there will be no rating
downgrade with respect to the Senior Secured
Notes after giving effect to the incurrence
of such additional Indebtedness;
(e) the Debt Service Coverage
Ratio of the Company shall be, for the
immediately preceding four fiscal quarters,
greater than 1.4 to 1;
(f) the amount in the Debt Service
Reserve Fund plus the amount in the Note
Guarantee Service Reserve Fund equals or
exceeds the Debt Service Reserve Requirement;
(vi) any additional Indebtedness issued
pursuant to one or more PFC Indenture supplements,
provided that, at the time of the creation of such
Indebtedness (other than the initial Series A
Bonds and any series of bonds issued solely in
exchange for an equivalent aggregate principal
amount of outstanding bonds of another series) the
following conditions have been met:
(a) PIC provides an officer's
certificate at the time of incurrence of such
Indebtedness to the Trustee (supported by a
certificate to the Trustee from the
Consolidating Financial Analyst) stating
that, after giving effect to the issuance of
such Indebtedness and the application of the
proceeds therefrom, the projected PIC Debt
Service Coverage Ratio and the projected PIC
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 PIC Future Ratio Determination
Period; and
(b) the rating of the outstanding
Indebtedness in effect immediately prior to
the issuance of such additional Indebtedness
is reaffirmed by the Rating Agencies after
giving effect to the issuance of such
additional Indebtedness, provided, further,
that a reaffirmation of the rating of the
outstanding Indebtedness shall not be
required if (1) neither PIC nor any
Subsidiary of the Company has acquired (or is
acquiring in connection with the issuance of
such additional Indebtedness), sold or
otherwise disposed of, since the last date
upon which the Indebtedness 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
Permitted Projects with respect to which the
sum of (w) the aggregate purchase price 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) $50.0 million and (z) 25% of
the aggregate principal amount of the
Indebtedness then outstanding and (2) the
aggregate principal amount of additional
Indebtedness to be issued is less than the
lesser of (x) $50.0 million and (y) 25% of
the aggregate principal amount of the
indebtedness then outstanding; and
(vii) in addition to the Indebtedness
referred to in clauses (i) through (vi), any other
Indebtedness of the Company and its Subsidiaries
that, in the aggregate, does not exceed $10.0
million.
"Permitted Liens" means, with respect to any Person,
any Lien arising by reason of (a) any judgment, decree or order
of any court, so long as such Lien is being contested in good
faith and is adequately bonded, any appropriate legal proceedings
which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated
or the period within which such proceedings may be initiated
shall not have expired; (b) taxes not yet delinquent or which are
being contested in good faith; (c) security for payment of
workers' compensation or other insurance; (d) security for the
performance of tenders, contracts (other than contracts for the
payment of money) or leases; (e) deposits to secure public or
statutory obligations, or to secure permitted contracts for the
purchase or sale of any currency entered into in the ordinary
course of business; (f) Liens imposed by operation of law in
favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business for sums which are not yet delinquent
or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof; (g)
security for surety or appeal bonds; and (h) easements, rights-of-
way, zoning and similar covenants and restrictions and other
similar encumbrances or title defects which, in the aggregate,
are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the business
of the Company or any of its Subsidiaries.
"Permitted Project" means (i) any Project or group of
Projects that fulfills the requirements of the PIC Additional
Projects Contract and which may be developed, constructed or
owned pursuant to the requirements of the PFC Indenture and
subject to compliance with the terms of this Indenture and the
Senior Secured Notes Indenture and (ii) to the extent that a
project does not fulfill the requirements of the PIC Additional
Projects Contract, or such requirements are no longer in effect,
any project or group of projects that may be developed, owned and
operated by the Company or one of its Subsidiaries pursuant to
the requirements of the Indentures and the Company shall (a)
maintain at least a 50% (direct or indirect) ownership or
equivalent interest in each project or (b)(x) at least a 25%
(direct or indirect) ownership or equivalent interest in each
project not meeting the requirements of clause (i) above and (y)
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).
"Permitted Project Document" means any and all
documents executed in connection with the development,
construction, ownership and operation of a Permitted Project.
"Permitted Project Event" means, with respect to any
Permitted Project, (i) an event which causes all or a portion of
the facilities of a Permitted Project to be damaged, destroyed or
rendered unfit for normal use for any reason whatsoever, (ii) any
event involving the compulsory transfer or taking or transfer
under threat of compulsory taking of any material part of such
Permitted Project's assets or (iii) the existence of any defect
of title or lien or encumbrance on the any material part of the
property of a Permitted Project (provided that liens or covenants
permitted by the covenant Limitation on Liens shall be excluded
from consideration) that entitles a Person to make a claim under
any title insurance policy in existence with respect to such
property.
"Permitted Project Event Proceeds" means the sum of any
and all proceeds payable upon occurrence of a Permitted Project
Event.
"Permitted Project Power Purchase Agreement" means the
power purchase agreement of any Permitted Project.
"Permitted Refinancing Indebtedness" means any
Indebtedness of the Company or any of its Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, other Indebtedness
of the Company or any of its Subsidiaries; provided that: (i) the
principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity
date at least as late as the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the Senior Secured Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the
Senior Secured Notes on terms at least as favorable to the
Holders of Senior Secured Notes as those contained in the
documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iv) if the
Indebtedness being refinanced is Non-Recourse Debt, such
Permitted Refinancing Indebtedness shall also be Non-Recourse
Debt; and (v) such Indebtedness is incurred either by the Company
or by the Subsidiary which is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company, or
other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing
business of any such entity or substantially all of the assets of
any such entity, subdivision or business).
"PFC" means Panda Funding Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of the
Company.
"PFC Capitalized Interest Fund" means the capitalized
interest fund maintained pursuant to the PFC Indenture.
"PFC Debt Service Reserve" has the meaning ascribed
thereto in the PFC Indenture.
"PFC Indenture" means the Trust Indenture, dated as of
July 31, 1996, among PFC, PIC and Bankers Trust Company, as
trustee, providing for the issuance from time to time of the
Pooled Project Securities in one or more series.
"PFC Registration Statement" means the Registration
Statement on Form S-1, filed by PFC and certain of its affiliates
with the Commission, which became effective on February 14, 1997.
"Physical Securities" shall have the meaning ascribed
thereto in Section 2.5 of this Indenture.
"PIC" means Panda Interfunding Corporation, a Delaware
corporation and an indirect wholly-owned subsidiary of the
Company.
"PIC Additional Projects Contract" means the Additional
Projects Contract, dated as of July 31, 1996, among Panda
International, PEC and PIC.
"PIC Cash Available for Distribution" means Total Cash
Flow from all Domestic Projects and Permitted Projects (owned,
constructed or developed pursuant to the PFC Indenture) on a
consolidated basis less (i) regularly scheduled payments of
principal and interest on Domestic Project and Permitted Projects
(owned, constructed or developed pursuant to the PFC Indenture)
project level Indebtedness, (ii) additions to reserves required
by the instruments providing for project level Indebtedness,
(iii) trustee's fees under the PFC Indenture and (iv) the NNW
Cash Flow Participation (as defined in the PFC Indenture) plus
interest earned on reserves required by the PFC Indenture entered
into by PIC, excluding, however, extraordinary financial
distributions and proceeds received as a result of mandatory
redemption events (pursuant to the PFC Indenture), that at the
time of determination is available to be legally distributed from
the Domestic Projects and Permitted Projects (owned, constructed
or developed pursuant to the PFC Indenture) to PIC without
contravention of any agreement.
"PIC Cash Available from Operations" means, for any
period, Total Cash Flow from all Project Entities on a
consolidated basis prior to all PIC Consolidated Debt Service,
less (i) additions to reserves required by project agreements,
(ii) trustee's fees under the PFC Indenture plus interest earned
on reserves required by the documents relating to the Pooled
Project Bonds entered into by PIC, and (iii) the NNW Cash Flow
Participation, excluding, however, "Extraordinary Financial
Distributions" (as defined in the PFC Indenture) and proceeds
received as a result of "Mandatory Redemption Events" (as defined
in the PFC Indenture).
"PIC Consolidated Debt Service" means, for purposes of
the PFC Indenture, for any period, the PIC Debt Service plus
scheduled principal and interest payments on all Project debt (as
such term is defined in the PFC Indenture).
"PIC Consolidated Debt Service Coverage Ratio" means,
as of any date of determination, the ratio of (i) PIC Cash
Available from Operations during the relevant period to (ii) PIC
Consolidated Debt Service for such period; provided, however,
that at any time that PIC holds interests in more than four
Projects, then the PIC Consolidated Debt Service Coverage Ratio
shall not be applied in respect of any event or requirement.
"PIC Debt Service" means, for any period, scheduled
principal, premium, if any, and interest (including liquidated
damages and additional amounts, if any) payments on any and all
Indebtedness issued pursuant to the PFC Indenture.
"PIC Debt Service Coverage Ratio" means, for purposes
of the PFC Indenture, as of any date of determination, the ratio
of (i) PIC Cash Available for Distribution during the relevant
period to (ii) PIC Debt Service for such period.
"PIC Future Ratio Determination Period" means, 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 beginning with January 1 and ending with the
Final Stated Maturity. For purposes of this definition, "Final
Stated Maturity" means the last stated maturity date of any
Indebtedness outstanding under the PFC Indenture.
"Place of Payment" when used with respect to the
Securities of any series means the office or agency maintained
pursuant to Section 10.11 of this Indenture and such other place
or places, if any, where the principal of, and premium, if any,
and interest on (including any Liquidated Damages or Additional
Amounts) the Securities of such series are payable as specified
in the Series Supplemental Indenture setting forth the terms of
the Securities of such series.
"Plant" means the 2x50 MW coal-fired cogeneration plant
to be constructed by the Joint Ventures in Luannan County,
Tangshan Municipality, Hebei Province, China.
"Pooled Project Securities" means the Series A Bonds
and certain additional series of bonds issued pursuant to the PFC
Indenture.
"Power Purchase Agreements" means the Luannan Power
Purchase Agreement, the Brandywine Power Purchase Agreement, the
Rosemary Power Purchase Agreement and any Permitted Project Power
Purchase Agreement.
"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.
"Predecessor Securities" with respect to any particular
Security, means any previous Security evidencing all or a portion
of the same debt as that evidenced by such particular Security;
for the purposes of this definition, any Security authenticated
and delivered under Section 2.11 of this Indenture in lieu of a
lost, destroyed or stolen Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Security.
"Pricing Approval Authority" means the Tangshan
Municipal Price Bureau.
"Pricing Document" means the document or documents
(issued by the Pricing Approval Authority) determining the price
for electric energy delivered, retail price and principles for
adjustment.
"Principal Payment Date" means, with respect to any
Security, the date specified in such Security as the date on
which an installment of principal on such Security is due and
payable.
"Private Placement Legend" means the legend initially
set forth on the Securities in the form set forth in
Section 2.8(b) of this Indenture.
"Project" means a power generation facility or any
activity relating thereto.
"Project Documents" means, collectively, the Luannan
Project Documents, the Luannan Financing Agreements, the
Brandywine Project Documents, the Rosemary Project Documents, the
Administrative Services Agreement, the Development Services
Agreement, and any and all Permitted Project Documents.
"Project Engineer" means a nationally recognized
engineering firm that is "independent" (as defined in the
definition of Eligible Successors) and provides engineering
services for any Permitted Project, any Domestic Project or the
Luannan Facility.
"Projected Luannan Facility Construction Cost" means
$118.8 million.
"Public Equity Offering" means an underwritten public
offering of Capital Stock (other than Disqualified Stock) of the
Company, Panda International or any direct or indirect parent of
the Company made on a primary basis by the Company, Panda
International or any direct or indirect parent of the Company
pursuant to a registration statement filed with and declared
effective by the Commission in accordance with the Securities Act
or an underwritten offering of Capital Stock (other than
Disqualified Stock) of the Company, Panda International or any
direct or indirect parent of the Company made on a primary basis
by the Company, Panda International or any direct or indirect
parent of the Company pursuant to Rule 144A under the Securities
Act.
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended.
"Purchase Agreement" means the agreement dated April
11, 1997, among the Issuer, the Company, Panda International and
the Initial Purchaser.
"PURPA" means the United States Public Utility
Regulatory Policies Act of 1978, as amended.
"QF" means Qualifying Facility.
"QIB" means Qualified Institutional Buyer.
"Qualified Capital Stock" means, as to any Person, any
and all Capital Stock of such Person other than Disqualified
Capital Stock.
"Qualified Construction Costs" shall mean the following
costs, expenses and payments which are or have been incurred by
the Joint Ventures with respect to, and prior to, final
completion of the Luannan Facility:
i) costs of labor (including benefits and
overhead), materials and equipment incurred in
connection with the construction of, and procurement
and installation of equipment to be installed in, the
Luannan Facility;
(ii) accounting, architectural, engineering,
construction management, construction monitoring and
disbursement expenses and fees, legal, insurance,
planning, testing, surveying and other development
expenses and fees and initial fuel, spare parts and
other equipment supply incurred in connection with the
planning, testing, development, financing, construction
and start-up of the Luannan Facility and in connection
with the obtaining of all necessary or appropriate
Governmental Approvals related thereto;
(iii) other reasonable costs and expenses
incurred by a Joint Venture in connection with the
construction of, and procurement and installation of
equipment to be installed in, the Luannan Facility and
approved by the Luannan Facility Engineer;
(iv) all payment obligations of the Joint
Ventures under or in connection with the Luannan EPC
Contract;
(v) costs incurred in connection with the
construction of, and procurement and installation of
equipment to be installed in, the Luannan Transmission
Facilities, as provided in the Luannan Transmission
Facilities Loan;
(vi) costs incurred in connection with the
Steam and Heat Network.
(vii) costs incurred in connection with
the purchase of land use rights and water rights, and
certain water wells and pipelines, respectively, from
the County Partners in an amount not to exceed
$5,740,000;
(viii) any and all interest payable on or
reserves established with respect to the Shareholder
Loans pursuant to the Shareholder Loan Agreements.
"Qualified Institutional Buyer" has the meaning
attributed thereto in Rule 144A under the Securities Act.
"Qualifying Facility Status" or "QF Status" 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 Standard & Poor's, Moody's, and
Duff & Phelps. "Reaffirmed by the Rating Agencies," or words to
similar effect, means two or three of such agencies have
reaffirmed or improved the rating of the Indebtedness at issue.
"Raytheon Parent Guaranty" means the Parent Guaranty
dated as of March 30, 1995 executed by Raytheon Company in favor
of the Brandywine Partnership.
"Redemption Date" shall have the meaning ascribed
thereto in Section 8.2 of this Indenture.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated as of April 22, 1997, among the Issuer,
the Company and the Initial Purchaser.
"Regular Record Date", for the Stated Maturity of any
Securities of a series, or for the Stated Maturity of any
installment of principal thereof or payment of interest thereon,
means 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
Securities of such series or in the form of Securities of such
series attached to the Series Supplemental Indenture relating to
the Securities of such series.
"Regulation S" means Regulation S under the Securities
Act.
"Regulation S Global Notes" means the Senior Secured
Notes issued under the Senior Secured Notes Indenture pursuant to
Regulation S.
"Related Party" means any Affiliate of the Company of
which the Company, Panda International or any direct or indirect
parent of the Company holds 51% or more of the voting securities
of such Person.
"Renminbi" or "RMB" means Renminbi, the legal tender
currency of China.
"Requirements of Law" means, 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 the Company, any Subsidiary,
the Domestic Projects, any Permitted Projects or the Luannan
Facility and PIC, 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, means any officer in the corporate trust and agency
group (or any successor group) of the Trustee including without
limitation, any managing director, vice president, assistant vice
president, assistant treasurer, 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.
"Restoration Budget" has the meaning ascribed thereto
in Section 4.8 of the Senior Secured Notes Indenture.
"Restoration Progress Payments Schedule" has the
meaning ascribed thereto in Section 4.8 of the Senior Secured
Notes Indenture.
"Restoration Requisition" has the meaning ascribed
thereto in Section 4.8 of the Senior Secured Notes Indenture.
"Restricted Payment" means any of the following: (i)
the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company or any Subsidiary of
the Company or any payment made to the direct or indirect holders
(in their capacities as such) of Capital Stock of the Company or
any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to
purchase Capital Stock (other than Disqualified Stock), and (y)
in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any
of its Subsidiaries or (iii) the making of any principal payment
on, or the purchase, defeasance, repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment,
of any Indebtedness which is subordinated in right of payment to
the Senior Secured Notes (other than Indebtedness acquired in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year
of the date of acquisition).
"RMB Revenue Funds" means the revenue funds maintained
by each Joint Venture and denominated in RMB.
"Rosemary Casualty Proceeds" means Casualty Proceeds as
defined in the Rosemary Indenture.
"Rosemary Eminent Domain Proceeds" means Eminent Domain
Proceeds as defined in the Rosemary Indenture.
"Rosemary Event of Eminent Domain" means an Event of
Eminent Domain as defined in the Rosemary Indenture.
"Rosemary Event of Loss" means an Event of Loss as
defined in the Rosemary Indenture.
"Rosemary Facility" means the 180 MW natural gas-fired,
combined-cycle cogeneration facility of the Rosemary Partnership
located in Roanoke Rapids, North Carolina.
"Rosemary Fuel Management Agreement" means the Fuel
Supply Management Agreement, dated October 10, 1990, between the
Rosemary Partnership and NGC, as amended.
"Rosemary Gas Supply Agreement" means the Gas Purchase
Contract, dated April 12, 1990, between the Rosemary Partnership
and NGC, as amended.
"Rosemary Indenture" means the trust indenture
governing the terms of issuance from time to time of debt
securities in one or more series, dated as of July 31, 1996,
among Panda-Rosemary Funding Corporation, the Rosemary
Partnership and Fleet National Bank, as trustee.
"Rosemary Partnership" means Panda-Rosemary, L.P., a
Delaware limited partnership.
"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 Rosemary Partnership.
"Rosemary Project Documents" means, collectively, the
Rosemary Power Purchase Agreement, the Rosemary EPC Agreement,
the Rosemary O&M Agreement, the Rosemary Steam Agreement, the
Rosemary Fuel Management Agreement, the Rosemary Gas Supply
Agreement, the Rosemary Site Lease (as each of the following is
defined in the Rosemary Indenture) and each Additional Project
Document (as defined in the PFC Indenture).
"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 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 Rosemary Partnership on January 3, 1990.
"Rosemary Title Event" means a Title Event as defined
in the Rosemary Indenture.
"Rosemary Title Insurance Proceeds" means Title
Insurance Proceeds as defined in the Rosemary Indenture.
"Rule 144A" means Rule 144A of the Securities Act.
"Rule 144A Global Notes" means the Senior Second Notes
issued under the Senior Secured Notes Indenture pursuant to Rule
144A.
"S&P" means Standard & Poor's Ratings Service.
"Secured Party" and "Secured Parties" shall have the
meanings ascribed thereto in the relevant Collateral Documents.
"Securities" or "Security" shall have the meaning
ascribed thereto in the recitals to this Indenture.
"Securities Act" means the United States Securities Act
of 1933, as amended.
"Security Register" shall have the meaning ascribed
thereto in Section 2.8(a) of the Indenture.
"Security Registrar" means any Person acting as
Security Registrar pursuant to Section 2.8 or 10.11 of this
Indenture.
"SEC" means the Securities and Exchange Commission of
the United States.
"Senior Indebtedness" means, under the Indentures and
with respect to either the Company or the Issuer, the principal
of, premium, if any, and interest (including interest accruing
after the filing of a petition initiating any proceeding under
any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding and including Liquidated
Damages and Additional Amounts, if any) and all other monetary
obligations on any Indebtedness (other than as otherwise provided
in this definition), whether outstanding on the Closing Date or
thereafter created, incurred or assumed, and whether at any time
owing, actually or contingently, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall be subordinated or junior
in right of payment to other Indebtedness of such entity. Without
limiting the generality of the foregoing, with respect to the
Issuer, "Senior Indebtedness" shall include the principal of,
premium, if any, and interest (including interest accruing after
the filing of a petition initiating any proceedings under any
state, federal or foreign bankruptcy laws whether or not
allowable as a claim in such proceeding and including Liquidated
Damages and Additional Amounts, if any), and all other monetary
obligations of every kind and nature of the Issuer from time to
time owed to the Noteholders under the Senior Secured Notes
Indenture. Notwithstanding the foregoing with respect to the
Issuer, "Senior Indebtedness" shall not include (i) Indebtedness
that is by its terms subordinate or junior in right of payment to
any Indebtedness of the Issuer, (ii) Indebtedness which, when
incurred, is without recourse to the Issuer, (iii) any liability
for foreign, federal, state, local or other tax owed or owing by
the Issuer to the extent such liability constitutes Indebtedness,
(iv) Indebtedness of the Issuer to a Wholly Owned Subsidiary and
(v) that portion of any Indebtedness which at the time of
issuance is issued in violation of the Indentures.
"Senior Secured Notes" means the 12-1/2% Senior Secured
Notes due 2004 issued by the Issuer on the date of this Indenture
under the terms of the Senior Secured Notes Indenture.
"Senior Secured Notes Capitalized Interest Fund" has
the meaning ascribed thereto in Section 3.3 of the Senior Secured
Notes Indenture.
"Senior Secured Notes Collateral" means the Issuer
Pledge Agreement, the Pan-Sino Pledge Agreement, the Pan-Western
Pledge Agreement, the Company Pledge Agreement, the Issuer Cash
Collateral Agreement, the Pan-Western Cash Collateral Agreement
and the Pan-Sino Cash Collateral Agreement.
"Senior Secured Notes Debt Service Fund" has the
meaning ascribed thereto in Section 3.3 of the Senior Secured
Notes Indenture.
"Senior Secured Notes Debt Service Reserve Fund" has
the meaning ascribed thereto in Section 3.3 of the Senior Secured
Notes Indenture.
"Senior Secured Notes Guarantee" means the Senior
Secured Notes Guarantee issued by the Company on the date of this
Indenture under the terms hereof.
"Senior Secured Notes Indenture" means the trust
indenture governing the terms of the issuance of the Senior
Secured Notes, dated as of April 22, 1997, by and between the
Issuer and the Senior Secured Notes Trustee.
"Senior Secured Notes Interest Account" has the meaning
ascribed thereto in Section 3.3 of the Senior Secured Notes
Indenture.
"Senior Secured Notes Principal Account" has the
meaning ascribed thereto in Section 3.3 of the Senior Secured
Notes Indenture.
"Senior Secured Notes Supplemental Indenture" means the
first Series Supplemental Indenture to the Senior Secured Notes
Indenture.
"Senior Secured Notes Trustee" means Bankers Trust
Company, a New York banking corporation, as trustee under the
Senior Secured Notes Indenture.
"Series A Bonds" means the 11-5/8% Pooled Project
Bonds, Series A due 2012 of PFC, issued pursuant to the PFC
Indenture.
"Series Supplemental Indenture" means an indenture
supplemental to the Indenture entered into by the Company and the
Trustee for the purpose of establishing the title, form and terms
of the Securities of any series; "Series Supplemental Indentures"
means each and every Series Supplemental Indenture.
"Shareholder Loan Agreements" means, collectively, the
Shareholder Loan Agreement by and among each Joint Venture and
Pan-Western.
"Shareholder Loans" means the outstanding indebtedness
of the Joint Ventures to Pan-Western incurred to finance the
development and construction of the Luannan Facility and funded
by Pan-Western with the proceeds of the Issuer Loan.
"Special Record Date" for the payment of any defaulted
principal or interest means a date fixed by the Company pursuant
to Section 2.11 of this Indenture.
"Standard & Poor's" means Standard & Poor's Ratings
Service.
"Stated Maturity" means, with respect to any security,
the date specified in such security as the fixed date on which
the final payment of principal of such security is due and
payable, including pursuant to any mandatory redemption provision
(but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency).
"Subaccounts" has the meaning ascribed thereto in
Section 3.3 of this Indenture.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof), (ii) any partnership (a) the
sole general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof) and
(iii) any Person that either is a Permitted Project or owns an
interest in a Permitted Project (to the extent described in
clauses (a) or (b) of the definition of Permitted Project).
"Tangshan Cayman" means Tangshan Cayman Heat & Power
Co., Ltd., a Sino-foreign equity joint venture.
"Tangshan Engineering" means Tangshan Heat and
Engineering Company, a company organized under the laws of the
PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.,
Ltd., a Sino-foreign equity joint venture.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture.
"Tax Authority" means the Cayman Islands, the United
States or any political subdivision thereof or any authority
having power to tax therein.
"Taxes" means any present or future taxes, duties,
assessments or governmental charges of whatever nature.
"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
GAAP.
"Transaction Documents" means, collectively, the
Collateral Documents, the Purchase Agreement, the Senior Secured
Notes, the Senior Secured Notes Guarantee, the Indentures, the
Shareholder Loan Agreements, the Luannan Project Documents, the
Luannan Financing Agreements, the Brandywine Financing Documents,
the Brandywine Project Documents and the Rosemary Project
Documents, together with any other document, instrument or
agreement now or hereafter entered into in connection with the
Indentures, the Senior Secured Notes, the indebtedness evidenced
thereby or the Collateral, as such documents, instruments or
agreements may be amended, modified or supplemented from time to
time.
"Transfer" means a sale, transfer, assignment,
exchange, hypothecation, pledge or other disposition and, when
used as a verb, shall have a correlative meaning.
"Transfer Restricted Securities" means each Senior
Secured Note until the earliest to occur of (i) the date on which
it is exchanged in the Exchange Offer for a Rule 144A Global Note
which may be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the
Securities Act, (ii) the date on which such Senior Secured Note
has been sold or otherwise disposed of in accordance with the
Shelf Registration Statement, (iii) the date on which such Senior
Secured Note is disposed of by a broker-dealer as contemplated by
the Exchange Offer Registration Statement (including delivery of
the prospectus contained therein) and (iv) the date on which such
Senior Secured Note is distributed to the public pursuant to Rule
144 under the Securities Act. "Exchange Offer", "Shelf
Registration Statement" and "Exchange Offer Registration
Statement" have the meanings ascribed to them in the Registration
Rights Agreement.
"Transferee Certificate" shall have the meaning
ascribed thereto in Section 2.8(b)(ii)(A)(3) of this Indenture.
"Transferor Certificate" Shall have the meaning
ascribed thereto in Section 2.8(b)(ii)(A)(4) of this Indenture.
"Treasury" means the United States Department of
Treasury.
"Trust Indenture Act" means 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" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939,
as so amended.
"Trustee" means Bankers Trust Company, a New York
banking corporation, as trustee under this Indenture, and any
successor thereto under the terms of this Indenture.
"Trustee Claims" means claims made by the Trustee for
monies owed pursuant to this Indenture and other Transaction
Documents.
"U.S. Distribution Fund" means the fund described in
Article IV of the PFC Indenture and maintained in the name of PIC
pursuant to such Article, which fund is entitled to distributions
of monies from the Domestic Projects and any Permitted Project
located in the United States to the extent that all obligations
have been met by PFC and PIC under the PFC Indenture.
"U.S. dollars," "dollars," or "$" means United States
dollars, legal currency of the United States of America.
"U.S. Government Obligations" means 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. Permitted Project" means a Permitted Project
located within the United States.
"United States" or "U.S." means the United States of
America.
"Weighted Average Life to Maturity" means, when applied
to any Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" by any Person means a
Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors'
qualifying shares) shall at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person.
EXHIBIT 4.13
FIRST SUPPLEMENTAL INDENTURE
dated as of April 22, 1997
to
TRUST INDENTURE
dated as of April 22, 1997
among
PANDA GLOBAL HOLDINGS, INC.
and
BANKERS TRUST COMPANY, AS TRUSTEE
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
THE TERMS OF THE SENIOR SECURED NOTES GUARANTEE
Section 2.1 Senior Secured Notes Guarantee
ARTICLE III
THE TERMS OF THE SENIOR SECURED NOTES
Section 3.1 Senior Secured Notes
Section 3.2 Interest and Principal
Section 3.3 Book Entry, Delivery and Form
Section 3.4 Transfer and Exchange
Section 3.5 Redemption
Section 3.6 Luannan Expropriation Event; Luannan Event
of Loss
Section 3.7 Withholding Taxes
Section 3.8 Calculation of Original Issue Discount
ARTICLE IV
MISCELLANEOUS
Section 4.1 Use of Proceeds
Section 4.2 Closing Costs
Section 4.3 Execution of Supplemental Indenture
Section 4.4 Concerning the Trustee
Section 4.5 Counterparts
Section 4.6 Governing Law and Submission to Jurisdiction
Exhibit A Form of Certificate for Exchange or Registration of
Transfer from Rule 144A Global Note to Regulation S
Global Note
Exhibit B Certificate for Exchange or Registration of Transfer
from Regulation S Global Note to Rule 144A Global Note
Exhibit C Form of Certificate for Exchange or Registration of
Transfer of Certificated Notes
Exhibit D Certificate for Exchange or Registration of Transfer
from Rule 144A Global Note or Regulation S Permanent
Global Note to Certificated Note
Exhibit E Certificate for Exchange or Registration of Transfer
from Certificated Note to Rule 144A Global Note or
Regulation S Permanent Global Note
Exhibit F Form of Face of Certificate Note
Exhibit G Form of Face of Rule 144A Global Note
Exhibit H Form of Face of Regulation S Global Note
Exhibit I Form of Face of Registered Global Note
Exhibit I Form of Reverse of Senior Secured Note
FIRST SUPPLEMENTAL INDENTURE, dated as of April 22, 1997, to
the Trust Indenture, dated as of April 22, 1997 (the "Original
Indenture"), between PANDA GLOBAL HOLDINGS, INC., a Delaware
corporation (the "Company"), its executive office and mailing
address being at 4100 Spring Valley Road, Suite 1001, Dallas,
Texas 75244 and BANKERS TRUST COMPANY, a New York banking
corporation (the "Trustee"), its corporate trust office and
mailing address being at 4 Albany Street, New York, New York
10006.
WHEREAS, the Company and the Trustee have heretofore
executed and delivered the Original Indenture to provide for the
issuance from time to time of the Company's Securities 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 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 Securities 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
Securities to be designated as hereinafter provided and (ii) has
requested the Trustee to enter into this supplement to the
Original Indenture (the "First Supplemental Indenture",
collectively with the Original Indenture, the "Indenture") for
the purpose of establishing the designation, form, terms and
provisions of the Securities of such series;
WHEREAS, all action on the part of the Company necessary to
authorize the issuance of such Securities under the Original
Indenture and this First Supplemental Indenture has been duly
taken; and
WHEREAS, all acts and things necessary to make such
Securities, 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 Securities 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 Securities.
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 Securities, and in consideration of the acceptance of
such Securities 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
Capitalized terms not otherwise defined herein shall have
the meanings set forth in Appendix A to 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 SENIOR SECURED NOTES GUARANTEE
Section II.1 Senior Secured Notes Guarantee. (a)
There is hereby created an initial series of Securities
designated Senior Secured Notes Guarantee relating to
$155,200,000 aggregate principal amount of Senior Secured Notes
being issued as of the date hereof by the Issuer pursuant to the
Senior Secured Notes Indenture (the "Initial Senior Secured Notes
Guarantee"). In addition, there is hereby created a subsequent
series of Securities designated Registered Senior Secured Notes
Guarantee (the "Registered Senior Secured Notes Guarantee"; the
Initial Senior Secured Notes Guarantee and the Registered Senior
Secured Notes Guarantee, collectively, the "Senior Secured Notes
Guarantee"). The Senior Secured Notes Guarantee 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 Senior Secured Notes Guarantee shall be issued
in the form of Schedule I hereto and shall be affixed to the
Senior Secured Notes. The Senior Secured Notes shall have the
terms and conditions described in Article III hereof.
ARTICLE III
THE TERMS OF THE SENIOR SECURED NOTES
Section III.1 Senior Secured Notes. (a) As of the
date hereof, the Issuer has issued an initial series of notes
designated 12-1/2% Senior Secured Notes due 2004, in the
aggregate principal amount of $155,200,000 (the "Initial Senior
Secured Notes") pursuant to the Senior Secured Notes Indenture.
In addition, as of the date hereof, the Issuer has created a
subsequent series of notes designated 12-1/2% Registered Senior
Secured Notes due 2004, in the aggregate principal amount not to
exceed $155,200,000 (the "Registered Senior Secured Notes"),
pursuant to the Senior Secured Notes Indenture (the Initial
Senior Secured Notes and the Registered Senior Secured Notes,
collectively, the "Senior Secured Notes").
(b) The Senior Secured Notes will mature on April 15,
2004.
(c) The Initial Senior Secured Notes shall be issued
in the form of one or more Rule 144A Global Notes substantially
in the form of Exhibit G hereto and one or more Regulation S
Global Notes substantially in the form of Exhibit H hereto; the
Registered Senior Secured Notes shall be issued in the form of
one or more Registered Global Notes substantially in the form of
Exhibit I hereto; and Certificated Notes issued in exchange for
beneficial interest substantially in the form of Exhibit F.
Section III.2 Interest and Principal. (a) Each
Senior Secured Note 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 each Senior Secured Note, a form of which is
attached to the Senior Secured Notes Supplemental Indenture.
Accrued but unpaid interest on any Initial Senior Secured Note
that is exchanged for a Registered Senior Secured Note pursuant
to the Registration Rights Agreement shall be paid on or before
the first Interest Payment Date on the Registered Senior Secured
Notes.
The Issuer shall be obligated to repay the Senior
Secured Notes by redeeming semi-annually on the dates and in the
amounts indicated in the following table, together with accrued
and unpaid interest (including Liquidated Damages and Additional
Amounts, if any):
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000 $1,650,000
April 15, 2001 $2,200,000
October 15, 2001 $2,200,000
April 15, 2002 $4,000,000
October 15, 2002 $4,000,000
April 15, 2003 $4,950,000
October 15, 2003 $4,950,000
In accordance with the terms of the Senior Secured Notes
Indenture, the Issuer shall not be allowed to fulfill its
obligation to repay such principal amounts through the purchase
of Senior Secured Notes and the deposit thereof with the Senior
Secured Notes Trustee.
(b) Cash interest on the Senior Secured Notes will
accrue at a rate of 12-1/2% per annum and will be payable semi-
annually in arrears on each April 15 and October 15, commencing
October 15, 1997 to the Holders of record of Senior Secured Notes
at the close of business on April 1 and October 1, respectively,
immediately preceding such interest payment date. Cash interest
will accrue from the most recent interest payment date to which
interest has been paid or, if no interest has been paid, from
April 22, 1997. Interest will be computed on the basis of a 360-
day year of twelve 30-day months. Interest on overdue principal
and on overdue installments of interest will accrue at the rate
of interest borne by the Senior Secured Notes.
(c) The Initial Senior Secured Notes and the
Registered Senior Secured Notes shall be considered collectively
as a single class of Securities for all purposes of the Senior
Secured Notes Indenture.
Section III.3 Book Entry, Delivery and Form. (a)
Rule 144A Global Notes. Initial Senior Secured Notes offered and
sold within the United States to qualified institutional buyers
as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall
be issued initially in the form of Rule 144A Global Notes, which
shall be deposited on behalf of the purchasers of the Initial
Senior Secured Notes represented thereby with the Depositary at
its New York office, and registered in the name of the Depositary
or a nominee of the Depositary, duly executed by the Issuer and
authenticated by the Senior Secured Notes Trustee as hereinafter
provided.
(b) Regulation S Global Notes. Initial Senior Secured
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global
Note (the "Regulation S Temporary Global Note"), which shall be
deposited on behalf of the purchasers of the Initial Senior
Secured Notes represented thereby with the Senior Secured Notes
Trustee, at its New York office, as custodian for the Depositary,
and registered in the name of the Depositary or the nominee of
the Depositary, duly executed by the Issuer and authenticated by
the Senior Secured Notes Trustee as hereinafter provided. The
Regulation S Temporary Global Note will be registered in the name
of a nominee of DTC for credit to the subscribers' respective
accounts at the Euroclear System ("Euroclear") and Cedel Bank,
S.A. ("CEDEL"). Beneficial interests in the Regulation S
Temporary Global Note may be held only through Euroclear or
CEDEL. The "40-day restricted period" (as defined in
Regulation S, the "Restricted Period") shall be terminated upon
the receipt by the Senior Secured Notes Trustee of (i)
confirmation from the Depositary certifying that it has received
certification of non-United States beneficial ownership of 100%
of the aggregate principal amount of the Regulation S Temporary
Global Note (except to the extent of any beneficial owners
thereof who acquired an interest therein pursuant to another
exemption from registration under the Securities Act and who will
take delivery of a beneficial ownership interest in a Rule 144A
Global Note, all as contemplated by Section 3.4(b)(ii) hereof),
and (ii) an Officers' Certificate from the Issuer. Following the
termination of the 40-day restricted period, beneficial interests
in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in one or more permanent global notes
(collectively, the "Regulation S Permanent Global Note" and,
together with the Regulation S Temporary Global Note, the
"Regulation S Global Note" (the Regulation S Global Note, the
Registered Global Note and the Rule 144A Global Note,
collectively being the "Global Notes")) upon delivery to DTC of
certification of compliance with the transfer restrictions
applicable to the Initial Senior Secured Notes and pursuant to
Regulation S as provided in the Senior Secured Notes Indenture.
Simultaneously with the authentication of Regulation S Permanent
Global Notes, the Senior Secured Notes Trustee shall cancel the
Regulation S Temporary Global Note. During the Restricted
Period, beneficial interests in the Regulation S Temporary Global
Note may be held only through Euroclear or CEDEL (as indirect
participants in DTC), unless transferred to a person that takes
delivery in the form of an interest in the corresponding Rule
144A Global Note in accordance with the certification
requirements described in Section 3.4 herein.
(c) Certificated Notes. Senior Secured Notes
originally purchased by or transferred to institutional
Accredited Investors or QIBs who elect to take physical delivery
of their certificates instead of holding their interest through a
Global Note (collectively referred to herein as the "Non-Global
Purchasers") will be issued in the form of Certificated Notes.
Upon the transfer to a QIB, an institutional Accredited Investor
or a foreign purchaser of any Certificated Note initially issued
to a Non-Global Purchaser, such Certificated Note will, unless
the transferee requests Certificated Notes or the Global Notes
have previously been exchanged in whole for Certificated Notes,
be exchanged for an interest in the Rule 144A Global Notes or the
Regulation S Global Notes, as the case may be, or after delivery
of the Registered Global Note to the Depositary, the Registered
Global Note. Upon the transfer of an interest in a Global Note,
such interest will, unless the transferee requests Certificated
Notes, be represented by an interest in the applicable Global
Note.
(d) Book-Entry Provisions. In addition to the
provisions of Section 2.4 of the Senior Secured Notes Indenture,
investors in the Rule 144A Global Note and the Registered Global
Note may hold their interests therein directly through DTC, if
they are participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are
participants ("Participants") in such system. Investors in the
Regulation S Global Note shall initially hold their interests
therein through Euroclear or CEDEL, if they are participants in
such systems, or indirectly through organizations which are
participants in such systems. After the expiration of the
Restricted Period (but not earlier), investors may also hold
interests in the Regulation S Global Note through organizations
other than Euroclear and CEDEL that are Participants in the DTC
system. Euroclear and CEDEL will hold interests in the
Regulation S Global Note on behalf of their participants through
customers' securities accounts in their respective names on the
books of their respective depositaries, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator or
Euroclear, and Citibank, N.A., as operator of CEDEL. The
depositaries, in turn, will hold such interests in the Regulation
S Global Note in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in a
Global Note, including those held through Euroclear or CEDEL, may
be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or CEDEL may also be subject to
the procedures and requirements of such system.
(e) Registered Senior Secured Notes. On or prior to
the date that the Exchange Offer (as defined in the Registration
Rights Agreement) is Consummated (as defined in the Registration
Rights Agreement), the Issuer may deliver Registered Senior
Secured Notes executed by the Issuer to the Senior Secured Notes
Trustee for authentication together with an Issuer Order for the
authentication and delivery of such Registered Senior Secured
Notes, and the Senior Secured Notes Trustee in accordance with
such Issuer Order shall authenticate and deliver such Registered
Senior Secured Notes as provided in the Senior Secured Notes.
(f) Registered Global Notes. On the date that the
Exchange Offer (as defined in the Registration Rights Agreement)
is Consummated (as defined in the Registration Rights Agreement),
the Issuer will deposit on behalf of the purchasers of the Senior
Secured Notes represented thereby with the Depositary at its New
York office, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Issuer and
authenticated by the Trustee, one or more Registered Global Notes
in exchange for an equivalent denomination of Rule 144A Global
Notes.
Section III.4 Transfer and Exchange. (a) Exchange of
Book-Entry Senior Secured Notes for Certificated Notes. A Global
Note is exchangeable for definitive Senior Secured Notes in
registered certificated form if (i) DTC (x) notifies the Issuer
that it is unwilling or unable to continue as depositary for the
Global Note and the Issuer thereupon fails to appoint a successor
depositary or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuer, at its option, notifies
the Trustees in writing that it elects to cause the issuance of
the Senior Secured Notes in certificated form or (iii) there
shall have occurred and be continuing an Event of Default with
respect to the Senior Secured Notes. Beneficial interests in a
Global Note may be exchanged for Certificated Notes upon request
but only upon at least 20 days prior written notice given to the
Trustees by or on behalf of DTC in accordance with its customary
procedures. Certificated Notes delivered in exchange for any
Global Note or beneficial interests therein shall be registered
in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its
customary procedures) and will bear, in the case of the Rule 144A
Global Note, the Private Placement Legend and, in the case of the
Regulation S Global Note, the legend set forth in bold type on
the cover of the Offering Memorandum, in each case.
(b) Transfer and Exchange of Global Notes. The
transfer and exchange of Global Notes or beneficial interests
therein shall be effected through the Depositary, in accordance
with the Senior Secured Notes Supplemental Indenture and the
procedures of the Depositary therefor, which shall include
restrictions on transfer comparable to those set forth herein and
therein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same
Global Note in accordance with the transfer restrictions set
forth in the applicable legends specified in Sections 2.8 and 2.9
of the Senior Secured Notes Indenture. Transfers of beneficial
interests in the Global Notes to Persons required to take
delivery thereof in the form of an interest in another Global
Note shall be permitted as follows:
(i) If, at any time, an owner of a beneficial
interest in a Rule 144A Global Note deposited with the
Depositary (or the Senior Secured Notes Trustee as custodian
for the Depositary) wishes to transfer its interest in such
Rule 144A Global Note to a Person who is required or
permitted to take delivery thereof in the form of an
interest in a Regulation S Global Note, such owner shall,
subject to the rules and procedures of the Depositary that
are applicable to such a transfer or exchange (the
"Applicable Rules"), exchange or cause the exchange of such
interest for an equivalent beneficial interest in a
Regulation S Global Note as provided in this Section
3.4(b)(i). Upon receipt by the Senior Secured Notes Trustee
of (1) instructions given in accordance with the Applicable
Procedures from any Agent Member directing the Senior
Secured Notes Trustee to credit or cause to be credited a
beneficial interest in the Regulation S Global Note in an
amount equal to the beneficial interest in the Rule 144A
Global Note to be exchanged, (2) a written order given in
accordance with the Applicable Procedures containing
information regarding the participant account of the
Depositary to be credited with such increase and (3) a
certificate in the form of Exhibit A attached hereto given
by the owner of such beneficial interest stating that the
transfer of such interest has been made in compliance with
the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with Rule 903 or Rule 904 of
Regulation S, then the Senior Secured Notes Trustee, as
Security Registrar, shall instruct the Depositary to reduce
or cause to be reduced the aggregate principal amount at
maturity of the applicable Rule 144A Global Note and to
increase or cause to be increased the aggregate principal
amount at maturity of the applicable Regulation S Global
Note by the principal amount at maturity of the beneficial
interest in the Rule 144A Global Note to be exchanged, to
credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
Regulation S Global Note equal to the reduction in the
aggregate principal amount at maturity of the Rule 144A
Global Note, and to debit, or cause to be debited, from the
account of the Person making such exchange or transfer the
beneficial interest in the Rule 144A Global Note that is
being exchanged or transferred; provided that during the
Restricted Period, transferees can only accept this transfer
through Euroclear or Cedel.
(ii) If, prior to the expiration of the
Restricted Period, an owner of a beneficial interest in a
Regulation S Global Note deposited with the Depositary (or
with the Senior Secured Notes Trustee as custodian for the
Depositary) wishes to transfer its interest in such
Regulation S Global Note to a Person who is required or
permitted to take delivery thereof in the form of an
interest in a Rule 144A Global Note, such owner shall,
subject to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial
interest in a Rule 144A Global Note as provided in this
Section 3.4(b)(ii). Upon receipt by the Senior Secured
Notes Trustee of (1) written instructions, or such other
forms of instructions as is customary, from the Depositary,
directing the Senior Secured Notes Trustee, as Security
Registrar, to credit or cause to be credited a beneficial
interest in the Rule 144A Global Note equal to the
beneficial interest in the Regulation S Global Note to be
exchanged, such instructions to contain information
regarding the participant account with the Depositary to be
credited with such increase, (2) a written order given in
accordance with the Applicable Procedures containing
information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit B
attached hereto given by the owner of such beneficial
interest stating (A) if the transfer is pursuant to Rule
144A, that the Person transferring such interest in a
Regulation S Global Note reasonably believes that the Person
acquiring such interest in a Rule 144A Global Note is a QIB
and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable
blue sky or securities laws of any state of the United
States, (B) that the transfer complies with the requirements
of Rule 144 under the Securities Act and any applicable blue
sky or securities laws of any state of the United States or
(C) if the transfer is pursuant to any other exemption from
the registration requirements of the Securities Act, that
the transfer of such interest has been made in compliance
with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the
requirements of the exemption claimed, such statement to be
supported by an Opinion of Counsel from the transferee or
the transferor in form reasonably acceptable to the Issuer
and to the Security Registrar, then the Senior Secured Notes
Trustee, as Security Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate
principal amount at maturity of such Regulation S Global
Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Rule 144A
Global Note by the principal amount at maturity of the
beneficial interest in the Regulation S Global Note to be
exchanged, and the Senior Secured Notes Trustee, as Security
Registrar, shall instruct the Depositary, concurrently with
such reduction, to credit or cause to be credited to the
account of the Person specified in such instructions a
beneficial interest in the applicable Rule 144A Global Note
equal to the reduction in the aggregate principal amount at
maturity of such Regulation S Global Note and to debit or
cause to be debited from the account of the Person making
such transfer the beneficial interest in the Regulation S
Global Note that is being transferred; provided that, on and
after the termination of the Restricted Period, no
certification shall be required with respect to such
transfers.
(iii) On the date the Exchange Offer is
consummated, beneficial interests in the Rule 144A Global Note
will be exchanged for equivalent beneficial interests in the
Registered Global Note.
(c) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented by a Holder to the Security
Registrar with a request (x) to register the transfer of the
Certificated Notes or (y) to exchange such Certificated Notes for
an equal principal amount of Certificated Notes of other
authorized denominations, the Security Registrar shall register
the transfer or make the exchange as requested; provided,
however, that the Certificated Notes presented or surrendered for
register of transfer or exchange (i) shall be duly endorsed or
accompanied by a written instruction of transfer in form
satisfactory to the Security Registrar duly executed by such
Holder or by his attorney, duly authorized in writing and (ii) in
the case of a Certificated Note that is a Transfer Restricted
Security, such request shall be accompanied by the following
additional information and documents, as applicable:
(i) if such Transfer Restricted Security is
being delivered to the Security Registrar by a Holder for
registration in the name of such Holder, without transfer,
or such Transfer Restricted Security is being transferred to
the Issuer, a certification to that effect from such Holder
(in substantially the form of Exhibit C hereto);
(ii) if such Transfer Restricted Security is
being transferred to a QIB in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from such Holder (in substantially the form of
Exhibit C hereto); or
(iii) if such Transfer Restricted Security is
being transferred in reliance on any other exemption from
the registration requirements of the Securities Act
(including Rule 904 thereunder), a certification to that
effect from such Holder (in substantially the form of
Exhibit C hereto) and an Opinion of Counsel from such Holder
or the transferee reasonably acceptable to the Issuer and to
the Security Registrar to the effect that such transfer is
in compliance with the Securities Act.
(d) Transfer of a Beneficial Interest in a Rule 144A
Global Note or Regulation S Permanent Global Note for a
Certificated Note.
(i) Any Person having a beneficial interest in
any Global Note may upon request, subject to the Applicable
Procedures, exchange such beneficial interest for a
Certificated Note. Upon receipt by the Senior Secured Notes
Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a
beneficial interest in any Global Note, and, in the case of
a Transfer Restricted Security, the following additional
information and documents:
(A) if such beneficial interest is
being transferred to the Person designated by the
Depositary as being the beneficial owner, a
certification to that effect from such Person (in
substantially the form of Exhibit D hereto);
(B) if such beneficial interest is
being transferred to a QIB in accordance with Rule 144A
under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit D hereto); or
(C) if such beneficial interest is
being transferred in reliance on any other exemption
from the registration requirements of the Securities
Act (including Rule 904 thereunder), a certification to
that effect from the transferor (in substantially the
form of Exhibit D hereto) and an Opinion of Counsel
from the transferee or the transferor reasonably
acceptable to the Issuer and to the Security Registrar
to the effect that such transfer is in compliance with
the Securities Act:
in which case the Senior Secured Notes Trustee or the Note
Custodian, at the direction of the Senior Secured Notes
Trustee, shall, in accordance with the standing instructions
and procedures existing between the Depositary and the Note
Custodian, cause the aggregate principal amount of Rule 144A
Global Notes or Regulation S Permanent Global Notes, as
applicable, to be reduced accordingly and, following such
reduction, the Issuer shall execute and the Senior Secured
Notes Trustee shall authenticate and deliver to the
transferee a Certificated Note in the appropriate principal
amount.
(ii) Certificated Notes issued in exchange for a
beneficial interest in any Global Note pursuant to this
Section 3.4(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Senior Secured Notes Trustee.
The Senior Secured Notes Trustee shall deliver such
Certificated Notes to the Persons in whose names such Notes
are so registered. Following any such issuance of
Certificated Notes, the Senior Secured Notes Trustee, as
Security Registrar, shall instruct the Depositary to reduce
or cause to be reduced the aggregate principal amount at
maturity of the applicable Global Note to reflect the
transfer.
(e) Transfer and Exchange of a Certificated Note for a
Beneficial Interest in a Global Note. Holders of Certificated
Notes may offer, resell, pledge or otherwise transfer such
Certificated Notes only pursuant to an effective registration
statement under the Securities Act, inside the United States to a
QIB in a transaction meeting the requirements of Rule 144A, in a
transaction meeting the requirements of Rule 144 under the
Securities Act, outside the United States in a transaction
meeting the requirements of Rule 904 under the Securities Act or
to the Issuer, in each case in compliance with any applicable
securities laws of any State of the United States or any other
applicable jurisdiction.
When Certificated Notes are presented by a Holder to
the Security Registrar with a request (x) to register the
transfer of the Certificated Notes or (y) to exchange such
Certificated Notes for an equal principal amount of Certificated
Notes of other authorized denominations, the Security Registrar
shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided,
however, that the Certificated Notes presented or surrendered for
register of transfer or exchange (i) shall be duly endorsed or
accompanied by a written instruction of transfer in form
satisfactory to the Security Registrar duly executed by such
Holder or by his attorney, duly authorized in writing, which
instructions, if applicable, shall direct the Senior Secured
Notes Trustee (A) to cancel any Certificated Note being exchanged
for another Certificated Note or a beneficial interest in a
Global Note in accordance with Section 2.13 of the Senior Secured
Notes Indenture, and (B) to make, or to direct the Security
Registrar to make, an endorsement on the appropriate Global Note
to reflect an increase in the aggregate principal amount of the
Senior Secured Notes represented by such Global Note and (ii)
such request shall be accompanied by the following additional
information and documents, as applicable:
(i) if such Certificated Note is being
delivered to the Security Registrar by a Holder for
registration in the name of such Holder, without transfer, a
certification to that effect from such Holder (in
substantially the form of Exhibit E hereto); or
(ii) if such Certificated Note is being
transferred to a QIB in accordance with Rule 144A, pursuant
to Rule 144 under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 904
under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit E hereto).
(f) Legends. (i) Except as permitted by the
following paragraphs (ii), (iii) and (iv), each Note certificate
evidencing Global Notes and Certificated Notes (and all Senior
Secured Notes issued in exchange therefor or substitution thereof
other than Registered Senior Secured Notes) shall bear the
applicable legend specified in Sections 2.8 and 2.9 of the Senior
Secured Notes Indenture.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Note) pursuant to Rule 144
or pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Security
Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Certificated
Note that does not bear the Private Placement Legend
and rescind any restriction on the transfer of such
Transfer Restricted Security upon receipt of a
certification from the transferring Holder
substantially in the form of Exhibit C hereto; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
Private Placement Legend, but shall continue to be
subject to the provisions of Section 3.4(b) and (c)
hereof; provided, however, that with respect to any
request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a
Certificated Note that does not bear the Private
Placement Legend which request is made in reliance upon
Rule 144, the Holder thereof shall certify in writing
to the Security Registrar that such request is being
made pursuant to Rule 144, such certification to be
substantially in the form of Exhibit E hereto.
(iii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Note) in reliance on any
exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to Rule 144A
or Rule 144 under the Securities Act) in which the Holder or
the transferee provides an Opinion of Counsel to the Issuer
and the Security Registrar in form and substance reasonably
acceptable to the Issuer and the Security Registrar (which
Opinion of Counsel shall also state that the transfer
restrictions contained in the applicable legend specified in
Sections 2.8 and 2.9 of the Senior Secured Notes Indenture
are no longer applicable):
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Security
Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Security for a Certificated
Note that does not bear the Private Placement Legend
and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer Restricted
Security represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
Private Placement Legend, but shall continue to be
subject to the provisions of Section 3.4(b) and (c)
hereof.
(g) Registration Rights. Pursuant to a Registration
Rights Agreement, dated the date hereof, the Company, the Issuer
and the Initial Purchaser have agreed to exchange the Initial
Senior Secured Notes and the Initial Senior Secured Notes
Guarantee for an equal principal amount of Registered Senior
Secured Notes and Registered Senior Secured Notes Guarantee on
the terms and conditions contained in such agreement.
Section III.5 Redemption. The Senior Secured Notes
are subject to redemption on the terms set forth in Article VIII
of the Senior Secured Notes Indenture. In addition, the Senior
Secured Notes are subject to optional redemption and mandatory
redemption on the terms set forth below:
(a) Optional Redemption by Issuer. (i) The Senior
Secured Notes shall be redeemable at the option of the Issuer (a
"Senior Secured Notes Optional Redemption"), in whole or in part,
at any time on or after April 15, 2002, at the redemption prices
(expressed as a percentage of principal amount) set forth below,
plus accrued and unpaid interest, if any, to the redemption date,
if redeemed during the 12 month period beginning on April 15 of
the years indicated below:
Redemption
Year Price
2002 107.00%
2003 103.50%
2004 100.00%
(ii) Prior to April 15, 2000, the Issuer may redeem up
to $51,733,000 of the originally issued principal amount of
Senior Secured Notes at a redemption price equal to 113.0%
of the principal amount of the Senior Secured Notes so redeemed,
plus accrued and unpaid interest, if any, to the redemption date
with the Net Cash Proceeds of one or more Public Equity Offerings
by the Company, Panda International or any direct or indirect
parent of the Company; provided that (i) the proceeds of such
offering used for the purposes of the optional redemption are
contributed as equity to the Issuer and (ii) at least
$103,467,000 of the originally issued principal amount of Senior
Secured Notes would remain outstanding immediately after giving
effect to such redemption (any such redemption, a "Senior Secured
Notes Public Equity Offering Redemption").
(b) Mandatory Redemption. Upon the occurrence of
certain events described below, the outstanding Senior Secured
Notes (together with, as provided in paragraph (vi) below, any
additional Senior Indebtedness of the Issuer outstanding at the
time of such Mandatory Redemption), will be redeemed (a
"Mandatory Redemption") pro rata, at a redemption price equal to
100% of the principal amount thereof, together with accrued and
unpaid interest (including Liquidated Damages and Additional
Amounts, If any), if any, to the redemption date:
(i) Upon the occurrence of a Luannan Event of
Loss or Luannan Expropriation Event that is determined by
the Issuer to render the Luannan Facility incapable of being
rebuilt, repaired or restored so as to permit operation of
the entire Luannan Facility on a Commercially Feasible
Basis, all Luannan Casualty Proceeds and all Luannan
Expropriation Proceeds and repayments of the Issuer Loan and
the Shareholder Loans (resulting from such Luannan Event of
Loss or Luannan Expropriation Event or otherwise) will be
applied pro rata to the redemption of the Senior Secured
Notes. The redemption date for such a Mandatory Redemption
may be any date during the 90-day period following the date
of the Issuer's determination that the Luannan Facility is
incapable of being rebuilt, repaired or restored (taking
into account the notice requirements set forth in the Senior
Secured Notes Indenture).
(ii) Upon the occurrence of a Luannan Event of
Loss or Luannan Expropriation Event that is determined by
the Issuer to render a portion of the Luannan Facility
incapable of being rebuilt, repaired or restored, but
permits the remaining portion of the Luannan Facility to be
rebuilt, repaired or restored so as to permit operation of
the remaining portion of the Luannan Facility on a
Commercially Feasible Basis (as confirmed by the Luannan
Facility Engineer pursuant to the Senior Secured Notes
Indenture), and if the amount of the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds and repayments of
the Issuer Loan and the Shareholder Loans resulting from
such Luannan Event of Loss or Luannan Expropriation Event
exceeds $500,000 (after reduction for the total cost of
rebuilding, repairing or restoring the Luannan Facility in
accordance with the Senior Secured Notes Indenture), the
total amount of such excess proceeds will be applied pro
rata to the redemption of the Senior Secured Notes. The
redemption date may be any date during the 90-day period
following the date of the Issuer's certification to the
Senior Secured Notes Trustee of completion of the
rebuilding, repairing or restoration of the Luannan Facility
(taking into account the notice requirements set forth in
the Senior Secured Notes Indenture).
(iii) Upon the occurrence of a Luannan Event of
Loss or a Luannan Expropriation Event for which the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
exceed the aggregate principal amount of the outstanding
Senior Secured Notes, and any applicable interest (including
Liquidated Damages and Additional Amounts, if any) thereon,
the Issuer may, at its option, determine not to rebuild,
repair or restore the Luannan Facility. Upon such a
determination, such Luannan Casualty Proceeds or Luannan
Expropriation Proceeds and repayments of the Issuer Loan and
the Shareholder Loans resulting from such Luannan Event of
Loss or Luannan Expropriation Event must be used to redeem,
in whole, but not in part, the outstanding Senior Secured
Notes. The redemption date may be any date during the 90-
day period following the date of the Issuer's determination
not to rebuild, repair or restore the Luannan Facility
(taking into account the notice requirements set forth in
the Senior Secured Notes Indenture).
(iv) Upon the payment of performance liquidated
damage payments under the Luannan EPC Contract, the amount
of performance liquidated damages paid, which are required
to be applied to payment of the Issuer Loan and the
Shareholder Loans, will be applied pro rata to the
redemption of the Senior Secured Notes. The redemption date
may be any date during the 90-day period following the date
of receipt by the Issuer of any such repayment of the Issuer
Loan (taking into account the notice requirements set forth
in the Senior Secured Notes Indenture).
(v) Upon the occurrence of a Domestic Project
Event that results in Domestic Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill any
and all mandatory redemption or mandatory repayment
obligations pursuant to (a) the PFC Indenture and (b) the
debt instrument or instruments governing the project level
financing of such Domestic Project, any and all excess
proceeds shall be applied pro rata to the redemption of the
Senior Secured Notes. The redemption date may be any date
during the 90-day period following the date of the Issuer's
receipt of such proceeds from the Company (taking into
account the notice requirements set forth in the Senior
Secured Notes Indenture).
(vi) Upon the occurrence of a Permitted Project
Event that results in Permitted Project Event Proceeds,
after the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to, as the case may be, the PFC
Indenture or the debt instrument or instruments governing
the project level financing (or additional Senior
Indebtedness issued solely to finance such Permitted
Project) of such Permitted Project, any and all excess
proceeds shall be applied pro rata to the redemption of the
Senior Secured Notes and, to the extent that any other
instrument governing any additional Senior Indebtedness of
the Company and the Issuer outstanding at the date of the
Mandatory Redemption so requires, to the redemption of such
additional Senior Indebtedness. The redemption date may be
any date during the 90-day period following the date of the
Company's or the Issuer's receipt of such proceeds from such
Permitted Project (taking into account the notice
requirements set forth in the Senior Secured Notes
Indenture).
(c) Redemption at Option of Holders. Upon the
occurrence of certain events described below, the Issuer shall be
obligated to make an offer to redeem pro rata the outstanding
Senior Secured Notes at a redemption price equal to 100% of the
principal amount thereof, together with accrued and unpaid
interest, if any, to the redemption date:
(i) Upon the occurrence of an Approval Event of
Default or a County Partners Event of Default that has had
or is reasonably likely to have a Material Adverse Effect,
the Issuer shall be obligated to make a Mandatory Redemption
Offer using any and all available monies to effect such
Mandatory Redemption Offer (such amounts to include, but not
be limited to, all amounts in the Company Funds, all amounts
in the Issuer Funds and all amounts available to the Issuer
or the Company through the enforcement of the Collateral).
The redemption date for such a redemption may be any date
during the 90-day period following the date of the Approval
Event of Default or the County Partners Event of Default
(taking into account the notice requirements set forth in
the Senior Secured Notes Indenture).
(ii) If the Luannan Facility Construction Cost
is less than the Projected Luannan Facility Construction
Cost, after using such excess funds to fund any deficits in
the Issuer Funds, and if any excess funds are remaining and
the amount of such excess funds equals or exceeds
$1,000,000, the Issuer shall be obligated to use such excess
funds to make a Mandatory Redemption Offer to the Holders of
the Senior Secured Notes. The redemption date for such a
redemption may be any date during the 90-day period
following the date of the Issuer's final calculation of the
Luannan Facility Construction Cost (taking into account the
notice requirements set forth in the Senior Secured Notes
Indenture).
(d) Redemption for Taxation Reasons. The Senior
Secured Notes may be redeemed, at the option of the Issuer or the
Company, as the case may be, in whole but not in part, at any
time upon giving not less than 30 nor more than 60 days' notice
to the Holders (which notice shall be irrevocable), at a
redemption price equal to the principal amount thereof, together
with accrued and unpaid interest and premium, if any, to the date
fixed by the Issuer or the Company, as the case may be, for
redemption (a "Tax Redemption Date") and all Additional Amounts,
if any, then due and which shall become due on the Tax Redemption
Date as a result of the redemption or otherwise, if the Issuer or
the Company, as the case may be, determines that, as a result of
(i) any change in, or amendment to, the laws or treaties (or any
regulations or rulings promulgated thereunder) of the Cayman
Islands or the United States (or any political subdivision or
taxing authority thereof) which change or amendment becomes
effective on or after the date hereof; or (ii) any change in
position regarding the application, administration or
interpretation of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent
jurisdiction) which change in application, administration or
interpretation becomes effective on or after the date hereof, the
Issuer or the Company, as the case may be, is, or on the next
interest payment date would be, required to pay Additional
Amounts, and the Issuer or the Company, as the case may be,
determines that such payment obligation cannot be avoided by the
Issuer or the Company, as the case may be, taking reasonable
measures.
Notwithstanding the foregoing, no such notice of
redemption shall be given earlier than 90 days prior to the
earliest date on which the Issuer or the Company, as the case may
be, would be obligated to make such payment or withholding if a
payment in respect of the Senior Secured Notes or the Senior
Secured Notes Guarantee, as the case may be, were then due. Prior
to the publication or, where relevant, mailing of any notice of
redemption of the Senior Secured Notes pursuant to the foregoing,
the Issuer or the Company, as the case may be, shall deliver to
the Trustee or the Senior Secured Notes Trustee, as the case may
be, an opinion of a tax counsel reasonably satisfactory to such
trustee or trustees to the effect that the circumstances referred
to above exist. The Trustee or the Senior Secured Notes Trustee,
as the case may be, shall accept such opinion as sufficient
evidence of the satisfaction of the conditions precedent
described above, in which event it shall be conclusive and
binding on the Holders.
Section III.6 Luannan Expropriation Event; Luannan
Event of Loss. (a) If a Luannan Event of Loss, or a Luannan
Expropriation Event shall occur the Issuer shall, or shall cause
the Joint Ventures to, diligently pursue all rights to
compensation against the appropriate party as set forth below
and, as soon as reasonably practicable, but no later than fifteen
(15) days after the date of receipt by any Joint Venture, Pan-
Western or the Issuer of Luannan Casualty Proceeds or Luannan
Expropriation Proceeds, as the case may be, the Issuer shall make
a reasonable good faith determination as to whether (i) the
Luannan Facility can be rebuilt, repaired or restored to permit
operation of the entire Luannan Facility or a portion thereof on
a Commercially Feasible Basis, and (ii) the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may be,
together with any related repayments of the Issuer Loan and the
Shareholder Loans and any other amounts that the Issuer and its
Affiliates and the County Partners in their sole discretion are
willing to commit to such rebuilding, repair or restoration are
sufficient to permit such rebuilding, repair or restoration of
the Luannan Facility. The determination of the Issuer shall be
evidenced by an Officer's Certificate filed with the Senior
Secured Notes Indenture Trustee which, in the event the Issuer
determines that the Luannan Facility can be rebuilt, repaired or
restored to permit operation of the entire Luannan Facility or a
portion thereof on a Commercially Feasible Basis and that the
Luannan Casualty Proceeds or Luannan Expropriation Proceeds, as
the case may be, together with any related repayments of
Shareholder Loans and any other amounts that the Issuer and its
Affiliates and the County Partners in their sole discretion are
willing to commit to such rebuilding, repair or restoration are
sufficient, shall also, if required pursuant to Section 4.8 of
the Senior Secured Notes Indenture, contain a Restoration Budget
and Restoration Progress Payments Schedule prepared by the Issuer
detailing reasonable good faith estimates of the total cost of
such rebuilding, repair or restoration. The Officer's
Certificate shall be accompanied by a certificate of an
Authorized Representative of the Luannan Facility Engineer 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 Issuer, the Luannan Facility
Engineer believes the determination and the estimate of the total
cost, if any, set forth in the Officer's Certificate to be
reasonable and, if such Officer's Certificate also contains a
Restoration Budget and Progress Payments Schedule, that such
Restoration Budget and Progress Payments Schedule are reasonable
and achievable.
(b) In the event that a determination is made pursuant
to clause (a) above with respect to the Luannan Facility:
(i) that the Luannan Facility cannot be rebuilt,
repaired or restored to permit operation of the entire
Luannan Facility on a Commercially Feasible Basis or that
the Luannan Casualty Proceeds or Luannan Expropriation
Proceeds together with any related repayments of the Issuer
Loan and the Shareholder Loans and any other amounts that
the Issuer and its Affiliates and the County Partners in
their sole discretion are willing to commit to such
rebuilding, repair or restoration are not sufficient to
permit such rebuilding, repair or restoration, then, unless
clause (iii) below hereof applies, then the Senior Secured
Notes Trustee shall apply all of the Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may
be and related repayments of the Issuer Loan and the
Shareholder Loans segregated in the Issuer Revenue Fund in
accordance with Section 4.1(a) of the Senior Secured Notes
Indenture to redeem the Senior Secured Notes Outstanding in
accordance with Section 3.5(b)(i);
(ii) that the Luannan Facility can be rebuilt,
repaired or restored to permit operation of the entire
Luannan Facility on a Commercially Feasible Basis and that
the Luannan Casualty Proceeds or Luannan Expropriation
Proceeds together with any other related repayments of the
Issuer Loan and the Shareholder Loans and any other amounts
that the Issuer and its Affiliates and the County Partners
in their sole discretion are willing to commit to such
rebuilding, repair or restoration are sufficient to permit
such rebuilding, repair or restoration, all of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds, as the
case may be, and the related repayments of Issuer Loan and
the Shareholder Loans segregated in the Issuer Revenue Fund
in accordance with Section 4.1(a) of the Senior Secured
Notes Indenture, shall be transferred from the Issuer
Revenue Fund and, together with any repayment of the Issuer
Loan and the Shareholder Loans, shall be deposited in the
Luannan Facility Restoration Fund in accordance with Section
4.8 of the Senior Secured Notes Indenture. Upon completion
of any rebuilding, repair or restoration of the Luannan
Facility, the excess, if any, of the remaining Luannan
Casualty Proceeds or Luannan Expropriation Proceeds, as the
case may be and the related repayments of the Issuer Loan
and the Shareholder Loans over the amounts to be retained in
the Luannan Facility Restoration Fund in accordance with
Section 4.8(d) of the Senior Secured Notes Indenture, shall
be distributed in accordance with Section 4.8(d) of the
Senior Secured Notes Indenture;
(iii) that the Luannan Facility can only be rebuilt,
repaired or restored to permit operation of a portion of the
Luannan Facility on a Commercially Feasible Basis and that
the Luannan Casualty Proceeds or Luannan Expropriation
Proceeds together with any related repayments of the Issuer
Loan and the Shareholder Loans and any other amounts that
the Issuer and its Affiliates and the County Partners in
their sole discretion are willing to commit to such
rebuilding, repair or restoration are sufficient to permit
such rebuilding, repair or restoration, all of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds, as the
case may be, and the related repayments of the Issuer Loan
and the Shareholder Loans and together with such other
amounts that the Issuer and its Affiliates and the County
Partners in their sole discretion are willing to commit to
such rebuilding, repair or restoration as segregated in the
Issuer Revenue Fund in accordance with Section 4.1(a) of the
Senior Secured Notes Indenture shall be transferred from the
Issuer Revenue Fund and deposited in the Luannan Facility
Restoration Fund in accordance with Section 4.8 of the
Senior Secured Notes Indenture. Upon completion of any
rebuilding, repair or restoration of the Luannan Facility,
the excess, if any, of the remaining Luannan Casualty
Proceeds or Luannan Expropriation Proceeds, as the case may
be, and the related repayments of the Issuer Loan and the
Shareholder Loans over the amounts to be retained in the
Luannan Facility Restoration Fund in accordance with Section
4.8(d) of the Senior Secured Notes Indenture, shall be
distributed in accordance with Section 4.8(d) of the Senior
Secured Notes Indenture.
(c) Notwithstanding any other provision of this
Section 3.6, in the event the Luannan Casualty Proceeds or
Luannan Expropriation Proceeds, as the case may be, from a
Luannan Event of Loss or a Luannan Expropriation Event do not
exceed $500,000 in the aggregate, the Issuer shall not have to
comply with the provisions of the third sentence of clause (a)
hereof requiring the delivery of a certificate of an Authorized
Representative of the Luannan Facility Engineer and the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds (segregated
in the Issuer Revenue Fund in accordance with Section 4.1(a) of
the Senior Secured Notes Indenture), as the case may be, shall be
paid to the Joint Ventures for payment of the cost of rebuilding,
repair or restoration.
(d) In the event that the Luannan Casualty Proceeds or
Luannan Expropriation Proceeds and the related repayments of the
Issuer Loan and the Shareholder Loans from a Luannan Event of
Loss or a Luannan Expropriation Event, as the case may be,
exceeds the principal amount of the Senior Secured Notes
Outstanding, and any applicable interest thereon (including
Liquidated Damages and Additional Amounts, if any), the Issuer,
at its option, may determine not to rebuild, repair or restore
the Luannan Facility. Upon delivery of an Officer's Certificate
to the Senior Secured Notes Trustee certifying that the Issuer
will not rebuild, repair or restore the Luannan Facility, all
Luannan Casualty Proceeds or Luannan Expropriation Proceeds
(segregated in the Issuer Revenue Fund in accordance with Section
4.1(a) of the Senior Secured Notes Indenture), as the case may
be, shall be distributed in accordance with Article 4 and the
Senior Secured Notes Trustee shall redeem the Senior Secured
Notes Outstanding in whole, but not in part, in accordance with
Section 3.5(b)(iii).
(e) If a Luannan Event of Loss or Luannan
Expropriation Event shall occur, the Issuer shall (A) diligently
pursue all its rights to compensation against any Person with
respect to such Luannan Event of Loss or Luannan Expropriation
Event and, with respect to a Luannan Event of Loss (1)
compromise, settle or consent to the settlement of any claim
against any Person with respect to such Luannan Event of Loss in
accordance with the provisions of Section 7.10 of the Senior
Secured Notes Indenture and (2) hold all Luannan Casualty
Proceeds (including instruments) received in respect of any
Luannan 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 Senior Secured Notes Trustee segregated from other
funds of the Issuer and promptly deposit all such Luannan
Casualty Proceeds in the Issuer Revenue Fund, segregated from all
other moneys pending the determination pursuant to clause (a)
hereof.
Section III.7 Withholding Taxes. (a) All payments
made by the Issuer on the Senior Secured Notes (whether or not in
the form of definitive Senior Secured Notes) or payments made by
the Company with respect to the Senior Secured Notes Guarantee
shall be made without withholding or deduction for, or on account
of, any present or future taxes, duties, assessments or
governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the Cayman Islands, the
United States or any political subdivision thereof or any
authority having power to tax therein (each a "Tax Authority"),
unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on
account of, any Taxes of any Tax Authority, shall at any time be
required on any payments for, or on account of, any payments made
by the Issuer with respect to the Senior Secured Notes, including
payments of principal, redemption price, interest or premium, or
payments made by the Company with respect to the Senior Secured
Notes Guarantee, the Issuer or the Company, as the case may be,
will pay such additional amounts (the "Additional Amounts") as
may be necessary in order that the net amounts received in
respect of such payments by the Holders of the Senior Secured
Notes or the Trustees, as the case may be, after such withholding
or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such
withholding or deduction; except that no such Additional Amounts
will be payable with respect to:
(i) any payments on a Senior Secured Note held
by or on behalf of a Holder or beneficial owner who is
liable for such Taxes in respect of such Senior Secured Note
by reason of the Holder or beneficial owner having some
connection with the Cayman Islands or the United States
(including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Cayman
Islands or the United States) other than by the mere holding
of such Senior Secured Note or enforcement of rights
thereunder or the receipt of payments in respect thereof;
(ii) any Taxes that are imposed or withheld
where such withholding or imposition is by reason of the
failure of the Holder or beneficial owner to comply with a
request by the Issuer or the Company, as the case may be, to
satisfy any certification, identification or other reporting
requirement which the Holder or beneficial owner is legally
able to satisfy and which is required or imposed by statute,
treaty, regulation, or administrative practices of the
taxing jurisdiction as a precondition to exemption from all
or part of such Taxes; or
(iii) any Senior Secured Note presented for
payment (where presentation is required) more than 30 days
after the relevant payment is first made available for
payment to the Holder except to the extent that the Holder
would have been entitled to such Additional Amounts on
presenting such Senior Secured Note for payment on the last
day of such period of 30 days.
Additional Amounts shall not be payable where, had the beneficial
owner of the Senior Secured Note been the Holder of the Senior
Secured Note, he would not have been entitled to payment of
Additional Amounts by reason of Sections 2.6(a)(i)-(iii) herein.
(b) Upon request, the Issuer or the Company, as the
case may be, shall provide the Trustees with documentation
satisfactory to the Trustees evidencing the payment of Additional
Amounts. Copies of such documentation will be made available to
the Holders upon request.
Section III.8 Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end of
each calendar year a written notice specifying the amount of
original issue discount (including daily rates and accrual
periods) accrued on the Senior Secured Notes as of the end of
such year, if any.
ARTICLE IV
MISCELLANEOUS
Section IV.1 Use of Proceeds. The proceeds from the
sale of the Senior Secured Notes will be used by the Issuer: (a)
to make a deposit in the Senior Secured Notes Capitalized
Interest Fund in the amount of $48,122,778; (b) to make a deposit
in the Senior Secured Notes Debt Service Reserve Fund in the
amount of $9,700,000; (c) to pay certain closing costs (including
transaction fees, commissions and expenses) incurred in
connection with the Offering of the Senior Secured Notes and
related Senior Secured Notes Guarantee, of $6,688,956 (which
amount includes fees and expenses of the Initial Purchaser
pursuant to the agreement between the Issuer and the Initial
Purchaser); and (d) to make a deposit in the Luannan Facility
Construction Fund in the amount of $80,513,354. This amount,
plus interest thereon and other income expected to be received by
the Issuer during construction, will be used by the Issuer to
make the Issuer Loan to Pan-Western. Pan-Western will use the
proceeds of the Issuer Loan to make the JV Equity Contributions
and the Shareholder Loans to each of the four Joint Ventures.
The Joint Ventures will use the proceeds of the JV Equity
Contributions and Shareholder Loans, together with capital
contributions from the County Partners in the amount of $5.7
million, to develop and construct the Luannan Facility.
Section IV.2 Closing Costs. Upon Closing the Company
will pay the costs referred to in Section 4.1(c) and will deliver
to the Trustee an Officer's Certificate certifying as to the
closing costs incurred and paid.
Section IV.3 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 IV.4 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 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 IV.5 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 IV.6 Governing Law and Submission to
Jurisdiction. THIS FIRST SUPPLEMENTAL INDENTURE AND THE SENIOR
SECURED NOTES GUARANTEE ISSUED HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY 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 INDENTURE AND THE SENIOR SECURED NOTES
GUARANTEE, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
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 GLOBAL HOLDINGS, INC.
By:
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
By:
Name:
Title:
SCHEDULE I
Form of Senior Secured Notes Guarantee
Senior Secured Notes Guarantee
The Company, as primary obligor and not merely as
surety, hereby irrevocably, fully and unconditionally guarantees
on a senior secured basis to each Holder of a Senior Secured Note
authenticated and delivered by the Senior Secured Notes Trustee
and to the Trustee and their successors and assigns, irrespective
of the validity and enforceability of the Indentures, the Senior
Secured Notes or the obligations of the Company and the Issuer
hereunder or thereunder: (a) the performance and punctual payment
when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Issuer under the Senior
Secured Notes Indenture and the Senior Secured Notes, whether for
principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes, expenses, indemnification or otherwise; and (b) in case of
any extension of time of payment or renewal of any Senior Secured
Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Company shall be obligated to pay the same
immediately.
The Company hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Secured Notes or the
Indentures, the absence of any action to enforce the same, any
waiver or consent by any Holder with respect to any provisions
hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge
or defense of a guarantor. The Company hereby waives diligence,
presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Senior
Secured Notes Guarantee shall not be discharged except by
complete performance of the obligations contained in the Senior
Secured Notes and the Indentures. If any Holder or the Trustee
is required by any court or otherwise to return to the Company,
or any custodian, trustee, liquidator or other similar official
acting in relation to the Company, any amount paid by either to
the Trustee or such Holder, this Senior Secured Notes Guarantee,
to the extent theretofore discharged, shall be reinstated in full
force and effect. The Company agrees that it shall not be
entitled to any right of subrogation in relation to the Holders
of the Senior Secured Notes Guarantee in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
This is a continuing Guarantee and shall remain in full
force and effect and shall be binding upon the Company and its
respective successors and assigns to the extent set forth in the
Indenture until full and final payment of all of the Issuer's
obligations under the Senior Secured Notes and the Senior Secured
Notes Indenture and shall inure to the benefit of the Trustee and
the Holders of Senior Secured Notes Guarantee and their
successors and assigns and, in the event of any transfer or
assignment of rights by any Holder of the Senior Secured Notes
Guarantee or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms
and conditions hereof. Notwithstanding the foregoing, if the
Company and the Issuer satisfy the provisions of Section 6.3 of
the Indentures the Company shall be released of its obligations
hereunder. This is a Guarantee of payment and not a guarantee of
collection.
This Senior Secured Notes Guarantee shall not be valid
or obligatory for any purpose until the certificate of
authentication on the Senior Secured Note upon which this Senior
Secured Notes Guarantee is noted shall have been executed by the
Senior Secured Notes Trustee under the Senior Secured Notes
Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings
given in the Indentures unless otherwise indicated.
PANDA GLOBAL HOLDINGS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Exhibit A
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of Panda
Global Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplemental Indenture thereto, dated
April 22, 1997 (collectively, the "Indenture"). Capitalized
terms used but not defined herein shall have the meanings given
to them in the Indenture.
This letter relates to $_______ principal amount of
Notes which are evidenced by one or more Rule 144A Global Notes
(CUSIP No. _________) and held with the Depositary in the name of
____________________________ (the "Transferor"). The Transferor
has requested a transfer of such beneficial interest in the Notes
to a Person who will take delivery thereof in the form of an
equal principal amount of Notes evidenced by one or more
Regulation S Global Notes (CUSIP No. _________), which amount,
immediately after such transfer, is to be held with the
Depositary.
In connection with such request and in respect of such
Notes, the Transferor hereby certifies that such transfer has
been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance
with Rule 903 or Rule 904 under the United States Securities Act
of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(1) The offer of the Notes was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was
originated, the transferee was outside the United
States or the Transferor and any person acting on
its behalf reasonably believed and believes that
the transferee was outside the United States; or
(b) the transaction was executed in, on or
through the facilities of a designated offshore
securities market and neither the Transferor nor
any person acting on its behalf knows that the
transaction was prearranged with a buyer in the
United States;
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest
being transferred as described above is to be held with the
Depositary.
Upon giving effect to this request to exchange a
beneficial interest in a Rule 144A Global Note for a beneficial
interest in a Regulation S Global Note, the resulting beneficial
interest shall be subject to the restrictions on transfer
applicable to Regulation S Global Notes pursuant to the Indenture
and the Securities Act and, if such transfer occurs prior to the
end of the 40-day restricted period associated with the initial
offering of Notes, the additional restrictions applicable to
transfers of interest in the Regulation S Temporary Global Note.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
__________________________
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: ,
Exhibit B
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Company and Bankers Trust Company, as
trustee, and the First Supplement Indenture thereto, dated April
22, 1997 (collectively, the "Indenture"). Capitalized terms used
but not defined herein shall have the meanings given to them in
the Indenture.
This letter relates to $_______ principal amount of
Notes which are evidenced by one or more Regulation S Global
Notes (CUSIP No. _______) and held with the Depositary in the
name of ____________________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest
in the Notes to a Person who will take delivery thereof in the
form of an equal principal amount of Notes evidenced by one or
more Rule 144A Global Notes (CUSIP No. _______), to be held with
the Depositary.
In connection with such request and in respect of such
Notes, the Transferor hereby certifies that:
[CHECK ONE]
such transfer is being effected pursuant to and in
accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further
certifies that the Notes are being transferred to a
Person that the Transferor reasonably believes is
purchasing the Notes for its own account, or for one or
more accounts with respect to which such Person
exercises sole investment discretion, and such Person
and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A;
or
such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
such transfer is being effected pursuant to an
effective registration statement under the Securities
Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and such Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United
States.
Upon giving effect to this request to exchange a
beneficial interest in Regulation S Global Notes for a beneficial
interest in Rule 144A Global Notes, the resulting beneficial
interest shall be subject to the restrictions on transfer
applicable to Rule 144A Global Notes pursuant to the Indenture
and the Securities Act.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Rule 144A or Regulation S under the
Securities Act.
__________________________
[Insert Name of Transferor]
By:
Name:
Title:
Dated: _____________, _____
Exhibit C
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED NOTES
Re: 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplement Indenture thereto, dated April
22, 1997 (collectively, the "Indenture"). Capitalized terms used
but not defined herein shall have the meanings given to them in
the Indenture.
In connection with such request and in respect of the
Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Notes"), the Holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being acquired for the
Transferor's own account, without transfer;
or
the Surrendered Notes are being transferred to the
Issuer;
or
the Surrendered Notes are being transferred
pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Notes
for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred
pursuant to an effective registration statement under
the Securities Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
__________________________
[Insert Name of Transferor]
By:________________________
Name:
Title:
Dated: _____________, _____
Exhibit D
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM GLOBAL NOTE TO CERTIFICATED NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Company and Bankers Trust Company, as
trustee, and the First Supplemental Indenture thereto, dated
April 22, 1997 (collectively, the "Indenture"). Capitalized
terms used but not defined herein shall have the meanings given
to them in the Indenture.
This letter relates to $_______ principal amount of
Notes which are evidenced by one or more [Rule 144A Global Notes
(CUSIP No. _______)] [Regulation S Permanent Global Note (CUSIP
No. _______)] [Registered Global Note (CUSIP No. _______)] and
held with the Depositary in the name of
____________________________ (the "Transferor"). The Transferor
has requested a transfer of such beneficial interest in the Notes
to a Person who will take delivery thereof in the form of an
equal principal amount of Notes evidenced by one or more
Certificated Notes (CUSIP No. ________), which Notes, immediately
after such transfer, are to be delivered to the transferor at the
address set forth below.
In connection with such request and in respect of the
Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Notes"), the Holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred to the
beneficial owner of such Notes;
or
the Surrendered Notes are being transferred
pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Notes
for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred
pursuant to an effective registration statement under
the Securities Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Rule 144A or Regulation S under the
Securities Act.
__________________________
[Insert Name of Transferor]
By:
Name:
Title:
Dated: _____________, _____
__________________________
[Address of Transferor]
__________________________
Exhibit E
CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM CERTIFICATED NOTE TO GLOBAL NOTE
Re: 12-1/2% Senior Secured Notes due 2004 of Panda Global
Energy Company (the "Issuer")
Reference is hereby made to the Indenture, dated as of
April 22, 1997, between the Issuer and Bankers Trust Company, as
trustee, and the First Supplement Indenture thereto, dated April
22, 1997 (collectively, the "Indenture"). Capitalized terms used
but not defined herein shall have the meanings given to them in
the Indenture.
In connection with such request and in respect of the
Notes surrendered to the Trustee herewith for exchange (the
"Surrendered Notes"), the Holder of such Surrendered Notes hereby
certifies that:
[CHECK ONE]
the Surrendered Notes are being transferred to the
beneficial owner of such Notes;
or
the Surrendered Notes are being transferred
pursuant to and in accordance with Rule 144A under the
United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor
reasonably believes is purchasing the Surrendered Notes
for its own account, or for one or more accounts with
respect to which such Person exercises sole investment
discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 144 under the Securities
Act;
or
the Surrendered Notes are being transferred in a
transaction permitted by Rule 904 under the Securities
Act;
or
the Surrendered Notes are being transferred
pursuant to an effective registration statement under
the Securities Act;
or
such transfer is being effected pursuant to an
exemption from the registration requirements of the
Securities Act other than Rule 144A or Rule 144, and
the Transferor hereby further certifies that the Notes
are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in
accordance with the requirements of the exemption
claimed, which certification is supported by an Opinion
of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached
to this certification) in form reasonably acceptable to
the Issuer and to the Security Registrar, to the effect
that such transfer is in compliance with the Securities
Act;
and the Surrendered Notes are being transferred in compliance
with any applicable blue sky securities laws of any state of the
United States.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Issuer and
Donaldson, Lufkin & Jenrette Securities Corporation, the initial
purchaser of such Notes being transferred. Terms used in this
certificate and not otherwise defined in the Indenture have the
meanings set forth in Rule 144A or Regulation S under the
Securities Act.
__________________________
[Insert Name of Transferor]
By:
Name:
Title:
Dated: _____________, _____
EXHIBIT F
FORM OF FACE OF CERTIFICATED NOTE
[THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE ISSUER THAT: (A) SUCH NOTE MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION; AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.]
[ABOVE LEGEND TO BE INCLUDED ON TRANSFER RESTRICTED SECURITIES
ONLY]
PANDA GLOBAL ENERGY COMPANY
12-1/2% SENIOR SECURED NOTES DUE 2004
[Principal amount] No. [serial number]
Nominal unit value: [ ] Cusip No. [ ]
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby promises to
pay to ___________________, or registered assigns on each date
(each a "Principal Payment Date") set forth on the schedule
attached hereto as Schedule A (the "Amortization Schedule") the
principal sum corresponding to such Principal Payment Date set
forth on the Amortization Schedule, or on such earlier date as
the entire principal hereof may become due in accordance with the
provisions hereof. The Issuer further unconditionally promises
to pay interest (including Liquidated Damages and Additional
Amounts, if any) in arrears on April 15 and October 15 of each
year, commencing October 15, 1997, on any outstanding portion of
the unpaid principal amount hereof at 12-1/2% per annum to the
person in whose name this Note is registered on the April 1 and
October 1, respectively, next preceding such Interest Payment
Date. Interest (including Liquidated Damages and Additional
Amounts, if any) shall accrue from and including the most recent
date to which interest has been paid or duly provided for, or, if
no interest has been paid or duly provided for, from the date of
original issuance, until payment of said principal sum has been
made or duly provided for. Such payments shall be made
exclusively 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.
The statements in the legend set forth above, if any,
are an integral part of the terms of this Note and by acceptance
hereof the holder of this Note agrees to be subject to and bound
by the terms and provisions set forth in such legend, if any.
This Certificated Note is issued in respect of an issue
of U.S.$155,200,000 aggregate principal amount of 12-1/2% Senior
Secured Notes due 2004 of the Issuer and is governed by the Trust
Indenture dated as of April 22, 1997 and the First Supplemental
Indenture dated as of April 22, 1997 (the "Indenture"), between
the Issuer and Bankers Trust Company, as trustee (the "Trustee"),
the terms of which Indenture are incorporated herein by
reference. This Certificated Global Note shall, except as
otherwise stated in the Indenture, be entitled to the same
benefits as other Notes under the Indenture.
Reference is made to the further provisions set forth
under the Terms and Conditions of the Notes endorsed on the
reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: ___________________________________
Name:
Title:
Certificate of Authentication
This is one of the Certificated Notes described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: ___________________________________
Authorized Officer
Schedule A
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT G
FORM OF FACE OF RULE 144A GLOBAL NOTE
CUSIP NO. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUER THAT: (A) SUCH NOTE MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION; AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby
promises to pay to Cede & Co. ("CEDE"), or registered
assigns on each date (each a "Principal Payment Date")
set forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall be
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Regulation S Global Note (as defined in
the Indenture referred to below) is increased following
a transfer of a portion or portions hereof for a
resulting portion or portions of the Regulation S
Global Note, (iii) adding the aggregate principal
amount by which the aggregate principal amount of the
Regulation S Global Note is decreased following a
transfer of a portion or portions of the Regulation S
Global Note for a resulting portion or portions hereof
and (iv) adding the aggregate principal amount of any
Certificated Notes canceled upon transfer or exchange
for a resulting portion or portions hereof, on April
15, 2004, or on such earlier date as the principal
hereof may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Liquidated Damages and
Additional Amounts, if any) in arrears on April 15 and
October 15 of each year, commencing October 15, 1997,
on any outstanding portion of the unpaid principal
amount hereof at 12-1/2% per annum to the person in whose
name this Note is registered on the April 1 and October
1, respectively, next preceding such Interest Payment
Date. Interest (including Liquidated Damages and
Additional Amounts, if any) shall accrue from and
including the most recent date to which interest has
been paid or duly provided for, or, if no interest has
been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being the
Rule 144A Global Note (as defined in the Indenture
referred to below) deposited with DTC acting as
depositary, and registered in the name of CEDE, a
nominee of DTC, CEDE, as holder of record of this Rule
144A Global Note, shall be entitled to receive payments
of principal, premium and interest (including
Liquidated Damages and Additional Amounts, if any),
other than principal, premium and interest due at the
maturity date, by wire transfer of immediately
available funds. Such payment shall be made 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.
The statements set forth in the legend set forth above
are an integral part of the terms of this Rule 144A
Global Note and by acceptance hereof each holder of
this Rule 144A Global Note agrees to be subject to and
bound by the terms and provisions set forth in such
legend.
This Rule 144A Global Note is issued in respect of an
issue of U.S.$155,200,000 principal amount of 12-1/2%
Senior Secured Notes due 2004 of the Issuer and is
governed by the Trust Indenture dated as of April 22,
1997 and the First Supplemental Indenture dated as of
April 22, 1997 (the "Indenture"), between the Issuer
and Bankers Trust Company, as trustee (the "Trustee"),
the terms of which Indenture are incorporated herein by
reference. This Rule 144A Global Note shall, except as
otherwise stated in the Indenture, be entitled to the
same benefits as other Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Rule 144A Global Note in
accordance with the terms of the Indenture as a whole
or in part without charge upon request of such holder
for Certificated Notes, or a portion or portions of the
Regulation S Global Note, upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Rule 144A
Global Note for Certificated Notes, or a portion or
portions of the Regulation S Global Note, or upon any
exchange or transfer of Certificated Notes or a portion
or portions of the Regulation S Global Note for an
interest in this Rule 144A Global Note, in accordance
with the terms of the Indenture, this Rule 144A Global
Note shall be endorsed on Schedule A hereto to reflect
the change of the principal amount evidenced hereby as
provided for in the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: __________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is the Rule 144A Global Note described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: _______________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes or of this Rule 144A
Regulation S Global Note
Global Note
exchanged or
transferred for,
or issued in
exchange for or
upon transfer of,
an interest in
this Rule 144A
Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT H
FORM OF FACE OF REGULATION S GLOBAL NOTE
Cusip No. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
THE SENIOR SECURED NOTES (AND SENIOR SECURED NOTES GUARANTEE)
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THE
SENIOR SECURED NOTES (AND SENIOR SECURED NOTES
GUARANTEE) OFFERED HEREBY ARE BEING OFFERED AND SOLD
ONLY TO QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), TO A LIMITED
NUMBER OF INSTITUTIONAL ACCREDITED INVESTORS (AS
DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) AND OUTSIDE THE
UNITED STATES IN RELIANCE ON REGULATION S UNDER THE
SECURITIES ACT. PROSPECTIVE PURCHASERS ARE HEREBY
NOTIFIED THAT SELLERS OF THE SENIOR SECURED NOTES MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
FOR CERTAIN RESTRICTIONS ON THE OFFER, SALE, RESALE AND
DELIVERY OF THE SENIOR SECURED NOTES, SEE "NOTICE TO
INVESTORS."
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands company
(the "Issuer"), for value received, hereby promises to
pay to Cede & Co. ("CEDE"), or its registered assigns
on each date (each a "Principal Payment Date"), set
forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Rule 144A Global Note (as defined in the
Indenture referred to below) is increased following a
transfer of a portion or portions hereof for a
resulting portion or portions of the Rule 144A Global
Note, (iii) adding the aggregate principal amount by
which the aggregate principal amount of the Rule 144A
Global Note is decreased following a transfer of a
portion or portions of the Rule 144A Global Note for a
resulting portion or portions hereof and (iv) adding
the aggregate principal amount of any Certificated
Notes canceled upon transfer or exchange for a
resulting portion or portions hereof, on October 15,
2004, or on such earlier date as the principal hereof
may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Liquidated Damages and
Additional Amounts, if any) in arrears on April 15 and
October 15 of each year, commencing October 15, 1997,
on any outstanding portion of the unpaid principal
amount hereof at 12-1/2% per annum to the person in whose
name this Note is registered on the April 1 and October
1, respectively, next preceding such Interest Payment
Date. Interest (including Liquidated Damages and
Additional Amounts, if any) shall accrue from and
including the most recent date to which interest has
been paid or duly provided for, or, if no interest has
been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being the
Regulation S Global Note (as defined in the Indenture
referred to below) deposited with DTC acting as
depositary, and registered in the name of CEDE, a
nominee of DTC, CEDE, as holder of record of this
Regulation S Global Note, shall be entitled to receive
payments of principal and interest (including
Liquidated Damages and Additional Amounts, if any),
other than principal, premium and interest due at the
maturity date, by wire transfer of immediately
available funds. Such payment shall be made 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.
This Regulation S Global Note is issued in respect of
an issue of U.S.$155,200,000 principal amount of 12-1/2%
Senior Secured Notes due 2004 of the Issuer and is
governed by the Trust Indenture dated as of April 22,
1997 and the First Supplemental Indenture dated as of
April 22, 1997 (collectively, the "Indenture"), between
the Issuer and Bankers Trust Company, as trustee (the
"Trustee"), the terms of which Indenture are
incorporated herein by reference. This Regulation S
Global Note shall in all respects be entitled to the
same benefits as other Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Regulation S Global Note in
accordance with the terms of the Indenture as a whole
or in part without charge upon request of such holder
for Certificated Notes upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Regulation S
Global Note for Certificated Notes or a portion or
portions of the Rule 144A Global Note, or upon any
exchange or transfer of Certificated Notes or a portion
or portions of the Rule 144A Global Note for an
interest in this Regulation S Global Note, in
accordance with the terms of the Indenture, this
Regulation S Global Note shall be endorsed on Schedule
A hereto to reflect the change of the principal amount
evidenced hereby as provided for in the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: ____________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is the Regulation S Global Note described in the within-
mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: ________________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes or Rule of this
144A Global Note Regulation S
exchanged or Global Note
transferred for,
or issued in
exchange for or
upon transfer
of, an interest
in this
Regulation S
Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT I
FORM OF FACE OF REGISTERED GLOBAL NOTE
CUSIP NO. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby
promises to pay to Cede & Co. ("CEDE"), or registered
assigns on each date (each a "Principal Payment Date")
set forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall be
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Regulation S Global Note (as defined in
the Indenture referred to below) is increased following
a transfer of a portion or portions hereof for a
resulting portion or portions of the Regulation S
Global Note, (iii) adding the aggregate principal
amount by which the aggregate principal amount of the
Regulation S Global Note is decreased following a
transfer of a portion or portions of the Regulation S
Global Note for a resulting portion or portions hereof
and (iv) adding the aggregate principal amount of any
Certificated Notes canceled upon transfer or exchange
for a resulting portion or portions hereof, on April
15, 2004, or on such earlier date as the principal
hereof may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Additional Amounts, if any) in
arrears on April 15 and October 15 of each year,
commencing October 15, 1997, on any outstanding portion
of the unpaid principal amount hereof at 12-1/2% per
annum to the person in whose name this Note is
registered on the April 1 and October 1, respectively,
next preceding such Interest Payment Date. Interest
(including Additional Amounts,if any) shall accrue from
and including the most recent date to which interest
has been paid or duly provided for, or, if no interest
has been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being a
Global Note (as defined in the Indenture referred to
below) deposited with DTC acting as depositary, and
registered in the name of CEDE, a nominee of DTC, CEDE,
as holder of record of this Global Note, shall be
entitled to receive payments of principal, premium and
interest (including Liquidated Damages and Additional
Amounts, if any), other than principal, premium and
interest due at the maturity date, by wire transfer of
immediately available funds. Such payment shall be
made 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.
This Global Note is issued in respect of an issue of
U.S.$155,200,000 principal amount of 12-1/2% Senior
Secured Notes due 2004 of the Issuer and is governed by
the Trust Indenture dated as of April 22, 1997 and the
First Supplemental Indenture dated as of April 22, 1997
(the "Indenture"), between the Issuer and Bankers Trust
Company, as trustee (the "Trustee"), the terms of which
Indenture are incorporated herein by reference. This
Global Note shall, except as otherwise stated in the
Indenture, be entitled to the same benefits as other
Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Global Note in accordance with
the terms of the Indenture as a whole or in part
without charge upon request of such holder for
Certificated Notes, or a portion or portions of the
Regulation S Global Note, upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Global Note for
Certificated Notes, or a portion or portions of the
Regulation S Global Note, or upon any exchange or
transfer of Certificated Notes or a portion or portions
of the Regulation S Global Note for an interest in this
Global Note, in accordance with the terms of the
Indenture, this Global Note shall be endorsed on
Schedule A hereto to reflect the change of the
principal amount evidenced hereby as provided for in
the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: __________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is a Global Note described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY, as Trustee
By: _______________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes, Rule 144A of this Global
Global Note or Note
Regulation S
Global Note
exchanged or
transferred for,
or issued in
exchange for or
upon transfer of,
an interest in
this Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
EXHIBIT J
[FORM OF REVERSE OF NOTES]
TERMS AND CONDITIONS
Aggregate Principal Amount
of all Notes: U.S.$155,200,000
Interest Rate: 12-1/2%
Interest Payment Dates: April 15 and October 15
(commencing October 15, 1997)
Maturity Date: April 15, 2004
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below
unless otherwise indicated.
(_) Interest. Panda Global Energy Company (the
"Issuer"), promises to pay interest on the unpaid
principal amount of this Senior Secured Note at the
rate of 12-1/2% per annum, which interest shall be payable
in cash semiannually in arrears on each April 15 and
October 15, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest
Payment Date shall be October 15, 1997. Interest on
this Senior Secured Note will accrue from the most
recent date to which interest has been paid or, if no
interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
(_) Method of Payment. On each Interest Payment Date
the Issuer will pay interest to the Person who is the
Holder of record of this Senior Secured Note as of the
close of business on April 1 or October 1 immediately
preceding such Interest Payment Date, even if this
Senior Secured Note is cancelled after such record date
and on or before such Interest Payment Date.
Principal, premium, if any, and interest (including
Liquidated Damages and Additional Amounts, if any) on
this Senior Secured Note will be payable at the
corporate trust office of the Trustee or, in the event
the Senior Secured Notes do not remain in book-entry
form, at the option of the Issuer, payment of interest
may be made by wire transfer or check mailed to the
Holder of this Senior Secured Note at its address set
forth in the register of Holders of Senior Secured
Notes; provided that all payments with respect to the
Global Notes and Certificated Notes, the Holders of
which have given wire transfer instructions to Panda
Global Holdings, Inc. (the "Company") at least 10
Business Days prior to the applicable payment date,
will be required to be made by wire transfer of
immediately available funds to the accounts specified
by the Holders thereof. Such payment shall be in such
coin or currency of the United States of America as at
the time of payment is legal tender for payment of
public and private debts.
(_) Paying Agent and Registrar. Initially, Bankers
Trust Company, the Trustee under a Trust Indenture,
will act as Paying Agent and Registrar. The Issuer may
change any Paying Agent or Registrar without notice to
any Holder. The Issuer or the Company or any other of
the Issuer's or the Company's Subsidiaries may act in
any such capacity.
(_) Indenture. The Issuer issued the Senior Secured
Notes under a Trust Indenture dated as of April 22,
1997, as supplemented by the First Supplemental
Indenture thereto dated as of April 22, 1997
(collectively, the "Indenture") between the Issuer and
the Trustee. The Company has issued the Senior Secured
Notes Guarantee under a Trust Indenture dated as of
April 22, 1997, as supplemented by the First
Supplemental Indenture thereto dated as of April 22,
1997 (collectively, the "Company Indenture" and
together with the Indenture, the "Indentures") between
the Company and the Trustee. The terms of the Senior
Secured Notes and the Senior Secured Notes Guarantee
include those stated in the Indentures and those made
part of the Indentures by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code
77aaa-77bbbb). The Senior Secured Notes and the
Senior Secured Notes Guarantee are subject to all such
terms, and Holders are referred to the applicable
Indenture and such Act for a statement of such terms.
The Senior Secured Notes are senior secured obligations
of the Issuer equal in an aggregate principal amount to
$155,200,000 and will mature on April 15, 2004.
(_) Ranking. The Senior Secured Notes will be senior
obligations of the Issuer ranking senior in right of
payment to all subordinated Indebtedness of the Issuer
and pari passu with all other Senior Indebtedness of
the Issuer. The Senior Secured Notes are secured by
security interests in the Collateral in favor of the
Noteholders acting through the Trustee pursuant to the
Collateral Documents. Subject to the satisfaction of
the applicable covenants by the Issuer, additional
Senior Indebtedness may be issued by the Issuer from
time to time, which additional Senior Indebtedness will
share equally and ratably in certain of the Collateral.
The Senior Secured Notes are effectively subordinated
to all Indebtedness and other liabilities and
commitments of all Subsidiaries of the Issuer. Any
right of the Issuer to receive assets of its
Subsidiaries, pursuant to the terms of the Collateral
Documents upon liquidation or reorganization of any
such entity (and the consequent right of the Holders of
the Senior Secured Notes to participate in those
assets) will be effectively subordinated to the claims
of that entity's creditors, except to the extent that
the Issuer is itself recognized as a creditor of such
entity, in which case the claims of the Issuer would
still be subordinate to any security in the assets of
its Subsidiaries, and any Indebtedness thereof, senior
to that held by the Issuer.
(_) Optional Redemption. (_) The Senior Secured
Notes are not redeemable at the Issuer's option prior
to April 15, 2002. From and after April 15, 2002, the
Senior Secured Notes will be subject to redemption at
the option of the Issuer, in whole or in part at the
redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and
unpaid interest (including Liquidated Damages and
Additional Amounts, if any) thereon to the applicable
redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated
below:
Year Percentage
2002 107.00%
2003 103.50%
2004 100.00%
(_) Notwithstanding the provisions of clause (a) of
this Paragraph 6, prior to April 15, 2000 the Issuer
may, at its option, on any one or more occasions,
redeem up to $51,733,000 of the aggregate principal
amount of the Senior Secured Notes at a redemption
price equal to 113.0% of the principal amount thereof,
plus accrued and unpaid interest, if any, (including
Liquidated Damages and Additional Amounts, if any)
thereon to the redemption date, with the Net Cash
Proceeds of one or more Public Equity Offerings by the
Company, Panda Energy International, Inc. or any direct
or indirect parent of the Company; provided that (i)
such Net Cash Proceeds used for the purposes of the
optional redemption are contributed as equity to the
Issuer and (ii) at least $103,467,000 of the originally
issued principal amount of Senior Secured Notes must
remain outstanding immediately after giving effect to
such redemption.
(_) Mandatory Redemption. Upon the occurrence of
events described below, the outstanding Senior Secured
Notes (together with, as provided in clause (vi) below,
any additional Senior Indebtedness of the Issuer
outstanding at the time of such Mandatory Redemption),
will be redeemed pro rata within 90 days of the
occurrence of such events (as more particularly
specified in the Indenture), at a redemption price
equal to 100% of the principal amount thereof, together
with accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any), if any, to the
redemption date:
(i) Upon the occurrence of a Luannan Event of Loss
or Luannan Expropriation Event that is determined by
the Issuer to render the Luannan Facility incapable of
being rebuilt, repaired or restored so as to permit
operation of the entire Luannan Facility on a
Commercially Feasible Basis, all Luannan Casualty
Proceeds and all Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
(resulting from such Luannan Event of Loss or Luannan
Expropriation Event or otherwise) will be applied pro
rata to the redemption of the Senior Secured Notes.
(ii) Upon the occurrence of a Luannan Event of Loss or
Luannan Expropriation Event that is determined by the
Issuer to render a portion of the Luannan Facility
incapable of being rebuilt, repaired or restored, but
permits the remaining portion of the Luannan Facility
to be rebuilt, repaired or restored so as to permit
operation of the remaining portion of the Luannan
Facility on a Commercially Feasible Basis (as confirmed
by the Luannan Facility Engineer) such excess proceeds
will be applied pro rata to the redemption of the
Senior Secured Notes.
(iii) Upon the occurrence of a Luannan Event of Loss
or a Luannan Expropriation Event for which the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
exceed the aggregate principal amount of the
outstanding Senior Secured Notes, and any applicable
interest thereon, the Issuer may, at its option,
determine not to rebuild, repair or restore the Luannan
Facility. Upon such a determination by the Issuer, the
outstanding Senior Secured Notes will be redeemed, in
whole, but not in part. The amount of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
resulting from such Luannan Event of Loss or Luannan
Expropriation Event will be applied to the redemption
of the Senior Secured Notes.
(iv) Upon the payment of performance liquidated damage
payments under the Luannan EPC Contract, the amount of
performance liquidated damages paid, which are required
to be applied to payment of the Issuer Loan and the
Shareholder Loans, will be applied pro rata to the
redemption of the Senior Secured Notes.
(v) Upon the occurrence of a Domestic Project Event
that results in Domestic Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to (a) the PFC Indenture and (b)
the debt instrument or instruments governing the
project level financing of such Domestic Project, any
and all excess proceeds shall be applied pro rata to
the redemption of the Senior Secured Notes.
(vi) Upon the occurrence of a Permitted Project Event
that results in Permitted Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to, as the case may be, the PFC
Indenture or the debt instrument or instruments
governing the project level financing (or additional
Senior Indebtedness issued solely to finance such
Permitted Project) of such Permitted Project, any and
all excess proceeds shall be applied pro rata to the
redemption of the Senior Secured Notes; and, to the
extent that the instrument governing any additional
Senior Indebtedness of the Company and the Issuer
outstanding at the date of the Mandatory Redemption so
requires, to the redemption of such additional Senior
Indebtedness.
(_) Redemption at Option of Holder. (_) Upon the
occurrence of events described below, the Issuer will
be obligated to make an offer (a "Mandatory Redemption
Offer") to redeem pro rata the outstanding Senior
Secured Notes within 90 days of the occurrence of such
events (as more particularly described in the
Indenture) at a redemption price equal to 100% of the
principal amount thereof, together with accrued and
unpaid interest, if any, (including Liquidated Damages
and Additional Amounts, if any) to the redemption date:
(i) Upon the occurrence of an Approval Event of
Default or a County Partners Event of Default that has
had or is reasonably likely to have a Material Adverse
Effect, the Issuer shall be obligated to make a
Mandatory Redemption Offer using any and all available
monies to effect such Mandatory Redemption Offer (such
amounts to include, but not be limited to, (a) all
amounts in the Company Funds, (b) all amounts in the
Issuer Funds and (c) all amounts available to the
Issuer or the Company through the enforcement of the
Collateral).
(ii) If the Luannan Facility Construction Cost is less
than the Projected Luannan Facility Construction Cost,
after using such excess funds to fund any deficits in
the Issuer Funds, if any excess funds are remaining and
the amount of such excess funds equals or exceeds $1.0
million, the Issuer shall be obligated to use such
excess funds to make a Mandatory Redemption Offer to
the Holders of the Senior Secured Notes.
(_) Upon the occurrence of a Change of Control, each
Holder of Senior Secured Notes shall have the right to
require the Issuer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such
Holder's Senior Secured Notes pursuant to the offer
described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid
interest, if any, (including Liquidated Damages and
Additional Amounts, if any) thereon to the date of
purchase (the "Change of Control Purchase Price") in
accordance with paragraphs (b), (c) and (d) of Section
7.28 of the Indenture. The Issuer will mail a notice
to each Holder describing the transaction or
transactions that constitute the Change of Control and
offering to repurchase Senior Secured Notes pursuant to
the procedures required by the Indenture and described
in such notice. The Issuer will comply with the
requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in
connection with the repurchase of the Senior Secured
Notes as a result of a Change of Control.
(_) On the earlier of (i) the 366th day after an Asset
Sale by the Company or any of its Subsidiaries or (ii)
such date as the Board of Directors of the Company
determines not to apply the Net Cash Proceeds relating
to such Asset Sale to an investment, the making of a
capital expenditure or the acquisition of other
tangible assets (or the Company determines not to cause
its Subsidiary to apply the Net Cash Proceeds in such a
manner), if the aggregate amount of Excess Proceeds
exceeds $1.0 million, the Company or its Subsidiary, as
the case may be, shall be subject to the following
requirements:
(_) in the event that the Company cannot then
incur $1.00 of additional Permitted Indebtedness
pursuant to clause (v) of the definition of "Permitted
Indebtedness" in Appendix A of the Indenture the
Company or its Subsidiary will be required to make an
offer to purchase (the "Asset Sale Redemption Offer")
from all Holders of Senior Secured Notes and holders of
additional Senior Indebtedness, up to a maximum
principal amount (expressed as a multiple of $1,000) of
Senior Secured Notes and holders of additional Senior
Indebtedness equal to the Excess Proceeds at a purchase
price equal to 100% of the principal amount thereof
plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if
any, to the date of purchase; in the event that there
is additional Senior Indebtedness outstanding at the
time of the Asset Sale Redemption Offer, Excess
Proceeds shall be allocated to each issuance of Senior
Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of
which is the principal amount of the Senior Secured
Notes and the denominator of which is the sum of the
principal amounts of all Senior Indebtedness which is
subject to this requirement or a similar requirement
under such Senior Indebtedness's governing instrument;
and
(_) in the event that the Company can incur $1.00
of additional Permitted Indebtedness pursuant to clause
(v) of the definition of "Permitted Indebtedness," the
Company or its Subsidiary will be required to make an
Asset Sale Redemption Offer from all Holders of Senior
Secured Notes and holders of additional Senior
Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Senior Secured
Notes and holders of additional Senior Indebtedness
equal to the Excess Proceeds (Excess Proceeds for
purposes of this clause (2) is limited to that amount
of the Net Cash Proceeds that equals the principal
amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the
asset being sold) at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid
interest (including Liquidated Damages and Additional
Amounts, if any) thereon, if any, to the date of
purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale
Redemption Offer, Excess Proceeds shall be allocated to
each issuance of Senior Indebtedness in accordance with
the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal
amount of the Senior Secured Notes and the denominator
of which is the sum of the principal amounts of all
Senior Indebtedness which is subject to this
requirement or a similar requirement under such Senior
Indebtedness's governing instrument.
(_) Redemption for Taxation Reasons. The Senior
Secured Notes may be redeemed, at the option of the
Issuer or the Company, as the case may be, in whole but
not in part, at a redemption price equal to the
principal amount thereof, together with accrued and
unpaid interest and premium, if any, (including
Liquidated Damages and Additional amounts, if any), to
the Tax Redemption Date, if the Issuer or the Company,
as the case may be, determines that, as a result of (i)
any change in, or amendment to, the laws or treaties
(or any regulations or rulings promulgated thereunder)
of the Cayman Islands or the United States (or any
political subdivision or taxing authority thereof)
which change or amendment becomes effective on or after
the date of the Indenture, (ii) any change in position
regarding the application, administration or
interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change in
application, administration or interpretation becomes
effective on or after the date of the Indenture, the
Issuer or the Company, as the case may be, is, or on
the next interest payment date would be, required to
pay Additional Amounts, and the Issuer or the Company,
as the case may be, determines that such payment
obligation cannot be avoided by the Issuer or the
Company, as the case may be, taking reasonable
measures.
(_) Notice of Redemption. Notice of redemption
(other than a Change of Control Offer) will be mailed
at least 30 days but not more than 60 days before the
redemption date to each Holder whose Senior Secured
Notes are to be redeemed at its registered address.
Notice of a Change of Control Offer shall be mailed by
the Company or Issuer to the Holders not less than 30
days nor more than 45 days before the Change of Control
Payment Date. Senior Secured Notes in denominations
larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000, unless all of the Senior
Secured Notes held by a Holder are to be redeemed. On
and after the redemption date interest ceases to accrue
on the aggregate principal amount of the Senior Secured
Notes called for redemption.
(_) Denominations, Transfer, Exchange. The Senior
Secured Notes may be issued initially in the form of
one or more fully registered Global Senior Secured
Notes. The Senior Secured Notes may also be issued in
registered form without coupons in minimum
denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Secured Notes may be
registered and Senior Secured Notes may be exchanged as
provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents
and the Issuer may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture.
The Issuer need not exchange or register the transfer
of any Senior Secured Note or portion of a Senior
Secured Note selected for redemption. Also, it need
not (i) register the transfer or exchange of any Senior
Secured Notes during any period (a) beginning at the
opening of business on a Business Day 15 days before
the day of any selection of Senior Secured Notes for
redemption and ending at the close of business on the
day of selection or (b) beginning at the opening of
business on a Business Day 15 days before an Interest
Payment Date and ending on the close of business on
such Interest Payment Date or (ii) register the
transfer or exchange of any Senior Secured Note
selected for redemption in whole or in part, except the
unredeemed portion of any Senior Secured Note being
redeemed in part.
(_) Persons Deemed Owners. The registered Holder of
a Senior Secured Note may be treated as its owner for
all purposes.
(_) Amendment, Supplement and Waiver. (_) Without
the consent of the Holders of any Senior Secured Notes,
the Indenture may be amended or supplemented (i) to
establish the form and terms of Securities of
additional series; (ii) to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the
Senior Secured Notes, any property or assets; (iii) to
evidence the assumption by a successor entity to the
Company or the Issuer, and the assumption by such
successor entity of the covenants, agreements and
obligations of the Company and the Issuer pursuant to
the Indentures; (iv) to evidence the succession of a
new Trustee; (v) in certain circumstances, to add
further covenants, restrictions, conditions or
provisions for the protection of the Holders, and
related Events of Default for the breach thereof; (vi)
to cure any ambiguity, defect or inconsistency in the
Indenture, any Supplemental Indenture, or the Senior
Secured Notes which shall not adversely affect the
interests of the Holders; (vii) to permit or facilitate
the issuance of Senior Secured Notes in uncertificated
form; (viii) to comply with any requirement of the SEC
to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; (ix) to
provide for the issuance of a new series of Securities
registered under the Securities Act in exchange for the
Senior Secured Notes; (x) to make any other change that
does not adversely affect the interest of the Holders
of any series in any material respect.
(_) Subject to certain exceptions, the Indenture or
the Senior Secured Notes may be amended or supplemented
with the consent of the Holders of not less than a 51%
in aggregate principal amount of all series of
Outstanding Securities (considered as one class) or if
such amendment or supplement shall directly affect the
rights of less than all series, the consent of the
Holders of not less than a 51% in aggregate principal
amount of all series so directly affected (considered
as one class) (including a supplemental indenture
changing the provisions of the Indenture with respect
to change of control). The consent of the Holder of
each Outstanding Security directly affected thereby, is
required to:
(i) change the Stated Maturity, Senior Secured Note
Payment Date, Senior Secured Note principal amount, or
the interest thereon or any premium payable, place of
payment, impair the right to institute suit for the
enforcement of any payments, change the dates or the
amounts of payments to be made through the operation of
the sinking fund or make certain other changes
effecting the amount and timing of payments;
(ii) permit the creation or termination of Liens on
property pledged under the Collateral Documents or
deprive any Holder of the security afforded by the Lien
of the Collateral Documents, except, in each case, to
the extent expressly permitted by this Indenture or any
of the Collateral Documents; (iii) release all or any
substantial portion of the Collateral; (iv) reduce the
percentage in principal amount of the Outstanding
Securities, or reduce the requirements with respect to
quorum or voting; (v) modify any of the provisions of
Section 9.7 of the Senior Secured Notes Indenture; or
(vi) amend, change or modify the obligation of the
Issuer to make and consummate a Change of Control
Offer, or any of the provisions or definitions with
respect thereto.
(_) Defaults and Remedies. Events of Default
include: (i) failure by the Issuer to pay the
principal and premium, if any, on any Security when the
same becomes due and payable, whether by scheduled
maturity or required prepayment or by acceleration or
otherwise; (ii) failure by the Issuer to pay the
interest (including Liquidated Damages and Additional
Amounts, if any) on any Security when the same becomes
due and payable, whether by scheduled maturity or
required prepayment or by acceleration or otherwise,
for 15 or more days; (iii) non-payment of any interest
on, or any principal of, the Issuer Loan by Pan-Western
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise, for 30 or more days; (iv)
failure by the Company to pay any amount it is
obligated to pay pursuant to the terms of any Security,
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise; (v) any agreement,
representation or warranty made by the Company or any
of its Subsidiaries in, respectively, the Indentures,
the Issuer Loan Agreement or the Shareholder Loan
Agreements or any representation, warranty or statement
in any certificate, financial statement or other
document furnished to the Trustees by or on behalf of
the Company or any of its Subsidiaries under the
Indentures, 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
or is reasonably likely to have a Material Adverse
Effect and the fact, event or circumstance shall
continue to be uncured for 30 or more days after the
Company or any of its Subsidiaries acquires notice of
such inaccuracy; provided that if the Company or any
such Subsidiary commences efforts to cure such fact,
event or circumstance within such 30-day period, the
Company or any such Subsidiary may continue to effect
such cure of such fact, event or circumstance and such
misrepresentation shall not be deemed an Event of
Default for an additional 60 days so long as the
Company or such Subsidiary, as the case may be, is
diligently pursuing such cure; (vi) failure by the
Company or any of its Material Subsidiaries to perform
or observe its covenants contained in the Indentures
relating to maintenance of existence, prohibition on
fundamental changes, disposition of assets, limitations
on Indebtedness, limitations on Liens or distributions;
(vii) failure by the Company or any of its Material
Subsidiaries to perform or observe any of the other
covenants contained in the Indentures or in the
Collateral Documents and such failure shall continue
uncured for 30 or more days (including, without
limitation, covenants with respect to insurance and
amendments to Luannan Project Documents or nature of
business); provided that if the Company or such
Material Subsidiary commences efforts to cure such
default within such 30-day period, the Company or such
Material Subsidiary 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 such Subsidiary is diligently pursuing
the cure; (viii) certain events of bankruptcy or
insolvency involving the Company or any Material
Subsidiary; (ix) the entry of one or more final and non-
appealable judgment or judgments for the payment of
money in excess of $1.0 million (exclusive of judgment
amounts fully covered by insurance or indemnity)
against the Company or any of its Material
Subsidiaries, which remains unpaid or unstayed for a
period of 90 or more consecutive days; (x) any Project
Document (except as otherwise permitted under this
Indenture) shall terminate or cease to be valid and
binding and in full force and effect, or any third
party thereto denies that it has any liability or
obligation under any such Project Document and such
third party ceases performance thereunder, or any third
party is in default under such Project Document
(subject to any applicable grace period), and in each
case such cessation or default has had or is reasonably
likely to have a Material Adverse Effect; (xi) any
Luannan Financing Agreement shall terminate or cease to
be valid and binding and in full force and effect;
(xii) with respect to a Domestic Project, or to the
extent applicable, any Permitted Project, the loss of
QF Status, to the extent that such loss of QF Status
has had or is reasonably likely to have a Material
Adverse Effect; (xiii) failure of any Joint Venture to
perform or observe any of its material covenants or
obligations contained in any of the Luannan Project
Documents if such failure has had or is reasonably
likely to have a Material Adverse Effect; (xiv) the
occurrence of any event resulting in the payment of
Domestic Project Event Proceeds or Permitted Project
Event Proceeds that will result, in the opinion of the
Consolidating Financial Analyst, in the Company's
failure to meet the following Debt Service Coverage
Ratios (after the application of such amounts as are
required to be applied pursuant to any and all
mandatory redemption or repayment obligations): (1) the
minimum (or lowest) annual projected Company Debt
Service Coverage Ratio for the remaining term of the
Senior Secured Notes will not be less than 1.4 to 1 and
(2) the minimum (or lowest) annual projected
Consolidated Debt Service Coverage Ratio for the
remaining term of the Senior Secured Notes will not be
less than 1.15 to 1; (xv) the Luannan Facility
Construction Schedule Certificate shall at any time
contain a conclusion that the Luannan Facility is not
being constructed in accordance with the Approved
Construction Budget and Schedule or, if applicable, an
Approved Completion Plan; (xvi) any of the Collateral
Documents ceases to be effective or any lien granted
therein ceases to be a perfected lien to the Trustees
on the collateral described therein with the priority
purported to be created thereby; provided that the
Company or the Issuer, as the case may be, shall have
15 days to cure such cessation or to furnish to the
Trustees all documents or instruments required to cure
such cessation; or (xvii) any default under the Issuer
Loan Agreement and the Shareholder Loan Agreements that
has had or is reasonably likely to have a Material
Adverse Effect and any default under the PFC Indenture,
the Rosemary Indenture, the Brandywine Facility Lease
and any other default under any other agreement or
instrument containing Indebtedness of at least $2.5
million of a Domestic Project or a Permitted Project,
to the extent that any of the preceding defaults is not
waived. If any Event of Default (other than an Event
of Default described in clause (viii) above) occurs and
is continuing, the Trustee shall declare all interest,
principal and premium (including Liquidated Damages and
Additional Amounts, if any) on the Senior Secured Notes
to be immediately due and payable, if the Holders of at
least 25% in principal amount of the then outstanding
Senior Secured Notes have notified the Issuer and the
Trustees in writing. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the
Company, any of its Material Subsidiaries, all
outstanding Senior Secured Notes will become due and
payable without further action or notice. Holders of
the Senior Secured Notes may not enforce the Indenture
or the Senior Secured Notes except as provided in the
Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding
Senior Secured Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may
withhold from Holders of the Senior Secured Notes
notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the
payment of principal or interest) if it determines that
withholding notice is in their interest.
(_) Trustee Dealings with Issuer. The Indenture
contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer or
the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in
respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or
resign.
(_) No Recourse Against Others. No director, officer,
or stockholder of the Issuer, as such, shall have any
liability for any obligations of the Issuer under the
Senior Secured Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Senior
Secured Notes, by accepting a Senior Secured Note,
waives and releases all such liability. The waiver and
release are part of the consideration for issuance of
the Senior Secured Notes. Such waiver may not be
effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such
a waiver is against public policy.
(_) Authentication. This Senior Secured Note shall
not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
(_) GOVERNING LAW. THIS SENIOR SECURED NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. THE ISSUER HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY 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 SENIOR SECURED NOTE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS. THE ISSUER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(_) Abbreviations. Customary abbreviations may be
used in the name of a Holder or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
(_) Additional Rights of Holders of Transfer
Restricted Securities. In addition to the rights
provided to Holders of Senior Secured Notes under the
Indenture, Holders of Transferred Restricted Securities
shall have all the rights set forth in the Registration
Rights Agreement dated as of the date of the Indenture,
between the Company and the parties named on the
signature pages thereof (the "Registration Rights
Agreement").
(_) Collateral Documents. As provided in the
Indenture and the Collateral Documents and subject to
certain limitations set forth therein, the Obligations
of the Issuer and the Company under the Indentures and
the Collateral Documents are secured by the Collateral
as provided in the Collateral Documents. Each Secured
Party, by accepting a Senior Secured Note, agrees to be
bound to all the terms and provisions of, and is
entitled to the benefits of, the Collateral Documents,
as the same may be amended from time to time. The
Liens created under the Collateral Documents shall be
released upon the terms and subject to the conditions
set forth in the Indentures and the Collateral
Documents.
(_) Senior Secured Notes Guarantee. This Senior
Secured Note is entitled to the benefits of the Senior
Secured Notes Guarantee of the Company. Upon the terms
and subject to the conditions set forth in the
Indentures and the Senior Secured Notes Guarantee, the
Company has unconditionally guaranteed on a senior
secured basis that the principal of, and premium, if
any (including Liquidated Damages and Additional
Amounts, if any), and interest on the Senior Secured
Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise,
and interest on overdue principal, and premium, if any,
and (to the extent permitted by law) interest on any
interest, if any, on the Senior Secured Notes and all
other Obligations of the Issuer to the Secured Parties
or the Trustee under the Senior Secured Notes or the
Indenture (including fees, expenses or other
obligations) will be promptly paid in full or
performed.
(_) CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security
Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Senior Secured Notes and
the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No
representation is made as to the accuracy of such
numbers either as printed on the Senior Secured Notes
or as contained in any notice of redemption and
reliance may be placed only on the other identification
numbers placed thereon.
The Issuer will furnish to any Holder upon written
request and without charge a copy of the Indenture.
Requests may be made to:
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Attention: General Counsel
ASSIGNMENT FORM
To assign this Senior Secured Note, fill in the form below:
(I) or (we) assign and transfer this Security to
(Insert assignee's Social Security or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Issuer. The
agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Secured Note
purchased by the Issuer pursuant to Section 2.5(c) of
the First Supplemental Indenture or Section 7.21 or
7.28 of the Indenture, check the appropriate box below:
Section 2.5(c) Section 7.21 Section 7.28
If you want to elect to have only part of the Senior
Secured Note purchased by the Issuer pursuant to
Section 2.5(c) of the First Supplemental Indenture or
Section 7.21 or 7.28 of the Indenture, state the
principal amount at maturity you elect to have
purchased: $______________
Date: Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR SECURED NOTES
[To be attached to Global Senior Secured Note]
The following exchanges of a part of this Global Senior Secured
Note for definitive Senior Secured Notes have been made:
Date of Amount of Amount of Principal Signature of
Exchange decrease increase in Amount of authorized
in Principal this Global officer of
Principal Amount Note Trustee
Amount of this following or Note
of this Global Note such decrease Custodian
Global (or increase)
Note
SCHEDULE I
Form of Senior Secured Notes Guarantee
Senior Secured Notes Guarantee
The Company, as primary obligor and not merely as
surety, hereby irrevocably, fully and unconditionally guarantees
on a senior secured basis to each Holder of a Senior Secured Note
authenticated and delivered by the Senior Secured Notes Trustee
and to the Trustee and their successors and assigns, irrespective
of the validity and enforceability of the Indentures, the Senior
Secured Notes or the obligations of the Company and the Issuer
hereunder or thereunder: (a) the performance and punctual payment
when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Issuer under the Senior
Secured Notes Indenture and the Senior Secured Notes, whether for
principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes, expenses, indemnification or otherwise; and (b) in case of
any extension of time of payment or renewal of any Senior Secured
Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Company shall be obligated to pay the same
immediately.
The Company hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Secured Notes or the
Indentures, the absence of any action to enforce the same, any
waiver or consent by any Holder with respect to any provisions
hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge
or defense of a guarantor. The Company hereby waives diligence,
presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Senior
Secured Notes Guarantee shall not be discharged except by
complete performance of the obligations contained in the Senior
Secured Notes and the Indentures. If any Holder or the Trustee
is required by any court or otherwise to return to the Company,
or any custodian, trustee, liquidator or other similar official
acting in relation to the Company, any amount paid by either to
the Trustee or such Holder, this Senior Secured Notes Guarantee,
to the extent theretofore discharged, shall be reinstated in full
force and effect. The Company agrees that it shall not be
entitled to any right of subrogation in relation to the Holders
of the Senior Secured Notes Guarantee in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
This is a continuing Guarantee and shall remain in full
force and effect and shall be binding upon the Company and its
respective successors and assigns to the extent set forth in the
Indenture until full and final payment of all of the Issuer's
obligations under the Senior Secured Notes and the Senior Secured
Notes Indenture and shall inure to the benefit of the Trustee and
the Holders of Senior Secured Notes Guarantee and their
successors and assigns and, in the event of any transfer or
assignment of rights by any Holder of the Senior Secured Notes
Guarantee or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms
and conditions hereof. Notwithstanding the foregoing, if the
Company and the Issuer satisfy the provisions of Section 6.3 of
the Indentures the Company shall be released of its obligations
hereunder. This is a Guarantee of payment and not a guarantee of
collection.
This Senior Secured Notes Guarantee shall not be valid
or obligatory for any purpose until the certificate of
authentication on the Senior Secured Note upon which this Senior
Secured Notes Guarantee is noted shall have been executed by the
Senior Secured Notes Trustee under the Senior Secured Notes
Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings
given in the Indentures unless otherwise indicated.
PANDA GLOBAL HOLDINGS, INC.
By:_______________________________
Name:
Title:
This is one of the Senior Secured
Notes referred to in the within-
mentioned Indenture:
BANKERS TRUST COMPANY,
as Trustee
By_________________________________
Authorized Signatory
_______________________________
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
EXHIBIT 4.14
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of April 22, 1997
by and among
Panda Global Energy Company
and
Panda Global Holdings, Inc.
and
Donaldson, Lufkin & Jenrette Securities Corporation
(the "Initial Purchaser")
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is
made and entered into as of April 22, 1997 by and among Panda
Global Energy Company, a Cayman Islands company (the "Issuer"),
Panda Global Holdings, Inc., a Delaware corporation (the
"Company") and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser"), who has agreed to purchase
the Issuer's 12-1/2% Senior Secured Notes due 2004 together with the
related Guarantee by the Company (the "Notes") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated April 11, 1997 (the "Purchase Agreement"), by and among the
Issuer, the Company, Panda Energy International, Inc. and the
Initial Purchaser. In order to induce the Initial Purchaser to
purchase the Securities, the Issuer has agreed to provide the
registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations
of the Initial Purchaser set forth in Section 4(p) of the
Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Broker-Dealer: Any broker or dealer registered under the
Exchange Act.
Business Day: Any day other than a Legal Holiday.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Company Indenture: The Indenture, dated as of April 22,
1997, as supplemented by the First Supplemental Indenture thereto
dated as of April 22, 1997, between the Company and Bankers Trust
Company, as trustee (the "Company Indenture Trustee"), pursuant
to which the Guarantee is to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the
terms thereof.
Consummate: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence
of (i) the filing and effectiveness under the Securities Act of
the Exchange Offer Registration Statement relating to the
Registered Notes (as defined below) to be issued in the Exchange
Offer, (ii) the maintenance of such Registration Statement as
continuously effective and the keeping open of the Exchange Offer
for a period not less than the minimum period required pursuant
to Section 3(b) hereof and (iii) the delivery, by the Company and
the Issuer to the Registrar under the Senior Secured Notes
Indenture of the Registered Notes in the same aggregate principal
amount as the aggregate principal amount of the Notes tendered by
the Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Offer: The registration by the Company and the
Issuer under the Securities Act of the Registered Notes pursuant
to a Registration Statement pursuant to which the Issuer and the
Company offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities held by such Holders for
Registered Notes in an aggregate principal amount equal to the
aggregate principal amount of Transfer Restricted Securities
tendered by such Holders in response to such exchange offer.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related
Prospectus.
Exempt Resales: The transactions in which the Initial
Purchaser proposes to sell the Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under
the Securities Act, and to certain institutional "accredited
investors," as such term is defined in Rule 501(1), (2), (3) and
(7) of Regulation D under the Securities Act.
Guarantee: The guarantee by the Company of the obligations
of the Issuer under the Senior Secured Notes Indenture and the
Senior Secured Notes.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indentures: The Company Indenture and the Senior Secured
Notes Indenture.
Initial Purchaser: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indentures and the
Notes.
Legal Holiday: A Saturday, a Sunday or a day on which
federal offices or banking institutions in the City of New York,
in the city of the Corporate Trust Office of the Trustees, or at
a place of payment are authorized by law, regulation or executive
order to remain closed. If a payment date is a Legal Holiday,
payment may be made on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening
period.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The Prospectus included in a Registration
Statement, as amended or supplemented by any Prospectus
supplement and by all other amendments thereto, including post-
effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date
relating to the Notes, each Person who is a Holder of the Notes
on the record date with respect to the Interest Payment Date on
which such Damages Payment Date shall occur.
Registered Notes: The Issuer's 12-1/2% Senior Secured Notes
due 2004 to be issued pursuant to the Senior Secured Notes
Indenture (i) in the Exchange Offer or (ii) upon the request of
any Holder of Notes covered by a Shelf Registration Statement, in
exchange for such Notes, together with the related Guarantee by
the Company.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Issuer and the Company relating to (a) an offering of Registered
Notes pursuant to an Exchange Offer or (b) the registration for
resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, which is filed pursuant to the provisions
of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and
material incorporated by reference therein.
Securities: The Notes and the Registered Notes.
Securities Act: The Securities Act of 1933, as amended.
Senior Secured Notes Indenture: The Indenture, dated as of
April 22, 1997, as supplemented by the First Supplemental
Indenture thereto dated as of April 22, 1997, between the Issuer
and Bankers Trust Company, as trustee (the "Senior Secured Notes
Trustee"), pursuant to which the Notes are to be issued, as such
Indenture is amended or supplemented from time to time in
accordance with the terms thereof.
Shelf Registration Statement: As defined in Section 4
hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Senior Secured
Notes Indenture.
Transfer Restricted Securities: Each Security , until the
earliest to occur of (a) the date on which such Security is
exchanged in the Exchange Offer by a Person other than a Broker-
Dealer for a Registered Note and is entitled to be resold to the
public by the Holder thereof without complying with the
prospectus delivery requirements of the Securities Act, (b)
following the exchange by a Broker-Dealer in the Exchange Offer
of a Note for a Registered Note, the date on which such
Registered Note 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, (c) the date on which such Security effectively has
been registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (d) the date
on which such Security is eligible to be distributed to the
public pursuant to Rule 144 under the Securities Act.
Trustees: The Senior Secured Notes Trustee and the Company
Indenture Trustee.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Issuer are sold to an
underwriter for reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities
entitled to the benefits of this Agreement are the Transfer
Restricted Securities. Without limiting the generality of the
foregoing, all obligations of the Company and the Issuer to file,
use their best efforts to have deemed effective or maintain the
effectiveness of any Registration Statement and the accrual of
liquidated damages under Section 5 shall cease with respect to a
Transfer Restricted Security immediately upon such Security no
longer being a Transfer Restricted Security.
(b) Holders of Transfer Restricted Securities. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a
"Holder") whenever such Person owns Transfer Restricted
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible
under applicable law or Commission policy (after the procedures
set forth in Section 6(a) below have been complied with), the
Company and the Issuer shall (i) cause to be filed under the
Securities Act with the Commission as soon as practicable after
the Closing Date, but in no event later than 60 days after the
Closing Date, an Exchange Offer Registration Statement relating
to the Registered Notes and the Exchange Offer, (ii) use their
best efforts to cause such Exchange Offer Registration Statement
to become effective at the earliest possible time, but in no
event later than 150 days after the Closing Date, (iii) in
connection with the foregoing, file (A) all pre-effective
amendments to such Exchange Offer Registration Statement as may
be necessary in order to cause such Exchange Offer Registration
Statement to become effective, (B) if applicable, a
post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Securities Act and (C)
all filings in connection with the registration and qualification
of the Registered Notes as are necessary under the Blue Sky laws
of such jurisdictions in order to permit Consummation of the
Exchange Offer, and (iv) commence the Exchange Offer on or prior
to ten Business Days after the date on which the Exchange Offer
Registration Statement is declared effective by the Commission,
and use their best efforts to issue Registered Notes in exchange
for all Transfer Restricted Securities validly tendered and not
properly withdrawn in the Exchange Offer. The Exchange Offer
shall be on the appropriate form permitting registration of the
Registered Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of the Registered
Notes held by Broker-Dealers as contemplated by Section 3(c)
below.
(b) The Company and the Issuer shall keep the Exchange
Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to
Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The
Company and the Issuer shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No
securities other than the Securities shall be included in the
Exchange Offer Registration Statement. The Company and the
Issuer shall use their best efforts to cause the Exchange Offer
to be Consummated on the earliest practicable date after the
Exchange Act Registration Statement has become effective, but in
no event later than 30 Business Days thereafter.
(c) The Company and the Issuer shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in
the Exchange Offer Registration Statement that any Broker-Dealer
who holds Notes that are Transfer Restricted Securities and that
were acquired for its own account as a result of market-making
activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Issuer), may
exchange such Notes pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Securities Act and, consequently, must deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resales of the Registered Notes received by
such Broker-Dealer in the Exchange Offer, which prospectus
delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section
shall also contain all other information with respect to such
resales by Broker-Dealers that the Commission may require in
order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose
the amount of the Securities held by any such Broker-Dealer
except to the extent required by the Commission as a result of a
change in law or policy after the date of this Agreement.
The Company and the Issuer shall use their reasonable best
efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented and amended as required by
the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Registered Notes
acquired by any Broker-Dealer for its own account as a result of
market-making activities or other trading activities (provided
that upon the request of the Company or the Issuer, such Broker-
Dealer notifies the Company and the Issuer within 30 Business
Days after the Exchange Offer is Consummated that it has acquired
Registered Notes for its own account), and to ensure that such
Exchange Offer Registration Statement conforms with the
requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced
from time to time, for a period equal to two hundred and seventy
(270) consecutive days after the date the Exchange Offer is
Consummated (subject to the provisions of Section 6(c)(i) below).
In order to facilitate such resales, at any time during such
270-day period the Issuer and the Company shall provide to Broker-
Dealers, promptly upon request, and in no event more than (i) two
Business Days after any such request, sufficient copies of the
latest version of such Prospectus or (ii) if any fact or event
contemplated by clause (c)(iii)(D) of Section 6 shall exist or
have occurred, two Business Days for an appropriate supplement or
amendment to such Prospectus has been prepared (and any related
post-effective amendment to the Registration Statement has been
declared effective).
Any time period for the taking of an action referred to in this
Section 3 will be tolled for such period if the Company or the
Issuer is prohibited by law from taking the action in question
during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Issuer
are not required to file an Exchange Offer Registration Statement
with respect to the Registered Notes or are not permitted to
consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law (after the procedures set forth in
Section 6(a) below have been complied with) or Commission policy
or (ii) if any Holder of Transfer Restricted Securities shall
notify the Company and the Issuer within 20 Business Days
following Consummation of the Exchange Offer that (A) such Holder
was prohibited by law or Commission policy from participating in
the Exchange Offer, (B) such Holder may not resell the Registered
Notes 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) such Holder is
a Broker-Dealer and holds the Notes acquired directly from the
Issuer or one of its affiliates, then the Company and the Issuer
shall (x) cause to be filed on or prior to 60 days after the date
on which the Issuer and the Company determine that they are not
required to file the Exchange Offer Registration Statement
pursuant to clause (i) above or 60 days after the date on which
the Issuer and the Company receive the notice specified in clause
(ii) above a shelf registration statement pursuant to Rule 415
under the Securities Act (which may be an amendment to the
Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement")), relating to all Transfer
Restricted Securities or, in the circumstances provided in clause
(ii) above, all Transfer Restricted Securities held by Holders
who were not eligible to participate in the Exchange Offer by
reason of subclause (A), (B), or (C) of clause (ii) above and who
shall have provided the information required pursuant to Section
4(b) hereof, and shall (y) use their respective best efforts to
cause the Shelf Registration Statement to be declared effective
by the Commission on or prior to 150 days after such obligation
arises; provided that in the circumstances provided in clause (i)
above, if the Issuer and the Company have not consummated the
Exchange Offer within 180 days of the Closing 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
Closing Date. If, after the Company and the Issuer have filed an
Exchange Offer Registration Statement which satisfies the
requirements of Section 3(a) above, the Company and the Issuer
are required to file a Shelf Registration Statement solely
because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the
requirements of clause (x) above. Such an event shall have no
effect on the requirements of clause (y) above or on the
Effectiveness Target Date as defined in Section 5 below.
Furthermore, if, after the Company and the Issuer have filed an
Exchange Offer Registration Statement which satisfies the
requirements of Section 3(a) above, the Company and the Issuer
are required to file a Shelf Registration Statement solely
because the Exchange Offer has not been Consummated within 180
days of the Closing Date, then, if the Exchange Offer
Registration Statement has been declared effective before the
Shelf Registration Statement has been declared effective and the
Company and the Issuer commence the Exchange Offer promptly after
the Exchange Offer Registration Statement has been declared
effective, the obligations of the Company and the Issuer to use
their best efforts to cause the Shelf Registration Statement to
be declared effective shall be suspended until the Exchange Offer
shall have been Consummated or for any reason terminated prior to
Consummation, and shall cease entirely upon Consummation of the
Exchange Offer.
Each of the Company and the Issuer shall use its reasonable
best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by
the provisions of Sections 6(b) and (c) hereof for a period of
three years from the Closing Date (as extended pursuant to
Section 6(c)(i)) or such shorter period that will terminate when
all the Securities covered by such Shelf Registration Statement
are no longer Transfer Restricted Securities or all the
Securities covered by such Shelf Registration Statement have been
sold pursuant thereto, and to ensure that such Shelf Registration
Statement conforms with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of three
years from the Closing Date (as extended pursuant to Section
6(c)(i)) or such shorter period that will terminate when all the
Securities covered by such Shelf Registration Statement are no
longer Transfer Restricted Securities or all the Securities
covered by such Shelf Registration Statement have been sold
pursuant thereto.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. 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 and the Issuer in writing, within 20 days after
receipt of a request therefor, such information as the Company
and the Issuer reasonably may 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 liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the
Company and the Issuer all information required to be disclosed
in order to make the information previously furnished to the
Company and the Issuer by such Holder not materially misleading.
(c) Restrictions on Sale of Certain Securities by Others.
The Company and the Issuer agree not to, and to use their
reasonable best efforts to cause their affiliates not to, offer,
sell, contract to sell or grant any option to purchase or
otherwise transfer or dispose of any debt security issued by the
Company or the Issuer or any security convertible into or
exchangeable or exercisable for any such debt security, including
a sale pursuant to Rule 144 under the Securities Act, during the
30-day period beginning on the closing date of each Underwritten
Offering made pursuant to the Shelf Registration Statement
(except as part of such Underwritten Registration).
(d) Tolling. Any time period for the taking of an action
referred to in this Section 4 will be tolled for such period if
the Company or the Issuer is prohibited by law from taking the
action in question during such period.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this
Agreement are not filed with the Commission on or prior to the
date specified for such filing in Section 3 or 4 of this
Agreement, (ii) any of such Registration Statements have not been
declared effective by the Commission on or prior to the date
specified for such effectiveness in Section 3 or 4 of this
Agreement (the "Effectiveness Target Date"), (iii) the Exchange
Offer has not been Consummated within 30 days of the
Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (iv) subject to the provisions of
Section 6(c)(i) below, any Registration Statement required by
this Agreement is filed and declared effective but shall
thereafter, subject to certain exceptions, cease to be effective
for a period of five Business Days during periods when it is
required to be effective or (v) at any time when the Prospectus
is required by the Securities Act to be delivered in connection
with sales of Transfer Restricted Securities, the Issuer and the
Company shall conclude, or the Holders of a majority in principal
amount of the affected Transfer Restricted Securities shall
reasonably conclude, based on advice of their counsel, and shall
give notice to the Issuer and the Company, that either (A) any
event shall occur or fact exist as a result of which it is
necessary to amend or supplement the Prospectus in order that it
will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they
were made, not misleading, or (B) it shall be necessary to amend
or supplement the Registration Statement or the Prospectus in
order to comply with the requirements of the Securities Act or
the rules of the Commission thereunder, and in the case of clause
(A) or (B), the Registration Statement is not appropriately
amended by an effective post-effective amendment, or the
Prospectus is not amended or supplemented, in a manner reasonably
satisfactory to the Holders of Transfer Restricted Securities
within five Business Days after the Issuer and the Company shall
so conclude or shall receive the above-mentioned notice from
Holders of Transfer Restricted Securities (each such event
referred to in clauses (i) through (v) above a "Registration
Default"), then the Issuer and the Company hereby, jointly and
severally, agree to pay liquidated damages to each Holder of
Transfer Restricted Securities to which a Registration Default
applies, in respect of any and all Registration Defaults, during
the first 90-day period immediately following the occurrence of
such Registration Default, in an amount equal to $.05 per week
per $1,000 principal amount of the Transfer Restricted Securities
held by such Holder for so long as the Registration Default
continues. The amount of liquidated damages payable to each
Holder shall increase by an additional $.05 per week per $1,000
principal amount of Transfer Restricted Securities held by such
Holder for each subsequent 90-day period, up to a maximum amount
of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder.
Notwithstanding anything to the contrary set forth herein, (1)
upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of
(i) above, (2) upon the effectiveness of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon
Consummation of the Exchange Offer, in the case of (iii) above,
or (4) upon the filing of a post-effective amendment to the
Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer
Restricted Securities as a result of such clause (i), (ii), (iii)
or (iv), as applicable, shall cease. Except in the case of bad
faith on the part of the Company or the Issuer, no event referred
to in clauses (i) through (v) above shall constitute a breach of
this Agreement, giving rise to any claim other than for the
payment of liquidated damages contemplated hereby, but shall
constitute a Registration Default subject to the provisions of
this Section 5.
All accrued liquidated damages shall be paid by the Company
and the Issuer on each Damages Payment Date (i) to Global Note
Holders by wire transfer of immediately available funds or by
federal funds check and (ii) to Holders of Certificated Notes by
mailing checks to their registered addresses. Following the cure
of all Registration Defaults relating to any particular Transfer
Restricted Securities, the accrual of liquidated damages with
respect to such Transfer Restricted Securities will cease. All
obligations of the Company and the Issuer set forth in the
preceding paragraph that are outstanding with respect to any
Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time
as all such obligations with respect to such security shall have
been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection
with the Exchange Offer, the Company and the Issuer shall comply
with all of the provisions of Section 6(c) below, shall use their
reasonable best efforts to effect such exchange to permit the
sale of Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the
Company and the Issuer there is a question as to whether the
Exchange Offer is permitted by applicable law, the Company and
the Issuer hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company
and the Issuer to Consummate an Exchange Offer for such Notes.
The Company and the Issuer hereby agree to pursue the issuance
of such a decision to the Commission staff level, but shall
not be required to take commercially unreasonable action to
effect a change of Commission policy. The Company and the
Issuer hereby agree, however, (A) to participate in telephonic
conferences with the Commission, (B) to deliver to the
Commission staff an analysis prepared by counsel to the
Company and the Issuer setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) to pursue diligently a
resolution (which need not be favorable) by the Commission
staff of such submission.
(ii) As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each
Holder of Transfer Restricted Securities, on its own behalf
and on behalf of all beneficial owners of such Transfer
Restricted Securities, shall furnish, upon the request of the
Company and the Issuer, prior to the Consummation thereof, a
written representation to the Company and the Issuer (which
may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that
such Holder (A) is not an affiliate of the Company or the
Issuer, (B) is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to
participate in, a distribution of the Registered Notes to be
issued in the Exchange Offer and (C) is acquiring the
Registered Notes in its ordinary course of business. Each
Holder hereby acknowledges and agrees that any Broker-Dealer
and any such Holder using the Exchange Offer to participate in
a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of
the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993,
and similar no-action letters (including any no-action letter
obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction
should be covered by an effective registration statement
containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K if the
resales are of the Registered Notes obtained by such Holder in
exchange for Notes acquired by such Holder directly from the
Issuer or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Issuer shall
provide, if requested by the Commission, a supplemental letter
to the Commission (A) stating that the Company and the Issuer
are registering the Exchange Offer in reliance on the position
of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988) and Morgan Stanley and
Co., Inc. (available June 5, 1991) and, if applicable, any no-
action letter obtained pursuant to clause (i) above and (B)
including a representation that the Company and the Issuer
have not entered into any arrangement or understanding with
any Person to distribute the Registered Notes to be received
in the Exchange Offer, to the best of the Company's and the
Issuer's information and belief, each Holder participating in
the Exchange Offer is acquiring the Registered Notes in its
ordinary course of business and has no arrangement or
understanding with any Person to participate in the
distribution of the Registered Notes received in the Exchange
Offer.
(b) Shelf Registration Statement. In connection with the
Shelf Registration Statement, the Company and the Issuer shall
comply with all of the provisions of Section 6(c) below and shall
use their best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution
thereof, and pursuant thereto the Company and the Issuer as
expeditiously as possible will prepare and file with the
Commission a Registration Statement relating to the registration
on any appropriate form under the Securities Act, which form
shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of
distribution thereof.
(c) General Provisions. In connection with any
Registration Statement and any Prospectus required by this
Agreement in order to permit the sale or resale of Transfer
Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to
permit resales of the Securities by Broker-Dealers), the Company
and the Issuer shall:
(i) use their reasonable best efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the
Issuer promptly shall file an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting
any such misstatement or omission, and, in the case of either
clause (A) or (B), use their best efforts to cause such
amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter.
Notwithstanding the foregoing, the Company and the Issuer may
suspend the effectiveness of (1) the Registration Statement
relating to the Exchange Offer for up to 45 days during the
270-day period referred to in Section 3(c) and (2) the Shelf
Registration Statement for up to 90 days in each year during
which such Shelf Registration Statement is required to be
effective and usable hereunder (measured from the date of
effectiveness of such Shelf Registration Statement to
successive anniversaries thereof) if (A) either (y)(I) the
Company and the Issuer shall be engaged in a material
acquisition or disposition and (II)(aa) such acquisition or
disposition is required to be disclosed in the Registration
Statement, the related Prospectus or any amendment or
supplement thereto, or the failure by the Company and the
Issuer to disclose such transaction in the Registration
Statement or related Prospectus, or any amendment or
supplement thereto, as then amended or supplemented, would
cause such Registration Statement, Prospectus or amendment or
supplement thereto, to contain an untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statement therein, in the light of the
circumstances under with they were made, not misleading, (bb)
information regarding the existence of such acquisition or
disposition has not then been publicly disclosed by or on
behalf of the Company and the Issuer and (cc) a majority of
the Board of Directors of the Company or the Issuer determines
in the exercise of its good faith judgment that disclosure of
such acquisition or disposition would not be in the best
interest of the Company or the Issuer and its subsidiaries or
would have a material adverse effect on the consummation of
such acquisition or disposition or (z) a majority of the Board
of Directors of the Company or the Issuer determines in the
exercise of its good faith judgment that compliance with the
disclosure obligations set forth in this Section 6(c)(i) would
otherwise have a material adverse effect on the Company or the
Issuer and its subsidiaries, taken as a whole, and (B) the
Company and the Issuer notify the Holders within two Business
Days after such Board of Directors makes the relevant
determination set forth in clause (A); provided, however, that
in each such case the applicable period specified in Section 3
and 4 hereof during which the applicable Registration
Statement is required to be kept effective and usable shall be
extended by the number of days during which such effectiveness
was suspended pursuant to the foregoing;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration
Statement effective for the applicable period set forth in
Section 3 or 4 hereof, as applicable, or such shorter period
as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders and, if requested by such Persons, confirm such advice
in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and,
with respect to any Registration Statement or any post-
effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
under the Securities Act or of the suspension by any state
securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of
the preceding purposes, (D) of the existence of any fact or
the happening of any event that makes any statement of a
material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company and the Issuer
shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to the Initial Purchaser, each of the
selling Holders and each of the underwriter(s), if any, before
filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement),
which documents will be subject to the review of such Holders
and underwriter(s), if any, for a period of at least five
Business Days, and neither the Company nor the Issuer will
file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by
reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the
underwriter(s), if any, shall object within five Business Days
after the receipt thereof. A selling Holder or underwriter,
if any, shall be deemed to have objected reasonably to such
filing if such Registration Statement, amendment, Prospectus
or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission or fails to
comply with the applicable requirements of the Securities Act;
(v) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement
or Prospectus, provide copies of such document to the selling
Holders and to the underwriter(s), if any, make the Company's
and the Issuer's representatives available for discussion of
such document and other customary due diligence matters, and
include such information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if any,
reasonably may request;
(vi) make available at reasonable times for
inspection by the selling Holders, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial
and other records, pertinent corporate documents and
properties of the Company and the Issuer and cause the
Company's and the Issuer's officers, directors and employees
to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof
and prior to its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, reasonably
may request to have included therein, including, without
limitation, information relating to the "Plan of Distribution"
of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted
Securities being sold to any such underwriter(s), the purchase
price being paid therefor and any other terms of the Transfer
Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the
Company and the Issuer are notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities
covered by the Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of
a majority in aggregate principal amount of the Securities
covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of
the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any
amendment or supplement thereto as such Persons reasonably may
request; the Company and the Issuer hereby consent to the use
of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto;
(xi) enter into such agreements (including an
underwriting agreement), and make such representations and
warranties, and take all such other actions in connection
therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to
such extent as may be requested by the Initial Purchaser or by
any Holder of Transfer Restricted Securities or underwriter in
connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten
Registration, each of the Company and the Issuer shall:
(A) furnish to the Initial Purchaser, each selling
Holder and each underwriter, if any, in such substance and
scope as they may request and as are customarily made by
issuers to underwriters in primary underwritten offerings,
upon the date of the Consummation of the Exchange Offer and,
if applicable, upon the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the
case may be, signed by (x) the President or any Vice
President and (y) a principal financial or accounting
officer of each of the Company and the Issuer,
confirming, as of the date thereof, the matters set forth
in paragraphs (a), (b), (c) and (d) and (e) of Section 7
of the Purchase Agreement and such other matters as such
parties may reasonably request;
(2) an opinion, dated the date of Consummation
of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of
counsel for the Company and the Issuer covering the
matters set forth in paragraphs (g) and (h) of Section 7
of the Purchase Agreement and such other matters as the
Holders and/or managing underwriter(s) reasonably may
request, and in any event including a statement to the
effect that such counsel has participated in conferences
with officers and other representatives of the Company
and the Issuer, representatives of the independent public
accountants for the Company and the Issuer, the Initial
Purchaser's representatives and the Initial Purchaser's
counsel in connection with the preparation of such
Registration Statement and the related Prospectus and
have considered the matters required to be stated therein
and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that on
the basis of the foregoing (relying upon facts provided
to such counsel by officers and other representatives of
the Company and the Issuer and without independent check
or verification), that no facts came to such counsel's
attention that caused such counsel to believe that the
applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto became effective, and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation, contained an untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained
in such Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained
an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. Without limiting
the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules
and other financial data, the reports of independent
engineers and consultants or other financial, engineering
and statistical data included in any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) customary comfort letters, dated as of the
date of Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the
case may be, from the Company's and the Issuer's past and
present independent accountants, in the customary form
and covering matters of the type customarily covered in
comfort letters to underwriters in connection with
primary underwritten offerings, and affirming the matters
set forth in the comfort letters delivered pursuant to
Section 7(u) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, the indemnification
provisions and procedures of Section 8 hereof with respect
to all parties to be indemnified pursuant to said Section;
and
(C) deliver such other documents and certificates as
reasonably may be requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company and the Issuer
pursuant to this clause (xi), if any.
The provisions of this clause (A) shall be applicable at
each closing under such underwriting or similar agreement, as
and to the extent required thereunder and, if at any time the
representations and warranties of the Company and the Issuer
contemplated in clause (A)(1) above cease to be true and
correct, the Company and the Issuer promptly shall so advise
the Initial Purchaser and the underwriter(s), if any, and each
selling Holder and, if requested by such Persons, shall
confirm such advice in writing;
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue
Sky laws of such jurisdictions as the selling Holders or
underwriter(s) may request and do any and all other acts or
things necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided,
however, that neither the Company nor the Issuer shall be
required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would
subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not
now so subject;
(xiii) upon the request of any Holder of Notes covered
by the Shelf Registration Statement, issue Registered Notes,
having an aggregate principal amount equal to the aggregate
principal amount of Notes surrendered to the Issuer by such
Holder in exchange therefor or being sold by such Holder, such
Registered Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Securities, as the
case may be; in return, the Notes held by such Holder shall be
surrendered to the Issuer for cancellation;
(xiv) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends,
and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or
the underwriter(s), if any, may request at least two Business
Days prior to any sale of Transfer Restricted Securities made
by such underwriter(s);
(xv) use their best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental
agencies or authorities as may be necessary in order to enable
the seller or sellers thereof or the underwriter(s), if any,
to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii)
above;
(xvi) if any fact or event contemplated by clause
(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading; provided, however, the Company and the Issuer
shall not be required to comply with this clause (xvi) if, and
only for so long as (A) either (l)(y) the Company and the
Issuer shall be engaged in a material acquisition or
disposition and (z)(I) such acquisition or disposition is
required to be disclosed in the Registration Statement, the
related Prospectus or any amendment or supplement thereto, or
the failure by the Company and the Issuer to disclose such
transaction in the Registration Statement or related
Prospectus, or any amendment or supplement thereto, as then
amended or supplemented, would cause such Registration
Statement, Prospectus or amendment or supplement thereto, to
contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
with they were made, not misleading, (II) information
regarding the existence of such acquisition or disposition has
not been publicly disclosed by or on behalf of the Company and
the Issuer and (III) a majority of the Board of Directors of
the Company or the Issuer determines in the exercise of its
good faith judgment that disclosure of such acquisition or
disposition would not be in the best interests of the Company
and the Issuer and its subsidiaries or would have a material
adverse effect on the consummation of such acquisition or
disposition or (2) a majority of the Board of Directors of the
Company or the Issuer determines in the exercise of its good
faith judgment that compliance with the disclosure obligations
set forth in this clause (xvi) would otherwise have a material
adverse effect on the Company and the Issuer and its
subsidiaries, taken as whole, and (B) the Issuer notifies the
Holders within two Business Days after the Board of Directors
makes the relevant determination set forth in clause (A);
provided, however, that in each such case the period specified
in Section 3 and 4 hereof during which the applicable
Registration Statement is required to be kept effective and
usable shall be extended by the number of days during which
such effectiveness was suspended pursuant to the foregoing;
(xvii) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of the
Registration Statement, and provide the Trustees under the
Indentures with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit
with the Depository Trust Company;
(xviii) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due
diligence investigation by any underwriter (including any
"qualified independent underwriter") that is required to be
retained in accordance with the rules and regulations of the
NASD, and use their reasonable best efforts to cause such
Registration Statement to become effective and approved by
such governmental agencies or authorities as may be necessary
to enable the Holders selling Transfer Restricted Securities
to consummate the disposition of such Transfer Restricted
Securities;
(xix) otherwise use their reasonable best efforts to
comply with all applicable rules and regulations of the
Commission, and make generally available to their security
holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not
be audited) for the twelve-month period (A) commencing at the
end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the
Company's and the Issuer's first fiscal quarter commencing
after the effective date of the Registration Statement;
(xx) cause the Indentures to be qualified under the
TIA not later than the effective date of the first
Registration Statement required by this Agreement, and, in
connection therewith, cooperate with the Trustees and the
Holders of the Securities to effect such changes to the
Indentures as may be required for such Indentures to be so
qualified in accordance with the terms of the TIA; and execute
and use their best efforts to cause the Trustees to execute,
all documents that may be required to effect such changes and
all other forms and documents required to be filed with the
Commission to enable such Indentures to be so qualified in a
timely manner;
(xxi) use their reasonable best efforts to cause all
Transfer Restricted Securities covered by the Registration
Statement to be listed on each securities exchange on which
similar securities issued by the Company and the Issuer are
then listed if requested by the Holders of a majority of the
outstanding shares or aggregate principal amount of the
Securities, or the underwriters, if any; and
(xxii) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by
acquisition of a Transfer Restricted Security that, upon receipt
of any notice from the Company and the Issuer of the existence of
any fact of the kind described in Section 6(c)(iii)(D) hereof,
such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration
Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof, or until it is advised in writing (the
"Advice") by the Company and the Issuer that the use of the
Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company and
the Issuer, each Holder will deliver to the Issuer (at the
Issuer's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company and the Issuer
shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in
Section 3 or 4 hereof, as applicable, shall be extended by the
number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder covered by
such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Issuer's
performance of or compliance with this Agreement will be borne by
the Company and the Issuer, regardless of whether a Registration
Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses (including
filings made by the Initial Purchaser or any Holder with the NASD
(and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by
the rules and regulations of the NASD)); (ii) all fees and
expenses of compliance with federal securities and state Blue Sky
or securities laws; (iii) all expenses of printing (including
printing certificates for the Registered Notes to be issued in
the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements
of counsel for the Issuer, the Company and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v)
all application and filing fees in connection with listing the
Securities on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi)
all fees and disbursements of independent certified public
accountants of the Company and the Issuer (including the expenses
of any special audit and comfort letters required by or incident
to such performance).
Each of the Company and the Issuer will, in any event, bear
its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and
the fees and expenses of any Person, including special experts,
retained by the Company or the Issuer.
(b) The Company and the Issuer, jointly and severally, will
reimburse the Initial Purchaser and the Holders for the
reasonable fees and disbursements of Simpson Thacher & Bartlett,
acting for the Initial Purchaser or Holders in connection with
the offer and sale of the Securities pursuant to each
Registration Statement required by this Agreement.
SECTION 8. INDEMNIFICATION
(a) The Company and the Issuer, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii)
each person, if any, who controls (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) any
Holder (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 each Holder and each controlling
person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder") to the
fullest extent lawful, from and against any and all losses,
claims, damages, judgments, actions and other liabilities
(collectively, "Liabilities"), and will reimburse each
Indemnified Holder for all fees and expenses (including, without
limitation, the reasonable fees and expenses of counsel to any
Indemnified Holder) (collectively, "Expenses") as they are
incurred in investigating, preparing, pursuing or defending any
claim or action, or any proceeding or investigation by any
governmental agency or body, whether or not in connection with
pending or threatened litigation and whether or not any
Indemnified Holder is a party (collectively, "Actions"), directly
or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement, preliminary Prospectus or Prospectus (including any
amendments thereof and supplements thereto), or by 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 light of the circumstances under which they were made, not
misleading, except insofar as such Liabilities or Expenses are
caused by an untrue statement or omission or alleged untrue
statement or omission that is made in reliance upon and in
conformity with information relating to an Indemnified Holder
furnished in writing to the Company or the Issuer by such
Indemnified Holder expressly for use therein. If either the
Issuer or the Company reimburses a Holder hereunder for any
Expenses, such Holder hereby agrees to refund such reimbursement
of Expenses to the extent that the Holder is not entitled to be
indemnified hereunder. The Company or the Issuer shall notify
each Indemnified Holder promptly of the institution, threat or
assertion of any Action in connection with the matters addressed
by this Agreement which involves the Company or the Issuer or an
Indemnified Holder.
Upon receipt by an Indemnified Holder of notice of an Action
against such Indemnified Holder with respect to which indemnity
may be sought under this Section 8, such Indemnified Holder shall
promptly notify the Company and the Issuer in writing; provided
that the failure to so notify the Issuer and the Company shall
not relieve the Company and the Issuer from any liability which
the Issuer or the Company may have on account of this indemnity
or otherwise, except to the extent the Company and the Issuer
shall have been materially prejudiced by such failure. The
Issuer and the Company shall, if requested by such Indemnified
Holder, assume the defense of any such Securities Action (as such
term is defined in the Purchase Agreement) including the
employment of counsel reasonably satisfactory to such Indemnified
Holder. Any Indemnified Holder 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 Holder, unless: (i) the
Issuer and the Company have failed promptly to assume the defense
and employ counsel reasonably satisfactory to such indemnified
party, (ii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the
indemnifying party or (iii) the named parties to any such
Securities Action (including any impleaded parties) include such
Indemnified Holder and the Issuer or the Company, and such
Indemnified Holder shall have been advised by counsel that there
may be one or more legal defenses available to it which are
different from or in addition to those available to the Issuer or
the Company, provided that the Issuer and the Company shall not
in such event be responsible hereunder for the fees and expenses
of more than one firm of separate counsel in connection with any
Securities Action in the same jurisdiction, in addition to any
local counsel. The Company and the Issuer shall not be liable
for any settlement of any Action effected without its written
consent (which shall not be unreasonably withheld) and the
Company and the Issuer agree to indemnify and hold harmless any
Indemnified Holder from and against any Liability or Expense by
reason of any settlement of any Action effected with the written
consent of the Company and the Issuer. In addition, the Company
and the Issuer will not, without the prior written consent of
each Indemnified Holder, settle any pending or threatened Action
in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Holder is a party
thereto), unless such settlement includes an unconditional
release of such Indemnified Holder from all Liabilities on claims
that are the subject matter of such proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the
Company and the Issuer, and its directors, officers, and any
person controlling (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Company and
the Issuer, and the respective officers, directors, partners,
employees, representatives and agents of each such person, to the
same extent as the foregoing indemnity from the Company and the
Issuer to each of the Indemnified Holders, but only with respect
to Liabilities and Expenses incurred in investigating, preparing,
pursuing or defending Actions directly or indirectly caused by,
related to, based upon, arising out of or in connection with any
untrue statement or omission or alleged untrue statement of a
material fact contained in any Registration Statement,
preliminary Prospectus or Prospectus (including any amendments
thereof and supplements thereto) that was made in reliance upon
and in conformity with information relating to such Holder
furnished in writing by or on behalf of such Holder expressly for
use in any Registration Statement or Prospectus or any amendment
or supplement thereto. In case any Action shall be brought
against the Company and the Issuer or their directors or officers
or any such controlling person in respect of which indemnity may
be sought against a Holder of Transfer Restricted Securities,
such Holder shall have the rights and duties given the Company
and the Issuer and the Company and the Issuer or its directors or
officers or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. In no
event shall the liability of any selling Holder hereunder be
greater than the amount by which the total proceeds received by
such Holder upon the sale of the Transfer Restricted Securities
giving rise to such indemnification obligation exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder
has otherwise been required to pay by reason of a claim or action
based on such information.
(c) If the indemnification provided for in this Section 8
is unavailable to an indemnified party under Section 8(a) or
Section 8(b) hereof (other than by reason of exceptions provided
in those Sections) in respect of any Liabilities or Expenses
referred to therein, then each applicable 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 Liabilities or Expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the
Issuer and the Company on the one hand and the Holders on the
other hand from their sale of Transfer Restricted 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 the Company and the
Issuer on the one hand and of the Indemnified Holder on the other
hand, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Issuer and
any Indemnified Holder shall be deemed to be in the same
proportion as (x) the total proceeds from the offering of the
Securities to the Initial Purchaser (net of discounts but before
deducting expenses) received by the Company and the Issuer and
(y) the total proceeds received by such Indemnified Holder upon
its sale of Transfer Restricted Services which otherwise would
give rise to the indemnification obligation, respectively. The
relative fault of the Company and the Issuer on the one hand and
of the Indemnified Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company and the Issuer or by the Indemnified Holder and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Issuer and each Holder of Transfer
Restricted Securities agree that it would not be just and
equitable if contribution pursuant to this Section 8(c) were
determined by pro rata allocation (even if the Holders 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 Liabilities and Expenses referred to in the
immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the second paragraph of
Section 8(a), any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with
investigating or defending any Action. Notwithstanding any other
provision of this Section 8, none of the Holders (and its related
Indemnified Holders) shall be required to contribute, in the
aggregate, an amount in excess of the amount by which the total
proceeds received by such Holder with respect to the sale of its
Transfer Restricted Securities giving rise to such Liabilities or
Expenses exceeds the sum of (A) the amount paid by such Holder
for its Transfer Restricted Securities plus (B) the amount of any
damages which such Holder 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
Holders' obligations to contribute pursuant to this Section 8(c)
are several in proportion to the principal amount of the Notes
held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company and the Issuer hereby agree with each Holder,
for so long as any Transfer Restricted Securities remain
outstanding, to make available to any Holder or beneficial owner
of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to
effect resales of such Transfer Restricted Securities pursuant to
Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and
executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting
arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such
Transfer Restricted Securities in an Underwritten Offering. In
any such Underwritten Offering, the investment banker or
investment bankers and manager or managers (referred to herein as
"underwriters") that will administer the offering will be
selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such
offering.
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled
to exercise all rights provided herein, in the Indentures, the
Purchase Agreement or granted by law, including recovery of
liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company and
the Issuer agree that a breach of any of the provisions of this
Agreement will cause irreparable injury to the Holders, that the
Holders have no adequate remedy by law in respect of such breach
and, as a consequence, that each and every provision contained in
this Agreement shall be specifically enforceable against the
Company and the Issuer, and the Company and the Issuer hereby
waive and agree not to assert as a defense to the request or
granting of specific performance of any such provision that any
breach of any such provision does not or would not cause
irreparable harm or is or would be compensable by an award of
money damages in respect of such breach.
(b) No Inconsistent Agreements. The Company and the Issuer
will not enter, on or after the date of this Agreement, into any
agreement with respect to its securities that would be
inconsistent with the rights granted to the Holders in this
Agreement or otherwise would conflict with the provisions hereof.
The Company and the Issuer previously have not entered into any
agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not
inconsistent in any way with the rights granted to the holders of
the Company's and the Issuer's securities under any agreement in
effect on the date hereof.
(c) Adjustments Affecting the Securities. The Company and
the Issuer will not take any action, or permit any change to
occur, with respect to the Securities that would materially and
adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to or departures from the provisions hereof
may not be given unless the Company and the Issuer have obtained
the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities
being tendered or registered may give a waiver or consent to
departure from the provisions hereof, which waiver or consent
relates exclusively to the rights of Holders whose securities are
being tendered pursuant to the Exchange Offer and does not
directly or indirectly affect the rights of other Holders whose
securities are not being tendered pursuant to such Exchange
Offer.
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-
delivery, first-class mail (registered or certified, return
receipt requested), telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to a Holder, then at the address set forth on the
records of the Registrar under the Indentures, with a copy to
the Registrar under the Indentures; and
(ii) if to the Company or the Issuer then:
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Telecopier No.: (214) 980-6815
Attention: William C. Nordlund
With copies to:
Chadbourne & Parke LLP
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
Telecopier No.: (202) 289-3002
Attention: Cornelius J. Golden, Jr.
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, NY 10172
Telecopier No.: (212) 892-7272
Attention: Louise Guarneri, Compliance Department
All such notices and communications shall be deemed to have
been duly given as follows: (A) at the time delivered by hand,
if personally delivered; (B) five Business Days after being
deposited in the mail, postage prepaid, if mailed; (C) when
answered back, if telexed; (D) when receipt acknowledged, if
telecopied; and (E) on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be delivered con-currently to the Trustees, at the
addresses specified in the Indentures, by the Person giving the
same.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of
each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer
Restricted Securities; provided, however, that this Agreement
shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or
assign acquired Transfer Restricted Securities from such Holder.
(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) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the
other Operative Documents (as defined in the Purchase Agreement)
is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement
of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein with respect to the
registration rights granted by the Issuer with respect to the
Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with
respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Panda Global Energy Company
By:
Name:
Title:
Panda Global Holdings, Inc.
By:
Name:
Title:
Accepted and agreed to as of
the date first above written:
Donaldson, Lufkin & Jenrette
Securities Corporation
By:
Name:
Title:
EXHIBIT 4.15
FORM OF FACE OF CERTIFICATED NOTE
[THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5
OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE ISSUER THAT: (A) SUCH NOTE MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO
REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION; AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.]
[ABOVE LEGEND TO BE INCLUDED ON TRANSFER RESTRICTED SECURITIES
ONLY]
PANDA GLOBAL ENERGY COMPANY
12-1/2% SENIOR SECURED NOTES DUE 2004
[Principal amount] No. [serial number]
Nominal unit value: [ ] Cusip No. [ ]
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby promises to
pay to ___________________, or registered assigns on each date
(each a "Principal Payment Date") set forth on the schedule
attached hereto as Schedule A (the "Amortization Schedule") the
principal sum corresponding to such Principal Payment Date set
forth on the Amortization Schedule, or on such earlier date as
the entire principal hereof may become due in accordance with the
provisions hereof. The Issuer further unconditionally promises
to pay interest (including Liquidated Damages and Additional
Amounts, if any) in arrears on April 15 and October 15 of each
year, commencing October 15, 1997, on any outstanding portion of
the unpaid principal amount hereof at 12-1/2% per annum to the
person in whose name this Note is registered on the April 1 and
October 1, respectively, next preceding such Interest Payment
Date. Interest (including Liquidated Damages and Additional
Amounts, if any) shall accrue from and including the most recent
date to which interest has been paid or duly provided for, or, if
no interest has been paid or duly provided for, from the date of
original issuance, until payment of said principal sum has been
made or duly provided for. Such payments shall be made
exclusively 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.
The statements in the legend set forth above, if any,
are an integral part of the terms of this Note and by acceptance
hereof the holder of this Note agrees to be subject to and bound
by the terms and provisions set forth in such legend, if any.
This Certificated Note is issued in respect of an issue
of U.S.$155,200,000 aggregate principal amount of 12-1/2% Senior
Secured Notes due 2004 of the Issuer and is governed by the Trust
Indenture dated as of April 22, 1997 and the First Supplemental
Indenture dated as of April 22, 1997 (the "Indenture"), between
the Issuer and Bankers Trust Company, as trustee (the "Trustee"),
the terms of which Indenture are incorporated herein by
reference. This Certificated Global Note shall, except as
otherwise stated in the Indenture, be entitled to the same
benefits as other Notes under the Indenture.
Reference is made to the further provisions set forth
under the Terms and Conditions of the Notes endorsed on the
reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: ___________________________________
Name:
Title:
Certificate of Authentication
This is one of the Certificated Notes described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY, as Trustee
By: ___________________________________
Authorized Officer
Schedule A
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
[FORM OF REVERSE OF NOTES]
TERMS AND CONDITIONS
Aggregate Principal Amount of all Notes: U.S.$155,200,000
Interest Rate: 12-1/2%
Interest Payment Dates: April 15 and October 15
(commencing October 15, 1997)
Maturity Date: April 15, 2004
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below
unless otherwise indicated.
(_) Interest. Panda Global Energy Company (the
"Issuer"), promises to pay interest on the unpaid
principal amount of this Senior Secured Note at the
rate of 12-1/2% per annum, which interest shall be payable
in cash semiannually in arrears on each April 15 and
October 15, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest
Payment Date shall be October 15, 1997. Interest on
this Senior Secured Note will accrue from the most
recent date to which interest has been paid or, if no
interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
(_) Method of Payment. On each Interest Payment Date
the Issuer will pay interest to the Person who is the
Holder of record of this Senior Secured Note as of the
close of business on April 1 or October 1 immediately
preceding such Interest Payment Date, even if this
Senior Secured Note is cancelled after such record date
and on or before such Interest Payment Date.
Principal, premium, if any, and interest (including
Liquidated Damages and Additional Amounts, if any) on
this Senior Secured Note will be payable at the
corporate trust office of the Trustee or, in the event
the Senior Secured Notes do not remain in book-entry
form, at the option of the Issuer, payment of interest
may be made by wire transfer or check mailed to the
Holder of this Senior Secured Note at its address set
forth in the register of Holders of Senior Secured
Notes; provided that all payments with respect to the
Global Notes and Certificated Notes, the Holders of
which have given wire transfer instructions to Panda
Global Holdings, Inc. (the "Company") at least 10
Business Days prior to the applicable payment date,
will be required to be made by wire transfer of
immediately available funds to the accounts specified
by the Holders thereof. Such payment shall be in such
coin or currency of the United States of America as at
the time of payment is legal tender for payment of
public and private debts.
(_) Paying Agent and Registrar. Initially, Bankers
Trust Company, the Trustee under a Trust Indenture,
will act as Paying Agent and Registrar. The Issuer may
change any Paying Agent or Registrar without notice to
any Holder. The Issuer or the Company or any other of
the Issuer's or the Company's Subsidiaries may act in
any such capacity.
(_) Indenture. The Issuer issued the Senior Secured
Notes under a Trust Indenture dated as of April 22,
1997, as supplemented by the First Supplemental
Indenture thereto dated as of April 22, 1997
(collectively, the "Indenture") between the Issuer and
the Trustee. The Company has issued the Senior Secured
Notes Guarantee under a Trust Indenture dated as of
April 22, 1997, as supplemented by the First
Supplemental Indenture thereto dated as of April 22,
1997 (collectively, the "Company Indenture" and
together with the Indenture, the "Indentures") between
the Company and the Trustee. The terms of the Senior
Secured Notes and the Senior Secured Notes Guarantee
include those stated in the Indentures and those made
part of the Indentures by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code
77aaa-77bbbb). The Senior Secured Notes and the
Senior Secured Notes Guarantee are subject to all such
terms, and Holders are referred to the applicable
Indenture and such Act for a statement of such terms.
The Senior Secured Notes are senior secured obligations
of the Issuer equal in an aggregate principal amount to
$155,200,000 and will mature on April 15, 2004.
(_) Ranking. The Senior Secured Notes will be senior
obligations of the Issuer ranking senior in right of
payment to all subordinated Indebtedness of the Issuer
and pari passu with all other Senior Indebtedness of
the Issuer. The Senior Secured Notes are secured by
security interests in the Collateral in favor of the
Noteholders acting through the Trustee pursuant to the
Collateral Documents. Subject to the satisfaction of
the applicable covenants by the Issuer, additional
Senior Indebtedness may be issued by the Issuer from
time to time, which additional Senior Indebtedness will
share equally and ratably in certain of the Collateral.
The Senior Secured Notes are effectively subordinated
to all Indebtedness and other liabilities and
commitments of all Subsidiaries of the Issuer. Any
right of the Issuer to receive assets of its
Subsidiaries, pursuant to the terms of the Collateral
Documents upon liquidation or reorganization of any
such entity (and the consequent right of the Holders of
the Senior Secured Notes to participate in those
assets) will be effectively subordinated to the claims
of that entity's creditors, except to the extent that
the Issuer is itself recognized as a creditor of such
entity, in which case the claims of the Issuer would
still be subordinate to any security in the assets of
its Subsidiaries, and any Indebtedness thereof, senior
to that held by the Issuer.
(_) Optional Redemption. (_) The Senior Secured
Notes are not redeemable at the Issuer's option prior
to April 15, 2002. From and after April 15, 2002, the
Senior Secured Notes will be subject to redemption at
the option of the Issuer, in whole or in part at the
redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and
unpaid interest (including Liquidated Damages and
Additional Amounts, if any) thereon to the applicable
redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated
below:
Year Percentage
2002 107.00%
2003 103.50%
2004 100.00%
(_) Notwithstanding the provisions of clause (a) of
this Paragraph 6, prior to April 15, 2000 the Issuer
may, at its option, on any one or more occasions,
redeem up to $51,733,000 of the aggregate principal
amount of the Senior Secured Notes at a redemption
price equal to 113.0% of the principal amount thereof,
plus accrued and unpaid interest, if any, (including
Liquidated Damages and Additional Amounts, if any)
thereon to the redemption date, with the Net Cash
Proceeds of one or more Public Equity Offerings by the
Company, Panda Energy International, Inc. or any direct
or indirect parent of the Company; provided that (i)
such Net Cash Proceeds used for the purposes of the
optional redemption are contributed as equity to the
Issuer and (ii) at least $103,467,000 of the originally
issued principal amount of Senior Secured Notes must
remain outstanding immediately after giving effect to
such redemption.
(_) Mandatory Redemption. Upon the occurrence of
events described below, the outstanding Senior Secured
Notes (together with, as provided in clause (vi) below,
any additional Senior Indebtedness of the Issuer
outstanding at the time of such Mandatory Redemption),
will be redeemed pro rata within 90 days of the
occurrence of such events (as more particularly
specified in the Indenture), at a redemption price
equal to 100% of the principal amount thereof, together
with accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any), if any, to the
redemption date:
(i) Upon the occurrence of a Luannan Event of Loss
or Luannan Expropriation Event that is determined by
the Issuer to render the Luannan Facility incapable of
being rebuilt, repaired or restored so as to permit
operation of the entire Luannan Facility on a
Commercially Feasible Basis, all Luannan Casualty
Proceeds and all Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
(resulting from such Luannan Event of Loss or Luannan
Expropriation Event or otherwise) will be applied pro
rata to the redemption of the Senior Secured Notes.
(ii) Upon the occurrence of a Luannan Event of Loss or
Luannan Expropriation Event that is determined by the
Issuer to render a portion of the Luannan Facility
incapable of being rebuilt, repaired or restored, but
permits the remaining portion of the Luannan Facility
to be rebuilt, repaired or restored so as to permit
operation of the remaining portion of the Luannan
Facility on a Commercially Feasible Basis (as confirmed
by the Luannan Facility Engineer) such excess proceeds
will be applied pro rata to the redemption of the
Senior Secured Notes.
(iii) Upon the occurrence of a Luannan Event of Loss
or a Luannan Expropriation Event for which the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
exceed the aggregate principal amount of the
outstanding Senior Secured Notes, and any applicable
interest thereon, the Issuer may, at its option,
determine not to rebuild, repair or restore the Luannan
Facility. Upon such a determination by the Issuer, the
outstanding Senior Secured Notes will be redeemed, in
whole, but not in part. The amount of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
resulting from such Luannan Event of Loss or Luannan
Expropriation Event will be applied to the redemption
of the Senior Secured Notes.
(iv) Upon the payment of performance liquidated damage
payments under the Luannan EPC Contract, the amount of
performance liquidated damages paid, which are required
to be applied to payment of the Issuer Loan and the
Shareholder Loans, will be applied pro rata to the
redemption of the Senior Secured Notes.
(v) Upon the occurrence of a Domestic Project Event
that results in Domestic Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to (a) the PFC Indenture and (b)
the debt instrument or instruments governing the
project level financing of such Domestic Project, any
and all excess proceeds shall be applied pro rata to
the redemption of the Senior Secured Notes.
(vi) Upon the occurrence of a Permitted Project Event
that results in Permitted Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to, as the case may be, the PFC
Indenture or the debt instrument or instruments
governing the project level financing (or additional
Senior Indebtedness issued solely to finance such
Permitted Project) of such Permitted Project, any and
all excess proceeds shall be applied pro rata to the
redemption of the Senior Secured Notes; and, to the
extent that the instrument governing any additional
Senior Indebtedness of the Company and the Issuer
outstanding at the date of the Mandatory Redemption so
requires, to the redemption of such additional Senior
Indebtedness.
(_) Redemption at Option of Holder. (_) Upon the
occurrence of events described below, the Issuer will
be obligated to make an offer (a "Mandatory Redemption
Offer") to redeem pro rata the outstanding Senior
Secured Notes within 90 days of the occurrence of such
events (as more particularly described in the
Indenture) at a redemption price equal to 100% of the
principal amount thereof, together with accrued and
unpaid interest, if any, (including Liquidated Damages
and Additional Amounts, if any) to the redemption date:
(i) Upon the occurrence of an Approval Event of
Default or a County Partners Event of Default that has
had or is reasonably likely to have a Material Adverse
Effect, the Issuer shall be obligated to make a
Mandatory Redemption Offer using any and all available
monies to effect such Mandatory Redemption Offer (such
amounts to include, but not be limited to, (a) all
amounts in the Company Funds, (b) all amounts in the
Issuer Funds and (c) all amounts available to the
Issuer or the Company through the enforcement of the
Collateral).
(ii) If the Luannan Facility Construction Cost is less
than the Projected Luannan Facility Construction Cost,
after using such excess funds to fund any deficits in
the Issuer Funds, if any excess funds are remaining and
the amount of such excess funds equals or exceeds $1.0
million, the Issuer shall be obligated to use such
excess funds to make a Mandatory Redemption Offer to
the Holders of the Senior Secured Notes.
(_) Upon the occurrence of a Change of Control, each
Holder of Senior Secured Notes shall have the right to
require the Issuer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such
Holder's Senior Secured Notes pursuant to the offer
described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid
interest, if any, (including Liquidated Damages and
Additional Amounts, if any) thereon to the date of
purchase (the "Change of Control Purchase Price") in
accordance with paragraphs (b), (c) and (d) of Section
7.28 of the Indenture. The Issuer will mail a notice
to each Holder describing the transaction or
transactions that constitute the Change of Control and
offering to repurchase Senior Secured Notes pursuant to
the procedures required by the Indenture and described
in such notice. The Issuer will comply with the
requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in
connection with the repurchase of the Senior Secured
Notes as a result of a Change of Control.
(_) On the earlier of (i) the 366th day after an Asset
Sale by the Company or any of its Subsidiaries or (ii)
such date as the Board of Directors of the Company
determines not to apply the Net Cash Proceeds relating
to such Asset Sale to an investment, the making of a
capital expenditure or the acquisition of other
tangible assets (or the Company determines not to cause
its Subsidiary to apply the Net Cash Proceeds in such a
manner), if the aggregate amount of Excess Proceeds
exceeds $1.0 million, the Company or its Subsidiary, as
the case may be, shall be subject to the following
requirements:
(_) in the event that the Company cannot then
incur $1.00 of additional Permitted Indebtedness
pursuant to clause (v) of the definition of "Permitted
Indebtedness" in Appendix A of the Indenture the
Company or its Subsidiary will be required to make an
offer to purchase (the "Asset Sale Redemption Offer")
from all Holders of Senior Secured Notes and holders of
additional Senior Indebtedness, up to a maximum
principal amount (expressed as a multiple of $1,000) of
Senior Secured Notes and holders of additional Senior
Indebtedness equal to the Excess Proceeds at a purchase
price equal to 100% of the principal amount thereof
plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if
any, to the date of purchase; in the event that there
is additional Senior Indebtedness outstanding at the
time of the Asset Sale Redemption Offer, Excess
Proceeds shall be allocated to each issuance of Senior
Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of
which is the principal amount of the Senior Secured
Notes and the denominator of which is the sum of the
principal amounts of all Senior Indebtedness which is
subject to this requirement or a similar requirement
under such Senior Indebtedness's governing instrument;
and
(_) in the event that the Company can incur $1.00
of additional Permitted Indebtedness pursuant to clause
(v) of the definition of "Permitted Indebtedness," the
Company or its Subsidiary will be required to make an
Asset Sale Redemption Offer from all Holders of Senior
Secured Notes and holders of additional Senior
Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Senior Secured
Notes and holders of additional Senior Indebtedness
equal to the Excess Proceeds (Excess Proceeds for
purposes of this clause (2) is limited to that amount
of the Net Cash Proceeds that equals the principal
amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the
asset being sold) at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid
interest (including Liquidated Damages and Additional
Amounts, if any) thereon, if any, to the date of
purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale
Redemption Offer, Excess Proceeds shall be allocated to
each issuance of Senior Indebtedness in accordance with
the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal
amount of the Senior Secured Notes and the denominator
of which is the sum of the principal amounts of all
Senior Indebtedness which is subject to this
requirement or a similar requirement under such Senior
Indebtedness's governing instrument.
(_) Redemption for Taxation Reasons. The Senior
Secured Notes may be redeemed, at the option of the
Issuer or the Company, as the case may be, in whole but
not in part, at a redemption price equal to the
principal amount thereof, together with accrued and
unpaid interest and premium, if any, (including
Liquidated Damages and Additional amounts, if any), to
the Tax Redemption Date, if the Issuer or the Company,
as the case may be, determines that, as a result of (i)
any change in, or amendment to, the laws or treaties
(or any regulations or rulings promulgated thereunder)
of the Cayman Islands or the United States (or any
political subdivision or taxing authority thereof)
which change or amendment becomes effective on or after
the date of the Indenture, (ii) any change in position
regarding the application, administration or
interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change in
application, administration or interpretation becomes
effective on or after the date of the Indenture, the
Issuer or the Company, as the case may be, is, or on
the next interest payment date would be, required to
pay Additional Amounts, and the Issuer or the Company,
as the case may be, determines that such payment
obligation cannot be avoided by the Issuer or the
Company, as the case may be, taking reasonable
measures.
(_) Notice of Redemption. Notice of redemption
(other than a Change of Control Offer) will be mailed
at least 30 days but not more than 60 days before the
redemption date to each Holder whose Senior Secured
Notes are to be redeemed at its registered address.
Notice of a Change of Control Offer shall be mailed by
the Company or Issuer to the Holders not less than 30
days nor more than 45 days before the Change of Control
Payment Date. Senior Secured Notes in denominations
larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000, unless all of the Senior
Secured Notes held by a Holder are to be redeemed. On
and after the redemption date interest ceases to accrue
on the aggregate principal amount of the Senior Secured
Notes called for redemption.
(_) Denominations, Transfer, Exchange. The Senior
Secured Notes may be issued initially in the form of
one or more fully registered Global Senior Secured
Notes. The Senior Secured Notes may also be issued in
registered form without coupons in minimum
denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Secured Notes may be
registered and Senior Secured Notes may be exchanged as
provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents
and the Issuer may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture.
The Issuer need not exchange or register the transfer
of any Senior Secured Note or portion of a Senior
Secured Note selected for redemption. Also, it need
not (i) register the transfer or exchange of any Senior
Secured Notes during any period (a) beginning at the
opening of business on a Business Day 15 days before
the day of any selection of Senior Secured Notes for
redemption and ending at the close of business on the
day of selection or (b) beginning at the opening of
business on a Business Day 15 days before an Interest
Payment Date and ending on the close of business on
such Interest Payment Date or (ii) register the
transfer or exchange of any Senior Secured Note
selected for redemption in whole or in part, except the
unredeemed portion of any Senior Secured Note being
redeemed in part.
(_) Persons Deemed Owners. The registered Holder of
a Senior Secured Note may be treated as its owner for
all purposes.
(_) Amendment, Supplement and Waiver. (_) Without
the consent of the Holders of any Senior Secured Notes,
the Indenture may be amended or supplemented (i) to
establish the form and terms of Securities of
additional series; (ii) to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the
Senior Secured Notes, any property or assets; (iii) to
evidence the assumption by a successor entity to the
Company or the Issuer, and the assumption by such
successor entity of the covenants, agreements and
obligations of the Company and the Issuer pursuant to
the Indentures; (iv) to evidence the succession of a
new Trustee; (v) in certain circumstances, to add
further covenants, restrictions, conditions or
provisions for the protection of the Holders, and
related Events of Default for the breach thereof; (vi)
to cure any ambiguity, defect or inconsistency in the
Indenture, any Supplemental Indenture, or the Senior
Secured Notes which shall not adversely affect the
interests of the Holders; (vii) to permit or facilitate
the issuance of Senior Secured Notes in uncertificated
form; (viii) to comply with any requirement of the SEC
to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; (ix) to
provide for the issuance of a new series of Securities
registered under the Securities Act in exchange for the
Senior Secured Notes; (x) to make any other change that
does not adversely affect the interest of the Holders
of any series in any material respect.
(_) Subject to certain exceptions, the Indenture or the
Senior Secured Notes may be amended or supplemented
with the consent of the Holders of not less than a 51%
in aggregate principal amount of all series of
Outstanding Securities (considered as one class) or if
such amendment or supplement shall directly affect the
rights of less than all series, the consent of the
Holders of not less than a 51% in aggregate principal
amount of all series so directly affected (considered
as one class) (including a supplemental indenture
changing the provisions of the Indenture with respect
to change of control). The consent of the Holder of
each Outstanding Security directly affected thereby, is
required to:
(i) change the Stated Maturity, Senior Secured Note
Payment Date, Senior Secured Note principal amount, or
the interest thereon or any premium payable, place of
payment, impair the right to institute suit for the
enforcement of any payments, change the dates or the
amounts of payments to be made through the operation of
the sinking fund or make certain other changes
effecting the amount and timing of payments;
(ii) permit the creation or termination of Liens on
property pledged under the Collateral Documents or
deprive any Holder of the security afforded by the Lien
of the Collateral Documents, except, in each case, to
the extent expressly permitted by this Indenture or any
of the Collateral Documents; (iii) release all or any
substantial portion of the Collateral; (iv) reduce the
percentage in principal amount of the Outstanding
Securities, or reduce the requirements with respect to
quorum or voting; (v) modify any of the provisions of
Section 9.7 of the Senior Secured Notes Indenture; or
(vi) amend, change or modify the obligation of the
Issuer to make and consummate a Change of Control
Offer, or any of the provisions or definitions with
respect thereto.
(_) Defaults and Remedies. Events of Default include:
(i) failure by the Issuer to pay the
principal and premium, if any, on any Security when the
same becomes due and payable, whether by scheduled
maturity or required prepayment or by acceleration or
otherwise; (ii) failure by the Issuer to pay the
interest (including Liquidated Damages and Additional
Amounts, if any) on any Security when the same becomes
due and payable, whether by scheduled maturity or
required prepayment or by acceleration or otherwise,
for 15 or more days; (iii) non-payment of any interest
on, or any principal of, the Issuer Loan by Pan-Western
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise, for 30 or more days; (iv)
failure by the Company to pay any amount it is
obligated to pay pursuant to the terms of any Security,
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise; (v) any agreement,
representation or warranty made by the Company or any
of its Subsidiaries in, respectively, the Indentures,
the Issuer Loan Agreement or the Shareholder Loan
Agreements or any representation, warranty or statement
in any certificate, financial statement or other
document furnished to the Trustees by or on behalf of
the Company or any of its Subsidiaries under the
Indentures, 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
or is reasonably likely to have a Material Adverse
Effect and the fact, event or circumstance shall
continue to be uncured for 30 or more days after the
Company or any of its Subsidiaries acquires notice of
such inaccuracy; provided that if the Company or any
such Subsidiary commences efforts to cure such fact,
event or circumstance within such 30-day period, the
Company or any such Subsidiary may continue to effect
such cure of such fact, event or circumstance and such
misrepresentation shall not be deemed an Event of
Default for an additional 60 days so long as the
Company or such Subsidiary, as the case may be, is
diligently pursuing such cure; (vi) failure by the
Company or any of its Material Subsidiaries to perform
or observe its covenants contained in the Indentures
relating to maintenance of existence, prohibition on
fundamental changes, disposition of assets, limitations
on Indebtedness, limitations on Liens or distributions;
(vii) failure by the Company or any of its Material
Subsidiaries to perform or observe any of the other
covenants contained in the Indentures or in the
Collateral Documents and such failure shall continue
uncured for 30 or more days (including, without
limitation, covenants with respect to insurance and
amendments to Luannan Project Documents or nature of
business); provided that if the Company or such
Material Subsidiary commences efforts to cure such
default within such 30-day period, the Company or such
Material Subsidiary 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 such Subsidiary is diligently pursuing
the cure; (viii) certain events of bankruptcy or
insolvency involving the Company or any Material
Subsidiary; (ix) the entry of one or more final and non-
appealable judgment or judgments for the payment of
money in excess of $1.0 million (exclusive of judgment
amounts fully covered by insurance or indemnity)
against the Company or any of its Material
Subsidiaries, which remains unpaid or unstayed for a
period of 90 or more consecutive days; (x) any Project
Document (except as otherwise permitted under this
Indenture) shall terminate or cease to be valid and
binding and in full force and effect, or any third
party thereto denies that it has any liability or
obligation under any such Project Document and such
third party ceases performance thereunder, or any third
party is in default under such Project Document
(subject to any applicable grace period), and in each
case such cessation or default has had or is reasonably
likely to have a Material Adverse Effect; (xi) any
Luannan Financing Agreement shall terminate or cease to
be valid and binding and in full force and effect;
(xii) with respect to a Domestic Project, or to the
extent applicable, any Permitted Project, the loss of
QF Status, to the extent that such loss of QF Status
has had or is reasonably likely to have a Material
Adverse Effect; (xiii) failure of any Joint Venture to
perform or observe any of its material covenants or
obligations contained in any of the Luannan Project
Documents if such failure has had or is reasonably
likely to have a Material Adverse Effect; (xiv) the
occurrence of any event resulting in the payment of
Domestic Project Event Proceeds or Permitted Project
Event Proceeds that will result, in the opinion of the
Consolidating Financial Analyst, in the Company's
failure to meet the following Debt Service Coverage
Ratios (after the application of such amounts as are
required to be applied pursuant to any and all
mandatory redemption or repayment obligations): (1) the
minimum (or lowest) annual projected Company Debt
Service Coverage Ratio for the remaining term of the
Senior Secured Notes will not be less than 1.4 to 1 and
(2) the minimum (or lowest) annual projected
Consolidated Debt Service Coverage Ratio for the
remaining term of the Senior Secured Notes will not be
less than 1.15 to 1; (xv) the Luannan Facility
Construction Schedule Certificate shall at any time
contain a conclusion that the Luannan Facility is not
being constructed in accordance with the Approved
Construction Budget and Schedule or, if applicable, an
Approved Completion Plan; (xvi) any of the Collateral
Documents ceases to be effective or any lien granted
therein ceases to be a perfected lien to the Trustees
on the collateral described therein with the priority
purported to be created thereby; provided that the
Company or the Issuer, as the case may be, shall have
15 days to cure such cessation or to furnish to the
Trustees all documents or instruments required to cure
such cessation; or (xvii) any default under the Issuer
Loan Agreement and the Shareholder Loan Agreements that
has had or is reasonably likely to have a Material
Adverse Effect and any default under the PFC Indenture,
the Rosemary Indenture, the Brandywine Facility Lease
and any other default under any other agreement or
instrument containing Indebtedness of at least $2.5
million of a Domestic Project or a Permitted Project,
to the extent that any of the preceding defaults is not
waived. If any Event of Default (other than an Event
of Default described in clause (viii) above) occurs and
is continuing, the Trustee shall declare all interest,
principal and premium (including Liquidated Damages and
Additional Amounts, if any) on the Senior Secured Notes
to be immediately due and payable, if the Holders of at
least 25% in principal amount of the then outstanding
Senior Secured Notes have notified the Issuer and the
Trustees in writing. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the
Company, any of its Material Subsidiaries, all
outstanding Senior Secured Notes will become due and
payable without further action or notice. Holders of
the Senior Secured Notes may not enforce the Indenture
or the Senior Secured Notes except as provided in the
Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding
Senior Secured Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may
withhold from Holders of the Senior Secured Notes
notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the
payment of principal or interest) if it determines that
withholding notice is in their interest.
(_) Trustee Dealings with Issuer. The Indenture
contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer or
the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in
respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or
resign.
(_) No Recourse Against Others. No director, officer,
or stockholder of the Issuer, as such, shall have any
liability for any obligations of the Issuer under the
Senior Secured Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Senior
Secured Notes, by accepting a Senior Secured Note,
waives and releases all such liability. The waiver and
release are part of the consideration for issuance of
the Senior Secured Notes. Such waiver may not be
effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such
a waiver is against public policy.
(_) Authentication. This Senior Secured Note shall
not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
(_) GOVERNING LAW. THIS SENIOR SECURED NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. THE ISSUER HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY 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 SENIOR SECURED NOTE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS. THE ISSUER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(_) Abbreviations. Customary abbreviations may be
used in the name of a Holder or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
(_) Additional Rights of Holders of Transfer
Restricted Securities. In addition to the rights
provided to Holders of Senior Secured Notes under the
Indenture, Holders of Transferred Restricted Securities
shall have all the rights set forth in the Registration
Rights Agreement dated as of the date of the Indenture,
between the Company and the parties named on the
signature pages thereof (the "Registration Rights
Agreement").
(_) Collateral Documents. As provided in the
Indenture and the Collateral Documents and subject to
certain limitations set forth therein, the Obligations
of the Issuer and the Company under the Indentures and
the Collateral Documents are secured by the Collateral
as provided in the Collateral Documents. Each Secured
Party, by accepting a Senior Secured Note, agrees to be
bound to all the terms and provisions of, and is
entitled to the benefits of, the Collateral Documents,
as the same may be amended from time to time. The
Liens created under the Collateral Documents shall be
released upon the terms and subject to the conditions
set forth in the Indentures and the Collateral
Documents.
(_) Senior Secured Notes Guarantee. This Senior
Secured Note is entitled to the benefits of the Senior
Secured Notes Guarantee of the Company. Upon the terms
and subject to the conditions set forth in the
Indentures and the Senior Secured Notes Guarantee, the
Company has unconditionally guaranteed on a senior
secured basis that the principal of, and premium, if
any (including Liquidated Damages and Additional
Amounts, if any), and interest on the Senior Secured
Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise,
and interest on overdue principal, and premium, if any,
and (to the extent permitted by law) interest on any
interest, if any, on the Senior Secured Notes and all
other Obligations of the Issuer to the Secured Parties
or the Trustee under the Senior Secured Notes or the
Indenture (including fees, expenses or other
obligations) will be promptly paid in full or
performed.
(_) CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security
Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Senior Secured Notes and
the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No
representation is made as to the accuracy of such
numbers either as printed on the Senior Secured Notes
or as contained in any notice of redemption and
reliance may be placed only on the other identification
numbers placed thereon.
The Issuer will furnish to any Holder upon written
request and without charge a copy of the Indenture.
Requests may be made to:
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Attention: General Counsel
ASSIGNMENT FORM
To assign this Senior Secured Note, fill in the form below:
(I) or (we) assign and transfer this Security to
(Insert assignee's Social Security or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Issuer. The
agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Secured Note
purchased by the Issuer pursuant to Section 2.5(c) of
the First Supplemental Indenture or Section 7.21 or
7.28 of the Indenture, check the appropriate box below:
Section 2.5(c) Section 7.21 Section 7.28
If you want to elect to have only part of the Senior
Secured Note purchased by the Issuer pursuant to
Section 2.5(c) of the First Supplemental Indenture or
Section 7.21 or 7.28 of the Indenture, state the
principal amount at maturity you elect to have
purchased: $______________
Date: Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR SECURED NOTES
[To be attached to Global Senior Secured Note]
The following exchanges of a part of this Global Senior Secured
Note for definitive Senior Secured Notes have been made:
Date of Amount of Amount of Principal Signature of
Exchange decrease increase in Amount of authorized
in Principal this Global officer of
Principal Amount Note Trustee
Amount of this following or Note
of this Global Note such decrease Custodian
Global (or increase)
Note
SCHEDULE I
Form of Senior Secured Notes Guarantee
Senior Secured Notes Guarantee
The Company, as primary obligor and not merely as
surety, hereby irrevocably, fully and unconditionally guarantees
on a senior secured basis to each Holder of a Senior Secured Note
authenticated and delivered by the Senior Secured Notes Trustee
and to the Trustee and their successors and assigns, irrespective
of the validity and enforceability of the Indentures, the Senior
Secured Notes or the obligations of the Company and the Issuer
hereunder or thereunder: (a) the performance and punctual payment
when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Issuer under the Senior
Secured Notes Indenture and the Senior Secured Notes, whether for
principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes, expenses, indemnification or otherwise; and (b) in case of
any extension of time of payment or renewal of any Senior Secured
Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Company shall be obligated to pay the same
immediately.
The Company hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Secured Notes or the
Indentures, the absence of any action to enforce the same, any
waiver or consent by any Holder with respect to any provisions
hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge
or defense of a guarantor. The Company hereby waives diligence,
presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Senior
Secured Notes Guarantee shall not be discharged except by
complete performance of the obligations contained in the Senior
Secured Notes and the Indentures. If any Holder or the Trustee
is required by any court or otherwise to return to the Company,
or any custodian, trustee, liquidator or other similar official
acting in relation to the Company, any amount paid by either to
the Trustee or such Holder, this Senior Secured Notes Guarantee,
to the extent theretofore discharged, shall be reinstated in full
force and effect. The Company agrees that it shall not be
entitled to any right of subrogation in relation to the Holders
of the Senior Secured Notes Guarantee in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
This is a continuing Guarantee and shall remain in full
force and effect and shall be binding upon the Company and its
respective successors and assigns to the extent set forth in the
Indenture until full and final payment of all of the Issuer's
obligations under the Senior Secured Notes and the Senior Secured
Notes Indenture and shall inure to the benefit of the Trustee and
the Holders of Senior Secured Notes Guarantee and their
successors and assigns and, in the event of any transfer or
assignment of rights by any Holder of the Senior Secured Notes
Guarantee or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms
and conditions hereof. Notwithstanding the foregoing, if the
Company and the Issuer satisfy the provisions of Section 6.3 of
the Indentures the Company shall be released of its obligations
hereunder. This is a Guarantee of payment and not a guarantee of
collection.
This Senior Secured Notes Guarantee shall not be valid
or obligatory for any purpose until the certificate of
authentication on the Senior Secured Note upon which this Senior
Secured Notes Guarantee is noted shall have been executed by the
Senior Secured Notes Trustee under the Senior Secured Notes
Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings
given in the Indentures unless otherwise indicated.
PANDA GLOBAL HOLDINGS, INC.
By:_____________________________
Name:
Title:
This is one of the Senior Secured
Notes referred to in the within-
mentioned Indenture:
BANKERS TRUST COMPANY,
as Trustee
By_________________________________
Authorized Signatory
_______________________________
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
EXHIBIT 4.16
FORM OF FACE OF REGISTERED GLOBAL NOTE
CUSIP NO. [ ]
Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Issuer or its agent
for registration of transfer, exchange or payment, and
any Note 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 GLOBAL ENERGY COMPANY
12-1/2% Senior Secured Note due 2004
Nominal unit value: [ ] No. [serial number]
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands exempted
company (the "Issuer"), for value received, hereby
promises to pay to Cede & Co. ("CEDE"), or registered
assigns on each date (each a "Principal Payment Date")
set forth on the schedule attached hereto as Schedule B
(the "Amortization Schedule") the principal sum
corresponding to such Principal Payment Date set forth
on the Amortization Schedule or such amount as shall be
the portion of the outstanding principal amount
represented by this Note after (i) subtracting the
aggregate principal amount of any Certificated Notes
(as defined in the Indenture referred to below) issued
upon transfer of or in exchange for a portion or
portions hereof, (ii) subtracting the aggregate
principal amount by which the aggregate principal
amount of the Regulation S Global Note (as defined in
the Indenture referred to below) is increased following
a transfer of a portion or portions hereof for a
resulting portion or portions of the Regulation S
Global Note, (iii) adding the aggregate principal
amount by which the aggregate principal amount of the
Regulation S Global Note is decreased following a
transfer of a portion or portions of the Regulation S
Global Note for a resulting portion or portions hereof
and (iv) adding the aggregate principal amount of any
Certificated Notes canceled upon transfer or exchange
for a resulting portion or portions hereof, on April
15, 2004, or on such earlier date as the principal
hereof may become due in accordance with the provisions
hereof. The Issuer further unconditionally promises to
pay interest (including Additional Amounts, if any) in
arrears on April 15 and October 15 of each year,
commencing October 15, 1997, on any outstanding portion
of the unpaid principal amount hereof at 12-1/2% per annum
to the person in whose name this Note is registered on
the April 1 and October 1, respectively, next preceding
such Interest Payment Date. Interest (including
Additional Amounts, if any) shall accrue from and
including the most recent date to which interest has
been paid or duly provided for, or, if no interest has
been paid or duly provided for, from the date of
original issuance, until payment of said principal sum
has been made or duly provided for. This being a
Global Note (as defined in the Indenture referred to
below) deposited with DTC acting as depositary, and
registered in the name of CEDE, a nominee of DTC, CEDE,
as holder of record of this Global Note, shall be
entitled to receive payments of principal, premium and
interest (including Liquidated Damages and Additional
Amounts, if any), other than principal, premium and
interest due at the maturity date, by wire transfer of
immediately available funds. Such payment shall be
made 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.
This Global Note is issued in respect of an issue of
U.S.$155,200,000 principal amount of 12-1/2% Senior
Secured Notes due 2004 of the Issuer and is governed by
the Trust Indenture dated as of April 22, 1997 and the
First Supplemental Indenture dated as of April 22, 1997
(the "Indenture"), between the Issuer and Bankers Trust
Company, as trustee (the "Trustee"), the terms of which
Indenture are incorporated herein by reference. This
Global Note shall, except as otherwise stated in the
Indenture, be entitled to the same benefits as other
Notes under the Indenture.
The Issuer hereby irrevocably undertakes to the holder
hereof to exchange this Global Note in accordance with
the terms of the Indenture as a whole or in part
without charge upon request of such holder for
Certificated Notes, or a portion or portions of the
Regulation S Global Note, upon delivery hereof to the
Trustee together with any certificates, letters or
writings required by the Indenture. Upon any exchange
or transfer of all or a portion of this Global Note for
Certificated Notes, or a portion or portions of the
Regulation S Global Note, or upon any exchange or
transfer of Certificated Notes or a portion or portions
of the Regulation S Global Note for an interest in this
Global Note, in accordance with the terms of the
Indenture, this Global Note shall be endorsed on
Schedule A hereto to reflect the change of the
principal amount evidenced hereby as provided for in
the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be duly executed.
Dated:
PANDA GLOBAL ENERGY COMPANY
By: __________________________________
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is a Global Note described in the within-mentioned
Indenture.
BANKERS TRUST COMPANY, as Trustee
By: _______________________________
Schedule A
Date Principal amount Remaining Notation
of Certificated Principal Amount Made By
Notes, Rule 144A of this Global
Global Note or Note
Regulation S
Global Note
exchanged or
transferred for,
or issued in
exchange for or
upon transfer of,
an interest in
this Global Note
Schedule B
Semi-annual Principal
Payment Date Amount Repaid
October 15, 2000
April 15, 2001
October 15, 2001
April 15, 2002
October 15, 2002
April 15, 2003
October 15, 2003
April 15, 2004
[FORM OF REVERSE OF NOTES]
TERMS AND CONDITIONS
Aggregate Principal Amount of all Notes: U.S.$155,200,000
Interest Rate: 12-1/2%
Interest Payment Dates: April 15 and October 15
(commencing October 15, 1997)
Maturity Date: April 15, 2004
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below
unless otherwise indicated.
(_) Interest. Panda Global Energy Company (the
"Issuer"), promises to pay interest on the unpaid
principal amount of this Senior Secured Note at the
rate of 12-1/2% per annum, which interest shall be payable
in cash semiannually in arrears on each April 15 and
October 15, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest
Payment Date"); provided that the first Interest
Payment Date shall be October 15, 1997. Interest on
this Senior Secured Note will accrue from the most
recent date to which interest has been paid or, if no
interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
(_) Method of Payment. On each Interest Payment Date
the Issuer will pay interest to the Person who is the
Holder of record of this Senior Secured Note as of the
close of business on April 1 or October 1 immediately
preceding such Interest Payment Date, even if this
Senior Secured Note is cancelled after such record date
and on or before such Interest Payment Date.
Principal, premium, if any, and interest (including
Liquidated Damages and Additional Amounts, if any) on
this Senior Secured Note will be payable at the
corporate trust office of the Trustee or, in the event
the Senior Secured Notes do not remain in book-entry
form, at the option of the Issuer, payment of interest
may be made by wire transfer or check mailed to the
Holder of this Senior Secured Note at its address set
forth in the register of Holders of Senior Secured
Notes; provided that all payments with respect to the
Global Notes and Certificated Notes, the Holders of
which have given wire transfer instructions to Panda
Global Holdings, Inc. (the "Company") at least 10
Business Days prior to the applicable payment date,
will be required to be made by wire transfer of
immediately available funds to the accounts specified
by the Holders thereof. Such payment shall be in such
coin or currency of the United States of America as at
the time of payment is legal tender for payment of
public and private debts.
(_) Paying Agent and Registrar. Initially, Bankers
Trust Company, the Trustee under a Trust Indenture,
will act as Paying Agent and Registrar. The Issuer may
change any Paying Agent or Registrar without notice to
any Holder. The Issuer or the Company or any other of
the Issuer's or the Company's Subsidiaries may act in
any such capacity.
(_) Indenture. The Issuer issued the Senior Secured
Notes under a Trust Indenture dated as of April 22,
1997, as supplemented by the First Supplemental
Indenture thereto dated as of April 22, 1997
(collectively, the "Indenture") between the Issuer and
the Trustee. The Company has issued the Senior Secured
Notes Guarantee under a Trust Indenture dated as of
April 22, 1997, as supplemented by the First
Supplemental Indenture thereto dated as of April 22,
1997 (collectively, the "Company Indenture" and
together with the Indenture, the "Indentures") between
the Company and the Trustee. The terms of the Senior
Secured Notes and the Senior Secured Notes Guarantee
include those stated in the Indentures and those made
part of the Indentures by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code
77aaa-77bbbb). The Senior Secured Notes and the
Senior Secured Notes Guarantee are subject to all such
terms, and Holders are referred to the applicable
Indenture and such Act for a statement of such terms.
The Senior Secured Notes are senior secured obligations
of the Issuer equal in an aggregate principal amount to
$155,200,000 and will mature on April 15, 2004.
(_) Ranking. The Senior Secured Notes will be senior
obligations of the Issuer ranking senior in right of
payment to all subordinated Indebtedness of the Issuer
and pari passu with all other Senior Indebtedness of
the Issuer. The Senior Secured Notes are secured by
security interests in the Collateral in favor of the
Noteholders acting through the Trustee pursuant to the
Collateral Documents. Subject to the satisfaction of
the applicable covenants by the Issuer, additional
Senior Indebtedness may be issued by the Issuer from
time to time, which additional Senior Indebtedness will
share equally and ratably in certain of the Collateral.
The Senior Secured Notes are effectively subordinated
to all Indebtedness and other liabilities and
commitments of all Subsidiaries of the Issuer. Any
right of the Issuer to receive assets of its
Subsidiaries, pursuant to the terms of the Collateral
Documents upon liquidation or reorganization of any
such entity (and the consequent right of the Holders of
the Senior Secured Notes to participate in those
assets) will be effectively subordinated to the claims
of that entity's creditors, except to the extent that
the Issuer is itself recognized as a creditor of such
entity, in which case the claims of the Issuer would
still be subordinate to any security in the assets of
its Subsidiaries, and any Indebtedness thereof, senior
to that held by the Issuer.
(_) Optional Redemption. (_) The Senior Secured
Notes are not redeemable at the Issuer's option prior
to April 15, 2002. From and after April 15, 2002, the
Senior Secured Notes will be subject to redemption at
the option of the Issuer, in whole or in part at the
redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and
unpaid interest (including Liquidated Damages and
Additional Amounts, if any) thereon to the applicable
redemption date, if redeemed during the twelve-month
period beginning on April 15 of the years indicated
below:
Year Percentage
2002 107.00%
2003 103.50%
2004 100.00%
(_) Notwithstanding the provisions of clause (a) of
this Paragraph 6, prior to April 15, 2000 the Issuer
may, at its option, on any one or more occasions,
redeem up to $51,733,000 of the aggregate principal
amount of the Senior Secured Notes at a redemption
price equal to 113.0% of the principal amount thereof,
plus accrued and unpaid interest, if any, (including
Liquidated Damages and Additional Amounts, if any)
thereon to the redemption date, with the Net Cash
Proceeds of one or more Public Equity Offerings by the
Company, Panda Energy International, Inc. or any direct
or indirect parent of the Company; provided that (i)
such Net Cash Proceeds used for the purposes of the
optional redemption are contributed as equity to the
Issuer and (ii) at least $103,467,000 of the originally
issued principal amount of Senior Secured Notes must
remain outstanding immediately after giving effect to
such redemption.
(_) Mandatory Redemption. Upon the occurrence of
events described below, the outstanding Senior Secured
Notes (together with, as provided in clause (vi) below,
any additional Senior Indebtedness of the Issuer
outstanding at the time of such Mandatory Redemption),
will be redeemed pro rata within 90 days of the
occurrence of such events (as more particularly
specified in the Indenture), at a redemption price
equal to 100% of the principal amount thereof, together
with accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any), if any, to the
redemption date:
(i) Upon the occurrence of a Luannan Event of Loss
or Luannan Expropriation Event that is determined by
the Issuer to render the Luannan Facility incapable of
being rebuilt, repaired or restored so as to permit
operation of the entire Luannan Facility on a
Commercially Feasible Basis, all Luannan Casualty
Proceeds and all Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
(resulting from such Luannan Event of Loss or Luannan
Expropriation Event or otherwise) will be applied pro
rata to the redemption of the Senior Secured Notes.
(ii) Upon the occurrence of a Luannan Event of Loss or
Luannan Expropriation Event that is determined by the
Issuer to render a portion of the Luannan Facility
incapable of being rebuilt, repaired or restored, but
permits the remaining portion of the Luannan Facility
to be rebuilt, repaired or restored so as to permit
operation of the remaining portion of the Luannan
Facility on a Commercially Feasible Basis (as confirmed
by the Luannan Facility Engineer) such excess proceeds
will be applied pro rata to the redemption of the
Senior Secured Notes.
(iii) Upon the occurrence of a Luannan Event of Loss
or a Luannan Expropriation Event for which the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
exceed the aggregate principal amount of the
outstanding Senior Secured Notes, and any applicable
interest thereon, the Issuer may, at its option,
determine not to rebuild, repair or restore the Luannan
Facility. Upon such a determination by the Issuer, the
outstanding Senior Secured Notes will be redeemed, in
whole, but not in part. The amount of the Luannan
Casualty Proceeds or Luannan Expropriation Proceeds and
repayments of the Issuer Loan and the Shareholder Loans
resulting from such Luannan Event of Loss or Luannan
Expropriation Event will be applied to the redemption
of the Senior Secured Notes.
(iv) Upon the payment of performance liquidated damage
payments under the Luannan EPC Contract, the amount of
performance liquidated damages paid, which are required
to be applied to payment of the Issuer Loan and the
Shareholder Loans, will be applied pro rata to the
redemption of the Senior Secured Notes.
(v) Upon the occurrence of a Domestic Project Event
that results in Domestic Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to (a) the PFC Indenture and (b)
the debt instrument or instruments governing the
project level financing of such Domestic Project, any
and all excess proceeds shall be applied pro rata to
the redemption of the Senior Secured Notes.
(vi) Upon the occurrence of a Permitted Project Event
that results in Permitted Project Event Proceeds, after
the amounts of such proceeds have been used to fulfill
any and all mandatory redemption or mandatory repayment
obligations pursuant to, as the case may be, the PFC
Indenture or the debt instrument or instruments
governing the project level financing (or additional
Senior Indebtedness issued solely to finance such
Permitted Project) of such Permitted Project, any and
all excess proceeds shall be applied pro rata to the
redemption of the Senior Secured Notes; and, to the
extent that the instrument governing any additional
Senior Indebtedness of the Company and the Issuer
outstanding at the date of the Mandatory Redemption so
requires, to the redemption of such additional Senior
Indebtedness.
(_) Redemption at Option of Holder. (_) Upon the
occurrence of events described below, the Issuer will
be obligated to make an offer (a "Mandatory Redemption
Offer") to redeem pro rata the outstanding Senior
Secured Notes within 90 days of the occurrence of such
events (as more particularly described in the
Indenture) at a redemption price equal to 100% of the
principal amount thereof, together with accrued and
unpaid interest, if any, (including Liquidated Damages
and Additional Amounts, if any) to the redemption date:
(i) Upon the occurrence of an Approval Event of
Default or a County Partners Event of Default that has
had or is reasonably likely to have a Material Adverse
Effect, the Issuer shall be obligated to make a
Mandatory Redemption Offer using any and all available
monies to effect such Mandatory Redemption Offer (such
amounts to include, but not be limited to, (a) all
amounts in the Company Funds, (b) all amounts in the
Issuer Funds and (c) all amounts available to the
Issuer or the Company through the enforcement of the
Collateral).
(ii) If the Luannan Facility Construction Cost is less
than the Projected Luannan Facility Construction Cost,
after using such excess funds to fund any deficits in
the Issuer Funds, if any excess funds are remaining and
the amount of such excess funds equals or exceeds $1.0
million, the Issuer shall be obligated to use such
excess funds to make a Mandatory Redemption Offer to
the Holders of the Senior Secured Notes.
(_) Upon the occurrence of a Change of Control, each
Holder of Senior Secured Notes shall have the right to
require the Issuer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such
Holder's Senior Secured Notes pursuant to the offer
described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid
interest, if any, (including Liquidated Damages and
Additional Amounts, if any) thereon to the date of
purchase (the "Change of Control Purchase Price") in
accordance with paragraphs (b), (c) and (d) of Section
7.28 of the Indenture. The Issuer will mail a notice
to each Holder describing the transaction or
transactions that constitute the Change of Control and
offering to repurchase Senior Secured Notes pursuant to
the procedures required by the Indenture and described
in such notice. The Issuer will comply with the
requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in
connection with the repurchase of the Senior Secured
Notes as a result of a Change of Control.
(_) On the earlier of (i) the 366th day after an Asset
Sale by the Company or any of its Subsidiaries or (ii)
such date as the Board of Directors of the Company
determines not to apply the Net Cash Proceeds relating
to such Asset Sale to an investment, the making of a
capital expenditure or the acquisition of other
tangible assets (or the Company determines not to cause
its Subsidiary to apply the Net Cash Proceeds in such a
manner), if the aggregate amount of Excess Proceeds
exceeds $1.0 million, the Company or its Subsidiary, as
the case may be, shall be subject to the following
requirements:
(_) in the event that the Company cannot then
incur $1.00 of additional Permitted Indebtedness
pursuant to clause (v) of the definition of "Permitted
Indebtedness" in Appendix A of the Indenture the
Company or its Subsidiary will be required to make an
offer to purchase (the "Asset Sale Redemption Offer")
from all Holders of Senior Secured Notes and holders of
additional Senior Indebtedness, up to a maximum
principal amount (expressed as a multiple of $1,000) of
Senior Secured Notes and holders of additional Senior
Indebtedness equal to the Excess Proceeds at a purchase
price equal to 100% of the principal amount thereof
plus accrued and unpaid interest (including Liquidated
Damages and Additional Amounts, if any) thereon, if
any, to the date of purchase; in the event that there
is additional Senior Indebtedness outstanding at the
time of the Asset Sale Redemption Offer, Excess
Proceeds shall be allocated to each issuance of Senior
Indebtedness in accordance with the following formula:
Excess Proceeds times a fraction, the numerator of
which is the principal amount of the Senior Secured
Notes and the denominator of which is the sum of the
principal amounts of all Senior Indebtedness which is
subject to this requirement or a similar requirement
under such Senior Indebtedness's governing instrument;
and
(_) in the event that the Company can incur $1.00
of additional Permitted Indebtedness pursuant to clause
(v) of the definition of "Permitted Indebtedness," the
Company or its Subsidiary will be required to make an
Asset Sale Redemption Offer from all Holders of Senior
Secured Notes and holders of additional Senior
Indebtedness, up to a maximum principal amount
(expressed as a multiple of $1,000) of Senior Secured
Notes and holders of additional Senior Indebtedness
equal to the Excess Proceeds (Excess Proceeds for
purposes of this clause (2) is limited to that amount
of the Net Cash Proceeds that equals the principal
amount of Indebtedness incurred by the Issuer or the
Company to acquire, develop, construct or finance the
asset being sold) at a purchase price equal to 100% of
the principal amount thereof plus accrued and unpaid
interest (including Liquidated Damages and Additional
Amounts, if any) thereon, if any, to the date of
purchase; in the event that there is additional Senior
Indebtedness outstanding at the time of the Asset Sale
Redemption Offer, Excess Proceeds shall be allocated to
each issuance of Senior Indebtedness in accordance with
the following formula: Excess Proceeds times a
fraction, the numerator of which is the principal
amount of the Senior Secured Notes and the denominator
of which is the sum of the principal amounts of all
Senior Indebtedness which is subject to this
requirement or a similar requirement under such Senior
Indebtedness's governing instrument.
(_) Redemption for Taxation Reasons. The Senior
Secured Notes may be redeemed, at the option of the
Issuer or the Company, as the case may be, in whole but
not in part, at a redemption price equal to the
principal amount thereof, together with accrued and
unpaid interest and premium, if any, (including
Liquidated Damages and Additional amounts, if any), to
the Tax Redemption Date, if the Issuer or the Company,
as the case may be, determines that, as a result of (i)
any change in, or amendment to, the laws or treaties
(or any regulations or rulings promulgated thereunder)
of the Cayman Islands or the United States (or any
political subdivision or taxing authority thereof)
which change or amendment becomes effective on or after
the date of the Indenture, (ii) any change in position
regarding the application, administration or
interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change in
application, administration or interpretation becomes
effective on or after the date of the Indenture, the
Issuer or the Company, as the case may be, is, or on
the next interest payment date would be, required to
pay Additional Amounts, and the Issuer or the Company,
as the case may be, determines that such payment
obligation cannot be avoided by the Issuer or the
Company, as the case may be, taking reasonable
measures.
(_) Notice of Redemption. Notice of redemption
(other than a Change of Control Offer) will be mailed
at least 30 days but not more than 60 days before the
redemption date to each Holder whose Senior Secured
Notes are to be redeemed at its registered address.
Notice of a Change of Control Offer shall be mailed by
the Company or Issuer to the Holders not less than 30
days nor more than 45 days before the Change of Control
Payment Date. Senior Secured Notes in denominations
larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000, unless all of the Senior
Secured Notes held by a Holder are to be redeemed. On
and after the redemption date interest ceases to accrue
on the aggregate principal amount of the Senior Secured
Notes called for redemption.
(_) Denominations, Transfer, Exchange. The Senior
Secured Notes may be issued initially in the form of
one or more fully registered Global Senior Secured
Notes. The Senior Secured Notes may also be issued in
registered form without coupons in minimum
denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Secured Notes may be
registered and Senior Secured Notes may be exchanged as
provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents
and the Issuer may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture.
The Issuer need not exchange or register the transfer
of any Senior Secured Note or portion of a Senior
Secured Note selected for redemption. Also, it need
not (i) register the transfer or exchange of any Senior
Secured Notes during any period (a) beginning at the
opening of business on a Business Day 15 days before
the day of any selection of Senior Secured Notes for
redemption and ending at the close of business on the
day of selection or (b) beginning at the opening of
business on a Business Day 15 days before an Interest
Payment Date and ending on the close of business on
such Interest Payment Date or (ii) register the
transfer or exchange of any Senior Secured Note
selected for redemption in whole or in part, except the
unredeemed portion of any Senior Secured Note being
redeemed in part.
(_) Persons Deemed Owners. The registered Holder of
a Senior Secured Note may be treated as its owner for
all purposes.
(_) Amendment, Supplement and Waiver. (_) Without
the consent of the Holders of any Senior Secured Notes,
the Indenture may be amended or supplemented (i) to
establish the form and terms of Securities of
additional series; (ii) to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the
Senior Secured Notes, any property or assets; (iii) to
evidence the assumption by a successor entity to the
Company or the Issuer, and the assumption by such
successor entity of the covenants, agreements and
obligations of the Company and the Issuer pursuant to
the Indentures; (iv) to evidence the succession of a
new Trustee; (v) in certain circumstances, to add
further covenants, restrictions, conditions or
provisions for the protection of the Holders, and
related Events of Default for the breach thereof; (vi)
to cure any ambiguity, defect or inconsistency in the
Indenture, any Supplemental Indenture, or the Senior
Secured Notes which shall not adversely affect the
interests of the Holders; (vii) to permit or facilitate
the issuance of Senior Secured Notes in uncertificated
form; (viii) to comply with any requirement of the SEC
to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; (ix) to
provide for the issuance of a new series of Securities
registered under the Securities Act in exchange for the
Senior Secured Notes; (x) to make any other change that
does not adversely affect the interest of the Holders
of any series in any material respect.
(_) Subject to certain exceptions, the Indenture or the
Senior Secured Notes may be amended or supplemented
with the consent of the Holders of not less than a 51%
in aggregate principal amount of all series of
Outstanding Securities (considered as one class) or if
such amendment or supplement shall directly affect the
rights of less than all series, the consent of the
Holders of not less than a 51% in aggregate principal
amount of all series so directly affected (considered
as one class) (including a supplemental indenture
changing the provisions of the Indenture with respect
to change of control). The consent of the Holder of
each Outstanding Security directly affected thereby, is
required to:
(i) change the Stated Maturity, Senior Secured Note
Payment Date, Senior Secured Note principal amount, or
the interest thereon or any premium payable, place of
payment, impair the right to institute suit for the
enforcement of any payments, change the dates or the
amounts of payments to be made through the operation of
the sinking fund or make certain other changes
effecting the amount and timing of payments;
(ii) permit the creation or termination of Liens on
property pledged under the Collateral Documents or
deprive any Holder of the security afforded by the Lien
of the Collateral Documents, except, in each case, to
the extent expressly permitted by this Indenture or any
of the Collateral Documents; (iii) release all or any
substantial portion of the Collateral; (iv) reduce the
percentage in principal amount of the Outstanding
Securities, or reduce the requirements with respect to
quorum or voting; (v) modify any of the provisions of
Section 9.7 of the Senior Secured Notes Indenture; or
(vi) amend, change or modify the obligation of the
Issuer to make and consummate a Change of Control
Offer, or any of the provisions or definitions with
respect thereto.
(_) Defaults and Remedies. Events of Default include:
(i) failure by the Issuer to pay the
principal and premium, if any, on any Security when the
same becomes due and payable, whether by scheduled
maturity or required prepayment or by acceleration or
otherwise; (ii) failure by the Issuer to pay the
interest (including Liquidated Damages and Additional
Amounts, if any) on any Security when the same becomes
due and payable, whether by scheduled maturity or
required prepayment or by acceleration or otherwise,
for 15 or more days; (iii) non-payment of any interest
on, or any principal of, the Issuer Loan by Pan-Western
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise, for 30 or more days; (iv)
failure by the Company to pay any amount it is
obligated to pay pursuant to the terms of any Security,
when the same becomes due and payable, whether by
scheduled maturity or required prepayment or by
acceleration or otherwise; (v) any agreement,
representation or warranty made by the Company or any
of its Subsidiaries in, respectively, the Indentures,
the Issuer Loan Agreement or the Shareholder Loan
Agreements or any representation, warranty or statement
in any certificate, financial statement or other
document furnished to the Trustees by or on behalf of
the Company or any of its Subsidiaries under the
Indentures, 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
or is reasonably likely to have a Material Adverse
Effect and the fact, event or circumstance shall
continue to be uncured for 30 or more days after the
Company or any of its Subsidiaries acquires notice of
such inaccuracy; provided that if the Company or any
such Subsidiary commences efforts to cure such fact,
event or circumstance within such 30-day period, the
Company or any such Subsidiary may continue to effect
such cure of such fact, event or circumstance and such
misrepresentation shall not be deemed an Event of
Default for an additional 60 days so long as the
Company or such Subsidiary, as the case may be, is
diligently pursuing such cure; (vi) failure by the
Company or any of its Material Subsidiaries to perform
or observe its covenants contained in the Indentures
relating to maintenance of existence, prohibition on
fundamental changes, disposition of assets, limitations
on Indebtedness, limitations on Liens or distributions;
(vii) failure by the Company or any of its Material
Subsidiaries to perform or observe any of the other
covenants contained in the Indentures or in the
Collateral Documents and such failure shall continue
uncured for 30 or more days (including, without
limitation, covenants with respect to insurance and
amendments to Luannan Project Documents or nature of
business); provided that if the Company or such
Material Subsidiary commences efforts to cure such
default within such 30-day period, the Company or such
Material Subsidiary 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 such Subsidiary is diligently pursuing
the cure; (viii) certain events of bankruptcy or
insolvency involving the Company or any Material
Subsidiary; (ix) the entry of one or more final and non-
appealable judgment or judgments for the payment of
money in excess of $1.0 million (exclusive of judgment
amounts fully covered by insurance or indemnity)
against the Company or any of its Material
Subsidiaries, which remains unpaid or unstayed for a
period of 90 or more consecutive days; (x) any Project
Document (except as otherwise permitted under this
Indenture) shall terminate or cease to be valid and
binding and in full force and effect, or any third
party thereto denies that it has any liability or
obligation under any such Project Document and such
third party ceases performance thereunder, or any third
party is in default under such Project Document
(subject to any applicable grace period), and in each
case such cessation or default has had or is reasonably
likely to have a Material Adverse Effect; (xi) any
Luannan Financing Agreement shall terminate or cease to
be valid and binding and in full force and effect;
(xii) with respect to a Domestic Project, or to the
extent applicable, any Permitted Project, the loss of
QF Status, to the extent that such loss of QF Status
has had or is reasonably likely to have a Material
Adverse Effect; (xiii) failure of any Joint Venture to
perform or observe any of its material covenants or
obligations contained in any of the Luannan Project
Documents if such failure has had or is reasonably
likely to have a Material Adverse Effect; (xiv) the
occurrence of any event resulting in the payment of
Domestic Project Event Proceeds or Permitted Project
Event Proceeds that will result, in the opinion of the
Consolidating Financial Analyst, in the Company's
failure to meet the following Debt Service Coverage
Ratios (after the application of such amounts as are
required to be applied pursuant to any and all
mandatory redemption or repayment obligations): (1) the
minimum (or lowest) annual projected Company Debt
Service Coverage Ratio for the remaining term of the
Senior Secured Notes will not be less than 1.4 to 1 and
(2) the minimum (or lowest) annual projected
Consolidated Debt Service Coverage Ratio for the
remaining term of the Senior Secured Notes will not be
less than 1.15 to 1; (xv) the Luannan Facility
Construction Schedule Certificate shall at any time
contain a conclusion that the Luannan Facility is not
being constructed in accordance with the Approved
Construction Budget and Schedule or, if applicable, an
Approved Completion Plan; (xvi) any of the Collateral
Documents ceases to be effective or any lien granted
therein ceases to be a perfected lien to the Trustees
on the collateral described therein with the priority
purported to be created thereby; provided that the
Company or the Issuer, as the case may be, shall have
15 days to cure such cessation or to furnish to the
Trustees all documents or instruments required to cure
such cessation; or (xvii) any default under the Issuer
Loan Agreement and the Shareholder Loan Agreements that
has had or is reasonably likely to have a Material
Adverse Effect and any default under the PFC Indenture,
the Rosemary Indenture, the Brandywine Facility Lease
and any other default under any other agreement or
instrument containing Indebtedness of at least $2.5
million of a Domestic Project or a Permitted Project,
to the extent that any of the preceding defaults is not
waived. If any Event of Default (other than an Event
of Default described in clause (viii) above) occurs and
is continuing, the Trustee shall declare all interest,
principal and premium (including Liquidated Damages and
Additional Amounts, if any) on the Senior Secured Notes
to be immediately due and payable, if the Holders of at
least 25% in principal amount of the then outstanding
Senior Secured Notes have notified the Issuer and the
Trustees in writing. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the
Company, any of its Material Subsidiaries, all
outstanding Senior Secured Notes will become due and
payable without further action or notice. Holders of
the Senior Secured Notes may not enforce the Indenture
or the Senior Secured Notes except as provided in the
Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding
Senior Secured Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may
withhold from Holders of the Senior Secured Notes
notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the
payment of principal or interest) if it determines that
withholding notice is in their interest.
(_) Trustee Dealings with Issuer. The Indenture
contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer or
the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in
respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or
resign.
(_) No Recourse Against Others. No director, officer,
or stockholder of the Issuer, as such, shall have any
liability for any obligations of the Issuer under the
Senior Secured Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Senior
Secured Notes, by accepting a Senior Secured Note,
waives and releases all such liability. The waiver and
release are part of the consideration for issuance of
the Senior Secured Notes. Such waiver may not be
effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such
a waiver is against public policy.
(_) Authentication. This Senior Secured Note shall
not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
(_) GOVERNING LAW. THIS SENIOR SECURED NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. THE ISSUER HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY 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 SENIOR SECURED NOTE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS. THE ISSUER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(_) Abbreviations. Customary abbreviations may be
used in the name of a Holder or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
(_) Additional Rights of Holders of Transfer
Restricted Securities. In addition to the rights
provided to Holders of Senior Secured Notes under the
Indenture, Holders of Transferred Restricted Securities
shall have all the rights set forth in the Registration
Rights Agreement dated as of the date of the Indenture,
between the Company and the parties named on the
signature pages thereof (the "Registration Rights
Agreement").
(_) Collateral Documents. As provided in the
Indenture and the Collateral Documents and subject to
certain limitations set forth therein, the Obligations
of the Issuer and the Company under the Indentures and
the Collateral Documents are secured by the Collateral
as provided in the Collateral Documents. Each Secured
Party, by accepting a Senior Secured Note, agrees to be
bound to all the terms and provisions of, and is
entitled to the benefits of, the Collateral Documents,
as the same may be amended from time to time. The
Liens created under the Collateral Documents shall be
released upon the terms and subject to the conditions
set forth in the Indentures and the Collateral
Documents.
(_) Senior Secured Notes Guarantee. This Senior
Secured Note is entitled to the benefits of the Senior
Secured Notes Guarantee of the Company. Upon the terms
and subject to the conditions set forth in the
Indentures and the Senior Secured Notes Guarantee, the
Company has unconditionally guaranteed on a senior
secured basis that the principal of, and premium, if
any (including Liquidated Damages and Additional
Amounts, if any), and interest on the Senior Secured
Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise,
and interest on overdue principal, and premium, if any,
and (to the extent permitted by law) interest on any
interest, if any, on the Senior Secured Notes and all
other Obligations of the Issuer to the Secured Parties
or the Trustee under the Senior Secured Notes or the
Indenture (including fees, expenses or other
obligations) will be promptly paid in full or
performed.
(_) CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security
Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Senior Secured Notes and
the Trustee may use CUSIP numbers in notices of
redemption as a convenience to Holders. No
representation is made as to the accuracy of such
numbers either as printed on the Senior Secured Notes
or as contained in any notice of redemption and
reliance may be placed only on the other identification
numbers placed thereon.
The Issuer will furnish to any Holder upon written
request and without charge a copy of the Indenture.
Requests may be made to:
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Attention: General Counsel
ASSIGNMENT FORM
To assign this Senior Secured Note, fill in the form below:
(I) or (we) assign and transfer this Security to
(Insert assignee's Social Security or tax I.D. No.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the Issuer. The
agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Secured Note
purchased by the Issuer pursuant to Section 2.5(c) of
the First Supplemental Indenture or Section 7.21 or
7.28 of the Indenture, check the appropriate box below:
Section 2.5(c) Section 7.21 Section 7.28
If you want to elect to have only part of the Senior
Secured Note purchased by the Issuer pursuant to
Section 2.5(c) of the First Supplemental Indenture or
Section 7.21 or 7.28 of the Indenture, state the
principal amount at maturity you elect to have
purchased: $______________
Date: Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:*
SCHEDULE OF EXCHANGES OF DEFINITIVE SENIOR SECURED NOTES
[To be attached to Global Senior Secured Note]
The following exchanges of a part of this Global Senior Secured
Note for definitive Senior Secured Notes have been made:
Date of Amount of Amount of Principal Signature of
Exchange decrease increase in Amount of authorized
in Principal this Global officer of
Principal Amount Note Trustee
Amount of this following or Note
of this Global Note such decrease Custodian
Global (or increase)
Note
SCHEDULE I
Form of Senior Secured Notes Guarantee
Senior Secured Notes Guarantee
The Company, as primary obligor and not merely as
surety, hereby irrevocably, fully and unconditionally guarantees
on a senior secured basis to each Holder of a Senior Secured Note
authenticated and delivered by the Senior Secured Notes Trustee
and to the Trustee and their successors and assigns, irrespective
of the validity and enforceability of the Indentures, the Senior
Secured Notes or the obligations of the Company and the Issuer
hereunder or thereunder: (a) the performance and punctual payment
when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Issuer under the Senior
Secured Notes Indenture and the Senior Secured Notes, whether for
principal, premium, if any, and interest (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes, expenses, indemnification or otherwise; and (b) in case of
any extension of time of payment or renewal of any Senior Secured
Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Company shall be obligated to pay the same
immediately.
The Company hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Secured Notes or the
Indentures, the absence of any action to enforce the same, any
waiver or consent by any Holder with respect to any provisions
hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge
or defense of a guarantor. The Company hereby waives diligence,
presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right
to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Senior
Secured Notes Guarantee shall not be discharged except by
complete performance of the obligations contained in the Senior
Secured Notes and the Indentures. If any Holder or the Trustee
is required by any court or otherwise to return to the Company,
or any custodian, trustee, liquidator or other similar official
acting in relation to the Company, any amount paid by either to
the Trustee or such Holder, this Senior Secured Notes Guarantee,
to the extent theretofore discharged, shall be reinstated in full
force and effect. The Company agrees that it shall not be
entitled to any right of subrogation in relation to the Holders
of the Senior Secured Notes Guarantee in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
This is a continuing Guarantee and shall remain in full
force and effect and shall be binding upon the Company and its
respective successors and assigns to the extent set forth in the
Indenture until full and final payment of all of the Issuer's
obligations under the Senior Secured Notes and the Senior Secured
Notes Indenture and shall inure to the benefit of the Trustee and
the Holders of Senior Secured Notes Guarantee and their
successors and assigns and, in the event of any transfer or
assignment of rights by any Holder of the Senior Secured Notes
Guarantee or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms
and conditions hereof. Notwithstanding the foregoing, if the
Company and the Issuer satisfy the provisions of Section 6.3 of
the Indentures the Company shall be released of its obligations
hereunder. This is a Guarantee of payment and not a guarantee of
collection.
This Senior Secured Notes Guarantee shall not be valid
or obligatory for any purpose until the certificate of
authentication on the Senior Secured Note upon which this Senior
Secured Notes Guarantee is noted shall have been executed by the
Senior Secured Notes Trustee under the Senior Secured Notes
Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings
given in the Indentures unless otherwise indicated.
PANDA GLOBAL HOLDINGS, INC.
By:_____________________________
Name:
Title:
This is one of the Senior Secured
Notes referred to in the within-
mentioned Indenture:
BANKERS TRUST COMPANY,
as Trustee
By_________________________________
Authorized Signatory
_______________________________
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
*/ Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor acceptable to the
Trustee).
EXHIBIT 10.78
JOINT VENTURE CONTRACT
FOR
TANGSHAN PANDA HEAT AND POWER CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Two Parties of the Joint Venture
ARTICLE 3 Name and Address of the Joint Venture Company
ARTICLE 4 Purpose and Business Scope of
the Joint Venture Company
ARTICLE 5 Total Investment and Registered Capital
ARTICLE 6 Responsibilities and Duties of the Parties
ARTICLE 7 Board of Directors
ARTICLE 8 Business Administrative Organization
ARTICLE 9 Purchase of Materials
ARTICLE 10 Preparation Work
ARTICLE 11 Personnel Administration
ARTICLE 12 Foreign Currency Control
ARTICLE 13 Financing, Taxing and Auditing
ARTICLE 14 Terms of the Joint Venture
ARTICLE 15 Insurance
ARTICLE 16 Amendment, Termination and Release of the
Contract
ARTICLE 17 Obligation of the Party Breaching the
Contract
ARTICLE 18 Force Majeure
ARTICLE 19 Laws Applicable
ARTICLE 20 Arbitration
ARTICLE 21 Validity of the Contract
ARTICLE 22 Language of the Text
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the stipulations of "The Law of the
People's Republic of China on Chinese-Foreign Equity Joint
Ventures" and other related laws and rules, and on the basis of
equality and mutual benefit Luannan County Heat & Power Plant of
Tangshan City, Hebei Province, the People's Republic of China
(PRC) and Pan-Western Energy Corp., LLC (a subsidiary of Panda
Energy Corp. In Dallas, Texas, U.S.A) of Cayman Islands, British
West Indies, both agree to establish a Joint Venture Company with
joint investment and hereby sign this contract.
ARTICLE 2
TWO PARTIES OF THE JOINT VENTURE
2.1. Luannan Heat & Power Plant (hereinafter referred to as
Park A) is a registered company in PRC, its statutory address
being Benchengzhong Street, Luannan County, Hebei Province, PRC
and statutory representative being Zhao Xiucheng, General
Manager of Party A, with Chinese nationality.
Pan-Western Energy Corp., LLC (hereinafter referred to as
Party B) is a registered company in Cayman Islands, British
West Indies with its statutory address being Maples and Calder,
Ugland House, South Church Street, P.O. Box 309, George Town,
Grand Cayman, Cayman Islands, British West Indies and statutory
representative Robert W. Carter, Chairman and President of
Party B. with U.S.A. nationality.
ARTICLE 3
NAME AND ADDRESS
OF THE JOINT VENTURE COMPANY
3.1. Full Chinese name for the Joint Venture Company shall be:
3.2. Full English name for the Joint Venture Company shall be:
TANGSHAN PANDA HEAT AND POWER CO., LTD. (hereinafter referred
to as JVC).
3.3. The registered address of JVC shall be at Benchengzhong
Street, Luannan County, Tangshan City, Hebei Province, PRC.
ARTICLE 4
PURPOSE AND BUSINESS SCOPE
OF THE JOINT VENTURE COMPANY
4.1 The company shall be based and run on sound and lawful
business principles and principles of equality and mutual benefit
with the aim of selling its products and services at a profit
acceptable to the compare.
4.2. The company shall manufacture and sell electricity, steam
and their by-products in the Chinese domestic market.
4.3. The total production capacity of the company shall be
approximately:
(i) Steam generation of 184,200 million kcal. per year and
electricity generation of 325 million kwh per year at
capacity of 50,000 kw
(ii) The production capacity may be changed from time to
time by agreement of the Parties.
ARTICLE 5
TOTAL INVESTMENT AND REGISTERED CAPITAL
5.1. JVC shall be a limited liability company. The liability of
both Parties to the company shall be limited to their amount of
capital investment.
5.2. The total investment of the company shall be US $29,500,000,
and the registered capital of the company shall be US
$11,800,000. The contribution made by Party A shall be US
$2,360,000, accounting for 20% of the registered capital; the
contribution made by Party B shall be US $9,440,000, accounting
for 80% of the registered capital.
The rest of the total investment exceeding the registered capital
shall be settled by international financing and JVC shall be
responsible for the payment of debt obligations, interests and
financing costs.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed.
5.3. Party A and Party B shall invest in the following way:
Party A: With land use rights, material objects and cash capital
contributions made at or during the times specified in Section
5.4. Party B: With cash capital contributions made at or during
the times specified in Section 5.4.
5.4. The total investment shall be fully made by the Commercial
Operation Date of the power and steam production facility (the
"Facility") to be owned by JVC (the "Commercial Operation Date"), with
registered capital contributions to be made according to the percentage
ownership of each Party.
Both Parties shall contribute five percent (5%) of the
registered capital in their respective proportion within thirty
(30) days after the business license is issued and contribute up
to fifteen percent (15%) of the registered capital in their
respective proportion within one hundred and eighty (180) days
after the business license is issued. Each Party shall guarantee
the payment of the remaining eighty five percent (85%) of the
registered capital to be sufficient to meet the requirements of
the Joint Venture project progress and within two years after the
establishment of JVC.
5.5. The registered capital of JVC shall not be reduced during
the joint venture period, but can be increased if either Party
reinvest with their profits distributed.
5.6. If either Party desires to transfer its capital investment
to a third Party, whether totally or partially, it should be
agreed upon by the other Party and approved by the authorities
concerned, and the other Party shall have the first night of
refusal to purchase which right must be exercised (if exercised),
within thirty (30) days after notice of such proposed transfer is
received. The other Party may waive its first right of refusal to
purchase, but shall reserve the right to choose a subsidiary or
affiliate Party as the assignee. The conditions for such transfer
from one Party of JVC to a third Party shall not be more
favorable than the conditions given to the other Party of JVC.
5.7. During the preparation period of JVC project and before
formal start of production, neither Party shall transfer its
capital investment.
5.8. Any increase, transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercial administration bureau.
5.9. The Parties shall agree upon a project development budget
and shall share all costs incurred pursuant to such budget
proportionately (in accordance with registered capital
contributions).
ARTICLE 6
RESPONSIBILITIES AND DUTIES OF THE PARTIES
6.1. Party A shall, in addition to its contribution of capital
investment, have responsibilities and duties to assist JVC in the
handling of the following matters concerned:
(i) To assist the company in handling matters such as the
application for approval registration and the obtaining of
business licenses from relevant Chinese departments;
(ii) To assist JVC and EPC in applying for and
obtaining all possible tax reductions and exemptions
according to Chinese law;
(iii) To assist JVC and EPC in matters concerning the
purchase of equipment and machinery, the customs
declaration of imported equipment and transportation
of supplies within China;
(iv) To assist JVC in contacting and implementing the
basic facilities of water, electricity,
transportation and communication, etc..
(v) To assist JVC in the employment of local Chinese
staff, technicians, workers and other required
personnel;
(vi) To assist foreign personnel sent by Party B to
work in JVC in obtaining necessary entry visas, work
permits and permit for travel on business within
China;
(vii) To assist in other matters
entrusted by JVC.
6.2. Party B shall in addition to its contribution of capi
tal investment have responsibilities and duties to assist
JVC in the handling of the following makers concerned:
(i) To assist JVC and the EPC Contractor to procure,
per specifications and instructions of JVC, the
advanced and applicable machinery and equipment from
the international market, and provide related
information in that regard;
(ii) To assign technical personal to be responsible
for the check and test, installation and maintenance
of the machinery and equipment introduced, train
technical personnel and workers of JVC;
(iii) To assist JVC in arranging for financing
of the Facility,
(iv) Subject to the direction of JVC, to manage the
development, construction and operation of the
Facility;
(v) To assist in other matters entrusted by JVC.
ARTICLE 7
BOARD OF DIRECTORS
7.1. The official date of obtaining the business license of JVC
is the date of the establishment of the Board of Directors.
The Board of Directors shall be the highest authority of JVC and
decide all major issues concerning JVC.
7.2. The Board of Directors shall be composed of five (5)
directors, one (1) of which shall be from Party A and four (4)
from Party B. From within the Board of Directors, Party B shall
appoint a chairman. There shall be two (2) vice chairmen to be
respectively appointed by Party A and Party B. The directors
shall hold the office for a period of four (4) years. The term of
office may be renewed by the nominating Party.
7.3. Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital of
TVC;
(iii) Merger of JVC with another corporation;
(iv) Extension, termination and dissolution of the Joint
Venture and the liquidation and wind-up thereof;
(v) Other major issues that the Board of Directors deems it
necessary to have unanimous affirmative votes.
All issues except for the above shall be decided by majority vote
of the directors then present at any board meeting (including
special board meeting) at which a quorum is present. Unless
waived by Party A's director or Party A, the quorum shall include
one Party A's director.
7.4. The chairman of the board is the statutory representative of
the JVC. When the chairman cannot carry out his obligations for
whatever reason, he can authorize a vice chairman to act on his
behalf.
7.5. The board meeting shall be convened at least once a year and
shall be sponsored by the chairman. At the request of at least
two (2) of the directors, the chairman shall convene a special
board meeting.
ARTICLE 8
BUSINESS ADMINISTRATIVE ORGANIZATION
8.1. JVC shall set up its business administrative organization
which shall be responsible for daily management of the company.
The business administrative organization shall have one (1)
general manager and two (2) deputy general managers. The general
manager shall be recommended by Party B, and each Party shall
recommend one (1) deputy general manager. General and deputy
general managers shall be appointed by the Board of Directors and
their tenures of office shall be four (4) years.
The obligation of the general manager is to carry out all the
decisions of the Board of Directors, organize and be responsible
for the routine business administrative work of JVC. The deputy
general managers shall assist the general manager in his work.
Decisions of important issues in the day-to-day business of JVC
shall be valid only when they are signed by both the general
manager and Party A's deputy general manager. Issues requiring
joint signatures shall be stipulated by the Board of Directors.
8.2 The business administrative organization of JVC shall
consist of certain departments and the manager of each department
shall be directly responsible to the general manager (or as
otherwise specified by the general manager or the Board of
Directors).
8.3. The general manager and each deputy general manager can be
dismissed at any time through the resolution passed at the board
meeting if they are found to practice graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 9
PURCHASE OF MATERIALS
9.1. As for the procurement of materials, fuels, fittings, means
of transport and office appliance (hereinafter referred to as
materials) required by JVC, priority should be given to China
under the same condition.
ARTICLE 10
PREPARATION WORK
10.1. During the preparation and construction period of the Joint
Venture, a preparation group should be set up directly under the
Board of Directors, which shall consist of three (3) persons, one
(1) from Party A and two (2) from Party B. A group leader shall
be recommended by Party B, and a deputy group leader by Party A.
The group leader and deputy group leader should be appointed by
the Board of Directors.
10.2. The preparation group shall be responsible for auditing of
engineering design, signing of contract project agreements,
organizing the procurement and checking of the related equipment,
materials and other goods, working out the general schedule of
the construction plan for the budget, controlling financial
payment and design-making on the construction; responsible for
the control and management of documents, blue prints, files, and
data when the construction is in progress.
10.3. The preparation group shall be responsible for the
auditing, supervision, check; and test of the project design,
quality, equipment and materials.
10.4. The staff organization of the preparation group and their
salaries and expenditures shall be entered into the construction
budget upon approval of the Board of Directors.
10.5. The preparation group shall be canceled upon the approval
of the Board of Directors after the construction is completed and
the procedure of transfer is implemented.
ARTICLE 11
PERSONNEL ADMINISTRATION
11.1. With regard to employment dismissal, wages, labor
insurance, welfare and reward and penalty of the workers of
JVC, the Board of Directors should discuss and work out a labor
contract and then implement it in accordance with the
"Provisions of the People's Republic of China on Labor
Management in Chinese-Foreign Equity Joint Venture" and the
methods of its implementation. The Labor Contract, after its
signing, should be kept in the file of the local labor
administration department.
11.2. Staff members of JVC have the right to establish their
trade union and take part in its activities in accordance with
the stipulations of the "Trade Union Act of the People's
Republic of China".
ARTICLE 12
FOREIGN CURRENCY CONTROL
12.1. Foreign currency of JVC shall be handled according to the
"Interim Provisions of People's Republic of China on the
Administration of Foreign Currency" and related stipulations.
12.2. JVC shall open a foreign currency account in the Bank of
China with its business license. All legal income of JVC may be
converted and all the foreign exchanges shall be deposited in
the foreign currency account of its opening bank and all
expenses and financing payments in foreign currency of JVC
shall be paid out of the foreign currency account of its
opening bank.
ARTICLE 13
FINANCING, TAXING AND AUDITING
13.1. Financial accounting of JVC shall be made in accordance
with the rules and regulations of financial accounting in PRC as
stipulated for joint venture enterprises using Chinese and
foreign investment.
13.2. The fiscal year of JVC starts from the 1st day of January
and ends on the 31st day of December of each year. All the
accounting certificates, documents, reports and account books
should be written both in English and Chinese.
13.3. JVC should pay all the taxes required according to the
related laws and stipulations of PRC.
13.4. JVC should draw reserve funds, enterprise development funds
and welfare and reward funds according to the stipulations of
"The Law of the People's Republic of China on Chinese-Foreign
Equity Joint Ventures", the ratio of which funds to be drawn each
year should be decided by the Board of Directors according to the
status of business of JVC.
13.5. For accounting and auditing, JVC should hire accountants
and auditors registered in PRC, and report these results to the
Board of Directors and the General Manager. If Party B is willing
to hire auditors of another country for auditing of the annual
finance, Party A should agree, but all charges shall be paid by
Party B.
13.6. Within the first three months of the business year, the
Debit/Credit accounts of the last business year, documents of
profit/loss accounts and profit sharing plan should be initiated
by the General Manager and submitted to the Board of Directors
for review and approval.
ARTICLE 14
TERMS OF THE JOINT VENTURE
14.1. The term of JVC shall be twenty three (23) years commencing
on the date of establishment of JVC. The date of the acquisition
of the business license for JVC shall be the date of its
establishment. It is necessary to submit an application to the
department in charge for the extension of the term of JVC twelve
(12) months prior to the expiration of the term of JVC provided a
motion is initiated by one of the Parties and approved
unanimously by the Board of Directors.
14.2. In accordance with the laws, JVC should be liquidated upon
the expiration of JVC or termination of the business in advance.
The liquidated properties should be distributed according to the
ratio of investment made by Party A and Party B. For purpose of
liquidation distributions, all contract rights, land use rights
and other tangible or intangible properties shall be valued on a
fair market value "going concern basis". The liquidation
appraisal shall be conducted by a public accountant registered in
PRC.
ARTICLE 15
INSURANCE
15. 1 Each engineering project of JVC should be insured by the
People's Insurance Company of China. The procedures shall be
handled by the department in charge.
ARTICLE 16
AMENDMENT TERMINATION AND RELEASE
OF THE CONTRACT
16.1 When amendment is made to this contract and its appendixes,
it shall not be valid unless a written agreement is signed by
both Parties and submitted to and approved by the applicable
governmental authorities (the "Authorities") concerned.
16.2 With the unanimous agreement of the Board of Directors and
approval of the Authorities concerned, JVC can be terminated
prior to the original term or the contract be terminated in
advance if the JVC is incapable of going on with the business for
certain reasons.
ARTICLE 17
OBLIGATION OF THE PARTY
BREACHING THE CONTACT
17.1. If either Party fails to contribute the amount of the
investment committed by the time stipulated in Article 5 of the
contract, the Party breaching the contract shall pay the Party
observing the contract 0.3% of the total amount of investment
overdue each three (3) months counting from the 30th bank date
overdue. Should the Party breaching the contract fail to
contribute the amount of capital it committed for six (6) months,
apart from the total sum of 0.6% of above-mentioned fines, the
Party observing the contract has the right to request the Party
breaching the contract to fully implement the contract within a
specified period or terminate the contract according to Article
16 of the contract and demand the Party breaching the contract to
compensate for its losses.
17.2. Obligation should go to the Party if it is that Party's
fault that elects the implementation or complete implementation
of the contract and its appendixes. Each Party shall be liable
for the breach of the contract, if the fault is due to both
Parties.
17.3. In order to guarantee its registered capital contributions,
Party B should provide a bank guarantee or guarantee from Panda
Energy Corp. of U.S.A. for its registered capital contributions.
ARTICLE 18
FORCE MAJEURE
18.1. As the consequence of Force Majeure, such as war,
earthquakes, typhoons, floods, fires or other natural calamities,
which cannot be predicated, or the happening or consequence of
which cannot be prevented or avoided (such as prolonged strikes),
and directly affects the execution of the contract, or execution
of the contract according to the terms stipulated in the
contract, the Party that encounters the Force Majeure should
notify the Party by fax or other most immediate means available
of the incident. Valid documents to certify the detailed
happenings of the accident, and valid documents to certify the
reasons of its inability to fulfill or completely fulfill, or the
necessity to postpone the fulfillment of the contract, should be
submitted to the other Party within thirty (30) days of the
accident, and should be certified by the notarization department
of the region where the accident took place. Disputes arising
from cases of Force Majeure shall be resolved through
negotiations between the two Parties as to whether to terminate
the contract or partially release the obligations of the affected
Party, or postpone the fulfillment of the contract according to
the effect of the accident on the fulfillment of the contract If
the maker cannot be resolved within fourth five (45) days through
negotiation, at the request of either Party, it shall be settled
through arbitration.
ARTICLE 19
LAWS APPLICABLE
19.1. The signing, validity, explanation and implementation of
this contract should abide by the laws of the People's Republic
of China.
ARTICLE 20
ARBITRATION
20.1. Should any dispute arise from the implementation of or
relating to the contract, both Parties shall resolve them through
friendly negotiations. If the discrepancies cannot be solved by
negotiations, they should be submitted to the Arbitration
Committee of China Council for the Promotion of International
Trade for solution, whose decision shall be final and legally
binding on both Parties. The arbitration shall be conducted in
both Chinese and English with both languages having equal weight.
20.2. During the process of arbitrator, the contract should be
executed with no interruption, except for those parts relating to
discrepancies under arbitration.
ARTICLE 21
VALIDITY OF THE CONTRACT
21.1. All the articles of the contract including appendixes
(Articles of Association of JVC, certificates of Party A's
tangible capital contributions and list of equipment to be
imported) are indispensable parts of this contract.
21.2. The contract including its appendixes shall be valid only
where it has been approved by the Ministry of Foreign Trade and
Economic Cooperation or its entrusted inspection departments.
21.3. Any communication relating to the rights and obligations of
the two Parties should be made in written form, except notices,
telegrams and faxes. The addresses stated in Article 2 of the
contract are statutory addresses for correspondence between the
two Parties. Any change in the statutory address should be
notified to the other Party thirty (30) days in advance.
ARTICLE 22
LANGUAGE OF THE TEXT
22.1. This contract is written both in English and Chinese. The
contract in both languages is of equal validity.
This contract for Tangshan Panda Heat and Power Co., Ltd. is
signed by the authorized representatives of both Parties in
Shijiazhuan City, Hebei Province, China, as follows:
Party A: Party B:
Luannan County Pan-Western Energy Corp.,LLC
Heat & Power Plant
Zhao Xiucheng Ralph T. Killian
General Manager Senior Vice President
Witnessed by:
China National Machinery Import & Export Corp.
Bai Congyong
General Manager of Overseas Enterprises Div.
Dated on Sept. 4, 1994
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN PANDA HEAT & POWER CO., LTD.
This amendment is made and entered into on July 19, 1996 by and
between Party A Luannan County Heat & Power Plant of Hebei
Province, China through its duly authorized agent and Party B
Pan-Western Energy Corp., LLC. of British Cayman Islands through
its duly authorized agent, both of which JV Parties to Tangshan
Panda Heat & Power Co., Ltd.
WHEREAS, adjustments are required for amounts of capital
contributions, their respective proportion to registered capital
and means of such contributions by the Parties to Tangshan Panda
Heat & Power Co., Ltd.;
NOW THEREFORE, through consultation, the Parties have agreed to
the following amendment to the Joint Venture Contract for
Tangshan Panda Heat & Power Co., Ltd. executed by and between the
Parties on September 4, 1994:
1. Delete the original Article 5.2 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
" 5.2 The total investment of the JVC shall be US$29,800,000, and
the registered capital of the Company shall be US$11,920,000. The
contribution made by Park A shall be US$l,440,417.6, accounting
for 12.08% of the registered capital, the contribution made by
Party B shall be US$10,479,582.4, accounting for 87.92% of the
registered capital.
The rest of the total investment exceeding the registered capital
shall be made up by a shareholder loan provided by Party B to the
JVC. JVC shall be responsible for the payment of debt
obligations, interest and financing costs on such shareholder
loan.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed. "
2. Delete the original Article 5.3 in its entirety, to be
replaced by a new Article 5.3, which stipulates as follows:
"5.3 Party A and Party B shall each invest in the following way:
Party A: With cash capital contributions made at or during the
times specified in Section 5.4;
Party B: With cash capital contributions made at or during the
times specified in Section 5. 4. "
3. The above-cited new Article 5.2 and Article 5.3 shall take
effect from the date upon which the amendment is approved by the
original examination and approval authority that approved the
above JV Contract. This amendment is made in both English and
Chinese, both of which shall be equally authentic.
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused their respective authorized agents execute this
amendment as of the date and year set forth hereinabove.
Party A: Luannan County Heat & Power Plant
Hebei Province, China
By:
Position:
Party B: Pan-Western Energy Corp., LLC.
British Cayman Islands
By:
Position:
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN PANDA HEAT & POWER CO., LTD.
This amendment is made and entered into this 18th
November, 1996 by and between Party A Luannan County Heat & Power
Plant of Hebei Province, China through its duly authorized agent
and Party B Pan-Western Energy Corp, LLC. of British Cayman
Islands through its duly authorized agent both of which JV
Parties to Tangshan Panda Heat & Power Co., Ltd.
WHEREAS, certain amendments are required for capital
contributions, responsibilities and duties of the Parties
concerning land use right as well as procedures for extension of
term of joint venture for Tangshan Panda Heat & Power Co., Ltd.
NOW THEREFORE, through consultation, the Parties have
agreed to the following amendment to the Joint Venture Contract
for Tangshan Panda Heat & Power Co., Ltd. executed by and between
the Parties on September 4, 1994:
1. Delete the original Article 5.9 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
"5.2 The total investment of the JVC shall be
US$29,800,000 and the registered capital
of the Company shall be US$11,920,000. The contribution
made by Party, A shall be US$1,440,417.6, accounting
for 12.08% of the registered capital;, the contribution
made by Party B shall be US$10,479,582.4 accounting for
87.92% of the registered capital.
The rest of the total investment exceeding, the
registered capital shall be made up by a shareholder loan provided
by Party B to the JVC. JVC shall be responsible for the payment
of debt obligations, interest and financing costs on such
shareholder loan.
The Parties shall share the profits, losses arid risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety to be replaced
by a new Article 5.3, which stipulates as follows:
"5.3 Party A and Party B shall each invest in the
following way:
Party A: With cash capital contributions made at or
during the times specified in Section 5.4;
Party B: With cash capital contributions made at
or during the times specified in Section 5.4. "
3. Add to Article 6.1 new sub-section (viii), which stipulates
as follows:
"(viii) for an initial 23 years of the JVC, to obtain in its
own name granted land use right for the land to be used by
JVC and make such granted land use right available to JVC
via transfer lease or other appropriate means."
4. Delete the original Article 14.1 in its entirety, to be
replaced with a new Article 14.1, which stipulates as follows:
"14.1 The term of JVC shall be for an initial period of
twenty-three (23) years commencing on the date of
establishment of JVC. The date of the acquisition of the
business license for JVC shall be the date of its
establishment. If Party B should notify Party A of its
intention to continue its participation in the JVC beyond
this initial 23 year term, then Party A shall submit an
application duly executed by authorized representatives of
the Parties to the department in charge for an extension of
the term of the JVC for the lesser amount of time, as
requested by Party B, or the maximum period permitted by
applicable laws and regulations twenty-four (24) months
prior to the expiration of the term of the JVC."
5. Add new Article 14.3, which stipulates as follows:
"14.3 Upon expiration of the initial twenty-three (23) year
term of JVC, if no extension is made of such term of the
JVC, then the assets of the JVC (other than land use right)
shall be valued as per their remaining value at that time
and distributed in accordance with the investment share of
the Parties at liquidation, regardless whether such land use
will expire or not. And such assets shall not be under-
valued due to any such expiration of land use right."
The above-cited new Article 5.2, Article 5.3, Article 6.1 (viii),
Article 14.1 and Article 14.3 shall take effect from the date
upon which the amendment is approved by the original examination
and approval authority that approved the above JVC contract. This
amendment is made in both English and Chinese, both of which
shall be equally authentic.
IN WITNESS THEREOF, the Parties, intending to be legally
bound, have caused their respective authorized agents execute
this amendment as of the date and year set forth hereinabove.
Party A:
Luannan County Heat & Power Plant
Hebei Province, China
By:
Position:
Party B:
Panda Heat & Power Co., Ltd.
British Cayman Islands
By:
Position:
EXHIBIT 10.79
JOINT VENTURE CONTRACT
FOR
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Two Parties of the Joint Venture
ARTICLE 3 Name and Address of the Joint Venture Company
ARTICLE 4 Purpose and Business Scope of the Joint Venture Company
ARTICLE 5 Total Investment and Registered Capital
ARTICLE 6 Responsibilities and Duties of the Parties
ARTICLE 7 Board of Directors
ARTICLE 8 Business Administrative Organization
ARTICLE 9 Purchase of Materials
ARTICLE 10 Preparation Work
ARTICLE 11 Personnel Administration
ARTICLE 12 Foreign Currency Control
ARTICLE 13 Financing, Taxing and Auditing
ARTICLE 14 Terms of the Joint Venture
ARTICLE 15 Insurance
ARTICLE 16 Amendment, Termination and Release of the Contract
ARTICLE 17 Obligation of the Party Breaching the Contract
ARTICLE 18 Force Majeure
ARTICLE 19 Laws Applicable
ARTICLE 20 Arbitration
ARTICLE 21 Validity of the Contract
ARTICLE 22 Language of the Text
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the stipulations of "The Law of the
People's Republic of China on Chinese-Foreign Equity Joint
Ventures" and other related laws and rules, and on the basis of
equality and mutual benefit, Tangshan Luanhua Co. (Group),
Tangshan City, Hebei Province, the People's Republic of China
(PRC) and Pan-Western Energy Corp., LLC (a subsidiary of Panda
Energy Corp. in Dallas, Texas, U.S.A.) of Cayman Islands, British
West Indies, both agree to establish a Joint Venture Company with
joint investment and hereby sign this contract.
ARTICLE 2
TWO PARTIES OF THE JOINT VENTURE
2.1. Tangshan Luanhua Co. (Group) (hereinafter referred to as
Party A) is a registered company in PRC, its statutory address
being Benchengzhong Street, Luannan County, Hebei Province, PRC
and statutory representative being Zhao Changjun, General Manager
of Party A, with Chinese nationality.
Pan-Western Energy Corp., LLC (hereinafter referred to as
Party B) is a registered company in Cayman Islands, British West
Indies with its statutory address being Maples and Calder, Ugland
House, South Church Street, P.O. Box 309, George Town, Grand
Cayman, Cayman Islands, British West Indies and statutory
representative Robert W. Carter, Chairman and President of Party
B, with U.S.A. nationality.
ARTICLE 3
NAME AND ADDRESS
OF THE JOINT VENTURE COMPANY
3.1. Full Chinese name for the Joint Venture Company shall be:
3.2. Full English name for the Joint Venture Company shall be:
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD. (hereinafter
referred to as JVC).
3.3. The registered address of JVC shall be at Benchengzhong
Street, Luannan County, Tangshan City, Hebei Province, PRC.
ARTICLE 4
PURPOSE AND BUSINESS SCOPE
OF THE JOINT VENTURE COMPANY
4.1. The company shall be based and run on sound and lawful
business principles and principles of equality and mutual benefit
with the aim of selling its products and services at a profit
acceptable to the company.
4.2. The company shall manufacture and sell electricity, steam
and their by-products in the Chinese domestic market.
4.3. The total production capacity of the company shall be
approximately:
(i) Steam generation of 184,200 million kcal. per year and
electricity generation of 325 million kWh per year at capacity of
50,000 kW.
(ii) The production capacity may be changed from time to time by
agreement of the Parties.
ARTICLE 5
TOTAL INVESTMENT AND REGISTERED CAPITAL
5.1. JVC shall be a limited 1iability company. The liability of
both Parses to the company shall be limited to their amount of
capital investment.
5.2. The total investment of the company shall be US S29,500 000,
and the registered capital of the company shall be US
$11,800,000. The contribution made by Party A shall be US
$2,360,00O, accounting for 20% of the registered capital; the
contribution made by Party B shall be US S9,440,000, accounting
for 80% of the registered capital.
The rest of the total investment exceeding the registered
capital shall be settled by international financing and JVC shall
be responsible for the payment of debt obligations, interests and
financing costs.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed.
5.3. Party A and Party B shall invest in the following way:
Party A: With land use rights, material objects and cash capital
contributions made at or during the times specified in Section 5.4.
Party B: With cash capital contributions made at or during the
times specified in Section 5.4.
5.4. The total investment shall be fully made by the Commercial
Operation Date of the power and steam production facility (the
"Facility") to be owned by JVC (the "Commercial Operation Date"),
with registered capital contributions to be made according to the
percentage ownership of each Party.
Both Parties shall contribute five percent (5%) of the
registered capital in their respective proportion within thirty
(30) days after the business license is issued and contribute up
to fifteen percent (15%) of the registered capital in their
respective proportion within one hundred and eighty (180) days
after the business license is issued. Each Party shall guarantee
the payment of the remaining eighty five percent (85%) of the
registered capital to be sufficient to meet the requirements of
the Joint Venture project progress and within two years after the
establishment of JVC.
5.5. The registered capital of JVC shall not be reduced during
the joint venture period, but can be increased if either Party
reinvest with their profits distributed.
5.6. If either Party desires to transfer its capital investment
to a third Party, whether totally or partially, it should be
agreed upon by the other Party and approved by the authorities
concerned, and the other Part shall have the first right of
refusal to purchase which right must be exercised (if exercised),
within thirty (30) days after notice of such proposed transfer is
received. The other Party may waive its first right of refusal to
purchase, but shall reserve the right to choose a subsidiary or
affiliate Party as the assignee. The conditions for such transfer
from one Party of JVC to a third Party shall not be more
favorable than the conditions given to the other Party of JVC.
5.7. During the preparation period of JVC project and before
formal start of production, neither Party shall transfer its
capital investment.
5.8. Any increase, transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercial administration bureau.
5.9. The Parties shall agree upon a project development budget
and shall share all costs incurred pursuant to such budget
proportionately (in accordance with registered capital
contributions).
ARTICLE 6
RESPONSIBILITIES AND DUTIES OF THE PARTIES
6.1. Party A shall, in addition to its contribution of capital
investment, have responsibilities and duties to assist JVC in the
handling of the following matters concerned:
(i) To assist the company in handling matters such as the
application for approval, registration and the obtaining of
business licenses from relevant Chinese departments;
(ii) To assist JVC and EPC in applying for and obtaining all
possible tax reductions and exemptions according to Chinese
law;
(iii) To assist JVC and EPC in matters concerning the
purchase of equipment and machinery, the customs declaration
of imported equipment and transportation of supplies within
China;
(iv) To assist JVC in contacting and implementing the basic
facilities of water, electricity, transportation and
communication, etc.
(v) To assist JVC in the employment of local Chinese staff,
technicians, workers and other required personnel;
(vi) To assist foreign personnel sent by Party B to work in
JVC in obtaining necessary entry visas, work permits and
permit for travel on business within China;
(vii) To assist in other matters entrusted by JVC.
6.2. Party B shall, in addition to its contribution of capital
investment, have responsibilities and duties to assist JVC in the
handling of the following matters concerned:
(i) To assist JVC and the EPC Contractor to procure, per
specifications and instructions of JVC, the advanced and
applicable machinery and equipment from the international
market, and provide related information in that regard;
(ii) To assign technical personnel to be responsible for the
check and test, installation and maintenance of the
machinery and equipment introduced, train technical
personnel and workers of JVC;
(iii) To assist JVC in arranging for financing of the
Facility;
(iv) Subject to the direction of JVC, to manage the
development, construction and operation of the Facility;
(v) To assist in other matters entrusted by JVC.
ARTICLE 7
BOARD OF DIRECTORS
7.1. The official date of obtaining the business license of JVC
is the date of the establishment of the Board of Directors.
The Board of Directors shall be the highest authority of JVC
and decide all major issues concerning JVC.
7.2. The Board of Directors shall be composed of five (5)
directors, one (1) of which shall be from Party A and four (4)
from Party B. From within the Board of Directors, Party B shall
appoint a chairman. There shall be two (2) vice chairmen to be
respectively appointed by Party A and Party B. The directors
shall hold the office for a period of four (4) years. The term of
office may be renewed by the nominating Party.
7.3. Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital of
JVC;
(iii) Merger of JVC with another corporation,
(iv) Extension, termination and dissolution of the Joint
Venture and the liquidation and wind-up thereof;
(v) Other major issues that the Board of Directors deems it
necessary to have unanimous affirmative votes.
All issues except for the above shall be decided by majority
vote of the directors then present at any board meeting
(including special board meeting) at which a quorum is present.
Unless waived by Party A's director or Party A, the quorum shall
include one Party A's director.
7.4. The chairman of the board is the statutory representative of
the JVC. When the chairman cannot carry out his obligations for
whatever reason, he can authorize a vice chairman to act on his
behalf.
7.5. The board meeting shall be convened at least once a year and
shall be sponsored by the chairman. At the request of at least
two (2) of the directors, the chairman shall convene a special
board meeting.
ARTICLE 8
BUSINESS AND ADMINISTRATIVE ORGANIZATION
8.1. JVC shall set up its business administrative organization
which shall be responsible for daily management of the company.
The business administrative organization shall have one (1)
general manager and two (2) deputy general managers. The general
manager shall be recommended by Party B, and each Party shall
recommend one (1) deputy general manager. General and deputy
general managers shall be appointed by the Board of Directors,
and their tenures of office shall be four (4) years.
The obligation of the general manager is to carry out all the
decisions of the Board of Directors, organize and be responsible
for the routine business administrative work of JVC. The deputy
general managers shall assist the general manager in his work.
Decisions of important issues in the day-to-day business of JVC
shall be valid only when they are signed by both the general
manager and Party A's deputy general manager. Issues requiring
joint signatures shall be stipulated by the Board of Directors.
8.2. The business administrative organization of JVC shall
consist of certain departments and the manager of each department
shall be directly responsible to the general manager (or as
otherwise specified by the general manager or the Board of
Directors).
8.3. The general manager and each deputy general manager can be
dismissed at any time through the resolution passed at the board
meeting if they are found to practice graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 9
PURCHASE OF MATERIALS
9.1. As for the procurement of materials, fuels, fittings, means
of transport and office appliance ( hereinafter referred to as
materials) required by JVC, priority should be given to China
under the same condition.
ARTICLE 10
PREPARATION WORK
10.1. During the preparation and construction period of the Joint
Venture, a preparation group should be set up directly under the
Board of Directors, which shall consist of three (3) persons, one
(1) from Party A and two (2) from Party B. A group leader shall
be recommended by Party B, and a deputy group leader by Party A.
The group leader and deputy group leader should be appointed by
the Board of Directors.
10.2. The preparation group shall be responsible for auditing of
engineering design, signing of contract project agreements,
organizing the procurement and checking of the related equipment,
materials and other goods, working out the general schedule of
the construction plan for the budget, controlling financial
payment and design-making on the construction; responsible for
the control and management of documents, blue prints, files, and
data when the construction is in progress.
10.3. The preparation group shall be responsible for the
auditing, supervision, check and test of the project design,
quality, equipment and materials.
10.4. The staff organization of the preparation group and their
salaries and expenditures shall be entered into the construction
budget upon approval of the Board of Directors.
10.5. The preparation group shall be canceled upon the approval
of the Board of Directors after the construction is completed and
the procedure of transfer is implemented.
ARTICLE 11
PERSONNEL ADMINISTRATION
11.1. With regard to employment, dismissal, wages, labor
insurance, welfare and reward and penalty of the workers of JVC,
the Board of Directors should discuss and work out a labor
contract and then implement it in accordance with the "Provisions
of the People's Republic of China on Labor Management in Chinese-
Foreign Equity Joint Venture" and the methods of its
Implementation. The Labor Contract, after its signing, should be
kept in the file of the local labor administration department.
11.2. Staff members of JVC have the right to establish their
trade union and take part in its activities in accordance with
the stipulations of the "Trade Union Act of the People's Republic
of China".
ARTICLE 12
FOREIGN CURRENCY CONTROL
12.1. Foreign currency of JVC shall be handled according to the
"Interim Provisions of People's Republic of China on the
Administration of Foreign Currency" and related stipulations.
12.2. JVC shall open a foreign currency account in the Bank of
China with its business license. All legal income of JVC may be
converted and all the foreign exchanges shall be deposited in the
foreign currency account of its opening bank, and all expenses
and financing payments in foreign currency of JVC shall be paid
out of the foreign currency account of its opening bank.
ARTICLE 13
FINANCING, TAXING AND AUDITING
13.1. Financial accounting of JVC shall be made in accordance
with the rules and regulations of financial accounting in PRC as
stipulated for joint venture enterprises using Chinese and
foreign investment.
13.2. The fiscal year of JVC starts from the 1st day of January
and ends on the 31st day of December of each year. All the
accounting certificates, documents, reports and account books
should be written both in English and Chinese.
13.3. JVC should pay all the taxes required according to the
related laws and stipulations of PRC.
13.4. JVC should draw reserve funds, enterprise development funds
and welfare and reward funds according to the stipulations of
"The Law of the People's Republic of China on Chinese-Foreign
Equity Joint Ventures", the ratio of which funds to be drawn each
year should be decided by the Board of Directors according to the
status of business of JVC.
13.5. For accounting and auditing, JVC should hire accountants
and auditors registered in PRC, and report these results to the
Board of Directors and the General Manager. If Party B is willing
to hire auditors of another country for auditing of the annual
finance, Party A should agree, but all charges shall be paid by
Party B.
13.6. Within the first three months of the business year, the
Debit/Credit accounts of the last business year, documents of
profit/loss accounts and profit sharing plan should be initiated
by the General Manager and submitted to the Board of Directors
for review and approval.
ARTICLE 14
TERMS OF THE JOINT VENTURE
14.1. The term of JVC shall be twenty three (23) years commencing
on the date of establishment of JVC. The date of the acquisition
of the business license for JVC shall be the date of its
establishment. It is necessary to submit an application to the
department in charge for the extension of the term of JVC twelve
(12) months prior to the expiration of the term of JVC provided a
motion is initiated by one of the Parties and approved
unanimously by the Board of Directors.
14.2. In accordance with the laws, JVC should be liquidated upon
the expiration of JVC or termination of the business in advance.
The liquidated properties should be distributed according to the
ratio of investment made by Party A and Party B. For purpose of
liquidation distributions, all contract rights, land use rights
and other tangible or intangible properties shall be valued on a
fair market value "going concern basis". The liquidation
appraisal shall be conducted by a public accountant registered in
PRC.
ARTICLE 15
INSURANCE
15.1 Each engineering project of JVC should be insured by the
People's Insurance Company of China. The procedures shall be
handled by the department in charge.
ARTICLE 16
AMENDMENT, TERMINATION AND RELEASE
OF THE CONTRACT
16.1 When amendment is made to this contract and its appendixes,
it shall not be valid unless a written agreement is signed by
both Parties and submitted to and approved by the applicable
governmental authorities (the "Authorities") concerned.
16.2 With the unanimous agreement of the Board of Directors and
approval of the Authorities concerned, JVC can be terminated
prior to the original term or the contract be terminated in
advance if the JVC is incapable of going on with the business for
certain reasons.
ARTICLE 17
OBLIGATION OF THE PARTY
BREACHING THE CONTRACT
17.1. If either Party fails to contribute the amount of the
investment committed by the time stipulated in Article 5 of the
contract, the Party breaching the contract shall pay the Party
observing the contract 0.3% of the total amount of investment
overdue each three (3) months counting from the 30th bank date
overdue. Should the Party breaching the contract fail to
contribute the amount of capital it committed for six (6) months,
apart from the total sum of 0.6% of above-mentioned fines, the
Party observing the contract has the right to request the Party
breaching the contract to fully implement the contract within a
specified period or terminate the contract according to Article
16 of the contract and demand the Party breaching the contract to
compensate for its losses.
17.2. Obligation should go to the Party if it is that Party's
fault that effects the implementation or complete implementation
of the contract and its appendixes. Each Party shall be liable
for the breach of the contract, if the fault is due to both
Parties.
17.3. In order to guarantee its registered capital contributions,
Party B should provide a bank guarantee or guarantee from Panda
Energy Corp. of U.S.A. for its registered capital contributions.
ARTICLE 18
FORCE MAJEURE
18.1. As the consequence of Force Majeure, such as war,
earthquakes, typhoons, floods, fires or other natural calamities,
which cannot be predicated, or the happening or consequence of
which cannot be prevented or avoided (such as prolonged strikes),
and directly affects the execution of the contract or execution
of the contract according to the terms stipulated in the
contract, the Party that encounters the Force Majeure should
notify the Party by fax or other most immediate means available
of the incident. Valid documents to certify the detailed
happenings of the accident, and valid documents to certify the
reasons of its inability to fulfill or completely fulfill, or the
necessity to postpone the fulfillment of the contract, should be
submitted to the other Party within thirty (30) days of the
accident, and should be certified by the notarization department
of the region where the accident took place. Disputes arising
from cases of Force Majeure shall be resolved through
negotiations between the two Parties as to whether to terminate
the contract or partially release the obligations of the affected
Party, or postpone the fulfillment of the contract according to
the effect of the accident on the fulfillment of the contract. If
the matter cannot be resolved within forty-five (45) days through
negotiation, at the request of either Party, it shall be settled
through arbitration.
ARTICLE 19
LAWS APPLICABLE
19.1. The signing, validity, explanation and implementation of
this contract should abide by the laws of the People's Republic
of China.
ARTICLE 20
ARBITRATION
20.1. Should any dispute arise from the implementation of or
relating to the contract, both Parties shall resolve them through
friendly negotiations. If the discrepancies cannot be solved by
negotiations, they should be submitted to the Arbitration
Committee of China Council for the Promotion of International
Trade for solution, whose decision shall be final and legally
binding on both Parties. The arbitration shall be conducted in
both Chinese and English with both languages having equal weight.
20.2. During the process of arbitration, the contract should be
executed with no interruption, except for those parts relating to
discrepancies under arbitration.
ARTICLE 21
VALIDITY OF THE CONTRACT
21.1. All the articles of the contract including appendixes
(Articles of Association of JVC, certificates of Party A's
tangible capital contributions and list of equipment to be
imported) are indispensable parts of this contract.
21.2. The contract including its appendixes shall be valid only
when it has been approved by the Ministry of Foreign Trade and
Economic Cooperation or its entrusted inspection departments.
21.3. Any communication relating to the rights and obligations of
the two Parties should be made in written form, except notices,
telegrams and faxes. The addresses stated in Article 2 of the
contract are statutory addresses for correspondence between the
two Parties. Any change in the statutory address should be
notified to the other Party thirty (30) days in advance.
ARTICLE 22
LANGUAGE OF THE TEXT
22.1. This contract is written both in English and Chinese. The
contract in both languages is of equal validity.
This JVC contract for Tangshan Pan-Western Heat and Power
Co., Ltd. is signed by the authorized representatives of both
Parties in Shijiazhuang City, Hebei Province, China, as follows:
Party A: Party B:
Tangshan Luanhua Co. (Group) Pan-Western Energy Corp., LLC
________________________ _________________________
Zhao Xiucheng Ralph T. Killian
Authorized by and Senior Vice President
on behalf of Party A
Witnessed by:
China National Machinery
Import & Export Corp.
________________________
Bai Congyong
General Manager of
Overseas Enterprises Div.
September 3, 1994
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN PAN-WESTERN HEAT & POWER CO., LTD.
This amendment is made and entered into on July 19, 1996 by
and between Party A Luannan County Heat & Power Plant of Hebei
Province, China through its duly authorized agent and Party B
Pan-Western Energy Corp., LLC. of British Cayman Islands through
its duly authorized agent, both of which JV Parties to Tangshan
Panda Heat & Power Co., Ltd.
WHEREAS, adjustments are required for amounts of capital
contributions, their respective proportion to registered capital
and means of such contributions by the Parties to Tangshan Panda
Heat & Power Co., Ltd.;
NOW THEREFORE, through consultation, the Parties have agreed
to the following amendment to the Joint Venture Contract for
Tangshan Panda Heat & Power Co., Ltd. executed by and between the
Parties on September 4, 1994:
1. Delete the original Article 5.2 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
" 5.2 The total investment of the JVC shall be
US$29,800,000, and the registered capital of the
Company shall be US$11,920,000. The contribution made
by Park A shall be US$l,440,417.6, accounting for
12.08% of the registered capital, the contribution made
by Party B shall be US$10,479,582.4, accounting for
87.92% of the registered capital.
The rest of the total investment exceeding the registered
capital shall be made up by a shareholder loan provided by
Party B to the JVC. JVC shall be responsible for the payment
of debt obligations, interest and financing costs on such
shareholder loan.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety, to be
replaced by a new Article 5.3, which stipulates as follows:
"5. 3 Party A and Party B shall each invest in the
following way:
Party A: With cash capital contributions made at or
during the times specified in Section 5.4;
Park B: With cash capital contributions made at or
during the times specified in Section 5. 4. "
3. The above-cited new Article 5.2 and Article 5.3 shall
take effect from the date upon which the amendment is approved by
the original examination and approval authority that approved the
above JV Contract. This amendment is made in both English and
Chinese, both of which shall be equally authentic.
IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused their respective authorized agents execute
this amendment as of the date and year set forth hereinabove.
Party A: Luannan County Heat & Power Plant
Hebei Province, China
By:
Position:
Party B: Pan-Western Energy Corp., LLC.
British Cayman Islands
By:
Position:
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN PAN-WESTERN HEAT & POWER CO., LTD.
This amendment is made and entered into this 18th
November, 1996 by and between Party A Luannan County Heat & Power
Plant of Hebei Province, China through its duly authorized agent
and Party B Pan-Western Energy Corp, LLC. of British Cayman
Islands through its duly authorized agent both of which JV
Parties to Tangshan Panda Heat & Power Co., Ltd.
WHEREAS, certain amendments are required for capital
contributions, responsibilities and duties of the Parties
concerning land use right as well as procedures for extension of
term of joint venture for Tangshan Panda Heat & Power Co., Ltd.
NOW THEREFORE, through consultation, the Parties have
agreed to the following amendment to the Joint Venture Contract
for Tangshan Panda Heat & Power Co., Ltd. executed by and between
the Parties on September 4, 1994:
1. Delete the original Article 5.9 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
"5.2 The total investment of the JVC shall be
US$29,800,000 and the registered capital of the Company
shall be US$11,920,000. The contribution made by Party,
A shall be US$1,440,417.6, accounting for 12.08% of the
registered capital;, the contribution made by Party B
shall be US$10,479,582.4 accounting for 87.92% of the
registered capital.
The rest of the total investment exceeding, the registered
capital shall be made up by a shareholder loan provided by
Party B to the JVC. JVC shall be responsible for the payment
of debt obligations, interest and financing costs on such
shareholder loan.
The Parties shall share the profits, losses arid risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety to be replaced
by a new Article 5.3, which stipulates as follows:
"5.3 Party A and Party B shall each invest in the
following way:
Party A: With cash capital contributions made at or
during the times specified in Section 5.4;
Party B: With cash capital contributions made at or
during the times specified in Section 5.4."
3. Add to Article 6.1 new sub-section (viii), which
stipulates as follows:
"(viii) for an initial 23 years of the JVC, to obtain
in its own name granted land use right for the land to
be used by JVC and make such granted land use right
available to JVC via transfer lease or other
appropriate means."
4. Delete the original Article 14.1 in its entirety, to be
replaced with a new Article 14.1, which stipulates as follows:
"14.1 The term of JVC shall be for an initial period
of twenty-three (23) years commencing on the date of
establishment of JVC. The date of the acquisition of
the business license for JVC shall be the date of its
establishment. If Party B should notify Party A of its
intention to continue its participation in the JVC
beyond this initial 23 year term, then Party A shall
submit an application duly executed by authorized
representatives of the Parties to the department in
charge for an extension of the term of the JVC for the
lesser amount of time, as requested by Party B, or the
maximum period permitted by applicable laws and
regulations twenty-four (24) months prior to the
expiration of the term of the JVC."
5. Add new Article 14.3, which stipulates as follows:
"14.3 Upon expiration of the initial twenty-three (23)
year term of JVC, if no extension is made of such term
of the JVC, then the assets of the JVC (other than land
use right) shall be valued as per their remaining value
at that time and distributed in accordance with the
investment share of the Parties at liquidation,
regardless whether such land use will expire or not.
And such assets shall not be under-valued due to any
such expiration of land use right."
The above-cited new Article 5.2, Article 5.3, Article 6.1 (viii),
Article 14.1 and Article 14.3 shall take effect from the date
upon which the amendment is approved by the original examination
and approval authority that approved the above JVC contract. This
amendment is made in both English and Chinese, both of which
shall be equally authentic.
IN WITNESS THEREOF, the Parties, intending to be legally bound,
have caused their respective authorized agents execute this
amendment as of the date and year set forth hereinabove.
Party A:
Luannan County Heat & Power Plant
Hebei Province, China
By:
Position:
Party B:
Pan-Western Heat & Power Co., Ltd.
British Cayman Islands
By:
Position:
EXHIBIT 10.80
JOINT VENTURE CONTRACT
FOR
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Two Parties of the Joint Venture
ARTICLE 3 Name and Address of the Joint Venture Company
ARTICLE 4 Purpose and Business Scope of
the Joint Venture Company
ARTICLE 5 Total Investment and Registered Capital
ARTICLE 6 Responsibilities and Duties of the Parties
ARTICLE 7 Board of Directors
ARTICLE 8 Business Administrative Organization
ARTICLE 9 Purchase of Materials
ARTICLE 10 Preparation Work
ARTICLE 11 Personnel Administration
ARTICLE 12 Foreign Currency Control
ARTICLE 13 Financing, Taxing and Auditing
ARTICLE 14 Terms of the Joint Venture
ARTICLE 15 Insurance
ARTICLE 16 Amendment, Termination and Release of the
Contract
ARTICLE 17 Obligation of the Party Breaching the
Contract
ARTTCLE 18 Force Majeure
ARTICLE 19 Laws Applicable
ARTICLE 20 Arbitration
ARTICLE 21 Validity of the Contract
ARTICLE 22 Language of the Text
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the stipulations of "The Law of the
People's Republic of China on Chinese-Foreign Equity Joint
Ventures" and other related laws and rules, and on the basis
of equality and mutual benefit, Luannan County Heat & Power
Plant of Tangshan City, Hebei Province, the People's
Republic of China (PRC) , Tangshan Luanhua (Group) Co. Of
Tangshan City, Hebei Province, PRC and Pan-Western Energy
Corp., LLC (a subsidiary of Panda Energy Corp. in Dallas,
Texas, U.S.A.) of Cayman Islands, British West Indies, both
agree to establish a Joint Venture Company with joint
investment and hereby sign this contract.
ARTICLE 2
PARTIES OF THE JOINT VENTURE
2.1. Luannan County Heat & Power Plant (hereinafter referred
to as Party A) is a registered company in PRC, its statutory
address being Benchengzhong Street, Luannan County. Hebei
Providence, PRC and statutory representative being Zhao
Xiuchen, General Manager of Party A, with Chinese
nationality.
Pan-Western Energy Corp. LLC (hereinafter referred to as
Party B) is a registered company in Cayman Islands, British
West Indies with its statutory address being_ Maples and
Calder, Ugland House, South Church Street, P.O. Box 309,
George Town, Grand Cayman, Cayman Islands, British West
Indies and statutory; representative Robert W. Carter,
Chairman and President of Party B, with U.S.A. nationality.
Tangshan Luanhua (Group) Co. (hereinafter referred to as
Party C) is a registered company in PRC, its statutory
address being Benchengzhong Street, Luannan County, Hebei
Province, PRC and statutory representative being Zhao
Changjun, General Manager of Party C, with Chinese
nationality.
ARTICLE 3
NAME AND ADDRESS
OF THE JOINT VENTURE COMPANY
3.1. Full Chinese name for the Joint Venture shall be:
3.2. Full English name for the Joint Venture Company shall
be: TANGSHAN CAYMAN HEAT AND POWER CO.LTD. (hereinafter
referred to as JVC).
3.3. The registered address of JVC shall be at Benchengzhong
Street, Luannan County, Tangshan City, Hebei Province, PRC.
ARTICLE 4
PURPOSE AND BUSINESS SCOPE
OF THE JOINT VENTURE COMPANY
4.1. The company shall be based and run on sound and lawful
business principles and principles of equality and mutual
benefit with the aim of selling its products and services at
profit acceptable to the company.
4.2. The company shall manufacture and sell hot water and
steam to the local heat network of Luannan County through
the construction, management and operation of a water supply
system and a steam and heat production facility.
4.3. The total production capacity of the company shall be
approximately:
(i) Steam generation of 184,200 million kcal. per year
and hot water sales equivalent of 112,000 million
kcal. per year
(ii) The production capacity may be changed from
time to time by agreement of the Parties.
ARTICLE 5
TOTAL INVESTMENT AND REGISTERED CAPITAL
5.1. JVC shall be a limited liability company. The liability
of any Party to the company shall be limited to their amount
of capital investment.
5.2. The total investment of the company shall be US
$29,440,000, and the registered capital of the company shall
be US $11,778,000. The contribution made by Party A shall be
US $1,178,000, accounting for 10% of the registered capital,
the contribution made by Party B shall be US $9,422,000,
accounting for 80% of the registered capital: the
contribution made by Party C shall be US $1,178,000,
accounting for 10% of the registered capital;
The rest of the total investment exceeding the registered
capital shall be settled by international financing and JVC
shall be responsible for the payment of debt obligations,
interests and financing costs.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed.
5.3. Party A, Party B and Party C shall invest in the
following way:
Party A: With cash capital contributions made at or during
the times specified in Section 5.4.
Party B: With cash capital contributions made at or during
the times specified in Section 5.4.
Party C: With cash capital contributions made at or during
the times specified in Section 5.4.
5.4. The total investment shall be fully made by the
Commercial Operation Date of the power and steam production
facility (the "Facility") to be owned by JVC (the
"Commercial Operation Date"), with registered capital
contributions to be made according to the percentage
ownership of each Party.
Each Party shall contribute fifteen percent (15%)of the
registered capital in their respective proportion within
ninety (90) days after the business license is issued. Each
Party shall guarantee the payment of the remaining eighty
five percent (85%) of the registered capital to be
sufficient to meet the requirements of the Joint Venture
project progress and within two years after the
establishment of JVC.
5.5. The registered capital of JVC shall not be reduced
during the joint venture period, but can be increased if any
Party reinvest with their profits distributed.
5.6. In case any party to this JVC contract intends to
transfer its investment share in the JVC to a party which is
not a party to this JVC (Outside Party), it shall require
the prior written consent of all the existing parties
hereto. If a Party desires to transfer its capital
investment to a Outside Party, whether totally or partially,
it should be agreed upon by the other Parties and approved
by the authorities concerned, and the other Parties shall
have the first right of refusal to purchase which right must
be exercised (if exercised), within thirty (30) days after
notice of such proposed transfer is received. The other
Parties may waive its first right of refusal to purchase,
but shall reserve the right to choose a subsidiary or
affiliate Party as the assignee. The conditions for such
transfer from one Party of JVC to a Outside Party shall not
be more favorable than the conditions given to any other
Party of JVC.
5.7. During the preparation period of JVC project and before
formal start of production, no Party shall transfer its
capital investment.
5.8. Any increase, transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors
and approved by the authorities concerned, and must be
registered with the local industrial and commercial
administration bureau.
5.9. The Parties shall agree upon a project development
budget and shall share all costs incurred pursuant to such
budget proportionately (in accordance with registered
capital contributions).
ARTICLE 6
RESPONSIBILITIES AND DUTIES OF THE PARTIES
6.1. Party A and Party C shall, in addition to its
contribution of capital investment, have responsibilities
and duties to assist JVC in the handling of the following
matters concerned:
(i) To assist the company in handling matters such as
the application for approval, registration and the
obtaining of business licenses from relevant Chinese
departments;
(ii) To assist JVC and EPC in applying for and obtaining
all possible tax reductions and exemptions according to
Chinese law;
(iii) To assist JVC and EPC in matters concerning the
purchase of equipment and machinery, the customs
declaration of imported equipment and transportation of
supplies within China;
(iv) To assist JVC in contacting and implementing the
basic facilities of water, electricity transportation
and communication, etc..
(v) To assist JVC in the employment of local Chinese
staff, technicians, workers and other required
personnel;
(vi) To assist foreign personnel sent by Party B to work
in JVC in obtaining necessary entry visas, work permits
and permit for travel on business within China;
(vii) To assist in other matters entrusted by JVC.
6.2. Party B shall, in addition to its contribution of
capital investment, have responsibilities and duties to
assist JVC in the handling of the following matters
concerned:
(i)To assist JVC and the EPC Contractor to procure, per
specifications and instructions of JVC, the advanced and
applicable machinery and equipment from the
international market, and provide related information in
that regard;
(ii) To assign technical personal to be responsible for
the check and test, installation and maintenance of the
machinery and equipment introduced, train technical
personnel and workers of JVC;
(iii) To assist JVC in arranging for financing of the
Facility;
(iv) Subject to the direction of JVC, to manage the
development, construction and operation of the Facility;
(v) To assist in other matters entrusted by JVC.
ARTICLE 7
BOARD OF DIRECTORS
7.1. The official date of obtaining the business license of
JVC is the date of the establishment of the Board of
Directors.
The Board of Directors shall be the highest authority of JVC
and decide all major issues concerning JVC.
7.2. The Board of Directors shall be composed of five (5)
directors, one (1) of which shall be from Party A and four
(4) from Party B, none from Party C. From within the Board
of Directors, Party B shall appoint a chairman. There shall
be two (2) vice chairmen to be respectively appointed by
Party A and Party B. The directors shall hold the office for
a period of four (4) years. The term of office may be
renewed by the nominating Party.
7.3. Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital of
JVC;
(iii) Merger of JVC with another corporation;
(iv) Extension, termination and dissolution of the Joint
Venture and the liquidation and wind-up thereof;
(v) Other major issues that the Board of Directors deems
it necessary to have unanimous affirmative votes.
All issues except for the above shall be decided by majority
vote of the directors then present at any board meeting
(including special board meeting) at which a quorum is
present. Unless waived by Party A's director or Party A, the
quorum shall include one Party A's director.
7.4. The chairman of the board is the statutory
representative of the JVC. When the chairman cannot carry
out his obligations for whatever reason, he can authorize a
vice chairman to act on his behalf.
7.5. The board meeting shall be convened at least once a
year and shall be sponsored by the chairman. At the request
of at least two (2) of the directors, the chairman shall
convene a special board meeting.
ARTICLE 8
BUSINESS ADMINISTRATIVE ORGANIZATION
8.1. JVC shall set up its business administrative
organization which shall be responsible for daily management
of the company.
The business administrative organization shall have one (1)
general manager and two (2) deputy general managers. The
general manager shall be recommended by Party B, and Party A
and Party B shall each recommend one (1) deputy general
manager. General and deputy general managers shall be
appointed by the Board of Directors, and their tenures of
office shall be four (4) years.
The obligation of the general manager is to carry out all
the decisions of the Board of Directors. organize and be
responsible for the routine business administrative work of
JVC. The deputy general managers shall assist the general
manager in his work. Decisions of important issues in the
day-to-day business of JVC shall be valid only when they are
signed by both the general manager and Party A's deputy;
general manager. Issues requiring joint signatures shall be
stipulated by the Board of Directors.
8.2. The business administrative organization of JVC shall
consist of certain departments and the manager of each
department shall be directly responsible to the general
manager (or as otherwise specified by the general manager or
the Board of Directors).
8.3. The general manager and each deputy general manager can
be dismissed at any time through the resolution passed at
the board meeting if they are found to practice graft or be
seriously derelict of their duties or with the approval of
the Party recommending such person for any reason.
ARTICLE 9
PURCHASE OF MATERIALS
9.1. As for the procurement of materials, fuels, fittings,
means of transport and office appliance (hereinafter
referred to as materials) required by JVC, priority should
be given to China under the same condition.
ARTICLE 10
PREPARATION WORK
10.1. During the preparation and construction period of the
Joint Venture, a preparation group should be set up directly
under the Board of Directors, which shall consist of three
(3) persons, one (1) from Party A and two (2) from Party B.
A group leader shall be recommended by Party B, and a deputy
group leader by Party A. The group leader and deputy group
leader should be appointed by the Board of Directors.
10.2. The preparation group shall be responsible for
auditing of engineering design, signing of contract project
agreements, organizing the procurement and checking of the
related equipment, materials and other goods, working out
the general schedule of the construction plan for the
budget, controlling financial payment and design-making on
the construction; responsible for the control and management
of documents, blue prints, files. and data when the
construction is in progress.
10.3. The preparation group shall be responsible for the
auditing, supervision, check and test of the project design,
quality, equipment and materials.
10.4. The staff organization of the preparation group and
their salaries and expenditures shall be entered into the
construction budget upon approval of the Board of Directors.
10.5. The preparation group shall be canceled upon the
approval of the Board of Directors after the construction is
completed and the procedure of transfer is implemented.
ARTICLE 11
PERSONNEL ADMINISTRATION
11.1. With regard to employment, dismissal, wages, labor
insurance, welfare and reward and penalty of the workers of
JVC, the Board of Directors should discuss and work out a
labor contract and then implement it in accordance with the
"Provisions of the People's Republic of China on Labor
Management in Chinese-Foreign Equity Joint Venture" and the
methods of its implementation. The Labor Contract, after its
signing, should be kept in the file of the local labor
administration department.
11.2. Staff members of JVC have the right to establish their
trade union and take part in its activities in accordance
with the stipulations of the "Trade Union Act of the
People's Republic of China".
ARTICLE 12
FOREIGN CURRENCY CONTROL
12.1. Foreign currency of JVC shall be handled according to
the "Interim Provisions of People's Republic of China on the
Administration of Foreign Currency and related stipulations.
12.2. JVC shall open a foreign currency account in the Bank
of China with its business license. All legal income of JVC
may be converted and all the foreign exchanges shall be
deposited in the foreign currency account of its opening
bank, and all expenses and financing payments in foreign
currency of JVC shall be paid out of the foreign currency
account of its opening bank.
ARTICLE 13
FINANCING, TAXING AND AUDITING
13.1. Financial accounting of JVC shall be made in
accordance with the rules and regulations of financial
accounting in PRC as stipulated for joint venture
enterprises using Chinese and foreign investment.
13.2. The fiscal year of JVC starts from the 1st day of
January and ends on the 31st day of December of each year.
All the accounting certificates, documents reports and
account books should be written both in English and Chinese.
13.3. JVC should pay all the taxes required according to the
related laws and stipulations of PRC.
13.4. JVC should draw reserve funds, enterprise development
funds and welfare and reward funds according to the
stipulations of "The Law of the People's Republic of China
on Chinese-Foreign Equity Joint Ventures", the ratio of
which funds to be drawn each year should be decided by the
Board of Directors according to the status of business of
JVC.
13.5. For accounting and auditing, JVC should hire
accountants and auditors registered in PRC, and report these
results to the Board of Directors and the General Manager.
If Party B is willing to hire auditors of another country
for auditing of the annual finance, Party A and Party C
should agree, but all charges shall be paid by Party B.
13.6. Within the first three months of the business year,
the Debit/Credit accounts of the last business year,
documents of profit/loss accounts and profit sharing plan
should be initiated by the General
Manager and submitted to the Board of Directors for review
and approval.
ARTICLE 14
TERMS OF THE JOINT VENTURE
14.1. The term of JVC shall be twenty three (23) years
commencing on the date of establishment of JVC. The date of
the acquisition of the business license for JVC shall be the
date of its establishment. It is necessary to submit an
application to the department in charge for the extension of
the term of JVC twelve (l2) months prior to the expiration
of the term of JVC provided a motion is initiated by one of
the Parties and approved unanimously by the Board of
Directors.
14.2. In accordance with the laws, JVC should be liquidated
upon the expiration of JVC or termination of the business in
advance. The liquidated properties should be distributed
according to the ratio of investment made by Party A, Party
B and Party C. For purpose of liquidation distributions, all
contract rights, land use rights and other tangible or
intangible properties shall be valued on a fair market value
"going concern basis". The liquidation appraisal shall be
conducted by a public accountant registered in PRC.
ARTICLE 15
INSURANCE
15.1 Each engineering project of JVC should be insured by
the People's Insurance Company of China. The procedures
shall be handled by the department in charge.
ARTICLE 16
AMENDMENT, TERMINATION AND RELEASE
OF THE CONTRACT
16.1 When amendment is made to this contract and its
appendixes, it shall not be valid unless a written agreement
is signed by all Parties and submitted to and approved by
the applicable governmental authorities (the "Authorities")
concerned.
16.2 With the unanimous agreement of the Board of Directors
and approval of the Authorities concerned, JVC can be
terminated prior to the original term or the contract be
terminated in advance if the JVC is incapable of going on
with the business for certain reasons.
ARTICLE 17
OBLIGATION OF THE PARTY
BREACHING THE CONTRACT
17.1. If any Party fails to contribute the amount of the
investment committed by the time stipulated in Article 5 of
the contract, the Party breaching the contract shall pay the
Parties observing the contract 0.3% of the total amount of
investment overdue each three (3) months counting from the
30th bank date overdue, allocated based on registered
capital contribution. Should the Party breaching the
contract fail to contribute the amount of capital it
committed for six (6) months, apart from the total sum of
0.6% of above-mentioned fines, the Parties observing the
contract has the right to request the Party breaching the
contract to fully implement the contract within a specified
period or terminate the contract according to Article 16 of
the contract and demand the Party breaching the contract to
compensate for its losses.
17.2. Obligation should go to the Party if it is that
Party's fault that effects the implementation or complete
implementation of the contract and its appendixes. Each
Party shall be liable for the breach of the contract. if the
fault is due to all Parties.
17.3. In order to guarantee its registered capital
contributions, Party B should provide a bank guarantee or
guarantee from Panda Energy Corp. of U.S.A. for its
registered capital contributions.
ARTICLE 18
FORCE MAJEURE
18.1. As the consequence of Force Majeure, such as war,
earthquakes, typhoons, floods, fires or other natural
calamities, which cannot be predicated, or the happening or
consequence of which cannot be prevented or avoided (such as
prolonged strikes), and directly affects the execution of
the contract, or execution of the contract according to the
terms stipulated in the contract, the Party that encounters
the Force Majeure should notify the other Parties by fax or
other most immediate means available of the incident. Valid
documents to certify the detailed happenings of the
accident, and valid documents to certify the reasons of its
inability to fulfill or completely fulfill, or the necessity
to postpone the fulfillment of the contract, should be
submitted to the other Parties within thirty (30) days of
the accident, and should be certified by the notarization
department of the region where the accident took place.
Disputes arising from cases of Force Majeure shall be
resolved through negotiations between the Parties as to
whether to terminate the contact or partially release the
obligations of the affected Party, or postpone the
fulfillment of the contract according to the effect of the
accident on the fulfillment of the contract. If the matter
cannot be resolved within forty-five (45) days through
negotiation, at the request of a Party, it shall be settled
through arbitration.
ARTICLE 19
LAWS APPLICABLE
19.1. The signing, validity, explanation and implementation
of this contract should abide by the laws of the People's
Republic of China.
ARTICLE 2O
ARBITRATION
20.1. Should any dispute arise from the implementation of or
relating to the contact, the Parties shall resolve them
through friendly negotiations. If the discrepancies cannot
be solved by negotiations, they should be submitted to the
Arbitration Committee of China Council for the Promotion of
International Trade for solution, whose decision shall be
final and legally binding on the Parties. The arbitration
shall be conducted in both Chinese and English with both
languages having equal weight.
20.2. During the process of arbitration, the contract should
be executed with no interruption, except for those parts
relating to discrepancies under arbitration.
ARTICLE 21
VALIDITY OF THE CONTRACT
21.1 All the articles of the contact including appendixes
(Articles of Association of JVC and list of equipment to be
imported) are indispensable parts of this contract.
21.2 The contract including its appendixes shall be valid
only when it has been approved by the Ministry of Foreign
Trade and Economic Cooperation or its entrusted inspection
departments.
21.3. Any communication relating to the rights and
obligations of the Parties should be made in written form,
except notices, telegrams and faxes. The addresses stated in
Article 2 of the contract are statutory addresses for
correspondence between the Parties. Any change in the
statutory address should be notified to the other Parties
thirty (30) days in advance.
ARTICLE 22
LANGUAGE OF THE TEXT
22.1. This contract is written both in English and Chinese.
The contract in both languages is of equal validity.
This contract for Tangshan Cayman Heat and Power Co., Ltd.
is signed by the authorized representatives of the Parties
in Beijing China, as follows:
Party A:
Luannan County
Heat & Power Plant
Zhou Dingpeng
Authorized by and on
behalf of Party A
Party B:
Pan-Western Energy Corp., LLC
Ralph T. Killian
Senior Vice President
Party C:
Tangshan Luanhua (Group) Co.
Zhou Dingpeng Authorized by
and on behalf of Party C
Witnessed by: China National
Machinery Import & Export Corp.
Yang Shengli
Deputy General Manager of CMC Enterprises Dept.
Dated on May 11, 1996
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN CAYMAN HEAT & POWER CO., LTD.
This amendment is made and entered into on July 19, 1996 by
and among Party A Luannan County Heat & Power Plant of
Hebei Province, China through its duly authorized agent,
Party B Pan-Western Energy Corp., LLC. of British Cayman
Islands through its duly authorized agent, and Party C
Tangshan Luanhua Co. (Group) of Hebei Province, China
through its duly authorized agent, all of which JV Parties
to Tangshan Cayman Heat & Power Co., Ltd.
WHEREAS, adjustments are required for amounts of capital
contributions, their respective proportion to registered
capital and means of such contributions by the Parties to
Tangshan Cayman Heat & Power Co., Ltd.;
NOW THEREFORE, through consultation, the Parties have
agreed to the following amendment to the Joint Venture
Contract for Tangshan Cayman Heat & Power Co., Ltd.
executed by and between the Parties on May 11, 1996:
l. Delete the original Article 5.2 in its entirety, to be
replaced by a new Article 5.2, which stipulates as
follows:
"5.2 The total investment of the JVC shall be
US$29,440,000, and the registered capital of the Company
shall be US$11,776,000. The contribution made by Party A
shall be US$71l,508.3, accounting for 6.04% of the
registered capital; the contribution made by Party B shall
be US$10,352,983.4, accounting for 87.92% of the
registered capital; the contribution made by Party C shall
be US$711,508.3, counting for 6.04% of the registered
capital.
The rest of the total investment exceeding the registered
capital shall be made up by a shareholder loan provided by
Party B to the JVC. JVC shall be responsible for the
payment of debt obligations, interest and financing costs
on such shareholder loan.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety, to be
replaced by a new Article 5.3, which stipulates as
follows:
"5.3 Party A, Party B and Party C shall each invest in the
following way:
Party A: With capital contribution in kind by water wells
and systems at the value of US$180,723 and the rest with
cash capital contributions made at or during the times
specified in Section 5.4;
Party B: With cash capital contributions made at or during
the times specified in Section 5.4."
Party C: With capital contribution in kind by water wells
and systems at the value of US$180,723 and the rest with
cash capital contributions made at or during the times
specified in Section 5.4;
3. The above-cited new Article 5.2 and Article 5.3 shall
take effect from the date upon which the amendment is
approved by the original examination and approval
authority that approved the above JV Contract. This
amendment is made in both English and Chinese, both of
which shall be equally authentic.
IN WITNESS WHEREOF, Parties, intending to be legally
bound, have caused their respective authorized agents
execute this amendment as of the date and year set forth
hereinabove.
Party A: Luannan County Heat &
Power Plant
Hebei Province, China
By: ________________
Position:
Party B: Pan-Western Energy Corp., LLC.
British Cayman Islands
By: _____________
Position:
Party C: Tangshan Luanhua Co. (Group)
Hebei Province, China
By: ________________
Position:
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN CAYMAN HEAT & POWER CO., LTD.
This amendment is made and entered into this 18th November, 1996
by and among Party A Luannan County Heat & Power Plant of Hebei
Province, China through its duly authorized agent, Party B Pan-
Western Energy Corp., LLC. of British Cayman Islands through its
duly authorized agent, and Party C Tangshan Luanhua Co. (Group)
of Hebei Province, China through its duly authorized agent, all
of which JV Parties to Tangshan Cayman Heat & Power Co., Ltd.
WHEREAS, certain amendments are required for capital
contributions, responsibilities and duties of the Parties
concerning land use right as well as procedures for extension of
term of joint venture for Tangshan Cayman Heat & Power Co., Ltd.;
NOW THEREFORE, through consultation, the Parties have agreed to
the following amendment to the Joint Venture Contract for
Tangshan Cayman Heat & Power Co., Ltd. executed by and between
the Parties on May 11, 1996:
1. Delete the original Article 5.2 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
"5.2 The total investment of the JVC shall be US$29,440,000,
and the registered capital of the Company shall be US$11,778,000.
The contribution made by Party A shall be US$71l,391.20,
accounting for 6.04% of the registered capital; the contribution
made by Party B shall be US$10,355,217, accounting for 87.92% of
the registered capital; the contribution made by Party C shall be
US $711,391.20, counting for 6.04% of the registered capital.
The rest of the total investment exceeding the registered capital
shall be made up by a shareholder loan provided by Party B to the
JVC. JVC shall be responsible for the payment of debt
obligations, interest and financing costs on such shareholder
loan.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety, to be
replaced by a new Article 5.3, which stipulates as follows:
"5.3 Party A, Party B and Party C shall each invest in the
following way:
Party A: With cash capital contributions made at or during the
times specified in Section 5.4;
Party B: With cash capital contributions made at or during the
times specified in Section 5.4."
Party C: With cash capital contributions made at or during the
times specified in Section 5.4."
3. Add to Article 6.1 new sub-section (viii), which stipulates as
follows:
"(viii) for an initial 23 years of the JVC, to obtain in
their own name granted land use right for the land to be
used by JVC and make such granted land use right available
to JVC via transfer, lease or other appropriate means."
4. Delete the original Article 14.1 in its entirety, to be
replaced with a new Article 14.1, which stipulates as follows:
"14.1 The term of JVC shall be for an initial period of
twenty-three (23) years commencing on the date of
establishment of JVC. The date of the acquisition of the
business license for JVC shall be the date of its
establishment. If Party B should notify Party A and Party C
of its intention to continue its participation in the JVC
beyond this initial 23 year term, then Party A and Party C
shall submit an application duly executed by authorized
representatives of the Parties to the department in charge
for an extension of the term of the JVC for the lesser
amount of time, as requested by Party B, or the maximum
period permitted by applicable laws and regulations twenty-
four (24) months prior to the expiration of the term of the
JVC."
5. Add new Article 14.3, which stipulates as follows:
"14.3 Upon expiration of the initial twenty-three (23) year term
of JVC, if no extension is made of such term of the JVC, then the
assets of the JVC (other than land use right) shall be valued as
per their remaining value at that time and distributed in
accordance with the investment share of the Parties at
liquidation, regardless whether such land use right will expire
or not. And such assets shall not be under-valued due to any
such expiration of land use right."
The above-cited new Article 5.2, Article 5.3, Article 6.1 (viii),
Article 14.1 and Article 14.3 shall take effect from the date
upon which the amendment is approved by the original examination
and approval authority that approved the above JV Contract. This
amendment is made in both English and Chinese, both of which
shall be equally authentic.
IN WITNESS WHEREOF, Parties, intending to be legally bound, have
caused their respective authorized agents execute this amendment
as of the date and year set forth hereinabove.
Party A:
Luannan County Heat & Power Plant
Hebei Province, China
By: ____________
Position:
Party B:
Pan-Western Energy Corp., LL.
British Cayman Islands
By: ____________
Position: Sr. VP
Party C:
Tangshan Luanhua Co. (Group)
Hebei Province, China
By: ____________
Position:
EXHIBIT 10.81
JOINT VENTURE CONTRACT
FOR
TANGSHAN PAN-SINO HEAT CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Two Parties of the Joint Venture
ARTICLE 3 Name and Address of the Joint Venture Company
ARTICLE 4 Purpose and Business Scope of the Joint Venture Company
ARTICLE 5 Total Investment and Registered Capital
ARTICLE 6 Responsibilities and Duties of the Parties
ARTICLE 7 Board of Directors
ARTICLE 8 Business Administrative Organization
ARTICLE 9 Purchase of Materials
ARTICLE 10 Preparation Work
ARTICLE 11 Personnel Administration
ARTICLE 12 Foreign Currency Control
ARTICLE 13 Financing, Taxing and Auditing
ARTICLE 14 Terms of the Joint Venture
ARTICLE 15 Insurance
ARTICLE 16 Amendment, Termination and Release of the Contract
ARTICLE 17 Obligation of the Party Breaching the Contact
ARTICLE 18 Force Majeure
ARTICLE 19 Laws Applicable
ARTICLE 20 Arbitration
ARTICLE 21 Validity of the Contract
ARTICLE 22 Language of the Text
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the stipulations of "The Law of the
People's Republic of China on Chinese-Foreign Equity Joint
Ventures" and other related laws and rules, and on the basis of
equality and mutual benefit, Luannan County Heat Company of
Tangshan City, Hebei Province, the People's Republic of China
(PRC), and Pan-Western Energy Corp., LLC (a subsidiary of Panda
Energy Corp. in Dallas, Texas, U.S.A) of Cayman Islands, British
West Indies, both agree to establish a Joint Venture Company with
joint investment and hereby sign this contract.
ARTICLE 2
PARTIES OF THE JOINT VENTURE
2.1. Luannan County Heat Company (hereinafter referred to as
Party A) is a registered company in PRC, its statutory address
being Benchengzhong Street Luannan County, Hebei Province, PRC
and statutory representative being Rong Taicheng, General Manager
of Party A with Chinese nationality. Pan-Western Energy Corp., LLC
(hereinafter referred to as Party B) is a registered company in
Cayman Islands, British West Indies with its statutory address being
Maples and Calder, Ugland House, South Church Street, P.O. Box
309, George Town, Grand Cayman, Cayman Islands, British West
Indies and statutory representative Robert W. Carter, Chairman and
President of Party B, with U.S.A. nationality.
ARTICLE 3
NAME AND ADDRESS
OF THE JOINT VENTURE COMPANY
3.1. Full Chinese name for the Joint Venture Company shall be:
[text written in Chinese]
3.2. Full English name for the Joint Venture Company shall be:
TANGSHAN PAN-SINO HEAT CO., LTD. (hereinafter referred to as
JVC).
3.3. The registered address of JVC shall be at Benchengzhong
Street, Luannan County, Tangshan City, Hebei Province, PRC.
ARTICLE 4
PURPOSE AND BUSINESS SCOPE
OF THE JOINT VENTURE COMPANY
4.1. The company shall be based and run on sound and lawful
business principles and principles of equality and mutual benefit
with the aim of selling its products and services at a profit
acceptable to the company.
4.2. The company shall distribute and sell hot water and steam to
the domestic Chinese industrial and commercial market through the
construction, management and operation of a local steam and hot
water network.
4.3. The total supply capacity of the company shall be
approximately:
(i) Steam supply of 184,200 million kcal. per year and hot
water sales equivalent of 112,000 million kcal. per year.
(ii) The supply capacity may be changed from time to time by
agreement of the Parties.
ARTICLE 5
TOTAL INVESTMENT AND REGISTERED CAPITAL
5.1. JVC shall be a limited liability company. The liability of
any Party to the company shall be limited to their amount of
capital investment.
5.2. The total investment of the company shall be US S29,715,000,
and the registered capital of the company shall be US
S11,886,000. The contribution made by Party A shall be US
$2,377,200, accounting for 20% of the registered capital; the
contribution made by Party B shall be US $9,508,800, accounting
for 80% of the registered capital.
The rest of the total investment exceeding the registered capital
shall be settled by international financing and JVC shall be
responsible for the payment of debt obligations, interests and
financing costs.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed.
5.3. Party A and Party B shall invest in the following way:
Party A: With cash capital contributions made at or during the
times specified in Section 5.4.
Party B: With cash capital contributions made at or during the
times specified in Section 5.4.
5.4. The total investment shall be fully made by the Commercial
Operation Date of the power and steam production facility, (the
"Facility") to be owned by JVC (the "Commercial Operation Date),
with registered capital contributions to be made according to the
percentage ownership of each Party.
Each Party shall contribute fifteen percent (15%) of the
registered capital in their respective proportion within ninety
(90) days after the business license is issued. Each Party shall
guarantee the payment of the remaining eighty five percent (85%)
of the registered capital to be sufficient to meet the
requirements of the Joint Venture project progress and within two
years after the establishment of JVC.
5.5. The registered capital of JVC shall not be reduced during
the joint venture period, but can be increased if any Party
reinvest with their profits distributed.
5.6 In case any party to this JVC contract intends to transfer
its investment share in the JVC to a party which is not a party
to this JVC(Outside Party), it shall require the prior written
consent of all the existing parties hereto. If a Party desires to
transfer its capital investment to an Outside Party, whether
totally or partially, it should be agreed upon by the other
Parties and approved by the authorities concerned, and the other
Parties shall have the first right of refusal to purchase which
right must be exercised (if exercised), within thirty (30) days
after notice of such proposed transfer is received. The other
Parties may waive its first right of refusal to purchase, but
shall reserve the right to choose a subsidiary or affiliate Party
as the assignee. The conditions for such transfer from one Party
of JVC to an Outside Party shall not be more favorable than the
conditions given to any other Party of JVC.
5.7. During the preparation period of JVC project and before
formal start of production, no Party shall transfer its capital
investment.
5.8. Any increase, transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercia1 administration bureau.
5.9. The Parties shall agree upon a project development budget
and shall share all costs incurred pursuant to such budget
proportionately (in accordance with registered capital
contributions).
ARTICLE 6
RESPONSIBILITIES AND DUTIES OF THE PARTIES
6.1. Party A shall, in addition to its contribution of capital
investment, has responsibilities and duties to assist JVC in the
handling, of the following matters concerned:
(i) To assist the company in handling matters such as the
application for approval, registration and the obtaining of
business licenses from relevant Chinese departments;
(ii) To assist JVC and EPC in applying for and obtaining
all possible tax reductions and exemptions according to
Chinese law;
(iii) To assist JVC and EPC in matters concerning the
purchase of equipment and machinery, the customs
declaration of imported equipment and transportation of
supplies within China;
(iv) To assist JVC in contacting and implementing the basic
facilities of water, electricity, transportation and
communication, etc.
(v) To assist JVC in the employment of local Chinese staff,
technicians, workers and other required personnel;
(vi) To assist foreign personnel sent by Party B to work in
JVC obtaining necessary entry visas, work permits and
permit for travel on business with China;
(vii) To assist in other matters entrusted by JVC.
6.2. Party B shall, in addition to its contribution of capital
investment, have responsibilities and duties to assist JVC in
the handling of the following matters concerned:
(i) To assist JVC and the EPC Contractor to procure, per
specifications and instructions of JVC, the advanced and
applicable machinery and equipment from the international
market, and provide related information in that regard;
(ii) To assist technical personal to be responsible for the
check and test, installation and maintenance of the
machinery and equipment introduced, train technical
personnel and workers of JVC;
(iii) To assist JVC in arranging for financing of the
Facility,
(iv) Subject to the direction of JVC, to manage the
development, construction and operation of the Facility;
(v) To assist in other matters entrusted by JVC.
ARTICLE 7
BOARD OF DIRECTORS
7.1. The official date of obtaining the business license of JVC
is the date of the establishment of the Board of Directors. The
Board of Directors shall be the highest authority of JVC and
decide all major issues concerning JVC.
7.2. The Board of Directors shall be composed of
five(5)directors, one (1) of which shall be from Party A and four
(4) from Party B. From within the Board of Directors, Party B
shall appoint a chairman. There shall be two (2) vice chairmen to
be respectively appointed by Party A and Party B. The directors
shall hold the office for a period of four (4) years. The term of
office may be renewed by the nominating Party.
7.3. Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital
of JVC;
(iii)Merger of JVC with another corporation;
(iv) Extension, termination and dissolution of the Joint Venture
and the liquidation and wind-up thereof;
(v) Other major issues that the Board of Directors deems it
necessary to have unanimous affirmative votes.
All issues except for the above shall be decided by majority
vote of the directors then present at any board meeting
(including special board meeting) at which a quorum is present.
Unless waived by Party A's director or Party A, the quorum shall
include one Party A's director.
7.4. The chairman of the board is the statutory representative
of the JVC. When the chairman cannot carry out his obligations
for whatever reason, he can authorize a vice chairman to act on
his behalf.
7.5 The board meeting sha11 be convened at least once a year
and shall be sponsored by the chairman. At the request of at
least two (2) of the directors, the chairman shall convene a
special board meeting.
ARTICLE 8
BUSINESS ADMINISTRATIVE ORGANIZATION
8.1. JVC shall set up its business administrative organization
which shall be responsible for daily management of the company.
The business administrative organization shall have one (1)
general manager and two (2) deputy general managers. The
general manager shall be recommended by Party B, and Party A and
Party B shall each recommend one (1) deputy general manager.
General and deputy general managers shall be appointed by the
Board of Directors, and their tenures of office shall be four
(4) years.
The obligation of the general manager is to carry out all the
decisions of the Board of Directors, organize and be responsible
for the routine business administrative work of JVC. The deputy
general managers shall assist the general manager in his work.
Decisions of important issues in the day-to-day business of JVC
shall be valid only when they are signed by both the general
manager and Party A's deputy general manager. Issues requiring
joint signatures shall be stipulated by the Board of Directors.
8.2. The business administrative organization of JVC shall
consist of certain departments and the manager of each
department shall be directly responsible to the general manager
(or as otherwise specified by the general manager or the Board
of Directors).
8.3. The general manager and each deputy general manager can be
dismissed at any tune through the resolution passed at the board
meeting if they are found to practice graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 9
PURCHASE OF MATERIALS
9.1. As for the procurement of materials, fuels, fittings, means
of transport and office appliance (hereinafter referred to as
materials) required by JVC, priority should be given to China
under the same condition.
ARTICLE 10
PREPARATION WORK
10.1. During the preparation and construction period of the
Joint Venture, a preparation group should be set up directly
under the Board of Directors, which shall consist of three (3)
persons, one (1) from Party A and two (2) from Party B. A group
leader shall be recommended by Party B, and a deputy group
leader by Party A. The group leader and deputy group leader
should be appointed by the Board of Directors.
10.2. The preparation group shall be responsible for auditing of
engineering design, signing of contract project agreements,
organizing the procurement and checking of the related
equipment, materials and other goods, working out the general
schedule of the construction plan for the budget, controlling
financial payment and design-making on the construction;
responsible for the control and management of documents, blue
prints, files and data when the construction is in progress.
10.3. The preparation group shall be responsible for the
auditing, supervision, check and test of the project design,
quality, equipment and materials,
10.4. The staff organization of the preparation group and their
salaries and expenditures shall be entered into the construction
budget upon approval of the Board of Directors.
10.5. The preparation group shall be canceled upon the approval
of the Board of Directors after the construction is completed and
the procedure of transfer is implemented.
ARTICLE 11
PERSONNEL ADMINISTRATION
11.1. With regard to employment, dismissal, wages, labor
insurance, welfare and reward and penalty of the workers of JVC,
the Board of Directors should discuss and work out a labor
contract and then implement it in accordance with the "Provisions
of the People's Republic of China on Labor Management in Chinese-
Foreign Equity Joint Venture" and the methods of its
implementation. The Labor Contract, after its signing, should be
kept in the file of the local administration department.
11.2. Staff members of JVC have the right to establish their
trade union and take part in its activities in accordance with
the stipulations of the "Trade Union Act of the People's Republic
of China".
ARTICLE 12
FOREIGN CURRENCY CONTROL
12.1. Foreign currency of JVC shall be handled according to the
"Interim Provisions of People's Republic of China on the
Administration of Foreign Currency" and related stipulations.
12.2. JVC shall open a foreign currency account in the Bank of
China with its business license. All legal income of JVC may be
converted and all the foreign exchanges shall be deposited in
the foreign currency account of its opening bank, and all
expenses and financing payments in foreign currency of JVC shall
be paid out of the foreign currency account of its opening bank.
ARTICLE 13
FINANCING, TAXING AND AUDITING
13.1. Financial accounting of JVC shall be made in accordance
with the rules and regulations of financial accounting in PRC as
stipulated for joint venture enterprises using Chinese and
foreign investment.
13.2. The fiscal year of JVC starts from the 1st day of January
and ends on the 31st day of December of each year. All the
accounting certificates, documents, reports and account books
should be written both in English end Chinese.
13.3. JVC should pay all the taxes required according to the
related laws and stipulations of PRC.
13.4. JVC should draw reserve funds, enterprise development funds
and welfare and reward funds according to the stipulations of
"The Law of the People's Republic of China on Chinese-Foreign
Equity Joint Ventures", the ratio of which funds to be drawn each
year should be decided by the Board of Directors according to the
status of business of JVC.
13.5. For accounting and auditing, JVC should hire accountants
and auditors registered in PRC, and report these results to the
Board of Directors and the General Manager. If Party B is willing
to hire auditors of another country for auditing of the annual
fee, Party A should agree, but all charges shall be paid by Party
B.
13.6. Within the first three months of the business year, the
Debit/Credit accounts of the last business year, documents of
profit/loss accounts and profit sharing plan should be initiated
by the General Manager and submitted to the Board of Directors
for review and approval.
ARTICLE 14
TERMS OF THE JOINT VENTURE
14.1. The term of JVC shall be twenty-three(23) years commencing
on the date of establishment of JVC. The date of the acquisition
of the business license for JVC shall be the date of its
establishment. It is necessary to submit an application to the
department in charge for extension of the term of JVC twelve
(12) months prior to the expiration of the term of JVC provided
a motion is initiated by one of the Parties and approved
unanimously by the Board of Directors;
14.2 In accordance with the laws, JVC should be liquidated upon
the expiration of JVC or termination of the business in advance.
The liquidated properties should be distributed according to the
ratio of investment made by Party A and Party B. For purpose of
liquidation distributions, all contact rights, land use rights
and other tangible or intangible properties shall be valued on a
fair market value "going concern basis". The liquidation
appraisal shall be conducted by a public accountant registered
in PRC.
ARTICLE 15
INSURANCE
15.1. Each engineering project of JVC should be insured by the
People's Insurance Company of China. The procedures shall be
handled by the department in charge.
ARTICLE 16
AMENDMENT, TERMINATION AND RELEASE
OF THE CONTRACT
16.1. When amendment is made to this contract and its
appendixes, it shall not be valid unless a written agreement is
signed by all Parties and submitted to and approved by the
applicable governmental authorities (the "Authorities")
concerned.
16.2. With the unanimous agreement of the Board of Directors and
approval of the Authorities concerned, JVC can be terminated
prior to the original term or the contract be terminated in
advance if the JVC is incapable of going on with the business
for certain reasons.
ARTICLE 17
OBLIGATION OF THE PARTY
BREACHING THE CONTRACT
17.1. If any Party fails to contribute the amount of the
investment committed by the time stipulated in Article 5 of the
contract, the Party breaching the contract shall pay the Parties
observing the contract 0.3% of the total amount of investment
overdue each three (3) months counting from the 30th bank date
overdue, allocated based on registered capital contribution.
Should the Party breaching the contract fail to contribute the
amount of capital it committed for six (6) months, apart from
the total sum of 0.6% of above-mentioned fines, the Parties
observing the contract has the right to request the Party
breaching the contract to fully implement the contract within a
specified period or terminate the contract according to Article
16 of the contract and demand the Party breaching the contract
to compensate for its losses.
17.2. Obligation should go to the Party if it is that Party's
fault that effects the implementation or complete implementation
of the contract and it appendixes. Each Party shall be liable
for the breach of the contract, if the fault is due to all
Parties.
17.3. In order to guarantee its registered capital
contributions, Party B should provide a bank guarantee or
guarantee from Panda Energy Corp. of U.S.A. for its registered
capital contributions.
ARTICLE 18
FORCE MAJEURE
18.1. As the consequence of Force Majeure, such as war,
earthquakes, typhoons, floods, fires or other natural calamities,
which cannot be predicated, or the happening or consequence of
which cannot be prevented or avoided (such as prolonged strikes),
and directly affects the execution of the contract, or execution
of the contract according to the terms stipulated in the
contract, the Party that encounters the Force Majeure should
notify the other Parties by fax or other most immediate means
available of the incident. Valid documents to certify the
detailed happenings of the accident, and valid documents to
certify the reasons of its inability to fulfill or completely
fulfill, or the necessity to postpone the fulfillment of the
contract should be submitted to the other Parties within thirty
(30) days of the accident, and should be certified by the
notarization department of be region where the accident took
place. Disputes arising from cases of Force Majeure shall be
resolved through negotiations between the Parties as to whether
to terminate the contract or partially release the obligations of
the affected Party, or postpone the fulfillment of the contract
according to the effect of the accident on the fulfillment of the
contract. If the matter cannot be resolved within forty-five (45)
days through negotiation, at the request of a Party, it shall be
settled through arbitration.
ARTICLE 19
LAWS APPLICABLE
19.1. The signing, validity, explanation and implementation of
this contract should abide by the laws of the People's Republic
of China.
ARTICLE 20
ARBITRATION
20.1. Should any dispute arise from the implementation of or
relating to the contract, the Parties shall resolve them through
friendly negotiations. If the discrepancies cannot be solved by
negotiations, they should be submitted to the Arbitration
Committee of China Council for the Promotion of International
Trade for solution, whose decision shall be final and legally
binding on the Parties. The arbitration shall be conducted in
both Chinese and English with both languages having equal
weight.
20.2. During the process of arbitration, the contract should be
executed with no interruption, except for those parts relating
to discrepancies under arbitration.
ARTICLE 21
VALIDITY OF THE CONTRACT
21.1. All the articles of the contract including appendixes
(Articles of Association of JVC and list of equipment to be
imported) are indispensable parts of this contract.
21.2. The contract including its appendixes shall be valid only
when it has been approved by the Ministry of Foreign Trade and
Economic Cooperation or its entrusted inspection department.
21.3. Any communication relating to the rights and obligations
of the Parties should be made in written form, except notices,
telegrams and faxes. The addresses stated in Article 2 of the
contract are statutory addresses for correspondence between the
Parties. Any change in the statutory address should be notified
to the other Parties thirty (30) days in advance.
ARTICLE 22
LANGUAGE 0F THE TEXT
22.1 This contract is written both in English and Chinese. The
contract in both languages is of equal validity.
This contract for Tangshan Pan-Sino Heat Co., Ltd. is signed by
the authorized representatives of the Parties in Beijing China,
as follows:
Party A: Party B:
Luannan County Pan-Western
Heat Company Energy Corp.,LLC
Zhao Xiuchen Darol S. Lindloff
Authorized by and on Senior Vice President
behalf of Party A
Witnessed by:
China National Machinery
Import & Export Corp.Yang Shengli
Deputy General Manager of
CMC Enterprises Dept
Dated on May 28, 1996
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN PAN-SINO HEAT CO., LTD.
This amendment is made and entered into only on July 19, 1996 by
and between Party A Luannan County Heat Company of Hebei
Province, China through its duly authorized agent and Party B Pan-
Western Energy Corp., LLC. of British Cayman Islands through its
duly authorized agent, both of which JV Parties to Tangshan Pan-
Sino Heat Co., Ltd.
WHEREAS, adjustments are required for amounts of capital
contributions, their respective proportion to registered
capital and means of such contributions by the Parties to
Tangshan Pan-Sino Heat Co., Ltd.;
NOW THEREFORE, through consultation, the Parties have agreed to
the following amendment to the Joint Venture Contract for
Tangshan Pan-Sino Heat Co., Ltd. executed by and between the
Parties on May 28, 1996:
1. Delete the original Article 5.2 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
"5.2 The total investment of the JVC shall be US$29,715,000,
and the registered capital of the Company shall be
US$11,886,000. The contribution made by Party A shall be
US$l,436,309.2, accounting for 12.08% of the registered
capital; the contribution made by Party B shall be
US$10,449,690.8, accounting for 87.92% of the registered
capital.
The rest of the total investment exceeding the registered
capital shall be made up by a shareholder loan provided by
Party B to the JVC. JVC shall be responsible for the payment of
debt obligations, interest and financing costs on such
shareholder loan.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety, to be
replaced by a new Article 5.3, which stipulates as follows:
"5.3 Party A and Party B shall each invest in the following
way:
Party A: With cash capital contributions made at or during the
times specified in Section 5.4;
Party B: With cash capital contributions made at or during the
times specified in Section 5.4.
3. The above-cited new Article 5.2 and Article 5.3 shall take
effect from the date upon which the amendment is approved by the
original examination and approval authority that approved the
above JV Contract. This amendment is made in both English and
Chinese, both of which shall be equally authentic.
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused their respective authorized agents execute this
amendment as of the date and year set forth hereinabove.
Party A:
Luannan County Heat Company
Hebei Province China
By: ____________
Position:
Party B:
Pan-Western Energy Corp., LLC.
British Cayman Islands
By: ____________
Position:
AMENDMENT
TO
JOINT VENTURE CONTRACT
FOR
TANGSHAN PAN-SINO HEAT CO., LTD.
This amendment is made and entered into this 18th November, 1996
by and between Party A Luannan County Heat Company of Hebei
Province, China through its duly authorized agent and Party B Pan-
Western Energy Corp., LLC. of British Cayman Islands through its
duly authorized agent, both of which JV Parties to Tangshan Pan-
Sino Heat Co., Ltd.
WHEREAS, certain amendments are required for capital
contributions, responsibilities and duties of the Parties
concerning land use right as well as procedures for extension of
term of joint venture for Tangshan Pan-Sino Heat Co., Ltd.;
NOW THEREFORE, through consultation, the Parties have agreed to
the following amendment to the Joint Venture Contract for
Tangshan Pan-Sino Heat Co., Ltd. executed by and between the
Parties on May 28, 1996:
1. Delete the original Article 5.2 in its entirety, to be
replaced by a new Article 5.2, which stipulates as follows:
"5.2 The total investment of the JVC shall be
US$29,715,000, and the registered capital of the
Company shall be US$1l,886,000. The contribution made
by Party A shall be US$1,436,309.2, accounting for
12.08% of the registered capital; the contribution
made by Party B shall be US$10,449,690.8, accounting
for 87.92% of the registered capital.
The rest of the total investment exceeding the registered capital
shall be made up by a shareholder loan provided by Party B to the
JVC. JVC shall be responsible for the payment of debt
obligations, interest and financing costs on such shareholder
loan.
The Parties shall share the profits, losses and risks in
proportion to their investment contributed."
2. Delete the original Article 5.3 in its entirety, to be
replaced by a new Article 5 3, which stipulates as follows:
"5.3 Party A and Party B shall each invest in the
following way:
Party A: With cash capital contributions made at or
during the times specified in Section 5.4;
Party B. With cash capital contributions made at or
during the times specified in Section 5. 4."
3. Add to Article 6.1 new sub-section (viii), which
stipulates as follows;
"(viii) for an initial 23 years of the JVC, to obtain
in its own name granted land use right for the land
to be used by JVC and make such granted land use
right available to JVC via transfer, lease or other
appropriate means."
4. Delete the original Article 14.1 in its entirety, to be
replaced with a new Article 14.1, which stipulates as follows:
"14.1 The term of JVC shall be for an initial period
of twenty-three (23) years commencing on the date of
establishment of JVC. The date of the acquisition of
the business license for JVC shall be the date of its
establishment. If Party B should notify Party A of
its intention to continue its participation in the
JVC beyond this initial 23 year term, then Party A
shall submit an application duly executed by
authorized representatives of the Parties to the
department in charge for an extension of the term of
the JVC for the lesser amount of time, as requested
by Party B, or the maximum period permitted by
applicable laws and regulations twenty-four (24)
months prior to the expiration of the term of the
JVC."
5. Add new Article 14.3, which stipulates as follows:
"14.3 Upon expiration of the initial twenty-three
(23) year term of JVC, if no extension is made of
such term of the JVC, then the assets of the JVC
(other than land use right) shall be valued as per
their remaining value at that time and distributed in
accordance with the investment share of the Parties
at liquidation, regardless whether such land use
right will expire or not. And such assets shall not
be under valued due to any such expiration of land
use right."
The above-cited new Article 5.2, Article 5.3, Article 6.1 (viii),
Article 14.1 and Article 14 3 shall take effect from the date
upon which the amendment is approved by the original examination
and approval authority that approved the above JV Contract. This
amendment is made in both English and Chinese, both of which
shall be equally authentic.
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused their respective authorized agents execute this
amendment as of the date and year set forth hereinabove.
Party A: Luannan County Heat Company
Hebei Province, China
By: __________
Position:
Party B: Pan-Western Energy Corp., LLC.
British Cayman Islands
By: __________
Position:
EXHIBIT 10.82
Coal Supply Agreement
This Agreement is made on February 3, 1996 between Kailuan
Coal Mining Administration ("Seller"), and Tangshan Panda Heat
and Power Co., Ltd. ("Panda") and Tangshan Pan-Western Heat and
Power Co., Ltd. ("Pan-Western" and jointly with Panda, "Buyer").
Either Buyer or Seller is a "Party" and together they are
"Parties to this Agreement.
Buyer intends to build, own and operate coal fired electric
generating facilities (collectively, the "Facilities") in Luannan
County near Tangshan City, Hebei Province.
Now therefore, the Parties agree as follows:
1.1 Purchase and Sale of Coal: Seller shall sell to Buyer a
portion of Buyer's coal requirements (as determined by Buyer) and
Buyer shall have the right to purchase up to 300,000 tonnes of
coal per year subject to the terms and conditions included
hereunder.
1.2 Seller's Coal Reserves: Seller represents that sufficient
coal reserves and production capability exist in the Kailuan Coal
Mining Administration to meet the portion of Buyer's coal
requirements covered by this Agreement. Buyer and Seller agree
that the primary mine to supply the coal covered by this
Agreement is the Qianjiaying Mine. If the geologic conditions or
mine plans for the Qianjiaying Mine change materially, Seller
will notify Buyer of such change at least three months before
such changes take effect.
1.3 Shipments: Prior to each Agreement year, Buyer shall
provide Seller an estimate of its coal requirements in
approximate equal monthly amounts. If Buyer's planned schedule
changes, Buyer may require Seller to change previously requested
amounts upon at least thirty (30) days prior notice. In
emergency situations, either Party may require the other Party to
change previously determined amounts upon at least 15 days prior
notice.
1.4 Term and Annual Redetermination: In the November prior to
the expected start-up of Buyer's Facilities, Buyer and Seller
shall meet to mutually determine the market price and shipping
schedule etc., and sign a coal supply contract for the following
year. Annually during November, thereafter, the Parties shall
meet to redetermine the market price, shipping schedule, etc. and
sign a coal supply contract for the following year. Effective
with the date of first purchase of coal by Buyer from Seller,
this Agreement shall continue for a term of ten years.
2.1 Coal Quality Specifications: Seller agrees to use its best
efforts to keep coal shipped to Buyer reasonably free of rock,
wood and other foreign substances. Seller agrees to sell blended
run of mine coal to Buyer which shall meet the following quality
specifications with total moisture:
Coal Contents: Average Quality: Acceptable Limits
Total Moisture % 7.5 9.0 (Maximum)
Ash % 33.0 37.0 (Maximum)
Sulfur % 1.25 1.35(Maximum)
Heat Value-Kilocalories 4,000 4,300 (Minimum)
per kilogram (Kcal/Kg)
Top Size Coal 0.0 5.0 (Maximum)
(% > 100 mm)
Fines-(% < 6 mm) 65 75 (Maximum)
Coal complying with the Acceptable Limits above will be accepted
by Buyer.
2.2 Governing Analysis: Buyer and Seller shall analyze coal
from samples collected by Seller at Seller's mine facilities.
Seller shall split such sample into three parts - one part for
Seller's analysis, one part for Buyer's analysis, and one part
for record. Such Analysis shall be performed according to
national sampling and testing standards to determine compliance
with Buyer's Coal Quality Specifications. Seller's analysis
shall govern unless Buyer's and Seller's analysis differ
significantly. Upon a dispute, the Parties shall discuss the
differences and if necessary have a third analysis on the record
sample split performed by an independent coal research facility
which analysis shall be binding on both Parties.
2.3 Buyer's Right to Reject Coal: Buyer shall have the right to
reject coal if any daily shipment does not meet the above
Acceptable Limits. Prior to any such rejection Buyer shall
notify Seller immediately of the problem and the Parties shall
discuss such rejection or acceptance of coal. If the coal
quality continues from all of Seller's shipments to be below
Acceptable Limits for two consecutive days, Buyer shall have the
right to suspend deliveries for all or any portion of coal upon
notice to Seller (until Buyer is satisfied that the cause of such
rejection has been cured).
3.1 Governing Weight: Buyer and Seller agree that the weight of
the coal sold and purchased shall be determined by certified
scales maintained by Seller at its mine. Seller agrees to allow
buyer the right to witness Seller's weighing operations and to
have an independent authority test the accuracy of Seller's
scales if, in good faith, Buyer has reason to question the
accuracy of Seller's scales. Weights shall be adjusted according
to the findings of the independent authority.
4.1 Market Price: The price of coal (which shall be
redetermined as of December 1 of each year) shall be the average
annual price in RMB Yuan per Kilocalorie ("Market Price") for
coal sold by Seller for the following year under similar terms
and conditions.
5.1 Payments: Excluding any amounts in good faith dispute,
amounts due Seller by Buyer, including adjustments, shall be paid
Seller within 5 to 15 days after the end of the month.
6.1 Law: This Agreement and the rights and obligations
hereunder shall be interpreted, construed and governed by the
laws of the Peoples Republic of China.
7.1 Termination: This Agreement may be terminated by either
Party by notice to the other Party if the other Party materially
breaches its obligations and such breach is not cured within
sixty (60) days after receipt of notice of such breach.
7.2 Lender Approval: If by December 31, 1996, Buyer is unable
to obtain its lenders approval of this Agreement (unless Buyer
waives such requirement), this Agreement may be terminated by
either Party upon written notice to the other Party.
7.3 Policy Change: If the National Energy Policy of the Peoples
Republic of china changes such that the rules governing the
allocation of coal would restrict Seller's ability to make all
such sales under similar terms and conditions, Seller shall have
the right to terminate this Agreement upon six months prior
written notice to Buyer.
8.1 Force Majeure: If either Party should experience
circumstances beyond its control, which prevents that Party from
performing its obligations under this Agreement, such Party will
be relieved from such obligations as long as the force majeure
condition exists. If the force majeure condition persists for 90
days, the other Party may terminate this Agreement upon written
notice to the Party declaring force majeure. Any Party declaring
force majeure shall use reasonable efforts to mitigate the effect
of such force majeure and to restore its performance.
9.1 Notices, Communications: Notices or other communications to
be given to a Party shall be in writing and sufficient if
delivered personally or sent by registered mail or facsimile, to
the addresses set forth below. Any Party may, by notice to the
other, change its addresses and/or facsimile numbers for notices
and communications.
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused this Agreement to be signed and sealed by their
respective officers thereunto duly authorized as of the day and
year set forth above.
For and on behalf of For and on behalf of
Kailuan Coal Mining Administration Tangshan Panda Heat and
Power Co. Ltd.
By: __________________________ By: ____________________
Name: Name:
Title: Title:
Notice Address: Notice Address:
Facsimile No.: Facsimile No.:
Telephone No.: Telephone No.:
Tangshan Panda Heat and
Power Co. Ltd.
By: ____________________
Name:
Title:
Notice Address:
Facsimile No.:
Telephone No.:
EXHIBIT 10.83
GENERAL INTERCONNECTION
AGREEMENT
PARTY A: North China Power Group Company
Party B: Tangshan Panda Heat and Power Co., Ltd.
Tangshan Pan-Western Heat and Power Co., Ltd.
Beijing
September 22, 1995
GENERAL INTERCONNECTION AGREEMENT
Two Parties of this Agreement:
North China Power Group Company (hereinafter referred to as
Party A); Tangshan Panda Heat and Power Co., Ltd. ("Panda") and
Tangshan Pan-Western Heat and Power Co., Ltd. ("Pan-Western")
(Panda and Pan-Western are hereinafter collectively referred to
as Party B).
Whereas, Party A and Party B intend to agree to interconnect
Panda's Power Plant (50 MW unit) and Pan-Western's power plant
(50 MW unit) (hereinafter referred to collectively as Power
Plants) to the Beijing-Tianjin-Tangshan Regional Grid of Party A
(hereinafter referred to as the Grid).
Whereas, for administrative convenience, Pan-Western has
appointed Panda as its agent with power-of attorney to represent
and bind Pan-Western on all matters herein or relating to its
Power Plant.
Whereas, in order to ensure the safety as well as the stable
and economic operation of both the Power Plants and the Grid, in
accordance with the Contract Law of the People's Republic of
China, "Regulation for Grid Dispatch Administration" and
implementation method relating thereto, "National Power Supply
and Consumption Regulation", "Grid Dispatch Administrative
Procedure for the Beijing-Tianjin-Tangshan Regional Grid", and
other relevant laws, regulations and rules, Party A and Party B
through friendly consultation and negotiation now sign this
Agreement regarding the interconnection.
Party A and Party B agree as follows:
ARTICLE ONE
DEFINITIONS AND EXPLANATIONS
1.1 "Sub Agreements" shall mean the Interconnection
Dispatch Agreement, and the Electric Energy Purchase and Sales
Agreement.
1.2 "Interconnection Point" shall mean the switch at the
location where the Power Plants and the Grid connect with each
other (the switch shall be specified in the Sub Agreements).
1.3 "Electric Energy Delivered" shall mean the amount of
electricity that Party B's Power Plants deliver to the Grid as
measured by the metering gauge at the Interconnection Point.
1.4 "Price for Electric Energy Delivered" shall mean Party
B's Power Plants weighted average (consisting of daily Trough
Hours, Non-Peak Hours and Peak Hours) electricity price for Party
B's Electric Energy Delivered to Party A's Grid (calculated for
different periods) set forth in the Pricing Document.
1.5 "Sales" shall mean Party B's Electric Energy Delivered
which Party A, based on the Document of promise issued by the
Tangshan Economic Commission, Planning Commission, and Price
Control Bureau, sells in the Tangshan region.
1.6 "Retail Price" shall mean the weighted average of Party
A's selling price for Party B's Electric Energy Delivered by the
Power Plants during different periods.
1.7 "Overdue Payment Interest Rate" shall mean an interest
rate equivalent to 0.05% per day which is applied during the past
due period stipulated in this Agreement or the Sub Agreements.
1.8 "Force Majeure" shall mean any event that is not
foreseeable and for which the damages caused by the event are not
reasonably preventable by the Party declaring Force Majeure and
cannot be overcome such that it adversely affects one Party's
performance of its obligations under this Agreement or the Sub
Agreements. Examples of Force Majeure events are as follows:
(1) Any natural disasters, such as fire, lightning,
earthquakes, damages caused by wind, (i.e., hurricane,
typhoon, etc.) and riot, war, or threat of war;
(2) After this Agreement becomes effective, any
modifications or changes of laws, regulations or rules made
by the Government of the People's Republic of China or any
other local government or their agencies which directly or
indirectly affects either Parties' performance of its
obligations under this Agreement or the Sub Agreements.
1.9 "Breach of Contract" shall be caused by any actions,
taken by any one of the Parties, resulting in non-performance of
obligations under this Agreement or the Sub Agreements.
1.10 "Commercial Operation Date" means the date upon which
Party B's Power Plants start regular delivery of their Electric
Energy Delivered to Party A's Grid which shall be determined by
Party A and Party B after approval of 72 hour full-load testing
operation by the generation units of Party B's Power Plants.
1.11 "Pricing Document" shall mean the document or documents
(issued by the Tangshan Price Control Bureau, Economic Commission
and Planning Commission) determining the Price for Electric
Energy Delivered, Retail Price and principles for adjustment.
1.12 "Trough Hours", "Non-Peak Hours" and "Peak Hours" shall
mean the respective 8 hour periods during each calendar day
designated as "Trough Hours", "Non-Peak Hours" and "Peak Hours"
by the Dispatch Department of the Grid (which designation shall
be made as specified in the Sub Agreements).
1.13 "Regulations" shall mean the Contract Law of the
People's Republic of China, "Regulation for Grid Dispatch
Administration" and implementation method relating thereto,
"National Power Supply and Consumption Regulation," "Grid
Dispatch Administration Procedure for the Beijing-Tangshan
Regional Grid" and other published relevant laws, regulations and
rules in China governing the Parties.
ARTICLE TWO
DOCUMENTS TO BE PROVIDED
Party B shall provide to Party A the following documents and
this shall be the precondition for signing the Sub Agreements:
2.1 The Power Project Proposal Approval (Exhibit 1);
2.2 The Project Feasibility Study and the Feasibility Study
Approval (Exhibit 2);
2.3 The Preliminary Design and the Preliminary Design
Approval (Exhibit 3, which shall be delivered to Party A as
soon as possible after execution of this Agreement).
2.4 The Heat Supply Project Approval (Exhibit 4);
2.5 The Heat Supply Agreements between the Power Plants and
heat users (Exhibit 5);
2.6 The Interconnection Design (first and secondary systems
and the Interconnection Design Approval) (Exhibit 6);
2.7 The document promising the investment for the Power
Plant's transmission and substation systems (Exhibit 7);
2.8 Power Plant's Application for Interconnection (Exhibit
8);
2.9 The Document of Promise for the Power Plant's
Electricity Output (Exhibit 9).
ARTICLE THREE
DISPATCH CONTROL
3.1 Starting from the Commercial Operation Date, Party B's
Power Plants must obey the dispatch control of the Grid and
conform to the peak regulation dispatch practice of the Grid, as
more fully specified in the Sub Agreements.
3.2 Party B shall guarantee that the Power Plants will have
the necessary equipment and control systems reasonably dictated
by the Grid's unified dispatch requirements, as more fully
specified in the Sub Agreements.
ARTICLE FOUR
PURCHASE AND SALE OF ELECTRIC ENERGY DELIVERED
4.1 Party A shall purchase the amount of Electric Energy
Delivered by the Power Plants in accordance with this Agreement
and the Sub Agreements. Party B may not sell any electric energy
directly to third parties without the consent of Party A.
Commencing on the Commercial Operation Date with respect to each
Power Plant, Party A shall purchase from Party B's Power Plants
Electric Energy Delivered, and shall pay Party B for such
Electric Energy Delivered.
4.2 Party A agrees to purchase Electric Energy Delivered
which is generated prior to the Commercial Operation Date for
start-up and testing purposes. Both Party A and Party B agree to
sign separately an agreement on purchase of such electric energy.
ARTICLE FIVE
PRICE OF ELECTRICITY AND ITS ADJUSTMENT
The price for Electric Energy Delivered and the Retail Price
and any adjustments to the Price for Electric Energy Delivered
and the Retail Price shall be set forth in the Pricing Document.
ARTICLE SIX
QUANTITY RECORD FOR ELECTRIC ENERGY DELIVERED
The quantity of Electric Energy Delivered to the Grid shall
be determined by having personnel from both Parties read and
record the meter gauge as more fully specified in the Sub
Agreements.
ARTICLE SEVEN
PAYMENT FOR ELECTRIC ENERGY DELIVERED TO POWER PLANTS
Party A shall, at the request of Party B, supply electric
energy to the Power Plants whenever required by Party B. Party B
shall purchase the electric energy at the then effective utility
retail price as charged by the Grid, which shall be paid to Party
A.
ARTICLE EIGHT
RESPONSIBILITY UNDER A BREACH OF CONTRACT
8.1 If, due to one Party's Breach of Contract, this
Agreement or the Sub Agreements cannot be performed or fully
performed in all material respects, the breaching Party shall
bear responsibility and shall in accordance with the requirements
stipulated in this Agreement, take measures to correct the
situation; if both Parties breach this Agreement or any Sub
Agreements, both Parties shall share the responsibilities for
breaching this Agreement or such Sub Agreements.
8.2 If Party B does not deliver the amount of electric
energy to Party A in accordance with this Agreement or the Sub
Agreements, based on paragraph 1.9 above, Party A shall have the
right to declare that a Breach of Contract has taken place. Party
B shall compensate Party A for all of the actual losses to Party
A caused by the Breach of Contract, which losses shall be limited
only to direct losses by Party A.
8.3 If, due to the fault of Party A, Party B is not able to
deliver the electric energy generated by the Power Plants to
Party A based on this Agreement or the Sub Agreements, in
accordance with paragraph 1.9 above, Party B shall have the right
to declare that a Breach of Contract has taken place. Party A
shall compensate Party B for all of the actual losses to Party B
caused by the Breach of Contract, which losses shall be limited
only to direct losses by Party B.
ARTICLE NINE
FORCE MAJEURE AND OBLIGATION RELIEF
When any one of the Parties is not able to perform or obey
any part of this Agreement or the Sub Agreements due to a Force
Majeure event, the other Party shall neither ask for compensation
from the Party encountering the Force Majeure event nor consider
the action as a Breach of Contract. The Party encountering the
Force Majeure event shall not be excused and released (based on
such force Majeure event) from its obligations to make payments
(existing prior to the occurrence of the Force Majeure event) in
accordance with this Agreement or the Sub Agreements. The Party
requesting to use the Force Majeure clause must notify the other
Party, as early as reasonably possible, of the nature of the
event and the degree of impact on the performance of the
obligations under this Agreement and the Sub Agreements, and
shall take measures to resume, as soon as possible, performance
of its obligations and to limit the damage caused to the other
Party.
ARTICLE TEN
AMENDMENT
Upon the occurrence of any one of the following events, this
Agreement and the Sub Agreements shall be amended:
10.1 Both Parties to this Agreement and the Sub Agreements
through consultation may agree in writing to change or amend this
Agreement and the Sub Agreements. Such amendment shall not
damage the interests of the State and the community.
10.2 In the event of a spin-off or merger of either Party to
this Agreement, the surviving Party or Parties respectively
shall assume the obligations of such Party under this Agreement
and the Sub Agreements.
10.3 In the event that a change in law or regulations
materially adversely affects the rights or obligations of any
Party under this Agreement or the Sub Agreements, the Parties
shall use good faith efforts to negotiate and execute amendments
to this Agreement and the Sub Agreements on a fair and equitable
basis that attempt to minimize the impact of the change in law or
regulations. Each Party agrees that it will not seek or lobby
for any change in law or regulations that adversely affects the
rights or obligations of the other Party hereto.
10.4 If due to an event of Force Majeure (excluding events
covered by paragraph 10.3) performance of a portion of this
Agreement or the Sub Agreements becomes impossible, the Parties
agree to negotiate and execute an amendment to this Agreement or
the Sub Agreements so that the unaffected portion can remain in
effect.
ARTICLE ELEVEN
TERMINATION
11.1 Both Parties to this Agreement, through consultation,
may agree in writing to terminate this Agreement or the Sub
Agreements provided such termination does not damage the State
and public interests.
11.2 Either Party may elect to terminate this Agreement and
the Sub Agreements (by written notice to the other Party) if a
Force Majeure is declared by the other Party and the Party
declaring the Force Majeure does not resume performance hereunder
and thereunder within 12 months after the date of such
declaration.
11.3 If a Breach of Contract as stipulated in paragraph 1.9
above has occurred, and if, within 30 days after written notice
(specifying in detail the nature of the Breach of Contract) is
received by the Breaching Party, the breaching Party neither
makes any payments required hereunder (excluding amounts in good
faith dispute, which shall not be a Breach of Contract hereunder
until such dispute is resolved) nor starts to take corrective
actions (which cure may take a longer period as long as it is
being pursued with diligence), the non-breaching Party shall have
the right to terminate this Agreement (under this circumstance,
the Sub Agreements shall also be terminated).
11.4 Prior to the Commercial Operation Date, in the event
Party B ceases the development of both Power Plants for a period
of at least 12 consecutive months, Party A may terminate this
Agreement and the Sub Agreements by written notice to Party B.
11.5 Except as specifically provided in this Article Eleven
and Article Twelve herein, this Agreement and the Sub Agreements
may not be terminated.
ARTICLE TWELVE
AMENDMENTS AND TERMINATION IN WRITING
Any agreement to amend or terminate this Agreement and the
Sub Agreement must be in writing and signed by both Parties to be
effective. The original agreements as previously amended, shall
remain in effect prior to the execution and delivery of such
written document by both Parties. Any such amendment or
termination of this Agreement shall also automatically amend or
terminate the Sub Agreements as necessary to reflect such action.
ARTICLE THIRTEEN
LIABILITY
13.1 In the event of the occurrence of any Breach of
Contract hereunder, the breaching Party shall not be relieved of
any of its liabilities or obligations hereunder, including its
liability for payment of the amounts in default and for payment
of damages whether becoming due before or after such Breach of
Contract, and the non-breaching party shall have the right to
recover from the breaching Party any and all such amounts.
13.2 The provisions contained in this Article Thirteen shall
survive termination of this Agreement and the Sub Agreements.
ARTICLE FOURTEEN
SCOPE OF THIS AGREEMENT
14.1 After signing this Agreement, both Parties shall sign
the Sub Agreements. This Agreement and the Sub Agreements
together make up the entire agreement between the Parties.
14.2 Anything not mentioned in this Agreement and the Sub
Agreements shall be determined through discussion between the two
Parties as supplemental agreements. Any supplemental agreements,
Sub Agreements and this Agreement shall have the same legal
effect.
ARTICLE FIFTEEN
TERM OF THIS AGREEMENT
This Agreement and the Sub Agreements shall be effective
upon being executed and stamped by both Parties. Unless this
Agreement and Sub Agreements are terminated pursuant to Article
Eleven, this Agreement and the Sub Agreements shall continue in
effect for a period ending on the 20th anniversary of the
Commercial Operation Date (with respect to each Power Plant);
provided, however, that if either Party desires to extend this
Agreement and the Sub Agreements, such Party shall notify the
other Party of its request for extension prior to the 19th
anniversary of the Commercial Operation Date. After receipt of
any such notice, the Parties will meet to determine whether this
Agreement and the Sub Agreements will be extended and the terms
of any such extension.
ARTICLE SIXTEEN
DISPUTE RESOLUTION
16.1 Except as otherwise provided in this Agreement or the
Sub Agreements, any dispute arising out of or in connection with
this Agreement or the Sub Agreements shall be settled through
friendly consultation or conciliation between the Parties
promptly upon the written request of one Party to the other
Party. If the Parties do not reach an amicable solution within
30 days from the notice of such dispute, either Party may submit,
with notice to the other Party, the dispute to the International
Chamber of Commerce's International Court of Arbitration for
binding arbitration to be held in Singapore under the Rules of
Conciliation and Arbitration of the International Chamber of
Commerce (the "ICC"). Except as otherwise provided in this
Agreement or the Sub Agreements, the Parties agree that any
unresolved dispute arising out of or in connection with this
Agreement or the Sub Agreements shall be submitted exclusively to
arbitration. Any settlement and award rendered through such an
arbitration proceeding shall be final and binding upon the
Parties. This Agreement and the Sub Agreements and the rights
and obligations of the Parties shall remain in full force and
effect pending the award in such arbitration proceeding, which
award shall determine whether and when any termination shall
become effective. The Parties agree that the arbitral award may
be enforced against the Parties or their assets wherever they may
be found, whether inside or outside of China, and that a judgment
upon such arbitral award may be entered in any court having
jurisdiction thereof, whether it is inside or outside of China.
16.2 The arbitration shall be conducted and the judgment
shall be rendered in both English and Chinese.
16.3 There shall be three arbitrators. Each Party shall
select one arbitrator within 30 days after giving or receiving
the demand for arbitration. Such arbitrators shall be freely
selected, and the Parties shall not be limited in their selection
to any prescribed list. The International Court of Arbitration
(the "ICA") of the ICC shall select the third arbitrator. If a
Party does not appoint an arbitrator who has consented to
participate within 30 days after the selection of the first
arbitrator, the relevant appointment shall be made by the ICA.
The costs of arbitration shall be borne by the Parties as
determined by the arbitration tribunal, taking into account the
relative merits of the positions of the Parties.
16.4 Each of the Parties is subject to civil and commercial
law and irrevocably agrees that this Agreement and the Sub
Agreements are a commercial rather than public or governmental
activity and neither Party is entitled to claim immunity from
legal proceedings with respect to itself or any of its assets on
the grounds of sovereignty or otherwise under any law or in any
jurisdiction where an action may be brought for the enforcement
of any of the obligations arising under or relating to this
Agreement or the Sub Agreements. Each Party hereby irrevocably
waives rights to immunity it may now have or later acquire with
respect to its obligations arising under or relating to this
Agreement or the Sub Agreements.
ARTICLE SEVENTEEN
GOVERNING LAW
This Agreement and all Sub Agreements are made under and
shall be governed in all respects by and interpreted in
accordance with the laws of the People's Republic of China.
ARTICLE EIGHTEEN
COMMUNICATIONS
For anything related to the rights and obligations of this
Agreement and any Sub Agreements, any one of this Agreement and
any Sub Agreements shall notify in writing the other Party. If
the address and telephone number of one Party are changed, this
party shall inform in writing the other Party of the change
within 10 business days after such change takes place (which new
address shall be the new address for notices addressed to such
Party). The following are the addresses and telephone and
facsimile numbers of both Parties:
(a) In the case of Party A, to:
North China Power Group Company
No. 32 Zaolingqian Street
Xuanwu District
Beijing 100053, China
Attention: Mr. Shi Tanding
Facsimile No.: 3263377 ext. 2296
Telephone No.: 3263377
(b) In the case of Party B, to:
Tangshan Panda Heat and Power Co., Ltd.
Cheng Guan, Luannan County
Tangshan, Hebei Province 063500
China
Attention: Mr. Zhao Xiuchen
Facsimile No. (315) 412-2610
Telephone No.: (315) 412-2610
ARTICLE NINETEEN
DOCUMENT
There shall be six original copies of this Agreement. Party
A shall keep two copies and Party B shall keep four copies.
There shall be copies of this Agreement submitted to and filed
with the relevant authorities of the Government.
ARTICLE TWENTY
ASSIGNMENT
20.1 For the purpose of securing financing, Party B may,
without the consent of Party A, assign or create security over
its rights and interests under or pursuant to (a) this Agreement
and the Sub Agreements, (b) any other agreement related to the
Power Plants, (c) the Power Plants, and (d) the Power Plant
sites. Party A agrees to negotiate in good faith and on a fair
and equitable basis a Consent to Assignment with the lenders to
Party B. Such Consent to Assignment shall provide that any
person or entity which elects to assume any or all of the rights
of Party B under this Agreement and the Sub Agreements shall also
assume all of Party B's obligations hereunder and thereunder.
The Parties acknowledge and agree that any assignment to a
secured party pursuant to any financing agreements shall be
subject to, and shall not relieve either Party of their
performance obligations to each other under, this Agreement or
the Sub Agreements.
20.2 This Agreement and the Sub Agreements shall be binding
upon and shall inure to the benefit of the Parties and their
respective successors and permitted assigns.
ARTICLE TWENTY-ONE
REPRESENTATIONS
21.1 Each Party represents that this Agreement and all Sub
Agreements have been duly authorized, signed and delivered by it,
and are in full force and effect on the date hereof.
21.2 Each Party represents that this Agreement and all Sub
Agreements are valid, legal and binding obligations of it,
enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, moratorium or other
similar laws and general principles of equity.
ARTICLE TWENTY-TWO
OBLIGATIONS OF PARTY B
The obligations of this Agreement and each Sub Agreement
shall be joint and several as between Panda and Pan-Western. For
administrative convenience, Pan-Western hereby irrevocably
appoints Panda as its exclusive agent to operate its Power Plant,
make and receive all payments, administer this Agreement and all
sub Agreements on its behalf, and send and receive notices.
Panda is hereby granted an irrevocable power-of-attorney by Pan-
Western to enter into any agreement or document on behalf of Pan-
Western or to take any action on behalf of Pan-Western that
Panda, in its sole discretion, deems to be necessary or
desirable.
ARTICLE TWENTY-THREE
EXECUTION OF SUB AGREEMENTS
The Parties hereto agree to negotiate and execute, based on
principles of equality and mutual benefit and good faith, the
Electric Energy Purchase and Sales Agreement and the
Interconnection Dispatch Agreement specifying power purchase and
sales relationships and dispatch control relationships between
Party A's Grid and Party B's Power Plants.
ARTICLE TWENTY-FOUR
EXECUTION OF THIS AGREEMENT
This Agreement is executed in Beijing, People's Republic of
China on September 22, 1995.
Legal Representative of Party A Legal Representative of Party B
North China Power Group Company Tangshan Panda Heat and Power
Co., Ltd.
By: _________________________ By: __________________________
Name: Name:
Title: Title:
Tangshan Pan-Western Heat and Power Co., Ltd.,
By: _________________________
Name:
Title:
EXHIBITS TO THE GENERAL INTERCONNECTION AGREEMENT
TABLE OF CONTENTS
EXHIBIT DOCUMENT TAB
No. 1 Project Proposal for Tangshan Panda #682 II-4
Project Proposal for Tangshan Pan-Western #683 II-9
Project Proposal for Tangshan Cayman #684 II-14
Project Proposal for Tangshan Pan-Sino #470 II-19
No. 2 Feasibility Study IV-1
No. 3 Preliminary Design IV-2
Preliminary Design Approval #10 II-37
No. 4 Heat Supply Project Approval #57 II-39
No. 5 Heat Supply Agreements I-10
No. 6 Interconnection Design Approval ##65 II-42
No. 7 Supplemental Agreement I-25
Construction Agreement I-26
Loan Agreement I-27
No. 8 Application for Interconnection Permit #59 II-34
No. 9 Document of Promise #37 II-38
EXHIBIT 10.84
ELECTRIC ENERGY PURCHASE
AND SALES AGREEMENT
Party A: North China Power Group Company
Party B: Tangshan Panda Heat and Power Co., Ltd.
Tangshan Pan-Western Heat and Power Co., Ltd.
Beijing
September 22, 1995
ELECTRIC ENERGY PURCHASE AND SALES AGREEMENT
The two Parties of this Agreement:
North China Power Group Company (hereafter referred to as
Party A); Tangshan Panda Heat and Power Co., Ltd. ("Panda") and
Tangshan Pan-Western Heat and Power Co., Ltd. ("Pan-Western")
(hereafter collectively referred to as Party B).
Party A and Party B, having both signed on September 22,
1995, the General Interconnection Agreement regarding
interconnection between Panda's power plant and Pan-Western's
power plant (hereafter collectively referred to as Power Plants)
and the Beijing-Tianjin-Tangshan Grid of Party A (the "Grid"),
agree to sign this Electric Energy Purchase and Sales Agreement.
Except for additional definitions provided by this Agreement, all
terms shall have the same definitions as the ones in the General
Interconnection Agreement.
ARTICLE ONE
PURCHASE OF ELECTRIC ENERGY DELIVERED
Starting with the Commercial Operation Date, Party A shall
purchase Electric Energy Delivered from Party B.
ARTICLE TWO
BASIS FOR DETERMINATION OF GROSS GENERATION AMOUNT
The gross generation amount determined in this Article Two
serves only as a basis. The related details will be determined
in the Interconnection Dispatch Agreement.
Unless otherwise requested by Party A, during Non-Peak Hours
and Trough Hours, the Power Plants shall not operate beyond the
gross generation amounts specified in Sections 2.1 and 2.2 below
on an average basis for the entire 8 hour period (exceeding these
limitations during a period is permitted as long as the overall
average gross generation amount during the 8 hour period does not
exceed these limitations). There shall be no limitation on gross
generation amount produced by the Power Plants during Peak Hours
and the amount set forth in Sections 2.1 and 2.2 below for Peak
Hours shall be a minimum gross generation amount for the Power
Plants and not a maximum amount. Subject to the limitations on
gross generation amount during Non-Peak Hours and Trough Hours,
Party B agrees to sell, and Party A agrees to purchase and take,
all Electric Energy Delivered from the Power Plants.
The Parties have determined the daily schedule reflecting
different hour periods for the gross generation amount of
electric energy production by Party B shall be as follows:
2.1 As the first 50 MW Power Plant starts generation (at
the Commercial Operation Date):
400,000 kWh During Peak Hours
260,000 kWh During Non-Peak Hours
240,000 kWh During Trough Hours
2.2 As the second 50 MW Power Plant starts generation (at
the Commercial Operation Date):
800,000 kWh During Peak Hours
520,000 kWh During Non-Peak Hours
480,000 kWh During Trough Hours
2.3 Based on the Grid's load characteristics, through
discussion and mutual written agreement between both Parties, the
above time-based daily schedule can be adjusted.
ARTICLE THREE
ANNUAL OVERHAUL
The cumulative annual overhaul outage for each Power Plant
of Party B will not exceed fifty-five (55) days calculated each
year (based on each 12 month period following the Commercial
Operation Date or such other period agreed upon by the Parties).
Outages will be calculated on an actual time elapsed basis. For
example, 24 one hour outages shall be equal to one day. For
purposes of this Agreement, an "outage" shall be any interruption
of required electric energy deliveries (as set forth in Sections
2.1 and 2.2) to Party A's Grid by Party B's Power Plants. Party
B shall not be penalized or required to pay damages under this
Agreement or the General Interconnection Agreement for the
failure of Party B's Power Plants to produce or deliver electric
energy where such failure results from an outage permitted under
the General Interconnection Agreement or the Sub Agreements.
ARTICLE FOUR
CALCULATION AND ADMINISTRATION OF THE QUANTITY OF ELECTRIC
ENERGY DELIVERED TO THE GRID FROM THE POWER PLANTS
OF PARTY B
4.1 The quantity of Electric Energy Delivered from the
Power Plants of Party B to the Grid shall be equivalent to the
readings from the electric energy metering gauge (to be owned by
Party B) located at the interconnection point. The readings from
the gauge shall be provided to the Dispatch Department of the
Tangshan Power Supply Bureau of the Grid.
4.2 The electric energy metering gauge for both Parties
shall be inspected, passed and sealed by a qualified inspection
agency determined by both Parties. Without the presence of both
Parties, the gauge shall not be adjusted. All of the measuring
devices shall be inspected on a regular schedule and in
accordance with the relevant national standards. If the two
Parties have any doubts concerning the readings from the
inspected gauge, the gauge may be reinspected by a higher level
inspection agency.
4.3 If the metering device is found to be inaccurate, the
two Parties shall determine the period affected by the
inaccuracy. Based on the difference before and after the
inspection, the Electric Energy Delivered (and payments relating
thereto) shall be adjusted; provided, however, that no adjustment
shall be made if the inaccuracy is less than 0.5% for the
affected period. Any malfunctioning meter shall be promptly
repaired and re-calibrated by Party B.
ARTICLE FIVE
THE PRICE FOR ELECTRIC ENERGY DELIVERED, RETAIL PRICE, AND
PRICE ADJUSTMENT
5.1 The Price for Electric Energy Delivered and Retail
Price for Electric Energy Delivered from the Plants to the Grid
shall be determined by the Pricing Document. Adjustment
mechanisms for prices shall be set forth in the Pricing Document.
ARTICLE SIX
ELECTRIC ENERGY CALCULATION AND PAYMENT
The payment for Electric Energy Delivered shall be
calculated each month. The quantity of Electric Energy Delivered
shall be based on the readings from the metering device located
at the Interconnection Point taken at midnight of the last day of
the calendar month. The number obtained from this reading shall
be the basis for calculating the quantity of Electric Energy
Delivered during the calendar month. Party A shall pay for
Electric Energy Delivered (after deducting any payments that
Party B is required to make to Party A, such as for back-up power
supplied) by the 15th day of the following calendar month( if
that is a holiday, the due date shall be the following business
day). Party A shall promptly send Party B an itemization or
invoice for any deductions from payment that it makes.
ARTICLE SEVEN
PEAK ADJUSTMENT COMPENSATION
Unless such additional electric energy is required by Party
A, if, due to technical restrictions of requirements of the heat
and steam supply, the partial electric energy load delivered
during the Trough Hours exceeds 60% of the full capacity
specified on the name plate, Party B shall compensate Party A by
paying the Grid peak adjustment compensation fee set forth in
Section 8.2.
ARTICLE EIGHT
BASIS FOR METHOD FOR DETERMINING THE QUANTITY OF ELECTRIC
ENERGY DURING DIFFERENT PERIODS
This Article only sets forth the basis for method of
determining the amount of Electric Energy Delivered during
different periods. More specific details of which shall be
stipulated in the Interconnection Dispatch Agreement.
8.1 Every day the Dispatch Department of Tangshan Power
Supply Bureau of the Grid shall issue instructions of the next
day's load curve for generation to Party B's Power Plants based
on the load characteristics of the Grid, the operation ability of
Party B's Power Plants, the Regulations and the requirements of
the General Interconnection Agreement and the Sub Agreements.
8.2 Party A shall not be required to pay Party B for
electric energy generated by the Power Plants during Trough Hours
which exceeds the generation amount for the Trough Hours as per
instructions by the Dispatch Department of Tangshan Power Supply
Bureau of the Grid (based on the average amount for Trough Hours
calculated on a daily basis), besides, it shall be entitled to
receive a compensation fee from Party B equivalent to five times
the applicable Price for Electric Energy Delivered based on the
exceeded amount.
8.3 Party A shall not pay Party B for electric energy
generated by the Power Plants during Non-Peak Hours which exceeds
the generation amount for the Non-Peak Hours as per instruction
by the Dispatch Department of Tangshan Power Supply Bureau of the
Grid (based on the average amount for Non-Peak Hours calculated
on a daily basis).
8.4 If the Power Plants of Party B do not deliver, during
the Peak Hours (based on an average specified in the
Interconnection Dispatch Agreement) the quantity of electric
energy stipulated in Sections 2.1 and 2.2 of this Agreement,
Party B shall compensate Party A, at five times the applicable
Price for Electric Energy Delivered, for the quantity gap between
the actual amount of electric energy produced and the required
electric energy production mentioned above.
8.5 If, due to Party A's actions or inactions which causes
Party B's Power Plants to generate less amount of electric
energy, and fall short of generation or purchase requirements,
Party A shall pay to Party B a compensation fee to be calculated
by the following formula:
(Amount of Electric Energy Delivered Specified in Article Two -
Actual Electric Energy Delivered) x applicable Price for Electric
Energy Delivered
8.6 The calculations in Sections 2, 3, and 4 of this
Article shall be determined daily and the related payments shall
be settled monthly.
ARTICLE NINE
COMPENSATION FOR EXCEEDING OVERHAUL TIME
If the cumulative maintenance down time for either of the
Power Plants exceeds fifty-five (55) days, Party B shall pay a
compensation fee calculated as follows:
(Electric Energy Delivered from Power Plants per day (based on
amounts set forth in Sections 2.1 and 2.2 and after deducting an
internal usage amount) x Maintenance Time Exceeding 55 days) x
Price for Electric Energy Delivered.
ARTICLE TEN
DELAYED PAYMENT AND DEFAULT PAYMENT
10.1 If either Party A or Party B does not make its payment
based on the schedule required, that Party shall pay accrued
interest with the next payment. The interest rate applied for
the delayed payment is equal to 0.05% per day.
10.2 A Breach of Contract occurs fifteen days after either
Party A or Party B does not make its payment.
ARTICLE ELEVEN
APPLICATION OF GENERAL INTERCONNECTION AGREEMENT
Force Majeure events, amendments, terminations, Breaches of
Contract, term of this Agreement, applied laws, and dispute
settlements for this Agreement shall be the same as those set
forth in the General Interconnection Agreement. The provisions
of the General Interconnection Agreement are hereby incorporated
into and made a part of this Agreement.
ARTICLE TWELVE
SUPPLEMENTAL AGREEMENT AND ITS LEGAL EFFECT
Anything not discussed in this Agreement shall be determined
by supplemental agreements through discussion between the two
Parties. Any supplemental agreements, the General
Interconnection Agreement, other Sub Agreements, and this
Agreement shall have the same legal effect.
ARTICLE THIRTEEN
TERM OF THIS AGREEMENT
This Agreement shall be effective upon being executed and
stamped by both Parties on September 22, 1995. This Agreement
shall continue in effect until termination of the General
Interconnection Agreement (at which time this Agreement shall
also terminate).
ARTICLE FOURTEEN
DOCUMENT
There shall be six originals of this Agreement. Party A
shall keep two and Party B shall keep four originals. There
shall be copies of this Agreement submitted to and filed with the
relevant authorities of the Government.
IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused this Agreement to be signed by their duly
authorized representatives, as of the day and year above written.
Legal Representative of Party A
North China Power Group Company
By: ___________________________
Name:
Title:
Legal Representatives of Party B
Tangshan Panda Heat and Power Co. Ltd.
By: ___________________________
Name:
Title:
Tangshan Pan-Western Heat and Power Co. Ltd.
By: ___________________________
Name:
Title:
EXHIBIT 10.85
SUPPLEMENTAL AGREEMENT
FOR
GENERAL INTERCONNECTION AGREEMENT
AND ELECTRIC ENERGY PURCHASE AND SALES AGREEMENT
The Parties to this Supplemental Agreement for General
Interconnection Agreement and Electric Energy Purchase and Sales
Agreement (this "Agreement"), dated February 10, 1996.
North China Power Group Company (hereinafter referred to as
"Party A") and Tangshan Panda Heat and Power Co., Ltd., ("Panda")
and Tangshan Pan-Western Heat and Power Co., Ltd., ("Pan-
Western") (collectively referred to as "Party B"). Panda has
been appointed agent of Pan-Western to act on behalf of Pan-
Western for all matters under this Agreement. Party A and Party
B are collectively referred to as the "Parties".
On September 22, 1995, Party A and Party B signed the
General Interconnection Agreement (the "General Interconnection
Agreement") regarding the interconnection between Panda's power
plant (50 MW) and Pan-Western's power plant (50 MW) (collectively
referred to as the "Power Plants") and the Beijing-Tianjin-
Tangshan Grid of Party A. On September 22, 1995, the Parties
also signed the Electric Energy Purchase and Sales Agreement (the
"Purchase Agreement") relating to the sale of power from the
Power Plants to Party A.
This Agreement supplements the General Interconnection
Agreement and Purchase Agreement for the purpose of clarifying
certain issues in connection with the international financing of
the Power Plants.
The Parties agree as follows:
Article One
DEFINITIONS
1.1 "Facilities" shall mean the 100 kV transmission facilities
required to interconnect the Power Plants with the Grid as well
as the 100 kV transmission and sub-station facilities necessary
for transmitting electric energy to the users.
1.2 "Interconnection Date" shall mean the date specified by
Party B in written notice to Party A for interconnection, which
date shall not be earlier than the time Party A is required to
have completed the Facilities in accordance with the Construction
Agreement and by which the Facilities meet the conditions for
transmitting electric energy from Party B's Power Plants.
1.3 "Test Period" shall mean the period of time between the
interconnection Date and the Commercial Operation Date in which
start-up and testing of the Power Plants electrical generation
capability may occur.
1.4 "Construction Agreement" shall mean the Construction
Agreement between Party A or its authorized representative and
Party B for the construction of the Facilities.
1.5 "Unless defined herein, all terms in this Agreement shall
have the same meanings as the ones in the General Interconnection
Agreement or the Purchase Agreement.
Article Two
INTERCONNECTION; TRANSMISSION SERVICE
2.1 The Parties agree to interconnect Party B's Power Plants
with Party A's electrical systems at the Interconnection Point.
2.2 Commencing on the interconnection Date and continuing for
the term of this Agreement, Party A's Facilities will transmit
Electric Energy Delivered by Party B's Power Plants to the Grid
in accordance with the Purchase Agreement provided that, before
the Commercial Operation Date, Party A will not require the
electric energy transmitted by Party b for test-operation to meet
the Purchase Agreement requirement, and the Facilities shall have
the capability for transmitting Electric Energy Delivered by
Party B's Power Plants at their full load generation. If the
said interconnection Facilities interrupt the transmission of
electric energy by Party B's Power Plants which is due to causes
other than Party B's responsibility or Force Majeure, Party A
shall pay damages to Party B for its direct losses thus incurred.
Article Three
OPERATION OF THE POWER PLANTS
3.1 Prior to the Commercial Operation Date, the following
provisions shall apply:
(a) During the Test Period of Party B's Power Plants, Party
A's Grid agrees to provide service to Party B's Power Plants for
the test-run of its generating unit. The said service shall
include emergency back-up capacity to Party B's Power Plants,
technical consultations, etc.
In the spirit of amicable co-operation, Party A agrees that
no fee will be charged to Party B for the above service. During
this period, Party A shall not check on or penalize Party B for
the generation performance of Party B. Concurrently, Party B's
Power Plants will not charge Party A for Electric Energy
Delivered to the Grid during this period.
(b) Party B shall give Party A ten (10) days prior written
notice of its initial 72 hour test run of each Power Plant to
establish its Commercial Operation Date. To establish the
Commercial Operation Date, such plant must generate electric
power at full load for a continuous 72 hour period. If Party B
does not complete such test successfully, it shall conduct
additional test runs of the Power Plant, which failed the test
run, on at least 24 hours prior written notice to Party A. Party
A may have a representative present for any such test or retest.
Party A and Party B shall sign a certificate establishing the
Commercial Operation Date on the day that the relevant test or
additional test of a Power Plant is completed successfully.
3.2 After the Commercial Operation Date, Party B's Power Plants
shall be normally dispatched by party A so as to allow the Power
Plants to operate in accordance with the General Interconnection
Agreement, the Purchase Agreement, and the Interconnection
Dispatch Agreement which is to be signed soon. Concurrently,
Party A shall agree to Party B's following requests:
(a) The dispatch load curve shall provide for Non-Peak
Hours of operation (between Peak Hours and Trough Hour periods)
permitting Party B's Power Plants to have a ramp period such that
the maximum capacity of such Power Plants may be generated during
all Peak Hour periods.
(b) Party A shall arrange frequency and voltage adjustments,
but Party A may not dispatch a Power Plant's reactive power
beyond the capabilities of the Power Plant's equipment. The ramp
rates of the dispatched load curves of each Power Plant shall not
exceed the requirement of NCPG's Grid for generation units of the
same type.
Article Four
MAINTENANCE OF POWER PLANTS
4.1 Each year (with the exception of the first year), Party A
shall schedule Party B's annual planned overhaul outages based on
Party B's application. The timing for such schedule shall be
fixed by Party A in accordance with the unified arrangement of
the Grid. The period for calculation of outages under Article
Three of the Purchase Agreement shall be based on a November 1 to
October 31 annual period.
4.2 Article Three of the Purchase Agreement shall apply to any
outage and calculations of outage days shall be made on a
cumulative basis.
Article Five
LEGAL EFFECTIVENESS
This Agreement shall have the same legal effectiveness as
the General Interconnection Agreement and the Electric Energy
Purchase and Sales Agreement, and shall be subject to the
relevant provisions of the General Interconnection Agreement.
Article Six
TERM OF THIS AGREEMENT
This Agreement shall be effective on the date written in the
first paragraph of this Agreement upon being signed and stamped
by both Parties. This Agreement shall continue in effect until
the termination of the General Interconnection Agreement at which
time this Agreement shall also terminate.
Article Seven
DOCUMENTS
There shall be six originals of this Agreement. Party A
shall keep two and Party B shall keep four originals. There
shall be copies of this Agreement submitted to and filed with the
relevant authorities of the Government.
IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused this Agreement to be signed by their duly
authorized representatives, as of the day and year above written.
Legal Representative of Party A:
North China Power Group Company
By:
Name: Zhao Jan Guo
Title: Vice President
Legal Representative of Party B:
Tangshan Panda Heat and Power Co., Ltd.,
By:
Name: Darol Lindloff
Title: Authorized Legal Representative
Tangshan Pan-Western Heat and Power Co., Ltd.,
By:
Name: Darol Lindloff
Title: Authorized Legal Representative
EXHIBIT 10.86
CONSTRUCTION AGREEMENT
The Parties to this Construction Agreement, dated February
10, 1996 (this "Agreement"):
North China Power Group Company (hereinafter referred to as
"Party A"), and Tangshan Panda Heat and Power Co., Ltd. ("Panda")
and Tangshan Pan-Western Heat and Power Co., Ltd. referred to as
the "Parties." Panda has been appointed agent of Pan-Western to
act on behalf of Pan-Western for all matters under this
Agreement.
The Parties have entered into a General Interconnection
Agreement dated September 22, 1995 (the "General Interconnection
Agreement") and the Sub-Agreements described therein. This
Agreement sets forth the terms and conditions to design,
construct and maintain the Facilities. This Agreement is subject
to and complies with the "Approval Notice on the Transmission
System Design Hearing of the Luannan Heat and Power Plant"
(Document - Huabeidianshe [1995] No. 65 dated July 13, 1995
issued by North China Electric Power Administration of the
Ministry of Electric Power) and "Approval Comments on the Scope
of Work of the 110 kV Transmission and Substation System for 2 x
50 MW Units of the Luannan Heat and Power Plant" (Document -
Huabeidianshe [1995] No. 75 dated August 24, 1995 issued by Party
A) (collectively the "Approvals"). Copies of such Approvals are
attached hereto.
1. SCOPE OF WORK AND DEFINITIONS
(a) The "Scope of Work" shall mean all designs, plans,
specifications, technical requirements and drawings, and mutually
agreeable changes or modifications therein, all as prepared by
Party A in consultation with Party B, together with all labor,
management, procurement, land use and other permissions and land
acquisitions, needed to design, engineer, construct,
interconnect, test-run and operate the Facilities capable of
transmitting safely and adequately the design capacity of the
Power Plants to the Grid. The telemetering equipment used to
read meters from remote locations, the wire between the dead end
support structure of the Power Plants (the "Dead End Structure")
and the main switch Interconnection Point, and the wire between
such structure and the first tower outside the fence line of the
Power Plants (on Party A's land), shall be Party A's
responsibility, within the Scope of Work, The Dead End Structure
itself shall not be within the Scope of Work and shall be Party
B's responsibility. The Scope of Work shall comply with the
Approvals.
(b) Work (the "Work") shall mean the performance of the
Scope of Work and all other obligations of Party A hereunder.
(c) Party B shall give Party A a written notice of when to
proceed with the Work (the "Notice to Proceed with Preliminary
Design") at least 18 months prior to the scheduled
Interconnection Date of the Facilities. Party A confirms that
Party B has delivered to Party A, such information about the
Power Plants as Party A requires to prepare the Scope of Work.
Party A shall deliver a written report containing the
interconnection plan, construction schedule (including timely
completion date), technical analysis confirming such completion
date and the feasibility of the interconnection plan for Party
B's confirmation as soon as possible but in no event more than 6
months after receiving the Notice to Proceed with Preliminary
Design from Party B.
(d) Party A shall design the Facilities so as to ensure an
adequate reverse supply of electric energy to the Power Plants
necessary for the Test Period as well as the needs of the Power
Plants for transmission of their generated electric energy from
the Interconnection Point to the Grid.
(e) Party A shall give Party B at least 30 days prior
written notice that the Facilities are available at the
Interconnection Point.
(f) In accordance with Article Seven of the General
Interconnection Agreement, Party A will provide construction
power to Party B at the Power Plants prior to and during
construction. Party B shall file relevant applications in
accordance with the relevant rules of the Grid for electric
energy supply for construction, and bear the relevant costs.
(g) Unless defined herein, all terms in this Agreement
shall have the same meanings as the ones in the General
Interconnection Agreement and Sub-Agreements or any supplemental
agreements thereunder.
2. TOTAL CONSTRUCTION COST, OTHER COSTS
Party B shall loan to Party A the total construction cost
for the Work equal to U.S. dollar equivalent of RMB Yuan
78,218,000 (converted according to the exchange rate on the loan
date) as adjusted by the change in the Price Index for Investment
determined by the State Planning Commission from December 31,
1994 to the date of issuance of the Notice to Proceed with
Preliminary Design (the "Total Construction Cost") pursuant to a
separate loan agreement. Unless the Scope of Work changes at the
request of Party B or the Total Construction Cost is adversely
affected by an event of Force Majeure or a breach by Party B of
its obligations under this Agreement or the loan agreement
relating hereto, no adjustment of the Total Construction Cost
shall be permitted (excluding the index adjustment described
above). The Total Construction Cost will cover the cost of all
of the Work.
3. GUARANTEES
3.1 Party A hereby guarantees (the "Party A Guarantees") the
following:
(a) It shall provide adequate reverse supply of electric
power to the Power Plants in compliance with voltage requirements
so as to satisfy the needs of the general contractor of the Power
Plants for test-runs of the Power Plants during power-on and
interconnecting, within not more than 17 months from the date on
which Party B gives Party A the Notice to Proceed with
Preliminary Design.
(b) It shall complete the Work, including the construction
of Facilities so that the Power Plants can transmit continuously
and/or intermittently on the Facilities all electric energy that
can be generated by the Power Plants and thereby meet the
requirements of the interconnecting system within not more than
18 months from the date on which Party B gives Party A the Notice
to Proceed with Preliminary Design.
(c) Design, construction and installation of the Facilities
shall be completed with new materials and in a good and
workmanlike manner in accordance with the standard for the same
category of transmission lines and sub-stations adopted by the
Grid on the date of the Notice to Proceed with Preliminary
Design.
3.2 Party B guarantees that it will make punctual loans of the
Total Construction Cost in accordance with the requirements of
the loan agreement relating hereto.
4. OWNERSHIP, MAINTENANCE AND SERVICES
(a) Party A shall be solely responsible for (excluding
problems caused by Party B or by Force Majeure) and own the
Facilities.
(b) Party A shall perform all operations, maintenance and
repair of the Facilities during the term of the General
Interconnection Agreement, including the supply, procurement,
storage and installation of the usual spare-parts needed in the
maintenance of interconnecting systems. Party A shall schedule
and perform normal and routine maintenance of the Facilities
during the scheduled maintenance of the Power Plants. Party A
shall perform all maintenance so as to avoid any interference
with the full operation of the Power Plants pursuant to the
General Interconnection Agreement and the Sub Agreements.
5. DAMAGES, OTHER REMEDIES
(a) In case of a breach of this Agreement, the breaching
Party shall be liable for the loss/damage of the other Party. In
addition, if Party B breaches this Agreement or the loan
agreement relating hereto, Party A shall be entitled to receive
appropriate schedule relief required because of the breach by
Party B. Party A shall also be entitled to charge Party B for
any increased costs in performing the Work resulting from the
breach of Party B.
(b) If Party A fails to meet any Party A Guarantee, Party B
may on written notice to Party A, assume responsibility for
completing all or any portion of the Work. In this case, Party A
shall have a 60 day cure period during which Party A must correct
the stated problem. If Party A does not correct such problem and
Party B assumes the responsibility for any portion of the Work,
Party B shall do so at Party A's expense with payments of
expenses by Party B for such Work treated as loans of a portion
of the Total Construction Cost to Party A. In the event that
such expenses exceed any balance not yet loaned on the Total
Construction Cost, Party A shall promptly pay or reimburse Party
B for such expenses.
6. COOPERATION
Party A acknowledges that payment for the Work shall be made
with loans obtained by Party B from international financial
entities. Such entities may require that relevant documents be
provided by the signatory parties of this Agreement. In order to
guarantee the obtaining of the loan, Party A agrees to cooperate
with Party B in this respect.
7. MISCELLANEOUS
The relevant terms of the General Interconnection Agreement
and the Sub Agreements are hereby incorporated into and made a
part of this Agreement with this Agreement treated as a "Sub-
Agreement" for such purposes.
IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused this Agreement to be signed by their duly
authorized representatives, as of the day and year above written.
Legal Representative of Party A.
North China Power Group Company
By: ___________________________
Name:
Title:
Legal Representative of Party B
Tangshan Panda Heat and Power Co. Ltd.
By: ___________________________
Name:
Title:
Tangshan Pan-Western Heat and Power Co. Ltd.
By: ___________________________
Name:
Title:
EXHIBIT 10.87
LOAN AGREEMENT
The Parties to this Loan Agreement, dated February 10, 1996.
North China Power Group Company (hereinafter referred to as
"Party A"), and Tangshan Panda Heat and Power Co., Ltd. ("Panda")
and Tangshan Pan-Western Heat and Power Co., Ltd. ("Pan-Western")
(collectively referred to as "Party B"). Party A and Party B are
collectively referred to as the "Parties." Panda has been
appointed agent of Pan-Western to act on behalf of Pan-Western
for all matters under this Loan Agreement.
The Parties have entered into a General Interconnection
Agreement dated September 22, 1995 (the "General Interconnection
Agreement") and the Sub-Agreements described therein. This Loan
Agreement is subject to and complies with the "Approval Notice on
the Interconnection System Design Hearing of the Luannan Heat and
Power Plant" (Document - Huabeidianshe [1995] No. 65 dated July
13, 1995 issued by North China Electric Power Administration of
the Ministry of Electric Power) and "Approval Comments on the
Scope of Work of the 110 kV Transmission and Substation System
for 2 x 50 MW Units of the Luannan Heat and Power Plant"
(Document - Huabeidianshe [1995] No. 75 dated August 24, 1995
issued by Party A) (collectively the "Approvals"). Copies of
such Approvals are attached hereto.
The Parties agree as follows:
1. Party B shall lend to Party A, and Party A shall borrow from
Party B, the U.S. dollar equivalent of RMB Yuan 78,218,000
adjusted by the change in the Price Index for Investment
determined by the State Planning Commission from December 31,
1994 to the date of issuance of the Notice to Proceed with
Preliminary Design (the "Total Construction Cost"). The RMB Yuan
amount shall be converted into U.S. dollars on the date of the
applicable loan advance at the then prevailing exchange rate as
quoted by State Administration for Foreign Exchange Control. The
proceeds of such loan shall be used solely to pay the cost of the
"Work" as described in the Construction Agreement dated as the
date hereof between the Parties (the "Construction Agreement").
Evidence of such usage shall be presented to Party B by Party A
at the request of Party B.
2. Party B shall make loan advances to Party A in accordance
with the following schedule:
(i) 10% of the Total Construction Cost on the date Party B
gives Party A the Notice to Proceed with Preliminary Design under
the Construction Agreement.
(ii) 50% of the Total Construction Cost six (6) months after
Party B gives Party A the Notice to Proceed with Preliminary
Design.
(iii) 30% of the Total Construction Cost twelve (12) months
after Party B gives Party A the Notice to Proceed with
Preliminary Design.
(iv) 10% of the Total Construction Cost upon completion of
the Facilities.
3. All loans made under this Loan Agreement by Party B to Party
A shall accrue and pay interest (from each date advanced) at the
actual rate of interest charges by international lenders to Party
B (excluding commitment and other fees), which interest rate
shall not exceed 10% simple interest per annum. Principal and
interest on all outstanding amounts shall be amortized over a
period of ten (10) years in 20 equal consecutive semi-annual
payments commencing on the September 30th or March 31st
immediately following the Commercial Operation Date of both Power
Plants (the "Repayment Commencement Date"). Starting on the
Repayment Commencement Date and each September 30th or March 31st
thereafter, semi-annual payments of principal and interest shall
be due and payable on or before each September 30th or March 31st
(or the next business day thereafter if such date is a Saturday,
Sunday or legal holiday recognized by the Central Bank in the
People's Republic of China). Payments shall be made by Party A
in U.S. dollars and in immediately available funds (or other
method of payment acceptable to Party B) to a foreign exchange
account located in the People's Republic of China designated by
Party B. A preliminary estimate of payments on the loan amount
is attached hereto based on a cost of RMB Yuan 78,218,000 and a
simple interest rate of 12% as a reference only. This estimate
will change due to actual changes in cost, interest rate or other
assumptions. In the event Party A is unable to borrow and repay
loan amounts in U.S. dollars (after making its best efforts to
obtain approvals for U.S. dollar borrowing), the Parties agree to
permit Party A to borrow and repay amounts in RMB Yuan. In the
event of the latter case of RMB Yuan loans, the Parties agree to
meet and negotiate in good faith for an equitable allocation of
the exchange rate risk.
4. Liability for Breach of Contract.
4.1 Any amounts not paid when due shall bear default interest
from the date due at a rate of 18% per annum until paid. Party A
shall pay or reimburse Party B for all its reasonable costs for
the collection of any amounts past due hereunder (including
attorney's fees).
4.2 Party A shall notify Party B at least 15 days before the
date of any advance. In the event that Party B fails to make any
advance (excluding amounts disputed in good faith) within 15 days
after the date such advance is due, Party A may suspend
performance of its work under the Construction Agreement until
such advance is made and be entitled to schedule relief and
damages for all direct losses from such delay from Party B.
5. This Loan Agreement and the construction Agreement shall
constitute Sub-Agreements under the General Interconnection
Agreement signed between the Parties on September 22, 1995.
IN WITNESS WHEROF, the Parties, intending to be legally
bound, have caused this Loan Agreement to be signed by their duly
authorized representatives, as of the day and year above written.
Legal Representative of Party A
North China Power Group Company
BY: ____________________________
Name:
Title:
Legal Representative of Party B
Tangshan Panda Heat and Power Co. Ltd.
BY: ____________________________
Name:
Title:
Tangshan Pan-Western Heat and Power Co Ltd.
BY: ____________________________
Name:
Title:
EXHIBIT 10.88
AGENCY CONTRACT FOR ENTRUSTED LOAN
Contract Serial No. 1996 Wei-tuo-zi G631
Name of the Principal: Tangshan Panda Heat and Power Co. Ltd.
and Tangshan Pan-Western Heat and Power
Co. Ltd.
Residence: Luannan County, Hebei Province
Legal Representative: Robert Carter
Name of financial institution with which it keeps account with:
Account Number:
Telephone: 0315-4122610
Zip Code:
Facsimile: 0315-4122610
Name of Agent: China Information Trust and Investment
Corporation
Residence: 27 Wanshou Road, Beijing
Legal Representative:
Telephone: 68283873
Zip Code: 100846
Facsimile: 63218546
Date of Contract: June 18, 1996
Place of the Contract: Beijing
Principal (hereinafter "Party A"): Tangshan Panda Heat and Power
Co. Ltd. and Tangshan Pan-
Western Heat and Power Co.
Ltd.
Agent (hereinafter "Party B"): China Information Trust and
Investment Corporation
WHEREAS: for the purpose of more effective
application of its funding, Party A hereby
entrusts Party B to make an "Entrusted
Loan" to North China Power Group Company
(hereinafter the "Borrower"), and Party B
hereby agrees to accept such entrustment,
as agent, from Party A. Pursuant to
relevant laws and regulations of the
State, Party A and Party B have entered
into this "Entrustment Contract" (herein
so called) after reaching agreement on the
terms hereof through consultation.
Article One: Party A, Party B and Borrower have
heretofore entered into an amendment to
the former "Loan Agreement" (which as
amended shall be referred to as "Loan
Contract for Entrusted Loan" and is
attached hereto as Attachment One) and
which by its terms designates Party B as
Agent for the Principal with respect to
the Loan Contract for Entrusted Loan, as
required by applicable law.
Article Two: Party A shall make available currency in
accordance with the terms of the
particular "Notice of Entrusted Loan" (in
the form attached hereto as Exhibit A)
issued pursuant to the requirements of the
Loan Contract for Entrusted Loan.
Article Three: For the purpose of this Entrustment
Contract, Party shall open a "Special Fund
Account for Entrusted Loan" with Party B's
banking department and make deposits to
such account in accordance with the terms
of the Loan Contract for Entrusted Loan.
The total amount of funds subject to this
Entrustment Contract shall not exceed the
aggregate amount of funds deposited by
Party A or held on deposit in the Special
Fund Account for Entrusted Loan.
Article Four: The recipient, project, amount, type,
purpose, term, interest rate, drawing and
repayment schedule shall be as specified
in the Loan Contract for Entrusted Loan
and as indicated in the Notice of
Entrusted Loan.
Article Five: Party A shall deliver a Notice of
Entrusted Loan to Party B on the date of
disbursement required in accordance with
the Loan Contract for Entrusted Loan.
Upon receipt of the Notice of Entrusted
Loan provided by Party A, Party B shall
disburse the Entrusted Loan pursuant to
the Notice of Entrusted Loan, after such
Notice of Entrusted Loan is verified as
consistent with the relevant terms and
conditions of the Loan Contract for
Entrusted Loan.
Article Six: In the event that Borrower fails to abide
by or make repayments of principal and
interest in accordance with the terms of
the Loan Contract for Entrusted Loan then
Party A shall have no right to draw from
the Special Fund Account for Entrusted
Loan any amounts attributable to such
outstanding principal or interest not so
paid by Borrower. Party B shall have no
responsibility or liability for the
payment of any such amount attributable to
Borrower's unpaid principal and interest
under the Loan Contract for Entrusted
Loan.
Article Seven: In the event that Borrower shall be in
default under the Loan Contract for
Entrusted loan, Party B shall impose the
penalty therefor provided under the Loan
Contract for Entrusted Loan and in
accordance with relevant banking rules.
Article Eight: In the Event of any default by Borrower
under the Loan Contract for Entrusted
Loan, Party B shall diligently pursue all
claims or other rights to enforcement
against the Borrower, including damages or
collection under the Loan Contract for
Entrusted Loan. Party B shall keep
Party A fully informed regarding the
progress of their pursuit of all such
claims or rights. In the event that
Party A is not satisfied therewith,
Party A shall be allowed to take over the
pursuit thereof in the name and place of
Party B and with the full assistance and
cooperation of Party B.
Article Nine: Interest and Fee. Party B shall pay
interest on the outstanding balance of the
funds held in the Special Fund Account for
Entrusted Loan, at the current deposit
rate of interest published by the People's
Bank of China. Party B will pay such
funds over to Party A semi-annually
immediately following the semi-annual
payment made by Borrower under the Loan
Contract for Entrusted Loan.
Party B shall charge to Party A
[***] FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT
on the balance of the amount of funds
from time to time outstanding to the
account of Borrower. Such fee shall be
deducted from the funds held in the Special
Fund Account for Entrustment Loan, on a
semi-annual basis calculated immediately
following the date of the semi-annual
payment made under the Loan Contract for
Entrusted Loan. In the event that funds
held in the Special Fund Account for
Entrusted Loan are insufficient to satisfy
the amount due to be paid by Party A to
Party B, Party B will submit an invoice
accounting for payment due which shall be
paid by Party A within fifteen days.
Article Ten: Party B shall credit to the account of
Party A, and transfer to Party A's
designated bank account (in immediately
available funds) within two full business
days following receipt of such funds from
the Borrower all payments made by the
Borrower pursuant to the Loan Contract for
Entrusted Loan. Party B will withhold
from such payment 5.5% of the amount of
such funds attributable to the interest
portion of the payment received from the
Borrower; immediately pay such amount
withheld over to the proper tax authority
and provide to Party A a receipt
evidencing such Tax Payment.
Party B shall pay over to the Borrower, in
immediately available funds for the
account of the Borrower, Entrusted Funds
within two full business days from the
receipt of such funds from Party A
Article Eleven: Premature payment of any principal or
interest by the Borrower shall be paid
over to Party A without penalty or other
offset or deduction and in the same manner
as described in Article Ten above.
Article Twelve: No amendment or modification to this
Entrustment Contract shall be effective
unless the same is reduced to writing and
executed by each of Party A and Party B.
No amendment, modification or
accommodation shall be made to the Loan
Contract for Entrusted Loan or with
respect to any payment required thereunder
without the prior written consent of
Party A.
Article Thirteen: Party B may refuse to make available to
the Borrower any funds otherwise due to be
paid to borrower under the Loan Contract
for Entrusted Loan if Party A fails to
deposit the required funds in the Special
Fund Account for Entrusted Loan. In the
event that Borrower fails for any reason
to make a required payment of principal or
interest to Party B, then Party B shall
not be required to make any payment of
such amounts otherwise due to be paid to
Party A under the Loan Contract for
Entrusted Loan, and the provisions of
Article 8 above shall apply.
Article Fourteen: Any written notice or instruction from
Party A under this Contract, including the
Notice of Entrusted Loan will be executed
by both of Tangshan Panda Heat and Power
Co. Ltd. and Tangshan Pan-Western Heat and
Power Co. Ltd.
Article Fifteen: Resolution of Disputes: Disputes arising
out of or in connection with the
performance of this Entrusted loan
Agreement shall be resolved through mutual
consultation between the Parties and
failing resolution thereof, by mediation.
In the case of the failure of any such
consultation or mediation, the dispute may
be resolved by legal action in a court of
appropriate jurisdiction or through
arbitration.
Article Sixteen: For matters not otherwise stipulated in
this Entrustment Contract the relevant
laws, regulations, or financial rules
applicable to transactions of this kind
shall apply.
Article Seventeen: This Entrustment Contract shall take
effect on the date last executed by each
of the Parties hereto, and shall remain in
full force and effect until the Loan
Contract for Entrusted Loan shall have
been finally satisfied or unless otherwise
terminated in accordance with applicable
law.
Article Eighteen: Each Notice of Entrusted Loan hereunder,
when validly executed by Party A and
delivered to Party B shall be and become a
part of this Entrustment Contract.
Article Nineteen: This Entrustment Contract shall be
executed in six original counterparts,
three of which shall be written in English
and three of which will be written in
Chinese.
PARTY A PARTY B
TANGSHAN PANDA HEAT AND CHINA INFORMATION TRUST AND
POWER. CO., LTD. INVESTMENT CORP.
(Company Seal) (Company Seal)\
Authorized Agent Authorized Agent
_______________________________ _______________________________
Date: June 18, 1996 Date: June 18, 1996
TANGSHAN PAN-WESTERN HEAT
AND POWER CO., LTD.
(Company Seal)
Authorized Agent
_______________________________
Date: June 18, 1996
EXHIBIT A
NOTICE OF ENTRUSTED LOAN
PRINCIPAL: TANGSHAN PANDA HEAT AND POWER CO., LTD. AND TANGSHAN
PAN-WESTERN HEAT AND POWER CO., LTD.
BORROWER: NORTH CHINA POWER GROUP COMPANY
Address: _______________________________________
Bank Name & Account No: ___________________________
___________________________
Type of Currency for Loan: Project: 2X50 LUNNAN POWER PLANT
PROJECT
LOAN AMOUNT:_______________________(in words)________(in numbers)
TERM:
INTEREST RATE:
DRAW SCHEDULE: DATE: AMOUNT
_____________________ ______________________
_____________________ ______________________
REPAYMENT SCHEDULE: _____________________ ______________________
_____________________ ______________________
_________________________________________________________________
THE ABOVE LOAN HAS PASSED OUR EXAMINATION. PLEASE CONDUCT YOUR
INVESTIGATION AND VERIFICATION FOR MAKING THE LOAN.
PRINCIPAL: (COMPANY SEAL)
LEGAL REPRESENTATIVE: (SIGNATURE)
(OR ITS AUTHORIZED PERSON)
DATE:
_________________________________________________________________
COMMENTS BY MANAGER OF THE ENTRUSTED AGENT:
SIGNATURE:
DATE:
SIGNATURE OF THE LEGAL REPRESENTATIVE OF THE ENTRUSTED AGENT:
(OR ITS AUTHORIZED PERSON)
DATE:
(COMPANY SEAL OF THE ENTRUSTED AGENT)
AMENDMENT TO AGENCY CONTRACT FOR ENTRUSTED LOAN
This Amendment to Agency Contract for Entrusted Loan is made and
entered into by and between Tangshan Panda Heat and Power Co.,
Ltd. ("Panda"), Tangshan Pan-Western Heat and Power Co., Ltd.
("Pan-Western"), Tangshan Pan-Sino Heat Co., Ltd.("Pan-Sino") and
China Information Trust and Investment Corporation (the "Party
B") on July 17, 1996.
WHEREAS, Panda and Pan-Western are collectively the Party A under
certain Agency Contract for Entrusted Loan between Party A and
Party B dated June 18, 1996, and both Panda and Pan-Western
intend to transfer all of their contractual rights and
obligations to Pan-Sino whereby Pan-Sino will assume the capacity
of Party A under such Contract;
WHEREAS, Party B consents to such transfer among Panda, Pan-
Western and Pan-Sino;
NOW THEREFOR, for good and valuable consideration and the mutual
benefit of the Parties hereunder, the Parties hereto have agreed
to the following Amendment to the Agency Contract for Entrusted
Loan:
1. For the purpose of the Agency Contract for Entrusted Loan,
Panda and Pan-Western shall be substituted by Pan-Sino as Party A
thereunder.
2. This Amendment shall constitute a valid transfer among Panda,
Pan-Western and Pan-Sino pursuant to Article Twelve of the Agency
Contract for Entrusted Loan.
IN WITNESSETH WHEREOF, the Parties, intending to be legally
bound, have caused this Amendment to Agency Contract for
Entrusted Loan to be executed by their duly authorized
representatives as of the day and year first above written.
Party A: Party B:
Tangshan Panda Heat and Power China Information Trust and Investment Co.,
Ltd. Corporation
By: /s/ Darol Lindloff By:
Title: Title:
(Company Seal) (Company Seal)
Tangshan Pan-Western Heat and Power Co., Ltd.
By: /s/ Darol Lindloff
Title:
(Company Seal)
Tangshan Pan-Sino Heat Co., Ltd.
By: /s/ Darol Lindloff
Title:
(Company Seal)
EXHIBIT 10.89
TRANSFER OF LOAN AGREEMENT
This Transfer of Loan Agreement is made and entered into by and
between Tangshan Panda Heat and Power Co., Ltd. ("Panda")
Tangshan Pan-Western Heat and Power Co., Ltd. ("Pan-Western") and
Tangshan Pan-Sino Heat Co., Ltd. ("Pan-Sino") on July 11, 1996.
WHEREAS, Panda and Pan-Western are collectively referred to as
Party B under certain Loan Agreement between North China Power
Group Company (referred to as "Party A" thereunder) and Party B
dated February 10, 1996 as well as an Amendment thereto among
Party A, Party B and China Information Trust and Investment
Corporation (referred to as "Party C" thereunder) dated June 18,
1996, and both Panda and Pan-Western intend to transfer all of
their contractual rights and obligations under such Loan
Agreement and its Amendment to Pan-Sino whereby Pan-Sino will
assume the capacity of Party B under such Loan Agreement as well
as its Amendment;
WHEREAS, Party A and Party C express no objection to such
transfer between Panda, Pan-Western and Pan-Sino and intend to
accept and confirm such transfer in writing once they are
notified;
NOW THEREFOR, for good and valuable consideration and the mutual
benefit of the Parties hereto, the Parties hereto have agree to
the following transfer of the Loan Agreement and it's Amendment:
1. For the purpose of the Loan Agreement and its Amendment, Pan-
Sino shall be substituted for and in the place of Panda and Pan-
Western as Party B wherever applicable, except for Article 2
(i)(ii)(iii) under which the obligation to give Party A "the
Notice to Proceed with Preliminary Design under the Construction
Agreement" shall remain with Panda and Pan-Western.
2. This transfer shall immediately take effect upon receipt of
written acceptance and confirmation of such transfer from both
North China Power Group Company ("Party A") and China Information
Trust and Investment Corporation ("Party C").
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused this Transfer of Loan Agreement and its Amendment to
be executed by their duly authorized representatives as of the
day and year first above written.
Transferor:
Tangshan Panda Heat and Power Co., Ltd.
By: ________________
Title:
(Company seal)
Tangshan Pan-Western Heat and Power Co., Ltd.
By: ________________
Title:
(Company seal)
Transferee:
Tangshan Pan-Sino Heat and Power Co., Ltd.
By: ________________
Title:
(Company seal)
EXHIBIT 10.90
ENGINEERING, PROCUREMENT AND CONSTRUCTION
CONTRACT
AMONG
TANGSHAN PANDA HEAT AND POWER CO., LTD
AND
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
AND
HARBIN POWER ENGINEERING COMPANY LIMITED
LUANNAN COUNTY, HEBEI PROVINCE
APRIL 24, 1996
TABLE OF CONTENTS
ARTICLE 1 DEFINTIONS 1
ARTICLE 2 RELATIONSHIP OF OWNER, CONTRACTOR, SUBCONTRACTORS
AND VENDORS 9
2.1 STATUS OF CONTRACTOR 9
2.1 STATUS OF CONTRACTOR 9
2.2 SUBCONTRACTORS AND VENDORS 9
2.3 ASSIGNMENT AND ASSUMPTION OF DESIGN CONTRACT 9
ARTICLE 3 CONTRACTOR'S RESPONSIBILITIES 10
3.1 FACILITY DESIGN AND CONSTRUCTION 10
3.2 THE SUBCONTRACTORS AND VENDORS 10
3.3 EMPLOYMENT OF LICENSED PERSONNEL; LOCAL PERSONNEL 10
3.4 CONTROL OF THE WORK 11
3.5 PAYMENT OF COSTS 11
3.6 CLEAN-UP 11
3.7 SAFETY 11
3.8 ACCESS 11
3.9 EMERGENCIES 11
3.10 OBTAINING APPLICABLE PERMISSIONS 11
3.11 LAW & REGULATIONS 12
3.12 STATUS REPORTS 12
3.13 TAX ACCOUNTING 12
3.14 OWNER'S, UTILITY AND LENDER'S RIGHT TO BE
PRESENT DURING TESTS 12
3.15 TAXES 12
3.16 CONTRACTOR'S REPRESENTATIVE 12
3.17 AS-BUILT DRAWINGS AND MANUALS 12
3.18 OWNERSHIP OF DRAWING AND MANUALS 13
3.19 SPARE PARTS 13
3.20 CONTRACTOR'S ENVIRONMENTAL OBLIGATIONS 13
3.21 PERFORMANCE TESTS 14
3.22 OPERATING AND MAINTENANCE MANUALS 14
3.23 TRAINING OF OWNER'S PERSONNEL 14
3.24 CLAIMS AND LIENS FOR LABOR AND MATERIALS 15
3.25 ELECTRICAL AND THERMAL ENERGY DISTRIBUTION FACILITIES 15
3.26 CONSTRUCTION POWER REQUIREMENTS 15
3.27 INSURANCE 15
3.28 TEMPORARY OFFICE QUARTERS 15
3.29 PARENT GUARANTY 15
3.30 BANK GUARANTEE FOR LIQUIDATED DAMAGES 16
3.31 ELECTRICAL INTERCONNECT FACILITIES 16
3.32 OPPORTUNITIES FOR OTHER CONTRACTORS 16
3.33 TRANSPORTATION AND STORAGE OF MATERIALS AND EQUIPMENT 16
3.34 SITE CONDITIONS 17
ARTICLE 4 OWNER'S RESPONSIBILITIES 17
4.1 PAYMENT 17
4.2 ACCESS TO FACILITY SITE 18
4.3 LAND FOR TEMPORARY WORKS 18
4.4 OWNER'S REPRESENTATIVE 18
4.5 DISPOSAL OF WASTE FROM OPERATION OF PLANT 18
4.6 CHANGE IN LAW OR APPLICABLE PERMITS 18
4.7 BOILER FUEL SUPPLY 18
4.8 INSURANCE 18
4.9 TAXES 19
ARTICLE 5 CONSTRUCTION SCHEDULE AND AVAILABLE FUNDS 20
5.1 COMMENCEMENT OF WORK 20
5.2 CONSTRUCTION SCHEDULE 20
5.3 AVAILABLE FUNDS 21
ARTICLE 6 CHANGE ORDERS 22
6.1 REQUEST FOR CHANGE ORDERS 22
6.2 FORCE MAJEURE EVENT 24
6.3 DISPUTES 24
ARTICLE 7 CONTRACT PRICE; PAYMENTS TO CONTRACTOR 25
7.1 CONTRACT PRICE 25
7.2 DOWN PAYMENT 25
7.3 PAYMENT FOR WORK 25
7.4 PAYMENT FOR RETAINAGE 26
7.5 FINANCING OF PLANT 26
7.6 CONTRACTOR'S PAYMENT ACCOUNT 27
7.7 LENDER'S REQUIREMENTS AND LIEN WAIVERS 27
ARTICLE 8 TITLE AND RISK OF LOSS 28
8.1 CLEAR TITLE 28
8.2 RISK OF LOSS 28
ARTICLE 9 INSURANCE 29
9.1 CONTRACTOR'S INSURANCE 29
9.2 GENERAL TERMS 29
9.3 OTHER SPECIFIC TERMS 29
9.4 PROPERTY INSURANCE LOSS ADJUSTMENT 29
9.5 WAIVER OF SUBROGATION 29
9.6 NONWAIVER 29
9.7 RIGHT TO INSURE 30
9.8 NO LIABILITY LIMIT 30
ARTICLE 10 PERFORMANCE TESTS AND FINAL ACCEPTANCE 30
10.1 NOTICE 30
10.2 PERFORMANCE TESTS 30
10.3 PERFORMANCE TEST PROCEDURES 30
10.4 FAILED PERFORMANCE TESTS 30
10.5 NOTICE OF COMMERCIAL OPERATION OF UNIT 1 31
10.6 NOTICE OF COMMERCIAL OPERATION OF THE PLANT 31
10.7 OWNER'S ACCEPTANCE OF COMMERCIAL OPERATION 31
10.8 NOTICE OF FINAL ACCEPTANCE 31
ARTICLE 11 WARRANTIES AND GUARANTEES 32
11.1 MATERIALS AND WORKMANSHIP 32
11.2 ENGINEERING AND DESIGN 33
11.3 VENDORS AND SUBCONTRACTORS 33
11.4 ASSIGNMENT OF WARRANTIES 33
11.5 LIMITATIONS 33
11.6 REMEDIES OF OWNER FOR BREACH OF WARRANTIES 35
ARTICLE 12 COMPLETION GUARANTEE 35
12.1 GUARANTEE OF TIMELY COMMERCIAL OPERATION 35
12.2 DELAY IN COMMERCIAL OPERATION 35
12.3 POSSESSION OF FACILITY FOLLOWING COMMERCIAL OPERATION 36
12.4 PAYMENT OF LIQUIDATED DAMAGES 36
12.5 BONUS FOR EARLY COMPLETION 36
ARTICLE 13 LIQUIDATED DAMAGES FOR FAILURE TO ACHIEVE
GUARANTEED PERFORMANCE 36
13.1 GUARANTEE 36
13.2 LIQUIDATED DAMAGES 37
13.3 NET DEPENDABLE CAPACITY BONUS 38
13.4 NET HEAT RATE BONUS 38
13.5 PAYMENT OF LIQUIDATED DAMAGES 38
ARTICLE 14 CONTRACTOR'S REPRESENTATIONS AND WARRANTIES 38
14.1 REPRESENTATIONS AND WARRANTIES 38
ARTICLE 15 DEFAULT AND TERMINATION 39
15.1 DEFAULT BY CONTRACTOR 39
15.2 SUSPENSION OR TERMINATION FOR CONVENIENCE 42
15.3 TERMINATION BY CONTRACTOR 43
ARTICLE 16 INDEMNITIES 44
16.1 CONTRACTOR'S INDEMNIFICATION 44
16.2 EMPLOYEE CLAIMS 44
16.3 OWNER'S INDEMNIFICATION 44
16.4 CONTRACTOR TAXES 44
16.5 PROPRIETARY RIGHTS 44
16.6 NOTICE OF CLAIM 45
16.7 SURVIVAL OF CLAUSE 45
ARTICLE 17 DISPUTES 46
17.1 ARBITRATION OF DISPUTES 46
17.2 LANGUAGE 46
17.3 ARBITRATOR(S) 46
17.4 NO IMMUNITY 46
17.5 CONTINUATION OF WORK DURING DISPUTE 46
ARTICLE 18 LIMITATION OF LIABITLIY 47
18.1 CONSEQUENTIAL DAMAGES 47
18.2 AGGREGATE LIABILITY OF CONTRACTOR 47
ARTICLE 19 MISCELLANEOUS PROVISIONS 47
19.1 ENTIRE CONTRACT 47
19.2 AMENDMENTS 47
19.3 JOINT EFFORT 47
19.4 CAPTIONS 47
19.5 NOTICE 47
19.6 SEVERABILITY 48
19.7 ASSIGNMENT BY OWNER AND CONTRACTOR 48
19.8 NO WAIVER 49
19.9 GOVERNING LAW 49
19.10 GOVERNING LANGUAGE 49
19.11 EXHIBITS 49
19.12 CONFIDENTIAL INFORMATION 49
19.13 OBLIGATIONS 49
19.14 TIME OF THE ESSENCE 50
19.15 OWNER POWER OF ATTORNEY 50
EXHIBITS
Exhibit Description Page
A Construction Schedule A-1
B Scope of Work B-1
C Design Contract C-1
D Form of Final Acceptance
Certificate D-1
E Interconnection Construction
Agreement E-1
F-1 Form of Progress Payment
Certificate F-1
F-2 Progress Payment Schedule F-2
G Form of Request for Payment G-1
H Pricing Summary H-1
I-1 Form of Bank Guarantee for
Liquidated Damages I-1
I-2 Form of Letter of Credit for
Retainage I-2
I-3 Form of Parent Guaranty I-3
J Form of Certificate for
Waiver of Liens J-1
K Time, Material and Equipment
Rate Schedule K-1
ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT
THIS ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT
(hereinafter this "Contract") is made and entered into as of
April 24, 1996, by and between HARBIN POWER ENGINEERING COMPANY
LIMITED, a Chinese Company (hereinafter the "Contractor"), and
TANGSHAN PANDA HEAT AND POWER CO., LTD., a Chinese joint venture
company (hereinafter "Panda") and TANGSHAN PAN-WESTERN HEAT AND
POWER CO., LTD., a Chinese joint venture company (hereinafter
"Pan-Western"). Panda and Pan-Western are hereinafter
collectively referred to as "Owner".
WITNESSETH
WHEREAS, Owner wishes to construct, own, and operate two
nominal 50 MW (nameplate) coal-fired electric and thermal energy
cogeneration power plants (as being further defined below, a
"Unit" and collectively, the "Plant"), having the Guaranteed Net
Dependable Capacity (as defined below) of 102,000 kW as corrected
to the Summer Design Conditions (as defined below) on an
approximately 233,100 square meter site in Luannan County, Hebei
Province for the purpose of supplying electric power to North
China Power Group Company (the "Utility") and Thermal Energy to
various industrial users and a district heating plant system
(collectively, the "Thermal Users").
WHEREAS, Owner desires Contractor to perform, and Contractor
has the ability and is willing to perform, design, engineering,
equipment and material procurement, project management,
construction, surveying, start-up and testing services and
operations and maintenance training to make the Facility fully
operational on a lump sum fixed price of U.S. $63,625,832,
turnkey basis, all as hereinafter set forth;
NOW THEREFORE, the parties, intending to be legally bound
hereby, agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the meanings specified in
this Article 1 when capitalized and used in this Contract. The
meanings specified are applicable to both the singular and
plural.
"Acceptable LC Issuer" shall have the meaning described in
Article 3.30 hereof.
"Applicable Laws" means any code, statute, law regulation,
permission (other than Applicable Permissions), ordinance, rule,
judgment, order, decree, directive, guideline or policy (to the
extent mandatory) or any similar form of decision or
determination by, or any interpretation or administration of, any
of the foregoing by any central, provincial or local government,
any political subdivision or any governmental, quasi-
governmental, judicial, public or statutory instrumentality,
administrative agency, authority, body or other entity with
jurisdiction over the Facility, the Facility Site, the
performance of the Work or other services to be performed under
this Contract.
"Applicable Permissions" means all permissions,
certifications, authorizations, approvals and licenses for the
Facility both obtained and applied for, including any variances
or waivers in effect from time to time necessary or desirable to
perform the Work. The contents of the application shall be the
"permission" for all purposes under this Contract until the
permission is obtained in writing from the proper authorities.
"As-Built Drawings" shall mean any Contractor or any
Subcontractor or Vendor engineering drawing, illustration,
diagram, schedule, as revised to reflect the final installation
of any individual Plant equipment or system or the plant as a
whole.
"Business Day(s)" shall mean any calendar Day(s) other than
Saturday or Sunday or any other calendar Day on which central
government offices are authorized or required to close in
Beijing, Peoples' Republic of China.
"Change" or "Changes" shall have the meaning described in
Article 6 hereof.
"Change in Law" shall mean any amendment, modification,
deletion, addition or change in or to any Applicable Law or
Applicable Permission that occurs and takes effect after the
Effective Date that Contractor can demonstrate will materially
and adversely affect Contractor's performance, the Scope of Work,
the Construction Schedule or the Contract Price.
"Change Order" shall mean a written order to Contractor
pursuant to Article 6 hereof, signed by Contractor and approved
by Owner and Lender (to the extent required by Lender)
authorizing an addition, deletion or revision to this Contract.
"Commercial Operation" means that all of the following have
occurred: (i) Mechanical Completion has been achieved; (ii) the
Plant or Unit has successfully completed system checkout, start-
up, and trial operation in accordance with the provisions of the
Scope of Work; (iii) the Plant or Unit is capable of operating
safely in accordance with the requirements of this Contract; (iv)
all Performance Tests have been successfully completed or with
respect to the Plant, Contractor has paid or become required to
pay such Liquidated Damages, under Article 10.4 hereof and
applicable Liquidated Damages under Article 13 hereof, to Owner
to the extent permitted in lieu of the successful completion of
certain Performance Tests; and (v) the Plant has met the 100 MW
gross output (or 50 MW gross output for the individual Unit)
testing requirements of the Power Purchase Agreement during the
Plant Acceptance Test
"Commercial Operation Date" shall mean the date on which
Commercial Operation actually occurs at the Plant, as determined
pursuant to Articles 10.5 and 10.6 hereof.
"Construction Drawings" shall mean the final Drawings
prepared by the Institute, as defined in the Design Contract.
"Construction Loan Agreement" shall have the meaning defined
in Article 7.7.1 hereof.
"Construction Schedule" shall mean the projected schedule
for the performance of the Work attached hereto as Exhibit A and
incorporated herein (as revised from time to time pursuant to
Article 5.2 hereof).
"Contract" shall mean this Engineering, Procurement and
Construction Contract (including all Exhibits attached hereto),
as it may be amended and supplemented in writing by mutual
agreement of the parties from time to time.
"Contract Price" shall have the meaning described in Article
7.1 hereof.
"Corporate Guaranty" shall have the meaning described in
Article 3.29 hereof.
"Critical Date(s)" shall have the meaning described in
Article 5.2.3 hereof.
"Day" shall mean a calendar day and shall include Saturdays,
Sundays and holidays.
"Design Conditions" shall mean, a) with respect to the
summer Performance of the Plant, ambient conditions of 38.6
degrees C and 65% relative humidity, and industrial steam flow of
44 tonnes/hour at the Plant fence line and with a delivery
pressure of 0.90 MPa; and b) with respect to the winter
Performance of the Plant, ambient conditions of minus 10 degrees
C and 56% relative humidity, and industrial steam flow to Thermal
Users of 50 tonnes/hour at the Plant fence line and with a
delivery pressure of 0.90 Mpa and c)with respect to both summer
and winter with 36 tonnes/hour of district heating steam plus in-
Plant steam uses, both at a pressure of 0.25 MPa. For either
condition, there shall be 0% condensate return for the industrial
steam.
"Design Contract" shall mean the Engineering and Design
Contract, dated December 21, 1995, between the Institute and the
Owner, as the same may from time to time be amended or
supplemented from time to time, in the form attached hereto as
Exhibit C.
"Design Criteria" shall mean those criteria described in the
Design Contract.
"Design Documents" shall mean specifications, calculations,
plans, Drawings, and other documents which determine and describe
the scope, quantity, and relationship of various components of
the Facility (as updated to reflect all changes) and final plans
created by Contractor, its Vendors or Subcontractors.
"Detailed Design" shall mean all engineering and analysis
required for the preparation of Construction Drawings base on
final, detailed calculations and vendor information.
"Dollars" or "$" shall mean a payment or amount in currency
of the United States of America.
"Drawings" shall mean all drawings, diagrams, illustrations,
schedules and performance charts, including data in the form of
electronic media, prepared by Contractor or any Subcontractor or
vendor in accordance with this Contract which illustrates any
portion of the Work, either in components or as completed.
"Effective Date" shall mean the date on which this Contract
shall have been fully executed by Contractor or Owner.
"Electrical Interconnect Facilities" shall mean the 100 kV
transmission facilities owned by the Grid, required to
interconnect the Plant with the Grid and necessary to transmit
electric energy to their users.
"Equipment" shall mean all of the materials, apparatus,
structures, tools, supplies and other goods provided by
Contractor and each Subcontractor and Vendor to complete the
Work.
"Facility Site" shall mean that real property leased or
otherwise controlled by Owner and on which the Facility is to be
constructed and operated as described in the Scope of Work in
Exhibit B hereto.
"Facility" shall mean the Plant and auxiliary buildings,
water wells, switchyard and dead end structure(s) and offsite
Equipment and buildings, sewage, pipeline and ash disposal
facilities as more fully described in the Scope of Work.
"Feasibility Study" shall mean the "Feasibility Study on
Luannan Power Plant of Tangshan Panda Heat and Power Co., Ltd."
written in Hebei in October, 1994, which is included in and made
a part of the Scope of Work.
"Final Acceptance" shall mean that all of the following have
occurred: (i) the Plant Commercial Operation Date has been
achieved; (ii) all Punch List Items have been completed; and
(iii) the Final Acceptance Certificate has been delivered to
Owner by Contractor and accepted by Owner in accordance with the
requirements of Article 10.8 hereof.
"Final Acceptance Certificate" shall mean a duly completed
and executed certificate, substantially in the form of Exhibit D
attached hereto.
"Final Acceptance Date" shall mean the date on which Final
Acceptance actually occurs.
"Financial Closing" shall mean the completion of all
agreements and satisfaction of all conditions necessary for the
Lender(s) to advance all funds which Owner anticipates will be
necessary to perform the Work.
"Force Majeure Event(s)"shall mean one or more events,
conditions or circumstances beyond the reasonable control and
without the fault or negligence of the party claiming force
majeure, that, despite all reasonable efforts of the party
claiming force majeure to prevent it, causes a material and
adverse delay or disruption in the performance of any obligation
imposed under this Contract. Force Majeure Event(s) shall
include natural disasters, fires, earthquakes, lightning, floods,
cyclones, typhoons, tornadoes, war, civil disturbances, riots,
the action of a court or action of any authority that is binding
upon the parties hereto and has been opposed by all reasonable
means by the party relying thereon as justification for not
performing an obligation or complying with any condition required
of such party under this Contract. Force Majeure Event does not
include: (i) the failure or inability to make payments when due
or (ii) third party strikes, lockouts or other third party labor
disputes (for this Article, "third party" means vendors and
Subcontractors).
"Grid" shall mean the Beijing-Tianjin-Tangshan Regional
Power Network which is owned and operated by the North China
Power Group Company.
"Guaranteed Commercial Operation Date" shall mean September
1, 1998, with respect to the Plant, provided that the Notice to
Proceed is on or before May 1, 1996. If Notice to Proceed is
later than May 1, 1996, there shall be a day for day extension to
the Guaranteed Commercial Operation Date. Contractor will allow
up to ninety (90) days extension of the Guaranteed Commercial
Operation Date with no change in the Contract Price. In
addition, the Guaranteed Commercial Operation Date is subject to
an extension for Change Orders but in no event shall be later
than July 1, 1999.
"Guaranteed Heat Rate" shall have the meaning described in
Article 13.1 hereto.
"Guaranteed Maximum Plant Emission Levels" shall mean the
emission levels and rates described in Article 13.1 hereto.
"Guaranteed Net Dependable Capacity" shall mean, with
respect to the Plant, the Net Dependable Capacity of 102,000 kW
as corrected to Design Conditions.
"Guaranteed Noise Levels" shall have the meaning described
in Article 13.1 hereof.
"Guaranteed Performance Levels" shall mean the applicable
performance test criteria and the levels described in Article 13
hereof.
"Hazardous Materials" shall mean any substance deemed as
toxic, contaminated or hazardous under any Applicable Law or
Applicable Permission
"Institute" shall mean Hebei Electric Power Survey and
Design Institute, a Chinese company, and the entity responsible
for the design of the Facility pursuant to the Design Contract.
"ICA" shall mean International Court of Arbitration (or its
successor).
"ICC" shall mean the International Chamber of Commerce (or
its successor).
"Interconnection Construction Agreement" shall mean the
Construction Agreement, dated February 10, 1996, between Utility
and Owner, relating to the financing, construction, ownership,
operation and maintenance of the Electrical Interconnect
Facilities, attached to this Contract as Exhibit E, as may be
amended or supplemented from time to time.
"Lender(s)" shall mean each and every bank, bond issuer,
trustee or other financial institution or entity providing
construction, leveraged lease or permanent financing for the
Facility, whether directly or indirectly.
"Letter of Credit" shall have the meanings described in
Articles 3.30 and 7.4 hereof.
"Lien" shall mean a lien, security interest, mortgage,
hypothecation, encumbrance or restriction on title or property
interest.
"Mechanical Completion" shall mean that, with respect to the
Facility, except for items of Work that would not affect the safe
performance or operation of the Plant, (i) each Unit has been
installed with the required connections and controls to produce
electrical power and thermal energy; (ii) all other Equipment has
been installed, checked for alignment, lubrication, and rotation;
(iii) all remaining mechanical and electrical systems, have been
checked out and are ready for operation without voiding or
impairing any warranties; (iv) all electrical continuity and
ground fault tests and all mechanical tests and calibrations have
been completed; (v) all instrumentation has been loop checked and
calibrated; (vi) each Unit has been flushed and cleaned out as
necessary and can be operated in a safe manner in accordance with
the Power Purchase Agreement, Applicable laws and Applicable
Permissions; and (vii) systems have been released and accepted
for start-up and testing of components and systems in accordance
with procedures to be agreed to between Contractor and Owner.
"Net Dependable Capacity" shall mean the electrical power
output of the Plant of 102,000 in kilowatts (kW) (51,000
kilowatts (kW) per Unit), measured at the output (high voltage
side) of the main transformer under all conditions.
"Notice to Proceed" shall mean a written notice from Owner
to Contractor directing Contractor to commence the performance of
the Work.
"O&M Personnel" shall mean those operating and maintenance
personnel who shall be experienced in operating and maintaining
facilities similar to the Facility.
"Operating Costs" shall mean all expenses incurred in
connection with the operation of the Facility.
"Operator" shall mean the entity which operates and
maintains the Facility.
"Parent Company" shall have the meaning described in Article
3.29 hereof.
"Performance Tests" shall mean the tests set forth in
Article 3.0 of the Scope of Work.
"Performance Tests Report" shall mean Contractor's written
report describing the results of the Performance Tests.
"Plant" shall mean collectively both Unit 1 and Unit 2.
"Plant Acceptance Test" shall mean the Seventy-Two (72) Hour
Performance Test set forth in Article 3.0 of the Scope of Work.
"Power Purchase Agreement" shall mean, collectively, the
General Interconnection Agreement and the Electric Energy
Purchase and Sales Agreement, each dated September 22, 1995,
between the Utility and Owner, the Supplemental Agreement and all
Sub-Agreements referred to in the General Interconnection
Agreement.
"Preliminary Design" shall mean the preliminary flow
diagrams, general arrangement drawings, and Equipment sizing as
described in the Design Contract.
"Progress Payment" shall mean an installment of the Contract
Price to be paid by Owner in accordance with Article 7.
"Progress Payment Certificate" shall mean that certificate,
substantially in the form of Exhibit F-1 attached hereto, which
is submitted by Contractor to Owner prior to the making of a
Progress Payment by Owners.
"Progress Payment Schedule" shall mean the schedule of
Progress Payments which is substantially in the form of Exhibit F-
2 attached hereto.
"Project Funding" means the advance of funds by Lender on,
and/or from time to time on or after, the Financial Closing, to
pay for the Contract Price.
"Project Procedures Manual" shall mean the document
developed by Contractor and approved by Owner, in English and
Chinese, that describes the administrative procedures to be used
for Contractor and Owner interface during the performance of the
Work.
"Punch List Item(s)" means only those items of unfinished
Work that do not affect the safety, reliability, performance or
operation of the Facility under all Design Conditions.
"Qualified Insurer" means an insurance company or companies
licensed to provide insurance in the People's Republic of China
(PRC) reasonably acceptable to Owner and, if required, Lender to
provide insurance coverage under this Contract.
"Reference Rate" shall mean the rate of interest equal to
12% per annum.
"Request(s) for Payment" shall mean the monthly written
requests from Contractor to Owner for payment, which requests
shall be in substantially the form of Exhibit G attached hereto.
"Retainage" shall mean the amount which is equal to ten
percent (10%) withheld by the Owner from (1) the Down Payment
which is as defined in Article 7.2, and (2) each Progress Payment
according to Article 7.3.
"Rules of Conciliation" shall mean the rules of conciliation
of the ICC, as construed and in effect from time to time.
"Scope of Work" shall mean the aggregate of all Work
required to complete the Facility, included in the Scope of Work
and all attached Addendums described in Exhibit B and as
otherwise expressly set forth in this Contract.
"Subcontractor" shall mean any contractor or constructor who
performs construction services on the Facility Site for
Contractor or any sub-contractor thereto pursuant to Article 2.2
hereof, including Hebei (pursuant to the Design Contract and this
Contract).
"Substantial Subcontractor" shall have the meaning described
in Article 7.7.4 of this Contract.
"Substantial Vendor" shall have the meaning described in
Article 7.7.4 of this Contract.
"Thermal Energy Distribution Facilities" shall mean the
pipeline, valves, regulations, instrumentation provided by third
parties necessary to deliver steam to the Thermal Users at Design
Conditions.
"Thermal Energy Output" or "Thermal Energy" shall mean the
export of saturated steam delivered to the Thermal Users.
"Thermal Users" shall have the meaning described in the
recitals to this Contract.
"Unit" means a Unit described in the first recital to this
Contract, which is one 50 MW nameplate generation train
consisting of one boiler, main and auxiliary transformer, steam
turbine and electric generator, coal and ash handling systems and
the necessary accessories dedicated to operate this Equipment as
part of the Plant for the export of electrical thermal energy, as
more fully described in the Scope of Work.
"Utility" shall have the meaning as described in the first
recital to this Contract.
"VAT" shall mean any Value Added Tax (or similar or
successor tax).
"Vendor" shall mean any supplier, manufacturer or vendor of
Equipment or services to Contractor or any Subcontractor thereof
pursuant to Article 2.2 hereof.
"Work" shall mean all obligations, duties and
responsibilities to be performed by Contractor and its
Subcontractors under this Contract including, but not limited to,
the furnishing of all Equipment, tools, labor, supplies, material
services and the provision of all design, engineering,
procurement, support, construction, start-up, performance testing
and other services pursuant to this Contract, including the Scope
of Work.
ARTICLE 2
RELATIONSHIP OF OWNER, CONTRACTOR,
SUBCONTRACTORS AND VENDORS
2.1 Status of Contractor. Contractor shall be an
independent contractor with respect to any and all Work to be
performed under this Contractor.
2.2 Subcontractors and Vendors. Contractor shall have the
right to have any of the Work accomplished by a Subcontractor or
a Vendor. Nothing in any such subcontracts and purchase orders
shall in any way diminish or relieve Contractor from any duties
and obligations under this Contract; and all such subcontracts
and purchase orders must provide that, the rights thereunder are
assignable to Owner and Lender at any time. No Subcontractor or
Vendor is intended to be or shall be deemed a third-party
beneficiary of this Contract. Owner shall have the right to
reasonable consent to the selection of the Substantial Vendors
and Substantial Subcontractors, which consent shall not be
unreasonably withheld or delayed. Contractor shall provide
lists, describing the Work to be performed by all Substantial
Contractors, until all Substantial Contractors and Substantial
Vendors have been identified and approved by Owner.
2.3 Assignment and Assumption of Design Contract. Pursuant
to Article 5.0 of the Design Contract, Owner hereby assigns all
of its rights and benefits in, and delegates all of its
obligations arising under, the Design Contract to Contractor, and
Contractor hereby accepts such rights and benefits and assumes
all such obligations from Owner, including the obligation to make
payments to Institute in accordance with the Design Contract
arising before or after the date of this Contract.
Notwithstanding the foregoing sentence, Owner reserves the right
under Article 4.1 of the Design Contract to require an
arbitration between the Institute and the Contractor. All
amendments to or supplements of the Design Contract shall first
be approved by Owner in writing. Contractor acknowledges that,
even though Owner originally entered into the Design Contract
with Institute, Institute is now and shall continue to be a
Substantial Subcontractor and shall have no further rights
against Owner. Contractor indemnifies Owner from and against any
claim, action, proceeding, liability or expense (including legal
fees and expenses) arising or in any way relating to Institute or
the Design Contract. Contractor's indemnification shall survive
the termination of this Contract.
ARTICLE 3
CONTRACTOR'S RESPONSIBILITIES
3.1 Facility Design and Construction. Contractor shall
furnish, on a turnkey basis, all products and services required
to perform the Work and turn over to Owner the Facility in a
manner which shall: (a) enable the Plant to meet the Performance
Tests by the Plant's Guaranteed Commercial Operation Date; (b) be
in conformance with the Scope of Work, the Addendums to the Scope
of Work, the Design Contract attached hereto as Exhibit C, and
(c) all Applicable Permissions and Applicable Laws.
3.2 The Subcontractors and Vendors. Contractor shall be
solely responsible for the engagement and management of the
Subcontractors and Vendors in the performance of the Work.
3.3 Employment of Licensed Personnel; Local Personnel
3.3.1 Contractor agrees, where required by Applicable
Law, to employ only licensed personnel in good standing with
their respective trades and licensing authorities to perform
professional services in the performance of Work.
3.3.2 The Contractor is expected to employ unskilled staff
and, to the extent practicable and reasonable, skilled labor from
within Luannan County. For the purposes of these requirements,
unskilled labor shall mean persons performing Work with common
hand tools and skilled labor shall include equipment operators
and persons having knowledge to lay out and supervise Work of a
complex character.
(a) The Contractor shall increase or decrease wages and
salaries for his local Employees in accordance with any changes in the
laws and regulations of China and the provincial government which
might occur during the validity period of this Contract Price.
(b) The Contractor shall not recruit his staff and labor
from any persons in the service of the Owner or the Owner's
representatives.
(c) The Contractor shall be responsible for the return
to the place of recruitment or to their domicile of all such persons as
he recruited and or to their domicile of all such persons as he
recruited and employed for the purposes of or in connection with
this Contract and shall maintain such persons as are to be so
returned in a suitable manner until they shall have left the
Facility Site or, in the case of persons who are not nationals of
China and have been recruited outside China, shall have left
China.
3.4 Control of the Work. Subject to the provisions of this
Contract, Contractor shall be solely responsible for all
construction and engineering means, construction surveying
methods, techniques, sequences, procedures, and safety and
security programs in connection with the performance of the Work.
3.5 Payment of Costs. Contractor shall pay for all labor,
construction utilities, supervision, inspection, other costs and
Equipment as may be necessary to complete the performance of the
Work.
3.6 Clean-Up. Contractor shall at all times during the Work
keep the Facility Site reasonable free from waste and rubbish
relating to its Work (and shall perform all clean-up work at the
Facility Site reasonable requested by Owner). As soon as
practicable after the earlier of (i) the Final Acceptance Date;
and (ii) an earlier termination of this Contract by Owner in
accordance with the provisions of Article 15 hereof, Contractor
shall remove all of its Equipment, materials and temporary
facilities from the Facility Site (other than Equipment and
materials incorporated in the Plant or necessary or useful to the
operation or maintenance of the Facility), and shall complete
removal and disposal of all waste and rubbish from and around the
Facility Site.
3.7 Safety. Contractor shall be responsible for the safety
of all persons and property in connection with the Work. The
Contractor shall initiate and maintain reasonable safety
precautions and programs which shall comply with Applicable Laws,
and Applicable Permissions, to prevent injury to persons or
damage to property on, about, or adjacent to the Facility Site.
3.8 Access. Contractor shall provide access to the Work to
the Owner, Owner's contractors, Owner's representatives or
Lender.
3.9 Emergencies. In the event of any emergency endangering
life or property, Contractor shall take such action as may be
reasonable and necessary to prevent, avoid or mitigate injury,
damage, or loss and shall, as soon as possible, report any such
incidents, including Contractor's response thereto, to Owner.
3.10 Obtaining Applicable Permissions. Contractor shall
timely obtain the Applicable Permissions. Contractor shall
deliver to Owner and Lender true and complete copies of such
Applicable Permissions upon receipt thereof and keep Owner fully
apprised of Applicable Permissions for which Contractor is
responsible under this Contract. Prior to initial Project
Funding, Contractor shall identify in writing all necessary
Applicable Permissions for construction. All Applicable
Permissions shall be issued in the name of Owner unless otherwise
required by Applicable Law. Owner and Contractor agree to assist
and cooperate with the other in obtaining Applicable Permissions
necessary for the performance of the Work.
3.11 Laws and Regulations. Contractor shall conform with
all Applicable Laws and Applicable Permissions that affect or
govern Contractor's performance of Work under this Contract.
Contractor agrees to indemnify, defend and hold Owner harmless
from and against all fines, penalties and related costs and
expenses, including attorneys' fees and costs, arising from or
related to any failure of Contractor or its Subcontractors,
employees, or Vendors to conform with such Applicable Laws and
Applicable Permissions. Contractor's indemnification obligation
shall survive the Final Acceptance Date or the earlier
termination of this Contract.
3.12 Status Reports. Contractor shall prepare and submit to
Owner, Lender and their authorized representatives within fifteen
(15) days after the end of each calendar month, written progress
reports, in a form reasonably acceptable to Owner, which reports
shall include a description of the status of material and
Equipment deliveries and scheduled deliveries, the
Subcontractors' activities, engineering and construction
progress. Photographs shall also be included documenting the
construction progress. Each photograph shall show the date,
Contractor's name and description of the view taken.
3.13 Tax Accounting. If required by Owner, after the Final
Acceptance Date, but in no event later than one (1) year after
the Final Acceptance Date, Contractor shall provide to Owner with
appropriate and reasonable information necessary in connection
with Owner's preparation of tax returns or claims for tax
exemptions.
3.14 Owner's, Utility and Lender's Right To Be Present
During Tests. Owner, the Utility and Lender and their authorized
representatives, shall have the right to inspect the Work and to
be present during testing. Contractor shall provide the notices
thereof as required under this Contract including Article 10.1.
3.15 Taxes. Contractor shall pay all taxes required by
Applicable Laws and Applicable Permissions in connection with the
Work.
3.16 Contractor's Representative. Contractor shall appoint
one individual, with the prior written consent of Owner, who
shall be authorized to act on behalf of Contractor and with whom
Owner may consult at all reasonable times, and whose instruction,
request and decisions in writing will be binding upon Contractor.
Contractor shall not remove such representative without Owner's
prior written consent. Contractor shall furnish a Project
Procedure Manual within fifteen (15) Days after the initial
Project Funding for review and approval by Owner.
3.17 As-Built Drawings and Manuals. Contractor shall
deliver to Owner, the number of complete sets of operations and
maintenance manuals and of the As-Built Drawings and Design
Documents, as reasonably requested by Owner or otherwise
prescribed in the Scope of Work, all on or before the final
payment is made by owner for the Work. Contractor shall also
provide such operating and maintenance information as is
reasonably requested by Owner's Operator for start-up and testing
purposes.
3.18 Ownership of Drawings, Information, and Other
Materials. All Drawings, shop Drawings. Trade prints, Design
Document, reports, calculations and other information of any kind
furnished to Contractor, or prepared by it, its Subcontractors,
or others in connection with the performance of the World, except
financial, accounting and payroll records, are the property of
Owner and are furnished to, or held by, Contractor for its use in
performing the Work. All such information shall be returned or
delivered to Owner concurrently with issuance of the Final
Acceptance Certificate or immediately upon termination of
Contractor's services under this Contract, whichever occurs
first. Contractor and any of its Subcontractors, as applicable,
may, however, retain one (1) set of all such documents for their
records.
Contractor shall maintain at the Facility Site one copy of
all Design Documents, (including detailed construction
drawings), Change Orders and other modifications in good order
and marked to record all changes made during performance of the
Work.
Contractor shall furnish Owner with documents that
correctly reflect, with substantial completeness, the Facility
or the portion of the Work against which a Request for Payment
is issued. Final Design Documents, including As-Built
Drawings, if not furnished earlier, shall be furnished to Owner
upon Contractor's request for a Final Acceptance Certificate of
the Facility.
3.19 Spare Parts. Contractor shall be responsible for
obtaining and for the cost of all spare parts required for
start-up and testing of the Plant Owner shall be responsible
for obtaining all spare parts required for the normal operation
of the Plant. Owner shall have ordered such operational spare
parts by the commencement of start-up operations at the Plant.
Contractor may use Owner's operational spare parts in stock in
connection with its start-up and testing of the Plant; provided
that such spare parts used by Contractor shall be promptly
replaced at Contractors expense.
3.20 Contractor's Environmental Obligations. Contractor
shall, and shall cause its Subcontractors and Vendors to, (i)
comply with all Applicable Laws regarding Hazardous Materials;
(ii) apply for, obtain, comply with, maintain and renew all
Applicable Permissions required of Contractor by Applicable
Laws; and (iii) comply with the requirements of any Lenders
with respect to Hazardous Materials.
3.20.1 Contractor shall conduct its activities under
this Contract, and shall cause each of its Subcontractors and
Vendors to conduct its activities, in a manner designed to
prevent pollution of the environment or any other prohibited
release of any Hazardous Materials by Contractor and its
Subcontractors and Vendors.
3.20.2 Contractor shall not cause or allow the
release or disposal of Hazardous Materials at the Facility
Site, bring Hazardous Materials to the Facility Site, or
transport Hazardous Materials from the Facility Site, except in
accordance with the Scope of Work, Applicable Laws and
Applicable Permissions regarding Hazardous Materials.
Contractor shall cause all Hazardous Materials generated by
Contractor or any of its Subcontractors or Vendors at the
Facility Site, if any, (i) to be transported only in accordance
with Applicable Laws and Applicable Permission and (ii) to be
treated and disposed of only in compliance with Applicable Laws
and Applicable Permissions.
3.20.3 If Contractor or any of its Subcontractors or
Vendors releases any Hazardous Material on, at, or from the
Facility Site, or becomes aware of any third person who
releases Hazardous Material on, at, or from the Facility Site
during the Work, Contractor shall immediately notify Owner in
writing. If Contractor's Work involves the area where such
release occurred, Contractor shall immediately stop any Work
affecting the area. Contractor shall, at its sole expense,
diligently proceed to take all necessary or desirable remedial
action to clean up fully the contamination caused by any such
release.
3.20.4 If Contractor discovers any Hazardous Material
stored, released or disposed of at the Facility Site, prior to
the date of this Contract, by a person or entity other than
Contractor, its Subcontractors and Vendors, Contractor shall
immediately notify Owner in writing. If Contractor's Work
involves the area where such a discovery was made, Contractor
shall immediately stop any Work affecting the area and Owner
shall determine a reasonable course of action. Contractor
shall not, and shall prevent its Subcontractors and Vendors
from, knowingly or negligently taking any action that may
exacerbate any such contamination. Contractor shall cooperate
with and assist Owner in making the Facility Site available for
taking necessary remedial steps to clean up any such
contamination at Owner's request and expense.
3.21 Performance Tests. Contractor shall be responsible
for notifying any Supplier or Vendor which must be present at
the Performance Tests.
3.22 Operating and Maintenance Manuals. Contractor shall,
by no later than Mechanical Completion, supply Owner with
manuals or handbooks in both English and Chinese, which
provide, either in such a single manual or handbook or
collectively, complete operating and maintenance instructions
for each major piece of Equipment and system of the Facility.
Each such manual or handbook shall comply with the requirements
of the Scope of Work.
3.23 Training of Owner's Personnel. During the
construction of the Plant, and at least one hundred twenty
(120) days prior to start-up and testing of the Plant in
accordance with the terms hereof, Contractor shall provide a
training program in operation and maintenance for Owners Plant
personnel and the O&M Personnel. The training program provided
by Contractor shall (i) include classroom and field training,
(ii) include all manuals, Drawings, and other educational
materials necessary or desirable for the adequate training of
the O&M Personnel, and (iii) establish quality controls so that
O&M Personnel are suitably trained and capable of operating and
maintaining the Plant during start-up and testing and after
Commercial Operation.
Owner is responsible for providing qualified non-
supervisory O&M Personnel who will normally staff the Facility
for use by Contractor during the testing and start-up phases of
operation of the Plant. Contractor will cooperate with Owner
and the supervisory O&M Personnel in all respects, including
reasonable scheduling of Operator's non-supervisory staffing
requirements for the Facility. Contractor will direct and have
complete responsibility for the activities performed by non-
supervisory O&M personnel for start-up and testing activities.
Contractor shall not use O&M Personnel for construction
activities.
3.24 Claims and Liens for Labor and Materials. Contractor
shall, at Contractor's sole expense, pay and discharge and
cause to be released on a written demand from Owner, any Lien
in respect to the Facility, this Contract, the Facility Site,
the Plant or the Equipment created by, through or under
Contractor or any Subcontractor or Vendor. Contractor shall
indemnify Owner against, and hold it harmless from, any
liability, damage, loss, claim, demand, cost or expense
(including attorneys' fees from legal professionals that Owner
retains) suffered or incurred by Owner in connection with any
such Lien, charge or security interest. This Article 3.24
shall survive Final Acceptance or the earlier termination of
this Contract.
3.25 Electrical and Thermal Energy Distribution
Facilities. Contractor shall cooperate with Owner and the
constructors of the Electrical Interconnection Facilities and
the Thermal Energy Distribution Facilities, including providing
information and access to the Facility Site to enable such
constructors to complete construction of such facilities as
required by Owner.
3.26 Construction Power Requirements. Contractor is
responsible for the cost, supply and availability of electric
power and transmission requirements during construction, start-
up and testing of the Plant. Contractor, at its sole expense,
shall furnish all lubricants and chemicals for start-up and
testing.
3.27 Insurance. Contractor shall provide the insurance
required by Article 9 hereof.
3.28 Temporary Office Quarters. Contractor shall provide
Owner, Owner's representatives and Lender with reasonably
adequate office space, including western style toilets and
fixtures, at the same time as Contractor creates its site
office on the Facility Site. Contractor shall submit plans and
Design Documents for such office space to Owner for its prior
written approval. Contractor shall be responsible for
maintenance and cleaning of these site offices. Contractor
shall provide daily lunches for Owner's on-site representatives
and O&M personnel, and twice daily beverage service during
normal construction days.
3.29 Parent Guaranty. Contractor shall provide prior to
the initial Project Funding to Owner, substantially in the form
of Exhibit I-3 attached hereto, a corporate guaranty of China
Harbin Power Equipment Company, Limited a Chinese company
("Parent Company"), for the benefit of Owner and Lender under
terms and conditions acceptable to Owner and Lender ("Parent
Guaranty"). In order to provide Owner and Lender with evidence
of Contractor's and Parent Company's financial ability to
complete the Facility, Contractor agrees to provide the
financial statements of Parent Company within twenty-one (21)
days of the date such statements are published. The failure of
Contractor to provide a suitable Parent Guaranty of Parent
Company prior to initial Project Funding shall constitute a
default by Contractor pursuant to Article 15 and will give rise
to the remedies set forth in Article 15. Any Parent Guaranty
shall require Parent Company to pay the reasonable costs and
expenses, including attorneys' fees, of collection from Parent
Company in the event of a default by Contractor or Parent
Company.
3.30 Bank Guarantee for Liquidated Damages. At Project
Funding, Contractor shall provide Owner with a Bank Guarantee,
issued in the form, attached hereto as Exhibit I-l and from a
financial institution acceptable to Owner and Lender, in their
sole discretion ("Acceptable Guarantor"), in an amount equal to
the product of the Contract Price (to be adjusted if the
Contract Price changes) multiplied by 0.35 (the "Bank
Guarantee"). Owner shall have the unconditional right to draw
upon such Bank Guarantee for damages, compensation or otherwise
under Articles 12, 13, and 15, or for any other purpose
specified in the draw certificate to the Bank Guarantee.
Within twenty (20) days after Owner's acceptance of Commercial
Operation Date of the Plant as defined in Article 10.7 or
twenty (20) days after payment of all liquidated damages
pursuant to Particles 12, 13, and 15, whichever is later, but
in no event beyond six (6) months after Owner's acceptance of
Commercial Operation Date of the Plant, Conner shall return the
Bank Guarantee to the issuing bank with instructions for
cancellation.
3.31 Electrical Interconnect Facilities. Neither
Contractor nor its Subcontractors shall tamper with the
Utility's Electrical Interconnect Facilities without the prior
written consent of Owner and Utility; except in situations
where such actions are taken to prevent immediate injury, death
or property damage, and Contractor uses all reasonable efforts
to provide Owner and Utility with advance notice of the need
for such actions.
3.32 Opportunities for Other Contractors. The Contractor
shall, upon written request from the Owner, give all reasonable
opportunities to any other contractors employed by the Owner
for carrying out their Work on or near the Facility Site,
except where and to the extent that any such Work may cause any
delay in Contractor's Work.
3.33 Transportation and Storage of Materials and Equipment.
3.33.1 Unless otherwise provided under this Contract,
Contractor shall procure and transport to the Facility Site all
domestic and foreign materials and Equipment in an expeditious
and orderly manner.
3.33.2 The Contractor shall, at its own risk and
expense, transport all the materials and Equipment to the
Facility Site required for it to perform the Work by the mode
of transport which the Contractor judges most suitable under
all circumstances.
3.33.3 Upon dispatch of each shipment of foreign
materials Contractor shall notify the Owner in writing of the
description of foreign materials, the point and means of
dispatch and the estimated time and point of arrival in the
People's Republic of China applicable, and at the Facility
Site. The Contractor shall furnish the Owner with relevant
shipping documents to be agreed upon between the parities.
3.33.4 The Contractor shall be responsible for
obtaining, if necessary, approvals from the competent
authorities for transportation of the foreign materials to the
Facility Site. The Owner shall use reasonable efforts in a
timely and expeditious manner to assist the Contractor and
Contractor shall indemnify and hold harmless the Owner from and
against any claim for damage to roads, bridges or any other
damages caused by the transportation of materials to the
Facility Site. This indemnity shall survive any termination of
this Contract.
3.33.5 The Contractor shall, at its own expense,
handle ad foreign materials at the point(s) of import, and any
formalities for customs clearance, provided that if applicable
laws or regulations require any application or act to be made by
or on behalf of Owner, Contractor shall prepare and submit to
Owner, for its approval, each such application.
3.34 Site Conditions.
3.34.1 Contractor shall have the sole responsibility
for Facility Site conditions and of satisfying itself concerning
the nature and location of Work and the general and local
conditions, and particularly, but without limitation, with
respect to the following: those affecting transportation,
disposal, handling and storage of materials; availability and
quality of labor; availability and condition of roads; climatic
conditions and seasons; river hydrology and river as a whole,
topography and ground surface conditions; nature and quantity of
surface materials to be encountered; Equipment and facilities
needed preliminary to and during performance of the Contract; and
all other matters which can in any way affect performance of the
Contract, or the cost associated with such performance.
3.34.2 The failure of the Contractor to acquaint
itself with the aforementioned applicable conditions will not
relieve it from the responsibility for properly estimating either
the difficulties, the time required, or the costs of successfully
performing the Contract.
3.34.3 Contractor will be solely responsible for
interpretation of data or information set forth in the "Luannan
Thermal Electric Power Plant Geotechnical Report," Document
Number 13-F032K-G0001-10.
ARTICLE 4
OWNER'S RESPONSIBILITIES
4.1 Payment. Owner shall timely pay all sums required to
be paid by it to Contractor pursuant to the terms of this
Contract.
4.2 Access to Facility Site. So long as Contractor is not
in default under this Contract, Owner shall provide Contractor
with free and clear access to the Facility Site until the later
of (i) the Final Acceptance Date (in its entirety) and (ii) the
date upon which Contractor shall no longer have any obligations
under this Contract (other than continuing indemnity or warranty
obligations), provided, however, and subject to the rights of
Owner on account of a default by Contractor under this Contract,
that Owner shall grant Contractor reasonable access to recover
Equipment belonging to Contractor used to complete the Work and
to perform Warranty Services.
4.3 Land for Temporary Works. The Owner shall provide
areas of land necessary to complete the Work, including those
areas of work activities, for offices, accommodation and missing
facilities, areas for temporary access roads, for the extension
to the right-of-way and for some other temporary works.
4.4 Owner's Representative. Owner shall appoint one
individual who shall be authorized to act on behalf of Owner
either to approve, reject or otherwise facilitate the orderly
execution of the Work, and with whom Contractor may consult at
all reasonable times, and whose instructions, requests, and
decisions in writing will be binding upon Owner as to all matters
pertaining to this Contract and the performance of the parties
under this Contract. Owner may substitute a different Owner's
representative upon prior written notice to Contractor. In the
event of such substitution, the Owner agrees to use best efforts
to maintain consistency in administration of the Contract and in
subsequent decisions.
4.5 Disposal of Waste from Operation of Plant. Owner shall
be responsible, at Owner's cost and expense, for the disposal of
wastes from the operation of the Facility.
4.6 Change in Law or Applicable Permits. If, after the
Effective Date, any Change in Law is adopted, or occurs, then
such Change in Law may be treated as a Change Order if such
change in Law meets the requirements in Article 6 hereof. If
the parties are unable to agree on the result of the Change in
Law, then the dispute shall be resolved in accordance with
Article 17 hereof, but Contractor shall continue its Work,
talking into account such Change in Law, until such dispute is
resolved.
4.7 Boiler Fuel Supply. Owner shall, at its expense, on
forty-five (45) Days prior notice from Contractor, supply fuel
oil and coal for boiler fuel at the Facility Site needed by
Contractor in connection with the start-up, adjustment and
testing and completion of the Performance Tests. Such notice
from Contractor shall include the amount and desired delivery
timing of such fuel.
4.8 Insurance.
4.8.1 Owner, at its sole cost and expense, shall
provide and maintain an All Risk Installation and Builder's Risk
Insurance Policy acceptable to Owner and Lender, if required
(the "Builder's Risk Policy") including any endorsements needed
to reflect coverage for flood and windstorm, in an amount at
least equal to the full replacement value of the Facility. The
required deductible shall be no more than fifty thousand dollars
($ 50,000) Owner shall provide to Contractor a copy of the
Builder's Risk Policy or other evidence reasonably satisfactory
to Contractor evidencing the Builder's Risk Insurance coverage
and the Delay in Opening and Start-up insurance Policy
endorsements therein prior to mobilization at the Facility Site.
4.8.2 Each "all risk" policy shall: (i) name Owner or
its assigns as the sole loss payee with respect to the Work;
(ii) provide for each insurer's waiver of its right to
subrogation against Contractor and the Subcontractors, and
(iii) provide that such insurance (A) shall not be invalidated
by any action of, or breach of warranty by, Contractor or any
Subcontractor of a provision of any of its insurance policies,
(B) shall waive set-off, counterclaim or offset against
Contractor, the Subcontractor and Lender, (C) provide that
Owner's insurance shall be primary without a right of
contribution of Contractor's insurance, if any, or any
obligation on the part of Contractor to pay premiums of Owner,
and (D) shall contain a clause requiring the insurer to give
Contractor and Lender at least 30 days' prior written notice of
its cancellation (other than cancellation for non-payment for
which 10 days' notice shall be sufficient). All insurance
shall be provided by a Company or other person authorized to
issue insurance in the Peoples' Republic of China. Contractor
further agrees to give Owner and Lender immediate notice of any
damage to, or loss of, the Equipment or any part thereof.
4.8.3 Should a loss be sustained under the Builder's
Risk Policy, to the extent permitted by Lender and at no cost
to Contractor and Lender, Owner, with the assistance of
Contractor, shall act on behalf of Owner and Contractor for the
purpose of adjusting the amount of loss with the insurance
companies. Contractor shall replace or repair any loss or
damage and complete the Work in accordance with the Contract
and Owner shall be responsible for making funds available for
such Work. An appropriate Change Order shall be executed, if
necessary, to reflect resulting extension of time or costs
associated with acceleration of Work requested by Owner.
4.8.4 Owner or Contractor may obtain such other
coverages as each desires so long as such coverages in no way
limit or modify the coverages to be provided under this Article
4.
4.8.5 The foregoing provision of this Article 4.8
notwithstanding, if any insurance coverage specified above is
unavailable, or is available only in an amount less than that
required, Owner shall in the event of such unavailability,
provide the most nearly comparable coverage reasonably
acceptable to Owner and Lender that is available, or in the
event of any such limited availability, provide the maximum
amount of coverage that is available at a reasonable cost and
use its continual best efforts to obtain the required insurance
and to keep Contractor advised of such efforts.
4.9 Taxes. Owner shall pay all real property taxes
assessed against the Facility Site and any permanent use
charges assessments such as water or sewer, but excluding
temporary charges for construction utilities which shall be
Contractor's responsibility.
ARTICLE 5
CONSTRUCTION SCHEDULE AND AVAILABLE FUNDS
5.1 Commencement of Work. Contractor shall commence
performance of the Work under this Contract after Owner receives
Preliminary Design approval from the Hebei Provincial
Construction Commission pursuant to Applicable Laws and
immediately upon receiving (l) the Notice to Proceed and (2) the
Down Payment as set forth herein in Article 7.2.
5.2 Construction Schedule.
5.2.1 Contractor shall perform the Work in compliance
with the Construction Schedule, including completing the Work
required by the Critical Dates, provide the reports
contemplated by Article 3.12, and provide any further
information as Owner or Lender may reasonably request to verify
actual progress and predict future progress. Contractor shall
promptly notify Owner and Lender in writing of any occurrence
that Contractor has reason to believe will adversely affect the
Construction Schedule. Contractor will specify in said notice
the corrective action planned by Contractor.
5.2.2 Contractor shall, commencing twenty (20)
Business Days after the Notice to Proceed, unless otherwise
required by Owner, submit to Owner for its approval, any
Changes to such Construction Schedule that provide for the
orderly, practicable and expeditious completion of the Work by
the Guaranteed Commercial Operation Date and that take into
account the relationship of the Work to other activities at the
Facility Site. Within twenty (20) Business Days of Owners
receipt of such a revised Construction Schedule, unless
otherwise specified, Owner will either approve such
Construction Schedule or return it to Contractor for revision.
If returned, Contractor will submit a revised Construction
Schedule for approval. The Construction Schedule will be
presented in reasonable detail and in a form appropriate to
cover substantially all of the Work. If at any time during the
Work, Contractor's actual progress appears to Owner to be
inadequate to meet the requirements of this Contract, Owner may
notify Contractor of such imminent or actual noncompliance.
Contractor will thereupon submit a recovery plan for approval
and take such steps as may be necessary to improve its
progress. Such notice will not relieve Contractor from its
obligation to achieve the quality of Work and rate of progress
required hereby.
5.2.3 Upon the failure of Contractor to achieve any of
the milestones set forth below by the date set forth opposite
thereof (each a "Critical Date"), Owner may notify Contractor
in writing to show cause why Contractor should not be held in
default under Article 15 hereof for failure to achieve any one
of the milestones by the date set forth. Within three (3) Days
of receipt of such written notice to show cause, Contractor
shall deliver to Owner the Contractor's plan of recovery which
shall reasonably demonstrate what steps Contractor shall take
to achieve such milestone within fifteen days of the date of
receipt by Contractor of the Owner's notice to show cause. If,
however, the Work necessary to achieve such milestone cannot,
with all best efforts by Contractor, be achieved within such
fifteen (15) Day period, Contractor's plan of recovery shall
reasonably demonstrate what special steps Contractor plans to
take to assure the earliest possible achievement of such
milestone and recovery of schedule (not to exceed ninety [90]
Days). Upon approval by Owner of Contractor's plan of recovery,
Contractor shall commence the special steps agreed upon
immediately and shall pursue such steps to completion. In the
event Owner and Contractor are unable to agree on the special
steps to be taken in the recovery plan, Owner, in its sole
discretion, may declare Contractor to be in default as
prescribed in Article 15.1.2 and may assert such remedies as
are set forth In Article 15.1.3.
Critical Dates Milestones
Unit 1 Unit2/Plant
May 1, 1996 May 1, 1996 Notice to Proceed/
Commencement of
Construction
August 1, 1996 August 1, 1996 Construction Drawings
Approval
November 1, 1996 November 1, 1996 Complete Turbine House
Foundation
July 15, 1997 November 15, 1997 Major Equipment Delivery
Complete*
August 15, 1997 August 15, 1997 Complete Turbine House
August 1, 1997 November 15, 1997 Complete Setting of
Boiler Drum
August 15, 1997 August 15, 1997 Complete Chimney
(including Liner)
November 1, 1997 February 1, 1998 Boiler Hydrotest
Complete
February 15, 1998 May 15, 1998 Mechanical Completion
Achieved
March 1, 1998 June 1, 1998 Synchronization to Grid
January 1, 1998 April 1, 1998 Coal Firing of Boiler
April 15, 1998 July 1, 1998 Start of first 72 hour
Full Load Test
May 1, 1998 September 1, 1998 Commercial Operation
November 1, 1998 November 1, 1998 Freeze Protection
Complete
March 1, 1999 Final Acceptance -
Facility
* "Major equipment" shall include Boiler, Precipitator,
Steam Turbine Generator, and Main Transformer.
Each such Critical Date shall be subject to delays caused
by Force Majeure Events and Change Orders.
5.3 Available Funds. Owner represents and covenants
that, as of the date of the initial Project Funding, there
will be sufficient funds allocated to it from Lenders to pay
the Contract Price and to complete construction of the
Facility in accordance with the Construction Schedule and that
Contractor will be promptly notified by Owner of any material
change in the availability of sufficient funds and Owner's
ability to make such full and timely payments.
ARTICLE 6
CHANGE ORDERS
6.1 Request for Change Orders. Owner or Contractor may
submit a written request to the other party to alter, add to or
deduct from, or otherwise change (a "Change" or "Changes") the
Scope of Work, without invalidating this Contract. If such Change
has the effect of increasing or decreasing the Contract Price,
shortening or lengthening the Guaranteed Commercial Operation
Date, modifying Contractor's warranty obligations under this
Contract' or requiring modification of Contractor warranties in
Article 11 hereof, equitable adjustment may be made to the
Contract Price and the Construction Schedule (including the
Guaranteed Commercial Operation Date). In addition, Contractor
shall provide Owner with written notice, as soon as possible but
in no event more than ten (10) Business Days of (i) any knowledge
of Contractor of any Change in Law or Force Majeure Event that
Contractor believes will involve a change in the Cost of the
Work, the Contract Price and/or the Construction Schedule, which
notice shall include a request for a Change Order setting forth
the proposed changes, and (ii) any Change Order to be requested
by Contractor pursuant to Article 5.2 above for a change in the
Construction Schedule. All such changes in the Scope of Work
shall be authorized by Change Order and shall be performed under
all applicable conditions of this Contract. The Contract Price,
the Critical Dates, Guaranteed Commercial Operation Date, the
Performance Tests and the Final Acceptance Date may be changed by
Change only.
6.1.1 Owner may at any time, by written notice to
Contractor request a Change. Contractor shall make a written
response to any requested Change within ten (10) days after
receiving it or, if it fails to do so, shall be deemed to have
accepted the proposed Change unconditionally and without
additional consideration or schedule change, in which event
such Change shall be deemed to become part of this Contract.
If Contractor believes that giving effect to such Change will
increase or decrease its cost of performing the Work, shorten
or lengthen the time needed for completion of the Work, or
require modification of its warranties in Article 11 or require
a modification of any other provisions of this Contract, its
response to the Change request shall set forth the Change or
Changes that Contractor deems necessary and its justification
for such Changes together with any necessary alterations or
amendments to this Contract. If Contractor does not provide a
written response to Owner specifying the effect of such Changes
as to cost, time and warranty obligations of Work within ten
(10) Days of Owner's notice under this Article 6.1.1, then
Contractor waives any claims or offsets against Owner as a
result of the Change Order, provided, however, that
notwithstanding the foregoing, if such Changes as to cost, time
and warranty obligations of the Work cannot be determined
within the ten (10) Day period, and Contractor submits notice
within such ten (10) Day period that the Changes will have an
effect on costs, time or warranty obligations and provides the
expected date (which shall be as soon as reasonably
practicable) for cost, time or warranty effect response,
Contractor shall not be deemed to have waived such claims or
offsets. If Owner accepts the Change(s) (together with any
necessary alterations or amendments to this Contract) proposed
by Contractor, or if the parties agree upon a modification of
such proposed Change(s), the parties shall then sign a change
order ("Change Order") setting forth the agreed upon Change in
the Work and agreed upon amendments to this Contract, and such
Change Order shall operate as an amendment to this Contract.
If there occurs a Change of Law that has a material impact on
the Work, each party shall bargain reasonably and in good-faith
for the execution of a mutually acceptable Change Order. Owner
may request a Change Order to require Contractor's compliance
with such Change of Law.
6.1.2 Owner may at any time, by written notice to
Contractor, propose Changes in the Work or the Construction
Schedule due to a Force Majeure Event. If there is a material
impact on Work or the Construction Schedule as a result of such
Force Majeure Event, then the parties agree to bargain
reasonably and in good-faith for the execution of a mutually
acceptable Change Order.
6.1.3 Contractor may at any time, by written notice
to Owner, propose Changes in the Work and if such proposed
Changes are agreed to by Owner they shall be set forth in a
Change Order signed by the parties. If Contractor believes
that such Change will increase or decrease its cost of
performing the Work, lengthen or shorten the time needed for
completion of the Work, or require modification of its
warranties in Article 11 hereof or require a modification of
any other provisions of this Contract, it shall set forth its
justification for such Changes and the effect of such Changes.
If Contractor does not provide a written notice to Owner
specifying the effect of such Changes as to cost, time and
warranty obligations of Work within five (5) Days of proposing
a Change Order under this Article 6.1.3, then Contractor waives
any claims or offsets against Owner as a result of the Change
Order.
6.1.4 Contractor may at any time, by written notice
to Owner, propose Changes in the Work to the extent of a Force
Majeure Event; provided, however, such Force Manure Event will
have a schedule impact that will actually, demonstrably,
adversely and materially affect Contractor's ability to meet
agreed project milestones.
6.1.5 Any Contractor response to a Change proposed by
Owner under Article 6.1.1 or Article 6.1.2 and any Contractor
proposed Change Order under Article 6.1.3 or 6.1.4 shall be
accompanied by a proposed all-inclusive final lump sum cost to
Owner. In the event that the parties are unable to reach a
mutually acceptable agreement on an all-inclusive final lump
sum cost to Owner, Contractor shall perform the Change Order
using a cost plus ten percent (10%) in accordance with the
Time, Material and Equipment Schedule attached hereto as
Exhibit K, basis to the extent acceptable to Owner, as
consideration for the Change Order.
6.1.6 A Change initiated by either party may have the
effect of either increasing or decreasing the Contract Price.
Any Contract Price increase or decrease resulting from a Change
Order taking effect under this Article 6.1 shall become an
addition or deletion to the Progress Payment or Payments to
which it properly belongs. In the event that Owner and
Contractor are unable to reach agreement on Change Orders under
this Contract as proposed by either Owner or Contractor, at the
direction of the Owner, Owner's proposed Changes shall become
effective, Contractor shall continue to perform the Work in
accordance with Owner's Change Order on a cost plus ten percent
(10%) price basis to the extent acceptable to Owner, and the
parties will resolve such Changes in accordance with Article 17
of this Contract.
6.2 Force Majeure Event. If either party to this Contract
because of a Force Majeure Event is rendered wholly or partly
unable to perform its obligations under this Contract, other
than the obligation of that party to make payments of money,
that party shall to the extent provided in this Contract, be
excused from the performance directly affected by the Force
Majeure Event, provided that:
6.2.1 The non-performing party, as soon as possible
but in no event more than ten (10) Days after it becomes aware
of its inability to perform, shall declare that a Force Majeure
Event has occurred and give the other party written notice of
the particulars of the occurrence(s), including, without
limitation, the nature, cause and date and time of commencement
of the occurrence(s), the anticipated scope and duration of any
delay, and any date(s) that may be affected thereby. If it is
impracticable to specify the length of such delay at the time
such notice is delivered, the non-performing party shall
provide the other party and Lender with periodic (not less
frequently than weekly) supplemental notices during the period
the Force Majeure Event continues. Such supplemental notices
shall keep such other party and Lender informed of any change,
development, progress or other relevant information concerning
the Force Majeure Event.
6.2.2 The suspension of performance is of no greater
scope and of no longer duration than is required by the Force
Majeure Event.
6.2.3 Obligations of either party which arose before
the Force Majeure Event causing the suspension of performance
are not excused as a result of the Force Majeure Event
6.2.4 The non-performing party immediately and
continuously uses its best efforts to remedy its inability to
perform with all reasonable dispatch.
6.2.5 When the non-performing party is able to resume
performance of its obligations under this Contract, that party
shall promptly so notify the other party in writing.
6.2.6 No Force Majeure Event declared by Contractor
shall delay the Guaranteed Commercial Operation Date beyond
March 1, 1999. During and following the occurrence of any
Force Majeure Event, Contractor and Owner each shall use its
best efforts to minimize the delay and costs caused by such
Force Majeure Event and shall continue actively and in good
faith consider the need for and, when appropriate, execute a
Change Order covering such event, which may result in the
extension of such March 1, 1999 Guaranteed Commercial
Operation Date.
6.3 Disputes. If a dispute arises between Owner and
Contractor relating to the change in the Construction Schedule
incurred by reason of a Force Majeure Event, then such change
shall be made as directed by Owner, but Contractor shall not
be deemed to have waived any subsequent right to challenge or
contest Owner's determination.
ARTICLE 7
CONTRACT PRICE; PAYMENTS TO CONTRACTOR
7.1 Contract Price. Contractor shall, at its own expense,
design, engineer, manage, supply all labor, Equipment and
materials for, construct, start up, and carry out Performance
Tests on the Plant, all on a turn-key lump sum fixed price basis
for a lump sum equal to U.S. $63,625,832 (the "Contract Price"),
based on Contractor's pricing summary attached hereto as Exhibit
H and in accordance with the Contractor's Critical Date Schedule
set forth in Article 5.2, the Scope of Work and other
performance requirements of Contractor set forth in this
Contract, all as may be modified or amended by Change Order,
under Article 6.
7.2 Down Payment. The Owner shall make a Down Payment in
an amount equal to ten percent (10%) of the Contract price
("Down Payment") at the time of giving the Notice to Proceed.
The Owner shall withhold ten percent (10%) of the Down Payment
as the initial Retainage.
7.3 Payment for Work. On or about the first Day of each
month (but in no event later than the seventh Day thereof),
Contractor shall submit to Owner for approval a Request for
Payment for Work performed. Within seven (7) days of receipt
of Request for Payment, Owner shall notify Contractor of
acceptance of such Request for Payment.
7.3.1 Subject to the provisions of Article 7.3.3, the
Contract Price shall be payable in accordance with the Progress
Payment Schedule, such that (i)payment for the civil and
installation portion of the Work shall be for Work actually
completed, and (ii) payment for the equipment portion of the
Work shall not exceed the percentages set forth in such
Schedule for Equipment, and after the Contractor's project
manager has delivered to Owner's representative a Progress
Payment Certificate. No payment shall be made for the civil
and installation portion of the Work until the actual percent
complete of such portion of the Work exceeds the ten percent
(10%) Down Payment.
7.3.2 Within thirty (30) days after its receipt of a
Request for Payment on or before the 16th day of the month for
all Work performed and certified in the month represented by
the Request for Payment, Owner shall pay to Contractor the
amount that remains after the deduction from the Progress
Payment requested of (i) any portion thereof that Owner
disputes as not being due and owing, (ii) any overpayment made
by Owner for any previous period, (iii) any past-due Contract
Price adjustment amount due Owner hereunder plus interest
thereon at the Reference Rate from the due date thereof and
(iv) Retainage. The payment made by Owner shall be accompanied
by a written notice to Contractor specifying the amount of each
deduction and setting forth the reason(s) why the deduction is
justified. Failure or forbearance on the part of Owner in
withholding, any amounts due under a Progress Payment shall not
be construed as accepting or acquiescing to any disputed
claims. If any such amount deducted from the requested amount
is subsequently determined, by agreement of the parties or by
arbitration pursuant to Article 17, to have been unjustifiably
so deducted, Contractor shall be entitled to payment of such
amount, plus interest thereon, at the Reference Rate from the
date that such amount should have been paid, in an invoice
submitted by it to Owner after the determination or if final
payment thereunder has been previously made, then in a written
demand. Pending the resolution of any disputed Progress
Payment, Contractor shall continue performance of the Work.
7.3.3 The making of any Progress Payment by Owner
shall not constitute an admission by it that the Work covered by
such payment (or any Work previously performed) is satisfactory
or timely performed, and it shall have the same right to
challenge the satisfactoriness and timeliness of such Work as if
it had not made such payment. If, after any such payment has
been made, it is subsequently determined by agreement of the
Parties or by arbitration pursuant to Article 17 that Contractor
was not entitled to all or a portion of any such payment,
Contractor shall refund all or a portion of such payment to
Owner with interest thereon at the Reference Rate from the date
that Contractor received such payment to the date of refund.
7.3.4 Notwithstanding any of the above, in the event
that Owner fails to make a payment in accordance with Article
7.3.2 above, if Owner does not make a payment within thirty (30)
days, interest shall accrue on the amount of the payment at the
Reference Rate beginning on the twentieth day (20th) day until
the payment is made to Contractor. If Owner does not pay within
sixty (60) days of the Request for Payment, Contractor may, upon
written notice to the Owner, suspend the performance of Work
until payment is made and may submit a Change to the
Construction Schedule in accordance with Article 5.2.
7.4 Payment of Retainage. Commercial Operation Date of
Unit 1, Contractor shall provide Owner with a Letter of Credit
in the form acceptable to Owner and Lender issued from a
financial institution acceptable to Owner and Lender attached
hereto as Exhibit I-2 (the "Letter of Credit for Retainage"),
in an amount equal to the product of the Contract Price
multiplied by 0.025. Upon the issuance of this Letter of
Credit, Owner shall pay to the Contractor a portion of the
Retainage in an amount equal to the product of the Contract
Price multiplied by 0.025. At Commercial Operation Date of the
Plant, Contractor shall increase the Letter of Credit for
Retainage by an amount equal to the product of the Contract
Price multiplied by 0.025 (Total amount equal to the product of
the Contract Price multiplied by 0.05). Upon issuance of the
adjusted Letter of Credit for Retainage by the Contractor, the
Owner shall pay to the Contractor a portion of the Retainage
equal to the product of the Contract Price multiplied by 0.025.
Owner shall have the unconditional right to draw upon such
Letter of Credit for Retainage for (i) damages, (ii)
compensation, (iii) the completion of Punch List Items if
Contractor has failed to complete such Punch List Items, (iv)
any reason set forth in under Article 11 and 15, or (v) any
other purpose specified in the draw certificate to the Letter
of Credit of Retainage. Within thirty (30) days after the Final
Acceptance Date, Owner shall return the remaining amount of
cash Retainage. At the end of twelve (12) calendar months and
twenty (20) days of the Final Acceptance Date, Owner shall
return the remaining Letter of Credit for Retainage to the
issuing bank with instructions for cancellation.
7.5 Financing of Plant
7.5.1 This Contract shall be the document referred to
in the Construction Loan Agreement as the agreement between the
Owner and Contractor for the Work.
7.5.2 The Construction Loan Agreement will require
that so long as Owner is not in default under the Construction
Loan Agreement and Contractor is not in default hereunder, and
provided that all other conditions precedent set forth in the
Construction Loan Agreement been satisfied, the Lender shall,
under the terms of the Construction Loan Agreement, disburse
funds for the purpose of Owner making the payments called for
by this Contract, except for those payments that are disputed
in accordance with this Contract.
7.5.3 Contractor shall promptly execute any
additional customary documentation reasonably requested by
Lender, including but not limited to documents evidencing
Contractor's consent to assignment of this Contract to Lender.
7.6 Contractor's Payment Account. Each payment made
pursuant to this Article shall be paid directly to Contractor.
Such payment shall be wire-transferred to an account designated
in writing by Contractor.
7.7 Lenders Requirements and Lien Waivers
7.7.1 Contractor acknowledges that Owner will borrow
certain funds from Lender for the construction of the Facility
and that, as a condition to making loans to Owner, Lender may
from time to time require amendments to this Contract and
certain documents from Contractor and its subcontractors,
materialmen and suppliers. In that connection, Contractor
agrees to furnish to Lender such written information,
certificates, copies of invoices and such receipts, Lien
waivers (upon payment), affidavits and other like documents as
Lender may reasonably request. Contractor shall negotiate in
good faith amendments to this Contract reasonably requested by
Lender. Upon Lender and Owner memorializing their legal rights
and obligations to each other in a final loan agreement, (the
"Construction Loan Agreement"), Contractor shall, on Lender's
request, state in writing as a condition precedent to
financing, whether or not it is satisfied with Owner's
performance to that date.
7.7.2 As a condition precedent to the making of any
payment under this Contract, Owner may require that Contractor
and each of its Substantial Subcontractors and Substantial
Vendors supply Owner with a certificate, in substantially the
same form as Exhibit J attached hereto, stating that all
amounts due to Contractor and its Subcontractors and Vendors
have been paid. Contractor shall obtain such certificates
simultaneously with the payment to a Substantial Subcontractor
or Substantial Vendor and submit the same upon request of
Lender.
7.7.3 Contractor hereby subordinates any Liens or
security interests to which it may be entitled by law or under
the provisions of this Contract to any Lien or security
interest granted in favor of Lender. In addition, Contractor
shall submit proof satisfactory to Owner that it has included
in each subcontract entered into by it with a Substantial
Subcontractor a requirement that any Lien or security interest
to which such Substantial Subcontractor may be entitled
thereunder or by law shall be subordinate and inferior to any
Lien and security interest granted in favor of Lender.
7.7.4 A "Substantial Subcontractor" is a
subcontractor, materialman or supplier, whose initial contract
or contracts (in the aggregate) with Contractor call for a
payment or payments by Contractor totaling at least $250,000.
A "Substantial Vendor" is a Vendor whose initial contract or
purchase orders (in the aggregate) with Contractor calls for a
payment by Contractor of at least $250,000.
7.7.5 In the event of Owner's default under this
Contract, Lender shall have the right within not more than one
hundred eighty (180) days to cure Owner's default and, in such
event, Contractor's duties and obligations under this Contract
shall be unaffected. Contractor further agrees to perform its
obligations under this Contract for the benefit of Lender in
the event of Owner's default under this Contract or under the
Construction Loan Agreement, provided that Lender (or its
assignee) shall have cured all defaults of Owner's obligations
under this Contract which Lender is reasonably capable of
curing and shall have paid all amounts then due, including
costs to cure.
7.7.6 Contractor shall promptly execute any
additional documentation as may be mutually agreed upon in
form and substance, reasonably requested by Lender, including,
but not limited to, documents evidencing Contractor's consent
to assignment of this Contract as security to Lender or
otherwise upon the occurrence of events specified in such
documents and any reasonable modifications to this Contract.
ARTICLE 8
TITLE AND RISK OF LOSS
8.1 Clear Title. Unless and to the extent earlier elected
by Owner following payment thereof under Article 7 or otherwise
under this Contract, Contractor warrants and guarantees that
legal title to and the ownership of the Work (including all
Design Documents, As-Built Drawings, specifications and
operations and maintenance manuals and spare parts required by
Owner in connection with the operation and maintenance of the
Facility) shall pass to Owner, free and clear of any and all
Liens at the Commercial Operation Date, except for those Liens
that may be created by the actions of Owner.
8.2 Risk of Loss. From initial mobilization by
Contractor under this Contract to the Commercial Operation
Date, Contractor shall assume the risk of loss for the
Facility including: (a) any Equipment (whether on the Facility
Site or in storage off Facility Site), (b) any other Work
completed at such site, and (c) any Work in progress. All
Equipment in storage but not yet incorporated into the
Facility shall be stored in secured areas. Contractor shall
bear the responsibility of preserving, safeguarding, and
maintaining such Equipment and any such other completed Work.
Except to the extent covered by Builders Risk Insurance
pursuant to Article 4.8 hereof, if any loss, damage, theft or
destruction occurs at the Facility Site prior to the
Commercial Operation Date for which Contractor so assumed the
risk of loss, Contractor shall, at its cost, promptly repair
or replace the property subject thereto.
ARTICLE 9
INSURANCE
9.1 Contractor's Insurance. Prior to commencing any
construction pursuant to this Contract and continuing until
Owner has issued Final Acceptance Date, Contractor shall
maintain in force insurance policies providing insurance
coverage including (i) Worker's Compensation (or equivalent)
that complies with the Laws of the People's Republic of China,
(ii) General Liability Insurance covering property damages of
all property owned by Contractor and personal injury subject to
the approval of Owner and Lender, and (iii) automobile
Liability including coverage for all owned, leased. or non-
owned licensed automobile Equipment.
9.2 General Terms. Each insurance policy required by this
Article 9, except the Worker's Compensation coverage, shall be
in a form reasonably satisfactory to Owner and Lender.
9.3 Other Specific Terms. Contractor shall request the
issuers of the Comprehensive General Liability Insurance to
amend such insurance policy required by this Article 9 to (i)
include Owner, Lender and the Utility, their directors,
officers and employees as additional insureds, (ii) include a
waiver of all rights of subrogation against the Utility, Lender
and Owner, their directors, officers and employees, (iii)
provide that complete copies of all inspection or other reports
required or performed for the insurer shall be provided to
Owner within thirty (30) Days of delivery to Contractor, and
(iv) provide that Owner, Lender and the Utility must be given
at least thirty (30) Days prior written notice of cancellation.
Contractor shall request all insurers under this Article 9 to
provide Owner, Lender and the Utility with certificates of
insurance evidencing the policies and endorsements upon the
earlier of the initial mobilization as contemplated in Article
5.1 or the Financial Closing (unless, Owner consents to a later
date) and on each issuance anniversary while such insurance is
in effect.
9.4 Property Insurance Loss Adjustment. Any insured loss
shall be adjusted with Contractor and any payment made by any
insurance carrier concerning an insured loss to property shall
be paid to the party entitled thereto.
9.5 Waiver of Subrogation. All policies of Subcontractors
shall include a waiver of any right of subrogation of the
insurers thereunder against Owner, Lender, Institute, the
Utility and Contractor, and any right of the insurers to any
set-off or counterclaim, offset or any other deduction, whether
by attachment or otherwise, in respect of any liability or any
such person insured under such policy.
9.6 Nonwaiver. Failure of Contractor to comply with the
foregoing insurance requirements shall in no manner waive its
respective obligations or liabilities under this Contract or
the rights of Owner under this Contract against Contractor.
9.7 Right to Insure. Should Contractor fail to provide or
maintain any of the insurance coverage required under this
Article 9, Owner shall have the right to provide or maintain
such coverage at Contractor's expense, either by direct charge
or set off.
9.8 No Liability Limit. Nothing in this Article 9 shall
be deemed to limit Contractor's liability under this Contract
to the insurance coverages required by this Article 9.
ARTICLE 10
PERFORMANCE TESTS AND FINAL ACCEPTANCE
10.1 Notice. Contractor shall provide Owner with at least
forty-five (45) Days advance notice of the initial testing of
each Unit of the Plant that involves delivering energy to the
Utility or the Thermal Users. Contractor shall deliver another
notice within five (5) Business Days prior to the actual
commencement of Performance Tests. Contractor shall provide
Owner, Utility and Lender with at least forty-five (45) Days
written notice prior to the start of the Performance Tests and
the commencement of any other test performed by or on behalf of
Contractor pursuant to this Contract, or as required by the
Power Purchase Agreement, Owner, the Utility and Lender shall
leave the option to witness any such tests. All test
procedures and initial start-up procedures conducted by
Contractor shall be in accordance with the Design Criteria,
this Contract, the Power Purchase Agreement, applicable thermal
energy supply contracts, applicable manufacturers' instructions
and warranty requirements, generally recognized and accepted
engineering principles and practices, Applicable Laws and
Applicable Permissions, and any and all applicable rules and
procedures described herein and as otherwise Creed to by Owner,
Lender and Contractor.
10.2 Performance Tests. All Performance Tests shall be
performed In accordance with the requirements set forth In the
Scope of Work.
10.3 Performance Test Procedures. The Contractor will be
required to provide to the Owner and Lender, for review and
acceptance, a detailed Performance Test Procedure which will
include but not be limited to (i) description of the test
procedures; (ii) list of all data to be collected; (iii)
instrumentation and location for taking all data points; (iv)
correction curves; (v) instrument and test accuracies; and (vi)
sample calculations. The draft performance test procedure shall
be submitted for review at least one hundred and eighty (180)
Days before the expected test date. Performance Tests shall
not start until the Owner and Lender have accepted the test
procedure and agreed to the sample calculation. Comments shall
be provided by Owner within ten (10) working Days. If no
comments are received within the ten (10) Day period, approval
by Owner shall be presumed.
10.4 Failed Performance Tests. If either Unit or the Plant
fails, as determined by the performance requirements in the
Scope of Work (Exhibit B) and Article 13 of this Contract, any
part of its original Performance Tests, Contractor shall take
appropriate corrective action and the failed or incompleted
Performance Tests shall then be performed again. If Unit 1
fails any part of the retest, the Contractor shall take
appropriate action and the Performance Tests shall be repeated.
If the Plant fails any part of the retest, Contractor shall
take appropriate corrective action and the Performance Tests
shall be repeated, unless Contractor pays required liquidated
damages hereunder relating thereto; provided, however, that on
and after first anniversary of the Guaranteed Commercial
Operation Date, no further Performance Tests shall be allowed
and Liquidated Damages, based on most recent Performance Tests,
shad be paid.
10.5 Notice of Commercial Operation of Unit 1. Once
Contractor has completed (i) the Performance Testing for Unit
1, (ii) has performed all of the requirements in accordance
with Article 10.2 hereof, (iii) and Unit 1 is capable of being
operated safely in accordance with this Contract and the Power
Purchase Agreement, the Contractor shall submit to Owner a
written notice for Unit 1 so stating and specifying the date
that Commercial Operation for Unit 1 was achieved. The
Performance Tests Reports shall be made a part of, and be
submitted with, such notices for Unit 1.
10.6 Notice of Commercial Operation of the Plant. Once
Contractor (1) has completed the Performance Testing for the
Plant, and (ii) performed all of the requirements in accordance
with Article 10.2 hereof, and the Plant is capable of being
operated safely in accordance with this Contract and the Power
Purchase Agreement, the Contractor shall submit to Owner a
written notice for the Plant so stating and specifying the date
that Commercial Operation for the Plant was achieved. The
Performance Tests Reports shall be made a part of, and be
submitted with, such notices for the Plant.
10.7 Owner's Acceptance of Commercial Operation. Within
fifteen (15) Business Days following receipt by Owner of such
notice of Commercial Operation for Unit 1 or for the Plant,
Owner shall notify Contractor in writing whether Contractor has
fulfilled the requirements of this Contract sufficient to
successfully achieve such Commercial Operation. If Owner
determines that Contractor has not fulfilled the requirements
for Commercial Operation, Owner shall so notify Contractor,
specifying in reasonable detail the manner in which the
requirements for Commercial Operation had not been met. With
regard to the Plant, Contractor shall promptly act to correct
such deficiencies so as to achieve Commercial Operation by the
Guaranteed Commercial Operation Date. In addition, if
Contractor fails to achieve such Commercial Operation by the
Guaranteed Commercial Operation Date, Contractor shall be
liable for the damages payable pursuant to Article 13 hereof.
Following any such remedial action, Contractor may deliver to
Owner a new Commercial Operation notice (including the forty-
five (45) Day notice) conforming to the requirements of this
Article 10, and the provisions of this Article 10.7 shall apply
with respect to such new Commercial Operation notice in the
same manner as they applied with respect to the original
Commercial Operation notice. The foregoing procedure shall be
repeated as often as necessary until Owner no longer rejects
Contractor's Commercial Operation notice and provides its own
notice to Contractor that the Commercial Operation Date has
occurred.
10.8 Notice of Final Acceptance. Once Contractor has
completed all of the requirements for Final Acceptance,
Contractor shall submit a proposed Final Acceptance Certificate
to Owner. A team consisting of representatives of Owner,
Lender and Contractor shall as soon as practicable make a final
inspection of the Facility and determine whether the Facility
meets all requirements of this Contract. Within fifteen (15)
Business Days following such final inspection, Owner, with the
consent of Lender, shall notify Contractor in writing whether
Contractor has fulfilled the requirements of this Contract to
reach Final Acceptance. If Owner determines in good faith
that, notwithstanding Contractor's delivery of the Final
Acceptance Certificate, the Facility has not fulfilled the
requirements for Final Acceptance for the Facility, then Owner
shall deliver its written notice to such effect to Contractor
describing in reasonable detail the deficiencies noted and
corrective action recommended, including projected target dates
for the completion of such incomplete or remedial Work, but in
no event later than six (6) months from the Commercial
Operation Date and, in the case of freeze protection, it shall
be completed by November 1, 1998. Contractor shall promptly
act to correct any such deficiencies. The procedure set forth
in this Article 10 shall be repeated as necessary until Owner
accepts the Final Acceptance Certificate and provides its own
notice to Contractor that the Final Acceptance Date has
occurred. If Contractor has not completed the requirements for
Final Acceptance within six (6) months after the Commercial
Operation Date Owner may, upon notice to Contractor, complete
any remaining Punch-List Items and charge (or deduct from
Retainage and/or Contractor's Letter of Credit) all expenses
incurred by Owner to complete such items.
ARTICLE 11
WARRANTIES AND GUARANTEES
11.1 Materials and Workmanship.
11.1.1 Contractor warrants to Owner that all
Equipment and other items furnished under this Contract by
Contractor (either directly or indirectly) shall be new and of
good quality, shall be free from improper workmanship and
defective materials, and shall conform to the Design Criteria
set forth in the Scope of Work. Contractor agrees, as soon as
reasonably possible after receipt of notice from Owner
specifying any defects or deficiencies with respect to the
Facility, promptly to correct or cause to be corrected, any
Work performed under this Contract that, at any time for a
period of one (1) year after the Final Acceptance Date proves
to be improper or defective with regard to the Scope of Work in
design, material or workmanship for the Facility. The warranty
period for such repaired deficiencies or defects in the
Facility shall extend for an additional one year period from
the date of the repair. In addition, if any item of Equipment
(or part thereof) or other specific item of the Work is
repaired or replaced during the applicable warranty period, the
warranty on such specific item (but not the Equipment, if any,
of which such item is a part) shall extend for an additional
one year from the completion of such repair or replacement.
Contractor shall bear all costs and expenses associated with
correcting any warranted Work, including, without limitation,
necessary disassembly, transportation, reassembly and
retesting, as well as reworking, repair or replacement of such
Work, and disassembly and reassembly of adjacent Work when
necessary to give access to improper, defective or non-
conforming Work, together with all reasonable attorneys' fees,
engineering fees, and other costs and expenses incurred by
Owner in enforcing the provisions of this Article 11.
11.1.2 If a particular item is repaired, replaced
or renewed one time and becomes defective again during the
applicable warranty period, then Contractor agrees that unless
Contractor can demonstrate to Owner's reasonable satisfaction
that there is not an unreasonable risk of the reoccurrence of
such problem, Contractor will undertake a technical analysis
of the problem and clear the "root cause" to Owner's
reasonable satisfaction.
11.2 Engineering and Design. Contractor guarantees that
it shall perform or have performed all of the construction
surveying, engineering and design services as of the Final
Acceptance Date, with respect to the Facility in accordance
with sound engineering practice, Design Documents and
Construction Drawings, plans and specifications for the
Facility (including the as-built Drawings provided under
Article 3.18 hereof), and that, when complete, the Facility
will be free of all defects and deficiencies and will be
operational in compliance with this Contract, the Power
Purchase Agreement, the Scope of Work, Applicable Permissions
and all Applicable Laws in effect as of the Final Acceptance
Date. Contractor warrants that, as of the Final Acceptance
Date, no design or other service provided under this Contract
shall infringe on any patent or constitute a misappropriation
of any trade secret. Except to the extent any Change in Law
results in a change in the Scope of Work and is payable by
Owner pursuant to Article 7, Contractor shall at its own
expense promptly correct any errors and omissions and resulting
deficiencies in the Facility as soon as reasonably possible
after receipt of notice from Owner specifying such
deficiencies.
11.3 Vendors and Subcontractors. Except as otherwise
provided herein, Contractor shall, for the protection of
Contractor and Owner, obtain from the Vendors and
Subcontractors such guarantees and warranties with respect to
Work performed and Equipment used and installed under this
Contract as are reasonably obtainable, which guarantees and
warranties shall equal or exceed those named in Article 11.1 or
Article 11.2 above and shall be made available and assignable
to Owner to the full extent of the terms thereof. Such
guarantees and warranties shall extend for a period of at least
one year after the Commercial Operation Date. In addition, if
more complete warranty or guarantee protection is available
than as set forth above with respect to the turbine generator
or any other principal Equipment, Contractor shall notify Owner
of the availability of such additional protection and of the
cost thereof, and Owner shall have the right to require
Contractor to secure such additional warranty or guarantee
protection pursuant to a Change Order issued in accordance with
the provisions of Article 6 above. Upon the earlier of the
Final Acceptance Date or termination of this Contract,
Contractor shall deliver to Owner copies of all relevant
contracts providing for the guarantees and warranties.
11.4 Assignment of Warranties. Contractor shall provide
Owner with, and hereby assigns to Owner effective at the
expiration of the warranty provided by Contractor (or at such
earlier date as Owner may request), all warranties and/or
guaranties relating to the Work or the Equipment that
Contractor receives from any and all of the Vendors and
Subcontractors.
11.5 Limitations. The express warranties and guarantees
contained herein shall be subject to the following terms and
conditions:
11.5.1 The term "defective" or "deficient" shall not
be construed to include damage caused exclusively by Owner's
misuse, negligence or failure to follow (i) generally accepted
and approved industry practices in the operation and
maintenance of the Facility, (ii) Contractor's written
operating and maintenance instructions accepted by Owner.
11.5.2 Owner's remedies with respect to such
warranties and guarantees shall be limited to those expressly
set forth In this Article 11.
11.5.3 Repair, adjustment, modifications or
replacement provided herein and reimbursement to Owner for
costs, charges and expense incurred (but not revenue lost) due
to the occurrence of a warranty claim event and, when
applicable, the supply of corrected technical information and
recommendations shall constitute fulfillment of all warranty
liabilities of Contractor to Owner under this Article 11 for
the Facility, whether based on contract or negligence of any
kind, strict liability or tort on the part of Contractor or of
its suppliers, engineers, or Subcontractors of any tier or
otherwise.
11.5.4. In the event, unless mutually agreed to the
contrary, Owner observes a defective occurrence in relation to
any Equipment, which Owner believes is covered by the Warranty
set forth in this Article 11, Owner shall promptly, and within
the Warranty period set forth herein, notify Contractor of the
occurrence believed to be defective in order that Contractor,
or its representative may have an opportunity to observe, as
provided above, test and examine the Equipment or part of such
Equipment believed to be defective. Contractor or its
representative shall, upon confirming the defect cause the
repair, allotment, modification or replacement which
Contractor, or its representative believe is required,
provided, however, upon receiving such notice, if Contractor
and Owner mutually agree to the amount of the total costs of
such necessary repair, adjustment, modification or replacement,
including Owner's costs, charges and expenses attributed
thereto as identified above, Contractor may, on Owner's
request, immediately consent to Owner making such repairs,
adjustments, modification or replacement at Contractor's
expense.
11.5.5 In the event of any emergency and, in the
reasonable judgment of Owner, the delay that would result from
giving formal notice to Contractor would cause serious loss or
damage which could be prevented or mitigated by immediate
action, any action including correction of defects and
deficiencies may be done by Owner or a third party chosen by
Owner, without giving prior notice to Contractor, and the cost
of correction shall be paid by Contractor in the case of a
defect or deficiency. In the event such action is taken by
Owner, Contractor shall be promptly notified, and shall assist
whenever and wherever possible in making the necessary
correction.
11.5.6 In the event that it is necessary (in order to
fulfill Contractor's warranty obligations under Article 11 or
otherwise) to dismantle piping, ducts, machinery, Equipment or
other Work furnished or performed by Contractor in order to
obtain access to the Work, to correct a defect or deficiency,
the cost of all such dismantling and reassembly will be borne
by Contractor.
11.5.7 THE EXPRESS WARRANTIES OF CONTRACTOR SET FORTH
IN THIS CONTRACT, AND THE REMEDIES OF OWNER FOR BREACH THEREOF,
INCLUDING, WITHOUT LIMITATION, THOSE EXPRESS WARRANTIES SET
FORTH IN THE EXHIBITS HERETO, ARE EXCLUSIVE AND ARE GIVEN BY
CONTRACTOR AND ACCEPTED BY OWNER IN LIEU OF ANY AND ALL IMPLIED
WARRANTIES.
11.6 Remedies of Owner for Breach of Warranties. If
Contractor fails to diligently commence, continue or complete
the making good of such materials or workmanship in a manner
fulfilling its obligations under Articles 11.1, 11.2, 11.3, and
11.4 hereof within a reasonable period of time after written
request of Owner to perform such obligations, then Owner may
correct such defective workmanship in accordance with this
Contract, and Contractor shall be liable (either by direct
charge or set-off) for all reasonable costs, charges, and
expenses incurred by Owner in connection with such repair or
replacement and shall within fifteen (l5) Days after request
therefor pay to Owner an amount equal to such costs, charges,
and expenses, upon receipt of invoices certified by Owner, and
each Day thereafter as such amounts accrue from the due date,
interest shall accrue thereon at two percent (2%) per annum
above the Reference Rate, until paid.
ARTICLE 12
COMPLETION GUARANTEE
12.1 Guarantee of Timely Commercial Operation. Contractor
hereby guarantees that Commercial Operation shall occur not
later than the Guaranteed Commercial Operation Date. In the
event that Commercial Operation shall not occur by the
Guaranteed Commercial Operation Date, Owner may exercise all
remedies provided it under this Article 12.
12.2 Delay in Commercial Operation.
12.2.1 Delay in Commercial Operation Caused by
Contractor. Owner and Contractor acknowledge and agree that
any failure to achieve Commercial Operation by the Guaranteed
Commercial Operation Date will directly cause substantial
damage to Owner, which damage cannot be ascertained with
reasonable certainty. The damage Owner would suffer would
include, but not be limited to, increased construction loan
interest costs and lost revenues. Accordingly, if Contractor
shall fail to achieve Commercial Operation by the Guaranteed
Commercial Operation Date, it shall pay, as liquidated damages,
commencing with September 1, 1998, subject to the extensions
provided for in the definition of "Guaranteed Commercial
Operation Date" herein above and, subject to extension as may
be provided for by Change Order, the sum of (i) $50,000 per Day
for each subsequent Day that Commercial Operation is delayed
after the Guaranteed Commercial Operation Date. In no event
shall liquidated damages payable pursuant to this Article
12.2.1 exceed Eighteen Million Dollars ($18,000,000).
12.2.2 Delay in Commercial Operation Caused By Other
Parties. Owner and Contractor acknowledge and agree that if
any delays are caused solely by Owner which results in the
failure to achieve Commercial Operation by the Guaranteed
Commercial Operation Date, Owner shall pay to Contractor the
actual bank fees charged by the Acceptable Guarantor to keep
the Bank Guarantee, as defined in Article 3.30, in full force
and effect from the period between (i) Owner's receipt of
Contractor's Notice of Commercial Operation Date of the Plant
and (ii) the release of the Bank Guarantee (hereafter referred
to as the "Bank Fees"). In the event that delays are caused by
third parties not associated with either Owner or Contractor,
or by a Force Majeure Event which results in the failure to
achieve Commercial Operation by the Guaranteed Commercial
Operation Date, Owner and Contractor agree to share equally the
Bank Fees.
12.3 Possession of Facility Following Commercial
Operation. Owner shall take possession of the Facility after
achievement of Commercial Operation Date by Contractor.
Contractor shall thereafter use its best efforts to minimize
interference with Owner's operation of the Facility while
completing the Work under this Contract. The Contractor shall
not perform any additional Performance Tests after achievement
of Commercial Operation Date. Damages and/or Bonuses due shall
be based upon the last Performance Test completed prior to the
Commercial Operation Date.
12.4 Payment of Liquidated Damages. Liquidated damages,
if any, under this Article 12 shall accrue on a daily basis for
each Day of delay. Within thirty (30) Days after the end of
each month during which such compensation accrues under this
Article 12, Owner shall provide Contractor with a statement of
the amount of liquidated damages owed for such month.
Contractor shall pay any liquidated damages pursuant to this
Article 12 within ten (10) Days after receipt of the statement
referred to above in this Article 12.4. If Contractor fails to
make payment within ten (10) Days, Contractor shall pay
interest thereon at the Reference Rate plus two percent (2%)
from the due date (that is, within ten Days after the notice
referred to above) until paid. The total and cumulative
liquidated damages payable under Articles 12.2, 13.2.1, 13.2.2,
and 13.2.3 shall not exceed thirty-five percent (35%) of this
Contract Price.
12.5 Bonus for Early Completion. In the event that
Commercial Operation occurs prior to the Guaranteed Commercial
Operation Date, the Contractor shall be compensated Twelve
Thousand and Five Hundred Dollars ($12,500) per day for every
day between August 15, 1998 and August 31, 1998 that Commercial
Operation is achieved. If Commercial Operation is achieved
prior to August 15, 1998, the Contractor shall be compensated
Twenty-Four Thousand and Nine Hundred Dollars ($24,900) per day
for every day between August 1, 1998 and August 15, 1998 that
Commercial Operation is achieved. No early completion bonus
shall be paid for any early completion date prior to August 1,
1998.
ARTICLE 13
LIQUIDATED DAMAGES FOR FAILURE
TO ACHIEVE GUARANTEED PERFORMANCE
13.1 Guarantee. Contractor warrants and guarantees that,
before the Commercial Operation Date (i) the Net Dependable
Capacity of the Plant shall be, as corrected to Design
Conditions, equal to, or greater than 102,000 kW, (ii) the heat
rate of the Plant operating as corrected to summer Design
Conditions shall be equal to, or less than 12,817 KJ/KWHR (LHV)
("Guaranteed Heat Rate"); (iii) the emission levels from the
Plant operating at full load conditions on coal, of the quality
and quantity specified, shall be equal to or less than, the
emissions limitations (as demonstrated through the use of air
quality sampling criteria and the techniques referenced
therein) of the Applicable Permissions and Applicable Laws as
more fully described in Chapter 7 of the Feasibility Study and
Article 3.0 of the Scope of Work ("Guaranteed Maximum Plant
Emission Level"); and (iv) the noise level at the Facility
shall not exceed that required by Applicable Permissions and
Applicable Law under all normal operating conditions and in any
case at levels established in accordance with Article 3.0 of
the Scope of Work (the "Guaranteed Maximum Noise Level").
Items (I) through (iv) of this paragraph constitute the
"Guaranteed Performance Levels."
13.1.1 Contractor's compliance with the guarantees set
forth in Article 13.1 or the degree of its failure to comply with any
such guarantee, shall be determined on the basis of the
Performance Tests in Article 10 and the results of such tests
shall be conclusive for such purpose.
13.2 Liquidated Damages. If, as of the Guaranteed
Commercial Operation Date, the Performance Tests have not been
successfully completed such that the actual Net Dependable
Capacity, heat rate and the emission levels of the Plant (as
corrected to Design Conditions) meet the Guaranteed Performance
Levels, Contractor shall be able to declare commercial Operation
not withstanding its failure to achieve the Guaranteed
Performance Levels, provided all other requirements for
Commercial Operation are met, by electing to make liquidated
damage payments in accordance with Articles 13.2.1, 13.2.2, and
13.2.3. The parties have agreed that Owner's actual damages, in
the event of a failure to achieve the Guaranteed Performance
Levels, would be extremely difficult or impractical to
determine.
13.2.1 Penalty for Deficiency in Net Dependable
Capacity. If the Plant Acceptance Tests demonstrate that the
Net Dependable Capacity is less than the Guaranteed Net
Dependable Capacity, Contractor shall pay Owner or an amount of
Seven Hundred Dollars ($700)/kW below 102,000 kW Net Dependable
Capacity as corrected to summer Design Conditions.
13.2.2 Liquidated Damages for Failure to Meet Heat
Rate Guarantee. If the Plant Acceptance Test demonstrates that
the Heat Rate, at summer Design Conditions, is greater than one
hundred and one percent (101%) of the Guaranteed Heat Rate,
Contractor shall pay to Owner the applicable liquidated damages
of Five Thousand Dollars ($5,000) for each KJ/kWh in excess of
the Net Heat Rate Guarantee.
13.2.3 Liquidated Damages for Failure to Meet
Emissions Guarantee. Contractor and Owner agree that the Plant
must only be operated in compliance within the Guaranteed
Maximum Facility Emission Levels, Applicable Law and Applicable
Permissions. If, at summer Design Conditions, the Plant cannot
be operated with an output of 102,000 net kilowatts and with
emissions limitations of less than the Guaranteed Maximum
Facility Emission Levels, then Contractor shall pay Owner at
Seven Hundred Dollars ($700)/kW shortfall necessitated by
operating the Plant at a reduced electrical output such that it
is in compliance with such emissions limitations.
13.3 Net Dependable Capacity Bonus. If Contractor
achieves a Guaranteed Net Dependable Capacity (as corrected to
Design Conditions as contemplated in Article 13.1) in excess of
the Guaranteed Net Dependable Capacity as such Guaranteed Net
Dependable Capacity is determined by the last Plant Acceptance
Test, then in such event, a bonus shall be owing to Contractor
from Owner in an amount that is the aggregate of Five Hundred
Fifty Dollars ($550) per kilowatt by which such Net Dependable
Capacity exceeds the Guaranteed Net Dependable Capacity
provided, however, that such Net Dependable Capacity bonus shall
not exceed One Million Dollars ($1,000,000). Such bonus shall
be paid within thirty (30) Days after the Final Acceptance Date.
13.4 Net Heat Rate Bonus. If Contractor achieves a Net Heat Rate
(as corrected to Design Conditions as contemplated in Article
13.1) that is less than the Net Heat Rate Guarantee (as such Net
Heat Rate is determined measured by the last Plant Acceptance
Test), then in such event, a bonus shall be owning to Contractor
from Owner in an amount that is the aggregate of One Thousand One
Hundred and Sixty-Five Dollars ($1,165) per KJ per kilowatt hour
by which such Net Heat Rate is less than ninety-nine percent
(99%) of the Net Heat Rate Guarantee provided, however, that such
Net Heat Rate bonus shall not exceed One Million Dollars
($1,000,000). Such bonus shall be paid within thirty (30) days
after Final Acceptance Date.
13.5 Payment of Liquidated Damages. Contractor shall pay any
liquidated damages pursuant to this Article 13 within fifteen
(15) Days after the date on which such damages are due and
payable, together with interest thereon at the Reference Rate
plus two percent (2%) from the due date until paid. The total
and cumulative liquidated damages payable under Articles 12.2,
13.2.1, 13.2.2, and 13.2.3 shall not exceed thirty-five percent
(35%) of this contract Price.
ARTICLE 14
CONTRACTOR'S REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties. Contractor represents and
warrants that:
14.1.1 Corporate Standing and Authorization. It is a
corporation duly organized, validly existing, and in good
standing under the laws of the People's Republic of China; and
the execution, delivery and performance of this Contract have
been duly authorized by all requisite corporate action and will
not violate any provision of any governmental rule, regulation,
or ordinance, its charter or by-laws, or any indenture,
agreement, or instrument to which it is a party or by which it or
its property may be bound or effected.
14.1.2 No Violation of Law. Contractor is not in violation
of any Applicable Law which violations, individually or in the
aggregate, would affect its performance of its obligations under
this Contract.
14.1.3 Licenses. Contractor is the holder of all central,
provincial and local and other governmental consents, licenses,
permissions, and other authorizations and Applicable Permissions
required to operate and conducts its business now and as
contemplated by this Contract.
14.1.4 Litigation. Except as otherwise disclosed to both
Owner and Lender, Contractor is not a party to any legal,
administrative, arbitral, investigatorial (to the best of its
knowledge), or other proceeding or controversy pending, or the
best of its knowledge, threatened, that could adversely affect
its ability to perform under this contract.
14.1.5 Qualifications. It has (a) examined this Contract,
together with all Exhibits attached hereto, thoroughly, and
become familiar with all their respective terms and provisions;
(b) by itself and through its Subcontractors and vendors, the
full experience and proper qualifications to perform the Work and
to construct the Facility in accordance with the Scope of Work
and Drawings and Design Document therefor; (c) visited and
examined the Facility Site and is fully familiar with such site
and based on such visit and examination has no reason to believe
that Contractor will be unable to complete the Work in accordance
with this Contract; and (d) to the best of its knowledge,
reviewed all other documents and information necessary and
available to Contractor in order to ascertain the nature,
location and Scope of the Work, the character and accessibility
of the Facility Site, the existence of obstacles to construction,
the availability of facilities and utilities, the location and
character of existing or adjacent Work or structures.
14.1.6 Waiver of Liens. Contractor will, subject to
Applicable Laws to the extent payment for work is received,
unconditionally waive and release any and all partial Liens,
claims or rights that it or its Subcontractors have or may have
against Owner or the Facility on account of Work performed and
paid for pursuant to this Contract. Subject to requirements
under local law, before any Subcontractor performs Work pursuant
to this Contract, Contractor shall obtain the consent of each
such Subcontractor to such waiver of partial Lien rights. In
lieu thereof and as approved by Owner, Contractor may furnish
such other form of assurance (such as, a bond issued by a bonding
company acceptable of Owner) indemnifying Owner against any such
partial Lien or claim, which bond shall remain in full force and
effect until any such partial Lien or claim is discharged of
record or otherwise satisfied.
14.1.7 Access Rights. Access rights granted to Contractor
to the Facility Site are adequate for the performance of the Work
and operation of the Facility.
ARTICLE 15
DEFAULT AND TERMINATION
15.1 Default by Contractor.
15.1.1 Termination for Contractor's Inability to
Perform. If (i) Contractor consents to the appointment of or
taking possession by, a receiver, a trustee, custodian, or
liquidator of itself or of a substantial part of its property,
or fails or admits in writing its inability to pay its debts
generally as they become due, or makes a general assignment for
the benefit of creditors; (ii) Contractor files a voluntary
petition in bankruptcy or a voluntary petition or an answer
seeking reorganization in a proceeding under any applicable
bankruptcy or insolvency laws (as now or hereafter in effect) or
an answer admitting the material allegations of a petition filed
against it in any such proceeding or seeks relief by voluntary
petition, answer or consent, under the provisions of any now
existing or future bankruptcy, insolvency or other similar law
providing for the liquidation, reorganization, or winding up of
corporations, or providing for an agreement, composition,
extension, or adjustment with its creditors; (iii) a substantial
part of Contractor's property is subject to the appointment of a
receiver, trustee, liquidator, or custodian by court order and
such order shall remain in effect for more than thirty (30)
Days; or (iv) Contractor is adjudged bankrupt or insolvent, has
any property sequestered by court order and such order shall
remain in effect for more than thirty (30) Days, or has filed
against it a petition under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction, whether now or hereafter in
effect, and such petition shall not be dismissed within thirty
(30) Days of such filing; then Owner may request assurances
satisfactory to Owner of Contractor's future performance in
accordance with the terms and conditions of this Contract,
including strict compliance with the Construction Schedule. If
Contractor fails to provide such assurances within ten (10) Days
of a request therefor, Owner may without prejudice to any other
of its rights or remedies under this Contract, terminate
Contractor's employment and his Contract.
15.1.2 Termination for Contractor's Failure to
Perform. If Contractor refuses or fails except in cases for
which extension of time is provided by Owner, to perform in
accordance with this Contract including, but not limited to,
under Article 5.2.3 (relating to achieving milestones in the
applicable Critical Dates) or as a result of a breach of any of
any other of Contractor's covenants, agreements, representations
and warranties, then, if Contractor fails to correct such
condition within fifteen (15) Days after written notice of such
condition from Owner, or if not capable of being corrected
within such fifteen (15) Day period, to commence to correct such
condition within such fifteen (15) Days after receipt of notice
of such condition from Owner and to thereafter diligently
prosecute such corrective action to completion (in a time period
not to exceed ninety (90) Days) in a manner satisfactory to
Owner in its sole discretion, Owner may, at its option, without
prejudice to any other right or remedy under this Contract,
terminate Contractor's employment and this Contract.
15.1.3 Termination for Insufficiencies in Bank
Guarantee
(a) If Contractor fails to secure the Bank Guarantee
for Liquidated Damages, as required pursuant to Article 3.30 above,
at the time of Project Funding, Owner may provide Contractor with
written notice of intent to terminate and if Contractor fails to
secure such Bank Guarantee within ten (10) Days of written
notice, Owner may, at its sole option, without prejudice to any
other rights or remedies under this Contract, terminate
Contractor's employment and this Contract.
(b) If, at any time, between the date of completion of
the Bank Guarantee for Liquidation Damages and the expiration date set
forth in the Bank Guarantee, the Bank Guarantee is canceled, not
renewed, terminated, or in any way is not in full force and
effect, Owner may, at its sole option, upon written notice to
Contractor without prejudice to any other rights or remedies
under this Contract, terminate Contractor's employment and this
Contract, or, in the alternative, may, upon written notice to
Contractor suspend all payments under this Contract until the
Bank Guarantee is replaced or renewed in a manner satisfactory to
Owner and Lender.
15.1.4 Owner's Rights. In the event that Owner elects to
terminate Contractor's employment pursuant to Article 15.1.1,
15.1.2, or 15.1.3 hereof, Contractor shall provide Owner with the
right to continue to use any and all patented and/or proprietary
information Owner deems necessary to complete the Facility.
Furthermore, Owner shall have the right to take possession and
use without compensation all of Contractor's Equipment located at
the Facility Site on the date of such termination for the purpose
of completing the Work and may employ any other person, firm or
corporation to finish the Work by whatever method that Owner may
deem expedient. Owner may make such expenditures as in Owner's
sole judgment will best accomplish the timely completion of the
Facility without limitation under the provisions of Article 13 or
otherwise. Contractor shall not be entitled to receive any
further payments under this Contract except for payments for Work
performed prior to such termination, but such payment shall only
be made after completion of the Facility and to the extent that
the cost to complete does not exceed the Contract Price.
However, Contractor shall nonetheless continue to be bound by
such provisions of this Contract that survive such date.
15.1.5 General Obligations. If Owner elects to terminate
Contractor's employment pursuant to Article 15.1.1, 15.1.2, or
15.1.3 hereof, Contractor shall, at Owner's request and at
Contractor's expense, perform the services relative to the Work
so affected including (i) assist Owner in preparing an inventory
of all Equipment in use or in storage at the Facility Site; (ii)
assign to Owner or its nominee all subcontracts and warranties
and other contractual agreements as may be designated by Owner,
which assignment shall occur automatically upon notice from Owner
to Contractor; provided, however, that Contractor shall execute
such documents as may be reasonably requested by Owner to
evidence such assignment; and (iii) remove from the Facility Site
all such Equipment and rubbish and Hazardous Materials as Owner
may request.
15.1.6 Termination Payment Obligations. If Owner
terminates Contractor's employment pursuant to Article 15.1.1, 15.1.2,
or 15.1.3 hereof, as soon as practicable after the Final Acceptance
Date (as if Contractor were still employed under this Contract),
Owner shall determine the total expense reasonably incurred and
accrued in completing the Work, including, without limitation,
additional overhead and legal and other professional expenses
incurred and accrued by Owner to effect such takeover and to
complete the Work. Contractor shall be liable for, and shall pay
to Owner, the amount by which the actual cost of the Work plus
Owner's expenses exceed the Contract Price, within ten (10) Days
following receipt of Owner's demand for such payment. Contractor
shall pay interest at the Reference Rate plus two percent (2%) on
any such amount which is not paid within ten (10) Days following
such demand, until such amount is paid in full.
15.1.7 Indemnification. If any event or condition
specified in Article 15.1.1 or, due to Contractor's acts or
omissions specified in Article 15.1.2, occurs, Contractor agrees
to indemnify and hold Owner harmless from any and all claims,
obligations and liabilities, including judgments, expenses,
costs, fines, and/or penalties of whatever nature arising from or
related to any such event or condition, except to the extent
resulting from Owner's negligence or willful misconduct.
15.2 Suspension or Termination for Convenience
15.2.1 Suspension for Owner's Convenience. Owner
may, by notice in writing to Contractor, suspend at any time the
performance of all or any portion of Work or terminate this
Contract. Upon receipt of such notice, Contractor shall, unless
the notice requires otherwise: (i) immediately discontinue the
Work on the date and to the extent specified in the notice; (ii)
place no further orders or subcontracts for material, services
or facilities with respect to suspended Work other than to the
extent required in the notice; (iii) promptly make every
reasonable effort with the concurrence of Owner to obtain
suspension with terms satisfactory to Owner of all orders,
subcontracts, and rental agreements to the extent they relate to
performance of suspended Work; (iv) continue to protect and
maintain the Work performed, including those portions on which
Work has been suspended; and (v) take any other reasonable steps
to minimize costs associated with such suspension or
termination. As full compensation for any suspension under this
Article 15.3, Contractor will be reimbursed by Owner for the
following costs, reasonably incurred, without duplication of any
item, to the extent that such costs directly result from such
suspension of the Work and do not reflect reimbursement for
Contractor's, Vendors' or Subcontractors' anticipated profit
from other Work: (i) a standby charge, sufficient to compensate
Contractor for keeping, to the extent required in the suspension
notice, its organization and Equipment committed to the Work on
a standby basis; (ii) all reasonable costs associated with
mobilization and demobilization of Contractor's facility,
forces, and Equipment; and (iii) an equitable amount to
reimburse Contractor for the cost of maintaining and protecting
that portion of Work upon which Performance has been suspended.
Upon delivery of notice by Owner to Contractor to resume
suspended Work (or reinstating this Contract), Contractor shall
immediately resume performance under this Contract to the extent
required in the notice. If contractor intends to assert a claim
for equitable adjustment under this clause, it must, within
twenty (20) Business Days after receipt of notice to resume
Work, submit to Owner a written statement setting forth the
schedule impact and monetary extent of such claim in sufficient
detail to permission thorough analysis and adjustment pursuant
to Article 6. Contractor shall permit access by Owner to
pertinent records for purposes of documenting such claims. In
the event that Owner suspends the performance of any portion of
the Work pursuant to Article 15.3 hereof, the Guaranteed
Commercial Operation Date shall be extended for the number of
Days' delay caused by the suspension. No adjustment shall be
made for any suspension to the extent that performance would
have been suspended, delayed or interrupted by Contractor for
noncompliance with the requirements of this Contract.
Suspension of the Work under this Contract may be accomplished
only by the written notice described in this Article 15.2.
15.2.2 Termination for Owner's Convenience. Owner
may terminate this Contract at any time for its convenience.
This Contract may be terminated under this Article 15.2.2 by
giving Contractor written notice of termination. Upon receiving
any such notice of termination, Contractor shall stop performing
the Work and shall cancel as quickly as possible all orders
placed by it with subcontractors and suppliers and shall use all
reasonable efforts to minimize cancellation charges. Contractor
shall be entitled to receive a termination payment (the
"Termination Payment") equal to the sum of (i) that portion of
the Contract Price that is applicable to Work completed up to
the date of termination that has not previously been paid to
Contractor, (ii) the costs reasonably incurred by Contractor in
withdrawing its equipment and personnel from the Job Site and in
otherwise demobilizing, and (iii) the costs reasonably incurred
by Contractor in terminating contracts with subcontractors and
suppliers pertaining to the Work. Representatives of Owner and
Contractor shall determine the Contract Price amount referred to
in clause (i) above in accordance with the Progress Payment
Schedule in Exhibit F, and Contractor shall document the costs
claimed under clauses (ii) and (iii) above to Owner's
satisfaction and shall supply Owner copies of the subcontractor
and supplier invoices covering amounts claimed under clause
(iii) above. Contractor shall submit an invoice to Owner for
the Termination Payment with the supporting information and
documents referred to above, and Owner shall pay such invoice
within thirty (30) Days after its receipt of same unless it
disputes certain elements thereof, in which event only the
undisputed portion of the Termination Payment need be made
within such thirty (30) Day period and the dispute over the
remainder of the claimed Termination Payment may be submitted to
arbitration pursuant to Article 17. Pursuant to this Article
15.2.2, within twenty (20) days after (1) payment of any and all
liquidated damages, compensation or otherwise under Articles 12,
13, and 15, and (2) the resolution of any dispute or arbitration
proceedings pursuant to Article 17, Owner shall return the Bank
Guarantee to the issuing bank with instructions for
cancellation.
15.3 Termination by Contractor.
15.3.1 If during the course of construction all or
substantially all of the Facility is damaged or destroyed for
any reason, other than as a result of Contractor's actions or
failure to act, and Owner notifies Contractor that neither
insurance proceeds nor any other adequate source of funds will
be made available for the repair or restoration of such damage,
then Contractor shall have the right to terminate this Contract
upon twenty (20) Days prior written notice to Owner, but
Contractor shall not be entitled to any payments for the cost of
termination (e.g. demobilization costs and costs of cancellation
of Contracts with Subcontractors or Vendors), and demobilization
shall occur only in accordance with the instructions of Owner.
15.3.2 Upon written notice to Owner, Contractor may
terminate this Contract if initial Project Funding has not
occurred by August 1, 1997.
15.3.3 Termination for Owner's Failure to Pay. If
Owner fails to make a payment pursuant to Article 7.3,
Contractor may, after thirty (30) days of giving notice to
suspend Work according to Article 7.2.4, give written notice to
Owner of its intent to terminate the Contract. Owner shall have
thirty (30) days after receipt of such termination notice to
make such late payment, otherwise, Contractor may terminate this
Contract.
ARTICLE 16
INDEMNITIES
16.1 Contractor's Indemnification. Contractor shall defend,
indemnify and hold harmless Owner, the Utility, Institute, or
Lender, their respective corporate affiliates and their
respective employees, agents, partners, officers, and directors
("Indemnitees"), from and against all claims, damages, losses,
liabilities, and expenses (including court costs and reasonable
attorneys' fees) which directly or indirectly arise out of or
result from any negligent act or negligent omission, during the
performance of the Work or any curative action under any warranty
following performance of the Work, of Contractor or any
Subcontractor or Vendor or anyone directly or indirectly employed
by any of them or anyone for whose acts any of them may be
liable.
16.2 Employee Claims. In any and all claims against an
Indemnitee, by any employee of Contractor or any Subcontractor or
by anyone directly or indirectly employed by any of them or
anyone for whose acts any of them may be liable, the
indemnification obligation stated above shall not be limited in
any way by any limitation on the amount or type of damages,
compensation, or benefits payable by or for Contractor or any
Subcontractor under the applicable workers' compensation act,
disability acts or other employee benefit acts.
16.3 Owner's Indemnification. Owner hereby agrees to indemnify,
defend and hold harmless Contractor, its officers, directors,
agents, servants and employees from any claims, suites, damages,
and costs directly resulting from the negligence or willful
misconduct by Owner which materially and adversely affects this
Contract with the understanding that Owner shall be entitled to
control and direct the defense of any such claim or litigation.
16.4 Contractor Taxes. Contractor shall defend, indemnify and
hold harmless Indemnitees from and against all claims by any
governmental or taxing authority claiming taxes based on income
of Contractor or any of its Subcontractors or Vendors or any of
their respective agents or employees with respect to any payment
for the Work made to or earned by Contractor or any of its
Subcontractors or any of their respective agents or employees
under this Contract.
16.5 Proprietary Rights.
16.5.1 Contractor shall defend, indemnify and hold harmless
Indemnitees against all claims, damages, losses, liabilities, and
expenses (including court costs and reasonable attorneys' fees)
arising from any claim or legal action by a third party for
unauthorized disclosure or use of any trade secrets, proprietary
rights, or intellectual property rights, or of patent, copyright
or trademark infringement arising from Contractor's performance
(or that of its Subcontractors or Vendors) under this Contract
and/or asserted against an Indemnitee that either (a) concerns
any of the Work or Equipment or other items provided by
Contractor or any Subcontractor or Vendor under this Contract; or
(b) is based upon the performance of the Work by the Contractor
or any Subcontractor or Vendor, including the use of any tools,
implements or construction by Contractor or any Subcontractor or
Vendor; or (c) is based upon the design or construction any item
or Unit specified by Contractor under this Contract or the
operation of any such item or Unit in accordance with directions
provided by Contractor.
16.5.2 If Owner is prevented from completing the Facility
or any part thereof, or from the use, operation, or enjoyment of the
Facility or any part thereof as a result of such claim or legal
action or any litigation based on a claim for which Contractor is
obligated to indemnify as set forth above, Contractor shall
promptly arrange to have such prevention removed.
16.5.3 Owner's acceptance of Contractor's engineering
designs, Drawings or Design Document and/or Contractor's
selections of Equipment shall not be construed to relieve
Contractor of any obligation under this Article 16.
16.6 Notice of Claim. An Indemnitee shall, within ten (10)
Business Days of the receipt of notice of the commencement of any
legal action or of any claims against such Indemnitee in respect
of which indemnification will be sought, notify Contractor in
writing thereof. Failure of the Indemnitee to give such notice
will not reduce the liability of the other party providing such
indemnity ("Indemnitor") unless and to the extent Indemnitor can
demonstrate that it is precluded from defending such claim or
litigation as a result of the failure of the Indemnitee to give
such notice to Indemnitor. In any case, the failure to so notify
shall not relieve Indemnitor from any liability that it may have
to such Indemnitee otherwise than under the indemnity agreements
contained in this Article 16. In case any such claim or legal
action shall be made or brought against an Indemnitee and such
Indemnitee shall notify Indemnitor thereof, Indemnitor may, or if
so requested by such Indemnitee, shall assume the defense
thereof, without any reservation of rights and after notice from
Indemnitor to such Indemnitee of an election to assume the
defense thereof and approval by the Indemnitee of such counsel,
and Indemnitor will not be liable to such Indemnitee under this
Article 16 for any legal fees or expenses subsequently incurred
by such Indemnitee in connection with the defense thereof. No
Indemnitee shall settle any indemnified claim over which
Indemnitor has not been afforded the opportunity to assume the
defense without Indemnitor's reasonable approval. Indemnitor
shall control the settlement of all claims over which it has
assumed the defense; provided, however, that Indemnitor shall not
conclude any settlement which shall not be unreasonably withheld
or destroyed without the prior approval of the Indemnitee. The
Indemnitee shall provide reasonable assistance to Indemnitor, at
Indemnitor's expense, in connection with such legal action or
claim. Notwithstanding anything to the contrary in this Article
16.6, the Indemnitee shall have the right, at its expense, to
retain counsel to monitor and consult with Indemnitor's counsel
in connection with any such legal action or claim; provided,
however, if counsel for Indemnitor has an actual conflict with
the interests of Indemnitee, Indemnitee may retain counsel at
Indemnitor's expense.
16.7 Survival of Clause. The indemnification provisions
contained in this Article 16 shall survive the Final Acceptance
Date and any earlier termination of this Contract.
ARTICLE 17
DISPUTES
17.1 Arbitration of Disputes. Any dispute arising out of or in
connection with this Contract, including Change Orders, the
Contract Price or the Construction Schedule, shall be settled
through friendly consultation or conciliation between the parties
promptly upon the written request of one party to the other
party. If the parties do not reach an amicable resolution within
thirty (30) Days from the notice of such dispute, either party
may, with notice to the other party, submit the dispute to the
ICA of the ICC, as the exclusive forum, for binding arbitration
to be held in Singapore for all disputes. For convenience
purposes, the parties may mutually agree to hold arbitration in
Beijing, China for disputes with a value below one million
Dollars (U.S. $1,000,000). In each case the Rules of
Conciliation of the ICC shall govern the proceedings. Any
settlement and award rendered through such an arbitration
proceeding shall be final and binding upon the parties.
17.2 Language. The arbitration shall be conducted and the
judgment shall be rendered in both English and Chinese.
17.3 Arbitrator(s). The parties may select one mutually
agreeable arbitrator within thirty (30) Days following a demand
for arbitration; and failing such selection there shall be three
arbitrators. In the latter case, each Party shall select one
arbitrator within forty-five (45) Days after giving or receiving
the demand for arbitration. Such arbitrators shall be freely
selected, and the parties shall not be limited in their selection
to any prescribed list. The ICA shall select the third
arbitrator. If a party does not appoint an arbitrator who has
consented to participate within thirty (30) Days after the
selection of the first arbitrator, the relevant appointment shall
be made by the ICA. The costs of arbitration shall be borne by
the parties as determined by the arbitration tribunal, taking
into account the relative merits of the positions of the parties.
17.4 No Immunity. Each of the parties is subject to civil and
commercial law and irrevocably agrees that this Contract is a
commercial rather than public or governmental activity and
neither party is entitled to claim immunity form legal
proceedings with respect to itself or any of its assets on the
grounds of sovereignty or otherwise under any law or in any
jurisdiction where an action may be brought for the enforcement
of any of the obligations arising under or relating to this
Contract. Each party hereby irrevocably waives rights to
immunity it may now have or later acquire with respect to its
obligation arising under or relating to this Contract.
17.5 Continuation of Work During Dispute. Unless otherwise
agreed in writing, Contractor shall continue the Work in
accordance with the Construction Schedule and Owner shall
continue to make payments of undisputed amount in accordance with
this Contract during any dispute resolution proceedings. Any
disputed amount ultimately paid shall be paid with interest from
the date of withholding to the date of payment at the Reference
Rate.
ARTICLE 18
LIMITATION OF LIABILITY
18.1 Consequential Damages. Except as otherwise specifically set
forth herein and excluding damages resulting from the gross
negligence or intentional misconduct of a party, neither party
shall be liable to the other party or any of its Subcontractors,
Vendors or agents for consequential loss or damage, including but
not limited to loss of use or loss of revenue or profit, and each
party hereby releases the other party and its Subcontractors,
Vendors and agents from any such liability (except as described
above).
18.2 Aggregate Liability of Contractor. Except for express
limits of liability herein and excluding indemnification
obligations hereunder for liabilities, expenses or damages
resulting from claims of third parties (where no limit of
liability shall apply) the aggregate limit of liability of
Contractor under this Contract shall be forty five percent (45%)
of the Contract Price.
ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 Entire Contract. This Contract contains the entire
understanding of the parties with respect to the subject matter
hereof and reflects the prior agreements and commitments with
respect thereto. There are no other oral understandings, terms
or conditions except as expressly stated herein, and neither
party has relied upon any representation, express or implied, not
contained in this Contract.
19.2 Amendments. No change, amendment or modification of this
Contract shall be valid or binding upon the parties hereto unless
such change, amendment, or modification shall be in writing and
duly executed by both parties hereto, to the extent required, and
consented to by Lender.
19.3 Joint Effort. Preparation of this Contract has been a joint
effort of the parties, and the resulting document shall be
construed as fairly as practicable in accordance with its terms.
19.4 Captions. The captions contained in this Contract are for
convenience and reference only and in no way define, describe,
extend or limit or modify this Contract or the intent of any
provision contained herein.
19.5 Notice. Any notice, demand, offer, approval, change order,
consent or other written instrument (each a "Notice") required or
permitted to be given pursuant to this Contract shall be in
writing signed by the party giving such Notice and shall be hand-
delivered or sent by overnight delivery with evidence of
delivery, or telex or telecopy, with electronic confirmation of
receipt, to the other party at such address as set forth below.
19.5.1 If delivered to Owner:
Tangshan Pan-Western Heat and Power Co., Ltd.;
And Tangshan Panda Heat and Power Co., Ltd.
at Cheng Guan, Luannan County
Tangshan City, Hebei Province 063500
China
with copies to:
Tangshan Pan-Western Heat and Power Co., Ltd.
and Tangshan Panda Heat and Power Co., Ltd.
c/o Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attn: Managing Partner/General Counsel
19.5.2 if delivered to Contractor:
Harbin Power Engineering Company Limited
45 Xusheng St., Post Code 150046
Dongli District, Harbin, China
Fax: 0451-268-2279
Telephone: 0451-268-2171
Each party shall have the right to change the place to
which Notice shall be sent or delivered by similar notice sent
or like manner to the other party. The effective date of Notice
issued pursuant to this Contract shall be as of the earlier of
addressee's receipt of such Notice or three (3) Days after
deposit in the mail.
19.6 Severability. The invalidity of one or more phrases,
sentences, clauses or Articles contained in this Contract shall
not affect the validity of any remaining portion of the Contract.
19.7 Assignment by Owner and Contractor.
19.7.1 Except as provided in Articles 19.7.2, the rights
and obligations of the Parties under this Contract may not be
assigned or delegated by either party except upon the express
written consent of the other party.
19.7.2 For the purpose of Owner securing financing to
construct and operate the Facility (i) Owner may, without the
consent of Contractor, assign or create security over its rights
and interest under this Contract; and (ii) Contractor agrees to
sign and seal in good faith and on a fair and equitable basis a
"Consent to Assignment" or similar documents with the lenders to
Owner (including changes or clarifications to this Contract
requested by such lenders).
19.7.3 This Contract shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and
permitted assigns.
19.8 No Waiver. Any failure of any party to enforce any of the
provisions of this Contract or to require compliance with any of
its terms at any time during the pendency of this Contract shall
in no way affect the validity of this Contract, or any part
hereof, and shall not be deemed a waiver of the right of such
party thereafter to enforce any and each such provisions.
19.9 Governing Law. This contract shall be governed by,
construed, and enforced in accordance with the laws of the
People's Republic of China.
19.10 Governing Language. This Contract shall be executed by
the parties in English. Although a certified Chinese translation
of the Contract shall be provided, in the event of a dispute
between the parties, the English version shall govern.
19.11 Exhibits. All Exhibits referenced in this Contract
shall be incorporated into this Contract by such reference and
shall be deemed to be an integral part of this Contract;
provided, however, in the event of any inconsistency, Articles 1
through 19 shall prevail over any Exhibit.
19.12 Confidential Information. Contractor agrees, subject
to Article 17, to hold in confidence for a period of three (3)
years from the date of first disclosure or for such other period
as the parties may from time to time agree in writing, and except
as may be necessary to perform the services under this Contract,
any information supplied to Contractor by Owner and designated in
writing as confidential. Contractor further agrees to require
its Subcontractors, Vendors, and employees to enter into
appropriate nondisclosure agreements relative to such
confidential information as may be communicated to them by
Contractor. The provisions of this Article 19.12 shall not apply
to information within any one of the following categories or any
combination thereof: (a) information that was in the public
domain prior to Contractor's receipt thereof from Owner or that
subsequently becomes part of the public domain by publication or
otherwise except by Contractor's wrongful act; (b) information
that Contractor can show was lawfully in its possession prior to
receipt thereof from Owner through no breach of any
confidentiality obligation; or (c) information received by
Contractor from a third party having no obligation of secrecy
with respect thereto. Contractor shall not publish information
regarding the Facility and shall not permit or accompany any
third party not connected with construction of the Facility onto
the Facility Site without the express written permission of
Owner. Owner may seek and obtain injunctive or equitable relief
against Contractor for any breach of this Article 19.12.
19.13 Obligations. Nothing contained in this Contract shall
be construed as constituting a joint venture or partnership
between Contractor and Owner.
19.14 Time of the Essence. Time is of the essence in the
performance by each party of its obligations under this Contract.
19.15 Owner Power of Attorney. For administrative
convenience, Pan-Western hereby irrevocably appoints Panda as its
exclusive agent on behalf of Owner to make any payments, exercise
rights and remedies and otherwise administer this Contract, in
its sole discretion, as necessary and desirable.
IN WITNESS WHEREOF, the parties have hereto set their hands
and seals as of this 24th Day of April, 1996.
OWNER: CONTRACTOR:
TANGSHAN PAN-WESTERN HARBIN POWER
HEAT AND POWER CO., LTD. ENGINEERING COMPANY LTD.
By: _______________________ By: ________________________
Name: Darol S. Lindloff Name: Hu Jian Qing
Title: Legal Representative Title: Chairman and General
Manager
TANGSHAN PANDA HEAT AND
POWER CO., LTD.
By: _______________________
Name: Darol S. Lindloff
Title: Legal Representative
EXHIBIT A
CONSTRUCTION SCHEDULE
EXHIBIT B
SCOPE OF WORK
EXHIBIT C
DESIGN CONTRACT
ENGINEERING AND DESIGN CONTRACT
BETWEEN
HEBEI ELECTRIC POWER SURVEY AND DESIGN INSTITUTE
AND
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
AND
TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY, LTD.
DATED: DECEMBER 21, 1995
Tangshan Panda Heat and Power Company, Ltd. and Tangshan Pan-
Western Heat and Power Company, Ltd. (hereafter collectively
called "Owner) each plan to build, own and operate a 50 MW
(nameplate) pulverized coal-fired power plant with a combined
capability of producing 100 MW (nameplate) power and steam/hot
water for export (each unit hereafter called a "Power Plant" and
collectively called the "Power Plants"). The Power Plants site
is located near Guyiaying in Luannan County, Hebei Province,
People's Republic of China. The name of the Power Plants is
Luannan Thermal Power Plant (hereafter called "Project").
The Design Criteria prepared by Parsons Brinkerhoff Energy
Services, Inc. (hereafter called "Owner's Engineer") is in
accordance with the Hebei Electric Power Survey and Design
Institute Feasibility Study and all relevant government
authorities comments and or approvals (hereafter called "Study"),
however, specific design criteria and more detailed requirements
are presented for the major systems and components where the
Study did not adequately address these items. The Study is
considered adequate for all areas not specifically addressed in
Design Criteria.
The Parties agree as follows:
1.0 ENGAGEMENT
Owner hereby engages Hebei Electric Power Survey and Design
Institute (hereafter called "Institute" and collectively with the
Owner, called the "Parties" and each is a "Party") to perform all
surveys, design and engineering work including the Preliminary
Design and Construction Drawings described below (sometimes
hereafter called the "Services") necessary for Owner to permit
and construct the Project in accordance with Chinese codes and
regulations, and with the Project Design Criteria detailed in
this Contract. the Institute represents that it is qualified and
licensed by appropriate authorities to perform the Services in
this Contract.
2.0 PROJECT DESIGN BASIS
The Institute shall design the Project on the basis of two (2) 50
MW (nameplate) units located on Site # 2 of the Study together
with the Scope of Work For the Engineering, Procurement and
Construction of Luannan Thermal Power Project (attached hereto
and hereafter called "Design Criteria") prepared by Owner's
Engineer. In the event of a conflict, the Design Criteria shall
take precedence over the Study. If the conflict(s) between the
Design Criteria and the Study impacts the government approval
process, the Institute shall immediately notify the Owner in
writing of the conflict(s). Owner and Institute shall cooperate
with each other to resolve the conflict(s) with the appropriate
government authority.
Facilities and systems to support future 2x50 MW units shall be
included only where specifically identified in the Design
Criteria.
2.1 Preliminary Design and Construction Drawings:
The Institute shall provide the "Preliminary Design" which shall
include, at a minimum, general layout arrangement of the Power
Plants, major equipment list and specifications, budgetary costs
of construction, single line electrical drawings, heat and mass
balance diagrams, process flow diagrams, and any other drawings
and documents required to obtain relevant government submittals
and approvals. Preliminary Design shall be performed in
accordance with the Design Criteria and in accordance with the
required design codes and regulations required by appropriate
government authorities.
The Institute shall provide "Construction Drawing" in accordance
with the proper design procedures and practices and in accordance
with the approved Preliminary Design.
2.2 Design Exclusions:
Items that are not included in the Services provided by the
Institute:
Survey and design of the heating distribution network,
including heat exchange station, outside the fenced or walled
area of the Power Plant site.
Environmental and hydrological studies.
Survey and design of social buildings.
Survey and design of transmission lines and substations,
interconnect systems and facilities required by the North China
Power Group that are outside the fenced or walled area of the
Power Plants site.
Roads outside the fenced or walled area of the Power Plants
site.
3.0 TERM, DESIGN SCHEDULE AND FEES
3.1 This contract shall become effective on the date of signing
by both Parties and shall remain in effect unless earlier
terminated by owner for any reason pursuant to Section 4.1, until
the end of the construction period which shall be deemed complete
upon final acceptance of the Project by Owner from the
Engineering, Procurement and Construction Contractor (hereafter
called "EPCC").
3.2 The Institute shall provide a completed Chinese version of
the Preliminary Design with Owner's acceptance prior to submittal
to relevant government authorities on or before April 15, 1996.
Institute shall modify or correct the Preliminary Design based on
the comments received from the relevant government authorities
and Owner and shall promptly resubmit for approval, if required,
at no additional cost to Owner. The English version of the
Preliminary Design shall be submitted to Owner as it is available
throughout the design process. However, the first draft of
English translation shall be completed and submitted to Owner no
later than April 30, 1996.
3.3 The "Lump Sum Price" of this Contract is Renminbi Yuan (RMB)
seven million (7,000,000), of which the Preliminary Design fee
shall be equal to thirty percent (30%) of the Lump Sum Price and
the Construction Drawings shall equal seventy (70%) of the Lump
Sum Price.
Owner shall make payments to the Institute for the Preliminary
Design in accordance to schedule in Section 3.6 of this Contract.
3.4 Owner has previously submitted a representative coal
analysis, herein attached, to the Institute for the basis of
design of the Power Plants. If the Owner provides the Institute
with a significant new coal analysis (excluding abrasive test
results) on or before December 31, 1995, the Institute shall
complete the Preliminary Design within the Lump Sum Price and
schedule stated in this Contract.
If the Owner provide the Institute with a significant new coal
analysis (excluding abrasive test results) between January 1,
1996 and January 15, 1996, the Institute shall be entitled to a
price increase of no more than RMB Yuan 100,000.00 without impact
to schedule. Owner shall provide the Institute with the new
abrasive test results when available to Owner.
If the Owner provide the Institute with a significant new coal
analysis after January 15, 1996, the Institute, subject to
negotiations with Owner, shall be entitled to price and or
schedule variance.
3.5 In addition to the Lump Sum Price described in section 3.3
above, the Owner shall pay the Institute a fee equal to RMB Yuan
150,000.00 for the English translation of the Preliminary Design
documents and general Construction Drawings, excluding detailed
installation drawings which shall be mutually determined at a
later date by Owner and Institute, described in Section 3.6 of
this Contract. Owner shall make payments to the Institute in
accordance with the following schedule:
The Owner shall pay RMB Yuan 100,000.00 on or before twenty
(20) days upon submission of the first draft translation of the
Preliminary Design documents by the Institute.
The remaining fee of RMB Yuan 50,000.00 will be paid by
Owner, or its assigns, on or before twenty (20) days after
submission of the final translation. The final translation shall
include approval comments from the relevant government
authorities pertaining to the Preliminary Design documents.
3.6 Preliminary Design Fee:
All payments made by Owner under this Contract shall be made by
Tangshan Panda Heat and Power Co., Ltd.; and
An advance payment of RMB Yuan 420,000.00 shall be made to the
Institute on or before twenty (20) days after signing this
Contract.
On or before twenty (20) days after the Institute submits the
Preliminary Design which shall be acceptable to the Owner prior
to its submittal, as referenced in Section 2.1 and 3.2 of this
Contract, the Owner shall remit payment of RMB Yuan 1,330,000.00.
After Owner obtains approval comments at the Preliminary Design
hearings by the relevant government authorities and the Institute
complies with Section 3.2 above, Owner shall remit RMB Yuan
350,000.00 to the Institute on or before twenty (20) days after
the conclusion of these hearings.
3.7 Construction Drawings Schedule and Fee:
The EPCC shall remit payment of RMB Yuan 1,000,000.00 to the
Institute ten (10) days after signing the assignment and
assumption of this Contract by the EPCC. Owner shall not be
obligated to made the payments under this Section 3.8.
Ten (10) days after the Institute submits approximately twenty
five percent (25%) of the total required number of construction
drawings to the Owner and EPCC, the EPCC shall remit payment of
RMB Yuan 1,000,000.00 to the Institute.
Ten (10) days after the Institute submits approximately sixty
percent (60%) of the total required construction drawings to the
EPCC and Owner, the EPCC shall remit payment of RMB Yuan
1,000,000.00 to the Institute.
Ten (10) days after the Institute submits one hundred percent
(100%) of the total required construction drawings to the Owner
and EPCC, the EPCC shall remit payment of RMB Yuan 1,400,000.00
to the Institute.
Ten (10) days after the EPCC has achieved Final Acceptance of the
Power Plants from the Owner, the EPCC shall remit RMB Yuan
500,000.00 to the Institute.
4.0 RIGHTS AND RESPONSIBILITIES OF OWNER & INSTITUTE:
4.1 Owner's Responsibilities and Rights:
The Owner shall:
provide Institute with relevant information necessary to
prepare and complete the Preliminary Design, Construction
Drawings and relevant government approvals. The Institute shall
provide the Owner and EPCC with their respective written list of
information required to complete the Preliminary Design and or
Construction Drawings. Failure to provide the Institute with the
required information in a timely manner, the Owner shall be
responsible for the cost of corrections to the Preliminary Design
and the EPCC shall be responsible for the cost of corrections to
the Construction Drawings as specified under this Contract; and
effect timely payment for Preliminary Design fee upon review
and acceptance of Owner's Engineer and in accordance with the
stipulations of this Contract; and
make payment of any reasonable expenses or fees to the
relevant authorities incurred by the Institute on behalf of the
Owner, and subject to Owner's prior written approval; and
have the right to terminate this Contract in writing for any
reason at any time. Should Owner terminate this Contract,
Institute shall immediately stop all Services. Owner shall pay
reasonable costs for Services completed and expenses up to the
time of termination. The Institute's costs shall include
reasonable profit; and
require the EPCC to provide reasonable living and working
accommodations and transportation to and from these
accommodations and local rail station, at no cost to the
Institute, for the Institute's on site personnel during the
construction stage of the Power Plants when the Institute's
personnel are required to be on site by the EPCC. This
responsibility is subject to final negotiations between the EPCC
and the Institute which requires Owner's approval; and
include, at Owner's option, the Owner's rights to require of
arbitration (similar to Section 6.0) between the Institute and
EPCC regarding the Services and price provided by the Institute
as contained in this Contract during the construction stage of
the Project.
have the right to approve the Preliminary Design. This
right does not relieve the Institute of its responsibilities and
guarantees described in this Contract.
4.2 Institute's Responsibilities:
The Institute shall:
accomplish the Preliminary Design, Construction Drawings and
their relevant government and Owner approvals in accordance with
the current design codes and regulations in China and in
accordance with the above Project Design Criteria provided in
Section 2.0 of this Contract. If there is a conflict with any
information provided by the Owner to the Institute with respect
to Chinese codes and regulations, it is the responsibility of the
Institute to inform the Owner in writing of such conflict prior
to implementing any design affected by this information. Failure
to provide adequate written notice in a timely manner, the
Institute shall be responsible for costs of any corrections to
the Services specified under this Contract; and
be responsible for any modifications required by the
relevant government authorities after examination of the
Preliminary Design. If changes resulting from the Institute's
errors or omissions, the Institute shall be responsible for
correcting the Preliminary Design at its own expense; and
make payment of all taxes associated with the Institute's
design services in accordance with the tax laws of the People's
Republic of China; and
be responsible for attending meetings that are necessary to
perform the Preliminary Design and Construction Drawings, and
that are necessary to submit and obtain government approvals; and
provide on-site personnel to support the EPCC construction
efforts during the construction stage of the Project. The
equivalent labor for the Institute's on-site personnel is
established at twenty four (24) man months. It shall be the
responsibility of the EPCC to utilize this allocation of on-site
personnel in an effective manner. The labor and expenses beyond
the twenty four (24) man months shall be reimbursed by the EPCC
to the Institute in accordance with relevant government
regulations; and
translate all materials produced as part of the Services
into English, including the Preliminary Design and its
specifications and the Construction Drawings as described in
Section 3.5 above.
4.3 Institute's Guarantee:
The Institute guarantees that the Preliminary Design and
Construction Drawings shall meet the requirements contained in
the Design Criteria and the Study, with such changes therein as
the Owner and the EPCC may approve, for the design of the Power
Plants, including power output and thermal output, heat rate and
emissions limits from such plants. The Institute makes this
guarantee specifically for the benefit of the Owner and its
permitted successors and assigns including the EPCC as provided
in Section 5.0 below.
If there is any error or omission in the Services provided by the
Institute or any breach of guarantee given in this Section 4.3,
the Institute shall perform such additional Services and design
work at its own expense, on Owner's request, as may be deemed
necessary to correct such error or omission; and the Institute
shall also be responsible for the relevant loss/damage of Owner.
5.0 ASSIGNMENTS
5.1 For purposes of securing financing, Owner may, without the
consent of the Institute assign or create security over its
rights and interests herein. The Institute agrees to negotiate
in good faith and on fair and equitable basis a consent to
assignment with the lenders to Owner. Such consent to assignment
shall provide that any person or entity which elects to assume
any or all of the rights of the Owner under this Contract shall
also assume all of the Owner's obligations hereunder. The
Parties acknowledge and agree that any assignment to a secured
party pursuant to any financing Contracts shall be subject to,
and shall not relieve either Party of their performance
obligations to, each other under this Contract except as provided
in Section 5.2 below.
5.2 This Contract shall be binding upon and shall inure to the
benefit of the Parties and their respective successor and
permitted assigns, except that the Institute shall not assign
this Contract without the prior written consent of Owner.
6.0 DISPUTE RESOLUTION
6.1 Settlement Arbitration. Except as otherwise provided in
this Contract, any dispute arising out of or in connection with
this Contract shall be settled through friendly consultation or
conciliation between the Parties promptly upon the written
request of one Party to the other Party. If the Parties do not
reach an amicable solution within 30 days from the notice of such
dispute, either Party may submit, with notice to the other Party,
the dispute to the International Chamber of Commerce's
International Court of Arbitration in Beijing, China under the
Rules of Conciliation and Arbitration of the International
Chamber of Commerce (the "ICC"). Except as otherwise provided in
this Contract, all disputes shall be submitted exclusively to
arbitration. Any settlement and award rendered through such an
arbitration proceeding shall be final and binding upon the
Parties. This Contract and the rights and obligations of the
Parties shall remain in full force and effect pending the award
in such arbitration proceeding, which award shall determine
whether and when any termination shall become effective.
6.2 Language. The arbitration shall be conducted and the
judgment shall be rendered in both English and Chinese.
6.3 Arbitrators. There shall be three arbitrators. Each Party
shall select one arbitrator within 30 days after being or
receiving the demand for arbitration. Such arbitrators shall be
freely selected, and the Parties shall not be limited in their
selection to any prescribed list. This International Court of
Arbitration (the "ICA") of the ICC shall select the third
arbitrator. If a Party does not appoint an arbitrator who has
consented to participate within 30 days after the selection of
the first arbitrator, the relevant appointment shall be made by
the ICA. The cost of arbitration shall be borne by the Parties
as determined by the arbitration tribunal, taking into account
the relative merits of the positions of the Parties.
6.4 No Immunity. Each of the Parties is subject to civil and
commercial law and irrevocably agrees that this Contract is a
commercial rather public or governmental activity and neither
Party is entitled to claim immunity from legal proceedings with
respect to itself or any of its assets on the grounds of
sovereignty otherwise under any law or in any jurisdiction where
an action may be brought for the enforcement of any of the
obligations arising under or relating to this Contract. Each
Party hereby irrevocably waives rights to immunity it may have or
later acquire with respect to its obligation arising under of
relating to this Contract.
7.0 NOTICES
7.1 Notices: Communications. Except as otherwise expressly
provided hereunder, all notices or other communications which are
required or permitted in this Contract shall be in writing and
sufficient if delivered personally or sent by registered or
certified mail, mail, facsimile, telex or telegram to the
addressees as set forth below.
Owner: Institute
Project Manager Mr. Yue Zhukang
c/o Panda Energy No. 7 Changan Road
International, Inc. Shijiazhuang,
4100 Spring Valley Rd. Hebei Province 050031
Suite 1001 China
Dallas, Texas 75244 USA
Facsimile No. (214) 980-6815 Facsimile No. (311) 506-4114
Telephone No. (214) 980-7159 Telephone No. (311) 505-3966
7.2 Change of Address. Any Party may, by notice to the other,
change the addresses and/or facsimile.
8.0 MISCELLANEOUS
8.1 Governing Law. This Contract and the rights and obligations
hereunder shall be interpreted, construed and governed by the
laws of the People's Republic of China.
8.2 Amendments. No amendments or modification of the terms of
this Contract shall be binding on any Party unless it is in
writing and signed by all Parties.
8.3 Representative Authority. For administrative convenience,
Tangshan Pan-Western Heat and Power Co., Ltd. has appointed
Tangshan Panda Heat and Power Co., Ltd. as its agent with power-
of-attorney to represent and bind Tangshan Pan-Western Heat and
Power Co., Ltd. on all matters herein or relating to its Power
Plant.
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused this Contract to be signed by their respective
officers thereunto duly authorized as of the day and year first
set forth above.
For and on behalf of
HEBEI ELECTRIC POWER SURVEY TANGSHAN PANDA HEAT AND
AND DESIGN INSTITUTE POWER CO., LTD.
TANGSHAN PAN-WESTERN
HEAT AND POWER CO., LTD.
By: By:
Name: Zhou Wei Name: Ted C. Hollon
Title: Vice President Title: Legal Representative
City of Shijiazhuang Chen Guan, Luannan County
Hebei Province 050031, China Hebei Province 063500, China
Facsimile No.: (311) 506-4114 Facsimile No.: (315) 412-2610
Telephone No.: (311) 505-3966 Telephone No.: (315) 412-2610
EXHIBIT D
FORM OF FINAL ACCEPTANCE CERTIFICATE
EXHIBIT D
FINAL ACCEPTANCE CERTIFICATE
Reference is made to that certain Agreement for the
Engineering, Procurement and Construction dated , 1996
(as the same may been amended, hereinafter called the
"Agreement") entered by Harbin Power Engineering Co. (hereinafter
called the "Contractor") and Tangshan Pan-Western Heat and Power
Co., Ltd. and Tangshan Panda Heat and Power Co., Ltd.
(hereinafter called the "Owner"). All terms defined in the
Agreement shall have the same meanings when used in this Final
Acceptance Certificate.
I. Contractor hereby certifies and represents that:
A. The Facility is complete, operable and capable of
generating kW (net) of electrical power on a
reliable and safe basis;
B. All Work has been performed and completed in accordance
with the requirements of the Agreement;
C. The performance Tests have been conducted and
documented in accordance with the requirements set
forth in the Agreement.
II. The total amounts remaining to be paid to Contractor under
the Agreement or otherwise with regard to Work are:
III. Upon receipt of the amount described in paragraph II above,
Contractor shall promptly pay all retention under the
contracts with its Subcontractors and Venders and provide
Owner with such releases of claims, waivers of liens and
other documents as may be reasonably requested by Owner to
evidence such payment and the release and discharge of any
and all claims and liens.
IV. Except only those obligations of Owner which the Agreement
provides shall survive Final Acceptance Date and earlier
termination of the Agreement, effective upon Contractor's
receipt of the amount specified in paragraph II above,
Contractor hereby unconditionally releases and discharges
Owner and its property from all claims, liens and
obligations of every nature arising out of or in connection
with the Agreement or any Work performed, costs incurred or
items furnished in connection with the Agreement.
V. Contractor shall defend, indemnify and hold harmless Owner
from and against all claims, liabilities, damages, costs and
expenses (including, but not limited to reasonable
attorney's fees) in any manner directly or indirectly
arising out of or in connection with any claim or lien
arising through Contractor.
VI. Contractor's warranties, guarantees and indemnities arising
under the Agreement or in connection with any Work, which
provide that they shall survive the Final Acceptance Date
and earlier termination of the Agreement shall survive the
Final Acceptance date and earlier termination of the
Agreement shall survive the execution and delivery of this
Final Acceptance Certificate as provided in the Agreement.
Contractor:
Harbin Power Engineering Co. COMPANY CHOP
By:
Title:
Dated:
EXHIBIT E
INTERCONNECTION CONSTRUCTION AGREEMENT
CONSTRUCTION AGREEMENT
The Parties to this Construction Agreement, dated February
10, 1996 (this "Agreement"):
North China Power Group Company (hereinafter referred to as
"Party A"), and Tangshan Panda Heat and Power Co., Ltd. ("Panda")
and Tangshan Pan-Western Heat and Power Co., Ltd. ("Pan-Western")
(collectively referred to as "Party B"). Party A and Party B are
collectively referred to as the "Parties." Panda has been
appointed agent of Pan-Western to act on behalf of Pan-Western
for all matters under this Agreement.
The Parties have entered into a General Interconnection
Agreement dated September 22, 1995 (the "General Interconnection
Agreement") and the Sub-Agreements described therein. This
Agreement sets forth the terms and conditions to design,
construct and maintain the Facilities. This Agreement is subject
to and complies with the "Approval Notice on the Transmission
System Design Hearing of the Luannan Heat and Power Plant"
(Document-Huabeidianshe [1995] No. 65 dated July 13, 1995 issued
by North China Electric Power Administration of the Ministry of
Electric Power) and "Approval Comments on the Scope of Work of
the 110kV Transmission and Substation System for 2 x 50 MW Units
of the Luannan Heat and Power Plant" (Document - Huabeidianjishe
p1995] No. 75 dated August 24, 1995 issued by Party A)
(collectively the "Approvals"). Copies of such Approvals are
attached hereto.
1. SCOPE OF WORK AND DEFINITIONS
(a) The "Scope of Work" shall mean all designs, plans,
specifications, technical requirements and drawings, and mutually
agreeable changes or modifications therein, all as prepared by
Party A in consultation with Party B, together with all labor,
management, procurement, land use and other permissions and land
acquisitions, needed to design, engineer, construct,
interconnect, test-run and operate the Facilities capable of
transmitting safely and adequately the design capacity of the
Power Plans to the Grid. The telemetering equipment used to read
meters from remote locations, the wire between the dead end
support structure of the Power Plants (the "Dead End Structure")
and the main switch Interconnection Point, and the wire between
such structure and the first tower outside the fence line of the
Power Plants (on Party A's land), shall be party A's
responsibility, within the Scope of Work. The Dead End Structure
itself shall not be within the Scope of Work and shall be Party
B's responsibility. The Scope of Work shall comply with the
Approvals.
(b) Work (the "Work") shall mean the performance of the
Scope of Work and all other obligations of Party A. hereunder.
(c) Party B shall give Party A a written notice of when to
proceed with the Work (the "Notice to Proceed with Preliminary
Design") at least 19 months prior to the scheduled
Interconnection Date of the Facilities. Party A confirms that
Party B has delivered to Party A, such information about the
Power Plants as Party A requires to prepare the Scope of Work,
Party A shall deliver a written report containing the
interconnection plan, construction schedule (including timely
completion date), technical analysis confirming such completion
date and the feasibility of the interconnection plan for Party
B's confirmation as soon as possible but in no event more than 6
months after receiving the Notice to Proceed with Preliminary
Design from Party B.
(d) Party A shall design the Facilities so as to ensure an
adequate reverse supply of electric energy to the Power Plants
necessary for the Test Period as well as the needs of the Power
Plants for transmission of their generated electric energy from
the Interconnection Point to the Grid.
(e) Party A shall give Party B at least 30 days prior
written notice that the facilities are available at the
Interconnection Point.
(f) In accordance with Article Seven of the General
Interconnection Agreement, Party A will provide construction
power to Party B at the Power Plants prior to and during
construction. Party B shall file relevant applications in
accordance with the relevant rules of the Grid for electric
energy supply for construction, and bear the relevant costs.
(g) Unless defined herein, all terms in this Agreement
shall have the same meanings as the ones in the General
Interconnection Agreement and Sub-Agreements or any supplemental
agreements thereunder.
2. TOTAL CONSTRUCTION COST, OTHER COSTS
party B shall loan to Party A the total construction cost
for the Work equal to U.S. dollar equivalent of RMP Yuan
78,218,000 (converted according to the exchange rate on the loan
date) as adjusted by the change in the Price Index for Investment
determined by the State Planning Commission from December 31,
1994 to the date of issuance of the Notice to Proceed with
Preliminary Design (the "Total Construction Cost") pursuant to a
separate loan agreement. Unless the Scope of Work changes at the
request of Party B or the Total Construction Cost is adversely
affected by an event of Force Majeure of a breach by Party B of
its obligations under this Agreement or the loan agreement
relating hereto, no adjustment of the Total construction Cost
shall be permitted (excluding the index adjustment described
above). The Total Construction Cost will cover the cost of all
of the Work.
3. GUARANTEES
3.1 Party A hereby guarantees (the "Party A Guarantees") the
following:
(a) It shall provide adequate reverse supply of electric
power to the Power Plants in compliance with voltage requirements
so as to satisfy the needs of the gneeral contractor of the Powre
Plants for test-runs of the Power Plants during power-on and
interconnecting, within not more than 17 months from the date on
which Party B gives Party A the Notice to Proceed with
Preliminary Design.
(b) It shall complete the Work, including the construction
of Facilities so that the Power Plants can transmit continuously
and/or intermittently on the Facilities all electric energy that
can be generated by the Power Plants and thereby meet the
requirements of the interconnecting system within not more than
18 months from the date on which Party B gives Party A the Notice
to Proceed with Preliminary Design.
(c) Design, construction and installation of the Facilities
shall be completed with new materials and in a good and
workmanlike manner in accordance with the standard for the same
category of transmission lines and sub-stations adopted by the
Grid on the date of the Notice to Proceed with Preliminary
Design.
3.2 Party B guarantees that it will make punctual loans of the
Total Construction Cost in accordance with the requirements of
the loan agreement relating hereto.
4. OWNERSHIP, MAINTENANCE AND SERVICE
(a) Party A shall be solely responsible for (excluding
problems caused by party B or by Force Majeure) and own the
Facilities.
(b) Party A shall perform all operation, maintenance and
repair of the Facilities during the term of the General
Interconnection Agreement, including the supply, procurement,
storage and installation of the usual spar=parts needed in the
maintenance of interconnecting systems. Party A shall schedule
and perform normal and routine maintenance of the Facilities
during the scheduled maintenance of the Power Plants. part A
shall perform all maintenance so as to avoid any interference
with the full operation of the Power Plants pursuant to the
General Interconnection Agreement and the Sub Agreements.
5. DAMAGES: OTHER REMEDIES
(a) In case of a breach of this Agreement, the breaching
Party shall be liable for the loss/damage of the other Party. In
addition, if Party B breaches this Agreement or the loan
agreement relating hereto, Party A shall be entitled to receive
appropriate schedule relief required because of the breach by
Party B. Party A shall also be entitled to charge Party B for
any increased costs in performing the Work resulting from the
breach of Party B.
(b) If Party A fails to meet any Party A Guarantee, Party B
may on written notice to Party A, assume responsibility for
completing all or any portion of the Work. In this case, Party A
shall have a 60 day cure period during which Party A must correct
the stated problem. If Party A does not correct such problem and
Party B assumes the responsibility for any portion of the Work,
Party B shall do so at Party A's expense with payments of
expenses by Party B for such Work treated as loans of a portion
of the Total Construction Cost to Party A. In the event that
such expenses exceed any balance not yet loaned on the Total
construction Cost, Party A shall promptly pay or reimburse Party
B for such expenses.
6. COOPERATION
Party A acknowledges that payment for the Work shall be made
with loans obtained by Party B from international financial
entities. Such entities may require that relevant documents be
provided by the signatory parties of this Agreement. In order to
guarantee the obtaining of the loan, Party A agrees to cooperate
with Party B in this respect.
7. MISCELLANEOUS
The relevant terms of the General Interconnection Agreement
and the Sub Agreements are hereby incorporated into and made a
part of this Agreement with this Agreement treated as a "Sub-
Agreement" for such purposes.
IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused this Agreement to be signed by their duly
authorized representatives, as of the day and year above written.
Legal Representative of Legal Representative of
Party A: Party B:
North China Power Group Company Tangshan Panda Heat
and Power Co. Ltd.
By: By:
Name: Zhao Jian Guo Name: Darol Lindolff
Title: Vice President Title:Authorized Legal
Representative
Tangshan Pan-Western
Heat and Power Co. Ltd.
Name: Darol Lindolff
Title:Authorized Legal
Representative
EXHIBIT F-1
FORM OF PROGRESS PAYMENT CERTIFICATE
Harbin Power Engineering Co.
Date:
Mr.
Luan Nan 2X50 MW Thermal Power Plant Project
Project Manager
Reference: Project No.
Subject: Construction Progress Certification Letter
Month:
Percent Complete:
Total Percent Complete to Date:
Dear Mr.
HPE certifies that ____ percent (____%) of the Civil Construction
and ____ percent (____%) of the Construction Erection for the
total of ____ percent (____%) construction complete has been
completed. For the Month of ____, the total completion of
construction to date is ____ percent (____%). As evidence of
achievement, the following documentation is offered:
item 1
item 2
item 3 and on
Very Truly Yours,
HPE Project Manager
Form F-1 attachment
FIELD MILESTONE
CERTIFICATE
To: <Project Manger - Harbin Power Engineering Co.>
From: <Site Manager - Harbin Power Engineering Co.>
Subject: Construction Progress for the Month of .
This is to certify that the following ____ percent (____%) of the
Civil Construction and ____ percent (____%) of the Construction
Erection was completed on .
Total ___ percent (___%) of Construction Complete for
month.
Total ___ percent (___%) of Date of Construction Complete.
SIGNED: DATE:
CONTRACTOR SITE MANAGER
SIGNED: DATE:
OWNER SITE REPRESENTATIVE
EXHIBIT F-2
PROGRESS PAYMENT SCHEDULE
EXHIBIT G
FORM OF REQUEST FOR PAYMENT
REQUEST Owner: _____________________________
FOR PAYMENT Contractor: ________________________
Field: _____________________________
Other: _____________________________
Subject: Luan Nan 2X50 MW Thermal Power Plant
Agreement Date: ____________
Agreement No.: _____________
Owner: _______________________ Owner Project No.: _________
1. Guarantee Lump Sum Price $__________
Change Orders
Total Additions $__________
Total Deductions $__________
2. Contract Sum to Date $__________
3. Total Complete to Date $__________
Less Retainage $__________
4. Total Earned Less Retainage $__________
5. Less Previous Certificates $__________
6. Amount Due This Certificate $__________
The undersigned certifies that the Work covered by this
Certificate for Payment was completed in accordance with the
Contract Documents and current payment shown here is now due.
Contractor:
Harbin Power Engineering Co. COMPANY CHOP
By: ________________________
Title: _____________________
Dated: _____________________
EXHIBIT H
PRICING SUMMARY
[***] MATERIAL UNDER THIS EXHIBIT H FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
EXHIBIT I-1
FORM OF LETTER OF CREDIT FOR LIQUIDATED DAMAGES
Exhibit I-1
B A N K G U A R A N T E E
THIS BANK GUARANTEE is given on the ___ day of _________, 1996
BY
THE EXPORT-IMPORT BANK OF CHINA (the "Guarantor")
of 75 Chong Nei Street, Beijing 10005, China
IN FAVOUR OF
TANGSHAN PANDA HEAT AND POWER CO., LTD. ("Panda"), of West
Guyiaying, Bencheng, Luannan County, Hebei Province, China
and TANGSHAN PAN-WESTERN HEAT AND POWR CO., LTD. ("Pan-
Western"), of Chong Dajie, Bencheng, Luannan County, Hebei
Province, China (both Panda and Pan-Western hereinafter
collectively the "Owner", or alternatively the "Creditor")
and Jefferies & Co., trustee or the issuer of the bond (the
"Permitted Assignee").
WHEREAS:
(a) By a Contract for the Engineering, Procurement and
Construction of the Project in Luannan County, Hebei
Province (the "EPC Contract") dated as of April 24, 1996
between the Owner and Harbin Power Engineering Company
Limited (the "Contractor"), the Contractor shall provide an
irrevocable, unconditional bank guarantee with joint and
several liability from a financial institution acceptable to
Owner in an amount equal to thirty-five percent (35%) of the
Contract Price (subject to increase or decrease under
Article 6.1 of the EPC Contract in case of change orders),
and the Guarantor, upon request by the Contractor, agrees to
provide such Guarantee for the Contractor in favour of the
Owner and its Permitted Assignee;
(b) It is a condition precedent to the Owner's obligation under
the EPC Contract to employ the Contractor or to continue
such employment anytime during the term of the EPC Contract
that the Guarantor enters into this Bank Guarantee in favour
of the Owner and its Permitted Assignee of such 35% of the
Contract Price (subject to increase or decrease under
Article 6.1 of the EPC Contract in case of change orders).
NOW THEREFORE, THIS BANK GUARANTEE WITNESSETH as follows:
1. Unless otherwise defined herein, all capitalised terms used
herein shall have the same meanings set forth in the EPC
Contract.
2. This Bank Guarantee shall be issued at the initial Project
Funding, and shall automatically become effective upon
written acceptance by the Owner, without any further action
or confirmation by the Guarantor or the Contractor. This
Bank Guarantee shall be a continuing guarantee remaining in
full force and effect until six (6) months after Owner's
acceptance of Commercial Operation Date of the Plant as
defined in Article 10.7 of the EPC Contract.
3. This is an irrevocable and unconditional guarantee issued by
the Guarantor, whereby the Guarantor, as primary obligor,
and not merely as guarantor under an ordinary guarantee,
shall assume joint and several liability with the Contractor
as if it were the sole principal debtor for the thirty-five
percent (35%) of the Contract Price (subject to increase or
decrease under Article 6.1 of the EPC Contract in case of
change orders), namely U.S. $22,269,041.20 (United Stated
Dollars Twenty-Two Million Two Hundred Sixty-Nine Thousand
Forty-0ne And Cents Twenty Only) (the "Guaranteed Amount").
Should there be an increase or decrease of the Contract
Price pursuant to Article 6.1 of the EPC Contract, the
Guaranteed Amount shall be adjusted accordingly upon written
notice from the Owner to the Guarantor.
4. Under this Bank Guarantee, the Owner and its Permitted
Assignee are hereby granted with unconditional rights, to
make multiple drawings from time to time for damages,
compensation, indemnities or otherwise under Articles 12,
13, 15, and 16 of the EPC Contract or for any other purpose
related to the Contractor's obligations thereunder and
specified in the draw certificate up to an aggregate amount
not to exceed the Guaranteed Amount, upon presentation of a
Creditor's Certificate [as per Exhibit A] and a Draft [as
per the form of the attached Exhibit B] bearing the original
handwritten signatures of two purportedly authorized
officers of the Owner in confirmance with the specimen
signatures of such officers [as per Exhibit C] (which may be
replaced or re-designated form time to time by the Owner
upon written notice to the Guarantor) and each such drawing
shall reduce the cumulative amount of the Guaranteed Amount
of a dollar-for-dollar basis.
5. Under this Bank Guarantee, the Guarantor is hereby committed
to honour such Draft accompanied by such Creditor's
Certificate immediately upon presentation (with a grace
period of ten (10) business days), and the Owner shall not
be required to exercise its recourse against the Contractor
first or to exhaust its remedies against the Contractor
first before being entitled to demand payment from the
Guarantor. In particular, the Guarantor shall not be
permitted hereunder to raise any contractual defense by the
Contractor under the EPC Contract, but shall honour its
obligations hereunder as an indebtedness independent of the
EPC Contract or any obligations of the Contractor
thereunder.
6. This Bank Guarantee is not transferable by either the
Guarantor or the Owner, except upon delivery to the
Guarantor of a completed transfer certificate, signed by the
authorized signatories of the Owner and counter-signed by an
authorized signatory of the Permitted Assignee. This
Guarantee shall be binding on the Guarantor and its
successors and shall inure to the benefit of the Owner and
its Permitted Assignee.
7. The obligations of the Guarantor hereunder shall not be
discharged by anything which would not discharge it or
affect its liability as if it were the sole principal debtor
in the case of (i) any time, grace, indulgence, waiver or
consent at any time given to the Contract, (ii) any
amendment to any clause of the EPC Contract, provided that
any amendment to the EPC Contract which involves the
Guarantor's assuming greater obligation for the Guaranteed
Amount (with the exception of any increase of such amount
pursuant to Article 6.1 in the case of change orders) will
require the prior written consent of the Guarantor, (iii)
any failure or delay in the enforcement or release of any
rights of or under the EPC Contract or any other related
documents thereto. Without limiting any other provisions of
this Bank Guarantee, the Guarantor acknowledges and agrees
that it will remain liable hereunder notwithstanding that
the Contractor may cease to exit or for any other reason the
Owner may no longer be able to deal with the Contractor.
8. The Guarantor hereby represents and warrants to the Owner
and its Permitted Assignee as follows:
(a) The Guarantor is a state-owned sole propritory bank
organised and validly existing under the laws of the
People's Republic of China and has full power,
authority and legal capacity to execute and delivery
this Bank Guarantee and to assume and perform the
obligations provided for herein;
(b) The Guarantor has taken all appropriate and necessary
legal actions to authorize the execution, delivery and
performance of this Bank Guarantee;
(c) This Bank Guarantee constitutes a legal, valid and
binding obligation of the Guarantor enforceable in
accordance with its terms;
(d) The obligations of the Guarantor hereunder rank and
will rank at least pari passu in priority of payment
and in all other respects with all other unsecured
indebtedness of the Guarantor.
(e) The Guarantor shall supply to the Owner and its
Permitted Assignee as soon as they are available copies
of the annual financial statements of the Guarantor.
9. This Bank Guarantee is a commercial act of the Guarantor in
relation to a commercial transaction and all obligations of
the Guarantor arising under this Bank Guarantee are
commercial in nature. The Guarantor hereby irrevocably
agrees not to raise any claim of immunity (if any) from
suit, attachment or execution in respect of any claims which
may be made against it at any time concerning its
obligations under this Bank Guarantee.
10. Any notice to or Draft accompanied by a Creditor's
Certificate drawn on the Guarantor from the Owner or its
Permitted Assignee must be in written form, delivered to the
Guarantor at the following address (or any new address
designated by the Guarantor in writing duly notified to the
Owner or its Permitted Assignee in future) in the following
manner.
(a) Method of delivery: (i) personally delivered, (ii)
transmitted by postage prepaid registered mail (airmail
if international), and (iii) transmitted by
internationally recognized courier service, or (iv)
transmitted by telex or facsimile (with postage prepaid
mail confirmation).
(b) Address of Guarantor:
75 Chong Nei Street
Beijing 100005
the People's Republic of China
Telex No.: 210292
Answerback: EXIM CN
Fax No.: 86-10-6523,6641
Attention: Insurance Department
IN WITNESS WHEREOF the undersigned Guarantor has executed this
Bank Guarantee by its duly authorised officer the day and
year first above written.
THE EXPORT-IMPORT BANK OF CHINA
By:
Name:
Title:
Exhibit A: Creditor's Certificate
We hereby certify that the attached draft represents the amount
which Creditor has the unconditional right to draw pursuant to that certain
Contract for the Engineering, Procurement and Construction dated as of
_______, 1996 (the "EPC Contract") relating to Creditor's project located in
Luannan County, Hebei Province, the People's Republic of China under [specify
appropriate Article of the EPC Contract].
EXHIBIT B: Form of Draft
[Reference Number] [Place and Date of Issue]
D R A F T
Pay unconditionally to the order of [name of Creditor] immediately upon
presentation the amount of the United States Dollars [amount in numbers
and also in words], drawn under a Bank guarantee [dated , 1996]
issued by [name of bank] in favour of the [name of Creditor].
To: [name of Bank] For and on behalf of:
[address of Bank] [name of Creditor]
[insert authorized signature 1]
[insert authorized signature 2]
Exhibit C: Specimen signatures of authorized signatures of
the Creditor
Name:
Title:
Signature:
Name:
Title:
Signature:
EXHIBIT I-2
FORM OF LETTER OF CREDIT FOR RETAINAGE
[FORM OF LETTER OF CREDIT]
Irrevocable Documentary Letter of Credit Number:
Issuing Bank:
Advising Bank:
Beneficiary:
Applicant:
Amount: United States Dollars
Available With:
Available By:
We hereby issue this irrevocable documentary credit in favor of
the above-named Beneficiary, which is available by acceptance of
your draft(s) drawn on us marked "drawn under [BANK DESIGNATION]
documentary credit number [ ], accompanied by:
1. A Beneficiary Certificate stating: "We hereby certify
that the attached draft represents the amount which
Beneficiary has the unconditional right to draw
pursuant to that certain Contract for the Engineering,
Procurement and Construction dated as of ,
1996 (the "Contract") relating to Beneficiary's project
located in Luannan County, Hebei Province, People's
Republic of China under Article [SPECIFY APPROPRIATE
ARTICLE OF CONTRACT]."
2. Multiple drawings may be made under this Letter of
Credit and each such drawing shall reduce the
cumulative amount on a dollar-for-dollar basis.
3. Each Draft and Beneficiary Certificate must bear: (a)
the original handwritten signatures of two purportedly
authorized officers of the beneficiary in conformance
with the specimen signatures of such officers contained
in Exhibit A.
4. Each Draft must be in the form of the attached Exhibit B.
5. Presentations of the Beneficiary Certificate and each
Draft shall be made at our office located at [ ],
by physical delivery. All drafts drawn in conformity with
the terms of this Letter of Credit will be duly honored
immediately upon presentation. If any demand for payment
does not confirm to the terms of this Letter of Credit, we
shall give Beneficiary prompt, written notice of the reason(s)
for the non-conformity, and provide Beneficiary an opportunity
to correct any such non-conformity.
6. Communications concerning this Letter of Credit shall
be addressed to Bank at [ ].
7. Communications concerning this Letter of Credit shall
be addressed to Beneficiary at [ ].
8. This Letter of Credit shall expire at the close of
business on [ ], but such expiration date
shall be automatically extended for a period of one (1)
year from the original or each future expiration date,
unless notice to Beneficiary is provided not less than
thirty (30) days prior to any such expiration date, by
telephone and by registered mail at the above address,
that this Letter of Credit shall not be extended beyond
the expiration date. In any such event, Beneficiary's
Certificate shall only state: "Beneficiary is drawing
the entirety of the amount available to be drawn
hereunder due to non-renewal of the Letter of Credit,
and to be applied in accordance with the terms of the
Contract."
Notwithstanding the foregoing, this Letter of Credit
shall be cancelled at any time prior to its then-
applicable expiration date upon Beneficiary's return to
us of the original Letter of Credit, with a request
that it be cancelled.
9. It is a condition of this Letter of Credit that this
Letter of Credit may be amended (a) to extend the
expiration date, or (b) to increase the Available
Amount, upon the written advice of Applicant, with a
copy to Beneficiary and subject to concurrence by
Issuer, but shall not be otherwise amended except with
the written concurrence of Beneficiary.
10. This Letter of Credit shall be governed, except so far
as otherwise expressly stated, by the Uniform Customs
and Practice for Documentary Credit (1993 Revision),
International Chamber of Commerce Publication No. 500.
[AUTHORIZED BANK SIGNATURE]
EXHIBIT B
FORM OF DRAFT
[REFERENCE NUMBER] [PLACE, DATE]
Pay to the Order of [BENEFICIARY] on [DATE] THE AMOUNT OF United
States Dollars [AMOUNT IN NUMBERS AND WORDS], drawn in terms of
documentary credit [REFERENCE NUMBER] issued by [NAME OF BANK].
To: [NAME OF BANK] For and on behalf of:
[ADDRESS OF BANK] [NAME OF BENEFICIARY]
[INSERT AUTHORIZED SIGNATURE 1]
[INSERT AUTHORIZED SIGNATURE 2]
EXHIBIT I-3
FORM OF PARENT GUARANTEE
GUARANTY
This Guaranty is executed as of , 1996.
R E C I T A L S
1. China Harbin Power Equipment Group Company, a Chinese
company with its principal place of business located at 45
Xusheng Street, Post Code 150046, Dongli District Harbin, China,
is the parent corporation of Harbin Power Engineering Company,
Ltd. (the "Contractor"). Contractor and Tangshan Panda Heat and
Power Co., Ltd., a Chinese Joint Venture Company with offices at
Cheng Guan, Luannan County, Tangshan City, Hebei Province 063500,
People's Republic of China, and Tangshan Pan-Western Heat and
Power Co., Ltd., a Chinese Joint Venture Company, with offices at
Cheng Guan, Luannan County, Tangshan City, Hebei Province 063500,
People's Republic of China (together the "Companies") entered
into that certain Engineering, Procurement and Construction
Agreement, dated as of (the "EPC Contract").
2. Pursuant to the terms of the EPC Contract, Contractor
is to provide engineering, procurement and construction services
relating to the Companies' Luannan County 2x50 MW Thermal Power
Plant Project, in Luannan County, Hebei Province, People's
Republic of China. As a consequence of providing the services
and guaranties required pursuant to the EPC Contract, Contractor
may become indebted to the Companies;
NOW THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the undersigned (the
"Guarantor") hereby irrevocably and unconditionally guarantees to
the Companies the prompt payment of the Guaranteed Indebtedness
(hereinafter defined) in accordance with the terms of this
Guaranty, being upon the following terms:
1. The term "Guaranteed Indebtedness," as used herein,
means all liabilities and obligations of the Contractor
(including, without limitation, the obligation of the Contractor
to pay liquidated damages and other performance or delay costs
that may be incurred pursuant to the EPC Contract, together with
interest thereon and at the rates designated in the EPC Contract,
and attorneys' fees incurred in connection with the collection
thereof under the EPC Contract or this Guaranty) arising in
connection with the EPC Contract (as the same may be amended from
time-to-time, with or without notice to the Guarantor.
2. This instrument shall be irrevocable, absolute and a
continuing guaranty on payment (and not merely of collection),
and the Guarantor shall remain liable on its obligations
hereunder until the payment in full of its Guaranteed
Indebtedness.
3. If Guarantor becomes liable for any indebtedness owing
by the Contractor to the companies, by endorsement or otherwise,
other than under this Guaranty, such liability shall not be in a
any manner impaired or affected hereby, and the rights of the
Companies hereunder shall be cumulative of any and all other
rights that the Companies may ever have against the Guarantor.
The exercise by the Companies of any rights hereunder or under
any other instrument, or at law or in equity, shall not preclude
the concurrent or subsequent exercise of any other rights.
4. In the event of any failure to pay or default by the
Contractor in payment of the Guaranteed Indebtedness, or any part
thereof, when such indebtedness becomes due, either by its terms
or as the result of exercise of any power to accelerate, the
guarantor shall, on demand by the Companies (or either of them)
and without further notice, without notice having been given to
the Contractor previous to such demand, of the acceptance by the
Companies (or either of them) of this Guaranty, and without any
notice having been given to the Guarantor previous to such demand
of the creating or incurring of such indebtedness, pay the amount
due thereon to the Companies, and it shall not be necessary for
the Companies, in order to enforce such payment by the Guarantor,
first to institute suit or exhaust its rights against the
Contractor or others liable on such indebtedness.
5. The Guarantor hereby agrees that its obligations under
the terms of this Guaranty shall not be released, diminished or
affected for any reason including, without limitation, the
occurrence of any one or more of the following events: (a) the
taking or accepting of any other security or guaranty for any or
all of the Guaranteed Indebtedness; (b) any release, surrender,
exchange, subordination, non-perfection or loss of any other
security or guaranty at any time existing in connection with any
or all of the Guaranteed Indebtedness; (c) any partial or
complete release of the liability of any Person (other than the
Contractor) at any time liable for the payment of any or all of
the Guaranteed Indebtedness (a "Guarantor"); (d) the insolvency,
bankruptcy, or lack of corporate power of the Contractor or any
Guarantor, whether now existing or hereafter occurring; (e) any
renewal, extension, and/or rearrangement of the payment of any or
all of the Guaranteed Indebtedness, either with or without notice
to or consent of the Guarantor, or any adjustment, indulgence,
forbearance, or compromise that may be granted or given by the
Companies to Contractor, Guarantor or any other guarantor; (f)
any neglect, delay, omission, failure or refusal of the Companies
(or either of them) to take or prosecute any action for the
collection of any of the Guaranteed Indebtedness or to take or
prosecute any action in connection with any instrument or
agreement evidencing or securing all or any part of the
Guaranteed Indebtedness; (g) any failure by the Companies (or
either of them) to notify Guarantor of any renewal, extension, or
assignment of the Guaranteed Indebtedness or any part thereof, or
the release of any security or of any other action taken or
refrained from being taken by the Companies against the
Contractor, or any new agreement between the Companies and the
Contractor, it being understood that the Companies shall not be
required to give the Guarantor any notice of any kind under any
circumstances whatsoever with respect to or in connection with
the Guaranteed Indebtedness; (h) the unenforceability of all or
any part of the Guaranteed Indebtedness against the Contractor by
reason of the fact that the Guaranteed Indebtedness exceeds the
amount permitted by law, the act of creating the Guaranteed
Indebtedness, or any part thereof, is ultra vires (outside the
scope of authority by the person creating the same), or that the
officers creating the same acted in excess of their authority or
for any reason whatsoever; (i) the fact that the outstanding
principal balance under the EPC Contract may from time to time be
zero; (j) if for any reason the Companies shall be required to
refund such payment or pay the amount thereof to someone else;
(k) any amendment of the EPC contract or any collateral document
pursuant to which the Guaranteed Indebtedness is created; (l) any
extension of time for performance of any covenant or condition is
effected; or (m) the waiver of performance under the EPC Contract
or failure or omission to enforce any right thereunder.
6. This Guaranty is for the benefit of each of the
Companies and their respective successors and assigns, and in the
event of an assignment of the guaranteed Indebtedness, or any
part thereof, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty is binding not only on the
Guarantor, but on the Guarantor's successors and assigns, and, if
this Guaranty is signed by more than one Person, then all of the
obligations of each Guarantor arising herein shall be jointly and
severally binding on all Guarantors, and their respective
successors and assigns, provided that, without the prior written
consent of the Companies no Guarantor may assign any of its
rights or obligations hereunder to any other Person.
7. The Guarantor represents and warrants that the value of
the consideration received and to be received by the Guarantor is
reasonably worth at least as much as the liability and obligation
of the Guarantor hereunder, and such liability and obligation may
reasonably be expected to benefit the guarantor directly or
indirectly.
8. By execution hereof, the Guarantor covenants and agrees
that the terms, representations, warranties, covenants and
conditions set forth in the EPC Contract (as amended from time to
time) shall be imposed upon the Guarantor, and the Guarantor
makes and confirms such representations and warranties and
covenants and agrees to promptly and properly perform, observe
and comply with each such term, covenant or condition. All of
the terms, representations, warranties, covenants, conditions,
and provisions of the EPC Contract (as amended from time to time)
are incorporated herein by reference, to the same extent as if
stated verbatim herein, and all terms defined in the EPC Contract
(as amended from time to time) shall have the same meaning
herein, unless specifically defined otherwise herein.
9. The Guarantor covenants and agrees that it will not
assert any rights arising from payment or other performance
hereunder until all of the Guarantor's liability hereunder shall
have been discharged in full and all of the Guaranteed
Indebtedness existing at the time of such discharge shall have
been paid and performed in full.
10. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire,
telecopy or similar writing) and shall be given to such party at
its address or telex number set forth on the signature page
hereof (or if to the Companies, at their addresses or telecopy
numbers set forth in the EPC Contract) or such other address or
telecopy number as such party may hereafter specify for such
purpose by notice to the other party. Each such notice, request
or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy
number specified herein and the appropriate answerback received,
(ii) if given by mail, then upon actual acknowledged written
receipt, prepaid addressed as aforesaid, or (iii) if given by any
other means, when delivered at the address specified in this
paragraph.
11. Upon the occurrence and during the continuance of any
"Event of Default" (as defined in the EPC Contract) the Companies
(or either of them) are hereby authorized at any time and from
time to time, to the fullest extent permitted to set off and
apply any and all other funds paid to and held or at any time
owing by the Companies to or for the credit or the account of the
Guarantor now or hereafter existing under this Guaranty or the
EPC Contract and although such obligations may be unmatured. The
Companies agree promptly to notify the Guarantor after any such
set-off and application made, provided that the failure to give
such notice shall not affect the validity of such set-off and
applications. The rights of the Companies under this paragraph
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Companies may
have.
12. The Guarantor will promptly upon demand pay to the
Companies the amount of any and all reasonable out-of-pocket
expenses, including, without limitation, the reasonable fees and
disbursements of counsel and of any agents or experts, which the
Companies (or either of them) may incur in connection with the
(i) administration of this Guaranty, (ii) the exercise by the
Bank of any of the rights confined upon it hereunder, or (iii)
any default on the part of the Guarantor hereunder.
13. This Guaranty shall be governed by and construed in
accordance with the laws of___________________.
EXECUTED as of the day and year first above written.
GUARANTOR
By:
Name:
Title:
Address:
EXHIBIT J
FORM OF CERTIFICATE FOR WAIVER OF LIENS
WHEREAS, a Subcontractor identified as No. _________ was entered
into the day of , 199__, by , a
corporation organized and existing under the laws of the State of
__________________, hereinafter referred to as the "CONTRACTOR" and
____________________________________________________________
hereinafter referred to as the "SUBCONTRACTOR"; and
WHEREAS, the CONTRACTOR had, prior thereto, to with, on the ___
day of , 199_, entered into a Contract with
____________________________________________________________
hereinafter referred as the "OWNER" for the construction of
____________________________________________________________
WHEREAS, the parties, by such Subcontractor have agreed that the
SUBCONTRACTOR would, for and in the stead of the CONTRACTOR,
fulfill and perform each part of said contract as is set forth in
said Subcontract in the amount of , and in Change Order
numbered to said Subcontract in the amount of ($ ).
Now, THEREFORE, SUBCONTRACTOR, for and in consideration of a
payment made herewith in the sum of ______________________ DOLLARS
($ ), does for itself, its successors, heirs and assignees,
here state, affirm and agree that, with respect to all of such work performed
to date and for which payment has been made or is being made
pursuant to this Partial Waiver and Release, except as identified
below in paragraph 3:
1. All labor employed thereon or in connection therewith
and all payroll taxes and charges (such as withholding
taxes, social security taxes and worker's compensation,
disability and unemployment taxes and/or insurance
premiums) have been paid in full; and
2. All materials, tools, equipment, supplies and services
furnished and used upon or in connection with said work
have been paid for in full; and all sales, use, excise
and similar taxes on or in connection with the same
have been fully paid; and
3. Upon receipt by the undersigned of a check from the
CONTRACTOR in the above amount, payable to the
undersigned, and when the check has been paid, this
document shall become effective to release and forever
discharge the CONTRACTOR AND OWNER and their respective
officers, directors, agents, servants and employees,
and all lands, improvement, chattels, and other real
and personal property connections with or a part of
said project from any and all claims, demands, liens
and claims of lien whatsoever arising out of the
performance of all work for which payment has been made
which it now has or hereafter might, or could have
except for the following:
(If there are no exceptions, write "None in the
following space):
Before any recipient of this document relies upon it,
he should verify evidence of a payment to
SUBCONTRACTOR; and
4. Except as provided in paragraph 3 above, SUBCONTRACTOR
warrants that it has completed all work performed to
date as required under the above-identified
Subcontractor and all charges and amendments thereto,
if any; and that it has complied with all the terms and
conditions of said Subcontractor; and
5. SUBCONTRACTOR will, at its sole cost and expense,
forever defend and hold harmless CONTRACTOR AND OWNER
from any and all claim and demands and will defend
against and obtain the discharge of any and all liens
and claims of liens of others arising out of or in
connection with said work, including, without
limitation, those claimed or asserted by an employee,
supplier or subcontractor of the SUBCONTRACTOR (or by
an employee or supplier of any subcontractor of the
undersigned) or by any governmental agency or an
insurance carrier; and
6. In the event that any of the work performed by the
SUBCONTRACTOR on the said project (including the
materials used incorporated therein and the workmanship
thereof) is the subject of any guarantee or warranty by
the undersigned, the giving of this Release and Waiver
of Lien by the Under signed shall not operate in any
way to reduce or modify such guarantee or warranty or
to release the undersigned therefrom. SUBCONTRACTOR
further agrees that if it hereafter performs any labor
or furnishes any materials, tools, equipment, supplies
or services pursuant to such guarantee or warranty, it
will fully paid for the same, will pay any or all taxes
and charges in connection therewith and will release,
discharge, defend and hold harmless CONTRACTOR AND
OWNER, and the said all lands, improvement, chattels,
and other real and personal property from any and all
claims, demands, liens and claims of lien arising in
connection therewith all in like manner and to the same
extent as is herein provided with respect to labor,
materials, etc., heretofore furnished. This Partial
Release and Waiver of Lien shall inure to the benefit
of CONTRACTOR AND OWNER and their respective successors
and assigns and shall be binding upon the undersigned
SUBCONTRACTOR and its or their successors, heirs and
assigns.
7. The work covered by this Partial Release and Partial
Waiver of Lien includes all work for which payment has
been received.
Dated this ____ day of __________, 19__ at _________.
Subcontractor: COMPANY CHOP
_________________
By:
Title:
Dated:
EXHIBIT K
TIME, MATERIAL AND EQUIPMENT RATE SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT.
MEMORANDUM
[Amendment No. 1 to EPC Contract]
1. Since the preliminary design hearing was just completed on July 4,
1996, the Tangshan Panda Heat & Power Co., Ltd. and Tangshan Pan-
Western Heat & Co., Ltd. (hereafter collectively referred to as Owner)
may not achieve financing of the Luannan Project by August 1, 1996.
The Owner requests Harbin Power Engineering Co., Ltd.
(hereafterreferred to as Contractor) to extend the EPC price
effectiveness date to September 15, 1996. The Contractor expresses his
understanding and agrees not to change the EPC contract price before
September 15, 1996.
2. The Owner agrees to pay 420,000 RMB Yuan for the test-pile 20,
1996 and such amount of money will not be a part of the EPC contract
price.
Tangshan Panda Heat & Power Harbin Power Engineering
Co., Ltd. Co., Ltd.
______________________________ _____________________________
Darol Lindloff Zhang Wei-Zhou
General Manager Contractor's Representative
Tangshan Pan-Western Heat
& Power Co., Ltd.
______________________________
Darol Lindloff
General Manager
July 5, 1996
AGREEMENT
[EPC Amendment #2]
THIS AGREEMENT (the "Agreement") is executed this 14th day
of September, 1996, by and between Tangshan Panda Heat and Power
Company, Ltd. and Tangshan Pan-Western Heat and Power Company
Limited, both of which are Sino-foreign equity joint venture
companies (collectively referred to herein as the "Owner"), and
Harbin Power Engineering Company Limited ("Harbin").
RECITALS:
1. Owner and Harbin are parties to a certain Engineering,
Procurement and Construction Contract dated April 24, 1996
the"EPC Contract").
2. The EPC Contract includes a turnkey fixed price payment due
to Harbin (upon performance in accordance with the EPC
Contract) in the amount of US $ 63,625,832 ( "Original
Contract Price").
3. The Original Contract Price is required to be paid in
accordance with the terms of the EPC Contract and according to
the terms of the EPC Contract was initially effective through
August 1, 1996.
4. By Memorandum dated July 5,1996, Owner and Harbin agreed to
extend the effective date of the Original Contract Price to
September 15, 1996.
5. Owner and Harbin now wish to provide for the escalation of
the Original Contract Price, as provided below.
6. Terms that have their original letter capitalized herein,
have the same meaning as given thereto in the EPC Contract
unless they are defined in this Agreement.
NOW THEREFORE, based upon the mutual benefits to be derived
by the Owner and Harbin as a result of this Agreement, Owner and
Harbin hereby agree as follows:
AGREEMENT:
1. In the event that the Notice to Proceed is not given prior
to September 16, 1996, the Original Contract Price shall
escalate at the pro-rated rate of 0.5% (five-tenths of one
percent) per month, calculated on a daily basis and without
compounding, up through and including December 31, 1996 such
that the "New Contract Price" at December 31, 1996 would be
US $64,739,284 (or the lesser pro-rated amount, calculated
daily and without compounding, as of any date prior thereto
on which Notice to Proceed is actually given). The "New
Contract Price" as used herein shall mean the calculated
escalated price at the date the Notice to Proceed is given.
2. In the event that the Notice to Proceed is not given prior
to January 1, 1997, then beginning as of such date, the
Original Contract Price as adjusted for escalation through
December 31, 1996 (US$64,739,284) shall escalate at the pro-
rated rate of 1.2% (one and two tenths of one percent) per
month, calculated on a daily basis and without compounding
from that date until the Notice to Proceed is issued.
3. This Agreement shall constitute a Change under the EPC
Contract and upon issuance of the Notice to Proceed and
determination of the New Contract Price a Change Order shall be
executed by Owner and Harbin to reflect the New Contract Price as
provided herein.
4. In all other respects the terms and conditions of the EPC
Contract are hereby affirmed.
This Agreement is executed by the persons designated below, being
the duly authorized representatives of Owner and Harbin,
respectively, as of the day and year first above written.
TANGSHAN PANDA HEAT HARBIN ENGINEERING
AND POWER COMPANY, LTD. COMPANY LIMITED
_____________________________ ________________________
By: J.Kyle Woodruff, By:
Owner's Representative
TANGSHAN PAN-WESTERN HEAT
AND POWER COMPANY, LTD.
_____________________________
By: J. Kyle Woodruff,
Owner's Representative
This shall acknowledge the discussions and agreement of the below
named parties on September 14, 1996 wherein Tangshan Panda Heat
and Power Company, LTD and Tangshan Pan-Western Heat and Power
Company Limited (collectively referred to herein as the"Owner")
and Harbin Power Engineering Company Limited ("Contractor")
agreed and do hereby agree as follows:
The Bid Security issued in favor of the Owner at the request
Harbin and utilized as security for Contractor's performance
under that certain Engineering, Procurement and Construction
Contract dated April 24,1996 between Owner and Contractor (the
"EPC Contract") shall be extended by Contractor to be effective
until January 1,1997 and evidence of such extension shall be
immediately delivered to the Owner.
Contractor shall cause EXIM Bank to execute its Guaranty as
required under the EPC Contract prior to October 1, 1996 and
immediately furnish a copy thereof to the Owner. Contractor
further represents that said Guaranty will be provided to Owner
in New York City, New York USA (or at such other place as Owner
may direct it to be delivered by written notice) upon receipt of
notice from Owner that the original copy thereof is required due
to its intent to close financing in at least two weeks.
HARBIN POWER AND ENGINEERING COMPANY
_______________________
BY: MR. ZHANG WEIZHOU
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
_______________________
BY: J. KYLE WOODRUFF,
OWNER'S REPRESENTATIVE
TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY LIMITED
_______________________
BY: J. KYLE WOODRUFF,
OWNER'S REPRESENTATIVE
Amendment No.3
Engineering. Procurement and Construction Contract
Among
Tangshan Panda Heat and Power Co., Ltd.
Tangshan Pan-Western Heat and Power Co., Ltd.
And
Harbin Power Engineering Company Limited
This amendment No. 3 ("Amendment No. 3) to that certain
Engineering, Procurement and Construction Contract dated April
24, 1996 (the "EPC Contract") by and between Tangshan Panda Heat
and Power Co., Ltd. and Tanghshan Pan-Western Heat and Power Co.,
Ltd both of which are Sino-foreign equity joint venture companies
(collectively, the "Owner") and Harbin Power Engineering Company
Limited, ("Harbin"), a company formed pursuant to the laws of the
People's Republic of China (the "PRC") is made as of the 17th day
of December, 1996. Each of the Owner and Harbin may be referred
to herein as a "Party" or collectively as the "Parties".
RECITALS:
1. The EPC Contract was entered by the Parties to set forth the
terms and conditions pursuant to which Harbin would provide its
services to the Owner relating to that certain 2X50 MW coalfired
power generation facility to be constructed in Luannan County,
Tangshan City, Hebei Province, PRC.
2. The EPC Contract provided for a fixed price turnkey payment
to Harbin (upon its performance in accordance with the terms of
the EPC Contract) in the amount of US $63,625,832 (the "Original
Contract Price"). The Original Contract Price was initially
effective through August 1, 1996.
3. By Memorandum dated July 5, 1996 ("Amendment No.1") the EPC
Contract was amended to extend the fixed price payment
established under the EPC Contract to September 15, 1996.
4. By Agreement dated September 14, 1996 ("Amendment No.2") the
Parties provided for a prorata escalation in the Original
Contract Price of 0.5% (five-tenths of one percent) per month, to
be calculated on a daily basis without compounding. The Original
Contract Price as escalated pursuant to Amendment No. 2 and
determined as of December 31, 1996 is US$ 64, 739,284 and shall
be referred to herein as the "New Contract Price".
5. The Owner gave notice to Harbin of their willingness to
provide this limited notice to proceed conditioned upon the
willingness of Harbin to deliver the Bank Guarantee described in
Section 3.30 of the EPC Contract. It is intended, pursuant to
this Amendment No.3 that the Owner will advance to Harbin (upon
receipt by the Owner of additional "Bank Security", in form and
substance and from a financial institution acceptable to the
Owner additional security (the "Bank Security") to secure that
the Bank Guarantee will not be revoked prior to the date
stipulated in the form of Attachment I) certain monies to allow
Harbin to begin to perform certain work under the EPC Contract.
The Bank Security shall be furnished in the form of Attachment I.
6. The Owner and Harbin wish to enter into this Amendment No. 3
to evidence their further agreement relating to the matters
described herein.
7. Terms that have their initial letter capitalized herein,
have the same meaning as given thereto in the EPC Contract unless
such term is defined differently herein.
AGREEMENT:
NOW THEREFORE, based upon the mutual benefits to be derived
by the Owner and Harbin as a result of this Amendment No.3 and in
the interest of cooperation, the Owner and Harbin agree as
follows:
1. The representations set forth in the above Recital No. 1
through No. 7 are hereby confirmed and agreed to be true and
correct, as if restated in their entirety hereunder, and
constitute the agreement of the Owner and Harbin to the matters
set forth in such representations.
2. The New Contract Price is confirmed and agreed by the
Parties to be US$64,739,284. Said New Contract Price shall
constitute the "Contract Price" for all purposes under the EPC
Contract and shall not be subject to any additional escalation
under the provisions of Amendment No.2. after December 31, 1996
unless Notice to Proceed is given after May 1, 1997 or Owner
fails to perform its obligations under Section 7(f) below, in
which event the terms of escalation provided in said Amendment
No.2 shall be applied retroactively to January 1, 1997.
Notwithstanding anything herein to the contrary, in the event
that Harbin has not furnished a fully effective (in accordance
with its terms) Bank Guarantee in accordance with this Amendment
No.3, Harbin shall not be entitled to any schedule or cost relief
under the EPC Contract. This Performance Security shall not be
revoked by Harbin or the issuer thereof prior to its
effectiveness.
3. Following the execution hereof and following receipt of the
Bank Security, Owner shall pay to Harbin the sum of US $2,000,000
in consideration of Harbin's work under this Amendment No.3 Owner
shall make an additional payment to Harbin of US $1,000,000 on or
before February 28, 1997. Owner shall make an additional payment
to Harbin of US $1,000,000 on or before March 31, 1997. All work
referred in this Amendment No.3 shall be performed in accordance
with the requirements of the EPC Contract and shall be subject to
the conditions stated therin. Notwithstanding the above, no
further payments shall be made hereunder effective immediately
upon issuance of the Notice to Proceed under the EPC Contract and
all further work shall be performed in accordance with the
requirements of the EPC Contract.
4. The sums paid under Section 3, immediately above shall be
credited against the New Contract Price and the down payment
under the EPC Contract, In addition, Owner shall receive a credit
against the New Contract Price for the amount determined to be
attributable to insurance that was to have been provided by
Harbin pursuant to Article IV of the EPC Contract, but that will
now be provided by the Owner (as described in the letter dated
April 22, 1996), and against the Down Payment in the amount of US
$159,665 (which is the sum attributable to payment made to the
Hebei Design Institute by the Owner at the request of Harbin)such
5. That the Down Payment shall be 10% of the New Contract
Price, as adjusted for Owner provided insurance,(less retainage)
minus the amounts paid through the date of the Notice to Proceed.
6. In the event that Notice to Proceed is given under the EPC
Contract prior to February 22, 1997 a Change Order will be
executed that will provide for an additional 30 days under the
Construction Schedule. In the event that Notice to Proceed is
given on or after February 22, 1997 there shall be no change to
the Construction Schedule that currently exists in the EPC
Contract. In the event that the Notice to Proceed is not given
prior to May 1, 1997, the EPC Contract (and this Amendment No.3)
shall terminate and the Contractor shall have the remedies
provided to it under Section 15.2.2. of the EPC Contract.
7. The first sentence of Section 3.30 of the EPC Contract will
be restated in its entirety to read as follows: "Prior to
Financial Closing, Contractor shall provide to Owner a Bank
Guarantee (which shall automatically become effective at the
initial Project Funding) issued in the form attached hereto as
Exhibit I-1(REVISED) and from a financial institution acceptable
to Owner and Lender in their sole discretion ("Acceptable
Guarantor"), in an amount equal to the product of the Contract
Price (to be adjusted if the Contract Price changes)multiplied by
0.35 (the"Bank Guarantee")."
8. The requirements of the Owner to make any payment under this
Amendment No.3 are as follows:
a) The Bid Security shall immediately be extended to expire on
January 20, 1997;
b) Owner shall furnish its original formal business license to
the Guarantor, under the Bank Guarantee, for inspection, and
allow said Guarantor to retain a copy thereof for its records, by
December 26, 1996.
c) Subject to Section 7 (a) above the Bank Guarantee shall be
issued by The Export and Import Bank of China ("Eximbank") in the
form confirmed by Eximbank by letter to Mr. Cai Chunsheng dated
July 9, 1996 (as revised to reflect 35% of the New Contract
Prices as the new "Guaranteed Amount" thereunder).
d) The original Bank Guarantee, together with a duplicate
marked "Copy for Advising Bank", both duly executed and issued by
Eximbank shall be delivered to the firm of Cai, Zhang & Lan,
Attention: Mr. Cai Chunsheng. Harbin has previously made a formal
request that the Bank Guarantee be issued. The "Copy for Advising
Bank" copy of the Bank Guarantee shall be furnished to Owner
immediately upon receipt by Mr. Cai.
e) The original of the Bank Security, substantially in the form
attached as Attachment I hereto, shall be delivered to Owner at
the same time as the "Copy for Advising Bank" of the Bank
Guarantee.
f) Provided that the Bank Security has been furnished by Harbin
to the Owner, and following completion of the requirements of the
immediately preceeding sections (a),(b),(c) and (d), the initial
payment in Section 3 above shall be paid. Owner shall furnish a
copy of an instrument issued by the transferring bank showing
implementation of a wire transfer for said amount to Harbin
within three (3) business days and cause the payment to be
completed within fifteen (150 days. Such funds shall be paid to
the account of Harbin at: Harbin Power Engineering Co., Ltd.,
Bank of China, Harbin Branch, Dongli Subbranch, Address: No. 196
Minsheng Road, Dongli Dist. Harbin, Account No. 148240000008.
g) Owner shall cause a joint notice to be issued by Owner and
the initial Lender to the Project. This joint notice shall be
addressed to Mr. Cai Chunsheng and shall indicate the financial
closing is expected to occur within approximately two weeks from
the date of such notice and also provide the anticipated date of
initial Project Funding under the EPC Contract. Owner shall
provide a copy of said notice to the Guarantor and to Harbin at
the same time. Immediately upon receipt by Mr. Cai of this
notice, the original Bank Guarantee shall be delivered by Mr. Cai
to the Owner.
9. The Parties hereto agree to work cooperatively each with the
other to resolve all matters in reconciliation of the issues
presented under the Preliminary Design Approval and to resolve
all of such issues in a cost effective manner so long as such
reconciliation does not materially adversely effect the safety,
quality and operability of the Project and to otherwise comply
with the performance standards and requirements under PRC law, of
any Lender to the Project and any insure of the Project.
10. In all other respects, the terms and conditions of the EPC
Contract are hereby ratified and confirmed.
IN WITNESS WHEREOF, the Parties have caused this Amendment
No.3 to be executed by their duly authorized representatives,
effective as of the day and date first above written.
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
__________________________________________
BY: J. Kyle Woodruff
TITLE: Owner's Representative
TANHSHAN PAN-WESTERN HEAT AND POWER COMPANY LTD.
__________________________________________
BY: J. Kyle Woodruff
TITLE: Owner's Representative
HARBIN POWER ENGINEERING COMPANY LIMITED
__________________________________________
By:
Title: Contractor's Representative
[FORM OF OUR IRREVOCABLE LETTER OF GUARANTEE NO.]
To: Tangshan Panda Heat and Power., Ltd and
Tangshan Pan-Western Heat and Power Co., Ltd.
Ref: [ ]
Date: DEC 19,1996
Bank Security No.[ ] for turnkey construction of 2X50
MW (nameplate) coal-fired, cogeneration power plant in Luannan
County, Tangshan City, Hebei Province, People's Republic of China
(the"PRC").
This guarantee is hereby issued to serve as "Bank
Security" of Harbin Power Engineering Co., Ltd., No.45 Xushen St.
Dongli Dist., Harbin China (hereinafter called "Harbin")
For performance under that certain engineering, procurement and
construction contract, as amended,(the "EPC Contract") for thr
turnkey construction of a 2X50MW Coal-Fired, Cogeneration Power
Plant in Luannan County, Tangshan City, Hebei Provine, PRC, in
favor of Tangshan Panda Heat and Power Co., Ltd, and Tangshan Pan-
Western Heat and Power Co., Ltd (hereinafter called the "Owner").
Terms that have their initial letter capitalized herein shall
have the meaning given to that term in the EPC Contract (as
amended), unless that term is defined differently herein.
We,_______________________, on behalf of Harbin, hereby
unconditionally and irrevocably guarantees and binds itself, is
successors and assigns to pay Owner, immediately without
recourse, the aggregate sum of US $4,000,000 (Four Million United
States Dollars). The Preceeding amount is referred to hereunder
as a "Guaranteed Amount". The Guaranteed Amount shall be payable
immediately upon receipt of written notification from Owner
stating the following:
The Bank Guarantee was not provided in accordance
with Amendment No.3 or was revoked by the issuer
(or has otherwise not become effective) prior to
becoming effective pursuant to the terms of the
Bank Guarantee for any reason other than initial
Project Funding not occurring or the EPC Contract
and its Amendment No.3 are terminated by the Owner
on or before May 1, 1997.
It is fully understood that this Bank Security shall take effect
from the date when Harbin receives the first payment (i.e. US
$2,000,000) which is effected by the Owner according to the
Amendment No.3. The Guaranteed Amount under this Bank Security
shall be automatically increased with the amount received by
Harbin from Owner pursuant to the payment schedule in the
Amendment No.3. This Bank Guarantee shall remain valid for a
period ending the earlier of two (2) days following effectiveness
of the Bank Guarantee (in accordance with the terms thereof)
delivered pursuant to the EPC Contract, or May 2, 1997, or
through any period of extension hereof that may agreed upon
between Owner and Harbin with Notice to the Bank, or unless
sooner terminated or released by Owner.
Issued By:___________________________
EXHIBIT 10.91
ENGINEERING AND DESIGN CONTRACT
BETWEEN
HEBEI ELECTRIC POWER SURVEY AND DESIGN INSTITUTE
AND
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
AND
TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY, LTD.
DATED: DECEMBER 21, 1995
Tangshan Panda Heat and Power Company, Ltd. and Tangshan Pan-
Western Heat and Power Company, Ltd. (hereafter collectively
called "Owner") each plan to build, own and operate a 50 MW
(nameplate) pulverized coal-fired power plant with a combined
capability of producing 100 MW (nameplate) power and steam/hot
water for export (each unit hereafter called a "Power Plant" and
collectively called the "Power Plants"). The Power Plants site is
located near Gujiaying in Luannan County, Hebei Province,
People's Republic of China. The name of the Power Plants is
Luannan Thermal Power Plant (hereafter called "Project").
The Design Criteria prepared by Parsons Brinkerhoff Energy
Services, Inc. (hereafter called "Owner's Engineer") is in
accordance with the Hebei Electric Power Survey and Design
Institute Feasibility Study and all relevant government
authorities comments and or approvals (hereafter called "Study"),
however, specific design criteria and more detailed requirements
are presented for the major systems and components where the
study did not adequately address these items. The Study is
considered adequate for all areas not specifically addressed in
the Design Criteria.
The Parties agree as follows:
1.0 ENGAGEMENT
Owner hereby engages Hebei Electric Power Survey and Design
Institute (hereafter caned "Institute" and collectively with the
Owner, called the "Parties" and each is a "Party") to perform all
surveys, design and engineering work including the Preliminary
Design and Construction Drawings described below (sometimes
hereafter called the "Services") necessary for Owner to permit
and construct the Project in accordance with Chinese codes and
regulations, and with the Project Design Criteria detailed in
this Contract. The Institute represents that it is qualified and
licensed by appropriate authorities to perform the Services in
this Contact.
2.0 PROTECT DESIGN BASIS
The Institute shall design the Project on the basis of two (2) 50
MW (nameplate) units located on Site # 2 of the Study together
with the Scope of Work For The Engineering, Procurement and
Construction of Luannan Thermal Power Project (attached hereto
and hereafter called "Design Criteria") prepared by Owner's
Engineer. In the event of a conflict, the Design Criteria shall
take precedence over the Study. If the conflict(s) between the
Design Criteria and the Study impacts the government approval
process, the Institute shall immediately notify the Owner in
writing of the conflict(s). Owner and Institute shall cooperate
with each other to resolve the conflict(s) with the appropriate
government authority.
Facilities and systems to support future 2X50 MW unit shall be
included only where specifically identified in the Design
Criteria.
2.1 Preliminary Design and Construction Drawings:
The Institute shall provide the "Preliminary Design" which shall
include, at a minimum, general layout arrangement of the Power
Plants; major equipment list and specifications budgetary costs
of construction, single line electrical drawings, heat and mass
balance diagrams, process flow diagrams, and any other drawings
and documents required to obtain relevant government submittals
and approvals. Preliminary Design shall be performed in
accordance with the Design Criteria and in accordance with
required design codes and regulations required by appropriate
government authorities.
The Institute shall provide "Construction Drawings" in accordance
with proper design procedures and practices and in accordance
with the approved Preliminary Design.
2.2 Design Exclusions:
Items that are not included in the Services provided by the
Institute:
- - Survey and design of the heating distribution network,
including heat exchange station, outside the fenced or walled
area of the Power Plants site.
- - Survey and design of social buildings.Survey and design of
transmission lines and substations, interconnect systems and
facilities required by the North China Power Group that are
outside the fenced or walled area of the Power Plant site.
- - Roads outside the fenced or walled area of the Power Plants
site.
3.0 TERM, DESIGN SCHEDULE AND FEES
3.1 This Contract shall become effective on the date of signing by
both Parties and shall remain in effect, unless earlier terminated
by Owner for any reason pursuant to Section 4.1, until the end
of the construction period which shall be deemed complete upon
final acceptance of the Project by Owner from the Engineering,
Procurement and Construction Contractor (hereafter called "EPCC").
3.2 The Institute shall provide a completed Chinese version of
the Preliminary Design win Owner's acceptance prior to submittal
to relevant government authorities on or before April 15, 1996.
Institute shall modify or correct the Preliminary Design based on
the comments received from the relevant government authorities
and Owner and shall promptly resubmit for approval, if required,
at no additional cost to Owner. The English version of the
Preliminary Design shall be submitted to Owner as it is available
throughout the design process. However, the first draft of
English translation shall be completed and submitted to Owner no
later than April 30, 1996.
3.3 The "Lump Sum Price" of this Contract is Renminbi Yuan (RMB)
seven million (7,000,000), of which the Preliminary Design fee
shall be equal to thirty percent (30%) of the Lump Sum Price and
the Construction Drawings shall equal seventy percent (70%) of
the Lump Sum Price.
Owner shall make payments to the Institute for the Preliminary
Design in accordance to the schedule in Section 3.6 of this
Contract.
3.4 Owner has previously submitted a representative coal
analysis, herein attached, to the Institute for the basis of
design of the Power Plants. If the Owner provides the Institute
with a significant new coal analysis (excluding abrasive test
results) on or before December 31, 1995, the Institute shall
complete the Preliminary Design within the Lump Sum Price and
schedule stated in this Contract.
If the Owner provide the Institute with a significant new coal
analysis (excluding abrasive test results) between January 1,1996
and January 15, 1996, the Institute shall be entitled to a price
increase of no more than RMB Yuan 100,000.00 without impact to
schedule. Owner shall provide the Institute with the new abrasive
test results when available to Owner.
If the Owner provide the Institute with a significant new coal
analysis after January 15, 1996, the Institute, subject to
negotiations with Owner, shall be entitled to price and or
schedule variance.
3.5 In addition to the Lump Sum Price described in section 3.3
above, the Owner shall pay the Institute a fee equal to RMB Yuan
150,000.00 for the English translation of the Preliminary Design
documents and general Construction Drawings, excluding detailed
installation drawings which shall be mutually determined at a
later date by Owner and Institute, described in Section 3.6 of
this Contract. Owner shall make payments to the Institute in
accordance with the following schedule:
- - The Owner shall pay RMB Yuan 100,000.00 on or before twenty
(20) days upon submission of the first draft translation of
the Preliminary Design documents by the Institute.
- - The remaining fee of RMB Yuan 50,000.00 will be paid by
Owner, or its assigns, on or before twenty (20) days after
submission of the final translation. The final translation
shall include approval comments from the relevant government
authorities pertaining to the Preliminary Design documents.
3.6 Preliminary Design Fee:All payments made by Owner under this
Contract shall be made by Tangshan Panda Heat and Power Co.,
Ltd.; and
An advance payment of RMB Yuan 420,000.00 shall be made to the
Institute on or before twenty (20) days after signing this
Contract.
On or before twenty (20) days after the Institute submits the
Preliminary Design which shall be acceptable to the Owner prior
to its submitttal,as referenced in Section 2.1 and 3.2 of as
Contract, the Owner shall remit payment of RMB Yuan 1,330,000.00.
After Owner obtains approval comments at the Preliminary Design
hearings by the relevant government authorities and the Institute
complies with Section 3.2 above, Owner shall remit payment of RMB
Yuan 350,000.00 to the Institute on or before twenty (20) days
after the conclusion of these hearings.
3.7 Construction Drawings:
EPCC shall be responsible for timely payment of the Construction
Drawing fee and payment schedule below and any changes to the
design made by the EPCC after the assignment of this Contract.
The Institute shall cooperate, within reason, with EPCC to
maintain the overall Project construction schedule and to comply
with the reasonable Construction Drawing requirements; of the
EPCC.
3.8 Construction Drawings Schedule and Fee:
The EPCC shall remit payment of RMB Yuan 1,000,000.00 to the
Institute ten (10) days after signing the assignment and
assumption of this Contract by the EPCC. Owner shall not be
obligated to make the payments under this Section 3.8.
Ten (10) days after the Institute submits approximately twenty
five percent (25%) of the total required number of construction
drawings to the Owner and EPCC, the EPCC shall remit payment of
RMB Yuan 1,000,000.00 to the Institute.
Ten (10) days after the Institute submits approximately sixty
percent (60%) of the total required construction drawings to the
EPCC and Owner, the EPCC shall remit payment of RMB Yuan
1,000,000.00 to the Institute.
Ten (10) days after the Institute submits one hundred percent
(100%) of the total required construction drawings to the Owner
and EPCC, The EPCC shall remit payment of RMB Yuan 1,400,000.00
to the Institute.
Ten (10) days after the EPCC has achieved Final Acceptance of the
Power Plants from the Owner, the EPCC shall remit RMB Yuan
500,000.00 to the Institute.
4.0 RIGHTS AND RESPONSIBILITIES OF OWNER & INSTITUTE:
4.1 Owner's Responsibilities and Right:
The Owner shall:
- - provide Institute with relevant information necessary to
prepare and complete the Preliminary Design, Construction
Drawings and relevant government approvals. The Institute
shall provide the Owner and EPCC with their respective
written list of information required to complete the
Preliminary Design and or Construction Drawings. Failure to
provide the Institute with the required information in a
timely manner, the Owner shall be responsible for the cost
of corrections to the Preliminary Design and the EPCC shall
be responsible for the cost of corrections to the
Construction Drawings as specified under this Contract; and
- - effect timely payment for Preliminary Design fee upon review
and acceptance of Owner's Engineer and in accordance with
the stipulations of this Contract; and
- - make payment of any reasonable expenses or fees to the
relevant authorities incurred by the Institute on behalf of
the Owner, and subject to Owner's prior written approval;
and
- - have the right to terminate this Contract in writing for any
reason at any time. Should Owner terminate this Contract,
Institute shall immediately stop all Services. Owner shall
pay reasonable cost for Services completed and expenses up
to the time of termination. The Institute's cost shall
include reasonable profit; and
- - require the EPCC to provide reasonable living and working
- - accommodations and transportation to and from these
accommodations and local rail station, at no cost to the
Institute, for the Institute's on site personnel during He
construction stage of the Power Plants when the Institute's
personnel are required to be on site by the EPCC. This
responsibility is subject to final negotiations between the
EPCC and the Institute which requires Owner's approval; and
- - include, at Owner's option, the Owner's rights to require of
arbitration (similar to Section 6.0) between the Institute
and EPCC regarding the Services and price provided by the
Institute as contained in this Contract during the
construction stage of the Project.
- - have the right to approve the Preliminary Design. This right
does not relieve the Institute of its responsibilities and
guarantees described in this Contract.
4.2 Institute's Responsibilities:
The Institute shall:
- - accomplish the Preliminary Design, Construction Drawings and
their relevant government and Owner approvals in accordance
with current design codes and regulations in China and in
accordance with the above Project Design Criteria provided
in Section 2.0 of this Contract. If there is a conflict with
any information provided by the Owner to the Institute with
respect to Chinese codes and regulations, it is the
responsibility of the Institute to inform the Owner in
writing of such conflict prior to implementing any design
affected by this information. Failure to provide adequate
written notice in a timely manner, the Institute shall be
responsible for costs of any corrections to the Services
specified under this Contract; and
- - be responsible for any modifications required by the
relevant government authorities after examination of the
Preliminary Design. If changes resulting from the Institute
errors or omissions, the Institute shall be responsible for
correcting the Preliminary Design at its own expense; and
- - make payment of an taxes associated with the Institute's
design services in accordance with the tax laws of the
Peoples Republic of China; and
- - be responsible for attending meetings that are necessary to
perform the Preliminary Design and Construction Drawings,
and that are necessary to submit and obtain government
approvals; and
- - provide on-site personnel to support the EPCC construction
efforts during the construction stage of the Project. The
equivalent labor for the Institute's on-site personnel is
established at twenty four (24) man months. It shall be the
responsibility of the EPCC to utilize this allocation of on-
site personnel in an effective manner. The labor and
expenses beyond the twenty four (24) man months shall be
reimbursed by the EPCC to the Institute in accordance with
relevant government regulations; and
- - translate all materials produced as part of the Services
into English, including the Preliminary Design and its
specifications and the Construction Drawings as described in
Section 3.5 above.
4.3 Institute's Guarantee:
The Institute guarantees that the Preliminary Design and
Construction Drawings shall meet the requirements contained in
the Design Criteria and the Study, with such changes therein as
the Owner and the EPCC may approve, for the design of the Power
Plants, including power output and theme output, heat rate and
emissions limits from such plants. The Institute makes this
guarantee specifically for the benefit of the Owner and its
permitted successors and assigns including the EPCC as provided
in Section 5.0 below.
If there is any error or omission in the Services provided by the
Institute or any breach of guarantee given in this Section 4.3,
the Institute shall perform such additional Services and design
work at its own expense, on Owner's request, as may be deemed
necessary to correct such error or omission; and the Institute
shall also be responsible for the relevant loss/damage of Owner.
5.0 ASSIGNMENTS
5.1 For purposes of securing financing, Owner may, without the
consent of the Institute assign or create security over its
rights and interests herein. The Institute agrees to negotiate in
good faith and on fair and equitable basis a consent to
assignment with the lenders to Owner. Such consent to assignment
shall provide that any person or entity which elects to assume
any or all of the rights of the Owner under this Contract shall
also assume all of the Owner's obligations hereunder. The Parties
acknowledge and agree that any assignment to a secured party
pursuant to any financing Contracts shall be subject to, and
shall not relieve either Party of their performance obligations
to each other under this Contract except as provided in Section
5.2 below.
5.2 Owner may assign its rights and delegate its obligations
hereunder, including the obligation to pay the Institute the fees
set forth above, to the EPCC, without the consent of the
Institute. On making such assignment, the Owner shall be released
from Owner's obligations under this Contract. The Institute shall
negotiate in good with the Owner and the EPCC at the time of such
assignment to make such changes in this Contract as may be
necessary or desirable to reflect the rights and the obligations
of the EPCC to the Owner under the Engineering, Construction and
Procurement Contract. The Institute shall cooperate with the EPCC
and Owner in performing the Services so as to enable the EPCC to
construct, in a timely manner, the Power Plants in accordance
with the Design Criteria and the Study.
5.3 This Contract shall be binding upon and shall inure to the
benefit of the Parties and their respective successor and
permitted assigns, except that the Institute shall not assign
this Contract without the prior written consent of Owner.
6.0 DISPUTE RESOLUTION
6.1 Settlement: Arbitration. Except as otherwise provided in this
Contract, any dispute arising out of or in connection with this
Contract shall be settled through friendly consultation or
conciliation between the Parties promptly upon the written
request of one Party to the other Party. If the Parties do not
reach an amicable solution within 30 days from the notice of such
dispute, either Party may submit, with notice to the other Party,
the dispute to the International Chamber of Commerce's
International Court of Arbitration in Beijing, China under the
Rules of Conciliation and Arbitration of the International
Chamber of Commerce (the "ICC"). Except as otherwise provided in
this Contract, all disputes shall be submitted exclusively to
arbitration. Any settlement and award rendered through such an
arbitration proceeding shall be final and binding upon the
Parties. This Contract and the rights and obligations of the
Parties shall remain in full force and effect pending the award
in such arbitration proceeding, which award shall determine
whether and when any termination shall become effective.
6.2 Language. The arbitration shall be conducted and the judgment
shall be rendered in both English and Chinese.
6.3 Arbitrators. There shall be three arbitrators. Each Party
shall select one arbitrator within 30 days after being or
receiving the demand for arbitration. Such arbitrators shall be
freely selected, and the Parties shall not be limited in their
selection to any prescribed list. This International Court of
Arbitration (the "ICA") of the ICC shall select the third
arbitrator. If a Party does not appoint an arbitrator who has
consented to participate within 30 days after the selection of
the first arbitrator, the relevant appointment shall be made by
the ICA. The costs of arbitration shall be borne by the Parties
as determined by the arbitration tribunal, taking into account
the relative merits of the positions of the Parties.
6.4 No Immunity. Each of the Parties is subject to civil and
commercial law and irrevocably agrees that this Contract is a
commercial rather public or governmental activity and neither
Party is entitled to claim immunity form legal proceedings with
respect to itself or any of its assets on the grounds of
sovereignty otherwise under any law or in any jurisdiction where
an action may be brought for the enforcement of any of the
obligations arising under or relating to this Contract. Each
Party hereby irrevocably waives rights to immunity it may now
have or later acquire with respect to its obligation arising
under of relating to this Contract.
7.0 NOTICES
7.1 Notices: Communications. Except as otherwise expressly
provided hereunder, all notices or other communications which are
required or permitted in this Contract shall be in writing and
sufficient if delivered personally or sent by registered or
certified mail, mail, facsimile, telex or telegram to the
addressees as set forth below.
Owner: Institute
Project Manager Mr. Yue Zhukang
c/o Panda Energy No. 7 Changan Road
International, Inc. Shijiazhuang
4100 Spring Valley Road, Suite 1001 Hebei 50031
Dallas, Texas 75244 USA China
Facsimile No. (214) 980-6815 Facsimile No.(311) 506-4114
Telephone No. (214) 980-7159 Telephone No.(311) 505-3966
7.2 Change of Address. Any Party may, by notice to the other,
change the addresses and/or facsimile.
8.0 MISCELLANEOUS
8.1 Governing Law This Contract and the rights and obligations
hereunder shall be interpreted, construed and governed by the
laws of the People's Republic of China.
8.2 Amendments. No amendment or modification of the terms of this
Contract shall be binding on any Party unless it is in writing
and signed by all Parties.
8.3 Representative Authority. For administrative convenience,
Tangshan Pan-Western Heat and Power Co., Ltd. has appointed
Tangshan Panda Heat and Power Co., Ltd. as its agent with power-
of-attorney to represent and bind Tangshan Pan-Western Heat and
Power Co.,Ltd. on all matters herein or relating to its Power
Plant.
IN WITNESS WHEREOF, the Parties, intending to be legally bound,
have caused this Contract to be signed by their respective
officers thereunto duly authorized as of the day and year first
set forth above.
For and on behalf of
HEBEI ELECTRIC POWER SHIRLEY TANGSHAN PANDA HEAT
AND DESIGN INSTITUTE AND POWER CO., LTD.
TANGSHAN PAN-WESTERN'
HEAT AND POWER CO., LTD.
By ____________________ By _______________________
Name: Zhou Wei Name: Ted C. Hollon
Title: Vice President Title: Legal Representative
City of Shijiazhuang Chen Guard Luannan County
Hebei Province 050031, China Hebei Province 063500, China
Facsimile No.: (311)506-4114 Facsimile No.: (315)412-2610
Telephone No.: (311)505-3966 Facsimile No.: (315)412-2610
[PANDA ENERGY LETTERHEAD]
June 21, 1996
Mr. Zhang Weizhou
Luannan Project Construction Manager
Harbin Power Engineering Co., Ltd.
45 Xusheng Street
Dongli District
Harbin 150046 China
RE: Design Engineering Services
EPC Contract dated April 24, 1996
Dear Mr. Zhang:
The fixed price for the subject EPC Contract included a price of
RMB 7,000,000 for the design engineering services provided by the
Hebei Electric Power Survey and Design Institute (Institute), as
described in the Engineering and Design Contract between the
Institute and Tangshan Panda Heat and Power Company, Ltd.and Tan
gshan Pan-Western Heat and Power Company, Ltd. ("Owner") dated
December 21,1995. The Engineering and Design Contract was
assigned to Harbin Power Engineer Company, Ltd. ("EPC
Contractor")in accordance with the Notice of Assignment of the
Engineering and Design Contract as described in one EPC Contract
between the Owner and EPC Contractor which Was agreed to by all
Parties. Such Notice of assignment obligates the EPC Contractor
to make payments to the Institute which arise before and after
the execution of the EPC Contract. Based upon the exchange rate
agreed to in the EPC Contract, the total value of Engineering and
Design Contract is US $840.300.00.
The Institute has invoiced the Owner per the Design Contract for
US $159,665 (RMB 1,330,000.00)for completion of the Preliminary
Design for submittal to the governmental authorities.. Since the
Notice to Proceed cannot be issued prior to Financial Closing,
and Harbin is obligated under the terms of the Notice of
Assignment, the Owner is willing to make payment directly to the
Institute on behalf of the EPC Contractor provided that Harbin
agrees to deduct an amount equal to US $159,665 from the down
payment amount to be submitted by Harbin at the time the Notice
to Proceed occurs.
Evidence of payment in the amount of $159,665 to the Institute
will be provided to you. Your response is required by June 25,
1996 in order to comply with our financial closing schedule.
Sincerely,
Ted Hollon
Vice PresidentConstruction
AGREED TO AND ACCEPTED THIS 27th DAY OF June, 1996:
OWNER CONTRACTOR:
TANGSHAN PAN-WESTERN HARBIN POWER
HEAT & POWER CO., LTD. ENGINEERING CO., LTD.
By:________________________ By:____________________
Name:______________________ Name:___________________
Title:_____________________ Title:__________________
TANGSHAN PANDA HEAT AND POWER
CO., LTD.
By:_________________________
Name:_______________________
Title:_______________________
EXHIBIT 10.92
GUARANTY
This Guaranty is executed as of JULY 16 , 1996.
R E C I T A L S
1. China Harbin Power Equipment Group Company, a Chinese
company with its principal place of business located at 45
Xusheng Street, Post Code 150046, Dongli District company with is
principal place of business located at Harbin, China, is the
parent corporation of Harbin Power Engineering Company, Ltd. (the
"Contractor"). Contractor and Tangshan Panda Heat and Power Co.,
Ltd., a Chinese Joint Venture Company with offices at Cheng Guan,
Luannan County, Tangshan City, Hebei Province 063500, People's
Republic of China, and Tangshan Pan-Western Heat and Power Co.,
Ltd., a Chinese Joint Venture Company, with offices at Cheng
Guan, Luannan County, Tanshan City, Hebei Province 063500,
People's Republic of China (together the "Companies") entered
into that certain Engineering. Procurement and Construction
Agreement, dated as of April 24, 1996 (the "EPC Contract").
2.Pursuant to the terms of the EPC Contract, Contractor is to
provide engineering, procurement and construction services
relating to the Companies' Luannan County 2X50MW Thermal Power
Plant Project, in Luannan County, Hebei Province, People's
Republic of China. As a consequence of providing the services and
guaranties required pursuant to the EPC Contract, Contractor may
become indebted to the Companies;
NOW THERFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the undersigned (the
"Guarantor") hereby irrevocably and unconditionally guarantees to
the Companies the prompt payments of the Guaranteed Indebtedness
(hereinafter defined) in accordance with the terms of this
Guaranty, being upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein, means
all liabilities and obligations of the Contractor (including,
without limitation, the obligations of the Contractor to pay
liquidated damages and other performance or delay costs that may
be incurred pursuant to the EPC Contract, together with interest
thereon and at the rates designated in the EPC Contract, and
attorney's fees incurred in connection with the collection
thereof under the EPC Contract or this Guaranty) arising in
connection with the EPC Contract (as the same may be amended from
time-to-time, with of without notice to the Guarantor).
2. This instrument shall be irrevocable, absolute and a
continuing guaranty of payment (and not merely of collection) and
the Guarantor shall remain liable on its obligations hereunder
until the payment in full of its Guaranteed Indebtedness.
3. If Guarantor becomes liable for any indebtedness owing by
the Contractor to the Companies, by endorsement or otherwise
other than under this Guaranty, such liability shall not be in
any manner impaired of affected hereby, and the Companies may
ever have against the Guarantor. The exercise by the Companies of
any rights hereunder or under any other instrument or a law or in
equity, shall not preclude the concurrent or subsequent of any
other rights.
4. In the event of any failure to pay or default by the
Contractor in payment of the Guaranteed Indebtedness, or any part
thereof, when such indebtedness becomes due, either by its terms
or as a result of exercise of any power to accelerate, the
Guarantor shall, on demand by the Companies (or either of them)
And without further notice, without notice having been given to
the Contractor previous to such demand, of the acceptance by the
Companies ( or either of them) of this Guaranty, and without any
notice having been given to the Guarantor previous to such demand
of the creating or incurring of such indebtedness, pay the amount
due thereon to the Companies and it shall not be necessary for
the Companies, in order to enforce such payment by the Guarantor,
first to institute suit or exhaust its rights against the
Contractor or others liable on such indebtedness.
5. The Guarantor hereby agrees that its obligations under the
terms of this Guaranty shall not be released, diminished or
affected for any reason including, without limitation the
occurrence of any or more of the following events: (a) the taking
or accepting of any other security or guaranty for any or all of
the Guaranteed Indebtedness; (b) any release surrender, exchange,
subordination, non-perfection or loss of any other security or
guaranty at any time existing in connection with any or all of
the Guaranteed Indebtedness;(c) any partial or complete release
of the liability of any Person (other than the Contractor) at any
time liable for the payment of any or all of the Guaranteed
Indebtedness (a "Guarantor"); (d) the insolvency, bankruptcy, or
lack of corporate power of the contractor or any Guarantor,
whether now existing or hereafter occurring;(e) any renewal,
extension and/or rearrangement of the payment of any or all of
the Guaranteed Indebtedness, either with or without notice or
consent of the Guarantor, or any adjustment indulgence,
forebearance, or compromise that may be granted or given by the
Companies to Contractor, Guarantor or any other guarantor. (f)any
neglect, delay, omission, failure or refusal of the Companies (or
either of them) to take or prosecute any action for the
collection of any the Guaranteed Indebtedness or to take or
prosecute any action in connection with any instrument or
agreement evidencing or securing all or any part of the
Guaranteed Indebtedness;(g) any failure by the Companies (or
either of them) to notify Guarantor of any renewal, extension, or
assignment of the Guaranteed Indebtedness or any part thereof, or
the release of any security or of any other action taken or
refrained from being taken by the Companies against the
Contractor, or any new agreement between the Companies and the
Contractor it being understood that the Companies shall not be
required to give the Guarantor the Guaranteed indebtedness;(h)
the unenforceability of all or any part of the Guaranteed
Indebtedness against the Contractor by reasons of the fact that
the Guaranteed Indebtedness exceeds the amount permitted by law,
the act of creating the Guaranteed Indebtedness, or any part
thereof, is ultra vires (outside of the scope of authority by the
person creating the same) or that the officers creating the same
acted in excess of their authority or for any reason whatsoever:
(I) the fact that the outstanding principal balance under the EPC
contract may from time to time be zero;(J) if for any reason the
Companies shall be required to refund such payment or pay the
amount thereof to someone else; (k) any amendment of the EPC
contract or any collateral document pursuant to which the
Guaranteed indebtedness is created;(l)any extension of time for
performance of any covenant or condition is effected; or (m) the
waiver of performance under the EPC Contract or failure or
omission to enforce any right thereunder.
6. This Guaranty is for the benefit of each of the Companies
and their respective successors and assigns, and in the event of
an assignment of the Guaranteed Indebtedness, or any part
thereof, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty is binding not only on the
Guarantor, but on the Guarantor's successors and assigns, and if
this Guaranty is signed by more than one Person, then all
obligations of each Guarantor arising herein shall be jointly
and severally binding on all Guarantors, and their respective
successors and assigns, provided that, without the prior written
consent of the Companies no Guarantor may assign an of its
rights or obligations hereunder to any other Person.
7. The Guarantor represents and warrants that the value of the
consideration received and to be received by the Guarantor is
reasonably worth at least as much as the liability and
obligation of the Guarantor hereunder, and such liability and
obligation may reasonably be expected to benefit the Guarantor
directly or indirectly.
8. By execution hereof, the Guarantor covenants and agrees
that the terms, representations, warranties, covenants and
conditions set forth in the EPC Contract (as amended from time
to time) shall be imposed upon the Guarantor, and the Guarantor
makes and confirms such representations, warranties, covenants,
conditions and provisions of the EPC Contract (as amended from
time to time) are incorporated herein by reference, to the same
extent as if stated verbatim herein, and all terms defined in
the EPC Contract (as amended from time to time)shall have the
same meaning herein, unless specifically defined otherwise
herein.
9. The Guarantor covenants and agrees that it will not assert
any rights arising from payment or other performance hereunder
until all of the Guarantor's liability hereunder shall have been
discharged in full and all of the Guaranteed Indebtedness
existing at the same time of such discharge shall have been paid
and performed in full.
10. All notices, requests and other communications to any party
hereunder shall be in writing (including bank wire, telecopy or
similar writing) and shall be given to such party at its address
or telex number set forth on the signature page hereof ( or if
to the Companies, at their addresses or telecopy numbers set
forth in the EPC Contract) or such other address or telecopy
numbers as such party may hereafter specify for such purpose by
notice to the other party. Each such notice, request or other
communications shall be effective(I) if given by telecopy, when
such telecopy is transmitted to the telepcopy number specified
herein and the appropriate answerback received (II) if given by
mail, then upon actual acknowledge written receipt prepaid
addressed as aforesaid or (III) if given by any other means,
when delivered at the same address specified in this paragraph.
11. Upon the occurrence and during the continuance of any
"Event of Default"(as defined in the EPC Contract) the
Companies(or either of them) are hereby authorized at any time
and from time to time to the fullest extent permitted to set off
and apply any and all of other funds paid to and held or at any
time owing by the Companies to or for the credit or the account
of the Guarantor now or hereafter existing under this Guaranty
or the EPC Contract and although such obligations may be
unmatured. The Companies agree promptly to notify the Guarantor
after any such set-off and application made, provided that the
failure to give such notice shall not affect the validity of
such set-off and applications. The rights of the Companies under
this paragraph are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
Companies may have.
12. The Guarantor will promptly upon demand pay to the
Companies the amount of any and all reasonable out-of pocket
expenses, including, without limitation, the reasonable fees and
disbursements of counsel and of any agents or experts, which the
Companies(or either of them)may incur in connection with the
(I)administration of this Guaranty,(II) the exercise by the Bank
of any of the rights confined upon it hereinder, or (III)any
default on the part of the Guarantor hereunder.
13. This Guaranty shall be governed by and construed with the
laws of People Republic of China.
EXECUTED as of the day and year first above written.
HARBIN POWER EQUIPMENT COMPANY LIMITED
By: ___________________
Name: ___________________
Title: ___________________
Address: ___________________
_____________________________
_____________________________
EXHIBIT 10.93
[China Eximbank Letterhead]
Date: July 9, 1996
To: Mr. Chai Chunsheng
Cai, Zhang & Lan
Suite 202. Jia-3 Sheng Gu-North Road
Beijing 100029
In your capacity of legal counsel to
Tangshan Panda Heat and Power Co., Ltd. and
Tangshan Pan-Western Heat and Power Co., Ltd.
From: Li Jianzhi
Deputy General Manager
Of Insurance Department
The Export-Import Bank of China
75 Chong Nei Street
Beijing 100005
RE: OUR BANK'S PERFORMANCE GUARANTEE IN FAVOR OF YOUR CLIENTS
Dear Sir,
This is to inform you and your clients Tangshan Panda Heat and
Power Co., Ltd. And Tangshan Pan-Western Heat and Power Co., Ltd.
that, the Export-Import Bank of China has hereby confirmed its
intention to issue a Performance Guarantee in the form of draft
July 4, 1996 prepared by Cai, Zhang & Lan, as revised and agreed
upon between Tangshan Panda Heat and Power Co., Ltd., Tangshan
Pan-Western Heat and Power Co., Ltd. (collectively the "Owner")
and Harbin Power Engineering company Limited (the "Contractor")
as per Exhibit I-1 of Engineering, Procurement and Construction
Contract (the "EPC Contract") between the Owner and the
Contractor on April 24, 1996.
The said Performance Guarantee will be issued by this Bank in the
form of draft July 4, 1996 prepared by Cai, Zhang & Lan in favour
of the Owner immediately upon request by the Contractor.
Sincerely Yours,
Li Jianzhi
For and on behalf of the Export-Import Bank of China
[Draft July 4, 1996 by Cai, Zhang & Lan]
PERFORMANCE GUARANTEE
THIS GUARANTEE is given on the______day of_________, 1996.
BY
THE EXPORT-IMPORT BANK OF CHINA (the"Guarantor") of 75
Chong Nei Street, Beijing 100005, China,
AT THE REQUEST OF
HARBIN POWER ENGINEERING COMPANY LIMITED ("the Contractor")
Of 45 Xusheng Street, Dongli District, Harbin, China,
IN FAVOUR OF
TANGSHAN PANDA HEAT AND POWER CO., Ltd.("Panda"), of West
Gujiaying, Bencheng, Luannan County, Hebei Province, China And
TANGSHAN PAN-WESTERN HEAT AND POWER CO., Ltd. ("Pan-Western"), of
China (both Panda and Pan-western herein-after collectively the
"Owner").
WHEREAS:
(a) By a Contract for the Engineering, Procurement and
Construction of the Project in Luannan County, Hebei Province
(the "EPC Contract") dated as of April 24, 1996 between the Owner
and the Contractor, the Contractor shall provide an irrevocable,
unconditional bank guarantee with joint and several liability
from a financial institution acceptable to Owner in an amount
equal to thirty-five percent (35%) of the Contract Price, and the
Guarantor, upon request by the Contractor, agrees to provide such
Guarantee for the Contractor in favour of the Owner;
(b) It is a condition precedent to the Owner's obligation under
the EPC Contract to employ the Contractor or to continue such
employment anytime during the term of the EPC Contract that the
Guarantor enters into this Guarantee in favour of the Owner of
such 35% of the Contract Price.
NOW THEREFORE, THIS GUARNTEE WITNESSETH as follows:
1. This Guarantee is issued at the request of the Contractor
per Exhibit I-1 (as revised and agreed upon between the
automatically become effective at the initial Project Funding as
defined in the EPC Contract, without any further action or
confirmation by the Guarantor or the Contractor. This Guarantee
shall be a continuing guarantee remaining in full force and
effect until six (6) months after Owner's acceptance of
Commercial Operation Date of the Plant as defined in Article 10.7
of the EPC Contract.
2. This is an irrevocable and unconditional guarantee issued by
the Guarantor, whereby the Guarantor shall assume the liability
of a primary obligor, and shall be jointly and severally liable
with the Contractor to the Owner for the thirty-five percent
(35%) of the EPC Contract Price, namely U.S. $22,269,041.20 (the
United States Dollars Twenty-Two Million Two Hundred Sixty-Nine
Thousand Forty-One and Cents Twenty Only) (subject to increase or
decrease under Article 6.1 of the EPC Contract in case of change
orders) (the "Guaranteed Amount"). Should there be any increase
or decrease of the Contract Price pursuant to Article 6.1 of the
EPC Contract, the Guaranteed Amount shall be adjusted accordingly
upon written notice from the Owner to the Guarantor.
3. Under this Guarantee, in the event that the Contract fails
to perform its obligations under the EPC Contract and such
failure trigers payment liability of liquidated damages by the
Contractor for damages, compensation, indemnities or otherwise
under Articles 12,13,15, and 16 of the EPC Contract or for any
other purpose related to the Contractor's obligations thereunder,
the Owner shall be entitled to issue a written demand to the
Guarantor for payment up to an aggregate amount not to exceed the
Guaranteed amount. Such written demand shall (I) state that the
Contractor has failed to perform its obligations under the EPC
Contract and, (ii) bear the original hand-written signatures of
two purportedly authorized officers of the Owner in confirmance
with the specimen signatures of such officers [as per Exhibit
attached hereto] (which may be replaced or re-designated from
time to time by the Owner upon written notice to the Guarantor).
The Guarantor shall not require that such written demand be
accompanied by any documents from any third parties.
4. Under this Guarantee, the Guarantor is hereby committed to
honour such written demand from the Owner for payment immediately
upon presentation (with a grace period of ten (10) business
days). Each payment by the Guarantor hereunder shall reduce the
cumilative amount of the Guaranteed Amount on a dollar-for-dollar
basis. The Guarantor shall neither require the Owner to exercise
its recourse against the Contractor first, nor require the Owner
to exhaust its remedies against the Contractor first, and shall
not set such requirements as a pre-condition for the Guarantor to
effect its payment under this Guarantee. In particular, the
Guarantor shall not raise any contractual defence by the
Contractor under the EPC Contract, but shall honour its
obligations hereunder as an indebtedness independent of the EPC
Contract or any obligations of the Contractor thereunder.
5. This Guarantee is not assignable by either the Guarantor or
the Owner, except assignable to PAN-WESTERN ENERGY CORPORATION,
LLC. (the "Permitted Assignee") with its registered office at
South Church Street, P.O. Box 309, George Town, Grand Cayman,
Cayman Islands, British West Indies, upon delivery to the
Guarantor of a completed assignment certificate, signed by the
authorized signatories of the Owner and counter-signed by an
authorized signatory of the Permitted Assignee. This Guarantee
shall be binding on the Guarantor and its successors and shall
inure to the benefit of the Owner and its Permitted Assignee.
6. The obligations of the Guarantor hereunder shall not be
discharged by (I) any time, grace, indulgence, waiver or consent
at any time given to the Contractor, (ii) any amendment to any
clause of the EPC Contract, provided that any amendment to the
EPC Contract which involves the Guarantor's assuming greater
obligation for the Guaranteed Amount (with the exception of any
increase of such amount pursuant to Article 6.1 in the case of
change orders) will require the prior written consent of the
Guarantor, (iii) any failure or delay in the enforcement or
release of any rights of or under the EPC Contract or any other
related documents thereto. Without limiting any other provisions
of this Guarantee, the Guarantor acknowledges and agrees that it
will remain liable hereunder notwithstanding that the Contractor
may cease to exist or for any other reason the Owner may no
longer be able to deal with the Contractor.
7. The Guarantor hereby represents and warrants to the Owner as
follows:
(a) The Guarantor is a state-owned bank duly organised and
Validly existing under the laws of the People's Republic of China
and has full power, authority and legal capacity to execute and
deliver this Guarantee and to assume and perform the obligations
provided for herein;
(b) The Guarantor has taken all appropriate and necessary legal
actions to authorize the execution, delivery and performance of
this Guarantee;
(c) This Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its
terms;
(d) The obligations of the Guarantor hereunder rank and will
rank at least pari passu in priority of payment and in all other
respects with all other unsecured indebtedness of the Guarantor.
(e) The Guarantor shall supply to the Owner and its Permitted
Assignee, upon request, copies of the annual financial statements
of the Guarantor.
8. This Guarantee is a commercial act of the Guarantor in
relation to a commercial transaction and all obligations of the
Guarantor arising under this Guarantee are commercial in nature.
The Guarantor hereby irrevocably agrees not to raise any claim of
immunity (if any) from suit, attachment or execution in respect
of any claims which may be made against it at any time concerning
its obligations under this Guarantee.
9. Any demand from the Owner to the Guarantor for payment must
be in written form, delivered to the Guarantor at the following
address (or any new address designated by the Guarantor in
writing duly notified to the Owner in future) in the following
manner.
(a) Method of delivery: (I) personally delivered, (ii)
transmitted by postage prepaid registered mail (airmail if
international), and (iii) transmitted by internationally
recognized courier service, or (iv) transmitted by telex or
facsimile (with postage prepaid mail confirmation).
(c) Address of the Guarantor:
75 Chong Nei Street
Beijing 100005
The People's Republic of China
Telex No.: 210292
Answerback: EXIM CN
Fax No: 86-10-6523,6641
Attention: Insurance Department
IN WITNESS WHEREOF the undersigned Guarantor has executed this
Guarantee by its duly authorised officer the day and year first
above written.
THE EXPORT-IMPORT BANK OF CHINA
By ____________________________
Name:
Title:
Exhibit: Specimen signatures of authorized signatures of the
Owner
Name: _____________________
Title: _____________________
Signature:_____________________
Name: _____________________
Title: ______________________
Signature:_______________________
EXHIBIT 10.94
AMENDED AND RESTATED
OPERATION AND MAINTENANCE AGREEMENT
BY
AND
BETWEEN
TANGSHAN PANDA HEAT AND POWER CO., LTD.
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TANGSHAN PAN-SINO HEAT CO., LTD.
AND
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
TABLE OF CONTENTS
SECTION I
DEFINITIONS 3
SECTION II
SERVICES TO BE PERFORMED BY OPERATOR 8
SECTION III
SERVICES TO BE PERFORMED BY OWNER 31
SECTION IV
COMPENSATION 34
SECTION V
PAYMENT 45
SECTION VI
TERM 46
SECTION VII
TERMINATION 47
SECTION VIII
INSURANCE AND INDEMNIFICATION 51
SECTION IX
PERMITS AND LICENSES 57
SECTION X
INDEPENDENT CONTRACTOR 58
SECTION XI
COORDINATION AND ACCESS 58
SECTION XII
FORCE MAJEURE 59
SECTION XIII
ARBITRATION 61
SECTION XIV
OPERATOR AND OWNER REPRESENTATIONS AND WARRANTIES 61
SECTION XV
NOTICES 64
SECTION XVI
APPLICABLE LAW 65
SECTION XVII
NON-WAIVER 66
SECTION XVIII
TITLE 67
SECTION XIX
ASSIGNMENT 67
SECTION XX
MISCELLANEOUS 67
AMENDED AND RESTATED
OPERATION AND MAINTENANCE AGREEMENT
BY
AND
BETWEEN
TANGSHAN PANDA HEAT AND POWER CO., LTD.,
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TANGSHAN PAN-SINO HEAT CO., LTD.
AND
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
RECITALS:
THIS AMENDED AND RESTATED OPERATION AND MAINTENANCE
AGREEMENT is made and entered into on the 6th day of March, 1997,
by and between Tangshan Panda Heat and Power Co., Ltd., a Chinese
Joint Venture company ("Tangshan Panda"), Tangshan Pan-Western
Heat and Power Co., Ltd., a Chinese Joint Venture company
("Tangshan Pan-Western"), Tangshan Cayman Heat and Power Co.,
Ltd., a Chinese Joint Venture company ("Tangshan Cayman") and
Tangshan Pan-Sino Heat Co., Ltd., a Chinese Joint Venture company
("Tangshan Pan-Sino") (collectively, hereinafter referred to as
"Owner"), and Duke/Fluor Daniel International Services, a general
partnership formed in the State of Nevada by Duke Coal Project
Services Pacific, Inc., a Nevada corporation, and Fluor Daniel
Asia, Inc., a Delaware corporation, (hereinafter referred to as
"Operator"), individually referred to hereinafter as "Party" and
collectively as "Parties."
WHEREAS, Duke Coal Project Services Pacific, Inc. entered
into a Partnership Agreement dated September 1, 1994 with Fluor
Daniel Asia, Inc. to form the partnership to be known as
Duke/Fluor Daniel International Services;
WHEREAS, Owner and North China Power Group Company, a
Chinese company (the "Utility") entered into an Electric Energy
Purchase and Sales Agreement dated September 22, 1995, pursuant
to which Owner intends to construct and operate two nominal 50MW
coal-fired electric and thermal energy cogeneration power
generation stations (collectively, the "Facilities") in Luannan
County near the city of Gujiaying, Hebei Province, the People's
Republic of China and pursuant to which Owner will sell and the
Utility will purchase electrical energy produced by the
Facilities and Owner shall sell steam and heat to local
businesses;
WHEREAS, Owner and Harbin Power Engineering Company,
Limited, a Chinese company (the "EPC Contractor") have entered
into a turnkey Engineering, Procurement and Construction
Agreement dated April 24, 1996 (the "EPC Contract") a copy of
which has previously been furnished to Operator pursuant to which
the EPC Contractor thereunder will design, construct, test and
startup the Facilities;
WHEREAS, Owner desires to have Operator provide pre-
commercial and post-commercial operation and maintenance services
at the Facilities and Operator desires to provide such services;
WHEREAS, Owner and Duke/Fluor Daniel International Services,
Inc. entered into the Operation and Maintenance Agreement dated
June 26, 1996 and where Duke/Fluor Daniel International Services,
Inc. was characterized incorrectly as a Nevada corporation; and
WHEREAS, the Operation and Maintenance Agreement dated June
26, 1996 is superceded by this Amended and Restated Operation and
Maintenance Agreement dated as of the date first written above.
NOW, THEREFORE, in consideration of the foregoing and of the
premises hereinafter contained, Owner and Operator agree as
follows:
SECTION I
DEFINITIONS
Whenever the following terms appear in this Agreement, they
shall have the following meanings:
"Affiliate" shall mean, with respect to any corporation, a
corporation which controls, is controlled by, or is under common
control with such corporation or successor thereto.
"Agreement" shall mean this Operation and Maintenance
Agreement made and entered into on the date set forth above by
and between Tangshan Panda Heat and Power Co., Ltd., Tangshan Pan-
Western Heat and Power Co., Ltd., Tangshan Cayman Heat and Power
Co., Ltd., Tangshan Pan-Sino Heat Co., Ltd., and Duke/Fluor
Daniel International Services.
"Annual Budget" shall mean the budget of all costs and
expenses anticipated to be incurred by Operator to meet its
obligations under this Agreement during any calendar year, or
part thereof.
"Annual Outage Period" shall mean the annual period from
November 1 through October 31 each year.
"Approved Budget" shall mean the annual budget prepared and
submitted by Operator pursuant to Section 2.17 hereof, which has
been approved by Owner.
"Authorization To Proceed" shall mean Owners' written notice
to Operator to commence the work required by this Agreement.
"Claims" shall have the meaning given such term in Section
8.03A. hereof.
"Commencement Date" shall mean the calendar date upon which
Operator is to commence the work required by this Agreement as
specified in the Authorization to Proceed. The expected date for
the Commencement Date is September 1, 1996.
"Commercial Operation Date" shall mean the date upon which
Owner's Facilities start regular delivery of their electric
energy delivered to the Utility's Grid which shall be determined
by the Utility and Owner after approval of 72 hour full-load
testing operation by both the generation units of Owner's
Facilities.
"Consumables" shall have the meaning set forth in Section
2.07 hereof.
"EPC Contract" shall mean the Turnkey EPC Contract between
Owner and EPC Contractor relating to the design, procurement,
construction, testing and starting up of the Facilities as the
same may be amended, supplemented or modified from time-to-time.
"EPC Contractor" shall mean Harbin Power Engineering Company
Limited, a Chinese company.
"Facilities" shall mean two nominal 50 MW coal-fired
electric and thermal energy cogeneration power stations and steam
and hot water distribution systems to be built by Owner in
Luannan County near the city of Gujiaying in Hebei Province, The
People's Republic of China to supply electrical energy to the
Utility and thermal energy to a number of Chinese companies in
Luannan County and all equipment contained therein and parts
thereof. It shall include, without limitation, the fuel
receiving and storage facility, all fuel delivery equipment from
the fuel storage facility to the balance of the Facility,
interconnection facilities to interconnect disconnect switch with
the Utility (that is on the high side of Owner's step-up
transformer) and other auxiliary equipment and systems described
in the EPC Contract. It shall also include the steam and hot
water distribution systems, including, without limitation,
piping, heat exchangers, valves, controls, and insulation, to be
built under separate contracts, up to the interconnect point at
each individual customer.
"Facilities Funding Date" shall mean the date upon which the
initial loans are made by the Lenders to Owner.
"Heat Rate" shall mean the net electrical output divided
into the thermal input expressed in British Thermal Units Per
Kilowatt Hours (BTU/kWh) at a specific process steam flow and
condition.
"Indemnitee" shall have the meaning set forth in Section
8.03A. hereof.
"Lender" and "Lenders" shall mean Pan-Western Energy
Corporation LLC, a Cayman Islands corporation.
"Loan Documents" shall mean the relevant documentation
executed between the Lender(s) and Owner for the financing of the
Facilities and any other financing documents as may be amended
from time-to-time, excerpts of which are attached hereto as
Exhibit C.
"Lost Work Day" shall mean any employee lost workday
resulting from an on-the-job injury or illness.
"Net Facilities Output" shall mean the power output of the
Facilities in Kilowatts (kW) measured at the high voltage side of
the main power transformer.
"Operator" shall mean Duke/Fluor Daniel International
Services.
"Owner" shall mean collectively Tangshan Panda Heat and
Power Co., Ltd., a Chinese Joint Venture company, Tangshan Pan-
Western Heat and Power Co., Ltd., a Chinese Joint Venture
company, Tangshan Cayman Heat and Power Co., Ltd., a Chinese
Joint Venture company, and Tangshan Pan-Sino Heat Co., Ltd., a
Chinese Joint Venture company.
"Owner's Account" or "Account of Owner" shall have the
meaning set forth in Section 4.02 of this Agreement.
"Owner's Representative" shall have the meaning set forth in
Section 3.01 of this Agreement.
"Outage" shall mean any interruption of required
(dispatched) electric energy deliveries (as set forth in Sections
2.1 and 2.2 of the Electric Energy Purchase and Sales Agreement)
to the Utility's Grid by Owner's Facilities.
"Outage Days" shall mean the cumulative elapsed outage time
of any type for each 50 MW unit of the Facilities calculated for
each Annual Outage Period. Outage Days will be calculated on an
actual time elapsed basis. (For example, twenty-four (24) one (1)
hour outages shall be equal to one (1) day). Outage Days do not
include the time when the Utility dispatches the unit(s) off-line
or the Utility is unable to accept electrical energy due to Force
Majeure conditions.
"Plant Manager" shall mean Operator's on-site employee
responsible for the operation and maintenance of the Facilities.
"Power Agreement" shall mean the Electric Energy Purchase
and Sales Agreement, and the General Interconnection Agreement,
both dated as of September 22, 1995, the Supplemental Agreement
dated February 10, 1996 and the technical interconnect dispatch
agreement (to be executed prior to the Commercial Operation
Date), relevant excepts of which are attached hereto as Exhibit
A, all between Owner and the Utility.
"Prudent Utility Practices" shall mean those practices
generally followed by the United States electric utility industry
with respect to the operation and maintenance of electric
generating facilities (including, but not limited to, the
operation and safety practices generally followed by the electric
utility industry), to the extent reasonably possible, unless
otherwise directed in writing by Owner or otherwise required for
financing of the Facilities. Operator will not be responsible,
however, for any failure to comply with those standards, or
portions thereof, where that failure is caused or necessitated by
differences between Chinese Prudent Utility Practices (or the
like) and those of the United States, or by workforce or industry
customs in China that make compliance by Operator with United
States Prudent Utility Practices imprudent or impractical.
"Reimbursable Costs" or "Reimbursable Cost" shall mean all
reasonable and actual direct costs properly incurred.
"Scheduled Commercial Operation Date" shall mean the
expected date which the Facilities achieve Commercial Operation
Date which is estimated to be November 1, 1998. Owner may change
the Scheduled Commercial Operation Date by giving two hundred and
forty (240) days prior written notice to Operator.
"Scheduled Annual Overhaul Outages" shall mean those planned
outages of the Facilities applied for by the Operator and
approved and scheduled by the Utility annually in advance of the
November 1 to October 31 annual period.
"Scheduled Outage" shall mean those times the unit(s) are
scheduled off-line by the Utility or Operator's request in
advance such that they are not dispatched to produce electric
energy by the Utility.
"Site" shall mean that real property upon which the
Facilities are located.
"Utility" shall mean North China Power Group Company, a
Chinese company organized under the laws of China.
"$" shall mean United States Dollars.
SECTION II
SERVICES TO BE PERFORMED BY OPERATOR
Operator will provide all operation and maintenance services
necessary for the efficient, sound and effective operation of the
Facilities so as to enable the Facilities to satisfy the
requirements set forth in the Power Agreement, attached as
Exhibit A hereto and which may be amended from time-to-time, and
to maintain the Facilities in good mechanical and operating
repair and condition all in accordance with Prudent Utility
Practices. Without limiting the generality of the foregoing,
Operator shall do the following:
2.01 Personnel. Operator shall provide and train, in a
manner consistent with Prudent Utility Practices, competent
qualified personnel to operate and maintain the Facilities
including, without limitation, the following:
A. A Plant Manager, assigned to the
Facilities full time, to manage on-site operations
and maintenance, which individual shall be
approved in writing by Owner.
B. Additional full time on-site personnel
as needed.
C. Additional engineering support,
operations, maintenance, and management personnel
not located full time at the Facilities, as needed
to perform the requirements of this Agreement.
Without limiting the generality of the foregoing, Operator
will (i) staff the Facilities during all hours; (ii) provide
those full time on-site personnel identified and agreed to by
Operator and Owner; and (iii) provide the home office support
identified in Exhibit B hereto. Operator shall submit the
qualifications of full-time, on-site management and key
supervisory personnel hired for review and approval by Owner, and
such personnel shall be acceptable to Owner at all times.
Owner's approval or acceptance of any such personnel shall not be
construed as or imply Owner's acceptance of the conduct,
performance or qualifications of such personnel nor result in any
waiver of Operator's duties and responsibilities for providing
personnel as required for its performance or for responsibility
for compliance with any standard or other duty of performance
hereunder and as required by the Power Agreement and the Loan
Documents.
2.02 Initial Staffing, Startup and Testing. After receiving
Authorization to Proceed, Operator shall prepare a hiring
schedule for the personnel identified and agreed to by Operator
and Owner. After review and written approval of the hiring
schedule by Owner, Operator shall cause the commencement of
initial hiring of personnel. Operator shall adjust the hiring
schedule, as requested by Owner in writing, in accordance with
changes in the construction, startup, and Commercial Operation
Date, and shall obtain Owner's review and approval of such
changes.
Operator shall provide capable operating personnel to assist
in initial training, startup and testing of the Facilities under
the direction and supervision of the EPC Contractor. It is
understood that Owner is obligated to pay for Operator's services
during startup and testing as provided herein but that total
supervision and direction of all startup and testing activities
(including those of Operator) shall be furnished by the EPC
Contractor who will have care, custody and control of the
Facilities prior to Commercial Operation Date of the Facilities.
2.03 Operation and Maintenance. Operator shall operate and
maintain the Facilities, seven (7) days a week, twenty-four (24)
hours per day, in accordance with Prudent Utility Practices,
manufacturers' recommendations as applicable, and as required by
the Power Agreement attached hereto as Exhibit A, or Loan
Documents as may be amended relating to the Facilities and this
Agreement. The Operator will operate the Facilities in a manner
to maximize the useful life of the equipment, to avoid excessive
fuel consumption, to minimize downtime for repairs, and to avoid
forced outages, in a manner consistent with that of a prudent
owner maintaining its own facility for its own account. Operator
shall consult with Owner in order to clarify its obligations in
the event that any conflict exists in these obligations under
this Agreement. Operator shall be solely responsible for the
operation and maintenance of the Facilities hereunder but will
follow the directions of Owner with respect to financial or
economic matters as long as compliance with such directions will
not materially and adversely affect the operation and maintenance
of the Facilities nor its performance as required hereunder after
comparison of the relative benefits and detriment of incurring
any cost and the relative effect on operations if such cost were
not incurred.
2.04 Tools.
A. Operator shall review the tool list
developed by the EPC Contractor pursuant to the
EPC Contract, and shall identify and prepare a
list of recommended tools required to adequately
perform the requirements of this Agreement. Said
list will be submitted to Owner in one or more
increments and shall be modified or supplemented
throughout the term of this Agreement by agreement
of the Parties as necessary to permit the timely
acquisition thereof. The initial list of such
tools shall, in no event, be submitted to Owner
later than one hundred eighty (180) days prior to
the Scheduled Commercial Operation Date.
B. The initial supply of tools identified
on the list described in Section 2.04A. above
shall be subject to the written approval of the
Owner and will be procured by Operator to Owner's
account as provided in Section IV of this
Agreement or as a Reimbursable Cost. Operator
shall promptly notify Owner in writing of tools
that were not approved that could impact its
obligations and duties hereunder.
C. Operator shall be responsible for
annually, or as otherwise reasonably requested by
Owner in writing, preparing and presenting to
Owner an accurate reconciliation of the
Facilities' tool inventory.
D. Operator shall be responsible for the
use, management, control, care, and custody of the
Facilities' tools.
E. Operator shall repair or replace tools
as required, as a Reimbursable Cost or to the
Account of Owner, as provided in Section IV.
F. Operator shall periodically, and no less
frequently than annually, review the Facilities
tools, and make recommendations to Owner for
additional tools that would improve the Facilities
operations.
2.05 Spare Parts.
A. Operator shall review the spare parts
list developed by the EPC Contractor pursuant to
the EPC Contract, and shall identify and prepare a
list of recommended spare parts required to
adequately perform the requirements of this
Agreement. Said list will be submitted to Owner
in one or more increments and shall be modified or
supplemented throughout the term of this Agreement
by agreement of the Parties as necessary to permit
the timely acquisition thereof. The initial list
of such spare parts shall, in no event, be
submitted to Owner later than one hundred eighty
(180) days prior to the Scheduled Commercial
Operation Date. Spare parts will be determined
with reference to generally accepted practices in
the industry and with reference to manufacturer's
recommendations.
B. The initial supply of spare parts
identified on the list described in Section 2.05A.
above shall be subject to the written approval of
the Owner and will be procured by Operator for
Owner's account as provided in Section IV of this
Agreement or as a Reimbursable Cost.
C. Operator shall, subsequent to submitting
the initial list of spare parts described in
Section 2.05A. above be responsible for procuring,
for Owner's account as provided in Section IV
hereof or as a Reimbursable Cost, replacements for
said listed spare parts as necessary.
D. Operator shall be responsible for the
use, care, custody, management and control of said
spare parts.
E. Operator shall be responsible for
annually, or as otherwise reasonably requested by
Owner in writing, performing and presenting to
Owner an accurate reconciliation of the
Facilities' spare parts inventory.
F. Operator shall be responsible for
establishing proper and effective on-site
warehousing and inventory controls for such spare
parts. The inventory control system is to be
coupled to an Owner approved plant maintenance
management information system.
G. Operator shall procure additional parts
subject to Owner's written approval or replacement
parts to maintain inventory at levels to support
Facilities requirements, as a Reimbursable Cost or
to the Account of Owner as provided for in Section
IV.
2.06 Equipment.
A. Operator shall identify and prepare a
list of recommended machinery, equipment, office
furnishings, computers, and software (the
"Equipment") required to adequately perform the
requirements of this Agreement. Said list will be
submitted to Owner in one or more increments and
shall be modified or supplemented throughout the
term of this Agreement by agreement of the Parties
as necessary to permit the timely acquisition
thereof. The initial list of such Equipment
shall, in no event, be submitted to Owner later
than one hundred eighty (180) days prior to the
Scheduled Commercial Operation Date.
B. The Equipment identified on the list of
such Equipment described in Section 2.06A. above
shall be subject to the written approval by Owner
and shall be procured by Operator for Owner's
Account as provided in Section IV or as a
Reimbursable Cost. Operator shall promptly notify
Owner in writing of the Equipment that was not
approved that could impact Operator's obligations
and duties hereunder.
C. Operator shall periodically review the
Equipment required to perform under this Agreement
and make recommendations to Owner of modifications
or additions to the Facilities equipment
throughout the term of this Agreement that would
improve or enhance the Facilities operations.
D. Operator shall be responsible for the
use, management, care, custody, operation and
maintenance of said Equipment. Operator shall
repair or replace, as a Reimbursable Cost or to
the Account of Owner as provided for in Section
IV, the Equipment.
E. Operator shall, when approved in advance
by Owner in writing, procure and install
additional Equipment as a Reimbursable Cost or to
the Account of Owner as provided for in Section
IV.
2.07 Consumables and Other Materials.
A. Operator shall identify those
consumable, expendable, and other materials and
supplies ("Consumables") necessary to perform the
requirements of this Agreement. Said Consumables
will be identified to Owner throughout the term of
this Agreement as necessary to permit the timely
acquisition thereof. The initial list of such
Consumables shall, in any event, be identified and
submitted to Owner in writing no later than one
hundred eighty (180) days prior to the Scheduled
Commercial Operation Date.
B. Operator shall use, manage, care for,
control and maintain Consumables as required to
support the needs of the Facilities, and procure
Consumables, as Reimbursable Costs or to Owner's
Account as provided in Section IV, throughout the
term of this Agreement.
2.08 Purchased Parts, Labor and Services. Operator shall
identify and procure, as Reimbursable Costs or for the account of
Owner as provided for in Section IV, parts other than spare parts
and labor and services throughout the term of this Agreement as
necessary to perform the requirements of this Agreement. This
will include procurement for the services of equipment
manufacturer's personnel, or personnel trained and qualified to
provide equivalent services, to perform manufacturer's
recommended service procedures when deemed necessary. Without
limitation, Operator, in its capacity as Owner's agent, shall
procure as a Reimbursable Cost third-party contracts to clean up
and remove hazardous waste and solid waste, except to the extent
such waste arises out of the negligence or fault of Operator or
pursuant to Section 2.16. Any maintenance or repair which can
reasonably be performed by regular full time on-site personnel,
provided pursuant to Section 2.01 above, shall be performed by
them.
2.09 Maintenance and Repairs. Operator shall comply with
procedures developed pursuant to Section 2.10 below and otherwise
provide all maintenance and repair services necessary to keep the
Facilities in good working order in a manner consistent with
Prudent Utility Practices, to correct by appropriate measures any
damage to or malfunction of the Facilities, and provide all
necessary information to and cooperate with Owner so that Owner
may enforce or make warranty claims with respect to any repair or
malfunction. Any parts utilized in performing operation and
maintenance services shall be new or refurbished according to
manufacturer's recommendations. Operator shall assign to Owner
the manufacturer's warranty on all parts Operator has procured.
2.10 Operating, Maintenance and Safety Plans and Procedures.
Using the operations and maintenance manuals supplied to Owner by
the EPC Contractor pursuant to the EPC Contract as supplemented
by Operator's standard procedures developed for like facilities,
Operator shall develop (and furnish copies to Owner for review
and approval in writing) necessary, specific and fully integrated
operating, maintenance and safety plans and procedures including,
without limitation, the following (each of which shall satisfy
the requirements set forth in the Power Agreement):
A. Startup, operating, dispatching and
shutdown procedures for the Facilities equipment
and systems including appropriate periodic checks
of and/or for water quality and treatment
requirements, fluid or gaseous leaks, improper
temperatures, excessive noise and vibrations,
proper pressures and liquid levels, emission
levels and other pertinent operating information
indicative of the equipment condition.
B. Periodic maintenance plans identifying
schedules and procedures for the equipment
lubrication, packing and seal checks, filter
checks and services, and electrical and control
system checks.
C. Plans and procedures for long-term
maintenance and overhaul of the Facilities'
equipment.
D. Plans and procedures for as-needed
repairs and overhauls.
E. Plans and procedures for emergency
service and repairs as needed, twenty-four (24)
hours a day, each day of the year. Such
procedures will provide for expedited service and
repairs; for the availability of Operator's
management personnel, in connection with such
services, on a twenty-four (24) hours a day, each
day of the year basis; for notification of and
expediting the availability of factory or service
personnel when necessary repairs are beyond the
capabilities of on-site personnel, and for the
immediate notification of Owner of any emergency
event or condition, of anticipated corrective
actions to be taken and of anticipated service and
repair times and cost consequences.
F. Procedures for identifying, acquiring
and maintaining required spare parts to ensure
that the Facilities has an adequate inventory of
spare parts, in accordance with Section 2.05 of
this Agreement including a critical spare parts
analysis which will identify key parts that may
require over-stocking for the purpose of increased
plant availability.
G. Procedures for notice to and approval by
Owner of any alterations or capital improvements
to the Facilities, so that no alterations or
capital improvements to the Facilities will be
made without the written consent of Owner.
Operator will, without limitation, provide in such plans and
procedures for visual, mechanical or instrumental inspection as
necessary in order to provide early detection of required
adjustments, repairs or replacements so that required
adjustments, repairs or replacements can be scheduled with
minimum interference to the Facilities operations insofar as
possible. Such procedures will be consistent with applicable
manufacturer's recommendations, will provide for the services of
factory representatives and/or outside consultants where
appropriate and will provide for orderly shutdowns and minimum
interference with operations. Such procedures will be reviewed
as required and in no event less frequently than annually with a
copy of the review provided to Owner. No alterations to the
Facilities shall, in any event, be made without the prior written
approval of Owner.
2.11 Records. Operator shall keep and maintain maintenance
and operation records for the Facilities and for the equipment
therein. Such records shall satisfy the requirements set forth
in the Power Agreement and Lenders' requirements under Loan
Documents and shall include, without limitation: the logging of
daily exception reports; daily Operator's logs; a record of all
maintenance and repairs performed; copies of all plans and
procedures developed pursuant to Section 2.10 above or otherwise;
emissions and compliance reports; equipment and instrument
calibration records; fuel consumption records; and electricity
production, consumption and delivery records. All records shall
be made available for examination by Owner, the Utility (where
required by the Power Agreement) or Lender (where required by the
Loan Documents) during normal working hours.
2.12 Reports. Operator shall prepare and furnish a monthly
operations report within ten (10) business days following the
close of each calendar month, including the following:
A. A review of operations for the prior
month (fuel consumption, electricity and steam
production, consumption and deliveries).
B. Identification of significant exceptions
to the normal status of equipment.
C. Identification of all major repairs or
alterations made to equipment during the prior
month.
D. Identification and explanation of
significant performance deviations from the prior
month or from anticipated performance.
E. Identification of maintenance and
shutdowns planned for the succeeding twelve (12)
months.
F. Any significant personnel issues
including hiring, disciplinary action or lost time
due to injuries.
G. Such other matters as may be reasonably requested
by Owner in writing.
Operator shall also provide all notices and reports required
in connection with the operation and maintenance of the
Facilities by applicable permits, laws and regulations and the
Power Agreement and Loan Documents relating to the Facilities
within the times required. Owner shall be responsible, pursuant
to Section 3.10C., for providing those documents which identify
all required notices relating to the operation and maintenance of
equipment contained in the Facilities that are required by this
Section 2.12 and Operator will cooperate with Owner in the
identification and obtaining of all such documents.
2.13 Governmental, Regulatory, Utility and Safety
Requirements. Operator shall operate and maintain the Facilities
in compliance with all applicable laws, permits, approvals,
ordinances, rules, regulations and orders of central, provincial,
city, county and local governmental authorities. Operator shall
also comply with all safety and other rules and regulations
reasonably established in writing by Owner with respect to the
Facilities and with all safety and other rules and regulations
established by the Utility with respect to interconnection
delivery facilities and with respect to property owned by or
leased from the Utility. In the event that such requirements
change during the term of the Agreement, and such changes require
additional costs of Operator, these additional costs shall be
mutually determined by Owner and Operator and reimbursed to
Operator by Owner as Reimbursable Costs. In the event such
changes require alteration to the Facilities, Owner shall be
responsible for the costs of such alterations.
2.14 Liens And Encumbrances. Operator shall keep all real
property and all personal property and equipment associated with
or part of the Facilities free and clear of all liens and
encumbrances caused by an action or failure to act by Operator or
any of its consultants, suppliers or subcontractors in the
performance of its obligations under this Agreement, including,
without limitation, failure by Operator to pay, when due, any
bill or charge for labor or services performed or materials or
equipment furnished for use in connection with this Agreement.
Contractor shall immediately notify Owner in writing of any such
liens or encumbrances. Nothing herein contained shall require
Operator to pay any claims for labor, materials or services which
Operator, in good faith disputes and which Operator, at its own
expense, is currently and diligently contesting; provided,
however, that Operator shall, not later than thirty (30) days
after notice of the filing of any claim of lien that is disputed
or contested by Operator, post a surety bond sufficient to
release said claim of lien in accordance with the relevant laws
and approvals of the People's Republic of China or other relevant
laws.
2.15 Metering. Operator shall verify the accuracy of meters
and devices used to measure the delivery of thermal energy as
required, but in no event less frequently than quarterly.
Operator shall verify the accuracy of meters and devices used to
measure the delivery of electricity, coal, and water as required,
but in no event less frequently than annually. Such verification
is to be performed in a manner consistent with the requirements
of the Power Agreement and the steam sales agreements, and other
applicable regulations of the Utility.
2.16 Waste. Operator shall not allow any hazardous or solid
waste to accumulate on the Site in contravention of any
applicable law, regulation or governmental permit or license, the
Power Agreement, or any Loan Documents relating to the Facilities
or otherwise to cause any impediment to operations and
maintenance services to be performed or which may threaten the
health or safety of persons present at the Facilities. Operator
shall notify Owner immediately should any hazardous or solid
waste problem arise and shall assist Owner to remedy such
situation.
2.17 Scope of Work. Operator shall perform, throughout the
term of this Agreement, all services described in this Agreement.
Such services shall be performed and supplied in connection with,
but not limited to, the following:
A. Prior to and until such time as
construction of the Facilities is commenced
pursuant to funding from non-affiliated third
party lenders to the Facilities, Operator will:
i. Develop a written plan for the
conduct of its responsibilities under this
Agreement and form, or be prepared to
immediately form, a business entity
appropriate for the conduct of its
responsibilities under this Agreement and in
accordance with a written business plan to be
agreed to by the Owner;
ii. Provide a preliminary review
and consult with Owner regarding all plant
design specifications, paying particular
attention to designs which affect the
Facilities operations and operability, and
submit a written assessment thereof to Owner
for its review;
iii. Conduct a preliminary
assessment of the available local Chinese
labor force which may be available to assist
in the Facilities operations and report
thereon to the Owner;
iv. Develop preliminary standards,
qualifications, and position description
criteria for key personnel and positions
which it believes necessary to perform its
duties under this Agreement;
v. Develop and provide to Owner
its plans with respect to all training
required for all Chinese labor;
vi. Prepare and deliver to Owner a
draft organization chart for the full
staffing of the Facilities, thought to be
required;
vii. Develop and prepare its
proposed preliminary, pre-commercial and post-
commercial operating budgets for the
Facilities and discuss all matters relating
thereto for conclusion and acceptance by
Owner;
viii. Support Owner with one
(1) trip to New York for a presentation to
bond rating agencies and cooperate with and
assist Owner on all matters, with information
relating to Operator which may be reasonably
required, within the scope of its work to be
conducted pursuant to this Agreement, which
may or does affect Owner's ability to obtain
construction and permanent financing for the
Facilities; and
ix. In the performance of the
services provided pursuant to this Section
2.17A., Operator may consult with and utilize
Owner's advisors and consultants and
information, for assistance in its
preliminary legal and procedural analysis of
the business structure required for the
conduct of operations. The cost of the use of
such outside consultants (whose use and scope
of services shall be pre-approved by Owner)
will be borne by Owner, except as required by
Operator in the formation of Operator's
business unit. Owner makes no representation
or warranty to Operator with respect to the
reliability or accuracy of all such
information, or advice, and Operator shall
make its own assessment and determination as
to the reliability and accuracy thereof.
B. Pre-Commercial Operations Period.
Subsequent to the Facilities Funding Date and
prior to the Commercial Operation Date (as defined
in the Power Agreement), Operator will assist
Owner in specifying and procuring tools, spare
parts, chemicals, etc., and will provide operating
personnel to assist in startup and testing of the
Facilities under the direction and supervision of
the EPC Contractor. These services will be
performed by Operator in accordance with this
Agreement and the schedules and budgets that are
established by Operator and approved by Owner, and
will include providing all management,
administration, supervision and staffing functions
required to mobilize and provide the personnel
capable of assisting the EPC Contractor during
startup and testing and also technically capable
of operating the Facilities upon commencement of
operations following the Commercial Operations
Date. In addition, Operator shall monitor any
services previously required to be provided, and
amend or revise or update all information as
required in order to maintain a current and
correct account thereof; and perform the following
generally described duties all in accordance with
the terms of this Agreement:
i. Administrative Services.
Operator shall be responsible for all normal
administrative and personnel related
activities with respect to Operator's
personnel, including benefits, bonuses,
scheduling and overtime. In addition,
Operator's administrative responsibilities
shall include, but are not limited to, the
following:
(a) The development of the
Facilities safety procedures including,
but not limited to, electrical lock-
out/tag-out procedures, closed vessel
entry procedures, hazardous materials
control plan, spill prevention plan,
fire prevention plan, etc.;
(b) All customary purchasing
activities on-site, including the
purchase of all consumables, chemicals,
spare parts, equipment, tools and
miscellaneous equipment needed prior to
Commercial Operations. Purchasing
activities shall include, without
limitation, obtaining competitive
quotes, examinations, purchase document
control, warranty tracking, receiving
and inspection and invoice approval.
Monthly purchase summaries shall be
provided to Owner within twenty (20)
days from the last day of each month;
(c) The development of an on-
site budget to provide for all customary
operation and maintenance functions in
accordance with Prudent Utility
Practices including, among other things,
initial spare parts, consumables,
maintenance overhauls, tools, equipment,
etc. This budget shall be submitted to
Owner for approval prior to any
commitment of funds;
(d) The review and comment by
Operator's management and supervisory
personnel of the startup and testing
activities prior to and during
performance testing by the EPC
Contractor, subject to Owner's ultimate
responsibility for the results of such
startup and testing activities;
(e) The review and comment by
Operator's management and supervisory
personnel of all mechanical and
electrical one line drawings to assure
plant operability and maintainability
concerns are addressed by the EPC
Contractor, subject to Owner's ultimate
responsibility for any errors or
omissions by the EPC Contractor;
(f) The review and comment by
Operator's management and supervisory
personnel of the adequacy of vendor
training programs and how these are
scheduled to fit in with the Operator's
overall training program;
(g) The development of
operating procedures for all customary
aspects of the plant's operations and
maintenance, including but not limited
to: day-to-day operations and
maintenance, dispatch protocol, delivery
and receipt of fuels, water treatment,
consumables and hazardous materials,
etc.;
(h) Making reasonable efforts
to promote the public relations of the
Facilities and to maintain good
community relations including those with
the city, county and provincial
authorities, customer representatives,
lending institution personnel and
approves site visitors;
(i) The identifying and
preparing of lists of recommended office
equipment and furnishings to adequately
perform administrative activities; and
(j) Providing Owner's on-site
plant manager and Owner's engineering
representatives with as needed
assistance during the startup and
testing of the Facilities.
ii. Training. Operator will
provide training services in conjunction with
those of the EPC Contractor which will fully
familiarize its personnel and subcontractor
personnel with all the Facilities systems
operation and maintenance requirements based
on Operator's assessment of available local
Chinese labor skills. Such training will
consist of, among other things, combined
classroom instruction and field walk-downs
for the operations and maintenance personnel,
as well as any specialized training required
for Chinese labor. These training sessions
will be conducted prior to the commencement
of startup activities on the plant so that
Operator's staff can get hands-on experience
during the startup, check-out and
commissioning and testing of the Facilities'
systems. Each session should be based on the
operating and maintenance data and
information contained in the Plant Manual(s)
to be prepared by the EPC Contractor's staff.
The Plant Manual(s) will be made available to
Operator on a schedule that will support the
development of a training program prior to
startup.
A preliminary list of systems expected to be covered in such materials is
presented below:
Ash Handling & Disposal HVAC
Chemical Feed Lighting
Circulating Water Main Steam
Coal Handling Plant Drains
Compressed Air Plant Water
Condensate Storage & Sample System
Transfer
Cooling Water Steam Generator
DCS/Controls Steam Turbine &
Auxiliaries
Feedwater UPS
Fire Protection Water Treatment
Fuel Oil 110 kV System
Fuel Unloading, Handling & 125 Vdc
Preparation
Heat Trace
iii. Operating Services. Operator's
operating responsibilities prior to the
Commercial Operation Date will include, but
are not limited to, the following:
(a) The hiring and
mobilization on-site in a timely manner
of qualified and competent (expatriate
or local) plant management, supervision,
operations and maintenance personnel
ready to be trained;
(b) Providing trained
operations and maintenance personnel to
assist in startup and testing of the
Facilities under the direction and
supervision of the EPC Contractor; and
(c) The development and
preparation of lists of consumables,
expendables and other materials and
supplies necessary to operate the plant.
iv. Maintenance Services.
Operator's maintenance responsibilities prior
to the Commercial Operation Date shall
include, but are not limited to, the
following:
(a) The development and
implementation of an Owner approved
maintenance management information
system (MMIS) in time to support the
commencement of system hand-over (in
some cases, this may occur prior to
Final Acceptance);
(b) The developing of
initial short- and long-term maintenance
plans for the Facilities in accordance
with manufacturer requirements prior to
the Commercial Operation Date;
(c) The preparation of
lists of recommended spare parts
required to adequately operate and
maintain the Facilities in a reliable
manner to meet the requirements of the
Power Agreement after the Commercial
Operation Date;
(d) The setting up and
organizing of an inventory control
system which is coupled to the MMIS
prior to the Commercial Operation Date;
and
(e) The organizing,
stocking and management of the plant
spare parts, consumables, and tools
inventory.
C. Commercial Operations Period. After the
Commercial Operation Date, Operator will have
complete on-site responsibility for the operations
and the maintenance of the Facilities. This
includes providing all (expatriate or local) plant
management, administration, supervision and
staffing functions and activities as are
necessary. This responsibility will include the
procurement of materials, supplies, consumables
and outside services, as per approved budget.
The scope of services and activities
required from Operator to meet these
responsibilities include, but are not limited to,
those described in the following sections.
i. Operational Services.
Operator's operations and maintenance
responsibilities shall include, but are not
limited to, the following:
(a) The continued providing
and training of sufficient qualified and
competent personnel to operate and
maintain the Facilities;
(b) Operational activities
necessary to produce and supply reliable
electrical energy to the customer in
accordance with the Power Agreement;
(c) Operational activities
necessary for the supply of thermal
energy to the thermal hosts in
accordance with the thermal energy
supply agreement during those hours when
electrical power is generated;
(d) The Facilities operation
in compliance with all environmental
regulations and updates, including
noise, water intake, waste water
discharge, ash and solids disposal, and
air emissions permits. This shall
include the timely submittal of periodic
reports as required by the permits;
(e) Fuel control including
sampling, testing, unloading, storage
and accounting;
(f) The control of minimal
waste water discharge from the
Facilities; and
(g) The safe and secure
storage and control of all gases,
chemicals, lubricants and any other
hazardous or perishable consumables.
ii. Maintenance Services.
Operator shall preserve the Facilities in
good mechanical, electrical and operating
repair and condition in accordance with
Prudent Utility Practices. Operator's
maintenance responsibilities shall also
include, but are not limited to, the
following:
(a) Providing continuous
updates to the previously implemented
MMIS including the generation of
comprehensive monthly reports on all
preventive, planned, and/or deferred
work orders associated with the
Facilities;
(b) Developing short-term and
long-term maintenance plans for the
Facilities in accordance with
manufacturer's requirements and prudent
practices;
(c) The Facilities upkeep and
maintenance, including landscaping,
roadways, buildings, and rubbish
collection; and
(d) The management of the
spare parts and tool inventory including
a monthly activity summary. This
responsibility shall include performing
an annual, audited, physical count of
all items retained on-site.
iii. Administrative Services.
Operator shall be responsible for all normal
administrative and personnel related
activities relating to its employees,
including benefits, bonuses, scheduling and
overtime.
In addition, Operator's responsibilities shall include, but are not
limited to, the following:
(a) The safety of all
personnel and equipment at the
Facilities. This responsibility shall
include compliance with all ordinances,
regulations, and local or national
legislation;
(b) The physical security of
the Facilities and its equipment,
inventory, and personnel;
(c) The efficient operation
of the Facilities to maximize useful
life of equipment, to avoid excessive
fuel consumption, to minimize downtime
for repairs and forced outages within
the constraints of the Power Agreement
and thermal energy agreements;
(d) The coordination of fuel
requirements for the Facilities with the
fuel supplier in accordance with the
fuel supply contract;
(e) All purchasing activities
on-site, including the purchase of all
consumables, chemicals, spare parts,
equipment, equipment repairs, outside
Operator services and approved the
Facilities modifications. Purchasing
activities shall include obtaining
competitive quotes, examination,
purchase document control, expediting,
receiving, inspection and invoice
approval. Monthly purchase activity
summaries will be required;
(f) The development of an on-
site annual budget with regard to
purchased parts, services and
administration cost for approval by
Owner at least two (2) months prior to
the budget year in question;
(g) The development of,
revisions to, and management of
emergency systems and procedures in
accordance with all Power Agreements and
local and national regulations;
(h) To use reasonable efforts
to promote mutually beneficial
relationships with customer
representatives, thermal hosts, and fuel
suppliers;
(i) To use reasonable efforts
to promote public relations relating to
the Facilities and to maintain good
community relations including those with
the city, county and provincial
authorities, and neighbors;
(j) Support of the Owner in
the timely update, re-application or
renewal of all environmental or
operating permits that pertain directly
to the operation of the Facilities; and
(k) The development of an
annual capital improvement plan with
draft plans and proposed budget
implications.
D. Preparation of the Facilities for the
Commercial Operation Date including, without
limitation, the following:
i. Review engineering drawings;
provided however, such review shall not give
Operator any responsibility for the design of
the Facilities;
ii. Participate with Owner in
design review meetings, in construction
reviews, in the development of training
programs and in development of the Facilities
checkout and startup procedures; and
iii. Provide and train qualified
Operator personnel.
E. Testing and acceptance of the Facilities
from the EPC Contractor including: (i) review of
turnover packages, (ii) system walk-downs; and
(iii) assistance in developing punchlists.
F. Testing of the Facilities required by
the Power Agreement. Operator shall provide
trained and qualified operating personnel to
assist in the startup and testing of the
Facilities under the direction and supervision of
the EPC Contractor prior to the Commercial
Operation Date of the Facilities.
G. Startup of the Facilities in connection
with each dispatch from the Utility.
H. Management and provision of all
activities required for the Facilities support and
operation, under the direction of Owner's
Representative, including but not limited to:
community interface, fuel scheduling, and
management of other contracts and services
necessary to support the Facilities.
I. Operation of the Facilities.
J. Management of all operation and
maintenance requirements of the Facilities.
K. Maintenance of the Facilities.
L. Furnishing electrical energy to the
Utility, together with the maintenance schedules
and other records required by the Utility under
the Power Agreement.
M. Providing home office support activities
for the Facilities including but not limited to
those of Exhibit B.
N. Assist Owner in obtaining and renewing
the necessary permits and licenses of Section 3.05
when requested by Owner.
O. Submit a desired schedule of Scheduled
Outages as defined herein (including the duration
of each outage) to Owner at least four (4) weeks
before Owner is required to supply same to the
Utility.
P. Cooperate with the Utility and Owner in
scheduling and performing all scheduled
maintenance outages, routine maintenance and major
overhaul outages in accordance with Owner's
obligations under the Power Agreement or as set
forth in any Loan Documents.
Q. Preparation and submission to Owner, for
Owner's approval, of an Annual Budget for the
Facilities, at least ninety (90) days before the
beginning of each calendar year. Such budget shall
be consistent with the requirements of this
Agreement and meet the requirements of the Power
Agreement or any Loan Documents.
R. Provide sufficient training to operating
and maintenance personnel to assure that their
capabilities and qualifications are maintained.
S. Cooperate with the Utility in scheduling
and performing all testing required under the
Power Agreement.
T. Provide all other maintenance and
operations services necessary to the safe,
efficient and reliable operation of the
Facilities.
SECTION III
SERVICES TO BE PERFORMED BY OWNER
From and after the Commencement Date, Owner shall be
responsible for the following:
3.01 Owner's Representative. Owner shall provide a full-
time Owner's Representative to administer Owner's
responsibilities under this Agreement, to monitor the operation
of the Facilities, and to provide direction on economic and
financial matters associated with all its responsibilities
hereunder.
3.02 Office Space, Equipment, and Administrative Services.
Owner shall provide office and administrative space,
administrative services and equipment for Operator at the
Facilities.
3.03 Tools, Spare Parts, Equipment and Consumables. Owner
will:
A. Provide written approval or give timely
objections to the lists of tools, spare parts,
Equipment, and Consumables identified by Operator
pursuant to Section II.
B. Pay for approved supplies of tools,
spare parts, equipment, Consumables, and purchased
parts, labor and services and Reimbursable Costs
required by Operator to perform its
responsibilities under this Agreement, and as
provided for in this Agreement.
3.04 Utilities. Owner will provide and pay for all
utilities.
3.05 Permits And Licenses. Owner will obtain necessary
permits and licenses, except those which are issued in the name
of Operator or that Operator is required to obtain under Section
II above.
3.06 Staffing Schedules. Owner will provide written
approval or give timely objections for its obligation to give
staffing schedule approval required in Section 2.02.
3.07 Manuals. Consistent with the needs of Operator for
such material to perform its obligations under this Agreement,
Owner shall deliver, or cause to be delivered to Operator, copies
of operating and maintenance manuals for all equipment installed
in the Facilities and any and all additional documents received
from the EPC Contractor under the EPC Contract including, but not
limited to, as-built drawings of the Facilities, record books,
vendor manuals and operations and maintenance manuals.
3.08 Training. Owner shall cause the EPC Contractor to
provide training to the employees of Operator in the startup and
operation of the Facilities and any and all related machinery and
equipment to the extent set forth in Section 3.02 of the EPC
Contract provided Operator has made such employees available to
the EPC Contractor as provided in Section II.
3.9 Payments. Owner shall make payments to Operator in
accordance with Sections IV and V of this Agreement.
3.10 Other Responsibilities. Owner will:
A. Provide and pay for all fuel required
throughout the term of this Agreement.
B. Pay or reimburse Operator all property
or other taxes (including, but not limited to, any
business tax or VAT taxes) related to the
Facilities or its activities and operations but
not income taxes of Operator.
C. Provide all necessary documents in its
possession, that Operator needs to perform its
obligations relating to the operation and
maintenance of equipment contained in the
Facilities under this Agreement. Owner and
Operator shall consult with each other to
determine the obligations under such documents for
which Operator is responsible.
3.11 Owner shall, at all times, conform to all laws,
ordinances, rules and regulations applicable to it.
3.12 Owner has a responsibility to identify and provide
Operator with all relevant provisions in the Power Agreement and
the Loan Documents and any amendments thereto in a timely manner.
To the extent that Owner does not notify Operator of such
amendments, Operator is not liable for compliance with such
amendments. Owner agrees to consult with Operator in the event
that such changes to the Loan Documents or Power Agreements is
contemplated.
SECTION IV
COMPENSATION
4.01 Owner shall pay for services provided by Operator
during all periods of service provided under this Agreement as
follows:
A. Operations and Maintenance Costs.
Operator will manage and control operations and
maintenance costs according to a predetermined
budget that has been accepted by and developed in
conjunction with the Owner. All operations and
maintenance expenses will be administered by
Operator and paid by Owner in local currency or
paid as a Reimbursable Cost.
B. Local Labor Costs. Operator shall
contract with one or more Chinese contractors to
supply suitable operations and maintenance
personnel for the Facilities. All labor contract
expenses shall be administered by Operator and
paid by Owner in local currency. In the event the
Parties determine that it may be appropriate or
desirable for Operator to direct-hire labor
personnel, the Parties will mutually agree upon
the compensation terms to apply to such direct-
hired labor.
C. Operator's US Labor Costs (work in US).
All Operator's United States labor (those employed
and paid by Operator) charges will be billed in US
dollars to Operator at a fixed multiplier of 2.1
on the hourly rate for work performed while in the
United States. Travel and living expenses which
have been pre-approved by Owner and Operator in
accordance with an approved budget, will be billed
in US dollars at actual cost with no markup in
accordance with Operator's standard travel
policies. Expenses associated with the work
performed will be billed at cost with no markup.
Payments by Owner to Operator for such labor shall
be in US currency.
D. Operator's US Labor Costs (work outside
of US). All Operator's United States labor (those
employed and paid by Operator for work performed
outside the US) will be billed in US dollars to
Owner at a fixed multiplier of 2.1 on the hourly
rate, plus an additional amount sufficient to
cover any duties, taxes, incentives and other
labor-related fees assessed on the income of
foreign nationals (which will be passed along by
Operator to its employees), for pre-approved work
performed hereunder outside of the United States.
Expenses associated with pre-approved work
performed will be billed at cost. Travel and
living expenses will be billed in US dollars at
actual cost with no markup in accordance with
Operator's standard travel policies. Payments by
Owner to Operator for such labor shall be in US
currency.
E. Expatriate Contract Labor Costs.
Expatriate contract labor costs will be treated as
normal operations and maintenance expenses
(summarized in 4.01A. above) and will be billed
through to Owner at actual cost with no markup,
but with an increase sufficient to cover any
duties, taxes, incentives and other labor-related
fees assessed on the income of such expatriate
contract laborers for payment by Operator to such
laborers. Payments by Owner to Operator for such
labor shall be in U.S. or Chinese currency as
directed by Operator.
All labor costs (items A., B., C. and E. above) will be
tracked against a budget approved by Owner.
F. Plant General and Administrative
Expenses. Plant site General and Administrative
(G&A) costs will be managed and controlled
according to a predetermined budget that has been
accepted by Owner. All G&A costs associated with
plant operations will be administered by Operator
and paid for by Owner in local currency.
G. Operating Fee. In addition to the
expense reimbursements provided for above, an
annual Operating Fee of Five Hundred Thousand and
No/100 Dollars ($500,000 US dollars) will be paid
to Operator in equal monthly installments
beginning with the establishment of Commercial
Operations to operate and maintain the Facilities.
For the first calendar month, the monthly
installment of the Operating Fee shall be prorated
based on the number of days of the month after the
Commercial Operations Date. The Operating Fee and
all dollar amounts indicated in Section 4.01H.vi.,
vii., and viii. shall be adjusted annually
commencing on the first day of each year
subsequent to January 1, 1997, by the change in
index values of the (i) immediately preceding
month of December; and (ii) the next immediately
preceding month of December, as specified in the
Consumer Price Index for All Urban Consumers, U.S.
City Average, Table 1, in the row titled
"Services" under the column heading "Unadjusted
percent change to..." as published in CPI Detailed
Report for the immediately preceding December.
H. Contract Price Adjustments.
i. Peak Hour Output Price
Adjustment. Subsequent to the Commercial
Operations Date, Operator's monthly
installment of the annual Operating Fee,
described in Section 4.01G., will be adjusted
based on the facility energy output during
Peak Hours (Peak Hours shall mean the eight
(8) hour period during each day designated as
"Peak Hours" by the Utility) as follows:
(a) For each Peak Hour
period during each day that the
Facilities exceed 760,000 kWh of net
energy production, Operator will receive
an increase in the monthly installment
of the annual Operating Fee of
$0.010/kWh for each kWh above 760,000
kWh of net energy production during the
Peak Hour period for that day.
(b) For each Peak Hour
period during each day that the
Facilities produces less than 800,000
kWh of gross energy production,
Operator's monthly installment of the
annual Operating Fee will be decreased
by $0.050/kWh for each kWh below 800,000
kWh of gross energy production during
the Peak Hour period for that day. This
provision (b) does not apply for times
when either unit is in a Scheduled
Outage, is not dispatched by the Utility
or is unable to produce electric energy
due to a Force Majeure condition of the
Facilities or the Utility. In the event
of a forced outage which may be
extended, the second (2nd) day of the
outage will be treated as a Scheduled
Outage.
ii. Non-Peak Hour Output Price
Adjustment. Subsequent to the Commercial
Operations Date, Operator's monthly
installment of the annual Operating Fee,
described in Section 4.01G., will be adjusted
based on the Facilities energy output during
Non-Peak Hours (Non-Peak Hours shall mean the
eight (8) hour period during each day
designated as "Non-Peak Hours" by the
Utility") as follows:
(a) For each Non-Peak
Hour period during each day that the
Facilities exceeds 504,000 kWh of gross
energy production but is less than
560,000 kWh, Operator will receive an
increase in the monthly installment of
the annual Operating Fee of $0.010/kWh
for each kWh of energy production above
504,000 kWh up to a maximum of 16,000
kWh of gross energy production during
the Non-Peak Hour period for that day.
(b) For each Non-Peak
Hour period during each day that the
Facilities exceeds 560,000 kWh of gross
energy production, Operator monthly
installment of the annual Operating Fee
will be decreased by $0.010/kWh for each
kWh above 560,000 kWh of gross energy
production during the Non-Peak Hour
period for that day.
iii. Trough Hour Output Price
Adjustment. Subsequent to the Commercial
Operation Date, Operator's monthly
installment of the annual Operating Fee,
described in Section 4.01G., will be adjusted
based on the Facilities energy output during
Trough Hours as follows, (Trough Hour shall
mean the eight (8) hour period during each
day designated as "Trough Hours" by the
Utility):
(a) For each Trough Hour
period during each day that the
Facilities exceeds 464,000 kWh of gross
energy production but is less than
480,000 kWh, Operator will receive an
increase in the monthly installment of
the annual Operating Fee of $0.010/kWh
for each kWh of energy production above
464,000 kWh up to a maximum of 16,000
kWh of gross energy production during
the Trough Hour period for that day.
(b) For each Trough Hour
period during each day that the
Facilities exceeds 480,000 kWh of gross
energy production, Operator's monthly
installment of the annual Operating Fee
will be decreased by $0.050/kWh for each
kWh above 480,000 kWh of gross energy
production during the Trough Hour period
for that day.
iv. Heat Rate Price Adjustment.
The Heat Rate Adjustment will be based on the
Base Heat Rate which shall be equal to 1.035
times the Heat Rate (including process steam)
of the final Facilities test conducted by the
EPC Contractor averaged at 60MW, 65MW and
full output of the Facilities. Subsequent to
the Commercial Operations Date, Operator's
monthly installment of the annual Operating
Fee, described in Section 4.01G., will be
adjusted based on the Facilities' monthly
Heat Rate as follows:
(a) For each month that
the Facilities' average Heat Rate
(including process steam) is less than
Base Heat Rate, Operator will receive an
increase in the monthly installment of
the annual Operating Fee of $0.003/kWh
times the net energy produced for the
month in kWh times the difference
between the Base Heat Rate and the
actual Heat Rate in Btu/kWh the quantity
divided by the Base Heat Rate.
(b) For each month that
the Facilities' average Heat Rate
(including process steam) is greater
than the Base Heat Rate plus 400
Btu/kWh, Operator will receive an
decrease in the monthly installment of
the annual Operating Fee of $0.003/kWh
times the net energy produced for the
month in kWh times the difference
between the actual Heat Rate (including
process steam) in Btu/kWh and the Base
Heat Rate plus 400 Btu/kWh the quantity
divided by the Base Heat Rate plus 400
Btu/kWh.
v. Outage Maintenance Days Price
Adjustment. Starting with the second October
31 after the Commercial Operations Date,
Operator's December monthly installment of
the annual Operating Fee, described in
Section 4.01G., will be adjusted based on the
Outage Days used by the Operator in the
preceding Annual Outage Period as follows:
(a) For each day that
each unit's Outage Days is less than
fifty-five (55) days in the preceding
twelve month Annual Outage Period,
Operator will receive an increase in the
December monthly installment of the
annual Operating Fee of [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
(b) For each day that
each unit's Outage Days is greater than
fifty-five (55) days in the preceding
twelve month Annual Outage Period,
Operator will receive a decrease in the
December monthly installment of the
annual Operating Fee of [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
For the period from Commercial Operation Date to the first October
31, the base Outage Days of fifty-five (55) days for determining
the adjustments of the provisions 4.01H.v.(a) and 4.01H.v.(b) above
shall be adjusted based on [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
The Price Adjustment Fee arrangement as noted
in 4.01H.v.(a) and 4.01H.v.(b) above shall be calculated at [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
vi. Environmental Compliance Price
Adjustments. Subsequent to the Commercial
Operations Date, Operator's monthly
installment of the annual Operating Fee,
described in Section 4.01G., will be adjusted
based on the Operator's compliance with
applicable regulations and permits as
follows:
(a) Operator's monthly
installment of the annual Operating Fee
will be increased by [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
based on the compliance of the Facilities'
operations with all applicable regulations
and permits.
(b) Operator's monthly
installment of the annual Operating Fee
will be decreased by [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
based on violation of any applicable
regulations or permits due to the fault
of the Operator.
vii. Personnel Safety Price
Adjustments. Subsequent to the Commercial
Operation Date, Operator's monthly
installment of the annual Operating Fee,
described in Section 4.01G., will be adjusted
based on the following:
(a) Operator's monthly
installment of the annual Operating Fee
will be increased by [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
based on no Lost Work Days on-site for that
month.
(b) Operator's monthly
installment of the annual Operating Fee
will be decreased by [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
based on any Lost Work Days on-site for
that month.
viii. Management Effectiveness
and Plant Appearance, Price Adjustment.
Subsequent to the Commercial Operation Date,
Operator's monthly installment of the annual
Operating Fee, described in Section 4.01G.,
may be increased by up to [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
per month based on the Owner's subjective
assessment of Operator's management effectiveness
and the overall housekeeping and general appearance
of the Facilities.
I. Contract Price Adjustment Limitations
i. Should the total monthly
contract price adjustments of Section 4.02H.
exceed Operator's monthly installment of the
Operating Fee, described in Section 4.01G.,
the amount of such price adjustments in
excess of the Operating Fee installment shall
be carried forward to the next month for
adjustment of that next month's installment
of the Operating Fee.
ii. Annually, starting with the
first full twelve (12) calendar month Annual
Outage Period, should the total of the twelve
(12) months of contract price adjustments of
Section 4.02H. result in a total negative
amount of more than [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
Owner shall credit Operator on the next invoice
payment with the difference between [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
and the total negative amount, such that
Operator's maximum exposure for negative
adjustments shall not exceed [***]
FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
iii. Should the period from
Commercial Operation Date to the first
October 31 date be less than three hundred
sixty-five (365) days, the adjustments
limitations of Section 4.01I.ii. above shall
be prorated based on the number of days
between the Commercial Operation Date and
October 31 divided by three hundred sixty-
five (365) days.
4.02 Operator Procurement to Owner's Account. Operator may
procure those items and services which are considered
Reimbursable Costs and are included in the Approved Budget by
issuing purchase orders to be paid directly by Owner on Owner's
purchasing and requisition forms. Operator shall supply a
confirming copy of the purchase order to Owner. For purchase
orders in excess of the equivalent of One Thousand and No/100
Dollars (US$1,000) or for any items not in the Approved Budget,
Operator is required to receive written authorization from
Owner's Representative prior to issuing purchase orders to be
paid directly by Owner on Owner's purchasing and requisition
forms.
4.03 Special Compensation Structure Prior to the Facilities'
Commercial Operation Date. Notwithstanding the provisions for
compensation enumerated above:
A. Prior to the Facilities Funding Date.
The special provisions for compensation from
execution of this Agreement until the Facilities
Funding Date are as follows:
i. No Operating Fee will apply;
ii. Costs of Operator setting up
its corporate entity to operate in China will
be borne by Operator;
iii. Travel and labor costs
associated with Operator's first trip to
China (regardless of mission or work
accomplishment) will be borne by Operator;
iv. Operator will perform the
workscope shown in Section 2.17A. at no cost
to Owner, other than: (i) pre-approved fees
and costs of Owner's consultants and other
resources incurred in connection with the
Facilities related services performed by
Operator, as provided for above; and (ii) in
connection with services rendered pursuant to
Sections 2.17A.iv. and v (for which Operator
and Owner will agree to a reasonable
compensation structure, prior to Operator
providing such work); and
v. All Operator's billings during
this period will be held and will be
submitted for payment after the Facilities
Funding Date or six (6) months, whichever
comes first. Operator will submit to Owner
monthly statements showing current billings
with totals accrued. No interest will accrue
on the billings.
B. Pre-commercial Operations Period. The
special provisions for compensation subsequent to
the Facilities Funding Date and prior to the
Commercial Operation Date, are as follows:
i. All expenses specifically
associated with setting up the Operator's
subsidiary in the People's Republic of China
will be to the account of Operator;
ii. In lieu of the annual
Operating Fee applicable pursuant to Section
4.01G., during this period of time will be
Two Hundred Fifty Thousand and No/100 Dollars
(US$250,000) per annum payable in monthly
installments of Twenty Thousand Eight Hundred
Thirty Three and No/100 Dollars ($20,833)
starting with the Commencement Date; and
iii. Operator will also be eligible
for a Startup Bonus payment of Five Hundred
Thousand and No/100 Dollars (US$500,000) at
the end of the Pre-Commercial Operations
Period. The Startup Bonus will be based upon
mutually agreed-upon criteria that measure
the Facilities' success during this period
including, but not limited to, achieving
critical path elements such as hiring,
training, sparing, or other program setup
milestones within the direct control of
Operator; and
iv. Operator's labor (in-country,
expatriate and contract), travel and other
expenses will be reimbursed by Owner in the
same manner as during the Commercial
Operating Period.
4.04 Taxes. Owner shall pay or reimburse all taxes or
duties arising from this Agreement, other than tax on Operator's
income, as provided in Section 3.10B. If the People's Republic
of China "deem" a profit to Operator based upon payments relating
to this Agreement in an amount in excess of the Operating Fee, as
adjusted pursuant to Section 4.01H., the deemed profit tax
payable by Operator on that excess amount shall be a Reimbursable
Cost. Operator shall use its best efforts to minimize the amount
of any such "deemed" profit.
4.05 Invoicing. Operator will invoice monthly for all
Reimbursable Costs and Fees payable under this Agreement.
Operator shall include in its invoice the Operating Fee and the
anticipated Reimbursable Costs payable under Sections 4.01C. and
4.01D., for the month following the invoice submission. With
respect to other Reimbursable Costs and any Contract Price
Adjustments pursuant to Section 4.01H., Operator's invoice shall
include amounts payable from the preceding month. On a quarterly
basis, Operator and Owner will reconcile actual Reimbursable
Costs under Sections 4.01C. and 4.01D. with the projected amounts
which have been paid hereunder, and Operator's next invoice
following such reconciliation will be adjusted accordingly.
SECTION V
PAYMENT
5.01 Payment of Monthly Compensation. The payment required
by Section IV, will be made on a calendar month basis. Operator
shall submit its invoices by the fifth day of the month. Owner
shall pay the amount due to Operator on or before the thirtieth
(30th) day following the date the invoice is received by Owner,
provided that invoices are submitted in a timely manner to allow
payment in the applicable month in accordance with applicable
loan requirements. Invoices not timely submitted shall be paid
within sixty (60) days. Operator shall submit its billing
together with copies of supporting invoices, vouchers, receipts,
and such other evidence of payment as Owner shall require.
5.02 Payment Of Termination Payments. Owner shall pay the
amount due pursuant to Section 7.02 to Operator on or before the
thirtieth (30th) day following the date the invoice for such
amount is received by Owner. Operator shall submit its billing
together with copies of supporting invoices, vouchers, receipts,
and such other evidence of payment as Owner shall require.
5.03 Payment Disputes. In the event of a dispute or
question regarding any invoice submitted by Operator, (i) all
amounts not disputed or in question shall be promptly paid as and
when required by Section 5.01 above, (ii) an explanation of the
dispute shall be promptly transmitted by Owner to Operator, (iii)
Owner and Operator shall immediately seek to resolve the dispute
or question, and (iv) payment shall be made within ten (10) days
of any remaining amount due when the dispute is resolved.
5.04 Audit Rights. Owner shall have the right to audit
Operator's books and records to verify that all reimbursable
costs are properly charged to Owner. No audit rights extend to
the makeup of lump sum amounts, unit rates, fixed percentages or
multipliers as may be agreed upon between Owner and Operator.
5.05 Interest. If Owner should fail to pay Operator the
amounts due and payable hereunder, except to the extent such
amounts may be in dispute, such delinquent payments shall bear
interest at an annual rate equal to one and twenty-five
hundredths (1.25) times the prime interest rate then currently
charged by the Chase Manhattan Bank in New York, New York
prorated for the period of arrears, but in no event shall such
rate exceed the maximum legal rate allowed by applicable usury
laws. Payment of interest shall not excuse or cure any default
or delay in payment of amounts due.
SECTION VI
TERM
6.01 Term. This Agreement shall become effective as of the
date of execution of this Agreement, and shall continue in effect
thereafter until the tenth (10th) anniversary of the date of
Commercial Operations unless otherwise terminated as provided in
this Agreement.
6.02 Extension of Term. Owner and Operator may elect to
extend such term for two additional periods of five (5) years
each. Any extension of the term of this Agreement will be
affected by mutual written agreement between the parties after
having given notice of the desire to so extend at least sixty
(60) days prior to the end of the then effective term. All of
the terms and conditions of this Agreement which are not modified
or changed in any such written agreement shall remain in full
force and effect throughout any such extended term.
SECTION VII
TERMINATION
7.01 Termination By Owner Without Cause. Owner shall have
the right to terminate this Agreement upon any termination of the
Power Agreement. Any Lender to the Facilities shall have the
right to terminate this Agreement for convenience should it
declare an "Event of Default" under the Loan Documents after any
cure period or other ability of Owner or any other party to cure
any such default. In addition, Owner shall have the right to
terminate this Agreement for convenience or in the event that the
Facilities are sold to a third party who intends to operate the
Facilities. In the event Owner gives a written termination
notice pursuant to the provision of this Section 7.01, this
Agreement shall terminate as of the date specified in such notice
which shall be no earlier than fifteen (15) days after the date
the notice is given.
7.02 Termination Payments. Upon termination pursuant to
this Section VII, Owner shall pay Operator: (i) all outstanding
costs pursuant to Section IV hereof; (ii) reasonable costs that
may be incurred by Operator in support of the termination of this
Agreement, and (iii) reasonable severance costs resulting from
the termination of employment of Operator's employees. Payment
of these amounts will be in accordance with Section V.
In the event of termination for convenience pursuant to
Section 7.01 or in the event of termination pursuant to Sections
7.04A. and 7.04B., Owner shall pay, in addition to the amounts
above, monthly termination payments from the date of termination
through the original Term of this Agreement. The monthly amounts
for such payments shall be determined from the following schedule
and shall be in accordance with Section V:
A. Twenty Five Thousand and No/100 Dollars
($25,000) per month from the Commercial Operation
Date through the twenty-fourth (24th) month
following the Commercial Operation Date;
B. Twenty Thousand and No/100 Dollars
($20,000.00) per month for the twenty-fifth (25th)
month through the forty-eighth (48th) month
following the Commercial Operation Date; and
C. Fifteen Thousand and No/100 Dollars
($15,000) per month for the forty-ninth (49th)
month following the Commercial Operation Date
through the original Term of this Agreement.
Owner may pay at its sole option Operator these monthly
termination payments in a lump sum based on the net present value
of the payment stream discounted at a rate of twelve percent
(12%) per annum.
7.03 Termination By Owner for Cause. Owner may terminate
this Agreement upon written notice to Operator as provided for in
Section 7.05 upon the occurrence of any of the following:
A. Operator's failure to provide adequate
qualified personnel to perform its obligations
under the Agreement.
B. Repeated failure of the Facilities to
produce adequate thermal or electrical energy to
enable Owner to meet its obligations to the
Utility to the extent such failure was in
Operator's control.
C. Outage Days for either unit which when
added with the remaining Scheduled Annual Overhaul
Outages for that unit during the Annual Outage
Period exceed forty-five (45) days on or before
May 1 of any year, or exceed fifty (50) days on or
before August 1 of any year, or exceed fifty-five
(55) days at any time after August 1 of any year
until the end of the applicable Annual Outage
Period; provided, however, that in the case of
Annual Outage Periods during which there is a
planned major boiler/turbine overhaul during the
last two (2) months of the Annual Outage Period,
Operator may, within five (5) days after the
applicable maximum Outage Days described above
occurs, request Owner to seek the approval of the
Utility to reschedule such maintenance in a manner
that will allow Operator to avoid the termination
provisions of this Section. In the event Owner is
able to reschedule such maintenance with the
Utility within twenty-five (25) days after receipt
of the request of Operator, the termination shall
not take effect unless Operator thereafter exceeds
the maximum number of Outage Days using the
revised Scheduled Annual Overhaul Outages. In the
event Owner is unable to reschedule such
maintenance within such twenty-five (25) day
period, after using reasonable efforts to do so,
Owner may terminate this Agreement.
D. Failure of the Operator to perform in
any material respect any service or obligation to
be performed by it hereunder or any representation
or warranty shall prove to be incorrect in any
material respect.
E. The appointment of a receiver,
liquidator or trustee for Operator by a court of
competent jurisdiction or an adjudication of
bankruptcy or insolvency by any such court or the
filing by Operator of a petition seeking an
adjudication of bankruptcy or insolvency.
F. Continuance of a Force Majeure by
Operator for more time than that allowed in
Section 12.01.
7.04 Termination By Operator For Cause. Operator may
terminate this Agreement upon written notice to Owner as
provided for in Section 7.05 upon the occurrence of any of the
following:
A. Failure to pay undisputed amounts due to
Operator under this Agreement in accordance with
Section V.
B. Failure of Owner to perform in any
material respect any service or obligation to be
supplied or performed by it or any representation
of warranty shall prove to be incorrect in any
material respect.
C. Failure of Owner to obtain the
Facilities Funding Date by June 30, 1997;
D. Continuance of a Force Majeure by Owner
for more time than that allowed in Section 12.01.
7.05 Written Notification of Termination. In the event a
written termination notice is given pursuant to Sections 7.03A.,
7.03D. or 7.04B., such notice shall set forth the circumstances
providing the basis for such termination and the Party which
receives such notice shall have thirty (30) days to remedy such
condition. In the event such circumstance is not corrected by
the Party receiving such notice, or the Party receiving such
notice has not taken substantive action acceptable to the other
Party in its sole discretion to correct the circumstances by the
end of such thirty (30) day period, this Agreement shall
terminate.
7.06 Termination Procedure. Neither Party may terminate
this Agreement except as provided in this Section VII. Operator
shall, in the event of termination, take all reasonable steps
necessary to assure an orderly transfer of operation and
maintenance responsibility to Owner or to Owner's designee
including, without limitation, the delivery of all of the
following to Owner or to any such designee:
A. All operation, maintenance or other
records, manuals and procedures associated with
the Facilities.
B. All tools, Consumables, spare parts and
equipment associated with the Facilities.
C. At the option of Owner or such designee,
assignments to Owner or such designee, in form
reasonably satisfactory to Owner or such designee,
of any agreements between Operator and third
parties relating to the performance of the
obligations of Operator under this Agreement.
7.07 Owner Cure of Operator's Default. In the event of a
default by Operator in its obligations hereunder, Owner may (but
shall not be required to) cure such default and may charge
Operator any additional incremental costs incurred by Owner to
cure such default. The exercise by Owner of this right shall not
waive any other rights of Owner hereunder.
SECTION VIII
INSURANCE AND INDEMNIFICATION
8.01 Insurance. Without limiting any of the obligations or
liabilities of the Operator, Operator shall at all times
throughout the term of this Agreement and any renewal thereof,
carry and maintain, or cause to be maintained, at its own
expense, insurance with at least the minimum insurance coverage
set forth below and such other additional insurance as may
reasonably be required from time-to-time by the Owner. All
insurance carried and maintained pursuant to this Agreement shall
be with insurers, and shall be in such form as shall be
satisfactory to the Lender.
A. Operator shall carry and maintain or
cause to be maintained worker's compensation
insurance (or other similar or equivalent social
insurance) written in accordance with the
governing insurance laws of the People's Republic
of China and employers' liability coverage in an
amount not less than $1,000,000 per occurrence in
the annual aggregate. The employers' liability
coverage shall not contain an occupational disease
exclusion.
B. Operator shall carry and maintain or
cause to be maintained comprehensive automobile
liability insurance covering all owned, non-owned
and hired vehicles. Such coverage shall be
written in an amount not less than $1,000,000
combined single limit per occurrence in the annual
aggregate.
C. Owner shall provide a Contractor's All
Risk (CAR) insurance policy for the Facilities
covering the general liability and builder's risk
exposure. The limit of liability insurance will
be $90,000,000 and Owner, Operator,
Subcontractors, and Financing Entities will be
named insureds.
D. Following Final Acceptance, Owner shall
procure and maintain all risk property insurance
(including boiler and machinery and business
interruption insurance) naming Operator as an
additional insured and providing a waiver of
subrogation in favor of Operator and designated
Subcontractors. Subject to Owner's approval, such
insurance may also include such other Persons as
may be requested by Operator as additional
insureds.
E. Commercial General Liability Insurance.
Owner shall provide coverage for Owner and
Operator against claims for third party bodily
injury (including death) and third party property
damage. Such insurance shall provide coverage for
products - completed operations, blanket
contractual, explosion, collapse and underground
coverage, broad form property damage and personal
injury insurance. The policy will provide a
combined single limit of liability of $20,000,000
per occurrence and in the aggregate for bodily
injury and property damage.
F. Owner shall furnish Operator and in turn
Operator shall furnish Owner with evidence of the
insurance required hereunder, in the form of
insurance certificates. All such insurance
certificates shall represent that the policies may
not be canceled or changed with respect to the
requirements of this Section 8.01 without thirty
(30) days prior written notice to Operator or its
permitted assigns.
G. All deductibles or self-insured
retentions under its respective policies shall be
the sole responsibility of the Operator.
H. Any insurance carried and maintained in
accordance with this Agreement shall be endorsed
to provide that:
i. Owner and any Lender to the
Facilities, shall be named as additional
insureds with respect to insurance carried
pursuant to items A. employers liability
(only if possible) and B. Any obligation
imposed upon the Operator (including the
liability to pay premiums) shall be the sole
obligation of the Operator and not that of
the Owner or Lender;
ii. The interest of the Owner and
any Lender to the Facilities shall not be
invalidated by any action or inaction of the
Operator or any other person and all policies
shall insure the Owner and Lender regardless
of any breach or violation by the Operator or
any other Person of any warranties,
declarations, or conditions in such policies;
iii. The insurer thereunder waives
all rights of subrogation against the Owner,
any Lender to the Facilities, and the
Utility, any right of setoff and counterclaim
and any other right to deduction due to
outstanding premium, 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
the Owner, any Lender, and the Utility with
respect to their interests as such in the
Facilities;
v. Inasmuch as such policies are
written to cover more than one insured, all
terms, conditions, insuring agreements and
endorsements (other than the limits of
liability) shall operate in the same manner
as if there were a separate policy covering
each insured; and
vi. If such insurance is canceled
for any reason whatsoever, including
nonpayment of premium, or any substantial
change is made in the coverage that affects
the interests of the Owner, any Lender, and
the Utility, such cancellation or change
shall not be effective as to the Owner, such
Lender, and the Utility, until thirty (30)
days after receipt by the Owner, Lender, and
the Utility of written notice sent by
registered mail from such insurer of such
cancellation or change; provided, however,
that such thirty (30) day period shall be
reduced to ten (10) days in the case where
cancellation results from the nonpayment of
premiums.
J. On or before the execution of this
Agreement and annually thereafter, Operator shall
arrange for furnishing Owner and third party for
which Owner makes written request with approved
certification of all required insurance. Such
certification shall be executed by each insurer or
by an authorized representative of each insurer.
Such certification or notice, as the case may be,
shall identify insurers, the type of insurance,
the insurance limits and the policy term and shall
specifically list the special endorsements in
Section 8.01D. above. Operator will furnish Owner
and any third party with copies of all insurance
policies, binders, and cover notes or other
evidence of such insurance relating to the
Facilities in the event of a claim.
K. Concurrently with the furnishing of the
certification referred to in item J. above,
Operator will furnish Owner and any third party at
the request of Owner with a report of each insurer
or insurance broker stating that all premiums then
due from the Operator have been paid and that in
the opinion of such insurer or insurance broker,
the insurance then carried and maintained with
respect to the Facilities is in accordance with
the terms of this Agreement. Furthermore,
Operator will cause an insurer or insurance broker
to advise Owner and any third party promptly in
writing of any default in the payment of any
premiums or any other act or omission on the part
of the Operator or any other person of which such
broker has actual knowledge which might invalidate
or render unenforceable, in whole or in part, any
insurance provided hereunder. Owner and/or such
third party may, at their sole option, obtain such
insurance if not obtained by the Operator and, in
such event, Operator shall reimburse Owner and/or
such third party upon demand for the cost thereof.
8.02 Risk of Loss. Owner shall bear the risk of physical
loss or damage to the Facility, including all materials,
equipment and supplies (including temporary materials, equipment
and supplies) purchased for permanent installation in or use
during construction of the Facility, regardless of whether Owner
has title thereto. Operator and Subcontractors shall have no
liability at any time for loss or damage to property of Owner, or
in custody of Owner, and Owner releases Operator and their
Subcontractors there from. Operator and their Subcontractors
shall also have no liability for any loss of, or damage to the
Facility, as it is the intent of the Parties to rely on the
proceeds of Owner's insurance as satisfaction for any loss or
damage to the Facility, and Owner releases Operator and their
Subcontractors for any such loss or damage.
8.03 Indemnification.
A. Subject to the scope and limits of the
insurance coverages listed in Section 8.01 above;
Operator agrees to defend and indemnify Owner, any
lenders, and the Utility and their respective
directors, officers and employees (collectively
"Indemnitee") against, and hold them harmless from
any and all claims, suits, liabilities and legal
expenses (collectively "Claims") resulting from or
in connection with Operator's performance,
negligent performance, or non-performance of its
obligations hereunder except where such Claims
were caused by the sole negligence or willful
misconduct of an Indemnitee, provided that
Operator shall be promptly notified in writing so
such claim or suit brought against such Indemnitee
and shall be permitted to participate in the
defense thereof.
B. Subject to the scope and limits of the
insurance coverages listed in Section 8.01 above;
Owner agrees to defend and to indemnify Operator
and its directors, officers and employees
(collectively "Operator Indemnitee") against, and
to hold them harmless from any and all Claims,
resulting from or in connection with Owner's
performance, negligent performance, or non-
performance of its obligations hereunder, except
where, such claims were caused by the sole
negligence or willful misconduct of the Operator
Indemnitee, provided that the same notification
to, and opportunity to participate, specified in
Section 7.05A. above is afforded to Owner.
C. Owner agrees to defend and to indemnify
Operator Indemnitee against and to hold them
harmless from any and all claims, resulting from
or in connection with Operator Indemnitee acting
under the EPC Contractor's supervision and
direction, the EPC's Contractor's performance,
negligent performance or non-performance of its
obligations pursuant to Section 2.02, except where
such claims where caused by Operator's
Indemnitee's failure to comply with the directions
given by EPC Contractor and/or the sole negligence
or willful misconduct of Operator's Indemnitee.
D. Indemnities against, releases from,
assumptions of, and limitations on liability
expressed in this Agreement, as well as waivers of
subrogation rights, shall apply even in the event
of the fault, negligence or strict liability of
the Party indemnified or released or whose
liability is limited or assumed or against whom
rights of subrogation are waived and shall extend
to the partners of each Party, their Affiliates,
and their respective officers, directors,
employees, and agents.
8.04 Additional Insured. Any Lender and the Utility shall
be named as an additional insured under the foregoing policies of
insurance.
8.05 Pre-Existing Contamination. Anything herein to the
contrary notwithstanding, title to, ownership of, and legal
responsibility and liability for any and all pre-existing
contamination shall at all times remain with Owner. "Pre-
existing contamination" is any hazardous or toxic substance
present at the site or sites concerned which was not brought onto
such site or sites by Operator. Owner agrees to release, defend,
indemnify and hold Operator harmless from and against any and all
liability which may in any manner arise in any way directly or
indirectly caused by such pre-existing contamination except if
such liability arises from Operator's gross negligence or willful
misconduct.
8.06 Damage Limitation. Except as expressly provided
herein, Operator nor Owner shall have liability to the other
party hereunder for indirect, incidental or consequential
damages, including, without limitation, loss of revenues,
liability for loss of use of the Facility or existing property,
loss of profits, loss of product or business interruption,
howsoever caused, including breach of contract, tort (including
negligence), strict liability or otherwise.
SECTION IX
PERMITS AND LICENSES
9.01 Owner Permits and Licenses. Owner shall be responsible
for obtaining and maintaining all permits, approvals and
licenses, required to be in the name of Owner, necessary for the
operation and maintenance of the Facilities (unless specifically
determined to be within the scope of work undertaken by
Operator). Operator shall cooperate with Owner in obtaining and
maintaining such permits and licenses and in preparing reports
required thereunder. Operator shall promptly advise Owner of any
required permits and licenses or renewals of which it becomes
aware.
9.02 Operator Permits and Licenses. Operator shall be
responsible for obtaining and maintaining all permits, approvals
and licenses required to be in the name of Operator and otherwise
required to be obtained by Operator in the performance of his
duties hereunder.
SECTION X
INDEPENDENT CONTRACTOR
At all times, Operator shall perform the requirements of
this Agreement as an independent contractor to the Owner.
Operator shall have full responsibility for the control and
direction of its employees, servants and agents. Operator shall
be fully and solely responsible for the payment of such
employees, servants and agents and for the payment of all
obligations incurred by Operator in performing the requirements
of this Agreement. This Agreement is not intended to and shall
not create a partnership of any kind or type. Except for as
provided in Section 2.08, Operator shall not be an agent for and
may not bind Owner. Owner shall not be an agent for and may not
bind Operator.
SECTION XI
COORDINATION AND ACCESS
11.01 Access. Owner shall provide Operator and its
employees, agents, and sub-contractors with full and free access
to the Facilities at all times to perform its obligations under
this Agreement. Operator shall furnish Owner with a list of
employees engaged in operation and maintenance of the Facilities
and shall inform Owner in writing of all changes thereto.
Operator, its employees, agents and subcontractors shall comply
with all safety and other requirements established by Operator
and Owner in connection with such access.
11.02 Coordination; Required Level of Performance.
Operator's personnel will interface with Owner's Representative
and with appropriate representatives of the Utility. Operator
shall accept daily instructions from the Utility, steam
purchasers, and Owner as to projected requirements, subject to
the design limits of the Facilities. In the event of any
interruption of the operation of the Facilities or in the event
Operator is unable to operate the Facilities so as to meet the
such requirements of the Utility, steam purchasers, and Owner,
Operator shall immediately notify Owner of the circumstance and
shall exert its best efforts to restore the Facilities to its
required operating level.
SECTION XII
FORCE MAJEURE
12.01 Force Majeure. Neither Party shall be responsible
or liable for or subjected to a termination of this Agreement for
or deemed in breach of this Agreement as a result of any delay or
deficiency in the performance of its obligations hereunder to the
extent that such delay or deficiency is due to circumstances
beyond its reasonable control. "Force Majeure Event" shall mean
any event that is not foreseeable and for which the damages
caused by the event are not reasonably preventable by the Party
declaring Force Majeure and cannot be overcome such that it
adversely affects one Party's performance of its obligations
under this Agreement, including, without limitation, unusually
severe weather conditions (i.e., lightening, hurricane or
typhoon); any natural disasters such as fire or earthquakes, any
labor difficulty not involving employees of any parties hereto,
any labor difficulty involving employees of parties hereto to the
extent such employees are members of a labor union and such labor
difficulty is in violation of a labor contract or in violation of
applicable laws; any labor difficulty involving employees of
parties hereto, not caused by the act or the failure to act on
the part of the relevant party hereto, to the extent such
employees are in the process of becoming members of a labor
union; war; inability to obtain fuel for the Facilities; riots;
requirements, actions or failures to act on the part of
governmental authorities preventing performance; any
modifications or changes in law, regulations or rules made by the
government of The People's Republic of China or any other local
government or their agencies which directly or indirectly affect
either Parties' performance of its obligations under this
Agreement; inability despite due diligence to obtain required
licenses or approvals; accident; fire; damage to or breakdown of
necessary facilities; or transportation delays or accidents (such
causes hereinafter called "Force Majeure"); provided that:
A. 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;
B. The suspension of performance is of no
greater scope and of no longer duration than is
required by the Force Majeure but under no
circumstances shall the Force Majeure exceed one
hundred and eighty (180) days; however, if such
Force Majeure is declared by Operator and results
in the inability of the Facilities to furnish
Dependable Capacity to the Utility as required by
the Power Agreement;
C. The Party with a deficiency in its
performance uses its best efforts to remedy such
deficiency and to mitigate the effect of the Force
Majeure Event. If the Force Majeure Event is
labor related, Operator shall use best efforts to
hire new employees or enter into new subcontracts;
D. 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;
E. If Operator declares Force Majeure,
Owner shall have the immediate right to enter the
site at Owner's discretion to operate and maintain
the Facilities until such time as the Force
Majeure is resolved; and
F. The Force Majeure shall not excuse
failure to apply money obligations nor shall it
excuse any deficiency in performance to the extent
caused by any negligent or intentional act, error,
or omission, or failure to comply with any law,
rule, regulation, order or ordinance.
12.02 Extension of Agreement by Force Majeure. Except
as otherwise provided, in no event will any condition of Force
Majeure extend this Agreement beyond its stated Term.
SECTION XIII
ARBITRATION
Any unresolved dispute that may arise between the Parties
regarding this Agreement shall be settled by arbitration. The
arbitration shall be conducted in accordance with the Commercial
Rules of the American Arbitration Association. Venue for any
arbitration proceedings shall be in Dallas, Texas. In such
proceedings, the arbitrator shall have the authority to include
in his award reimbursement of attorney fees and costs to the
prevailing Party. Such award shall be final and binding upon the
parties and may be entered and enforced in any court of
appropriate jurisdiction.
SECTION XIV
OPERATOR AND OWNER REPRESENTATIONS AND WARRANTIES
14.01 Representations and Warranties of Operator.
Operator represents and warrants, as of the date hereof, as
follows:
A. It is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Nevada, is duly qualified to
do business in and is in good standing in the
State of Nevada and shall be qualified to do
business in the People's Republic of China within
one hundred twenty (120) days after Notice of
Proceed to the Commercial Operation Date, and in
any other jurisdiction where it is required to be
so qualified;
B. It has taken all necessary action to
authorize the execution, delivery and performance
of its obligations under this Agreement, which
action has not been superseded or modified, and
this Agreement constitutes the legal, valid and
binding obligation of Operator, enforceable in
accordance with its terms;
C. The execution, delivery and performance
of this Agreement do not violate (i) its articles
of incorporation or by-laws or any resolution of
its Board of Directors or other committees charges
with the governance of its affairs, (ii) any
contract to which it or, to the best of its
knowledge, any of its Affiliates is a party or
(iii) any law, rule, regulation, order writ,
judgment, injunction, decree or determination
affecting Operator or any of its properties;
D. It has not filed any petition for relief
under the bankruptcy laws of the United States of
America, or any other sovereign nation has not
made nor is making an assignment for the benefit
of creditors, initiated nor been the subject of
any proceeding seeking to have a receiver or
trustee appointed to liquidate or manage its
affairs, and none of its properties is subject to
the jurisdiction of any bankruptcy court of the
United States of America or any receivership
proceeding;
E. No litigation is pending or, to its
knowledge, threatened which seeks to restrain it
from performing its obligations hereunder or the
adverse outcome of which would materially affect
its business or its ability to perform its
obligations hereunder;
F. No authorization or approval or other
action by, and notice to or filing with, any
government agency or regulatory body is required
for the due execution, delivery and performance by
Operator of this Agreement which have not been
obtained;
G. It or one of its Affiliates is
experienced in the operation, maintenance and
repair of electrical generating facilities, has
complied with the provisions of all applicable
laws, including, without limitation, environmental
laws, respecting the operation of such facilities
and has not been and is not currently subject to
any judgment or settlement of any claim imposing
significant liability on it for noncompliance with
law or mismanagement in its operation of any
electric power generating facility; and
H. It is familiar with the terms of the
Power Agreement and steam sales agreements if
Operator is to operate the steam sales agreements
which affect or relate to the operation of the
Facilities.
14.02 Representations and Warranties of Owner. Each of
Tangshan Panda, Tangshan Pan-Western, Tangshan Cayman, and
Tangshan Pan-Sino represents and warrants, as of the date hereof,
as follows:
A. It is a foreign joint venture company
duly organized, validly existing and in good
standing under the laws of the People's Republic
of China;
B. It has taken all necessary action to
authorize the execution, delivery and performance
of its obligations under this Agreement, which
action has not been superseded or modified, and
this Agreement represents the valid and binding
obligation of Owner, enforceable in accordance
with its terms;
C. The execution, delivery and performance
of this Agreement do not violate (i) its Joint
Venture Contracts, Articles of Association, or by-
laws or any resolution of its Board of Directors
or other committees charges with the governance of
its affairs, (ii) any contract to which it is a
party or (iii) any law, rule, regulation, order,
writ, judgment, injunction, decree or
determination affecting Owner or any of its
properties;
D. It has not filed any petition for relief
under the bankruptcy laws of the United States of
America or any other sovereign nation, has not
made nor is making an assignment for the benefit
of creditors, has not initiated nor been the
subject of any proceeding seeking to have a
receiver or trustee appointed to liquidate or
manage its affairs, and none of its properties is
subject to the jurisdiction of any bankruptcy
court of the United States of America or any
receivership proceeding;
E. No litigation is pending or, to its
knowledge, threatened which seeks to restrain the
performance of its obligations hereunder or the
adverse outcome of which could materially affect
its business or its ability to perform its
obligations hereunder; and
F. No authorization or approval or other
action by, and notice to or filing with, any
government agency or regulatory body is required
for the due execution, delivery and performance by
Operator of this Agreement which have not been
obtained.
SECTION XV
NOTICES
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, or by telecopy, addressed as follows:
If to Operator:
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
2225 East Flamingo Road, Suite 307
Las Vegas, Nevada 89119
ATTN: Vice President, Operations and Maintenance
DUKE/FLUOR DANIEL
One Coliseum Centre
2300 Yorkmont Road
Charlotte, North Carolina 28217
ATTN: Vice President, Operations and Maintenance
If to Owner:
Tangshan Panda Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: Director of Operations
Tangshan Pan-Western Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: Director of Operations
Tangshan Cayman Heat and Power Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: Director of Operations
Tangshan Pan-Sino Heat Co., Ltd.
Luannan County
Hebei Province
The People's Republic of China
ATTN: Director of Operations
Either Party may change or augment their above address by
written notice given as provided herein.
SECTION XVI
APPLICABLE LAW
16.01 Choice of Law. This Agreement shall be deemed to
have been made in Dallas, Texas and to be performed in China. It
shall be construed in accordance with the laws of the State of
Texas without application of its conflicts of laws provisions.
16.02 Certain Legal Representations and Undertakings.
Each of Operator and Owner represent, undertake and warrant that
it will not engage in and that no funds shall be used directly or
indirectly for any illegal payments or activities under the laws
of The People's Republic of China or of the United States of
America.
Payments made to any person shall not be used for any
improper or unlawful purposes, including any form of comical
bribe, kickback, or influence payment. Without limiting the
generality of the foregoing, it is expressly understood that
neither Operator nor Owner shall, directly or indirectly, give,
pay, offer, promise nor authorize the giving or payment of, any
money or anything of value to any officer or employee of any
government or any department, agency, or instrumentality thereof,
to any person acting in an official capacity for or on behalf of
any government or any department, agency or instrumentality, to
any political party official, or to any candidate for political
office for the purpose of influencing any act or decision in
order to assist the Partnership in obtaining, retaining or
directing business to the Partnership, or any other person or
entity. No party shall establish or maintain any undisclosed or
unrecorded funds or assets nor falsify or cause the making of any
artificial entries in any books or records in connection with any
services performed under this Agreement.
In addition to the foregoing provisions, each of Operator
and Owner expressly undertake that in connection with any
inspection or audit of the records of either party, to insure
compliance with the provisions hereof, the audited party shall
cooperate fully with the auditing party or its designee, shall
refrain from making any false or misleading statements, and shall
not omit to state, or cause any person to omit to state, any
material facts necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading.
SECTION XVII
NON-WAIVER
The failure of Owner or of Operator to enforce any of the
terms and conditions or to exercise any right or privilege under
this Agreement shall not be construed as waiving any such term or
condition or right or privilege and the same shall continue and
remain in force and effect as if no such failure to enforce or
exercise has occurred. No waiver shall be valid unless so stated
in writing.
SECTION XVIII
TITLE
Title to all tools, equipment, supplies and parts purchased
by Operator and of all reports, record logs and documentation
prepared by Operator pursuant to this Agreement shall pass
directly upon payment by Owner. Said tools, equipment, supplies
and parts shall be and become the property of Owner free of all
liens and encumbrances except as provided for in Section 2.14
SECTION XIX
ASSIGNMENT
Operator may not assign either its rights or duties under
this Agreement without the prior written consent of Owner and
Lender which shall not be unreasonably withheld. Operator shall
execute all consents to assignment reasonably required by Lenders
to the Facilities.
SECTION XX
MISCELLANEOUS
20.01 Confidentiality. All Proprietary Information of a
Party (the "Transferor") which is disclosed to or otherwise
received or obtained by the other Party (the "Transferee")
incident to this Agreement is disclosed, and shall be held, in
confidence, and the Transferee shall not publish or otherwise
disclosed any Proprietary Information to any person for any
reason or purpose whatsoever or use any Proprietary Information
for its own purposes or for the benefit of any person, without
the prior written approval of the Transferor for a period of
eight (8) years from the date of receipt of such Proprietary
Information; provided, however, that the Proprietary Information
may be disclosed to any prospective financier of the Facilities
for purposes of obtaining financing for the development,
construction, operation or maintenance of the Facilities; and,
provided further that nothing herein shall limit the right of the
Transferee to provide any Proprietary Information to any court or
governmental authority having jurisdiction over or asserting a
right to obtain such information, provided that (i) such court or
governmental authority orders that such Proprietary Information
be provided, and (ii) the Transferee promptly advises the
Transferor of any request for such information by such
governmental authority and cooperates in giving the Transferor an
opportunity to present objections, requests for limitation,
and/or requests for confidentiality or other restrictions on
disclosure or access, to such court or governmental authority.
The term "Proprietary Information" means all written
information which has been or is disclosed by the Transferor, or
by an affiliate, officer, employee, agent, representative,
consultant, contractor, subcontractor or partner of the
Transferor, or which other becomes known to the Transferee or
other party in a confidential relationship with the Transferee,
and which (x) relates to matters such as patents, trade secrets,
research and development activities, draft or final contracts or
other business arrangements, books and records, budgets, cost
estimates, pro forma calculations, engineering work project,
environmental compliance, pricing information, operations and
maintenance procedures, private processes and other similar
information, as they may exist from time-to-time, or (y) the
Transferor expressly designates in writing to be confidential.
However, Proprietary Information shall exclude:
A. Information that, at the time of disclosure
hereunder is in the public domain, other than any such
information which entered the public domain by breach
of this Agreement or in violation of applicable law;
B. Information that, after disclosure hereunder,
enters the public domain, other than information that
entered the public domain by breach of this Agreement
or any other agreement, or in violation of applicable
law;
C. Information, other than that obtained from third
parties, that prior to disclosure hereunder, was
already in the recipient's possession, either without
limitation on disclosure to others or subsequently
becoming free of such limitation;
D. Information obtained by the recipient from a third
party having an independent right to disclose the
information; or
E. Information that is obtained through independent
research without use of or access to the Property
Information.
20.02 Joint Several Liability. Tangshan Panda, Tangshan
Pan-Western, Tangshan Cayman, and Tangshan Pan-Sino, shall be
jointly and severally liable for the obligations under this
Agreement.
20.03 Amendments. All amendments to this Agreement must
be written and must be signed by both parties hereto. Owner
shall give Operator written notice of any relevant amendments to
the Loan Documents in a timely manner. If an amendment or sub-
agreement to the Power Agreement, or an amendment to the Loan
Documents materially adversely affects the performance of the
Parties to this Agreement, the Parties shall negotiate in good
faith to amend this Agreement accordingly, including, but not
limited to, appropriate modifications to the Contract Price
Adjustments and Terminations for Default provisions, however,
such amendment(s) shall preserve the rights of the Parties
hereto.
20.04 Invalidity. 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.
20.05 Successors & Assigns. This Agreement shall inure
to the benefit of and shall be binding upon the parties hereto
and upon their respective successors and assigns.
20.06 Entire Agreement. This Agreement contains the
entire agreement and understanding between the parties as to the
subject matter of this Agreement and merges and supersedes all
prior agreements, commitments, representations, and discussion
between the Parties pertaining to the subject matter of this
Agreement.
20.07 Survival. The provisions of this Agreement which
by their nature are intended to survive the cancellation,
completion or termination of the Agreement shall continue as
valid and enforceable commitments of the Parties notwithstanding
any such cancellation, completion or termination.
20.08 WAIVER OF CONSUMER RIGHTS. The Parties HEREBY
WAIVE THEIR RIGHTS under the Deceptive Trade Practices Consumer
Protection Act, Section 17.41 et seq., Business and Commerce
Code, a law that gives consumers special rights and protections.
After both Parties have consulted with attorneys of their own
selection, they voluntarily consent to this waiver.
20.09 Limitations Application. Neither Party makes any
representations, covenants, warranties or guarantees, express or
implied, other than expressly set forth herein. The Parties'
rights, liabilities, responsibilities and remedies with respect
to the Services, whether in contract or otherwise, shall be
exclusively those expressly set forth in this Agreement.
20.10 Third Party Beneficiaries. Excluding rights any
lenders to the Facilities, this Agreement is not intended to
create any third party beneficiary or rights.
20.11 Off-Shore Services. The Parties agree to
negotiate in good faith to: (i) amend this Agreement by deleting
services to be provided outside of the People's Republic of
China; and (ii) to execute a separate off-shore services
agreement covering such services. The resulting agreements will
include all aspects of the rights, obligations and services
described herein.
20.12 Counterparts. This Agreement may be executed in
more than one counterpart, each of which shall be deemed to be an
original but all of which taken together shall be deemed a single
instrument.
Executed on the first day above-written.
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES
By:
Name: Richard D. Snell
Title: Vice President
TANGSHAN PANDA HEAT AND POWER COMPANY, LTD.
By:
Name: Darol S. Lindloff, General Manager
Title: Authorized Legal Representative
TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY, LTD.
By:
Name: Darol S. Lindloff, General Manager
Title: Authorized Legal Representative
TANGSHAN CAYMAN HEAT AND POWER COMPANY, LTD.
By:
Name: Darol S. Lindloff, General Manager
Title: Authorized Legal Representative
TANGSHAN PAN-SINO HEAT COMPANY, LTD.
By:
Name: Darol S. Lindloff, General Manager
Title: Authorized Legal Representative
EXHIBIT A
1. Electric Energy Purchase and Sales Agreement dated as of
September 22, 1995
[See Exhibit 10.84 to the Registration Statement on Form S-1
to which this exhibit is attached.]
2. General Interconnection Agreement as of September 22, 1995
[See Exhibit 10.83 to the Registration Statement on Form S-1
to which this exhibit is attached.]
3. Supplemental Agreement dated February 10, 1996
[See Exhibit 10.85 to the Registration Statement on Form S-1
to which this exhibit is attached.]
EXHIBIT B
HOME OFFICE SUPPORT
The following services may be typically provided by the
Operator's home office and shall be considered Reimbursable
Costs:
A. Overall job management
B. Annual Operations audit and report
C. Engineering review of plant performance and efficiency
D. Maintenance planning assistance programs
E. Inventory tracking control programs
F. Contract administration and interpretation assistance
G. Troubleshooting support
H. Site safety and hazardous materials programs
I. Capital project engineering support (includes
conceptualization, analysis, and recommendation and
does not include detailed engineering for such
projects, which will be performed as required as a
separate contract)
J. Problem analysis and resolution
K. Warranty administration assistance
L. Travel and living expenses of home office personnel
EXHIBIT C
EXCERPTS FROM LOAN AGREEMENT
[See Exhibit 10.87 to the Registration Statement on Form S-1 to which
this exhibit is attached.]
EXHIBIT 10.95
Construction Agreement of Heat and Steam Network of
Luannan Heat and Power Plant for Tangshan Pan-Sino Heat Company, Ltd.
Tangshan Pan-Sino Heat Co., Ltd., is related to Luannan Heat and
Power Plant, whose planned capacity is 2x50 MW. In order to achieve the
expected social benefits, the construction of Heat and Steam Network will
start and proceed simultaneously with the construction of the Luannan Heat
and Power Plant, and will finish ahead of the completion of construction
of the Luannan Heat and Power Plant. The construction of the Heat and
Steam Network will be contracted to Tangshan Heat and Engineering Company.
1. Scope of Construction: 12.1 kilometers hot water pipeline, 8.78
kilometers steam pipeline, heat exchange stations, heat control equipment
and civil construction.
2. Cost: The budget of the construction of the Heat and Steam Network is
RMB 24,170,000.00 in 1995 RMB. The cost is subject to escalation according
to Chinese State Statistic Bureau Price Index (Chinese CPI).
3. Payment Schedule: The contractor will begin construction upon Notice
to Proceed. 10% of the total cost will be paid by the owner as down
payment. The rest of payment will be paid out according to milestones of
the construction of the Network.
4. Construction Schedule: The construction of Heat and Steam Network
will start and proceed simultaneously with the construction of the Luannan
Heat and Power Plant, and will finish ahead of the completion of
construction of the Luannan Heat and Power Plant.
Tangshan Pan-Sino Heat Co., Ltd. Tangshan Heat and Engineering Company
Legal Representative: Legal Representative:
Darol Lindloff Li Yao
June 20, 1996 June 20, 1996
EXHIBIT 10.96
AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT
between
PAN-WESTERN ENERGY CORPORATION LLC
as Lender
and
TANGSHAN PANDA HEAT AND POWER CO., LTD.
as Borrower
Dated as of April 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS 1
1.1 Definitions 1
ARTICLE 2 - THE CREDIT FACILITY 13
2.1 Credit Facility 13
2.2 Interest Payments 13
2.2.1 Interest Payment Dates 13
2.2.2 Interest 13
2.3 Project Note 13
2.4 Repayment of the Loans 14
2.4.1 Payments 14
2.4.2 Application of Payments 14
2.5 Prepayments 14
2.5.1 Voluntary Prepayments 14
2.5.2 Certain Mandatory Prepayments 14
2.5.3 Expropriation Event; Event of Loss 14
2.6 Fees 15
ARTICLE 3 - CONDITIONS PRECEDENT 16
3.1 Borrower's Certificate 16
(a) Representations and Warranties 16
(b) No Event of Default 16
(c) Governmental Authorizations and other
consents and approvals 16
(d) Facility Costs 16
3.2 On-Shore Accounts 16
3.3 Evidence of Facility Costs and Other Expenses 16
3.4 Progress Report; Project Engineer 16
3.5 Registration Certificate 17
3.6 Equity Contributions; Real Estate Transfers 17
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 17
4.1 Organization 17
4.2 Authorization; No Conflict 17
4.3 Legality, Validity and Enforceability 17
4.4 Compliance with Law, Governmental Authorizations
and Project Documents 17
4.5 Governmental Authorizations 18
4.6 Litigation 18
4.7 Existing Defaults 18
4.8 Taxes 18
4.9 Contingent Liabilities 18
4.10 Business, Debt, Contracts, Etc. 18
4.11 Representations and Warranties 18
4.12 Utilities 18
4.13 Project Documents 19
4.14 Fees and Enforcement 19
4.15 Immunity 19
4.16 Subsidiaries and Beneficial Interest 19
4.17 No Other Powers of Attorney, etc. 19
4.18 Liens 19
4.19 Regulation of Parties 19
4.20 Transactions with Affiliates 19
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER 20
5.1 Repayment of Indebtedness 20
5.2 Existence, Conduct of Business, Properties, Etc. 20
5.3 Performance of Covenants and Obligations 20
5.4 Use of Funds 20
5.5 Accounts 20
5.6 Compliance with Legal Requirements 21
5.7 Operating Budgets 21
5.8 Books, Records, Access 22
5.9 Financial Statements 22
5.10 Insurance 22
5.11 Reports; Cooperation 23
5.12 Taxes and Other Governmental Charges 23
5.13 Notices 24
5.14 Expropriation Event 24
5.15 Increased Costs 24
5.16 Taxes 25
5.17 Registration of the Loans; Other Foreign
Exchange Matters 25
5.18 Loan Payment Reserve 25
ARTICLE 6 - NEGATIVE COVENANTS 25
6.1 Indebtedness 26
6.2 Limitations on Liens 26
6.3 Nature of Business 26
6.4 Sale or Lease of Facility Assets 26
6.5 Merger, Consolidation, Liquidation, Dissolution 26
6.7 Loans, Advances or Investments 27
6.8 Immunity 27
6.9 Distributions 27
6.10 Transactions With Affiliates 27
6.11 Partnerships; Subsidiaries 27
6.12 Assignment 27
6.13 Abandonment of Project 28
6.14 Improper Use 28
6.15 Regulation of Parties 28
6.16 Amendments 28
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES 28
7.1 Events of Default; Cure Rights 28
7.1.1 Failure to Make Payments 28
7.1.2 Misstatements; Omissions 28
7.1.3 Affirmative Covenants 28
7.1.4 Negative Covenants 29
7.1.5 Breach of Material Project Documents 29
7.1.6 Bankruptcy; Insolvency 29
7.1.7 Judgments 30
7.1.8 Other Indebtedness 30
7.1.9 Termination or Invalidity of Certain
Project Documents; Abandonment of Project 30
7.1.10 Commercial Operation Date 30
7.1.11 Government Authorizations 31
7.1.12 Destruction of Project 31
7.1.13 Change of Law 31
7.1.14 Remedies 31
ARTICLE 8 - SCOPE OF LIABILITY 31
ARTICLE 9 - MISCELLANEOUS 32
9.1 Addresses 32
9.2 Delay and Waiver 32
9.3 Entire Agreement 32
9.4 Governing Law 32
9.5 Severability 33
9.6 Headings 33
9.7 No Partnership, Etc. 33
9.8 Consent to Jurisdiction 33
9.9 Successors and Assigns 33
9.10 Counterparts 33
TABLE OF SCHEDULES AND EXHIBITS iv
TABLE OF SCHEDULES AND EXHIBITS
Exhibit A Form of Project Note
Schedule 5.8 Insurance
Schedule A Interest Payment Schedule
Schedule B Amortization Schedule
THIS AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT (this
"Agreement") dated as of April 1, 1997, by and between Pan-
Western Energy Corporation LLC (the "Lender"), a company with
limited liability organized under the laws of the Cayman Islands,
and Tangshan Panda Heat and Power Co., Ltd. (the "Borrower"), a
Sino-foreign equity joint venture with limited liability
organized under the laws of the People's Republic of China (the
"PRC" or "China").
W I T N E S S E T H :
WHEREAS, the Borrower has developed, and desires to
construct and operate, a 50 MW coal-fired thermal power
generation facility to be located in Luannan County, Tangshan
City, Hebei Province, China (the "Facility") in conjunction with
certain other facilities including an additional 50 MW coal-fired
thermal power generation facility and certain water supply,
steam, heat and hot water production and distribution facilities
and other related facilities (collectively referred to herein as
the "Project"); and
WHEREAS, the Lender, as the owner of approximately 88% of
the aggregate ownership interest in the Borrower, can be expected
to derive certain benefits as a result of this Agreement and
desires to lend certain funds to the Borrower on commercial terms
negotiated at arms length by and between the Borrower and the
Lender pursuant to, and upon the term and conditions contained
in, this Agreement and for the benefit of the Borrower;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" of a specified Person means any other
Person or Persons that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under
common control with the Person specified, or who holds or
beneficially owns 10% or more of the equity interest in the
Person specified or 10% or more of any class of voting securities
of the Person specified.
"Asset Sale" means sale, transfer or other disposition
(including any sale and leaseback of assets and any sale of
accounts receivable in connection with a receivable financing
transaction) by the Borrower or any of its Subsidiaries of any
property of the Borrower or any such Subsidiary, other than as
permitted pursuant to subsection 2.5.2.
"Authorized Representative" means as to any Person, its
president, chief executive officer or any senior vice president
or any other person specifically identified as such in a
certificate of such Person delivered to the Lender.
"Banking Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Bankruptcy Law" means any insolvency, reorganization,
moratorium or similar law for the general relief of debtors in
any relevant jurisdiction.
"Basic Settlement Account" shall have the meaning
ascribed to it in subsection 5.5.
"Borrower" means Tangshan Panda.
"Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
"Capitalized Lease" means as to any Person, any lease
of any property of which the discounted present value of the
rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such
Person, and "Capitalized Lease Obligation" means the rental
obligations, as aforesaid, under any such lease.
"Cash Equivalents" means, at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System, whose
rating is AA or higher from Standard & Poor's or Aa2 or higher
from Moody's, having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper
with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and
having the highest rating obtainable from Standard & Poor's or
Moody's; and (iv) repurchase obligations for a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above.
"Cash Flow Available for Debt Service" means, for any
period, (i) the sum of all revenues (including interest and fee
income and any principal payments received by the Borrower on the
Transmission Loan for such period, but excluding any insurance
proceeds, other than business interruption insurance proceeds,
and other similar non-recurring receipts) of the Borrower for
such period minus (ii) the aggregate amount of O&M Costs for such
period as determined on a cash basis and otherwise in accordance
with GAAP).
"Change of Law" means after the date of this Agreement,
the adoption of any Legal Requirement, any change in any Legal
Requirement or the application or requirements thereof, any
change in the interpretation or administration of any Legal
Requirement by any Governmental Instrumentality, or compliance by
the Lender or the Borrower with any request or directive (whether
or not having the force of law) of any Governmental
Instrumentality.
"CHEXIM" means the Export-Import Bank of China, a
company organized under the laws of PRC.
"CHEXIM Guarantee" means the guarantee to be given by
CHEXIM as required pursuant to the EPC Contract in respect of the
EPC Contractor's obligations under the EPC Contract, as the same
may from time to time be amended, supplemented or otherwise
modified.
"Coal Supply Agreements" means all agreements entered
into by the Joint Venture Companies for the supply of coal to the
Project.
"Coal Transportation Agreements" means all agreements
entered into by the Joint Venture Companies for the
transportation of coal to the Project.
"Commercial Operation Date" means that date by which
both of the following have occurred: (i) the Project Engineer
has certified that the Project has achieved commercial operations
and (ii) the Commercial Operation Date, as such term is used in
the General Interconnection Agreement, has occurred.
"Commercially Feasible Basis" means that, following an
Event of Loss or an Expropriation Event, (i) the sum of the
proceeds of business interruption insurance, any funds available
to be applied to the rebuilding, repair or restoration pursuant
to subsection 2.5.3(e), any amounts that the shareholders of all
the Joint Venture Companies are irrevocably committed to
contribute and the anticipated revenues of the Project during the
estimated period of rebuilding, repair or restoration will be
sufficient to pay all Debt Service and O&M Costs of the Project
during the estimated period of rebuilding, repair or restoration
and (ii) the Project upon being rebuilt, repaired or restored can
reasonably be expected to produce revenues adequate to pay all
Debt Service and O&M Costs of all Joint Venture Companies
pursuant to each such Joint Venture Company's respective
Shareholder Loan Agreement over the remaining terms of the Loans
outstanding of each Joint Venture Company, taking into account
any change in projected operating results due to the impairment
of any portion of the Project, all without materially affecting
the Borrower's Debt Service Coverage Ratio.
"Covered Taxes" means taxes, levies, imposts,
deductions, charges, withholdings and liabilities imposed on or
measured by the net income or capital of a Person by any
jurisdiction or any political subdivision or taxing authority
thereof or therein solely as a result of a permanent
establishment of such Person in such jurisdiction or political
subdivision.
"Debt Service" means, for any period, an amount equal
to the aggregate of, without duplication all payments of
principal and interest (including any adjustment for withholding
taxes or similar taxes) due and payable on Indebtedness during
such period.
"Debt Service Coverage Ratio" means, for any period,
and, if the transaction giving rise to the need to calculate Debt
Service Coverage Ratio is an incurrence of Indebtedness,
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been incurred or made on
the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, means the
ratio of (A) Cash Available for Debt Service to (B) Net Debt
Service for such period.
"Debt Service Reserve Requirement" means US$1,000,000
less the amount of any Performance Bonus Payment paid by the
Borrower.
"Development Expenses" shall mean all reasonable out-of
pocket expenses related to the Facility that have been incurred
by the Borrower, Panda International or their Affiliates in the
development of the Facility prior to the date of this Agreement.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Loans, as the case may be.
"Dollar Equivalent" means, with respect to any monetary
amount in Renminbi, at any time for the determination thereof,
the amount of Dollars obtained by converting the amount of
Renminbi involved in such computation into Dollars at the spot
rate at which Renminbi are offered for sale against delivery of
Dollars by leading banks in Tangshan City on the date of
determination thereof as determined by the Lender in its
reasonable judgement. If for any reason the Dollar Equivalent
cannot be calculated as provided in the immediately preceding
sentence, the Lender shall calculate the Dollar Equivalent on
such basis as it deems fair and equitable.
"Dollar Permitted Investments" means investments which
are denominated and payable in U.S. Dollars (a) with respect to
funds in the On-Shore Accounts, deposits denominated in U.S.
Dollars maintained at, or certificates of deposit insured, or
obligations insured or guaranteed by, the Bank of China, The
China Construction Bank, the Communication Bank, the China
Farmers Bank or China International Trust and Investment
Corporation, or any branch of a commercial bank organized 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 Standard & Poor's and Moody's
equal to the highest rating assigned thereby to long-term
unsecured debt securities; and (b) means any of the following
securities: (i) direct obligations of the Department of the
Treasury of the United States of America; (ii) obligations of any
of the following federal agencies which obligations represent
full faith and credit of the United States of America, including:
Export-Import Bank, Farmers Home Administration, General Services
Administration, U.S. Maritime Administration, Small Business
Administration, Government National Mortgage Associate (GNMA),
U.S. Department of Housing & Urban Development (PHA's) and
Federal Housing Administration; (iii) bonds, notes or other
evidences of indebtedness rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal Home Loan Bank, the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation; (iv) commercial paper rated in any one of
the two highest rating categories by Moody's or Standard &
Poor's; (v) investment agreements with banks (foreign &
domestic), broker/dealers, and other financial institutions rated
at the time of bid in any one of the three highest rating
categories by Moody's and Standard & Poor's; (vi) repurchase
agreements with banks (foreign & domestic), broker/dealers, and
other financial institutions rated at the time of bid in any one
of the three highest rating categories by each of Standard &
Poor's and Moody's, provided: (1) collateral is limited to (i),
(ii) and (iii) above, (2) the margin levels for collateral must
be maintained at a minimum of 102% including principal and
interest, (3) the Lender shall have a first perfected security
interest in the collateral, (4) the collateral will be delivered
to a third party custodian, designated by the Lender and all fees
and expenses related to collateral custody will be the
responsibility of the Lender, (5) the collateral must have been
or will be acquired at the market price and marked to market
weekly and collateral level shortfalls cured within 24 hours, (6)
unlimited right of substitution of collateral is allowed provided
that substitution collateral must be permitted collateral
substituted at a current market price and substitution fees of
the custodian shall be paid by the Lender; (vii) forward purchase
agreements delivering securities outlined in (i) and (iv) above
with banks (foreign and domestic), broker/dealers, and other
financial institutions maintaining a long-term rating on the day
of bid no lower than investment grade by each of Standard &
Poor's and Moody's (such rating may be at either the parent or
subsidiary level).
"Dollars," "U.S. Dollars" and "US$" mean lawful
currency of the United States of America.
"Energy Purchase Agreement" means Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, between
NCPGC and Tangshan Panda and Tangshan Pan-Western, as the same
may from time to time be amended, supplemented or otherwise
modified.
"EPC Contract" means the Engineering, Procurement and
Construction Contract, dated as of April 24, 1996 between the EPC
Contractor and Tangshan Panda and Tangshan Pan-Western, as the
same may from time to time be amended, supplemented or otherwise
modified.
"EPC Contractor" means Harbin Power Engineering Company
Limited, a company organized under the laws of the PRC and a
wholly owned subsidiary of Harbin Power.
"EPC Contract Liquidated Damages" means liquidated
damages as defined in the EPC Contract.
"EPC Contractor Parent Guarantee" means the guarantee
to be given by Harbin Power in favor of Tangshan Panda and
Tangshan Pan-Western in respect of the EPC Contractor's
obligations under the EPC Contract, as the same may from time to
time be amended, supplemented or otherwise modified.
"Event of Default" shall have the meaning given to such
term in Section 7.1.
"Event of Loss" means an event which causes all or a
portion of the Facility to be damaged, destroyed or rendered
unfit for normal use for any reason whatsoever, other than an
Expropriation Event.
"Expropriation Event" means any condemnation,
nationalization, seizing, or expropriation by any Government
Instrumentality of all or a substantial portion of the Project or
the property or assets of the Borrower or of its share capital,
or any Government Instrumentality shall have assumed custody or
control of such property or other assets or business operations
of the Borrower or of its share capital, or shall have taken any
action for the dissolution or disestablishment of the Borrower or
any action that would prevent the Borrower or its officers from
carrying on its business or operations or a substantial part
thereof.
"Expropriation Proceeds" means any proceeds received by
the Borrower as a result of the occurrence of an Expropriation
Event.
"Facility" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Facility Budget" means the construction budget and
schedule provided by the Lender (containing customary assumptions
and qualifications) approved as reasonable by the Project
Engineer prior to the making of the first Loan pursuant to this
Agreement, and as it thereafter may be amended with the approval
of the Lender.
"Facility Costs" means all costs incurred, or to be
incurred, in connection with the development, design,
engineering, procurement, construction and commissioning of the
Facility, which costs shall include, but not be limited to: (a)
all costs incurred under the EPC Contract, (b) Development
Expenses, (c) O&M Costs incurred in connection with the start up
of the Facility or otherwise prior to the Commercial Operation
Date, (d) actual interest costs (including, prior to Commercial
Operation, interest due and payable on the Loans) and amounts
required pursuant to the Debt Service Reserve Requirement,
closing and administration costs related to the Facility until
the Commercial Operation Date, (e) the costs of acquiring
Governmental Authorizations for the Facility prior to the
Commercial Operation Date and (f) without duplication, working
capital costs.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressures or compulsion to complete the transaction. Fair Market
Value shall be determined by the board of directors of the
Borrower acting in good faith and shall be evidenced by a board
resolution delivered to the Lender except that any determination
of Fair Market Value made with respect to any parcel of real
property shall be made by an independent appraiser.
"Financing Agreements" means, collectively, this
Agreement, the Guarantees, the Project Notes, the other
Shareholder Loan Agreements, each individually a "Financing
Agreement".
"Foreign Debt Account" shall have the meaning ascribed
to it in Section 5.5.
"Foreign Debt Repayment Account" shall have the meaning
ascribed to it in Section 5.5.
"FPA" means the United States Federal Power Act, as
amended, excluding Sections I-18, 21-30, 202(c), 210, 211, 212,
305(c) and any necessary enforcement provision of Part III of the
Act with regard to the foregoing sections.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date hereof.
"Governmental Authorizations" means all authorizations,
consents, decrees, permits, waivers, privilege approvals from and
filings with all Governmental Instrumentalities necessary for the
realization of the Project in accordance with the Project
Documents.
"Governmental Instrumentality" of any country shall
mean such country and its government and any ministry,
department, political subdivision, instrumentality, agency,
corporation or commission under the direct or indirect control of
such country.
"Guarantees" means collectively, the undertakings by
Tangshan Panda, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Pan-
Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Lender pursuant to any Indebtedness
obligation then or thereafter due and owing by any such party to
Lender; the undertakings by Tangshan Pan-Western, each executed
as of the 22nd day of September, 1996, to unconditionally and
irrevocably guarantee to the Lender the prompt payment and
performance by each of Tangshan Panda, Tangshan Cayman, and
Tangshan Pan-Sino of their individual obligations to Lender
pursuant to any Indebtedness obligation then or thereafter due
and owing by any such party to Lender; the undertakings by
Tangshan Cayman, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Pan-Sino of their individual
obligations to Lender pursuant to any Indebtedness obligation
then or thereafter due and owing by any such party to Lender; and
the undertakings by Tangshan Pan-Sino, each executed as of the
22nd day of September, 1996 to unconditionally and irrevocably
guarantee to the Lender the prompt payment and performance by
each of Tangshan Panda, Tangshan Pan-Western and Tangshan Cayman
of their individual obligations to Lender pursuant to any
Indebtedness obligation then or thereafter due and owing by any
such party to Lender.
"Harbin Power" means Harbin Power Equipment Group
Company, a PRC Company.
"Heat Supply Contracts" means the contracts to supply
steam and hot water to various PRC industrial and commercial
users that have been assigned by Luannan Heat and Power Plant to
Tangshan Pan-Sino, or any similar contracts in addition to or in
replacement thereof.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a capitalized lease obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Independent Accountants" means an internationally
recognized accounting firm.
"Independent Insurance Consultant" means Sedgwick, PLC,
a corporation incorporated in accordance with the laws of the
United Kingdom, or its successors.
"Inter-Company Steam Sales Agreement" means the Water,
Heat, Steam and Hot Water Supply and Usage Agreement, dated as of
October 3, 1996 between Tangshan Cayman and Tangshan Panda.
"Interconnection Agreement" means the General
Interconnection Agreement dated September 22, 1995, between NCPGC
and Tangshan Panda and Tangshan Pan-Western, as the same may from
time to time be amended, supplemented or otherwise modified.
"Interconnection Dispatch Agreement" means the
agreement to be negotiated among Tangshan Power Supply Bureau of
NCPGC, Tangshan Panda and Tangshan pan-Western shortly prior to
the Commercial Operation Date of the Project concerning specific
details as to the dispatch of the Luannan Facility.
"Interest Expense"means, for any period, the sum of (a)
the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Joint Venture Companies" means, collectively Tangshan
Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-
Sino.
"Legal Requirements" means all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements
and regulations of any Governmental Instrumentality having
jurisdiction over the matter in question.
"Lender" means Pan-Western Energy Corporation LLC, a
Cayman Islands corporation.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of this Agreement, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Loans" means the loans made under this Agreement.
"Luanhua Co." means Tangshan Luanhua (Group) Co., a
company organized under the laws of the PRC.
"Luannan Government" means the government of Luannan
County, Tangshan City, Hebei Province, PRC.
"Luannan Heat Company" means Luannan County Heat
Company, Ltd. a company organized under the laws of the PRC.
"Luannan Heat & Power" means Luannan County Heat &
Power Plant, a company organized under the laws of the PRC.
"Major Maintenance Reserve Account" shall have the
meaning ascribed to it in subsection 5.5.
"Major Maintenance Reserve Requirement" means, with
respect to any month, an amount established periodically by the
Project Engineer, based on anticipated major maintenance
requirements for the next five years, to constitute the Major
Maintenance Reserve Requirement for the Facility for such month.
"Material Adverse Effect" means (i) a material adverse
change in the financial condition of the Joint Venture Companies
taken as a whole or (ii) any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the construction or operation of the Project or (b) the Joint
Venture Companies' ability (taken as a whole) to perform any of
their obligations under the Project Documents.
"Material Project Documents" means, collectively, the
Power Purchase Agreement, the EPC Contract, the Transmission
Facilities Construction Agreement, the O&M Agreement, the Coal
Supply Agreements, the Coal Transportation Agreement and all
other instruments, agreements or other documents arising from or
related to the Project, but shall not include any Financing
Agreement.
"Maturity Date" means April 1, 2004.
"Moody's" means Moody's Investors Services.
"NCPGC" means North China Power Group Company, a
company organized under the laws of the PRC.
"Net Cash Proceeds" in connection with (a) any Asset
Sale, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise,
but only as and when received) of such Asset Sale, net of
attorneys' fees, accountants' fees, investment banking fees,
survey costs, title insurance premiums, amounts required to be
applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the subject
of such Asset Sale and other customary fees and expenses actually
incurred in connection therewith, net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax
sharing arrangements) and net of purchase price adjustments
reason.
"Net Debt Service" means the sum of (i) (a) Interest
Expense less (b) non-cash Interest Expense plus (ii) all payments
of scheduled and overdue principal of, and premium, if any, on
Indebtedness plus (iii) without duplication, all rental payments
in respect of Capitalized Lease Obligations paid, accrued, or
scheduled to be paid or accrued.
"Non-Excluded Taxes" shall have the meaning ascribed to
it subsection 5.16.
"Nonrecourse Persons" shall have the meaning ascribed
to it in Article 8.
"O&M" means operation and maintenance services.
"O&M Agreement" means the Amended and Restated
Operation and Maintenance Agreement, dated as of March 6, 1997,
among the Joint Ventures and Duke/Fluor Daniel Asia, Inc., a
California corporation.
"O&M Costs" means all amounts disbursed by or on behalf
of the Borrower for operation, maintenance, repair, or
improvement of the Facility, including, without limitation,
premiums on insurance policies, property, income and all other
taxes to the extent paid, and payments under the relevant
operating and maintenance agreements, leases (including Operating
Lease Obligations), royalty and other land use agreements, and
any other payments required under the Project Documents, each as
determined on a cash basis and otherwise in accordance with GAAP.
"Obligations" means all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by the
Borrower to the Lender or existing or hereafter arising hereunder
or pursuant to the terms of any of the Financing Agreements or
any of the other Project Documents, including all interest, fees,
charges and expenses chargeable to the Borrower; and in the event
of any proceeding for the collection or enforcement of the
Obligations, after an event of default shall have occurred and be
continuing, any exercise by the Lender, together with reasonable
attorney's fees and court costs.
"Officer's Certificate" means a certificate of an
authorized representative of the Borrower, signed by the
Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Borrower.
"On-Shore Accounts" has the meaning set forth in
subsection 5.5.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Other Taxes" means any other excise or property taxes,
charges or similar levies that arise under the laws of any
jurisdiction on any payment made under this Agreement or under
any other Financing Agreement or from the execution or delivery
or otherwise with respect to this Agreement or any other
Financing Agreement.
"Panda International" means Panda Energy International
Inc., a Texas corporation.
"Performance Bonus Payment" means an amount payable to
the EPC Contractor pursuant to subsections 13.3 and 13.4 of the
EPC Contract.
"Permitted Indebtedness" has the meaning set forth in
subsection 6.1.
"Permitted Liens" means (a) Liens for any tax,
assessment or other governmental charge not yet due, due but
payable without penalty or being contested in good faith and by
appropriate proceedings, (b) retentions of title in favor of
materialmen, workers or repairmen, or other like Liens arising in
the ordinary course of business or in connection with the
construction of the Project, (c) Liens arising out of judgments
or awards so long as an appeal or proceeding for review is being
prosecuted in good faith, (d) mineral rights the use and
enjoyment of which do not materially interfere with the use and
enjoyment of the Facility, (e) Liens, deposits or pledges to
secure statutory obligations or performance of 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 the Borrower's business and affecting property with a
value not exceeding the equivalent of US$250,000 at any one time,
(f) involuntary Liens (including a Lien of an attachment,
judgment or execution) securing a charge or obligation, on any of
the Borrower's property, real or personal, whether now or
hereafter owned with a value not exceeding the equivalent of
US$250,000 at any one time, (g) rights of any party pursuant to
any Project Document, (h) Liens securing workers' compensation,
unemployment insurance or other social security or pension
obligations, (i) Liens securing Indebtedness permitted pursuant
to Section 6.1 (to the extent not required by Section 6.1 to be
unsecured), (j) Liens securing the purchase price of property
having an aggregate value not exceeding the equivalent of
US$1,000,000 at any one time an (k) Liens securing other
obligations not constituting Indebtedness none of which could
reasonably be expected to have a Material Adverse Effect.
"Person" means any natural person, corporation,
partnership, firm, association, Governmental Instrumentality or
any other entity whether acting in an individual, fiduciary or
other capacity.
"PRC" or "China" means the People's Republic of China.
"PRC Shareholder" means Luannan Heat and Power.
"Pricing Document" means the document or documents
(issued by the Tangshan Municipal Price Bureau) determining the
price for electric energy delivered, retail price and principals
for adjustment.
"Project" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Project Documents" means this Agreement and all
instruments, contracts, agreements or other documents arising
from or related to the Project, including all Financing
Agreements, each individually a "Project Document".
"Project Engineer" means Parsons Brinckerhoff Energy
Services Inc., or its successor.
"Project Note" has the meaning given that term in
Section 2.3.
"Power Purchase Agreement" means, collectively, the
Energy Purchase Agreement, the Interconnection Agreement and the
Supplemental Agreement (and, after execution thereof, the
Interconnection Dispatch Agreement).
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended, and all rules and regulations
adopted thereunder.
"Registered Capital Account" shall have the meaning
ascribed to it in Section 5.5.
"Registration Certificate" has the meaning given to
such term in Section 3.5.
"Renminbi" or "RMB" means lawful currency of the PRC.
"Registered Capital Contribution and Agency Agreement"
means the agreement among each of the Joint Venture Companies and
their respective shareholders, dated as of March 26, 1997 (as
amended, modified and supplemented from time to time) pursuant to
which the Joint Venture Companies are entitled to receive equity
contributions.
"RMB Permitted Investments" means deposit accounts
denominated and payable in RMB to be maintained at, certificates
of deposit issued, or obligations issued or guaranteed by, one of
the following policy or commercial banks in the PRC: (i) the
Bank of China, (ii) the China Construction Bank, (iii) the
Communication Bank, (iv) the China Farmers Bank, (v) the China
International Trust and Investment Corporation (vi) any foreign
bank or branch of any foreign bank authorized and licensed to
conduct business in the PRC, including without limitation, the
establishment and maintenance of RMB and foreign currency
accounts and exchange functions having a combined capital and
surplus of at least $500,000,000 and having at least an
investment grade rating assigned to its long-term unsecured debt
securities by each of Standard & Poor's and Moody's.
"RMB Revenue Account" shall have the meaning ascribed
to it in Section 5.5.
"RMB Checking Account" shall have the meaning ascribed
to it in Section 5.5.
"SAFE" means the State Administration of Foreign
Exchange of the PRC.
"Shareholder Loan Agreements" means, collectively, this
Agreement and the Shareholder Loan Agreements, each dated as of
September 24, 1996, between the Lender and (i) Tangshan Pan-
Western, (ii) Tangshan Cayman and (iii) Tangshan Pan-Sino, as the
same may from time to time be amended, supplemented or otherwise
modified.
"Shareholders" means the Lender and the PRC
Shareholder.
"Site" means the approximately 200 square meters of
land on which the Facility is to be located.
"Standard & Poor's" means Standard & Poor's Ratings
Service.
"Steam Sales Agreements" means the Heat Supply
Contracts and the Inter-Company Steam Sales Agreement.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Supplemental Agreement" means Supplemental Agreement
for General Interconnection Agreement and Electric Energy
Purchase and Sales Agreement, dated February 10, 1996, among
NCPGC, Tangshan Panda and Tangshan Pan-Western, as the same may
from time to time be amended, supplemented or otherwise modified.
"Tangshan Cayman" means Tangshan Cayman Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.,
Ltd., a Sino-foreign equity joint venture with limited liability
organized under the laws of the PRC.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture with
limited liability organized under the laws of the PRC.
"Transmission Facilities" means three new substations,
the upgrades of both an existing substation and an existing
switching station and approximately 43 km of 110 KV transmission
lines to interconnect the Project to the Jing-Jin-Tang Grid.
"Transmission Facilities Construction Agreement" means
the construction agreement, dated February 10, 1996, among
Tangshan Panda, Tangshan Pan-Western and NCPGC.
"Transmission Loan" means the loan made by Tangshan Pan-
Sino to NCPGC through a PRC financial intermediary for the
construction cost of the Transmission Facilities, in the amount
of RMB 78,218,000, to be adjusted for inflation from December 31,
1994 to the date of issuance of the notice to proceed with
preliminary design and for accrued interest during the
construction period.
ARTICLE 2 - THE CREDIT FACILITY
2.1 Credit Facility. Subject to the terms and conditions
set forth in Article 3, the Lender shall from time to time make
shareholder loans to the Borrower in an aggregate amount of
US$17,880,000 (the "Loans").
2.2 Interest Payments.
2.2.1 Interest Payment Dates. The Borrower shall
pay accrued interest on the unpaid principal amount of the Loans
semiannually in arrears on each June 30 and December 31,
commencing June 30, 1997, until the first such date to occur not
less than six months after the Commercial Operation Date, and on
the last day of each month thereafter.
2.2.2 Interest. The Borrower shall pay accrued
interest on the unpaid principal amount of the Loans from the
date of this Agreement (i) through the first June 30 or December
31 to occur not less than six months after the Commercial
Operation Date, at a rate per annum of 13.75%, subject to a
maximum applicable to all interest accrued in respect of such
period and all amounts due in respect thereof pursuant to Section
5.16 hereof of $4,010,273, and (b) thereafter until the maturity
thereof at a rate per annum equal to 12.75%.
2.3 Project Note. The obligation of the Borrower to repay
the Loans and to pay interest thereon at the rate provided herein
shall be evidenced by a promissory note substantially in the form
of Exhibit A, payable to the order of the Lender and in the
principal amount of SEVENTEEN MILLION EIGHT HUNDRED EIGHTY
THOUSAND DOLLARS (US$17,880,000) (the "Project Note"). The
Borrower authorizes the Lender to record on the schedule annexed
to the Project Note, each payment or prepayment of principal of
the Loans and agrees that all such notations shall be prima facie
evidence of the information recorded. The Borrower further
authorizes the Lender to attach to and make a part of the Project
Note continuations of the schedule attached thereto as necessary.
No failure to make any such notations, nor any errors in making
any such notations, shall affect the validity of the Borrower's
obligations to repay the full unpaid principal amount of the
Loans or the duties of the Borrower hereunder or thereunder.
2.4 Repayment of the Loans.
2.4.1 Payments. The Borrower shall make all
payments hereunder to an account which the Lender shall specify
by notice to Borrower prior to the date of the first payment of
interest hereunder. The aggregate unpaid principal amount of the
Loans shall be payable in installments on or before 10:00 A.M.,
Beijing time, on each Repayment Date in accordance with the
amortization schedule set forth on Schedule B, and any remaining
unpaid principal, interest, fees and costs shall be due and
payable on the Maturity Date.
2.4.2 Application of Payments. If the amount of
any payment made by the Borrower hereunder is less than the total
amount due and payable by the Borrower to the Lender as of the
date on which such payment is actually made by the Borrower, such
payment shall be applied: (i) first, against charges, fees,
costs and expenses due hereunder; (ii) second, if the principal
of the Loans shall not have become or be then due and payable,
against interest on the overdue principal of the Loans (including
amounts payable in respect thereof pursuant to Section 5.16) in
order of maturity of such installments of interest and against
interest on such overdue interest; (iii) third, if the principal
of the Loans shall have become or shall be then due and payable,
against the whole amount of all such principal, interest on
overdue principal of the Loans (including amounts payable in
respect thereof pursuant to Section 5.16) and interest on such
overdue interest; and (iv) fourth, against all other amounts then
due and payable to the Lender hereunder.
2.5 Prepayments.
2.5.1 Voluntary Prepayments. Except as required by
this Agreement, the Borrower may not prepay Loans without the
permission of the Lender.
2.5.2 Certain Mandatory Prepayments. In addition
to other amounts which shall be applied to the prepayment of
Loans as provided in this Agreement, the Borrower shall apply to
prepayment of the principal of the Loan, within ten Business Days
following receipt thereof, (i) all Net Cash Proceeds from the
sale or other disposition of all or any part of the assets or
other rights of the Borrower, other than in the ordinary course
of business and permitted pursuant to the terms of the Financing
Agreements, having a value, individually in excess of US$100,000
and in the aggregate in any year, in excess of US$250,000, and
(ii) any Liquidated Damages which shall have been made by the EPC
Contractor to the Borrower under the EPC Contract.
2.5.3 Expropriation Event; Event of Loss. (a) If
an Expropriation Event shall occur with respect to the Facility
or any part thereof, the Borrower shall (i) diligently pursue all
of its rights to compensation against the appropriate
Governmental Instrumentality in respect of such event, (ii) not
compromise, settle or consent to the settlement of any claim in
respect thereof without the consent of the Lender, and (iii)
promptly deposit all proceeds received in respect of any
Expropriation Event (after deducting all reasonable expenses) (A)
in the RMB Revenue Account if denominated in RMB or (B) in the
Foreign Debt Repayment Account if denominated in Dollars, in each
case segregated from all other moneys pending the determination
pursuant to paragraph (c) below.
(b) If an Event of Loss shall occur with respect
to the Facility or any part thereof, the Borrower shall (i)
diligently pursue all its rights to compensation with respect to
such Event of Loss, (ii) not compromise, settle or consent to the
settlement of any claim exceeding $250,000 in respect thereof
without the consent of the Lender, and (iii) promptly deposit all
proceeds received in respect of any Event of Loss (after
deducting all reasonable expenses) which are denominated in RMB
in the RMB Revenue Account, and transfer to the Lender any such
proceeds which are denominated in U.S. Dollars, to be held by the
Lender and segregated from all other moneys pending the
determination pursuant to paragraph (c) below.
(c) If such Expropriation Event or an Event of
Loss shall occur, as soon as reasonably practicable, but no later
than fifteen (15) days after the date of receipt by the Borrower
of any proceeds in respect thereof, the Borrower shall make a
reasonable good faith determination as to whether (i) the
Facility can be rebuilt, repaired or restored to permit operation
of the entire Project on a Commercially Feasible Basis, and (ii)
the proceeds thereof, together with any other amounts that the
Borrower has available to commit to such rebuilding, repair or
restoration, are sufficient to pay for such rebuilding, repair or
restoration of the Facility. The determination of the Borrower
shall be evidenced by a certificate filed with the Lender which,
in the event the Borrower determines that the Facility can be
rebuilt, repaired or restored to permit operation of the entire
Project or a portion thereof on a commercially feasible basis,
shall also certify that such proceeds, together with any other
amounts that the Borrower is willing to commit to such
rebuilding, repair or restoration, are sufficient to pay the
costs thereof, and shall also set forth a reasonable good faith
estimate by the Borrower of such costs. If the amount of such
costs exceeds $500,000, such certificate shall be accompanied by
a Project Engineer's certificate, dated within five (5) days of
the date of the Borrower's certificate, stating that, based upon
reasonable investigation and a review of the determination made
by the Borrower, the Project Engineer believes that the
determination and the estimate of the total cost, if any, set
forth in the Borrower's certificate to be reasonable.
(d) In the event that the Borrower determines not
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss shall be transferred
within ten Business Days after the date of such determination to
the Lender and applied to prepayment of the Loans.
(e) In the event that the determination is made
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss on deposit in the
RMB Revenue Account shall be transferred to the RMB Checking
Account and, together with the amounts (if any) previously
transferred to the Lender in connection with such Expropriation
Event or Event of Loss and such other amounts as the Borrower has
available for such rebuilding, repair or restoration (which also
shall be transferred to the Lender prior to any disbursement for
rebuilding, repair or restorations), shall be used to pay the
costs of such rebuilding, repair or restoration, and any excess
shall, upon completion of such rebuilding, repair or restoration,
be applied to the prepayment of the Loans within 15 days of the
completion of such rebuilding, repair or restoration as certified
by the Project Engineer.
2.6 Fees. Not more than thirty (30) days following the
making of the first Loan hereunder, the Borrower shall reimburse
the Lender for its reasonable costs other than interest costs
incurred in funding the Loans.
ARTICLE 3 - CONDITIONS PRECEDENT
The obligation of the Lender to make each Loan shall be
subject to the fulfillment or waiver of each of the following
conditions precedent:
3.1 Borrower's Certificate. The Lender shall have received
from the Borrower a certificate dated the date of the request for
such Loan, certifying the following:
(a) Representations and Warranties. The
representations and warranties made by the Borrower herein or in
any other Project Document to which it is a party, or which are
contained in any certificate, document, financial or other
statement furnished by the Borrower hereunder or thereunder or in
connection herewith or therewith, are true and correct in all
material respects on and as of such date as if made on and as of
such date, except as affected by the consummation of the
transaction contemplated thereby or to extent that such
representations and warranties relate solely to an earlier date;
(b) No Event of Default. No Event of Default is in
existence on such date, or shall occur after giving effect to the
Loan to be made on such date;
(c) Governmental Authorizations and other consents and
approvals. All Governmental Authorizations which are required to
be obtained on or prior to the date of the making of such Loan
have been duly obtained or maintained and are in full force and
effect, except for Governmental Authorizations which have not
been obtained at such time but which the Borrower has no reason
to believe will not be obtained in the normal course of business
prior to the date such Governmental Authorizations are required;
and
(d) Facility Costs. The costs for the payment of
which the borrowing is being made are Facility Costs and payment
of such costs is in accordance with the Facility Budget.
3.2 On-Shore Accounts. The On-Shore Accounts shall have
been established pursuant to Section 5.5.
3.3 Evidence of Facility Costs and Other Expenses. At
least 10 Business Days prior to each such Loan, the Lender shall
have received a copy of the EPC Contractor's application for
payment under the EPC Contract or evidence of or application for
other expenses in connection with the construction and
development of the Facility (together with all supplemental
reports required to be furnished thereunder), and copies of all
invoices and other statements of charges with respect to the
payments to be made to the EPC Contractor pursuant to the EPC
Contract or to the recipient of such other expenses on the date,
or expected to be due and payable within 30 days of, such Loan
and with respect to all other items of Facility Costs to be paid
on such date, or expected to be due and payable within 30 days of
such Loan.
3.4 Progress Report; Project Engineer. The Lender shall
have received a report signed by the Authorized Representative of
the Borrower on the date of each such Loan to the effect that
construction of the Facility is proceeding satisfactorily in
accordance with the EPC Contract and the Facility Budget and the
Facility Budget sets forth accurately the estimated costs to
complete the Facility, and such confirmation thereof from the
Project Engineer as the Lender reasonably deems necessary.
3.5 Registration Certificate. The Lender shall have
received a registration certificate of the Tangshan Municipal
Bureau for Exchange Control (a "Registration Certificate")
evidencing that a Registration Certificate has been obtained for
the full aggregate amount of the Loans to be made hereunder
pursuant to subsection 2.1.
3.6 Equity Contributions; Real Estate Transfers. It shall
be a condition to any Loan hereunder which increases the
aggregate of all loans made under all of the Shareholder Loan
Agreements to more than $15,000,000 that (A) the Borrower shall
have received the full amount of the equity contributions to
which the Borrower is then entitled pursuant to the Registered
Capital Contribution and Agency Agreement (B) all transfers of
land use rights relating to the Site shall have been completed.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
The Borrower makes all of the following representations
and warranties to and in favor of the Lender the date on which
any Loan is made hereunder, except as such representations relate
to an earlier date.
4.1 Organization. The Borrower (a) is a Sino-foreign
equity joint venture with limited liability duly organized and
validly existing under the laws of the PRC, (b) is duly
authorized to do business in the PRC, and (c) has all requisite
power and authority to (i) own or hold under land use right or
lease and operate the property it purports to own or hold under
land use right or lease, (ii) carry on its business as now being
conducted and as now proposed to be conducted in respect of the
Project, (iii) incur Indebtedness, and (iv) execute, deliver and
perform its obligations under each of the Project Documents to
which it is a party. The sole shareholders of the Borrower are
the Lender and Luannan Heat and Power.
4.2 Authorization; No Conflict. The Borrower has duly
authorized, executed and delivered the Project Documents to which
it is a party, and neither its execution and delivery thereof nor
its consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (a) does or will contravene its
formation documents or any other Legal Requirement then
applicable to or binding on it, (b) does or will contravene or
result in any breach or constitute any default under, or result
in or require the creation of any Lien upon any of its property
or under any agreement or instrument to which it is a party or by
which it or any of its properties may be bound, or (c) does or
will require the consent or approval of any Person.
4.3 Legality, Validity and Enforceability. Each of the
Project Documents to which the Borrower is a party is a legal,
valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, subject to bankruptcy
laws or principles of equity, to the extent applicable to the
Borrower. None of the Project Documents to which the Borrower is
a party has been amended or modified except in accordance with
this Agreement.
4.4 Compliance with Law, Governmental Authorizations and
Project Documents. The Borrower is in compliance in all material
respects with all Legal Requirements and Governmental
Authorizations and Project Documents to which it is a party, and
no notices of violation of any Governmental Authorization or
Project Document relating to the Project have been issued,
entered or received by the Borrower.
4.5 Governmental Authorizations. There are no Governmental
Authorizations under Legal Requirements existing as of the date
of this Agreement that are required or will become required,
other than the Governmental Authorizations (a) which have been
obtained or granted and are in full force and effect, or (b)
which the Borrower has no reason to believe will not be obtained
before they become necessary for the ownership, construction,
financing or operation of the Facility. To the best of its
knowledge, the Borrower is not in violation of any condition in
any Governmental Authorization.
4.6 Litigation. There are no pending or, to the Borrower's
knowledge, threatened actions, suits, proceedings or
investigations of any kind, including actions or proceedings of
or before any Governmental Instrumentality, to which the Borrower
or any Shareholder or, to the knowledge of the Borrower, is a
party or is subject, or by which any of them or any of their
properties are bound.
4.7 Existing Defaults. There is no Event of Default by the
Borrower under any of the Material Project Documents. To the
best of the Borrower's knowledge, there is no event of default
under any Material Project Document by any party to such Material
Project Document.
4.8 Taxes. The Borrower has filed, or caused to be filed,
all tax and informational returns that are required to have been
filed by it in any jurisdiction, and has paid 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 (other than those taxes that it is contesting in good
faith and by appropriate proceedings, with adequate, segregated
reserves established for such taxes) and, to the extent such
taxes are not due, has established reserves that are adequate for
the payment thereof and are required by the GAAP.
4.9 Contingent Liabilities. The Borrower has no material
contingent liabilities or obligations except those authorized
under and permitted by the Project Documents and the Financing
Agreements.
4.10 Business, Debt, Contracts, Etc. The Borrower has not
conducted any business other than the business contemplated by
the Project Documents to which it is a party, has no outstanding
Indebtedness other than Indebtedness incurred under the Financing
Agreements or permitted under Section 6.1 and has no other
liabilities other than those incurred under the Project Documents
or permitted under this Agreement, and is not a party to or bound
by any contract other than as contemplated by the Project
Documents to which Borrower is a party and those contracts
permitted under this Agreement. The Borrower has established
offices in the PRC only.
4.11 Representations and Warranties. All representations
and warranties of the Borrower contained in the Project Documents
are true and correct in all material respects and the Borrower
hereby confirms each such representation and warranty of the
Borrower with the same effect as if set forth in full herein.
4.12 Utilities. All utility services and easements
necessary for the construction and the operation of the Facility
for its intended purposes, are or will be available at the Site
as and when required on commercially reasonable terms.
4.13 Project Documents.
4.13.1 The Lender has received a true, complete and
correct copy of each of the Project Documents in effect or
required to be in effect as of the date this representation is
made or deemed made (including all exhibits, schedules, side
letters and disclosure letters to therein or delivered pursuant
thereto, if any).
4.13.2 All conditions precedent to the obligations
of the respective parties under the Material Project Documents
have been satisfied or waived in accordance with the provisions
thereof and hereof, except for such conditions precedent which by
their terms cannot be met until a later stage in the construction
or operation of the Facility, and the Borrower has no reason to
believe that any such condition precedent cannot be satisfied on
or prior to the appropriate stage in the construction or
operation of the Facility.
4.14 Fees and Enforcement. Other than amounts that have
been paid in full, no fees or taxes, including without limitation
stamp, transaction, registration or similar taxes, are required
to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Project Documents.
4.15 Immunity. In any proceedings in the PRC or elsewhere
in connection with any of the Project Documents to which the
Borrower is a party, the Borrower will not be entitled to claim
for itself or any of its assets immunity from suit, execution,
attachment or other legal process.
4.16 Subsidiaries and Beneficial Interest. The Borrower has
no subsidiaries and does not beneficially own the whole or any
part of the issued share capital or other ownership interest of
any other company or corporation or other Person.
4.17 No Other Powers of Attorney, etc. The Borrower has not
executed and delivered any powers of attorney, fiduciary transfer
agreements or similar documents, instruments or agreements,
except for powers authorizing signatures of various Project
Documents.
4.18 Liens. The Borrower has not secured or agreed to
secure any Indebtedness by any Lien upon any of its present or
future revenues or assets or capital stock except Permitted
Liens. The Borrower does not have any outstanding Lien or
obligation to create Liens on or with respect to any of its
properties or revenues except Permitted Liens.
4.19 Regulation of Parties. The Borrower is not nor will it
be, solely as a result of its participation in the transactions
contemplated hereby or by any other Project Document, or as a
result of the ownership, use or operation of the Facility,
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company." The Borrower is not subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA.
4.20 Transactions with Affiliates. Except as otherwise
permitted under Section 6.10, the Borrower is not a party to any
contracts or agreements with, or any other commitments to,
whether or not in the ordinary course of business, any Affiliate
of the Borrower.
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that until all
Obligations owed to the Lender are paid in full it will:
5.1 Repayment of Indebtedness. Repay in accordance with
its terms, all Indebtedness, including without limitation, all
sums due under this Agreement and the other Financing Agreements
but, in the case of any such Indebtedness with a repayment that
is limited by any term of any Financing Agreement, repay subject
to such limitation.
5.2 Existence, Conduct of Business, Properties, Etc.
Except as otherwise expressly permitted under this Agreement,
(i) maintain and preserve its existence as a Sino-foreign joint
venture with limited liability and all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business, and (ii) engage only in the business contemplated by
the Financing Agreements and the Project Documents.
5.3 Performance of Covenants and Obligations. The Borrower
shall perform and observe in all material respects, its covenants
and obligations under all Material Project Documents.
5.4 Use of Funds. The Borrower shall use the proceeds of
the Loans only for deposit in the On-Shore Accounts pending
disbursement for the payment of Facility Costs as provided
herein.
5.5 Accounts. (a) On or prior to the date of the making
of the first Loan, the Borrower shall establish the following
accounts with banks or financial institutions in the PRC in
accordance with applicable PRC laws and regulations: (i) the
Registered Capital Account denominated in U.S. Dollars (the
"Registered Capital Account"), (ii) the Foreign Debt Account
denominated in U.S. Dollars (the "Foreign Debt Account"), (iii)
the Foreign Debt Repayment Account denominated in U.S. Dollars
(the "Foreign Debt Repayment Account"), (iv) the Basic Settlement
Account denominated in U.S. Dollars (the "Basic Settlement
Account"), (v) the RMB Revenue Account denominated in Renminbi
(the "RMB Revenue Account"), (vi) the RMB Checking Account
denominated in Renminbi (the "RMB Checking Account"), and (vii)
the Major Maintenance Reserve Account denominated in Renminbi
(the "Major Maintenance Reserve Account") (collectively, the "On-
Shore Accounts").
(b) The proceeds of all Loans shall be deposited in
the Foreign Debt Account. Funds in the Foreign Debt Account
shall not be used for any purpose other than disbursement of
Facility Costs denominated in U.S. Dollars or funding of reserves
for the payment of principal and interest on the Loans, or, after
conversion into RMB, transfer to the RMB Checking Account for
disbursement of Facility Costs denominated in RMB.
(c) All funds received by the Borrower constituting
capital contributions from any shareholder shall be deposited in
the Registered Capital Account. Until after Commercial Operation
Date, funds in the Registered Capital Account shall not be used
for any purpose other than disbursement of Facility Costs
denominated in the U.S. Dollars or, after conversion into RMB,
transfer to the RMB Checking Account for disbursement of Facility
Costs denominated in RMB.
(d) All revenues received by the Borrower from any
source whatsoever shall be deposited (after conversion into
Renminbi, if necessary) into the RMB Revenue Account. The
Borrower shall instruct NCPGC, the EPC Contractor and other
participants in the Project to deposit revenues, penalties or
other payments owing to the Borrower in RMB directly into the RMB
Revenue Account. The RMB Revenue Account shall not be used for
any purpose other than (and in accordance with the following
priority): (i) the transfer of funds to the RMB Checking Account
for the payment of O&M Costs and (ii) after conversion into U.S.
Dollars, the transfer of funds to the Foreign Debt Repayment
Account for the payment of the principal of and interest on the
Loans or reserves in respect thereof.
(e) Amounts remaining in the RMB Revenue Account
subsequent to disbursement in accordance with clause (d) hereof
shall be deposited into the Major Maintenance Reserve Account in
an amount equal to the Major Maintenance Reserve Requirement.
Disbursement shall be made from the Major Maintenance Reserve
Account only to pay for major maintenance costs of the Facility
upon a certification of the Project Engineer that after
withdrawal of such funds for such purpose, the amounts remaining
in the Major Maintenance Reserve Account (including anticipated
future funding thereof) shall be adequate to meet the anticipated
needs of the Facility for major maintenance for the next five
years.
(f) Amounts remaining in the RMB Revenue Account
subsequent to disbursements in accordance with clauses (d) and
(e) hereof shall be retained in the RMB Revenue Account pending
disbursement to the Borrower's Shareholders in the form of
dividends. The amount designated for the payment of dividends to
the Lender in its capacity as a shareholder of the Borrower shall
be transferred from the RMB Revenue Account (after conversion to
U.S. Dollars) to the Basic Settlement Account and then to the
Lender. The corresponding amount designated for the payment of
dividends to the PRC Shareholder shall be distributed from the
RMB Revenue Account directly to the PRC Shareholder in RMB.
(g) The funds in the Foreign Debt Repayment Account
shall not be used for any purpose other than the payment of
amounts due hereunder pursuant to Subsection 2.4 to an off-shore
account maintained by the Lender.
(h) The funds in the Basic Settlement Account shall
not be used for any purpose other than remittance after the
Commercial Operation Date to an off-shore equity distribution
account approved by the Lender.
5.6 Compliance with Legal Requirements. Promptly and
diligently (i) own, construct, maintain and operate the Facility
in compliance with all applicable Legal Requirements, and
(ii) procure, maintain and comply, or cause to be procured,
maintained and complied with all Governmental Authorizations
required for the ownership, construction, financing, maintenance
or operation of the Facility or any part thereof at or before the
time such Governmental Authorization becomes necessary for the
ownership, construction, financing, maintenance or operation of
the Facility, as the case may be, as contemplated by the Project
Documents and except that the Borrower may, at its expense,
contest by appropriate proceedings conducted in good faith the
validity or application of any such Legal Requirements, provided
that, in either case, (x) neither the Lender nor the Borrower
would be subject to any criminal liability for failure to comply
therewith and (y) all proceedings to enforce such Legal
Requirements against the Lender, the Borrower or the Project or
any part thereof, shall have been duly and effectively stayed
during the entire pendency of such contest.
5.7 Operating Budgets. On or before the anticipated
Commercial Operation Date, deliver to the Lender an annual
operating budget, certified by the Project Engineer as being a
reasonable estimate of projected costs, expenses and revenues of
the Borrower, for the period commencing on the anticipated
Commercial Operation Date, and continuing until the end of the
first full calendar year thereafter, in substantially the same
form as the initial annual operating budget. In advance of each
calendar year thereafter, the Borrower shall adopt and deliver to
the Lender an annual operating budget, certified by the Project
Engineer as being a reasonable estimate of projected costs,
expenses and revenues of the Borrower, for the ensuing calendar
year.
5.8 Books, Records, Access. Maintain adequate books,
accounts and records with respect to the Borrower and the
Facility in compliance with the regulations of any Governmental
Instrumentality having jurisdiction thereof, and, with respect to
financial statements, in accordance with the GAAP and, subject to
reasonable safety requirements, permit employees or designees of
the Lender and the Project Engineer, at any reasonable time and
upon reasonable prior notice to inspect the Facility, and to
examine or audit all of Borrower's books, accounts and records
pertaining or related to the Facility and make copies and
memoranda thereof.
5.9 Financial Statements.
5.9.1 Provide the Lender with:
(a) As soon as available and in any event
within one hundred thirty five (135) days after the close of each
fiscal year commencing with the fiscal year ended after the date
of this Agreement, audited financial statements of the Borrower
including a statement of equity, a balance sheet as of the close
of such year, an income and expense statement, reconciliation of
capital accounts and a statement of sources and uses of funds,
all prepared in accordance with the GAAP and certified by
Independent Accountants.
(b) As soon as available and in any event
within ninety (90) days after the end of each of the quarterly
accounting periods of its fiscal year commencing with the quarter
ending after the date of this Agreement, unaudited financial
statements of the Borrower, including without limitation, an
unaudited balance sheet of the Borrower as of the last day of
such quarterly period, the related statements of income and cash
flows for such quarterly period and (in the case of second, third
and fourth quarterly periods) for the portion of the fiscal year
ending with the last day of such quarterly period, setting forth
in each case in comparative form corresponding unaudited figures
from the preceding fiscal year.
5.9.2 Each time the financial statements of
the Borrower are delivered under this subsection 5.9, a
certificate signed by an Authorized Representative of the
Borrower shall be delivered along with such financial statements,
certifying that such officer has made or caused to be made a
review of the transactions and financial condition of the
Borrower during the relevant fiscal period and that such review
has not, to the best of such Authorized Representative's
knowledge, disclosed the existence of any event or condition
which constitutes an Event of Default under this Agreement, or if
any such event or condition existed or exists, the nature thereof
and the corrective actions that Borrower has taken or proposes to
take with respect thereto, and also certifying that the Borrower
is in compliance in all material respects with its obligations
under this Agreement and each other Financing Agreement to which
it is a party or, if such is not the case, stating the nature of
such non-compliance and the corrective actions which the Borrower
has taken or proposes to take with respect thereto.
5.10 Insurance. The Borrower shall maintain, or cause to be
maintained, adequate insurance with respect to its Facility
satisfactory to the Lender in its reasonable judgment, based upon
the advice of the Independent Insurance Consultant. All
insurance other than third party liability insurance shall name
the Lender as an insured and the sole loss payee thereunder.
Policies for third party liability insurance shall name the
Lender as an additional insured.
5.11 Reports; Cooperation.
5.11.1 Deliver to the Lender on each anniversary of
the date of this Agreement a certificate from the Borrower's
insurers or insurance agents (i) evidencing that the insurance
policies in place satisfy the requirements specified in Section
5.10 (including, without limitation, listing all insurance being
carried by or on behalf of the Borrower pursuant to the Project
Documents and certifying that all insurance required to be
maintained by the Borrower pursuant to the Project Documents is
in full force and effect and all premiums therefore have been
paid in full), and (ii) setting forth a summary of all losses in
excess of US$250,000 (or the equivalent thereof) incurred with
respect to the Project in the preceding year.
5.11.2 Deliver to the Lender within thirty (30) days
following the end of each calendar quarter a quarterly status
report describing in reasonable detail the progress of the
construction of the Facility since the immediately preceding
report hereunder, including without limitation, the cost incurred
to the end of such quarter, an estimate of the time and cost
required for completion of the Facility and such other
information which the Lender may reasonably request.
5.11.3 Prior to the Commercial Operation Date,
deliver to the Lender, within thirty (30) days following the end
of each calendar quarter an update of the Facility Budget,
including but not limited to an explanation or other
reconciliation of differences between such report and previous
reports.
5.11.4 From and after the Commercial Operation Date,
deliver to the Lender within ninety (90) days following each
calendar year, a summary operating report, which shall include,
unless otherwise agreed to by the Lender, a numerical and
narrative assessment of (i) the Project's compliance with each
category in the annual operating budget, (ii) statistical data
relating to the Facility, including heat rate, net electrical and
scheduled and unscheduled outages, (iii) fuel deliveries and use,
(iv) major maintenance activity, (v) casualty losses of value in
excess of US$250,000 or the equivalent thereof in other
currencies (whether or not covered by insurance), (vi) disputes
with any other Major Project Participant, materialman, supplier
or other Person and any related claims against the Borrower,
(vii) pricing information disclosed or made available under the
agreements pertaining to the supply of coal for the Facility and
(viii) compliance with the Governmental Authorizations.
5.11.5 No later than five Business Days following
the receipt thereof, deliver to the Lender all progress reports
provided by the EPC Contractor to the Borrower pursuant to the
EPC Contract and all progress reports prepared under the Power
Purchase Agreement.
5.11.6 Deliver to the Lender any such other
information or data with respect to its business or operations
(including supporting information as to compliance with this
Agreement) as the Lender may reasonably request from time to
time.
5.12 Taxes and Other Governmental Charges. Before the same
become delinquent, pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or
levies lawfully imposed upon the Borrower or its income or
profits or upon the Facility, all utility and other governmental
charges incurred in the ownership, operation, maintenance, use,
occupancy and upkeep of the Facility. However, the Borrower may
contest in good faith any such taxes, assessments and other
charges and, in such event, may permit the taxes, assessments or
other charges so contested to remain unpaid during any period,
including appeals, when the Borrower is in good faith contesting
the same, so long as (a) adequate cash reserves have been
established in an amount sufficient to pay any such taxes,
assessments or other charges, accrued interest thereon and
potential penalties or other costs relating thereto, or other
adequate provision for the payment thereof shall have been made,
(b) enforcement of the contested tax, assessment or other charge
is effectively stayed for the entire duration of such contest,
and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is promptly paid
after resolution of such contest.
5.13 Notices. Promptly, upon acquiring notice or giving
notice, or obtaining knowledge thereof, as the case may be,
provide to the Lender written notice of:
5.13.1 Any Event of Default which it has knowledge,
specifically stating that an Event of Default has occurred and
describing such an Event of Default and any action being taken or
proposed to be taken with respect to such Event of Default;
5.13.2 Any termination or event of default or notice
thereof under the Power Purchase Agreement; and
5.13.3 Any litigation pending against the Borrower or
any other party of which the Borrower has actual knowledge, which
is or could reasonably be expected to have a Material Adverse
Effect.
5.14 Expropriation Event. If an Expropriation Event shall
occur with respect to the Project, (a) promptly upon discovery or
receipt of notice of any occurrence thereof, provide written
notice thereof to the Lender, (b) diligently pursue all its
rights to compensation against the relevant Governmental
Instrumentality in respect of such Expropriation Event, and
(c) hold any Expropriation Proceeds received in respect of such
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
Lender separated from other funds of the Borrower, (d) promptly
deposit all Expropriation Proceeds in (i) the RMB Revenue Account
if denominated in RMB or (ii) in the Foreign Debt Repayment
Account if denominated in Dollars. The Borrower consents to the
participation of the Lender in any proceedings regarding an
Expropriation Event, and the Borrower shall from time to time
deliver to the Lender all documents and instruments requested by
it to permit such participation. Nothing in this Section 5.14
shall be deemed to impair any rights which the Lender may have
with respect to any such Expropriation Event.
5.15 Increased Costs. If, after the date of this Agreement,
any Change of Law:
(a) shall subject the Lender to any tax, duty or other
charge with respect to the
Loans, or shall change the basis of taxation of payments by the
Borrower to the Lender on the Loans (except for Covered Taxes,
Other Taxes or changes in the rate of taxation on the overall net
income of the Lender); or
(b) shall impose on the Lender any other condition
directly related to the Loans;
and the effect of any of the foregoing is to increase the cost to
the Lender of making, issuing, creating, renewing, participating
in or maintaining the Loans or to reduce any amount receivable by
the Lender hereunder, then the Borrower shall from time to time,
upon demand by the Lender, pay to the Lender additional amounts
sufficient to reimburse the Lender for such increased costs or to
compensate the Lender for such reduced amounts.
5.16 Taxes. All payments made by the Borrower under this
Agreement and the Project Note shall be made free and clear of,
and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Instrumentality, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Lender as a result of a present or former connection between
the Lender and the jurisdiction of the Governmental
Instrumentality imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such
connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Agreement or the Project Note). If any
such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Lender hereunder or
under the Project Note, the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender
(after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement. Whenever any Non-Excluded Taxes are
payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender for its own account a certified
copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the
Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
The agreements in this subsection 5.16 shall survive the
termination of this Agreement and the payment of the Loans, the
Project Note and all other amounts payable hereunder.
5.17 Registration of the Loans; Other Foreign Exchange
Matters.
5.17.1 Prior to any due date for any repayment of
the principal of and/or the payment of interest on the Loans, the
Borrower shall (i) use the Registration Certificate and the
notice regarding such repayment and/or payment to obtain from the
registration department a verification and approval certificate
with respect to such repayment and/or payment and (ii) use such
verification and approval certificate and the Registration
Certificate to handle matters regarding the remittance from its
foreign debt account of the principal of and interest on the
Loans outside of China at the relevant bank.
5.17.2 At the beginning of each year, the Borrower
shall submit to the local foreign exchange administration a
report stating the amount of foreign currency purchased in the
preceding year for the purpose of repaying the principal of
and/or paying the interest on the Loans and a plan regarding the
purchase of foreign currency for the current year.
5.18 Loan Payment Reserve. At the time of the final drawing
under this Agreement, the Borrower shall deposit an amount equal
to the Debt Service Reserve Requirement in the Debt Service
Reserve Fund.
ARTICLE 6 - NEGATIVE COVENANTS
The Borrower covenants and agrees for the benefit of the
Lender that until all Obligations owed to the Lender are paid in
full, without the consent of the Lender, the Borrower shall not:
6.1 Indebtedness. Incur, create, assume or be liable for
any Indebtedness, except:
(a) the Loans and additional loans from the Lender;
(b debt incurred to finance working capital
requirements; provided that after giving effect to such
additional debt, (i) the minimum (or lowest) projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.5 to 1 and (ii) the average projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.7 to 1; provided further, however, that the
amount of such debt shall not at any time exceed
US$1,000,000;
(c) purchase money or Capital Lease Obligations
incurred to finance assets of the Borrower that are readily
replaceable personal property with a principal amount or
capitalized portion not exceeding US$1,000,000 in the
aggregate outstanding at any time;
(d) trade accounts payable (other than for borrowed
money) due within 90 days arising, and accrued expenses
incurred, in the ordinary course of business of
constructing, operating or maintaining the Facility on
customary terms;
(e) interest or currency exchange rate protection
agreements;
(f) Indebtedness under the Guarantees to which the
Borrower is a party and any other guarantees of the
obligations of any other Joint Venture Company permitted
under the Financing Agreements.
(g) any debt to any other Joint Venture Company, ((a)
through (g), collectively "Permitted Indebtedness").
6.2 Limitations on Liens. Create, assume or permit to
exist any Lien upon any of the Borrower's assets or properties
including without limitation the Facility, whether now owned or
hereafter acquired, other than Permitted Liens.
6.3 Nature of Business. Amend or modify its Articles of
Association without the prior written consent of the Lender, or
engage in any business other than the ownership and operation of
the Facility.
6.4 Sale or Lease of Facility Assets. Sell, lease, assign,
transfer or otherwise dispose of the Facility or other assets
unless (a) such sale, lease, assignment or other disposition
relates only to property that is worn out or no longer useful or
usable in connection with the operation of the Facility or 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 such lease or transfer is required to
comply with law or to obtain or maintain any Governmental
Authorization, (b) with respect to any other sales, leases,
assignments or other dispositions, the aggregate amount thereof
does not exceed US$250,000 in any given year or US$1,000,000 in
the aggregate since the date of this Agreement, or (c) such sale,
lease, assignment or other disposition is made in the ordinary
course of business in accordance with the Project Documents.
6.5 Merger, Consolidation, Liquidation, Dissolution. Merge
or consolidate with or into any other Person, other than any of
the other Joint Venture Companies or other Sino-foreign joint
ventures with no material liabilities and no material activities
unrelated to the Project, or liquidate, wind up, dissolve, or
otherwise transfer or dispose of all or any substantial part of
its property, assets or business, or change its legal form, or
purchase or otherwise acquire any assets of any Person unless
such purchase or acquisition of assets is reasonably necessary
for the operation of the Facility or in the ordinary course of
business.
6.6 Contingent Liabilities. Become liable as a surety,
guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person; provided, however, that the
Borrower may guarantee or otherwise become liable in respect of
any Indebtedness incurred by any other Person (on its behalf) in
connection with or relating to incurrence of Indebtedness
permitted under Section 6.1; and provided, further, however, that
this Section 6.6 shall not be deemed to prohibit (i) the
acquisition of goods, supplies or merchandise in the normal
course of business on normal trade credit, or (ii) the
endorsement of negotiable instruments received in the normal
course of business; or (iii) the obligations hereunder and under
the Guarantees or any other guarantee of any obligation of any
other Joint Venture Company if such guarantee is required for the
development and construction of the Project and is not contrary
to any Legal Requirements.
6.7 Loans, Advances or Investments. Make or permit to
remain outstanding any loans, extensions of credit or advances to
or investments in (whether by acquisition of any stocks, notes or
other securities or obligations) any Person except RMB Permitted
Investments with respect to the On-Shore Accounts denominated in
Renminbi or Dollar Permitted Investments with respect to the On-
Shore Accounts denominated in the U.S. Dollars or as expressly
provided in the Project Documents.
6.8 Immunity. In any proceedings in China or elsewhere in
connection with any of the Financing Agreements to which the
Borrower is a party, claim for itself or any of its assets
immunity from suit, execution, attachment or other legal process.
6.9 Distributions. Agree to any restriction on its ability
to pay dividends (excluding restrictions imposed by law).
6.10 Transactions With Affiliates. Except for the Project
Documents, directly or indirectly: (i) enter into any
transaction with any Person (including any Affiliate) other than
in the ordinary course of business, or (ii) enter into any
transaction with any Person, including any Affiliate, on terms
less favorable to those available from independent third parties
or (ii) establish any sole and exclusive purchasing or sales
agency, or enter into any transaction whereby the Borrower might
receive less than the full commercial price (subject to normal
trade discounts) for electricity or pay more than the commercial
price for products of others.
6.11 Partnerships; Subsidiaries. Except as contemplated by
the Project Documents, become a general or limited partner in any
partnership or a joint venturer in any joint venture, acquire any
ownership interest in any other Person or enter into any profit-
sharing or royalty agreement or other similar arrangement whereby
the Borrower's income or profits are, or might be, shared with
any other Person, or enter into any management contract or
similar arrangement whereby its business or operations are
managed by any other Person (other than any agreement under which
the Borrower may provide operation and management consulting or
other similar services), or form any Subsidiary.
6.12 Assignment. Assign or otherwise transfer its rights
under any of the Project Documents to which it is a party, or
Governmental Authorizations for its benefit, to any Person
without the prior written consent of the Lender.
6.13 Abandonment of Project. Voluntarily cease or abandon
the development, construction or operation of the Project.
6.14 Improper Use. Use, maintain, operate or occupy, or
allow the use, maintenance, operation or occupancy of, any
portion of the Site or Facility for any purpose which: (a) may
be dangerous, unless safeguarded as required by any Legal
Requirement or Government Instrumentality; (b) may constitute a
public or private nuisance resulting in a Material Adverse
Effect; or (c) may make void, voidable or cancelable, or
materially increase the premium of, any insurance then in force
with respect to the Site or Project or any part thereof.
6.15 Regulation of Parties. Take any action which could
reasonably be expected to result in (a) the Borrower being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company", (b) the Borrower being subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA or (c) any Person who by reason
of its or their ownership or operation of the Facility upon the
exercise of remedies hereunder or under the Guarantees, being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "holding company" or a
subsidiary or Affiliate of any of the foregoing under any Legal
Requirement of the United States (including, without limitation,
PUHCA and the FPA).
6.16 Amendments. Amend any of the Project Documents without
the prior written consent of the Lender.
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES
7.1 Events of Default; Cure Rights. The occurrence of any
of the following events shall constitute an event of default
("Event of Default") hereunder:
7.1.1 Failure to Make Payments. Payment shall not
have been made of any principal of or any interest on the Loans
or other amounts owed by the Borrower to the Lender within 15
Banking Days after such amounts are due.
7.1.2 Misstatements; Omissions. Any representation
or warranty confirmed or made in any Project Documents by the
Borrower or in any writing provided by the Borrower in connection
with the transactions contemplated by this Agreement shall be
found to have been incorrect in any material respect when made or
deemed to be made; provided, however, that no Event of Default
shall occur if within sixty (60) days after the date on which the
General Manager of the Borrower has actual notice that such
incorrect statement has occurred, the Borrower shall deliver in
good faith, to the Lender an Officer's Certificate stating in
reasonable detail that either (i) the Borrower has eliminated any
adverse effect relating to such incorrect statement or (ii) that
the Borrower has taken action that it reasonably believes will
eliminate the adverse effect relating to such incorrect statement
within a reasonable specified time.
7.1.3 Affirmative Covenants. The Borrower shall
fail to perform or observe any of its obligations under (a)
Sections 5.4 and 5.5 or (b) any other term, covenant or agreement
set forth in Article 5 hereof, where such default shall not have
been remedied within fifteen (15) days after notice of such
failure.
7.1.4 Negative Covenants. The Borrower shall fail
to perform or observe any of its obligations under any term,
covenant or agreement set forth in Article 6 hereof other than
Section 6.2, where such default shall not have been remedied
within fifteen (15) days after the Borrower has received notice
of such failure.
7.1.5 Breach of Material Project Documents. The
Borrower or any other party thereto shall breach or default under
any term, condition, provision, covenant, representation or
warranty contained in any of the Material Project Documents and
the Financing Agreements to which the Borrower is a party if such
breach or default shall continue unremedied for fifteen (15) days
after notice to the Borrower from the Lender; provided, however,
that in the case of any of the EPC Contract, the CHEXIM Guarantee
or the Transmission Facilities Construction Agreement, if the
breach or default cannot be remedied within such fifteen (15)
days despite the Borrower's and/or such other party's, as the
case may be, good faith and diligent efforts to do so, but is
susceptible to cure within a longer period, the Borrower or such
party shall continue diligently such efforts to cure such breach
or default until cured (but in no event longer than sixty (60)
days in the aggregate.
7.1.6 Bankruptcy; Insolvency.
(a) The Borrower or any other Joint Venture Company
shall institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or the Borrower shall file a petition, answer or consent or shall
otherwise institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or the Borrower or any
other Joint Venture Company shall apply for, or by consent or
acquiescence there shall be an appointment of, a receiver,
liquidator, sequestrator, trustee or other officer with similar
powers; or the Borrower or any other Joint Venture Company shall
make an assignment for the benefit of creditors; or the Borrower
or any other Joint Venture Company shall admit in writing its
inability to pay its debts generally as they become due; or if an
involuntary case shall be commenced seeking the liquidation or
reorganization of the Borrower or any other Joint Venture Company
under any Bankruptcy Law (or any successor statute or similar
statute under any relevant jurisdiction) or any similar
proceeding shall be commenced against the Borrower or any other
Joint Venture Company under any other Legal Requirements and (i)
the petition commencing the involuntary case is not timely
controverted, (ii) the petition commencing the involuntary case
is not dismissed within sixty (60) days of its filing, (iii) an
interim trustee is appointed to take possession of all or a
portion of the property, and/or to operate all or any part of the
business of the Borrower or any other Joint Venture Company and
such appointment is not vacated within sixty (60) days, or
(iv) an order for relief shall have been issued or entered
therein; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers of
the Borrower or any other Joint Venture Company of all or a part
of their property, shall have been entered; or any other similar
relief shall be granted against the Borrower or any other Joint
Venture Company under any Legal Requirements; and
(b) NCPGC, the EPC Contractor, or Harbin Power shall
institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or shall file a petition, answer or consent or shall otherwise
institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or shall apply for, or by
consent or acquiescence there shall be an appointment of, a
receiver, liquidator, sequestrator, trustee or other officer with
similar powers; or shall make an assignment for the benefit of
creditors; or shall admit in writing its inability to pay its
debts generally as they become due; or if an involuntary case
shall be commenced seeking the liquidation or reorganization of
NCPGC, the EPC Contractor, or Harbin Power under any Bankruptcy
Law (or any successor statute or similar statute under any
relevant jurisdiction) or any similar proceeding shall be
commenced against NCPGC, the EPC Contractor, or Harbin Power
under other Legal Requirements and (i) the petition commencing
the involuntary case is not timely controverted, (ii) the
petition commencing the involuntary case is not dismissed within
sixty (60) days of its filing, (iii) an interim trustee is
appointed to take possession of all or a portion of the property,
and/or to operate all or any part of the business of any of
NCPGC, the EPC Contractor, or Harbin Power and such appointment
is not vacated within sixty (60) days, or (iv) an order for
relief shall have been issued or entered therein; or a decree or
order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee or
other officer having similar powers of any of NCPGC, the EPC
Contractor, or Harbin Power of all or a part of any of their
respective property, shall have been entered; or any other
similar relief shall be granted against the NCPGC, the EPC
Contractor, or Harbin Power under any Legal Requirements.
7.1.7 Judgments. A final judgment or judgments
shall be entered (i) against the Borrower in the aggregate amount
of US$1,000,000 (or the equivalent thereof in other currencies)
(exclusive of judgment amounts fully covered by insurance where
the insured has admitted liability), other than a judgment, the
execution of which is effectively stayed within sixty (60) days
after its entry but only for no more than ninety (90) days after
the date on which such stay is terminated or expires; or (ii) in
the form of an injunction or similar form of relief requiring
suspension or abandonment of construction or operation of the
Facility on grounds of violation of a Legal Requirement and
failure of the Borrower to have such injunction or similar form
of relief stayed or discharged within ninety (90) days.
7.1.8 Other Indebtedness. The Borrower shall
default for a period beyond any applicable grace period in the
payment of any principal, interest or other amount due under any
agreement involving the borrowing of money or the advance of
credit and the outstanding amount or amounts payable under such
agreement equals or exceeds US$250,000 (or the equivalent thereof
in other currencies) in the aggregate.
7.1.9 Termination or Invalidity of Certain Project
Documents; Abandonment of Project.
(a) Any of the Project Documents or the Financing
Agreements shall have become invalid, illegal or unenforceable;
(b) The Borrower shall cease to have the right to use
the Site for the purpose of owning, constructing, maintaining and
operating the Facility in the manner contemplated by the Project
Documents (or to obtain sufficient water for its operations); or
(c) The Borrower shall abandon the Project or
otherwise cease to pursue the operations of the Project in
accordance with standard industry practice or shall (except as
permitted by Section 6.4) sell or otherwise dispose of its
interest in the Project.
7.1.10 Commercial Operation Date. The Commercial
Operation Date shall not have occurred by December 31, 1999.
7.1.11 Government Authorizations. Any Governmental
Authorization, approval or permit (whether central, provincial,
municipal, local or otherwise) necessary for (a) the
establishment of the Borrower (b) the ownership, construction,
maintenance, financing or operation of the Project, (c) the
setting or adjustment of the electricity price for the Project in
accordance with the method of calculation set forth in the
attachments to the Pricing Document or (d) the conversion or
transfer of any foreign currency shall not be obtained if and
when required, or shall be modified, revoked or cancelled, or a
notice of violations is issued under any Governmental
Authorization on grounds of, or illegality or the absence of any
required authorization, by the issuing agency or other
Governmental Instrumentality having jurisdiction or any
proceeding is commenced by any Governmental Instrumentality for
the purpose of modifying, revoking or cancelling any Governmental
Authorization.
7.1.12 Destruction of Project. The Facility is
destroyed, or suffers an actual or constructive total loss or
damage.
7.1.13 Change of Law. The occurrence of any adverse
Change of Law of the PRC.
7.1.14 Remedies. Upon the occurrence of any of the
Events of Default, the Lender may, by written notice to the
Borrower and the other Joint venture Companies, declare the Loans
to be immediately due and payable and pursue any and all remedies
available for the non-payment of debts.
ARTICLE 8 - SCOPE OF LIABILITY
The Lender shall have no claims with respect to the
transactions contemplated by the Project Documents against any
Person other than the Borrower including, but not limited to, the
Panda International and the Luannan Government or any of their
respective Affiliates (other than the Borrower) or direct or
indirect parents, or to the shareholders, officers, directors,
employees, or other controlling persons (including members of the
management committee) of the Panda International and the Luannan
Government, their respective Affiliates (other than the
Borrower), or their direct or indirect parents (collectively the
"Nonrecourse Persons"), subject to the exceptions set forth below
in this Article 8; provided that (a) the foregoing provision of
this Article 8 shall not constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms,
covenants, conditions, or provisions of this Agreement, any other
Financing Agreement and the same shall continue until fully paid,
discharged, observed, or performed; (b) the foregoing provision
of this Article 8 shall not limit or restrict the right of the
Lender, to name the Borrower or any other Person as a defendant
in any action or suit for a judicial foreclosure or for the
exercise of any other remedy under or with respect to this
Agreement or any other Financing Agreement, or for injunction or
specific performance, so long as no judgement in the nature of a
deficiency judgement shall be enforced against any Nonrecourse
Persons, except as set forth in this Article 8; (c) the foregoing
provision of this Article 8 shall not affect or diminish or
constitute a waiver, release or discharge of any specific written
obligation, covenant, or agreement in respect to the Project made
by any of the Nonrecourse Persons; and (d) nothing contained
herein shall limit the liability of any Person who is a party to
any Project Document or has issued any certificate or other
statement in connection therewith with respect to such liability
as may arise by reason of the terms and conditions of such
Project Document, certificate or statement, or otherwise, in each
case under this clause (d) relating solely to such liability of
such Person as may arise under such referenced agreement,
instrument or opinion. The limitations on recourse set forth in
this Article 8 shall survive the termination of this Agreement
and the full payment and performance of the Obligations hereunder
and under the other Project Documents.
ARTICLE 9 - MISCELLANEOUS
9.1 Addresses. Any communications between the parties
hereto or notice provided herein to be given may be given to the
following addresses.
If to the Lender: Pan-Western Energy Corporation, LLC
c/o Maples and Calder
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
If to the Borrower: Tangshan Panda Heat and Power Co., Ltd.
South Gujiaying Cun, Bencheng
Luannan County
Hebei Province, China
in either case,
with a copy to: Panda Energy Industrial Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
9.2 Delay and Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Lender upon the occurrence
of any Event of Default or any breach or default of the Borrower
under this Agreement shall impair any such right, power or remedy
of the Lender, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any
waiver of any single Event of Default, or other breach or default
be deemed a waiver of any other Event of Default, or other breach
or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part
of the Lender of any Event of Default, or other breach or default
under this Agreement, or any waiver on the part of the Lender of
any provision or condition of this Agreement, must be in writing
and shall be effective only to the extent in such writing
specifically set forth. All remedies, either under this
Agreement or by law or otherwise afforded to the Lender shall be
cumulative and not alternative.
9.3 Entire Agreement. This Agreement and any agreement,
document or instrument attached hereto or referred to herein
integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral negotiations and prior
writings in respect to the subject matter hereof. In the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail. This Agreement may only be amended or modified by an
instrument in writing signed by the Borrower, the Lender and any
other parties to be charged.
9.4 Governing Law. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the law of
the Cayman Islands.
9.5 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
9.6 Headings. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and
it is agreed that such paragraph headings are not a part of this
Agreement and shall not be used in the interpretation of any
provision of this Agreement.
9.7 No Partnership, Etc. The Lender and the Borrower
intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement or the
Project Note shall be deemed or construed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or
co-ownership by or between the Lender, on the one hand, and the
Borrower or any other Person, on the other hand. The Lender
shall not be in any way responsible or liable for the debts,
losses, obligations or duties of the Borrower or any other Person
with respect to the Project or otherwise. All obligations to pay
real property or other taxes, assessments, insurance premiums,
and all other fees and charges arising from the ownership,
operation or occupancy of the Project and to perform all
obligations under the agreements and contracts relating to the
Project shall be the sole responsibility of the Borrower.
9.8 Consent to Jurisdiction. The Lender and the Borrower
agree that any legal action or proceeding by or against the
Borrower or with respect to or arising out of this Agreement the
Project Note may be brought in or removed to the courts of the
Cayman Islands. By execution and delivery of this Agreement, the
Lender and the Borrower accept, for themselves and in respect of
their property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Lender and the Borrower irrevocably
consent 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 airmail,
postage prepaid, to the Lender or the Borrower, as the case may
be, at their respective addresses for notices as specified herein
and that such service shall be effective five (5) Banking Days
after such mailing. Nothing herein shall affect the right to
serve process in any other manner permitted by law or the right
of the Lender to bring legal action or proceedings in any other
competent jurisdiction. The Lender and the Borrower further
agree that the aforesaid courts of the Cayman Islands shall have
exclusive jurisdiction with respect to any claim or counterclaim
of the Borrower based upon the assertion that the rate of
interest charged by the Lender on or under this Agreement and/or
the Project Note is usurious. The Lender and the Borrower hereby
waive any right to stay or dismiss any action or proceeding under
or in connection with any or all of the Project or this Agreement
brought before the foregoing courts on the basis of forum
non-conveniens.
9.9 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The
Borrower may not assign or otherwise transfer any of its rights
under this Agreement.
9.10 Counterparts. This Agreement may be executed in one or
more duplicate counterparts and when signed by all of the parties
listed below shall constitute a single binding agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their officers or partners
thereunto duly authorized as of the day and year first above
written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
TANGSHAN PANDA HEAT AND POWER CO., LTD.
By:
Name:
Title:
Schedule 5.8
[TO COME]
EXHIBIT A
FORM OF PROJECT NOTE
$ New York, New York
, 199
FOR VALUE RECEIVED, the undersigned,
, a Sino-foreign equity joint venture with limited liability
organized under the laws of the People's Republic of China, (the
"Borrower"), hereby unconditionally promises to pay to the order
of Pan-Western Energy Corporation LLC (the "Lender") at the
office of [ ] in lawful money of the United
States of America and in immediately available funds, the
principal amount of DOLLARS ($ ),
or, if less, the unpaid principal amount of the Loans made by the
Lender pursuant to the Shareholder Loan Agreement, as hereinafter
defined. The principal amount shall be paid in the amounts and
on the dates specified in the Shareholder Loan Agreement. The
Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in the
Shareholder Loan Agreement.
The holder of this Note is authorized to endorse on the
schedule 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 the Loans and the date and
amount of each payment or prepayment of principal 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 Loans.
This Note (a) is the Project Note referred to in the
Shareholder Loan Agreement dated as of September 24, 1996 (as
amended, supplemented or otherwise modified from time to time,
the "Shareholder Loan Agreement"), between the Borrower and the
Lender, (b) is subject to the provisions of the Shareholder Loan
Agreement and (c) is subject to optional and mandatory prepayment
in whole or in part as provided in the Shareholder Loan
Agreement. This Note is guaranteed as provided in the Financing
Agreements. Reference is hereby made to the Financing Agreements
for a description of the terms and conditions upon which each
guarantee was 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 Shareholder Loan Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the
Shareholder Loan Agreement and used herein shall have the
meanings given to them in the Shareholder Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE CAYMAN ISLANDS.
[BORROWER]
By:
Name:
Title:
SCHEDULE A
INTEREST PAYMENT SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE B
AMORTIZATION SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
EXHIBIT 10.97
AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT
between
PAN-WESTERN ENERGY CORPORATION LLC
as Lender
and
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
as Borrower
Dated as of April 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS 1
1.1 Definitions 1
ARTICLE 2 - THE CREDIT FACILITY 13
2.1 Credit Facility 13
2.2 Interest Payments 13
2.2.1 Interest Payment Dates 13
2.2.2 Interest 13
2.3 Project Note 13
2.4 Repayment of the Loans 14
2.4.1 Payments 14
2.4.2 Application of Payments 14
2.5 Prepayments 14
2.5.1 Voluntary Prepayments 14
2.5.2 Certain Mandatory Prepayments 14
2.5.3 Expropriation Event; Event of Loss 14
2.6 Fees 15
ARTICLE 3 - CONDITIONS PRECEDENT 16
3.1 Borrower's Certificate 16
(a) Representations and Warranties 16
(b) No Event of Default 16
(c) Governmental Authorizations and other
consents and approvals 16
(d) Facility Costs 16
3.2 On-Shore Accounts 16
3.3 Evidence of Facility Costs and Other Expenses 16
3.4 Progress Report; Project Engineer 16
3.5 Registration Certificate 17
3.6 Equity Contributions; Real Estate Transfers 17
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 17
4.1 Organization 17
4.2 Authorization; No Conflict 17
4.3 Legality, Validity and Enforceability 17
4.4 Compliance with Law, Governmental
Authorizations and Project Documents 17
4.5 Governmental Authorizations 18
4.6 Litigation 18
4.7 Existing Defaults 18
4.8 Taxes 18
4.9 Contingent Liabilities 18
4.10 Business, Debt, Contracts, Etc. 18
4.11 Representations and Warranties 18
4.12 Utilities 18
4.13 Project Documents 19
4.14 Fees and Enforcement 19
4.15 Immunity 19
4.16 Subsidiaries and Beneficial Interest 19
4.17 No Other Powers of Attorney, etc. 19
4.18 Liens 19
4.19 Regulation of Parties 19
4.20 Transactions with Affiliates 19
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER 20
5.1 Repayment of Indebtedness 20
5.2 Existence, Conduct of Business,
Properties, Etc. 20
5.3 Performance of Covenants and Obligations 20
5.4 Use of Funds 20
5.5 Accounts 20
5.6 Compliance with Legal Requirements 21
5.7 Operating Budgets 21
5.8 Books, Records, Access 22
5.9 Financial Statements 22
5.10 Insurance 22
5.11 Reports; Cooperation 23
5.12 Taxes and Other Governmental Charges 23
5.13 Notices 24
5.14 Expropriation Event 24
5.15 Increased Costs 24
5.16 Taxes 25
5.17 Registration of the Loans; Other Foreign
Exchange Matters 25
5.18 Loan Payment Reserve 25
ARTICLE 6 - NEGATIVE COVENANTS 25
6.1 Indebtedness 26
6.2 Limitations on Liens 26
6.3 Nature of Business 26
6.4 Sale or Lease of Facility Assets 26
6.5 Merger, Consolidation, Liquidation, Dissolution 26
6.7 Loans, Advances or Investments 27
6.8 Immunity 27
6.9 Distributions 27
6.10 Transactions With Affiliates 27
6.11 Partnerships; Subsidiaries 27
6.12 Assignment 27
6.13 Abandonment of Project 28
6.14 Improper Use 28
6.15 Regulation of Parties 28
6.16 Amendments 28
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES 28
7.1 Events of Default; Cure Rights 28
7.1.1 Failure to Make Payments 28
7.1.2 Misstatements; Omissions 28
7.1.3 Affirmative Covenants 28
7.1.4 Negative Covenants 29
7.1.5 Breach of Material Project Documents 29
7.1.6 Bankruptcy; Insolvency 29
7.1.7 Judgments 30
7.1.8 Other Indebtedness 30
7.1.9 Termination or Invalidity of Certain
Project Documents; Abandonment of
Project 30
7.1.10 Commercial Operation Date 30
7.1.11 Government Authorizations 31
7.1.12 Destruction of Project 31
7.1.13 Change of Law 31
7.1.14 Remedies 31
ARTICLE 8 - SCOPE OF LIABILITY 31
ARTICLE 9 - MISCELLANEOUS 32
9.1 Addresses 32
9.2 Delay and Waiver 32
9.3 Entire Agreement 32
9.4 Governing Law 32
9.5 Severability 33
9.6 Headings 33
9.7 No Partnership, Etc. 33
9.8 Consent to Jurisdiction 33
9.9 Successors and Assigns 33
9.10 Counterparts 33
TABLE OF SCHEDULES AND EXHIBITS iv
TABLE OF SCHEDULES AND EXHIBITS
Exhibit A Form of Project Note
Schedule 5.8 Insurance
Schedule A Interest Payment Schedule
Schedule B Amortization Schedule
THIS AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT (this
"Agreement") dated as of April 1, 1997, by and between Pan-
Western Energy Corporation LLC (the "Lender"), a company with
limited liability organized under the laws of the Cayman Islands,
and Tangshan Pan-Western Heat and Power Co., Ltd. (the
"Borrower"), a Sino-foreign equity joint venture with limited
liability organized under the laws of the People's Republic of
China (the "PRC" or "China").
W I T N E S S E T H :
WHEREAS, the Borrower has developed a business opportunity
concerning ownership and operation of a steam and hot water
distribution system, land conscribed to industrial use, an ash
slurry pipeline and ash disposal land, certain social buildings,
the provision of certain services and the making of certain
investments (collectively referred to as the "Facility") to be
undertaken in conjunction with the development and operation of
certain other facilities including two 50 MW coal-fired thermal
power generation facilities, water wells and pipeline systems,
heat, steam and hot water system facilities (collectively, with
the Facility referred to herein as the "Project"); and
WHEREAS, the Lender, as the owner of approximately 88% of
the aggregate ownership interest in the Borrower, can be expected
to derive certain benefits as a result of this Agreement and
desires to lend certain funds to the Borrower on commercial terms
negotiated at arms length by and between the Borrower and the
Lender pursuant to, and upon the term and conditions contained
in, this Agreement and for the benefit of the Borrower;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" of a specified Person means any other
Person or Persons that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under
common control with the Person specified, or who holds or
beneficially owns 10% or more of the equity interest in the
Person specified or 10% or more of any class of voting securities
of the Person specified.
"Asset Sale" means sale, transfer or other disposition
(including any sale and leaseback of assets and any sale of
accounts receivable in connection with a receivable financing
transaction) by the Borrower or any of its Subsidiaries of any
property of the Borrower or any such Subsidiary, other than as
permitted pursuant to subsection 2.5.2.
"Authorized Representative" means as to any Person, its
president, chief executive officer or any senior vice president
or any other person specifically identified as such in a
certificate of such Person delivered to the Lender.
"Banking Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Bankruptcy Law" means any insolvency, reorganization,
moratorium or similar law for the general relief of debtors in
any relevant jurisdiction.
"Basic Settlement Account" shall have the meaning
ascribed to it in subsection 5.5.
"Borrower" means Tangshan Pan-Western.
"Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
"Capitalized Lease" means as to any Person, any lease
of any property of which the discounted present value of the
rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such
Person, and "Capitalized Lease Obligation" means the rental
obligations, as aforesaid, under any such lease.
"Cash Equivalents " means, at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System, whose
rating is AA or higher from Standard & Poor's or Aa2 or higher
from Moody's, having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper
with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and
having the highest rating obtainable from Standard & Poor's or
Moody's; and (iv) repurchase obligations for a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above.
"Cash Flow Available for Debt Service" means, for any
period, (i) the sum of all revenues (including interest and fee
income and any principal payments received by the Borrower on the
Transmission Loan for such period, but excluding any insurance
proceeds, other than business interruption insurance proceeds,
and other similar non-recurring receipts) of the Borrower for
such period minus (ii) the aggregate amount of O&M Costs for such
period as determined on a cash basis and otherwise in accordance
with GAAP).
"Change of Law" means after the date of this Agreement,
the adoption of any Legal Requirement, any change in any Legal
Requirement or the application or requirements thereof, any
change in the interpretation or administration of any Legal
Requirement by any Governmental Instrumentality, or compliance by
the Lender or the Borrower with any request or directive (whether
or not having the force of law) of any Governmental
Instrumentality.
"CHEXIM" means the Export-Import Bank of China, a
company organized under the laws of PRC.
"CHEXIM Guarantee" means the guarantee to be given by
CHEXIM as required pursuant to the EPC Contract in respect of the
EPC Contractor's obligations under the EPC Contract, as the same
may from time to time be amended, supplemented or otherwise
modified.
"Coal Supply Agreements" means all agreements entered
into by the Joint Venture Companies for the supply of coal to the
Project.
"Coal Transportation Agreements" means all agreements
entered into by the Joint Venture Companies for the
transportation of coal to the Project.
"Commercial Operation Date" means that date by which
both of the following have occurred: (i) the Project Engineer
has certified that the Project has achieved commercial operations
and (ii) the Commercial Operation Date, as such term is used in
the General Interconnection Agreement, has occurred.
"Commercially Feasible Basis" means that, following an
Event of Loss or an Expropriation Event, (i) the sum of the
proceeds of business interruption insurance, any funds available
to be applied to the rebuilding, repair or restoration pursuant
to subsection 2.5.3(e), any amounts that the shareholders of all
the Joint Venture Companies are irrevocably committed to
contribute and the anticipated revenues of the Project during the
estimated period of rebuilding, repair or restoration will be
sufficient to pay all Debt Service and O&M Costs of the Project
during the estimated period of rebuilding, repair or restoration
and (ii) the Project upon being rebuilt, repaired or restored can
reasonably be expected to produce revenues adequate to pay all
Debt Service and O&M Costs of all Joint Venture Companies
pursuant to each such Joint Venture Company's respective
Shareholder Loan Agreement over the remaining terms of the Loans
outstanding of each Joint Venture Company, taking into account
any change in projected operating results due to the impairment
of any portion of the Project, all without materially affecting
the Borrower's Debt Service Coverage Ratio.
"Covered Taxes" means taxes, levies, imposts,
deductions, charges, withholdings and liabilities imposed on or
measured by the net income or capital of a Person by any
jurisdiction or any political subdivision or taxing authority
thereof or therein solely as a result of a permanent
establishment of such Person in such jurisdiction or political
subdivision.
"Debt Service" means, for any period, an amount equal
to the aggregate of, without duplication all payments of
principal and interest (including any adjustment for withholding
taxes or similar taxes) due and payable on Indebtedness during
such period.
"Debt Service Coverage Ratio" means, for any period,
and, if the transaction giving rise to the need to calculate Debt
Service Coverage Ratio is an incurrence of Indebtedness,
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been incurred or made on
the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, means the
ratio of (A) Cash Available for Debt Service to (B) Net Debt
Service for such period.
"Debt Service Reserve Requirement" means US$1,000,000
less the amount of any Performance Bonus Payment paid by the
Borrower.
"Development Expenses" shall mean all reasonable out-of
pocket expenses related to the Facility that have been incurred
by the Borrower, Panda International or their Affiliates in the
development of the Facility prior to the date of this Agreement.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Loans, as the case may be.
"Dollar Equivalent" means, with respect to any monetary
amount in Renminbi, at any time for the determination thereof,
the amount of Dollars obtained by converting the amount of
Renminbi involved in such computation into Dollars at the spot
rate at which Renminbi are offered for sale against delivery of
Dollars by leading banks in Tangshan City on the date of
determination thereof as determined by the Lender in its
reasonable judgement. If for any reason the Dollar Equivalent
cannot be calculated as provided in the immediately preceding
sentence, the Lender shall calculate the Dollar Equivalent on
such basis as it deems fair and equitable.
"Dollar Permitted Investments" means investments which
are denominated and payable in U.S. Dollars (a) with respect to
funds in the On-Shore Accounts, deposits denominated in U.S.
Dollars maintained at, or certificates of deposit insured, or
obligations insured or guaranteed by, the Bank of China, The
China Construction Bank, the Communication Bank, the China
Farmers Bank or China International Trust and Investment
Corporation, or any branch of a commercial bank organized 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 Standard & Poor's and Moody's
equal to the highest rating assigned thereby to long-term
unsecured debt securities; and (b) means any of the following
securities: (i) direct obligations of the Department of the
Treasury of the United States of America; (ii) obligations of any
of the following federal agencies which obligations represent
full faith and credit of the United States of America, including:
Export-Import Bank, Farmers Home Administration, General Services
Administration, U.S. Maritime Administration, Small Business
Administration, Government National Mortgage Associate (GNMA),
U.S. Department of Housing & Urban Development (PHA's) and
Federal Housing Administration; (iii) bonds, notes or other
evidences of indebtedness rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal Home Loan Bank, the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation; (iv) commercial paper rated in any one of
the two highest rating categories by Moody's or Standard &
Poor's; (v) investment agreements with banks (foreign &
domestic), broker/dealers, and other financial institutions rated
at the time of bid in any one of the three highest rating
categories by Moody's and Standard & Poor's; (vi) repurchase
agreements with banks (foreign & domestic), broker/dealers, and
other financial institutions rated at the time of bid in any one
of the three highest rating categories by each of Standard &
Poor's and Moody's, provided: (1) collateral is limited to (i),
(ii) and (iii) above, (2) the margin levels for collateral must
be maintained at a minimum of 102% including principal and
interest, (3) the Lender shall have a first perfected security
interest in the collateral, (4) the collateral will be delivered
to a third party custodian, designated by the Lender and all fees
and expenses related to collateral custody will be the
responsibility of the Lender, (5) the collateral must have been
or will be acquired at the market price and marked to market
weekly and collateral level shortfalls cured within 24 hours, (6)
unlimited right of substitution of collateral is allowed provided
that substitution collateral must be permitted collateral
substituted at a current market price and substitution fees of
the custodian shall be paid by the Lender; (vii) forward purchase
agreements delivering securities outlined in (i) and (iv) above
with banks (foreign and domestic), broker/dealers, and other
financial institutions maintaining a long-term rating on the day
of bid no lower than investment grade by each of Standard &
Poor's and Moody's (such rating may be at either the parent or
subsidiary level).
"Dollars," "U.S. Dollars" and "US$" mean lawful
currency of the United States of America.
"Energy Purchase Agreement" means Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, between
NCPGC and Tangshan Panda and Tangshan Pan-Western, as the same
may from time to time be amended, supplemented or otherwise
modified.
"EPC Contract" means the Engineering, Procurement and
Construction Contract, dated as of April 24, 1996 between the EPC
Contractor and Tangshan Panda and Tangshan Pan-Western, as the
same may from time to time be amended, supplemented or otherwise
modified.
"EPC Contractor" means Harbin Power Engineering Company
Limited, a company organized under the laws of the PRC and a
wholly owned subsidiary of Harbin Power.
"EPC Contract Liquidated Damages" means liquidated
damages as defined in the EPC Contract.
"EPC Contractor Parent Guarantee" means the guarantee
to be given by Harbin Power in favor of Tangshan Panda and
Tangshan Pan-Western in respect of the EPC Contractor's
obligations under the EPC Contract, as the same may from time to
time be amended, supplemented or otherwise modified.
"Event of Default" shall have the meaning given to such
term in Section 7.1.
"Event of Loss" means an event which causes all or a
portion of the Facility to be damaged, destroyed or rendered
unfit for normal use for any reason whatsoever, other than an
Expropriation Event.
"Expropriation Event" means any condemnation,
nationalization, seizing, or expropriation by any Government
Instrumentality of all or a substantial portion of the Project or
the property or assets of the Borrower or of its share capital,
or any Government Instrumentality shall have assumed custody or
control of such property or other assets or business operations
of the Borrower or of its share capital, or shall have taken any
action for the dissolution or disestablishment of the Borrower or
any action that would prevent the Borrower or its officers from
carrying on its business or operations or a substantial part
thereof.
"Expropriation Proceeds" means any proceeds received by
the Borrower as a result of the occurrence of an Expropriation
Event.
"Facility" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Facility Budget" means the construction budget and
schedule provided by the Lender (containing customary assumptions
and qualifications) approved as reasonable by the Project
Engineer prior to the making of the first Loan pursuant to this
Agreement, and as it thereafter may be amended with the approval
of the Lender.
"Facility Costs" means all costs incurred, or to be
incurred, in connection with the development, design,
engineering, procurement, construction and commissioning of the
Facility, which costs shall include, but not be limited to: (a)
all costs incurred under the EPC Contract, (b) Development
Expenses, (c) O&M Costs incurred in connection with the start up
of the Facility or otherwise prior to the Commercial Operation
Date, (d) actual interest costs (including, prior to Commercial
Operation, interest due and payable on the Loans) and amounts
required pursuant to the Debt Service Reserve Requirement,
closing and administration costs related to the Facility until
the Commercial Operation Date, (e) the costs of acquiring
Governmental Authorizations for the Facility prior to the
Commercial Operation Date and (f) without duplication, working
capital costs.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressures or compulsion to complete the transaction. Fair Market
Value shall be determined by the board of directors of the
Borrower acting in good faith and shall be evidenced by a board
resolution delivered to the Lender except that any determination
of Fair Market Value made with respect to any parcel of real
property shall be made by an independent appraiser.
"Financing Agreements" means, collectively, this
Agreement, the Guarantees, the Project Notes, the other
Shareholder Loan Agreements, each individually a "Financing
Agreement".
"Foreign Debt Account" shall have the meaning ascribed
to it in Section 5.5.
"Foreign Debt Repayment Account" shall have the meaning
ascribed to it in Section 5.5.
"FPA" means the United States Federal Power Act, as
amended, excluding Sections I-18, 21-30, 202(c), 210, 211, 212,
305(c) and any necessary enforcement provision of Part III of the
Act with regard to the foregoing sections.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date hereof.
"Governmental Authorizations" means all authorizations,
consents, decrees, permits, waivers, privilege approvals from and
filings with all Governmental Instrumentalities necessary for the
realization of the Project in accordance with the Project
Documents.
"Governmental Instrumentality" of any country shall
mean such country and its government and any ministry,
department, political subdivision, instrumentality, agency,
corporation or commission under the direct or indirect control of
such country.
"Guarantees" means collectively, the undertakings by
Tangshan Panda, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Pan-
Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Lender pursuant to any Indebtedness
obligation then or thereafter due and owing by any such party to
Lender; the undertakings by Tangshan Pan-Western, each executed
as of the 22nd day of September, 1996, to unconditionally and
irrevocably guarantee to the Lender the prompt payment and
performance by each of Tangshan Panda, Tangshan Cayman, and
Tangshan Pan-Sino of their individual obligations to Lender
pursuant to any Indebtedness obligation then or thereafter due
and owing by any such party to Lender; the undertakings by
Tangshan Cayman, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Pan-Sino of their individual
obligations to Lender pursuant to any Indebtedness obligation
then or thereafter due and owing by any such party to Lender; and
the undertakings by Tangshan Pan-Western, each executed as of the
22nd day of September, 1996 to unconditionally and irrevocably
guarantee to the Lender the prompt payment and performance by
each of Tangshan Panda, Tangshan Pan-Western and Tangshan Cayman
of their individual obligations to Lender pursuant to any
Indebtedness obligation then or thereafter due and owing by any
such party to Lender.
"Harbin Power" means Harbin Power Equipment Group
Company, a PRC Company.
"Heat Supply Contracts" means the contracts to supply
steam and hot water to various PRC industrial and commercial
users that have been assigned by Luannan Heat and Power Plant to
Tangshan Pan-Western, or any similar contracts in addition to or
in replacement thereof.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a capitalized lease obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Independent Accountants" means an internationally
recognized accounting firm.
"Independent Insurance Consultant" means Sedgwick, PLC,
a corporation incorporated in accordance with the laws of the
United Kingdom, or its successors.
"Inter-Company Steam Sales Agreement" means the Water,
Heat, Steam and Hot Water Supply and Usage Agreement, dated as of
October 3, 1996 between Tangshan Cayman and Tangshan Panda.
"Interconnection Agreement" means the General
Interconnection Agreement dated September 22, 1995, between NCPGC
and Tangshan Panda and Tangshan Pan-Western, as the same may from
time to time be amended, supplemented or otherwise modified.
"Interconnection Dispatch Agreement" means the
agreement to be negotiated among Tangshan Power Supply Bureau of
NCPGC, Tangshan Panda and Tangshan pan-Western shortly prior to
the Commercial Operation Date of the Project concerning specific
details as to the dispatch of the Luannan Facility.
"Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Joint Venture Companies" means, collectively Tangshan
Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-
Sino.
"Legal Requirements" means all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements
and regulations of any Governmental Instrumentality having
jurisdiction over the matter in question.
"Lender" means Pan-Western Energy Corporation LLC, a
Cayman Islands corporation.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of this Agreement, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Loans" means the loans made under this Agreement.
"Luanhua Co." means Tangshan Luanhua (Group) Co., a
company organized under the laws of the PRC.
"Luannan Government" means the government of Luannan
County, Tangshan City, Hebei Province, PRC.
"Luannan Heat Company" means Luannan County Heat
Company, Ltd. a company organized under the laws of the PRC.
"Luannan Heat & Power" means Luannan County Heat &
Power Plant, a company organized under the laws of the PRC.
"Major Maintenance Reserve Account" shall have the
meaning ascribed to it in subsection 5.5.
"Major Maintenance Reserve Requirement" means, with
respect to any month, an amount established periodically by the
Project Engineer, based on anticipated major maintenance
requirements for the next five years, to constitute the Major
Maintenance Reserve Requirement for the Facility for such month.
"Material Adverse Effect" means (i) a material adverse
change in the financial condition of the Joint Venture Companies
taken as a whole or (ii) any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the construction or operation of the Project or (b) the Joint
Venture Companies' ability (taken as a whole) to perform any of
their obligations under the Project Documents.
"Material Project Documents" means, collectively, the
Power Purchase Agreement, the EPC Contract, the Transmission
Facilities Construction Agreement, the O&M Agreement, the Coal
Supply Agreements, the Coal Transportation Agreement and all
other instruments, agreements or other documents arising from or
related to the Project, but shall not include any Financing
Agreement.
"Maturity Date" means April 1, 2004.
"Moody's" means Moody's Investors Services.
"NCPGC" means North China Power Group Company, a
company organized under the laws of the PRC.
"Net Cash Proceeds" in connection with (a) any Asset
Sale, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise,
but only as and when received) of such Asset Sale, net of
attorneys' fees, accountants' fees, investment banking fees,
survey costs, title insurance premiums, amounts required to be
applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the subject
of such Asset Sale and other customary fees and expenses actually
incurred in connection therewith, net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax
sharing arrangements) and net of purchase price adjustments
reason.
"Net Debt Service" means the sum of (i) (a) Interest
Expense less (b) non-cash Interest Expense plus (ii) all payments
of scheduled and overdue principal of, and premium, if any, on
Indebtedness plus (iii) without duplication, all rental payments
in respect of Capitalized Lease Obligations paid, accrued, or
scheduled to be paid or accrued.
"Non-Excluded Taxes" shall have the meaning ascribed to
it subsection 5.16.
"Nonrecourse Persons" shall have the meaning ascribed
to it in Article 8.
"O&M" means operation and maintenance services.
"O&M Agreement" means the Amended and Restated
Operation and Maintenance Agreement, dated as of March 6, 1997,
among the Joint Ventures and Duke/Fluor Daniel Asia, Inc., a
California corporation.
"O&M Costs" means all amounts disbursed by or on behalf
of the Borrower for operation, maintenance, repair, or
improvement of the Facility, including, without limitation,
premiums on insurance policies, property, income and all other
taxes to the extent paid, and payments under the relevant
operating and maintenance agreements, leases (including Operating
Lease Obligations), royalty and other land use agreements, and
any other payments required under the Project Documents, each as
determined on a cash basis and otherwise in accordance with GAAP.
"Obligations" means all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by the
Borrower to the Lender or existing or hereafter arising hereunder
or pursuant to the terms of any of the Financing Agreements or
any of the other Project Documents, including all interest, fees,
charges and expenses chargeable to the Borrower; and in the event
of any proceeding for the collection or enforcement of the
Obligations, after an event of default shall have occurred and be
continuing, any exercise by the Lender, together with reasonable
attorney's fees and court costs.
"Officer's Certificate" means a certificate of an
authorized representative of the Borrower, signed by the
Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Borrower.
"On-Shore Accounts" has the meaning set forth in
subsection 5.5.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Other Taxes" means any other excise or property taxes,
charges or similar levies that arise under the laws of any
jurisdiction on any payment made under this Agreement or under
any other Financing Agreement or from the execution or delivery
or otherwise with respect to this Agreement or any other
Financing Agreement.
"Panda International" means Panda Energy International
Inc., a Texas corporation.
"Performance Bonus Payment" means an amount payable to
the EPC Contractor pursuant to subsections 13.3 and 13.4 of the
EPC Contract.
"Permitted Indebtedness" has the meaning set forth in
subsection 6.1.
"Permitted Liens" means (a) Liens for any tax,
assessment or other governmental charge not yet due, due but
payable without penalty or being contested in good faith and by
appropriate proceedings, (b) retentions of title in favor of
materialmen, workers or repairmen, or other like Liens arising in
the ordinary course of business or in connection with the
construction of the Project, (c) Liens arising out of judgments
or awards so long as an appeal or proceeding for review is being
prosecuted in good faith, (d) mineral rights the use and
enjoyment of which do not materially interfere with the use and
enjoyment of the Facility, (e) Liens, deposits or pledges to
secure statutory obligations or performance of 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 the Borrower's business and affecting property with a
value not exceeding the equivalent of US$250,000 at any one time,
(f) involuntary Liens (including a Lien of an attachment,
judgment or execution) securing a charge or obligation, on any of
the Borrower's property, real or personal, whether now or
hereafter owned with a value not exceeding the equivalent of
US$250,000 at any one time, (g) rights of any party pursuant to
any Project Document, (h) Liens securing workers' compensation,
unemployment insurance or other social security or pension
obligations, (i) Liens securing Indebtedness permitted pursuant
to Section 6.1 (to the extent not required by Section 6.1 to be
unsecured), (j) Liens securing the purchase price of property
having an aggregate value not exceeding the equivalent of
US$1,000,000 at any one time an (k) Liens securing other
obligations not constituting Indebtedness none of which could
reasonably be expected to have a Material Adverse Effect.
"Person" means any natural person, corporation,
partnership, firm, association, Governmental Instrumentality or
any other entity whether acting in an individual, fiduciary or
other capacity.
"PRC" or "China" means the People's Republic of China.
"PRC Shareholder" means Luannan Heat Company.
"Pricing Document" means the document or documents
(issued by the Tangshan Municipal Price Bureau) determining the
price for electric energy delivered, retail price and principals
for adjustment.
"Project" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Project Documents" means this Agreement and all
instruments, contracts, agreements or other documents arising
from or related to the Project, including all Financing
Agreements, each individually a "Project Document".
"Project Engineer" means Parsons Brinckerhoff Energy
Services Inc., or its successor.
"Project Note" has the meaning given that term in
Section 2.3.
"Power Purchase Agreement" means, collectively, the
Energy Purchase Agreement, the Interconnection Agreement and the
Supplemental Agreement (and, after execution thereof, the
Interconnection Dispatch Agreement).
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended, and all rules and regulations
adopted thereunder.
"Registered Capital Account" shall have the meaning
ascribed to it in Section 5.5.
"Registration Certificate" has the meaning given to
such term in Section 3.5.
"Renminbi" or "RMB" means lawful currency of the PRC.
"Registered Capital Contribution and Agency Agreement"
means the agreement among each of the Joint Venture Companies and
their respective shareholders, dated as of March 26, 1997 (as
amended, modified and supplemented from time to time) pursuant to
which the Joint Venture Companies are entitled to receive equity
contributions.
"RMB Permitted Investments" means deposit accounts
denominated and payable in RMB to be maintained at, certificates
of deposit issued, or obligations issued or guaranteed by, one of
the following policy or commercial banks in the PRC: (i) the
Bank of China, (ii) the China Construction Bank, (iii) the
Communication Bank, (iv) the China Farmers Bank, (v) the China
International Trust and Investment Corporation (vi) any foreign
bank or branch of any foreign bank authorized and licensed to
conduct business in the PRC, including without limitation, the
establishment and maintenance of RMB and foreign currency
accounts and exchange functions having a combined capital and
surplus of at least $500,000,000 and having at least an
investment grade rating assigned to its long-term unsecured debt
securities by each of Standard & Poor's and Moody's.
"RMB Revenue Account" shall have the meaning ascribed
to it in Section 5.5.
"RMB Checking Account" shall have the meaning ascribed
to it in Section 5.5.
"SAFE" means the State Administration of Foreign
Exchange of the PRC.
"Shareholder Loan Agreements" means, collectively, this
Agreement and the Shareholder Loan Agreements, each dated as of
September 24, 1996, between the Lender and (i) Tangshan Panda,
(ii) Tangshan Cayman and (iii) Tangshan Pan-Sino, as the same may
from time to time be amended, supplemented or otherwise modified.
"Shareholders" means the Lender and the PRC
Shareholder.
"Site" means the approximately 200 square meters of
land on which the Facility is to be located.
"Standard & Poor's" means Standard & Poor's Ratings
Service.
"Steam Sales Agreements" means the Heat Supply
Contracts and the Inter-Company Steam Sales Agreement.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Supplemental Agreement" means Supplemental Agreement
for General Interconnection Agreement and Electric Energy
Purchase and Sales Agreement, dated February 10, 1996, among
NCPGC, Tangshan Panda and Tangshan Pan-Western, as the same may
from time to time be amended, supplemented or otherwise modified.
"Tangshan Cayman" means Tangshan Cayman Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.
Ltd., a Sino-foreign equity joint venture with limited liability
organized under the laws of the PRC.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture with
limited liability organized under the laws of the PRC.
"Transmission Facilities" means three new substations,
the upgrades of both an existing substation and an existing
switching station and approximately 43 km of 110 KV transmission
lines to interconnect the Project to the Jing-Jin-Tang Grid.
"Transmission Facilities Construction Agreement" means
the construction agreement, dated February 10, 1996, among
Tangshan Panda, Tangshan Pan-Western and NCPGC.
"Transmission Loan" means the loan made by Tangshan Pan-
Sino to NCPGC through a PRC financial intermediary for the
construction cost of the Transmission Facilities, in the amount
of RMB 78,218,000, to be adjusted for inflation from December 31,
1994 to the date of issuance of the notice to proceed with
preliminary design and for accrued interest during the
construction period.
ARTICLE 2 - THE CREDIT FACILITY
2.1 Credit Facility. Subject to the terms and conditions
set forth in Article 3, the Lender shall from time to time make
shareholder loans to the Borrower in an aggregate amount of
US$17,829,000 (the "Loans").
2.2 Interest Payments.
2.2.1 Interest Payment Dates. The Borrower shall
pay accrued interest on the unpaid principal amount of the Loans
semiannually in arrears on each June 30 and December 31,
commencing June 30, 1997, until the first such date to occur not
less than six months after the Commercial Operation Date, and on
the last day of each month thereafter.
2.2.2 Interest. The Borrower shall pay accrued
interest on the unpaid principal amount of the Loans from the
date of this Agreement (i) through the first June 30 or December
31 to occur not less than six months after the Commercial
Operation Date, at a rate per annum of 13.75%, subject to a
maximum applicable to all interest accrued in respect of such
period and all amounts due in respect thereof pursuant to Section
5.16 hereof of $4,010,273, and (b) thereafter until the maturity
thereof at a rate per annum equal to 12.75%.
2.3 Project Note. The obligation of the Borrower to repay
the Loans and to pay interest thereon at the rate provided herein
shall be evidenced by a promissory note substantially in the form
of Exhibit A, payable to the order of the Lender and in the
principal amount of SEVENTEEN MILLION EIGHT HUNDRED TWENTY-NINE
THOUSAND DOLLARS (US$17,829,000) (the "Project Note"). The
Borrower authorizes the Lender to record on the schedule annexed
to the Project Note, each payment or prepayment of principal of
the Loans and agrees that all such notations shall be prima facie
evidence of the information recorded. The Borrower further
authorizes the Lender to attach to and make a part of the Project
Note continuations of the schedule attached thereto as necessary.
No failure to make any such notations, nor any errors in making
any such notations, shall affect the validity of the Borrower's
obligations to repay the full unpaid principal amount of the
Loans or the duties of the Borrower hereunder or thereunder.
2.4 Repayment of the Loans.
2.4.1 Payments. The Borrower shall make all
payments hereunder to an account which the Lender shall specify
by notice to Borrower prior to the date of the first payment of
interest hereunder. The aggregate unpaid principal amount of the
Loans shall be payable in installments on or before 10:00 A.M.,
Beijing time, on each Repayment Date in accordance with the
amortization schedule set forth on Schedule B, and any remaining
unpaid principal, interest, fees and costs shall be due and
payable on the Maturity Date.
2.4.2 Application of Payments. If the amount of
any payment made by the Borrower hereunder is less than the total
amount due and payable by the Borrower to the Lender as of the
date on which such payment is actually made by the Borrower, such
payment shall be applied: (i) first, against charges, fees,
costs and expenses due hereunder; (ii) second, if the principal
of the Loans shall not have become or be then due and payable,
against interest on the overdue principal of the Loans (including
amounts payable in respect thereof pursuant to Section 5.16) in
order of maturity of such installments of interest and against
interest on such overdue interest; (iii) third, if the principal
of the Loans shall have become or shall be then due and payable,
against the whole amount of all such principal, interest on
overdue principal of the Loans (including amounts payable in
respect thereof pursuant to Section 5.16) and interest on such
overdue interest; and (iv) fourth, against all other amounts then
due and payable to the Lender hereunder.
2.5 Prepayments.
2.5.1 Voluntary Prepayments. Except as required by
this Agreement, the Borrower may not prepay Loans without the
permission of the Lender.
2.5.2 Certain Mandatory Prepayments. In addition
to other amounts which shall be applied to the prepayment of
Loans as provided in this Agreement, the Borrower shall apply to
prepayment of the principal of the Loan, within ten Business Days
following receipt thereof, (i) all Net Cash Proceeds from the
sale or other disposition of all or any part of the assets or
other rights of the Borrower, other than in the ordinary course
of business and permitted pursuant to the terms of the Financing
Agreements, having a value, individually in excess of US$100,000
and in the aggregate in any year, in excess of US$250,000, and
(ii) any Liquidated Damages which shall have been made by the EPC
Contractor to the Borrower under the EPC Contract.
2.5.3 Expropriation Event; Event of Loss. (a) If
an Expropriation Event shall occur with respect to the Facility
or any part thereof, the Borrower shall (i) diligently pursue all
of its rights to compensation against the appropriate
Governmental Instrumentality in respect of such event, (ii) not
compromise, settle or consent to the settlement of any claim in
respect thereof without the consent of the Lender, and (iii)
promptly deposit all proceeds received in respect of any
Expropriation Event (after deducting all reasonable expenses) (A)
in the RMB Revenue Account if denominated in RMB or (B) in the
Foreign Debt Repayment Account if denominated in Dollars, in each
case segregated from all other moneys pending the determination
pursuant to paragraph (c) below.
(b) If an Event of Loss shall occur with respect
to the Facility or any part thereof, the Borrower shall (i)
diligently pursue all its rights to compensation with respect to
such Event of Loss, (ii) not compromise, settle or consent to the
settlement of any claim exceeding $250,000 in respect thereof
without the consent of the Lender, and (iii) promptly deposit all
proceeds received in respect of any Event of Loss (after
deducting all reasonable expenses) which are denominated in RMB
in the RMB Revenue Account, and transfer to the Lender any such
proceeds which are denominated in U.S. Dollars, to be held by the
Lender and segregated from all other moneys pending the
determination pursuant to paragraph (c) below.
(c) If such Expropriation Event or an Event of
Loss shall occur, as soon as reasonably practicable, but no later
than fifteen (15) days after the date of receipt by the Borrower
of any proceeds in respect thereof, the Borrower shall make a
reasonable good faith determination as to whether (i) the
Facility can be rebuilt, repaired or restored to permit operation
of the entire Project on a Commercially Feasible Basis, and (ii)
the proceeds thereof, together with any other amounts that the
Borrower has available to commit to such rebuilding, repair or
restoration, are sufficient to pay for such rebuilding, repair or
restoration of the Facility. The determination of the Borrower
shall be evidenced by a certificate filed with the Lender which,
in the event the Borrower determines that the Facility can be
rebuilt, repaired or restored to permit operation of the entire
Project or a portion thereof on a commercially feasible basis,
shall also certify that such proceeds, together with any other
amounts that the Borrower is willing to commit to such
rebuilding, repair or restoration, are sufficient to pay the
costs thereof, and shall also set forth a reasonable good faith
estimate by the Borrower of such costs. If the amount of such
costs exceeds $500,000, such certificate shall be accompanied by
a Project Engineer's certificate, dated within five (5) days of
the date of the Borrower's certificate, stating that, based upon
reasonable investigation and a review of the determination made
by the Borrower, the Project Engineer believes that the
determination and the estimate of the total cost, if any, set
forth in the Borrower's certificate to be reasonable.
(d) In the event that the Borrower determines not
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss shall be transferred
within ten Business Days after the date of such determination to
the Lender and applied to prepayment of the Loans.
(e) In the event that the determination is made
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss on deposit in the
RMB Revenue Account shall be transferred to the RMB Checking
Account and, together with the amounts (if any) previously
transferred to the Lender in connection with such Expropriation
Event or Event of Loss and such other amounts as the Borrower has
available for such rebuilding, repair or restoration (which also
shall be transferred to the Lender prior to any disbursement for
rebuilding, repair or restorations), shall be used to pay the
costs of such rebuilding, repair or restoration, and any excess
shall, upon completion of such rebuilding, repair or restoration,
be applied to the prepayment of the Loans within 15 days of the
completion of such rebuilding, repair or restoration as certified
by the Project Engineer.
2.6 Fees. Not more than thirty (30) days following the
making of the first Loan hereunder, the Borrower shall reimburse
the Lender for its reasonable costs other than interest costs
incurred in funding the Loans.
ARTICLE 3 - CONDITIONS PRECEDENT
The obligation of the Lender to make each Loan shall be
subject to the fulfillment or waiver of each of the following
conditions precedent:
3.1 Borrower's Certificate. The Lender shall have received
from the Borrower a certificate dated the date of the request for
such Loan, certifying the following:
(a) Representations and Warranties. The
representations and warranties made by the Borrower herein or in
any other Project Document to which it is a party, or which are
contained in any certificate, document, financial or other
statement furnished by the Borrower hereunder or thereunder or in
connection herewith or therewith, are true and correct in all
material respects on and as of such date as if made on and as of
such date, except as affected by the consummation of the
transaction contemplated thereby or to extent that such
representations and warranties relate solely to an earlier date;
(b) No Event of Default. No Event of Default is in
existence on such date, or shall occur after giving effect to the
Loan to be made on such date;
(c) Governmental Authorizations and other consents and
approvals. All Governmental Authorizations which are required to
be obtained on or prior to the date of the making of such Loan
have been duly obtained or maintained and are in full force and
effect, except for Governmental Authorizations which have not
been obtained at such time but which the Borrower has no reason
to believe will not be obtained in the normal course of business
prior to the date such Governmental Authorizations are required;
and
(d) Facility Costs. The costs for the payment of
which the borrowing is being made are Facility Costs and payment
of such costs is in accordance with the Facility Budget.
3.2 On-Shore Accounts. The On-Shore Accounts shall have
been established pursuant to Section 5.5.
3.3 Evidence of Facility Costs and Other Expenses. At
least 10 Business Days prior to each such Loan, the Lender shall
have received a copy of the EPC Contractor's application for
payment under the EPC Contract or evidence of or application for
other expenses in connection with the construction and
development of the Facility (together with all supplemental
reports required to be furnished thereunder), and copies of all
invoices and other statements of charges with respect to the
payments to be made to the EPC Contractor pursuant to the EPC
Contract or to the recipient of such other expenses on the date,
or expected to be due and payable within 30 days of, such Loan
and with respect to all other items of Facility Costs to be paid
on such date, or expected to be due and payable within 30 days of
such Loan.
3.4 Progress Report; Project Engineer. The Lender shall
have received a report signed by the Authorized Representative of
the Borrower on the date of each such Loan to the effect that
construction of the Facility is proceeding satisfactorily in
accordance with the EPC Contract and the Facility Budget and the
Facility Budget sets forth accurately the estimated costs to
complete the Facility, and such confirmation thereof from the
Project Engineer as the Lender reasonably deems necessary.
3.5 Registration Certificate. The Lender shall have
received a registration certificate of the Tangshan Municipal
Bureau for Exchange Control (a "Registration Certificate")
evidencing that a Registration Certificate has been obtained for
the full aggregate amount of the Loans to be made hereunder
pursuant to subsection 2.1.
3.6 Equity Contributions; Real Estate Transfers. It shall
be a condition to any Loan hereunder which increases the
aggregate of all loans made under all of the Shareholder Loan
Agreements to more than $15,000,000 that (A) the Borrower shall
have received the full amount of the equity contributions to
which the Borrower is then entitled pursuant to the Registered
Capital Contribution and Agency Agreement (B) all transfers of
land use rights relating to the Site shall have been completed.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
The Borrower makes all of the following representations
and warranties to and in favor of the Lender the date on which
any Loan is made hereunder, except as such representations relate
to an earlier date.
4.1 Organization. The Borrower (a) is a Sino-foreign
equity joint venture with limited liability duly organized and
validly existing under the laws of the PRC, (b) is duly
authorized to do business in the PRC, and (c) has all requisite
power and authority to (i) own or hold under land use right or
lease and operate the property it purports to own or hold under
land use right or lease, (ii) carry on its business as now being
conducted and as now proposed to be conducted in respect of the
Project, (iii) incur Indebtedness, and (iv) execute, deliver and
perform its obligations under each of the Project Documents to
which it is a party. The sole shareholders of the Borrower are
the Lender and Luannan Heat Company.
4.2 Authorization; No Conflict. The Borrower has duly
authorized, executed and delivered the Project Documents to which
it is a party, and neither its execution and delivery thereof nor
its consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (a) does or will contravene its
formation documents or any other Legal Requirement then
applicable to or binding on it, (b) does or will contravene or
result in any breach or constitute any default under, or result
in or require the creation of any Lien upon any of its property
or under any agreement or instrument to which it is a party or by
which it or any of its properties may be bound, or (c) does or
will require the consent or approval of any Person.
4.3 Legality, Validity and Enforceability. Each of the
Project Documents to which the Borrower is a party is a legal,
valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, subject to bankruptcy
laws or principles of equity, to the extent applicable to the
Borrower. None of the Project Documents to which the Borrower is
a party has been amended or modified except in accordance with
this Agreement.
4.4 Compliance with Law, Governmental Authorizations and
Project Documents. The Borrower is in compliance in all material
respects with all Legal Requirements and Governmental
Authorizations and Project Documents to which it is a party, and
no notices of violation of any Governmental Authorization or
Project Document relating to the Project have been issued,
entered or received by the Borrower.
4.5 Governmental Authorizations. There are no Governmental
Authorizations under Legal Requirements existing as of the date
of this Agreement that are required or will become required,
other than the Governmental Authorizations (a) which have been
obtained or granted and are in full force and effect, or (b)
which the Borrower has no reason to believe will not be obtained
before they become necessary for the ownership, construction,
financing or operation of the Facility. To the best of its
knowledge, the Borrower is not in violation of any condition in
any Governmental Authorization.
4.6 Litigation. There are no pending or, to the Borrower's
knowledge, threatened actions, suits, proceedings or
investigations of any kind, including actions or proceedings of
or before any Governmental Instrumentality, to which the Borrower
or any Shareholder or, to the knowledge of the Borrower, is a
party or is subject, or by which any of them or any of their
properties are bound.
4.7 Existing Defaults. There is no Event of Default by the
Borrower under any of the Material Project Documents. To the
best of the Borrower's knowledge, there is no event of default
under any Material Project Document by any party to such Material
Project Document.
4.8 Taxes. The Borrower has filed, or caused to be filed,
all tax and informational returns that are required to have been
filed by it in any jurisdiction, and has paid 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 (other than those taxes that it is contesting in good
faith and by appropriate proceedings, with adequate, segregated
reserves established for such taxes) and, to the extent such
taxes are not due, has established reserves that are adequate for
the payment thereof and are required by the GAAP.
4.9 Contingent Liabilities. The Borrower has no material
contingent liabilities or obligations except those authorized
under and permitted by the Project Documents and the Financing
Agreements.
4.10 Business, Debt, Contracts, Etc. The Borrower has not
conducted any business other than the business contemplated by
the Project Documents to which it is a party, has no outstanding
Indebtedness other than Indebtedness incurred under the Financing
Agreements or permitted under Section 6.1 and has no other
liabilities other than those incurred under the Project Documents
or permitted under this Agreement, and is not a party to or bound
by any contract other than as contemplated by the Project
Documents to which Borrower is a party and those contracts
permitted under this Agreement. The Borrower has established
offices in the PRC only.
4.11 Representations and Warranties. All representations
and warranties of the Borrower contained in the Project Documents
are true and correct in all material respects and the Borrower
hereby confirms each such representation and warranty of the
Borrower with the same effect as if set forth in full herein.
4.12 Utilities. All utility services and easements
necessary for the construction and the operation of the Facility
for its intended purposes, are or will be available at the Site
as and when required on commercially reasonable terms.
4.13 Project Documents.
4.13.1 The Lender has received a true, complete and
correct copy of each of the Project Documents in effect or
required to be in effect as of the date this representation is
made or deemed made (including all exhibits, schedules, side
letters and disclosure letters to therein or delivered pursuant
thereto, if any).
4.13.2 All conditions precedent to the obligations
of the respective parties under the Material Project Documents
have been satisfied or waived in accordance with the provisions
thereof and hereof, except for such conditions precedent which by
their terms cannot be met until a later stage in the construction
or operation of the Facility, and the Borrower has no reason to
believe that any such condition precedent cannot be satisfied on
or prior to the appropriate stage in the construction or
operation of the Facility.
4.14 Fees and Enforcement. Other than amounts that have
been paid in full, no fees or taxes, including without limitation
stamp, transaction, registration or similar taxes, are required
to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Project Documents.
4.15 Immunity. In any proceedings in the PRC or elsewhere
in connection with any of the Project Documents to which the
Borrower is a party, the Borrower will not be entitled to claim
for itself or any of its assets immunity from suit, execution,
attachment or other legal process.
4.16 Subsidiaries and Beneficial Interest. The Borrower has
no subsidiaries and does not beneficially own the whole or any
part of the issued share capital or other ownership interest of
any other company or corporation or other Person.
4.17 No Other Powers of Attorney, etc. The Borrower has not
executed and delivered any powers of attorney, fiduciary transfer
agreements or similar documents, instruments or agreements,
except for powers authorizing signatures of various Project
Documents.
4.18 Liens. The Borrower has not secured or agreed to
secure any Indebtedness by any Lien upon any of its present or
future revenues or assets or capital stock except Permitted
Liens. The Borrower does not have any outstanding Lien or
obligation to create Liens on or with respect to any of its
properties or revenues except Permitted Liens.
4.19 Regulation of Parties. The Borrower is not nor will it
be, solely as a result of its participation in the transactions
contemplated hereby or by any other Project Document, or as a
result of the ownership, use or operation of the Facility,
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company." The Borrower is not subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA.
4.20 Transactions with Affiliates. Except as otherwise
permitted under Section 6.10, the Borrower is not a party to any
contracts or agreements with, or any other commitments to,
whether or not in the ordinary course of business, any Affiliate
of the Borrower.
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that until all
Obligations owed to the Lender are paid in full it will:
5.1 Repayment of Indebtedness. Repay in accordance with
its terms, all Indebtedness, including without limitation, all
sums due under this Agreement and the other Financing Agreements
but, in the case of any such Indebtedness with a repayment that
is limited by any term of any Financing Agreement, repay subject
to such limitation.
5.2 Existence, Conduct of Business, Properties, Etc.
Except as otherwise expressly permitted under this Agreement,
(i) maintain and preserve its existence as a Sino-foreign joint
venture with limited liability and all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business, and (ii) engage only in the business contemplated by
the Financing Agreements and the Project Documents.
5.3 Performance of Covenants and Obligations. The Borrower
shall perform and observe in all material respects, its covenants
and obligations under all Material Project Documents.
5.4 Use of Funds. The Borrower shall use the proceeds of
the Loans only for deposit in the On-Shore Accounts pending
disbursement for the payment of Facility Costs as provided
herein.
5.5 Accounts. (a) On or prior to the date of the making
of the first Loan, the Borrower shall establish the following
accounts with banks or financial institutions in the PRC in
accordance with applicable PRC laws and regulations: (i) the
Registered Capital Account denominated in U.S. Dollars (the
"Registered Capital Account"), (ii) the Foreign Debt Account
denominated in U.S. Dollars (the "Foreign Debt Account"), (iii)
the Foreign Debt Repayment Account denominated in U.S. Dollars
(the "Foreign Debt Repayment Account"), (iv) the Basic Settlement
Account denominated in U.S. Dollars (the "Basic Settlement
Account"), (v) the RMB Revenue Account denominated in Renminbi
(the "RMB Revenue Account"), (vi) the RMB Checking Account
denominated in Renminbi (the "RMB Checking Account"), and (vii)
the Major Maintenance Reserve Account denominated in Renminbi
(the "Major Maintenance Reserve Account") (collectively, the "On-
Shore Accounts").
(b) The proceeds of all Loans shall be deposited in
the Foreign Debt Account. Funds in the Foreign Debt Account
shall not be used for any purpose other than disbursement of
Facility Costs denominated in U.S. Dollars or funding of reserves
for the payment of principal and interest on the Loans, or, after
conversion into RMB, transfer to the RMB Checking Account for
disbursement of Facility Costs denominated in RMB.
(c) All funds received by the Borrower constituting
capital contributions from any shareholder shall be deposited in
the Registered Capital Account. Until after Commercial Operation
Date, funds in the Registered Capital Account shall not be used
for any purpose other than disbursement of Facility Costs
denominated in the U.S. Dollars or, after conversion into RMB,
transfer to the RMB Checking Account for disbursement of Facility
Costs denominated in RMB.
(d) All revenues received by the Borrower from any
source whatsoever shall be deposited (after conversion into
Renminbi, if necessary) into the RMB Revenue Account. The
Borrower shall instruct NCPGC, the EPC Contractor and other
participants in the Project to deposit revenues, penalties or
other payments owing to the Borrower in RMB directly into the RMB
Revenue Account. The RMB Revenue Account shall not be used for
any purpose other than (and in accordance with the following
priority): (i) the transfer of funds to the RMB Checking Account
for the payment of O&M Costs and (ii) after conversion into U.S.
Dollars, the transfer of funds to the Foreign Debt Repayment
Account for the payment of the principal of and interest on the
Loans or reserves in respect thereof.
(e) Amounts remaining in the RMB Revenue Account
subsequent to disbursement in accordance with clause (d) hereof
shall be deposited into the Major Maintenance Reserve Account in
an amount equal to the Major Maintenance Reserve Requirement.
Disbursement shall be made from the Major Maintenance Reserve
Account only to pay for major maintenance costs of the Facility
upon a certification of the Project Engineer that after
withdrawal of such funds for such purpose, the amounts remaining
in the Major Maintenance Reserve Account (including anticipated
future funding thereof) shall be adequate to meet the anticipated
needs of the Facility for major maintenance for the next five
years.
(f) Amounts remaining in the RMB Revenue Account
subsequent to disbursements in accordance with clauses (d) and
(e) hereof shall be retained in the RMB Revenue Account pending
disbursement to the Borrower's Shareholders in the form of
dividends. The amount designated for the payment of dividends to
the Lender in its capacity as a shareholder of the Borrower shall
be transferred from the RMB Revenue Account (after conversion to
U.S. Dollars) to the Basic Settlement Account and then to the
Lender. The corresponding amount designated for the payment of
dividends to the PRC Shareholder shall be distributed from the
RMB Revenue Account directly to the PRC Shareholder in RMB.
(g) The funds in the Foreign Debt Repayment Account
shall not be used for any purpose other than the payment of
amounts due hereunder pursuant to Subsection 2.4 to an off-shore
account maintained by the Lender.
(h) The funds in the Basic Settlement Account shall
not be used for any purpose other than remittance after the
Commercial Operation Date to an off-shore equity distribution
account approved by the Lender.
5.6 Compliance with Legal Requirements. Promptly and
diligently (i) own, construct, maintain and operate the Facility
in compliance with all applicable Legal Requirements, and
(ii) procure, maintain and comply, or cause to be procured,
maintained and complied with all Governmental Authorizations
required for the ownership, construction, financing, maintenance
or operation of the Facility or any part thereof at or before the
time such Governmental Authorization becomes necessary for the
ownership, construction, financing, maintenance or operation of
the Facility, as the case may be, as contemplated by the Project
Documents and except that the Borrower may, at its expense,
contest by appropriate proceedings conducted in good faith the
validity or application of any such Legal Requirements, provided
that, in either case, (x) neither the Lender nor the Borrower
would be subject to any criminal liability for failure to comply
therewith and (y) all proceedings to enforce such Legal
Requirements against the Lender, the Borrower or the Project or
any part thereof, shall have been duly and effectively stayed
during the entire pendency of such contest.
5.7 Operating Budgets. On or before the anticipated
Commercial Operation Date, deliver to the Lender an annual
operating budget, certified by the Project Engineer as being a
reasonable estimate of projected costs, expenses and revenues of
the Borrower, for the period commencing on the anticipated
Commercial Operation Date, and continuing until the end of the
first full calendar year thereafter, in substantially the same
form as the initial annual operating budget. In advance of each
calendar year thereafter, the Borrower shall adopt and deliver to
the Lender an annual operating budget, certified by the Project
Engineer as being a reasonable estimate of projected costs,
expenses and revenues of the Borrower, for the ensuing calendar
year.
5.8 Books, Records, Access. Maintain adequate books,
accounts and records with respect to the Borrower and the
Facility in compliance with the regulations of any Governmental
Instrumentality having jurisdiction thereof, and, with respect to
financial statements, in accordance with the GAAP and, subject to
reasonable safety requirements, permit employees or designees of
the Lender and the Project Engineer, at any reasonable time and
upon reasonable prior notice to inspect the Facility, and to
examine or audit all of Borrower's books, accounts and records
pertaining or related to the Facility and make copies and
memoranda thereof.
5.9 Financial Statements.
5.9.1 Provide the Lender with:
(a) As soon as available and in any event
within one hundred thirty five (135) days after the close of each
fiscal year commencing with the fiscal year ended after the date
of this Agreement, audited financial statements of the Borrower
including a statement of equity, a balance sheet as of the close
of such year, an income and expense statement, reconciliation of
capital accounts and a statement of sources and uses of funds,
all prepared in accordance with the GAAP and certified by
Independent Accountants.
(b) As soon as available and in any event
within ninety (90) days after the end of each of the quarterly
accounting periods of its fiscal year commencing with the quarter
ending after the date of this Agreement, unaudited financial
statements of the Borrower, including without limitation, an
unaudited balance sheet of the Borrower as of the last day of
such quarterly period, the related statements of income and cash
flows for such quarterly period and (in the case of second, third
and fourth quarterly periods) for the portion of the fiscal year
ending with the last day of such quarterly period, setting forth
in each case in comparative form corresponding unaudited figures
from the preceding fiscal year.
5.9.2 Each time the financial statements of
the Borrower are delivered under this subsection 5.9, a
certificate signed by an Authorized Representative of the
Borrower shall be delivered along with such financial statements,
certifying that such officer has made or caused to be made a
review of the transactions and financial condition of the
Borrower during the relevant fiscal period and that such review
has not, to the best of such Authorized Representative's
knowledge, disclosed the existence of any event or condition
which constitutes an Event of Default under this Agreement, or if
any such event or condition existed or exists, the nature thereof
and the corrective actions that Borrower has taken or proposes to
take with respect thereto, and also certifying that the Borrower
is in compliance in all material respects with its obligations
under this Agreement and each other Financing Agreement to which
it is a party or, if such is not the case, stating the nature of
such non-compliance and the corrective actions which the Borrower
has taken or proposes to take with respect thereto.
5.10 Insurance. The Borrower shall maintain, or cause to be
maintained, adequate insurance with respect to its Facility
satisfactory to the Lender in its reasonable judgment, based upon
the advice of the Independent Insurance Consultant. All
insurance other than third party liability insurance shall name
the Lender as an insured and the sole loss payee thereunder.
Policies for third party liability insurance shall name the
Lender as an additional insured.
5.11 Reports; Cooperation.
5.11.1 Deliver to the Lender on each anniversary of
the date of this Agreement a certificate from the Borrower's
insurers or insurance agents (i) evidencing that the insurance
policies in place satisfy the requirements specified in Section
5.10 (including, without limitation, listing all insurance being
carried by or on behalf of the Borrower pursuant to the Project
Documents and certifying that all insurance required to be
maintained by the Borrower pursuant to the Project Documents is
in full force and effect and all premiums therefore have been
paid in full), and (ii) setting forth a summary of all losses in
excess of US$250,000 (or the equivalent thereof) incurred with
respect to the Project in the preceding year.
5.11.2 Deliver to the Lender within thirty (30) days
following the end of each calendar quarter a quarterly status
report describing in reasonable detail the progress of the
construction of the Facility since the immediately preceding
report hereunder, including without limitation, the cost incurred
to the end of such quarter, an estimate of the time and cost
required for completion of the Facility and such other
information which the Lender may reasonably request.
5.11.3 Prior to the Commercial Operation Date,
deliver to the Lender, within thirty (30) days following the end
of each calendar quarter an update of the Facility Budget,
including but not limited to an explanation or other
reconciliation of differences between such report and previous
reports.
5.11.4 From and after the Commercial Operation Date,
deliver to the Lender within ninety (90) days following each
calendar year, a summary operating report, which shall include,
unless otherwise agreed to by the Lender, a numerical and
narrative assessment of (i) the Project's compliance with each
category in the annual operating budget, (ii) statistical data
relating to the Facility, including heat rate, net electrical and
scheduled and unscheduled outages, (iii) fuel deliveries and use,
(iv) major maintenance activity, (v) casualty losses of value in
excess of US$250,000 or the equivalent thereof in other
currencies (whether or not covered by insurance), (vi) disputes
with any other Major Project Participant, materialman, supplier
or other Person and any related claims against the Borrower,
(vii) pricing information disclosed or made available under the
agreements pertaining to the supply of coal for the Facility and
(viii) compliance with the Governmental Authorizations.
5.11.5 No later than five Business Days following
the receipt thereof, deliver to the Lender all progress reports
provided by the EPC Contractor to the Borrower pursuant to the
EPC Contract and all progress reports prepared under the Power
Purchase Agreement.
5.11.6 Deliver to the Lender any such other
information or data with respect to its business or operations
(including supporting information as to compliance with this
Agreement) as the Lender may reasonably request from time to
time.
5.12 Taxes and Other Governmental Charges. Before the same
become delinquent, pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or
levies lawfully imposed upon the Borrower or its income or
profits or upon the Facility, all utility and other governmental
charges incurred in the ownership, operation, maintenance, use,
occupancy and upkeep of the Facility. However, the Borrower may
contest in good faith any such taxes, assessments and other
charges and, in such event, may permit the taxes, assessments or
other charges so contested to remain unpaid during any period,
including appeals, when the Borrower is in good faith contesting
the same, so long as (a) adequate cash reserves have been
established in an amount sufficient to pay any such taxes,
assessments or other charges, accrued interest thereon and
potential penalties or other costs relating thereto, or other
adequate provision for the payment thereof shall have been made,
(b) enforcement of the contested tax, assessment or other charge
is effectively stayed for the entire duration of such contest,
and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is promptly paid
after resolution of such contest.
5.13 Notices. Promptly, upon acquiring notice or giving
notice, or obtaining knowledge thereof, as the case may be,
provide to the Lender written notice of:
5.13.1 Any Event of Default which it has knowledge,
specifically stating that an Event of Default has occurred and
describing such an Event of Default and any action being taken or
proposed to be taken with respect to such Event of Default;
5.13.2 Any termination or event of default or notice
thereof under the Power Purchase Agreement; and
5.13.3 Any litigation pending against the Borrower or
any other party of which the Borrower has actual knowledge, which
is or could reasonably be expected to have a Material Adverse
Effect.
5.14 Expropriation Event. If an Expropriation Event shall
occur with respect to the Project, (a) promptly upon discovery or
receipt of notice of any occurrence thereof, provide written
notice thereof to the Lender, (b) diligently pursue all its
rights to compensation against the relevant Governmental
Instrumentality in respect of such Expropriation Event, and
(c) hold any Expropriation Proceeds received in respect of such
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
Lender separated from other funds of the Borrower, (d) promptly
deposit all Expropriation Proceeds in (i) the RMB Revenue Account
if denominated in RMB or (ii) in the Foreign Debt Repayment
Account if denominated in Dollars. The Borrower consents to the
participation of the Lender in any proceedings regarding an
Expropriation Event, and the Borrower shall from time to time
deliver to the Lender all documents and instruments requested by
it to permit such participation. Nothing in this Section 5.14
shall be deemed to impair any rights which the Lender may have
with respect to any such Expropriation Event.
5.15 Increased Costs. If, after the date of this Agreement,
any Change of Law:
(a) shall subject the Lender to any tax, duty or other
charge with respect to the
Loans, or shall change the basis of taxation of payments by the
Borrower to the Lender on the Loans (except for Covered Taxes,
Other Taxes or changes in the rate of taxation on the overall net
income of the Lender); or
(b) shall impose on the Lender any other condition
directly related to the Loans;
and the effect of any of the foregoing is to increase the cost to
the Lender of making, issuing, creating, renewing, participating
in or maintaining the Loans or to reduce any amount receivable by
the Lender hereunder, then the Borrower shall from time to time,
upon demand by the Lender, pay to the Lender additional amounts
sufficient to reimburse the Lender for such increased costs or to
compensate the Lender for such reduced amounts.
5.16 Taxes. All payments made by the Borrower under this
Agreement and the Project Note shall be made free and clear of,
and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Instrumentality, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Lender as a result of a present or former connection between
the Lender and the jurisdiction of the Governmental
Instrumentality imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such
connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Agreement or the Project Note). If any
such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Lender hereunder or
under the Project Note, the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender
(after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement. Whenever any Non-Excluded Taxes are
payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender for its own account a certified
copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the
Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
The agreements in this subsection 5.16 shall survive the
termination of this Agreement and the payment of the Loans, the
Project Note and all other amounts payable hereunder.
5.17 Registration of the Loans; Other Foreign Exchange
Matters.
5.17.1 Prior to any due date for any repayment of
the principal of and/or the payment of interest on the Loans, the
Borrower shall (i) use the Registration Certificate and the
notice regarding such repayment and/or payment to obtain from the
registration department a verification and approval certificate
with respect to such repayment and/or payment and (ii) use such
verification and approval certificate and the Registration
Certificate to handle matters regarding the remittance from its
foreign debt account of the principal of and interest on the
Loans outside of China at the relevant bank.
5.17.2 At the beginning of each year, the Borrower
shall submit to the local foreign exchange administration a
report stating the amount of foreign currency purchased in the
preceding year for the purpose of repaying the principal of
and/or paying the interest on the Loans and a plan regarding the
purchase of foreign currency for the current year.
5.18 Loan Payment Reserve. At the time of the final drawing
under this Agreement, the Borrower shall deposit an amount equal
to the Debt Service Reserve Requirement in the Debt Service
Reserve Fund.
ARTICLE 6 - NEGATIVE COVENANTS
The Borrower covenants and agrees for the benefit of the
Lender that until all Obligations owed to the Lender are paid in
full, without the consent of the Lender, the Borrower shall not:
6.1 Indebtedness. Incur, create, assume or be liable for
any Indebtedness, except:
(a) the Loans and additional loans from the Lender;
(b) debt incurred to finance working capital
requirements; provided that after giving effect to such
additional debt, (i) the minimum (or lowest) projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.5 to 1 and (ii) the average projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.7 to 1; provided further, however, that the
amount of such debt shall not at any time exceed
US$1,000,000;
(c) purchase money or Capital Lease Obligations
incurred to finance assets of the Borrower that are readily
replaceable personal property with a principal amount or
capitalized portion not exceeding US$1,000,000 in the
aggregate outstanding at any time;
(d) trade accounts payable (other than for borrowed
money) due within 90 days arising, and accrued expenses
incurred, in the ordinary course of business of
constructing, operating or maintaining the Facility on
customary terms;
(e) interest or currency exchange rate protection
agreements;
(f) Indebtedness under the Guarantees to which the
Borrower is a party and any other guarantees of the
obligations of any other Joint Venture Company permitted
under the Financing Agreements.
(g) any debt to any other Joint Venture Company, ((a)
through (g), collectively "Permitted Indebtedness").
6.2 Limitations on Liens. Create, assume or permit to
exist any Lien upon any of the Borrower's assets or properties
including without limitation the Facility, whether now owned or
hereafter acquired, other than Permitted Liens.
6.3 Nature of Business. Amend or modify its Articles of
Association without the prior written consent of the Lender, or
engage in any business other than the ownership and operation of
the Facility.
6.4 Sale or Lease of Facility Assets. Sell, lease, assign,
transfer or otherwise dispose of the Facility or other assets
unless (a) such sale, lease, assignment or other disposition
relates only to property that is worn out or no longer useful or
usable in connection with the operation of the Facility or 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 such lease or transfer is required to
comply with law or to obtain or maintain any Governmental
Authorization, (b) with respect to any other sales, leases,
assignments or other dispositions, the aggregate amount thereof
does not exceed US$250,000 in any given year or US$1,000,000 in
the aggregate since the date of this Agreement, or (c) such sale,
lease, assignment or other disposition is made in the ordinary
course of business in accordance with the Project Documents.
6.5 Merger, Consolidation, Liquidation, Dissolution. Merge
or consolidate with or into any other Person, other than any of
the other Joint Venture Companies or other Sino-foreign joint
ventures with no material liabilities and no material activities
unrelated to the Project, or liquidate, wind up, dissolve, or
otherwise transfer or dispose of all or any substantial part of
its property, assets or business, or change its legal form, or
purchase or otherwise acquire any assets of any Person unless
such purchase or acquisition of assets is reasonably necessary
for the operation of the Facility or in the ordinary course of
business.
6.6 Contingent Liabilities. Become liable as a surety,
guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person; provided, however, that the
Borrower may guarantee or otherwise become liable in respect of
any Indebtedness incurred by any other Person (on its behalf) in
connection with or relating to incurrence of Indebtedness
permitted under Section 6.1; and provided, further, however, that
this Section 6.6 shall not be deemed to prohibit (i) the
acquisition of goods, supplies or merchandise in the normal
course of business on normal trade credit, or (ii) the
endorsement of negotiable instruments received in the normal
course of business; or (iii) the obligations hereunder and under
the Guarantees or any other guarantee of any obligation of any
other Joint Venture Company if such guarantee is required for the
development and construction of the Project and is not contrary
to any Legal Requirements.
6.7 Loans, Advances or Investments. Make or permit to
remain outstanding any loans, extensions of credit or advances to
or investments in (whether by acquisition of any stocks, notes or
other securities or obligations) any Person except RMB Permitted
Investments with respect to the On-Shore Accounts denominated in
Renminbi or Dollar Permitted Investments with respect to the On-
Shore Accounts denominated in the U.S. Dollars or as expressly
provided in the Project Documents.
6.8 Immunity. In any proceedings in China or elsewhere in
connection with any of the Financing Agreements to which the
Borrower is a party, claim for itself or any of its assets
immunity from suit, execution, attachment or other legal process.
6.9 Distributions. Agree to any restriction on its ability
to pay dividends (excluding restrictions imposed by law).
6.10 Transactions With Affiliates. Except for the Project
Documents, directly or indirectly: (i) enter into any
transaction with any Person (including any Affiliate) other than
in the ordinary course of business, or (ii) enter into any
transaction with any Person, including any Affiliate, on terms
less favorable to those available from independent third parties
or (ii) establish any sole and exclusive purchasing or sales
agency, or enter into any transaction whereby the Borrower might
receive less than the full commercial price (subject to normal
trade discounts) for electricity or pay more than the commercial
price for products of others.
6.11 Partnerships; Subsidiaries. Except as contemplated by
the Project Documents, become a general or limited partner in any
partnership or a joint venturer in any joint venture, acquire any
ownership interest in any other Person or enter into any profit-
sharing or royalty agreement or other similar arrangement whereby
the Borrower's income or profits are, or might be, shared with
any other Person, or enter into any management contract or
similar arrangement whereby its business or operations are
managed by any other Person (other than any agreement under which
the Borrower may provide operation and management consulting or
other similar services), or form any Subsidiary.
6.12 Assignment. Assign or otherwise transfer its rights
under any of the Project Documents to which it is a party, or
Governmental Authorizations for its benefit, to any Person
without the prior written consent of the Lender.
6.13 Abandonment of Project. Voluntarily cease or abandon
the development, construction or operation of the Project.
6.14 Improper Use. Use, maintain, operate or occupy, or
allow the use, maintenance, operation or occupancy of, any
portion of the Site or Facility for any purpose which: (a) may
be dangerous, unless safeguarded as required by any Legal
Requirement or Government Instrumentality; (b) may constitute a
public or private nuisance resulting in a Material Adverse
Effect; or (c) may make void, voidable or cancelable, or
materially increase the premium of, any insurance then in force
with respect to the Site or Project or any part thereof.
6.15 Regulation of Parties. Take any action which could
reasonably be expected to result in (a) the Borrower being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company", (b) the Borrower being subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA or (c) any Person who by reason
of its or their ownership or operation of the Facility upon the
exercise of remedies hereunder or under the Guarantees, being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "holding company" or a
subsidiary or Affiliate of any of the foregoing under any Legal
Requirement of the United States (including, without limitation,
PUHCA and the FPA).
6.16 Amendments. Amend any of the Project Documents without
the prior written consent of the Lender.
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES
7.1 Events of Default; Cure Rights. The occurrence of any
of the following events shall constitute an event of default
("Event of Default") hereunder:
7.1.1 Failure to Make Payments. Payment shall not
have been made of any principal of or any interest on the Loans
or other amounts owed by the Borrower to the Lender within 15
Banking Days after such amounts are due.
7.1.2 Misstatements; Omissions. Any representation
or warranty confirmed or made in any Project Documents by the
Borrower or in any writing provided by the Borrower in connection
with the transactions contemplated by this Agreement shall be
found to have been incorrect in any material respect when made or
deemed to be made; provided, however, that no Event of Default
shall occur if within sixty (60) days after the date on which the
General Manager of the Borrower has actual notice that such
incorrect statement has occurred, the Borrower shall deliver in
good faith, to the Lender an Officer's Certificate stating in
reasonable detail that either (i) the Borrower has eliminated any
adverse effect relating to such incorrect statement or (ii) that
the Borrower has taken action that it reasonably believes will
eliminate the adverse effect relating to such incorrect statement
within a reasonable specified time.
7.1.3 Affirmative Covenants. The Borrower shall
fail to perform or observe any of its obligations under (a)
Sections 5.4 and 5.5 or (b) any other term, covenant or agreement
set forth in Article 5 hereof, where such default shall not have
been remedied within fifteen (15) days after notice of such
failure.
7.1.4 Negative Covenants. The Borrower shall fail
to perform or observe any of its obligations under any term,
covenant or agreement set forth in Article 6 hereof other than
Section 6.2, where such default shall not have been remedied
within fifteen (15) days after the Borrower has received notice
of such failure.
7.1.5 Breach of Material Project Documents. The
Borrower or any other party thereto shall breach or default under
any term, condition, provision, covenant, representation or
warranty contained in any of the Material Project Documents and
the Financing Agreements to which the Borrower is a party if such
breach or default shall continue unremedied for fifteen (15) days
after notice to the Borrower from the Lender; provided, however,
that in the case of any of the EPC Contract, the CHEXIM Guarantee
or the Transmission Facilities Construction Agreement, if the
breach or default cannot be remedied within such fifteen (15)
days despite the Borrower's and/or such other party's, as the
case may be, good faith and diligent efforts to do so, but is
susceptible to cure within a longer period, the Borrower or such
party shall continue diligently such efforts to cure such breach
or default until cured (but in no event longer than sixty (60)
days in the aggregate.
7.1.6 Bankruptcy; Insolvency.
(a) The Borrower or any other Joint Venture Company
shall institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or the Borrower shall file a petition, answer or consent or shall
otherwise institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or the Borrower or any
other Joint Venture Company shall apply for, or by consent or
acquiescence there shall be an appointment of, a receiver,
liquidator, sequestrator, trustee or other officer with similar
powers; or the Borrower or any other Joint Venture Company shall
make an assignment for the benefit of creditors; or the Borrower
or any other Joint Venture Company shall admit in writing its
inability to pay its debts generally as they become due; or if an
involuntary case shall be commenced seeking the liquidation or
reorganization of the Borrower or any other Joint Venture Company
under any Bankruptcy Law (or any successor statute or similar
statute under any relevant jurisdiction) or any similar
proceeding shall be commenced against the Borrower or any other
Joint Venture Company under any other Legal Requirements and (i)
the petition commencing the involuntary case is not timely
controverted, (ii) the petition commencing the involuntary case
is not dismissed within sixty (60) days of its filing, (iii) an
interim trustee is appointed to take possession of all or a
portion of the property, and/or to operate all or any part of the
business of the Borrower or any other Joint Venture Company and
such appointment is not vacated within sixty (60) days, or
(iv) an order for relief shall have been issued or entered
therein; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers of
the Borrower or any other Joint Venture Company of all or a part
of their property, shall have been entered; or any other similar
relief shall be granted against the Borrower or any other Joint
Venture Company under any Legal Requirements; and
(b) NCPGC, the EPC Contractor, or Harbin Power shall
institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or shall file a petition, answer or consent or shall otherwise
institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or shall apply for, or by
consent or acquiescence there shall be an appointment of, a
receiver, liquidator, sequestrator, trustee or other officer with
similar powers; or shall make an assignment for the benefit of
creditors; or shall admit in writing its inability to pay its
debts generally as they become due; or if an involuntary case
shall be commenced seeking the liquidation or reorganization of
NCPGC, the EPC Contractor, or Harbin Power under any Bankruptcy
Law (or any successor statute or similar statute under any
relevant jurisdiction) or any similar proceeding shall be
commenced against NCPGC, the EPC Contractor, or Harbin Power
under other Legal Requirements and (i) the petition commencing
the involuntary case is not timely controverted, (ii) the
petition commencing the involuntary case is not dismissed within
sixty (60) days of its filing, (iii) an interim trustee is
appointed to take possession of all or a portion of the property,
and/or to operate all or any part of the business of any of
NCPGC, the EPC Contractor, or Harbin Power and such appointment
is not vacated within sixty (60) days, or (iv) an order for
relief shall have been issued or entered therein; or a decree or
order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee or
other officer having similar powers of any of NCPGC, the EPC
Contractor, or Harbin Power of all or a part of any of their
respective property, shall have been entered; or any other
similar relief shall be granted against the NCPGC, the EPC
Contractor, or Harbin Power under any Legal Requirements.
7.1.7 Judgments. A final judgment or judgments
shall be entered (i) against the Borrower in the aggregate amount
of US$1,000,000 (or the equivalent thereof in other currencies)
(exclusive of judgment amounts fully covered by insurance where
the insured has admitted liability), other than a judgment, the
execution of which is effectively stayed within sixty (60) days
after its entry but only for no more than ninety (90) days after
the date on which such stay is terminated or expires; or (ii) in
the form of an injunction or similar form of relief requiring
suspension or abandonment of construction or operation of the
Facility on grounds of violation of a Legal Requirement and
failure of the Borrower to have such injunction or similar form
of relief stayed or discharged within ninety (90) days.
7.1.8 Other Indebtedness. The Borrower shall
default for a period beyond any applicable grace period in the
payment of any principal, interest or other amount due under any
agreement involving the borrowing of money or the advance of
credit and the outstanding amount or amounts payable under such
agreement equals or exceeds US$250,000 (or the equivalent thereof
in other currencies) in the aggregate.
7.1.9 Termination or Invalidity of Certain Project
Documents; Abandonment of Project.
(a) Any of the Project Documents or the Financing
Agreements shall have become invalid, illegal or unenforceable;
(b) The Borrower shall cease to have the right to use
the Site for the purpose of owning, constructing, maintaining and
operating the Facility in the manner contemplated by the Project
Documents (or to obtain sufficient water for its operations); or
(c) The Borrower shall abandon the Project or
otherwise cease to pursue the operations of the Project in
accordance with standard industry practice or shall (except as
permitted by Section 6.4) sell or otherwise dispose of its
interest in the Project.
7.1.10 Commercial Operation Date. The Commercial
Operation Date shall not have occurred by December 31, 1999.
7.1.11 Government Authorizations. Any Governmental
Authorization, approval or permit (whether central, provincial,
municipal, local or otherwise) necessary for (a) the
establishment of the Borrower (b) the ownership, construction,
maintenance, financing or operation of the Project, (c) the
setting or adjustment of the electricity price for the Project in
accordance with the method of calculation set forth in the
attachments to the Pricing Document or (d) the conversion or
transfer of any foreign currency shall not be obtained if and
when required, or shall be modified, revoked or cancelled, or a
notice of violations is issued under any Governmental
Authorization on grounds of, or illegality or the absence of any
required authorization, by the issuing agency or other
Governmental Instrumentality having jurisdiction or any
proceeding is commenced by any Governmental Instrumentality for
the purpose of modifying, revoking or cancelling any Governmental
Authorization.
7.1.12 Destruction of Project. The Facility is
destroyed, or suffers an actual or constructive total loss or
damage.
7.1.13 Change of Law. The occurrence of any adverse
Change of Law of the PRC.
7.1.14 Remedies. Upon the occurrence of any of the
Events of Default, the Lender may, by written notice to the
Borrower and the other Joint venture Companies, declare the Loans
to be immediately due and payable and pursue any and all remedies
available for the non-payment of debts.
ARTICLE 8 - SCOPE OF LIABILITY
The Lender shall have no claims with respect to the
transactions contemplated by the Project Documents against any
Person other than the Borrower including, but not limited to, the
Panda International and the Luannan Government or any of their
respective Affiliates (other than the Borrower) or direct or
indirect parents, or to the shareholders, officers, directors,
employees, or other controlling persons (including members of the
management committee) of the Panda International and the Luannan
Government, their respective Affiliates (other than the
Borrower), or their direct or indirect parents (collectively the
"Nonrecourse Persons"), subject to the exceptions set forth below
in this Article 8; provided that (a) the foregoing provision of
this Article 8 shall not constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms,
covenants, conditions, or provisions of this Agreement, any other
Financing Agreement and the same shall continue until fully paid,
discharged, observed, or performed; (b) the foregoing provision
of this Article 8 shall not limit or restrict the right of the
Lender, to name the Borrower or any other Person as a defendant
in any action or suit for a judicial foreclosure or for the
exercise of any other remedy under or with respect to this
Agreement or any other Financing Agreement, or for injunction or
specific performance, so long as no judgement in the nature of a
deficiency judgement shall be enforced against any Nonrecourse
Persons, except as set forth in this Article 8; (c) the foregoing
provision of this Article 8 shall not affect or diminish or
constitute a waiver, release or discharge of any specific written
obligation, covenant, or agreement in respect to the Project made
by any of the Nonrecourse Persons; and (d) nothing contained
herein shall limit the liability of any Person who is a party to
any Project Document or has issued any certificate or other
statement in connection therewith with respect to such liability
as may arise by reason of the terms and conditions of such
Project Document, certificate or statement, or otherwise, in each
case under this clause (d) relating solely to such liability of
such Person as may arise under such referenced agreement,
instrument or opinion. The limitations on recourse set forth in
this Article 8 shall survive the termination of this Agreement
and the full payment and performance of the Obligations hereunder
and under the other Project Documents.
ARTICLE 9 - MISCELLANEOUS
9.1 Addresses. Any communications between the parties
hereto or notice provided herein to be given may be given to the
following addresses.
If to the Lender: Pan-Western Energy Corporation, LLC
c/o Maples and Calder
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
If to the Borrower: Tangshan Pan-Western Heat and Power Co., Ltd.
Zhongdajie, Bencheng
Luannan County
Hebei Province, China
in either case,
with a copy to: Panda Energy Industrial Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
9.2 Delay and Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Lender upon the occurrence
of any Event of Default or any breach or default of the Borrower
under this Agreement shall impair any such right, power or remedy
of the Lender, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any
waiver of any single Event of Default, or other breach or default
be deemed a waiver of any other Event of Default, or other breach
or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part
of the Lender of any Event of Default, or other breach or default
under this Agreement, or any waiver on the part of the Lender of
any provision or condition of this Agreement, must be in writing
and shall be effective only to the extent in such writing
specifically set forth. All remedies, either under this
Agreement or by law or otherwise afforded to the Lender shall be
cumulative and not alternative.
9.3 Entire Agreement. This Agreement and any agreement,
document or instrument attached hereto or referred to herein
integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral negotiations and prior
writings in respect to the subject matter hereof. In the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail. This Agreement may only be amended or modified by an
instrument in writing signed by the Borrower, the Lender and any
other parties to be charged.
9.4 Governing Law. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the law of
the Cayman Islands.
9.5 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
9.6 Headings. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and
it is agreed that such paragraph headings are not a part of this
Agreement and shall not be used in the interpretation of any
provision of this Agreement.
9.7 No Partnership, Etc. The Lender and the Borrower
intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement or the
Project Note shall be deemed or construed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or
co-ownership by or between the Lender, on the one hand, and the
Borrower or any other Person, on the other hand. The Lender
shall not be in any way responsible or liable for the debts,
losses, obligations or duties of the Borrower or any other Person
with respect to the Project or otherwise. All obligations to pay
real property or other taxes, assessments, insurance premiums,
and all other fees and charges arising from the ownership,
operation or occupancy of the Project and to perform all
obligations under the agreements and contracts relating to the
Project shall be the sole responsibility of the Borrower.
9.8 Consent to Jurisdiction. The Lender and the Borrower
agree that any legal action or proceeding by or against the
Borrower or with respect to or arising out of this Agreement the
Project Note may be brought in or removed to the courts of the
Cayman Islands. By execution and delivery of this Agreement, the
Lender and the Borrower accept, for themselves and in respect of
their property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Lender and the Borrower irrevocably
consent 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 airmail,
postage prepaid, to the Lender or the Borrower, as the case may
be, at their respective addresses for notices as specified herein
and that such service shall be effective five (5) Banking Days
after such mailing. Nothing herein shall affect the right to
serve process in any other manner permitted by law or the right
of the Lender to bring legal action or proceedings in any other
competent jurisdiction. The Lender and the Borrower further
agree that the aforesaid courts of the Cayman Islands shall have
exclusive jurisdiction with respect to any claim or counterclaim
of the Borrower based upon the assertion that the rate of
interest charged by the Lender on or under this Agreement and/or
the Project Note is usurious. The Lender and the Borrower hereby
waive any right to stay or dismiss any action or proceeding under
or in connection with any or all of the Project or this Agreement
brought before the foregoing courts on the basis of forum
non-conveniens.
9.9 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The
Borrower may not assign or otherwise transfer any of its rights
under this Agreement.
9.10 Counterparts. This Agreement may be executed in one or
more duplicate counterparts and when signed by all of the parties
listed below shall constitute a single binding agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their officers or partners
thereunto duly authorized as of the day and year first above
written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
TANGSHAN PAN-WESTERN HEAT AND POWER CO.,
LTD.
By:
Name:
Title:
Schedule 5.8
[TO COME]
EXHIBIT A
FORM OF PROJECT NOTE
$ New York, New York
, 199
FOR VALUE RECEIVED, the undersigned,
, a Sino-foreign equity joint venture with limited liability
organized under the laws of the People's Republic of China, (the
"Borrower"), hereby unconditionally promises to pay to the order
of Pan-Western Energy Corporation LLC (the "Lender") at the
office of [ ] in lawful money of the United
States of America and in immediately available funds, the
principal amount of DOLLARS ($ ),
or, if less, the unpaid principal amount of the Loans made by the
Lender pursuant to the Shareholder Loan Agreement, as hereinafter
defined. The principal amount shall be paid in the amounts and
on the dates specified in the Shareholder Loan Agreement. The
Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in the
Shareholder Loan Agreement.
The holder of this Note is authorized to endorse on the
schedule 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 the Loans and the date and
amount of each payment or prepayment of principal 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 Loans.
This Note (a) is the Project Note referred to in the
Shareholder Loan Agreement dated as of September 24, 1996 (as
amended, supplemented or otherwise modified from time to time,
the "Shareholder Loan Agreement"), between the Borrower and the
Lender, (b) is subject to the provisions of the Shareholder Loan
Agreement and (c) is subject to optional and mandatory prepayment
in whole or in part as provided in the Shareholder Loan
Agreement. This Note is guaranteed as provided in the Financing
Agreements. Reference is hereby made to the Financing Agreements
for a description of the terms and conditions upon which each
guarantee was 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 Shareholder Loan Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the
Shareholder Loan Agreement and used herein shall have the
meanings given to them in the Shareholder Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE CAYMAN ISLANDS.
[BORROWER]
By:
Name:
Title:
SCHEDULE A
INTEREST PAYMENT SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE B
AMORTIZATION SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
EXHIBIT 10.98
AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT
between
PAN-WESTERN ENERGY CORPORATION LLC
as Lender
and
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
as Borrower
Dated as of April 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS 1
1.1 Definitions 1
ARTICLE 2 - THE CREDIT FACILITY 13
2.1 Credit Facility 13
2.2 Interest Payments 13
2.2.1 Interest Payment Dates 13
2.2.2 Interest 13
2.3 Project Note 13
2.4 Repayment of the Loans 14
2.4.1 Payments 14
2.4.2 Application of Payments 14
2.5 Prepayments 14
2.5.1 Voluntary Prepayments 14
2.5.2 Certain Mandatory Prepayments 14
2.5.3 Expropriation Event; Event of Loss 14
2.6 Fees 15
ARTICLE 3 - CONDITIONS PRECEDENT 16
3.1 Borrower's Certificate 16
(a) Representations and Warranties 16
(b) No Event of Default 16
(c) Governmental Authorizations and other consents
and approvals 16
(d) Facility Costs 16
3.2 On-Shore Accounts 16
3.3 Evidence of Facility Costs and Other Expenses 16
3.4 Progress Report; Project Engineer 16
3.5 Registration Certificate 17
3.6 Equity Contributions; Real Estate Transfers 17
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 17
4.1 Organization 17
4.2 Authorization; No Conflict 17
4.3 Legality, Validity and Enforceability 17
4.4 Compliance with Law, Governmental Authorizations
and Project Documents 17
4.5 Governmental Authorizations 18
4.6 Litigation 18
4.7 Existing Defaults 18
4.8 Taxes 18
4.9 Contingent Liabilities 18
4.10 Business, Debt, Contracts, Etc. 18
4.11 Representations and Warranties 18
4.12 Utilities 18
4.13 Project Documents 19
4.14 Fees and Enforcement 19
4.15 Immunity 19
4.16 Subsidiaries and Beneficial Interest 19
4.17 No Other Powers of Attorney, etc. 19
4.18 Liens 19
4.19 Regulation of Parties 19
4.20 Transactions with Affiliates 19
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER 20
5.1 Repayment of Indebtedness 20
5.2 Existence, Conduct of Business, Properties, Etc. 20
5.3 Performance of Covenants and Obligations 20
5.4 Use of Funds 20
5.5 Accounts 20
5.6 Compliance with Legal Requirements 21
5.7 Operating Budgets 21
5.8 Books, Records, Access 22
5.9 Financial Statements 22
5.10 Insurance 22
5.11 Reports; Cooperation 23
5.12 Taxes and Other Governmental Charges 23
5.13 Notices 24
5.14 Expropriation Event 24
5.15 Increased Costs 24
5.16 Taxes 25
5.17 Registration of the Loans; Other Foreign
Exchange Matters 25
5.18 Loan Payment Reserve 25
ARTICLE 6 - NEGATIVE COVENANTS 25
6.1 Indebtedness 26
6.2 Limitations on Liens 26
6.3 Nature of Business 26
6.4 Sale or Lease of Facility Assets 26
6.5 Merger, Consolidation, Liquidation, Dissolution 26
6.7 Loans, Advances or Investments 27
6.8 Immunity 27
6.9 Distributions 27
6.10 Transactions With Affiliates 27
6.11 Partnerships; Subsidiaries 27
6.12 Assignment 27
6.13 Abandonment of Project 28
6.14 Improper Use 28
6.15 Regulation of Parties 28
6.16 Amendments 28
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES 28
7.1 Events of Default; Cure Rights 28
7.1.1 Failure to Make Payments 28
7.1.2 Misstatements; Omissions 28
7.1.3 Affirmative Covenants 28
7.1.4 Negative Covenants 29
7.1.5 Breach of Material Project Documents 29
7.1.6 Bankruptcy; Insolvency 29
7.1.7 Judgments 30
7.1.8 Other Indebtedness 30
7.1.9 Termination or Invalidity of Certain
Project Documents; Abandonment of Project 30
7.1.10 Commercial Operation Date 30
7.1.11 Government Authorizations 31
7.1.12 Destruction of Project 31
7.1.13 Change of Law 31
7.1.14 Remedies 31
ARTICLE 8 - SCOPE OF LIABILITY 31
ARTICLE 9 - MISCELLANEOUS 32
9.1 Addresses 32
9.2 Delay and Waiver 32
9.3 Entire Agreement 32
9.4 Governing Law 32
9.5 Severability 33
9.6 Headings 33
9.7 No Partnership, Etc. 33
9.8 Consent to Jurisdiction 33
9.9 Successors and Assigns 33
9.10 Counterparts 33
TABLE OF SCHEDULES AND EXHIBITS iv
TABLE OF SCHEDULES AND EXHIBITS
Exhibit A Form of Project Note
Schedule 5.8 Insurance
Schedule A Interest Payment Schedule
Schedule B Amortization Schedule
THIS AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT (this
"Agreement") dated as of April 1, 1997, by and between Pan-
Western Energy Corporation LLC (the "Lender"), a company with
limited liability organized under the laws of the Cayman Islands,
and Tangshan Cayman Heat and Power Co., Ltd. (the "Borrower"), a
Sino-foreign equity joint venture with limited liability
organized under the laws of the People's Republic of China (the
"PRC" or "China").
W I T N E S S E T H :
WHEREAS, the Borrower has developed, and desires to obtain,
own and operate certain water wells and pipeline systems, heat,
steam and hot water system facilities (the "Facility") and to
provide services related thereto, in conjunction with certain
other facilities including two 50 MW coal-fired thermal power
generation facilities and a steam and hot water distribution
system (collectively referred to herein as the "Project"); and
WHEREAS, the Lender, as the owner of approximately 88% of
the aggregate ownership interest in the Borrower, can be expected
to derive certain benefits as a result of this Agreement and
desires to lend certain funds to the Borrower on commercial terms
negotiated at arms length by and between the Borrower and the
Lender pursuant to, and upon the term and conditions contained
in, this Agreement and for the benefit of the Borrower;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" of a specified Person means any other
Person or Persons that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under
common control with the Person specified, or who holds or
beneficially owns 10% or more of the equity interest in the
Person specified or 10% or more of any class of voting securities
of the Person specified.
"Asset Sale" means sale, transfer or other disposition
(including any sale and leaseback of assets and any sale of
accounts receivable in connection with a receivable financing
transaction) by the Borrower or any of its Subsidiaries of any
property of the Borrower or any such Subsidiary, other than as
permitted pursuant to subsection 2.5.2.
"Authorized Representative" means as to any Person, its
president, chief executive officer or any senior vice president
or any other person specifically identified as such in a
certificate of such Person delivered to the Lender.
"Banking Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Bankruptcy Law" means any insolvency, reorganization,
moratorium or similar law for the general relief of debtors in
any relevant jurisdiction.
"Basic Settlement Account" shall have the meaning
ascribed to it in subsection 5.5.
"Borrower" means Tangshan Cayman.
"Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
"Capitalized Lease" means as to any Person, any lease
of any property of which the discounted present value of the
rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such
Person, and "Capitalized Lease Obligation" means the rental
obligations, as aforesaid, under any such lease.
"Cash Equivalents" means, at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System, whose
rating is AA or higher from Standard & Poor's or Aa2 or higher
from Moody's, having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper
with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and
having the highest rating obtainable from Standard & Poor's or
Moody's; and (iv) repurchase obligations for a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above.
"Cash Flow Available for Debt Service" means, for any
period, (i) the sum of all revenues (including interest and fee
income and any principal payments received by the Borrower on the
Transmission Loan for such period, but excluding any insurance
proceeds, other than business interruption insurance proceeds,
and other similar non-recurring receipts) of the Borrower for
such period minus (ii) the aggregate amount of O&M Costs for such
period as determined on a cash basis and otherwise in accordance
with GAAP).
"Change of Law" means after the date of this Agreement,
the adoption of any Legal Requirement, any change in any Legal
Requirement or the application or requirements thereof, any
change in the interpretation or administration of any Legal
Requirement by any Governmental Instrumentality, or compliance by
the Lender or the Borrower with any request or directive (whether
or not having the force of law) of any Governmental
Instrumentality.
"CHEXIM" means the Export-Import Bank of China, a
company organized under the laws of PRC.
"CHEXIM Guarantee" means the guarantee to be given by
CHEXIM as required pursuant to the EPC Contract in respect of the
EPC Contractor's obligations under the EPC Contract, as the same
may from time to time be amended, supplemented or otherwise
modified.
"Coal Supply Agreements" means all agreements entered
into by the Joint Venture Companies for the supply of coal to the
Project.
"Coal Transportation Agreements" means all agreements
entered into by the Joint Venture Companies for the
transportation of coal to the Project.
"Commercial Operation Date" means that date by which
both of the following have occurred: (i) the Project Engineer
has certified that the Project has achieved commercial operations
and (ii) the Commercial Operation Date, as such term is used in
the General Interconnection Agreement, has occurred.
"Commercially Feasible Basis" means that, following an
Event of Loss or an Expropriation Event, (i) the sum of the
proceeds of business interruption insurance, any funds available
to be applied to the rebuilding, repair or restoration pursuant
to subsection 2.5.3(e), any amounts that the shareholders of all
the Joint Venture Companies are irrevocably committed to
contribute and the anticipated revenues of the Project during the
estimated period of rebuilding, repair or restoration will be
sufficient to pay all Debt Service and O&M Costs of the Project
during the estimated period of rebuilding, repair or restoration
and (ii) the Project upon being rebuilt, repaired or restored can
reasonably be expected to produce revenues adequate to pay all
Debt Service and O&M Costs of all Joint Venture Companies
pursuant to each such Joint Venture Company's respective
Shareholder Loan Agreement over the remaining terms of the Loans
outstanding of each Joint Venture Company, taking into account
any change in projected operating results due to the impairment
of any portion of the Project, all without materially affecting
the Borrower's Debt Service Coverage Ratio.
"Covered Taxes" means taxes, levies, imposts,
deductions, charges, withholdings and liabilities imposed on or
measured by the net income or capital of a Person by any
jurisdiction or any political subdivision or taxing authority
thereof or therein solely as a result of a permanent
establishment of such Person in such jurisdiction or political
subdivision.
"Debt Service" means, for any period, an amount equal
to the aggregate of, without duplication all payments of
principal and interest (including any adjustment for withholding
taxes or similar taxes) due and payable on Indebtedness during
such period.
"Debt Service Coverage Ratio" means, for any period,
and, if the transaction giving rise to the need to calculate Debt
Service Coverage Ratio is an incurrence of Indebtedness,
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been incurred or made on
the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, means the
ratio of (A) Cash Available for Debt Service to (B) Net Debt
Service for such period.
"Debt Service Reserve Requirement" means US$1,000,000
less the amount of any Performance Bonus Payment paid by the
Borrower.
"Development Expenses" shall mean all reasonable out-of
pocket expenses related to the Facility that have been incurred
by the Borrower, Panda International or their Affiliates in the
development of the Facility prior to the date of this Agreement.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Loans, as the case may be.
"Dollar Equivalent" means, with respect to any monetary
amount in Renminbi, at any time for the determination thereof,
the amount of Dollars obtained by converting the amount of
Renminbi involved in such computation into Dollars at the spot
rate at which Renminbi are offered for sale against delivery of
Dollars by leading banks in Tangshan City on the date of
determination thereof as determined by the Lender in its
reasonable judgement. If for any reason the Dollar Equivalent
cannot be calculated as provided in the immediately preceding
sentence, the Lender shall calculate the Dollar Equivalent on
such basis as it deems fair and equitable.
"Dollar Permitted Investments" means investments which
are denominated and payable in U.S. Dollars (a) with respect to
funds in the On-Shore Accounts, deposits denominated in U.S.
Dollars maintained at, or certificates of deposit insured, or
obligations insured or guaranteed by, the Bank of China, The
China Construction Bank, the Communication Bank, the China
Farmers Bank or China International Trust and Investment
Corporation, or any branch of a commercial bank organized 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 Standard & Poor's and Moody's
equal to the highest rating assigned thereby to long-term
unsecured debt securities; and (b) means any of the following
securities: (i) direct obligations of the Department of the
Treasury of the United States of America; (ii) obligations of any
of the following federal agencies which obligations represent
full faith and credit of the United States of America, including:
Export-Import Bank, Farmers Home Administration, General Services
Administration, U.S. Maritime Administration, Small Business
Administration, Government National Mortgage Associate (GNMA),
U.S. Department of Housing & Urban Development (PHA's) and
Federal Housing Administration; (iii) bonds, notes or other
evidences of indebtedness rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal Home Loan Bank, the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation; (iv) commercial paper rated in any one of
the two highest rating categories by Moody's or Standard &
Poor's; (v) investment agreements with banks (foreign &
domestic), broker/dealers, and other financial institutions rated
at the time of bid in any one of the three highest rating
categories by Moody's and Standard & Poor's; (vi) repurchase
agreements with banks (foreign & domestic), broker/dealers, and
other financial institutions rated at the time of bid in any one
of the three highest rating categories by each of Standard &
Poor's and Moody's, provided: (1) collateral is limited to (i),
(ii) and (iii) above, (2) the margin levels for collateral must
be maintained at a minimum of 102% including principal and
interest, (3) the Lender shall have a first perfected security
interest in the collateral, (4) the collateral will be delivered
to a third party custodian, designated by the Lender and all fees
and expenses related to collateral custody will be the
responsibility of the Lender, (5) the collateral must have been
or will be acquired at the market price and marked to market
weekly and collateral level shortfalls cured within 24 hours, (6)
unlimited right of substitution of collateral is allowed provided
that substitution collateral must be permitted collateral
substituted at a current market price and substitution fees of
the custodian shall be paid by the Lender; (vii) forward purchase
agreements delivering securities outlined in (i) and (iv) above
with banks (foreign and domestic), broker/dealers, and other
financial institutions maintaining a long-term rating on the day
of bid no lower than investment grade by each of Standard &
Poor's and Moody's (such rating may be at either the parent or
subsidiary level).
"Dollars," "U.S. Dollars" and "US$" mean lawful
currency of the United States of America.
"Energy Purchase Agreement" means Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, between
NCPGC and Tangshan Panda and Tangshan Pan-Western, as the same
may from time to time be amended, supplemented or otherwise
modified.
"EPC Contract" means the Engineering, Procurement and
Construction Contract, dated as of April 24, 1996 between the EPC
Contractor and Tangshan Panda and Tangshan Pan-Western, as the
same may from time to time be amended, supplemented or otherwise
modified.
"EPC Contractor" means Harbin Power Engineering Company
Limited, a company organized under the laws of the PRC and a
wholly owned subsidiary of Harbin Power.
"EPC Contract Liquidated Damages" means liquidated
damages as defined in the EPC Contract.
"EPC Contractor Parent Guarantee" means the guarantee
to be given by Harbin Power in favor of Tangshan Panda and
Tangshan Pan-Western in respect of the EPC Contractor's
obligations under the EPC Contract, as the same may from time to
time be amended, supplemented or otherwise modified.
"Event of Default" shall have the meaning given to such
term in Section 7.1.
"Event of Loss" means an event which causes all or a
portion of the Facility to be damaged, destroyed or rendered
unfit for normal use for any reason whatsoever, other than an
Expropriation Event.
"Expropriation Event" means any condemnation,
nationalization, seizing, or expropriation by any Government
Instrumentality of all or a substantial portion of the Project or
the property or assets of the Borrower or of its share capital,
or any Government Instrumentality shall have assumed custody or
control of such property or other assets or business operations
of the Borrower or of its share capital, or shall have taken any
action for the dissolution or disestablishment of the Borrower or
any action that would prevent the Borrower or its officers from
carrying on its business or operations or a substantial part
thereof.
"Expropriation Proceeds" means any proceeds received by
the Borrower as a result of the occurrence of an Expropriation
Event.
"Facility" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Facility Budget" means the construction budget and
schedule provided by the Lender (containing customary assumptions
and qualifications) approved as reasonable by the Project
Engineer prior to the making of the first Loan pursuant to this
Agreement, and as it thereafter may be amended with the approval
of the Lender.
"Facility Costs" means all costs incurred, or to be
incurred, in connection with the development, design,
engineering, procurement, construction and commissioning of the
Facility, which costs shall include, but not be limited to: (a)
all costs incurred under the EPC Contract, (b) Development
Expenses, (c) O&M Costs incurred in connection with the start up
of the Facility or otherwise prior to the Commercial Operation
Date, (d) actual interest costs (including, prior to Commercial
Operation, interest due and payable on the Loans) and amounts
required pursuant to the Debt Service Reserve Requirement,
closing and administration costs related to the Facility until
the Commercial Operation Date, (e) the costs of acquiring
Governmental Authorizations for the Facility prior to the
Commercial Operation Date and (f) without duplication, working
capital costs.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressures or compulsion to complete the transaction. Fair Market
Value shall be determined by the board of directors of the
Borrower acting in good faith and shall be evidenced by a board
resolution delivered to the Lender except that any determination
of Fair Market Value made with respect to any parcel of real
property shall be made by an independent appraiser.
"Financing Agreements" means, collectively, this
Agreement, the Guarantees, the Project Notes, the other
Shareholder Loan Agreements, each individually a "Financing
Agreement".
"Foreign Debt Account" shall have the meaning ascribed
to it in Section 5.5.
"Foreign Debt Repayment Account" shall have the meaning
ascribed to it in Section 5.5.
"FPA" means the United States Federal Power Act, as
amended, excluding Sections I-18, 21-30, 202(c), 210, 211, 212,
305(c) and any necessary enforcement provision of Part III of the
Act with regard to the foregoing sections.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date hereof.
"Governmental Authorizations" means all authorizations,
consents, decrees, permits, waivers, privilege approvals from and
filings with all Governmental Instrumentalities necessary for the
realization of the Project in accordance with the Project
Documents.
"Governmental Instrumentality" of any country shall
mean such country and its government and any ministry,
department, political subdivision, instrumentality, agency,
corporation or commission under the direct or indirect control of
such country.
"Guarantees" means collectively, the undertakings by
Tangshan Panda, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Pan-
Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Lender pursuant to any Indebtedness
obligation then or thereafter due and owing by any such party to
Lender; the undertakings by Tangshan Pan-Western, each executed
as of the 22nd day of September, 1996, to unconditionally and
irrevocably guarantee to the Lender the prompt payment and
performance by each of Tangshan Panda, Tangshan Cayman, and
Tangshan Pan-Sino of their individual obligations to Lender
pursuant to any Indebtedness obligation then or thereafter due
and owing by any such party to Lender; the undertakings by
Tangshan Cayman, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Pan-Sino of their individual
obligations to Lender pursuant to any Indebtedness obligation
then or thereafter due and owing by any such party to Lender; and
the undertakings by Tangshan Pan-Sino, each executed as of the
22nd day of September, 1996 to unconditionally and irrevocably
guarantee to the Lender the prompt payment and performance by
each of Tangshan Panda, Tangshan Pan-Western and Tangshan Cayman
of their individual obligations to Lender pursuant to any
Indebtedness obligation then or thereafter due and owing by any
such party to Lender.
"Harbin Power" means Harbin Power Equipment Group
Company, a PRC Company.
"Heat Supply Contracts" means the contracts to supply
steam and hot water to various PRC industrial and commercial
users that have been assigned by Luannan Heat and Power Plant to
Tangshan Pan-Sino, or any similar contracts in addition to or in
replacement thereof.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a capitalized lease obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Independent Accountants" means an internationally
recognized accounting firm.
"Independent Insurance Consultant" means Sedgwick, PLC,
a corporation incorporated in accordance with the laws of the
United Kingdom, or its successors.
"Inter-Company Steam Sales Agreement" means the Water,
Heat, Steam and Hot Water Supply and Usage Agreement, dated as of
October 3, 1996 between Tangshan Cayman and Tangshan Panda.
"Interconnection Agreement" means the General
Interconnection Agreement dated September 22, 1995, between NCPGC
and Tangshan Panda and Tangshan Pan-Western, as the same may from
time to time be amended, supplemented or otherwise modified.
"Interconnection Dispatch Agreement" means the
agreement to be negotiated among Tangshan Power Supply Bureau of
NCPGC, Tangshan Panda and Tangshan pan-Western shortly prior to
the Commercial Operation Date of the Project concerning specific
details as to the dispatch of the Luannan Facility.
"Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Joint Venture Companies" means, collectively Tangshan
Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-
Sino.
"Legal Requirements" means all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements
and regulations of any Governmental Instrumentality having
jurisdiction over the matter in question.
"Lender" means Pan-Western Energy Corporation LLC, a
Cayman Islands corporation.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of this Agreement, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Loans" means the loans made under this Agreement.
"Luanhua Co." means Tangshan Luanhua (Group) Co., a
company organized under the laws of the PRC.
"Luannan Government" means the government of Luannan
County, Tangshan City, Hebei Province, PRC.
"Luannan Heat Company" means Luannan County Heat
Company, Ltd. a company organized under the laws of the PRC.
"Luannan Heat & Power" means Luannan County Heat &
Power Plant, a company organized under the laws of the PRC.
"Major Maintenance Reserve Account" shall have the
meaning ascribed to it in subsection 5.5.
"Major Maintenance Reserve Requirement" means, with
respect to any month, an amount established periodically by the
Project Engineer, based on anticipated major maintenance
requirements for the next five years, to constitute the Major
Maintenance Reserve Requirement for the Facility for such month.
"Material Adverse Effect" means (i) a material adverse
change in the financial condition of the Joint Venture Companies
taken as a whole or (ii) any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the construction or operation of the Project or (b) the Joint
Venture Companies' ability (taken as a whole) to perform any of
their obligations under the Project Documents.
"Material Project Documents" means, collectively, the
Power Purchase Agreement, the EPC Contract, the Transmission
Facilities Construction Agreement, the O&M Agreement, the Coal
Supply Agreements, the Coal Transportation Agreement and all
other instruments, agreements or other documents arising from or
related to the Project, but shall not include any Financing
Agreement.
"Maturity Date" means April 1, 2004.
"Moody's" means Moody's Investors Services.
"NCPGC" means North China Power Group Company, a
company organized under the laws of the PRC.
"Net Cash Proceeds" in connection with (a) any Asset
Sale, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise,
but only as and when received) of such Asset Sale, net of
attorneys' fees, accountants' fees, investment banking fees,
survey costs, title insurance premiums, amounts required to be
applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the subject
of such Asset Sale and other customary fees and expenses actually
incurred in connection therewith, net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax
sharing arrangements) and net of purchase price adjustments
reason.
"Net Debt Service" means the sum of (i) (a) Interest
Expense less (b) non-cash Interest Expense plus (ii) all payments
of scheduled and overdue principal of, and premium, if any, on
Indebtedness plus (iii) without duplication, all rental payments
in respect of Capitalized Lease Obligations paid, accrued, or
scheduled to be paid or accrued.
"Non-Excluded Taxes" shall have the meaning ascribed to
it subsection 5.16.
"Nonrecourse Persons" shall have the meaning ascribed
to it in Article 8.
"O&M" means operation and maintenance services.
"O&M Agreement" means the Amended and Restated
Operation and Maintenance Agreement, dated as of March 6, 1997,
among the Joint Ventures and Duke/Fluor Daniel Asia, Inc., a
California corporation.
"O&M Costs" means all amounts disbursed by or on behalf
of the Borrower for operation, maintenance, repair, or
improvement of the Facility, including, without limitation,
premiums on insurance policies, property, income and all other
taxes to the extent paid, and payments under the relevant
operating and maintenance agreements, leases (including Operating
Lease Obligations), royalty and other land use agreements, and
any other payments required under the Project Documents, each as
determined on a cash basis and otherwise in accordance with GAAP.
"Obligations" means all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by the
Borrower to the Lender or existing or hereafter arising hereunder
or pursuant to the terms of any of the Financing Agreements or
any of the other Project Documents, including all interest, fees,
charges and expenses chargeable to the Borrower; and in the event
of any proceeding for the collection or enforcement of the
Obligations, after an event of default shall have occurred and be
continuing, any exercise by the Lender, together with reasonable
attorney's fees and court costs.
"Officer's Certificate" means a certificate of an
authorized representative of the Borrower, signed by the
Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Borrower.
"On-Shore Accounts" has the meaning set forth in
subsection 5.5.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Other Taxes" means any other excise or property taxes,
charges or similar levies that arise under the laws of any
jurisdiction on any payment made under this Agreement or under
any other Financing Agreement or from the execution or delivery
or otherwise with respect to this Agreement or any other
Financing Agreement.
"Panda International" means Panda Energy International
Inc., a Texas corporation.
"Performance Bonus Payment" means an amount payable to
the EPC Contractor pursuant to subsections 13.3 and 13.4 of the
EPC Contract.
"Permitted Indebtedness" has the meaning set forth in
subsection 6.1.
"Permitted Liens" means (a) Liens for any tax,
assessment or other governmental charge not yet due, due but
payable without penalty or being contested in good faith and by
appropriate proceedings, (b) retentions of title in favor of
materialmen, workers or repairmen, or other like Liens arising in
the ordinary course of business or in connection with the
construction of the Project, (c) Liens arising out of judgments
or awards so long as an appeal or proceeding for review is being
prosecuted in good faith, (d) mineral rights the use and
enjoyment of which do not materially interfere with the use and
enjoyment of the Facility, (e) Liens, deposits or pledges to
secure statutory obligations or performance of 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 the Borrower's business and affecting property with a
value not exceeding the equivalent of US$250,000 at any one time,
(f) involuntary Liens (including a Lien of an attachment,
judgment or execution) securing a charge or obligation, on any of
the Borrower's property, real or personal, whether now or
hereafter owned with a value not exceeding the equivalent of
US$250,000 at any one time, (g) rights of any party pursuant to
any Project Document, (h) Liens securing workers' compensation,
unemployment insurance or other social security or pension
obligations, (i) Liens securing Indebtedness permitted pursuant
to Section 6.1 (to the extent not required by Section 6.1 to be
unsecured), (j) Liens securing the purchase price of property
having an aggregate value not exceeding the equivalent of
US$1,000,000 at any one time an (k) Liens securing other
obligations not constituting Indebtedness none of which could
reasonably be expected to have a Material Adverse Effect.
"Person" means any natural person, corporation,
partnership, firm, association, Governmental Instrumentality or
any other entity whether acting in an individual, fiduciary or
other capacity.
"PRC" or "China" means the People's Republic of China.
"PRC Shareholders" means collectively, Luannan Heat and
Power and Luanhua Co.
"Pricing Document" means the document or documents
(issued by the Tangshan Municipal Price Bureau) determining the
price for electric energy delivered, retail price and principals
for adjustment.
"Project" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Project Documents" means this Agreement and all
instruments, contracts, agreements or other documents arising
from or related to the Project, including all Financing
Agreements, each individually a "Project Document".
"Project Engineer" means Parsons Brinckerhoff Energy
Services Inc., or its successor.
"Project Note" has the meaning given that term in
Section 2.3.
"Power Purchase Agreement" means, collectively, the
Energy Purchase Agreement, the Interconnection Agreement and the
Supplemental Agreement (and, after execution thereof, the
Interconnection Dispatch Agreement).
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended, and all rules and regulations
adopted thereunder.
"Registered Capital Account" shall have the meaning
ascribed to it in Section 5.5.
"Registration Certificate" has the meaning given to
such term in Section 3.5.
"Renminbi" or "RMB" means lawful currency of the PRC.
"Registered Capital Contribution and Agency Agreement"
means the agreement among each of the Joint Venture Companies and
their respective shareholders, dated as of March 26, 1997 (as
amended, modified and supplemented from time to time) pursuant to
which the Joint Venture Companies are entitled to receive equity
contributions.
"RMB Permitted Investments" means deposit accounts
denominated and payable in RMB to be maintained at, certificates
of deposit issued, or obligations issued or guaranteed by, one of
the following policy or commercial banks in the PRC: (i) the
Bank of China, (ii) the China Construction Bank, (iii) the
Communication Bank, (iv) the China Farmers Bank, (v) the China
International Trust and Investment Corporation (vi) any foreign
bank or branch of any foreign bank authorized and licensed to
conduct business in the PRC, including without limitation, the
establishment and maintenance of RMB and foreign currency
accounts and exchange functions having a combined capital and
surplus of at least $500,000,000 and having at least an
investment grade rating assigned to its long-term unsecured debt
securities by each of Standard & Poor's and Moody's.
"RMB Revenue Account" shall have the meaning ascribed
to it in Section 5.5.
"RMB Checking Account" shall have the meaning ascribed
to it in Section 5.5.
"SAFE" means the State Administration of Foreign
Exchange of the PRC.
"Shareholder Loan Agreements" means, collectively, this
Agreement and the Shareholder Loan Agreements, each dated as of
September 24, 1996, between the Lender and (i) Tangshan Pan-
Western, (ii) Tangshan Cayman and (iii) Tangshan Pan-Sino, as the
same may from time to time be amended, supplemented or otherwise
modified.
"Shareholders" means the Lender and the PRC
Shareholders.
"Site" means the approximately 200 square meters of
land on which the Facility is to be located.
"Standard & Poor's" means Standard & Poor's Ratings
Service.
"Steam Sales Agreements" means the Heat Supply
Contracts and the Inter-Company Steam Sales Agreement.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Supplemental Agreement" means Supplemental Agreement
for General Interconnection Agreement and Electric Energy
Purchase and Sales Agreement, dated February 10, 1996, among
NCPGC, Tangshan Panda and Tangshan Pan-Western, as the same may
from time to time be amended, supplemented or otherwise modified.
"Tangshan Cayman" means Tangshan Cayman Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.,
Ltd., a Sino-foreign equity joint venture with limited liability
organized under the laws of the PRC.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture with
limited liability organized under the laws of the PRC.
"Transmission Facilities" means three new substations,
the upgrades of both an existing substation and an existing
switching station and approximately 43 km of 110 KV transmission
lines to interconnect the Project to the Jing-Jin-Tang Grid.
"Transmission Facilities Construction Agreement" means
the construction agreement, dated February 10, 1996, among
Tangshan Panda, Tangshan Pan-Western and NCPGC.
"Transmission Loan" means the loan made by Tangshan Pan-
Sino to NCPGC through a PRC financial intermediary for the
construction cost of the Transmission Facilities, in the amount
of RMB 78,218,000, to be adjusted for inflation from December 31,
1994 to the date of issuance of the notice to proceed with
preliminary design and for accrued interest during the
construction period.
ARTICLE 2 - THE CREDIT FACILITY
2.1 Credit Facility. Subject to the terms and conditions
set forth in Article 3, the Lender shall from time to time make
shareholder loans to the Borrower in an aggregate amount of
US$17,664,000 (the "Loans").
2.2 Interest Payments.
2.2.1 Interest Payment Dates. The Borrower shall
pay accrued interest on the unpaid principal amount of the Loans
semiannually in arrears on each June 30 and December 31,
commencing June 30, 1997, until the first such date to occur not
less than six months after the Commercial Operation Date, and on
the last day of each month thereafter.
2.2.2 Interest. The Borrower shall pay accrued
interest on the unpaid principal amount of the Loans from the
date of this Agreement (i) through the first June 30 or December
31 to occur not less than six months after the Commercial
Operation Date, at a rate per annum of 13.75%, subject to a
maximum applicable to all interest accrued in respect of such
period and all amounts due in respect thereof pursuant to Section
5.16 hereof of $4,010,273, and (b) thereafter until the maturity
thereof at a rate per annum equal to 12.75%.
2.3 Project Note. The obligation of the Borrower to repay
the Loans and to pay interest thereon at the rate provided herein
shall be evidenced by a promissory note substantially in the form
of Exhibit A, payable to the order of the Lender and in the
principal amount of SEVENTEEN MILLION SIX HUNDRED SIXTY-FOUR
THOUSAND DOLLARS (US$17,664,000) (the "Project Note"). The
Borrower authorizes the Lender to record on the schedule annexed
to the Project Note, each payment or prepayment of principal of
the Loans and agrees that all such notations shall be prima facie
evidence of the information recorded. The Borrower further
authorizes the Lender to attach to and make a part of the Project
Note continuations of the schedule attached thereto as necessary.
No failure to make any such notations, nor any errors in making
any such notations, shall affect the validity of the Borrower's
obligations to repay the full unpaid principal amount of the
Loans or the duties of the Borrower hereunder or thereunder.
2.4 Repayment of the Loans.
2.4.1 Payments. The Borrower shall make all
payments hereunder to an account which the Lender shall specify
by notice to Borrower prior to the date of the first payment of
interest hereunder. The aggregate unpaid principal amount of the
Loans shall be payable in installments on or before 10:00 A.M.,
Beijing time, on each Repayment Date in accordance with the
amortization schedule set forth on Schedule B, and any remaining
unpaid principal, interest, fees and costs shall be due and
payable on the Maturity Date.
2.4.2 Application of Payments. If the amount of
any payment made by the Borrower hereunder is less than the total
amount due and payable by the Borrower to the Lender as of the
date on which such payment is actually made by the Borrower, such
payment shall be applied: (i) first, against charges, fees,
costs and expenses due hereunder; (ii) second, if the principal
of the Loans shall not have become or be then due and payable,
against interest on the overdue principal of the Loans (including
amounts payable in respect thereof pursuant to Section 5.16) in
order of maturity of such installments of interest and against
interest on such overdue interest; (iii) third, if the principal
of the Loans shall have become or shall be then due and payable,
against the whole amount of all such principal, interest on
overdue principal of the Loans (including amounts payable in
respect thereof pursuant to Section 5.16) and interest on such
overdue interest; and (iv) fourth, against all other amounts then
due and payable to the Lender hereunder.
2.5 Prepayments.
2.5.1 Voluntary Prepayments. Except as required by
this Agreement, the Borrower may not prepay Loans without the
permission of the Lender.
2.5.2 Certain Mandatory Prepayments. In addition
to other amounts which shall be applied to the prepayment of
Loans as provided in this Agreement, the Borrower shall apply to
prepayment of the principal of the Loan, within ten Business Days
following receipt thereof, (i) all Net Cash Proceeds from the
sale or other disposition of all or any part of the assets or
other rights of the Borrower, other than in the ordinary course
of business and permitted pursuant to the terms of the Financing
Agreements, having a value, individually in excess of US$100,000
and in the aggregate in any year, in excess of US$250,000, and
(ii) any Liquidated Damages which shall have been made by the EPC
Contractor to the Borrower under the EPC Contract.
2.5.3 Expropriation Event; Event of Loss. (a) If
an Expropriation Event shall occur with respect to the Facility
or any part thereof, the Borrower shall (i) diligently pursue all
of its rights to compensation against the appropriate
Governmental Instrumentality in respect of such event, (ii) not
compromise, settle or consent to the settlement of any claim in
respect thereof without the consent of the Lender, and (iii)
promptly deposit all proceeds received in respect of any
Expropriation Event (after deducting all reasonable expenses) (A)
in the RMB Revenue Account if denominated in RMB or (B) in the
Foreign Debt Repayment Account if denominated in Dollars, in each
case segregated from all other moneys pending the determination
pursuant to paragraph (c) below.
(b) If an Event of Loss shall occur with respect
to the Facility or any part thereof, the Borrower shall (i)
diligently pursue all its rights to compensation with respect to
such Event of Loss, (ii) not compromise, settle or consent to the
settlement of any claim exceeding $250,000 in respect thereof
without the consent of the Lender, and (iii) promptly deposit all
proceeds received in respect of any Event of Loss (after
deducting all reasonable expenses) which are denominated in RMB
in the RMB Revenue Account, and transfer to the Lender any such
proceeds which are denominated in U.S. Dollars, to be held by the
Lender and segregated from all other moneys pending the
determination pursuant to paragraph (c) below.
(c) If such Expropriation Event or an Event of
Loss shall occur, as soon as reasonably practicable, but no later
than fifteen (15) days after the date of receipt by the Borrower
of any proceeds in respect thereof, the Borrower shall make a
reasonable good faith determination as to whether (i) the
Facility can be rebuilt, repaired or restored to permit operation
of the entire Project on a Commercially Feasible Basis, and (ii)
the proceeds thereof, together with any other amounts that the
Borrower has available to commit to such rebuilding, repair or
restoration, are sufficient to pay for such rebuilding, repair or
restoration of the Facility. The determination of the Borrower
shall be evidenced by a certificate filed with the Lender which,
in the event the Borrower determines that the Facility can be
rebuilt, repaired or restored to permit operation of the entire
Project or a portion thereof on a commercially feasible basis,
shall also certify that such proceeds, together with any other
amounts that the Borrower is willing to commit to such
rebuilding, repair or restoration, are sufficient to pay the
costs thereof, and shall also set forth a reasonable good faith
estimate by the Borrower of such costs. If the amount of such
costs exceeds $500,000, such certificate shall be accompanied by
a Project Engineer's certificate, dated within five (5) days of
the date of the Borrower's certificate, stating that, based upon
reasonable investigation and a review of the determination made
by the Borrower, the Project Engineer believes that the
determination and the estimate of the total cost, if any, set
forth in the Borrower's certificate to be reasonable.
(d) In the event that the Borrower determines not
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss shall be transferred
within ten Business Days after the date of such determination to
the Lender and applied to prepayment of the Loans.
(e) In the event that the determination is made
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss on deposit in the
RMB Revenue Account shall be transferred to the RMB Checking
Account and, together with the amounts (if any) previously
transferred to the Lender in connection with such Expropriation
Event or Event of Loss and such other amounts as the Borrower has
available for such rebuilding, repair or restoration (which also
shall be transferred to the Lender prior to any disbursement for
rebuilding, repair or restorations), shall be used to pay the
costs of such rebuilding, repair or restoration, and any excess
shall, upon completion of such rebuilding, repair or restoration,
be applied to the prepayment of the Loans within 15 days of the
completion of such rebuilding, repair or restoration as certified
by the Project Engineer.
2.6 Fees. Not more than thirty (30) days following the
making of the first Loan hereunder, the Borrower shall reimburse
the Lender for its reasonable costs other than interest costs
incurred in funding the Loans.
ARTICLE 3 - CONDITIONS PRECEDENT
The obligation of the Lender to make each Loan shall be
subject to the fulfillment or waiver of each of the following
conditions precedent:
3.1 Borrower's Certificate. The Lender shall have received
from the Borrower a certificate dated the date of the request for
such Loan, certifying the following:
(a) Representations and Warranties. The
representations and warranties made by the Borrower herein or in
any other Project Document to which it is a party, or which are
contained in any certificate, document, financial or other
statement furnished by the Borrower hereunder or thereunder or in
connection herewith or therewith, are true and correct in all
material respects on and as of such date as if made on and as of
such date, except as affected by the consummation of the
transaction contemplated thereby or to extent that such
representations and warranties relate solely to an earlier date;
(b) No Event of Default. No Event of Default is in
existence on such date, or shall occur after giving effect to the
Loan to be made on such date;
(c) Governmental Authorizations and other consents and
approvals. All Governmental Authorizations which are required to
be obtained on or prior to the date of the making of such Loan
have been duly obtained or maintained and are in full force and
effect, except for Governmental Authorizations which have not
been obtained at such time but which the Borrower has no reason
to believe will not be obtained in the normal course of business
prior to the date such Governmental Authorizations are required;
and
(d) Facility Costs. The costs for the payment of
which the borrowing is being made are Facility Costs and payment
of such costs is in accordance with the Facility Budget.
3.2 On-Shore Accounts. The On-Shore Accounts shall have
been established pursuant to Section 5.5.
3.3 Evidence of Facility Costs and Other Expenses. At
least 10 Business Days prior to each such Loan, the Lender shall
have received a copy of the EPC Contractor's application for
payment under the EPC Contract or evidence of or application for
other expenses in connection with the construction and
development of the Facility (together with all supplemental
reports required to be furnished thereunder), and copies of all
invoices and other statements of charges with respect to the
payments to be made to the EPC Contractor pursuant to the EPC
Contract or to the recipient of such other expenses on the date,
or expected to be due and payable within 30 days of, such Loan
and with respect to all other items of Facility Costs to be paid
on such date, or expected to be due and payable within 30 days of
such Loan.
3.4 Progress Report; Project Engineer. The Lender shall
have received a report signed by the Authorized Representative of
the Borrower on the date of each such Loan to the effect that
construction of the Facility is proceeding satisfactorily in
accordance with the EPC Contract and the Facility Budget and the
Facility Budget sets forth accurately the estimated costs to
complete the Facility, and such confirmation thereof from the
Project Engineer as the Lender reasonably deems necessary.
3.5 Registration Certificate. The Lender shall have
received a registration certificate of the Tangshan Municipal
Bureau for Exchange Control (a "Registration Certificate")
evidencing that a Registration Certificate has been obtained for
the full aggregate amount of the Loans to be made hereunder
pursuant to subsection 2.1.
3.6 Equity Contributions; Real Estate Transfers. It shall
be a condition to any Loan hereunder which increases the
aggregate of all loans made under all of the Shareholder Loan
Agreements to more than $15,000,000 that (A) the Borrower shall
have received the full amount of the equity contributions to
which the Borrower is then entitled pursuant to the Registered
Capital Contribution and Agency Agreement (B) all transfers of
land use rights relating to the Site shall have been completed.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
The Borrower makes all of the following representations
and warranties to and in favor of the Lender the date on which
any Loan is made hereunder, except as such representations relate
to an earlier date.
4.1 Organization. The Borrower (a) is a Sino-foreign
equity joint venture with limited liability duly organized and
validly existing under the laws of the PRC, (b) is duly
authorized to do business in the PRC, and (c) has all requisite
power and authority to (i) own or hold under land use right or
lease and operate the property it purports to own or hold under
land use right or lease, (ii) carry on its business as now being
conducted and as now proposed to be conducted in respect of the
Project, (iii) incur Indebtedness, and (iv) execute, deliver and
perform its obligations under each of the Project Documents to
which it is a party. The sole shareholders of the Borrower are
the Lender and the PRC Shareholders.
4.2 Authorization; No Conflict. The Borrower has duly
authorized, executed and delivered the Project Documents to which
it is a party, and neither its execution and delivery thereof nor
its consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (a) does or will contravene its
formation documents or any other Legal Requirement then
applicable to or binding on it, (b) does or will contravene or
result in any breach or constitute any default under, or result
in or require the creation of any Lien upon any of its property
or under any agreement or instrument to which it is a party or by
which it or any of its properties may be bound, or (c) does or
will require the consent or approval of any Person.
4.3 Legality, Validity and Enforceability. Each of the
Project Documents to which the Borrower is a party is a legal,
valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, subject to bankruptcy
laws or principles of equity, to the extent applicable to the
Borrower. None of the Project Documents to which the Borrower is
a party has been amended or modified except in accordance with
this Agreement.
4.4 Compliance with Law, Governmental Authorizations and
Project Documents. The Borrower is in compliance in all material
respects with all Legal Requirements and Governmental
Authorizations and Project Documents to which it is a party, and
no notices of violation of any Governmental Authorization or
Project Document relating to the Project have been issued,
entered or received by the Borrower.
4.5 Governmental Authorizations. There are no Governmental
Authorizations under Legal Requirements existing as of the date
of this Agreement that are required or will become required,
other than the Governmental Authorizations (a) which have been
obtained or granted and are in full force and effect, or (b)
which the Borrower has no reason to believe will not be obtained
before they become necessary for the ownership, construction,
financing or operation of the Facility. To the best of its
knowledge, the Borrower is not in violation of any condition in
any Governmental Authorization.
4.6 Litigation. There are no pending or, to the Borrower's
knowledge, threatened actions, suits, proceedings or
investigations of any kind, including actions or proceedings of
or before any Governmental Instrumentality, to which the Borrower
or any Shareholder or, to the knowledge of the Borrower, is a
party or is subject, or by which any of them or any of their
properties are bound.
4.7 Existing Defaults. There is no Event of Default by the
Borrower under any of the Material Project Documents. To the
best of the Borrower's knowledge, there is no event of default
under any Material Project Document by any party to such Material
Project Document.
4.8 Taxes. The Borrower has filed, or caused to be filed,
all tax and informational returns that are required to have been
filed by it in any jurisdiction, and has paid 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 (other than those taxes that it is contesting in good
faith and by appropriate proceedings, with adequate, segregated
reserves established for such taxes) and, to the extent such
taxes are not due, has established reserves that are adequate for
the payment thereof and are required by the GAAP.
4.9 Contingent Liabilities. The Borrower has no material
contingent liabilities or obligations except those authorized
under and permitted by the Project Documents and the Financing
Agreements.
4.10 Business, Debt, Contracts, Etc. The Borrower has not
conducted any business other than the business contemplated by
the Project Documents to which it is a party, has no outstanding
Indebtedness other than Indebtedness incurred under the Financing
Agreements or permitted under Section 6.1 and has no other
liabilities other than those incurred under the Project Documents
or permitted under this Agreement, and is not a party to or bound
by any contract other than as contemplated by the Project
Documents to which Borrower is a party and those contracts
permitted under this Agreement. The Borrower has established
offices in the PRC only.
4.11 Representations and Warranties. All representations
and warranties of the Borrower contained in the Project Documents
are true and correct in all material respects and the Borrower
hereby confirms each such representation and warranty of the
Borrower with the same effect as if set forth in full herein.
4.12 Utilities. All utility services and easements
necessary for the construction and the operation of the Facility
for its intended purposes, are or will be available at the Site
as and when required on commercially reasonable terms.
4.13 Project Documents.
4.13.1 The Lender has received a true, complete and
correct copy of each of the Project Documents in effect or
required to be in effect as of the date this representation is
made or deemed made (including all exhibits, schedules, side
letters and disclosure letters to therein or delivered pursuant
thereto, if any).
4.13.2 All conditions precedent to the obligations
of the respective parties under the Material Project Documents
have been satisfied or waived in accordance with the provisions
thereof and hereof, except for such conditions precedent which by
their terms cannot be met until a later stage in the construction
or operation of the Facility, and the Borrower has no reason to
believe that any such condition precedent cannot be satisfied on
or prior to the appropriate stage in the construction or
operation of the Facility.
4.14 Fees and Enforcement. Other than amounts that have
been paid in full, no fees or taxes, including without limitation
stamp, transaction, registration or similar taxes, are required
to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Project Documents.
4.15 Immunity. In any proceedings in the PRC or elsewhere
in connection with any of the Project Documents to which the
Borrower is a party, the Borrower will not be entitled to claim
for itself or any of its assets immunity from suit, execution,
attachment or other legal process.
4.16 Subsidiaries and Beneficial Interest. The Borrower has
no subsidiaries and does not beneficially own the whole or any
part of the issued share capital or other ownership interest of
any other company or corporation or other Person.
4.17 No Other Powers of Attorney, etc. The Borrower has not
executed and delivered any powers of attorney, fiduciary transfer
agreements or similar documents, instruments or agreements,
except for powers authorizing signatures of various Project
Documents.
4.18 Liens. The Borrower has not secured or agreed to
secure any Indebtedness by any Lien upon any of its present or
future revenues or assets or capital stock except Permitted
Liens. The Borrower does not have any outstanding Lien or
obligation to create Liens on or with respect to any of its
properties or revenues except Permitted Liens.
4.19 Regulation of Parties. The Borrower is not nor will it
be, solely as a result of its participation in the transactions
contemplated hereby or by any other Project Document, or as a
result of the ownership, use or operation of the Facility,
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company." The Borrower is not subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA.
4.20 Transactions with Affiliates. Except as otherwise
permitted under Section 6.10, the Borrower is not a party to any
contracts or agreements with, or any other commitments to,
whether or not in the ordinary course of business, any Affiliate
of the Borrower.
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that until all
Obligations owed to the Lender are paid in full it will:
5.1 Repayment of Indebtedness. Repay in accordance with
its terms, all Indebtedness, including without limitation, all
sums due under this Agreement and the other Financing Agreements
but, in the case of any such Indebtedness with a repayment that
is limited by any term of any Financing Agreement, repay subject
to such limitation.
5.2 Existence, Conduct of Business, Properties, Etc.
Except as otherwise expressly permitted under this Agreement,
(i) maintain and preserve its existence as a Sino-foreign joint
venture with limited liability and all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business, and (ii) engage only in the business contemplated by
the Financing Agreements and the Project Documents.
5.3 Performance of Covenants and Obligations. The Borrower
shall perform and observe in all material respects, its covenants
and obligations under all Material Project Documents.
5.4 Use of Funds. The Borrower shall use the proceeds of
the Loans only for deposit in the On-Shore Accounts pending
disbursement for the payment of Facility Costs as provided
herein.
5.5 Accounts. (a) On or prior to the date of the making
of the first Loan, the Borrower shall establish the following
accounts with banks or financial institutions in the PRC in
accordance with applicable PRC laws and regulations: (i) the
Registered Capital Account denominated in U.S. Dollars (the
"Registered Capital Account"), (ii) the Foreign Debt Account
denominated in U.S. Dollars (the "Foreign Debt Account"), (iii)
the Foreign Debt Repayment Account denominated in U.S. Dollars
(the "Foreign Debt Repayment Account"), (iv) the Basic Settlement
Account denominated in U.S. Dollars (the "Basic Settlement
Account"), (v) the RMB Revenue Account denominated in Renminbi
(the "RMB Revenue Account"), (vi) the RMB Checking Account
denominated in Renminbi (the "RMB Checking Account"), and (vii)
the Major Maintenance Reserve Account denominated in Renminbi
(the "Major Maintenance Reserve Account") (collectively, the "On-
Shore Accounts").
(b) The proceeds of all Loans shall be deposited in
the Foreign Debt Account. Funds in the Foreign Debt Account
shall not be used for any purpose other than disbursement of
Facility Costs denominated in U.S. Dollars or funding of reserves
for the payment of principal and interest on the Loans, or, after
conversion into RMB, transfer to the RMB Checking Account for
disbursement of Facility Costs denominated in RMB.
(c) All funds received by the Borrower constituting
capital contributions from any shareholder shall be deposited in
the Registered Capital Account. Until after Commercial Operation
Date, funds in the Registered Capital Account shall not be used
for any purpose other than disbursement of Facility Costs
denominated in the U.S. Dollars or, after conversion into RMB,
transfer to the RMB Checking Account for disbursement of Facility
Costs denominated in RMB.
(d) All revenues received by the Borrower from any
source whatsoever shall be deposited (after conversion into
Renminbi, if necessary) into the RMB Revenue Account. The
Borrower shall instruct NCPGC, the EPC Contractor and other
participants in the Project to deposit revenues, penalties or
other payments owing to the Borrower in RMB directly into the RMB
Revenue Account. The RMB Revenue Account shall not be used for
any purpose other than (and in accordance with the following
priority): (i) the transfer of funds to the RMB Checking Account
for the payment of O&M Costs and (ii) after conversion into U.S.
Dollars, the transfer of funds to the Foreign Debt Repayment
Account for the payment of the principal of and interest on the
Loans or reserves in respect thereof.
(e) Amounts remaining in the RMB Revenue Account
subsequent to disbursement in accordance with clause (d) hereof
shall be deposited into the Major Maintenance Reserve Account in
an amount equal to the Major Maintenance Reserve Requirement.
Disbursement shall be made from the Major Maintenance Reserve
Account only to pay for major maintenance costs of the Facility
upon a certification of the Project Engineer that after
withdrawal of such funds for such purpose, the amounts remaining
in the Major Maintenance Reserve Account (including anticipated
future funding thereof) shall be adequate to meet the anticipated
needs of the Facility for major maintenance for the next five
years.
(f) Amounts remaining in the RMB Revenue Account
subsequent to disbursements in accordance with clauses (d) and
(e) hereof shall be retained in the RMB Revenue Account pending
disbursement to the Borrower's Shareholders in the form of
dividends. The amount designated for the payment of dividends to
the Lender in its capacity as a shareholder of the Borrower shall
be transferred from the RMB Revenue Account (after conversion to
U.S. Dollars) to the Basic Settlement Account and then to the
Lender. The corresponding amount designated for the payment of
dividends to the PRC Shareholders shall be distributed from the
RMB Revenue Account directly to the PRC Shareholders in RMB.
(g) The funds in the Foreign Debt Repayment Account
shall not be used for any purpose other than the payment of
amounts due hereunder pursuant to Subsection 2.4 to an off-shore
account maintained by the Lender.
(h) The funds in the Basic Settlement Account shall
not be used for any purpose other than remittance after the
Commercial Operation Date to an off-shore equity distribution
account approved by the Lender.
5.6 Compliance with Legal Requirements. Promptly and
diligently (i) own, construct, maintain and operate the Facility
in compliance with all applicable Legal Requirements, and
(ii) procure, maintain and comply, or cause to be procured,
maintained and complied with all Governmental Authorizations
required for the ownership, construction, financing, maintenance
or operation of the Facility or any part thereof at or before the
time such Governmental Authorization becomes necessary for the
ownership, construction, financing, maintenance or operation of
the Facility, as the case may be, as contemplated by the Project
Documents and except that the Borrower may, at its expense,
contest by appropriate proceedings conducted in good faith the
validity or application of any such Legal Requirements, provided
that, in either case, (x) neither the Lender nor the Borrower
would be subject to any criminal liability for failure to comply
therewith and (y) all proceedings to enforce such Legal
Requirements against the Lender, the Borrower or the Project or
any part thereof, shall have been duly and effectively stayed
during the entire pendency of such contest.
5.7 Operating Budgets. On or before the anticipated
Commercial Operation Date, deliver to the Lender an annual
operating budget, certified by the Project Engineer as being a
reasonable estimate of projected costs, expenses and revenues of
the Borrower, for the period commencing on the anticipated
Commercial Operation Date, and continuing until the end of the
first full calendar year thereafter, in substantially the same
form as the initial annual operating budget. In advance of each
calendar year thereafter, the Borrower shall adopt and deliver to
the Lender an annual operating budget, certified by the Project
Engineer as being a reasonable estimate of projected costs,
expenses and revenues of the Borrower, for the ensuing calendar
year.
5.8 Books, Records, Access. Maintain adequate books,
accounts and records with respect to the Borrower and the
Facility in compliance with the regulations of any Governmental
Instrumentality having jurisdiction thereof, and, with respect to
financial statements, in accordance with the GAAP and, subject to
reasonable safety requirements, permit employees or designees of
the Lender and the Project Engineer, at any reasonable time and
upon reasonable prior notice to inspect the Facility, and to
examine or audit all of Borrower's books, accounts and records
pertaining or related to the Facility and make copies and
memoranda thereof.
5.9 Financial Statements.
5.9.1 Provide the Lender with:
(a) As soon as available and in any event
within one hundred thirty five (135) days after the close of each
fiscal year commencing with the fiscal year ended after the date
of this Agreement, audited financial statements of the Borrower
including a statement of equity, a balance sheet as of the close
of such year, an income and expense statement, reconciliation of
capital accounts and a statement of sources and uses of funds,
all prepared in accordance with the GAAP and certified by
Independent Accountants.
(b) As soon as available and in any event
within ninety (90) days after the end of each of the quarterly
accounting periods of its fiscal year commencing with the quarter
ending after the date of this Agreement, unaudited financial
statements of the Borrower, including without limitation, an
unaudited balance sheet of the Borrower as of the last day of
such quarterly period, the related statements of income and cash
flows for such quarterly period and (in the case of second, third
and fourth quarterly periods) for the portion of the fiscal year
ending with the last day of such quarterly period, setting forth
in each case in comparative form corresponding unaudited figures
from the preceding fiscal year.
5.9.2 Each time the financial statements of the
Borrower are delivered under this subsection 5.9, a certificate
signed by an Authorized Representative of the Borrower shall be
delivered along with such financial statements, certifying that
such officer has made or caused to be made a review of the
transactions and financial condition of the Borrower during the
relevant fiscal period and that such review has not, to the best
of such Authorized Representative's knowledge, disclosed the
existence of any event or condition which constitutes an Event of
Default under this Agreement, or if any such event or condition
existed or exists, the nature thereof and the corrective actions
that Borrower has taken or proposes to take with respect thereto,
and also certifying that the Borrower is in compliance in all
material respects with its obligations under this Agreement and
each other Financing Agreement to which it is a party or, if such
is not the case, stating the nature of such non-compliance and
the corrective actions which the Borrower has taken or proposes
to take with respect thereto.
5.10 Insurance. The Borrower shall maintain, or cause to be
maintained, adequate insurance with respect to its Facility
satisfactory to the Lender in its reasonable judgment, based upon
the advice of the Independent Insurance Consultant. All
insurance other than third party liability insurance shall name
the Lender as an insured and the sole loss payee thereunder.
Policies for third party liability insurance shall name the
Lender as an additional insured.
5.11 Reports; Cooperation.
5.11.1 Deliver to the Lender on each anniversary of
the date of this Agreement a certificate from the Borrower's
insurers or insurance agents (i) evidencing that the insurance
policies in place satisfy the requirements specified in Section
5.10 (including, without limitation, listing all insurance being
carried by or on behalf of the Borrower pursuant to the Project
Documents and certifying that all insurance required to be
maintained by the Borrower pursuant to the Project Documents is
in full force and effect and all premiums therefore have been
paid in full), and (ii) setting forth a summary of all losses in
excess of US$250,000 (or the equivalent thereof) incurred with
respect to the Project in the preceding year.
5.11.2 Deliver to the Lender within thirty (30) days
following the end of each calendar quarter a quarterly status
report describing in reasonable detail the progress of the
construction of the Facility since the immediately preceding
report hereunder, including without limitation, the cost incurred
to the end of such quarter, an estimate of the time and cost
required for completion of the Facility and such other
information which the Lender may reasonably request.
5.11.3 Prior to the Commercial Operation Date,
deliver to the Lender, within thirty (30) days following the end
of each calendar quarter an update of the Facility Budget,
including but not limited to an explanation or other
reconciliation of differences between such report and previous
reports.
5.11.4 From and after the Commercial Operation Date,
deliver to the Lender within ninety (90) days following each
calendar year, a summary operating report, which shall include,
unless otherwise agreed to by the Lender, a numerical and
narrative assessment of (i) the Project's compliance with each
category in the annual operating budget, (ii) statistical data
relating to the Facility, including heat rate, net electrical and
scheduled and unscheduled outages, (iii) fuel deliveries and use,
(iv) major maintenance activity, (v) casualty losses of value in
excess of US$250,000 or the equivalent thereof in other
currencies (whether or not covered by insurance), (vi) disputes
with any other Major Project Participant, materialman, supplier
or other Person and any related claims against the Borrower,
(vii) pricing information disclosed or made available under the
agreements pertaining to the supply of coal for the Facility and
(viii) compliance with the Governmental Authorizations.
5.11.5 No later than five Business Days following
the receipt thereof, deliver to the Lender all progress reports
provided by the EPC Contractor to the Borrower pursuant to the
EPC Contract and all progress reports prepared under the Power
Purchase Agreement.
5.11.6 Deliver to the Lender any such other
information or data with respect to its business or operations
(including supporting information as to compliance with this
Agreement) as the Lender may reasonably request from time to
time.
5.12 Taxes and Other Governmental Charges. Before the same
become delinquent, pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or
levies lawfully imposed upon the Borrower or its income or
profits or upon the Facility, all utility and other governmental
charges incurred in the ownership, operation, maintenance, use,
occupancy and upkeep of the Facility. However, the Borrower may
contest in good faith any such taxes, assessments and other
charges and, in such event, may permit the taxes, assessments or
other charges so contested to remain unpaid during any period,
including appeals, when the Borrower is in good faith contesting
the same, so long as (a) adequate cash reserves have been
established in an amount sufficient to pay any such taxes,
assessments or other charges, accrued interest thereon and
potential penalties or other costs relating thereto, or other
adequate provision for the payment thereof shall have been made,
(b) enforcement of the contested tax, assessment or other charge
is effectively stayed for the entire duration of such contest,
and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is promptly paid
after resolution of such contest.
5.13 Notices. Promptly, upon acquiring notice or giving
notice, or obtaining knowledge thereof, as the case may be,
provide to the Lender written notice of:
5.13.1 Any Event of Default which it has knowledge,
specifically stating that an Event of Default has occurred and
describing such an Event of Default and any action being taken or
proposed to be taken with respect to such Event of Default;
5.13.2 Any termination or event of default or notice
thereof under the Power Purchase Agreement; and
5.13.3 Any litigation pending against the Borrower or
any other party of which the Borrower has actual knowledge, which
is or could reasonably be expected to have a Material Adverse
Effect.
5.14 Expropriation Event. If an Expropriation Event shall
occur with respect to the Project, (a) promptly upon discovery or
receipt of notice of any occurrence thereof, provide written
notice thereof to the Lender, (b) diligently pursue all its
rights to compensation against the relevant Governmental
Instrumentality in respect of such Expropriation Event, and
(c) hold any Expropriation Proceeds received in respect of such
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
Lender separated from other funds of the Borrower, (d) promptly
deposit all Expropriation Proceeds in (i) the RMB Revenue Account
if denominated in RMB or (ii) in the Foreign Debt Repayment
Account if denominated in Dollars. The Borrower consents to the
participation of the Lender in any proceedings regarding an
Expropriation Event, and the Borrower shall from time to time
deliver to the Lender all documents and instruments requested by
it to permit such participation. Nothing in this Section 5.14
shall be deemed to impair any rights which the Lender may have
with respect to any such Expropriation Event.
5.15 Increased Costs. If, after the date of this Agreement,
any Change of Law:
(a) shall subject the Lender to any tax, duty or other
charge with respect to the
Loans, or shall change the basis of taxation of payments by the
Borrower to the Lender on the Loans (except for Covered Taxes,
Other Taxes or changes in the rate of taxation on the overall net
income of the Lender); or
(b) shall impose on the Lender any other condition
directly related to the Loans;
and the effect of any of the foregoing is to increase the cost to
the Lender of making, issuing, creating, renewing, participating
in or maintaining the Loans or to reduce any amount receivable by
the Lender hereunder, then the Borrower shall from time to time,
upon demand by the Lender, pay to the Lender additional amounts
sufficient to reimburse the Lender for such increased costs or to
compensate the Lender for such reduced amounts.
5.16 Taxes. All payments made by the Borrower under this
Agreement and the Project Note shall be made free and clear of,
and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Instrumentality, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Lender as a result of a present or former connection between
the Lender and the jurisdiction of the Governmental
Instrumentality imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such
connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Agreement or the Project Note). If any
such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Lender hereunder or
under the Project Note, the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender
(after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement. Whenever any Non-Excluded Taxes are
payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender for its own account a certified
copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the
Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
The agreements in this subsection 5.16 shall survive the
termination of this Agreement and the payment of the Loans, the
Project Note and all other amounts payable hereunder.
5.17 Registration of the Loans; Other Foreign Exchange
Matters.
5.17.1 Prior to any due date for any repayment of
the principal of and/or the payment of interest on the Loans, the
Borrower shall (i) use the Registration Certificate and the
notice regarding such repayment and/or payment to obtain from the
registration department a verification and approval certificate
with respect to such repayment and/or payment and (ii) use such
verification and approval certificate and the Registration
Certificate to handle matters regarding the remittance from its
foreign debt account of the principal of and interest on the
Loans outside of China at the relevant bank.
5.17.2 At the beginning of each year, the Borrower
shall submit to the local foreign exchange administration a
report stating the amount of foreign currency purchased in the
preceding year for the purpose of repaying the principal of
and/or paying the interest on the Loans and a plan regarding the
purchase of foreign currency for the current year.
5.18 Loan Payment Reserve. At the time of the final drawing
under this Agreement, the Borrower shall deposit an amount equal
to the Debt Service Reserve Requirement in the Debt Service
Reserve Fund.
ARTICLE 6 - NEGATIVE COVENANTS
The Borrower covenants and agrees for the benefit of the
Lender that until all Obligations owed to the Lender are paid in
full, without the consent of the Lender, the Borrower shall not:
6.1 Indebtedness. Incur, create, assume or be liable for
any Indebtedness, except:
(a) the Loans and additional loans from the Lender;
(b) debt incurred to finance working capital
requirements; provided that after giving effect to such
additional debt, (i) the minimum (or lowest) projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.5 to 1 and (ii) the average projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.7 to 1; provided further, however, that the
amount of such debt shall not at any time exceed
US$1,000,000;
(c) purchase money or Capital Lease Obligations
incurred to finance assets of the Borrower that are readily
replaceable personal property with a principal amount or
capitalized portion not exceeding US$1,000,000 in the
aggregate outstanding at any time;
(d) trade accounts payable (other than for borrowed
money) due within 90 days arising, and accrued expenses
incurred, in the ordinary course of business of
constructing, operating or maintaining the Facility on
customary terms;
(e) interest or currency exchange rate protection
agreements;
(f) Indebtedness under the Guarantees to which the
Borrower is a party and any other guarantees of the
obligations of any other Joint Venture Company permitted
under the Financing Agreements.
(g) any debt to any other Joint Venture Company, ((a)
through (g), collectively "Permitted Indebtedness").
6.2 Limitations on Liens. Create, assume or permit to
exist any Lien upon any of the Borrower's assets or properties
including without limitation the Facility, whether now owned or
hereafter acquired, other than Permitted Liens.
6.3 Nature of Business. Amend or modify its Articles of
Association without the prior written consent of the Lender, or
engage in any business other than the ownership and operation of
the Facility.
6.4 Sale or Lease of Facility Assets. Sell, lease, assign,
transfer or otherwise dispose of the Facility or other assets
unless (a) such sale, lease, assignment or other disposition
relates only to property that is worn out or no longer useful or
usable in connection with the operation of the Facility or 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 such lease or transfer is required to
comply with law or to obtain or maintain any Governmental
Authorization, (b) with respect to any other sales, leases,
assignments or other dispositions, the aggregate amount thereof
does not exceed US$250,000 in any given year or US$1,000,000 in
the aggregate since the date of this Agreement, or (c) such sale,
lease, assignment or other disposition is made in the ordinary
course of business in accordance with the Project Documents.
6.5 Merger, Consolidation, Liquidation, Dissolution. Merge
or consolidate with or into any other Person, other than any of
the other Joint Venture Companies or other Sino-foreign joint
ventures with no material liabilities and no material activities
unrelated to the Project, or liquidate, wind up, dissolve, or
otherwise transfer or dispose of all or any substantial part of
its property, assets or business, or change its legal form, or
purchase or otherwise acquire any assets of any Person unless
such purchase or acquisition of assets is reasonably necessary
for the operation of the Facility or in the ordinary course of
business.
6.6 Contingent Liabilities. Become liable as a surety,
guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person; provided, however, that the
Borrower may guarantee or otherwise become liable in respect of
any Indebtedness incurred by any other Person (on its behalf) in
connection with or relating to incurrence of Indebtedness
permitted under Section 6.1; and provided, further, however, that
this Section 6.6 shall not be deemed to prohibit (i) the
acquisition of goods, supplies or merchandise in the normal
course of business on normal trade credit, or (ii) the
endorsement of negotiable instruments received in the normal
course of business; or (iii) the obligations hereunder and under
the Guarantees or any other guarantee of any obligation of any
other Joint Venture Company if such guarantee is required for the
development and construction of the Project and is not contrary
to any Legal Requirements.
6.7 Loans, Advances or Investments. Make or permit to
remain outstanding any loans, extensions of credit or advances to
or investments in (whether by acquisition of any stocks, notes or
other securities or obligations) any Person except RMB Permitted
Investments with respect to the On-Shore Accounts denominated in
Renminbi or Dollar Permitted Investments with respect to the On-
Shore Accounts denominated in the U.S. Dollars or as expressly
provided in the Project Documents.
6.8 Immunity. In any proceedings in China or elsewhere in
connection with any of the Financing Agreements to which the
Borrower is a party, claim for itself or any of its assets
immunity from suit, execution, attachment or other legal process.
6.9 Distributions. Agree to any restriction on its ability
to pay dividends (excluding restrictions imposed by law).
6.10 Transactions With Affiliates. Except for the Project
Documents, directly or indirectly: (i) enter into any
transaction with any Person (including any Affiliate) other than
in the ordinary course of business, or (ii) enter into any
transaction with any Person, including any Affiliate, on terms
less favorable to those available from independent third parties
or (ii) establish any sole and exclusive purchasing or sales
agency, or enter into any transaction whereby the Borrower might
receive less than the full commercial price (subject to normal
trade discounts) for electricity or pay more than the commercial
price for products of others.
6.11 Partnerships; Subsidiaries. Except as contemplated by
the Project Documents, become a general or limited partner in any
partnership or a joint venturer in any joint venture, acquire any
ownership interest in any other Person or enter into any profit-
sharing or royalty agreement or other similar arrangement whereby
the Borrower's income or profits are, or might be, shared with
any other Person, or enter into any management contract or
similar arrangement whereby its business or operations are
managed by any other Person (other than any agreement under which
the Borrower may provide operation and management consulting or
other similar services), or form any Subsidiary.
6.12 Assignment. Assign or otherwise transfer its rights
under any of the Project Documents to which it is a party, or
Governmental Authorizations for its benefit, to any Person
without the prior written consent of the Lender.
6.13 Abandonment of Project. Voluntarily cease or abandon
the development, construction or operation of the Project.
6.14 Improper Use. Use, maintain, operate or occupy, or
allow the use, maintenance, operation or occupancy of, any
portion of the Site or Facility for any purpose which: (a) may
be dangerous, unless safeguarded as required by any Legal
Requirement or Government Instrumentality; (b) may constitute a
public or private nuisance resulting in a Material Adverse
Effect; or (c) may make void, voidable or cancelable, or
materially increase the premium of, any insurance then in force
with respect to the Site or Project or any part thereof.
6.15 Regulation of Parties. Take any action which could
reasonably be expected to result in (a) the Borrower being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company", (b) the Borrower being subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA or (c) any Person who by reason
of its or their ownership or operation of the Facility upon the
exercise of remedies hereunder or under the Guarantees, being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "holding company" or a
subsidiary or Affiliate of any of the foregoing under any Legal
Requirement of the United States (including, without limitation,
PUHCA and the FPA).
6.16 Amendments. Amend any of the Project Documents without
the prior written consent of the Lender.
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES
7.1 Events of Default; Cure Rights. The occurrence of any
of the following events shall constitute an event of default
("Event of Default") hereunder:
7.1.1 Failure to Make Payments. Payment shall not
have been made of any principal of or any interest on the Loans
or other amounts owed by the Borrower to the Lender within 15
Banking Days after such amounts are due.
7.1.2 Misstatements; Omissions. Any representation
or warranty confirmed or made in any Project Documents by the
Borrower or in any writing provided by the Borrower in connection
with the transactions contemplated by this Agreement shall be
found to have been incorrect in any material respect when made or
deemed to be made; provided, however, that no Event of Default
shall occur if within sixty (60) days after the date on which the
General Manager of the Borrower has actual notice that such
incorrect statement has occurred, the Borrower shall deliver in
good faith, to the Lender an Officer's Certificate stating in
reasonable detail that either (i) the Borrower has eliminated any
adverse effect relating to such incorrect statement or (ii) that
the Borrower has taken action that it reasonably believes will
eliminate the adverse effect relating to such incorrect statement
within a reasonable specified time.
7.1.3 Affirmative Covenants. The Borrower shall
fail to perform or observe any of its obligations under (a)
Sections 5.4 and 5.5 or (b) any other term, covenant or agreement
set forth in Article 5 hereof, where such default shall not have
been remedied within fifteen (15) days after notice of such
failure.
7.1.4 Negative Covenants. The Borrower shall fail
to perform or observe any of its obligations under any term,
covenant or agreement set forth in Article 6 hereof other than
Section 6.2, where such default shall not have been remedied
within fifteen (15) days after the Borrower has received notice
of such failure.
7.1.5 Breach of Material Project Documents. The
Borrower or any other party thereto shall breach or default under
any term, condition, provision, covenant, representation or
warranty contained in any of the Material Project Documents and
the Financing Agreements to which the Borrower is a party if such
breach or default shall continue unremedied for fifteen (15) days
after notice to the Borrower from the Lender; provided, however,
that in the case of any of the EPC Contract, the CHEXIM Guarantee
or the Transmission Facilities Construction Agreement, if the
breach or default cannot be remedied within such fifteen (15)
days despite the Borrower's and/or such other party's, as the
case may be, good faith and diligent efforts to do so, but is
susceptible to cure within a longer period, the Borrower or such
party shall continue diligently such efforts to cure such breach
or default until cured (but in no event longer than sixty (60)
days in the aggregate.
7.1.6 Bankruptcy; Insolvency.
(a) The Borrower or any other Joint Venture Company
shall institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or the Borrower shall file a petition, answer or consent or shall
otherwise institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or the Borrower or any
other Joint Venture Company shall apply for, or by consent or
acquiescence there shall be an appointment of, a receiver,
liquidator, sequestrator, trustee or other officer with similar
powers; or the Borrower or any other Joint Venture Company shall
make an assignment for the benefit of creditors; or the Borrower
or any other Joint Venture Company shall admit in writing its
inability to pay its debts generally as they become due; or if an
involuntary case shall be commenced seeking the liquidation or
reorganization of the Borrower or any other Joint Venture Company
under any Bankruptcy Law (or any successor statute or similar
statute under any relevant jurisdiction) or any similar
proceeding shall be commenced against the Borrower or any other
Joint Venture Company under any other Legal Requirements and (i)
the petition commencing the involuntary case is not timely
controverted, (ii) the petition commencing the involuntary case
is not dismissed within sixty (60) days of its filing, (iii) an
interim trustee is appointed to take possession of all or a
portion of the property, and/or to operate all or any part of the
business of the Borrower or any other Joint Venture Company and
such appointment is not vacated within sixty (60) days, or
(iv) an order for relief shall have been issued or entered
therein; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers of
the Borrower or any other Joint Venture Company of all or a part
of their property, shall have been entered; or any other similar
relief shall be granted against the Borrower or any other Joint
Venture Company under any Legal Requirements; and
(b) NCPGC, the EPC Contractor, or Harbin Power shall
institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or shall file a petition, answer or consent or shall otherwise
institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or shall apply for, or by
consent or acquiescence there shall be an appointment of, a
receiver, liquidator, sequestrator, trustee or other officer with
similar powers; or shall make an assignment for the benefit of
creditors; or shall admit in writing its inability to pay its
debts generally as they become due; or if an involuntary case
shall be commenced seeking the liquidation or reorganization of
NCPGC, the EPC Contractor, or Harbin Power under any Bankruptcy
Law (or any successor statute or similar statute under any
relevant jurisdiction) or any similar proceeding shall be
commenced against NCPGC, the EPC Contractor, or Harbin Power
under other Legal Requirements and (i) the petition commencing
the involuntary case is not timely controverted, (ii) the
petition commencing the involuntary case is not dismissed within
sixty (60) days of its filing, (iii) an interim trustee is
appointed to take possession of all or a portion of the property,
and/or to operate all or any part of the business of any of
NCPGC, the EPC Contractor, or Harbin Power and such appointment
is not vacated within sixty (60) days, or (iv) an order for
relief shall have been issued or entered therein; or a decree or
order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee or
other officer having similar powers of any of NCPGC, the EPC
Contractor, or Harbin Power of all or a part of any of their
respective property, shall have been entered; or any other
similar relief shall be granted against the NCPGC, the EPC
Contractor, or Harbin Power under any Legal Requirements.
7.1.7 Judgments. A final judgment or judgments
shall be entered (i) against the Borrower in the aggregate amount
of US$1,000,000 (or the equivalent thereof in other currencies)
(exclusive of judgment amounts fully covered by insurance where
the insured has admitted liability), other than a judgment, the
execution of which is effectively stayed within sixty (60) days
after its entry but only for no more than ninety (90) days after
the date on which such stay is terminated or expires; or (ii) in
the form of an injunction or similar form of relief requiring
suspension or abandonment of construction or operation of the
Facility on grounds of violation of a Legal Requirement and
failure of the Borrower to have such injunction or similar form
of relief stayed or discharged within ninety (90) days.
7.1.8 Other Indebtedness. The Borrower shall
default for a period beyond any applicable grace period in the
payment of any principal, interest or other amount due under any
agreement involving the borrowing of money or the advance of
credit and the outstanding amount or amounts payable under such
agreement equals or exceeds US$250,000 (or the equivalent thereof
in other currencies) in the aggregate.
7.1.9 Termination or Invalidity of Certain Project
Documents; Abandonment of Project.
(a) Any of the Project Documents or the Financing
Agreements shall have become invalid, illegal or unenforceable;
(b) The Borrower shall cease to have the right to use
the Site for the purpose of owning, constructing, maintaining and
operating the Facility in the manner contemplated by the Project
Documents (or to obtain sufficient water for its operations); or
(c) The Borrower shall abandon the Project or
otherwise cease to pursue the operations of the Project in
accordance with standard industry practice or shall (except as
permitted by Section 6.4) sell or otherwise dispose of its
interest in the Project.
7.1.10 Commercial Operation Date. The Commercial
Operation Date shall not have occurred by December 31, 1999.
7.1.11 Government Authorizations. Any Governmental
Authorization, approval or permit (whether central, provincial,
municipal, local or otherwise) necessary for (a) the
establishment of the Borrower (b) the ownership, construction,
maintenance, financing or operation of the Project, (c) the
setting or adjustment of the electricity price for the Project in
accordance with the method of calculation set forth in the
attachments to the Pricing Document or (d) the conversion or
transfer of any foreign currency shall not be obtained if and
when required, or shall be modified, revoked or cancelled, or a
notice of violations is issued under any Governmental
Authorization on grounds of, or illegality or the absence of any
required authorization, by the issuing agency or other
Governmental Instrumentality having jurisdiction or any
proceeding is commenced by any Governmental Instrumentality for
the purpose of modifying, revoking or cancelling any Governmental
Authorization.
7.1.12 Destruction of Project. The Facility is
destroyed, or suffers an actual or constructive total loss or
damage.
7.1.13 Change of Law. The occurrence of any adverse
Change of Law of the PRC.
7.1.14 Remedies. Upon the occurrence of any of the
Events of Default, the Lender may, by written notice to the
Borrower and the other Joint venture Companies, declare the Loans
to be immediately due and payable and pursue any and all remedies
available for the non-payment of debts.
ARTICLE 8 - SCOPE OF LIABILITY
The Lender shall have no claims with respect to the
transactions contemplated by the Project Documents against any
Person other than the Borrower including, but not limited to, the
Panda International and the Luannan Government or any of their
respective Affiliates (other than the Borrower) or direct or
indirect parents, or to the shareholders, officers, directors,
employees, or other controlling persons (including members of the
management committee) of the Panda International and the Luannan
Government, their respective Affiliates (other than the
Borrower), or their direct or indirect parents (collectively the
"Nonrecourse Persons"), subject to the exceptions set forth below
in this Article 8; provided that (a) the foregoing provision of
this Article 8 shall not constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms,
covenants, conditions, or provisions of this Agreement, any other
Financing Agreement and the same shall continue until fully paid,
discharged, observed, or performed; (b) the foregoing provision
of this Article 8 shall not limit or restrict the right of the
Lender, to name the Borrower or any other Person as a defendant
in any action or suit for a judicial foreclosure or for the
exercise of any other remedy under or with respect to this
Agreement or any other Financing Agreement, or for injunction or
specific performance, so long as no judgement in the nature of a
deficiency judgement shall be enforced against any Nonrecourse
Persons, except as set forth in this Article 8; (c) the foregoing
provision of this Article 8 shall not affect or diminish or
constitute a waiver, release or discharge of any specific written
obligation, covenant, or agreement in respect to the Project made
by any of the Nonrecourse Persons; and (d) nothing contained
herein shall limit the liability of any Person who is a party to
any Project Document or has issued any certificate or other
statement in connection therewith with respect to such liability
as may arise by reason of the terms and conditions of such
Project Document, certificate or statement, or otherwise, in each
case under this clause (d) relating solely to such liability of
such Person as may arise under such referenced agreement,
instrument or opinion. The limitations on recourse set forth in
this Article 8 shall survive the termination of this Agreement
and the full payment and performance of the Obligations hereunder
and under the other Project Documents.
ARTICLE 9 - MISCELLANEOUS
9.1 Addresses. Any communications between the parties
hereto or notice provided herein to be given may be given to the
following addresses.
If to the Lender: Pan-Western Energy Corporation, LLC
c/o Maples and Calder
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
If to the Borrower: Tangshan Cayman Heat and Power Co.,
Ltd.
Zhongdajie, Bencheng
Luannan County
Hebei Province, China
in either case,
with a copy to: Panda Energy Industrial Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
9.2 Delay and Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Lender upon the occurrence
of any Event of Default or any breach or default of the Borrower
under this Agreement shall impair any such right, power or remedy
of the Lender, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any
waiver of any single Event of Default, or other breach or default
be deemed a waiver of any other Event of Default, or other breach
or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part
of the Lender of any Event of Default, or other breach or default
under this Agreement, or any waiver on the part of the Lender of
any provision or condition of this Agreement, must be in writing
and shall be effective only to the extent in such writing
specifically set forth. All remedies, either under this
Agreement or by law or otherwise afforded to the Lender shall be
cumulative and not alternative.
9.3 Entire Agreement. This Agreement and any agreement,
document or instrument attached hereto or referred to herein
integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral negotiations and prior
writings in respect to the subject matter hereof. In the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail. This Agreement may only be amended or modified by an
instrument in writing signed by the Borrower, the Lender and any
other parties to be charged.
9.4 Governing Law. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the law of
the Cayman Islands.
9.5 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
9.6 Headings. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and
it is agreed that such paragraph headings are not a part of this
Agreement and shall not be used in the interpretation of any
provision of this Agreement.
9.7 No Partnership, Etc. The Lender and the Borrower
intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement or the
Project Note shall be deemed or construed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or
co-ownership by or between the Lender, on the one hand, and the
Borrower or any other Person, on the other hand. The Lender
shall not be in any way responsible or liable for the debts,
losses, obligations or duties of the Borrower or any other Person
with respect to the Project or otherwise. All obligations to pay
real property or other taxes, assessments, insurance premiums,
and all other fees and charges arising from the ownership,
operation or occupancy of the Project and to perform all
obligations under the agreements and contracts relating to the
Project shall be the sole responsibility of the Borrower.
9.8 Consent to Jurisdiction. The Lender and the Borrower
agree that any legal action or proceeding by or against the
Borrower or with respect to or arising out of this Agreement the
Project Note may be brought in or removed to the courts of the
Cayman Islands. By execution and delivery of this Agreement, the
Lender and the Borrower accept, for themselves and in respect of
their property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Lender and the Borrower irrevocably
consent 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 airmail,
postage prepaid, to the Lender or the Borrower, as the case may
be, at their respective addresses for notices as specified herein
and that such service shall be effective five (5) Banking Days
after such mailing. Nothing herein shall affect the right to
serve process in any other manner permitted by law or the right
of the Lender to bring legal action or proceedings in any other
competent jurisdiction. The Lender and the Borrower further
agree that the aforesaid courts of the Cayman Islands shall have
exclusive jurisdiction with respect to any claim or counterclaim
of the Borrower based upon the assertion that the rate of
interest charged by the Lender on or under this Agreement and/or
the Project Note is usurious. The Lender and the Borrower hereby
waive any right to stay or dismiss any action or proceeding under
or in connection with any or all of the Project or this Agreement
brought before the foregoing courts on the basis of forum non-
conveniens.
9.9 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The
Borrower may not assign or otherwise transfer any of its rights
under this Agreement.
9.10 Counterparts. This Agreement may be executed in one or
more duplicate counterparts and when signed by all of the parties
listed below shall constitute a single binding agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their officers or partners
thereunto duly authorized as of the day and year first above
written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
By:
Name:
Title:
Schedule 5.8
[TO COME]
EXHIBIT A
FORM OF PROJECT NOTE
$ New York, New York
, 199
FOR VALUE RECEIVED, the undersigned,
, a Sino-foreign equity joint venture with limited liability
organized under the laws of the People's Republic of China, (the
"Borrower"), hereby unconditionally promises to pay to the order
of Pan-Western Energy Corporation LLC (the "Lender") at the
office of [ ] in lawful money of the United
States of America and in immediately available funds, the
principal amount of DOLLARS ($ ),
or, if less, the unpaid principal amount of the Loans made by the
Lender pursuant to the Shareholder Loan Agreement, as hereinafter
defined. The principal amount shall be paid in the amounts and
on the dates specified in the Shareholder Loan Agreement. The
Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in the
Shareholder Loan Agreement.
The holder of this Note is authorized to endorse on the
schedule 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 the Loans and the date and
amount of each payment or prepayment of principal 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 Loans.
This Note (a) is the Project Note referred to in the
Shareholder Loan Agreement dated as of September 24, 1996 (as
amended, supplemented or otherwise modified from time to time,
the "Shareholder Loan Agreement"), between the Borrower and the
Lender, (b) is subject to the provisions of the Shareholder Loan
Agreement and (c) is subject to optional and mandatory prepayment
in whole or in part as provided in the Shareholder Loan
Agreement. This Note is guaranteed as provided in the Financing
Agreements. Reference is hereby made to the Financing Agreements
for a description of the terms and conditions upon which each
guarantee was 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 Shareholder Loan Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the
Shareholder Loan Agreement and used herein shall have the
meanings given to them in the Shareholder Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE CAYMAN ISLANDS.
[BORROWER]
By:
Name:
Title:
SCHEDULE A
INTEREST PAYMENT SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE B
AMORTIZATION SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
EXHIBIT 10.99
AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT
between
PAN-WESTERN ENERGY CORPORATION LLC
as Lender
and
TANGSHAN PAN-SINO HEAT CO., LTD.
as Borrower
Dated as of April 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS 1
1.1 Definitions 1
ARTICLE 2 - THE CREDIT FACILITY 13
2.1 Credit Facility 13
2.2 Interest Payments 13
2.2.1 Interest Payment Dates 13
2.2.2 Interest 13
2.3 Project Note 13
2.4 Repayment of the Loans 14
2.4.1 Payments 14
2.4.2 Application of Payments 14
2.5 Prepayments 14
2.5.1 Voluntary Prepayments 14
2.5.2 Certain Mandatory Prepayments 14
2.5.3 Expropriation Event; Event of Loss 14
2.6 Fees 15
ARTICLE 3 - CONDITIONS PRECEDENT 16
3.1 Borrower's Certificate 16
(a) Representations and Warranties 16
(b) No Event of Default 16
(c) Governmental Authorizations and other
consents and approvals 16
(d) Facility Costs 16
3.2 On-Shore Accounts 16
3.3 Evidence of Facility Costs and Other Expenses 16
3.4 Progress Report; Project Engineer 16
3.5 Registration Certificate 17
3.6 Equity Contributions; Real Estate Transfers 17
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 17
4.1 Organization 17
4.2 Authorization; No Conflict 17
4.3 Legality, Validity and Enforceability 17
4.4 Compliance with Law, Governmental
Authorizations and Project Documents 17
4.5 Governmental Authorizations 18
4.6 Litigation 18
4.7 Existing Defaults 18
4.8 Taxes 18
4.9 Contingent Liabilities 18
4.10 Business, Debt, Contracts, Etc. 18
4.11 Representations and Warranties 18
4.12 Utilities 18
4.13 Project Documents 19
4.14 Fees and Enforcement 19
4.15 Immunity 19
4.16 Subsidiaries and Beneficial Interest 19
4.17 No Other Powers of Attorney, etc. 19
4.18 Liens 19
4.19 Regulation of Parties 19
4.20 Transactions with Affiliates 19
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER 20
5.1 Repayment of Indebtedness 20
5.2 Existence, Conduct of Business, Properties, Etc.20
5.3 Performance of Covenants and Obligations 20
5.4 Use of Funds 20
5.5 Accounts 20
5.6 Compliance with Legal Requirements 21
5.7 Operating Budgets 21
5.8 Books, Records, Access 22
5.9 Financial Statements 22
5.10 Insurance 22
5.11 Reports; Cooperation 23
5.12 Taxes and Other Governmental Charges 23
5.13 Notices 24
5.14 Expropriation Event 24
5.15 Increased Costs 24
5.16 Taxes 25
5.17 Registration of the Loans; Other Foreign
Exchange Matters 25
5.18 Loan Payment Reserve 25
ARTICLE 6 - NEGATIVE COVENANTS 25
6.1 Indebtedness 26
6.2 Limitations on Liens 26
6.3 Nature of Business 26
6.4 Sale or Lease of Facility Assets 26
6.5 Merger, Consolidation, Liquidation, Dissolution 26
6.7 Loans, Advances or Investments 27
6.8 Immunity 27
6.9 Distributions 27
6.10 Transactions With Affiliates 27
6.11 Partnerships; Subsidiaries 27
6.12 Assignment 27
6.13 Abandonment of Project 28
6.14 Improper Use 28
6.15 Regulation of Parties 28
6.16 Amendments 28
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES 28
7.1 Events of Default; Cure Rights 28
7.1.1 Failure to Make Payments 28
7.1.2 Misstatements; Omissions 28
7.1.3 Affirmative Covenants 28
7.1.4 Negative Covenants 29
7.1.5 Breach of Material Project Documents 29
7.1.6 Bankruptcy; Insolvency 29
7.1.7 Judgments 30
7.1.8 Other Indebtedness 30
7.1.9 Termination or Invalidity of Certain
Project Documents; Abandonment of
Project 30
7.1.10 Commercial Operation Date 30
7.1.11 Government Authorizations 31
7.1.12 Destruction of Project. 31
7.1.13 Change of Law. 31
7.1.14 Remedies. 31
ARTICLE 8 - SCOPE OF LIABILITY 31
ARTICLE 9 - MISCELLANEOUS 32
9.1 Addresses 32
9.2 Delay and Waiver 32
9.3 Entire Agreement 32
9.4 Governing Law 32
9.5 Severability 33
9.6 Headings 33
9.7 No Partnership, Etc. 33
9.8 Consent to Jurisdiction 33
9.9 Successors and Assigns 33
9.10 Counterparts 33
TABLE OF SCHEDULES AND EXHIBITS iv
TABLE OF SCHEDULES AND EXHIBITS
Exhibit A Form of Project Note
Schedule 5.8 Insurance
Schedule A Interest Payment Schedule
Schedule B Amortization Schedule
THIS AMENDED AND RESTATED SHAREHOLDER LOAN AGREEMENT (this
"Agreement") dated as of April 1, 1997, by and between Pan-
Western Energy Corporation LLC (the "Lender"), a company with
limited liability organized under the laws of the Cayman Islands,
and Tangshan Pan-Sino Heat Co., Ltd. (the "Borrower"), a Sino-
foreign equity joint venture with limited liability organized
under the laws of the People's Republic of China (the "PRC" or
"China").
W I T N E S S E T H :
WHEREAS, the Borrower has developed a business opportunity
concerning ownership and operation of a steam and hot water
distribution system, land conscribed to industrial use, an ash
slurry pipeline and ash disposal land, certain social buildings,
the provision of certain services and the making of certain
investments (collectively referred to as the "Facility") to be
undertaken in conjunction with the development and operation of
certain other facilities including two 50 MW coal-fired thermal
power generation facilities, water wells and pipeline systems,
heat, steam and hot water system facilities (collectively, with
the Facility referred to herein as the "Project"); and
WHEREAS, the Lender, as the owner of approximately 88% of
the aggregate ownership interest in the Borrower, can be expected
to derive certain benefits as a result of this Agreement and
desires to lend certain funds to the Borrower on commercial terms
negotiated at arms length by and between the Borrower and the
Lender pursuant to, and upon the term and conditions contained
in, this Agreement and for the benefit of the Borrower;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. The following terms, as used herein, have
the following meanings:
"Affiliate" of a specified Person means any other
Person or Persons that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under
common control with the Person specified, or who holds or
beneficially owns 10% or more of the equity interest in the
Person specified or 10% or more of any class of voting securities
of the Person specified.
"Asset Sale" means sale, transfer or other disposition
(including any sale and leaseback of assets and any sale of
accounts receivable in connection with a receivable financing
transaction) by the Borrower or any of its Subsidiaries of any
property of the Borrower or any such Subsidiary, other than as
permitted pursuant to subsection 2.5.2.
"Authorized Representative" means as to any Person, its
president, chief executive officer or any senior vice president
or any other person specifically identified as such in a
certificate of such Person delivered to the Lender.
"Banking Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Bankruptcy Law" means any insolvency, reorganization,
moratorium or similar law for the general relief of debtors in
any relevant jurisdiction.
"Basic Settlement Account" shall have the meaning
ascribed to it in subsection 5.5.
"Borrower" means Tangshan Pan-Sino.
"Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
"Capitalized Lease" means as to any Person, any lease
of any property of which the discounted present value of the
rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such
Person, and "Capitalized Lease Obligation" means the rental
obligations, as aforesaid, under any such lease.
"Cash Equivalents " means, at any time (i) any evidence
of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System, whose
rating is AA or higher from Standard & Poor's or Aa2 or higher
from Moody's, having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper
with a maturity of 180 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and
having the highest rating obtainable from Standard & Poor's or
Moody's; and (iv) repurchase obligations for a term of not more
than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above.
"Cash Flow Available for Debt Service" means, for any
period, (i) the sum of all revenues (including interest and fee
income and any principal payments received by the Borrower on the
Transmission Loan for such period, but excluding any insurance
proceeds, other than business interruption insurance proceeds,
and other similar non-recurring receipts) of the Borrower for
such period minus (ii) the aggregate amount of O&M Costs for such
period as determined on a cash basis and otherwise in accordance
with GAAP).
"Change of Law" means after the date of this Agreement,
the adoption of any Legal Requirement, any change in any Legal
Requirement or the application or requirements thereof, any
change in the interpretation or administration of any Legal
Requirement by any Governmental Instrumentality, or compliance by
the Lender or the Borrower with any request or directive (whether
or not having the force of law) of any Governmental
Instrumentality.
"CHEXIM" means the Export-Import Bank of China, a
company organized under the laws of PRC.
"CHEXIM Guarantee" means the guarantee to be given by
CHEXIM as required pursuant to the EPC Contract in respect of the
EPC Contractor's obligations under the EPC Contract, as the same
may from time to time be amended, supplemented or otherwise
modified.
"Coal Supply Agreements" means all agreements entered
into by the Joint Venture Companies for the supply of coal to the
Project.
"Coal Transportation Agreements" means all agreements
entered into by the Joint Venture Companies for the
transportation of coal to the Project.
"Commercial Operation Date" means that date by which
both of the following have occurred: (i) the Project Engineer
has certified that the Project has achieved commercial operations
and (ii) the Commercial Operation Date, as such term is used in
the General Interconnection Agreement, has occurred.
"Commercially Feasible Basis" means that, following an
Event of Loss or an Expropriation Event, (i) the sum of the
proceeds of business interruption insurance, any funds available
to be applied to the rebuilding, repair or restoration pursuant
to subsection 2.5.3(e), any amounts that the shareholders of all
the Joint Venture Companies are irrevocably committed to
contribute and the anticipated revenues of the Project during the
estimated period of rebuilding, repair or restoration will be
sufficient to pay all Debt Service and O&M Costs of the Project
during the estimated period of rebuilding, repair or restoration
and (ii) the Project upon being rebuilt, repaired or restored can
reasonably be expected to produce revenues adequate to pay all
Debt Service and O&M Costs of all Joint Venture Companies
pursuant to each such Joint Venture Company's respective
Shareholder Loan Agreement over the remaining terms of the Loans
outstanding of each Joint Venture Company, taking into account
any change in projected operating results due to the impairment
of any portion of the Project, all without materially affecting
the Borrower's Debt Service Coverage Ratio.
"Covered Taxes" means taxes, levies, imposts,
deductions, charges, withholdings and liabilities imposed on or
measured by the net income or capital of a Person by any
jurisdiction or any political subdivision or taxing authority
thereof or therein solely as a result of a permanent
establishment of such Person in such jurisdiction or political
subdivision.
"Debt Service" means, for any period, an amount equal
to the aggregate of, without duplication all payments of
principal and interest (including any adjustment for withholding
taxes or similar taxes) due and payable on Indebtedness during
such period.
"Debt Service Coverage Ratio" means, for any period,
and, if the transaction giving rise to the need to calculate Debt
Service Coverage Ratio is an incurrence of Indebtedness,
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been incurred or made on
the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, means the
ratio of (A) Cash Available for Debt Service to (B) Net Debt
Service for such period.
"Debt Service Reserve Requirement" means US$1,000,000
less the amount of any Performance Bonus Payment paid by the
Borrower.
"Development Expenses" shall mean all reasonable out-of
pocket expenses related to the Facility that have been incurred
by the Borrower, Panda International or their Affiliates in the
development of the Facility prior to the date of this Agreement.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Loans, as the case may be.
"Dollar Equivalent" means, with respect to any monetary
amount in Renminbi, at any time for the determination thereof,
the amount of Dollars obtained by converting the amount of
Renminbi involved in such computation into Dollars at the spot
rate at which Renminbi are offered for sale against delivery of
Dollars by leading banks in Tangshan City on the date of
determination thereof as determined by the Lender in its
reasonable judgement. If for any reason the Dollar Equivalent
cannot be calculated as provided in the immediately preceding
sentence, the Lender shall calculate the Dollar Equivalent on
such basis as it deems fair and equitable.
"Dollar Permitted Investments" means investments which
are denominated and payable in U.S. Dollars (a) with respect to
funds in the On-Shore Accounts, deposits denominated in U.S.
Dollars maintained at, or certificates of deposit insured, or
obligations insured or guaranteed by, the Bank of China, The
China Construction Bank, the Communication Bank, the China
Farmers Bank or China International Trust and Investment
Corporation, or any branch of a commercial bank organized 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 Standard & Poor's and Moody's
equal to the highest rating assigned thereby to long-term
unsecured debt securities; and (b) means any of the following
securities: (i) direct obligations of the Department of the
Treasury of the United States of America; (ii) obligations of any
of the following federal agencies which obligations represent
full faith and credit of the United States of America, including:
Export-Import Bank, Farmers Home Administration, General Services
Administration, U.S. Maritime Administration, Small Business
Administration, Government National Mortgage Associate (GNMA),
U.S. Department of Housing & Urban Development (PHA's) and
Federal Housing Administration; (iii) bonds, notes or other
evidences of indebtedness rated "AAA" by Standard & Poor's and
"Aaa" by Moody's issued by the Federal Home Loan Bank, the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation; (iv) commercial paper rated in any one of
the two highest rating categories by Moody's or Standard &
Poor's; (v) investment agreements with banks (foreign &
domestic), broker/dealers, and other financial institutions rated
at the time of bid in any one of the three highest rating
categories by Moody's and Standard & Poor's; (vi) repurchase
agreements with banks (foreign & domestic), broker/dealers, and
other financial institutions rated at the time of bid in any one
of the three highest rating categories by each of Standard &
Poor's and Moody's, provided: (1) collateral is limited to (i),
(ii) and (iii) above, (2) the margin levels for collateral must
be maintained at a minimum of 102% including principal and
interest, (3) the Lender shall have a first perfected security
interest in the collateral, (4) the collateral will be delivered
to a third party custodian, designated by the Lender and all fees
and expenses related to collateral custody will be the
responsibility of the Lender, (5) the collateral must have been
or will be acquired at the market price and marked to market
weekly and collateral level shortfalls cured within 24 hours, (6)
unlimited right of substitution of collateral is allowed provided
that substitution collateral must be permitted collateral
substituted at a current market price and substitution fees of
the custodian shall be paid by the Lender; (vii) forward purchase
agreements delivering securities outlined in (i) and (iv) above
with banks (foreign and domestic), broker/dealers, and other
financial institutions maintaining a long-term rating on the day
of bid no lower than investment grade by each of Standard &
Poor's and Moody's (such rating may be at either the parent or
subsidiary level).
"Dollars," "U.S. Dollars" and "US$" mean lawful
currency of the United States of America.
"Energy Purchase Agreement" means Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, between
NCPGC and Tangshan Panda and Tangshan Pan-Western, as the same
may from time to time be amended, supplemented or otherwise
modified.
"EPC Contract" means the Engineering, Procurement and
Construction Contract, dated as of April 24, 1996 between the EPC
Contractor and Tangshan Panda and Tangshan Pan-Western, as the
same may from time to time be amended, supplemented or otherwise
modified.
"EPC Contractor" means Harbin Power Engineering Company
Limited, a company organized under the laws of the PRC and a
wholly owned subsidiary of Harbin Power.
"EPC Contract Liquidated Damages" means liquidated
damages as defined in the EPC Contract.
"EPC Contractor Parent Guarantee" means the guarantee
to be given by Harbin Power in favor of Tangshan Panda and
Tangshan Pan-Western in respect of the EPC Contractor's
obligations under the EPC Contract, as the same may from time to
time be amended, supplemented or otherwise modified.
"Event of Default" shall have the meaning given to such
term in Section 7.1.
"Event of Loss" means an event which causes all or a
portion of the Facility to be damaged, destroyed or rendered
unfit for normal use for any reason whatsoever, other than an
Expropriation Event.
"Expropriation Event" means any condemnation,
nationalization, seizing, or expropriation by any Government
Instrumentality of all or a substantial portion of the Project or
the property or assets of the Borrower or of its share capital,
or any Government Instrumentality shall have assumed custody or
control of such property or other assets or business operations
of the Borrower or of its share capital, or shall have taken any
action for the dissolution or disestablishment of the Borrower or
any action that would prevent the Borrower or its officers from
carrying on its business or operations or a substantial part
thereof.
"Expropriation Proceeds" means any proceeds received by
the Borrower as a result of the occurrence of an Expropriation
Event.
"Facility" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Facility Budget" means the construction budget and
schedule provided by the Lender (containing customary assumptions
and qualifications) approved as reasonable by the Project
Engineer prior to the making of the first Loan pursuant to this
Agreement, and as it thereafter may be amended with the approval
of the Lender.
"Facility Costs" means all costs incurred, or to be
incurred, in connection with the development, design,
engineering, procurement, construction and commissioning of the
Facility, which costs shall include, but not be limited to: (a)
all costs incurred under the EPC Contract, (b) Development
Expenses, (c) O&M Costs incurred in connection with the start up
of the Facility or otherwise prior to the Commercial Operation
Date, (d) actual interest costs (including, prior to Commercial
Operation, interest due and payable on the Loans) and amounts
required pursuant to the Debt Service Reserve Requirement,
closing and administration costs related to the Facility until
the Commercial Operation Date, (e) the costs of acquiring
Governmental Authorizations for the Facility prior to the
Commercial Operation Date and (f) without duplication, working
capital costs.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressures or compulsion to complete the transaction. Fair Market
Value shall be determined by the board of directors of the
Borrower acting in good faith and shall be evidenced by a board
resolution delivered to the Lender except that any determination
of Fair Market Value made with respect to any parcel of real
property shall be made by an independent appraiser.
"Financing Agreements" means, collectively, this
Agreement, the Guarantees, the Project Notes, the other
Shareholder Loan Agreements, each individually a "Financing
Agreement".
"Foreign Debt Account" shall have the meaning ascribed
to it in Section 5.5.
"Foreign Debt Repayment Account" shall have the meaning
ascribed to it in Section 5.5.
"FPA" means the United States Federal Power Act, as
amended, excluding Sections I-18, 21-30, 202(c), 210, 211, 212,
305(c) and any necessary enforcement provision of Part III of the
Act with regard to the foregoing sections.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date hereof.
"Governmental Authorizations" means all authorizations,
consents, decrees, permits, waivers, privilege approvals from and
filings with all Governmental Instrumentalities necessary for the
realization of the Project in accordance with the Project
Documents.
"Governmental Instrumentality" of any country shall
mean such country and its government and any ministry,
department, political subdivision, instrumentality, agency,
corporation or commission under the direct or indirect control of
such country.
"Guarantees" means collectively, the undertakings by
Tangshan Panda, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Pan-
Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Lender pursuant to any Indebtedness
obligation then or thereafter due and owing by any such party to
Lender; the undertakings by Tangshan Pan-Western, each executed
as of the 22nd day of September, 1996, to unconditionally and
irrevocably guarantee to the Lender the prompt payment and
performance by each of Tangshan Panda, Tangshan Cayman, and
Tangshan Pan-Sino of their individual obligations to Lender
pursuant to any Indebtedness obligation then or thereafter due
and owing by any such party to Lender; the undertakings by
Tangshan Cayman, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Lender
the prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Pan-Sino of their individual
obligations to Lender pursuant to any Indebtedness obligation
then or thereafter due and owing by any such party to Lender; and
the undertakings by Tangshan Pan-Sino, each executed as of the
22nd day of September, 1996 to unconditionally and irrevocably
guarantee to the Lender the prompt payment and performance by
each of Tangshan Panda, Tangshan Pan-Western and Tangshan Cayman
of their individual obligations to Lender pursuant to any
Indebtedness obligation then or thereafter due and owing by any
such party to Lender.
"Harbin Power" means Harbin Power Equipment Group
Company, a PRC Company.
"Heat Supply Contracts" means the contracts to supply
steam and hot water to various PRC industrial and commercial
users that have been assigned by Luannan Heat and Power Plant to
Tangshan Pan-Sino, or any similar contracts in addition to or in
replacement thereof.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a capitalized lease obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Independent Accountants" means an internationally
recognized accounting firm.
"Independent Insurance Consultant" means Sedgwick, PLC,
a corporation incorporated in accordance with the laws of the
United Kingdom, or its successors.
"Inter-Company Steam Sales Agreement" means the Water,
Heat, Steam and Hot Water Supply and Usage Agreement, dated as of
October 3, 1996 between Tangshan Cayman and Tangshan Panda.
"Interconnection Agreement" means the General
Interconnection Agreement dated September 22, 1995, between NCPGC
and Tangshan Panda and Tangshan Pan-Western, as the same may from
time to time be amended, supplemented or otherwise modified.
"Interconnection Dispatch Agreement" means the
agreement to be negotiated among Tangshan Power Supply Bureau of
NCPGC, Tangshan Panda and Tangshan pan-Western shortly prior to
the Commercial Operation Date of the Project concerning specific
details as to the dispatch of the Luannan Facility.
"Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Joint Venture Companies" means, collectively Tangshan
Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-
Sino.
"Legal Requirements" means all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements
and regulations of any Governmental Instrumentality having
jurisdiction over the matter in question.
"Lender" means Pan-Western Energy Corporation LLC, a
Cayman Islands corporation.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of this Agreement, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Loans" means the loans made under this Agreement.
"Luanhua Co." means Tangshan Luanhua (Group) Co., a
company organized under the laws of the PRC.
"Luannan Government" means the government of Luannan
County, Tangshan City, Hebei Province, PRC.
"Luannan Heat Company" means Luannan County Heat
Company, Ltd. a company organized under the laws of the PRC.
"Luannan Heat & Power" means Luannan County Heat &
Power Plant, a company organized under the laws of the PRC.
"Major Maintenance Reserve Account" shall have the
meaning ascribed to it in subsection 5.5.
"Major Maintenance Reserve Requirement" means, with
respect to any month, an amount established periodically by the
Project Engineer, based on anticipated major maintenance
requirements for the next five years, to constitute the Major
Maintenance Reserve Requirement for the Facility for such month.
"Material Adverse Effect" means (i) a material adverse
change in the financial condition of the Joint Venture Companies
taken as a whole or (ii) any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the construction or operation of the Project or (b) the Joint
Venture Companies' ability (taken as a whole) to perform any of
their obligations under the Project Documents.
"Material Project Documents" means, collectively, the
Power Purchase Agreement, the EPC Contract, the Transmission
Facilities Construction Agreement, the O&M Agreement, the Coal
Supply Agreements, the Coal Transportation Agreement and all
other instruments, agreements or other documents arising from or
related to the Project, but shall not include any Financing
Agreement.
"Maturity Date" means April 1, 2004.
"Moody's" means Moody's Investors Services.
"NCPGC" means North China Power Group Company, a
company organized under the laws of the PRC.
"Net Cash Proceeds" in connection with (a) any Asset
Sale, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of
deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise,
but only as and when received) of such Asset Sale, net of
attorneys' fees, accountants' fees, investment banking fees,
survey costs, title insurance premiums, amounts required to be
applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the subject
of such Asset Sale and other customary fees and expenses actually
incurred in connection therewith, net of taxes paid or reasonably
estimated to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax
sharing arrangements) and net of purchase price adjustments
reason.
"Net Debt Service" means the sum of (i) (a) Interest
Expense less (b) non-cash Interest Expense plus (ii) all payments
of scheduled and overdue principal of, and premium, if any, on
Indebtedness plus (iii) without duplication, all rental payments
in respect of Capitalized Lease Obligations paid, accrued, or
scheduled to be paid or accrued.
"Non-Excluded Taxes" shall have the meaning ascribed to
it subsection 5.16.
"Nonrecourse Persons" shall have the meaning ascribed
to it in Article 8.
"O&M" means operation and maintenance services.
"O&M Agreement" means the Amended and Restated
Operation and Maintenance Agreement, dated as of March 6, 1997,
among the Joint Ventures and Duke/Fluor Daniel Asia, Inc., a
California corporation.
"O&M Costs" means all amounts disbursed by or on behalf
of the Borrower for operation, maintenance, repair, or
improvement of the Facility, including, without limitation,
premiums on insurance policies, property, income and all other
taxes to the extent paid, and payments under the relevant
operating and maintenance agreements, leases (including Operating
Lease Obligations), royalty and other land use agreements, and
any other payments required under the Project Documents, each as
determined on a cash basis and otherwise in accordance with GAAP.
"Obligations" means all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by the
Borrower to the Lender or existing or hereafter arising hereunder
or pursuant to the terms of any of the Financing Agreements or
any of the other Project Documents, including all interest, fees,
charges and expenses chargeable to the Borrower; and in the event
of any proceeding for the collection or enforcement of the
Obligations, after an event of default shall have occurred and be
continuing, any exercise by the Lender, together with reasonable
attorney's fees and court costs.
"Officer's Certificate" means a certificate of an
authorized representative of the Borrower, signed by the
Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Borrower.
"On-Shore Accounts" has the meaning set forth in
subsection 5.5.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Other Taxes" means any other excise or property taxes,
charges or similar levies that arise under the laws of any
jurisdiction on any payment made under this Agreement or under
any other Financing Agreement or from the execution or delivery
or otherwise with respect to this Agreement or any other
Financing Agreement.
"Panda International" means Panda Energy International
Inc., a Texas corporation.
"Performance Bonus Payment" means an amount payable to
the EPC Contractor pursuant to subsections 13.3 and 13.4 of the
EPC Contract.
"Permitted Indebtedness" has the meaning set forth in
subsection 6.1.
"Permitted Liens" means (a) Liens for any tax,
assessment or other governmental charge not yet due, due but
payable without penalty or being contested in good faith and by
appropriate proceedings, (b) retentions of title in favor of
materialmen, workers or repairmen, or other like Liens arising in
the ordinary course of business or in connection with the
construction of the Project, (c) Liens arising out of judgments
or awards so long as an appeal or proceeding for review is being
prosecuted in good faith, (d) mineral rights the use and
enjoyment of which do not materially interfere with the use and
enjoyment of the Facility, (e) Liens, deposits or pledges to
secure statutory obligations or performance of 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 the Borrower's business and affecting property with a
value not exceeding the equivalent of US$250,000 at any one time,
(f) involuntary Liens (including a Lien of an attachment,
judgment or execution) securing a charge or obligation, on any of
the Borrower's property, real or personal, whether now or
hereafter owned with a value not exceeding the equivalent of
US$250,000 at any one time, (g) rights of any party pursuant to
any Project Document, (h) Liens securing workers' compensation,
unemployment insurance or other social security or pension
obligations, (i) Liens securing Indebtedness permitted pursuant
to Section 6.1 (to the extent not required by Section 6.1 to be
unsecured), (j) Liens securing the purchase price of property
having an aggregate value not exceeding the equivalent of
US$1,000,000 at any one time an (k) Liens securing other
obligations not constituting Indebtedness none of which could
reasonably be expected to have a Material Adverse Effect.
"Person" means any natural person, corporation,
partnership, firm, association, Governmental Instrumentality or
any other entity whether acting in an individual, fiduciary or
other capacity.
"PRC" or "China" means the People's Republic of China.
"PRC Shareholder" means Luannan Heat Company.
"Pricing Document" means the document or documents
(issued by the Tangshan Municipal Price Bureau) determining the
price for electric energy delivered, retail price and principals
for adjustment.
"Project" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Project Documents" means this Agreement and all
instruments, contracts, agreements or other documents arising
from or related to the Project, including all Financing
Agreements, each individually a "Project Document".
"Project Engineer" means Parsons Brinckerhoff Energy
Services Inc., or its successor.
"Project Note" has the meaning given that term in
Section 2.3.
"Power Purchase Agreement" means, collectively, the
Energy Purchase Agreement, the Interconnection Agreement and the
Supplemental Agreement (and, after execution thereof, the
Interconnection Dispatch Agreement).
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended, and all rules and regulations
adopted thereunder.
"Registered Capital Account" shall have the meaning
ascribed to it in Section 5.5.
"Registration Certificate" has the meaning given to
such term in Section 3.5.
"Renminbi" or "RMB" means lawful currency of the PRC.
"Registered Capital Contribution and Agency Agreement"
means the agreement among each of the Joint Venture Companies and
their respective shareholders, dated as of March 26, 1997 (as
amended, modified and supplemented from time to time) pursuant to
which the Joint Venture Companies are entitled to receive equity
contributions.
"RMB Permitted Investments" means deposit accounts
denominated and payable in RMB to be maintained at, certificates
of deposit issued, or obligations issued or guaranteed by, one of
the following policy or commercial banks in the PRC: (i) the
Bank of China, (ii) the China Construction Bank, (iii) the
Communication Bank, (iv) the China Farmers Bank, (v) the China
International Trust and Investment Corporation (vi) any foreign
bank or branch of any foreign bank authorized and licensed to
conduct business in the PRC, including without limitation, the
establishment and maintenance of RMB and foreign currency
accounts and exchange functions having a combined capital and
surplus of at least $500,000,000 and having at least an
investment grade rating assigned to its long-term unsecured debt
securities by each of Standard & Poor's and Moody's.
"RMB Revenue Account" shall have the meaning ascribed
to it in Section 5.5.
"RMB Checking Account" shall have the meaning ascribed
to it in Section 5.5.
"SAFE" means the State Administration of Foreign
Exchange of the PRC.
"Shareholder Loan Agreements" means, collectively, this
Agreement and the Shareholder Loan Agreements, each dated as of
September 24, 1996, between the Lender and (i) Tangshan Pan-
Western, (ii) Tangshan Cayman and (iii) Tangshan Pan-Sino, as the
same may from time to time be amended, supplemented or otherwise
modified.
"Shareholders" means the Lender and the PRC
Shareholder.
"Site" means the approximately 200 square meters of
land on which the Facility is to be located.
"Standard & Poor's" means Standard & Poor's Ratings
Service.
"Steam Sales Agreements" means the Heat Supply
Contracts and the Inter-Company Steam Sales Agreement.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Supplemental Agreement" means Supplemental Agreement
for General Interconnection Agreement and Electric Energy
Purchase and Sales Agreement, dated February 10, 1996, among
NCPGC, Tangshan Panda and Tangshan Pan-Western, as the same may
from time to time be amended, supplemented or otherwise modified.
"Tangshan Cayman" means Tangshan Cayman Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.
Ltd., a Sino-foreign equity joint venture with limited liability
organized under the laws of the PRC.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture with
limited liability organized under the laws of the PRC.
"Transmission Facilities" means three new substations,
the upgrades of both an existing substation and an existing
switching station and approximately 43 km of 110 KV transmission
lines to interconnect the Project to the Jing-Jin-Tang Grid.
"Transmission Facilities Construction Agreement" means
the construction agreement, dated February 10, 1996, among
Tangshan Panda, Tangshan Pan-Western and NCPGC.
"Transmission Loan" means the loan made by Tangshan Pan-
Sino to NCPGC through a PRC financial intermediary for the
construction cost of the Transmission Facilities, in the amount
of RMB 78,218,000, to be adjusted for inflation from December 31,
1994 to the date of issuance of the notice to proceed with
preliminary design and for accrued interest during the
construction period.
ARTICLE 2 - THE CREDIT FACILITY
2.1 Credit Facility. Subject to the terms and conditions
set forth in Article 3, the Lender shall from time to time make
shareholder loans to the Borrower in an aggregate amount of
US$17,829,000 (the "Loans").
2.2 Interest Payments.
2.2.1 Interest Payment Dates. The Borrower shall
pay accrued interest on the unpaid principal amount of the Loans
semiannually in arrears on each June 30 and December 31,
commencing June 30, 1997, until the first such date to occur not
less than six months after the Commercial Operation Date, and on
the last day of each month thereafter.
2.2.2 Interest. The Borrower shall pay accrued
interest on the unpaid principal amount of the Loans from the
date of this Agreement (i) through the first June 30 or December
31 to occur not less than six months after the Commercial
Operation Date, at a rate per annum of 13.75%, subject to a
maximum applicable to all interest accrued in respect of such
period and all amounts due in respect thereof pursuant to Section
5.16 hereof of $4,010,273, and (b) thereafter until the maturity
thereof at a rate per annum equal to 12.75%.
2.3 Project Note. The obligation of the Borrower to repay
the Loans and to pay interest thereon at the rate provided herein
shall be evidenced by a promissory note substantially in the form
of Exhibit A, payable to the order of the Lender and in the
principal amount of SEVENTEEN MILLION EIGHT HUNDRED TWENTY-NINE
THOUSAND DOLLARS (US$17,829,000) (the "Project Note"). The
Borrower authorizes the Lender to record on the schedule annexed
to the Project Note, each payment or prepayment of principal of
the Loans and agrees that all such notations shall be prima facie
evidence of the information recorded. The Borrower further
authorizes the Lender to attach to and make a part of the Project
Note continuations of the schedule attached thereto as necessary.
No failure to make any such notations, nor any errors in making
any such notations, shall affect the validity of the Borrower's
obligations to repay the full unpaid principal amount of the
Loans or the duties of the Borrower hereunder or thereunder.
2.4 Repayment of the Loans.
2.4.1 Payments. The Borrower shall make all
payments hereunder to an account which the Lender shall specify
by notice to Borrower prior to the date of the first payment of
interest hereunder. The aggregate unpaid principal amount of the
Loans shall be payable in installments on or before 10:00 A.M.,
Beijing time, on each Repayment Date in accordance with the
amortization schedule set forth on Schedule B, and any remaining
unpaid principal, interest, fees and costs shall be due and
payable on the Maturity Date.
2.4.2 Application of Payments. If the amount of
any payment made by the Borrower hereunder is less than the total
amount due and payable by the Borrower to the Lender as of the
date on which such payment is actually made by the Borrower, such
payment shall be applied: (i) first, against charges, fees,
costs and expenses due hereunder; (ii) second, if the principal
of the Loans shall not have become or be then due and payable,
against interest on the overdue principal of the Loans (including
amounts payable in respect thereof pursuant to Section 5.16) in
order of maturity of such installments of interest and against
interest on such overdue interest; (iii) third, if the principal
of the Loans shall have become or shall be then due and payable,
against the whole amount of all such principal, interest on
overdue principal of the Loans (including amounts payable in
respect thereof pursuant to Section 5.16) and interest on such
overdue interest; and (iv) fourth, against all other amounts then
due and payable to the Lender hereunder.
2.5 Prepayments.
2.5.1 Voluntary Prepayments. Except as required by
this Agreement, the Borrower may not prepay Loans without the
permission of the Lender.
2.5.2 Certain Mandatory Prepayments. In addition
to other amounts which shall be applied to the prepayment of
Loans as provided in this Agreement, the Borrower shall apply to
prepayment of the principal of the Loan, within ten Business Days
following receipt thereof, (i) all Net Cash Proceeds from the
sale or other disposition of all or any part of the assets or
other rights of the Borrower, other than in the ordinary course
of business and permitted pursuant to the terms of the Financing
Agreements, having a value, individually in excess of US$100,000
and in the aggregate in any year, in excess of US$250,000, and
(ii) any Liquidated Damages which shall have been made by the EPC
Contractor to the Borrower under the EPC Contract.
2.5.3 Expropriation Event; Event of Loss. (a) If
an Expropriation Event shall occur with respect to the Facility
or any part thereof, the Borrower shall (i) diligently pursue all
of its rights to compensation against the appropriate
Governmental Instrumentality in respect of such event, (ii) not
compromise, settle or consent to the settlement of any claim in
respect thereof without the consent of the Lender, and (iii)
promptly deposit all proceeds received in respect of any
Expropriation Event (after deducting all reasonable expenses) (A)
in the RMB Revenue Account if denominated in RMB or (B) in the
Foreign Debt Repayment Account if denominated in Dollars, in each
case segregated from all other moneys pending the determination
pursuant to paragraph (c) below.
(b) If an Event of Loss shall occur with respect
to the Facility or any part thereof, the Borrower shall (i)
diligently pursue all its rights to compensation with respect to
such Event of Loss, (ii) not compromise, settle or consent to the
settlement of any claim exceeding $250,000 in respect thereof
without the consent of the Lender, and (iii) promptly deposit all
proceeds received in respect of any Event of Loss (after
deducting all reasonable expenses) which are denominated in RMB
in the RMB Revenue Account, and transfer to the Lender any such
proceeds which are denominated in U.S. Dollars, to be held by the
Lender and segregated from all other moneys pending the
determination pursuant to paragraph (c) below.
(c) If such Expropriation Event or an Event of
Loss shall occur, as soon as reasonably practicable, but no later
than fifteen (15) days after the date of receipt by the Borrower
of any proceeds in respect thereof, the Borrower shall make a
reasonable good faith determination as to whether (i) the
Facility can be rebuilt, repaired or restored to permit operation
of the entire Project on a Commercially Feasible Basis, and (ii)
the proceeds thereof, together with any other amounts that the
Borrower has available to commit to such rebuilding, repair or
restoration, are sufficient to pay for such rebuilding, repair or
restoration of the Facility. The determination of the Borrower
shall be evidenced by a certificate filed with the Lender which,
in the event the Borrower determines that the Facility can be
rebuilt, repaired or restored to permit operation of the entire
Project or a portion thereof on a commercially feasible basis,
shall also certify that such proceeds, together with any other
amounts that the Borrower is willing to commit to such
rebuilding, repair or restoration, are sufficient to pay the
costs thereof, and shall also set forth a reasonable good faith
estimate by the Borrower of such costs. If the amount of such
costs exceeds $500,000, such certificate shall be accompanied by
a Project Engineer's certificate, dated within five (5) days of
the date of the Borrower's certificate, stating that, based upon
reasonable investigation and a review of the determination made
by the Borrower, the Project Engineer believes that the
determination and the estimate of the total cost, if any, set
forth in the Borrower's certificate to be reasonable.
(d) In the event that the Borrower determines not
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss shall be transferred
within ten Business Days after the date of such determination to
the Lender and applied to prepayment of the Loans.
(e) In the event that the determination is made
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss on deposit in the
RMB Revenue Account shall be transferred to the RMB Checking
Account and, together with the amounts (if any) previously
transferred to the Lender in connection with such Expropriation
Event or Event of Loss and such other amounts as the Borrower has
available for such rebuilding, repair or restoration (which also
shall be transferred to the Lender prior to any disbursement for
rebuilding, repair or restorations), shall be used to pay the
costs of such rebuilding, repair or restoration, and any excess
shall, upon completion of such rebuilding, repair or restoration,
be applied to the prepayment of the Loans within 15 days of the
completion of such rebuilding, repair or restoration as certified
by the Project Engineer.
2.6 Fees. Not more than thirty (30) days following the
making of the first Loan hereunder, the Borrower shall reimburse
the Lender for its reasonable costs other than interest costs
incurred in funding the Loans.
ARTICLE 3 - CONDITIONS PRECEDENT
The obligation of the Lender to make each Loan shall be
subject to the fulfillment or waiver of each of the following
conditions precedent:
3.1 Borrower's Certificate. The Lender shall have received
from the Borrower a certificate dated the date of the request for
such Loan, certifying the following:
(a) Representations and Warranties. The
representations and warranties made by the Borrower herein or in
any other Project Document to which it is a party, or which are
contained in any certificate, document, financial or other
statement furnished by the Borrower hereunder or thereunder or in
connection herewith or therewith, are true and correct in all
material respects on and as of such date as if made on and as of
such date, except as affected by the consummation of the
transaction contemplated thereby or to extent that such
representations and warranties relate solely to an earlier date;
(b) No Event of Default. No Event of Default is in
existence on such date, or shall occur after giving effect to the
Loan to be made on such date;
(c) Governmental Authorizations and other consents and
approvals. All Governmental Authorizations which are required to
be obtained on or prior to the date of the making of such Loan
have been duly obtained or maintained and are in full force and
effect, except for Governmental Authorizations which have not
been obtained at such time but which the Borrower has no reason
to believe will not be obtained in the normal course of business
prior to the date such Governmental Authorizations are required;
and
(d) Facility Costs. The costs for the payment of
which the borrowing is being made are Facility Costs and payment
of such costs is in accordance with the Facility Budget.
3.2 On-Shore Accounts. The On-Shore Accounts shall have
been established pursuant to Section 5.5.
3.3 Evidence of Facility Costs and Other Expenses. At
least 10 Business Days prior to each such Loan, the Lender shall
have received a copy of the EPC Contractor's application for
payment under the EPC Contract or evidence of or application for
other expenses in connection with the construction and
development of the Facility (together with all supplemental
reports required to be furnished thereunder), and copies of all
invoices and other statements of charges with respect to the
payments to be made to the EPC Contractor pursuant to the EPC
Contract or to the recipient of such other expenses on the date,
or expected to be due and payable within 30 days of, such Loan
and with respect to all other items of Facility Costs to be paid
on such date, or expected to be due and payable within 30 days of
such Loan.
3.4 Progress Report; Project Engineer. The Lender shall
have received a report signed by the Authorized Representative of
the Borrower on the date of each such Loan to the effect that
construction of the Facility is proceeding satisfactorily in
accordance with the EPC Contract and the Facility Budget and the
Facility Budget sets forth accurately the estimated costs to
complete the Facility, and such confirmation thereof from the
Project Engineer as the Lender reasonably deems necessary.
3.5 Registration Certificate. The Lender shall have
received a registration certificate of the Tangshan Municipal
Bureau for Exchange Control (a "Registration Certificate")
evidencing that a Registration Certificate has been obtained for
the full aggregate amount of the Loans to be made hereunder
pursuant to subsection 2.1.
3.6 Equity Contributions; Real Estate Transfers. It shall
be a condition to any Loan hereunder which increases the
aggregate of all loans made under all of the Shareholder Loan
Agreements to more than $15,000,000 that (A) the Borrower shall
have received the full amount of the equity contributions to
which the Borrower is then entitled pursuant to the Registered
Capital Contribution and Agency Agreement (B) all transfers of
land use rights relating to the Site shall have been completed.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
The Borrower makes all of the following representations
and warranties to and in favor of the Lender the date on which
any Loan is made hereunder, except as such representations relate
to an earlier date.
4.1 Organization. The Borrower (a) is a Sino-foreign
equity joint venture with limited liability duly organized and
validly existing under the laws of the PRC, (b) is duly
authorized to do business in the PRC, and (c) has all requisite
power and authority to (i) own or hold under land use right or
lease and operate the property it purports to own or hold under
land use right or lease, (ii) carry on its business as now being
conducted and as now proposed to be conducted in respect of the
Project, (iii) incur Indebtedness, and (iv) execute, deliver and
perform its obligations under each of the Project Documents to
which it is a party. The sole shareholders of the Borrower are
the Lender and Luannan Heat Company.
4.2 Authorization; No Conflict. The Borrower has duly
authorized, executed and delivered the Project Documents to which
it is a party, and neither its execution and delivery thereof nor
its consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (a) does or will contravene its
formation documents or any other Legal Requirement then
applicable to or binding on it, (b) does or will contravene or
result in any breach or constitute any default under, or result
in or require the creation of any Lien upon any of its property
or under any agreement or instrument to which it is a party or by
which it or any of its properties may be bound, or (c) does or
will require the consent or approval of any Person.
4.3 Legality, Validity and Enforceability. Each of the
Project Documents to which the Borrower is a party is a legal,
valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, subject to bankruptcy
laws or principles of equity, to the extent applicable to the
Borrower. None of the Project Documents to which the Borrower is
a party has been amended or modified except in accordance with
this Agreement.
4.4 Compliance with Law, Governmental Authorizations and
Project Documents. The Borrower is in compliance in all material
respects with all Legal Requirements and Governmental
Authorizations and Project Documents to which it is a party, and
no notices of violation of any Governmental Authorization or
Project Document relating to the Project have been issued,
entered or received by the Borrower.
4.5 Governmental Authorizations. There are no Governmental
Authorizations under Legal Requirements existing as of the date
of this Agreement that are required or will become required,
other than the Governmental Authorizations (a) which have been
obtained or granted and are in full force and effect, or (b)
which the Borrower has no reason to believe will not be obtained
before they become necessary for the ownership, construction,
financing or operation of the Facility. To the best of its
knowledge, the Borrower is not in violation of any condition in
any Governmental Authorization.
4.6 Litigation. There are no pending or, to the Borrower's
knowledge, threatened actions, suits, proceedings or
investigations of any kind, including actions or proceedings of
or before any Governmental Instrumentality, to which the Borrower
or any Shareholder or, to the knowledge of the Borrower, is a
party or is subject, or by which any of them or any of their
properties are bound.
4.7 Existing Defaults. There is no Event of Default by the
Borrower under any of the Material Project Documents. To the
best of the Borrower's knowledge, there is no event of default
under any Material Project Document by any party to such Material
Project Document.
4.8 Taxes. The Borrower has filed, or caused to be filed,
all tax and informational returns that are required to have been
filed by it in any jurisdiction, and has paid 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 (other than those taxes that it is contesting in good
faith and by appropriate proceedings, with adequate, segregated
reserves established for such taxes) and, to the extent such
taxes are not due, has established reserves that are adequate for
the payment thereof and are required by the GAAP.
4.9 Contingent Liabilities. The Borrower has no material
contingent liabilities or obligations except those authorized
under and permitted by the Project Documents and the Financing
Agreements.
4.10 Business, Debt, Contracts, Etc. The Borrower has not
conducted any business other than the business contemplated by
the Project Documents to which it is a party, has no outstanding
Indebtedness other than Indebtedness incurred under the Financing
Agreements or permitted under Section 6.1 and has no other
liabilities other than those incurred under the Project Documents
or permitted under this Agreement, and is not a party to or bound
by any contract other than as contemplated by the Project
Documents to which Borrower is a party and those contracts
permitted under this Agreement. The Borrower has established
offices in the PRC only.
4.11 Representations and Warranties. All representations
and warranties of the Borrower contained in the Project Documents
are true and correct in all material respects and the Borrower
hereby confirms each such representation and warranty of the
Borrower with the same effect as if set forth in full herein.
4.12 Utilities. All utility services and easements
necessary for the construction and the operation of the Facility
for its intended purposes, are or will be available at the Site
as and when required on commercially reasonable terms.
4.13 Project Documents.
4.13.1 The Lender has received a true, complete and
correct copy of each of the Project Documents in effect or
required to be in effect as of the date this representation is
made or deemed made (including all exhibits, schedules, side
letters and disclosure letters to therein or delivered pursuant
thereto, if any).
4.13.2 All conditions precedent to the obligations
of the respective parties under the Material Project Documents
have been satisfied or waived in accordance with the provisions
thereof and hereof, except for such conditions precedent which by
their terms cannot be met until a later stage in the construction
or operation of the Facility, and the Borrower has no reason to
believe that any such condition precedent cannot be satisfied on
or prior to the appropriate stage in the construction or
operation of the Facility.
4.14 Fees and Enforcement. Other than amounts that have
been paid in full, no fees or taxes, including without limitation
stamp, transaction, registration or similar taxes, are required
to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Project Documents.
4.15 Immunity. In any proceedings in the PRC or elsewhere
in connection with any of the Project Documents to which the
Borrower is a party, the Borrower will not be entitled to claim
for itself or any of its assets immunity from suit, execution,
attachment or other legal process.
4.16 Subsidiaries and Beneficial Interest. The Borrower has
no subsidiaries and does not beneficially own the whole or any
part of the issued share capital or other ownership interest of
any other company or corporation or other Person.
4.17 No Other Powers of Attorney, etc. The Borrower has not
executed and delivered any powers of attorney, fiduciary transfer
agreements or similar documents, instruments or agreements,
except for powers authorizing signatures of various Project
Documents.
4.18 Liens. The Borrower has not secured or agreed to
secure any Indebtedness by any Lien upon any of its present or
future revenues or assets or capital stock except Permitted
Liens. The Borrower does not have any outstanding Lien or
obligation to create Liens on or with respect to any of its
properties or revenues except Permitted Liens.
4.19 Regulation of Parties. The Borrower is not nor will it
be, solely as a result of its participation in the transactions
contemplated hereby or by any other Project Document, or as a
result of the ownership, use or operation of the Facility,
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company." The Borrower is not subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA.
4.20 Transactions with Affiliates. Except as otherwise
permitted under Section 6.10, the Borrower is not a party to any
contracts or agreements with, or any other commitments to,
whether or not in the ordinary course of business, any Affiliate
of the Borrower.
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that until all
Obligations owed to the Lender are paid in full it will:
5.1 Repayment of Indebtedness. Repay in accordance with
its terms, all Indebtedness, including without limitation, all
sums due under this Agreement and the other Financing Agreements
but, in the case of any such Indebtedness with a repayment that
is limited by any term of any Financing Agreement, repay subject
to such limitation.
5.2 Existence, Conduct of Business, Properties, Etc.
Except as otherwise expressly permitted under this Agreement,
(i) maintain and preserve its existence as a Sino-foreign joint
venture with limited liability and all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business, and (ii) engage only in the business contemplated by
the Financing Agreements and the Project Documents.
5.3 Performance of Covenants and Obligations. The Borrower
shall perform and observe in all material respects, its covenants
and obligations under all Material Project Documents.
5.4 Use of Funds. The Borrower shall use the proceeds of
the Loans only for deposit in the On-Shore Accounts pending
disbursement for the payment of Facility Costs as provided
herein.
5.5 Accounts. (a) On or prior to the date of the making
of the first Loan, the Borrower shall establish the following
accounts with banks or financial institutions in the PRC in
accordance with applicable PRC laws and regulations: (i) the
Registered Capital Account denominated in U.S. Dollars (the
"Registered Capital Account"), (ii) the Foreign Debt Account
denominated in U.S. Dollars (the "Foreign Debt Account"), (iii)
the Foreign Debt Repayment Account denominated in U.S. Dollars
(the "Foreign Debt Repayment Account"), (iv) the Basic Settlement
Account denominated in U.S. Dollars (the "Basic Settlement
Account"), (v) the RMB Revenue Account denominated in Renminbi
(the "RMB Revenue Account"), (vi) the RMB Checking Account
denominated in Renminbi (the "RMB Checking Account"), and (vii)
the Major Maintenance Reserve Account denominated in Renminbi
(the "Major Maintenance Reserve Account") (collectively, the "On-
Shore Accounts").
(b) The proceeds of all Loans shall be deposited in
the Foreign Debt Account. Funds in the Foreign Debt Account
shall not be used for any purpose other than disbursement of
Facility Costs denominated in U.S. Dollars or funding of reserves
for the payment of principal and interest on the Loans, or, after
conversion into RMB, transfer to the RMB Checking Account for
disbursement of Facility Costs denominated in RMB.
(c) All funds received by the Borrower constituting
capital contributions from any shareholder shall be deposited in
the Registered Capital Account. Until after Commercial Operation
Date, funds in the Registered Capital Account shall not be used
for any purpose other than disbursement of Facility Costs
denominated in the U.S. Dollars or, after conversion into RMB,
transfer to the RMB Checking Account for disbursement of Facility
Costs denominated in RMB.
(d) All revenues received by the Borrower from any
source whatsoever shall be deposited (after conversion into
Renminbi, if necessary) into the RMB Revenue Account. The
Borrower shall instruct NCPGC, the EPC Contractor and other
participants in the Project to deposit revenues, penalties or
other payments owing to the Borrower in RMB directly into the RMB
Revenue Account. The RMB Revenue Account shall not be used for
any purpose other than (and in accordance with the following
priority): (i) the transfer of funds to the RMB Checking Account
for the payment of O&M Costs and (ii) after conversion into U.S.
Dollars, the transfer of funds to the Foreign Debt Repayment
Account for the payment of the principal of and interest on the
Loans or reserves in respect thereof.
(e) Amounts remaining in the RMB Revenue Account
subsequent to disbursement in accordance with clause (d) hereof
shall be deposited into the Major Maintenance Reserve Account in
an amount equal to the Major Maintenance Reserve Requirement.
Disbursement shall be made from the Major Maintenance Reserve
Account only to pay for major maintenance costs of the Facility
upon a certification of the Project Engineer that after
withdrawal of such funds for such purpose, the amounts remaining
in the Major Maintenance Reserve Account (including anticipated
future funding thereof) shall be adequate to meet the anticipated
needs of the Facility for major maintenance for the next five
years.
(f) Amounts remaining in the RMB Revenue Account
subsequent to disbursements in accordance with clauses (d) and
(e) hereof shall be retained in the RMB Revenue Account pending
disbursement to the Borrower's Shareholders in the form of
dividends. The amount designated for the payment of dividends to
the Lender in its capacity as a shareholder of the Borrower shall
be transferred from the RMB Revenue Account (after conversion to
U.S. Dollars) to the Basic Settlement Account and then to the
Lender. The corresponding amount designated for the payment of
dividends to the PRC Shareholder shall be distributed from the
RMB Revenue Account directly to the PRC Shareholder in RMB.
(g) The funds in the Foreign Debt Repayment Account
shall not be used for any purpose other than the payment of
amounts due hereunder pursuant to Subsection 2.4 to an off-shore
account maintained by the Lender.
(h) The funds in the Basic Settlement Account shall
not be used for any purpose other than remittance after the
Commercial Operation Date to an off-shore equity distribution
account approved by the Lender.
5.6 Compliance with Legal Requirements. Promptly and
diligently (i) own, construct, maintain and operate the Facility
in compliance with all applicable Legal Requirements, and
(ii) procure, maintain and comply, or cause to be procured,
maintained and complied with all Governmental Authorizations
required for the ownership, construction, financing, maintenance
or operation of the Facility or any part thereof at or before the
time such Governmental Authorization becomes necessary for the
ownership, construction, financing, maintenance or operation of
the Facility, as the case may be, as contemplated by the Project
Documents and except that the Borrower may, at its expense,
contest by appropriate proceedings conducted in good faith the
validity or application of any such Legal Requirements, provided
that, in either case, (x) neither the Lender nor the Borrower
would be subject to any criminal liability for failure to comply
therewith and (y) all proceedings to enforce such Legal
Requirements against the Lender, the Borrower or the Project or
any part thereof, shall have been duly and effectively stayed
during the entire pendency of such contest.
5.7 Operating Budgets. On or before the anticipated
Commercial Operation Date, deliver to the Lender an annual
operating budget, certified by the Project Engineer as being a
reasonable estimate of projected costs, expenses and revenues of
the Borrower, for the period commencing on the anticipated
Commercial Operation Date, and continuing until the end of the
first full calendar year thereafter, in substantially the same
form as the initial annual operating budget. In advance of each
calendar year thereafter, the Borrower shall adopt and deliver to
the Lender an annual operating budget, certified by the Project
Engineer as being a reasonable estimate of projected costs,
expenses and revenues of the Borrower, for the ensuing calendar
year.
5.8 Books, Records, Access. Maintain adequate books,
accounts and records with respect to the Borrower and the
Facility in compliance with the regulations of any Governmental
Instrumentality having jurisdiction thereof, and, with respect to
financial statements, in accordance with the GAAP and, subject to
reasonable safety requirements, permit employees or designees of
the Lender and the Project Engineer, at any reasonable time and
upon reasonable prior notice to inspect the Facility, and to
examine or audit all of Borrower's books, accounts and records
pertaining or related to the Facility and make copies and
memoranda thereof.
5.9 Financial Statements.
5.9.1 Provide the Lender with:
(a) As soon as available and in any event
within one hundred thirty five (135) days after the close of each
fiscal year commencing with the fiscal year ended after the date
of this Agreement, audited financial statements of the Borrower
including a statement of equity, a balance sheet as of the close
of such year, an income and expense statement, reconciliation of
capital accounts and a statement of sources and uses of funds,
all prepared in accordance with the GAAP and certified by
Independent Accountants.
(b) As soon as available and in any event
within ninety (90) days after the end of each of the quarterly
accounting periods of its fiscal year commencing with the quarter
ending after the date of this Agreement, unaudited financial
statements of the Borrower, including without limitation, an
unaudited balance sheet of the Borrower as of the last day of
such quarterly period, the related statements of income and cash
flows for such quarterly period and (in the case of second, third
and fourth quarterly periods) for the portion of the fiscal year
ending with the last day of such quarterly period, setting forth
in each case in comparative form corresponding unaudited figures
from the preceding fiscal year.
5.9.2Each time the financial statements of the Borrower
are delivered under this subsection 5.9, a certificate signed by
an Authorized Representative of the Borrower shall be delivered
along with such financial statements, certifying that such
officer has made or caused to be made a review of the
transactions and financial condition of the Borrower during the
relevant fiscal period and that such review has not, to the best
of such Authorized Representative's knowledge, disclosed the
existence of any event or condition which constitutes an Event of
Default under this Agreement, or if any such event or condition
existed or exists, the nature thereof and the corrective actions
that Borrower has taken or proposes to take with respect thereto,
and also certifying that the Borrower is in compliance in all
material respects with its obligations under this Agreement and
each other Financing Agreement to which it is a party or, if such
is not the case, stating the nature of such non-compliance and
the corrective actions which the Borrower has taken or proposes
to take with respect thereto.
5.10 Insurance. The Borrower shall maintain, or cause to be
maintained, adequate insurance with respect to its Facility
satisfactory to the Lender in its reasonable judgment, based upon
the advice of the Independent Insurance Consultant. All
insurance other than third party liability insurance shall name
the Lender as an insured and the sole loss payee thereunder.
Policies for third party liability insurance shall name the
Lender as an additional insured.
5.11 Reports; Cooperation.
5.11.1 Deliver to the Lender on each anniversary of
the date of this Agreement a certificate from the Borrower's
insurers or insurance agents (i) evidencing that the insurance
policies in place satisfy the requirements specified in Section
5.10 (including, without limitation, listing all insurance being
carried by or on behalf of the Borrower pursuant to the Project
Documents and certifying that all insurance required to be
maintained by the Borrower pursuant to the Project Documents is
in full force and effect and all premiums therefore have been
paid in full), and (ii) setting forth a summary of all losses in
excess of US$250,000 (or the equivalent thereof) incurred with
respect to the Project in the preceding year.
5.11.2 Deliver to the Lender within thirty (30) days
following the end of each calendar quarter a quarterly status
report describing in reasonable detail the progress of the
construction of the Facility since the immediately preceding
report hereunder, including without limitation, the cost incurred
to the end of such quarter, an estimate of the time and cost
required for completion of the Facility and such other
information which the Lender may reasonably request.
5.11.3 Prior to the Commercial Operation Date,
deliver to the Lender, within thirty (30) days following the end
of each calendar quarter an update of the Facility Budget,
including but not limited to an explanation or other
reconciliation of differences between such report and previous
reports.
5.11.4 From and after the Commercial Operation Date,
deliver to the Lender within ninety (90) days following each
calendar year, a summary operating report, which shall include,
unless otherwise agreed to by the Lender, a numerical and
narrative assessment of (i) the Project's compliance with each
category in the annual operating budget, (ii) statistical data
relating to the Facility, including heat rate, net electrical and
scheduled and unscheduled outages, (iii) fuel deliveries and use,
(iv) major maintenance activity, (v) casualty losses of value in
excess of US$250,000 or the equivalent thereof in other
currencies (whether or not covered by insurance), (vi) disputes
with any other Major Project Participant, materialman, supplier
or other Person and any related claims against the Borrower,
(vii) pricing information disclosed or made available under the
agreements pertaining to the supply of coal for the Facility and
(viii) compliance with the Governmental Authorizations.
5.11.5 No later than five Business Days following
the receipt thereof, deliver to the Lender all progress reports
provided by the EPC Contractor to the Borrower pursuant to the
EPC Contract and all progress reports prepared under the Power
Purchase Agreement.
5.11.6 Deliver to the Lender any such other
information or data with respect to its business or operations
(including supporting information as to compliance with this
Agreement) as the Lender may reasonably request from time to
time.
5.12 Taxes and Other Governmental Charges. Before the same
become delinquent, pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or
levies lawfully imposed upon the Borrower or its income or
profits or upon the Facility, all utility and other governmental
charges incurred in the ownership, operation, maintenance, use,
occupancy and upkeep of the Facility. However, the Borrower may
contest in good faith any such taxes, assessments and other
charges and, in such event, may permit the taxes, assessments or
other charges so contested to remain unpaid during any period,
including appeals, when the Borrower is in good faith contesting
the same, so long as (a) adequate cash reserves have been
established in an amount sufficient to pay any such taxes,
assessments or other charges, accrued interest thereon and
potential penalties or other costs relating thereto, or other
adequate provision for the payment thereof shall have been made,
(b) enforcement of the contested tax, assessment or other charge
is effectively stayed for the entire duration of such contest,
and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is promptly paid
after resolution of such contest.
5.13 Notices. Promptly, upon acquiring notice or giving
notice, or obtaining knowledge thereof, as the case may be,
provide to the Lender written notice of:
5.13.1 Any Event of Default which it has knowledge,
specifically stating that an Event of Default has occurred and
describing such an Event of Default and any action being taken or
proposed to be taken with respect to such Event of Default;
5.13.2 Any termination or event of default or notice
thereof under the Power Purchase Agreement; and
5.13.3 Any litigation pending against the Borrower or
any other party of which the Borrower has actual knowledge, which
is or could reasonably be expected to have a Material Adverse
Effect.
5.14 Expropriation Event. If an Expropriation Event shall
occur with respect to the Project, (a) promptly upon discovery or
receipt of notice of any occurrence thereof, provide written
notice thereof to the Lender, (b) diligently pursue all its
rights to compensation against the relevant Governmental
Instrumentality in respect of such Expropriation Event, and
(c) hold any Expropriation Proceeds received in respect of such
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
Lender separated from other funds of the Borrower, (d) promptly
deposit all Expropriation Proceeds in (i) the RMB Revenue Account
if denominated in RMB or (ii) in the Foreign Debt Repayment
Account if denominated in Dollars. The Borrower consents to the
participation of the Lender in any proceedings regarding an
Expropriation Event, and the Borrower shall from time to time
deliver to the Lender all documents and instruments requested by
it to permit such participation. Nothing in this Section 5.14
shall be deemed to impair any rights which the Lender may have
with respect to any such Expropriation Event.
5.15 Increased Costs. If, after the date of this Agreement,
any Change of Law:
(a) shall subject the Lender to any tax, duty or other
charge with respect to the
Loans, or shall change the basis of taxation of payments by the
Borrower to the Lender on the Loans (except for Covered Taxes,
Other Taxes or changes in the rate of taxation on the overall net
income of the Lender); or
(b) shall impose on the Lender any other condition
directly related to the Loans;
and the effect of any of the foregoing is to increase the cost to
the Lender of making, issuing, creating, renewing, participating
in or maintaining the Loans or to reduce any amount receivable by
the Lender hereunder, then the Borrower shall from time to time,
upon demand by the Lender, pay to the Lender additional amounts
sufficient to reimburse the Lender for such increased costs or to
compensate the Lender for such reduced amounts.
5.16 Taxes. All payments made by the Borrower under this
Agreement and the Project Note shall be made free and clear of,
and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Instrumentality, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Lender as a result of a present or former connection between
the Lender and the jurisdiction of the Governmental
Instrumentality imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such
connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Agreement or the Project Note). If any
such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Lender hereunder or
under the Project Note, the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender
(after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement. Whenever any Non-Excluded Taxes are
payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender for its own account a certified
copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the
Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
The agreements in this subsection 5.16 shall survive the
termination of this Agreement and the payment of the Loans, the
Project Note and all other amounts payable hereunder.
5.17 Registration of the Loans; Other Foreign Exchange
Matters.
5.17.1 Prior to any due date for any repayment of
the principal of and/or the payment of interest on the Loans, the
Borrower shall (i) use the Registration Certificate and the
notice regarding such repayment and/or payment to obtain from the
registration department a verification and approval certificate
with respect to such repayment and/or payment and (ii) use such
verification and approval certificate and the Registration
Certificate to handle matters regarding the remittance from its
foreign debt account of the principal of and interest on the
Loans outside of China at the relevant bank.
5.17.2 At the beginning of each year, the Borrower
shall submit to the local foreign exchange administration a
report stating the amount of foreign currency purchased in the
preceding year for the purpose of repaying the principal of
and/or paying the interest on the Loans and a plan regarding the
purchase of foreign currency for the current year.
5.18 Loan Payment Reserve. At the time of the final drawing
under this Agreement, the Borrower shall deposit an amount equal
to the Debt Service Reserve Requirement in the Debt Service
Reserve Fund.
ARTICLE 6 - NEGATIVE COVENANTS
The Borrower covenants and agrees for the benefit of the
Lender that until all Obligations owed to the Lender are paid in
full, without the consent of the Lender, the Borrower shall not:
6.1 Indebtedness. Incur, create, assume or be liable for
any Indebtedness, except:
(a) the Loans and additional loans from the Lender;
(b) debt incurred to finance working capital
requirements; provided that after giving effect to such
additional debt, (i) the minimum (or lowest) projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.5 to 1 and (ii) the average projected Debt
Service Coverage Ratio for any calendar year will not be
less than 1.7 to 1; provided further, however, that the
amount of such debt shall not at any time exceed
US$1,000,000;
(c) purchase money or Capital Lease Obligations
incurred to finance assets of the Borrower that are readily
replaceable personal property with a principal amount or
capitalized portion not exceeding US$1,000,000 in the
aggregate outstanding at any time;
(d) trade accounts payable (other than for borrowed
money) due within 90 days arising, and accrued expenses
incurred, in the ordinary course of business of
constructing, operating or maintaining the Facility on
customary terms;
(e) interest or currency exchange rate protection
agreements;
(f) Indebtedness under the Guarantees to which the
Borrower is a party and any other guarantees of the
obligations of any other Joint Venture Company permitted
under the Financing Agreements.
(g) any debt to any other Joint Venture Company, ((a)
through (g), collectively "Permitted Indebtedness").
6.2 Limitations on Liens. Create, assume or permit to
exist any Lien upon any of the Borrower's assets or properties
including without limitation the Facility, whether now owned or
hereafter acquired, other than Permitted Liens.
6.3 Nature of Business. Amend or modify its Articles of
Association without the prior written consent of the Lender, or
engage in any business other than the ownership and operation of
the Facility.
6.4 Sale or Lease of Facility Assets. Sell, lease, assign,
transfer or otherwise dispose of the Facility or other assets
unless (a) such sale, lease, assignment or other disposition
relates only to property that is worn out or no longer useful or
usable in connection with the operation of the Facility or 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 such lease or transfer is required to
comply with law or to obtain or maintain any Governmental
Authorization, (b) with respect to any other sales, leases,
assignments or other dispositions, the aggregate amount thereof
does not exceed US$250,000 in any given year or US$1,000,000 in
the aggregate since the date of this Agreement, or (c) such sale,
lease, assignment or other disposition is made in the ordinary
course of business in accordance with the Project Documents.
6.5 Merger, Consolidation, Liquidation, Dissolution. Merge
or consolidate with or into any other Person, other than any of
the other Joint Venture Companies or other Sino-foreign joint
ventures with no material liabilities and no material activities
unrelated to the Project, or liquidate, wind up, dissolve, or
otherwise transfer or dispose of all or any substantial part of
its property, assets or business, or change its legal form, or
purchase or otherwise acquire any assets of any Person unless
such purchase or acquisition of assets is reasonably necessary
for the operation of the Facility or in the ordinary course of
business.
6.6 Contingent Liabilities. Become liable as a surety,
guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person; provided, however, that the
Borrower may guarantee or otherwise become liable in respect of
any Indebtedness incurred by any other Person (on its behalf) in
connection with or relating to incurrence of Indebtedness
permitted under Section 6.1; and provided, further, however, that
this Section 6.6 shall not be deemed to prohibit (i) the
acquisition of goods, supplies or merchandise in the normal
course of business on normal trade credit, or (ii) the
endorsement of negotiable instruments received in the normal
course of business; or (iii) the obligations hereunder and under
the Guarantees or any other guarantee of any obligation of any
other Joint Venture Company if such guarantee is required for the
development and construction of the Project and is not contrary
to any Legal Requirements.
6.7 Loans, Advances or Investments. Make or permit to
remain outstanding any loans, extensions of credit or advances to
or investments in (whether by acquisition of any stocks, notes or
other securities or obligations) any Person except RMB Permitted
Investments with respect to the On-Shore Accounts denominated in
Renminbi or Dollar Permitted Investments with respect to the On-
Shore Accounts denominated in the U.S. Dollars or as expressly
provided in the Project Documents.
6.8 Immunity. In any proceedings in China or elsewhere in
connection with any of the Financing Agreements to which the
Borrower is a party, claim for itself or any of its assets
immunity from suit, execution, attachment or other legal process.
6.9 Distributions. Agree to any restriction on its ability
to pay dividends (excluding restrictions imposed by law).
6.10 Transactions With Affiliates. Except for the Project
Documents, directly or indirectly: (i) enter into any
transaction with any Person (including any Affiliate) other than
in the ordinary course of business, or (ii) enter into any
transaction with any Person, including any Affiliate, on terms
less favorable to those available from independent third parties
or (ii) establish any sole and exclusive purchasing or sales
agency, or enter into any transaction whereby the Borrower might
receive less than the full commercial price (subject to normal
trade discounts) for electricity or pay more than the commercial
price for products of others.
6.11 Partnerships; Subsidiaries. Except as contemplated by
the Project Documents, become a general or limited partner in any
partnership or a joint venturer in any joint venture, acquire any
ownership interest in any other Person or enter into any profit-
sharing or royalty agreement or other similar arrangement whereby
the Borrower's income or profits are, or might be, shared with
any other Person, or enter into any management contract or
similar arrangement whereby its business or operations are
managed by any other Person (other than any agreement under which
the Borrower may provide operation and management consulting or
other similar services), or form any Subsidiary.
6.12 Assignment. Assign or otherwise transfer its rights
under any of the Project Documents to which it is a party, or
Governmental Authorizations for its benefit, to any Person
without the prior written consent of the Lender.
6.13 Abandonment of Project. Voluntarily cease or abandon
the development, construction or operation of the Project.
6.14 Improper Use. Use, maintain, operate or occupy, or
allow the use, maintenance, operation or occupancy of, any
portion of the Site or Facility for any purpose which: (a) may
be dangerous, unless safeguarded as required by any Legal
Requirement or Government Instrumentality; (b) may constitute a
public or private nuisance resulting in a Material Adverse
Effect; or (c) may make void, voidable or cancelable, or
materially increase the premium of, any insurance then in force
with respect to the Site or Project or any part thereof.
6.15 Regulation of Parties. Take any action which could
reasonably be expected to result in (a) the Borrower being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "public utility holding
company", (b) the Borrower being subject to regulation as a
"subsidiary company" or an "affiliate" of a "holding company"
under (and as defined in) PUHCA or (c) any Person who by reason
of its or their ownership or operation of the Facility upon the
exercise of remedies hereunder or under the Guarantees, being
subject to regulation by any Governmental Instrumentality of the
United States as a "public utility," an "electric utility," an
"electric utility holding company" or a "holding company" or a
subsidiary or Affiliate of any of the foregoing under any Legal
Requirement of the United States (including, without limitation,
PUHCA and the FPA).
6.16 Amendments. Amend any of the Project Documents without
the prior written consent of the Lender.
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES
7.1 Events of Default; Cure Rights. The occurrence of any
of the following events shall constitute an event of default
("Event of Default") hereunder:
7.1.1 Failure to Make Payments. Payment shall not
have been made of any principal of or any interest on the Loans
or other amounts owed by the Borrower to the Lender within 15
Banking Days after such amounts are due.
7.1.2 Misstatements; Omissions. Any representation
or warranty confirmed or made in any Project Documents by the
Borrower or in any writing provided by the Borrower in connection
with the transactions contemplated by this Agreement shall be
found to have been incorrect in any material respect when made or
deemed to be made; provided, however, that no Event of Default
shall occur if within sixty (60) days after the date on which the
General Manager of the Borrower has actual notice that such
incorrect statement has occurred, the Borrower shall deliver in
good faith, to the Lender an Officer's Certificate stating in
reasonable detail that either (i) the Borrower has eliminated any
adverse effect relating to such incorrect statement or (ii) that
the Borrower has taken action that it reasonably believes will
eliminate the adverse effect relating to such incorrect statement
within a reasonable specified time.
7.1.3 Affirmative Covenants. The Borrower shall
fail to perform or observe any of its obligations under (a)
Sections 5.4 and 5.5 or (b) any other term, covenant or agreement
set forth in Article 5 hereof, where such default shall not have
been remedied within fifteen (15) days after notice of such
failure.
7.1.4 Negative Covenants. The Borrower shall fail
to perform or observe any of its obligations under any term,
covenant or agreement set forth in Article 6 hereof other than
Section 6.2, where such default shall not have been remedied
within fifteen (15) days after the Borrower has received notice
of such failure.
7.1.5 Breach of Material Project Documents. The
Borrower or any other party thereto shall breach or default under
any term, condition, provision, covenant, representation or
warranty contained in any of the Material Project Documents and
the Financing Agreements to which the Borrower is a party if such
breach or default shall continue unremedied for fifteen (15) days
after notice to the Borrower from the Lender; provided, however,
that in the case of any of the EPC Contract, the CHEXIM Guarantee
or the Transmission Facilities Construction Agreement, if the
breach or default cannot be remedied within such fifteen (15)
days despite the Borrower's and/or such other party's, as the
case may be, good faith and diligent efforts to do so, but is
susceptible to cure within a longer period, the Borrower or such
party shall continue diligently such efforts to cure such breach
or default until cured (but in no event longer than sixty (60)
days in the aggregate.
7.1.6 Bankruptcy; Insolvency.
(a) The Borrower or any other Joint Venture Company
shall institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or the Borrower shall file a petition, answer or consent or shall
otherwise institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or the Borrower or any
other Joint Venture Company shall apply for, or by consent or
acquiescence there shall be an appointment of, a receiver,
liquidator, sequestrator, trustee or other officer with similar
powers; or the Borrower or any other Joint Venture Company shall
make an assignment for the benefit of creditors; or the Borrower
or any other Joint Venture Company shall admit in writing its
inability to pay its debts generally as they become due; or if an
involuntary case shall be commenced seeking the liquidation or
reorganization of the Borrower or any other Joint Venture Company
under any Bankruptcy Law (or any successor statute or similar
statute under any relevant jurisdiction) or any similar
proceeding shall be commenced against the Borrower or any other
Joint Venture Company under any other Legal Requirements and (i)
the petition commencing the involuntary case is not timely
controverted, (ii) the petition commencing the involuntary case
is not dismissed within sixty (60) days of its filing, (iii) an
interim trustee is appointed to take possession of all or a
portion of the property, and/or to operate all or any part of the
business of the Borrower or any other Joint Venture Company and
such appointment is not vacated within sixty (60) days, or
(iv) an order for relief shall have been issued or entered
therein; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers of
the Borrower or any other Joint Venture Company of all or a part
of their property, shall have been entered; or any other similar
relief shall be granted against the Borrower or any other Joint
Venture Company under any Legal Requirements; and
(b) NCPGC, the EPC Contractor, or Harbin Power shall
institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or shall file a petition, answer or consent or shall otherwise
institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or shall apply for, or by
consent or acquiescence there shall be an appointment of, a
receiver, liquidator, sequestrator, trustee or other officer with
similar powers; or shall make an assignment for the benefit of
creditors; or shall admit in writing its inability to pay its
debts generally as they become due; or if an involuntary case
shall be commenced seeking the liquidation or reorganization of
NCPGC, the EPC Contractor, or Harbin Power under any Bankruptcy
Law (or any successor statute or similar statute under any
relevant jurisdiction) or any similar proceeding shall be
commenced against NCPGC, the EPC Contractor, or Harbin Power
under other Legal Requirements and (i) the petition commencing
the involuntary case is not timely controverted, (ii) the
petition commencing the involuntary case is not dismissed within
sixty (60) days of its filing, (iii) an interim trustee is
appointed to take possession of all or a portion of the property,
and/or to operate all or any part of the business of any of
NCPGC, the EPC Contractor, or Harbin Power and such appointment
is not vacated within sixty (60) days, or (iv) an order for
relief shall have been issued or entered therein; or a decree or
order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee or
other officer having similar powers of any of NCPGC, the EPC
Contractor, or Harbin Power of all or a part of any of their
respective property, shall have been entered; or any other
similar relief shall be granted against the NCPGC, the EPC
Contractor, or Harbin Power under any Legal Requirements.
7.1.7 Judgments. A final judgment or judgments
shall be entered (i) against the Borrower in the aggregate amount
of US$1,000,000 (or the equivalent thereof in other currencies)
(exclusive of judgment amounts fully covered by insurance where
the insured has admitted liability), other than a judgment, the
execution of which is effectively stayed within sixty (60) days
after its entry but only for no more than ninety (90) days after
the date on which such stay is terminated or expires; or (ii) in
the form of an injunction or similar form of relief requiring
suspension or abandonment of construction or operation of the
Facility on grounds of violation of a Legal Requirement and
failure of the Borrower to have such injunction or similar form
of relief stayed or discharged within ninety (90) days.
7.1.8 Other Indebtedness. The Borrower shall
default for a period beyond any applicable grace period in the
payment of any principal, interest or other amount due under any
agreement involving the borrowing of money or the advance of
credit and the outstanding amount or amounts payable under such
agreement equals or exceeds US$250,000 (or the equivalent thereof
in other currencies) in the aggregate.
7.1.9 Termination or Invalidity of Certain Project
Documents; Abandonment of Project.
(a) Any of the Project Documents or the Financing
Agreements shall have become invalid, illegal or unenforceable;
(b) The Borrower shall cease to have the right to use
the Site for the purpose of owning, constructing, maintaining and
operating the Facility in the manner contemplated by the Project
Documents (or to obtain sufficient water for its operations); or
(c) The Borrower shall abandon the Project or
otherwise cease to pursue the operations of the Project in
accordance with standard industry practice or shall (except as
permitted by Section 6.4) sell or otherwise dispose of its
interest in the Project.
7.1.10 Commercial Operation Date. The Commercial
Operation Date shall not have occurred by December 31, 1999.
7.1.11 Government Authorizations. Any Governmental
Authorization, approval or permit (whether central, provincial,
municipal, local or otherwise) necessary for (a) the
establishment of the Borrower (b) the ownership, construction,
maintenance, financing or operation of the Project, (c) the
setting or adjustment of the electricity price for the Project in
accordance with the method of calculation set forth in the
attachments to the Pricing Document or (d) the conversion or
transfer of any foreign currency shall not be obtained if and
when required, or shall be modified, revoked or cancelled, or a
notice of violations is issued under any Governmental
Authorization on grounds of, or illegality or the absence of any
required authorization, by the issuing agency or other
Governmental Instrumentality having jurisdiction or any
proceeding is commenced by any Governmental Instrumentality for
the purpose of modifying, revoking or cancelling any Governmental
Authorization.
7.1.12 Destruction of Project. The Facility is
destroyed, or suffers an actual or constructive total loss or
damage.
7.1.13 Change of Law. The occurrence of any adverse
Change of Law of the PRC.
7.1.14 Remedies. Upon the occurrence of any of the
Events of Default, the Lender may, by written notice to the
Borrower and the other Joint venture Companies, declare the Loans
to be immediately due and payable and pursue any and all remedies
available for the non-payment of debts.
ARTICLE 8 - SCOPE OF LIABILITY
The Lender shall have no claims with respect to the
transactions contemplated by the Project Documents against any
Person other than the Borrower including, but not limited to, the
Panda International and the Luannan Government or any of their
respective Affiliates (other than the Borrower) or direct or
indirect parents, or to the shareholders, officers, directors,
employees, or other controlling persons (including members of the
management committee) of the Panda International and the Luannan
Government, their respective Affiliates (other than the
Borrower), or their direct or indirect parents (collectively the
"Nonrecourse Persons"), subject to the exceptions set forth below
in this Article 8; provided that (a) the foregoing provision of
this Article 8 shall not constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms,
covenants, conditions, or provisions of this Agreement, any other
Financing Agreement and the same shall continue until fully paid,
discharged, observed, or performed; (b) the foregoing provision
of this Article 8 shall not limit or restrict the right of the
Lender, to name the Borrower or any other Person as a defendant
in any action or suit for a judicial foreclosure or for the
exercise of any other remedy under or with respect to this
Agreement or any other Financing Agreement, or for injunction or
specific performance, so long as no judgement in the nature of a
deficiency judgement shall be enforced against any Nonrecourse
Persons, except as set forth in this Article 8; (c) the foregoing
provision of this Article 8 shall not affect or diminish or
constitute a waiver, release or discharge of any specific written
obligation, covenant, or agreement in respect to the Project made
by any of the Nonrecourse Persons; and (d) nothing contained
herein shall limit the liability of any Person who is a party to
any Project Document or has issued any certificate or other
statement in connection therewith with respect to such liability
as may arise by reason of the terms and conditions of such
Project Document, certificate or statement, or otherwise, in each
case under this clause (d) relating solely to such liability of
such Person as may arise under such referenced agreement,
instrument or opinion. The limitations on recourse set forth in
this Article 8 shall survive the termination of this Agreement
and the full payment and performance of the Obligations hereunder
and under the other Project Documents.
ARTICLE 9 - MISCELLANEOUS
9.1 Addresses. Any communications between the parties
hereto or notice provided herein to be given may be given to the
following addresses.
If to the Lender: Pan-Western Energy Corporation, LLC
c/o Maples and Calder
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
If to the Borrower: Tangshan Pan-Sino Heat Co., Ltd.
Zhongdajie, Bencheng
Luannan County
Hebei Province, China
in either case,
with a copy to: Panda Energy Industrial Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
9.2 Delay and Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Lender upon the occurrence
of any Event of Default or any breach or default of the Borrower
under this Agreement shall impair any such right, power or remedy
of the Lender, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any
waiver of any single Event of Default, or other breach or default
be deemed a waiver of any other Event of Default, or other breach
or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part
of the Lender of any Event of Default, or other breach or default
under this Agreement, or any waiver on the part of the Lender of
any provision or condition of this Agreement, must be in writing
and shall be effective only to the extent in such writing
specifically set forth. All remedies, either under this
Agreement or by law or otherwise afforded to the Lender shall be
cumulative and not alternative.
9.3 Entire Agreement. This Agreement and any agreement,
document or instrument attached hereto or referred to herein
integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral negotiations and prior
writings in respect to the subject matter hereof. In the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail. This Agreement may only be amended or modified by an
instrument in writing signed by the Borrower, the Lender and any
other parties to be charged.
9.4 Governing Law. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the law of
the Cayman Islands.
9.5 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
9.6 Headings. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and
it is agreed that such paragraph headings are not a part of this
Agreement and shall not be used in the interpretation of any
provision of this Agreement.
9.7 No Partnership, Etc. The Lender and the Borrower
intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement or the
Project Note shall be deemed or construed to create a
partnership, tenancy-in-common, joint tenancy, joint venture or
co-ownership by or between the Lender, on the one hand, and the
Borrower or any other Person, on the other hand. The Lender
shall not be in any way responsible or liable for the debts,
losses, obligations or duties of the Borrower or any other Person
with respect to the Project or otherwise. All obligations to pay
real property or other taxes, assessments, insurance premiums,
and all other fees and charges arising from the ownership,
operation or occupancy of the Project and to perform all
obligations under the agreements and contracts relating to the
Project shall be the sole responsibility of the Borrower.
9.8 Consent to Jurisdiction. The Lender and the Borrower
agree that any legal action or proceeding by or against the
Borrower or with respect to or arising out of this Agreement the
Project Note may be brought in or removed to the courts of the
Cayman Islands. By execution and delivery of this Agreement, the
Lender and the Borrower accept, for themselves and in respect of
their property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The Lender and the Borrower irrevocably
consent 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 airmail,
postage prepaid, to the Lender or the Borrower, as the case may
be, at their respective addresses for notices as specified herein
and that such service shall be effective five (5) Banking Days
after such mailing. Nothing herein shall affect the right to
serve process in any other manner permitted by law or the right
of the Lender to bring legal action or proceedings in any other
competent jurisdiction. The Lender and the Borrower further
agree that the aforesaid courts of the Cayman Islands shall have
exclusive jurisdiction with respect to any claim or counterclaim
of the Borrower based upon the assertion that the rate of
interest charged by the Lender on or under this Agreement and/or
the Project Note is usurious. The Lender and the Borrower hereby
waive any right to stay or dismiss any action or proceeding under
or in connection with any or all of the Project or this Agreement
brought before the foregoing courts on the basis of forum
non-conveniens.
9.9 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The
Borrower may not assign or otherwise transfer any of its rights
under this Agreement.
9.10 Counterparts. This Agreement may be executed in one or
more duplicate counterparts and when signed by all of the parties
listed below shall constitute a single binding agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their officers or partners
thereunto duly authorized as of the day and year first above
written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
TANGSHAN PAN-SINO HEAT CO., LTD.
By:
Name:
Title:
Schedule 5.8
[TO COME]
EXHIBIT A
FORM OF PROJECT NOTE
$ New York, New York
, 199
FOR VALUE RECEIVED, the undersigned,
, a Sino-foreign equity joint venture with limited liability
organized under the laws of the People's Republic of China, (the
"Borrower"), hereby unconditionally promises to pay to the order
of Pan-Western Energy Corporation LLC (the "Lender") at the
office of [ ] in lawful money of the United
States of America and in immediately available funds, the
principal amount of DOLLARS ($ ),
or, if less, the unpaid principal amount of the Loans made by the
Lender pursuant to the Shareholder Loan Agreement, as hereinafter
defined. The principal amount shall be paid in the amounts and
on the dates specified in the Shareholder Loan Agreement. The
Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in the
Shareholder Loan Agreement.
The holder of this Note is authorized to endorse on the
schedule 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 the Loans and the date and
amount of each payment or prepayment of principal 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 Loans.
This Note (a) is the Project Note referred to in the
Shareholder Loan Agreement dated as of September 24, 1996 (as
amended, supplemented or otherwise modified from time to time,
the "Shareholder Loan Agreement"), between the Borrower and the
Lender, (b) is subject to the provisions of the Shareholder Loan
Agreement and (c) is subject to optional and mandatory prepayment
in whole or in part as provided in the Shareholder Loan
Agreement. This Note is guaranteed as provided in the Financing
Agreements. Reference is hereby made to the Financing Agreements
for a description of the terms and conditions upon which each
guarantee was 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 Shareholder Loan Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the
Shareholder Loan Agreement and used herein shall have the
meanings given to them in the Shareholder Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE CAYMAN ISLANDS.
[BORROWER]
By:
Name:
Title:
SCHEDULE A
INTEREST PAYMENT SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
SCHEDULE B
AMORTIZATION SCHEDULE
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
EXHIBIT 10.100
WATER, HEAT, STEAM AND HOT WATER SUPPLY
AND USAGE AGREEMENT
THIS AGREEMENT, (the "Agreement") is made as of this
3rd day of October, 1996, by and between Tangshan Cayman
Heat and Power Company, Ltd., a Sino-foreign equity joint
venture company (the "Supplier") and Tangshan Panda Heat and
Power Company, Ltd., a Sino-foreign equity joint venture
company (the "User").
R E C I T A L S:
1. Supplier intends to acquire, own and operate certain
water wells and pipeline systems, and to make available for
industrial use, water, heat, steam and hot-water (the
"Products") and their associated facilities.
2. User intends to construct, own and operate a 1x50 MW
heat and power, coal-fired generation facility to be located
in Luannan County, Hebei Province, People's Republic of
China (the "Project").
3. Supplier desires to sell its Products and User desires
to obtain such Products from the Supplier all upon the terms
and conditions contained herein below.
AGREEMENT:
NOW THEREFORE, based upon the mutual promises made and
benefits to be derived as a result of this Agreement,
Supplier and User hereby agree as follows:
1. Term. The term of this Agreement shall be for a
period of twenty (20) years from the date hereof.
2. Sale of Products. Supplier shall use its best efforts
to procure the Products and provide the Products to User and
User shall purchase all of its requirements for such
products from the Supplier in accordance with the terms of
this Agreement. In connection with Supplier's furnishing of
the Products, Supplier shall keep all records with respect
to volumes, pressures, and quantities of the Products made
available to the User for purchase and perform, directly or
indirectly all technical and administrative functions
related to its sale of the Products and User's purchase and
payment for all such Products.
3. User's Obligations. User shall be required, irrevocably
and unconditionally to purchase from Supplier all of its
requirements for the Products unless Supplier gives notice
that at any specific time such Products are not available
for sale to and purchase by User.
4. Supplier's Obligations. Supplier's obligations to User
shall be on a best efforts basis only. Supplier shall not
be limited or prohibited as a result of this Agreement from
making the Products available and from selling such Products
to any other party. Supplier's only obligation to User in
such event will be to give notice to User of the quantities,
volumes and rates of supply that will be available for
purchase by User. Notwithstanding the above, Supplier
intends to devote approximately fifty percent (50%) of its
resources to a sale of Products directly to the User.
5. Price. The price to be paid by the User for the
Products sold to it shall be a variable rate calculated
quarterly (or at such other intervals as Supplier may
require) as follows:
A Products Usage fee shall be paid as follows:
[***] THIS LANGUAGE FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
6. Payment. The Price due to be paid to Supplier as
calculated in Number 5 above, will be calculated by the
Supplier in Renminbi (or any successor official currency of
the People's Republic of China) on at least a quarterly
basis and an invoice for said amount shall be presented to
User. User shall have ten (10) days within which to pay
said invoice. Such payment will be made in Renminbi in cash
or by check or wire transfer to such account as Supplier may
direct that payment be made. Any amounts not paid within
said ten (10) days shall bear interest at the annualized
rate of fifteen percent (15%) (or if such rate is required
to be lower under Chinese law, rule or regulation, then at
the highest rate permitted thereby).
7. Dispute as to Payment. In the event User does not
agree with the invoiced amount, then User shall give notice
to Supplier with the said ten (10) day period, of the amount
in dispute, the reason for any discrepancy in the
calculation presented by Supplier, and User's calculation of
the charges then due. Supplier and User shall meet amicably
to resolve any such discrepancy, but in any event, User
shall make payment for all portions of the invoiced amount
that are not in dispute, within the time required for
payment.
8. Address for Notices. Any notice required to be
given and any other written communication between Supplier
shall be given as provided below:
If to Supplier:
Tangshan Cayman Heat and Power Company, Ltd.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention:
Telephone: (972) 980-7159
Facsimile: (972)980-6815
with a copy to:
Pan-Western Energy, LLC
If to User:
Tangshan Panda Heat and Power Company, Ltd.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention:
Telephone: (972) 980-7159
Facsimile: (972)980-6815
with a copy to:
Pan-Western Energy, LLC
9. Delay and Waiver. No delay or omission to exercise
any right, power or remedy accruing to Supplier or User
under this Agreement or on account of any breach or default
hereof shall impair any such right, power or remedy of the
other Party, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or
in any similar breach or default thereafter occurring. Any
waiver, permit consent or approval of any kind or character
must be in writing and shall be effective only to the extent
specifically set forth in such writing.
10. Entire Agreement. This Agreement contains all the
terms and conditions finally agreed between Supplier and
User with respect to the subject matter hereof and any oral
negotiations or prior agreements of the Parties are hereby
merged with and into this final Agreement. This Agreement
may only be amended or modified by an instrument in writing
signed by both Supplier and User.
11. Governing Law. This Agreement shall be governed by and
be construed and interpreted in accordance with the Laws of
the [People's Republic of China].
12. Severability. In case if any one or more of the
provisions contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
13. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, Supplier and User have caused this
Agreement to be duly executed by their officers, duly
authorized as of the day and year first above written.
USER: TANGSHAN PANDA HEAT AND POWER
COMPANY, LTD.
By:
Title:
Name:
SUPPLIER: TANGSHAN CAYMAN HEAT AND
POWER COMPANY, LTD.
By:
Title:
Name:
EXHIBIT 10.101
WATER, HEAT, STEAM AND HOT WATER SUPPLY
AND USAGE AGREEMENT
THIS AGREEMENT, (the "Agreement") is made as of this 3rd day
of October, 1996, by and between Tangshan Cayman Heat and Power
Company, Ltd., a Sino-foreign equity joint venture company (the
"Supplier") and Tangshan Pan-Western Heat and Power Company,
Ltd., a Sino-foreign equity joint venture company (the "User").
R E C I T A L S:
1. Supplier intends to acquire, own and operate certain water
wells and pipeline systems, and to make available for
industrial use, water, heat, steam and hot-water (the
"Products") and their associated facilities.
2. User intends to construct, own and operate a 1x50 MW heat
and power, coal-fired generation facility to be located in
Luannan County, Hebei Province, People's Republic of China
(the "Projected").
3. Supplier desires to sell its Products and User desires to
obtain such Products from the Supplier all upon the terms
and conditions contained herein below.
AGREEMENT:
NOW THEREFORE, based upon the mutual promises made and
benefits to be derived as a result of this Agreement, Supplier
and User hereby agree as follows:
1. Term. The term of this Agreement shall be for a period of
twenty (20) years from the date hereof.
2. Sale of Products. Supplier shall use its best efforts to
procure the Products to User and User shall purchase all of
its requirements for such products from the Supplier in
accordance with the terms of this Agreement. In connection
with Supplier's furnishing of the Products, Supplier shall
keep all records with respect to volumes, pressures, and
quantities of the Products made available to the User for
purchase and perform, directly or indirectly all technical
and administrative functions related to its sale of the
Products and User's purchase and payment for all such
Products.
3. User's Obligations. User shall be required, irrevocably and
unconditionally to purchase from Supplier all of its
requirements for the Products unless Supplier gives notice
that at any specific time such Products are not available
for sale to and purchase by User.
4. Supplier's Obligations. Supplier's obligations to User
shall be on a best efforts basis only. Supplier shall not
be limited or prohibited as a result of this Agreement from
making the Products available and from selling such
Products to any other party. Supplier's only obligation to
User in such event will be to give notice to User of the
quantities, volumes and rates of supply that will be
available for purchase by User. Notwithstanding the above,
Supplier intends to devote approximately fifty percent
(50%) of its resources to a sale of Products directly to
the User.
5. Price. The price to be paid by the User for the Products
sold to it shall be a variable rate calculated quarterly
(or at such other intervals as Supplier may require) as
followers:
A Products Usage fee shall be paid as follows:
[***] FILED SEPARATELY WITH THE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
6. Payment. The Price due to be paid to Supplier as calculated
in Number 5 above, will be calculated by the Supplier in
Renminbi (or any successor official currency of the People's
Republic of China) on at least a quarterly basis and an
invoice for said amount shall be presented to User. User
shall have ten (10) days within which to pay said invoice.
Such payment will be made in Renminbi in cash or by check or
wire transfer to such account as Supplier may direct that
payment be made. Any amounts not paid within said ten (10)
days shall bear interest at the annualized rate of fifteen
percent (15%) (or if such rate is required to be lower under
Chinese law, rule or regulation, then at the highest rate
permitted thereby).
7. Dispute as to Payment. In the event User does not agree
with the invoiced amount, then User shall give notice to
Supplier with the said ten (10) day period, of the amount
in dispute, the reason for any discrepancy in the
calculation presented by Supplier, and User's calculation
of the charges then due. Supplier and User shall meet
amicably to resolve any such discrepancy, but in any event,
User shall make payment for all portions of the invoiced
amount that are not in dispute. within the time required
for payment.
8. Address for Notices. Any notice required to be given and
any other written communication between Supplier shall be given
as provided below:
If to Supplier: Tangshan Cayman Heat and Power Company, Ltd.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention: _______________________
Telephone: (972) 980-7159
Facsimile: (972) 980 6815
with a copy to: Pan-Western Energy, LLC
If to User: Tangshan Panda Heat and Power Company, Ltd.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention: _________________________
Telephone: (972) 980-7159
Facsimile: (972) 980-6815
with a copy to: Pan-Western Energy, LLC
9. Delay and Waiver. No delay or omission to exercise any
right, power or remedy accruing to Supplier or User under
this Agreement or on account of any breach or default hereof
shall impair any such right, power or remedy of the other
Party nor shall it be construed to be a waiver of any such
breach or default or an acquiescence therein, or of or in
any similar breach or default thereafter occurring. Any
waiver, permit consent or approval of any kind or character
must be in writing and shall be effective only to the extent
specifically set forth in such writing.
10. Entire Agreement. This Agreement contains all the terms and
conditions finally agreed between Supplier and User with
respect to the subject matter hereof and any oral
negotiations or prior agreements of the Parties are hereby
merged with and into this final Agreement. This Agreement
may only be amended or modified by an instrument in writing
signed by both Supplier and User.
11. Governing Law. This Agreement shall be governed by and be
construed and interpreted in accordance with the Laws of the
[People's Republic of China].
12. Severability. In case if any one or more of the provisions
contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
13. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Supplier and User have caused this
Agreement to be duly executed by their officers, duly authorized
as of the day and year first above written.
USER: TANGSHAN PAN-WESTERN HEAT AND POWER COMPANY, LTD.
By: _______________________
Title: Chairman
Name: Robert W. Carter
SUPPLIER: TANGSHAN CAYMAN HEAT AND POWER COMPANY, LTD.
By: _______________________
Title: General Manager
Name: Darol S. Lindloff
EXHIBIT 10.102
STEAM FOR PROCESS AND HEATING WATER SALES AGREEMENT
THIS AGREEMENT, (the "Agreement") is made as of this
16th day of October, 1996, by and between Tangshan Cayman
Heat and Power Company, Ltd., a Sino-foreign equity joint
venture company (the "Supplier") and Tangshan Pan-Sino Heat
Company, Ltd., a Sino-foreign equity joint venture company
(the "Vendor").
R E C I T A L S:
1. Supplier intends to acquire, own and operate certain
water wells and pipeline systems, and as a part of its
business to make available for industrial use steam for
process and steam for heating water and certain associated
materials (the "Products").
2. Vendor intends to acquire, sell and distribute the
Products on a retail basis to Luannan County Heat Company
and certain other industrial users (the "Users").
3. Supplier desires to sell its Products and Vendor
desires to obtain such Products from the Supplier all upon
the terms and conditions contained herein below.
AGREEMENT:
NOW THEREFORE, based upon the mutual promises made and
benefits to be derived as a result of this Agreement,
Supplier and Vendor hereby agree as follows:
1. Term. The term of this Agreement shall be for a
period of twenty-three (23) years from the date hereof.
2. Sale of Products. Supplier shall use its best efforts
to provide the Products to Vendor and Vendor shall purchase
all of its requirements for such Products from the Supplier
in accordance with the terms of this Agreement. It is
currently anticipated that the Product will be available
beginning approximately April 1999. In connection with
Supplier's furnishing of the Products, Supplier shall keep
all records with respect to volumes, pressures, and
quantities of the Products made available to the Vendor for
purchase and perform, directly or indirectly all technical
and administrative functions related to its sale of the
Products and Vendor's purchase and payment for all such
Products.
3. Vendor's Obligations. Vendor shall be required,
irrevocably and unconditionally to purchase from Supplier
all of its requirements for the Products unless Supplier
gives notice that at any specific time such Products are not
available for sale to and purchase by Vendor. Provided that
Supplier has made the Product available, User shall purchase
a minimum of 349,680 tonnes/year (at approximately 0.9MPa
and 265 degrees C) of steam for process (the "Process Steam") and
steam (at approximately .25MPa and 120 degrees C) for heating water
(the "Heating Steam") equivalent to 362,518 GJ/year.
4. Supplier's Obligations. Supplier's obligations to
Vendor shall be on a best efforts basis only. Supplier
shall not be limited or prohibited as a result of this
Agreement from making the Products available and from
selling such Products to any other party. Supplier's only
obligation to Vendor in such event will be to give notice to
Vendor of the quantities, volumes and rates of supply that
will be available for purchase by Vendor.
5. Price. The price to be paid by the Vendor for the
Products sold to it shall be calculated quarterly (or at
such other intervals as Supplier may require) based upon the
amount of Products made available to Vendor for purchase
during the subject period at the rate of U.S. $3.276/ tonne
with respect to Process Steam and 9.34 RMB/GJ with respect
to Heating Steam. Said price is based upon a price
established in 1994, which was escalated up to the planned
Commercial Operation Date (at an assumed rate of escalation)
and which shall be subject to further price escalation as
agreed by the Parties and dependent upon actual increases in
Supplier's cost of producing the Product.
6. Payment. The Price due to be paid to Supplier as
calculated in Number 5 above, will be calculated by the
Supplier in Renminbi Yuan (or any successor official
currency of the People's Republic of China) on at least a
quarterly basis and an invoice for said amount shall be
presented to Vendor. Vendor shall have ten (10) days within
which to pay said invoice. Such payment will be made in
Renminbi in cash or by check or wire transfer to such
account as Supplier may direct that payment be made. Any
amounts not paid within said ten (10) days shall bear
interest at the annualized rate of fifteen percent (15%) (or
if such rate is required to be lower under Chinese law, rule
or regulation, then at the highest rate permitted thereby).
7. Dispute as to Payment. In the event Vendor does not
agree with the invoiced amount, then Vendor shall give
notice to Supplier with the said ten (10) day period, of the
amount in dispute, the reason for any discrepancy in the
calculation presented by Supplier, and Vendor's calculation
of the charges then due. Supplier and Vendor shall meet
amicably to resolve any such discrepancy, but in any event,
Vendor shall make payment for all portions of the invoiced
amount that are not in dispute, within the time required for
payment.
8. Address for Notices. Any notice required to be
given and any other written communication between Supplier
and Vendor shall be given as provided below:
If to Supplier:
Tangshan Cayman Heat and Power Company, Ltd.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention: General Manager
Telephone: (972) 980-7159
Facsimile: (972) 980-6815
with a copy to: Pan-Western Energy, LLC
If to Vendor:
Tangshan Pan-Sino Heat Company, Ltd.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention: General Manager
Telephone: (972) 980-7159
Facsimile: (972) 980-6815
with a copy to: Pan-Western Energy, LLC
9. Delay and Waiver. No delay or omission to exercise
any right, power or remedy accruing to Supplier or Vendor
under this Agreement or on account of any breach or default
hereof shall impair any such right, power or remedy of the
other Party, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or
in any similar breach or default thereafter occurring. Any
waiver, permit consent or approval of any kind or character
must be in writing and shall be effective only to the extent
specifically set forth in such writing.
10. Entire Agreement. This Agreement contains all the
terms and conditions finally agreed between Supplier and
Vendor with respect to the subject matter hereof and any
oral negotiations or prior agreements of the Parties are
hereby merged with and into this final Agreement. This
Agreement may only be amended or modified by an instrument
in writing signed by both Supplier and Vendor.
11. Governing Law. This Agreement shall be governed by and
be construed and interpreted in accordance with the Laws of
the People's Republic of China.
12.
Severability. If any one or more of the provisions
contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
13. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, Supplier and Vendor have caused
this Agreement to be duly executed by their officers, duly
authorized as of the day and year first above written.
VENDOR: TANGSHAN PAN-SINO HEAT COMPANY
By:
Title: General Manager
Name: Darol Lindloff
SUPPLIER: TANGSHAN CAYMAN HEAT AND POWER
COMPANY, LTD.
By:
Title: General Manager
Name: Darol Lindloff
EXHIBIT 10.103
THE ARTICLES OF ASSOCIATION
FOR
TANGSHAN PANDA HEAT AND POWER CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Total Investment and Registered Capital
ARTICLE 3 Board of Directors
ARTICLE 4 Business Administrative Organization
ARTICLE 5 Profit Sharing
ARTICLE 6 Financial Accounting
ARTICLE 7 Workers
ARTICLE 8 Trade Union Organization
ARTICLE 9 Term, Expiration and Liquidation
ARTICLE 10 Rules and Regulations
ARTICLE 11 Miscellaneous
ARTICLE I
GENERAL PRINCIPLE
1.1.In accordance with the "Law of the People's Republic of China
on Chinese-Foreign Equity Joint Ventures", Luannan County Heat &
Power Plant of Tangshan City, Hebei Province, the People's
Republic of China (hereinafter referred to as Party A), and Pan-
Western Energy Corp., LLC of Cayman Islands, British West Indies
(hereinafter referred to as Party B) in signing this contract
hereby establish a Joint Venture Company, Tangshan Panda Heat and
Power Co., Ltd. (hereinafter referred to as JVC). The Articles of
Association of JVC shall be worked out in accordance with the
articles of the contract.
1.2. JVC shall be a limited liability company.
1.3. All activities of JVC should abide by the stipulations of
the laws, ordinances and related regulations of the People's
Republic of China.
ARTICLE 2
TOTAL INVESTMENT AND REGISTERED CAPITAL
2.1. Both Parties should contribute the capital within the period
stipulated in the JVC contract. After the Parties have
contributed the amount committed, JVC should hire an accountant
registered in China for regular audits, and each Party should be
offered investment certificates, which should clarify the name of
JVC, the date of approval, the amount of investment, and the date
of investment, etc..
2.2. If either Party desires to transfer its capital investment
to a third Party, whether totally or partially, it should be
agreed upon by the other Party and approved by the authorities
concerned, and the other Party shall have the first right of
refusal to purchase which right must be exercised (if exercised)
within thirty (30) days after notice of the proposed sale is
received. The other Party may waive its first right of refusal to
purchase, but shall reserve the right to choose a subsidiary or
affiliate Party as assignee. The conditions for such transfer
from one Party of JVC to a third Party should not be more
favorable than the conditions given to the other Party of JVC.
2.3. Any increase or transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercial administration bureau.
2.4. During the preparation and construction period of JVC
project and before formal start of production, neither Party
should transfer its capital investment.
ARTICLE 3
BOARD OF DIRECTORS
3.1. JVC shall have a Board of Directors, which shall have the
supreme authority of JVC.
3.2. The Board of Directors shall make final decisions on all
issues of importance.
Its powers are as follows:
(i) Authority to decide and approve the production plan,
annual business report, turnover of capital, income budget,
financial report, annual profit distribution etc.;
(ii) Authority to decide and approve the rules and
regulations of JVC;
(iii) Authority to decide issues of production, expansion of
production, stopping production, termination of contracts
and the liquidation of contracts, etc.;
(iv) Authority to make decisions relating to the hiring of
the General Manager, Deputy General Manager, Chief
Accountant, and other senior staff;
(v) Authority to amend the Articles of Association of JVC;
(vi) Authority concerning all important lawsuits or matters
of arbitration relating to JVC;
(vii) Authority over all discussion and decision-making on
any other issues of importance.
3.3. The Board of Directors shall consist of five (5) directors,
one of which shall be assigned by Party A, and four (4) shall be
assigned by Party B. The Directors shall hold the office for a
period of four (4) years. The term of office may be renewed by
the nominating Party.
3.4. The Chairman of the Board of Directors shall be assigned by
Party B, and both party shall respectively assign a Vice
Chairman.
3.5. Either party shall give the written notice to the Board of
Directors when assigning and replacing the directors.
3.6. The Board Meeting shall be convened at least once a year. At
the request of at least two (2) directors, the Chairman shall
convene a special Board Meeting of the directors.
3.7. The Board Meeting shall generally be held at its registered
address. Under the circumstance of no board meeting convened in
person, the resolutions signed by all members of the board shall
be deemed as valid as the board resolutions convened in a Board
Meeting.
3.8. The Board Meeting shall be called and presided over by the
Chairman of the Board. In the absence of the Chairman, one Vice
Chairman shall call and preside over the Meeting through the
authority of the Chairman.
3.9. Unless waived in writing or by attendance at the meeting,
the Chairman shall give the board members thirty (30) days
written notice of every meeting, which includes the following
items: content, date and place.
3.10. The Directors unable to attend Board Meeting may send their
alternate director or duly executed written proxy to vote with
the other Directors, otherwise their votes shall be deemed as
waived.
3.11. The Quorum of the Board Meeting shall be three (3)
directors (including Party A's director). Any resolution shall be
invalid if the Quorum is less than three.
3.12. Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital of JVC;
(iii) Merger of JVC with another corporation;
(iv) Extension, Termination and dissolution of JVC and the
liquidation and wind-up thereof;
(v) Other important issues that both Parties deem it
necessary to have unanimous approval.
3.13. Other matters except those specified in Clause 3.12 shall
be decided by majority vote of the directors then present at any
board meeting (including special board meeting) at which a quorum
is present.
3.14. A detailed written Record of each Board meeting shall be
made and signed by all the attending directors (or their
alternate director or proxy) and be kept both in Chinese and
English versions on file for reference.
ARTICLE 4
BUSINESS ADMINISTRATIVE ORGANIZATION
4.1. The business administrative organization of JVC shall
consist of certain departments which shall be determined by the
Board of Directors.
4.2. JVC shall have one (1) General Manager and two (2) Deputy
General Managers who shall be selected by the Board of Directors.
The General Manager shall be recommended by Party B. Each Party
shall recommend a Deputy General Manager.
4.3. The General Manager shall be directly responsible to the
board of Directors, carry out all the decisions of the Board of
Directors, organize and be responsible for routine production,
technology, business and administrative tasks. The Deputy General
Managers shall assist the General Manager in his work. During the
General Manager's absence, to the extent authorised by the
General Manager or the Board of Director, they shall take the
responsibilities of the General Manager on his behalf.
4.4. Decisions of important issues in day-to-day business of JVC
shall be valid only when they are signed by both the General
Manager and the Party A's Deputy General Manager. Issues
requiring joint signatures shall be stipulated by the Board of
Directors.
4.5. The Tenure of office for both the General and the Deputy
General Managers shall be four (4) years. At the authorization of
the Board of Directors, they can be reappointed consecutively.
4.6. Appointed by the Board of Directors, the Chairman and Vice
Chairman of the Board of Directors can take the posts of General
and Deputy General Managers of JVC.
4.7. Neither the General and Deputy General Managers nor Board
members (excluding personnel from China National Machinery Imp. &
Exp. Corp.) shall take the posts of General or Deputy General
Managers of other economic organizations located within a 100
kilometer radius of the primary place of business of JVC within
Luannan County ("the Territory"), nor shall they be involved in
any other economic organizations engaged in commercial
competition with JVC within the Territory.
4.8. JVC shall have one Chief Engineer, and one Chief Accountant
to be appointed by the Board of Directors, and shall report to
the General Manager.
4.9. The General Manager, Deputy General Manager, Chief Engineer,
Chief Accountant and other senior staff shall give thirty (30)
days written notice to the Board of Directors if they desire to
resign from their office.
4.10. The General Manager and each Deputy General Manager can be
dismissed at any time through the resolution passed at the Board
Meeting if they are found to practise graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 5
PROFIT SHARING
5.1. The Joint Venture shall draw reserve funds, enterprise
development funds, staff reward funds and welfare funds from the
after tax profit, the proportions of which shall be decided by
the Board of Directors.
5.2. The net profit of JVC after paying income tax and drawing
all funds, shall be shared according to the actual ownership of
the registered capital of the Parties, with the exception of any
special unanimous stipulation given by the Board of Directors.
5.3. The profit of the Joint Venture may be distributed every
three months. Furthermore, calculation for each distribution and
the amount each Party shall be able to share in the previous
quarter shall be determined and announced by the Board of
Directors.
5.4. Profit will not be shared until the loss of the previous
fiscal year has been made up. The profit of all prior fiscal
years retained can be shared together with the current fiscal
year's profit.
ARTICLE 6
FINANCIAL ACCOUNTING
6.1. Financial accounting of JVC shall be made in accordance with
the rules and regulations of financial accounting in PRC, as
stipulated for joint venture enterprises using Chinese and
foreign investment.
6.2. JVC shall use the calendar year as its fiscal year, starting
from January 1st and closing on December 31st.
6.3. All certificates, accounting books and reports should be
written both in English and Chinese.
6.4. JVC shall open both Renminbi and foreign currency accounts
with the Bank of China.
6.5. JVC shall use both debit and credit accounts for its
bookkeeping.
6.6. Within the first three (3) months of each fiscal year, the
accounting department of JVC should compile a list of all assets
& liabilities and a report on profit & loss of the previous
fiscal year, which will be audited and signed by auditors before
being submitted for approval by the Board of Directors.
6.7. JVC shall use Renminbi as the base currency for accounting.
The conversion between Renminbi and other currency shall be
calculated according to the rate of foreign exchanges published
by the State Administration of Foreign Currency of the People's
Republic of China on the date of conversion.
6.8. Either Party of JVC shall have the right to have the
accounting books audited independently at its own expense.
6.9. Foreign currency of JVC shall be handled according to the
"Interim Provisions of the People's Republic of China on
Management of Foreign Currencies" and related stipulations as
well as those of the contract.
ARTICLE 7
WORKERS
7.1. Issue of the employment, dismissal, resignation, salaries
and welfare, labor insurance, labor protection, labor discipline,
etc., shall be handled according to the "Provisions of the
People's Republic of China on Labor Management in Chinese-Foreign
Equity Joint Ventures".
7.2. The staff requirements of JVC shall be in accordance with
applicable Chinese Laws and Regulations and written policies
established by the Board of Directors.
7.3. The Joint Venture has the right to give such penalties as
warning, record of demerit, demotion or reduced salaries, to
those who violate the rules and regulations of the Joint Venture.
Those committing serious violations shall be dismissed.
7.4. Wages for workers shall be determined by the Board of
Directors according to the relevant stipulations of PRC and
concrete conditions of JVC and be specified in the labor
contract.
7.5. Welfare, reward, labor protection, labor insurance and
other, related issues shall be stipulated in each regulation of
JVC respectively so that normal production and working conditions
of the workers can be ensured.
ARTICLE 8
TRADE UNION ORGANIZATION
8.1. According to the stipulations of the "Trade Union Act of the
People's Republic of China", employees of JVC have the right to
organize a trade union and take part in its activities.
8.2. The trade union of the Joint Venture represents the legal
interest of the workers. Its tasks are as follows: support legal
democratic rights and materials interest of the workers, assist
the JVC in the rational use of welfare and reward funds, organize
the workers to study science and technology, organize sports and
recreational activities, educate the workers to observe labor
discipline and utilize their best efforts to fulfill their tasks.
8.3. The trade union leaders of JVC, at the invitation of the
Board of Directors, can attend relevant meetings and reflect
workers' opinions and rational demands.
8.4. The trade union of the Joint Venture shall take part in
mediations in solving discrepancies and disputes between the
workers and JVC.
8.5. The Joint Venture shall contribute a sum equal to 2% of the
total amount of the workers' salaries per month as trade union
fees. The trade union of JVC shall use the fees according to the
"Management Methods of Trade Union Fees" as stipulated by the
General Trade Union of China.
ARTICLE 9
TERM EXPIRATION AND LIQUIDATION
9.1. The term of JVC is twenty three (23) years. starting from
the date of acquisition of the business license.
9.2. If both Parties agree to extend the term of JVC, the Board
of Directors should pass a resolution. An application for the
extension of JVC term should be submitted to the Ministry of
Foreign Trade and Economic Cooperation or its authorized
department for approval twelve (12) months before the expiration
of the term of JVC. Only then can the formalities to amend the
term be handled at the local industrial and commercial
administration bureau.
9.3. If both Parties unanimously consider it beneficial to
terminate JVC, the JVC contract can be terminated in advance. The
resolution should be made by the Board Meeting with all its
members being present and submitted to and approved by the
authorities concerned.
9.4. Except as otherwise provided below, either party shall have
the lawful right to request termination of JVC provided any of
the following has occurred:
(i) when the term of JVC expires;
(ii) in case JVC can not continue its business due to three
consecutive years of serious losses in its production after
the Commercial Operation Date;
(iii) in case JVC can not continue its business if one party
fails to implement its liabilities and duties as stipulated
in JVC contract and the Articles of Association;
(iv) in case JVC can not continue its business due to
serious losses incurred from force majeure for eighteen (18)
consecutive months after the Commercial Operation Date.
In case of (ii) or (iv), the Board of Directors shall submit a
JVC termination application to the authorities concerned for
approval.
In case of the (iii), the Party failing to implement its
obligations of JVC Contract and the Articles of Association shall
compensate the party observing the Contract for any losses
incurred.
9.5. Before the expiration or termination of JVC contract, the
Board of Directors should work out a liquidation procedure and
organize a liquidation committee for liquidation.
9.6. The task of the liquidation committee is to check, appraise
on a fair market value and "going concern" basis all the contract
rights, land use rights and the other tangible or intangible
properties, creditor's rights and liabilities of JVC, make a list
of all assets and liabilities and a list of properties, make the
plan of liquidation, and submit all of the documents of
liquidation to the Board of Directors for approval. The
liquidation appraisal shall be conducted by a public accountant
registered in PRC.
9.7. During the period of liquidation, the liquidation committee
shall represent JVC to enter or answer lawsuits.
9.8. All liquidation expenses and remunerations to the members of
the liquidation committee shall have the priority to be paid out
of the existing properties of JVC.
9.9. After paying off all debts of JVC by the liquidation
committee, the remaining properties of JVC should be shared
according to the actual ownership of the Parties. After the
liquidation, the liquidation committee should submit a report and
go through the formalities to cancel JVC registration at the
Industrial and Commercial Administration Bureau, and a public
announcement should be made.
ARTICLE 10
RULES AND REGULATIONS
10.1. The rules and regulation as stipulated by the Board of
Directors of JVC shall include:
(i)Regulations for business management;
(ii) Rules for workers;
(iii) Rules for labor and wages;
(iv) Regulations for promotions, reward and penalty of the
workers;
(v) Regulations of workers' welfare;
(vi) Regulations of financial affairs;
(vii) Procedure of liquidation at the time of JVC
termination,
(viii) Other necessary rules and regulations.
ARTICLE 11
MISCELLANEOUS
11.1. The Board of Directors is authorized to amend and explain
each of the stipulations of the Articles of Association.
11.2. These Articles of Association are written both in English
and Chinese. The Articles of Association in both languages is of
equal validity.
11.3. The Articles of Association become effective concurrent
with JVC Contract.
These Articles of Association for Tangshan Panda Heat and Power
Co. Ltd. are signed by the authorized representatives of both
Parties in Shijiazhuang City, Hebei Province, PRC, as follows:
Party A
Luannan County
Heat & Power Plant
Zhao Xiucheng
General Manger
Party B
Pan-Western Energy Co., LLC
Ralph T. Killian
Senior Vice President
Witnessed by:
China National Machinery
Import & Export Corp.
Bai Congyong
General Manager of
Overseas Enterprises Div.
Dated Sept. 4, 1994
EXHIBIT 10.104
THE ARTICLES OF ASSOCIATION
FOR
TANGSHAN PAN-WESTERN HEAT AND POWER CO.,LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Total Investment and Registered Capital
ARTICLE 3 Board of Directors
ARTICLE 4 Business Administrative Organization
ARTICLE 5 Profit Sharing
ARTICLE 6 Financial Accounting
ARTICLE 7 Workers
ARTICLE 8 Trade Union Organization
ARTICLE 9 Term, Expiration and Liquidation
ARTICLE 10 Rules and Regulations
ARTICLE 11 Miscellaneous
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the "Law of the People's Republic of
China on Chinese-Foreign Equity Joint Ventures", Tangshan Luanhua
Co. (Group) of Tangshan City, Hebei Province, the People's
Republic of China (hereinafter referred to as Party A), and Pan-
Western Energy Corp., LLC of Cayman Islands, British West Indies
(hereinafter referred to as Party B) in signing this contract
hereby establish a Joint Venture Company, Tangshan Pan-Western
Heat and Power Co., Ltd. (hereinafter referred to as JVC). The
Articles of Association of JVC shall be worked out in accordance
with the articles of the contract.
1.2. JVC shall be a limited liability company.
1.3. All activities of JVC should abide by the stipulations of
the laws, ordinances and related regulations of the People's
Republic of China.
ARTICLE 2
TOTAL INVESTMENT AND REGISTERED CAPITAL
2.1. Both Parties should contribute the capital within the period
stipulated in the JVC contract. After the Parties have
contributed the amount committed, JVC should hire an accountant
registered in China for regular audits, and each Party should be
offered investment certificates, which should clarify the name of
JVC, the date of approval, the amount of investment and the date
of investment, etc.
2.2. If either Party desires to transfer its capital investment
to a third Party, whether totally or partially, it should be
agreed upon by the other Party and approved by the authorities
concerned, and the other Party shall have the first right of
refusal to purchase which right must be exercised (if exercised)
within thirty (30) days after notice of the proposed sale is
received. The other Party may waive its first right of refusal
to purchase, but shall reserve the right to choose a subsidiary
or affiliate Party as assignee. The conditions for such transfer
from one Party of JVC to a third Party should not be more
favorable than the conditions given to the other Party of JVC.
2.3. Any increase or transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercial administration bureau.
2.4. During the preparation and construction period of JVC
project and before formal start of production, neither Party should
transfer its capital investment.
ARTICLE 3
BOARD OF DIRECTORS
3.1. JVC shall have a Board of Directors, which shall have the
supreme authority of JVC.
3.2. The Board of Directors shall make final decisions on all
issues of importance.
Its powers are as follows:
(i) Authority to decide and approve the production plan,
annual business report, turnover of capital, income budget,
financial report, annual profit distribution etc.;
(ii) Authority to decide and approve the rules and
regulations of JVC;
(iii) Authority to decide issues of production, expansion
of production. stopping production. termination of
contracts and the liquidation of contracts, etc.;
(iv) Authority to make decisions relating to the hiring of
the General Manager, Deputy General Manager, Chief
Accountant and other senior staff;
(v) Authority to amend the Articles of Association of JVC;
(vi) Authority concerning all important lawsuits or
matters of arbitration relating to JVC;
(vii) Authority over all discussion and decision-making on
any other issues of importance.
3.3. The Board of Directors shall consist of five (5) directors,
one of which shall be assigned by Party A, and four (4) shall be
assigned by Party B. The Directors shall hold the office for a
period of four (4) years. The term of office may be renewed by
the nominating Party.
3.4. The Chairman of the Board of Directors shall be assigned by
Party B, and both party shall respectively assign a Vice
Chairman.
3.5. Either party shall give the written notice to the Board of
Directors when assigning and replacing the directors.
3.6. The Board Meeting shall be convened at least once a year.
At the request of at least two (2) directors, the Chairman shall
convene a special Board Meeting of the directors.
3.7. The Board Meeting shall generally be held at its registered
address. Under the circumstance of no board meeting convened in
person, the resolutions signed by all members of the board shall
be deemed as valid as the board resolutions convened in a Board
Meeting.
3.8. The Board Meeting shall be called and presided over by the
Chairman of the Board. In the absence of the Chairman, one Vice
Chairman shall call and preside over the Meeting through the
authority of the Chairman.
3.9. Unless waived in writing or by attendance at the meeting,
the Chairman shall give the board members thirty (30) days
written notice of every meeting, which includes the following
items: content, date and place.
3.10. The Directors unable to attend Board Meeting may send their
alternate director or duly executed written proxy to vote with
the other Directors, otherwise their votes shall be deemed as
waived.
3.11. The Quorum of the Board Meeting shall be three (3)
directors (including Party A's director). Any resolution shall
be invalid if the Quorum is less than three.
3.12. Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital of JVC;
(iii) Merger of JVC with another corporation;
(iv) Extension, Termination and dissolution of JVC and the
liquidation and wind-up thereof;
(v) Other important issues that both Parties deem it necessary
to have unanimous approval.
3.13. Other matters except those specified in Clause 3.12 shall
be decided by majority vote of the directors then present at any
board meeting (including special board meeting) at which a quorum
is present.
3.14. A detailed written Record of each Board meeting shall be
made and signed by all the attending directors (or their
alternate director or proxy) and be kept both in Chinese and
English versions on file for reference.
ARTICLE 4
BUSINESS ADMINISTRATIVE ORGANIZATION
4.1. The business administrative organization of JVC shall
consist of certain departments which shall be determined by the
Board of Directors.
4.2. JVC shall have one (1) General Manager and two (2) Deputy
General Managers who shall be selected by the Board of Directors.
The General Manager shall be recommended by Party B. Each Party
shall recommend a Deputy General Manager.
4.3. The General Manager shall be directly responsible to the
board of Directors, carry out all the decisions of the Board of
Directors, organize and be responsible for routine production,
technology, business and administrative tasks. The Deputy
General Managers shall assist the General Manager in his work.
During the General Manager's absence, to the extent authorised by
the General Manager or the Board of Director, they shall take the
responsibilities of the General Manager on his behalf.
4.4. Decisions of important issues in day-to-day business of JVC
shall be valid only when they are signed by both the General
Manager and the Party A's Deputy General Manager. Issues
requiring joint signatures shall be stipulated by the Board of
Directors.
4.5. The Tenure of office for both the General and the Deputy
General Managers shall be four (4) years. At the authorization
of the Board of Directors, they can be reappointed consecutively.
4.6. Appointed by the Board of Directors, the Chairman and Vice
Chairman of the Board of Directors can take the posts of General
and Deputy General Managers of JVC.
4.7. Neither the General and Deputy General Managers nor Board
members (excluding personnel from China National Machinery Imp. &
Exp. Corp.) shall take the posts of General or Deputy General
Managers of other economic organizations located within a 100
kilometer radius of the primary place of business of JVC within
Luannan County ("the Territory"), nor shall they be involved in
any other economic organizations engaged in commercial
competition with JVC within the Territory.
4.8. JVC shall have one Chief Engineer, and one Chief Accountant
to be appointed by the Board of Directors, and shall report to
the General Manager.
4.9. The General Manager, Deputy General Manager, Chief Engineer,
Chief Accountant and other senior staff shall give thirty (30)
days written notice to the Board of Directors if they desire to
resign from their office.
4.10. The General Manager and each Deputy General Manager can be
dismissed at any time through the resolution passed at the Board
Meeting if they are found to practise graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 5
PROFIT SHARING
5.1. The Joint Venture shell draw reserve hinds, enterprise
development funds, staff reward funds and welfare funds from the
after tax profit, the proportions of which shall be decided by
the Board of Directors.
5.2. The net profit of JVC after paying income tax and drawing
all funds, shall be shared according to the actual ownership of
the registered capital of the Parties, with the exception of any
special unanimous stipulation given by the Board of Directors.
5.3. The profit of the Joint Venture may be distributed every
three months. Furthermore, calculation for each distribution and
the amount each Party shall be able to share in the previous
quarter shall be determined and announced by the Board of
Directors.
5.4. Profit will not be shared until the loss of the previous
fiscal year has been made up. The profit of all prior fiscal
years retained can be shared together with the current fiscal
year's profit.
ARTICLE 6
FINANCIAL ACCOUNTING
6.1. Financial accounting of JVC shad be made in accordance with
the rules and regulations of financial accounting in PRC, as
stipulated for joint venture enterprises using Chinese and
foreign investment.
6.2. JVC shall use the calendar year as its fiscal year,
starting from January 1st and closing on December 31st.
6.3. All certificates, accounting books and reports should be
written both in English and Chinese.
6.4. JVC shall open both Renminbi and foreign currency accounts
with the Bank of China.
6.5 JVC shall use both debit and credit accounts for its
bookkeeping.
6.6. Within the first three (3) months of each fiscal year, the
accounting department of JVC should compile a list of all assets
& liabilities and a report on profit & loss of the previous
fiscal year, which will be audited and signed by auditors before
being submitted for approval by the Board of Directors.
6.7. JVC shall use Renminbi as the base currency for accounting.
The conversion between Renminbi and other currency shall be
calculated according to the rate of foreign exchanges published
by the State Administration of Foreign Currency of the People's
Republic of China on the date of conversion.
6.8. Either Party of JVC shall have the right to have the
accounting books audited independently at its own expense.
6.9. Foreign currency of JVC shall be handled according to the
"Interim Provisions of the People's Republic of China on
Management of Foreign Currencies" and related stipulations as
well as those of the contract.
ARTICLE 7
WORKERS
7.1. Issue of the employment, dismissal, resignation, salaries
and welfare, labor insurance, labor protection, labor discipline,
etc., shall be handled according to the "Provisions of the
People's Republic of China on Labor Management in Chinese-Foreign
Equity Joint Ventures".
7.2. The staff requirements of JVC shall be in accordance with
applicable Chinese Laws and Regulations and written policies
established by the Board of Directors.
7.3. The Joint Venture has the right to give such penalties as
warning, record of demerit, demotion or reduced salaries, to
those who violate the rules and regulations of the Joint Venture.
Those committing serious violations shall be dismissed.
7.4. Wages for workers shall be determined by the Board of Directors
according to the relevant stipulations of PRC and concrete conditions
of JVC and be specified in the labor contract.
7.5. Welfare, reward, labor protection, labor insurance and other
related issues shall be stipulated in each regulation of JVC
respectively so that normal production and working conditions of
the workers can be ensured.
ARTICLE 8
TRADE UNION ORGANIZATION
8.1. According to the stipulations of the "Trade Union Act of
the People's Republic of China", employees of JVC have the right
to organize a trade union and take part in its activities.
8.2. The trade union of the Joint Venture represents the legal
interest of the workers. Its tasks are as follows: support legal
democratic rights and materials interest of the workers, assist
the JVC in the rational use of welfare and reward funds, organize
the workers to study science and technology, organize sports and
recreational activities, educate the workers to observe labor
discipline and utilize their best efforts to fulfill their tasks.
8.3. The trade union leaders of JVC, at the invitation of the
Board of Directors, can attend relevant meetings and reflect
workers' opinions and rational demands.
8.4. The trade union of the Joint Venture shall take part in
mediations in solving discrepancies and disputes between the
workers and JVC.
8.5. The Joint Venture shall contribute a sum equal to 2% of the
total amount of the workers' salaries per month as trade union
fees. The trade union of JVC shall use the fees according to the
"Management Methods of Trade Union Fees" as stipulated by the
General Trade Union of China.
ARTICLE 9
TERM EXPIRATION AND LIQUIDATION
9.1. The term of JVC is twenty-three (23) years, starting from
the date of acquisition of the business license.
9.2. If both Parties agree to extend the term of JVC, the Board
of Directors should pass a resolution. An application for the
extension of JVC term should be submitted to the Ministry of
Foreign Trade and Economic Cooperation or its authorized
department for approval twelve (12) months before the expiration
of the term of JVC. Only then can the formalities to amend the
term be handled at the local industrial and commercial
administration bureau.
9.3. If both Parties unanimously consider it beneficial to
terminate JVC, the JVC contract can be terminated in advance.
The resolution should be made by the Board Meeting with all its
members being present and submitted to and approved by the
authorities concerned.
9.4. Except as otherwise provided below, either party shall have
the lawful right to request termination of JVC provided any of
the following has occurred:
(i) when the terror of JVC expires;
(ii) in case JVC can not continue its business due to three
consecutive years of serious losses in its production after
the Commercial Operation Date;
(iii) in case JVC can not continue its business if one
party fails to implement its liabilities and duties as
stipulated in JVC contract and the Articles of Association;
(iv) in case JVC can not continue its business due to
serious losses incurred from force majeure for eighteen
(18) consecutive months after the Commercial Operation Date
In case of (ii) or (iv), the Board of Directors shall submit
a JVC termination application to the authorities concerned for
approval.
In case of the (iii), the Party failing to implement its
obligations of JVC Contract and the Articles of Association shall
compensate the party observing the Contract for any losses
incurred.
9.5. Before the expiration or termination of JVC contract, the
Board of Directors should work out a liquidation procedure and
organize a liquidation committee for liquidation.
9.6. The task of the liquidation committee is to check, appraise
on a fair market value and "going concern" basis all the contract
rights, land use rights and the other tangible or intangible
properties, creditor's rights and liabilities of JVC, make a list
of all assets and liabilities and a list of properties, make the
plan of liquidation and submit all of the documents of
liquidation to the Board of Directors for approval. The
liquidation appraisal shall be conducted by a public accountant
registered in PRC.
9.7. During the period of liquidation, the liquidation committee
shall represent JVC to enter or answer lawsuits.
9.8. All liquidation expenses and remunerations to the members of
the liquidation committee shall have the priority to be paid out
of the existing properties of JVC.
9.9. After paying off all debts of JVC by the liquidation
committee, the remaining properties of JVC should be shared
according to the actual ownership of the Parties. After the
liquidation, the liquidation committee should submit a report and
go through the formalities to cancel JVC registration at the
Industrial and Commercial Administration Bureau, and a public
announcement should be made.
ARTICLE 10
RULES AND REGULATIONS
10.1. The rules and regulation as stipulated by the Board of
Directors of JVC shall include:
(i) Regulations for business management;
(ii) Rules for workers;
(iii) Rules for labor and wages;
(iv) Regulations for promotions, reward and penalty of the
workers;
(v) Regulations for workers' welfare;
(vi) Regulations of financial affairs;
(vii) Procedure of liquidation at the time of JVC
termination;
(viii) Other necessary rules and regulations.
ARTICLE 11
MISCELLANEOUS
11.1. The Board of Directors is authorized to amend and explain
each of the stipulations of the Articles of Association.
11.2. These Articles of Association are written both in English
and Chinese. The Articles of Association in both languages is of
equal validity.
11.3. The Articles of Association become effective concurrent
with JVC Contract
These Articles of Association for Tangshan Pan-Western Heat
and Power Co., Ltd. are signed by the authorized representatives
of both Parties in Shijiazhuang City, Hebei Province, PRC, as
follows:
Party A: Party B:
Tangshan Luanhua Co. (Group) Pan-Western Energy Co., LLC
______________________ ______________________
Zhao Xiucheng Ralph T. Killian
Authorised by and Senior Vice President
on behalf of Party A
Witnessed by:
China National Machinery
Import & Export Corp.
________________________
Bai Congyong
General Manager of
Overseas Enterprises Div.
EXHIBIT 10.105
THE ARTICLES OF ASSOCIATION
FOR
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Total Investment and Registered Capital
ARTICLE 3 Board of Directors
ARTICLE 4 Business Administrative Organization
ARTICLE 5 Profit Sharing
ARTICLE 6 Financial Accounting
ARTICLE 7 Workers
ARTICLE 8 Trade Union Organization
ARTICLE 9 Term, Expiration and Liquidation
ARTICLE 10 Rules and Regulations
ARTICLE 11 Miscellaneous
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the "Law of the People's Republic of
China on Chinese-Foreign Equity Joint Ventures", Luannan County
Heat & Power Plant of Tangshan City, Hebei Province, the People's
Republic of China (PRC) (hereinafter referred to as Party A),
Pan-Western Energy Corp., LLC of Cayman Islands, British West
Indies (hereinafter referred to as Party B) and Tangshan Luanhua
(Group) Co. of Tangshan City, Hebei Province, PRC (hereinafter
referred to as Party C) in signing this contract hereby establish
a Joint Venture Company, Tangshan Cayman Heat and Power Co., Ltd.
(hereinafter referred to as JVC). The Articles of Association of
JVC shall be worked out in accordance with the articles of the
contract.
1.2. JVC shall be a limited liability company.
1.3. All activities of JVC should abide by the stipulations of
the laws, ordinances and related regulations of the People's
Republic of China.
ARTICLE 2
TOTAL INVESTMENT AND REGISTERED CAPITAL
2.1. Each Party should contribute the capital within the period
stipulated in the JVC contract. After the Parties have
contributed the amount committed, JVC should hire an accountant
registered in China for regular audits, and each Party should be
offered investment certificates, which should clarify the name of
JVC, the date of approval, the amount of investment, and the date
of investment, etc.
2.2. In case any party to this JVC contract intends to transfer
its investment share in the JVC to a party which is not a party
to this JVC (Outside Party), it shall require the prior written
consent of all the existing parties hereto. If a Party desires
to transfer its capital investment to a Outside Party, whether
totally or partially, it should be agreed upon by the other Party
and approved by the authorities concerned, and the other Parties
shall have the first right of refusal to purchase which right
must be exercised (if exercised), within thirty (30) days after
notice of such proposed transfer is received. The other Parties
may waive their first right of refusal to purchase, but shall
reserve the right to choose a subsidiary or affiliate Party as
the assignee. The conditions for such transfer from one Party of
JVC to a Outside Party shall not be more favorable than the
conditions given to any other Party of JVC.
2.3. Any increase or transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercial administration bureau.
2.4. During the preparation and construction period of JVC
project and before formal start of production, no Party should
transfer its capital investment.
ARTICLE 3
BOARD OF DIRECTORS
3.1. JVC shall have a Board of Directors, which shall have the
supreme authority of JVC.
3.2. The Board of Directors shall make final decisions on all
issues of importance.
Its powers are as follows:
(i) Authority to decide and approve the production plan, annual
business report, turnover of capital, income budget, financial
report, annual profit distribution, etc.;
(ii) Authority to decide and approve the rules and regulations of
JVC;
(iii) Authority to decide issues of production, expansion of
production, stopping production, termination of contracts and the
liquidation of contracts, etc.;
(iv) Authority to make decisions relating to the hiring of the
General Manager, Deputy General Manager, Chief Accountant, and
other senior staff;
(v) Authority to amend the Articles of Association of JVC;
(vi) Authority concerning all important lawsuits or matters of
arbitration relating to JVC;
(vii) Authority over all discussion and decision-making on
any other issues of importance.
3.3. The Board of Directors shall consist of five (5) directors,
one of which shall be assigned by Party A, four (4) shall be
assigned by Party B and none shall be assigned by Party C. The
Directors shall hold the office for a period of four (4) years.
The term of office may be renewed by the nominating Party.
3.4. The Chairman of the Board of Directors shall be assigned by
Party B, and both Party A and Party B shall respectively assign a
Vice Chairman.
3.5. Either party shall give the written notice to the Board of
Directors when assigning and replacing the directors.
3.6. The Board Meeting shall be convened at least once a year.
At the request of at least two (2) directors, the Chairman shall
convene a special Board Meeting of the directors.
3.7. The Board Meeting shall generally be held at its registered
address. Under the circumstances of no board meeting convened in
person, the resolutions signed by all members of the board shall
be deemed as valid as the board resolutions convened in a Board
Meeting.
3.8. The Board Meeting shall be called and presided over by the
Chairman of the Board. In the absence of the Chairman, one Vice
Chairman shall call and preside over the Meeting through the
authority of the Chairman.
3.9. Unless waived in writing or by attendance at the meeting,
the Chairman shall give the board members thirty (30) days
written notice of every meeting, which includes the following
items: content, date and place.
3.10. The Directors unable to attend Board Meeting may send their
alternate director or duly executed written proxy to vote with
the other Directors, otherwise their votes shall be deemed as
waived.
3.11. The Quorum of the Board Meeting shall be four (4)
directors (including Party A's director). Any resolution shall
be invalid if the Quorum is less than four.
3.12 Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;
(ii) Increase or assignment of the registered capital of JVC;
(iii) Merger of JVC with another corporation;
(iv) Extension, Termination and dissolution of JVC and the
liquidation and wind-up thereof;
(v) Other important issues that the Parties deem it necessary to
have unanimous approval.
3.13. Other matters except those specified in Clause 3.12 shall
be decided by majority vote of the directors then present at any
board meeting (including special board meeting) at which a quorum
is present.
3.14. A detailed written Record of each Board meeting shall be
made and signed by all the attending directors (or their
alternate director or proxy) and be kept both in Chinese and
English versions on file for reference.
ARTICLE 4
BUSINESS ADMINISTRATIVE ORGANIZATION
4.1. The business administrative organization of JVC shall
consist of certain departments which shall be determined by the
Board of Directors.
4.2. JVC shall have one (1) General Manager and two (2) Deputy
General Managers who shall be selected by the Board of Directors.
The General Manager shall be recommended by Party B. Each Party
A and Party B shall recommend a Deputy General Manager.
4.3. The General Manager shall be directly responsible to the
board of Directors, carry out all the decisions of the Board of
Directors, organize and be responsible for routine production,
technology, business and administrative tasks. The Deputy
General Managers shall assist the General Manager in his work.
During the General Manager's absence, to the extent authorised by
the General Manager or the Board of Director, they shall take the
responsibilities of the General Manager on his behalf.
4.4. Decisions of important issues in day-to-day business of JVC
shall be valid only when they are signed by both the General
Manager and the Party A's Deputy General Manager. Issues
requiring joint signatures shall be stipulated by the Board of
Directors.
4.5. The Tenure of office for both the General and the Deputy
General Managers shall be four (4) years. At the authorization of
the Board of Directors, they can be reappointed consecutively.
4.6. Appointed by the Board of Directors, the Chairman and Vice
Chairman of the Board of Directors can take the posts of General
and Deputy General Managers of JVC.
4.7. Neither the General and Deputy General Managers nor Board
members (excluding personnel from China National Machinery Imp. &
Exp. Corp.) shall take the posts of General or Deputy General
Managers of other economic organizations located within a 100
kilometer radius of the primary place of business of JVC within
Luannan County ("the Territory"), nor shall they be involved in
any other economic organizations engaged in commercial
competition with JVC within the Territory.
4.8. JVC shall have one Chief Engineer, and one Chief Accountant
to be appointed by the Board of Directors, and shall report to
the General Manager.
4.9. The General Manager, Deputy General Manager, Chief
Engineer, Chief Accountant and other senior staff shall give
thirty (30) days written notice to the Board of Directors if they
desire to resign from their office.
4.10. The General Manager and each Deputy General Manager can be
dismissed at any time through the resolution passed at the Board
Meeting if they are found to practise graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 5
PROFIT SHARING
5.1. The Joint Venture shall draw reserve funds, enterprise
development funds, staff reward funds and welfare funds from the
after tax profit, the proportions of which shall be decided by
the Board of Directors.
5.2. The net profit of JVC after paying income tax and drawing
all funds, shall be shared according to the actual ownership of
the registered capital of the Parties.
5.3. The profit of the Joint Venture may be distributed every
three months. Furthermore, calculation for each distribution and
the amount each Party shall be able to share in the previous
quarter shall be determined and announced by the Board of
Directors.
5.4. Profit will not be shared until the loss of the previous
fiscal year has been made up. The profit of all prior fiscal
years retained can be shared together with the current fiscal
year's profit.
ARTICLE 6
FINANCIAL ACCOUNTING
6.1. Financial accounting of JVC shall be made in accordance
with the rules and regulations of financial accounting in PRC, as
stipulated for joint venture enterprises using Chinese and
foreign investment.
6.2. JVC shall use the calendar year as its fiscal year,
starting from January 1st and closing on December 31st.
6.3. All certificates, accounting books and reports should be
written both in English and Chinese.
6.4. JVC shall open both Renminbi and foreign currency accounts
with the Bank of China.
6.5. JVC shall use both debit and credit accounts for its
bookkeeping.
6.6. Within the first three (3) months of each fiscal year, the
accounting department of JVC should compile a list of all assets
& liabilities and a report on profit & loss of the previous
fiscal year, which will be audited and signed by auditors before
being submitted for approval by the Board of Directors.
6.7. JVC shall use Renminbi as the base currency for accounting.
The conversion between Renminbi and other currency shall be
calculated according to the rate of foreign exchanges published
by the State Administration of Foreign Currency of the People's
Republic of China on the date of conversion.
6.8. Any Party of JVC shall have the right to have the
accounting books audited independently at its own expense.
6.9. Foreign currency of JVC shall be handled according to the
"Interim Provisions of the People's Republic of China on
Management of Foreign Currencies" and related stipulations as
well as those of the contract.
ARTICLE 7
WORKERS
7.1. Issue of the employment, dismissal, resignation, salaries
and welfare, labor insurance, labor protection, labor discipline,
etc., shall be handled according to the "Provisions of the
People's Republic of China on Labor Management in Chinese-Foreign
Equity Joint Ventures".
7.2. The staff requirements of JVC shall be in accordance with
applicable Chinese Laws and Regulations and written policies
established by the Board of Directors.
7.3. The Joint Venture has the right to give such penalties as
warning, record of demerit, demotion or reduced salaries, to
those who violate the rules and regulations of the Joint Venture.
Those committing serious violations shall be dismissed.
7.4. Wages for workers shall be determined by the Board of
Directors according to the relevant stipulations of PRC and
concrete conditions of JVC and be specified in the labor
contract.
7.5. Welfare, reward, labor protection, labor insurance and other
related issues shall be stipulated in each regulation of JVC
respectively so that normal production and working conditions of
the workers can be ensured.
ARTICLE 8
TRADE UNION ORGANIZATION
8.1. According to the stipulations of the "Trade Union Act of
the People's Republic of China", employees of JVC have the right
to organize a trade union and take part in its activities.
8.2. The trade union of the Joint Venture represents the legal
interest of the workers. Its tasks are as follows: support legal
democratic rights and materials interest of the workers, assist
the JVC in the rational use of welfare and reward funds, organize
the workers to study science and technology, organize sports and
recreational activities, educate the workers to observe labor
discipline and utilize their best efforts to fulfill their tasks.
8.3. The trade union leaders of JVC, at the invitation of the
Board of Directors, can attend relevant meetings and reflect
workers' opinions and rational demands.
8.4. The trade union of the Joint Venture shall take part in
mediations in solving discrepancies and disputes between the
workers and JVC.
8.5. The Joint Venture shall contribute a sum equal to 2% of the
total amount of the workers' salaries per month as trade union
fees. The trade union of JVC shall use the fees according to the
"Management Methods of Trade Union Fees" as stipulated by the
General Trade Union of China.
ARTICLE 9
TERM EXPIRATION AND LIQUIDATION
9.1. The term of JVC is twenty three (23) years, starting from
the date of acquisition of the business license.
9.2. If the Parties agree to extend the term of JVC, the Board
of Directors should pass a resolution. An application for the
extension of JVC term should be submitted to the Ministry of
Foreign Trade and Economic Cooperation or its authorized
department for approval twelve (12) months before the expiration
of the term of JVC. Only then can the formalities to amend the
term be handled at the local industrial and commercial
administration bureau.
9.3. If the Parties unanimously consider it beneficial to
terminate JVC, the JVC contract can be terminated in advance.
The resolution should be made by the Board Meeting with all its
members being present and submitted to and approved by the
authorities concerned.
9.4. Except as otherwise provided below, any party shall have
the lawful right to request termination of JVC provided any of
the following has occurred:
(i) when the term of JVC expires;
(ii) in case JVC can not continue its business due to three
consecutive years of serious losses in its production after the
Commercial Operation Date;
(iii) in case JVC can not continue its business if one party
fails to implement its liabilities and duties as stipulated in
JVC contract and the Articles of Association;
(iv) in case JVC can not continue its business due to serious
losses incurred from force majeure for eighteen (18) consecutive
months after the Commercial Operation Date.
In case of (ii) or (iv), the Board of Directors shall
submit a JVC termination application to the authorities concerned
for approval.
In case of the (iii), the Party failing to implement its
obligations of JVC Contract and the Articles of Association shall
compensate the parties observing the Contract for any losses
incurred.
9.5. Before the expiration or termination of JVC contract, the
Board of Directors should work out a liquidation procedure and
organize a liquidation committee for liquidation.
9.6. The task of the liquidation committee is to check, appraise
on a fair market value and "going concern" basis all the contract
rights, land use rights and the other tangible or intangible
properties, creditor's rights and liabilities of JVC, make a list
of all assets and liabilities and a list of properties, make the
plan of liquidation, and submit all of the documents of
liquidation to the Board of Directors for approval. The
liquidation appraisal shall be conducted by a public accountant
registered in PRC.
9.7. During the period of liquidation, the liquidation committee
shall represent JVC to enter or answer lawsuits.
9.8. All liquidation expenses and remunerations to the members
of the liquidation committee shall have the priority to be paid
out of the existing properties of JVC.
9.9. After paying off all debts of JVC by the liquidation
committee, the remaining properties of JVC should be shared
according to the actual ownership of the Parties. After the
liquidation, the liquidation committee should submit a report and
go through the formalities to cancel JVC registration at the
Industrial and Commercial Administration Bureau, and a public
announcement should be made.
ARTICLE 10
RULES AND REGULATIONS
10.1. The rules and regulations as stipulated by the Board of
Directors of JVC shall include:
(i) Regulations for business management;
(ii) Rules for workers;
(iii) Rules for labor and wages;
(iv) Regulations for promotions, reward and penalty of the
workers;
(v) Regulations of workers' welfare;
(vi) Regulations of financial affairs;
(vii) Procedure of liquidation at the time of JVC
termination;
(viii) Other necessary rules and regulations.
ARTICLE 11
MISCELLANEOUS
11.1. The Board of Directors is authorized to amend and explain
each of the stipulations of the Articles of Association.
11.2. These Articles of Association are written both in English
and Chinese. The Articles of Association in both languages is of
equal validity.
11.3. The Articles of Association become effective concurrent
with JVC Contract.
These Articles of Association for Tangshan Cayman Heat and
Power Co., Ltd. are signed by the authorized representatives of
the Parties in Beijing, PRC, as follows:
Party A: Party B:
Luannan County Pan-Western Energy Co., LLC
Heat & Power Plant
______________________ ______________________________
Zhou Dingpeng Ralph T. Killian
Authorized by and on Senior Vice President
behalf of Party A
Party C:
Tangshan Luanhua (Group) Co.
_______________________
Zhou Dingpeng
Authorized by and on
behalf of Party C
Witnessed by:
China National Machinery
Import & Export Corp.
_______________________
Yang Shengli
Deputy General Manager of
CMC Enterprises Dept.
Dated May 11, 1996
EXHIBIT 10.106
THE ARTICLES OF ASSOCIATION
FOR
TANGSHAN PAN-SINO HEAT CO., LTD.
TABLE OF CONTENTS
ARTICLE 1 General Principle
ARTICLE 2 Total Investment and Registered Capital
ARTICLE 3 Board of Directors
ARTICLE 4 Business Administrative Organization
ARTICLE 5 Profit Sharing
ARTICLE 6 Financial Accounting
ARTICLE 7 Workers
ARTICLE 8 Trade Union Organization
ARTICLE 9 Term, Expiration and Liquidation
ARTICLE 10 Rules and Regulations
ARTICLE 11 Miscellaneous
ARTICLE 1
GENERAL PRINCIPLE
1.1. In accordance with the "Law of the People's Republic of
China on Chinese-Foreign Equity Joint Ventures", Luannan County
Heat Company of Tangshan City, Hebei Province, the People's
Republic of China (PRC) (hereinafter referred to as Party A) and
Pan-Western Energy Corp., LLC of Cayman Islands, British West
Indies (hereinafter referred to as Party B) in signing this
contract hereby establish a Joint Venture Company, Tangshan Pan-
Sino Heat Co., Ltd. (hereinafter referred to as JVC). The
Articles of Association of JVC shall be worked out in accordance
with the articles of the contract.
1.2. JVC shall be a limited liability company.
1.3. All activities of JVC should abide by the stipulations of
the laws, ordinances and related regulations of the People's
Republic of China.
ARTICLE 2
TOTAL INVESTMENT AND REGISTERED CAPITAL
2.1. Each Party should contribute the capital within the period
stipulated in the JVC contract. After the Parties have
contributed the amount committed, JVC should hire an accountant
registered in China for regular audits, and each Party should be
offered investment certificates, which should clarify the name of
JVC, the date of approval, the amount of investment, and the date
of investment, etc.
2.2. In case any party to this JVC contract intends to transfer
its investment share in the JVC to a party which is not a party
to this JVC (Outside Party), it shall require the prior written
consent of the other party hereto. If a Party desires to
transfer its capital investment to an Outside Party, whether
totally or partially, it should be agreed upon by the other Party
and approved by the authorities concerned, and the other Party
shall have the first right of refusal to purchase which right
must be exercised, if exercised, within thirty (30) days after
notice of such proposed transfer is received. The other Party
may waive its first right of refusal to purchase, but shall
reserve the right to choose a subsidiary or affiliate Party as
the assignee. The conditions for such transfer from one Party of
JVC to a Outside Party shall not be more favorable than the
conditions given to any other Party of JVC.
2.3. Any increase or transfer of the registered capital of JVC
should be unanimously agreed upon by the Board of Directors and
approved by the authorities concerned, and must be registered
with the local industrial and commercial administration bureau.
2.4. During the preparation and construction period of JVC
project and before formal start of production, no Party should
transfer its capital investment.
ARTICLE 3
BOARD OF DIRECTORS
3.1. JVC shall have a Board of Directors, which shall have the
supreme authority of JVC.
3.2. The Board of Directors shall make final decisions on all
issues of importance.
Its powers are as follows:
(i) Authority to decide and approve the production plan, annual
business report, turnover of capital, income budget, financial
report, annual profit distribution, etc.;
(ii) Authority to decide and approve the rules and regulations of
JVC;
(iii) Authority to decide issues of production, expansion of
production, stopping production, termination of contracts and the
liquidation of contracts, etc.;
(iv) Authority to make decisions relating to the hiring of the
General Manager, Deputy General Manager, Chief Accountant, and
other senior staff;
(v) Authority to amend the Articles of Association of JVC;
(vi) Authority concerning all important lawsuits or matters of
arbitration relating to JVC;
(vii) Authority over all discussion and decision-making on
any other issues of importance.
3.3. The Board of Directors shall consist of five (5) directors,
one of which shall be assigned by Party A, four (4) shall be
assigned by Party B. The Directors shall hold the office for a
period of four (4) years. The term of office may be renewed by
the nominating Party.
3.4. The Chairman of the Board of Directors shall be assigned by
Party B, and both Party A and Party B shall respectively assign a
Vice Chairman.
3.5. Either party shall give the written notice to the Board of
Directors when assigning and replacing the directors.
3.6. The Board Meeting shall be convened at least once a year.
At the request of at least two (2) directors, the Chairman shall
convene a special Board Meeting of the directors.
3.7. The Board Meeting shall generally be held at its registered
address. Under the circumstances of no board meeting convened in
person, the resolutions signed by all members of the board shall
be deemed as valid as the board resolutions convened in a Board
Meeting.
3.8. The Board Meeting shall be called and presided over by the
Chairman of the Board. In the absence of the Chairman, one Vice
Chairman shall call and preside over the Meeting through the
authority of the Chairman.
3.9. Unless waived in writing or by attendance at the meeting,
the Chairman shall give the board members thirty (30) days
written notice of every meeting, which includes the following
items: content, date and place.
3.10. The Directors unable to attend Board Meeting may send their
alternate director or duly executed written proxy to vote with
the other Directors, otherwise their votes shall be deemed as
waived.
3.11. The Quorum of the Board Meeting shall be four (4)
directors (including Party A's director). Any resolution shall
be invalid if the Quorum is less than four.
3.12 Issues which require unanimous decision of the Board of
Directors shall include:
(i) Amendment of the Articles of Association of JVC;'
(ii) Increase or assignment of the registered capital of JVC;
(iii) Merger of JVC with another corporation;
(iv) Extension, Termination and dissolution of JVC and the
liquidation and wind-up thereof;
(v) Other important issues that the Parties deem it necessary to
have unanimous approval.
3.13. Other matters except those specified in Clause 3.12 shall
be decided by majority vote of the directors then present at any
board meeting (including special board meeting) at which a quorum
is present.
3.14. A detailed written Record of each Board meeting shall be
made and signed by all the attending directors (or their
alternate director or proxy) and be kept both in Chinese and
English versions on file for reference.
ARTICLE 4
BUSINESS ADMINISTRATIVE ORGANIZATION
4.1. The business administrative organization of JVC shall
consist of certain departments which shall be determined by the
Board of Directors.
4.2. JVC shall have one (1) General Manager and two (2) Deputy
General Managers who shall be selected by the Board of Directors.
The General Manager shall be recommended by Party B. Each Party
A and Party B shall recommend a Deputy General Manager.
4.3. The General Manager shall be directly responsible to the
board of Directors, carry out all the decisions of the Board of
Directors, organize and be responsible for routine production,
technology, business and administrative tasks. The Deputy
General Managers shall assist the General Manager in his work.
During the General Manager's absence, to the extent authorised by
the General Manager or the Board of Director, they shall take the
responsibilities of the General Manager on his behalf.
4.4. Decisions of important issues in day-to-day business of JVC
shall be valid only when they are signed by both the General
Manager and the Party A's Deputy General Manager. Issues
requiring joint signatures shall be stipulated by the Board of
Directors.
4.5. The Tenure of office for both the General and the Deputy
General Managers shall be four (4) years. At the authorization of
the Board of Directors, they can be reappointed consecutively.
4.6. Appointed by the Board of Directors, the Chairman and Vice
Chairman of the Board of Directors can take the posts of General
and Deputy General Managers of JVC.
4.7. Neither the General and Deputy General Managers nor Board
members (excluding personnel from China National Machinery Imp. &
Exp. Corp.) shall take the posts of General or Deputy General
Managers of other economic organizations located within a 100
kilometer radius of the primary place of business of JVC within
Luannan County ("the Territory"), nor shall they be involved in
any other economic organizations engaged in commercial
competition with JVC within the Territory.
4.8. JVC shall have one Chief Engineer, and one Chief Accountant
to be appointed by the Board of Directors, and shall report to
the General Manager.
4.9. The General Manager, Deputy General Manager, Chief
Engineer, Chief Accountant and other senior staff shall give
thirty (30) days written notice to the Board of Directors if they
desire to resign from their office.
4.10. The General Manager and each Deputy General Manager can be
dismissed at any time through the resolution passed at the Board
Meeting if they are found to practise graft or be seriously
derelict of their duties or with the approval of the Party
recommending such person for any reason.
ARTICLE 5
PROFIT SHARING
5.1. The Joint Venture shall draw reserve funds, enterprise
development funds, staff reward funds and welfare funds from the
after tax profit, the proportions of which shall be decided by
the Board of Directors.
5.2. The net profit of JVC after paying income tax and drawing
all funds, shall be shared according to the actual ownership of
the registered capital of the Parties.
5.3. The profit of the Joint Venture may be distributed every
three months. Furthermore, calculation for each distribution and
the amount each Party shall be able to share in the previous
quarter shall be determined and announced by the Board of
Directors.
5.4. Profit will not be shared until the loss of the previous
fiscal year has been made up. The profit of all prior fiscal
years retained can be shared together with the current fiscal
year's profit.
ARTICLE 6
FINANCIAL ACCOUNTING
6.1. Financial accounting of JVC shall be made in accordance
with the rules and regulations of financial accounting in PRC, as
stipulated for joint venture enterprises using Chinese and
foreign investment.
6.2. JVC shall use the calendar year as its fiscal year,
starting from January 1st and closing on December 31st.
6.3. All certificates, accounting books and reports should be
written both in English and Chinese.
6.4. JVC shall open both Renminbi and foreign currency accounts
with the Bank of China.
6.5. JVC shall use both debit and credit accounts for its
bookkeeping.
6.6. Within the first three (3) months of each fiscal year, the
accounting department of JVC should compile a list of all assets
& liabilities and a report on profit & loss of the previous
fiscal year, which will be audited and signed by auditors before
being submitted for approval by the Board of Directors.
6.7. JVC shall use Renminbi as the base currency for accounting.
The conversion between Renminbi and other currency shall be
calculated according to the rate of foreign exchanges published
by the State Administration of Foreign Currency of the People's
Republic of China on the date of conversion.
6.8. Any Party of JVC shall have the right to have the
accounting books audited independently at its own expense.
6.9. Foreign currency of JVC shall be handled according to the
"Interim Provisions of the People's Republic of China on
Management of Foreign Currencies" and related stipulations as
well as those of the contract.
ARTICLE 7
WORKERS
7.1. Issue of the employment, dismissal, resignation, salaries
and welfare, labor insurance, labor protection, labor discipline,
etc., shall be handled according to the "Provisions of the
People's Republic of China on Labor Management in Chinese-Foreign
Equity Joint Ventures".
7.2. The staff requirements of JVC shall be in accordance with
applicable Chinese Laws and Regulations and written policies
established by the Board of Directors.
7.3. The Joint Venture has the right to give such penalties as
warning, record of demerit, demotion or reduced salaries, to
those who violate the rules and regulations of the Joint Venture.
Those committing serious violations shall be dismissed.
7.4. Wages for workers shall be determined by the Board of
Directors according to the relevant stipulations of PRC and
concrete conditions of JVC and be specified in the labor
contract.
7.5. Welfare, reward, labor protection, labor insurance and other
related issues shall be stipulated in each regulation of JVC
respectively so that normal production and working conditions of
the workers can be ensured.
ARTICLE 8
TRADE UNION ORGANIZATION
8.1. According to the stipulations of the "Trade Union Act of
the People's Republic of China", employees of JVC have the right
to organize a trade union and take part in its activities.
8.2. The trade union of the Joint Venture represents the legal
interest of the workers. Its tasks are as follows: support legal
democratic rights and materials interest of the workers, assist
the JVC in the rational use of welfare and reward funds, organize
the workers to study science and technology, organize sports and
recreational activities, educate the workers to observe labor
discipline and utilize their best efforts to fulfill their tasks.
8.3. The trade union leaders of JVC, at the invitation of the
Board of Directors, can attend relevant meetings and reflect
workers' opinions and rational demands.
8.4. The trade union of the Joint Venture shall take part in
mediations in solving discrepancies and disputes between the
workers and JVC.
8.5. The Joint Venture shall contribute a sum equal to 2% of the
total amount of the workers' salaries per month as trade union
fees. The trade union of JVC shall use the fees according to the
"Management Methods of Trade Union Fees" as stipulated by the
General Trade Union of China.
ARTICLE 9
TERM EXPIRATION AND LIQUIDATION
9.1. The term of JVC is twenty-three (23) years, starting from
the date of acquisition of the business license.
9.2. If the Parties agree to extend the term of JVC, the Board
of Directors should pass a resolution. An application for the
extension of JVC term should be submitted to the Ministry of
Foreign Trade and Economic Cooperation or its authorized
department for approval twelve (12) months before the expiration
of the term of JVC. Only then can the formalities to amend the
term be handled at the local industrial and commercial
administration bureau.
9.3. If the Parties unanimously consider it beneficial to
terminate JVC, the JVC contract can be terminated in advance.
The resolution should be made by the Board Meeting with all its
members being present and submitted to and approved by the
authorities concerned.
9.4. Except as otherwise provided below, any party shall have
the lawful right to request termination of JVC provided any of
the following has occurred:
(i) when the term of JVC expires;
(ii) in case JVC can not continue its business due to three
consecutive years of serious losses in its production after the
Commercial Operation Date;
(iii) in case JVC can not continue its business if one party
fails to implement its liabilities and duties as stipulated in
JVC contract and the Articles of Association;
(iv) in case JVC can not continue its business due to serious
losses incurred from force majeure for eighteen (18) consecutive
months after the Commercial Operation Date.
In case of (ii) or (iv), the Board of Directors shall
submit a JVC termination application to the authorities concerned
for approval.
In case of the (iii), the Party failing to implement its
obligations of JVC Contract and the Articles of Association shall
compensate the parties observing the Contract for any losses
incurred.
9.5. Before the expiration or termination of JVC contract, the
Board of Directors should work out a liquidation procedure and
organize a liquidation committee for liquidation.
9.6. The task of the liquidation committee is to check, appraise
on a fair market value and "going concern" basis all the contract
rights, land use rights and the other tangible or intangible
properties, creditor's rights and liabilities of JVC, make a list
of all assets and liabilities and a list of properties, make the
plan of liquidation, and submit all of the documents of
liquidation to the Board of Directors for approval. The
liquidation appraisal shall be conducted by a public accountant
registered in PRC.
9.7. During the period of liquidation, the liquidation committee
shall represent JVC to enter or answer lawsuits.
9.8. All liquidation expenses and remunerations to the members
of the liquidation committee shall have the priority to be paid
out of the existing properties of JVC.
9.9. After paying off all debts of JVC by the liquidation
committee, the remaining properties of JVC should be shared
according to the actual ownership of the Parties. After the
liquidation, the liquidation committee should submit a report and
go through the formalities to cancel JVC registration at the
Industrial and Commercial Administration Bureau, and a public
announcement should be made.
ARTICLE 10
RULES AND REGULATIONS
10.1. The rules and regulations as stipulated by the Board of
Directors of JVC shall include:
(i) Regulations for business management;
(ii) Rules for workers;
(iii) Rules for labor and wages;
(iv) Regulations for promotions, reward and penalty of the
workers;
(v) Regulations of workers' welfare;
(vi) Regulations of financial affairs;
(vii) Procedure of liquidation at the time of JVC
termination;
(viii) Other necessary rules and regulations.
ARTICLE 11
MISCELLANEOUS
11.1. The Board of Directors is authorized to amend and explain
each of the stipulations of the Articles of Association.
11.2. These Articles of Association are written both in English
and Chinese. The Articles of Association in both languages is of
equal validity.
11.3. The Articles of Association become effective concurrent
with JVC Contract.
These Articles of Association for Tangshan Pan-Sino Heat
Co., Ltd. are signed by the authorized representatives of the
Parties in Beijing, PRC, as follows:
Party A: Party B:
Luannan County Pan-Western Energy Co., LLC
Heat Company
______________________ ______________________________
Zhao Xiuchen Darol S. Lindloff
Authorized by and on Senior Vice President
Behalf of Party A
Witnessed by:
China National Machinery
Import & Export Corp.
_______________________
Yang Shengli
Deputy General Manager of
CMC Enterprises Dept.
Dated May 28, 1996
EXHIBIT 10.107
TANGSHAN PANDA HEAT AND POWER CO., LTD. AND
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
Tang-pan-dian-zi (1995) #1
Application Regarding Power Price
Tangshan Municipal Price Bureau:
Tangshan Panda Heat and Power Co., Ltd. And Tangshan Pan-Western
Heat and Power Co., Ltd. Are Joint Ventures between Luannan Heat
and Power Plant, Luanhua Group Co. and Pan-Western Energy Corp.,
LCC (hereinafter "Joint Ventures"). The Joint Ventures have
registered with Tangshan Office of the State Administration for
Industry and Commerce in September 1995 and plan to build power
plants with 2 X 50 MW capacity. According to the Joint Venture
Contracts, in addition to the registered capital contributions
from the Joint Venture partners, the Projects will be financed
via foreign partner by international project financing. To
evaluate the financial situation for the Projects, the lenders
need a commitment from the Municipal Price Bureau on a reasonable
Planned Wholesale Price for electricity. Through calculation,
the Projects' reasonable Planned Wholesale Power Price should be
[***] REDACTED LANGUAGE, AS WELL AS EXHBITS 1, 2 AND 6 HERETO,
FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT. (Pages 1 and 5 hereof.)
This power price is only for project financial evaluation. Based
on actual situation, the Joint Ventures will apply for actual
Initial Wholesale Power Price upon operation based on the
calculation procedures approved by the Price Bureau as per the
Exhibits attached hereto. Periodically, the Joint Ventures shall
be able to adjust the Wholesale Price in accordance with changed
conditions based on the calculation procedures in the Exhibits
attached hereto.
October 17, 1995
(Corporate Seal of (Corporate Seal of
Tangshan Pan-Western Tangshan Panda
Heat and Power Co., Ltd.) Heat and Power Co., Ltd.)
Exhibit 3
Adjustment of Planned Wholesale Price
To Initial Wholesale Price
Thirty (30) days prior to Commercial Operation Date as defined in
the "General Interconnection Agreement" described below, Tangshan
Panda Heat and Power Co., Ltd. and Tangshan Pan-Western Heat and
Power Co., Ltd. and the Tangshan Municipal Price Bureau will
adjust the Planned Wholesale Price to the Initial Wholesale Price
in accordance with the following procedure. The Tangshan
Municipal Price Bureau will approve the Initial Wholesale Price
as so adjusted, which Initial Wholesale Price shall be the
initial "Price for Electric Energy Delivered" under the General
Interconnection Agreement dated September 22, 1995 between North
China Power Group Company and the Joint Ventures and the Sub
Agreements described therein, and shall be adjusted as described
herein. Such approval will be made prior to the Commercial
Operation Date.
A. Total Investment Cost
1. The budgeted costs from the Total Investment Budget attached
hereto as Exhibit 1 will be adjusted up or down based on actual
costs to determine the Total Investment Cost.
2. The actual costs will be supported by actual Financial
Closing Statements or Invoice Statements or other such support
documents.
3. If actual costs are incurred in US$, the actual cost will be
adjusted to Yuan based on the Yuan / US$ Exchange at that time of
the expenditure.
4. The sum of the adjusted costs will become the Total
Investment Cost.
B. Initial Wholesale Price
1. The components of the Planned Wholesale Price (in 1995 Yuan)
will be adjusted up or down to determine the Initial Wholesale
Price.
2. Each component will be multiplied by an Adjustment Factor
(shown on "Planned Wholesale Price" Exhibit 2 and defined on the
"Adjustment Factors Definitions" Exhibit 5) from the 1995
Yuan/kWh Price to a price for the year in which Commercial
Operation Date occurs (Initial Year).
3. The total of the adjusted components for the Initial Year
will become incorporated into the Initial Wholesale Price.
Exhibit 4
Adjustment to Initial Wholesale Price
After Commercial Operations Date to Adjusted Wholesale Price
After the Commercial Operation Date, the Joint Ventures may
request an adjustment to the Initial Wholesale Price. This
adjusted price is referred to as the "Adjusted Wholesale Price",
which shall also be the "Price for Electric Energy Delivered"
under the General Interconnection Agreement and the Sub
Agreements described therein. The Joint Ventures shall have the
right to request a determination of a new Adjusted Wholesale
Price whenever the Joint Ventures determine that changes in the
components of the Wholesale Price require a new determination.
The adjustment will be in accordance with the following
procedure. The Price Bureau will approve the Adjusted Wholesale
Price as so determined. Such approval will be made in a timely
manner.
1. Each component of the Initial Wholesale Price will be
adjusted by the Adjustment Factors (shown on Exhibit 2 labeled
"Planned Wholesale Price" and defined in Exhibit 5 labeled
"Adjustment Factors Definitions") to the year in which the
Adjusted Wholesale Price is in effect ("Adjustment Year").
2. The total of the adjusted components for the Adjustment Year
will become incorporated into the new Adjusted Wholesale Price.
Exhibit 5
The Adjustment Factor Definitions
A = Coal Factor
= Initial Year or Adjustment Year Coal Price (Yuan/metric
ton) 135 Yuan/metric ton for 1995 Coal Price
B = Chinese Price Index
= Change in Overall Chinese Price Index between 1995 and
Initial Year or Adjustment Year as published by the State
Statistics Bureau.
C = US$ Exchange/Inflation Adjustment
= Initial Year or Adjustment Year Yuan/US$ Exchange Rate
8.5 Yuan/US$ x US Inflation Increase according to the US
Consumer Price Index (CPI) between 1995 and Initial Year or
Adjustment Year
D = US$ Exchange Adjustment
= Initial Year or Adjustment Year Yuan/US$ Exchange Rate 8.5
Yuan/US$
E = Actual Tax Adjustment
= Adjustment for actual taxes to be incurred during year
F = Total Investment Cost Adjustment
= Total Investment Cost Total Investment Budget
G = Profit Deferral/Recovery Adjustment
= Adjustment for the deferral or recovery of the deferred
profit based on the percentage of registered capital shown
in the Profit Deferral/Recovery Table under the heading
"Profit Deferral/Recovery" for the appropriate year.
H = Interest on Profit Deferral Adjustment
= 18% x [the % of Registered Capital amount shown in the
Profit Deferral/Recovery Table under the heading
"Outstanding Average Profit Deferral" for the appropriate
year] x Registered Capital
T A N G S H A N M U N I C I P A L P R I C E B U R E A U
Tangshan-jia-zhong-han-zi [1995] #16
Tangshan Panda Heat and Power Co., Ltd., and
Tangshan Pan-Western Heat and Power Co., Ltd.:
The application Tang-pan-dian-zi (1995) #1 dated October 17, 1995
from your Companies has been duly received. After study of the
said document, we approve the following points:
1. Agreed to use
[***] REDACTED LANGUAGE, AS WELL AS EXHIBITS 1, 2 AND 6
HERETO, FILED SEPARATELY WITH THE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT. (Pages 1 and 5 hereof.)
as your Planned Wholesale Power Price which is only for
project financial evaluation.
2. Thirty days before the Commercial Operation Date, based on
the method suggested in your application for the Planned
Wholesale Power Price and in accordance with the shui-cai-zi 87
(101) Document issued by the Ministry of Water Conservancy and
Electric Power, or its replacement governmental document, the
Initial Wholesale Power Price will be submitted to our Bureau for
approval.
3. Future Wholesale Power Price Adjustment calculated in
similar method as stated in paragraph 2 hereof shall be submitted
to our Bureau for approval.
Tangshan Municipal Price Bureau
(Official Seal)
October 18, 1995
T A N G S H A N M U N I C I P A L P R I C E B U R E A U
Tangshan-jia-zhong-han-zi [1995] #25
Tangshan Panda Heat and Power Co., Ltd.:
Tangshan Pan-Western Heat and Power Co., Ltd.:
We have discussed the adjustment method for your Wholesale
Power Price in our Tang-jia-zhong-han-zi [1995] #16 Document. If
there is any changes regarding your delivered coal price,
adjustment of the Wholesale Power Price will be considered in the
next price adjustment.
Tangshan Municipal Price Bureau
(Seal)
May 8, 1996
EXHIBIT 10.108
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this
"Agreement"), dated as of April 22, 1997, is by and between
PANDA ENERGY INTERNATIONAL, INC., a Texas corporation
("Panda International"), and PANDA GLOBAL HOLDINGS, INC., a
Delaware corporation ("Panda Global").
W I T N E S S E T H :
WHEREAS, Panda Global is engaged, directly or
through direct and indirect subsidiaries, in (a) the
development, equipping, financing, construction, ownership,
operation, maintenance and management of certain electric
power generation facilities, sources of fuel, pipeline and
other infrastructure projects; (b) the marketing of electric
power, thermal energy and fuel; (c) the borrowing and
lending of funds in connection with the financing of any of
the foregoing; and (d) any other activities related or
incidental thereto (collectively, the "Activities"); and
WHEREAS, Panda Global desires that Panda
International provide certain services required by Panda
Global for or in support of such Activities; and
WHEREAS, Panda International is willing to provide
such services;
NOW, THEREFORE, in consideration of the agreements
and covenants hereinafter set forth, and intending to be
legally bound hereby, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. As used herein, the
following terms shall have the following meanings:
"Applicable Laws" means all laws, statutes,
judgments, decrees, injunctions, writs and orders of any
court, arbitrator or governmental agency or authority and
rules, regulations, orders, interpretations and permits of
any governmental body, agency or authority or court or other
body having jurisdiction over the Projects (as hereinafter
defined) or the Activities of either party, the transmission
of electricity in the United States or other countries, and
the performance of the Activities or the Services or
obligations to be performed hereunder, as may be in effect
from time to time.
"Competent Authority" means any court of law,
person, body or other authority having jurisdiction over
Panda Global, Panda International, any Project or any party
under or mentioned in any Project Document.
"Development Services Agreement" means that
certain Development Services Agreement dated as of even date
herewith between Panda International and Panda Global.
"Financial Closing" means, with respect to a
Project, (a) the first to occur of the closing of the
initial construction or long-term project financing for such
Project or (b) in the case of a Project that is acquired
after it has been constructed, the closing of the
acquisition financing with respect to such Project.
"Indentures" means, collectively, the Trust
Indenture dated as of April 22, 1997 by and between Panda
Global and Bankers Trust Company, as trustee, as
supplemented by the First Supplemental Indenture thereto
dated as of the same date, and the Trust Indenture dated as
of April 22, 1997 by and between Panda Global Energy Company
and Bankers Trust Company, as trustee, as supplemented by
the First Supplemental Indenture thereto dated as of the
same date.
"Project" means each of (i) a 180 megawatt natural
gas-fired, combined cycle cogeneration facility located in
Roanoke Rapids, North Carolina, and owned by an indirect
subsidiary of Panda Global; (ii) a 230 megawatt natural gas-
fired, combined-cycle cogeneration facility located in
Brandywine, Maryland, and leased by an indirect wholly-owned
subsidiary of Panda Global pursuant to a long-term leveraged
lease; (iii) a 2x50 megawatt coal-fired cogeneration
facility (the "Luannan Facility") to be constructed and
located in Luannan County, Tangshan Municipality, Hebei
Province, People's Republic of China and indirectly majority-
owned by a wholly-owned subsidiary of Panda Global; and (iv)
any other project relating to an Activity which reaches
Financial Closing and is owned by Panda Global or a
Subsidiary of Panda Global.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, limited
liability company, or other business entity.
"Project Document" means any agreement with
respect to any Project, the Services or the Activities.
"Services" has the meaning set forth in Section
2.1(a) hereof.
"Subsidiary" means, with respect to any Person,
(i) any corporation, association or other business entity of
which at least 50% of the total voting power of shares of
capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a
combination thereof), (ii) any partnership (a) the sole
general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof) and
(iii) any Person in which (a) at least a 25% direct or
indirect ownership or equivalent interest is held by such
Person or by one or more Subsidiaries of such Person (or a
combination thereof) and (b) such Person, directly or
indirectly, has a controlling influence over the management
and policies with respect to the Person, 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 the Person.
Section 1.2. Interpretation.
(a) All terms defined in this Agreement
shall have the defined meanings when used in any notice,
certificate or other document made or delivered pursuant
hereto.
(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 article
and section references are to this Agreement unless
otherwise specified.
ARTICLE II
SERVICES
Section 2.1. Services of Panda International.
(a) Panda International shall perform and
provide to Panda Global and its Subsidiaries administrative
services in connection with the Projects owned by Panda
Global or its Subsidiaries and Activities related to such
Projects, including, without limitation:
(i) preparing and monitoring of all budgets and
actual costs of all Activities;
(ii) selecting, contracting for, supervising,
managing and coordinating all engineers, architects,
lawyers, accountants, financial advisors, investment
bankers, agents, consultants, contractors,
subcontractors, equipment vendors, operations and
maintenance firms, and other vendors and suppliers and
also perform services relating to all such functions
directly through its own employees or agents;
(iii) providing and maintaining all information
and equipment necessary for provision of the Services
hereunder;
(iv) consulting and assisting in the arrangement
and placement of all insurance coverage relating to the
Projects, Panda Global or any Subsidiary of Panda
Global;
(v) arranging and negotiating for financing of
the Projects;
(vi) conducting and negotiating contracts and
other arrangements pertaining to the Activities,
including without limitation contracts for the
provision of fuel, equipment, materials, construction
services and operation and maintenance services;
(vii) providing equipment, files, offices,
computers, furnishings, copiers, fax machines,
telephones and other audio and visual equipment and
devices, training, data processing, and other office
supplies and materials;
(viii) providing accounting, budgeting,
engineering, tax, legal, investment consulting, public
and industrial relations, human resources management,
payroll, wage, health and benefit plans for the benefit
of any employees of the parties, insurance consulting,
business development, real estate, leasing, purchasing,
obtaining permits, approvals or licenses and other
services in connection with the Activities and Services
and payroll, wage, health and benefit plans for any
employees of Panda Global and any Subsidiary of Panda
Global;
(ix) preparing and maintaining records of
accounts and of technical operations of facilities and
all reports, statements, data and information that may
be required from time to time under Project Documents
or by any governmental authority;
(x) opening and maintaining bank accounts and
performing cash management functions in connection with
the operation of facilities, including the payment of
costs, expenses, rentals and taxes incurred in
connection with the management of the Projects and
other facilities; and
(xi) preparing all federal, state, provincial,
local and foreign tax returns of Panda Global and its
Subsidiaries.
(xii) provide construction management services
including, without limitation, supervision and
management of the design, engineering and construction
of facilities for such Project, and taking all steps as
are necessary to assure that such facilities are
constructed in accordance with generally accepted
engineering practices, generally accepted construction
procedures, applicable construction contracts and
Applicable Laws and governmental permits, licenses and
approvals, on schedule and within budget;
(xiii) supervising and managing the operations and
maintenance of facilities for such Project in
accordance with applicable standards and requirements,
including, without limitation, good engineering and
operating practices and such standards as are set forth
in power purchase agreements and other documents
relating to the Project;
(xiv) obtaining and maintaining all governmental
permits, licenses and approvals required in connection
with the Projects and the Activities;
(xv) obtaining and maintaining insurance as is
required under various Project Documents;
(xvi) preparing periodic reports setting forth
fuel consumption, electrical production, operating
costs and other matters as required under Project
Documents;
(xvii) providing all other services required by any
contract for operations and maintenance services which
may be entered;
(xviii) overall project management, annual
operations auditing and reporting, performance and
efficiency testing, review and reporting, maintenance
planning assistance and safety and environmental
planning and performance services, inventory tracking
and control systems, contract and asset administration
and management services, warranty administration and
all problem resolution activity including without
limitation, litigation;
(xix) arranging for travel and living
arrangements incurred by Panda International employees,
agents or other personnel performing any Services
hereunder; and
(xx) arranging for the provision of litigation
services related to the Projects.
Such services are herein referred to as "Services." The
parties hereto intend that the Services to be rendered by
Panda International under this Agreement and the Services
(as defined therein) to be rendered by Panda International
under the Development Services Agreement shall encompass the
totality of the services to be provided by Panda
International to Panda Global and its Subsidiaries in
connection with the Activities (as defined herein and in the
Development Services Agreement).
(b) Panda International shall at all times
provide or cause to be provided the Services in accordance
with and subject to standards, practices, methods and
procedures conforming to Applicable Laws and substantially
in accordance with all Project Documents. The Services
shall be provided on terms that are no less favorable to
Panda Global or its Subsidiaries, as the case may be, than
those that could have been obtained in a comparable
transaction on an arm's-length basis from a Person that is
not an Affiliate of Panda Global or its Subsidiaries, as
reasonably determined by Panda International.
(c) Panda International shall retain sole
responsibility for selection, hiring, dismissal, assigning
and supervising of all personnel (including the obtaining,
maintaining and (where necessary) renewing of work permits
and any other necessary permissions, registrations,
authorizations, licenses and permits in relation to such
personnel) required for the performance of the Services.
(d) Panda International may replace or remove any
personnel involved in the provision of the Services without
the approval of Panda Global. The selection of replacement
personnel shall be at the sole discretion of Panda
International.
(e) Panda International may engage such persons,
firms or companies (including affiliates of Panda
International and their employees and agents) as it deems
necessary for the purpose of performing the Services.
(f) Notwithstanding anything in this Agreement to
the contrary, the management and business of Panda Global
shall at all times be subject to the overall direction of
the Board of Directors of Panda Global.
Section 2.2. Authority of Panda International.
Panda International shall have all such authority to act on
behalf of Panda Global and its Subsidiaries as is necessary
to provide the Services and to fulfill its other obligations
pursuant to this Agreement.
Section 2.3. Obligations of Panda Global. Panda
Global shall do and cause to be done all such acts and
things within its power as may be necessary or desirable to
enable Panda International promptly and efficiently to
provide or cause to be provided the Services and comply with
its other obligations hereunder and shall not do or permit
anything which may prevent or restrict Panda International
from such performance or compliance. Without limiting the
generality of the previous sentence, Panda Global shall:
(i) pay or cause the prompt payment to Panda
International of all sums due to it under this
Agreement; and
(ii) observe and perform, and cause each of its
Subsidiaries to observe and perform, all its
obligations under all Project Documents to which it is
a party, except to the extent that observance or
performance is excused thereunder pursuant to the terms
thereof.
Section 2.4. Payment for Services.
(a) Subject to Section 2.4(d), from time to time
during the term of this Agreement, promptly upon receipt of
an invoice therefor, Panda Global shall reimburse Panda
International for its costs in performing the Services
(whenever and howsoever such costs were incurred),
including, without limitation, labor costs of Panda
International's officers, directors, employees, agents,
contractors, consultants or any other person engaged by it,
allocable to such Services and overhead costs allocable to
such Services and the costs incurred by Panda International
and such persons in providing such Services and in engaging
other persons, firms or companies (including affiliates of
Panda International and their employees and agents) for the
purpose of performing such Services. Allocated overhead
costs shall be determined in accordance with Panda
International's standard method of computing overhead but in
any event shall be allocated on a reasonable basis. Labor
costs shall include, without limitation, salaries, wages,
bonuses and expenses incurred in connection with employee
health and benefit plans (other than stock option, stock
ownership or deferred compensation plans) maintained or
adopted by Panda International for the benefit of its
employees. With respect to Services provided by a
Subsidiary of Panda International or by a third-party
provider, Panda International may direct that payment for
such Services be made by Panda or a Subsidiary of Panda
Global directly to such Subsidiary or other third-party
provider, and Panda Global or a Subsidiary of Panda Global
shall make such payment as so directed.
(b) If any payment to Panda International, or to
any Subsidiary of Panda International, which becomes due
under this Agreement remains unpaid after the date on which
funds are available to make such payment under the
Indentures, such payment shall accrue interest daily at the
rate of 2% per annum above the base rate declared from time
to time by Morgan Guaranty Trust Company of New York from
the day after the date on which payment was due until the
date payment is actually received. The right of either
party to receive interest in respect of the late payment of
any sum due shall be without prejudice to such other rights
which it may have in respect of such late payment.
(c) Panda Global shall be entitled to conduct an
audit and review of all fees, costs and expenses payable
hereunder, together with all supporting documentation. Any
such audit shall be conducted by a nationally recognized
accounting firm acceptable to Panda International. If such
audit reveals that Panda Global has paid sums to Panda
International to which, in accordance with the provisions of
this Agreement, Panda International was not entitled, then
Panda International shall forthwith repay such sums to Panda
Global together with interest accrued thereon at the rate
specified in Section 2.4(b) and shall at the same time pay
to Panda Global any reasonable fees, costs and expenses
involved in carrying out such audit where the amount of the
repayment exceeds by at least $25,000 the amount first paid
to Panda International.
(d) Notwithstanding anything provided elsewhere
herein, Panda Global shall be obligated to make payments to
Panda International (or as directed by Panda International)
under invoices received from Panda International only when
funds are available to Panda Global for such payments
pursuant to the terms of the Indentures. Panda
International agrees to provide Panda Global with such
documentation and certificates as may be requested by Panda
Global in order to comply with the requirements of the
Indentures for the release of funds to make payments under
this Agreement.
ARTICLE III
TERM AND TERMINATION
Section 3.1. Term. The term of this Agreement
shall commence as of the date hereof and, unless earlier
terminated as provided herein or by mutual written agreement
of the parties hereto, shall terminate on March 31, 2007.
Section 3.2. Termination.
(a) This Agreement may be terminated by either
party with or without cause, provided that such party has
given 120 days' written notice to the other party and the
Trustee. Furthermore, this Agreement may be terminated
immediately by either party upon the institution of
voluntary or involuntary proceedings in bankruptcy,
reorganization, dissolution or liquidation of the other
party.
ARTICLE IV
INSURANCE
Section 4.1. Insurance. During the term of this
Agreement, Panda International shall maintain public
liability and worker's compensation insurance with insurers
of recognized financial responsibility in such amounts and
providing such coverages as shall be customary for companies
engaged in similar businesses.
ARTICLE V
LIMITATION OF LIABILITY
Section 5.1. Limitation of Liability. Neither
party shall be liable to the other party for any special or
consequential damages arising from or connected with its
performance hereunder or any breach of its obligations
hereunder.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification.
(a) Panda Global shall indemnify, defend and hold
Panda International, its directors, officers, employees and
agents and its and their successors, assigns and personal
representatives (collectively, the "Indemnitees") harmless
from and against all damages, losses or expenses, claims or
causes of action of every kind or character suffered or paid
as a result of any and all claims, demands, suits,
penalties, causes of action, proceedings, judgments,
administrative and judicial orders and liabilities
(including reasonable fees of counsel incurred in any
litigation or otherwise) (collectively, "Losses") assessed,
incurred or sustained by or against such indemnified party
with respect to or arising out of any action taken or
omitted to be taken in connection with the Services or
otherwise in connection with this Agreement, except to the
extent that (i) any such Losses result from or arise out of
any action taken or omitted to be taken not in good faith or
not in a manner the Indemnitee reasonably believed to be in
or not opposed to the best interest of Panda Global or
(ii) any such Losses result from or arise out of the gross
negligence or willful misconduct of the indemnified party.
(b) In the event of the occurrence of any event
which is an indemnifiable event pursuant to this Section
6.1, Panda Global will notify the indemnifying party
promptly. If such event involves the claim of any third
person not a party hereto and Panda Global confirms in
writing its responsibility therefor, Panda Global will have
sole control over, and will assume all expenses with respect
to, the defense or settlement of such claim; provided, that
(i) Panda International will be entitled, at its expense, to
participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such
claim, (ii) Panda Global will obtain the prior written
approval of Panda International before entering into any
settlement of such claim or ceasing to defend against such
claim, if, pursuant to or as a result of such settlement or
cessation, injunctive or similar relief would be imposed
against Panda Global, and (iii) Panda Global will not be
entitled to control (but will be entitled to participate at
its own expense in the defense of), and Panda International
will be entitled to have sole control over, the defense or
settlement of any claim to the extent (and only to the
extent) the claim seeks an order, injunction or other
equitable relief against Panda International which, if
successful, could materially interfere with the business,
assets, liabilities, obligations, prospects, financial
condition or results of operations of Panda International.
If Panda Global does not assume sole control over the
defense or settlement of such claim as provided in this
Section 6.1(b), Panda International will have the right to
defend and settle the claim in such manner as it may deem
appropriate at the cost and expense of Panda Global, and
Panda Global will promptly reimburse Panda International
therefor in accordance with this Section 6.1.
(c) Notwithstanding anything provided in Section
6.1(a) and (b), no Indemnitee shall be entitled to
indemnification hereunder to the extent that any Losses
otherwise subject to indemnification are covered by
insurance.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1. Representations and Warranties.
Panda International and Panda Global each represents and
warrants to the other that (a) it is a corporation duly
organized, validly existing and in good standing under the
laws of the state of its incorporation and is in good
standing in all other jurisdictions where necessary in light
of the business and properties it conducts and owns and
intends to conduct and own, and has full power, authority
and legal right to incur the obligations provided for in
this Agreement; (b) the execution, delivery and performance
of this Agreement does not and will not (i) require any
consent or approval of its shareholders, (ii) violate any
provision of its charter or by-laws, or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect, (iii) result in
a breach of or constitute a default under its charter or by-
laws or any indenture or loan or credit agreement or other
material agreement, lease or instrument to which it is a
party or by which it or its properties may be bound or
affected, or (iv) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any
nature upon or with respect to any of the properties now
owned or hereafter acquired by it; and (c) upon execution
and delivery hereof, this Agreement is the legal, valid and
binding obligation enforceable against it in accordance with
the terms hereof, except as the enforceability hereof may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other such laws affecting the
rights of creditors generally and subject to general
equitable principles.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Further Assurances. If either
party reasonably determines or is reasonably advised that
any further instruments, actions or things are necessary or
desirable to carry out the terms of this Agreement, upon the
request of such party the other party shall execute and
deliver all such instruments, perform all such actions and
provide all such things reasonably necessary and proper to
carry out the terms of this Agreement.
Section 8.2. Entire Agreement. This Agreement
contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all
prior negotiations and understandings. Neither of the
parties shall be bound by or be deemed to have made any
representations, warranties or commitments except those
contained herein or in the documents delivered pursuant
hereto.
Section 8.3. Counterparts. This Agreement may
be executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute one
agreement.
Section 8.4. GOVERNING LAW. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 8.5. Assignability. The terms and
provisions of this Agreement, and the respective rights,
obligations and duties hereunder of Panda Global and Panda
International are not assignable by either Panda Global or
Panda International and any assignment thereof shall be
void, except (i) Panda International, without relieving
itself of any liability hereunder, may engage agents or
subcontractors to provide the services described herein,
(ii) Panda International may assign any and all of its
rights to payments made, due or to become due hereunder, and
(iii) Panda Global, without relieving itself of any
liability hereunder, may assign its rights and obligations
hereunder to any direct or indirect Subsidiary of Panda
Global or to any party that provides financing to Panda
Global or any direct or indirect Subsidiary of Panda Global.
Section 8.6. Binding Effect. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns. This Agreement is not made for the benefit of any
person or entity not a party hereto, and nothing in this
Agreement shall be construed as giving any person or entity,
other than the parties hereto and their respective
successors and permitted assigns, any right, remedy or claim
under or in respect of this Agreement or any provision
hereof.
Section 8.7. Headings. The headings used in
this Agreement are for convenience only and shall not affect
the construction of any of the terms of this Agreement.
Section 8.8. Notices. All notices or other
communications which are required or permitted hereunder
shall be in writing and shall be deemed sufficiently given
if delivered personally, or by courier, or sent by facsimile
or by registered or certified mail, postage prepaid, as
follows:
If to Panda International:
Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Facsimile: (972) 980-6815
Attention: General Counsel
If to Panda Global:
Panda Global Holdings, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Facsimile: (972) 980-6815
Attention: General Counsel
or to such other person or address as the addressee may have
specified in a notice duly given to sender as provided
herein. Such notice of communication shall be deemed to
have been given as of the date received.
Section 8.9. Amendment. Neither party hereto
shall be bound by any termination, amendment, supplement,
waiver or modification of any term hereof unless such party
shall have consented thereto in writing.
Section 8.10. No Implied Waiver. No delay or
failure on the part of any party in exercising any right,
remedy, power or privilege provided herein or by statute or
at law or in equity shall operate as a waiver thereof, and
no partial or single exercise thereof shall preclude any
other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be duly executed on its behalf on
the date first above written.
PANDA ENERGY INTERNATIONAL, INC.
By
Name:
Title:
PANDA GLOBAL HOLDINGS, INC.
By
Name:
Title:
EXHIBIT 10.109
DEVELOPMENT SERVICES AGREEMENT
This DEVELOPMENT SERVICES AGREEMENT (this
"Agreement"), dated as of April 22, 1997, is by and between
PANDA ENERGY INTERNATIONAL, INC., a Texas corporation
("Panda International"), and PANDA GLOBAL HOLDINGS, INC., a
Delaware corporation ("Panda Global").
W I T N E S S E T H :
WHEREAS, Panda Global is engaged, directly or
through direct and indirect subsidiaries, in (a) the
development, equipping, financing, construction, ownership,
operation, maintenance and management of certain electric
power generation facilities, sources of fuel, pipeline and
other infrastructure projects ("Projects"); (b) the
marketing of electric power, thermal energy and fuel;
(c) the borrowing and lending of funds in connection with
the financing of any of the foregoing; and (d) any other
activities related or incidental thereto (collectively the
"Activities"); and
WHEREAS, Panda Global desires that Panda
International provide certain services required by Panda
Global for or in support of such Activities; and
WHEREAS, Panda International is willing to provide
such services;
NOW, THEREFORE, in consideration of the agreements
and covenants hereinafter set forth, and intending to be
legally bound hereby, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. As used herein, the
following terms shall have the following meanings:
"Administrative Services Agreement" means that
certain Administrative Services Agreement dated as of even
date herewith between Panda International and Panda Global.
"Applicable Laws" means all laws, statutes,
judgments, decrees, injunctions, writs and orders of any
court, arbitrator or governmental agency or authority and
rules, regulations, orders, interpretations and permits of
any governmental body, agency or authority or court or other
body having jurisdiction over the Projects or the Activities
of either party, the transmission of electricity in the
United States or other countries, and the performance of the
Activities or the Services or obligations to be performed
hereunder, as may be in effect from time to time.
"Competent Authority" means any court of law,
person, body or other authority having jurisdiction over
Panda Global, Panda International, any Project or any party
under or mentioned in any Project Document.
"Financial Closing" means, with respect to a
Project, (a) the first to occur of the closing of the
initial construction or long-term project financing for such
Project or (b) in the case of a Project that is acquired
after it has been constructed, the closing of the
acquisition financing with respect to the Project.
"Indentures" means, collectively, the Trust
Indenture dated as of April 22, 1997 by and between Panda
Global and Bankers Trust Company, as trustee, as
supplemented by the First Supplemental Indenture thereto
dated as of the same date, and the Trust Indenture dated as
of April 22, 1997 by and between Panda Global Energy Company
and Bankers Trust Company, as trustee, as supplemented by
the First Supplemental Indenture thereto dated as of the
same date.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, limited
liability company, or other business entity.
"Project Document" means any agreement with
respect to any Project, the Services or the Activities.
"Services" has the meaning set forth in Section
2.1(c) hereof.
"Subsidiary" means, with respect to any Person,
(i) any corporation, association or other business entity of
which at least 50% of the total voting power of shares of
capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a
combination thereof), (ii) any partnership (a) the sole
general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof) and
(iii) any Person in which (a) at least a 25% direct or
indirect ownership or equivalent interest is held by such
Person or by one or more Subsidiaries of such Person (or a
combination thereof) and (b) such Person, directly or
indirectly, has a controlling influence over the management
and policies with respect to the Person, 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 the Person.
Section 1.2. Interpretation.
(a) All terms defined in this Agreement
shall have the defined meanings when used in any notice,
certificate or other document made or delivered pursuant
hereto.
(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 article
and section references are to this Agreement unless
otherwise specified.
ARTICLE II
SERVICES
Section 2.1. Services of Panda International.
(a) Panda International shall perform and
provide to Panda Global and its Subsidiaries administrative
services in connection with the development of any Projects
being developed by Panda Global and its Subsidiaries that
have not reached Financial Closing and all Activities
related to such Projects, including, without limitation:
(i) reviewing potential sites and projects;
(ii) negotiating with governmental agencies and
other third parties to arrive at letters of intent and
preliminary joint venture and other such agreements or
arrangements relating to the Projects or Activities;
(iii) preparing preliminary feasibility studies
and reports;
(iv) conducting preliminary design and
engineering studies and reports including, without
limitation, conceptualization, analysis and
recommendation;
(v) preparing and monitoring all budgets and
estimated costs of development and construction;
(vi) selecting, contracting for, supervising,
managing and coordinating all engineers, architects,
lawyers, accountants, financial advisors, investment
bankers, agents, consultants, contractors,
subcontractors, equipment vendors, fuel suppliers and
other vendors and suppliers and also performing
services relating to all such functions directly
through its own employees or agents;
(vii) providing design criteria and other
information necessary for design, procurement and
construction services;
(viii) assisting architects, engineers,
contractors, construction firms, subcontractors and
vendors on costs, plans and development;
(ix) providing and maintaining all information
and equipment necessary for provision of the Services
hereunder;
(x) consulting and assisting in the arrangement
and placement of all insurance coverage relating to the
Projects;
(xi) arranging and negotiating for financing of
the Projects;
(xii) conducting and negotiating contracts and
other arrangements pertaining to the Activities,
including without limitation contracts for the
provision of fuel, equipment, materials, construction
services and operation and maintenance services;
(xiii) providing equipment, files, offices,
computers, furnishings, copiers, fax machines,
telephones and other audio and visual equipment and
devices, training, data processing, and other office
supplies and materials;
(xiv) providing accounting, budgeting,
engineering, tax, legal, investment consulting, public
and industrial relations, human resources management,
payroll, wage, health and benefit plans for the benefit
of any employees of the parties, insurance consulting,
business development, real estate, leasing, purchasing,
obtaining permits, approvals or licenses, and other
services in connection with the Activities and Services
and payroll, wage, health and benefit plans for any
employees of Panda Global and any Subsidiary of Panda
Global;
(xv) preparing and maintaining records of
accounts and of technical operations of facilities and
all reports, statements, data and information that may
be required from time to time under Project Documents
or by any governmental authority;
(xvi) opening and maintaining bank accounts and
performing cash management functions in connection with
the operation of facilities, including the payment of
costs, expenses, rentals and taxes incurred in
connection with the management of the Projects and
other facilities;
(xvii) preparing all federal, state, provincial,
local and foreign tax returns of Panda Global and its
Subsidiaries; and
(xviii) arranging for travel and living arrangements
incurred by Panda International employees, agents or
other personnel performing any Services hereunder;
(xix) arranging for the provision of litigation
services for Panda Global and its Subsidiaries (whether
or not such litigation services are related to a
Project or to any other matter);
(xx) obtaining and maintaining all governmental
permits, licenses and approvals required in connection
with Projects and the Activities; and
(xxi) any other services rendered in connection
with the Activities to the extent not otherwise
specifically described in this Agreement or in the
Administrative Services Agreement.
Such services are herein referred to as "Project
Administrative Services."
(b) Panda International shall perform and provide
to Panda Global and its Subsidiaries construction management
services in connection with the development of any Projects
being developed by Panda Global and its Subsidiaries that
have not reached Financial Closing and all Activities
related to such Projects, including, without limitation,
supervision and management of the design, engineering and
construction of facilities for any such Project, and taking
all steps as are necessary to assure that such facilities
are constructed in accordance with generally accepted
engineering practices, generally accepted construction
procedures, applicable construction contracts and Applicable
Laws and governmental permits, licenses and approvals, on
schedule and within budget. Such services are herein
referred to as "Construction Management Services." The
Project Administrative Services and Construction Management
Services are collectively hereinafter referred to as the
"Services." The parties hereto intend that the Services to
be rendered by Panda International under this Agreement and
the Services (as defined therein) to be rendered by Panda
International under the Administrative Services Agreement
shall encompass the totality of the services to be provided
by Panda International to Panda Global and its Subsidiaries
in connection with the Activities (as defined herein and in
the Administrative Services Agreement).
(c) Panda International shall at all times
provide or cause to be provided the Services in accordance
with and subject to standards, practices, methods and
procedures conforming to Applicable Laws and substantially
in accordance with all Project Documents. The Services
shall be provided on terms that are no less favorable to
Panda Global or its Subsidiaries, as the case may be, than
those that could have been obtained in a comparable
transaction on an arm's-length basis from a Person that is
not an Affiliate of Panda Global or its Subsidiaries, as
reasonably determined by Panda International.
(d) Panda International shall retain sole
responsibility for selection, hiring, dismissal, assigning
and supervising of all personnel (including the obtaining,
maintaining and (where necessary) renewing of work permits
and any other necessary permissions, registrations,
authorizations, licenses and permits in relation to such
personnel) required for the performance of the Services.
(e) Panda International may replace or remove any
personnel involved in the provision of the Services without
the approval of Panda Global. The selection of replacement
personnel shall be at the sole discretion of Panda
International.
(f) Panda International may engage such persons,
firms or companies (including Subsidiaries and other
affiliates of Panda International and their employees and
agents) as it deems necessary for the purpose of performing
the Services.
(g) Notwithstanding anything in this Agreement to
the contrary, the management and business of Panda Global
shall at all times be subject to the overall direction of
the Board of Directors of Panda Global.
Section 2.2. Authority of Panda International.
Panda International shall have all such authority to act on
behalf of Panda Global and its Subsidiaries as is necessary
to provide the Services and to fulfill its other obligations
pursuant to this Agreement.
Section 2.3. Obligations of Panda Global. Panda
Global shall do and cause to be done all such acts and
things within its power as may be necessary or desirable to
enable Panda International promptly and efficiently to
provide or cause to be provided the Services and comply with
its other obligations hereunder and shall not do or permit
anything which may prevent or restrict Panda International
from such performance or compliance. Without limiting the
generality of the previous sentence, Panda Global shall:
(i) pay or cause the prompt payment to Panda
International of all sums due to it under this
Agreement; and
(ii) observe and perform, and cause each of its
Subsidiaries to observe and perform, all its
obligations under all Project Documents to which it is
a party, except to the extent that observance or
performance is excused thereunder pursuant to the terms
thereof.
Section 2.4. Payment for Services.
(a) Subject to Section 2.4(e), from time to time,
during the term of this Agreement, promptly upon receipt of
an invoice therefor, Panda Global shall reimburse Panda
International for its costs in performing the Services
(whenever and howsoever such costs were incurred),
including, without limitation, labor costs of Panda
International's officers, directors, employees, agents,
contractors, consultants or any other person engaged by it,
allocable to such Services and overhead costs allocable to
such Services and the costs incurred by Panda International
and such persons in providing such Services and in engaging
other persons, firms or companies (including affiliates of
Panda International and their employees and agents) for the
purpose of performing such Services. Allocated overhead
costs shall be determined in accordance with Panda
International's standard method of computing overhead, but
in any event shall be allocated on a reasonable basis.
Labor costs shall include, without limitation, salaries,
wages, bonuses and expenses incurred in connection with
employee health and benefit plans (other than stock option,
stock ownership or deferred compensation plans) maintained
or adopted by Panda International for the benefit of its
employees. With respect to Services provided by a
Subsidiary of Panda International or by a third-party
provider, Panda International may direct that payment for
such Services be made by Panda Global or a Subsidiary of
Panda Global directly to such Subsidiary or other third-
party provider, and Panda Global or a Subsidiary of Panda
Global shall make such payment as so directed.
(b) In addition to reimbursement for the cost of
Services performed following the date of this Agreement,
Panda International shall be entitled to be reimbursed for
its costs in performing Services prior to the date of this
Agreement with respect to Panda Global or any entity that is
as of the date hereof (including, without limitation, the
Luannan Facility) or hereafter becomes a Subsidiary of Panda
Global, including without limitation reimbursement from
funds available to Panda Global Energy Company, a Cayman
Islands exempted company; provided, however, that the total
amount of such reimbursement related to the Luannan Facility
between the date of this Agreement and the Luannan
Commercial Operation Date may not exceed $7,500,000 and any
such reimbursement shall be applied as promptly as
reasonably practicable to the payment of costs incurred by
Panda International in performing Services for Panda Global
or a Subsidiary of Panda Global which are not, and shall not
be, the subject of any other claim for reimbursement under
this Section 2.4, and provided, further, that any such
reimbursement may be effected by paying invoices directly
from the Issuer Equity Distribution Fund or the Company
Equity Distribution Fund.
(c) If any payment to Panda International, or to
any Subsidiary of Panda International, which becomes due
under this Agreement remains unpaid after the date on which
funds are available to make such payments under the
Indentures, such payment shall accrue interest daily at the
rate of 2% per annum above the base rate declared from time
to time by Morgan Guaranty Trust Company of New York from
the day after the date on which payment was due until the
date payment is actually received. The right of either
party to receive interest in respect of the late payment of
any sum due shall be without prejudice to such other rights
which it may have in respect of such late payment.
(d) Panda Global shall be entitled to conduct an
audit and review of all fees, costs and expenses payable
hereunder, together with all supporting documentation. Any
such audit shall be conducted by a nationally recognized
accounting firm acceptable to Panda International. If such
audit reveals that Panda Global has paid sums to Panda
International to which, in accordance with the provisions of
this Agreement, Panda International was not entitled, then
Panda International shall forthwith repay such sums to Panda
Global together with interest accrued thereon at the rate
specified in Section 2.4(c) and shall at the same time pay
to Panda Global any reasonable fees, costs and expenses
involved in carrying out such audit where the amount of the
repayment exceeds by at least $25,000 the amount first paid
to Panda International.
(e) Notwithstanding anything provided elsewhere
herein, Panda Global shall be obligated to make payments to
Panda International (or as directed by Panda International)
under invoices received from Panda International only when
funds are available to Panda Global for such payments
pursuant to the terms of the Indentures. Panda
International agrees to provide Panda Global with such
documentation and certificates as may be requested by Panda
Global in order to comply with the requirements of the
Indentures for the release of funds to make payments under
this Agreement.
ARTICLE III
TERM AND TERMINATION
Section 3.1. Term. The term of this Agreement
shall commence as of the date hereof and, unless earlier
terminated as provided herein or by mutual written agreement
of the parties hereto, shall terminate on March 31, 2007.
Section 3.2. Termination.
(a) This Agreement may be terminated by either
party with or without cause, provided that such party has
given 120 days' written notice to the other party and the
Trustee. Furthermore, this Agreement may be terminated
immediately by either party upon the institution of
voluntary or involuntary proceedings in bankruptcy,
reorganization, dissolution or liquidation of the other
party.
ARTICLE IV
INSURANCE
Section 4.1. Insurance. During the term of this
Agreement, Panda International shall maintain public
liability and worker's compensation insurance with insurers
of recognized financial responsibility in such amounts and
providing such coverages as shall be customary for companies
engaged in similar businesses.
ARTICLE V
LIMITATION OF LIABILITY
Section 5.1. Limitation of Liability. Neither
party shall be liable to the other party for any special or
consequential damages arising from or connected with its
performance hereunder or any breach of its obligations
hereunder.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification.
(a) Panda Global shall indemnify, defend and hold
Panda International, its directors, officers, employees and
agents and its and their successors, assigns and personal
representatives (collectively, the "Indemnitees") harmless
from and against all damages, losses or expenses, claims or
causes of action of every kind or character suffered or paid
as a result of any and all claims, demands, suits,
penalties, causes of action, proceedings, judgments,
administrative and judicial orders and liabilities
(including reasonable fees of counsel incurred in any
litigation or otherwise) (collectively, "Losses") assessed,
incurred or sustained by or against such indemnified party
with respect to or arising out of any action taken or
omitted to be taken in connection with the Services or
otherwise in connection with this Agreement, except to the
extent that (i) any such Losses result from or arise out of
any action taken or omitted to be taken not in good faith or
not in a manner the Indemnitee reasonably believed to be in
or not opposed to the best interests of Panda Global or
(ii) any such Losses result from or arise out of the gross
negligence or willful misconduct of the indemnified party.
(b) In the event of the occurrence of any event
which is an indemnifiable event pursuant to this Section
6.1, Panda Global will notify the indemnifying party
promptly. If such event involves the claim of any third
person not a party hereto and Panda Global confirms in
writing its responsibility therefor, Panda Global will have
sole control over, and will assume all expenses with respect
to, the defense or settlement of such claim; provided, that
(i) Panda International will be entitled, at its expense, to
participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such
claim, (ii) Panda Global will obtain the prior written
approval of Panda International before entering into any
settlement of such claim or ceasing to defend against such
claim, if, pursuant to or as a result of such settlement or
cessation, injunctive or similar relief would be imposed
against Panda Global, and (iii) Panda Global will not be
entitled to control (but will be entitled to participate at
its own expense in the defense of), and Panda International
will be entitled to have sole control over, the defense or
settlement of any claim to the extent (and only to the
extent) the claim seeks an order, injunction or other
equitable relief against Panda International which, if
successful, could materially interfere with the business,
assets, liabilities, obligations, prospects, financial
condition or results of operations of Panda International.
If Panda Global does not assume sole control over the
defense or settlement of such claim as provided in this
Section 6.1(b), Panda International will have the right to
defend and settle the claim in such manner as it may deem
appropriate at the cost and expense of Panda Global, and
Panda Global will promptly reimburse Panda International
therefor in accordance with this Section 6.1.
(c) Notwithstanding anything provided in Section
6.1(a) and (b), no Indemnitee shall be entitled to
indemnification hereunder to the extent that any Losses
otherwise subject to indemnification are covered by
insurance.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1. Representations and Warranties.
Panda International and Panda Global each represents and
warrants to the other that (a) it is a corporation duly
organized, validly existing and in good standing under the
laws of the state of its incorporation and is in good
standing in all other jurisdictions where necessary in light
of the business and properties it conducts and owns and
intends to conduct and own, and has full power, authority
and legal right to incur the obligations provided for in
this Agreement; (b) the execution, delivery and performance
of this Agreement does not and will not (i) require any
consent or approval of its shareholders, (ii) violate any
provision of its charter or by-laws, or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect, (iii) result in
a breach of or constitute a default under its charter or by-
laws or any indenture or loan or credit agreement or other
material agreement, lease or instrument to which it is a
party or by which it or its properties may be bound or
affected, or (iv) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any
nature upon or with respect to any of the properties now
owned or hereafter acquired by it; and (c) upon execution
and delivery hereof, this Agreement is the legal, valid and
binding obligation enforceable against it in accordance with
the terms hereof, except as the enforceability hereof may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other such laws affecting the
rights of creditors generally and subject to general
equitable principles.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Further Assurances. If either party
reasonably determines or is reasonably advised that any
further instruments, actions or things are necessary or
desirable to carry out the terms of this Agreement, upon the
request of such party the other party shall execute and
deliver all such instruments, perform all such actions and
provide all such things reasonably necessary and proper to
carry out the terms of this Agreement.
Section 8.2. Entire Agreement. This Agreement
contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all
prior negotiations and understandings. Neither of the
parties shall be bound by or be deemed to have made any
representations, warranties or commitments except those
contained herein or in the documents delivered pursuant
hereto.
Section 8.3. Counterparts. This Agreement may be
executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute one
agreement.
Section 8.4. GOVERNING LAW. THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK
Section 8.5. Assignability. The terms and
provisions of this Agreement, and the respective rights,
obligations and duties hereunder of Panda Global and Panda
International are not assignable by either Panda Global or
Panda International and any assignment thereof shall be
void, except (i) Panda International, without relieving
itself of any liability hereunder, may engage agents or
subcontractors to provide the services described herein,
(ii) Panda International may assign any and all of its
rights to payments made, due or to become due hereunder, and
(iii) Panda Global, without relieving itself of any
liability hereunder, may assign its rights and obligations
hereunder to any direct or indirect Subsidiary of Panda
Global or to any party that provides financing to Panda
Global or any direct or indirect Subsidiary of Panda Global.
Section 8.6. Binding Effect. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns. This Agreement is not made for the benefit of any
person or entity not a party hereto, and nothing in this
Agreement shall be construed as giving any person or entity,
other than the parties hereto and their respective
successors and permitted assigns, any right, remedy or claim
under or in respect of this Agreement or any provision
hereof.
Section 8.7. Headings. The headings used in this
Agreement are for convenience only and shall not affect the
construction of any of the terms of this Agreement.
Section 8.8. Notices. All notices or other
communications which are required or permitted hereunder
shall be in writing and shall be deemed sufficiently given
if delivered personally, or by courier, or sent by facsimile
or by registered or certified mail, postage prepaid, as
follows:
If to Panda International:
Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Facsimile: (972) 980-6815
Attention: General Counsel
If to Panda Global:
Panda Global Holdings, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Facsimile: (972) 980-6815
Attention: General Counsel
or to such other person or address as the addressee may have
specified in a notice duly given to sender as provided
herein. Such notice of communication shall be deemed to
have been given as of the date received.
Section 8.9. Amendment. Neither party hereto
shall be bound by any termination, amendment, supplement,
waiver or modification of any term hereof unless such party
shall have consented thereto in writing.
Section 8.10. No Implied Waiver. No delay or
failure on the part of any party in exercising any right,
remedy, power or privilege provided herein or by statute or
at law or in equity shall operate as a waiver thereof, and
no partial or single exercise thereof shall preclude any
other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be duly executed on its behalf on
the date first above written.
PANDA ENERGY INTERNATIONAL, INC.
By
Name:
Title:
PANDA GLOBAL HOLDINGS, INC.
By
Name:
Title:
EXHIBIT 10.110
Execution Copy
PANDA GLOBAL ENERGY COMPANY
$155,200,000 12 1/2% Senior Secured Notes due 2004
PURCHASE AGREEMENT
April 11, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Each of Panda Global Energy Company, a Cayman Islands
exempted company (the "Issuer"), Panda Global Holdings, Inc., a
Delaware corporation (the "Company"), and Panda Energy
International, Inc., a Texas corporation ("PEI") (but for the
Company and PEI only with respect to Sections 4(f), 5, 6 and 9
herein) agrees with you as follows:
1. The Note Offering and Related Transactions. The
Issuer proposes to offer and sell (the "Offering") to Donaldson,
Lufkin & Jenrette Securities Corporation (the "Initial
Purchaser"), $155,200,000 aggregate principal amount of its 12
1/2% Senior Secured Notes due 2004 (the "Notes"). The Notes are
to be issued pursuant to the provisions of an Indenture to be
dated as of April 22, 1997 as supplemented by the First
Supplemental Indenture thereto, to be dated as of April 22, 1997
(the "Senior Secured Notes Indenture"), between the Issuer and
Bankers Trust Company, as Trustee (the "Trustee"). The Senior
Secured Notes will be guaranteed (the "Guarantee") by the Company
pursuant to a Guarantee issued under an Indenture to be dated as
of April 22, 1997 as supplemented by the First Supplemental
Indenture thereto, to be dated as of April 22, 1997 (the "Company
Indenture" and together with the Senior Secured Notes Indenture,
the "Indentures"), between the Company and the Trustee.
Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Offering Memorandum
(as hereinafter defined) unless otherwise indicated.
The Notes will be offered and sold to you pursuant to
an exemption from the registration requirements under the
Securities Act of 1933, as amended (the "Securities Act"), and
may be offered and sold outside the United States in reliance on
Regulation S under the Securities Act. The Issuer has prepared a
preliminary offering memorandum, dated March 31, 1997 and
supplemented on April 9, 1997 (the "preliminary Offering
Memorandum"), and a final offering memorandum, dated April 11,
1997 (the "Offering Memorandum"), relating to the Company, the
Issuer, the Joint Ventures and the Notes.
Upon original issuance thereof, and until such time as
the same is no longer required under the applicable requirements
of the Securities Act, the Notes (and all securities issued in
exchange therefor or in substitution thereof) shall bear the
following legend:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED
HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM, REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE NOTE EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT:
(A) SUCH NOTE MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS),
(2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION; AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE NOTE EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
You have advised the Issuer that you will make offers
(the "Exempt Resales") of the Notes purchased hereunder on the
terms set forth in the Offering Memorandum, as amended or
supplemented, solely to persons whom you reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under
the Securities Act ("QIBs") and to a limited number of
institutional "accredited investors" referred to in Rule
501(a)(1), (2), (3) or (7) under the Act (each, an "Accredited
Investor"). The QIBs and the Accredited Investors are sometimes
referred to herein as the "Eligible Purchasers." You will offer
to such QIBs and Accredited Investors the Notes initially at a
price equal to 93.444% of the principal amount thereof. Such
prices may be changed by you at any time without notice.
Holders (including subsequent transferees) of the Notes
will have the registration rights set forth in the registration
rights agreement relating thereto (the "Registration Rights
Agreement"), to be dated the Closing Date (as defined herein), in
substantially the form of Exhibit A hereto, for so long as such
Notes constitute "Transfer Restricted Securities" (as defined in
the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Issuer and the Company will agree to file
with the Securities and Exchange Commission (the "Commission"),
under the circumstances set forth therein (i) a registration
statement under the Securities Act (the "Exchange Offer
Registration Statement") relating to the issue of senior secured
notes (the "Registered Notes"; the Notes and the Registered Notes
are collectively referred to as the "Securities") of the Issuer
together with a new guarantee by the Company of such new notes to
be offered in exchange for an equal principal amount of the Notes
(and the related Guarantee by the Company of the Issuer's
obligations under the Notes) (the "Exchange Offer"), and (ii) a
shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement" and together
with the Exchange Offer Registration Statement, the "Registration
Statements") relating to the resale by certain holders of the
Notes, and to use its best efforts to cause such Registration
Statements to be declared effective. This Purchase Agreement
(this "Agreement"), the Securities, the Indentures, the
Guarantee, the Registration Rights Agreement, the Luannan
Financing Agreements, the Luannan Project Documents that have
been duly authorized, executed and delivered on or before the
date hereof and the Collateral Documents are hereinafter
sometimes referred to collectively as the "Operative Documents."
As used herein, the terms Notes and Securities shall include the
Guarantee thereof whenever the context permits.
2. Agreements to Sell and Purchase. On the basis of
the representations and warranties contained in this Agreement,
and subject to its terms and conditions, the Issuer agrees to
issue and sell to you and you agree to purchase from the Issuer,
$155,200,000 aggregate principal amount of Notes together with
the related Guarantee issued by the Company. The purchase price
for the Notes shall be $140,674,335, net of discount.
3. Delivery and Payment. Delivery to the Initial
Purchaser of, and payment for, the Notes shall be made at 10:00
a.m., New York City time, on April 22, 1997 (the "Closing Date")
at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York, or such other time or place as you and the
Issuer shall designate.
Payment for the Notes shall be made by the Initial
Purchaser to the Issuer or its order by wire transfer in U.S.
dollars in immediately available funds to an account at a bank in
New York City designated in writing by the Issuer prior to the
Closing Date. Such payment shall be made against delivery at the
place or places and in the principal amounts of Notes specified
by the Initial Purchaser to (a) the Trustee, on behalf of The
Depository Trust Company ("DTC"), on behalf of The Euroclear
System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel
Bank"), of a global certificate registered in the name of Cede &
Co., as nominee of DTC, in respect of the Notes sold pursuant to
Regulation S, (b) the Trustee, on behalf of DTC, of a global
certificate registered in the name of Cede & Co., as nominee of
DTC, in respect of the Notes sold pursuant to Rule 144A and (c)
the Trustee of certificates in permanent certificated form and
bearing the restrictive legend specified in the Offering
Memorandum in respect of the Notes sold to institutional
Accredited Investors.
4. Agreements of the Issuer, the Company and PEI.
The Issuer, the Company and (as to Section 4(f) only) PEI each
agree with the Initial Purchaser as follows:
(a) Before completion of the distribution of the Notes
by you, to advise you promptly and, if requested by you,
confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the
Notes for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority, and
(ii) before the completion of the Exchange Offer, to advise
you promptly, and if requested by you, confirm such advice
in writing, of (A) the happening of any event that makes any
statement of a material fact made in the Offering Memorandum
untrue or that requires the making of any additions to or
changes in the Offering Memorandum in order to make the
statements therein, in the light of the circumstances under
which they are made, not misleading and (B) the issuance of
any quarterly or annual financial statements by the Issuer
or the Company (copies of which shall be delivered to you
within one business day after issuance). The Issuer and the
Company shall use their best efforts to prevent the issuance
of any stop order or order suspending the qualification or
exemption of any of the Notes under any state securities or
Blue Sky laws, and if at any time any state securities
commission or other regulatory authority shall issue an
order suspending the qualification or exemption of any of
the Notes under any state securities or Blue Sky laws, the
Issuer and the Company shall use their best efforts to
obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish you, without charge, as many copies of
the preliminary Offering Memorandum and the Offering
Memorandum, and any amendments or supplements thereto, as
you may reasonably request. The Issuer and the Company
consent to the use of the preliminary Offering Memorandum
and the Offering Memorandum, and any amendments and
supplements thereto, by you in connection with Exempt
Resales; provided, however, that the Initial Purchaser shall
discontinue using such preliminary Offering Memorandum or
Offering Memorandum if advised by the Issuer or the Company
that the preliminary Offering Memorandum or Offering
Memorandum is to be amended or supplemented until such
document is so amended or supplemented.
(c) Not to amend or supplement the preliminary
Offering Memorandum or the Offering Memorandum prior to the
Closing Date unless you shall previously have been advised
thereof and shall not have objected thereto in writing
within five business days after being furnished a copy
thereof. The Issuer and the Company shall promptly prepare,
upon your request, any amendment or supplement to the
preliminary Offering Memorandum or the Offering Memorandum
that may be necessary or advisable in connection with Exempt
Resales.
(d) If, after the date hereof and prior to
consummation of any Exempt Resales, any event shall occur as
a result of which, in the judgment of the Issuer and its
counsel or in the reasonable opinion of your counsel, it
becomes necessary to amend or supplement the Offering
Memorandum in order to make the statements therein, in the
light of the circumstances when the Offering Memorandum is
delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary to amend or
supplement the Offering Memorandum to comply with applicable
law, promptly to prepare an appropriate amendment or
supplement to the Offering Memorandum so that the statements
therein as so amended or supplemented will not, in the light
of the circumstances when the Offering Memorandum is so
delivered, be misleading, or so the Offering Memorandum will
comply with applicable law.
(e) To cooperate with you and your counsel in
connection with the qualification of the Notes under the
state securities or Blue Sky laws of such jurisdictions in
the United States as you may request and to continue such
qualification in effect so long as required for the Exempt
Resales; provided, however that neither the Issuer nor the
Company shall be required in connection therewith to
register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it
to the service of process in suits or taxation, other than
as to matters and transactions relating to the Exempt
Resales, in any jurisdiction where it is not now so subject.
The Issuer and the Company will continue such qualification
in effect so long as required by law for distribution of the
Notes.
(f) Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is
terminated, and as except as otherwise may have been agreed
in writing, to pay all costs, expenses, fees and taxes
incident to and in connection with: (i) the preparation,
printing, processing, distribution and delivery of the
preliminary Offering Memorandum and the Offering Memorandum
(including, without limitation, financial statements and
exhibits) and all amendments and supplements thereto,
(ii) the preparation (including, without limitation, word
processing and duplication costs) printing, processing,
distribution and delivery of this Agreement and the other
Operative Documents, and all preliminary and final Blue Sky
memoranda and all other agreements, memoranda,
correspondence and other documents prepared and delivered in
connection herewith and with the Exempt Resales, (iii) the
issuance and delivery by the Issuer of the Notes and the
Company of the Guarantee, (iv) the qualification of the
Securities for offer and sale under the securities or Blue
Sky laws of the several states (including, without
limitation, the reasonable fees and disbursements of your
counsel relating to such registration or qualification), (v)
furnishing such copies of the preliminary Offering
Memorandum and the Offering Memorandum, and all amendments
and supplements thereto, as may be reasonably requested for
use in connection with Exempt Resales, (vi) the preparation
of certificates for the Notes (including, without
limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of the Issuer's and the Company's
counsel and accountants, (viii) the fees and expenses of the
Trustees and their counsel under the Indentures, (ix) all
expenses and listing fees in connection with the application
for designation of the Notes in the National Association of
Securities Dealers, Inc. ("NASD") Private Offerings, Resales
and Trading through Automated Linkages Market ("PORTAL"),
(x) all fees and expenses (including fees and expenses of
counsel) of the Issuer in connection with approval of the
Securities by DTC for "book-entry" transfer, (xi) any fees
charged by rating agencies for rating the Securities, (xii)
all "road show" and other marketing expenses related to the
preparation of slides, videotapes and printed marketing
materials, and travel, hotel, food and entertainment
expenses of affiliates of the Issuer and the Company, (xiii)
the performance by each of the Issuer and the Company of its
other obligations under this Agreement and the other
Operative Documents and (xiv) any fees and expenses of the
Issuer in connection with approval of the Notes by DTC,
Euroclear and Cedel Bank for "book-entry" transfer.
(g) To use the proceeds from the sale of the Notes in
the manner described in the Offering Memorandum under the
caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively
any attempts to claim, the benefit of any usury laws against
the holders of any Notes.
(i) To do and perform all things required to be done
and performed under this Agreement by them prior to or after
the Closing Date and to satisfy all conditions precedent on
their part to the delivery of the Notes that are within
their control.
(j) Not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would be integrated with
the sale of the Notes in a manner that would require the
registration under the Securities Act of the sale to you or
Eligible Purchasers of the Notes.
(k) For so long as any of the Securities remain
outstanding and during any period in which the Issuer and
the Company are not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available to any QIB or beneficial owner of
the Notes in connection with any sale thereof and any
prospective purchaser of such Notes from such QIB or
beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act.
(l) To use its best efforts as provided in the
Registration Rights Agreement to cause the Exchange Offer to
be made in the appropriate form to permit registration of
the Registered Notes to be offered in exchange for the Notes
and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(m) To use their best efforts to effect the inclusion
of the Notes in PORTAL.
(n) During a period of five years following the date
of this Agreement, to deliver to you promptly upon their
becoming available, copies of all current, regular and
periodic reports filed by the Issuer or the Company with the
Commission or any securities exchange or with any
governmental authority succeeding to any of the Commission's
functions and such other publicly available information
concerning the Issuer and the Company as the Initial
Purchaser shall reasonably request.
(o) Not to, and to use its reasonable best efforts to
cause its affiliates not to, offer, sell, contract to sell
or grant any option to purchase or otherwise transfer or
dispose of any preferred stock or debt security issued or
guaranteed by the Issuer or the Company (other than (i) the
Notes and (ii) the Registered Notes issuable in the Exchange
Offer), or any security convertible into or exchangeable or
exercisable for any such preferred stock or debt security,
for a period of 90 days after the Closing Date, without your
prior written consent.
(p) Prior to or concurrently with the Closing, to
enter into the Registration Rights Agreement in
substantially the form attached hereto as Exhibit A in order
to permit registration of the Registered Notes to be offered
in exchange for the Notes as contemplated thereby.
(q) To comply with the requirements of DTC, Euroclear
and Cedel Bank relating to the approval of the Notes for
"book-entry" transfer.
(r) During the two year period following the Closing
Date, neither the Company nor the Issuer will, nor will they
permit any of their affiliates (as defined for the purposes
of Rule 144 under the Securities Act) to, resell any of the
Notes that may be acquired by any of them.
(s) Not to engage, directly or indirectly through any
agent (provided that no agreement is made as to the Initial
Purchaser or any person acting on its behalf), in any
"directed selling efforts" (as defined in Regulation S) with
respect to the Notes, and to comply and cause any person
acting on its behalf to comply with the offering
restrictions requirement of Regulation S.
5. Representations and Warranties. (a) Each of the
Issuer, the Company and PEI represents and warrants, jointly and
severally, to you that:
(i) The preliminary Offering Memorandum and the
Offering Memorandum do not, and any supplement or amendment
to them will not, contain any untrue statement of a material
fact or omit to state any material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that the representations and warranties contained in
this paragraph (i) shall not apply to statements in or
omissions from the preliminary Offering Memorandum and the
Offering Memorandum (or any supplement or amendment thereto)
made in reliance upon and in conformity with information
furnished to the Issuer or the Company in writing by you
expressly for use therein, which information is specified in
the second paragraph of Section 6(c). There are no
agreements, contracts, indentures, leases or other documents
or instruments of the Issuer, the Joint Ventures or the
Company that are required to be described in the Offering
Memorandum in order that the statements made therein are not
misleading in any material respect or in order that there
are no material omissions therefrom. No stop order
preventing the use of the preliminary Offering Memorandum or
the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been
issued. Each of the preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the
information specified in, and meeting the requirements of,
Rule 144A(D)(4) under the Securities Act.
(ii) When the Notes and Guarantee are issued and
delivered pursuant to this Agreement, none of the Notes or
the Guarantee will be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities of the
Issuer or the Company that are listed on a national
securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(iii) Each of the Issuer, the Company and their
respective Subsidiaries (other than the Joint Ventures) is a
corporation, partnership or exempted company, as the case
may be, duly organized or formed, validly existing and in
good standing under the laws of its respective jurisdiction
of incorporation or formation with full power and authority
to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, and is
duly authorized, 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 (as defined below). The Issuer has not engaged in
any business or activity other than in connection with the
development, construction, ownership and financing of the
Luannan Facility.
(iv) The entities listed on Schedule I hereto
are the only subsidiaries, direct or indirect, of the
Company. The Company owns, directly or indirectly through
other subsidiaries, the percentage listed in Schedule I
hereto of the outstanding capital stock or other securities
evidencing equity ownership of such subsidiaries, free and
clear of any security interest, claim, lien, limitation on
voting rights or encumbrance (except for those arising
pursuant to state and federal securities laws and those
described in Schedule I or the Offering Memorandum); and all
of such securities have been duly authorized, validly
issued, are fully paid and nonassessable and were not issued
in violation of any preemptive or similar rights. There are
no outstanding subscriptions, rights, warrants, calls,
commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, or any agreements
providing for the issuance (contingent or otherwise) of, any
such shares of capital stock or other equity interest of
such subsidiaries other than those described in Schedule I
or the Offering Memorandum. Neither the Company nor any of
its subsidiaries has any investments in the securities of
other persons and there are no outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable
for, any such securities of such person.
(v) All of the outstanding capital stock of the
Issuer is owned by the Company, and all of the outstanding
capital stock of the Company is owned by PEI. Except as
disclosed in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, calls,
commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of
capital stock or other equity interest of the Issuer or the
Company.
(vi) Each Joint Venture is a Sino-foreign joint
venture duly organized, validly existing and in good
standing under the laws and the regulations of the People's
Republic of China, with full corporate power and authority
to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, 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 joint
venture interests in the Joint Ventures have been duly and
validly authorized and issued; and the indirect ownership of
joint venture interests by the Issuer in each of the Joint
Ventures conforms to the descriptions thereof contained in
the Offering Memorandum; Pan-Western has good and valid
title to the joint venture interests in each of the Joint
Ventures as described in the Offering Memorandum, free and
clear of all encumbrances or claims, except for restrictions
under the Indentures and the Collateral Documents and except
as described in the Offering Memorandum. On the Closing
Date, the Joint Ventures will not have outstanding any
certificates or securities that evidence interests in the
Joint Ventures, or any securities convertible into or
exchangeable for any joint ventures 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
joint venture interests except for those rights established
by the Joint Venture Agreements or restrictions under the
Indentures. None of the Joint Ventures own or holds any
capital stock or any other securities of any corporation or
has any equity interest in any firm, partnership,
association or other entity. None of the Joint Ventures has
engaged in any business or activity other than in connection
with the development, construction, ownership and financing
of the Luannan Facility.
(vii) Each of the Issuer, the Company and PEI has
full corporate power and authority to execute and enter
into, deliver and perform its obligations under this
Agreement, the Securities, the Guarantee, and the Collateral
Documents to which it is a party and each of the Joint
Ventures has full corporate power and authority to execute
and enter into, deliver and perform its obligations under
the Operative Documents to which it is a party. This
Agreement and the Luannan Project Documents have been duly
authorized, executed and delivered by each of the Issuer,
the Company and PEI that is a party thereto, and the other
Operative Documents have been or will be duly authorized,
executed and delivered by or on the Closing Date and,
assuming due authorization, execution and delivery by the
parties thereto (other than the Issuer, the Company, PEI and
the Joint Ventures) each of this Agreement and the other
Operative Documents constitutes, or when executed and
delivered will constitute, the valid and legally binding
obligation of each of the Issuer, the Company, PEI and the
Joint Ventures that is a party thereto, enforceable against
each such party 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; no
qualification of the Indentures under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act") is
required in connection with the offer and sale of the Notes
contemplated thereby or in connection with the Exempt
Resales; and the Operative Documents conform in all material
respects to the descriptions thereof in the Offering
Memorandum.
(viii) The execution and delivery of the Operative
Documents, and the performance by the Issuer, the Company
and the Joint Ventures are within such parties' corporate or
other powers, have been or will be on or before the Closing
Date duly authorized by all necessary corporate and other
actions, require no action by or in respect of, or filing
with, any governmental body, agency or official (except such
as have been obtained or made and are in full force and
effect and as otherwise described in the Offering
Memorandum); to the best of the Issuer's and the Company's
knowledge and belief after reasonable investigation, on or
before the Closing Date, each of the Operative Documents
will be duly executed and delivered by the parties thereto
(other than the Issuer, the Company and PEI) and will
constitute a valid and binding agreement of each of such
parties, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and
subject to the applicability of general principles of
equity.
(ix) All Permits required to be obtained by or
on behalf of the Issuer and the Joint Ventures in connection
with (i) the due execution, delivery and performance by the
Issuer or any of the Joint Ventures of the Operative
Documents to which it is a party and (ii) the use,
ownership, occupancy, operation, or maintenance of the
Luannan Facility that are required to be obtained on or
prior to the date hereof have been duly obtained, have been
validly issued, and are in full force and effect. None of
the Company or the Issuer has any reason to believe that any
of such Permits that are not required to be obtained on or
prior to the date hereof will not be obtained. To the best
knowledge of the Issuer and the Company, all permits that
are required to be obtained on or prior to the date hereof
in the name of any of the County Partners (as such term is
defined in the Offering Memorandum) in connection with the
matters described in clauses (i) and (ii) of the first
sentence of this paragraph, have been duly obtained, have
been validly issued and are in full force and effect and
final determination has been made thereon.
(x) Each of the Issuer, the Company and the
Joint Ventures maintains a system of internal accounting
controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally
accepted accounting principles in the United States, the
Cayman Islands or the People's Republic of China, as the
case may be, and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the
recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is
taken with respect to any difference.
(xi) The easements, licenses and other rights
granted or to be granted to the Joint Ventures pursuant to
the terms of the relevant Operative Documents are not
subject to any Liens (other than Permitted Liens) and
provide or will provide the Joint Ventures with all rights
and property interests required to enable the Joint Ventures
to obtain all services, materials or rights (including
access) required for the operation and maintenance of the
Luannan Facility, including the Joint Ventures' 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 Operative
Documents, other than those services, materials or rights
that reasonably can be expected to be obtainable in the
ordinary course of business.
(xii) Each of the Issuer, the Company and their
respective subsidiaries has good, marketable and valid title
in and to all of the Collateral which it purports to own
free and clear of all Liens other than Permitted Liens.
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
Issuer, the Company and their respective Subsidiaries, in
the Collateral covered thereby, subject to no prior, equal
or junior Liens other than Permitted Liens. The Collateral
Documents create, in favor of the Trustees for the benefit
of the Holders, a legally valid, first priority security
interest and upon delivery of the Collateral to the Trustee
pursuant to the Collateral Documents, such security interest
will be perfected. No financing statement or other document
creating, perfecting or recording any Lien on any Collateral
(other than Permitted Liens and the Lien of the Collateral
Documents) is on file in any jurisdiction.
(xiii) To the best of the Issuer's knowledge,
neither any County Partner nor any Joint Venture Company is
in default in the performance of any material term, covenant
or obligation under any Luannan Project Document. To the
best of the Issuer's knowledge, there is no dispute between
any Joint Venture Company and any County Partner with
respect to any Luannan Project Document.
(xiv) Except as disclosed in the Offering
Memorandum, subsequent to the date as of which such
information is given in the Offering Memorandum, neither the
Issuer, the Company nor any of the Joint Ventures has
incurred any liability or obligation, direct or contingent,
or entered into any transaction, in each case that is
material to the Issuer, the Company or any of the Joint
Ventures, and there has not been any change in the capital
stock or equity, or material increase in the short-term or
long-term debt, of the Issuer, the Company or any of the
Joint Ventures or any event or circumstance that has had, or
reasonably could be expected to have, a Material Adverse
Effect.
(xv) The execution and delivery of this
Agreement, the other Operative Documents and the sale of the
Notes to the Initial Purchaser by the Issuer or by the
Initial Purchaser to Eligible Purchasers will not involve
any prohibited transaction within the meaning of Section 406
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the Internal Revenue
Code of 1986. The representation made by the Issuer and the
Company 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 Memorandum
under the Section entitled "Notice to Investors."
(xvi) Each Luannan Project Document and Luannan
Financing Agreement is (or will be when executed and
delivered by all parties thereto) in full force and effect
and constitutes or will constitute a valid and legally
binding obligation of the Joint Ventures enforceable in
accordance with its terms and, to the best knowledge of the
Issuer and the Company, constitutes a validly and legally
binding obligation of each other party that is a party
thereto enforceable against each such party, to the extent
they are parties thereto, in accordance with the terms
thereof, except in each case 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, the Luannan Project
Documents and the Luannan Financing Agreements, none of the
Joint Ventures will be in default (and no event has occurred
which with lapse of time or notice or action by a third
party could reasonably be expected to result in a default)
in the performance of or compliance with any term or
provisions of any Luannan Project Documents and Luannan
Financing Agreements and, to the best knowledge of the
Issuer, no force majeure has occurred and is continuing
under any Luannan Project Document and Luannan Financing
Agreement.
(xvii) The Issuer and the Company have reviewed
the financial projections for the Luannan Facility contained
in the Luannan Engineering Report (the "Projections") and
believe that the Projections are based on 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 Memorandum. The
Issuer and the Company believe the Projections to be
reasonable in light of the assumptions made therein. The
Issuer and the Company have reviewed the assumptions
contained in the Luannan Coal Consultant's Report prepared
by Marston & Marston, Inc., and the Issuer and the Company
believe such assumptions to be reasonable.
(xviii) The capitalization of the Issuer and its
consolidated subsidiaries as of December 31, 1996 is as set
forth in the Offering Memorandum in the section titled
"Capitalization" under the column titled "Actual."
(xix) Moody's Investors Service, Inc. has
assigned a rating of B2 to the Notes; Standard & Poor's
Ratings Service has assigned a rating of B- to the Notes and
Duff & Phelps Credit Rating Co. has assigned a rating of B
to the Notes. No downgrade of such ratings has occurred as
of the date hereof, and to the best knowledge of the Issuer
and the Company none is contemplated.
(xx) The Luannan Power Purchase Agreement
provides that NCPGC shall purchase and take all net
electrical output delivered by (i) the Luannan Facility
during Peak Hours; (ii) the first unit of the Plants, up to
a maximum of 260,000 kWh during Non-Peak Hours; (iii) the
first unit of the Plants, up to a maximum of 240,000 kWh
during Trough Hours; (iv) the second unit of the Plants, up
to a maximum of 520,000 kWh during Non-Peak Hours and (v)
the second unit of the Plants, up to a maximum of 480,000
kWh during Trough Hours.
(xxi) Except as set forth in the Offering
Memorandum, the pricing formula set forth in the Pricing
Document does not require PRC central government approval.
(xxii) The Notes have been duly and validly
authorized for issuance and sale to you by the Issuer
pursuant to this Agreement and, when issued and
authenticated in accordance with the terms of the Senior
Secured Notes Indenture and delivered against payment
therefor in accordance with the terms hereof, will be the
legally valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their
terms (except as such enforceability may be limited by any
exceptions to enforceability of the type set forth in the
legal opinions delivered to you pursuant to Section 7(g)
hereof) and entitled to the benefits of the Senior Secured
Notes Indenture. The Notes when issued, authenticated and
delivered, will conform to the descriptions thereof in the
Offering Memorandum.
(xxiii) The Guarantee has been duly and validly
authorized and, when duly executed and delivered by the
Company and endorsed upon a duly issued and authenticated
Note in accordance with the terms of the Company Indenture
will be the legally valid and binding obligations of the
Company, enforceable against the Company in accordance with
their terms (except as such enforceability may be limited by
any exceptions to enforceability of the type set forth in
the legal opinions delivered to you pursuant to Section 7(g)
hereof) and entitled to the benefits of the Company
Indenture. The Guarantee, when executed and delivered, will
conform to the description thereof in the Offering
Memorandum.
(xxiv) The Company Indenture will have been duly
and validly authorized by the Company on or before the
Closing Date and, when duly executed and delivered by the
Company (assuming the due execution and delivery thereof by
the Trustee), will be the legally valid and binding
obligation of the Company, enforceable against the Company
in accordance with its terms (except as such enforceability
may be limited by any exceptions to enforceability of the
type set forth in the legal opinions delivered to you
pursuant to Section 7(g) hereof). The Senior Secured Notes
Indenture has been duly and validly authorized by the Issuer
and, when duly executed and delivered by the Issuer
(assuming the due execution and delivery thereof by the
Trustee), will be the legally valid and binding obligation
of the Issuer, enforceable against the Issuer in accordance
with its terms (except as such enforceability may be limited
by any exceptions to enforceability of the type set forth in
the legal opinions delivered to you pursuant to Section 7(g)
hereof). The Indentures, when executed and delivered, will
conform to the descriptions thereof in the Offering
Memorandum and will conform to the requirements of the Trust
Indenture Act.
(xxv) The Registration Rights Agreement will have
been duly and validly authorized by the Issuer and the
Company on or before the Closing Date and, when duly
executed and delivered by the Issuer and the Company
(assuming the due execution and delivery thereof by you),
will be the legally valid and binding obligation of the
Issuer and the Company, enforceable against the Issuer and
the Company in accordance with its terms (except as such
enforceability may be limited by any exceptions to
enforceability of the type set forth in the legal opinions
delivered to you pursuant to Section 7(g) hereof). The
Registration Rights Agreement, when executed and delivered,
will conform to the description thereof in the Offering
Memorandum.
(xxvi) The Registered Notes have been duly and
validly authorized for issuance by the Issuer, and if and
when issued and authenticated in accordance with the terms
of the Issuer Indentures and the Registration Rights
Agreement, will be the legally valid and binding obligations
of the Issuer, enforceable against the Issuer in accordance
with their terms (except as such enforceability may be
limited by any exceptions to enforceability of the type set
forth in the legal opinions delivered to you pursuant to
Section 7(g) hereof) and entitled to the benefits of the
Issuer Indentures. The Registered Notes, if and when
issued, authenticated and delivered, will conform to the
descriptions thereof in the Offering Memorandum.
(xxvii) None of the Issuer, the Company or the
Joint Ventures or any of their subsidiaries is (A) in
violation of its respective charter or bylaws or other
organizational documents, (B) in default in the performance
of any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which it is a
party or by which it is bound or to which any of its
properties is subject, or (C) is in violation of any law,
statute, rule, regulation, judgment or court decree
applicable to the Issuer, the Company or the Joint Ventures,
any of their subsidiaries or their assets or properties that
in the case of clauses (A), (B) and (C) above, (x) would
reasonably be expected, individually or in the aggregate, to
result in a material adverse effect on the assets,
properties, business, results of operations, condition
(financial or otherwise) or business prospects of the Issuer
or the Company or the Joint Ventures and their subsidiaries,
taken as a whole, (y) would materially interfere with or
adversely affect the issuance of the Notes and the Guarantee
or (z) in any manner draw into question the validity of this
Agreement or any other Operative Document (any of the events
set forth in clauses (x), (y) or (z), a "Material Adverse
Effect"). To the best knowledge of the Issuer and the
Company, there exists no condition that, with notice, the
passage of time or otherwise, would constitute a default
under any such document or instrument which would reasonably
be expected to have a Material Adverse Effect.
(xxviii) The execution, delivery and performance by
each of the Issuer, the Company, PEI and the Joint Ventures
of this Agreement and the other Operative Documents to which
it is a party, the issuance and sale of the Securities by
the Issuer, the execution, delivery and performance of the
Guarantee by the Company, and the consummation of the
transactions contemplated hereby and thereby, will not
violate, conflict with or constitute a breach of any of the
terms or provisions of, or a default under (or an event that
with notice or the lapse of time, or both, would constitute
a default), or require consent under, or result in the
imposition of a lien or encumbrance (except Liens
contemplated by the Collateral Documents) on any properties
of the Issuer, the Company, PEI or any of their
subsidiaries, or an acceleration of indebtedness pursuant
to, (i) the charter or bylaws of the Issuer, the Company,
PEI or any of their subsidiaries, (ii) any bond, debenture,
note, indenture, mortgage, deed of trust or other agreement
or instrument to which the Issuer, the Company, PEI or any
of their subsidiaries is a party or by which any of them or
their property is or may be bound, (iii) any statute, rule
or regulation applicable to the Issuer, the Company, PEI,
any of their subsidiaries or any of their assets or
properties, or (iv) any judgment, order or decree of any
court or governmental agency or authority having
jurisdiction over the Issuer, the Company, PEI, any of their
subsidiaries or their assets or properties, except insofar
as any of (ii), (iii) or (iv) above would not reasonably be
expected, individually or in the aggregate, to result in a
Material Adverse Effect. No consent, approval,
authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is
required for the execution, delivery and performance of this
Agreement and the other Operative Documents, the issuance
and sale of the Securities, the execution, delivery and
performance of the Guarantee, and the consummation of the
transactions contemplated hereby and thereby, except such as
have been obtained and made (or, in the case of the
Registration Rights Agreement, will be obtained and made)
under the Securities Act, the Trust Indenture Act and state
securities or Blue Sky laws and regulations or such as may
be required by the NASD, except insofar as the failure to
obtain such consent, appraisal, authorization or order of,
or filing, registration, qualification, license or permit
would not reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(xxix) No consents or waivers from any other
person are required for the execution, delivery and
performance of this Agreement and, except as disclosed in
the Offering Memorandum, the other Operative Documents or
for the issuance and sale of the Securities, the execution,
delivery and performance of the Guarantee and the
consummation of the transactions contemplated hereby and
thereby, other than such consents and waivers as have been
obtained (or, in the case of the Registration Rights
Agreement, will be obtained), except where the failure to
have obtained any of the foregoing would not reasonably be
expected to have a Material Adverse Effect.
(xxx) Except as disclosed in the Offering
Memorandum, there is (i) no action, suit or proceeding
before or by any court, arbitrator or governmental agency,
body or official, domestic or foreign, now pending or, to
the best knowledge of the Issuer or the Company, threatened
or contemplated to which the Issuer, the Company or the
Joint Ventures or any of their subsidiaries or any benefit
plan maintained thereby is or may be a party or to which the
business or property of the Issuer, the Company or the Joint
Ventures or any of their subsidiaries is or may be subject,
(ii) no statute, rule, regulation or order that, to the best
knowledge of the Issuer and the Company, has been enacted,
adopted or issued by any governmental agency or that, to the
best knowledge of the Issuer and the Company, has been
proposed by any governmental body, (iii) no injunction,
restraining order or order of any nature by a federal or
state court or foreign court of competent jurisdiction to
which the Issuer, the Company, the Joint Ventures or any of
their subsidiaries is or may be subject or to which the
business, assets or property of the Issuer, the Company, the
Joint Ventures or their subsidiaries are or may be subject
issued that would, in the case of clauses (i), (ii) and
(iii) above, reasonably be expected to, individually or in
the aggregate, result in a Material Adverse Effect.
(xxxi) No action has been taken and no statute,
rule or regulation or order has been enacted, adopted or
issued by any governmental agency that prevents the issuance
of the Securities; no injunction, restraining order or order
of any nature by a federal or state court of competent
jurisdiction has been issued that prevents the issuance of
the Securities or suspends the sale of the Securities in any
jurisdiction referred to in Section 4(e) hereof; and no
action, suit or proceeding is pending against or affecting
or, to the best knowledge of the Company, threatened
against, the Company or any of its subsidiaries before any
court or arbitrator or any governmental body, agency or
official which, if adversely determined, would prohibit,
interfere with or adversely affect the issuance or
marketability of the Securities or in any manner draw into
question the validity of any Operative Document; and every
request of any securities authority or agency of any
jurisdiction for additional information of which the Company
or the Issuer has been notified, has been complied with in
all material respects.
(xxxii) There is (i) no significant unfair labor
practice complaint pending against the Company, the Issuer,
the Joint Ventures or any of their subsidiaries nor, to the
best knowledge of the Company and the Issuer, threatened
against any of them, before the National Labor Relations
Board, any state or local labor relations board or any
foreign labor relations board, and no significant grievance
or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending
against the Company, the Issuer, the Joint Ventures or any
of their subsidiaries or, to the best knowledge of the
Company and the Issuer, threatened against any of them, (ii)
no significant strike, labor dispute, slowdown or stoppage
pending against the Company, the Issuer, the Joint Ventures
or any of their subsidiaries nor, to the best knowledge of
the Company and the Issuer, threatened against the Company,
the Issuer, the Joint Ventures or any of their subsidiaries
and (iii) to the best knowledge of the Company and the
Issuer, no union representation question exists with respect
to the employees of the Company, the Issuer, the Joint
Ventures and their subsidiaries and, to the best knowledge
of the Company and the Issuer, no union organizing
activities are taking place, except insofar as any of the
foregoing would not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse
Effect. None of the Company, the Issuer, the Joint Ventures
or any of their subsidiaries has violated any federal, state
or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, nor any applicable
wage or hour laws, nor any provision of ERISA, or the rules
and regulations thereunder, or analogous foreign laws and
regulations, which would reasonably be expected, either
individually or in the aggregate, to have a Material Adverse
Effect.
(xxxiii) Each of the Company, the Issuer, the Joint
Ventures and their subsidiaries is in compliance with all
applicable existing federal, state, local and foreign laws
and regulations relating to the protection of human health
or the environment or imposing liability or standards of
conduct concerning any Hazardous Material (as defined below)
(collectively, "Environmental Laws"), except for such
instances of noncompliance that, either singly or in the
aggregate, would reasonably be expected to have a Material
Adverse Effect. The term "Hazardous Material" means (i) any
"hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended, (ii) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976, as
amended, (iii) any petroleum or petroleum product (iv) any
polychlorinated biphenyl and (v) any pollutant or
contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the
meaning of any other Environmental Law. There is no alleged
liability of which the Company, the Issuer, the Joint
Ventures or any of their subsidiaries has received notice,
or, to the best knowledge and information of the Company and
the Issuer, potential liability (including, without
limitation, alleged or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or
penalties) of the Company, the Issuer or any of their
subsidiaries arising out of, based on, or resulting from (A)
the presence or release into the environment of any
Hazardous Material at any location currently or previously
owned by the Company, the Issuer or any of their
subsidiaries or at any location currently or previously used
or leased by the Company, the Issuer or any of their
subsidiaries or (B) any violation or alleged violation of
any Environmental Law, except in each case with respect to
clauses (A) and (B), alleged or potential liabilities that,
singly or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(xxxiv) Each of the Company, the Issuer and the
Joint Ventures and their subsidiaries has (i) good and
marketable title to all of the properties and assets
described in the Offering Memorandum as owned by it, free
and clear of all liens, charges, encumbrances and
restrictions, except such as are described in the Offering
Memorandum or for liens for taxes not yet due and payable or
as would not reasonably be expected, either individually or
in the aggregate, to have a Material Adverse Effect,
(ii) peaceful and undisturbed possession under all leases to
which it is party as lessee, except where the failure to
have such possession would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect, (iii) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from,
and has made all declarations and filings with, all federal,
state, local and foreign authorities, all self-regulatory
authorities and all courts and other tribunals (each an
"Authorization") necessary to engage in the business
currently conducted by it in the manner described in the
Offering Memorandum, except where failure to hold such
Authorizations would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect and (iv) no reason to believe that any governmental
body or agency is considering limiting, suspending or
revoking any such Authorization. All such Authorizations
are valid and in full force and effect and the Company, the
Issuer, the Joint Ventures and their subsidiaries are in
compliance in all material respects with the terms and
conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having
jurisdiction with respect thereto, except insofar as the
failure to have any of the foregoing would not reasonably be
expected either individually or in the aggregate, to have a
Material Adverse Effect. All leases to which the Company,
the Issuer, the Joint Ventures or any of their subsidiaries
is a party are valid and binding and to the knowledge of the
Company and the Issuer no material defaults by the landlord
are existing under any such lease.
(xxxv) Each of the Company, the Issuer and the
Joint Ventures and their subsidiaries owns or possesses or
has the right to use all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the
"Intellectual Property") presently employed by it in
connection with the businesses now operated by them as
described in the Offering Memorandum, except insofar as
failure to have any of the foregoing would not reasonably be
expected to have a Material Adverse Effect, and none of the
Company, the Issuer, the Joint Ventures or any of their
subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any
of the foregoing which would have a Material Adverse Effect.
The use of the Intellectual Property in connection with the
business and operations of the Issuer and its subsidiaries
does not infringe on the rights of any person, except
infringements which would not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse
Effect.
(xxxvi) All tax returns required to be filed by the
Company, the Issuer and the Joint Ventures or any of their
subsidiaries, in all jurisdictions, have been so filed. All
taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due
from such entities or that are due and payable have been
paid, other than those being contested in good faith and for
which adequate reserves have been provided or those
currently payable without penalty or interest. None of the
Company, the Issuer, the Joint Ventures or any of their
subsidiaries knows of any material proposed additional tax
assessments against it or any of its subsidiaries or the
assets or property of the Issuer or any of its subsidiaries.
(xxxvii) None of the Company, the Issuer, the Joint
Ventures or any of their subsidiaries 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 (the "Investment Company Act"), or
analogous Cayman Islands or People's Republic of China laws
and regulations, or (ii) a "holding company" or a
"subsidiary company" or an "affiliate" of a holding company
within the meaning of the Public Utility Holding Company Act
of 1935, as amended (the "Public Utility Holding Company
Act"), or analogous Cayman Islands or People's Republic of
China laws and regulations.
(xxxviii) There are no holders of securities of the
Company, the Issuer, the Joint Ventures or any of their
subsidiaries who, by reason of the execution by the Issuer
and the Company of this Agreement or any other Operative
Document to which either is a party or the consummation of
the transactions contemplated hereby and thereby, have the
right to request or demand that the Issuer or the Company
register under the Securities Act or analogous foreign laws
and regulations securities held by them.
(xxxix) Each certificate signed by any officer of
the Issuer or the Company and delivered to the Initial
Purchaser or counsel for the Initial Purchaser shall be
deemed to be a representation and warranty by the Issuer or
the Company, as the case may be, to the Initial Purchaser as
to the matters covered thereby.
(xl) The Company, the Issuer and the Joint
Ventures and each of their subsidiaries maintains insurance
covering their properties, operations, personnel and
businesses. Such insurance insures against such losses and
risks as are believed by them to be adequate in accordance
with customary industry practice to protect the Company, the
Issuer, the Joint Ventures and their subsidiaries and their
businesses. None of the Company, the Issuer, the Joint
Ventures nor any of their subsidiaries has received notice
from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be
made in order to continue such insurance. All such
insurance is outstanding and duly in force on the date
hereof and will be outstanding and duly in force on the
Closing Date.
(xli) Neither the Issuer, the Company nor PEI has
(i) taken (or will 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
any security of the Issuer, the Company or any of their
subsidiaries to facilitate the sale or resale of the
Securities or (ii) since the date of the preliminary
Offering Memorandum (A) sold, bid for, purchased or paid any
person any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Issuer, the Company or any of their
subsidiaries.
(xlii) No registration under the Securities Act of
the Notes is required for the sale of the Notes to the
Initial Purchaser as contemplated hereby or for the Exempt
Resales assuming (i) that the purchasers who buy the Notes
in the Exempt Resales are either QIBs or Accredited
Investors and (ii) the accuracy of the Initial Purchaser's
representations in Section 5(b) hereof. No form of general
solicitation or general advertising was used by the Company,
the Issuer or any of their representatives in connection
with the offer and sale of any of the Notes or in connection
with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or
general advertising. No securities of the same class or
series as the Notes have been issued and sold by the Issuer
or the Company within the six-month period immediately prior
to the date hereof. Neither the Issuer nor the Company has
entered into any contractual arrangement with respect to the
distribution of the Notes except for this Agreement.
(xliii) The Issuer and the Company, directly or
through any agent, have not engaged or will not engage in
any activity for the purpose of, or that could reasonably be
expected to have the effect of, conditioning the market in
the United States for the Notes and the Issuer and the
Company, and any person acting on their behalf, have
complied and will comply with the offering restrictions
requirement of Regulation S; provided, however, that the
Issuer and the Company make no representation or warranty as
to any actions taken by the Initial Purchaser or any person
acting on its behalf in respect of the transactions
contemplated by this Agreement.
(xliv) Each of the preliminary Offering Memorandum
and the Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, contains or
will contain all the information specified in, and meets or
will meet the requirements of, Rule 144A(d)(4) under the
Securities Act.
(xlv) Subsequent to the respective dates as of
which information is given in the Offering Memorandum and up
to the Closing Date, except as set forth in the Offering
Memorandum, none of the Company, the Issuer, the Joint
Ventures and their subsidiaries has incurred any liabilities
or obligations, direct or contingent, which are material to
the Company and its subsidiaries taken as a whole, nor
entered into any transaction not in the ordinary course of
business, nor has there been, singly or in the aggregate,
any material adverse change, or any development which may
reasonably be expected to involve a material adverse change,
in the assets, properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of
the Company and its subsidiaries, taken as a whole (a
"Material Adverse Change") and there have not been dividends
or distributions of any kind declared, paid or made by the
Company or any of its subsidiaries on any class of its
capital stock.
(xlvi) None of the Issuer, the Company or any
agent thereof acting on behalf of the Issuer or the Company
has taken, and none of them will take, any action that would
reasonably be expected to cause this Agreement or the
issuance or sale of the Notes to violate Regulation G (12
C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve
System or analogous Cayman Islands or People's Republic of
China laws and regulations.
(xlvii) The accountants who have certified or shall
certify the financial statements and supporting schedules
included or to be included as part of the Offering
Memorandum are independent accountants under Rule 101 of
AICPA's Code of Professional Conduct and its interpretations
and rulings. The consolidated historical statements fairly
present the consolidated financial condition and results of
operations of the Company, the Issuer and their consolidated
subsidiaries at the respective dates and for the respective
periods indicated, in accordance with generally accepted
accounting principles consistently applied throughout such
periods, except as stated therein. The pro forma financial
statements included in the Offering Memorandum have been
prepared on a basis consistent with such historical
statements, except for the pro forma adjustments specified
therein, and give effect to assumptions made on a reasonable
basis and present fairly the historical and proposed
transactions contemplated by this Agreement and the other
Operative Documents. Other financial and statistical
information and data included in the Offering Memorandum,
historical and pro forma, are accurately presented and
prepared on a basis consistent with such financial
statements and the books and records of the Company, the
Issuer, and their subsidiaries.
(xlviii) Neither the Company, the Issuer nor the
Joint Ventures intends to, nor does it believe that it will,
incur debts beyond its ability to pay such debts as they
mature. The Company and the Issuer believe that the present
fair saleable value of the assets of each of the Company,
the Issuer and the Joint Ventures will exceed the amount
that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent
liabilities) of such person as they become absolute and
matured. The assets of each of the Company, the Issuer and
the Joint Ventures will not constitute unreasonably small
capital to carry out their respective businesses as now
conducted, including the capital needs of each of the
Company, the Issuer and the Joint Ventures, taking into
account their respective projected capital requirements and
capital availability. Each of the Company, the Issuer and
the Joint Ventures currently believes that it is, and
immediately after the Closing Date will be, Solvent. As
used herein, the term "Solvent" means, with respect to a
person on a particular date, that on such date (A) the fair
market value of the assets of such person is greater than
the total amount of liabilities (including contingent
liabilities) of such person, (B) the present fair saleable
value of the assets of such person is greater than the
amount that will be required to pay the probable liabilities
of such person on its debts as they become absolute and
matured, (C) such person is able to realize upon its assets
and pay its debts and other liabilities, including
contingent obligations, as they mature and (D) such person
does not have an unreasonably small capital.
(xlix) Except for this Agreement, there are no
contracts, agreements or understandings between the Issuer
or the Company or any of their subsidiaries and any person
that would give rise to a valid claim against the Issuer or
the Company, its subsidiaries or the Initial Purchaser for a
brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the
Securities.
(l) Prior to the Exchange Offer or the
effectiveness of the Shelf Registration Statement, none of
the Indentures are required to be qualified under the Trust
Indenture Act.
The Company and the Issuer acknowledge that the Initial
Purchaser and, for purposes of the opinions to be delivered to
the Initial Purchaser pursuant to Section 7 hereof, counsel to
the Company and the Issuer and counsel to the Initial Purchaser,
will rely upon the accuracy and truth of the foregoing
representations and hereby consent to such reliance.
(b) The Initial Purchaser represents and warrants to
the Issuer and the Company and agrees that:
(i) The Initial Purchaser is a QIB, with such
knowledge and experience in financial and business matters
as are necessary in order to evaluate the merits and risks
of an investment in the Notes and acknowledges that none of
the Notes or the Guarantee has been registered under the
Securities Act and that such securities may not be offered
or sold within the United States or to, or for the account
or benefit of, U.S. persons (as defined in Regulation S
under the Securities Act) except pursuant to an exemption
from the registration requirements of the Securities Act.
(ii) The Initial Purchaser (A) is not acquiring
the Notes with a view to any distribution thereof that would
violate the Securities Act or the securities laws of any
state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the
Notes only (1) inside the United States to QIBs in reliance
on the exemption from the registration requirements of the
Securities Act provided by Rule 144A, (2) inside the United
States to Accredited Investors that execute and deliver a
letter containing representations and agreements in the form
attached as Annex A to the Offering Memorandum in a private
placement exempt from the registration requirements of the
Securities Act and (3) outside the United States in
compliance with Regulation S.
(iii) No form of general solicitation or general
advertising has been or will be used by the Initial
Purchaser or any of its representatives in connection with
the offer and sale of any of the Notes, including, but not
limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general
solicitation or general advertising.
(iv) The Initial Purchaser agrees that, in
connection with the Exempt Resales, it will solicit offers
to buy the Notes only from, and will offer to sell the Notes
only (A) inside the United States to QIBs and a limited
number of institutional Accredited Investors and (B) outside
the United States in compliance with Regulation S. The
Initial Purchaser further agrees (C) that it will offer to
sell the Notes only to, and will solicit offers to buy the
Notes only from (l) QIBs who in purchasing such Notes will
be deemed to have represented and agreed that they are
purchasing the Notes for their own accounts or accounts with
respect to which they exercise sole investment discretion
and that they or such accounts are QIBs and (2)
institutional Accredited Investors who make the
representations contained in, and execute and return to the
Initial Purchaser, a certificate in the form of Appendix H
attached to the Offering Memorandum and (D) that, in the
case of such QIBs and Accredited Investors, acknowledges and
agrees that such Notes will not have been registered under
the Securities Act and may be resold, pledged or otherwise
transferred only (x)(I) to a person who the seller
reasonably believes is a QIB in a transaction meeting the
requirements of Rule 144A, (II) in a transaction meeting the
requirements of Rule 144, (III) to a foreign person in a
transaction meeting the requirements of Rule 904 under the
Securities Act or (IV) in accordance with another exemption
from the registration requirements of the Securities Act
(and based upon an opinion of counsel if the Issuer so
requests), (y) to the Issuer, or (z) pursuant to an
effective registration statement under the Securities Act
and, in each case, in accordance with any applicable
securities laws of any state of the United States or any
other applicable jurisdiction and (C) that the holder will,
and each subsequent holder is required to, notify any
purchaser from it of the security evidenced thereby of the
resale restrictions set forth in (B) above.
(v) The Initial Purchaser will have provided
each Eligible Purchaser with a copy of the Offering
Memorandum prior to or concurrent with settlement of each
initial resale pursuant to Rule 144A, either with the
confirmation of such initial resale or otherwise.
(vi) The Initial Purchaser (A) has not
solicited, and will not solicit, offers to purchase any of
the Notes from, (B) it has not sold, and will not sell, any
of the Notes to, and (C) it has not distributed and will not
distribute, the Offering Memorandum to, any person or entity
in any jurisdiction outside of the United States except, in
each case, in compliance in all material respects with all
applicable laws.
(vii) The Initial Purchaser also understands that
the Issuer and the Company and, for purposes of the opinions
to be delivered to you pursuant to Section 7 hereof, counsel
to the Issuer and the Company and counsel to the Initial
Purchaser, will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such
reliance.
(viii) The Initial Purchaser, and each of its
affiliates and any person acting on its behalf, has not
engaged and will not engage in any "directed selling
efforts" (as defined in Regulation S) with respect to the
Notes, and it and they have complied and will comply with
any applicable offering restrictions requirement of
Regulation S with respect to the Notes.
6. Indemnification.
(a) The Issuer, the Company and Panda Energy
International, Inc. ("PEI"), jointly and severally, agree to
indemnify and hold harmless the Initial Purchaser and each
person, if any, who controls (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) the Initial
Purchaser (any of such persons hereinafter referred to as a
"controlling person"), and the officers, directors, partners,
employees, representatives and agents of the Initial Purchaser or
any controlling person (each such entity or person an
"Indemnified Person") to the fullest extent lawful, from and
against any and all losses, claims, damages, assessments,
judgments, actions and other liabilities (collectively,
"Liabilities"), and will reimburse each Indemnified Person for
all fees and expenses (including without limitation, the
reasonable fees and expenses of counsel to any Indemnified
Person) (collectively, "Expenses") as they are incurred in
investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental
agency or body, whether or not in connection with pending or
threatened litigation and whether or not any Indemnified Person
is a party (collectively, "Securities Actions"), directly or
indirectly caused by, related to, based upon, arising out of or
in connection with any untrue statement or alleged untrue
statement of a material fact contained in the preliminary
Offering Memorandum or the Offering Memorandum (or any amendment
or supplement thereto), or by 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 light of the
circumstances under which they were made, not misleading, except
insofar as such Liabilities or Expenses are caused by an untrue
statement or omission or alleged untrue statement or omission (i)
that is made in reliance upon and in conformity with information
furnished in writing to the Issuer and the Company by the Initial
Purchaser expressly for use therein, which information is
specified in the second paragraph of Section 6(c) or (ii) that is
made in any preliminary Offering Memorandum if a copy of the
Offering Memorandum (as then amended or supplemented) was not
sent or given by or on behalf of the Initial Purchaser to the
person asserting any such loss, claim, damage, liability or
expense at or prior to the written confirmation of the sale of
the Notes and the Offering Memorandum (as then amended or
supplemented) would have corrected each untrue statement or
omission. The Issuer, the Company and PEI will also reimburse
each Indemnified Person for all Expenses as incurred in
connection with enforcing such Indemnified Person's rights under
this Agreement; provided, that if the Issuer, the Company or PEI
reimburses the Initial Purchaser hereunder for any Expenses, the
Initial Purchaser hereby agrees to refund such reimbursement of
Expenses to the extent that the Initial Purchaser is not entitled
to be indemnified hereunder. The Issuer and the Company shall
notify the Initial Purchaser promptly of the institution, threat
or assertion of any Securities Action in connection with the
matters addressed by this Agreement which involves the Issuer,
the Company or an Indemnified Person.
(b) Upon receipt by an Indemnified Person of notice of
a Securities Action against such Indemnified Person with respect
to which indemnity may be sought under Section 6(a), such
Indemnified Person shall promptly notify the Issuer, the Company
and PEI in writing, provided that the failure to so notify the
Issuer, the Company and PEI shall not relieve the Issuer, the
Company or PEI from any liability which the Issuer, the Company
or PEI may have on account of this indemnity or otherwise, except
to the extent the Issuer, the Company and PEI shall have been
materially prejudiced by such failure. The Issuer, the Company
and PEI shall, if requested by such Indemnified Person, assume
the defense of any such Securities Action including the
employment of counsel reasonably satisfactory to such Indemnified
Person. 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
Issuer, the Company and PEI have failed promptly to assume the
defense and employ counsel reasonably satisfactory to such
indemnified party, (ii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of
the indemnifying party or (iii) the named parties to any such
Securities Action (including any impleaded parties) include such
Indemnified Person and the Issuer, the Company or PEI, 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 in addition to those available to the Issuer,
the Company, or PEI, provided that the Issuer, the Company and
PEI shall not in such event be responsible hereunder for the fees
and expenses of more than one firm of separate counsel in
connection with any Securities Action in the same jurisdiction,
in addition to any local counsel. None of the Issuer, the
Company or PEI shall be liable for any settlement of any
Securities Action effected without written consent of the Issuer,
the Company and PEI (which shall not be unreasonably withheld)
and the Issuer, the Company or PEI agree to indemnify and hold
harmless any Indemnified Person from and against any Liability or
Expense by reason of any settlement of any Securities Action
effected with the written consent of the Issuer. Notwithstanding
the immediately preceding sentence, if at any time an Indemnified
Person shall have requested the Issuer, the Company or PEI to
reimburse the Indemnified Person for fees and expenses of counsel
as contemplated by the third sentence of this paragraph, each of
the Issuer, the Company and PEI 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 sixty
(60) business days after receipt by the Issuer, the Company and
PEI of the aforesaid request and (ii) the Issuer, the Company and
PEI shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such
settlement. In addition, the Issuer, the Company and PEI will
not, without the prior written consent of each Indemnified
Person, settle any pending or threatened Securities Action in
respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party
thereto), unless such settlement includes an unconditional
release of each Indemnified Person from all Liabilities on claims
that are the subject matter of such proceedings.
(c) The Initial Purchaser agrees to indemnify and hold
harmless each of the Issuer, the Company and PEI, and its
directors, officers and any person controlling (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Issuer, the Company and PEI, and the officers,
directors, partners, employees, representatives and agents of
each such person, to the same extent as the foregoing indemnity
from the Issuer and the Company to each of the Indemnified
Persons, but only with respect to Liabilities and Expenses
incurred in investigating, preparing, pursuing or defending
Securities Actions directly or indirectly caused by, related to,
based upon, arising out of or in connection with any untrue
statement or omission or alleged untrue statement or omission of
a material fact contained in the preliminary Offering Memorandum
or the Offering Memorandum that was made in reliance upon and in
conformity with information relating to the Initial Purchaser
furnished in writing by or on behalf of the Initial Purchaser to
the Issuer, the Company and PEI expressly for use in the
preliminary Offering Memorandum, the Offering Memorandum or any
amendment or supplement thereto, which information is specified
in the second paragraph of this Section 6(c). In case any
Securities Action shall be brought against the Issuer, the
Company or their directors or officers or any such controlling
person in respect of which indemnity may be sought against the
Initial Purchaser, the Initial Purchaser shall have the rights
and duties given the Issuer, the Company and PEI, and the Issuer,
the Company and PEI or their directors or officers or such
controlling person shall have the rights and duties given to the
Initial Purchaser by the preceding paragraph. In no event shall
the liability of the Initial Purchaser hereunder be greater, in
the aggregate, than the amount by which the total discounts and
commissions received by the Initial Purchaser with respect to the
Notes exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of a claim
or action based on such information.
The statements in the preliminary Offering Memorandum
and the Offering Memorandum set forth in the last paragraph on
the cover page, the third paragraph on page (i), the third
paragraph (other than the final sentence thereof) and the third,
fourth, fifth and sixth sentences of the fourth paragraph under
"Plan of Distribution" constitute the only information heretofore
furnished to the Issuer, the Company and PEI in writing by the
Initial Purchaser expressly for use in the preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or
supplement thereto.
(d) If the indemnification provided for in this
Section 6 is unavailable to an indemnified party under Section
6(a), (b) and (c) hereof (other than by reason of exceptions
provided in those Sections) in respect of any Liabilities or
Expenses referred to therein, 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 Liabilities and Expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on
the other hand from the offering of the Notes 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 the indemnifying party and the
indemnified party, as well as any other relevant equitable
considerations. The relative benefits received by the Issuer,
the Company and PEI on the one hand and the Initial Purchaser on
the other hand, shall be in the same proportion as the total
proceeds from the sale of the Notes (net of discounts and
commissions but before deducting expenses) received by the
Issuer, the Company and PEI on the one hand and the total
discounts and commissions received by the Initial Purchaser on
the other hand, bear to the total price of the Notes, in each
case, as set forth in the table on the covering page of the
Offering Memorandum. The relative fault of the indemnifying
party on the one hand and of the indemnified party on the other
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the
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, PEI and the Initial Purchaser
agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata
allocation 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 Liabilities or Expenses
referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above,
any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any Securities Action. Notwithstanding the provisions of this
Section 6, the Initial Purchaser (and its related Indemnified
Persons) shall not be required to contribute, in the aggregate,
any amount in excess of the amount by which the total discounts
and commissions received by the Initial Purchaser with respect to
the Notes, exceeds the amount of any damages which the Initial
Purchaser 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.
7. Conditions of Initial Purchaser's Obligations.
The obligations of the Initial Purchaser under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All of the representations and warranties of the
Issuer, the Company and PEI contained in this Agreement
shall be true and correct on the date hereof and on the
Closing Date with the same force and effect as if made on
and as of the date hereof and the Closing Date,
respectively. The Issuer, the Company and PEI shall have
performed or complied with all of the agreements herein
contained and required to be performed or complied with by
them at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed
and copies distributed to the Initial Purchaser not later
than 10:00 a.m., New York City time, on the date of this
Agreement or at such later date and time as to which you may
agree.
(c) No stop order suspending the qualification or
exemption from qualification of any of the Notes in any
jurisdiction referred to in Section 4(e) shall have been
issued and no proceeding for that purpose shall have been
commenced or shall be pending or threatened.
(d) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted
or issued by any governmental agency which would, as of the
Closing Date, prevent the issuance or sale of any of the
Notes; no action, suit or proceeding shall be pending
against or affecting or, to the knowledge of the Issuer or
the Company, threatened against, the Issuer, the Company or
any of their respective subsidiaries before any court or
arbitrator or any governmental body, agency or official
that, if adversely determined, would have a Material Adverse
Effect; and no stop order preventing the use of the Offering
Memorandum, or any amendment or supplement thereto, or any
order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements
of the Securities Act shall have been issued.
(e) Since the dates as of which information is given
in the Offering Memorandum, (i) there shall not have been
any material change, or any development that is reasonably
likely to result in a material change, in the capital stock,
or material increase in the short-term debt or the long-term
debt, of the Company, the Issuer or any of their
subsidiaries from that set forth in the Offering Memorandum,
(ii) no dividend or distribution of any kind shall have been
declared, paid or made by the Company, the Issuer or any of
their subsidiaries on any class of its capital stock, and
(iii) none of the Company, the Issuer nor any of their
subsidiaries shall have incurred any liabilities or
obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company, the Issuer
and their subsidiaries, taken as a whole, and that are
required to be disclosed on a balance sheet in accordance
with generally accepted accounting principles and are not
disclosed on the latest balance sheet included in the
Offering Memorandum. Since the date hereof and since the
dates as of which information is given in the Offering
Memorandum, there shall not have been any Material Adverse
Change.
(f) You shall have received certificates, dated the
Closing Date, signed by (i) the Chief Executive Officer or
any Vice President and (ii) a principal financial or
accounting officer of the Issuer, as of the Closing Date,
confirming the matters set forth in paragraphs (a), (b),
(c), (d) and (e) of this Section 7.
(g) The Notes (other than then Notes being sold to
Institutional Accredited Investors) shall have been approved
or designated for "book-entry" settlement through the
facilities of DTC, Euroclear and Cedel Bank.
(h) You shall have received on the Closing Date an
opinion (satisfactory to you and your counsel), dated the
Closing Date, of Chadbourne & Parke LLP, counsel for the
Issuer and the Company, to the effect that:
(1) Each of the Company and its subsidiaries
(other than those entities organized in the Cayman
Islands, the People's Republic of China or the State of
Texas) has been duly organized and is validly existing
in good standing under the laws of its respective
jurisdiction of organization. Each of the Company and
its subsidiaries (other than those entities organized
in the Cayman Islands, the People's Republic of China
or the State of Texas) has the requisite corporate or
company power and authority to own, lease and operate
its properties and to conduct its business as described
in the Offering Memorandum, and each of the Company is
duly qualified as a foreign entity and in good standing
in each jurisdiction in which the ownership, leasing
and operation of its property and the conduct of its
business requires such qualification except where the
failure to so qualify would not have a Material Adverse
Effect.
(2) (i) All of the issued and outstanding
shares of capital stock of each of the Company and its
subsidiaries (other than those entities organized in
the Cayman Islands, the People's Republic of China or
the State of Texas) have been duly and validly
authorized and issued is fully paid and nonassessable
and was not issued in violation of or subject to
preemptive or similar rights; (ii) the capital stock of
each of the Issuer, the Company and their respective
subsidiaries is owned of record as described in the
Offering Memorandum; and (iii) the Issuer and the
Company have the authorized and outstanding
capitalization as set forth in the Offering Memorandum.
(3) The Company has the requisite corporate
power and authority to execute, deliver and perform its
obligations under this Agreement, the Indentures, the
Registration Rights Agreement and the other Operative
Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby,
including, without limitation, with respect to the
Issuer, the corporate power and authority to issue,
sell and deliver the Securities as contemplated by this
Agreement. The Company has the requisite corporate
power and authority to execute, deliver and perform its
obligations under the Guarantee and, if and when it is
issued, the Registered Guarantee.
(4) Each of this Agreement, the Notes, the
Issuer Indentures and the other Operative Documents to
which it is a party has been duly and validly executed
and delivered by the Issuer. Each of this Agreement,
the Guarantee, the Company Indentures and the other
Operative Documents to which it is a party has been
duly and validly authorized, executed and delivered by
the Company. The Registered Guarantee has been duly
and validly authorized for issuance by the Company.
(5) When issued and authenticated in
accordance with the terms of the Issuer Indentures and
delivered against payment therefor in accordance with
the terms of this Agreement, the Notes will constitute
legally valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their
terms and entitled to the benefits of the Issuer
Indentures.
(6) When endorsed upon duly issued and
authenticated Notes in accordance with the terms of the
Indentures and delivered against payment therefor in
accordance with the terms of this Agreement, the
Guarantee will constitute the valid and legally binding
obligation of the Company, enforceable against the
Company in accordance with their terms and entitled to
the benefits of the Indentures.
(7) When issued and authenticated in
accordance with the terms of the Issuer Indentures, the
Registration Rights Agreement and the Exchange Offer,
the Registered Notes will constitute legally valid and
binding obligations of the Issuer, enforceable against
the Issuer in accordance with their terms and entitled
to the benefits of the Issuer Indentures.
(8) The Company Indentures, assuming due
authorization, execution and delivery thereof by the
trustee named therein, constitute legally valid and
binding obligations of the Company, enforceable against
the Company in accordance with their terms. Each of
the Indentures conforms to the requirements of the
Trust Indenture Act.
(9) The Issuer Indentures, assuming due
authorization, execution and delivery thereof by the
trustee named therein, constitute legally valid and
binding obligations of the Issuer, enforceable against
the Issuer in accordance with their terms.
(10) The Registration Rights Agreement has
been duly and validly executed and delivered by the
Issuer and the Company and constitutes a valid and
legally binding agreement of each of the Issuer and the
Company, enforceable against each of the Issuer and the
Company in accordance with its terms.
(11) The Securities, the Guarantee, the
Registered Guarantee, the Indentures, the Registration
Rights Agreement, and the other Operative Documents
conform in all material respects to the descriptions
thereof contained in the Offering Memorandum.
(12) When the Notes and the Guarantee are
issued and delivered pursuant to this Agreement, the
Notes and the Guarantee will not be of the same class
(within the meaning of Rule 144A under the Securities
Act) as securities of the Issuer or the Company that
are listed on any national securities exchange
registered under Section 6 of the Exchange Act or that
are quoted in a United States automated inter-dealer
quotation system.
(13) No registration under the Securities
Act of the Notes or the Guarantee is required for the
sale of the Notes to you as contemplated hereby or for
the Exempt Resales, and prior to the commencement of
the Exchange Offer or the effectiveness of the Shelf
Registration Statement, none of the Indentures are
required to be qualified under the Trust Indenture Act,
assuming (i) that Eligible Purchasers acquire the Notes
in the Exempt Resales; (ii) the accuracy of the Initial
Purchaser's representations regarding the absence of
general solicitation in connection with the Exempt
Resales contained herein and (iii) the accuracy of the
representations made by each Accredited Investor who
purchases Notes pursuant to an Exempt Resale as set
forth in the letter of representation executed by such
Accredited Investor in the form of Appendix H to the
Offering Memorandum.
(14) Each of the preliminary Offering
Memorandum and the Offering Memorandum, as of its date,
and each amendment or supplement thereto, as of its
date (except for the financial statements and the notes
thereto and schedules and other financial and
accounting data included therein, as to which no
opinion need be expressed), complied in all material
respects with the information requirements of Rule
144A(d)(4) of the Securities Act.
(15) None of the Issuer or the Company, or
any of their subsidiaries, is an "investment company"
or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act, or a
"holding company" or a "subsidiary company" or an
"affiliate" of a holding company within the meaning of
the Public Utility Holding Company Act.
(16) The execution, delivery and performance
by each of the Issuer and the Company of this Agreement
and the other Operative Documents to which it is a
party, the execution, delivery and performance of the
Guarantee and the Registered Guarantee, the issuance
and sale of the Securities and the consummation of the
transactions contemplated hereby and thereby, will not
violate, conflict with or constitute a breach of any of
the terms or provisions of, or a default under (or an
event that with notice or the lapse of time, or both,
would constitute a default) or require consent under,
or result in the imposition of a Lien on any properties
of the Issuer or the Company or any of their
subsidiaries (except for Liens contemplated by the
Collateral Documents), or an acceleration of
indebtedness pursuant to, (i) the charter or bylaws of
the Company or any of its subsidiaries (other than the
Joint Ventures, the Issuer and the other subsidiaries
of the Company which are incorporated in the Cayman
Islands), (ii) any material bond, debenture, note,
indenture, mortgage, deed of trust or other agreement
or instrument identified as such to such counsel to
which the Issuer, the Company or any of their
subsidiaries is a party or by which any of them or
their property is bound, (iii) any statute, rule or
regulation applicable to the Issuer, the Company or any
of their subsidiaries or any of their assets or
properties or (iv) any judgment, order or decree known
to such counsel of any court or governmental agency or
authority having jurisdiction over the Issuer, the
Company or any of their subsidiaries or any of their
assets or properties. No consent, approval, authoriza
tion or order of, or filing, registration,
qualification, license or permit of or with, any U.S.
federal or New York court or governmental agency, body
or administrative agency is required for the execution,
delivery and performance of this Agreement and the
other Operative Documents, the execution, delivery and
performance of the Guarantee, the issuance and sale of
the Notes and the consummation of the transactions
contemplated hereby and thereby, except such as may be
required under state securities or Blue Sky laws and
regulations (as to which such counsel may express no
opinion), the Securities Act and the Trust Indenture
Act or such as may be required by the NASD.
(17) To the best knowledge of such counsel,
no injunction, restraining order or order of any nature
by a United States federal, New York or Delaware state
court of competent jurisdiction has been issued that
prevents or suspends the use of the Offering
Memorandum.
(18) To the best knowledge of such counsel,
there are no holders of securities of the Issuer or the
Company who, by reason of the execution by the Issuer
and the Company of this Agreement or any other
Operative Document to which it is a party, or the
consummation of the transactions contemplated hereby
and thereby, have the right to request or demand that
the Issuer or the Company register under the Securities
Act securities held by them.
(19) Each of the Issuer, the Company and
their subsidiaries has (i) all licenses, certificates,
permits, authorizations, approvals, franchises and
other rights from, and has made all declarations and
filings with, all U.S. federal, New York state and
local authorities, all U.S. federal self-regulatory
authorities and all U.S. federal and New York State
courts and other tribunals (each a "Permit") necessary
to engage in the business currently conducted by it in
the manner described in the Offering Memorandum, except
where failure to hold such Permit would not have a
Material Adverse Effect.
(20) The statements made in the Offering
Memorandum under the captions "Notice to Investors" and
"Certain Federal Income Tax Considerations", insofar as
such statements purport to constitute statements of law
or legal conclusions, are accurate in all material
respects.
In addition, counsel for the Issuer and the Company
shall state that such counsel has participated in conferences
with officers and other representatives of the Issuer and the
Company, representatives of the independent certified public
accountants for the Issuer and the Company, PRC Counsel to the
Issuer and the Company, representatives and counsel to the
Initial Purchaser in connection with the preparation of the
Offering Memorandum and any amendment thereof or supplement
thereto and has considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy, completeness
or fairness of such statements and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum and any amendment
thereof or supplement thereto (except as indicated above); and
such counsel advises you that, on the basis of the foregoing, no
facts came to such counsel's attention that caused such counsel
to believe that the Offering Memorandum (as amended or
supplemented, if applicable), as of the date thereof or on the
Closing Date, contained an untrue statement of a material fact or
omitted 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 (it
being understood such counsel need express no belief or opinion
with respect to the financial statements, notes and schedules
thereto and other financial data included therein, the reports of
independent engineers and consultants or other financial and
engineering data included therein).
In rendering such opinion, counsel for the Issuer and
the Company shall opine as to the laws of the State of New York,
the General Corporation Law of the State of Delaware and the
federal laws of the United States. Counsel for the Issuer and
the Company will be permitted to except from its opinions with
respect to enforceability: (A) the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws now
or hereafter in effect relating to or affecting the rights and
remedies of creditors; (B) the effect of general equitable
principles, whether such enforceability is considered in a
proceeding in equity or at law, and the discretion of the court
before which any proceeding therefor may be brought; and (C) the
unenforceability of any provision requiring the payment of
attorney's fees, except to the extent that a court determines
such fees to be reasonable.
(i) You shall have received on the Closing Date an
opinion (satisfactory to you and your counsel), dated the
Closing Date, of the Vice President and General Counsel of
the Issuer and the Company, in his capacity as such officer,
to the effect that:
(1) (i) all issued and outstanding shares
of capital stock of each of the Issuer, the Company and
their respective subsidiaries are owned free and clear
of any Lien other than the Liens created pursuant to
the Collateral Documents and Liens created pursuant to
the Luannan Financing Agreements and were not issued in
violation of any preemptive or similar rights; (ii)
except as described in the Offering Memorandum, each of
the Issuer, the Company and their respective
subsidiaries has no other direct or indirect
subsidiaries; (v) there are no outstanding
subscriptions, rights, warrants, options, calls,
convertible securities, commitments of sale or Liens
related to or entitling any person to purchase or
otherwise to acquire any shares of the capital stock
of, or other ownership interest in, any of the Issuer,
the Company, or any subsidiary, except as set forth in
the Offering Memorandum;
(2) Neither PEC nor, to the best knowledge
of such counsel, the Issuer, the Company, the Joint
Ventures or any of their subsidiaries is (A) in
violation of its respective charter or bylaws or other
organizational documents, (B) in default in the
performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is
bound or to which any of its properties is subject, or
(C) is in violation of any law, statute, rule,
regulation, judgment or court decree applicable to the
Issuer, the Company, the Joint Ventures, any of their
subsidiaries or their assets or properties that in the
case of clauses (A), (B) and (C) above, (x) would
reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
There exists no condition that, with notice, the
passage of time or otherwise, would constitute a
default under any such document or instrument.
(3) PEI has the requisite corporate power
and authority to execute, deliver and perform its
obligations under this Agreement and the Operative
Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby.
(4) No consents or waivers from any other
person are required for the execution, delivery and
performance of this Agreement and the other Operative
Documents, the issuance and sale of the Notes, the
execution, delivery and performance of the Guarantee
and the consummation of the transactions contemplated
hereby and thereby, other than such consents and
waivers as have been obtained (or, in the case of the
Registration Rights Agreement, will be obtained),
except where the failure to have obtained any of the
foregoing would not reasonably be expected to have a
Material Adverse Effect.
(5) There is (i) no action, suit or
proceeding before or by any court, arbitrator or
governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of such
counsel, threatened or contemplated to which the
Issuer, the Company or any of their subsidiaries is or
may be a party or to which the business or property of
the Issuer, the Company or any of their subsidiaries is
or may be subject, (ii) to the best of such counsel's
knowledge no statute, rule, regulation or order that
has been enacted, adopted or issued by any governmental
agency or that has been proposed by any governmental
body, (iii) no injunction, restraining order or order
of any nature by a federal or state court or foreign
court of competent jurisdiction to which the Issuer,
the Company or any of their subsidiaries is or may be
subject or to which the business, assets or property of
the Issuer, the Company or their subsidiaries are or
may be subject issued that would, in the case of
clauses (i), (ii) and (iii) above, reasonably be
expected to, individually or in the aggregate, result
in a Material Adverse Effect.
(6) Each of the Company, the Issuer, the
Joint Ventures and their subsidiaries has (i) to the
best of such counsel's knowledge, good and marketable
title to all of the properties and assets described in
the Offering Memorandum as owned by it, free and clear
of all liens, charges, encumbrances and restrictions,
except such as are described in the Offering Memorandum
or for liens for taxes not yet due and payable or as
would not reasonably be expected, either individually
or in the aggregate, to have a Material Adverse Effect,
(ii) to the best of such counsel's knowledge, peaceful
and undisturbed possession under all leases to which it
is party as lessee, except where the failure to have
such possession would not reasonably be expected,
individually or in the aggregate, to have a Material
Adverse Effect, (iii) all licenses, certificates,
permits, authorizations, approvals, franchises and
other rights from, and has made all declarations and
filings with all federal, state and local authorities,
all self-regulatory authorities and all courts and
other tribunals (other than authorities, courts and
tribunals in the People's Republic of China) (each an
"Authorization") necessary to engage in the business
currently conducted by it in the manner described in
the Offering Memorandum, except where failure to hold
such Authorizations would not reasonably be expected,
individually or in the aggregate, to have a Material
Adverse Effect and (iv) such counsel has no reason to
believe that any governmental body or agency is
considering limiting, suspending or revoking any such
Authorization. All such Authorizations are valid and
in full force and effect and the Company, the Issuer,
the Joint Ventures and their subsidiaries are in
compliance in all material respects with the terms and
conditions of all such Authorizations and with the
rules and regulations of the regulatory authorities
having jurisdiction with respect thereto, except
insofar as the failure to have any of the foregoing
would not reasonably be expected either individually or
in the aggregate, to have a Material Adverse Effect.
All leases to which the Company, the Issuer, the Joint
Ventures or any of their subsidiaries is a party are
valid and binding and to the knowledge of such counsel
no material defaults by the landlord are existing under
any such lease.
(7) To the best of such counsel's knowledge,
each of the Company, the Issuer, the Joint Ventures and
their subsidiaries is in compliance with all applicable
existing Environmental Laws, except for such instances
of noncompliance that, either singly or in the
aggregate, could not have a Material Adverse Effect.
There is no alleged liability, or, to the best
knowledge and information of such counsel, potential
liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources
damages, property damages, personal injuries, or
penalties) of the Company, the Issuer or any of their
subsidiaries arising out of, based on, or resulting
from (A) the presence or release into the environment
of any Hazardous Material at any location currently or
previously owned by the Company, the Issuer or any of
their subsidiaries or at any location currently or
previously used or leased by the Company, the Issuer or
any of their subsidiaries or (B) any violation or
alleged violation of any Environmental Law, except in
each case with respect to clauses (A) and (B), alleged
or potential liabilities that, singly or in the
aggregate, could not have a Material Adverse Effect.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other
representatives of the Issuer and the Company, representatives of
the independent certified public accountants for the Issuer and
the Company, representatives and counsel to the Initial Purchaser
in connection with the preparation of the Offering Memorandum and
any amendment thereof or supplement thereto and has considered
the matters required to be stated therein and the statements
contained therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such
statements and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in
the Offering Memorandum and any amendment thereof or supplement
thereto; and such counsel advises you that, on the basis of the
foregoing, no facts came to such counsel's attention that caused
such counsel to believe that the Offering Memorandum (as amended
or supplemented, if applicable), as of the date thereof or on the
Closing Date, contained an untrue statement of a material fact or
omitted 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 (it
being understood that such counsel need express no belief or
opinion with respect to the financial statements, notes and
schedules thereto and other financial data included therein).
(j) You shall have received an opinion, dated the
Closing Date, of Simpson Thacher & Bartlett, your counsel,
in form and substance reasonably satisfactory to you,
covering such matters as are customarily covered in such
opinions.
(k) You shall have received an opinion, dated the
Closing Date, of Cai, Zhang & Lan, People's Republic of
China ("PRC") Counsel to the Company and the Issuer, in form
and substance reasonably satisfactory to you, covering
matters including, but not limited to, the Luannan Project
Documents and government approvals required by the PRC.
(l) You shall have received an opinion, dated the
Closing Date, of Maples & Calder, Cayman Islands counsel to
the Company and the Issuer, in form and substance reasonably
satisfactory to you, covering matters relating to Cayman
Islands law.
(m) You shall have received an opinion, dated the
Closing Date, of Gong Cheng, your PRC counsel, in form and
substance reasonably satisfactory to you, covering matters
relating to PRC law.
(n) The Initial Purchaser shall have received copies
of all Permits [set forth on Part A of Section 5(1),]
certified by authorized officers of the Issuer and the Joint
Ventures as being complete and in full force and effect.
(o) The Initial Purchaser shall have received (i) a
certified copy of, or binder for, each of the insurance policies
required by the Indentures, together with evidence satisfactory
to the Initial Purchaser that such insurance complies with the
provisions of the Indentures and with the provisions of each of
the Operative Documents, and that all premiums then due with
respect to such insurance have been paid, and (ii) a written
report of the Insurance Consultant describing the insurance
obtained by the Joint Ventures as of the Closing Date with
respect to the Project and stating that the insurance required to
be obtained as of the Closing Date pursuant to the Operative
Documents is in full force and effect and provides reasonable and
adequate coverage for the Project.
(p) No law, regulation, ruling, guideline or other
governmental action or inaction or any Permit shall be in effect
or 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 Trustees, the Issuer, the
Joint Ventures or any other party to any Luannan Project Document
from fulfilling its respective obligations thereunder.
(q) Parsons Brinckerhoff Energy Services, Inc. shall
have consented to the references to it in the Offering Memorandum
and the use of the Luannan Engineering Report in the Offering
Memorandum, and since the date of the Luannan Engineering Report,
no event affecting the Luannan Engineering Report 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 Luannan
Engineering Report or in the Offering Memorandum under the
caption "Offering Memorandum Summary--Luannan Engineering Report"
or (ii) which shall not be reflected in the Offering Memorandum
but should be reflected therein in order to make the statements
and information contained in the Luannan Engineering Report, or
in the Offering Memorandum relating to matters referred to in the
Luannan Engineering Report, 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 Parsons Brinckerhoff Energy Services, Inc.,
dated the Closing Date.
(r) Marston & Marston, Inc. shall have consented to
the references to it in the Offering Memorandum and the use of
the Luannan Coal Consultant's Report in the Offering Memorandum;
and since the date of the Luannan Coal Consultant's Report, no
event affecting the Luannan Coal Consultant's Report 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
Luannan Coal Consultant's Report or in the Offering Memorandum
under the caption "Offering Memorandum Summary--Luannan Coal
Consultant's Report" or (ii) which shall not be reflected in the
Offering Memorandum but should be reflected therein in order to
make the statements and information contained in the Luannan Coal
Consultant's Report, or in the Offering Memorandum relating to
matters referred to in the Luannan Coal Consultant's Report, 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 Marston & Marston,
Inc., dated the Closing Date.
(s) The Initial Purchaser shall have received an
opinion, dated the Closing Date from White & Case, counsel to the
Trustee, in respect of the enforceability of the Luannan
Financing Agreements and the Collateral Documents to which the
Trustee is a party.
(t) You shall have received, in form and substance
satisfactory to you.
(i) certified copies of the (A) Memorandum of
Association, business certificates, by-laws, joint venture
agreement or other organizational documents of each of the
Issuer, the Joint Ventures and the Company as requested by
the Initial Purchaser and (B) resolutions of the board of
directors (or other equivalent body) of each of the Joint
Ventures, the Issuer, the Company and PEI, authorizing the
execution, delivery and performance of each Operative
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
Operative Documents to which such Person is a party and the
other documents of certificates to be delivered pursuant
hereto and thereto, which may be conclusively relied upon
until a revised certificate is similarly so delivered; and
(iii) long form good standing certificates,
certificates of authority to transact business as a foreign
corporation or partnership, as applicable, with respect to
each of the Issuer and the Company, together with bring-down
good standing certificates, dated the date of the Closing.
(iv) The Issuer and the Company shall have paid in
full on the Closing Date the fees and expenses payable to
counsel for the Initial Purchaser pursuant to clause (iv) of
Section 4(f) hereof by delivering to counsel for the Initial
Purchaser on such date a check payable to such counsel in
the requisite amount, or wiring such amount to such counsel.
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 signed by any officer of the Issuer and
delivered to the Initial Purchaser pursuant to this Agreement
shall be deemed a representation and warranty by the Issuer to
the Initial Purchaser as to the statements made therein.
(u) At the time this Agreement is executed and
delivered by the Issuer and on the Closing Date, you shall
have received letters, substantially in the form previously
approved by you, from Deloitte & Touche LLP, independent
public accountants, with respect to the financial statements
and certain financial information contained in the Offering
Memorandum.
(v) Subsequent to the execution and delivery of this
Agreement, there shall not have been any downgrading, nor
shall have any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded to any securities of the Company or
the Issuer by any "nationally recognized statistical rating
organization," as such term is defined for the purposes of
Rule 436(g)(2) under the Securities Act.
(w) Simpson Thacher & Bartlett shall have been
furnished with such documents and opinions, in addition to
those set forth above, as they may reasonably require for
the purpose of enabling them to review or pass upon the
matters referred to in this Section 7 and in order to
evidence the accuracy, completeness or satisfaction in all
material respects of any of the representations, warranties
or conditions herein contained.
(x) Prior to the Closing Date, the Company and the
Issuer shall have furnished to you such further information,
certificates and documents as you may reasonably request;
(y) The Issuer, the Company and the Trustee shall have
entered into the Senior Secured Notes Indenture; the Company
and the Trustee shall have entered into the Company
Indenture; and you shall have received counterparts,
conformed as executed, of each of the Indentures.
(z) The Issuer and the Company shall have entered into
the Registration Rights Agreement and you shall have
received counterparts, conformed as executed, thereof.
(aa) The Approved Construction Budget and Schedule
shall have been prepared and submitted by the Issuer to you.
(bb) All Operative Documents shall have been entered
into by all of the relevant parties thereto and you shall
have received counterparts, conformed as executed, thereof.
(cc) Prior to the Closing Date, the Company, the
Issuer and their subsidiaries shall have furnished to you
such further information, certificates and documents as you
may reasonably request, including any such information,
certificates and documents required in connection with the
legal opinions to be furnished by your counsel as set forth
above.
All opinions, certificates, letters and other documents
required by this Section 7 to be delivered by the Company and the
Issuer will be in compliance with the provisions hereof only if
they are reasonably satisfactory in form and substance to you.
The Company and the Issuer will furnish the Initial Purchaser
with such conformed copies of such opinions, certificates,
letters and other documents as they shall reasonably request.
8. Conditions to the Obligations of the Issuer and
the Company. All of the representations and warranties of the
Initial Purchaser contained in this Agreement shall be true and
correct as of the Closing Date with the same force and effect as
if made on and as of the Closing Date.
9. Effective Date of Agreement and Termination. This
Agreement shall become effective upon the execution hereof.
This Agreement may be terminated at any time on or
prior to the Closing Date by you by notice to the Issuer and the
Company if any of the following has occurred: (i) subsequent to
the date information is provided in the Offering Memorandum, any
Material Adverse Change which, in your judgment, materially
impairs the investment quality of any of the Notes, (ii) any
outbreak or escalation of hostilities or other national or
international calamity or crisis or material adverse change in
the financial markets of the United States or elsewhere, or any
other substantial national or international calamity or emergency
if the effect of such outbreak, escalation, calamity, crisis,
material adverse change or emergency would, in your judgment,
make it impracticable or inadvisable to market any of the Notes
or to enforce contracts for the sale of any of the Notes, (iii)
any suspension or limitation of trading generally in securities
on the New York Stock Exchange or in the Nasdaq National Market
System or any setting of minimum prices for trading on such
exchange or markets, (iv) any declaration of a general banking
moratorium by either federal or New York authorities, (v) the
taking of any action by any federal, state or local government or
agency in respect of its monetary or fiscal affairs that in your
judgment has a material adverse effect on the financial markets
in the United States, and would, in your judgment, make it
impracticable or inadvisable to market any of the Notes or to
enforce contracts for the sale of any of the Notes, (vi) the
enactment, publication, decree, or other promulgation of any
federal or state statute, regulation, rule or order of any court
or other governmental authority which, in your judgment, would
have a Material Adverse Effect, or (vii) any securities of the
Issuer or the Company or any of their subsidiaries shall have
been downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating
organization.
The indemnities and contribution provisions and the
other agreements, representations and warranties of the Issuer,
the Company, PEI their respective officers and directors and of
the Initial Purchaser set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Notes
regardless, of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser or
by or on behalf of the Issuer, the Company, PEI, the officers or
directors of the Issuer, the Company, PEI or the controlling
person of the Issuer, the Company or PEI, (ii) acceptance of the
Notes and payment for them hereunder and (iii) termination of
this Agreement.
If this Agreement shall be terminated by the Initial
Purchaser pursuant to clause (i) of the second paragraph of this
Section 9 or because of the failure or refusal on the part of the
Issuer, the Company or PEI to comply with the terms or to fulfill
any of the conditions of this Agreement, the Issuer, the Company
and PEI agree jointly and severally to reimburse you for all
out-of-pocket expenses (including the fees and disbursements of
counsel) incurred by you, except as otherwise agreed in writing.
Notwithstanding any termination of this Agreement, the Issuer,
the Company and PEI shall be jointly and severally liable for all
expenses which they have agreed to pay pursuant to Section 4(f)
hereof. If the transactions contemplated hereby are consummated,
each of the parties shall pay its own expenses in connection with
the offering and sale of the Notes, including the costs and
expenses of its counsel, except as otherwise provided in Section
4(f) hereof.
Except as otherwise provided, this Agreement has been
and is made solely for the benefit of and shall be binding upon
the Issuer, the Company, PEI, the Initial Purchaser, any
Indemnified Person referred to herein and their respective
successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successors and
assigns" shall not include a purchaser of any of the Notes from
the Initial Purchaser merely because of such purchase.
10. Miscellaneous. Notices given pursuant to any
provision of this Agreement shall be addressed as follows:
(i) if to PEI, the Issuer or the Company:
Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Attention: William C. Nordlund
Telecopier: (972) 980-6815
with copy to:
Chadbourne & Parke LLP
1101 Vermont Ave., N.W.
Washington, D.C. 20005
Attention: Cornelius J. Golden, Jr.
Telecopier: (202) 289-3002
(ii) if to the Initial Purchaser:
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: David Hedley
Telecopier: (212) 892-7272
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard A. Miller
Telecopier: (212) 455-2502
(iii) or in any case to such other address as the
person to be notified may have requested in
writing.
This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York as
applied to contracts made and performed entirely within the State
of New York, without regard to the conflicts of laws and
principles thereof. This Agreement may be signed in various
counterparts which together shall constitute one and the same
instrument.
Please confirm that the foregoing correctly sets forth
the Agreement among PEI, the Issuer, the Company and the Initial
Purchaser.
Very truly yours,
PANDA GLOBAL ENERGY COMPANY
By:
Name:
Title:
PANDA GLOBAL HOLDINGS, INC.
By:
Name:
Title:
PANDA ENERGY INTERNATIONAL,
INC.
By:
Name:
Title:
Accepted and agreed to as of
the date first above written:
Donaldson, Lufkin & Jenrette
Securities Corporation
By: __________________________
Name:
Title:
SCHEDULE I
Subsidiaries of the Company
Panda Energy Corporation (a Texas corporation)
Panda Global Energy Company
Panda Interfunding Corporation
Lakeland Water Company
Panda-Kathleen Corporation
Panda/Live Oak Corporation
Panda Interholding Corporation
Panda Funding Corporation
Panda Cayman Interfunding Corporation
Panda-Rosemary Corporation
PRC II Corporation
Panda Brandywine Corporation
Panda Energy Corporation (a Delaware corporation)
Brandywine Water Company
Pan-Sino Energy Development Company LLC
Pan-Western Energy Corporation LLC
Tangshan Panda Heat and Power Co., Ltd.
Tangshan Pan-Western Heat and Power Co., Ltd.
Tangshan Cayman Heat and Power Co., Ltd.
Tangshan Pan-Sino Heat Co., Ltd.
Exhibit A
Form of Registration Rights Agreement
[See Exhibit 4.14 to this Registration Statement on Form S-1]
EXHIBIT 10.111
ISSUER LOAN AGREEMENT
between
PANDA GLOBAL ENERGY COMPANY
as Lender
and
PAN-WESTERN ENERGY CORPORATION LLC
as Borrower
Dated as of April 22, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS 1
1.1 Definitions 1
ARTICLE 2 - THE CREDIT FACILITY 11
2.1 Credit Facility 11
2.2 Interest Payments 11
2.2.1 Interest Payment Dates 11
2.2.2 Interest 11
2.3 Issuer Note 12
2.4 Repayment of the Loans 12
2.4.1 Payments 12
2.4.2 Application of Payments 12
2.5 Payment Procedure 12
2.6 Prepayments 12
2.6.1 Voluntary Prepayments 12
2.6.2 Certain Mandatory Prepayments 12
2.6.3 Expropriation Event; Event of Loss 13
2.7 Fees 14
ARTICLE 3 - CONDITIONS PRECEDENT 14
3.1 Borrower's Certificate 14
(a) Representations and Warranties 14
(b) No Event of Default 14
(e) Use of Proceeds 14
3.2 Progress Report and Requisition Facility Engineer 14
3.3 Shareholders' Agreement 15
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 15
4.1 Organization 15
4.2 Authorization; No Conflict 15
4.3 Legality, Validity and Enforceability. 15
4.4 Compliance with Law, Governmental Authorizations
and Facility Documents 15
4.5 Governmental Authorizations 16
4.6 Litigation 16
4.7 Existing Defaults. 16
4.8 Taxes 16
4.9 Contingent Liabilities 16
4.10 Business, Debt, Contracts, Etc 16
4.11 Representations and Warranties 16
4.12 Utilities 16
4.13 Facility Documents 17
4.14 Fees and Enforcement 17
4.15 Subsidiaries and Beneficial Interest 17
4.16 Liens 17
4.17 Regulation of Parties 17
4.18 Transactions with Affiliates 17
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER 17
5.1 Repayment of Indebtedness 17
5.2 Existence, Conduct of Business, Properties, Etc. 18
5.3 Use of Funds 18
5.4 Compliance with Legal Requirements 18
5.5 Operating Budgets 18
5.6 Books, Records, Access 18
5.7 Financial Statements 18
5.8 Progress Report; Facility Engineer 19
5.9 Insurance 19
5.10 Reports; Cooperation 19
5.11 Taxes and Other Governmental Charges 20
5.12 Taxes 21
5.13 Increased Costs 21
5.14 Notices 21
5.15 Expropriation Event 22
ARTICLE 6 - NEGATIVE COVENANTS 22
6.1 Indebtedness 22
6.2 Limitations on Liens 22
6.3 Nature of Business 22
6.4 Sale or Lease of Assets 22
6.5 Merger, Consolidation, Liquidation, Dissolution 22
6.7 Loans, Advances or Investments 23
6.8 Distributions 23
6.9 Transactions With Affiliates 23
6.10 Partnerships; Subsidiaries 23
6.11 Amendments 23
6.12 Assignment 23
6.13 Consent of the Lender 23
6.14 Immunity 23
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES 23
7.1 Events of Default; Cure Rights 23
7.1.1 Failure to Make Payments 23
7.1.2 Misstatements; Omissions 23
7.1.3 Affirmative Covenants 24
7.1.4 Negative Covenants 24
7.1.5 Bankruptcy; Insolvency 24
7.1.6 Judgments 24
7.1.7 Other Indebtedness 24
7.1.8 Default under the JV Shareholder
Loan Agreements 25
ARTICLE 8 - SCOPE OF LIABILITY 25
ARTICLE 9 - MISCELLANEOUS 25
9.1 Addresses 25
9.2 Delay and Waiver 26
9.3 Entire Agreement 26
9.4 Severability 26
9.5 Headings 27
9.6 No Partnership, Etc. 27
9.7 Governing Law 27
9.8 Submission To Jurisdiction; Waivers 27
9.9 WAIVERS OF JURY TRIAL 27
9.10 Successors and Assigns 28
9.11 Counterparts 28
TABLE OF SCHEDULES AND EXHIBITS iv
THIS ISSUER LOAN AGREEMENT (this "Agreement") dated as of
April 22, 1997, by and between Panda Global Energy Company (the
"Lender"), a company organized under the laws of the Cayman
Islands, and Pan-Western Energy Corporation LLC (the "Borrower"),
a company with limited liability organized under the laws of the
Cayman Islands
W I T N E S S E T H :
WHEREAS, the Borrower is the owner of approximately 88% of
the aggregate ownership interest in four joint venture companies
(the "Joint Venture Companies") that have developed, and desire
to construct and operate, two 50 MW coal-fired thermal power
generation facilities in conjunction with certain other
facilities including certain water supply, steam, heat and hot
water production and distribution facilities and other related
facilities to be located in Luannan County, Tangshan City, Hebei
Province, China (collectively referred to herein as the
"Facility"); and
WHEREAS, the Borrower has entered into the JV Shareholder
Loan Agreements (as defined below) and the Registered Capital
Contribution and Agency Agreement (as defined below) to finance
the development, construction and operation of the Facility by
the Joint Venture Companies; and
WHEREAS, the Borrower is an indirect Subsidiary of the
Lender and each of the Borrower and the Lender can be expected to
derive certain benefits as a result of this Agreement and from
the financing of the Facility by way of the JV Shareholder Loan
Agreements and the Registered Capital Contribution and Agency
Agreement; and
WHEREAS, the Lender accordingly desires to lend certain
funds to the Borrower upon the term and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. The following terms, as used herein, have
the following meanings, and capitalized terms not otherwise
defined herein shall have the meanings given to such terms in the
Trust Indenture, dated as of April 22, 1997, between the Lender
and Bankers Trust Company, Trustee:
"Administrative Services Agreement" means the agreement
between Panda International and Panda Global Holdings, Inc., a
Delaware corporation dated as of April 22, 1997.
"Affiliate" of a specified Person means any other
Person or Persons that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under
common control with the Person specified, or who holds or
beneficially owns 10% or more of the equity interest in the
Person specified or 10% or more of any class of voting securities
of the Person specified.
"Authorized Representative" means as to any Person, its
president, chief executive officer or any senior vice president
or any other person specifically identified as such in a
certificate of such Person delivered to the Lender.
"Available Cash Flow" means, for any period, the sum of
(i) all payments of principal and interest on the Shareholder
Loans, (ii) all dividends and distributions received by the
Borrower from the Joint Venture Companies, and (iii) all other
revenues received by the Borrower from any source whatsoever,
other than, unless and until a determination is made as provided
in Section 2.6.3(d), Expropriation Proceeds or the proceeds of an
Event of Loss, less (iv) the cash operating costs of the
Borrower, including expenses incurred in connection with the
Administrative Service Agreement, to the extent permitted to be
paid by the Borrower pursuant to the Indenture, and (v) taxes,
each of (i), (ii), (iii), (iv) and (v) determined on a cash
basis.
"Banking Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required by law to be closed.
"Bankruptcy Law" means any insolvency, reorganization,
moratorium or similar law for the general relief of debtors in
any relevant jurisdiction.
"Borrower" has the meaning set forth in the Preamble
hereto.
"Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banks in New York, New York,
George Town, Grand Cayman, Cayman Islands or Zhongdajie,
Bencheng, Luannan County, Hebei Province, China, are authorized
or required to be closed.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (iii)
in the case of a partnership, partnership interests (whether
general or limited) and (iv) any other interest or participation
that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing
Person.
"Capitalized Lease" means as to any Person, any lease
of any property of which the discounted present value of the
rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such
Person, and "Capitalized Lease Obligation" means the rental
obligations, as aforesaid, under any such lease.
"Carrier" means Luannan County State-Owned
Transportation Company, a PRC company owned and operated by
Luannan County.
"Change of Law" means after the date of this Agreement,
the adoption of any Legal Requirement, any change in any Legal
Requirement or the application or requirements thereof, any
change in the interpretation or administration of any Legal
Requirement by any Governmental Instrumentality, or compliance by
the Lender or the Borrower with any request or directive (whether
or not having the force of law) of any Governmental
Instrumentality.
"Chinamac" means Chinamac (Singapore) Pte Ltd. a
Singapore corporation.
"Closing Date" means April 22, 1997.
"Coal Suppliers" mean, collectively, Kailuan Coal
Mining Administration, Luannan County Coal Mine, Liu Guantun Coal
Mine, Le Ting County Coal Mine, Zunhua Coal Mine, and Chang Li
County Coal Mine.
"Coal Supply Agreements" means, collectively, the coal
supply agreements entered into among Tangshan Panda, Tangshan Pan-
Western and the Coal Suppliers.
"Coal Transportation Agreement" means the coal
transportation agreement, dated March 6, 1996, among the Carrier,
Tangshan Panda and Tangshan Pan-Western.
"Commercial Operation Date" means that date by which
both of the following have occurred: (i) the Facility Engineer
has certified that the Facility has achieved commercial
operations and (ii) the Commercial Operation Date, as such term
is used in the General Interconnection Agreement, has occurred.
"Commercially Feasible Basis" means that, following an
Event of Loss or an Expropriation Event, (i) the sum of the
proceeds of business interruption insurance, any funds available
to be applied to the rebuilding, repair or restoration pursuant
to subsection 2.6.3(e), any amounts that the shareholders of all
the Joint Venture Companies are irrevocably committed to
contribute and the anticipated revenues of the Facility during
the estimated period of rebuilding, repair or restoration will be
sufficient to pay all Facility restoration costs, Debt Service
and O&M Costs of the Facility during the estimated period of
rebuilding, repair or restoration and (ii) the Facility upon
being rebuilt, repaired or restored can reasonably be expected to
produce revenues adequate to pay all Debt Service and O&M Costs
of all Joint Venture Companies pursuant to each such Joint
Venture Company's respective JV Shareholder Loan Agreement over
the remaining terms of the Loans outstanding of each Joint
Venture Company, taking into account any change in projected
operating results due to the impairment of any portion of the
Facility, all without materially affecting the ability of the
Joint Venture Companies to repay their Shareholder Loan or the
ability of the Borrower to repay the Loans.
"Company" means Panda Global Holdings, Inc., a Delaware
corporation.
"Company Indenture" means the trust indenture governing
the terms of the issuance of, from time to time, bonds, notes
indentures, guarantees and, as of the Closing Date, the Senior
Secured Notes Guarantee by the Company, dated as of the Closing
Date, between the Company and the trustee pursuant to such trust
indenture.
"Covered Taxes" means taxes, levies, imposts,
deductions, charges, withholdings and liabilities imposed on or
measured by the net income or capital of a Person by any
jurisdiction or any political subdivision or taxing authority
thereof or therein solely as a result of a permanent
establishment of such Person in such jurisdiction or political
subdivision.
"Debt Service Reserve Requirement" has the meaning
ascribed thereto in the JV Shareholder Loan Agreements.
"Development Expenses" shall mean all reasonable out-of
pocket expenses related to the Facility that have been incurred
by the Borrower, Panda International or their Affiliates in the
development of the Facility prior to the date of this Agreement.
"Disqualified Stock" means, with respect to any Person,
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Loans, as the case may be.
"Dollars," "U.S. Dollars" and "US$" mean lawful
currency of the United States of America.
"Energy Purchase Agreement" means Electric Energy
Purchase and Sales Agreement, dated September 22, 1995, between
NCPGC and Tangshan Panda and Tangshan Pan-Western, as the same
may from time to time be amended, supplemented or otherwise
modified.
"EPC Contract Price" means the price that the Joint
Ventures have agreed to pay to the EPC Contractor under the EPC
Contract.
"EPC Contractor" means Harbin Power Engineering Company
Limited, a company organized under the laws of the PRC and a
wholly owned subsidiary of Harbin Power.
"Event of Default" shall have the meaning given to such
term in Section 7.1.
"Event of Loss" means an event which causes all or a
portion of the Facility to be damaged, destroyed or rendered
unfit for normal use for any reason whatsoever, other than an
Expropriation Event.
"Expropriation Event" means any condemnation,
nationalization, seizing, or expropriation by any Government
Instrumentality of all or a substantial portion of the Facility
or the property or assets of the Borrower or of its share
capital, or any Government Instrumentality shall have assumed
custody or control of such property or other assets or business
operations of the Borrower or of its share capital, or shall have
taken any action for the dissolution or disestablishment of the
Borrower or any action that would prevent the Borrower or its
officers from carrying on its business or operations or a
substantial part thereof.
"Expropriation Proceeds" means any proceeds received by
the Borrower as a result of the occurrence of an Expropriation
Event.
"Facility" shall have the meaning stated in the first
WHEREAS clause of this Agreement.
"Facility Budget" means the construction budget and
schedule provided by the Lender (containing customary assumptions
and qualifications) approved as reasonable by the Facility
Engineer prior to the making of the first Loan pursuant to this
Agreement, and as it thereafter may be amended with the approval
of the Lender.
"Facility Costs" means all costs incurred, or to be
incurred, in connection with the development, design,
engineering, procurement, construction and commissioning of the
Facility, which costs shall include, but not be limited to: (a)
all costs incurred under the EPC Contract, (b) Development
Expenses, (c) O&M Costs incurred in connection with the start up
of the Facility or otherwise prior to the Commercial Operation
Date, (d) actual interest costs (including, prior to the
Commercial Operation Date, interest due and payable on the Loans)
and amounts required pursuant to the Debt Service Reserve
Requirement, closing and administration costs related to the
Facility until the Commercial Operation Date, (e) the costs of
acquiring Governmental Authorizations for the Facility prior to
the Commercial Operation Date and (f) without duplication,
working capital costs.
"Facility Documents" means, collectively, the Power
Purchase Agreement, the EPC Contract, the Transmission Facilities
Construction Agreement, the O&M Agreement, the Coal Supply
Agreements, the Coal Transportation Agreement, the Engineering
and Design Contract, the Steam Sales Agreements, the Heat Supply
Contracts, the Inter-Company Steam Sales Agreement, and all other
instruments, agreements or other documents arising from or
related to the Facility, but shall not include any Financing
Agreement.
"Facility Engineer" means Parsons Brinckerhoff Energy
Services Inc., or its successor.
"Facility Notes" has the meaning ascribed thereto in
the JV Shareholder Loan Agreements.
"Fair Market Value" or "fair value" means, with respect
to any asset or property, the price which could be negotiated in
an arm's-length market transaction, for cash, between a willing
seller and a willing buyer, neither of whom is under undue
pressures or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors of the
Borrower acting in good faith and shall be evidenced by a Board
Resolution delivered to the Trustee except that any determination
of Fair Market Value made with respect to any parcel of real
property shall be made by an independent appraiser.
"Financing Agreements" means, collectively, this
Agreement, the Issuer Note, the JV Shareholder Loan Agreements,
the JV Guarantees and the Facility Notes, each individually a
"Financing Agreement".
"FPA" means the United States Federal Power Act, as
amended, excluding Sections I-18, 21-30, 202(c), 210, 211, 212,
305(c) and any necessary enforcement provision of Part III of the
Act with regard to the foregoing sections.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States, which are applicable
as of the date hereof.
"Governmental Authorizations" means all authorizations,
consents, decrees, permits, waivers, privilege approvals from and
filings with all Governmental Instrumentalities necessary for the
realization of the Facility in accordance with the Facility
Documents.
"Governmental Instrumentality" of any country shall
mean such country and its government and any ministry,
department, political subdivision, instrumentality, agency,
corporation or commission under the direct or indirect control of
such country.
"Harbin Power" means Harbin Power Equipment Group
Company, a PRC Company.
"Heat Supply Contracts" means the contracts to supply
steam and hot water to various PRC industrial and commercial
users that have been assigned by Luannan Heat and Power Plant to
Tangshan Pan-Sino, or any similar contracts in addition to or in
replacement thereof.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or otherwise,
of such Person (A) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a
purchase money obligation) or (C) for the payment of money
relating to a Capitalized Lease Obligation or other obligation
relating to the deferred purchase price of property; (ii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; (iii) the maximum fixed repurchase
price of any redeemable or putable Disqualified Stock; (iv)
contractual obligations to repurchase goods sold or distributed;
(v) obligations of a Person in respect of interest rate or
currency exchange agreements to the extent they appear on the
balance sheet; (vi) any and all deferrals, renewals, extensions
and refundings of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding
clauses (i) - (v); and (vii) any liability of others of the kind
described in clauses (i) - (vi) which the Person has guaranteed
or which is otherwise directly or indirectly its legal liability.
"Indentures" means the Company Indenture and the Senior
Secured Notes Indenture.
"Independent Accountants" means an internationally
recognized accounting firm.
"Independent Insurance Consultant" means Sedgwick, PLC,
a corporation incorporated in accordance with the laws of the
United Kingdom, or its successors.
"Inter-Company Steam Sales Agreement" means the Water,
Heat, Steam and Hot Water Supply and Usage Agreement, dated as of
October 3, 1996 between Tangshan Cayman and Tangshan Panda.
"Interconnection Agreement" means the General
Interconnection Agreement dated September 22, 1995, between NCPGC
and Tangshan Panda and Tangshan Pan-Western, as the same may from
time to time be amended, supplemented or otherwise modified.
"Interconnection Dispatch Agreement" means the
agreement to be negotiated among Tangshan Power Supply Bureau of
NCPGC, Tangshan Panda and Tangshan pan-Western shortly prior to
the Commercial Operation Date of the Facility concerning specific
details as to the dispatch of the Facility.
"Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Person in question for such
period as determined in accordance with GAAP, including, without
limitation, (i) amortization of debt issuance costs or of
original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting, (ii)
accrued interest, (iii) noncash interest payments, (iv)
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(v) interest actually paid by the Person in question under any
guarantee of Indebtedness or other obligation of any other Person
and (vi) net costs associated with interest rate agreements
(including amortization of discounts) and currency agreements,
plus (b) capitalized interest plus (c) dividends paid in respect
of preferred stock of the Person in question, held by Persons
other than the Person in question.
"Issuer Note" has the meaning given that term in
Section 2.3.
"Issuer Revenue Fund" means the fund to be established
by the Lender in accordance with the terms of the Indentures.
"Joint Venture Companies" means, collectively Tangshan
Panda, Tangshan Pan-Western, Tangshan Cayman and Tangshan Pan-
Sino.
"JV Equity Contributions" means equity contributions
made by the Borrower to the Joint Venture Companies pursuant to
the Registered Capital Contribution and Agency Agreement.
"JV Guarantees" means collectively, the undertakings by
Tangshan Panda, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Borrower
the prompt payment and performance by each of Tangshan Pan-
Western, Tangshan Cayman and Tangshan Pan-Sino of their
individual obligations to Borrower pursuant to any Indebtedness
obligation then or thereafter due and owing by any such party to
Borrower; the undertakings by Tangshan Pan-Western, each executed
as of the 22nd day of September, 1996, to unconditionally and
irrevocably guarantee to the Borrower the prompt payment and
performance by each of Tangshan Panda, Tangshan Cayman, and
Tangshan Pan-Sino of their individual obligations to Borrower
pursuant to any Indebtedness obligation then or thereafter due
and owing by any such party to Borrower; the undertakings by
Tangshan Cayman, each executed as of the 22nd day of September,
1996 to unconditionally and irrevocably guarantee to the Borrower
the prompt payment and performance by each of Tangshan Panda,
Tangshan Pan-Western and Tangshan Pan-Sino of their individual
obligations to Borrower pursuant to any Indebtedness obligation
then or thereafter due and owing by any such party to Borrower;
and the undertakings by Tangshan Pan-Sino, each executed as of
the 22nd day of September, 1996 to unconditionally and
irrevocably guarantee to the Borrower the prompt payment and
performance by each of Tangshan Panda, Tangshan Pan-Western and
Tangshan Cayman of their individual obligations to Borrower
pursuant to any Indebtedness obligation then or thereafter due
and owing by any such party to Borrower.
"JV Shareholder Loans" means loans made by the Borrower
to the Joint Venture Companies pursuant to the JV Shareholder
Loan Agreements.
"JV Shareholder Loan Agreements" means, collectively
the shareholder loan agreements between the Borrower and each of
the Joint Venture Companies respectively, dated September 24,
1997 as each is amended by an amendment and restatement dated
April 1, 1997 (as each is amended, modified and supplemented from
time to time, each a "JV Shareholder Loan Agreement").
"Legal Requirements" means all laws, statutes, orders,
decrees, injunctions, licenses, permits, approvals, agreements
and regulations of any Governmental Instrumentality having
jurisdiction over the matter in question.
"Lender" has the meaning set forth in the recitals
hereto.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, claim, hypothecation,
assignment for security, deposit arrangement or preference or
other security agreement of any kind or nature whatsoever. For
purposes of this Agreement, a Person shall be deemed to own
subject to a lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such Person.
"Loans" means the loans made under this Agreement.
"Luanhua Co." means Tangshan Luanhua (Group) Co., a
company organized under the laws of the PRC.
"Luannan Government" means the government of Luannan
County, Tangshan City, Hebei Province, PRC.
"Luannan Heat Company" means Luannan County Heat
Company, Ltd. a company organized under the laws of the PRC.
"Luannan Heat & Power" means Luannan County Heat &
Power Plant, a company organized under the laws of the PRC.
"Material Adverse Effect" means a material adverse
change in the financial condition with respect to the party or
entity in question or any event or occurrence which could
reasonably be expected to materially and adversely affect: (a)
the development, construction or operation of the Facility; or
(b) the ability of the Facility to perform any of its material
obligations under a Facility Document; or (c) the ability of the
Borrower to make payments of principal, premium, if any, or
interest on the Loans when due.
"Material Facility Documents" means, collectively, the
Power Purchase Agreement, the EPC Contract, the Transmission
Facilities Construction Agreement, the O&M Agreement, the Coal
Supply Agreements, the Coal Transportation Agreement and all
other instruments, agreements or other documents arising from or
related to the Facility, but shall not include any Financing
Agreement.
"Maturity Date" means April 10, 2004.
"NCPGC" means North China Power Group Company, a
company organized under the laws of the PRC.
"Non-Excluded Taxes" shall have the meaning ascribed to
it subsection 5.16.
"Nonrecourse Persons" shall have the meaning ascribed
to it in Article 8.
"O&M" means operation and maintenance services.
"O&M Agreement" means the Amended and Restated
Operation and Maintenance Agreement, dated as of March 6, 1997,
among the Joint Ventures and Duke/Fluor Daniel International
Services, a partnership organized and existing under the laws of
Nevada, whose partners are Duke Coal Project Services Pacific,
Inc., a Nevada corporation and Fluor Daniel Asia, Inc., a
California corporation.
"O&M Costs" means all amounts disbursed by or on behalf
of the Borrower for operation, maintenance, repair, or
improvement of the Facility, including, without limitation,
premiums on insurance policies, property, income and all other
taxes to the extent paid, and payments under the relevant
operating and maintenance agreements, leases (including Operating
Lease Obligations), royalty and other land use agreements, and
any other payments required under the Facility Documents, each as
determined on a cash basis and otherwise in accordance with GAAP.
"Obligations" means all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by the
Borrower to the Lender or existing or hereafter arising hereunder
or pursuant to the terms of any of the Financing Agreements or
any of the other Facility Documents, including all interest,
fees, charges and expenses chargeable to the Borrower; and in the
event of any proceeding for the collection or enforcement of the
Obligations, after an event of default shall have occurred and be
continuing, any exercise by the Lender, together with reasonable
attorney's fees and court costs.
"Officer's Certificate" means a certificate of an
authorized representative of the Borrower, signed by the
Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of
the Borrower.
"Operating Lease Obligations" means any obligation of
the Person in question incurred or assumed under or in connection
with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as
a capital lease.
"Other Taxes" means any other excise or property taxes,
charges or similar levies that arise under the laws of any
jurisdiction on any payment made under this Agreement or under
any other Financing Agreement or from the execution or delivery
or otherwise with respect to this Agreement or any other
Financing Agreement.
"Panda International" means Panda Energy International
Inc., a Texas corporation.
"Pan-Sino" means Pan-Sino Energy Development Company
LLC, a Cayman Islands exempted company.
"Pan-Western Equity Distribution Fund" has the meaning
ascribed thereto in subsection 3.4.
"Pan-Western Funds" has the meaning ascribed thereto in
subsection 3.4.
"Pan-Western Revenue Fund" has the meaning ascribed
thereto in subsection 3.4
"Permitted Indebtedness" means the Loans any other
loans from the Lender to the Borrower.
"Permitted Liens" means, with respect to any Person,
any Lien arising by reason of (a) any judgment, decree or order
of any court, so long as such Lien is being contested in good
faith and is adequately bonded, and any appropriate legal
proceedings which may have been duly initiated for the review of
such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be
initiated shall not have expired; (b) taxes not yet delinquent or
which are being contested in good faith; (c) security for payment
of workers' compensation or other insurance; (d) deposits to
secure public or statutory obligations, or to secure permitted
contracts for the purchase or sale of any currency entered into
in the ordinary course of business; and (e) security for surety
or appeal bonds.
"Person" means any natural person, corporation,
partnership, firm, association, Governmental Instrumentality or
any other entity whether acting in an individual, fiduciary or
other capacity.
"Power Purchase Agreement" means, collectively, the
Energy Purchase Agreement, the Interconnection Agreement and the
Supplemental Agreement (and, after execution thereof, the
Interconnection Dispatch Agreement).
"PRC" or "China" means the People's Republic of China.
"Pricing Document" means the document or documents
(issued by the Tangshan Municipal Price Bureau) determining the
price for electric energy delivered, retail price and principals
for adjustment.
"PUHCA" means the United States Public Utility Holding
Company Act of 1935, as amended, and all rules and regulations
adopted thereunder.
"Registered Capital Contribution and Agency Agreements"
means the agreements among each of the Joint Venture Companies
and their respective shareholders, dated as of March 26, 1997 (as
amended, modified and supplemented from time to time) pursuant to
which the Joint Venture Companies are entitled to receive equity
contributions.
"Renminbi" or "RMB" means lawful currency of the PRC.
"Repayment Date" means the 10th day of April in each
year from April 10, 2000 to the Maturity Date.
"SAFE" means the State Administration of Foreign
Exchange of the PRC.
"Senior Secured Notes" means the notes issued by the
Lender pursuant to the Indentures.
"Senior Secured Notes Guarantee" means the Senior
Secured Notes Guarantee issued by the Company under the terms of
the Indentures.
"Senior Secured Notes Indenture" means the trust
indenture governing the terms of issuance of the Senior Secured
Notes, dated as of the Closing Date, by and between the Lender
and the trustee thereunder.
"Shareholders' Agreement" shall have the meaning
ascribed thereto in subsection 3.5.
"Shareholders" means Pan-Sino and Chinamac each
individually a "Shareholder".
"Site" means the land on which the Facility is to be
located.
"Steam Sales Agreements" means the Heat Supply
Contracts and the Inter-Company Steam Sales Agreement.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Supplemental Agreement" means Supplemental Agreement
for General Interconnection Agreement and Electric Energy
Purchase and Sales Agreement, dated February 10, 1996, among
NCPGC, Tangshan Panda and Tangshan Pan-Western, as the same may
from time to time be amended, supplemented or otherwise modified.
"Tangshan Cayman" means Tangshan Cayman Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Panda" means Tangshan Panda Heat and Power
Co., Ltd., a Sino-foreign equity joint venture with limited
liability organized under the laws of the PRC.
"Tangshan Pan-Sino" means Tangshan Pan-Sino Heat Co.,
Ltd., a Sino-foreign equity joint venture with limited liability
organized under the laws of the PRC.
"Tangshan Pan-Western" means Tangshan Pan-Western Heat
and Power Co., Ltd., a Sino-foreign equity joint venture with
limited liability organized under the laws of the PRC.
"Transmission Facilities" means three new substations,
the upgrades of both an existing substation and an existing
switching station and approximately 43 km of 110 KV transmission
lines to interconnect the Facility to the Jing-Jin-Tang Grid.
"Transmission Facilities Construction Agreement" means
the construction agreement, dated February 10, 1996, among
Tangshan Panda, Tangshan Pan-Western and NCPGC.
"Wholly Owned" by any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more
Wholly Owned Subsidiaries of such Person.
ARTICLE 2 - THE CREDIT FACILITY
2.1 Credit Facility. Subject to the terms and conditions
set forth in Article 3, the Lender shall from time to time make
shareholder loans to the Borrower in an aggregate amount of
US$114,271,288 (the "Loans").
2.2 Interest Payments.
2.2.1 Interest Payment Dates. The Borrower shall
pay accrued interest on the unpaid principal amount of the Loans
semiannually in arrears on each April 10 and October 10,
commencing October 10, 1997, until the first such date to occur
not less than six months after the Commercial Operation Date, and
on the last day of each month thereafter.
2.2.2 Interest. The Borrower shall pay accrued
interest on the unpaid principal amount of the Loans (a) from the
date of this Agreement through the first April 10 or October 10
to occur not less than six months after the Commercial Operation
Date, at the rate of 12.25% per annum; (b) thereafter through
March 10, 2001, at the rate of 11.0% per annum; (c) thereafter
through March 10, 2002, at the rate of 12.5% per annum, and (d)
thereafter until the Maturity Date, at the rate of 13.5% per
annum.
2.3 Issuer Note. The obligation of the Borrower to repay
the Loans and to pay interest thereon at the rate provided herein
shall be evidenced by a promissory note substantially in the form
of Exhibit A, payable to the order of the Lender and in the
principal amount of ONE HUNDRED FOURTEEN MILLION, TWO HUNDRED
SEVENTY-ONE THOUSAND, TWO HUNDRED AND EIGHTY-EIGHT DOLLARS
(US$114,271,288) (the "Issuer Note"). The Borrower authorizes
the Lender to record on the schedule annexed to the Issuer Note,
each payment or prepayment of principal of the Loans and agrees
that all such notations shall be prima facie evidence of the
information recorded. The Borrower further authorizes the Lender
to attach to and make a part of the Issuer Note continuations of
the schedule attached thereto as necessary. No failure to make
any such notations, nor any errors in making any such notations,
shall affect the validity of the Borrower's obligations to repay
the full unpaid principal amount of the Loans or the duties of
the Borrower hereunder or thereunder.
2.4 Repayment of the Loans.
2.4.1 Payments. The aggregate unpaid principal
amount of the Loans shall be payable in installments on each
Repayment Date in accordance with the amortization schedule set
forth on Schedule A, and any remaining unpaid principal,
interest, fees and costs shall be due and payable on the Maturity
Date.
2.4.2 Application of Payments. If the amount of
any payment made by the Borrower hereunder is less than the total
amount due and payable by the Borrower to the Lender as of the
date on which such payment is actually made by the Borrower, such
payment shall be applied: (i) first, against charges, fees,
costs and expenses due hereunder; (ii) second, against interest
on the Loans (including amounts payable in respect thereof
pursuant to Sections 5.11, 5.12 and 5.13; (iii) third, against
the principal of the Loans (including amounts payable in respect
thereof pursuant to Sections 5.11, 5.12 and 5.13) and interest on
such overdue interest; and (iv) fourth, against all other amounts
then due and payable to the Lender hereunder.
2.5 Payment Procedure. The Borrower shall make all
payments due hereunder on or prior to the Capitalized Interest
Expiration Date to the Trustee for deposit in the Issuer
Construction Fund, and all payments due thereafter to the Trustee
for deposit in the Issuer Revenue Fund.
2.6 Prepayments.
2.6.1 Voluntary Prepayments. Except as required by
this Agreement, the Borrower may not prepay Loans without the
permission of the Lender.
2.6.2 Certain Mandatory Prepayments. In addition
to other amounts which shall be applied to the prepayment of
Loans as provided in this Agreement, the Borrower shall apply to
prepayment of the principal of the Loan, on the next scheduled
Interest Payment Date following receipt thereof, all Available
Cash Flow remaining after all other amounts due hereunder have
been paid. Such payments shall be applied to the installments of
principal due on the Loans in the order of their maturity.
2.6.3 Expropriation Event; Event of Loss. (a) If
an Expropriation Event shall occur with respect to the Facility
or any part thereof, the Borrower shall (i) diligently pursue all
of its rights, and cause the Joint Venture Companies to pursue
their respective rights, the rights to compensation against the
appropriate Governmental Instrumentality in respect of such
event, (ii) not compromise, settle or consent to the settlement
of any claim in respect thereof without the consent of the
Lender, and (iii) promptly deposit all proceeds received in
respect of any Expropriation Event (after deducting all
reasonable expenses) in the Pan-Western Revenue Fund segregated
from all other moneys pending the determination pursuant to
paragraph (c) below.
(b) If an Event of Loss shall occur with respect
to the Facility or any part thereof, the Borrower shall (i)
diligently pursue all its rights and the rights of the Joint
Venture Companies to compensation with respect to such Event of
Loss, (ii) not compromise, settle or consent to the settlement of
any claim exceeding $250,000 in respect thereof without the
consent of the Lender, and (iii) promptly deposit all proceeds
received in respect of any Event of Loss (after deducting all
reasonable expenses) in the Pan-Western Revenue Fund, segregated
from all other moneys pending the determination pursuant to
paragraph (c) below.
(c) If any such Expropriation Event or an Event
of Loss shall occur, as soon as reasonably practicable, but no
later than fifteen (15) days after the date of receipt by the
Borrower of any proceeds in respect thereof, the Borrower shall
make a reasonable good faith determination as to whether (i) the
Facility can be rebuilt, repaired or restored to permit operation
of the entire Facility on a Commercially Feasible Basis, and (ii)
the proceeds thereof, together with any other amounts that the
Borrower and the Joint Ventures have available to commit to such
rebuilding, repair or restoration, are sufficient to pay for such
rebuilding, repair or restoration of the Facility. The
determination of the Borrower shall be evidenced by an Officer's
Certificate filed with the Lender which, in the event the
Borrower determines that the Facility can be rebuilt, repaired or
restored to permit operation of the entire Facility or a portion
thereof on a Commercially Feasible Basis, shall also certify that
such proceeds, together with any other amounts that the Borrower
and the Joint Venture Companies are willing to commit to such
rebuilding, repair or restoration, are sufficient to pay the
costs thereof, and shall also set forth a reasonable good faith
estimate by the Borrower of such costs. If the amount of such
costs exceeds $500,000, such certificate shall be accompanied by
a Facility Engineer's certificate, dated within five (5) days of
the date of the Borrower's certificate, stating that, based upon
reasonable investigation and a review of the determination made
by the Borrower, the Facility Engineer believes that the
determination and the estimate of the total cost, if any, set
forth in the Borrower's certificate to be reasonable.
(d) In the event that the Borrower determines not
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss shall be applied to
prepayment of the Loans.
(e) In the event that the determination is made
to rebuild, repair or restore the Facility, all of the proceeds
of such Expropriation Event or Event of Loss on deposit in the
Pan-Western Revenue Fund or the Issuer Fund shall be transferred
to the Luanna Facility Restoration Fund, together with the
amounts (if any) previously transferred to the Lender in
connection with such Expropriation Event or Event of Loss and
such other amounts as the Borrower has available for such
rebuilding, repair or restoration (which also shall be
transferred to the Lender prior to any disbursement for
rebuilding, repair or restorations), shall be used to pay the
costs of such rebuilding, repair or restoration, and any excess
shall, upon completion of such rebuilding, repair or restoration,
be applied to the prepayment of the Loans within 15 days of the
completion of such rebuilding, repair or restoration as certified
by the Facility Engineer.
2.7 Fees. Not more than thirty (30) days following the
making of the first Loan hereunder, the Borrower shall reimburse
the Lender for its reasonable costs other than interest costs
incurred in funding and administering the Loans.
ARTICLE 3 - CONDITIONS PRECEDENT
The obligation of the Lender to make each Loan shall be
subject to the fulfillment or waiver of each of the following
conditions precedent:
3.1 Borrower's Certificate. The Lender shall have received
from the Borrower an Officer's Certificate dated the date of the
request for such Loan, certifying the following:
(a) Representations and Warranties. The
representations and warranties made by the Borrower herein or
which are contained in any certificate, document, financial or
other statement furnished by the Borrower hereunder or thereunder
or in connection herewith or therewith, or, to the knowledge of
the Borrower, made by the Joint Venture Companies pursuant to the
JV Shareholder Loan Agreements, are true and correct in all
material respects on and as of such date as if made on and as of
such date, except as affected by the consummation of the
transaction contemplated thereby or to extent that such
representations and warranties relate solely to an earlier date;
(b) No Event of Default. (i) No Event of Default is
in existence on such date, or shall occur after giving effect to
the Loan to be made on such date, and (ii) to the knowledge of
the Borrower, no JV Shareholder Loan Agreement Event of Default
is in existence on such date.
(d) Governmental Authorizations and other consents and
approvals. All Governmental Authorizations which are required to
be obtained on or prior to the date of the making of such Loan
have been duly obtained or maintained and are in full force and
effect, except for Governmental Authorizations which have not
been obtained at such time but which the Borrower has no reason
to believe will not be obtained in the normal course of business
prior to the date such Governmental Authorizations are required;
and
(e) Use of Proceeds. The costs for the payment of
which the borrowing is being made are to advance money to one or
more Joint Venture Companies pursuant to the JV Shareholder Loan
Agreements or to make equity contributions to one or more Joint
Venture Companies pursuant to the Registered Capital Contribution
and Agency Agreement.
3.2 Progress Report and Requisition Facility Engineer. The
Lender shall have received (a) a copy of a report signed by the
Authorized Representative of each Joint Venture on the date of
each such Loan to the effect that construction of the Facility is
proceeding satisfactorily in accordance with the EPC Contract and
the Facility Budget and the Facility Budget sets forth accurately
the estimated costs to complete the Facility, and such
confirmation thereof from the Facility Engineer as the Lender
reasonably deems necessary and (b) a copy of the EPC Contractor's
application for payment under the EPC Contract or evidence of or
application for other expenses in connection with the
construction and development of the Facility (together with all
supplemental reports required to be furnished thereunder) and
copies of all invoices and other statements of charges with
respect to the payments to be made to the EPC Contractor pursuant
to the EPC Contract or to the recipient of such other expenses on
the date, or expected to be due and payable within 30 days of,
such Loan and with respect to all other items of Facility Costs
to be paid on such date, or expected to be due and payable within
30 days of such Loan.
3.3 Shareholders' Agreement. The Borrower shall have
entered into a shareholders' agreement among the Borrower, Pan-
Sino and Chinamac (the "Shareholders' Agreement") pursuant to
which the shareholders of the Borrower will have agreed to cause
the Borrower to declare distributions immediately upon the
availability of funds for such purpose.
3.4 Equity Contributions; Real Estate Transfers. It shall
be a condition to any Loan hereunder which will be used to
advance funds to the Joint Venture Companies pursuant to the JV
Shareholder Loan Agreements which will have the effect of
increasing the total amount of Loans hereunder to more than
$15,000,000 that (A) each Joint Venture Company shall have
received the full amount of the equity contributions to which
each Joint Venture Company is then entitled pursuant to the
Registered Capital Contribution and Agency Agreement and (B) all
transfers of land use rights relating to the Site shall have been
completed.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
The Borrower makes all of the following representations
and warranties to and in favor of the Lender on the date on which
any Loan is made hereunder, except as such representations relate
to an earlier date.
4.1 Organization. The Borrower (a) is a company with
limited liability duly organized and validly existing under the
laws of the Cayman Islands, (b) is duly authorized to do business
in the Cayman Islands, (c) has all requisite power and authority
to (i) carry on its business as now being conducted and as now
proposed to be conducted, (ii) incur Indebtedness, and (iii)
execute, deliver and perform its obligations under each of the
Financing Agreements to which it is a party, and (d) the sole
shareholders of the Borrower are Pan-Sino and Chinamac.
4.2 Authorization; No Conflict. The Borrower has duly
authorized, executed and delivered the Facility Documents and the
Financing Agreements to which it is a party, and neither the
execution and delivery thereof nor the consummation of the
transactions contemplated thereby nor its compliance with the
terms thereof (a) does or will contravene its formation documents
or any other Legal Requirement then applicable to or binding on
it, (b) does or will contravene or result in any breach or
constitute any default under, or result in or require the
creation of any Lien upon any of its property or under any
agreement or instrument to which it is a party or by which it or
any of its properties may be bound, or (c) does or will require
the consent or approval of any Person.
4.3 Legality, Validity and Enforceability. Each of the
Financing Agreements to which the Borrower is a party is a legal,
valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, subject to bankruptcy
laws or principles of equity, to the extent applicable to the
Borrower. None of the Financing Agreements to which the Borrower
is a party has been amended or modified except in accordance with
this Agreement.
4.4 Compliance with Law, Governmental Authorizations and
Facility Documents. The Borrower is in compliance in all
material respects with all Legal Requirements and Governmental
Authorizations and Financing Agreements to which it is a party,
and no notices of violation of any Governmental Authorization or
Financing Agreements have been issued, entered or received by the
Borrower or, to the knowledge of the Borrower, issued, entered or
received by the Joint Venture Companies.
4.5 Governmental Authorizations. With respect to the Joint
Venture Companies, to the knowledge of the Borrower, there are no
Governmental Authorizations under Legal Requirements existing as
of the date of this Agreement that are required or will become
required, other than the Governmental Authorizations (a) which
have been obtained or granted and are in full force and effect,
or (b) which the Borrower has no reason to believe will not be
obtained before they become necessary for the ownership,
construction, financing or operation of the Facility. To the
best of its knowledge, neither the Borrower nor any of the Joint
Venture Companies is in violation of any condition in any
Governmental Authorization.
4.6 Litigation. There are no pending or, to the Borrower's
knowledge, threatened actions, suits, proceedings or
investigations of any kind, including actions or proceedings of
or before any Governmental Instrumentality, to which the Borrower
or to the knowledge of the Borrower, any Shareholder or any Joint
Venture Company is a party or is subject, or by which any of them
or any of their properties are bound.
4.7 Existing Defaults. There is no Event of Default by the
Borrower under any of the Financing Agreements. To the best of
the Borrower's knowledge, there is no event of default under any
Material Facility Document or any Financing Agreement by any
party to such Material Facility Document or Financing Agreement.
4.8 Taxes. The Borrower has filed, or caused to be filed,
all tax and informational returns that are required to have been
filed by it in any jurisdiction, and has paid 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 (other than those taxes that it is contesting in good
faith and by appropriate proceedings, with adequate, segregated
reserves established for such taxes) and, to the extent such
taxes are not due, has established reserves that are adequate for
the payment thereof and are required by GAAP.
4.9 Contingent Liabilities. The Borrower has no material
contingent liabilities or obligations except those authorized
under and permitted by the Financing Agreements.
4.10 Business, Debt, Contracts, Etc. The Borrower has not
conducted any business other than the business contemplated
hereunder, has no outstanding Indebtedness other than
Indebtedness incurred hereunder or permitted under Section 6.1
and has no other liabilities other than those incurred hereunder
or permitted hereby.
4.11 Representations and Warranties. All representations
and warranties of the Borrower contained in herein are true and
correct in all material respects and the Borrower hereby confirms
each such representation and warranty of the Borrower with the
same effect as if set forth in full herein.
4.12 Utilities. to the knowledge of the Borrower, all
utility services and easements necessary for the construction and
the operation of the Facility for its intended purposes, are or
will be available at the Site as and when required on
commercially reasonable terms.
4.13 Facility Documents.
4.13.1 The Lender has received a true, complete and
correct copy of each of the Facility Documents and the Financing
Agreements in effect or required to be in effect as of the date
this representation is made or deemed made (including all
exhibits, schedules, side letters and disclosure letters to
therein or delivered pursuant thereto, if any).
4.13.2 To the Borrower's knowledge, all conditions
precedent to the obligations of the respective parties under the
Material Facility Documents have been satisfied or waived in
accordance with the provisions thereof and hereof, except for
such conditions precedent which by their terms cannot be met
until a later stage in the construction or operation of the
Facility, and the Borrower has no reason to believe that any such
condition precedent cannot be satisfied on or prior to the
appropriate stage in the construction or operation of the
Facility.
4.14 Fees and Enforcement. Other than amounts that have
been paid in full, no fees or taxes, including without limitation
stamp, transaction, registration or similar taxes, are required
to be paid for the legality, validity, or enforceability of this
Agreement or any of the other Facility Documents and the
Financing Agreements.
4.15 Subsidiaries and Beneficial Interest. The Borrower has
no subsidiaries other than the Joint Venture Companies and does
not beneficially own the whole or any part of the issued share
capital or other ownership interest of any other company or
corporation or other Person.
4.16 Liens. The Borrower has not secured or agreed to
secure any Indebtedness by any Lien upon any of its present or
future revenues or assets or capital stock except Permitted
Liens. The Borrower does not have any outstanding Lien or
obligation to create Liens on or with respect to any of its
properties or revenues except Permitted Liens.
4.17 Regulation of Parties. The Borrower is not nor will it
be, solely as a result of its participation in the transactions
contemplated hereby or by any other Facility Document, subject to
regulation by any Governmental Instrumentality of the United
States as a "public utility," an "electric utility," an "electric
utility holding company" or a "public utility holding company."
The Borrower is not subject to regulation as a "subsidiary
company" or an "affiliate" of a "holding company" under (and as
defined in) PUHCA.
4.18 Transactions with Affiliates. Except as otherwise
permitted under Section 6.9, the Borrower is not a party to any
contracts or agreements with, or any other commitments to,
whether or not in the ordinary course of business, any Affiliate
of the Borrower.
ARTICLE 5 - AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that until all
Obligations owed to the Lender are paid in full it will:
5.1 Repayment of Indebtedness. Repay in accordance with
its terms, all Indebtedness, including without limitation, all
sums due under this Agreement and the Issuer Note.
5.2 Existence, Conduct of Business, Properties, Etc.
Except as otherwise expressly permitted by the Indentures under
this Agreement, (i) maintain and preserve its existence as a
Cayman Islands exempted company with limited liability and all
rights, privileges and franchises necessary or desirable in the
normal conduct of its business and (ii) engage only in the
business contemplated by the Issuer Indenture and the Financing
Agreements.
5.3 Use of Funds. (a) Use the proceeds of the Loans only
to make (i) the JV Shareholder Loans and (ii) the JV Equity
Contributions.
(b) Immediately upon receipt thereof deposit all cash
revenues, from whatever source derived, with the Trustee for
deposit in the Pan-Western Revenue Fund.
(c) Any funds on deposit in the Pan-Western Operating
Fund shall be used by the Borrower solely for the payment of
expenses in connection with the Administrative Services
Agreement.
(d) Subject to the Indenture, any funds in the Pan-
Western Equity Distribution Fund may be distributed as dividends
in accordance with the Shareholder's Agreement.
5.4 Compliance with Legal Requirements. Promptly and
diligently procure, maintain and comply with or cause to be
procured, maintained or complied with all Governmental
Authorizations required for financing of the Joint Venture
Companies and the transactions contemplated by the Financing
Agreement and the Facility Documents, except that the Borrower
may, at its expense contest by appropriate proceedings conducted
in good faith the validity or application of any such Legal
Requirements, provided that, in either case, (x) none of the
Lender, the Borrower and the Joint Venture Companies would be
subject to any criminal liability for failure to comply therewith
and (y) all proceedings to enforce such Legal Requirements
against the Lender, the Borrower the Joint Venture Companies, or
the Facility or any part thereof, shall have been duly and
effectively stayed during the entire pendency of such contest.
5.5 Operating Budgets. Deliver to the Lender an annual
operating budget in advance of each calendar year.
5.6 Books, Records, Access. Maintain adequate books,
accounts and records with respect to the Borrower, the Joint
Venture Companies, and the Facility in compliance with the
regulations of any Governmental Instrumentality having
jurisdiction thereof, and, with respect to financial statements,
in accordance with GAAP and, subject to reasonable safety
requirements, permit employees or designees of the Lender and the
Facility Engineer, at any reasonable time and upon reasonable
prior notice to inspect the Facility, and to examine or audit all
of Borrower's books, accounts and records pertaining or related
to the Facility and make copies and memoranda thereof.
5.7 Financial Statements.
5.7.1 Provide the Lender with:
(a) As soon as available and in any
event within ninety (90) days after the close of each fiscal year
commencing with the fiscal year ended after the date of this
Agreement, audited financial statements of the Borrower including
a statement of equity, a balance sheet as of the close of such
year, an income and expense statement, reconciliation of capital
accounts and a statement of sources and uses of funds, all
prepared in accordance with GAAP and certified by Independent
Accountants.
(b) As soon as available and in any
event within forty five (45) days after the end of each of the
quarterly accounting periods of its fiscal year commencing with
the quarter ending after the date of this Agreement, unaudited
financial statements of the Borrower, including without
limitation, an unaudited balance sheet of the Borrower as of the
last day of such quarterly period, the related statements of
income and cash flows for such quarterly period and (in the case
of second, third and fourth quarterly periods) for the portion of
the fiscal year ending with the last day of such quarterly
period, setting forth in each case in comparative form
corresponding unaudited figures from the preceding fiscal year,
all prepared in accordance with GAAP.
5.7.2 Each time the financial statements of the
Borrower are delivered under this subsection, an Officer's
Certificate signed by an Authorized Representative of the
Borrower shall be delivered along with such financial statements,
certifying that such officer has made or caused to be made a
review of the transactions and financial condition of the
Borrower during the relevant fiscal period and that such review
has not, to the best of such Authorized Representative's
knowledge, disclosed the existence of any event or condition
which constitutes an Event of Default under this Agreement, or if
any such event or condition existed or exists, the nature thereof
and the corrective actions that Borrower has taken or proposes to
take with respect thereto, and also certifying that the Borrower
is in compliance in all material respects with its obligations
under this Agreement and each other Financing Agreement to which
it is a party or, if such is not the case, stating the nature of
such non-compliance and the corrective actions which the Borrower
has taken or proposes to take with respect thereto.
5.8 Progress Report; Facility Engineer. Delivered to the
Lender a copy of a report signed by the Authorized Representative
of each Joint Venture Company on the date of each borrowing
hereunder to the effect that construction of the Facility is
proceeding satisfactorily in accordance with the EPC Contract and
the Facility Budget and the Facility Budget sets forth accurately
the estimated costs to complete the Facility, and such
confirmation thereof from the Facility Engineer as the Lender
reasonably deems necessary.
5.9 Insurance. Maintain, or cause to be maintained,
adequate insurance with respect to the Facility satisfactory to
the Lender in its reasonable judgment, based upon the advice of
the Independent Insurance Consultant. All insurance other than
third party liability insurance shall name Pan-Western as an
insured and the sole loss payee thereunder. Policies for third
party liability insurance shall name the Lender as an additional
insured.
5.10 Reports; Cooperation.
5.10.1 Deliver to the Lender on each anniversary of
the date of this Agreement a certificate from the Borrower's
insurers or insurance agents (i) evidencing that the insurance
policies in place satisfy the requirements specified in Section
5.9 (including, without limitation, listing all insurance being
carried by or on behalf of the Borrower or the Joint Venture
Companies pursuant to the Financing Agreements and certifying
that all insurance required to be maintained by the Borrower or
the Joint Venture Companies pursuant to the Facility Documents is
in full force and effect and all premiums therefore have been
paid in full), and (ii) setting forth a summary of all losses in
excess of US$250,000 (or the equivalent thereof) incurred with
respect to the Facility in the preceding year.
5.10.2 Deliver to the Lender within thirty (30) days
following the end of each calendar quarter until the Commercial
Operation Date a quarterly status report describing in reasonable
detail the progress of the construction of the Facility since the
immediately preceding report hereunder, including without
limitation, the cost incurred to the end of such quarter, an
estimate of the time and cost required for completion of the
Facility and such other information which the Lender may
reasonably request.
5.10.3 Prior to the Commercial Operation Date,
deliver to the Lender, within thirty (30) days following the end
of each calendar quarter, an update of the Facility Budget,
including but not limited to an explanation or other
reconciliation of differences between such report and previous
reports.
5.10.4 Upon completion of the Facility, deliver to
the Lender an Officer's Certificate certifying that (a) the
Commercial Operation Date has occurred, (b) to the knowledge of
the Borrower, there does not exist as of the date of such
certificate an event of default under any of the JV Shareholder
Loan Agreements, (c) to the knowledge of the Borrower, all
amounts required to be paid or repaid as of such date under the
Facility Documents and the Financing Agreements have been paid or
repaid and (d) the Facility Engineer has delivered a certificate
(which has been attached to such Officer's Certificate)
certifying that the Commercial Operation Date has occurred and
that the amount available in the Completion Sub-Account is
sufficient to complete the Facility.
5.10.5 From and after the Commercial Operation Date,
deliver to the Lender within ninety (90) days following each
calendar year, a summary operating report, which shall include,
unless otherwise agreed to by the Lender, a numerical and
narrative assessment of (i) the Facility's compliance with each
category in the annual operating budget, (ii) statistical data
relating to the Facility, including heat rate, net electrical and
scheduled and unscheduled outages, (iii) fuel deliveries and use,
(iv) major maintenance activity, (v) casualty losses of value in
excess of US$250,000 or the equivalent thereof in other
currencies (whether or not covered by insurance), (vi) disputes
with any materialman, supplier or other Person and any related
claims against the Borrower, (vii) to the knowledge of the
Borrower, pricing information disclosed or made available under
the Coal Supply Agreements and (viii) compliance with the
Governmental Authorizations.
5.10.6 No later than five Business Days following
the receipt thereof, deliver to the Lender all progress reports
and other information concerning the Facility provided by the
Joint Venture Companies to the Borrower pursuant to the JV
Shareholder Loan Agreements.
5.10.7 Deliver to the Lender any such other
information or data with respect to its business or operations
(including supporting information as to compliance with this
Agreement) as the Lender may reasonably request from time to
time.
5.11 Taxes and Other Governmental Charges. Before the same
become delinquent, pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or
levies lawfully imposed upon the Borrower or its income or
profits or upon the Facility, all utility and other governmental
charges incurred in the ownership, operation, maintenance, use,
occupancy and upkeep of the Facility. However, the Borrower may
contest in good faith any such taxes, assessments and other
charges and, in such event, may permit the taxes, assessments or
other charges so contested to remain unpaid during any period,
including appeals, when the Borrower is in good faith contesting
the same, so long as (a) adequate cash reserves have been
established in an amount sufficient to pay any such taxes,
assessments or other charges, accrued interest thereon and
potential penalties or other costs relating thereto, or other
adequate provision for the payment thereof shall have been made,
(b) enforcement of the contested tax, assessment or other charge
is effectively stayed for the entire duration of such contest,
and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is promptly paid
after resolution of such contest.
5.12 Taxes. All payments made by the Borrower under this
Agreement and the Issuer Note shall be made free and clear of,
and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Instrumentality, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Lender as a result of a present or former connection between
the Lender and the jurisdiction of the Governmental
Instrumentality imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such
connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment
under, or enforced, this Agreement or the Issuer Note). If any
such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Lender hereunder or
under the Issuer Note, the amounts so payable to the Lender shall
be increased to the extent necessary to yield to the Lender
(after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement. Whenever any Non-Excluded Taxes are
payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender for its own account a certified
copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-
Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the
Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
The agreements in this subsection shall survive the termination
of this Agreement and the payment of the Loans, the Issuer Note
and all other amounts payable hereunder.
5.13 Increased Costs. If, after the date of this Agreement,
any Change of Law:
(a) shall subject the Lender to any tax, duty or other
charge with respect to the
Loans, or shall change the basis of taxation of payments by the
Borrower to the Lender on the Loans (except for Covered Taxes,
Other Taxes or changes in the rate of taxation on the overall net
income of the Lender); or
(b) shall impose on the Lender any other condition
directly related to the Loans;
and the effect of any of the foregoing is to increase the cost to
the Lender of making, issuing, creating, renewing, participating
in or maintaining the Loans or to reduce any amount receivable by
the Lender hereunder, then the Borrower shall from time to time,
upon demand by the Lender, pay to the Lender additional amounts
sufficient to reimburse the Lender for such increased costs or to
compensate the Lender for such reduced amounts.
5.14 Notices. Promptly, upon acquiring notice or giving
notice, or obtaining knowledge thereof, as the case may be,
provide to the Lender written notice of:
5.14.1 Any Event of Default which it has knowledge,
specifically stating that an Event of Default has occurred and
describing such an Event of Default and any action being taken or
proposed to be taken with respect to such Event of Default;
5.14.2 Any termination or event of default or notice
thereof under the Power Purchase Agreement or any of the JV
Shareholder Loan Agreements; and
5.14.3 Any litigation pending against the Borrower or
any other party of which the Borrower has actual knowledge, which
is or could reasonably be expected to have a Material Adverse
Effect.
5.14.4 Any request by any Joint Venture Company for
the consent of the Borrower under any provision of such Joint
Venture Company's JV Shareholder Loan Agreement.
5.15 Expropriation Event. If an Expropriation Event shall
occur with respect to the Facility, (a) promptly upon discovery
or receipt of notice of any occurrence thereof, provide written
notice thereof to the Lender, (b) diligently pursue all its
rights and the rights of the Joint Venture Companies rights to
compensation against the relevant Governmental Instrumentality in
respect of such Expropriation Event, and (c) immediately deposit
with the Trustee, to be held and applied pursuant to the
Indenture, any Expropriation Proceeds received in respect of such
event. The Borrower consents to the participation of the Lender
in any proceedings regarding an Expropriation Event, and the
Borrower shall from time to time deliver to the Lender all
documents and instruments requested by it to permit such
participation. Nothing in this Section shall be deemed to impair
any rights which the Lender may have with respect to any such
Expropriation Event.
ARTICLE 6 - NEGATIVE COVENANTS
The Borrower covenants and agrees for the benefit of the
Lender that until all Obligations owed to the Lender are paid in
full, without the consent of the Lender, the Borrower shall not:
6.1 Indebtedness. Incur, create, assume or be liable for
any Indebtedness except Permitted Indebtedness.
6.2 Limitations on Liens. Create, assume or permit to
exist any Lien upon any of the Borrower's assets or properties
other than as contemplated by the Indentures and Permitted Liens.
6.3 Nature of Business. Amend or modify its Articles of
Association without the prior written consent of the Lender, or
engage in any business other than the ownership of its interests
in the Joint Venture Companies and making the Shareholder Loans
and capital contribution to the Joint Venture Companies.
6.4 Sale or Lease of Assets. Sell, lease, assign, transfer
or otherwise dispose of its interests, equity or debt, in the
Joint Venture Companies other than as contemplated by the
Indentures.
6.5 Merger, Consolidation, Liquidation, Dissolution. Merge
or consolidate with or into any other Person, other than the
Lender or Pan-Sino, or liquidate, wind up, dissolve, or otherwise
transfer or dispose of all or any substantial part of its
property, assets or business, or change its legal form, or
purchase or otherwise acquire any assets of any Person.
6.6 Contingent Liabilities. Become liable as a surety,
guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person.
6.7 Loans, Advances or Investments. Make or permit to
remain outstanding any loans, extensions of credit or advances to
or investments in (whether by acquisition of any stocks, notes or
other securities or obligations) any Person except as expressly
provided in the Financing Agreements, or the Indentures.
6.8 Distributions. Other than as contemplated in the
Indentures, agree to any restriction on its ability to pay
dividends (excluding restrictions imposed by law).
6.9 Transactions With Affiliates. Except as contemplated
by the Financing Agreements and the Facility Documents, directly
or indirectly: (i) enter into any transaction with any Person
(including any Affiliate) other than in the ordinary course of
business and on terms not less favorable to those available from
independent third parties.
6.10 Partnerships; Subsidiaries. Except as contemplated by
the Financing Agreements, the Facility Documents or the
Indentures, become a general or limited partner in any
partnership or a joint venturer in any joint venture, acquire any
ownership interest in any other Person or enter into any profit-
sharing or royalty agreement or other similar arrangement whereby
the Borrower's income or profits are, or might be, shared with
any other Person, or enter into any management contract or
similar arrangement whereby its business or operations are
managed by any other Person.
6.11 Amendments. Amend, or permit the amendment of, any of
the Financing Agreements or the Facility Documents without the
prior written consent of the Lender.
6.12 Assignment. Without the prior written consent of the
Lender, assign or otherwise transfer its rights under any of the
Financing Agreements or Facility Documents to which it is a
party, or Governmental Authorizations for its benefit, to any
Person without the prior written consent of the Lender.
6.13 Consent of the Lender. Grant any consent or approval
under the JV Shareholder Loan Agreements which require the
consent or approval of the Borrower without the written consent
or approval of the Lender.
6.14 Immunity. In any proceedings in the Cayman Islands,
the United States or elsewhere in connection with any of the
Financing Agreements to which the Borrower is a party, claim for
itself or any of its assets immunity from suit, execution,
attachment or other legal process.
ARTICLE 7 - EVENTS OF DEFAULT; CURE RIGHTS; REMEDIES
7.1 Events of Default; Cure Rights. The occurrence of any
of the following events shall constitute an event of default
("Event of Default") hereunder:
7.1.1 Failure to Make Payments. Payment shall not
have been made of any principal of or any interest on the Loans
or other amounts owed by the Borrower to the Lender within 15
Banking Days after such amounts are due.
7.1.2 Misstatements; Omissions. Any representation
or warranty confirmed or made in any Financing Agreements or
Facility Documents by the Borrower or in any writing provided by
the Borrower in connection with the transactions contemplated by
this Agreement shall be found to have been incorrect in any
material respect when made or deemed to be made; provided,
however, that no Event of Default shall occur if within sixty
(60) days after the date on which the Borrower has actual notice
that such incorrect statement has occurred, the Borrower shall
deliver in good faith, to the Lender an Officer's Certificate
stating in reasonable detail that either (i) the Borrower has
eliminated any adverse effect relating to such incorrect
statement or (ii) that the Borrower has taken action that it
reasonably believes will eliminate the adverse effect relating to
such incorrect statement within a reasonable specified time.
7.1.3 Affirmative Covenants. The Borrower shall
fail to perform or observe any of its obligations under (a)
Section 5.3 or (b) any other term, covenant or agreement set
forth in Article 5 hereof, which failure is not remedied within
fifteen (15) days after notice of such failure.
7.1.4 Negative Covenants. The Borrower shall fail
to perform or observe any of its obligations under any term,
covenant or agreement set forth in Article 6 hereof, which
failure is not remedied within fifteen (15) days after the
Borrower has received notice of such failure.
7.1.5 Bankruptcy; Insolvency. The Borrower shall
institute a voluntary case or undertake actions to form an
arrangement with creditors for the purpose of paying past due
debts, seeking liquidation, reorganization or moratorium of
payments, under any Bankruptcy Law (or any successor statute or
similar statute in any relevant jurisdiction), or shall consent
to the institution of an involuntary case thereunder against it;
or the Borrower shall file a petition, answer or consent or shall
otherwise institute any similar proceeding under any other Legal
Requirements, or shall consent thereto; or the Borrower shall
apply for, or by consent or acquiescence there shall be an
appointment of, a receiver, liquidator, sequestrator, trustee or
other officer with similar powers; or the Borrower shall make an
assignment for the benefit of creditors; or the Borrower shall
admit in writing its inability to pay its debts generally as they
become due; or if an involuntary case shall be commenced seeking
the liquidation or reorganization of the Borrower under any
Bankruptcy Law (or any successor statute or similar statute under
any relevant jurisdiction) or any similar proceeding shall be
commenced against the Borrower under any other Legal Requirements
and (i) the petition commencing the involuntary case is not
timely controverted, (ii) the petition commencing the involuntary
case is not dismissed within sixty (60) days of its filing,
(iii) an interim trustee is appointed to take possession of all
or a portion of the property, and/or to operate all or any part
of the business of the Borrower and such appointment is not
vacated within sixty (60) days, or (iv) an order for relief shall
have been issued or entered therein; or a decree or order of a
court having jurisdiction in the premises for the appointment of
a receiver, liquidator, sequestrator, trustee or other officer
having similar powers of the Borrower of all or a part of their
property, shall have been entered; or any other similar relief
shall be granted against the Borrower under any Legal
Requirements.
7.1.6 Judgments. A final judgment or judgments
shall be entered (i) against the Borrower in the aggregate amount
of US$1,000,000 (or the equivalent thereof in other currencies)
(exclusive of judgment amounts fully covered by insurance where
the insured has admitted liability), other than a judgment, the
execution of which is effectively stayed within sixty (60) days
after its entry but only for no more than ninety (90) days after
the date on which such stay is terminated or expires; or (ii) in
the form of an injunction or similar form of relief requiring
suspension or abandonment of construction or operation of the
Facility on grounds of violation of a Legal Requirement and
failure of the Borrower to have such injunction or similar form
of relief stayed or discharged within ninety (90) days.
7.1.7 Other Indebtedness. The Borrower shall
default for a period beyond any applicable grace period in the
payment of any principal, interest or other amount due under any
agreement involving the borrowing of money or the advance of
credit and the outstanding amount or amounts payable under such
agreement equals or exceeds US$500,000 (or the equivalent thereof
in other currencies) in the aggregate.
7.1.8 Default under the JV Shareholder Loan
Agreements. Any default under the Shareholder Loan Agreements
shall occur and be continuing.
7.1.9 Remedies. Upon the occurrence of any of the
Events of Default, the Lender may, by written notice to the
Borrower declare the Loans to be immediately due and payable and
pursue any and all remedies available for the non-payment of
debts.
ARTICLE 8 - SCOPE OF LIABILITY
The Lender shall have no claims with respect to the
transactions contemplated by the Financing Agreements or the
Facility Documents against any Person other than the Borrower
including, but not limited to, the Panda International and the
Luannan Government or any of their respective Affiliates (other
than the Borrower) or direct or indirect parents, or to the
shareholders, officers, directors, employees, or other
controlling persons (including members of the management
committee) of the Panda International and the Luannan Government,
their respective Affiliates (other than the Borrower), or their
direct or indirect parents (collectively the "Nonrecourse
Persons"), subject to the exceptions set forth below in this
Article 8; provided that (a) the foregoing provision of this
Article 8 shall not constitute a waiver, release or discharge of
any of the indebtedness, or of any of the terms, covenants,
conditions, or provisions of this Agreement, any other Financing
Agreement and the same shall continue until fully paid,
discharged, observed, or performed; (b) the foregoing provision
of this Article 8 shall not limit or restrict the right of the
Lender, to name the Borrower or any other Person as a defendant
in any action or suit for a judicial foreclosure or for the
exercise of any other remedy under or with respect to this
Agreement or any other Financing Agreement, or for injunction or
specific performance, so long as no judgement in the nature of a
deficiency judgement shall be enforced against any Nonrecourse
Persons, except as set forth in this Article 8; (c) the foregoing
provision of this Article 8 shall not affect or diminish or
constitute a waiver, release or discharge of any specific written
obligation, covenant, or agreement in respect to the Facility
made by any of the Nonrecourse Persons; and (d) nothing contained
herein shall limit the liability of any Person who is a party to
any Facility Document or has issued any certificate or other
statement in connection therewith with respect to such liability
as may arise by reason of the terms and conditions of such
Facility Document, certificate or statement, or otherwise, in
each case under this clause (d) relating solely to such liability
of such Person as may arise under such referenced agreement,
instrument or opinion. The limitations on recourse set forth in
this Article 8 shall survive the termination of this Agreement
and the full payment and performance of the Obligations hereunder
and under the other Facility Documents.
ARTICLE 9 - MISCELLANEOUS
9.1 Addresses. Any communications between the parties
hereto or notice provided herein to be given may be given to the
following addresses.
If to the Lender: Panda Global Energy Company
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
If to the Borrower: Pan-Western Energy Corporation, LLC
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
in either case,
with a copy to: Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
9.2 Delay and Waiver. No delay or omission to exercise any
right, power or remedy accruing to the Lender upon the occurrence
of any Event of Default or any breach or default of the Borrower
under this Agreement shall impair any such right, power or remedy
of the Lender, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any
waiver of any single Event of Default, or other breach or default
be deemed a waiver of any other Event of Default, or other breach
or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part
of the Lender of any Event of Default, or other breach or default
under this Agreement, or any waiver on the part of the Lender of
any provision or condition of this Agreement, must be in writing
and shall be effective only to the extent in such writing
specifically set forth. All remedies, either under this
Agreement or by law or otherwise afforded to the Lender shall be
cumulative and not alternative.
9.3 Entire Agreement. This Agreement and any agreement,
document or instrument attached hereto or referred to herein
integrate all the terms and conditions mentioned herein or
incidental hereto and supersede all oral negotiations and prior
writings in respect to the subject matter hereof. In the event
of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument,
the terms, conditions and provisions of this Agreement shall
prevail. This Agreement may only be amended or modified by an
instrument in writing signed by the Borrower, the Lender and any
other parties to be charged.
9.4 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
9.5 Headings. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and
it is agreed that such paragraph headings are not a part of this
Agreement and shall not be used in the interpretation of any
provision of this Agreement.
9.6 No Partnership, Etc. The Lender and the Borrower
intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement or the
Issuer Note shall be deemed or construed to create a partnership,
tenancy-in-common, joint tenancy, joint venture or co-ownership
by or between the Lender, on the one hand, and the Borrower or
any other Person, on the other hand. The Lender shall not be in
any way responsible or liable for the debts, losses, obligations
or duties of the Borrower or any other Person with respect to the
Facility or otherwise. All obligations to pay real property or
other taxes, assessments, insurance premiums, and all other fees
and charges arising from the ownership, operation or occupancy of
the Facility and to perform all obligations under the agreements
and contracts relating to the Facility shall be the sole
responsibility of the Borrower.
9.7 Governing Law. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the law of
the State of New York.
9.8 Submission To Jurisdiction; Waivers. The parties
hereby irrevocably and unconditionally agree to:
(a) submit for themselves and their property in any
legal action or proceeding relating to this Agreement, 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 in the Borough of Manhattan, the courts of the
United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consent that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) agree that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the Pledgor at its address set
forth below or at such other address of which the Trustee shall
have been notified pursuant hereto;
(d) agree that nothing herein shall affect the right
to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction; and
(e) waive, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any special,
exemplary or punitive damages.
9.9 WAIVERS OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
9.10 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The
Borrower may not assign or otherwise transfer any of its rights
under this Agreement.
9.11 Counterparts. This Agreement may be executed in one or
more duplicate counterparts and when signed by all of the parties
listed below shall constitute a single binding agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed by their officers or partners thereunto duly
authorized as of the day and year first above written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
PANDA GLOBAL ENERGY COMPANY
By:
Name:
Title:
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1 Subsidiaries
Schedule 5.9 Insurance
Schedule A Amortization Schedule
Exhibit A Form of Issuer Note
Schedule 5.9
N/A
EXHIBIT A
FORM OF ISSUER NOTE
$114,271,288.00 New York, New York
April 22, 1997
FOR VALUE RECEIVED, the undersigned, PAN-WESTERN ENERGY
CORPORATION LLC, a company with limited liability organized under
the laws of the Cayman Islands (the "Borrower"), hereby
unconditionally promises to pay to the order of PANDA GLOBAL
ENERGY COMPANY, a company with limited liability organized under
the laws of the Cayman Islands (the "Lender"), by transfer to
such account as the Lender may designate by written notice to the
Borrower, in lawful money of the United States of America and in
immediately available funds, the principal amount of ONE HUNDRED
FOURTEEN MILLION TWO HUNDRED SEVENTY-ONE THOUSAND TWO HUNDRED
EIGHTY EIGHT DOLLARS ($114,271,288), or, if less, the unpaid
principal amount of the Loans made by the Lender pursuant to the
Issuer Loan Agreement, as hereinafter defined. The principal
amount shall be paid in the amounts and on the dates specified in
the Issuer Loan Agreement. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on
the dates specified in the Issuer Loan Agreement.
The holder of this Note is authorized to endorse on the
schedule 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 the Loans and the date and
amount of each payment or prepayment of principal 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 Loans.
This Note (a) is the Issuer Note referred to in the Issuer
Loan Agreement dated as of April 22, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Issuer
Loan Agreement"), between the Borrower and the Lender, (b) is
subject to the provisions of the Issuer Loan Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part
as provided in the Issuer Loan Agreement.
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable,
all as provided in the Issuer Loan Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the Issuer
Loan Agreement and used herein shall have the meanings given to
them in the Issuer Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
Schedule 1
Subsidiaries
Tangshan Panda Heat & Power Company, Ltd.
Tangshan Pan-Western Heat & Power Company, Ltd.
Tangshan Cayman Heat & Power Company, Ltd.
Tangshan Pan-Sino Heat Company, Ltd.
Schedule A
Issuer Loan Principal Amortization Schedule
Payment Calendar Total Principal
No. Year Payment
1 2000 $ 3,155,000
2 2001 8,867,000
3 2002 9,533,000
4 2003 10,283,000
5 2004 82,433,288
EXHIBIT 10.112
ISSUER NOTE
US$ 114,271,288.00 New York, New York
April 22, 1997
FOR VALUE RECEIVED, the undersigned, PAN-WESTERN ENERGY
CORPORATION LLC, a company with limited liability organized under
the laws of the Cayman Islands (the "Borrower"), hereby
unconditionally promises to pay to the order of PANDA GLOBAL
ENERGY COMPANY, a company with limited liability organized under
the laws of the Cayman Islands (the "Lender"), by transfer to
such account as the Lender may designate by written notice to the
Borrower, in lawful money of the United States of America and in
immediately available funds, the principal amount of ONE HUNDRED
FOURTEEN MILLION TWO HUNDRED SEVENTY-ONE THOUSAND TWO HUNDRED
EIGHTY-EIGHT DOLLARS ($114,271,288), or, if less, the unpaid
principal amount of the Loans made by the Lender pursuant to the
Issuer Loan Agreement, as hereinafter defined. The principal
amount shall be paid in the amounts and on the dates specified in
the Issuer Loan Agreement. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on
the dates specified in the Issuer Loan Agreement.
The holder of this Note is authorized to endorse on the
schedule 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 the Loans and the date and
amount of each payment or prepayment of principal 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 Loans.
This Note (a) is the Issuer Note referred to in the Issuer
Loan Agreement dated as of April 22, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Issuer
Loan Agreement"), between the Borrower and the Lender, (b) is
subject to the provisions of the Issuer Loan Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part
as provided in the Issuer Loan Agreement.
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable,
all as provided in the Issuer Loan Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
Unless otherwise defined herein, terms defined in the Issuer
Loan Agreement and used herein shall have the meanings given to
them in the Issuer Loan Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE CAYMAN ISLANDS.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Name:
Title:
EXHIBIT 10.113
REGISTERED CAPITAL CONTRIBUTION AND
AGENCY AGREEMENT
THIS REGISTERED CAPITAL CONTRIBUTION AND AGENCY AGREEMENT
(the "Agreement") is dated as of this 26th day of March, 1997
by and among Tangshan Panda Heat and Power Company, Ltd.
("Tangshan Panda"), Tangshan Pan-Western Heat and Power Company,
Ltd. ("Tangshan Pan-Western"), Tangshan Cayman Heat and Power
Company, Ltd. ("Tangshan Cayman") and Tangshan Pan-Sino Heat
Company, Ltd. ("Tangshan Pan-Sino") each a Chinese equity joint
venture company (collectively referred to herein as the "JV
Co's") and Luannan County Heat and Power Plant ("LCHPP"),
Tangshan Luanhua (Group) Co. ("TLG") and Luannan County Heat
Company ("LCHC") (collectively referred to herein as the "County
Partners") and Pan-Western Energy Corporation, LLC ("Pan-Western"
or the "Agent").
WITNESSETH:
RECITALS:
1. Pan-Western and the County Partners have formed the JV Co's
with approximate ownership interests held as indicated below:
JV Co. County Partner Pan-Western
Tangshan Panda LCHPP - 12.08% 87.92%
Tangshan Pan-Western TLG - 12.08% 87.92%
Tangshan Cayman LCHPP - 6.04% 87.92%
TLG - 6.04%
Tangshan Pan-Sino LCHC - 12.08% 87.92%
2. Pan-Western, the JV Co's and the County Partners wish to
enter into this Agreement to provide for the contribution of
certain assets owned by the County Partners to the JV Co's (as a
Registered Capital contribution) and the allocation of value of
an appropriate amount thereof to each JV Co on behalf of their
respective County Partner (in order to establish a basis for the
issuance of a certificate of Registered Capital verification of
the County Partners' Registered Capital contributions in
proportion to the ownership interest of each of LCHPP, TLG and
LCHC to the JV Co's) to provide for the apportionment of the
contribution of Registered Capital by the County Partners and the
allocation of the value of such assets on terms and conditions
consistent with the documents governing formation of the JV Co's
and the obtaining of international financing for the Project, and
applicable laws, rules, and regulations of The Peoples Republic
of China (the "PRC"), and to provide for the appointment of Pan-
Western as "Agent" to act for and on behalf of the County
Partners for the purpose of finalizing the international
financing arrangements for the Project and in the initial
capitalization of the JV Co's.
3. Each of Pan-Western, the County Partners and the JV Co's
shall derive substantial benefit from the obtaining of the
financing for the Project and from this Agreement.
NOW THEREFORE, in consideration of the mutual benefits to be
derived and the mutual undertakings and promises described below,
the Parties hereto agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall have
the following respective meanings:
"Registered Capital Contribution" shall mean a contribution
to the JV Co's of value in cash or kind as satisfactory to the JV
Co's.
"Registered Capital Contribution Date" shall mean the date
of receipt by the JV Co's of cash contributions from each of Pan-
Western and the County Partners in an amount sufficient to
constitute their proportionate contribution of Registered Capital
funds thereto, as required pursuant to the equity joint venture
contract entered between an individual County Partner and Pan-
Western to form each JV Co, respectively.
"Equity Share" shall mean with respect to each person, the
percentage ownership amount set forth in the Recital 1 above.
"Project" means two 50MW coal-fired cogeneration power
production plants to be constructed by the JV Co's in Luannan
County, Tangshan Municipality, Hebei Province, China, a steam and
hot water generation and distribution facility and other related
facilities necessary for the development, construction and
operation of the Plants.
"Project Documents" shall mean collectively, all contracts,
agreements, instruments or other documents arising from or
related to the Project.
SECTION 2. OBLIGATIONS
2.1 Registered Capital Contribution. On the Registered Capital
Contribution Date, each Party hereto shall make an Registered
Capital Contribution in an amount equal to the such Party's
Equity Share times the total equity required to be contributed to
the JV Co in accordance with the documents governing formation of
that JV Co. The obligation of each Party hereto to make the
Registered Capital Contribution required to be made by it under
the immediately preceding sentence is a several obligation of
each such Person.
2.2 County Partners' Capital Contribution. The County Partners
will be deemed to have made their Registered Capital Contribution
to the JV Co's as a result of fulfillment of their respective
obligations under each Transfer Contract of Right to Use State-
Owned Land (the "Transfer Contract") for each of the four parcels
of land (the total dimension of which is 501,258.19 square meters
or equivalent to 751.88 Chinese mu, with approval serial number
for Application of Grant of Right to Use State-Owned Land being
Ji-zheng-chu [1996]60, Ji-zheng-chu [1996]61, Ji-zheng-chu
[1996]62 and Ji-zheng-chu [1996]63 respectively), as well as
under Purchase Contract for certain water-wells, buildings and
structures, vehicles and electric and machinery equipment and
land use right for the land occupied by such water-wells,
originally owned by LCHPP. For the purpose of applying such
proceeds to the County Partners' capital contributions to
Tangshan Panda, Tangshan Pan-Western, Tangshan Cayman and
Tangshan Pan-Sino, Tangshan Pan-Sino will purchase such land use
rights from the County Partners under each Transfer Contract and
Tangshan Cayman will purchase such assets from LCHPP under such
Purchase Contract. The proceeds attributable to such contribution
shall be subject to the terms of this Agreement such that:
2.2.1 Pan-Western will be the designated agent for the County
Partners, empowered to apportion the proceeds of such sale to the
account and for the benefit of the individual County Partners in
such amounts as are required to be contributed to each JV Co in
accordance with that County Partner's Equity Share therein;
2.2.2 Pan-Western shall provide an accounting of the
apportionment of funds to the County Partners to be reflected in
the books and records of the JV Co's, however, no physical
payment for the transfer and the purchase shall be made to County
Partners by Tangshan Cayman and Tangshan Pan-Sino respectively
upon transfer of land use rights or title to such assets as
stipulated under the above-mentioned Transfer Contracts and
Purchase Contract after their execution, the intent of the
Parties hereto being solely to provide such proceeds for the
required capitalization of the JV Co's;
2.2.3 It is the clear intent and understanding of the Parties
hereto that the total of all proceeds from the above mentioned
Transfer Contracts and Purchase Contract be allocated among and
paid to the JV Co's through the Agent in proportion to the Equity
Share of the County Partners therein and that the Agent is
obligated to make such application and allocation in the future.
2.3 If eventually the Agent has failed to allocate among and pay
to the JV Co's the aggregate amount of proceeds from the above
mentioned Transfer Contracts and Purchase Contract in proportion
to the Equity Share of the County Partners therein, County
Partners shall have the right to rescind such Transfer Contracts
and Purchase Contract, and consequently the relevant land use
rights and title to assets shall revert to County Partners after
such rescission.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Each of the JV Co's, the County Partners and Pan-Western,
severally and on their own behalf represents and warrants that:
a) It is a legal entity duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is
registered and it has full corporate power and authority to
conduct its business, to own its properties, and to execute and
deliver, and to perform its obligations under this Agreement.
b) The execution, delivery, and performance by it of this
Agreement is duly authorized and no consent or authorization of ,
filing with, or any other act is required in connection with its
execution, delivery, performance, validity or enforceability of
this Agreement by such person.
c) This Agreement has been duly executed, and upon delivery
shall constitute the legal, valid and binding obligation of such
person, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the
rights of creditors and subject to general equitable principles.
SECTION 4. AGENCY
Pan-Western is hereby appointed by each of the County Partners,
severally, to act for and in their behalf with respect to the
handling of any funds, and the accounting for such funds through
their contribution thereof to or on the books of the JV Co's in
the amount required based upon the actual proportionate ownership
of that County Partner to the designated JV Co. Pan-Western
accepts such appointment to so act, in accordance with the terms
of this Agreement and the Project Documents.
SECTION 5. MISCELLANEOUS
5.1 No Waiver. No failure on the part of the Agent, the JV
Co's or the County Partners to exercise and no delay in exercise
and no course of dealing with respect to, any right, remedy,
power or privilege provided herein or by law, rule, regulation or
policy shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
5.2 Severability. If any provision hereof is found to be
invalid or unenforceable in any jurisdiction, then, to the
fullest extent permitted, (i) the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be
liberally construed 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 provisions in any other jurisdiction. If any provision or
provisions of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity, illegality or unenforceability of
the remaining provisions hereof shall not in any way be affected
or impaired thereby.
5.3 Texts. This Agreement is written in both English and
Chinese, and the two versions shall be equally authentic.
5.4 Applicable Law. The law of the People's Republic of
China shall be the applicable law for the formation, validity and
construction of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this
Registered Capital Contribution and Agency Agreement to be duly
executed and delivered as of the date first above written.
TANGSHAN PANDA HEAT AND LUANNAN COUNTY HEAT
POWER COMPANY, LTD. POWER PLANT
By: /s/ By:
Name: Darol Lindloff Name:
Title: Legal Representative Title:
Address for Notice: Address for Notices:
TANGSHAN PAN-WESTERN HEAT TANGSHAN LUANHUA
AND POWER COMPANY, LTD. (GROUP) CO.
By: /s/ By:
Name: Darol Lindloff Name:
Title: Legal Representative Title:
Address for Notice: Address for Notices:
TANGSHAN CAYMAN HEAT LUANNAN COUNTY HEAT
AND POWER COMPANY, LTD. COMPANY
By: /s/ By:
Name: Darol Lindloff Name:
Title: Legal Representative Title:
Address for Notice: Address for Notices:
TANGSHAN PAN-SINO HEAT PAN-WESTERN ENERGY
COMPANY, LTD. CORPORATION, LLC
By: /s/ By:
Name: Darol Lindloff Name:
Title: Legal Representative Title:
Address for Notice: Address for Notices:
EXHIBIT 10.114
ACCOUNT AGREEMENT
ACCOUNT AGREEMENT dated as of April 22, 1997, among
Panda Interfunding Corporation, a Delaware corporation ("PIC"),
Panda Energy Corporation, a Texas corporation ("PEC") and Panda
Global Holdings, Inc., a Delaware corporation (the "Company")
(each of PIC, PEC and the Company referred to individually as a
"Party"), (as amended, supplemented and modified from time to
time, this "Agreement").
W I T N E S S E T H:
WHEREAS, Panda Global Energy Company, a Cayman Islands
exempted company (the "Issuer") has issued notes (the "Senior
Secured Notes") pursuant to a Trust Indenture dated as of April
22, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Indenture") between the Issuer and Bankers
Trust Company, as trustee thereunder;
WHEREAS, in order to facilitate the sale of the Senior
Secured Notes the Company has issued a guarantee with respect to
the Senior Secured Notes (the "Guarantee") pursuant to a Trust
Indenture dated as of the date hereof (as amended, supplemented
or otherwise modified from time to time, the "Company
Indenture"), between the Company and Bankers Trust Company as
trustee thereunder (the "Trustee");
WHEREAS, the Company Indenture provides that the Company
may issue other securities (collectively with the Guarantee, the
"Securities") pursuant to the Company Indenture and one or more
Series Supplemental Indentures as described therein;
WHEREAS, PEC is a wholly-owned subsidiary of the
Company and PIC is a wholly-owned subsidiary of PEC, and it is to
the advantage of PEC and PIC that the Company has issued the
Guarantee and that the Company may issue additional Securities
from time to time pursuant to the Company Indenture and one or
more Series Supplemental Indentures;
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Company Indenture and to
facilitate the sale of the Guarantee and any additional
Securities, PEC, PIC and the Company hereby agree as follows:
Section 1. Defined Terms. Unless otherwise defined
herein, terms defined in the Company Indenture and used herein
shall have the meanings given to them in the Company Indenture.
Section 2. PIC Transfer of Funds. PIC agrees that it
shall cause all cash, instruments, securities and funds deposited
from time to time in the U.S. Distribution Fund and any proceeds
thereof to be transferred in same day funds to the PEC Revenue
Fund.
Section 3. Instruction Letter. PIC further agrees
that in order to facilitate the transfer of funds described in
Section 2, PIC shall cause the entity where the account is
maintained (the "Account Manager") to execute an instruction
letter substantially in the form of Exhibit A hereto.
Section 4. PEC Transfer of Funds. PEC agrees that it
shall cause all cash, instruments, securities and funds deposited
from time to time in the PEC Revenue Account and any proceeds
thereof to be transferred in same day funds to the Company
Revenue Fund.
Section 5. Further Assurances. The Company agrees
that it will cause PIC and PEC to take all action necessary to
fulfill the terms of this Agreement.
Section 6. Representations and Warranties. Each Party
represents and warrants to each other (in each case as to itself
only) that:
(1) Such Party is a corporation, duly organized,
validly existing and in good standing, under the laws of its
jurisdiction of organization.
(2) None of the execution and delivery of this
Agreement, the consummation of the transactions herein
contemplated or compliance with the terms and provisions
hereof by such Party will (i) conflict with or result in a
breach of, or require any consent which has not been
obtained under, the charter, by-laws, formation documents or
other organizational instrument of such Party, or any
applicable provision or term of any material law or
regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any material
agreement or instrument to which such Party is a party or by
which such Party or any of its property is bound or to which
it is subject, (ii) constitute a default under any such
agreement or instrument or (iii) (except for the Liens
created pursuant to the Transaction Documents) result in the
creation or imposition of any Lien upon any property of such
Party pursuant to the terms of any such agreement or
instrument.
(3) Such Party has all necessary corporate power,
authority and legal right to execute, deliver and perform
the obligations of such Party under this Agreement, and the
execution, delivery and performance by such Party of this
Agreement have been duly authorized by all necessary
corporate or other action on the part of such Party
(including, without limitation, any required shareholder
approvals).
(4) This Agreement has been duly and validly executed
and delivered by such Party and constitutes the legal, valid
and binding obligation of such Party, enforceable against
such Party in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance,
fraudulent transfer or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(5) No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or
regulatory authority or agency, or any securities exchange,
are necessary for the execution, delivery or performance by
such Party of this Agreement or for the legality, validity
or enforceability hereof.
Section 7. Miscellaneous.
(1) No Waiver. No failure on the part of any Party 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
any Party 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 are cumulative and
are not exclusive of any remedies provided by law.
(2) Notices. All notices, requests, demands, waivers
or other communications to or upon the respective parties hereto
shall be in writing, delivered by certified mail, return receipt
requested, postage prepaid, by nationally recognized overnight
courier or by telex, telecopy and (except as otherwise specified
herein to be effective upon receipt) shall be deemed to have been
duly given or made when received, if mailed or delivered by
courier, or when personally delivered or transmitted by telex or
telecopy, addressed to the party to which such notice, request,
demand, waiver or other communication is required or permitted to
be given or made hereunder at the "Address for Notices" specified
below the name of such party on the signature pages hereof; or
such other address of which such party shall have notified in
writing the party giving such notice.
(3) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective heirs,
executors, administrators, successors and assigns of each Party,
provided, however, that no Party shall assign or transfer any of
its rights or obligations hereunder without the prior written
consent of each other Party.
(4) Captions. The captions and section headings
appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any
provision of this Agreement.
(5) Counterparts. 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.
(6) Governing Law; Submission to Jurisdiction. This
Agreement shall be governed by, and construed in accordance with,
the law of the State of New York. Each Party hereby submits to
the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York and of the Supreme Court of
the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the
State of New York, for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Party irrevocably waives, to the
fullest extent permitted by applicable law, any objection that
such Party 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.
(7) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
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.
(8) Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest
extent permitted by law, (a) the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the
parties hereto as nearly as may be possible and (b) 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.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their officers or partners
thereunto duly authorized as of the day and year first above
written.
PANDA ENERGY CORPORATION
By:
Name:
Title:
PANDA INTERFUNDING CORPORATION
By:
Name:
Title:
PANDA GLOBAL HOLDINGS, INC.
By:
Name:
Title:
Address for Notices, in each case:
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attention: General Counsel
EXHIBIT A
[FORM OF INSTRUCTION LETTER]
[NAME OF ACCOUNT MANAGER]
________________
________________
Ladies and Gentlemen:
As we have discussed, the undersigned, Panda
Interfunding Corporation ("PIC") has entered into an agreement
(the "Account Agreement") dated as of April 22, 1997 among PIC,
Panda Energy Corporation and Panda Global Holdings, Inc.
Pursuant to the Account Agreement, PIC has agreed to
transfer all cash, instruments, securities and funds deposited
from time to time in the [described U.S. Distribution Fund] (the
"U.S. Distribution Fund" and any proceeds thereof to be
transferred in same day funds to Account No. __________
(designated "_______________") with [Name and Address of location
of Account] (ABA No._____________)(the "PEC Revenue Account").
This Account Agreement was necessary in order to
facilitate the sale of securities by an indirect affiliate of PIC
which sale of securities was of indirect benefit to PIC.
Pursuant to the Account Agreement, PIC is required to
(and hereby does) instruct the Account Manager to transfer all
cash, instruments, securities and funds deposited from time to
time in the U.S. Distribution Fund and any proceeds thereof by
wire to the PEC Revenue Account.
The instructions contained in this letter are
irrevocable and cannot be changed without the prior written
consent of Panda Energy Corporation and Panda Global Holdings,
Inc.
Please acknowledge your agreement to make the transfers
referred to above and to comply with reasonable information
requests by signing in the space provided below.
Very truly yours,
PANDA INTERFUNDING CORPORATION
By:
Name:
Title:
Acknowledged and agreed as of
the date first above written:
[NAME OF ACCOUNT MANAGER]
By: ________________________
Title: _____________________
Address: ___________________
___________________
Facsimile: _________________
EXHIBIT 10.115
PANDA GLOBAL ENERGY COMPANY PLEDGE AGREEMENT
Pledge Agreement, dated as of April 22, 1997, by Panda
Global Energy Company, a Cayman Islands exempted company (the
"Pledgor"), in favor of Bankers Trust Company, as Trustee (in
such capacity, the "Trustee") for the Holders of the 12-1/2% Senior
Secured Notes due 2004 (the "Senior Secured Notes") of the
Pledgor issued pursuant to the terms and subject to the
conditions of the Trust Indenture dated as of April 22, 1997 (as
amended, supplemented or otherwise modified from time to time,
the "Indenture") between the Pledgor and the Trustee and any
additional securities ( together with the Senior Secured Notes,
the "Securities") as may be issued by the Pledgor from time to
time pursuant to one or Series Supplemental Indentures (as
described in the Indenture).
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture, the Trustee has agreed
to act on behalf of the Holders upon the terms and subject to the
conditions set forth therein;
WHEREAS, the Pledgor is the issuer of the Securities, and it
is to the advantage of the Pledgor to facilitate the sale of the
Senior Secured Notes by entering into this Pledge Agreement; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the shares of Pledged Stock (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Indenture and to induce the
Initial Purchaser to purchase the Securities under the Purchase
Agreement dated April 11, 1997 (as it may be amended,
supplemented or otherwise modified from time to time, the
"Purchase Agreement") with the Pledgor, Panda Global Holdings,
Inc. and Panda Energy International, Inc., the Pledgor hereby
agrees with the Trustee, for the ratable benefit of the Holders,
as follows:
I. Defined Terms . A. Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the
meanings given to them in the Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Collateral": the Pledged Note, the Pledged Agreement, the
Pledged Stock and all Proceeds thereof.
"Obligations": the collective reference to the unpaid
principal interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Securities and
all other obligations and liabilities of the Pledgor to the
Trustee and the Holders (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 Pledgor whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the
Indenture, any Series Supplemental Indenture, the Securities, the
other Transaction Documents to which the Pledgor is a party or
any other document made, delivered or given in connection
therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the Trustee or counsel to the
Initial Purchaser that are required to be paid by the Pledgor
pursuant to the terms of the Indenture, any Series Supplemental
Indenture, this Agreement or any other Transaction Document to
which the Pledgor is a party).
"Pan-Sino Agreement": the agreement entered into as of the
date hereof pursuant to which Pan-Sino has pledged certain stock
in favor of the Trustee.
"Pledged Note": the promissory note listed on Schedule 2.
"Pledged Agreement": the Issuer Loan Agreement.
"Pledged Stock": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted
by the Stock Issuer to the Pledgor in respect of the Pledged
Stock while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial UCC in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, (a) with respect to the Pledged
Stock, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto and (b)
with respect to the Pledged Note, all interest and principal
payments, instruments, and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for the Pledged Note.
"Stock Issuer": the company identified on Schedule 1
attached hereto as the issuer of the Pledged Stock.
"UCC": the Uniform Commercial UCC from time to time in
effect in the State of New York.
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. (a) The
Pledgor hereby delivers to the Trustee all of the Pledged Stock
listed on Schedule 1 hereto and hereby grants to the Trustee a
first security interest in the Collateral, as collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Obligations.
(b) The Pledgor hereby delivers to the Trustee the
Pledged Note and hereby grants to the Trustee a first security
interest in the Collateral, as collateral security for the prompt
and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the
Obligations.
3. Stock Powers; Assignment. (a) Concurrently with
the delivery to the Trustee of each certificate representing one
or more shares of the Pledged Stock, the Pledgor shall deliver an
undated stock power covering such certificate, duly executed in
blank with, if the Trustee so requests, signature guaranteed.
(b) (i) Concurrently with the delivery to the Trustee
of the Pledged Note, the Pledgor shall indorse the Pledged Note
as follows:
"Pay to the order of Bearer
PANDA GLOBAL ENERGY COMPANY
By:_________________________
Title:"
(ii) The Pledgor shall deliver to the Trustee an
Acknowledgement and Consent substantially in the form of Exhibit
A to this Agreement, duly executed by the maker.
4. Payments Under the Pledged Notes. (a) For so long as
any Securities are outstanding and unpaid, the Pledgor shall
cause all payments in respect of the Pledged Notes to be
deposited with the Trustee in accordance with the Indenture. If
the Pledgor shall receive any such payments, the Pledgor shall
hold the same in trust for the Trustee, segregated from other
funds of the Pledgor, and deliver the same forthwith to the
Trustee in the exact form received, duly indorsed by the Pledgor
to the Trustee, if required.
5. Representations and Warranties. The Pledgor represents
and warrants that:
(a) the Pledgor has the corporate power and authority
and the legal right to execute and deliver, to perform its
obligations under, and to grant the Lien on the Collateral
pursuant to, this Agreement and has taken all necessary
corporate action to authorize its execution, delivery and
performance of, and grant of the Lien on the Collateral
pursuant to, this Agreement;
(b) this Agreement constitutes a legal, valid and
binding obligation of the Pledgor enforceable in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and the security interest created pursuant to this
Agreement will constitute a valid, perfected, first priority
security interest;
(c) the execution, delivery and performance of this
Agreement will not violate any provision of any Requirement
of Law or contractual obligation of the Pledgor and will not
result in the creation or imposition of any Lien on any of
the properties or revenues of the Pledgor pursuant to any
Requirement of Law or contractual obligation, except as
contemplated hereby;
(d) no consent or authorization of, filing with, or
other act by or in respect of, any arbitrator or
governmental authority and no consent of any other Person
(including, without limitation, any stockholder or creditor
of the Pledgor or the Stock Issuer), is required in
connection with the execution, delivery, performance,
validity or enforceability of this Agreement;
(e) no litigation, investigation or proceeding of or
before any arbitrator or governmental authority is pending
or, to the knowledge of the Pledgor, threatened by or
against the Pledgor or against any of its properties or
revenues with respect to this Agreement or any of the
transactions contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule 1
hereto constitute at least 90% of the issued and outstanding
shares of all classes of the capital stock of the Stock
Issuer;
(g) all the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial owner of,
and has good and marketable title to, the Pledged Stock
listed on Schedule 1 hereto, free of any and all Liens or
options in favor of, or claims of, any other Person, except
the Lien created by this Agreement;
(i) the Pledged Note is the legal, valid and binding
obligation of Pan-Western (which is the maker thereof),
enforceable against Pan-Western in accordance with its
terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally;
and
(j) upon delivery to the Trustee of the stock
certificates evidencing the Pledged Stock and the Pledged
Note, the Lien granted pursuant to this Agreement will
constitute a valid, perfected first priority Lien on the
Collateral, enforceable as such against all creditors of the
Pledgor and any Persons purporting to purchase any
Collateral from the Pledgor.
6. Covenants. The Pledgor covenants and agrees with
the Trustee that except as the Trustee may otherwise consent in
accordance with the terms of the Indenture, from and after the
date of this Agreement until the Obligations are paid in full:
(a) If the Pledgor shall, as a result of its ownership
of the Pledged Stock, become entitled to receive or shall
receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued
in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion
of, or in exchange for any shares of the Pledged Stock, or
otherwise in respect thereof, the Pledgor shall accept the
same as the Trustee's agent, hold the same in trust for the
Trustee and deliver the same forthwith to the Trustee in the
exact form received, duly indorsed by the Pledgor to the
Trustee, if required, together with an undated stock power
covering such certificate duly executed in blank and with,
if the Trustee so requests, signature guaranteed, to be held
by the Trustee hereunder as additional collateral security
for the Obligations. Any sums paid upon or in respect of
the Pledged Stock or the Pledged Note upon the liquidation
or dissolution of any Stock Issuer or maker of the Pledged
Note shall be paid over to the Trustee to be held by it
hereunder as additional collateral security for the
Obligations, and in case any distribution of capital shall
be made on or in respect of the Pledged Stock or the Pledged
Note or any property shall be distributed upon or with
respect to the Pledged Stock or the Pledged Note pursuant to
the recapitalization or reclassification of the capital of
any Stock Issuer or the maker of the Pledged Note or
pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Trustee to be held by
it, subject to the terms hereof, as additional collateral
security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged
Stock or the Pledged Note shall be received by the Pledgor,
the Pledgor shall, until such money or property is paid or
delivered to the Trustee, hold such money or property in
trust for the Trustee, segregated from all other funds as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Trustee,
the Pledgor will not (i) vote to enable, or take any other
action to permit, any Stock Issuer to issue any stock or
other equity securities of any nature or to issue any other
securities convertible into or granting the right to
purchase or exchange for any stock or other equity
securities of such Stock Issuer, or (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 Lien or option in favor of, or
any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the Lien
provided for by this Agreement, or (iv) take any action, the
taking of which might result in an alteration or impairment
of the Pledged Note, or (v) enter into any agreement
amending, modifying or supplementing the Pledged Note, or
(vi) waive or release any obligation of any party to the
Pledged Note, or (vii) consent or agree to any act or
omission to act on the part of any party to the Pledged Note
which, without such omission, consent or agreement, would
constitute a default thereunder, or (viii) fail to exercise
promptly and diligently each and every right which it may
have under the Pledged Note (except the right to recovery,
release or cancel unless the Pledged Note has been paid in
full), or (ix) fail to give prompt notice to the Trustee of
any notice of default given by or to the Pledgor under or
with respect to the Pledged Note together with a complete
copy of such notice; provided, however, that Pan-Sino may be
merged into Pan-Western or the Pledgor in accordance with
the terms of the Indenture. The Pledgor will defend the
right, title and interest of the Trustee in and to the
Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the
written request of the Trustee, and at the sole expense of
the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such
further actions as the Trustee may reasonably request for
the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered
to the Trustee, duly endorsed in a manner satisfactory to
the Trustee, to be held as Collateral pursuant to this
Agreement.
(d) The Pledgor agrees to pay, and to save the Trustee
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 or in connection with any of the transactions
contemplated by this Agreement.
(e) In the event that the Stock Issuer is merged or
consolidated into Pan-Western, the Pledgor will pledge at
least 99% of the Capital Stock of Pan-Western to the
Trustee.
(f) In the event that the Stock Issuer is merged or
consolidated into the Pledgor, the Pledgor will assume the
obligations of the Stock Issuer under the Pan-Sino Pledge
Agreement.
(g) In the event that a Non-U.S. Permitted Project is
developed, constructed or owned pursuant to the provisions
of the Indenture, the Issuer shall not expend in excess of
$2,500,000 in the furtherance of the development of such Non-
U.S. Permitted Project, unless a first priority perfected
security interest in 100% of the Capital Stock of the Person
that owns such Non-U.S. Permitted Project has been given to
the Trustee for the ratable benefit of the Holders of the
Securities (or, to the extent that a Non-U.S. Permitted
Project is not Wholly Owned by the Issuer or its Subsidiary,
in the entire ownership interest in such Non-U.S. Permitted
Project held by the Issuer or such Subsidiary or group of
Subsidiaries). Notwithstanding the requirement of the
preceding sentence, (i) in the event that the financing
arrangements with respect to a Non-U.S. Permitted Project
require the pledge of a Non-U.S. Permitted Project's Capital
Stock to secure Non-Recourse Debt, upon financial closing,
the Trustee shall release such stock to the extent necessary
to allow for such a pledge and (ii) the Issuer shall not be
required to pledge the Capital Stock of a Subsidiary if (A)
such a pledge is contrary to the law, taking into account
the structure of the project, of the jurisdiction of
domicile of the relevant Subsidiary or (B) such a pledge is
not permitted under the Project Documents of such Non-U.S.
Permitted Project. The Pledgor shall attempt in good faith
to provide, or cause to be provided, such a pledge to the
Trustee. In the event that the Capital Stock of a
Subsidiary that was not available for a pledge to the
Trustee pursuant to clauses (i) and (ii) of the preceding
sentence becomes available at a subsequent date, the Issuer
shall be required to pledge promptly the Capital Stock of
such Subsidiary to the Trustee.
7. Cash Dividends; Voting Rights; Etc. For so long
as any Securities are outstanding pursuant to the Indenture, the
Pledgor shall cause all dividends, distributions and other
Proceeds of the Pledged Stock to be deposited with the Trustee in
accordance with the Indenture. Unless an Event of Default shall
have occurred and be continuing, the Pledgor shall be permitted
to exercise all voting and corporate rights with respect to the
Pledged Stock, provided, however, that no vote shall be cast or
corporate right exercised or other action taken which would
impair the Collateral or which would be inconsistent with or
result in any violation of any provision of the Indenture, any
Series Supplemental Indenture, the Securities or this Agreement.
8. Rights of the Trustee. (a) If an Event of Default
shall occur and be continuing and the Trustee shall give notice
of its intent to exercise such rights to the Pledgors: (i) the
Trustee shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and any and all
cash payments of interest and principal with respect to the
Pledged Note and make application thereof to the Obligations in
such order as it may determine, (ii) all shares of the Pledged
Stock shall be registered in the name of the Trustee or its
nominee, and the Trustee or its nominee may thereafter exercise
(A) all voting, corporate and other rights pertaining to such
shares of the Pledged Stock at any meeting of shareholders of the
Stock Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged
Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any
and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in
the corporate structure of the Stock Issuer, or upon the exercise
by the Pledgor or the Trustee of any right, privilege or option
pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, 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 Trustee
shall have no duty to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or
delay in so doing, and (iii) the Pledged Note shall be registered
in the name of the Trustee or its nominee, and the Trustee or its
nominee may thereafter exercise all rights pertaining to the
holder of the Pledged Note, all without liability except to
account for property actually received by it, but the Trustee
shall have no duty to exercise any such rights and shall not be
responsible for any failure to do so or delay in so doing.
(b) If an Event of Default shall occur and be
continuing, the Trustee shall be entitled to exercise all rights
of the Pledgor under the Pledged Agreement.
(c) The rights of the Trustee hereunder shall not be
conditioned or contingent upon the pursuit by the Trustee of any
right or remedy against the Stock Issuer or against any other
Person which may be or become liable in respect of all or any
part of the Obligations or against any other collateral security
therefor, guarantee thereof or right of offset with respect
thereto. The Trustee shall not be liable for any failure to
demand, collect or realize upon all or any part of the Collateral
or for any delay in doing so, nor shall it be under any
obligation to sell or otherwise dispose of any Collateral upon
the request of any Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part
thereof.
9. Remedies. If an Event of Default shall occur and
be continuing, the Trustee may exercise, in addition to all other
rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the
UCC. Without limiting the generality of the foregoing, the
Trustee, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon any
Pledgor, the Stock Issuer or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or
any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, in the over-
the-counter market, at any exchange, broker's board or office of
the Trustee or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash
or on credit or for future delivery without assumption of any
credit risk. The Trustee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of
redemption in any Pledgor, which right or equity is hereby waived
or released. The Trustee shall apply any Proceeds from time to
time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the
rights of the Trustee hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Obligations, in such order as the Trustee
may elect, and only after such application and after the payment
by the Trustee of any other amount required by any provision of
law, including, without limitation, Section 9-504(1)(c) of the
UCC, need the Trustee account for the surplus, if any, to any
Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the
Trustee arising out of the exercise by the Trustee of any of its
rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition. The Pledgor shall remain
liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Obligations
and the fees and disbursements of any attorneys employed by the
Trustee to collect such deficiency. The Pledgor further waives
and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the UCC.
10. No Subrogation. Notwithstanding any payment or
payments made by the Pledgor hereunder, or any setoff or
application of funds of the Pledgor by the Trustee, or the
receipt of any amounts by the Trustee with respect to any of the
Collateral, the Pledgor shall not be entitled to be subrogated to
any of the rights of the Trustee. If any amount shall be paid to
the Pledgor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full,
such amount shall be held by the Pledgor in trust for the
Trustee, segregated from other funds of the Pledgor, and shall,
forthwith upon receipt by the Pledgor, be turned over to the
Trustee in the exact form received by the Pledgor (duly indorsed
by the Pledgor to the Trustee, if required), to be applied
against the Obligations, whether matured or unmatured, in such
order as the Trustee may determine.
11. Amendments, etc. with respect to the Obligations.
The Pledgor shall remain obligated hereunder, and the Collateral
shall remain subject to the Lien granted hereby, notwithstanding
that, without any reservation of rights against the Pledgor, and
without notice to or further assent by the Pledgor, any demand
for payment of any of the Obligations made by the Trustee may be
rescinded by the Trustee, and any of the Obligations continued,
and the Obligations, or the liability of the Stock Issuer or any
other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Trustee, and any other document in
connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Trustee may deem
advisable from time to time, and any guarantee, right of offset
or other collateral at any time held by the Trustee for the
payment of the Obligations may be sold, exchanged, waived,
surrendered or released. The Trustee shall have no obligation to
protect, secure, perfect or insure any other Lien at any time
held by it as security for the Obligations or any property
subject thereto. The Pledgor 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 upon this
Agreement; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred in
reliance upon this Agreement; and all dealings between the Stock
Issuer, the maker of the Pledged Note, the Pledgor and the
Trustee shall likewise be conclusively presumed to have been had
or consummated in reliance upon this Agreement. The Pledgor
waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Stock Issuer or
the Pledgor with respect to the Obligations.
12. Limitation on Duties Regarding Collateral. The
Trustee's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise, shall be to deal with it
in the same manner as the Trustee deals with similar securities
and property for its own account. Neither the Trustee nor any of
its directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any 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 Pledgor or otherwise.
13. Powers Coupled with an Interest. All
authorizations and agencies herein contained with respect to the
Collateral are irrevocable and powers coupled with an interest.
14. 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.
15. Paragraph Headings. The paragraph 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.
16. No Waiver; Cumulative Remedies. The Trustee shall
not by any act (except by a written instrument pursuant to
Paragraph 17 hereof), 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,
nor any delay in exercising, on the part of the Trustee, any
right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
A waiver by the Trustee of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or
remedy which the Trustee would otherwise 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.
17. Waivers and Amendments; Successors and Assigns.
None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Trustee, provided that
any provision of this Agreement may be waived by the Trustee in a
letter or agreement executed by the Trustee or by facsimile
transmission from the Trustee. This Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to
the benefit of the Trustee and its successors and assigns.
18. Irrevocable Authorization and Instruction to Stock
Issuer. The Pledgor hereby authorizes and instructs the Stock
Issuer and the maker of the Pledged Note to comply with any
instruction received by it from the Trustee in writing that (a)
states that an Event of Default has occurred and (b) is otherwise
in accordance with the terms of this Agreement, without any other
or further instructions from the Pledgor, and the Pledgor agrees
that the Stock Issuer and the maker of the Pledged Note shall be
fully protected in so complying.
19. Notices. All notices, requests and demands to or
upon the Trustee or the Pledgor to be effective shall be in
writing (or by telex, fax or similar electronic transfer
confirmed in writing) and shall be deemed to have been duly given
or made (1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed as
follows:
(a) if to the Trustee, at its address or transmission
number for notices provided in the Recitals to the Indenture; and
(b) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
21. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of
Manhattan, the courts of the United States of America for
the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) designates, appoints and empowers CT Corporation
Systems, at 1633 Broadway, New York, N.Y. 10019 as its
authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such
action, suit or proceeding in the State of New York;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any
special, exemplary, punitive or consequential damages.
22. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
23. Return of Collateral.
(a) When this Agreement is terminated and the security
interests created hereby are released, the Trustee shall
return the Pledged Note and certificates representing the
the Pledged Stock to the Pledgor.
(b) Upon payment in full of any Pledged Note and
payment of the Proceeds thereof as provided in this
Agreement, the Trustee shall return such Pledged Note to the
Pledgor.
(c) Upon the occurrence of a default or event of
default under the Pledged Note, subject to Sections 8 and 9
hereof, the Trustee shall cooperate reasonably with the
Pledgor, at the expense of the Pledgor, in the exercise of
the Pledgor's rights and remedies under such Pledged Note.
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed and delivered as of the date first
above written.
PANDA GLOBAL ENERGY COMPANY
By
Title
Address for Notices:
Panda Global Energy Company
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
with a copy to:
Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attn: General Counsel
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Stock Issuer Stock No Shares
Pan-Sino Energy Class B 004 9,750
Development Company LLC
SCHEDULE 2
TO PLEDGE AGREEMENT
THE PLEDGED NOTE
Principal Amount/
Description of Pledged Note Interest Payment
Promissory Note dated April Outstanding principal amount:
22, 1997, made by Pan-Western $114,271,288
Energy Corporation LLC to the
order of Panda Global Energy Last date to which interest
Company in the original was paid: n/a
principal amount of
$114,271,288.
EXHIBIT A
TO PLEDGE AGREEMENT
April 22, 1997
TO: Pan-Western Energy Corporation LLC
c/o Maples and Calder
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
Reference is hereby made to the Promissory Note dated April
22, 1997, (the "Note"), made by you to the order of Panda Global
Energy Company (the "Pledgor") in the original principal amount
of $____________. By Pledge Agreement, dated as of April 22,
1997 (the "Pledge Agreement"), the Pledgor has pledged the Note
to Bankers Trust Company, as Trustee for the Holders pursuant to
the Indenture referred to in the Pledge Agreement (the
"Trustee"), to secure payment and performance of obligations of
the Pledgor to the Trustee.
You are hereby irrevocably directed, until receipt of notice
from the Trustee, to make any and all payments becoming due under
the Note directly to the Trustee, without set-off or
counterclaim, to such account as the Trustee may designate by
written notice to you.
The instructions contained herein are irrevocable and may
not be amended, revoked or otherwise modified without the prior
written consent of the Trustee.
PANDA GLOBAL ENERGY COMPANY
By
Title
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated as of April 22, 1997, made by Panda Global
Energy Company for the benefit of Bankers Trust Company as
Trustee (the "Pledge Agreement"). The undersigned agrees for the
benefit of the Trustee and the Holders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Trustee promptly in
writing of the occurrence of any of the events described in
paragraph 6(a) of the Pledge Agreement.
PAN-SINO ENERGY DEVELOPMENT COMPANY
LLC
By
Title
Address for Notices:
Pan-Sino Energy Development
Company, LLC
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
with a copy to:
Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attention: General Counsel
EXHIBIT 10.116
PAN-SINO PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 22, 1997, made by Pan-
Sino Energy Development Company LLC, a Cayman Islands exempted
company (the "Pledgor") in favor of Bankers Trust Company, as
Trustee (in such capacity, the "Trustee") for the Holders of the
12-1/2% Senior Secured Notes due 2004 (the "Senior Secured
Notes") of Panda Global Energy Company (the "Issuer") issued
pursuant to the terms and subject to the conditions of the Trust
Indenture dated as of April 22, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Indenture") between
the Trustee and the Issuer and fully and unconditionally
guaranteed by Panda Global Holdings, Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture, the Trustee has agreed
to act on behalf of the Holders of the Senior Secured Notes upon
the terms and subject to the conditions set forth therein; and
WHEREAS, the Pledgor is a Subsidiary of the Issuer, and
substantially all of the proceeds of the Senior Secured Notes are
being loaned to Subsidiaries of the Pledgor; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the shares of Pledged Stock (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Indenture and to induce the
Initial Purchaser to purchase the Senior Secured Notes under the
Purchase Agreement dated April 11, 1997 (as it may be amended,
supplemented or otherwise modified from time to time, the
"Purchase Agreement") with the Issuer, the Company and Panda
Energy International, Inc., the Pledgor hereby agrees with the
Trustee, for the ratable benefit of the Holders of the Senior
Secured Notes, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the
meanings given to them in the Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Collateral": the Pledged Stock and all Proceeds.
"Collateral Account": any account established to hold money
Proceeds, maintained under the sole dominion and control of the
Trustee, subject to withdrawal by the Trustee for the account of
the Holders of the Senior Secured Notes only as provided in
paragraph 9(a).
"Guaranteed Obligations": the collective reference to the
unpaid principal, interest and premium, if any on the loans made
pursuant to the Issuer Loan Agreement (including, without
limitation, interest accruing at the then applicable rate
provided in the Issuer Loan Agreement after the maturity of the
loans thereunder and interest accruing at the then applicable
rate provided in the Issuer Loan Agreement after the filing of
any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to Pan-
Western whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or
in connection with, the Issuer Loan Agreement, the Issuer Note,
this Agreement or any other document made, delivered or given in
connection therewith whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and
disbursements of counsel that are required to be paid by Pan-
Western pursuant to the terms of the Issuer Loan Agreement, the
Issuer Note, this Agreement or any other Transaction Document).
"Obligations": (i) the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes and all other obligations and liabilities of the Issuer to
the Trustee and the Holders of the Senior Secured Notes
(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
Issuer whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or
in connection with, the Senior Secured Notes; and
(ii) all obligations and liabilities of the Pledgor which
may arise under or in connection with this Agreement or any other
Transaction Document to which the Pledgor is a party;
in each case, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Trustee or counsel to the Initial Purchaser that are required to
be paid by the Pledgor pursuant to the terms of this Agreement or
any other Transaction Document.
"Pledged Stock": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted
by the Stock Issuer to the Pledgor in respect of the Pledged
Stock while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon or distributions with
respect thereto.
"Stock Issuer": the company identified on Schedule 1
attached hereto as the issuer of the Pledged Stock.
"UCC": the Uniform Commercial Code from time to time in
effect in the State of New York.
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Guarantee. (a) Subject to the provisions of paragraphs
2(b) and 2(c) below, the Pledgor hereby unconditionally and irre-
vocably guarantees to the Trustee, for the ratable benefit of the
Holders of the Senior Secured Notes and their respective suc-
cessors, indorsees, transferees and assigns, the prompt and
complete payment and performance by Pan-Western (whether at the
stated maturity, by acceleration or otherwise) of the Guaranteed
Obligations.
(b) The Pledgor shall have no personal liability for
payment of the Guaranteed Obligations, and in any action or suit
to collect the Guaranteed Obligations the Trustee and the Holders
of the Senior Secured Notes shall not seek any in personam
judgment against the Pledgor or any judgment for a deficiency but
shall look solely to the security interests hereunder and under
the Pan-Sino Security Agreement and the collateral described
herein and therein for payment of the Guaranteed Obligations.
Nothing contained in this Section shall be construed to impair
the validity of the Guaranteed Obligations or the Pan-Sino
Security Agreement or affect or impair in any way the right of
the Trustee and the Holders of the Senior Secured Notes to
exercise their rights and remedies under the Indenture, any
Series Supplemental Indentures, the Senior Secured Notes and any
other Transaction Document in accordance with their terms.
(c) The maximum liability of the Pledgor hereunder and
under the Pan-Sino Security Agreement shall in no event exceed
the amount which can be guaranteed by the Pledgor under
applicable laws relating to the insolvency of debtors.
3. Pledge; Grant of Security Interest. The Pledgor hereby
delivers to the Trustee, for the ratable benefit of the Holders
of the Senior Secured Notes, all the Pledged Stock and hereby
grants to the Trustee, for the ratable benefit of the Holders of
the Senior Secured Notes, a first security interest in the
Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations.
4. Stock Powers. Concurrently with the delivery to the
Trustee of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor
with, if the Trustee so requests, signature guaranteed.
5. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon delivery to the Trustee of the stock certificates
evidencing the Pledged Stock, the security interest created
pursuant to this Agreement will constitute a valid, perfected
first priority security interest in the Collateral, enforceable
in accordance with the terms hereof against all creditors of the
Pledgor and any Persons purporting to purchase any Collateral
from the Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirements of
Law or contractual obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any
Requirements of Law or contractual obligation of the Pledgor,
except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The shares of Pledged Stock constitute at least 99% of
the issued and outstanding shares of all classes of the capital
stock of the Stock Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Stock, free of any
and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement.
6. Covenants. The Pledgor covenants and agrees with the
Trustee for the benefit of the Holders of the Senior Secured
Notes that except as the Trustee may otherwise consent in
accordance with the terms of the Indenture, from and after the
date of this Agreement until this Agreement is terminated and the
security interests created hereby are released:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive
any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, the
Pledgor shall accept the same as the agent of the Trustee, hold
the same in trust for the Trustee and deliver the same forthwith
to the Trustee in the exact form received, duly indorsed by the
Pledgor to the Trustee, if required, together with an undated
stock power covering such certificate duly executed in blank by
the Pledgor and with, if the Trustee so requests, signature
guaranteed, to be held by the Trustee, subject to the terms
hereof, as additional collateral security for the Obligations.
Any sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of the Stock Issuer shall be paid over
to the Trustee to be held by it hereunder as additional
collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with
respect to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Stock Issuer or pursuant
to the reorganization thereof, the property so distributed shall
be delivered to the Trustee to be held by it hereunder as
additional collateral security for the Obligations. If any sums
of money or property so paid or distributed in respect of the
Pledged Stock shall be received by the Pledgor, the Pledgor
shall, until such money or property is paid or delivered to the
Trustee, hold such money or property in trust for the Trustee,
segregated from other funds of the Pledgor, as additional
collateral security for the Obligations.
(b) Without the prior written consent of the Trustee, the
Pledgor will not (1) vote to enable, or take any other action to
permit, the Stock Issuer to issue any stock or other equity
securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of any nature of the
Stock Issuer, (2) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral,
(3) create, incur or permit to exist any Lien or option in favor
of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security
interest created by this Agreement or (4) enter into any
agreement or undertaking restricting the right or ability of the
Pledgor or the Trustee to sell, assign or transfer any of the
Collateral, provided, however, that, with the consent of the
Issuer, the Pledgor may be merged into Pan-Western or the Issuer
in accordance with the terms of the Indenture.
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever. At any time and from time to
time, upon the written request of the Trustee, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and
take such further actions as the Trustee may reasonably request
for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted. If
any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note,
other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Trustee, duly
endorsed in a manner satisfactory to the Trustee, to be held as
Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Trustee and the
Holders of the Senior Secured Notes 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 or in connection with any of the transactions
contemplated by this Agreement.
7. Cash Dividends; Voting Rights. For so long as the
Senior Secured Notes are outstanding and unpaid, the Pledgor
shall cause all cash dividends, distributions and other Proceeds
in respect of the Pledged Stock to be deposited with the Trustee
in accordance with the Indenture. Unless an Event of Default
shall have occurred and be continuing, the Pledgor shall be
permitted to exercise all voting and corporate rights with
respect to the Pledged Stock; provided, however, that no vote
shall be cast or corporate right exercised or other action taken
which would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the
Indenture, any Series Supplemental Indentures, or any other
Transaction Document.
8. Rights of the Trustee. (a) All money Proceeds received
by the Trustee hereunder shall be deposited with the Trustee
under the Indenture for the benefit of the Holders of the Senior
Secured Notes. All Proceeds while held by the Trustee (or by the
Pledgor in trust for the Trustee) shall continue to be held as
collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in paragraph
9(a).
(b) If an Event of Default shall occur and be continuing
and the Trustee shall give notice of its intent to exercise such
rights to the Pledgor, (1) the Trustee shall have the right to
receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Obligations in such
order as the Trustee may determine, and (2) all shares of the
Pledged Stock shall be registered in the name of the Trustee or
its nominee, and the Trustee or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders
of the Stock Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged
Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any
and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in
the corporate structure of the Stock Issuer, or upon the exercise
by the Pledgor or the Trustee of any right, privilege or option
pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and
conditions as the Trustee may determine), all without liability
except to account for property actually received by it, but the
Trustee shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.
9. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Trustee's
election, the Trustee may apply all or any part of Proceeds held
in any Collateral Account in payment of the Obligations in such
order as the Trustee may elect.
(b) If an Event of Default shall occur and be continuing,
the Trustee, on behalf of the Holders of the Senior Secured
Notes, may exercise, in addition to all other rights and remedies
granted in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations,
all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, the Trustee,
without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Pledgor or any
other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise
dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market,
at any exchange, broker's board or office of the Trustee or
elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The
Trustee or any Holder of the Senior Secured Notes shall have the
right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or
equity is hereby waived or released. The Trustee shall apply any
Proceeds from time to time held by it and the net proceeds of any
such collection, recovery, receipt, appropriation, realization or
sale, after deducting all reasonable costs and expenses of every
kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee and the Holders of
the Senior Secured Notes hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of
counsel to the Trustee and counsel to the Initial Purchaser to
the payment in whole or in part of the Obligations, in such order
as the Trustee may elect, and only after such application and
after the payment by the Trustee of any other amount required by
any provision of law, including, without limitation, Section
9-504(1)(c) of the UCC, need the Trustee account for the surplus,
if any, to the Pledgor. To the extent permitted by applicable
law, the Pledgor waives all claims, damages and demands it may
acquire against the Trustee or any Holder of the Senior Secured
Notes arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Pledgor waives and agrees
not to assert any rights or privileges which it may acquire under
Section 9-112 of the UCC.
10. Irrevocable Authorization and Instruction to Stock
Issuer. The Pledgor hereby authorizes and instructs the Stock
Issuer to comply with any instruction received by it from the
Trustee in writing that (a) states that an Event of Default has
occurred and (b) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that the Stock Issuer shall
be fully protected in so complying.
11. No Subrogation. Notwithstanding any payment or
payments made by the Pledgor hereunder, or any setoff or
application of funds of the Pledgor by any Holders of the Senior
Secured Notes, or the receipt of any amounts by the Trustee or
any Holder of the Senior Secured Notes with respect to any of the
Collateral, the Pledgor shall not be entitled to be subrogated to
any of the rights of the Trustee or any Holder of the Senior
Secured Notes against the Issuer or Pan-Western or against any
other collateral security held by the Trustee or any Holder of
the Senior Secured Notes for the payment of the Obligations, nor
shall the Pledgor seek any reimbursement from the Issuer or the
Company in respect of payments made by the Pledgor in connection
with this Agreement, or amounts realized by the Trustee or any
Holders of the Senior Secured Notes in connection with the
Collateral, until all amounts owing to the Trustee and the
Holders of the Senior Secured Notes on account of the Obligations
are paid in full. If any amount shall be paid to the Pledgor on
account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall
be held by the Pledgor in trust for the Trustee, segregated from
other funds of the Pledgor, and shall, forthwith upon receipt by
the Pledgor, be turned over to the Trustee in the exact form
received by the Pledgor (duly indorsed by the Pledgor to the
Trustee, if required) to be applied against the Obligations,
whether matured or unmatured, in such order as the Trustee may
determine.
12. Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder,
and the Collateral shall remain subject to the security interests
granted hereby, notwithstanding that, without any reservation of
rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the
Obligations made by the Trustee or any Holders of the Senior
Secured Notes may be rescinded by the Trustee or such Holders of
the Senior Secured Notes and any of the Obligations may be
continued, and the Obligations, or the liability of the Issuer or
the Company or any other Person upon or for any part thereof, or
any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered, or released by the Trustee or
any Holder of the Senior Secured Notes, and the Indenture, any
Series Supplemental Indenture, the Senior Secured Notes, the
other Transaction Documents and any other documents executed and
delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or part, in accordance with
their terms and the terms of the Indenture and, subject to the
Indenture, any guarantee, right of offset or other collateral
security at any time held by the Trustee or any Holder of the
Senior Secured Notes for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the
Trustee nor any Holder of the Senior Secured Notes shall have any
obligation to protect, secure, perfect or insure any other Lien
at any time held by it as security for the Obligations or any
property subject thereto. The Pledgor 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
any Holder upon this Agreement; the Obligations, and any of them,
shall be deemed conclusively to have been created, contracted or
incurred in reliance upon this Agreement; and all dealings
between the Issuer or the Company and the Pledgor, on the one
hand, and the Trustee and the Holders of the Senior Secured
Notes, on the other, likewise shall be conclusively presumed to
have been had or consummated in reliance upon this Agreement.
The Pledgor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Issuer
or the Company or the Pledgor with respect to the Obligations.
When pursuing its rights and remedies hereunder against the
Pledgor, the Trustee and any Holder of the Senior Secured Notes
may, but shall be under no obligation to, pursue such rights and
remedies as it may have against the Issuer or the Company or any
other Person or against any collateral security or guarantee for
the Obligations or any right of offset with respect thereto, and
any failure by the Trustee or any Holder of the Senior Secured
Notes to pursue such other rights or remedies or to collect any
payments from the Issuer or the Company or any such other Person
or to realize upon any such collateral security or guarantee or
to exercise any such right of offset, or any release of the
Issuer or the Company or any such other Person or of any such
collateral security, guarantee or right of offset, shall not
relieve the Pledgor 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 Trustee or any
Holder of the Senior Secured Notes against the Pledgor or the
Collateral.
13. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys-in-
fact shall lawfully do or cause to be done pursuant to the power
of attorney granted in paragraph 12(a). All powers, authoriza-
tions and agencies contained in this Agreement are coupled with
an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
14. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or
otherwise, shall be to deal with it in the same manner as the
Trustee deals with similar securities and property for its own
account, except that the Trustee shall have no obligation to
invest funds held in any Collateral Account and may hold the same
as demand deposits. Neither the Trustee, any Holder of the
Senior Secured Notes nor any of their respective directors,
officers, employees or agents (a) shall be liable for failure to
demand, collect or realize upon any of the Collateral or for any
delay in doing so or (b) shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the
Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
15. Execution of Financing Statements. Pursuant to Section
9-402 of the UCC, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
16. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, voting
right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as
between the Trustee and the Holders of the Senior Secured Notes,
be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but,
as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of
the Senior Secured Notes with full and valid authority so to act
or refrain from acting, and neither the Pledgor nor the Stock
Issuer shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
17. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed as
follows:
(a) if to the Trustee, at its address or transmission
number for notices provided in the Recitals to the Indenture; and
(b) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
18. 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.
19. Integration. This Agreement represents the agreement
of the Pledgor with respect to the subject matter hereof and
there are no promises or representations by the Trustee or any
Holder of the Senior Secured Notes relative to the subject matter
hereof not reflected herein.
20. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee on behalf of the Holders of the Senior Secured Notes
pursuant to the Indenture, in a letter or agreement executed by
the Trustee or by telex or facsimile transmission from the
Trustee.
(b) Neither the Trustee nor any Holder of the Senior
Secured Notes shall by any act (except by a written instrument pur-
suant to paragraph 20(a) hereof), delay, indulgence, omission or
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
any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Trustee
Trustee, any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power
power or privilege hereunder shall preclude any other or further ex-
ercise thereof or the exercise of any other right, power or privi-
lege. A waiver by the Trustee of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or any
right or remedy which the Trustee would otherwise have on any future
occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
21. 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.
22. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders of the Senior
Secured Notes and their successors and assigns.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
24. Submission To Jurisdiction; Waivers. The Pledgor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of
Manhattan, the courts of the United States of America for
the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) designates, appoints and empowers CT Corporation
Systems, at 1633 Broadway, New York, N.Y. 10019 as its
authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such
action, suit or proceeding in the State of New York;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any
special, exemplary, punitive or consequential damages.
25. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
26. Return of Pledged Stock. When this Agreement is
terminated and the security interests created hereby are
released, the Trustee shall return the certificate representing
the Pledged Stock to the Pledgor.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
PAN-SINO ENERGY DEVELOPMENT COMPANY
LLC
By
Title
Address: Pan-Sino Energy
Development Company LLC
c/o Maples and Calder
P.O. Box 309
Ugland House
South Church Street
George Town, Grand Cayman
Cayman Islands, British
West Indies
with a copy to: Panda Energy
International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attn: General Counsel
Exhibit A
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated as of April 22, 1997, made by Pan-Sino
Energy Development Company for the benefit of Bankers Trust
Company as Trustee (the "Pledge Agreement"). The undersigned
agrees for the benefit of the Trustee as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Trustee promptly in
writing of the occurrence of any of the events described in
paragraph 6(a) of the Pledge Agreement.
PAN-WESTERN ENERGY CORPORATION LLC
By
Title
Address for Notices:
Pan-Western Energy
Corporation, LLC
c/o Maples and Calder
P.O. Box 309
Ugland House
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
with a copy to: Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attn: General Counsel
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Issuer
Class of Stock* Stock Certificate No.
No. of Shares
Pan-Western Energy Corporation LLC Class B 002 9,900,000
EXHIBIT 10.117
PAN-WESTERN PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 22, 1997, made by Pan-
Western Energy Corporation LLC, a Cayman Islands exempted company
(the "Pledgor") in favor of Bankers Trust Company, as Trustee (in
such capacity, the "Trustee") for the Holders of the 12-1/2%
Senior Secured Notes due 2004 (the "Senior Secured Notes") of
Panda Global Energy Company (the "Issuer") issued pursuant to the
terms and subject to the conditions of the Trust Indenture dated
as of April 22, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Indenture") between the Issuer
and the Trustee and fully and unconditionally guaranteed by Panda
Global Holdings, Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture, the Trustee has agreed
to act on behalf of the Holders of the Senior Secured Notes upon
the terms and subject to the conditions set forth therein; and
WHEREAS, the Pledgor is an indirect Subsidiary of the
Issuer, and substantially all of the proceeds of the Senior
Secured Notes are being loaned to the Pledgor pursuant to the
Issuer Loan Agreement; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the Pledged Notes (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Indenture and to induce the
Initial Purchaser of the Senior Secured Notes to purchase the
Senior Secured Notes under the Purchase Agreement dated April 11,
1997 (as it may be amended, supplemented or otherwise modified
from time to time, the "Purchase Agreement") with the Issuer, the
Company and Panda Energy International, Inc., the Pledgor hereby
agrees with the Trustee, for the ratable benefit of the Holders
of the Senior Secured Notes, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the
meanings given to them in the Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Collateral": the Pledged Notes and all Proceeds and the
Pledged Agreements.
"Collateral Account": any account established to hold money
Proceeds, maintained under the sole dominion and control of the
Trustee, subject to withdrawal by the Trustee for the account of
the Holders of the Senior Secured Notes only as provided in
paragraph 7.
"Obligations": (i) the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes and all other obligations and liabilities of the Issuer to
the Trustee and the Holders of the Senior Secured Notes
(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
Issuer whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or
in connection with the Senior Secured Notes; and
(ii) all obligations and liabilities of the Pledgor which
may arise under or in connection with this Agreement or any other
Transaction Document to which the Pledgor is a party;
in each case, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Trustee or counsel to the Initial Purchaser that are required to
be paid by the Pledgor pursuant to the terms of this Agreement or
any other Transaction Document.
"Pledged Agreements": the Shareholder Loan Agreements.
"Pledged Notes": all promissory notes listed on Schedule 1
hereto.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the UCC in effect in the State of New York on
the date hereof and, in any event, shall include, without
limitation, all principal, interest and other income from the
Pledged Notes and all collections thereon.
"UCC": the Uniform Commercial UCC from time to time in
effect in the State of New York.
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
delivers to the Trustee, for the ratable benefit of the Holders
of the Senior Secured Notes, all of the Pledged Notes and hereby
grants to the Trustee, for the ratable benefit of the Holders of
the Senior Secured Notes, a first security interest in the
Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations.
3. Indorsement; Acknowledgment and Consent. Concurrently
with the delivery of each Pledged Note to the Trustee pursuant to
Section 2 of this Agreement:
(a) such Pledged Note shall be indorsed by the Pledgor as
follows:
Pay to the order of Bearer
PAN-WESTERN ENERGY CORPORATION LLC
By: _______________________
Title: ____________________; and
(b) the Pledgor shall deliver to the Trustee an
Acknowledgment and Consent, substantially in the form of
Exhibit A to this Agreement, duly executed by the maker of such
Pledged Note.
4. Payments Under the Pledged Notes. (a) For so long as
the Senior Secured Notes are outstanding and unpaid, the Pledgor
shall cause all payments in respect of the Pledged Notes to be
deposited with the Trustee in accordance with the Indenture. If
the Pledgor shall receive any such payments, the Pledgor shall
hold the same in trust for the Trustee, segregated from other
funds of the Pledgor, and deliver the same forthwith to the
Trustee in the exact form received, duly indorsed by the Pledgor
to the Trustee, if required.
5. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon delivery to the Trustee of the Pledged Notes, the
security interest created pursuant to this Agreement will
constitute a valid, perfected first priority security interest in
the Collateral, enforceable in accordance with the terms hereof
against all creditors of the Pledgor and any Persons purporting
to purchase any Collateral from the Pledgor, except in each case
as enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirements of
Law or contractual obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any
Requirements of Law or contractual obligation of the Pledgor,
except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The Pledgor is the record and beneficial owner of, and
has good and marketable title to, each Pledged Note, free of any
and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement.
(g) Each Pledged Note is the legal, valid and enforceable
obligation of the maker thereof, except as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
None of the Pledged Notes is subject to any right of counterclaim
or offset whatsoever.
(h) There exists no default under any Pledged Note. The
principal amount outstanding and the last date to which interest
has been paid under each Pledged Note are as specified on
Schedule 1. There exists no security interest or guarantee that
secures or supports payment of the indebtedness evidenced by any
Pledged Note.
6. Covenants. The Pledgor covenants and agrees with the
Trustee for the benefit of the Holders of the Senior Secured
Notes that except as the Trustee may otherwise consent in
accordance with the terms of the Indenture, from and after the
date of this Agreement until this Agreement is terminated and the
security interests created hereby are released:
(a) The Pledgor will not assign, transfer, or encumber any
of its right, title or interest under, in or to the Collateral.
(b) The Pledgor will not take or omit to take any action,
the taking or the omission of which would result in an alteration
or impairment of the Collateral or the security of this
Agreement.
(c) The Pledgor will not enter into any agreement amending
or supplementing the Collateral.
(d) The Pledgor will not waive or release any obligation of
any party to the Collateral.
(e) Unless directed otherwise by the Trustee, the Pledgor
will exercise promptly and diligently each and every right which
it may have under the Collateral (except the right to release or
cancel).
(f) The Pledgor will not take or omit to take any action or
suffer or permit any action to be omitted or taken, the taking or
omission of which would result in any right of offset against
sums payable under the Collateral.
(g) The Pledgor will give the Trustee copies of all notices
(including notices of default) given or received with respect to
the Collateral, promptly after giving or receiving such notices.
(h) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever. At any time and from time to
time, upon the written request of the Trustee, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and
take such further actions as the Trustee reasonably may request
for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted. If
any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or
other instrument, such note or instrument shall be immediately
delivered to the Trustee, duly indorsed in a manner satisfactory
to the Trustee, to be held as Collateral under this Agreement.
(i) The Pledgor shall pay, and save the Trustee and the
Holders of the Senior Secured Notes 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 and any
and all recording and filing fees which may be payable or
determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this
Agreement.
7. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Trustee's
election, the Trustee may apply all or any part of Proceeds held
in any Collateral Account in payment of the Obligations in such
order as the Trustee may elect. If an Event of Default shall
occur and be continuing, the Trustee shall be entitled to
exercise all rights of the Pledgor under the Pledged Agreements.
(b) If an Event of Default shall occur and be continuing,
the Trustee, on behalf of the Holders of the Senior Secured
Notes, may exercise, in addition to all other rights and remedies
granted in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations,
all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, the Trustee,
without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Pledgor, or any
other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise
dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board
or office of the Trustee or any Holder of the Senior Secured
Notes or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit
risk. The Trustee of any Senior Secured Note shall have the
right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or
equity is hereby waived or released. The Trustee shall apply any
Proceeds from time to time held by it and the net proceeds of any
such collection, recovery, receipt, appropriation, realization or
sale, after deducting all reasonable costs and expenses of every
kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Trustee, to the payment in whole or in part of
the Obligations, in such order as the Trustee may elect, and only
after such application and after the payment by the Trustee of
any other amount required by any provision of law, including,
without limitation, Section 9-504(1)(c) of the UCC, need the
Trustee account for the surplus, if any, to the Pledgor. To the
extent permitted by applicable law, the Pledgor waives all
claims, damages and demands it may acquire against the Trustee or
any Holder of the Senior Secured Notes arising out of the
exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other
disposition. The Pledgor further waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112
of the UCC.
8. Powers Coupled with an Interest. All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are
released.
9. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or
otherwise, shall be to deal with it in the same manner as the
Trustee deals with similar securities and property for its own
account, except that the Trustee shall have no obligation to
invest funds held in any Collateral Account and may hold the same
as demand deposits. Neither the Trustee, any Holder of the
Senior Secured Notes nor any of their respective directors,
officers, employees or agents shall be liable for failure to
demand, collect or realize upon any 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
Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
10. Execution of Financing Statements. Pursuant to Section
9-402 of the UCC, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
11. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, voting
right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as
between the Trustee and the Holders of the Senior Secured Notes,
be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but,
as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of
the Senior Secured Notes with full and valid authority so to act
or refrain from acting, and neither the Pledgor nor maker of the
Pledged Notes shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed as
follows:
(a) if to the Trustee, at its address or transmission
number for notices provided in the Recitals to the Indenture; and
(b) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
13. Term of Agreement. This Agreement shall remain in full
force and effect and be binding in accordance with and to the
extent of its terms, and the security interest created by this
Agreement shall not be released, until payment in full of the all
the Obligations.
14. Return of Pledged Notes. (a) When this Agreement is
terminated and the security interests created hereby are
released, the Trustee shall return each Pledged Note to the
Pledgor.
(b) Upon payment in full of any Pledged Note and payment of
the Proceeds thereof as provided in this Agreement, the Trustee
shall return such Pledged Note to the Pledgor.
(c) Upon the occurrence of a default or event of default
under any Pledged Note, subject to Section 4 and 7 hereof, the
Trustee shall cooperate reasonably with the Pledgor, at the
expense of the Pledgor, in the exercise of the Pledgor's rights
and remedies under such Pledged Note.
15. 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.
16. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee on behalf of the Holders of the Senior Secured Notes
in a letter or agreement executed by the Trustee or by telex or
facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder of the Senior
Secured Notes shall by any act (except by a written instrument
pursuant to paragraph 16(a) hereof), 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, nor any delay in exercising, on
the part of the Trustee , any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Trustee of any right
or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Trustee would otherwise
have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
17. 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.
18. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders of the Senior
Secured Notes and their successors and assigns.
19. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
20. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of
Manhattan, the courts of the United States of America for
the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) designates, appoints and empowers CT Corporation
Systems, at 1633 Broadway, New York, N.Y. 10019 as its
authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such
action, suit or proceeding in the State of New York;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any
special, exemplary, punitive or consequential damages.
21. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Title:
Address:
Pan-Western Energy Corporation LLC
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
With a copy to:
Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attn: General Counsel
SCHEDULE 1
to Pledge Agreement
THE PLEDGED NOTES
Principal Amount/
Description of Pledged Notes Interest Payment
Promissory Note dated April Outstanding principal amount:
22, 1997, made by Tangshan $ 17,880,000
Panda Heat and Power Co., Ltd.
to the order of Pan-Western Interest Payments: none
Energy Corporation LLC in the
original principal amount of
$17,880,000.
Promissory Note dated April Outstanding principal amount:
22, 1997, made by Tangshan Pan- $ 17,880,000
Western Heat and Power Co.,
Ltd. to the order of Pan- Interest Payments: none
Western Energy Corporation LLC
in the original principal
amount of $17,880,000.
Promissory Note dated April Outstanding principal amount:
22, 1997, made by Tangshan $ 17,664,000
Cayman Heat and Power Co.,
Ltd. to the order of Pan- Interest Payments: none
Western Energy Corporation LLC
in the original principal
amount of $17,664,000.
Promissory Note dated April Outstanding principal amount:
22, 1997, made by Tangshan Pan- $ 17,829,000
Sino Heat Co., Ltd. to the
order of Pan-Western Energy Interest Payments: none
Corporation LLC in the
original principal amount of
$17,829,000.
EXHIBIT A-1
to Note Pledge Agreement
April 22, 1997
TO: Tangshan Panda Heat and Power Co., Ltd.
Reference is hereby made to the Project Note dated April 22,
1997, (the "Note"), made by you to the order of Pan-Western
Energy Corporation LLC (the "Pledgor") in the original principal
amount of $17,880,000. By Pledge Agreement, dated as of April
22, 1997 (the "Pledge Agreement"), the Pledgor has pledged the
Note to Bankers Trust Company, as Trustee for the Holders of the
Senior Secured Notes pursuant to the Indenture referred to in the
Pledge Agreement (the "Trustee"), to secure payment of the Senior
Secured Notes.
You are hereby directed, until receipt of notice from the
Trustee that the Senior Secured Notes have been paid in full, to
make any and all payments becoming due under the Note directly to
the Trustee, to such account as the Trustee may from time to time
designate by notice to you, without set-off or counterclaim, as
provided in the Note at the Trustee's office specified in the
recitals to the Indenture.
The instructions contained herein are irrevocable and may
not be amended, revoked or otherwise modified without the prior
written consent of the Trustee.
PAN-WESTERN ENERGY CORPORATION LLC
By
Title
EXHIBIT A-2
to Note Pledge Agreement
April 22, 1997
TO: Tangshan Pan-Western Heat and Power Co., Ltd.
Reference is hereby made to the Project Note dated April 22,
1997, (the "Note"), made by you to the order of Pan-Western
Energy Corporation LLC (the "Pledgor") in the original principal
amount of $17,880,000. By Pledge Agreement, dated as of April
22, 1997 (the "Pledge Agreement"), the Pledgor has pledged the
Note to Bankers Trust Company, as Trustee for the Holders of the
Senior Secured Notes pursuant to the Indenture referred to in the
Pledge Agreement (the "Trustee"), to secure payment of the Senior
Secured Notes.
You are hereby directed, until receipt of notice from the
Trustee that the Senior Secured Notes have been paid in full, to
make any and all payments becoming due under the Note directly to
the Trustee, to such account as the Trustee may from time to time
designate by notice to you, without set-off or counterclaim, as
provided in the Note at the Trustee's office specified in the
recitals to the Indenture.
The instructions contained herein are irrevocable and may
not be amended, revoked or otherwise modified without the prior
written consent of the Trustee.
PAN-WESTERN ENERGY CORPORATION LLC
By
Title
EXHIBIT A-3
to Note Pledge Agreement
April 22, 1997
TO: Tangshan Cayman Heat and Power Co., Ltd.
Reference is hereby made to the Project Note dated April 22,
1997, (the "Note"), made by you to the order of Pan-Western
Energy Corporation LLC (the "Pledgor") in the original principal
amount of $17,664,000. By Pledge Agreement, dated as of April
22, 1997 (the "Pledge Agreement"), the Pledgor has pledged the
Note to Bankers Trust Company, as Trustee for the Holders of the
Senior Secured Notes pursuant to the Indenture referred to in the
Pledge Agreement (the "Trustee"), to secure payment of the Senior
Secured Notes.
You are hereby directed, until receipt of notice from the
Trustee that the Senior Secured Notes have been paid in full, to
make any and all payments becoming due under the Note directly to
the Trustee, to such account as the Trustee may from time to time
designate by notice to you, without set-off or counterclaim, as
provided in the Note at the Trustee's office specified in the
recitals to the Indenture.
The instructions contained herein are irrevocable and may
not be amended, revoked or otherwise modified without the prior
written consent of the Trustee.
PAN-WESTERN ENERGY CORPORATION LLC
By
Title
EXHIBIT A-4
to Note Pledge Agreement
April 22, 1997
TO: Tangshan Pan-Sino Heat Co., Ltd.
Reference is hereby made to the Project Note dated April 22,
1997, (the "Note"), made by you to the order of Pan-Western
Energy Corporation LLC (the "Pledgor") in the original principal
amount of $17,664,000. By Pledge Agreement, dated as of April
22, 1997 (the "Pledge Agreement"), the Pledgor has pledged the
Note to Bankers Trust Company, as Trustee for the Holders of the
Senior Secured Notes pursuant to the Indenture referred to in the
Pledge Agreement (the "Trustee"), to secure payment of the Senior
Secured Notes.
You are hereby directed, until receipt of notice from the
Trustee that the Senior Secured Notes have been paid in full, to
make any and all payments becoming due under the Note directly to
the Trustee, to such account as the Trustee may from time to time
designate by notice to you, without set-off or counterclaim, as
provided in the Note at the Trustee's office specified in the
recitals to the Indenture.
The instructions contained herein are irrevocable and may
not be amended, revoked or otherwise modified without the prior
written consent of the Trustee.
PAN-WESTERN ENERGY CORPORATION LLC
By
Title
ACKNOWLEDGEMENT AND AGREEMENT
The undersigned hereby acknowledges receipt of a copy
of the Pledge Agreement described in the foregoing letter and
agrees for the benefit of the Trustee to be bound by the terms of
the Pledge Agreement and to comply with the terms of the
foregoing letter. To the best knowledge of the undersigned, no
representation or warranty of the Pledgor in the Pledge Agreement
is incomplete or incorrect.
[NAME OF MAKER]
By
Title
EXHIBIT 10.118
PANDA GLOBAL HOLDINGS, INC. ISSUER PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 22, 1997, made by Panda
Global Holdings, Inc., a Delaware corporation (the "Pledgor"), in
favor of Bankers Trust Company, as Trustee (in such capacity, the
"Trustee") for the Holders of the Senior Secured Notes Guarantee
issued pursuant to the terms and subject to the conditions of the
Trust Indenture dated as of April 22, 1997 (as amended,
supplemented or otherwise modified from time to time, the
"Company Indenture") between the Pledgor and the Trustee.
W I T N E S S E T H:
WHEREAS, pursuant to the Company Indenture, the Trustee has
agreed to act on behalf of the Holders of the Senior Secured
Notes Guarantee upon the terms and subject to the conditions set
forth therein;
WHEREAS, pursuant to the Company Indenture the Pledgor has
issued the Senior Secured Notes Guarantee, a guarantee of certain
notes (the "Senior Secured Notes") issued by Panda Global Energy
Company (the "Issuer") in order to facilitate the sale of the
Senior Secured Notes;
WHEREAS, the Issuer is a Wholly-Owned Subsidiary of the
Pledgor, and it is to the advantage of the Pledgor to facilitate
the sale of the Senior Secured Notes; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the shares of Pledged Stock (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Company Indenture and to
induce the Initial Purchaser to purchase the Senior Secured Notes
under the Purchase Agreement dated April 11, 1997 (as may be
amended, supplemented or otherwise modified from time to time,
the "Purchase Agreement") with the Issuer, the Pledgor and Panda
Energy International, Inc., the Pledgor hereby agrees with the
Trustee, for the ratable benefit of the Holders of the Senior
Secured Notes Guarantee, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the
meanings given to them in the Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Collateral": the Pledged Stock and all Proceeds.
"Collateral Account": any account established to hold money
Proceeds, maintained under the sole dominion and control of the
Trustee, subject to withdrawal by the Trustee for the account of
the Holders of the Senior Secured Notes Guarantee only as
provided in paragraph 8(a).
"Obligations": (i) the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), and any other amount
payable pursuant to the Senior Secured Notes Guarantee and all
other obligations and liabilities of the Pledgor to the Trustee
and the Holders of the Senior Secured Notes Guarantee (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 Issuer whether
or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with,
the Senior Secured Notes Guarantee, this Agreement, the other
Transaction Documents or any other document made, delivered or
given in connection therewith; and
(ii) all obligations and liabilities of the Pledgor which
may arise under or in connection with this Agreement or any other
Transaction Document to which the Pledgor is a party;
in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee or counsel to the Initial
Purchasers that are required to be paid by the Pledgor pursuant
to the terms of the Company Indenture, the First Supplemental
Indenture thereto, the Senior Secured Notes Guarantee, this
Agreement or any other Transaction Document).
"Pledged Stock": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted
by the Stock Issuer to the Pledgor while this Agreement is in
effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon or distributions with
respect thereto.
"Stock Issuer": the company identified on Schedule 1
attached hereto as the issuer of the Pledged Stock.
"UCC": the Uniform Commercial Code from time to time in
effect in the State of New York.
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
delivers to the Trustee, for the ratable benefit of the Holders
of the Senior Secured Notes Guarantee, all the Pledged Stock and
hereby grants to the Trustee, for the ratable benefit of the
Holders of the Senior Secured Notes Guarantee only, a first
security interest in the Collateral, as collateral security for
the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the
Obligations.
3. Stock Powers. Concurrently with the delivery to the
Trustee of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor
with, if the Trustee so requests, signature guaranteed.
4. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon delivery to the Trustee of the stock certificates
evidencing the Pledged Stock, the security interest created
pursuant to this Agreement will constitute a valid, perfected
first priority security interest in the Collateral, enforceable
in accordance with the terms hereof against all creditors of the
Pledgor and any Persons purporting to purchase any Collateral
from the Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirements of
Law or contractual obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any
Requirements of Law or contractual obligation of the Pledgor,
except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The shares of Pledged Stock constitute all the issued
and outstanding shares of all classes of the capital stock of the
Stock Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Stock, free of any
and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement.
5. Covenants. The Pledgor covenants and agrees with the
Trustee that, except as the Trustee may otherwise consent
pursuant to the terms of the Company Indenture, from and after
the date of this Agreement until this Agreement is terminated and
the security interests created hereby are released:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive
any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, the
Pledgor shall accept the same as the agent of the Trustee, hold
the same in trust for the Trustee and deliver the same forthwith
to the Trustee in the exact form received, duly indorsed by the
Pledgor to the Trustee, if required, together with an undated
stock power covering such certificate duly executed in blank by
the Pledgor and with, if the Trustee so requests, signature
guaranteed, to be held by the Trustee, subject to the terms
hereof, as additional collateral security for the Obligations.
Any sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of the Stock Issuer shall be paid over
to the Trustee to be held by it hereunder as additional
collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with
respect to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Stock Issuer or pursuant
to the reorganization thereof, the property so distributed shall
be delivered to the Trustee to be held by it hereunder as
additional collateral security for the Obligations. If any sums
of money or property so paid or distributed in respect of the
Pledged Stock shall be received by the Pledgor, the Pledgor
shall, until such money or property is paid or delivered to the
Trustee, hold such money or property in trust for the Trustee,
segregated from other funds of the Pledgor, as additional
collateral security for the Obligations.
(b) Without the prior written consent of the Trustee, the
Pledgor will not (1) vote to enable, or take any other action to
permit, the Stock Issuer to issue any stock or other equity
securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of any nature of the
Stock Issuer, (2) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral,
(3) create, incur or permit to exist any Lien or option in favor
of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security
interest created by this Agreement or (4) enter into any
agreement or undertaking restricting the right or ability of the
Pledgor or the Trustee to sell, assign or transfer any of the
Collateral.
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever. At any time and from time to
time, upon the written request of the Trustee, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and
take such further actions as the Trustee may reasonably request
for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted. If
any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note,
other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Trustee, duly
endorsed in a manner satisfactory to the Trustee, to be held as
Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Trustee and the
Holders of the Senior Secured Notes Guarantee 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 or in connection with any of the transactions
contemplated by this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of
Default shall have occurred and be continuing, the Pledgor shall
be permitted to exercise all voting and corporate rights with
respect to the Pledged Stock; provided, however, that no vote
shall be cast or corporate right exercised or other action taken
which would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Company
Indenture, any Series Supplemental Indenture, the Senior Secured
Notes Guarantee, or any other Transaction Document to which the
Pledgor is a party.
7. Rights of the Trustee. (a) All money Proceeds received
by the Trustee hereunder shall be deposited by the Trustee for
the benefit of the Holders of the Senior Secured Notes Guarantee
in the Issuer Revenue Fund. All Proceeds while held by the
Trustee (or by the Pledgor in trust for the Trustee) shall
continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until
applied as provided in paragraph 8(a).
(b) If an Event of Default shall occur and be continuing
and the Trustee shall give notice of its intent to exercise such
rights to the Pledgor, (1) the Trustee shall have the right to
receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Obligations in such
order as the Trustee may determine, and (2) all shares of the
Pledged Stock shall be registered in the name of the Trustee or
its nominee, and the Trustee or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders
of the Stock Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged
Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any
and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in
the corporate structure of the Stock Issuer, or upon the exercise
by the Pledgor or the Trustee of any right, privilege or option
pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and
conditions as the Trustee may determine), all without liability
except to account for property actually received by it, but the
Trustee shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.
8. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Trustee's
election, the Trustee may apply all or any part of Proceeds held
in any Collateral Account in payment of the Obligations in such
order as the Trustee may elect.
(b) If an Event of Default shall occur and be continuing,
the Trustee, on behalf of the Holders of the Senior Secured Notes
Guarantee, may exercise, in addition to all other rights and
remedies granted in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations,
all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, the Trustee,
without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Pledgor or any
other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise
dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market,
at any exchange, broker's board or office of the Trustee or
elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk. The
Trustee or any Holder of the Senior Secured Notes Guarantee shall
have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or
equity is hereby waived or released. The Trustee shall apply any
Proceeds from time to time held by it and the net proceeds of any
such collection, recovery, receipt, appropriation, realization or
sale, after deducting all reasonable costs and expenses of every
kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Trustee and counsel to the Initial Purchaser to
the payment in whole or in part of the Obligations, in such order
as the Trustee may elect, and only after such application and
after the payment by the Trustee of any other amount required by
any provision of law, including, without limitation, Section
9-504(1)(c) of the UCC, need the Trustee account for the surplus,
if any, to the Pledgor. To the extent permitted by applicable
law, the Pledgor waives all claims, damages and demands it may
acquire against the Trustee or any Holder of the Senior Secured
Notes Guarantee arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Pledgor waives and agrees
not to assert any rights or privileges which it may acquire under
Section 9-112 of the UCC.
9. Irrevocable Authorization and Instruction to Stock
Issuer. The Pledgor hereby authorizes and instructs the Stock
Issuer to comply with any instruction received by it from the
Trustee in writing that (a) states that an Event of Default has
occurred and (b) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that the Stock Issuer shall
be fully protected in so complying.
10. No Subrogation. Notwithstanding any payment or
payments made by the Pledgor hereunder, or any setoff or
application of funds of the Pledgor by any Holders of the Senior
Secured Notes Guarantee, or the receipt of any amounts by the
Trustee or any Holder of the Senior Secured Notes Guarantee with
respect to any of the Collateral, the Pledgor shall not be
entitled to be subrogated to any of the rights of the Trustee or
any Holder of the Senior Secured Notes Guarantee against the
Issuer or against any other collateral security held by the
Senior Secured Notes Trustee or any holder for the payment of the
Senior Secured Notes, nor shall the Pledgor seek any
reimbursement from the Issuer in respect of payments made by the
Pledgor in connection with this Agreement, or amounts realized by
the Trustee or any Holders of the Senior Secured Notes Guarantee
in connection with the Collateral, until all amounts owing to the
Trustee and the Holders of the Senior Secured Notes on account of
the Senior Secured Notes are paid in full. If any amount shall
be paid to the Pledgor on account of such subrogation rights at
any time when all of the Senior Secured Notes shall not have been
paid in full, such amount shall be held by the Pledgor in trust
for the Trustee, segregated from other funds of the Pledgor, and
shall, forthwith upon receipt by the Pledgor, be turned over to
the Trustee in the exact form received by the Pledgor (duly
indorsed by the Pledgor to the Trustee, if required) to be
applied against the Senior Secured Notes, whether matured or
unmatured, in such order as the Trustee may determine.
11. Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder,
and the Collateral shall remain subject to the security interests
granted hereby, notwithstanding that, without any reservation of
rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the
Obligations made by the Trustee or any Holders of the Senior
Secured Notes Guarantee may be rescinded by the Trustee or such
Holders of the Senior Secured Notes Guarantee and any of the
Obligations may be continued, and the Obligations, or the
liability of the Issuer, the Pledgor or any other Person upon or
for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered, or
released by the Trustee or any Holder of the Senior Secured Notes
Guarantee, and the Indenture, any Series Supplemental Indenture,
the Senior Secured Notes Guarantee, the other Transaction
Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or
terminated in accordance with their terms and the terms of the
Indentures, in whole or part, from time to time, and any
guarantee, right of offset or other collateral security at any
time held by the Trustee or any Holder of the Senior Secured
Notes Guarantee for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. Neither the Trustee
nor any Holder of the Senior Secured Notes Guarantee shall have
any obligation to protect, secure, perfect or insure any other
Lien at any time held by it as security for the Obligations or
any property subject thereto. The Pledgor 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 any Holder of the Senior Secured Notes Guarantee upon this
Agreement; the Obligations, and any of them, shall be deemed
conclusively to have been created, contracted or incurred in
reliance upon this Agreement; and all dealings between the Issuer
and the Pledgor, on the one hand, and the Trustee and the Holders
of the Senior Secured Notes Guarantee, on the other, likewise
shall be conclusively presumed to have been had or consummated in
reliance upon this Agreement. The Pledgor waives diligence,
presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Issuer or the Pledgor with respect to
the Obligations. When pursuing its rights and remedies hereunder
against the Pledgor, the Trustee may, but shall be under no
obligation to, pursue such rights and remedies as it may have
against the Issuer or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Trustee to pursue
such other rights or remedies or to collect any payments from the
Issuer or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of
offset, or any release of the Issuer or any such other Person or
of any such collateral security, guarantee or right of offset,
shall not relieve the Pledgor 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 Trustee
against the Pledgor or the Collateral.
12. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys-in-
fact shall lawfully do or cause to be done pursuant to the power
of attorney granted in paragraph 12(a). All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are
released.
13. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or
otherwise, shall be to deal with it in the same manner as the
Trustee deals with similar securities and property for its own
account, except that the Trustee shall have no obligation to
invest funds held in any Collateral Account and may hold the same
as demand deposits. Neither the Trustee, any Holder of the
Senior Secured Notes Guarantee nor any of their respective
directors, officers, employees or agents (a) shall be liable for
failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or (b) shall be under any obligation
to sell or otherwise dispose of any Collateral upon the request
of the Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
14. Execution of Financing Statements. Pursuant to Section
9-402 of the UCC, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
15. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, voting
right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as
between the Trustee and the Holders of the Senior Secured Notes
Guarantee, be governed by the Indenture and by such other
agreements with respect thereto as may exist from time to time
among them, but, as between the Trustee and the Pledgor, the
Trustee shall be conclusively presumed to be acting as agent for
the Holders of the Senior Secured Notes Guarantee with full and
valid authority so to act or refrain from acting, and neither the
Pledgor nor the Stock Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
16. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed as
follows:
(a) if to the Trustee, at its address or transmission
number for notices provided in the Recitals to the Indenture; and
(b) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
17. 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.
18. Integration. This Agreement represents the agreement
of the Pledgor with respect to the subject matter hereof and
there are no promises or representations by the Trustee or any
Holder of the Senior Secured Notes Guarantee relative to the
subject matter hereof not reflected herein.
19. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee on behalf of the Holders of the Senior Secured Notes
Guarantee pursuant to the terms of the Indentures, in a letter or
agreement executed by the Trustee or by telex or facsimile
transmission from the Trustee.
(b) Neither the Trustee nor any Holder of the Senior
Secured Notes Guarantee shall by any act (except by a written
instrument pursuant to paragraph 19(a) hereof), 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, nor any delay in
exercising, on the part of the Trustee, any right, power or
privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Trustee of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
20. 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.
21. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders of the Senior
Secured Notes Guarantee and their successors and assigns.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
23. Submission To Jurisdiction; Waivers. The Pledgor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of
Manhattan, the courts of the United States of America for
the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Pledgor at its
address set forth below or at such other address of which
the Trustee shall have been notified pursuant hereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any
special, exemplary, punitive or consequential damages.
24. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
25. Return of Pledged Stock. When this Agreement is
terminated and the security interests created hereby are
released, the Trustee shall return the certificate representing
the Pledged Stock to the Pledgor.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
PANDA GLOBAL HOLDINGS, INC.
By
Title
Address: 4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated as of April 22, 1997, made by Panda Global
Holdings, Inc. for the benefit of Bankers Trust Company as
Trustee (the "Pledge Agreement"). The undersigned agrees for the
benefit of the Trustee as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Trustee promptly in
writing of the occurrence of any of the events described in
paragraph 5(a) of the Pledge Agreement.
PANDA GLOBAL ENERGY COMPANY
By
Title
Address for Notices:
Panda Global Energy Company
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
With a copy to:
Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attention: General Counsel
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock No. Shares
Panda Global Energy Common 004 2
Company
EXHIBIT 10.119
ISSUER CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of April 22, 1997 between
PANDA GLOBAL ENERGY COMPANY, a Cayman Islands company, (the
"Pledgor") and BANKERS TRUST COMPANY, as Trustee (in such
capacity, the "Trustee") for the Holders of 12-1/2% Senior Secured
Notes due 2004 (the "Senior Secured Notes") of the Pledgor issued
pursuant to the terms and subject to the conditions of the Trust
Indenture dated as of April 22, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Indenture") between
the Pledgor and the Trustee and any additional securities
("Securities") as may be issued by the Pledgor from time to time
pursuant to one or Series Supplemental Indentures (as described
in the Indenture).
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture, the Trustee has agreed
to act on behalf of the Holders of the Senior Secured Notes upon
the terms and subject to the conditions set forth therein;
WHEREAS, the Senior Secured Notes are fully and
unconditionally guaranteed by Panda Global Holdings, Inc. (the
"Company") pursuant to the terms and subject to the conditions of
the guarantee dated as of April 22, 1997 (the "Guarantee") issued
pursuant to the Trust Indenture dated as of April 22, 1997 (as
amended, supplemented or otherwise modified from time to time,
the "Company Indenture") between the Company and the Bankers
Trust Company as trustee thereunder;
WHEREAS, the Pledgor is the issuer of the Securities, and it
is to the advantage of the Pledgor to facilitate this sale of the
Senior Secured Notes by entering into this Agreement;
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Indenture and to induce the
Initial Purchaser to purchase the Senior Secured Notes under the
Purchase Agreement dated April 11, 1997 (as it may be amended,
supplemented or otherwise modified from time to time, the
"Purchase Agreement"), the Pledgor hereby agrees with the
Trustee, for the ratable benefit of the Holders of the
Securities, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the
meanings given to them in the Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Cash Collateral Agreement, as the same
may be amended, modified or otherwise supplemented from time to
time.
"Cash Collateral": the Note Holders Cash Collateral and the
Holders Cash Collateral.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the Note Holders Collateral and the Holders
Collateral.
"Collateral Accounts": the Note Holders Collateral Accounts
and the Holders Collateral Accounts.
"Holders": the Holders of any Securities, including the
Senior Secured Notes.
"Holders Cash Collateral": the collective reference to:
(a) all cash, instruments, securities and funds deposited
from time to time in the Holders Collateral Accounts, including,
without limitation, any and all excess Non-U.S. Permitted Project
Event Proceeds deposited in the Holders Collateral Accounts and
all cash or other money proceeds of any collateral subject to a
security interest for the benefit of the Trustee under any
Transaction Document;
(b) all investments of funds in the Holders Collateral
Accounts and all instruments and securities evidencing such
investments; and
(c) all interest, dividends, cash, instruments, securities
and other property received in respect of, or as proceeds of, or
in substitution or exchange for, any of the foregoing.
"Holders Collateral": the Holders Cash Collateral, the
Holders Collateral Accounts and any additional securities or
other property pledged, assigned or granted to the Trustee for
the benefit of the Holders from time to time, pursuant to the
Indenture and any Series Supplemental Indenture.
"Holders Collateral Accounts": the Issuer Revenue Fund, the
Issuer Operating Fund and the Issuer Equity Distribution Fund.
"Note Holders": the Holders of the Senior Secured Notes.
"Note Holders Cash Collateral": the collective reference
to:
(a) all cash, instruments, securities and funds deposited
from time to time in the Note Holders Collateral Accounts,
including, without limitation, all cash or other money proceeds
of any collateral subject to a security interest for the benefit
of the Trustee under any Transaction Document;
(b) all investments of funds in the Note Holders Collateral
Accounts and all instruments and securities evidencing such
investments; and
(c) all interest, dividends, cash, instruments, securities
and other property received in respect of, or as proceeds of, or
in substitution or exchange for, any of the foregoing.
"Note Holders Collateral": the collective reference to the
Note Holders Cash Collateral, the Note Holders Collateral
Accounts and all of the Pledgor's right under the Issuer Loan
Agreement.
"Note Holders Collateral Accounts": the Capitalized
Interest Fund, the Luannan Facility Construction Fund, the Debt
Service Fund, the Debt Service Reserve Fund and the Luannan
Facility Restoration Fund.
"Note Obligations": the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Senior Secured
Notes and all other obligations and liabilities of the Issuer to
the Trustee and the Note Holders (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 Issuer or the Pledgor whether or not
a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with,
the Indenture (as the Indenture relates to the Senior Secured
Notes), the Series Supplemental Indenture relating to the Senior
Secured Notes, the Senior Secured Notes, the other Transaction
Documents or any other document relating to the Senior Secured
Notes made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of
counsel to the Trustee or counsel to the Initial Purchaser that
are required to be paid by the Issuer or the Pledgor pursuant to
the terms of the Indenture (as the Indenture relates to the
Senior Secured Notes), the Series Supplemental Indenture relating
to the Senior Secured Notes, this Agreement or any other
Transaction Document relating to the Senior Secured Notes).
"Obligations": the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Securities and
all other obligations and liabilities of the Issuer or the
Pledgor to the Trustee and the Holders (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 Issuer or the Pledgor whether
or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with,
the Indenture, any Series Supplemental Indenture, the Securities,
the other Transaction Documents relating to the Securities, or
any other document made, delivered or given in connection
therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the Trustee or counsel to the
Initial Purchaser that are required to be paid by the Issuer or
the Pledgor pursuant to the terms of the Indenture, any Series
Supplemental Indenture, the Securities, this Agreement or any
other Transaction Document relating to the Securities).
"Secured Note Obligations": the collective reference to (a)
the Note Obligations and (b) all obligations and liabilities of
the Pledgor which may arise under or in connection with this
Agreement or any other Transaction Document relating to the
Senior Secured Notes to which the Pledgor is a party, whether on
account of reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the Trustee or counsel to the
Initial Purchaser that are required to be paid by the Pledgor
pursuant to the terms of this Agreement or any other Transaction
Document to which the Pledgor is a party).
"Secured Obligations": the collective reference to (a) the
Obligations and (b) all obligations and liabilities of the
Pledgor which may arise under or in connection with this
Agreement or any other Transactions Document to which the Pledgor
is a party, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Trustee or counsel to the Initial Purchaser that are required to
be paid by the Pledgor pursuant to the terms of this Agreement or
any other Transaction Document to which the Pledgor is a party).
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Grant of Security Interest. (a) As collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Secured Note Obligations, the Pledgor hereby grants to the
Trustee, for the ratable benefit of the Note Holders, a security
interest in the Note Holders Collateral.
(b) As collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations, the
Pledgor hereby grants to the Trustee, for the ratable benefit of
the Holders, a security interest in the Holders Collateral.
3. Maintenance of Collateral Accounts. (a) The Note
Holders Collateral shall be maintained until the Secured Note
Obligations have been paid and performed in full.
(b) The Holders Collateral shall be maintained until the
Secured Obligations have been paid and performed in full.
(c) The Collateral shall be subject to the exclusive
dominion and control of the Trustee, which shall hold the Cash
Collateral and administer the Collateral Accounts subject to the
terms and conditions of this Agreement and the Indenture. The
Pledgor shall have no right of withdrawal from the Collateral
Accounts nor any other right or power with respect to the
Collateral, except as expressly provided herein and therein.
4. Deposit of Funds. The Pledgor shall make deposits into
the Collateral Accounts in accordance with the provisions of the
Indenture.
5. Representation and Warranty. The Pledgor represents and
warrants to the Trustee that this Agreement creates in favor of
the Trustee a perfected, first priority security interest in the
Collateral, enforceable in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
6. Covenants. The Pledgor covenants and agrees with the
Trustee that, except as the Trustee may otherwise consent in
accordance with the terms of the Indenture:
(a) The Pledgor will not (1) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, or (2) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein,
except for the security interest created by this Agreement.
(b) The Pledgor will maintain the security interest created
by this Agreement as a first, perfected security interest and
defend the right, title and interest of the Trustee and the
Holders in and to the Collateral against the claims and demands
of all Persons whomsoever. At any time and from time to time,
upon the written request of the Trustee, and at the sole expense
of the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such
further actions as the Trustee reasonably may request for the
purposes of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including,
without limitation, financing statements under the Code.
7. Investment of Cash Collateral. Collected funds on
deposit in the Collateral Accounts shall be invested by the
Trustee pursuant to the terms of Indenture.
8. Release of Cash Collateral. Collateral shall be
released in accordance with the provisions of the Indenture.
9. Remedies. (a) Upon the occurrence of an Event of
Default under the Indenture, the Trustee may, without notice of
any kind, except for notices required by law which may not be
waived, apply (i) the Collateral, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the
Trustee hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to the Trustee, to
the payment in whole or in part of the Secured Obligations and
(ii) the Guarantee Collateral, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Guarantee
Collateral or in any way relating to the Guarantee Collateral or
the rights of the Trustee and the Guarantee Holders hereunder,
including, without limitation, reasonable attorneys' fees and
disbursements of counsel to the Trustee, to the payment in whole
or in part of the Secured Guarantee Obligations, in each case in
accordance with the Indenture, and only after such application
and after the payment by the Trustee of any other amount required
by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Trustee account for the
surplus, if any, to the Pledgor. In addition to the rights,
powers and remedies granted to it under this Agreement and the
Indenture, the Trustee shall have all the rights, powers and
remedies available at law, including, without limitation, the
rights and remedies of a secured party under the Code. To the
extent permitted by law, the Pledgor waives presentment, demand,
protest and all notices (except notices specifically provided for
in any agreement securing, evidencing or relating to the Secured
Obligations), of any kind and all claims, damages and demands it
may acquire against the Trustee or any Holder arising out of the
exercise by them of any rights hereunder.
(b) The Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Trustee to collect
such deficiency.
10. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 10(a). All powers, authorizations
and agencies contained in this Agreement are coupled with an in-
terest and are irrevocable until this Agreement is terminated and
the security interests created hereby are released.
11. Indemnity of Trustee. The Pledgor shall indemnify the
Trustee, its officers, agents, employees and directors for, and
to hold each such person harmless against any and all losses,
liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties
under this Agreement, including the costs and expenses of
enforcing this Agreement against the Pledgor or any other Person
and investigating or defending itself against any claim (whether
asserted by the Pledgor or any Holder of Senior Secured Notes or
any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall
notify the Pledgor promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Pledgor shall
not relieve the Pledgor of its obligations hereunder. The
Pledgor shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and, if the
Pledgor's counsel is not diligently prosecuting or defending the
matter, or in the event that there may be a conflict between the
positions of the Pledgor and Trustee in conducting the defense,
the Pledgor shall pay the reasonable fees and expenses of such
counsel. The Pledgor need not pay for any settlement made
without their consent, which consent shall not be unreasonably
withheld.
12. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to comply with the specific duties and
responsibilities set forth herein and in the Indenture. The
powers conferred on the Trustee in this Agreement are solely for
the protection of the Trustee's and the Holders' interests in the
Collateral and shall not impose any duty upon the Trustee or any
Holder to exercise any such powers. Neither the Trustee nor any
Holder nor its or their directors, officers, employees or agents
shall be liable for any action lawfully taken or omitted to be
taken by any of them under or in connection with the Collateral
or this Agreement, except for its or their gross negligence or
willful misconduct.
13. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Trustee and the Holders, be governed by the Indenture and by such
other agreements with respect thereto as may exist from time to
time among them, but, as between the Trustee and the Pledgor, the
Trustee shall be conclusively presumed to be acting as agent for
the Holders with full and valid authority so to act or refrain
from acting, and the Pledgor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
15. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed to
the Trustee or the Pledgor at its address or transmission number
for notices provided in the recitals of the Indenture. The
Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this paragraph.
16. 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.
17. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee in a letter or agreement executed by the Trustee or
by telex or facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder shall by any act
(except by a written instrument pursuant to paragraph 17(a) hereof),
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, nor any delay in
exercising, on the part of the Trustee any right, power or
privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Trustee of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
18. 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.
19. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders and their
successors and assigns.
20. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
21. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of Manhattan, the courts
of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) designates, appoints and empowers CT Corporation
Systems, at 1633 Broadway, New York, N.Y. 10019 as its authorized
agent to receive for an on its behalf service of any summons,
complaint or other legal process in any such action, suit or
proceeding in the State of New York;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any special,
exemplary, punitive or consequential damages.
22. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the Pledgor and the Trustee have caused
this Cash Collateral Agreement to be duly executed and delivered
as of the date first above written.
PANDA GLOBAL ENERGY COMPANY
By:
Title:
Address: Panda Global Energy Company
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
with a copy to: Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attention: General Counsel
BANKERS TRUST COMPANY, as
Trustee
By:
Title:
EXHIBIT 10.120
PAN-WESTERN CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of April 22, 1997,
between PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
exempted company (the "Pledgor") and BANKERS TRUST COMPANY, as
Trustee (in such capacity, the "Trustee") for the Holders of the
12-1/2% Senior Secured Notes due 2004 (the "Senior Secured
Notes") of Panda Global Energy Company (the "Issuer") issued
pursuant to the terms and subject to the conditions of the Trust
Indenture, dated as of April 22, 1997 (as amended, supplemented
or otherwise modified from time to time, the "Indenture"),
between the Issuer and the Trustee and fully and unconditionally
guaranteed by Panda Global Holdings, Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the Indenture, the Trustee has
agreed to act on behalf of the Holders of the Senior Secured
Notes upon the terms and subject to the conditions set forth
therein; and
WHEREAS, the Pledgor is an indirect Subsidiary of the
Issuer, and substantially all of the proceeds of the Senior
Secured Notes are being loaned to the Pledgor pursuant to the
Issuer Loan Agreement; and
WHEREAS, in order to receive more favorable financing
terms for the sale of the Senior Secured Notes the Pledgor has
agreed to assign its rights to certain assets to the Trustee.
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Indenture and to induce the
Initial Purchaser of the Senior Secured Notes to purchase the
Senior Secured Notes under the Purchase Agreement dated April 11,
1997 (as it may be amended, supplemented or otherwise modified
from time to time, the "Purchase Agreement") with the Issuer, the
Company and Panda Energy International, Inc., the Pledgor hereby
agrees with the Trustee, for the ratable benefit of the Holders
of the Senior Secured Notes, as follows:
1. Defined Terms. (a) Unless otherwise defined
herein, terms defined in the Indenture and used herein shall have
the meanings given to them in the Indenture.
(b) The following terms shall have the following
meanings:
"Agreement": this Pan-Western Cash Collateral
Agreement, as the same may be amended, modified or otherwise
supplemented from time to time.
"Cash Collateral": the collective reference to:
(a) all cash, instruments, securities and funds
deposited from time to time in the Cash Collateral Accounts,
including, without limitation, all cash or other money proceeds
of any property of the Pledgor that constitutes collateral
subject to a security interest for the benefit of the Trustee
under any Collateral Document;
(b) all investments of funds in the Cash
Collateral Accounts and all instruments and securities evidencing
such investments; and
(c) all interest, dividends, cash, instruments,
securities and other property received in respect of, or as
proceeds of, or in substitution or exchange for, any of the
foregoing.
"Cash Collateral Accounts": the Pan-Western Revenue
Fund, the Pan-Western Operating Fund and the Pan-Western Equity
Distribution Fund.
"Code": the Uniform Commercial Code from time to time
in effect in the State of New York.
"Collateral": the collective reference to: (a) the
Cash Collateral, (b) the Cash Collateral Accounts and (c) all of
the Pledgor's rights and interest in and under the Shareholder
Loan Agreements and the Joint Venture Guarantees.
"Obligations": (i) the collective reference to the
unpaid principal, interest and premium, if any (including
Liquidated Damages and Additional Amounts, if any), on the Senior
Secured Notes and all other obligations and liabilities of the
Issuer to the Trustee and the Holders of Senior Secured Notes
(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
Issuer whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or
in connection with, Senior Secured Notes; and
(ii) all obligations and liabilities of the
Pledgor which may arise under or in connection with this
Agreement or any other Transaction Document to which the Pledgor
is a party;
in each case, whether on account of reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of
counsel to the Trustee or counsel to the Initial Purchaser that
are required to be paid by the Pledgor pursuant to the terms of
this Agreement or any other Transaction Document. Anything
herein to the contrary notwithstanding, the maximum liability of
the Pledgor hereunder shall in no event exceed the amount which
can be guaranteed by the Pledgor under applicable federal and
state laws relating to the insolvency of debtors.
(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 and paragraph references are to
this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
2. Grant of Security Interest. As collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Obligations, the Pledgor hereby grants to the Trustee, for
the ratable benefit of the Holders of Senior Secured Notes, a
security interest in the Collateral.
3. Maintenance of Cash Collateral Accounts. (a) The
Cash Collateral Accounts shall be maintained until the
Obligations have been paid and performed in full.
(b) The Collateral shall be subject to the exclusive
dominion and control of the Trustee, which shall hold the Cash
Collateral and administer the Cash Collateral Accounts subject to
the terms and conditions of this Agreement and the Indenture.
The Pledgor shall have no right of withdrawal from the Cash
Collateral Accounts nor any other right or power with respect to
the Collateral, except as expressly provided herein and therein.
4. Deposit of Funds. The Pledgor will make deposits
to the Cash Collateral Accounts in accordance with the terms of
the Indenture.
5. Representations and Warranties. The Pledgor
represents and warrants to the Trustee that:
(a) The Pledgor has the corporate power and authority
and the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and
binding obligation of the Pledgor enforceable in accordance with
its terms and creates in favor of the Trustee a perfected, first
priority security interest in the Collateral, enforceable in
accordance with its terms, except in each case as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirement of
Law or Contractual Obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any Requirement
of Law or Contractual Obligation of the Pledgor, except as
contemplated hereby.
(d) No consent or authorization of, filing with, or
other act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to
the knowledge of the Pledgor, threatened by or against the
Pledgor or against any of its properties or revenues with respect
to this Agreement or any of the transactions contemplated hereby.
6. Covenants. The Pledgor covenants and agrees with
the Trustee for the benefit of the Holders of the Senior Secured
Notes that, except as the Trustee may otherwise consent in
accordance with the terms of the Indenture:
(a) The Pledgor will not (1) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, or (2) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein,
except for the security interest created by this Agreement.
(b) The Pledgor will maintain the security interest
created by this Agreement as a first, perfected security interest
and will defend the right, title and interest of the Trustee in
and to the Collateral against the claims and demands of all
Persons whomsoever. At any time and from time to time, upon the
written request of the Trustee, and at the sole expense of the
Pledgor, the Pledgor will promptly and duly execute and deliver
such further instruments and documents and take such further
actions as the Trustee reasonably may request for the purposes of
obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without
limitation, financing statements under the Code.
7. Investment of Cash Collateral. Collected funds on
deposit in the Cash Collateral Accounts shall be invested by the
Trustee pursuant to the terms of the Indenture.
8. Release of Cash Collateral. The Trustee shall
release the Cash Collateral in accordance with the terms of the
Indenture.
9. Remedies. (a) Upon the occurrence of an Event of
Default, the Trustee may, without notice of any kind, except for
notices required by law which may not be waived, apply the
Collateral, after deducting all reasonable costs and expenses of
every kind incurred in respect thereof or incidental to the care
or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Trustee, to the payment in whole or in part of
the Obligations, in such order as the Trustee in its sole
discretion may elect, and only after such application and after
the payment by the Trustee of any other amount required by any
provision of law, including, without limitation, Section 9-
504(1)(c) of the Code, need the Trustee account for the surplus,
if any, to the Pledgor. In addition to the rights, powers and
remedies granted to it under this Agreement and in any other
agreement securing, evidencing or relating to the Obligations,
the Trustee shall have all the rights, powers and remedies
available at law, including, without limitation, the rights and
remedies of a secured party under the Code. To the extent
permitted by law, the Pledgor waives presentment, demand, protest
and all notices (except notices specifically provided for in any
agreement securing, evidencing or relating to the Obligations),
of any kind and all claims, damages and demands it may acquire
against the Trustee or any Holder arising out of the exercise by
them of any rights hereunder.
(b) The Pledgor waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of
the Code. The Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Trustee to collect
such deficiency.
10. No Subrogation. Notwithstanding any payment or
payments made by the Pledgor hereunder, or any setoff or
application of funds of the Pledgor by any Holder, or the receipt
of any amounts by the Trustee or any Holder with respect to any
of the Collateral, the Pledgor shall not be entitled to be
subrogated to any of the rights of the Trustee or any Holder
against the Issuer or against any other collateral security held
by the Trustee or any Holder for the payment of the Obligations,
nor shall the Pledgor seek any reimbursement from the Issuer in
respect of payments made by the Pledgor in connection with this
Agreement, or amounts realized by the Trustee or any Holder in
connection with the Collateral, until all amounts owing to the
Trustee and the Holders of Senior Secured Notes on account of the
Obligations are paid in full. If any amount shall be paid to the
Pledgor on account of such subrogation rights at any time when
all of the Obligations shall not have been paid in full, such
amount shall be held by the Pledgor in trust for the Trustee,
segregated from other funds of the Pledgor, and shall, forthwith
upon receipt by the Pledgor, be turned over to the Trustee in the
exact form received by the Pledgor (duly indorsed by the Pledgor
to the Trustee, if required) to be applied against the
Obligations, whether matured or unmatured, in such order as the
Trustee may determine.
11. Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder,
and the Collateral shall remain subject to the security interest
created hereby, notwithstanding that, without any reservation of
rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the
Obligations made by the Trustee or any Holder may be rescinded by
the Trustee or such Holder, and any of the Obligations continued,
and the Obligations, or the liability of the Issuer or any other
Person upon or for any part thereof, or any collateral security
or guarantee therefor or right of offset with respect thereto,
may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Trustee or any Holder, and the
Indenture, the Senior Secured Notes, the Shareholder Loan
Agreements, the Project Notes and the other Transaction Documents
executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in accordance with their
terms, and any guarantee, right of offset or other collateral
security at any time held by the Trustee or any Holder for the
payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Trustee nor any Holder
shall have any obligation to protect, secure, perfect or insure
any other Lien at any time held by it as security for the
Obligations or any property subject thereto. The Pledgor 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 any Holder upon this Agreement; the Obligations,
and any of them, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon this Agreement;
and all dealings between the Issuer and the Pledgor, on the one
hand, and the Trustee and the Holders of Senior Secured Notes, on
the other, shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Agreement. The Pledgor
waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Issuer or the
Pledgor with respect to the Obligations. When pursuing its
rights and remedies hereunder against the Pledgor, the Trustee
may, but shall be under no obligation to, pursue such rights and
remedies as it may have against the Issuer or any other Person or
against any collateral security or guarantee for the Obligations
or any right of offset with respect thereto, and any failure by
the Trustee to pursue such other rights or remedies or to collect
any payments from the Issuer or any such other Person or to
realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Issuer
or any such other Person or of any such collateral security,
guarantee or right of offset, shall not relieve the Pledgor 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 Trustee or any Holder against the Pledgor
or the Collateral.
12. Trustee's Appointment as Attorney-in-Fact. (a)
The Pledgor hereby irrevocably constitutes and appoints the
Trustee and any officer or agent of the Trustee, 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 Pledgor and in the name of the Pledgor or in the Trustee's
own name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said
attorneys shall lawfully do or cause to be done pursuant to the
power of attorney granted in paragraph 12(a). All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are
released.
13. Duty of Trustee. The Trustee's sole duty with
respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code
or otherwise, shall be to comply with the specific duties and
responsibilities set forth herein and in the Indenture. The
powers conferred on the Trustee in this Agreement are solely for
the protection of the Trustee's and the Holders of Senior Secured
Notes' interests in the Collateral and shall not impose any duty
upon the Trustee or any Holder to exercise any such powers.
Neither the Trustee nor any Holder nor its or their directors,
officers, employees or agents shall be liable for any action
lawfully taken or omitted to be taken by any of them under or in
connection with the Collateral or this Agreement, except for its
or their gross negligence or willful misconduct.
14. Execution of Financing Statements. Pursuant to
Section 9-402 of the Code, the Pledgor authorizes the Trustee to
file financing statements with respect to the Collateral without
the signature of the Pledgor in such form and in such filing
offices as the Trustee reasonably determines appropriate to
perfect the security interests of the Trustee under this
Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing
in any jurisdiction.
15. Authority of Trustee. The Pledgor acknowledges
that the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Trustee and the Holders of Senior Secured Notes, be governed by
the Indenture and by such other agreements with respect thereto
as may exist from time to time among them, but, as between the
Trustee and the Pledgor, the Trustee shall be conclusively
presumed to be acting as agent for the Holders of Senior Secured
Notes with full and valid authority so to act or refrain from
acting, and the Pledgor shall not be under any obligation, or
entitlement, to make any inquiry respecting such authority.
16. Indemnity of Trustee. The Pledgor shall indemnify
the Trustee, its officers, agents, employees, directors for, and
to hold each such person harmless against any and all losses,
liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties
under this Agreement, including the costs and expenses of
enforcing this Agreement against the Pledgor or any other Person
and investigating or defending itself against any claim (whether
asserted by the Pledgor or any Holder of Senior Secured Notes or
any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall
notify the Pledgor promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Pledgor shall
not relieve the Pledgor of its obligations hereunder. The
Pledgor shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and, if
Pledgor's counsel is not diligently prosecuting or defending the
matter, or in the event that there may be a conflict between the
positions of the Pledgor and Trustee in conducting the defense,
the Pledgor shall pay the reasonable fees and expenses of such
counsel. The Pledgor need not pay for any settlement made
without its consent, which consent shall not be unreasonably
withheld.
17. Notices. All notices, requests and demands to or
upon the Trustee or the Pledgor to be effective shall be in
writing (or by telex, fax or similar electronic transfer
confirmed in writing) and shall be deemed to have been duly given
or made (a) when delivered by hand or (b) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, as follows:
(1) if to the Trustee, at its address or transmission
number for notices provided in the recitals of the Indenture; and
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses
and transmission numbers for notices by notice in the manner
provided in this paragraph.
18. 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.
19. Integration. This Agreement represents the
agreement of the Pledgor with respect to the subject matter
hereof and there are no promises or representations by the
Trustee or any Holder relative to the subject matter hereof not
reflected herein.
20. Amendments in Writing; No Waiver; Cumulative
Remedies. (a) None of the terms or provisions of this Agreement
may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee in a letter or agreement executed by the Trustee or
by telex or facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder shall by any
act (except by a written instrument pursuant to paragraph 20(a)
hereof), 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, nor any
delay in exercising, on the part of the Trustee, any right, power
or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by
the Trustee of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
21. 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.
22. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders of Senior
Secured Notes and their successors and assigns.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
24. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of Manhattan, the courts
of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) designates, appoints and empowers CT Corporation
Systems, at 1633 Broadway, New York, N.Y. 10019 as its authorized
agent to receive for and on its behalf service of any summons,
complaint or other legal process in any such action, suit or
proceeding in the State of New York;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any special,
exemplary, punitive or consequential damages.
25. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the Pledgor and the Trustee have
caused this Cash Collateral Agreement to be duly executed and
delivered as of the date first above written.
PAN-WESTERN ENERGY CORPORATION LLC
By:
Title:
Address:
Pan-Western Energy Corporation LLC
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
with a copy to: Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
BANKERS TRUST COMPANY, as Trustee
By:
Title:
EXHIBIT 10.121
PAN-SINO CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of April 22, 1997,
between PAN-SINO ENERGY DEVELOPMENT COMPANY LLC, a Cayman Islands
exempted company (the "Pledgor") and BANKERS TRUST COMPANY, as
Trustee (in such capacity, the "Trustee") for the Holders of the
12-1/2% Senior Secured Notes due 2004 ("Senior Secured Notes") of
Panda Global Energy Company (the "Issuer") issued pursuant to the
terms and subject to the conditions of a Trust Indenture, dated
as of April 22, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Indenture"), between the Issuer
and the Trustee.
W I T N E S S E T H:
WHEREAS, the Pledgor is a Subsidiary of the Issuer, and
substantially all of the proceeds of the Senior Secured Notes are
being loaned to Subsidiaries of the Pledgor;
WHEREAS, in order to receive more favorable financing terms
for the sale of the Senior Secured Notes, the Pledgor has agreed
to pledge certain assets in favor of the Trustee;
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Indenture and to induce the
Initial Purchaser to purchase the Senior Secured Notes under the
Purchase Agreement dated April 11, 1997 (as it may be amended,
supplemented or otherwise modified from time to time, the
"Purchase Agreement") with the Issuer, Panda Global Holdings,
Inc. (the "Company") and Panda Energy International, Inc., the
Pledgor hereby agrees with the Trustee, for the ratable benefit
of the Holders of the Senior Secured Notes, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the
meanings given to them in the Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Pan-Sino Cash Collateral Agreement, as
the same may be amended, modified or otherwise supplemented from
time to time.
"Cash Collateral": the collective reference to:
(a) all cash, instruments, securities and funds deposited
from time to time in the Cash Collateral Account, including,
without limitation, all cash or other money proceeds of any
property of the Pledgor that constitutes collateral subject to a
security interest for the benefit of the Trustee under any
Transaction Document;
(b) all investments of funds in the Cash Collateral Account
and all instruments and securities evidencing such investments;
and
(c) all interest, dividends, cash, instruments, securities
and other property received in respect of, or as proceeds of, or
in substitution or exchange for, any of the foregoing.
"Cash Collateral Account": the Pan-Sino Fund.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the collective reference to the Cash
Collateral and the Cash Collateral Account.
"Guaranteed Obligations": the collective reference to the
unpaid principal, interest and premium, if any, on the loans made
pursuant to the Issuer Loan Agreement (including, without
limitation, interest accruing at the then applicable rate of
interest provided in the Issuer Loan Agreement after the maturity
of the loans thereunder and interest accruing at the then
applicable rate of interest provided in the Issuer Loan Agreement
after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to Pan-Western whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Issuer
Loan Agreement, the Issuer Note, or any other document made,
delivered or given in connection therewith whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel that are
required to be paid by Pan-Western pursuant to the terms of the
Issuer Loan Agreement, the Issuer Note or any other Transaction
Document).
"Obligations": (i) the collective reference to the
Guaranteed Obligations and the unpaid principal interest and
premium, if any (including Liquidated Damages and Additional
Amounts, if any), on the Senior Secured Notes and all other
obligations and liabilities of the Issuer to the Trustee and the
Holders of the Senior Secured Notes (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 Issuer whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, Senior
Secured Notes; and
(ii) all obligations and liabilities of the Pledgor which
may arise under or in connection with this Agreement or any other
Transaction Document to which the Pledgor is a party;
in each case, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Trustee or counsel to the Initial Purchaser that are required to
be paid by the Pledgor pursuant to the terms of this Agreement or
any other Transaction Document.
2. Guarantee. (a) Subject to the provisions of paragraphs
2(b) and 2(c) below, the Pledgor hereby unconditionally and irre-
vocably guarantees to the Trustee, for the ratable benefit of the
Holders of the Senior Secured Notes and their respective succes-
sors, indorsees, transferees and assigns, the prompt and com-
plete payment and performance by Pan-Western when due (whether at
the stated maturity, by acceleration or otherwise) of the Guaran-
teed Obligations.
(a) The Pledgor shall have no personal liability for
payment of the Guaranteed Obligations, and in any action or suit
to collect the Guaranteed Obligations the Trustee and the Holders
of the Senior Secured Notes shall not seek any in personam
judgment against the Pledgor or any judgment for a deficiency but
shall look solely to the security interests hereunder and under
the other Transaction Documents to which the Pledgor is a party
and the collateral described herein and therein for payment of
the Guaranteed Obligations. Nothing contained in this Section
shall be construed to impair the validity of the Guaranteed
Obligations or any of the Transaction Documents to which the
Pledgor is a party or affect or impair in any way the right of
the Trustee and the Holders to exercise their rights and remedies
under the Indenture, the Senior Secured Notes and any other
Transaction Documents in accordance with their terms.
(b) The maximum liability of the Pledgor hereunder and
under the other Transaction Documents to which it is a party
shall in no event exceed the amount which can be guaranteed by
the Pledgor under applicable federal and state laws relating to
the insolvency of debtors.
3. Grant of Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the
Obligations, the Pledgor hereby grants to the Trustee, for the
ratable benefit of the Holders of the Senior Secured Notes, a
security interest in the Collateral.
4. Maintenance of Cash Collateral Account. (a) The Cash
Collateral Account shall be maintained until the Obligations have
been paid and performed in full.
(b) The Collateral shall be subject to the exclusive
dominion and control of the Trustee, which shall hold the Cash
Collateral and administer the Cash Collateral Account subject to
the terms and conditions of this Agreement and the Indenture.
The Pledgor shall have no right of withdrawal from the Cash
Collateral Account nor any other right or power with respect to
the Collateral, except as expressly provided herein and therein.
5. Deposit of Funds. (a) Pan-Sino shall make deposits to
the Pan-Sino Fund in accordance with the terms of the Indenture.
6. Representations and Warranties. The Pledgor represents
and warrants to the Trustee that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its
terms and creates in favor of the Trustee a perfected, first
priority security interest in the Collateral, enforceable in
accordance with its terms, except in each case as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirement of
Law or Contractual Obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any Requirement
of Law or Contractual Obligation of the Pledgor, except as
contemplated hereby.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
7. Covenants. The Pledgor covenants and agrees with the
Trustee for the benefit of the Holders of the Senior Secured
Notes that, except as the Trustee may otherwise consent in
accordance with the terms of the Indenture:
(a) The Pledgor will not (1) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, or (2) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein,
except for the security interest created by this Agreement.
(b) The Pledgor will maintain the security interest created
by this Agreement as a first, perfected security interest and
will defend the right, title and interest of the Trustee in and
to the Collateral against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written
request of the Trustee, and at the sole expense of the Pledgor,
the Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions
as the Trustee reasonably may request for the purposes of
obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without
limitation, financing statements under the Code.
8. Investment of Cash Collateral. Collected funds on
deposit in the Cash Collateral Account shall be invested by the
Trustee pursuant to the terms of the Indenture.
9. Release of Cash Collateral. The Trustee shall release
the Cash Collateral in accordance with the terms of the
Indenture.
10. Remedies. (a) Upon the occurrence of an Event of
Default, the Trustee may, without notice of any kind, except for
notices required by law which may not be waived, apply the
Collateral, after deducting all reasonable costs and expenses of
every kind incurred in respect thereof or incidental to the care
or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Trustee, to the payment in whole or in part of
the Obligations, in such order as the Trustee in its sole
discretion may elect, and only after such application and after
the payment by the Trustee of any other amount required by any
provision of law, including, without limitation, Section 9-
504(1)(c) of the Code, need the Trustee account for the surplus,
if any, to the Pledgor. In addition to the rights, powers and
remedies granted to it under this Agreement and in any other the
Trustee shall have all the rights, powers and remedies available
at law, including, without limitation, the rights and remedies of
a secured party under the Code. To the extent permitted by law,
the Pledgor waives presentment, demand, protest and all notices
(except notices specifically provided for in any agreement
securing, evidencing or relating to the Obligations), of any kind
and all claims, damages and demands it may acquire against the
Trustee arising out of the exercise by them of any rights
hereunder.
(b) The Pledgor waives and agrees not to assert any rights
or privileges which it may acquire under Section 9-112 of the
Code. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Trustee to collect
such deficiency.
11. No Subrogation. Notwithstanding any payment or
payments made by the Pledgor hereunder, or any setoff or
application of funds of the Pledgor by any Holder of Senior
Secured Notes, or the receipt of any amounts by the Trustee or
any Holder with respect to any of the Collateral, the Pledgor
shall not be entitled to be subrogated to any of the rights of
the Trustee or any Holder of Senior Secured Notes against the
Issuer or against any other collateral security held by the
Trustee or any Holder of Senior Secured Notes for the payment of
the Obligations, nor shall the Pledgor seek any reimbursement
from the Issuer in respect of payments made by the Pledgor in
connection with this Agreement, or amounts realized by the
Trustee or any Holder in connection with the Collateral, until
all amounts owing to the Trustee and the Holders of Senior
Secured Notes on account of the Obligations are paid in full. If
any amount shall be paid to the Pledgor on account of such
subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by the
Pledgor in trust for the Trustee, segregated from other funds of
the Pledgor, and shall, forthwith upon receipt by the Pledgor, be
turned over to the Trustee in the exact form received by the
Pledgor (duly indorsed by the Pledgor to the Trustee, if
required) to be applied against the Obligations, whether matured
or unmatured, in such order as the Trustee may determine.
12. Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder,
and the Collateral shall remain subject to the security interest
created hereby, notwithstanding that, without any reservation of
rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the
Obligations made by the Trustee or any Holder of Senior Secured
Notes may be rescinded by the Trustee or such Holder of Senior
Secured Notes, and any of the Obligations continued, and the
Obligations, or the liability of the Issuer or any other Person
upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered,
or released by the Trustee or any Holder of Senior Secured Notes,
and the Indenture, the Issuer Loan Agreement, the Issuer Note,
the Senior Secured Notes and the other Transaction Documents
executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, in
accordance with their terms, and any guarantee, right of offset
or other collateral security at any time held by the Trustee or
any Holder of Senior Secured Notes for the payment of the
Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Trustee nor any Holder of Senior Secured
Notes shall have any obligation to protect, secure, perfect or
insure any other Lien at any time held by it as security for the
Obligations or any property subject thereto. The Pledgor 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 any Holder of Senior Secured Notes upon this
Agreement; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred in
reliance upon this Agreement; and all dealings between the Issuer
and the Pledgor, on the one hand, and the Trustee and the Holders
of Senior Secured Notes, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance
upon this Agreement. The Pledgor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment
to or upon the Issuer or the Pledgor with respect to the
Obligations. When pursuing its rights and remedies hereunder
against the Pledgor, the Trustee may, but shall be under no
obligation to, pursue such rights and remedies as it may have
against the Issuer or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Trustee to pursue
such other rights or remedies or to collect any payments from the
Issuer or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of
offset, or any release of the Issuer or any such other Person or
of any such collateral security, guarantee or right of offset,
shall not relieve the Pledgor 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 Trustee
or any Holder of Senior Secured Notes against the Pledgor or the
Collateral.
13. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 13(a). All powers, authorizations
and agencies contained in this Agreement are coupled with an interest
and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
14. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to comply with the specific duties and
responsibilities set forth herein and in the Indenture. The
powers conferred on the Trustee in this Agreement are solely for
the protection of the Trustee's and the Holders of Senior Secured
Notes' interests in the Collateral and shall not impose any duty
upon the Trustee or any Holder of Senior Secured Notes to
exercise any such powers. Neither the Trustee nor any Holder of
Senior Secured Notes nor its or their directors, officers,
employees or agents shall be liable for any action lawfully taken
or omitted to be taken by any of them under or in connection with
the Collateral or this Agreement, except for its or their gross
negligence or willful misconduct.
15. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
16. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Trustee and the Holders of Senior Secured Notes, be governed by
the Indenture and by such other agreements with respect thereto
as may exist from time to time among them, but, as between the
Trustee and the Pledgor, the Trustee shall be conclusively
presumed to be acting as agent for the Holders with full and
valid authority so to act or refrain from acting, and the Pledgor
shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
17. Indemnity of Trustee. The Pledgor shall indemnify the
Trustee, its officers, agents, employees, and directors for, and
to hold each such person harmless against any and all losses,
liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties
under this Agreement, including the costs and expenses of
enforcing this Agreement against the Pledgor or any other Person
and investigating or defending itself against any claim (whether
asserted by the Pledgor or any Holder of Senior Secured Notes or
any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall
notify the Pledgor promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Pledgor shall
not relieve the Pledgor of its obligations hereunder. The
Pledgor shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and, if
Pledgor's counsel is not diligently prosecuting or defending the
matter, or in the event that there may be a conflict between the
positions of the Pledgor and Trustee in conducting the defense,
the Pledgor shall pay the reasonable fees and expenses of such
counsel. The Pledgor need not pay for any settlement made
without its consent, which consent shall not be unreasonably
withheld.
18. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(a) when delivered by hand or (b) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, as follows:
(1) if to the Trustee, at its address or transmission
number for notices provided in the recitals of the Indenture; and
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this paragraph.
19. 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.
20. Integration. This Agreement represents the agreement
of the Pledgor with respect to the subject matter hereof and
there are no promises or representations by the Trustee or any
Holder of Senior Secured Notes relative to the subject matter
hereof not reflected herein.
21. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee in a letter or agreement executed by the Trustee or
by telex or facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder of Senior Secured
Notes shall by any act (except by a written instrument pursuant
to paragraph 21(a) hereof), delay, indulgence, omission or other-
wisebe 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,
nor any delay in exercising, on the part of the Trustee, any right,
power or privilege hereunder shall operate as a waiver thereof.
No single or partial exercise of any right, power or privilege here-
under shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Trustee of any right or remedy hereunder on anyone occasion shall
not be construed as a bar to any right or remedy which the Trustee
would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
22. 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.
23. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders of Senior
Secured Notes and their successors and assigns.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
25. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of Manhattan, the courts
of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) designates, appoints and empowers CT Corporation
Systems, at 1633 Broadway, New York, N.Y. 10019 as its authorized
agent to receive for and on its behalf service of any summons,
complaint or other legal process in any such action, suit or
proceeding in the State of New York;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any special,
exemplary, punitive or consequential damages.
26. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the Pledgor and the Trustee have caused
this Cash Collateral Agreement to be duly executed and delivered
as of the date first above written.
PAN-SINO ENERGY DEVELOPMENT COMPANY LLC
By:
Title:
Address:
Pan-Sino Energy Development Company LLC
c/o Maples and Calder
Ugland House
P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
with a copy to: Panda Energy International Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
BANKERS TRUST COMPANY, as Trustee
By:
Title:
EXHIBIT 10.122
PANDA ENERGY INTERNATIONAL PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 22, 1997, made by Panda
Energy International, Inc., a Texas corporation (the "Pledgor")
in favor of Bankers Trust Company, as Trustee (in such capacity,
the "Trustee") for the Holders (the "Holders") of securities (the
"Securities") issued by Panda Global Holdings, Inc. (the
"Company") pursuant to the terms and subject to the conditions of
the Trust Indenture dated as of April 22, 1997 (as amended,
supplemented or otherwise modified from time to time, the
"Company Indenture") between the Company and the Trustee and one
or more Series Supplemental Indentures (as described in the
Company Indenture).
W I T N E S S E T H:
WHEREAS, pursuant to the Company Indenture, the Company has
agreed to issue Securities in the form of a guarantee of senior
secured notes (the "Senior Secured Notes") issued by Panda Global
Energy Company, a Cayman Islands exempted company (the "Issuer")
in order to facilitate the sale of such Senior Secured Notes;
WHEREAS, the Company wishes from time to time to issue
additional Securities pursuant to the Company Indenture and one
or more Series Supplemental Indentures;
WHEREAS, the Issuer and the Company are Wholly-Owned
Subsidiaries of the Pledgor, and it is to the advantage of the
Pledgor to facilitate the sale of the Senior Secured Notes by
entering into this Pledge Agreement; and
WHEREAS, the Pledgor is the legal and beneficial owner of
the shares of Pledged Stock (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Company Indenture and to
induce the Initial Purchaser to purchase the Senior Secured Notes
under the Purchase Agreement dated April 11, 1997 (as it may be
amended, supplemented or otherwise modified from time to time,
the "Purchase Agreement") with the Issuer, the Company and the
Pledgor, the Pledgor hereby agrees with the Trustee, for the
ratable benefit of the Holders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Company Indenture and used herein shall have
the meanings given to them in the Company Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Collateral": the Pledged Stock and all Proceeds.
"Collateral Account": any account established to hold money
Proceeds, maintained under the sole dominion and control of the
Trustee, subject to withdrawal by the Trustee for the account of
the Holders only as provided in paragraph 8(a).
"Obligations": (i) the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Securities and
all other obligations and liabilities of the Company to the
Trustee and the Holders (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 whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Company
Indenture, any Series Supplemental Indenture, the Securities,
this Agreement, the other Transaction Documents to which the
Pledgor is a party or any other document made, delivered or given
in connection therewith; and
(ii) all obligations and liabilities of the Pledgor which
may arise under or in connection with this Agreement or any other
Transaction Document to which the Pledgor is a party;
in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee or counsel to the Initial
Purchaser that are required to be paid by the Company pursuant to
the terms of the Company Indenture, any Series Supplemental
Indenture, the Securities or this Agreement or any other
Transaction Document).
"Pledged Stock": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted
by the Stock Issuer to the Pledgor while this Agreement is in
effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon or distributions with
respect thereto.
"Stock Issuer": the company identified on Schedule 1
attached hereto as the issuer of the Pledged Stock.
"UCC": the Uniform Commercial Code from time to time in
effect in the State of New York.
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
delivers to the Trustee, for the ratable benefit of the Holders,
all the Pledged Stock and hereby grants to the Trustee, for the
ratable benefit of the Holders, a first security interest in the
Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the
Trustee of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor
with, if the Trustee so requests, signature guaranteed.
4. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon delivery to the Trustee of the stock certificates
evidencing the Pledged Stock, the security interest created
pursuant to this Agreement will constitute a valid, perfected
first priority security interest in the Collateral, enforceable
in accordance with the terms hereof against all creditors of the
Pledgor and any Persons purporting to purchase any Collateral
from the Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirements of
Law or contractual obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any
Requirements of Law or contractual obligation of the Pledgor,
except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The shares of Pledged Stock constitute all the issued
and outstanding shares of all classes of the capital stock of the
Stock Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Stock, free of any
and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement.
5. Covenants. The Pledgor covenants and agrees with the
Trustee for the benefit of the Holders that except as the Trustee
may otherwise consent in accordance with the terms of the Company
Indenture, from and after the date of this Agreement until this
Agreement is terminated and the security interests created hereby
are released:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive
any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, the
Pledgor shall accept the same as the agent of the Trustee, hold
the same in trust for the Trustee and deliver the same forthwith
to the Trustee in the exact form received, duly indorsed by the
Pledgor to the Trustee, if required, together with an undated
stock power covering such certificate duly executed in blank by
the Pledgor and with, if the Trustee so requests, signature
guaranteed, to be held by the Trustee, subject to the terms
hereof, as additional collateral security for the Obligations.
Any sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of the Stock Issuer shall be paid over
to the Trustee to be held by it hereunder as additional
collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with
respect to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Stock Issuer or pursuant
to the reorganization thereof, the property so distributed shall
be delivered to the Trustee to be held by it hereunder as
additional collateral security for the Obligations. If any sums
of money or property so paid or distributed in respect of the
Pledged Stock shall be received by the Pledgor, the Pledgor
shall, until such money or property is paid or delivered to the
Trustee, hold such money or property in trust for the Trustee,
segregated from other funds of the Pledgor, as additional
collateral security for the Obligations.
(b) Without the prior written consent of the Trustee, the
Pledgor will not (1) vote to enable, or take any other action to
permit, the Stock Issuer to issue any stock or other equity
securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of any nature of the
Stock Issuer, (2) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral,
(3) create, incur or permit to exist any Lien or option in favor
of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security
interest created by this Agreement or (4) enter into any
agreement or undertaking restricting the right or ability of the
Pledgor or the Trustee to sell, assign or transfer any of the
Collateral.
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever. At any time and from time to
time, upon the written request of the Trustee, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and
take such further actions as the Trustee may reasonably request
for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted. If
any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note,
other instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to the Trustee, duly
endorsed in a manner satisfactory to the Trustee, to be held as
Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Trustee and the
Holders 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 or in connection
with any of the transactions contemplated by this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of
Default shall have occurred and be continuing, the Pledgor shall
be permitted to receive all cash dividends paid in the normal
course of business of the Stock Issuer in respect of the Pledged
Stock and to exercise all voting and corporate rights with
respect to the Pledged Stock; provided, however, that no vote
shall be cast or corporate right exercised or other action taken
which would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Company
Indenture, any Series Supplemental Indenture, the Securities or
any other Transaction Document.
7. Rights of the Trustee. (a) All money Proceeds received
by the Trustee hereunder shall be held by the Trustee for the
benefit of the Holders in a Collateral Account. All Proceeds
while held by the Trustee in a Collateral Account (or by the
Pledgor in trust for the Trustee) shall continue to be held as
collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in paragraph
8(a).
(b) If an Event of Default shall occur and be continuing
and the Trustee shall give notice of its intent to exercise such
rights to the Pledgor, (1) the Trustee shall have the right to
receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Obligations in such
order as the Trustee may determine, and (2) all shares of the
Pledged Stock shall be registered in the name of the Trustee or
its nominee, and the Trustee or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders
of the Stock Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged
Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any
and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in
the corporate structure of the Stock Issuer, or upon the exercise
by the Pledgor or the Trustee of any right, privilege or option
pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and
conditions as the Trustee may determine), all without liability
except to account for property actually received by it, but the
Trustee shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.
8. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Trustee's
election, the Trustee may apply all or any part of Proceeds held
in any Collateral Account in payment of the Obligations in such
order as the Trustee may elect.
(b) If an Event of Default shall occur and be continuing,
the Trustee, on behalf of the Holders, may exercise, in addition
to all other rights and remedies granted in this Agreement and in
any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the
foregoing, the Trustee, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon
the Pledgor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-
counter market, at any exchange, broker's board or office of the
Trustee or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash
or on credit or for future delivery without assumption of any
credit risk. The Trustee or any Holder shall have the right upon
any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole
or any part of the Collateral so sold, free of any right or
equity of redemption in the Pledgor, which right or equity is
hereby waived or released. The Trustee shall apply any Proceeds
from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or
sale, after deducting all reasonable costs and expenses of every
kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Trustee and counsel to the Initial Purchaser to
the payment in whole or in part of the Obligations, in such order
as the Trustee may elect, and only after such application and
after the payment by the Trustee of any other amount required by
any provision of law, including, without limitation, Section
9-504(1)(c) of the UCC, need the Trustee account for the surplus,
if any, to the Pledgor. To the extent permitted by applicable
law, the Pledgor waives all claims, damages and demands it may
acquire against the Trustee or any Holder arising out of the
exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other
disposition. The Pledgor waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of
the UCC.
9. Irrevocable Authorization and Instruction to Stock
Issuer. The Pledgor hereby authorizes and instructs the Stock
Issuer to comply with any instruction received by it from the
Trustee in writing that (a) states that an Event of Default has
occurred and (b) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that the Stock Issuer shall
be fully protected in so complying.
10. No Subrogation. Notwithstanding any payment or
payments made by the Pledgor hereunder, or any setoff or
application of funds of the Pledgor by any Holders, or the
receipt of any amounts by the Trustee or any Holder with respect
to any of the Collateral, the Pledgor shall not be entitled to be
subrogated to any of the rights of the Trustee or any Holder
against the Issuer or the Company or against any other collateral
security held by the Trustee or any Holder for the payment of the
Obligations, nor shall the Pledgor seek any reimbursement from
the Issuer or the Company in respect of payments made by the
Pledgor in connection with this Agreement, or amounts realized by
the Trustee or any Holders in connection with the Collateral,
until all amounts owing to the Trustee and the Holders on account
of the Obligations are paid in full. If any amount shall be paid
to the Pledgor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full,
such amount shall be held by the Pledgor in trust for the
Trustee, segregated from other funds of the Pledgor, and shall,
forthwith upon receipt by the Pledgor, be turned over to the
Trustee in the exact form received by the Pledgor (duly indorsed
by the Pledgor to the Trustee, if required) to be applied against
the Obligations, whether matured or unmatured, in such order as
the Trustee may determine.
11. Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder,
and the Collateral shall remain subject to the security interests
granted hereby, notwithstanding that, without any reservation of
rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the
Obligations made by the Trustee or any Holders may be rescinded
by the Trustee or such Holders any of the Obligations continued,
and the Obligations, or the liability of the Issuer or the
Company or any other Person upon or for any part thereof, or any
collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered, or released by the Trustee or any Holder,
and the Indentures, any Series Supplemental Indenture, the
Securities, the other Transaction Documents and any other
documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated in accordance with
their terms, and any guarantee, right of offset or other
collateral security at any time held by the Trustee or any Holder
for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. Neither the Trustee nor any
Holder shall have any obligation to protect, secure, perfect or
insure any other Lien at any time held by it as security for the
Obligations or any property subject thereto. The Pledgor 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 any Holder upon this Agreement; the Obligations,
and any of them, shall be deemed conclusively to have been
created, contracted or incurred in reliance upon this Agreement;
and all dealings between the Issuer or the Company and the
Pledgor, on the one hand, and the Trustee and the Holders, on the
other, likewise shall be conclusively presumed to have been had
or consummated in reliance upon this Agreement. The Pledgor
waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Issuer or the
Company or the Pledgor with respect to the Obligations. When
pursuing its rights and remedies hereunder against the Pledgor,
the Trustee may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Issuer or the
Company or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Trustee to pursue such other
rights or remedies or to collect any payments from the Issuer or
the Company or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of
offset, or any release of the Issuer or the Company or any such
other Person or of any such collateral security, guarantee or
right of offset, shall not relieve the Pledgor 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 Trustee against the Pledgor or the Collateral.
12. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys-in-
fact shall lawfully do or cause to be done pursuant to the power
of attorney granted in paragraph 12(a). All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are
released.
13. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or
otherwise, shall be to deal with it in the same manner as the
Trustee deals with similar securities and property for its own
account, except that the Trustee shall have no obligation to
invest funds held in any Collateral Account and may hold the same
as demand deposits. Neither the Trustee, any Holder nor any of
their respective directors, officers, employees or agents (a)
shall be liable for failure to demand, collect or realize upon
any of the Collateral or for any delay in doing so or (b) shall
be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or any other Person or
to take any other action whatsoever with regard to the Collateral
or any part thereof.
14. Execution of Financing Statements. Pursuant to Section
9-402 of the UCC, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
15. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, voting
right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as
between the Trustee and the Holders, be governed by the Indenture
and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Trustee and the
Pledgor, the Trustee shall be conclusively presumed to be acting
as agent for the Holders with full and valid authority so to act
or refrain from acting, and neither the Pledgor nor the Stock
Issuer shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
16. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed as
follows:
(a) if to the Trustee, at its address or transmission
number for notices provided in the Recitals to the Indenture; and
(b) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
17. 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.
18. Integration. This Agreement represents the agreement
of the Pledgor with respect to the subject matter hereof and
there are no promises or representations by the Trustee or any
Holder relative to the subject matter hereof not reflected
herein.
19. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee on behalf of the Holders pursuant to the terms of the
Indentures in a letter or agreement executed by the Trustee or by
telex or facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder shall by any act
(except by a written instrument pursuant to paragraph 19(a)
hereof), 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, nor any
delay in exercising, on the part of the Trustee, any right, power
or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by
the Trustee of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
20. 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.
21. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders and their
successors and assigns.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
23. Submission To Jurisdiction; Waivers. The Pledgor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of
Manhattan, the courts of the United States of America for
the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Pledgor at its
address set forth below or at such other address of which
the Trustee shall have been notified pursuant hereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any
special, exemplary, punitive or consequential damages.
24. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
25. Return of Pledged Stock. When this Agreement is
terminated and the security interests created hereby are
released, the Trustee shall return the certificate representing
the Pledged Stock to the Pledgor.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
PANDA ENERGY INTERNATIONAL, INC.
By:
Title:
Address: 4100 Spring Valley Road,
Suite 1001
Dallas, Texas 75244
fax: (972) 980-6815
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated as of April 22, 1997, made by Panda Energy
International, Inc. for the benefit of Bankers Trust Company as
Trustee (the "Pledge Agreement"). The undersigned agrees for the
benefit of the Trustee as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Trustee promptly in
writing of the occurrence of any of the events described in
paragraph 5(a) of the Pledge Agreement.
PANDA GLOBAL HOLDINGS, INC.
By:
Title:
Address for Notices:
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
fax: (972) 980-6815
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock No. Shares
Panda Global Holdings, Common 001 1,000
Inc.
EXHIBIT 10.123
COMPANY CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of April 22, 1997,
between PANDA GLOBAL HOLDINGS, INC., a Delaware corporation (the
"Pledgor") and BANKERS TRUST COMPANY, as Trustee (in such
capacity, the "Trustee") for the holders of securities (the
"Securities") issued by the Pledgor pursuant to the Trust
Indenture dated as of April 22, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Company Indenture"),
between the Pledgor and the Trustee and any Series Supplemental
Indenture (as described in the Company Indenture).
W I T N E S S E T H:
WHEREAS, pursuant to the Company Indenture, the Pledgor has
issued Securities in the form of a guarantee (the "Guarantee") to
guarantee the senior secured notes ("Senior Secured Notes")
issued by Panda Global Energy Company, a Cayman Islands exempted
company (the "Issuer") in order to facilitate the sale of such
Senior Secured Notes;
WHEREAS, the Issuer is a Wholly-Owned Subsidiary of the
Pledgor and it is to the advantage of the Pledgor to facilitate
the sale of the Senior Secured Notes;
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Company Indenture and to
induce the Initial Purchaser to purchase the Senior Secured Notes
under the Purchase Agreement dated April 11, 1997 (as it may be
amended, supplemented or otherwise modified from time to time,
the "Purchase Agreement") with the Issuer, the Pledgor and Panda
Energy International, Inc., the Pledgor hereby agrees with the
Trustee, for the ratable benefit of the Holders of the
Securities, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Company Indenture and used herein shall have
the meanings given to them in the Company Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this Company Cash Collateral Agreement, as the
same may be amended, modified or otherwise supplemented from time
to time.
"Cash Collateral": the Guarantee Holders Cash Collateral
and the Holders Cash Collateral.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the Guarantee Holders Collateral and the
Holders Collateral.
"Collateral Accounts": the Guarantee Holders Collateral
Accounts and the Holders Collateral Accounts.
"Guarantee Holders": the Holders of the Guarantee.
"Guarantee Holders Cash Collateral": the collective
reference to:
(a) all cash, instruments, securities and funds deposited
from time to time in the Guarantee Holders Collateral Accounts,
including, without limitation, all cash or other money proceeds
of any collateral subject to a security interest for the benefit
of the Trustee under any Transaction Document;
(b) all investments of funds in the Guarantee Holders
Collateral Accounts and all instruments and securities evidencing
such investments; and
(c) all interest, dividends, cash, instruments, securities
and other property received in respect of, or as proceeds of, or
in substitution or exchange for, any of the foregoing.
"Guarantee Holders Collateral": the collective reference to
the Guarantee Holders Cash Collateral and the Guarantee Holders
Collateral Accounts.
"Guarantee Holders Collateral Accounts": the Notes
Guarantee Service Fund and the Notes Guarantee Service Reserve
Fund and Subaccounts.
"Guarantee Obligations": the collective reference to the
unpaid principal, interest and premium, if any (including
Liquidated Damages and Additional Amounts, if any), on the
Guarantee and all other obligations and liabilities of the
Pledgor to the Trustee and the Guarantee Holders (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 Pledgor
whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in
connection with, the Company Indenture (as the Company Indenture
relates to the Guarantee), the Series Supplemental Indenture
relating to the Guarantee, the Guarantee, the other Transaction
Documents or any other document relating to the Guarantee made,
delivered or given in connection therewith, in each case whether
on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Trustee or counsel to the Initial Purchaser that are required to
be paid by the Pledgor pursuant to the terms of the Indenture (as
the Indenture relates to the Guarantee), the Series Supplemental
Indenture relating to the Guarantee, the Guarantee or this
Agreement or any other Transaction Document relating to the
Guarantee).
"Holders": the Holders of any Securities, including the
Guarantee.
"Holders Cash Collateral": the collective reference to:
(a) all cash, instruments, securities and funds deposited
from time to time in the Holders Collateral Accounts, including,
without limitation, any and all excess U.S. Permitted Project
Event Proceeds deposited in the Holders Collateral Accounts, and
all cash or other money proceeds of any collateral subject to a
security interest for the benefit of the Trustee under any
Transaction Document;
(b) all investments of funds in the Holders Collateral
Accounts and all instruments and securities evidencing such
investments; and
(c) all interest, dividends, cash, instruments, securities
and other property received in respect of, or as proceeds of, or
in substitution or exchange for, any of the foregoing.
"Holders Collateral": the Holders Cash Collateral, the
Holders Collateral Accounts and any additional securities or
other property pledged, assigned or granted to the Trustee for
the benefit of the Holders from time to time, pursuant to the
Company Indenture and any Series Supplemental Indenture.
"Holders Collateral Accounts": the Company Revenue Fund,
the Company Operating Fund and the Company Equity Distribution
Fund.
"Obligations": the collective reference to the unpaid
principal interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Securities and
all other obligations and liabilities of the Pledgor to the
Trustee and the Holders (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 Pledgor whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Company
Indenture, any Series Supplemental Indenture, the Securities, the
other Transaction Documents relating to the Securities or any
other document relating to the Securities made, delivered or
given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Trustee
or counsel to the Initial Purchaser that are required to be paid
by the Pledgor pursuant to the terms of the Company Indenture,
any Series Supplemental Indenture, the Securities, this Agreement
or any other Transaction Document).
"Secured Guarantee Obligations": the collective reference
to (a) the Guarantee Obligations and (b) all obligations and
liabilities of the Pledgor which may arise under or in connection
with this Agreement or any other Transaction Document relating to
the Securities to which the Pledgor is a party, whether on
account of reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the Trustee or counsel to the
Initial Purchaser that are required to be paid by the Pledgor
pursuant to the terms of this Agreement or any other Transaction
Document to which the Pledgor is a party).
"Secured Obligations": the collective reference to (a) the
Obligations and (b) all obligations and liabilities of the
Pledgor which may arise under or in connection with this
Agreement or any other Transaction Document relating to the
Securities to which the Pledgor is a party, whether on account of
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee or counsel to the Initial
Purchaser that are required to be paid by the Pledgor pursuant to
the terms of this Agreement or any other Transaction Document to
which the Pledgor is a party).
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Grant of Security Interest. (a) As collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Secured Guarantee Obligations, the Pledgor hereby grants to
the Trustee, for the ratable benefit of the Guarantee Holders, a
security interest in the Guarantee Holders Collateral.
(b) As collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Secured Obligations, the
Pledgor hereby grants to the Trustee, for the ratable benefit of
the Holders, a security interest in the Holders Collateral.
3. Maintenance of Collateral Account. (a) The Guarantee
Holders Collateral shall be maintained until the Secured
Guarantee Obligations have been paid and performed in full.
(b) The Holders Collateral shall be maintained until the
Secured Obligations have been paid and performed in full.
(c) The Collateral shall be subject to the exclusive
dominion and control of the Trustee, which shall hold the Cash
Collateral and administer the Collateral Accounts subject to the
terms and conditions of this Agreement and the Company Indenture.
The Pledgor shall have no right of withdrawal from the Collateral
Accounts nor any other right or power with respect to the
Collateral, except as expressly provided herein or therein.
4. Deposit of Funds. The Pledgor shall make deposits into
the Collateral Accounts in accordance with the provisions of the
Company Indenture.
5. Representations and Warranties. The Pledgor represents
and warrants to the Trustee that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its
terms and creates in favor of the Trustee a perfected, first
priority security interest in the Collateral, enforceable in
accordance with its terms, except in each case as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirement of
Law or Contractual Obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any Requirement
of Law or Contractual Obligation of the Pledgor, except as
contemplated hereby.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
6. Covenants. The Pledgor covenants and agrees with the
Trustee that, except as the Trustee may otherwise consent in
accordance with the terms of the Company Indenture:
(a) The Pledgor will not (1) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, or (2) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein,
except for the security interest created by this Agreement.
(b) The Pledgor will maintain the security interest created
by this Agreement as a first, perfected security interest and
defend the right, title and interest of the Trustee in and to the
Collateral against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written
request of the Trustee, and at the sole expense of the Pledgor,
the Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions
as the Trustee reasonably may request for the purposes of
obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without
limitation, financing statements under the Code.
7. Investment of Cash Collateral. Collected funds on
deposit in the Collateral Accounts shall be invested by the
Trustee pursuant to the terms of the Company Indenture.
8. Release of Cash Collateral. Collateral shall be
released in accordance with the provisions of the Company
Indenture.
9. Remedies. (a) Upon the occurrence of an Event of
Default under the Company Indenture, the Trustee may, without
notice of any kind, except for notices required by law which may
not be waived, apply (i) the Collateral, after deducting all
reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights
of the Trustee hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the
Trustee, to the payment in whole or in part of the Secured
Obligations and (ii) the Guarantee Collateral, after deducting
all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any
of the Guarantee Collateral or in any way relating to the
Guarantee Collateral or the rights of the Trustee and the
Guarantee Holders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the
Trustee, to the payment in whole or in part of the Secured
Guarantee Obligations, in each case in accordance with the
Company Indenture, and only after such application and after the
payment by the Trustee of any other amount required by any
provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Trustee account for the
surplus, if any, to the Pledgor. In addition to the rights,
powers and remedies granted to it under this Agreement and the
Company Indenture, the Trustee shall have all the rights, powers
and remedies available at law, including, without limitation, the
rights and remedies of a secured party under the Code. To the
extent permitted by law the Pledgor waives presentment, demand,
protest and all notices (except notices specifically provided for
in any agreement securing, evidencing or relating to the Secured
Obligations), of any kind and all claims, damages and demands it
may acquire against the Trustee or any Holder arising out of the
exercise by them of any rights hereunder.
(b) The Pledgor waives and agrees not to assert any rights
or privileges which it may acquire under Section 9-112 of the
Code. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Trustee to collect
such deficiency.
10. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 10(a). All powers, authorizations and
agencies contained in this Agreement are coupled with an interest
and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
11. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to comply with the specific duties and
responsibilities set forth herein and in the Company Indenture.
The powers conferred on the Trustee in this Agreement are solely
for the protection of the Trustee's and the Holders' interests in
the Collateral and shall not impose any duty upon the Trustee or
any Holder to exercise any such powers. Neither the Trustee nor
any Holder nor its or their directors, officers, employees or
agents shall be liable for any action lawfully taken or omitted
to be taken by any of them under or in connection with the
Collateral or this Agreement, except for its or their gross
negligence or willful misconduct.
12. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
13. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Trustee and the Holders, be governed by the Company Indenture and
by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Trustee and the
Pledgor, the Trustee shall be conclusively presumed to be acting
as agent for the Holders with full and valid authority so to act
or refrain from acting, and the Pledgor shall not be under any
obligation, or entitlement, to make any inquiry respecting such
authority.
14. Indemnity of Trustee. The Pledgor shall indemnify the
Trustee, its officers, agents, employees and directors for, and
hold each such person harmless against any and all losses,
liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties
under this Agreement, including the costs and expenses of
enforcing this Agreement against the Pledgor or any other Person
and investigating or defending itself against any claim (whether
asserted by the Pledgor or any Holder of Securities or any other
Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall
notify the Pledgor promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Pledgor shall
not relieve the Pledgor of its obligations hereunder. The
Pledgor shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and, if the
Pledgor's counsel is not diligently prosecuting or defending the
matter, or in the event that there may be a conflict between the
positions of the Pledgor and Trustee in conducting the defense,
or in the event that there may be a Conflict between the
positions of the Pledgor and Trustee in conducting the defense,
the Pledgor shall pay the reasonable fees and expenses of such
counsel. The Pledgor need not pay for any settlement made
without their consent, which consent shall not be unreasonably
withheld.
15. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(a) when delivered by hand or (b) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed as
follows:
(1) if to the Trustee, at its address or transmission
number for notices provided in the recitals of the Company
Indenture; and
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
16. 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.
17. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee in a letter or agreement executed by the Trustee or
by telex or facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder shall by any act
(except by a written instrument pursuant to paragraph 17(a) hereof),
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, nor any delay in
exercising, on the part of the Trustee, any right, power or
privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Trustee of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
18. 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.
19. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders and their
successors and assigns.
20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
21. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of
Manhattan, the courts of the United States of America for
the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar
form of mail), postage prepaid, to its address set forth
below or at such other address of which the Trustee shall
have been notified pursuant hereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other
jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any
special, exemplary, punitive or consequential damages.
22. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the Pledgor and the Trustee have caused
this Cash Collateral Agreement to be duly executed and delivered
as of the date first above written.
PANDA GLOBAL HOLDINGS, INC.
By:
Title:
Address: 4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attention: General Counsel
BANKERS TRUST COMPANY, as Trustee
By:
Title:
EXHIBIT 10.124
PEC CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of April 22, 1997,
between PANDA ENERGY CORPORATION, a Texas corporation (the
"Pledgor") and BANKERS TRUST COMPANY, as Trustee (in such
capacity, the "Trustee") for the holders ("Holders") of
securities ("Securities") issued pursuant to the terms and
subject to the conditions of the Trust Indenture, dated as of
April 22, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Company Indenture"), between Panda Global
Holdings, Inc., a Delaware corporation (the "Company") and the
Trustee and any Series Supplemental Indentures (as described in
the Company Indenture).
W I T N E S S E T H:
WHEREAS, the Company has issued Securities pursuant to the
Company Indenture in the form of a guarantee (the "Senior Secured
Notes Guarantee") of certain notes (the "Senior Secured Notes")
issued by Panda Global Energy Company, a subsidiary of the
Company (the "Issuer") in order to receive more favorable
financing terms for the sale of the Senior Secured Notes, and the
Pledgor has agreed to assign its rights to certain assets to the
Trustee;
WHEREAS, the Pledgor is an affiliate of the Company and of
the Issuer, and it is to the advantage of Pledgor to facilitate
the sale of Senior Secured Notes;
NOW, THEREFORE, in consideration of the premises and to
induce the Trustee to enter into the Company Indenture and to
induce the Initial Purchaser to purchase the Securities under the
Purchase Agreement dated April 11, 1997 (as it may be amended,
supplemented or otherwise modified from time to time, the
"Purchase Agreement") with the Issuer, the Company and Panda
Energy International, Inc., the Pledgor hereby agrees with the
Trustee, for the ratable benefit of the Holders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Company Indenture and used herein shall have
the meanings given to them in the Company Indenture.
(b) The following terms shall have the following meanings:
"Agreement": this PEC Cash Collateral Agreement, as the
same may be amended, modified or otherwise supplemented from time
to time.
"Cash Collateral": the collective reference to:
(a) all cash, instruments, securities and funds deposited
from time to time in the Cash Collateral Account, including,
without limitation, all Domestic Project Event Proceeds deposited
in the Cash Collateral Account and all cash or other money
proceeds of any property of the Pledgor that constitutes
collateral subject to a security interest for the benefit of the
Trustee under any Transaction Document;
(b) all investments of funds in the Cash Collateral Account
and all instruments and securities evidencing such investments;
and
(c) all interest, dividends, cash, instruments, securities
and other property received in respect of, or as proceeds of, or
in substitution or exchange for, any of the foregoing.
"Cash Collateral Account": the PEC Revenue Account.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the collective reference to the Cash
Collateral and the Cash Collateral Account.
"Obligations": (i) the collective reference to the unpaid
principal, interest and premium, if any (including Liquidated
Damages and Additional Amounts, if any), on the Securities and
all other obligations and liabilities of the Company or the
Pledgor to the Trustee and the Holders of the Securities
(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 the Pledgor whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Company Indenture, any Series
Supplemental Indenture, any Senior Secured Notes Guarantee, any
other Securities, this Agreement, the other Transaction Documents
to which the Company is a party or any other document made,
delivered or given in connection therewith; and
(ii) all obligations and liabilities of the Pledgor which
may arise under or in connection with this Agreement or any other
Transaction Document to which the Pledgor is a party;
in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee or the Holders that are
required to be paid by the Company or the Pledgor pursuant to the
terms of the Company Indenture or this Agreement or any other
Transaction Document.
(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 and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Grant of Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the
Obligations, the Pledgor hereby grants to the Trustee, for the
ratable benefit of the Holders, a security interest in the
Collateral.
3. Maintenance of Cash Collateral Account. (a) The Cash
Collateral Account shall be maintained until the Obligations have
been paid and performed in full.
(b) The Collateral shall be subject to the exclusive
dominion and control of the Trustee, which shall hold the Cash
Collateral and administer the Cash Collateral Account subject to
the terms and conditions of this Agreement and the Company
Indenture. The Pledgor shall have no right of withdrawal from
the Cash Collateral Account nor any other right or power with
respect to the Collateral, except as expressly provided herein.
4. Representations and Warranties. The Pledgor represents
and warrants to the Trustee that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its
terms and creates in favor of the Trustee a perfected, first
priority security interest in the Collateral, enforceable in
accordance with its terms, except in each case as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirement of
Law or Contractual Obligation of the Pledgor and will not result
in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any Requirement
of Law or Contractual Obligation of the Pledgor, except as
contemplated hereby.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
5. Covenants. The Pledgor covenants and agrees with the
Trustee that, except as the Trustee may otherwise consent in
accordance with the terms of the Company Indenture:
(a) The Pledgor will not, (1) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, or (2) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein,
except for the security interest created by this Agreement.
(b) The Pledgor will maintain the security interest created
by this Agreement as a first, perfected security interest and
will defend the right, title and interest of the Trustee and the
Holders of Securities in and to the Collateral against the claims
and demands of all Persons whomsoever. At any time and from time
to time, upon the written request of the Trustee, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and
take such further actions as the Trustee reasonably may request
for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted,
including, without limitation, financing statements under the
Code.
6. Investment of Cash Collateral. Collected funds on
deposit in the Cash Collateral Account shall be invested by the
Trustee pursuant to the terms of the Company Indenture.
7. Release of Cash Collateral. The Trustee shall release
the Cash Collateral in accordance with the terms of the Company
Indenture.
8. Remedies. (a) Upon the occurrence of an Event of
Default, the Trustee may, without notice of any kind, except for
notices required by law which may not be waived, apply the
Collateral, after deducting all reasonable costs and expenses of
every kind incurred in respect thereof or incidental to the care
or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Trustee, to the payment in whole or in part of
the Obligations, in such order as the Trustee in its sole
discretion may elect, and only after such application and after
the payment by the Trustee of any other amount required by any
provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Trustee account for the
surplus, if any, to the Pledgor. In addition to the rights,
powers and remedies granted to it under this Agreement and in any
other agreement securing, evidencing or relating to the
Obligations, the Trustee shall have all the rights, powers and
remedies available at law, including, without limitation, the
rights and remedies of a secured party under the Code. To the
extent permitted by law, the Pledgor waives presentment, demand,
protest and all notices (except notices specifically provided for
in any agreement securing, evidencing or relating to the
Obligations) of any kind and all claims, damages and demands it
may acquire against the Trustee or any Holder arising out of the
exercise by them of any rights hereunder.
(b) The Pledgor waives and agrees not to assert any rights
or privileges which it may acquire under Section 9-112 of the
Code. The Pledgor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Trustee to collect
such deficiency.
9. No Subrogation. Notwithstanding any payment or payments
made by the Pledgor hereunder, or any setoff or application of
funds of the Pledgor by any Holder, or the receipt of any amounts
by the Trustee or any Holder with respect to any of the
Collateral, the Pledgor shall not be entitled to be subrogated to
any of the rights of the Trustee or any Holder against the
Company or against any other collateral security held by the
Trustee or any Holder for the payment of the Obligations, nor
shall the Pledgor seek any reimbursement from the Company in
respect of payments made by the Pledgor in connection with this
Agreement, or amounts realized by the Trustee or any Holder in
connection with the Collateral, until all amounts owing to the
Trustee and the Holders on account of the Obligations are paid in
full. If any amount shall be paid to the Pledgor on account of
such subrogation rights at any time when all of the Obligations
shall not have been paid in full, such amount shall be held by
the Pledgor in trust for the Trustee, segregated from other funds
of the Pledgor, and shall, forthwith upon receipt by the Pledgor,
be turned over to the Trustee in the exact form received by the
Pledgor (duly indorsed by the Pledgor to the Trustee, if
required) to be applied against the Obligations, whether matured
or unmatured, in such order as the Trustee may determine.
10. Amendments, etc. with respect to the Obligations;
Waiver of Rights. The Pledgor shall remain obligated hereunder,
and the Collateral shall remain subject to the security interest
created hereby, notwithstanding that, without any reservation of
rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the
Obligations made by the Trustee or any Holder may be rescinded by
the Trustee or such Holder, and any of the Obligations continued,
and the Obligations, or the liability of the Company or any other
Person upon or for any part thereof, or any collateral security
or guarantee therefor or right of offset with respect thereto,
may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Trustee or any Holder, and the
Company Indenture, the Securities and the other Transaction
Documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or part,
in accordance with their terms, and any guarantee, right of
offset or other collateral security at any time held by the
Trustee or any Holder for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the
Trustee nor any Holder shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it
as security for the Obligations or any property subject thereto.
The Pledgor 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 any Holder upon this
Agreement; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred in
reliance upon this Agreement; and all dealings between the
Company and the Pledgor, on the one hand, and the Trustee and the
Holders, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Agreement.
The Pledgor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Issuer
or the Pledgor with respect to the Obligations. When pursuing
its rights and remedies hereunder against the Pledgor, the
Trustee may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Company or any
other Person or against any collateral security or guarantee for
the Obligations or any right of offset with respect thereto, and
any failure by the Trustee to pursue such other rights or
remedies or to collect any payments from the Company or any such
other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release
of the Company or any such other Person or of any such collateral
security, guarantee or right of offset, shall not relieve the
Pledgor 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 Trustee or any Holder
against the Pledgor or the Collateral.
11. Trustee's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, 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
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, 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, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 0. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest
and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
12. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to comply with the specific duties and
responsibilities set forth herein and in the Company Indenture.
The powers conferred on the Trustee in this Agreement are solely
for the protection of the Trustee's and the Holders' interests in
the Collateral and shall not impose any duty upon the Trustee or
any Holder to exercise any such powers. Neither the Trustee nor
any Holder nor its or their directors, officers, employees or
agents shall be liable for any action lawfully taken or omitted
to be taken by any of them under or in connection with the
Collateral or this Agreement, except for its or their gross
negligence or willful misconduct.
13. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Trustee to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Trustee reasonably determines appropriate to perfect the
security interests of the Trustee under this Agreement. A
carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Trustee and the Holders, be governed by the Company Indenture and
by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Trustee and the
Pledgor, the Trustee shall be conclusively presumed to be acting
as agent for the Holders with full and valid authority so to act
or refrain from acting, and the Pledgor shall not be under any
obligation, or entitlement, to make any inquiry respecting such
authority.
15. Indemnity of Trustee. The Pledgor shall indemnify the
Trustee, its officers, agents, employees and directors for, and
to hold each such person harmless against any and all losses,
liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties
under this Agreement, including the costs and expenses of
enforcing this Agreement against the Pledgor or any other Person
and investigating or defending itself against any claim (whether
asserted by the Pledgor or any Holder of Senior Secured Notes or
any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall
notify the Pledgor promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Pledgor shall
not relieve the Pledgor of its obligations hereunder. The
Pledgor shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and, if
Pledgor's counsel is not diligently prosecuting or defending the
matter, or in the event that there may be a conflict between the
positions of the Pledgor and Trustee in conducting the defense,
the Pledgor shall pay the reasonable fees and expenses of such
counsel. The Pledgor need not pay for any settlement made
without its consent, which consent shall not be unreasonably
withheld.
16. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(or by telex, fax or similar electronic transfer confirmed in
writing) and shall be deemed to have been duly given or made
(a) when delivered by hand or (b) if given by mail, when
deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, as follows:
(1) if to the Trustee, at its address or transmission
number for notices provided in the recitals of the Company
Indenture; and
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this paragraph.
17. 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.
18. Integration. This Agreement represents the agreement
of the Pledgor with respect to the subject matter hereof and
there are no promises or representations by the Trustee or any
Holder relative to the subject matter hereof not reflected
herein.
19. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee in a letter or agreement executed by the Trustee or
by telex or facsimile transmission from the Trustee.
(b) Neither the Trustee nor any Holder shall by any act
(except by a written instrument pursuant to paragraph 0 hereof),
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, nor any delay in
exercising, on the part of the Trustee, any right, power or
privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the
Trustee of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
20. 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.
21. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and the Holders and their
successors and assigns.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
23. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement, 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 sitting in the Borough of Manhattan, the courts
of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to its address set forth below or at
such other address of which the Trustee shall have been notified
pursuant hereto;
(d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal
action or proceeding referred to in this paragraph any special,
exemplary, punitive or consequential damages.
24. WAIVERS OF JURY TRIAL. THE PLEDGOR AND, BY ITS
ACCEPTANCE HEREOF, THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the Pledgor and the Trustee have caused
this Cash Collateral Agreement to be duly executed and delivered
as of the date first above written.
PANDA ENERGY CORPORATION
By:
Title:
Address:
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Fax: (972) 980-6815
Attention: General Counsel
BANKERS TRUST COMPANY, as Trustee
By:
Title:
EXHIBIT 10.125
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan
Panda Heat and Power Co., Ltd. (the "Borrower"), an equity joint
venture organized under the law of the People's Republic of China
(the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luannan County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.126
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan
Panda Heat and Power Co., Ltd. (the "Borrower"), an equity joint
venture organized under the law of the People's Republic of China
(the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luannan County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.127
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan
Panda Heat and Power Co., Ltd. (the "Borrower"), an equity joint
venture organized under the law of the People's Republic of China
(the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PAN-SINO HEAT CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luannan County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.128
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan Pan-
Western Heat and Power Co., Ltd. (the "Borrower"), an equity
joint venture organized under the law of the People's Republic of
China (the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PAN-SINO HEAT CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
West Gujiaying Cun, Bencheng, Luannan County, Hebei Province,
People's Republic of China
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.129
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan Pan-
Western Heat and Power Co., Ltd. (the "Borrower"), an equity
joint venture organized under the law of the People's Republic of
China (the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PANDA HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
South Gujiaying Cun, Bencheng, Luannan County, Hebei Province,
People's Republic of China
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.130
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan Pan-
Western Heat and Power Co., Ltd. (the "Borrower"), an equity
joint venture organized under the law of the People's Republic of
China (the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luannan County, Hebei Province, People's
Republic of China
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.131
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan
Cayman Heat and Power Co., Ltd. (the "Borrower"), an equity joint
venture organized under the law of the People's Republic of China
(the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PANDA HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
South Gujiaying Cun, Bencheng, Luanna County, Hebei Province,
People's Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.132
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan
Cayman Heat and Power Co., Ltd. (the "Borrower"), an equity joint
venture organized under the law of the People's Republic of China
(the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PAN-SINO HEAT CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
West Gujiaying Cun, Bencheng, Luanna County, Hebei Province,
People's Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.133
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan
Cayman Heat and Power Co., Ltd. (the "Borrower"), an equity joint
venture organized under the law of the People's Republic of China
(the "PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luanna County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.134
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan Pan-
Sino Heat Co., Ltd. (the "Borrower"), an equity joint venture
organized under the law of the People's Republic of China (the
"PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luanna County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.135
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan Pan-
Sino Heat Co., Ltd. (the "Borrower"), an equity joint venture
organized under the law of the People's Republic of China (the
"PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luanna County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 10.136
GUARANTEE, dated as of September 24, 1996 (this
"Guarantee"), made by the undersigned (the "Guarantor"), in favor
of PAN-WESTERN ENERGY CORPORATION LLC, a Cayman Islands
corporation (the "Lender"), as the lender party to the
Shareholder Loan Agreement, dated September 24, 1996 (the
"Shareholder Loan Agreement") between the Lender and Tangshan Pan-
Sino Heat Co., Ltd. (the "Borrower"), an equity joint venture
organized under the law of the People's Republic of China (the
"PRC").
W I T N E S S E T H:
WHEREAS, Lender has agreed to make loans to the Borrower,
pursuant to the Shareholder Loan Agreement;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of such loans to the Borrower;
WHEREAS, it is a condition precedent to the obligation of
the Lender to make such loans to the Borrower that the Guarantor
shall have executed and delivered this Guarantee for the benefit
of the Lender;
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the Guarantor hereby agrees for the
benefit of the Lender as follows:
1. Defined Terms. a. Unless otherwise defined herein,
terms defined in the Shareholder Loan Agreement and used herein
shall have the meanings given to them in the Shareholder Loan
Agreement.
b. As used herein, "Obligations" is the collective
reference to the unpaid principal of and interest on the Project
Note and all other obligations and liabilities of the Borrower to
the Lender (including, without limitation, interest accruing at
the then applicable rate provided in the Shareholder Loan
Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in the Shareholder Loan
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower), which may arise under, out
of, or in connection with, the Shareholder Loan Agreement, the
Project Note, the other Financing Agreements or any other
document made, delivered or given in connection therewith.
2. Guarantee a. Subject to the provisions of paragraph
2(b), the Guarantor hereby unconditionally and irrevocably
guarantees to the Lender the prompt and complete payment (in RMB
for conversion under Borrower's foreign debt registration
certificate for the Shareholder Loan Agreement, and Guarantor
hereby commits itself to make up any shortfall in RMB therefor)
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
b. Anything herein or in any other Financing Agreement to
the contrary notwithstanding, the maximum liability of the
Guarantor hereunder and under the other Financing Agreements
shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable laws relating to the insolvency of
debtors.
c. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of
counsel) which may be paid or incurred by the Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
d. The Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
the Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Lender hereunder.
e. No payment or payments made by the Borrower, any other
guarantor or any other person or received or collected by the
Lender from the Borrower, 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 Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder, which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in
respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of the Guarantor
hereunder until the Obligations are paid in full.
f. The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Lender on account
of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes the Lender at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived
by the Guarantor, to set-off and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or
claims, in any currency, at any time held or owing by the Lender
to or for the credit or the account of the Guarantor, or any part
thereof in such amounts as the Lender may elect, against and on
account of the obligations and liabilities of the Guarantor to
the Lender hereunder and claims of every nature and description
of the Lender against the Guarantor, in any currency, whether
arising hereunder, under the Shareholder Loan Agreement, the
Project Note, any Financing Agreements or otherwise, as the
Lender may elect. The rights of the Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
4. No Subrogation. Notwithstanding any payment or
payments made by the Guarantor hereunder or any set-off or
application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any guarantee or
right of offset held by the Lender for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower in respect of
payments made hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full.
5. Amendments, etc. with respect to the Obligations; Waiver
of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against
the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any guarantee
therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, amended,
accelerated, compromised, waived, surrendered or released by the
Lender, and the Shareholder Loan Agreement, the Project Note and
the other Financing Agreements and any other documents executed
and delivered in connection therewith may be amended,
supplemented or terminated, in whole or in part, as the Lender
may deem advisable from time to time.
6. Guarantee Absolute and Unconditional. The Guarantor
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 Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the
Borrower or any other guarantor with respect to the Obligations.
Each Guarantor understands and agrees that this Guarantee shall
be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Shareholder Loan Agreement,
the Project Note or any other Financing Agreement, any of the
Obligations or any guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b)
any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge
of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any guarantor, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Borrower
or any guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Lender without set-off or
counterclaim at the office of the Lender located at 4100, Spring
Valley Road, Suite 1001, Dallas, Texas, 75244, U.S.A., or to such
account at such financial institution as Lender may direct by
notice to the Guarantor.
9. Notices. All notices, requests and demands to or upon
the Lender or the Guarantor shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
a. if to the Lender, at its address or transmission number
for notices provided in the Shareholder Loan Agreement; and
b. if to the Guarantor, at its address or transmission
number for notices set forth under its signature below.
10. Severability. Any provision of this Guarantee 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.
11. Integration. This Guarantee represents the entire
agreement of the Guarantor with respect to the subject matter
hereof and there are no promises or representations by the Lender
relative to the subject matter hereof not reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies.
a. None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender.
b. The Lender 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, nor any delay in exercising, on
the part of the Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion.
c. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
13. Section Headings. The section headings used in this
Guarantee are for convenience of reference only.
14. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of the Guarantor and
shall inure to the benefit of the Lender and its successors and
assigns.
15. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
Cayman Islands.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
TANGSHAN PANDA HEAT AND POWER CO., LTD.
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
Address for Notices:
Zhongdajie, Bencheng, Luanna County, Hebei Province, People's
Republic of China.
ACKNOWLEDGED AND AGREED BY:
PAN-WESTERN ENERGY CORPORATION LLC
By: /s/ L. Stephen Rizzieri
Name: L. Stephen Rizzieri
Title: Deputy General Counsel
EXHIBIT 12.00
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES EXHIBIT 12.00
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Mos.
Year Ended December 31, Ended March 31,
------------------------------------------------------- -----------------
1991 1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before minority interest
and extraordinary items $ 3,573 $ 4,957 $4,346 $ 4,839 $ 2,316 $(8,916) $ 566 $(6,691)
Interest expense 15,414 11,478 11,066 11,018 11,716 19,414 3,185 10,802
Amortization of debt issue costs 493 436 502 600 554 494 141 174
Capitalized interest 803 5,793 11,055 2,837 -
Total fixed charges 15,907 11,914 11,568 12,421 18,063 30,963 6,163 10,976
Earnings before fixed charges 19,480 16,871 15,914 16,457 14,586 10,992 3,892 4,285
Ratio of earnings to fixed charges 1.22 1.42 1.38 1.32 0.81 0.36 0.63 0.39
Deficiency in coverage of fixed charges $(3,477) $(19,971) $(2,271) $(6,691)
</TABLE>
EXHIBIT 21.00
SUBSIDIARIES OF PANDA GLOBAL ENERGY CO.
Jurisdiction of
Name of Entity: Organization:
Pan-Sino Energy Development Company, L.L.C. Cayman Islands
Pan-Western Energy, L.L.C. Cayman Islands
Tangshan Panda Heat & Power Company, Ltd. People's Republic
of China
Tangshan Pan-Western Heat & Power Company, Ltd. People's Republic
of China
Tangshan Cayman Heat & Power Company, Ltd. People's Republic
of China
Tangshan Pan-Sino Heat Company, Ltd. People's Republic
of China
SUBSIDIARIES OF PANDA GLOBAL HOLDING, INC.
Jurisdiction of
Name of Entity: Organization:
Panda Energy Corporation Texas
Lakeland Water Company Delaware
Panda-Kathleen Corporation Delaware
Panda/Live Oak Corporation Delaware
Panda-Kathleen, L.P. Delaware
Panda Interfunding Corporation Delaware
Panda Interholding Corporation Delaware
Panda Funding Corporation Delaware
Panda Cayman Interfunding Corporation Cayman Islands
Panda-Rosemary Corporation Delaware
PRC II Corporation Delaware
Panda-Rosemary, L.P. Delaware
Panda-Rosemary Funding Co. Delaware
Panda-Brandywine Corporation Delaware
Panda Energy Corp. Delaware
Brandywine Water Company Delaware
Panda-Brandywine, L.P. Delaware
EXHIBIT 23.01
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT ACCOUNTANT'S CONSENT
We consent to the use in this Registration Statement on Form S-1
of Panda Global Energy Company and Panda Global Holdings, Inc. of
our report dated April 9, 1997 on the consolidated financial
statements of Panda Global Energy Company and Panda Global
Holdings, Inc. appearing in the Prospectus, which is a part of
such Registration Statement, and to the reference to us under the
headings "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 9, 1997
EXHIBIT 23.03
[ICF Kaiser Letterhead]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
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 dated April 11, 1997
entitled "Independent Panda Brandywine Pro Forma Projects" (the
"Brandywine Report"), (ii) our report dated April 11, 1997 entitled
"Summary of the Consolidated Pro Forma of Panda Global Holdings, Inc.
(the "Consolidated Report") and (iii) the Officer's Certificate dated
June 6, 1997 related thereto (including any amendments or supplements
thereto) in the Registration Statement on Form S-1 of Panda Global
Energy Company and Panda Global Holdings, Inc. (the "Registration
Statement") relating to the offering of 12-1/2% Registered Senior
Secured Notes by Panda Global Energy Company and the inclusion of the
Officer's Certificate and Brandywine Report as an exhibit to the
Registration Statement (the "Prospectus"). In addition, we consent
to the inclusion of the summary of the Brandywine Report and the
Consolidated Report contained in the Prospectus.
We also consent to the statements by C.C. Pace Resources, Inc.
and Pacific Energy Services, Inc. in their reports that they have
relied on our Brandywine Report and we authorize such reliance.
We also hereby consent to the reference to us as experts
under the headings "Independent Engineers and Consultants" in
the Prospectus.
All the above-referenced ICF Resources Incorporated reports
were prepared pursuant to the terms of Consulting Agreement(s) between
ICF Resources and Panda Energy International.
ICF RESOURCES (sm) INCORPORATED
By: /s/ Theodore R. Breton
Name: Theodore R. Breton
Title: Vice President
EXHIBIT 23.04
[BURNS & MCDONNELL LETTERHEAD]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Re: Rosemary Independent Engineer's Report
Ladies and Gentlemen:
We consent to the use of our report dated April 11, 1997 entitled
"Panda-Rosemary Cogeneration Project Condition Assessment Report
for Potential Investors at the Request of Panda Energy
International, Inc. "(the "Report") and the Officer's Certificate
dated June 6th, 1997 related thereto (including any amendments or
supplements thereto) as an exhibit to the Registration Statement
on Form S-1 of Panda Global Energy Company and Panda Global
Holdings, Inc. (the "Registration Statement") relating to the
offering of 12-1/2% Registered Senior Secured Notes by Panda
Global Energy Company. In addition, we consent to the inclusion
of the summary of the Report contained in the Prospectus included
in the Registration Statement (the "Prospectus").
We also consent to the statements by ICF Resources Incorporated
in their reports 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 "Independent Engineers and Consultants" in the
Prospectus.
BURNS & MCDONNELL ENGINEERING
COMPANY, INC.
By: /s/ Michael W. McComas
Name: Michael W. McComas
Title: Vice President
EXHIBIT 23.05
[Benjamin Schlesinger & Assoc. Letterhead]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Re: Rosemary Fuel Consultant's Report
Ladies and Gentlemen:
We consent to the use of our Report dated September 20,
1996, updated on April 11, 1997, entitled "Assessment of Fuel
Price, Supply and Delivery Risks for the Panda-Rosemary
Cogeneration Project" (the "Report") and the Officer's
Certificate dated June 6, 1997 Related thereto (including any
amendments or supplements thereto) as an exhibit to the
Registration Statement on Form S-1 of Panda Global Energy Company
and Panda Global Holdings, Inc. (the "Registration Statement")
relating to the offering of 12-1/2% Registered Senior Secured
Notes by Panda Global Energy Company. In addition, we consent to
the inclusion of the summary of the Report contained in the
Prospectus included in the Registration Statement.
We also hereby consent to the statements by Burns &
McDonnell Engineering Company, Inc. in their report summarized in
the Registration Statement that they have relied on the Report,
and we authorize such reliance.
We also hereby consent to the reference to us as experts
under the heading "Independent Engineers and Consultants" in the
Prospectus included in the Registration Statement.
BENJAMIN SCHLESINGER & ASSOCIATES, INC.
By: /s/ Benjamin Schlesinger
Benjamin Schlesinger, Ph.D
President
EXHIBIT 23.06
[PACIFIC ENERGY SYSTEMS LETTERHEAD]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Re: Brandywine Independent Engineer's Report
Ladies and Gentlemen:
We consent to the use of our report dated July 22, 1996 and
updated on April 11, 1997 entitled "Independent Engineer's Report
Panda-Brandywine Cogeneration Project" (the "Report") and the
Officer's Certificate dated June 6, 1997 related thereto
(including any amendments or supplements thereto) as an exhibit
to the Registration Statement on Form S-1 of Panda Global Energy
Company and Panda Global Holdings, Inc. (the "Registration
Statement") relating to the offering of 12-1/2% Registered
Secured Notes by Panda Global Energy Company. In addition, we
consent to the inclusion of the summary of the Report contained
in the Prospectus included in the Registration Statement (the
"Prospectus").
We also consent to the statements by ICF Resources Incorporated
and C.C. Pace Resources, Inc. in their reports included or
summarized in the Prospectus that they have relied on the Report
and we authorize such reliance.
We also consent to the reference to us as experts under the
heading "Independent Engineers and Consultants" in the
Prospectus.
PACIFIC ENERGY SYSTEMS, INC.
By: /s/ John R. Martin
Name: John R. Martin
Title: President
EXHIBIT 23.07
[CC PACE RESOURCES LETTERHEAD]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Re: Brandywine Fuel Consultant's Report
Ladies and Gentlemen:
We consent to the use of our report dated July 2, 1996 entitled
"Panda-Brandywine, L.P. Generating Facility Fuel Consultant's
Report" and the supplemental update letter dated April 11, 1997
(the "Report") and the Officer's Certificate dated June 6, 1997
related thereto as an exhibit to the Registration Statement on
Form S-1 of Panda Global Energy Company and Global Holdings, Inc.
(the "Registration Statement") relating to the offering of 12.5%
Registered Senior Secured Notes offered by Panda Global Energy
Company. In addition, we consent to the summary of the Report
contained in the Prospectus included in the Registration
Statement (the "Prospectus").
We also consent to the statements by ICF Resources, Incorporated
in their reports included or summarized in the Prospectus, that
they have relied on the Report and we authorize such reliance.
We also hereby consent to the reference to us as experts under
the heading "Independent Engineers and Consultants" in the
Prospectus.
C. C. PACE RESOURCES, INC.
By: /s/ Daniel E. White
Name: Daniel E. White
Title: Senior Vice President
EXHIBIT 23.08
[PARSONS BRINCKERHOFF ENERGY SERVICES, INC.]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
RE: Luannan Engineer's Review Report
Ladies and Gentlemen:
We consent to the use of our report dated April 11, 1997 entitled
"Engineer's Review and Report Panda Energy International, Inc. 2
x 50 MW Coal-Fired Power Plant at Luannan, China" (the "Report")
and the Officer's Certificate dated June 6, 1997 related thereto
in the Prospectus (including any amendments or supplements
thereto) relating to the offering of 12-1/2% Registered Senior
Secured Notes offered by Panda Global Energy Company and included
in the registration statement on Form S-1 of Panda Global Energy
Company and Panda Global Holdings, Inc. (the "Prospectus") and
the inclusion of the Report and Officer's Certificate as an
Appendix to the Prospectus. In addition, we consent to the
inclusion of the summary of the Report contained in the
Prospectus.
We also consent to the statements by ICF Resources Incorporated
in their report included in the Prospectus that they have relied
on the Report and we authorize such reliance.
We also hereby consent to the reference to us as experts under
the heading "Independent Engineers and Consultants" in the
Prospectus.
Very truly yours,
PARSONS BRINCKERHOFF ENERGY SERVICES, INC.
/s/ R. J. Bednarz
R. J. Bednarz
Engineering Manager
EXHIBIT 23.09
[MARSTON & MARSTON, INC. LETTERHEAD]
June 6, 1997
Panda Global Holdings, Inc.
Panda Global Energy Company
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
RE: Independent Coal Consultant's Report
Ladies and Gentlemen:
We consent to the use of our report dated April 11, 1997,
entitled "Review of the Coal Supply Arrangements for the Luannan
Power Project of Panda Energy International, Inc." (the "Report")
and the Officer's Certificate dated June 6, 1997, related thereto
in the Prospectus (including any amendments or supplements
thereto) relating to the offering of 12-1/2% Registered Senior
Secured Notes by Panda Global Energy Company (the "Prospectus")
and included in the registration statement on Form S-1 of Panda
Global Energy Company and Panda Global Holdings, Inc. and the
inclusion of the Report and Officer's Certificate as an Appendix
to the Prospectus. In addition, we consent to the inclusion of
the summary of the Report contained in the Prospectus.
We also hereby consent to the reference to us as experts under
the heading "Independent Engineers and Consultants" in the
Prospectus.
Yours truly,
MARSTON & MARSTON, INC.
/s/ Richard Marston
Richard Marston, P.E.
Vice President & General Counsel
EXHIBIT 23.10
[MAPLES AND CALDER LETTERHEAD]
June 6, 1997
Panda Global Energy Company
Panda Global Holdings, Inc.
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, TX 75244
Ladies and Gentlemen:
We hereby consent to the references to our firm contained in the
Prospectus constituting a part of the Registration Statement on
Form S-1 under the United States Securities Act of 1993 of Panda
Global Energy Company and Panda Global Holdings, Inc., under the
captions:
(i) "Enforcement of Civil Liabilities"; and
ii) "Legal Matters".
Very truly yours,
MAPLES & CALDER
By: /s/
EXHIBIT 23.11
[CAI, ZHANG & LAN LETTERHEAD]
June 6, 1997
Panda Global Energy Company
Panda Global Holdings, Inc.
c/o Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, TX 75244
Ladies and Gentlemen:
We hereby consent to the references to our firm in the
Registration Statement on Form S-1 of Panda Global Energy Company
and Panda Global Holdings, Inc., under the captions: (i) Risk
Factors -- Considerations Relating to the PRC - Legal and
Regulatory Considerations, (ii) Risk Factors - Considerations
Relating to the PRC - Governmental Regulation of Power Rates,
(iii) Description of the Projects - The Luannan Facility -
Governmental Approvals, (iv) Certain Tax Considerations of the
Exchange Offer - PRC Taxation, and (v) Legal Matters.
Very truly yours,
CAI, ZHANG & LAN
By: /s/ Chungsheng Cai
Chunsheng Cai
EXHIBIT 99.03
BURNS & MCDONNELL
PANDA-ROSEMARY COGENERATION PROJECT
CONDITION ASSESSMENT REPORT
for
POTENTIAL INVESTORS
at the Request of
PANDA ENERGY INTERNATIONAL, INC.
[Burns & McDonnell Letterhead]
April 11, 1997
Mr. Bryan Urban
Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Panda-Rosemary Cogeneration Project
Burns & McDonnell Project No. 94-443-4-002
Dear Bryan:
We are pleased to submit this Report for the Panda-Rosemary
Cogeneration project provided for use in the offering by
Panda Global Energy Company of its Senior Secured Notes due
2004. This document summarizes efforts by Panda Energy
International, Inc. and burns & McDonnell to assess the
conditions, operating history, and operating projections of
the 180-MW Panda-Rosemary Cogeneration project on behalf of
potential investors.
Please feel free to call if you have any comments or
questions.
Sincerely,
BURNS & MCDONNELL
/s/ Michael W. McComas
Michael W. McComas
Vice President
/s/ Jeffrey J. Greig
Jeffrey J. Greig
Senior Economist
/s/ Melissa A. Yancey
Melissa A. Yancey
Project Analyst
cc: Pete Wright
TABLE OF CONTENTS
Page No.
PART I - EXECUTIVE SUMMARY
Conclusions I-1
Assumptions I-4
PART II - INTRODUCTION
PART III - FACILITY DESCRIPTION
Project Site III-1
Mechanical Equipment and Systems III-1
Environmental Control Equipment III-2
Electrical Intertie III-4
Site Visit III-4
PART IV - OPERATING HISTORY
Electric Power Production IV-1
Steam Production IV-1
Availability IV-3
Heat Rate IV-3
Qualifying Facility Compliance IV-5
Environmental Compliance IV-6
Air Permit IV-6
Clean Air Act Amendments IV-6
NPDES Permit IV-7
Spill Prevention IV-7
Forced Outages IV-7
Major Maintenance Activities IV-8
Equipment and System Design Changes IV-8
Freeze Protection IV-8
Transformers IV-10
Corrosion Protection IV-10
Chiller #2 IV-11
Fire Protection IV-11
Oil Conditioning IV-12
Ultraviolet Protection IV-12
Chemical Feedlines IV-12
Automatic Generation Control IV-12
O&M Contractor IV-13
Training Program IV-13
PART V - EQUIPMENT ASSESSMENT
1996 Hurricane Damage V-1
Operating Condition V-2
Major Maintenance and Overall Programs V-3
Equipment Replacement Program V-3
PART VI - PROJECTED PLANT PERFORMANCE
Capacity VI-1
Capacity and Heat Rate Degradation VI-1
Dispatch VI-3
Availability VI-3
Heat Rate VI-3
Annual Operation and Maintenance Costs VI-4
Major Maintenance Programs and Costs VI-5
Equipment Replacement Provisions VI-5
Overall Economic Life VI-5
Steam Turbine Rankine Cycle VI-6
Combustion Turbines Brayton Cycle VI-6
PART VII - FINANCIAL ASSESSMENT OF PROJECT
Power Purchase Agreement VII-1
Factors Affecting Project VII-1
Effective Operating Service Life of the
Project VII-1
Expected Rates for Capacity and Energy VII-1
Expected Dispatch of the Project VII-6
Expected Operating Performance VII-6
Project Capacity VII-6
Project Heat Rate VII-9
Project Fixed Operating Costs VII-9
Project Variable Operation and
Maintenance Expenses VII-10
Project Overhaul Requirements VII-10
Project Steam/Chilled Water Sales and
Costs VII-10
Expected Fuel Costs VII-11
Conclusion VII-11
Zero Dispatch Case VII-11
Statement of Limiting Conditions VII-16
PART VIII - CONCLUSIONS
Project Condition VIII-1
EXHIBIT A - PROJECT PRO FORMA
LIST OF TABLES
Table No. Page No.
PART I - EXECUTIVE SUMMARY
I-1 Summary of Project Debt Coverage Ratios I-3
PART IV - OPERATING HISTORY
IV-1 Panda-Rosemary Project Operating History IV-1
IV-2 Project Availability History IV-3
IV-3 Annual Average Heat Rate IV-3
IV-4 Average Fired Hours Per Start IV-4
IV-5 History of Qualifying Facility Status IV-6
PART V - EQUIPMENT ASSESSMENT
V-1 Comparison of Manufacturers' Recommendations
with 10 Year Plan Maintenance Activities for
Major Pieces of Rotating Equipment V-4
PART VI - PROJECTED PLANT PERFORMANCE
VI-1 Historical Capacity Test Results VI-1
PART VII - FINANCIAL ASSESSMENT OF PROJECT
VII-1 Contractual Capacity Charges VII-2
VII-2 Projected Summer and Winter Gas Energy
Charges VII-4
VII-3 Dispatch Assumptions VII-7
VII-4 Fuel Market Assumptions VII-12
VII-5 Summary of Project Debt Coverage Ratios VII-14
VII-6 Summary of Project Debt Coverage Ratios,
Zero Dispatch Option VII-15
LIST OF FIGURES
Figure No. Page No.
PART III - FACILITY DESCRIPTION
III-1 Panda-Rosemary Simplified Process Diagram III-3
III-2 Panda-Rosemary Electrical Interconnections
- One Line Diagram III-5
III-3 Panda-Rosemary Site Plan III-6
PART VI - PROJECTED PLANT PERFORMANCE
VI-1 Heavy-Duty Gas Turbine Degradation as a
Function of Total Factored Hours VI-2
PART VII - FINANCIAL ASSESSMENT OF PROJECT
VII-1 Contractual Capacity Charges VII-3
VII-2 Summer and Winter Gas Energy Charges VII-5
VII-3 Dispatch Assumptions VII-8
VII-4 Fuel Market Assumptions VII-13
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") issued in 1996 by a
finance subsidiary of the Panda-Rosemary Partnership (the
"Partnership") are scheduled to be outstanding. This Report has
been provided for use in the offering by Panda Global Energy
Company of its Senior Secured Notes due 2004. 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.
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. The recent change from U-
TECH to Panda Global Services, Inc. as the operator
should not have any effect on the future operations and
maintenance of the Facility because all the staff
transferred to Panda Global Services, Inc.
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 1997 budgeted allowance
for overhauls of $276 per fired hour is appropriate.
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 amortization
schedule for the outstanding Rosemary Bonds submitted
to us by the Rosemary 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 Rosemary Bonds of 1.37:1 and an average debt
service coverage over the outstanding term of the
Rosemary Bonds of 1.58:1, as shown on Table I-1.
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")
updated as of November 11, 1996. 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.
<TABLE>
<CAPTION>
Table I-1
SUMMARY OF PROJECTED DEBT COVERAGE RATIOS
Panda-Rosemary Cogeneration Project
Rosemary
Pre-Tax Total Debt
Total Total Operating Debt Service Coverage
YEAR Revenues Expenses Cashflow Costs Ratio [1]
<S> <C> <C> <C> <C> <C>
1997 $32,285,600 $ 9,680,000 $22,605,600 $14,693,000 1.54
1998 $31,198,000 $11,185,000 $20,013,000 $14,627,000 1.37
1999 $31,376,000 $12,860,000 $18,516,000 $13,314,000 1.39
2000 $33,672,000 $14,808,000 $18,864,000 $13,242,000 1.42
2001 $36,095,000 $16,861,000 $19,234,000 $13,164,000 1.46
2002 $37,491,000 $18,122,000 $19,369,000 $13,058,000 1.48
2003 $39,309,000 $19,667,000 $19,642,000 $12,943,000 1.52
2004 $41,378,000 $21,526,000 $19,852,000 $12,825,000 1.55
2005 $44,160,000 $23,907,000 $20,253,000 $12,669,000 1.60
2006 $38,446,000 $23,964,000 $14,482,000 $ 8,710,000 1.66
2007 $38,146,000 $23,985,000 $14,161,000 $ 8,534,000 1.66
2008 $37,808,000 $24,026,000 $13,782,000 $ 8,352,000 1.65
2009 $37,570,000 $24,115,000 $13,455,000 $ 8,154,000 1.65
2010 $37,286,000 $24,243,000 $13,043,000 $ 7,946,000 1.64
2011 $37,300,000 $24,488,000 $12,812,000 $ 7,772,000 1.65
2012 $37,229,000 $24,683,000 $12,546,000 $ 7,565,000 1.66
2013 $37,040,000 $24,910,000 $12,130,000 $ 7,328,000 1.66
2014 $36,908,000 $25,141,000 $11,767,000 $ 7,042,000 1.67
2015 $36,722,000 $25,376,000 $11,346,000 $ 6,356,000 1.79
</TABLE>
Average Coverage over the term of the Bonds is 1.58:1.
[1] Debt Coverage Ratio represents Pre-tax Operating Cash flow divided by
Total Debt Service Costs.
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. Panda Global
Services, Inc. took over contract operations of the
Project on January 1, 1997. Burns & McDonnell believes
Panda Global Services, Inc. will continue to operate
and maintain the Facility consistent with past
practices.
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 overall fuel market forecasts 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 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. This dispatch was not modeled directly by
ICF but confirmed as reasonable by ICF. Under these
assumptions, dispatch is projected to increase from
1,031 equivalent full load hours in 1997 to 3,491
equivalent full load hours in 2005. After 2005,
dispatch is projected to decrease steadily to 2,366
equivalent full load hours in 2015.
9. Thermal energy in the form of steam and chilled water
will be exported from the Facility, operating in the
cogeneration mode, to WestPoint Stevens Inc.'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. It is assumed the
recent sale of the manufacturing facility from the Bibb
Company to WestPoint Stevens Inc. will result in an
assignment of the Cogeneration Energy Supply Agreement
to WestPoint Stevens Inc., and will not impact the
thermal operating loads of the Project.
10. Steam and chilled water sales to WestPoint Stevens Inc.
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 activities over time. The additional
maintenance allowance component of Facility maintenance
costs is held constant.
12. The original principal amount of the bonds issued in
1996 was $111,400,000.
13. The actual amortization schedule of the Bonds will be
as provided by the Partnership.
14. The projected annual interest expenses on the Bonds
outstanding will be as submitted to Burns & McDonnell
by the Partnership based on the terms of the Indenture.
15. The Debt Service Reserve Fund was funded at $8,090,714
at the issuance of the Bonds in 1996 and thereafter
will be maintained at adequate levels throughout the
Bonds' repayment period. It is assumed that the
Partnership enters into an agreement in which the
future interest earnings of the Debt Service Reserve
Fund are monetized to provide $3.0 million in proceeds
during 1997 and that future interest earnings are not
available to the Project.
16. The Partnership will not be required to establish or
maintain any balance in the Property Tax Fund.
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 and subsequent Project Lenders. Throughout
Project design, construction, start-up, and seven 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
issuance of the Rosemary Bonds.
As discussed more fully below, during February 1996, Burns &
McDonnell conducted its most recent Project site visit. The
primary purpose of this site visit was to assess the condition of
the Project, 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 a textile mill owned
by WestPoint Stevens Inc. which is the Project's thermal host.
The Project commenced commercial operation on December 27, 1990.
The Project was operated by University Technical Services until
the expiration of their contract on December 31, 1996. As of
January 1, 1997, Panda Global Services, a wholly owned subsidiary
of Panda Energy, took over contract operations of the Project.
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 high-
pressure 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 operate at a pressure
of 200 psig and each has a design steaming rate of 68,400 pounds
per hour.
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? 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 develop 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 on-
site fuel oil storage capacity capable of operating the Project
at full load for 168 hours (approximately one week). 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 on-
line 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.
The thermal host typically returns good-quality condensate.
However, the thermal host 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 the fuel oil tank for spill containment.
- - Silencers installed in the relief valve stacks for noise
attenuation.
- - An oil-water separator for wastewater treatment.
- - Mist eliminator on the cooling tower.
- - 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 its most recent site visit on
February 29, 1996. Figure III-3 is a site plan to gain
perspective on the Project. During the remainder of 1996 and the
first two months of 1997, Burns & McDonnell has had continued
discussions with plant personnel and project management to keep
apprised of all events at the Project.
[FIGURE III-1
PANDA-ROSEMARY SIMPLIFIED PROCESS DIAGRAM]
[FIGURE III-2
PANDA-ROSEMARY ELECTRICAL INTERCONNECTIONS
One-Line Diagram]
[DIAGRAM 3
PANDA-ROSEMARY PLOT PLAN]
PART IV
OPERATING HISTORY
The operating history of the Project is summarized in Table IV-1.
<TABLE>
TABLE IV-1
PANDA-ROSEMARY PROJECT OPERATING HISTORY
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Total Hours Dispatched 377 324 764 2,224 635
Total Electricity Produced (MWh) 44,759 31,938 76,652 234,866 64,931
Summer Dependable Capacity (MW) 161 165 165 165 165
Winter Dependable Capacity (MW) 198 198 198 198 198
Forced Outage Days 1 16 12 18 16
Total Steam Produced (1,000 lbs) 377,940 429,915 364,786 291,170 264,559
Total Chilled Water Produced
(1,000 ton-hrs) 4,028 3,694 4,123 4,069 3,300
Equivalent Availability 92.14% 89.76% 88.50% 91.22% 89.02%
</TABLE>
ELECTRIC POWER PRODUCTION
During 1995, the Project was dispatched for 2,224 hours. A
fueling arrangement included in a 1993 amendment to the Purchase
Power Agreement (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 1,000 dispatched hours would have been normal for
1995 based on typical conditions.
During 1996, electrical generation was significantly down from
1995, although it was on par with the production levels of both
1993 and 1994. The contracted fuel runs which caused higher
generation in 1995 did not materialize in 1996.
STEAM PRODUCTION
WestPoint Stevens Inc. (WestPoint Stevens) is the Project's
thermal host. WestPoint Stevens is a major manufacturer of terry
cloth towels. WestPoint Stevens's Rosemary mill currently
produces approximately thirty percent of the terry cloth towels
produced in the United States. Steam and chilled water required
by WestPoint Stevens are supplied by the Project.
The Cogeneration Energy Supply Agreement was originally executed
between Panda and the Bibb Company. The Bibb Company served as
the Project's thermal host since 1991 until the recent sale
(February 1997) of the manufacturing facility by the Bibb Company
to WestPoint Stevens Inc. Burns & McDonnell knows of no reason
why the Project's thermal energy services will not continue to be
provided to WestPoint Stevens under an assignment of the
Cogeneration Energy Supply Agreement, and it is further expected
that similar operating loads and conditions will be required
based on the indications from thermal host plant personnel.
Steam and chilled water sales to WestPoint Stevens 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 1996 was
27,959 klb. The total exported steam summarized in Table IV-1
includes both extraction steam and steam produced by the
auxiliary boilers. WestPoint Stevens 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
WestPoint Stevens has no "minimum take" requirement, WestPoint
Stevens is obligated to purchase all of its steam and chilled
water requirements from the Project.
In the event WestPoint Stevens 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 WestPoint Stevens
plant is a major manufacturer of terry cloth towels, it is
unlikely the plant will discontinue operations under its current
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 WestPoint
Stevens 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 or output
performance.
The Brandywine distilled water plant process uses steam from the
Brandywine 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.
Burns & McDonnell believes WestPoint Stevens 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 51 days during 1996.
There were 16 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>
TABLE IV-2
PROJECT AVAILABILITY HISTORY
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Dispatched MWh 45,056 31,930 76,652 234,866 64,487
Period Hours 8,760 8,760 8,760 8,760 8,760
Forced Outage MWh 3,857 60,357 44,193 23,890 23,569
Capacity Factor 2.88% 1.98% 6.60% 14.56% 4.04%
Equivalent Availability 92.14% 89.76% 88.50% 91.22% 89.02%
Availability 91.16% 89.13% 88.36% 90.56% 89.33%
</TABLE>
Council - Generating Availability Data System (NERC-GADS):
HEAT RATE
Hawker Siddeley, 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?
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)
1992 9,290
1993 9,550
1994 9,459
1995 9,652
1996 9,757
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 by VEPCO on-line for
more hours than 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.
The pattern of dispatch by VEPCO has required numerous start-ups
and shut-downs during the past several years with 1996
representing the lowest average run hours per start. 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. It is unlikely the hours per start will
be any less than what has been experienced recently.
<TABLE>
TABLE IV-4
AVERAGE FIRED HOURS PER START
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Frame 6 17 26 30 19 7
Frame 7 27 11 10 11 11
Plant Average 22 17 18 15 9
</TABLE>
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. In recent years, additional hours of
only Frame 6 operation were incurred in connection with Owner
Requested Generation (ORG) runs by the Facility (See "Qualifying
Facility Compliance" section).
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 defined by the PPA.
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. 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
Water, Tons-Hrs)(12,000 Btu/Ton-Hr)
Thermal -------------------------------------
Output = (Net Dispatched Energy Sales, kW-Hrs)(3,415 Btu/kW-Hr)
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.
(Useful Net Electric Output) + (1/2)(Useful Thermal Output)
FERC -----------------------------------------------------------
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 calendar year 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 continuously to ensure that
if they are near or below the compliance levels some corrective
measures can be taken. During 1994, 1995, and 1996, some
corrective measures, i.e. ORG runs, were taken during the fall
to ensure PURPA requirements were met. The project has shown the
ability to effectively provide any corrective measures needed to
facilitate meeting annual PURPA requirements.
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 1996
<S> <C> <C> <C> <C> <C>
Thermal Output 25.46% 16.30% 16.17% 15.18% 15.54%
FERC Efficiency 48.29% 44.35% 44.70% 43.38% 43.91%
Meet PURPA Yes 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. 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 within 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 1996, the Frame 6
unit had 631 fired hours, while the Frame 7 had 421 fired hours.
The projections provided by ICF indicate a peak of approximately
3500 hours of operation by 2005 and as such, SCR installation
will most likely be necessary.
The Project has a reserve account of $5.3 million which has been
established to provide for this installation. The reserve amount
should provide adequate funds to cover the cost of the SCR
enhancement.
Quarterly reports have been submitted to the NCDEM regional
office in Raleigh indicating the hours of operation, fuel use,
etc., so that they may monitor the situation. The NCDEM has
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. On July 24,
1996, the Facility provided the North Carolina Department of
Environmental, Health, and Natural Resources (NC DEHNR) the
necessary data, fee, and application for a Title V Clean Air Act
Permit. On October 2, 1996, NC DEHNR issued the Project a Title
V "Application Completeness Determination #420170A5.A" outlining
the fact that their application was timely and complete. Panda
is currently tracking the status of their permit application as
it progresses through the State's review process and expects it
to be issued by the end of 1997.
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 conditions 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 an adequate Spill Prevention and Countermeasure
Control (SPCC) plan 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. No problems have been
experienced with the transformer since that time relating to
these modifications.
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, which
since 1995 have been more tolerable. 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 an unusually sharp
one day 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.
In 1996, 16 Forced Outage Days were experienced, 13 of those due
to the repair of the T1 transformer, which was damaged during
Hurricane Fran. Without the 13 forced outage days, the facility
had its second best year ever, with a forced-outage-days to
dispatch-days of only 5.9%.
On Friday, September 6, 1996, the Project experienced
extraordinary weather conditions caused by Hurricane Fran. These
conditions resulted in an electrical fault which caused damage to
certain electrical interconnection equipment. Panda's
engineering consultant, C. H. Guernsey & Company (Guernsey),
conducted an immediate site visit, inspected the damage due to
the incident, and consulted on recommended repairs to the damaged
equipment. A report of the incident was prepared by Guernsey.
The damage occurred to two switches and one power transformer
used to interconnect the Project with VEPCO (see further
description below "1996 Hurricane Damage").
There have been no forced outages to date during the 1997 forced
outage period, which started on December 1, 1996.
MAJOR MAINTENANCE ACTIVITIES
Maintenance activities performed in 1996 include:
- - Major inspection of low pressure steam turbine.
- - Inspection of high pressure boiler feed pumps.
- - Installation of mesh pads in high pressure superheater drums
of both HRSG's.
- - Inspection on both combustion turbine NOx water pumps.
The first major overhaul is expected in 2002, when the overhaul
of the combustion turbines will be performed.
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 replaced by Panda with an improved
type of heat tracing. The new heat tracing is 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? 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 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 and
it is working well.
As noted, the T1 transformer was significantly damaged due to an
electrical fault that occurred during the severe weather caused
by Hurricane Fran. This transformer has been removed from
service and is currently under repair. A rental transformer is
currently being used by the Project. The repaired transformer is
expected to be back in service in early 1997 (see further
discussions below "1996 Hurricane Damage").
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 had found
corrosion pitting had occurred in the steam drum, evidence of
oxygen-related corrosion.
In an effort to enhance the long term reliability and reduce the
oxygen-related corrision 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 water-side internal
components of the Project and maintains a positive pressure on
these components to prevent the infiltration of atmospheric
oxygen. This has been successful in reducing 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. It is likely that the Chiller #2 will eventually need
replacement at a cost of $700,000-800,000, however no provision
for this has been made at this time in the projections due to the
uncertainty of the timing.
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 which was successfully achieved.
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 in 1997 for a cost of
approximately $10,000. 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. 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. Panda has had numerous discussions with VEPCO on the
AGC ramp rates and since the 1995 installation, has seen more
reasonable and customary ramping procedures taken by VEPCO which
are more consistant with prudent utility practices.
O&M CONTRACTOR
Prior to the expiration of their contract on December 31, 1996,
University Technical Services (U-TECH) was responsible for
managing the day-to-day operations and administrative functions
of the Project. As of January 1, 1997, Panda Global Services,
Inc., a wholly owned subsidiary of Panda Energy International,
Inc., took over contract operations of the Project. Burns &
McDonnell has reviewed the O&M Agreement with Panda Global
Services, Inc. in November of 1996, and concluded it is
consistent with the scope and costs of the U-TECH O&M Agreement,
which was obtained through a competitive bid process.
It is the opinion of Burns & McDonnell that U-TECH's performance
had been adequate during the term of the O&M contract and that
there is no reason Panda Global Services, Inc. would not fulfill
U-TECH's previous obligations. All of the U-TECH personnel at
the facility remain as employees of Panda Global Services, Inc.
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 facility personnel.
In November 1994, Panda held a training session for the 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
1996 HURRICANE DAMAGE
On Friday, September 6, 1996, the Project experienced
extraordinary weather conditions caused by Hurricane Fran. These
conditions resulted in an electrical fault which caused damage to
certain electrical interconnection equipment. Panda's
engineering consultant, C. H. Guernsey & Company (Guernsey),
conducted an immediate site visit, inspected the damage due to
the incident, and consulted on recommended repairs to the damaged
equipment. A report of the incident was prepared by Guernsey.
The damage occurred to two switches and one power transformer
used to interconnect the Project with VEPCO. The damage to the
transformer was of primary concern for the following reasons:
- - Replacement Cost - The damaged transformer is a major
component of the Project. Repair of this component is
estimated to cost $577,250 and repair and reinstallation
will be completed by April, 1997.
- - Delivery Schedule - A replacement transformer is a major
component that is not kept in stock by equipment suppliers.
The delivery schedule for a replacement transformer would
have been several months at best. As a result, Panda
decided to repair to the damaged transformer, which has also
required several months with a planned in-service date of
April, 1997. A substantial cost to be incurred as a result
of this delivery schedule is rental costs for use of a
temporary transformer. Anticipated rental costs of
$1,021,680 are actually greater than anticipated repair
costs for the transformer.
Burns & McDonnell has reviewed the report prepared by Guernsey
and subsequent cost estimates prepared by Panda, Guernsey and
others. These cost estimates include price quotes from well-
qualified equipment suppliers and repair facilities. Based upon
our review of the Guernsey report, the cost estimates and
discussions with Panda's insurance specialist, it appears damages
to the facility and the temporary transformer rental will most
likely be covered by insurance. Assuming this is true, the 1996
financial impact to the Project was the insurance deductible
costs of $330,000.
A preliminary assessment of the damage to the transformer
indicates one of the three phases contained within the
transformer has been damaged. Although tests at the repair
facility could indicate the other two phases are satisfactory,
degradation of these phases may have occurred. Considering the
cost of a potential failure of this transformer in the future,
Panda has indicated they plan to repair all three phases
regardless of any favorable test results at the repair facility.
The incremental cost of repairing all three phases versus only
one phase may or may not be covered by insurance. In the event
these incremental costs are not covered by insurance, Panda will
incur an additional cost of $222,225. The Project pro forma has
been modified under the assumption that Panda incurs this cost in
1997.
The inclusion of the hurricane damage costs incurred by Panda did
not affect the debt service coverage on the Panda-Rosemary Bonds,
because it is assumed that the debt service coverage obligations
are paid before this cost which is considered a capital
improvement.
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 (see
discussion of exhaust temperature spread below). Although of
some concern, steps have been taken to remedy this situation.
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 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 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, Panda
performs borescopic inspections of the three turbines annually.
By reviewing Table V-1 and its knowledge of the Facility, 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 an organized computerized preventative
maintenance program is used an annual spare parts inventory is
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. 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.
<TABLE>
Table V-1
COMPARISON OF MANUFACTURERS' RECOMMENDATIONS
WITH 10 YEAR PLAN MAINTENANCE ACTIVITIES FOR MAJOR PIECES OF ROTATING EQUIPMENT
<CAPTION>
COMBUSTION HOT GAS PATH
- ---------UNIT------ ---INSPECTION--- ---INSPECTION--- MAJOR INSPECTION LIMITED OVERHAUL -MAJOR OVERHAUL-
--MFG-- -PANDA- --MFG-- -PANDA- --MFG-- -PANDA- --MFG-- -PANDA- --MFG-- -PANDA-
<S> <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
Steam Turbine 25,000 16,000 50,000 50,000
</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 has 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
three years. The proforma projections use 198 MW and 165 MW for
the winter and summer capacity output factors, respectively,
which is reasonable and achievable based on historical plant
performance.
<TABLE>
TABLE VI-1
HISTORICAL CAPACITY TEST RESULTS
<CAPTION>
Test Date Result Capacity 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 continued 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.
However, using the straight line average is most appropriate for
proforma projection purposes.
[FIGURE VI-1
Graph of Heavy-Duty Gas Turbine Degradation
as a Function of Total Factored Hours]
The Project has demonstrated capacity output in excess of the PPA
contract maximum in recent years without experiencing a major
overhaul of the combustion turbines or steam turbine. Based upon
recent actual performance, it was assumed the Project would, on
average, continue to achieve those capacity levels through the
term of 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. Refer to the 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 which was 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 764 in 1994. During 1996, the Project was dispatched
for 635 hours which was consistent with 1994 operations.
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 ICF
dispatch projections, which we have reviewed in determining the
adequacy of the $5.3 million reserve provided, this NOx reduction
equipment installation is not anticipated to be required until
after the year 2000. Panda estimates a three to four week outage
would be necessary, which is allowed for under a special
provision in the PPA.
AVAILABILITY
Availability during 1994 (88.36%) was hampered largely due to
transformer and freeze protection problems. Since Panda
addressed these issues, the availability of the Project has
increased to 90.65 percent and 89.33 percent in 1995 and 1996,
respectively. The availability in 1996 was affected by the
damage to the T1 transformer as a result of Hurricane Fran as
discussed above.
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 plant heat rate of 8,678 Btu/kWh (HHV) during a
full load 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.
The electrical generation portion of the plant heat rate of 8,678
Btu/kWh demonstrated in May 1995 would be 8,238 Btu/kWh after
credit for fuel used for process steam generation.
Burns & McDonnell last conducted a detailed review of the
Project's historical heat rate performance in 1996. The Project
has demonstrated excellent heat rate for as-designed conditions
of full load, cogeneration mode. Presently, three factors
prevent the Project from demonstrating this excellent heat rate
potential: (1) the variability of the thermal host, and (2) the
dispatch pattern of VEPCO, and (3) Panda's requirements to
conduct ORG runs. With the normalization of these events, Burns
& McDonnell feels that the contract heat rate of 8900 Btu/kWh can
be consistently obtained.
For proforma projection 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 significant 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 may be able to outperform the heat rate estimates
indicated.
ANNUAL OPERATION AND MAINTENANCE COSTS
Annual fixed and variable operation and maintenance (O&M) costs
are characterized as follows:
- - The facility's operational staff and gas transportation
costs are the primary components of fixed O&M costs.
- - 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 which has been reflected in
the proforma projections. 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 closely.
MAJOR MAINTENANCE PROGRAMS AND COSTS
The maintenance staff at the Plant 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.
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 the hourly
dispatch overhaul allowance of $276 per fired hour.
EQUIPMENT REPLACEMENT PROVISIONS
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 through the term of the PPA and
beyond. 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 overhauled and maintained throughout the operating
life of the Project which is expected.
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 that
the following repairs and maintenance allowances included in the
financial projections are reasonable:
- - General Maintenance and Repairs - This allowance in the
annual Project budget accounts for normal maintenance
activities required to keep the Project functioning on a day-
to-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 shake-
out 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).
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 repaired 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
expires 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 have 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)
1997 [1] 11.65
1998 11.65
1999 10.82
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 fixed by the PPA.
[Figure VII-1 Graph of Contractual Capacity Charges]
TABLE VII-2
PROJECTED SUMMER AND WINTER GAS ENERGY CHARGES
Panda-Rosemary Cogeneration Project
Summer Winter
Year Energy Charge Energy Charge
---- ------------- -------------
($/kWh) ($/kWh)
1997 [1] 0.0221 0.0261
1998 0.0232 0.0271
1999 0.0244 0.0283
2000 0.0256 0.0296
2001 0.0267 0.0308
2002 0.0277 0.0321
2003 0.0290 0.0335
2004 0.0302 0.0349
2005 0.0315 0.0364
2006 0.0330 0.0378
2007 0.0343 0.0392
2008 0.0358 0.0410
2009 0.0374 0.0426
2010 0.0391 0.0445
2011 0.0406 0.0461
2012 0.0419 0.0478
2013 0.0435 0.0495
2014 0.0451 0.0512
2015 0.0468 0.0529
[1] Summer and winter gas energy charges under the PPA term based on
estimated cost of delivered fuel and variable operation and
maintenance expenditures. The gas and guel oil market forecast
was prepared by ICF in connection with their dispatch study.
[Figure VII-2 Graph of
SUMMER AND WINTER GAS ENERGY CHARGES]
Expected Dispatch of the Project
VEPCO controls the dispatch of the Project under the terms of the
existing PPA. VEPCO uses the Project to meet peak and
intermediate capacity and energy requirements based on economic
dispatch of its generation and power supply resources. Recently,
VEPCO has agreed as part of a buyout of an independent power
project, Richmond Power Enterprises (RPE), to purchase economy
energy from an Enron affiliate which is forecasted to displace
some of the Project's off-peak dispatch. The expected dispatch
for the remainder of the PPA term is presented in Table VII-3 and
illustrated graphically in Figure VII-3 as estimated by ICF in
their dispatch study.
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 VII-3
DISPATCH ASSUMPTIONS [1]
Panda-Rosemary Cogeneration Project
<TABLE>
<CAPTION>
Summer Winter Gas Winter Oil VEPCO Gas Total
Year Dispatch Hours Dispatch Hours Dispatch Hours Dispatch Hours [2] Dispatch Hours Percent
- ---- -------------- -------------- -------------- ------------------ -------------- -------
%
<C> <C> <C> <C> <C> <C> <C>
1997[3] 511 117 3 400 1031 11.77%
1998 775 183 10 500 1468 16.76%
1999 1038 250 17 500 1805 20.61%
2000 1453 241 19 500 2213 25.26%
2001 1868 231 21 500 2620 29.91%
2002 1960 272 37 500 2769 31.61%
2003 2053 320 65 600 3038 34.68%
2004 2149 376 114 600 3239 36.97%
2005 2248 441 202 600 3491 39.85%
2006 2130 418 186 600 3334 38.06%
2007 2019 397 171 600 3187 36.38%
2008 1913 376 158 600 3047 34.78%
2009 1813 356 145 600 2914 33.26%
2010 1718 338 134 600 2790 31.85%
2011 1650 320 133 600 2703 30.86%
2012 1581 303 132 600 2616 29.86%
2013 1513 286 131 600 2530 28.88%
2014 1446 271 130 600 2447 27.93%
2015 1380 257 129 600 2366 27.01%
</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 graph of Dispatch Assumptions]
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, once during the
summer period and once during the winter period, 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. During this
time period, 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 which
is reasonable based on expected ICF dispatch. 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 operation and
maintenance contract currently provided by Panda Global Services,
Inc., 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 1996 and the projected fixed operating costs in the 1997
budget. A forecast of fixed operating costs for the remainder of
the PPA term was estimated by Burns & McDonnell. 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 its management fee to all other Project operating,
debt, and capital costs. Therefore, the Panda management fee has
been removed from the Project fixed operating cost forecast.
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 1996, the 1997 budget, 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 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. The 1997 overhaul allowance was
increased to $276 per fired hour upon Burns & McDonnell's request
and escalated 3.0% annually 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,
WestPoint Stevens, to maintain QF status under PURPA. However,
due to the Project's low dispatch requirements, the thermal loads
for WestPoint Stevens are mainly met from the operation of
auxiliary boilers. The current steam and chilled water pricing
in the Cogeneration Energy Supply Agreement provides WestPoint
Stevens 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 WestPoint Stevens.
The pro forma assumes this will continue throughout the life of
the Project.
The Cogeneration Energy Supply Agreement was originally executed
between Panda and the Bibb Company. The Bibb Company served as
the Project's thermal host since 1991 until the recent sale
(February 1997) of the manufacturing facility by the Bibb Company
to WestPoint Stevens Inc. Burns & McDonnell knows of no reason
why the Project's thermal energy services will not continue to be
provided to WestPoint Stevens under an assignment of the
Cogeneration Energy Supply Agreement, and it is further expected
that similar operating loads and conditions will be required
based on the indications from thermal host plant personnel.
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 market forecast was
prepared for Panda by ICF in connection with their dispatch
study. 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.
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-5
indicates the Project is expected to maintain strong debt
coverage ratios throughout the twenty-year debt repayment period
of the Rosemary Bonds under the dispatch forecast presented in
Table VII-3.
Zero Dispatch Case
To illustrate the ability to repay debt service under the most
extreme dispatch case, a Project pro forma sensitivity 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. Table VII-6 presents a summary of the forecasted
revenues and expenditures, and debt coverage ratios of the
Project with the zero dispatch scenario. Table VII-6 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.
<TABLE>
<CAPTION>
TABLE VII-4
FUEL MARKET ASSUMPTIONS
Panda-Rosemary Cogeneration Project
Summer Winter Winter
Year Gas Cost Gas Cost Oil Cost
- ---- -------- -------- --------
($/MMBtu) ($/MMBtu) ($/MMBtu)
<S> <C> <C> <C>
1997[1] $2.15 $2.61 $3.69
1998 $2.26 $2.72 $3.81
1999 $2.38 $2.84 $3.92
2000 $2.50 $2.97 $4.02
2001 $2.61 $3.10 $4.20
2002 $2.71 $3.24 $4.37
2003 $2.84 $3.37 $4.54
2004 $2.97 $3.53 $4.72
2005 $3.10 $3.67 $4.91
2006 $3.24 $3.83 $5.10
2007 $3.38 $3.97 $5.30
2008 $3.53 $4.15 $5.51
2009 $3.70 $4.32 $5.72
2010 $3.87 $4.51 $5.95
2011 $4.02 $4.68 $6.18
2012 $4.15 $4.85 $6.42
2013 $4.31 $5.03 $6.66
2014 $4.47 $5.20 $6.91
2015 $4.64 $5.38 $7.18
</TABLE>
[1] Fuel market forecast prepared by ICF.
[Figure VII-4 graph of Fuel Market Assumptions]
<TABLE>
<CAPTION
TABLE VII-5
SUMMARY OF PROJECT DEBT COVERAGE RATIOS
Panda-Rosemary Cogeneration Project
Rosemary
Pre-tax Total Debt
Total Total Operating Debt Service Coverage
Year Revenues Expenses Cashflow Costs Ratio [1]
- ---- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1997 $32,285,000 $ 9,680,000 $22,605,600 $14,693,000 1.54
1998 $31,198,000 $11,185,000 $20,013,000 $14,627,000 1.37
1999 $31,376,000 $12,860,000 $18,516,000 $13,314,000 1.39
2000 $33,672,000 $14,808,000 $18,864,000 $13,242,000 1.42
2001 $36,095,000 $16,861,000 $19,234,000 $13,164,000 1.46
2002 $37,491,000 $18,122,000 $19,369,000 $13,058,000 1.48
2003 $39,309,000 $19,667,000 $19,642,000 $12,943,000 1.52
2004 $41,378,000 $21,526,000 $19,852,000 $12,825,000 1.55
2005 $44,160,000 $23,907,000 $20,253,000 $12,669,000 1.60
2006 $38,446,000 $23,964,000 $14,482,000 $ 8,710,000 1.66
2007 $38,146,000 $23,985,000 $14,161,000 $ 8,534,000 1.65
2008 $37,808,000 $24,026,000 $13,782,000 $ 8,352,000 1.65
2009 $37,570,000 $24,115,000 $13,455,000 $ 8,154,000 1.65
2010 $37,286,000 $24,243,000 $13,043,000 $ 7,946,000 1.64
2011 $37,300,000 $24,488,000 $12,812,000 $ 7,772,000 1.65
2012 $37,229,000 $24,683,000 $12,546,000 $ 7,565,000 1.66
2013 $37,040,000 $24,910,000 $12,130,000 $ 7,328,000 1.66
2014 $36,908,000 $25,141,000 $11,767,000 $ 7,042,000 1.67
2015 $36,722,000 $25,376,000 $11,346,000 $ 6,356,000 1.79
</TABLE>
Average coverage over the term of the bonds is 1.58:1.
[1] Debt Coverage Ratio represents Pre-tax Operating Cash flow divided
by Total Debt Service Costs.
<TABLE>
<CAPTION
TABLE VII-6
SUMMARY OF PROJECT DEBT COVERAGE RATIOS
ZERO DISPATCH OPTION
Panda-Rosemary Cogeneration Project
Rosemary
Pre-tax Total Debt
Total Total Operating Debt Service Coverage
Year Revenues Expenses Cashflow Costs Ratio [1]
- ---- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1997 $28,983,000 $ 5,626,000 $23,357,000 $14,693,000 1.59
1998 $25,972,000 $ 5,742,000 $20,230,000 $14,627,000 1.38
1999 $24,158,000 $ 5,872,000 $18,286,000 $13,314,000 1.37
2000 $24,158,000 $ 6,010,000 $18,148,000 $13,242,000 1.37
2001 $24,179,000 $ 6,132,000 $18,047,000 $13,164,000 1.37
2002 $24,179,000 $ 6,261,000 $17,918,000 $13,058,000 1.37
2003 $24,179,000 $ 6,410,000 $17,769,000 $12,943,000 1.37
2004 $24,179,000 $ 6,552,000 $17,627,000 $12,825,000 1.37
2005 $24,179,000 $ 6,700,000 $17,479,000 $12,669,000 1.38
2006 $18,754,000 $ 6,871,000 $11,883,000 $ 8,710,000 1.36
2007 $18,754,000 $ 7,048,000 $11,706,000 $ 8,534,000 1.37
2008 $18,754,000 $ 7,220,000 $11,534,000 $ 8,352,000 1.38
2009 $18,754,000 $ 7,410,000 $11,344,000 $ 8,154,000 1.39
2010 $18,754,000 $ 7,611,000 $11,143,000 $ 7,946,000 1.40
2011 $18,774,000 $ 7,795,000 $10,979,000 $ 7,772,000 1.41
2012 $18,774,000 $ 7,986,000 $10,788,000 $ 7,565,000 1.43
2013 $18,774,000 $ 8,185,000 $10,589,000 $ 7,328,000 1.45
2014 $18,774,000 $ 8,391,000 $10,383,000 $ 7,042,000 1.47
2015 $18,774,000 $ 8,606,000 $10,168,000 $ 6,356,000 1.60
</TABLE>
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.
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.
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
* * * * * * * * * * * * 10-Mar-97 Page 1
OPERATING ASSUMPTIONS
Planning Period
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
Capacity Assumptions
-----------------------------------------------------------------------
Summer Summer Winter Winter
Demonstrated Capacity Contract Demonstrated Capacity Contract
Year Capacity Degradation Capacity Capacity Degradation Capacity
- ---- -------- ----------- -------- -------- ----------- --------
(MW) (%) (MW) (MW) (%) (MW)
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
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>
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 [4] 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>
1997 511 88,914 117 23,166 3 594 400 66,000 1031 11.77%
1998 775 134,850 183 36,234 10 1,980 500 82,500 1468 16.76%
1999 1038 180,612 250 49,500 17 3,366 500 82,500 1805 20.61%
2000 1453 252,822 241 47,718 19 3,762 500 82,500 2213 25.26%
2001 1868 325,032 231 45,738 21 4,158 500 82,500 2620 29.91%
2002 1960 341,040 272 53,856 37 7,326 500 82,500 2769 31.61%
2003 2053 357,222 320 63,360 65 12,870 600 99,000 3038 34.68%
2004 2149 373,926 376 74,448 114 22,572 600 99,000 3239 36.97%
2005 2248 391,152 441 87,318 202 39,996 600 99,000 3491 39.85%
2006 2130 370,620 418 82,764 186 36,828 600 99,000 3334 38.06%
2007 2019 351,306 397 78,606 171 33,858 600 99,000 3187 36.38%
2008 1913 332,862 376 74,448 158 31,284 600 99,000 3047 34.78%
2009 1813 315,462 356 70,488 145 28,710 600 99,000 2914 33.26%
2010 1718 298,932 338 66,924 134 26,532 600 99,000 2790 31.85%
2011 1650 287,100 320 63,360 133 26,334 600 99,000 2703 30.86%
2012 1581 275,094 303 59,994 132 26,136 600 99,000 2616 29.86%
2013 1513 263,262 286 56,628 131 25,938 600 99,000 2530 28.88%
2014 1446 251,604 271 53,658 130 25,740 600 99,000 2447 27.93%
2015 1380 240,120 257 50,886 129 25,542 600 99,000 2366 27.01%
</TABLE>
OPERATING ASSUMPTIONS
- ---------------------
Planning Period
- ---------------
Planning Period
- ---------------
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
<TABLE>
<CAPTION>
Electric Heat Rate 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) (tons-hr) (Btu/lb)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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.
[4] Summer output based on demonstrated capacity.
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
* * * * * * * * * * * * * 10-Mar-97 Page 2
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
Summer Gas Cost
-----------------------------------------------------------------------------
SSG SGT SGT SGT SR1 SR2 SRX
Gulf Spot Transco Panda NCG Transco NCNG Swing Gas
Year Price IT Pipeline IT Mgt. Fee Retainage Retainage Retainage
---- ----- -- ----------- -------- --------- --------- ---------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%)
3.79% 2.00% 3.00%
Escalation 1996-2015 ICF Forecast
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $1.69 $0.34 $0.27 $0.04 3.79% 2.00% 3.00%
1998 $1.78 $0.35 $0.27 $0.04 3.79% 2.00% 3.00%
1999 $1.89 $0.36 $0.28 $0.04 3.79% 2.00% 3.00%
2000 $1.99 $0.37 $0.29 $0.04 3.79% 2.00% 3.00%
2001 $2.09 $0.38 $0.30 $0.04 3.79% 2.00% 3.00%
2002 $2.19 $0.38 $0.31 $0.04 3.79% 2.00% 3.00%
2003 $2.30 $0.39 $0.32 $0.04 3.79% 2.00% 3.00%
2004 $2.41 $0.40 $0.33 $0.04 3.79% 2.00% 3.00%
2005 $2.52 $0.42 $0.34 $0.04 3.79% 2.00% 3.00%
2006 $2.65 $0.43 $0.35 $0.04 3.79% 2.00% 3.00%
2007 $2.78 $0.43 $0.36 $0.04 3.79% 2.00% 3.00%
2008 $2.91 $0.44 $0.37 $0.04 3.79% 2.00% 3.00%
2009 $3.05 $0.45 $0.38 $0.04 3.79% 2.00% 3.00%
2010 $3.21 $0.47 $0.39 $0.04 3.79% 2.00% 3.00%
2011 $3.33 $0.48 $0.40 $0.04 3.79% 2.00% 3.00%
2012 $3.47 $0.48 $0.41 $0.04 3.79% 2.00% 3.00%
2013 $3.60 $0.49 $0.43 $0.04 3.79% 2.00% 3.00%
2014 $3.75 $0.51 $0.44 $0.04 3.79% 2.00% 3.00%
2015 $3.89 $0.52 $0.45 $0.04 3.79% 2.00% 3.00%
</TABLE>
FUEL COST ASSUMPTIONS
Summer Gas Cost
-----------------------------------------------------
Summer Summer Summer
Gas Gas Gas
Year Charge Charge Cost Margin Margin
---- ------ ------ ---- ------ ------
($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/kWh)
Escalation 1996-2015
1997 $2.49 $0.02213 $2.15 $0.34 $0.00300
1998 $2.61 $0.02320 $2.26 $0.35 $0.00310
1999 $2.74 $0.02441 $2.38 $0.36 $0.00322
2000 $2.87 $0.02557 $2.50 $0.37 $0.00333
2001 $3.00 $0.02667 $2.61 $0.39 $0.00344
2002 $3.11 $0.02770 $2.71 $0.40 $0.00356
2003 $3.26 $0.02899 $2.84 $0.41 $0.00368
2004 $3.40 $0.03022 $2.97 $0.43 $0.00381
2005 $3.54 $0.03150 $3.10 $0.44 $0.00394
2006 $3.70 $0.03295 $3.24 $0.46 $0.00408
2007 $3.86 $0.03434 $3.38 $0.47 $0.00422
2008 $4.02 $0.03578 $3.53 $0.49 $0.00436
2009 $4.20 $0.03741 $3.70 $0.51 $0.00452
2010 $4.39 $0.03911 $3.87 $0.53 $0.00467
2011 $4.56 $0.04057 $4.02 $0.54 $0.00483
2012 $4.71 $0.04194 $4.15 $0.56 $0.00498
2013 $4.89 $0.04351 $4.31 $0.58 $0.00515
2014 $5.07 $0.04514 $4.47 $0.60 $0.00531
2015 $5.26 $0.04682 $4.64 $0.62 $0.00549
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
Winter Gas Cost
-----------------------------------------------------------------------------
WSG WGT WGT Panda WGT WR1 WR2
Appalachian Transco CNG Pipeline NCG Transco CNG
Year Price IT IT IT Mgt. Fee Retainage Retainage
---- ----- -- -- -- -------- --------- ---------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%)
1.97% 2.28%
Escalation 1996-2015 ICF Forecast
<S> <C> <C> <C> <C> <C> <C> <C>
1997 $1.98 $0.24 $0.21 $0.27 $0.04 1.97% 2.28%
1998 $2.08 $0.25 $0.21 $0.27 $0.04 1.97% 2.28%
1999 $2.19 $0.25 $0.21 $0.28 $0.04 1.97% 2.28%
2000 $2.30 $0.26 $0.22 $0.29 $0.04 1.97% 2.28%
2001 $2.40 $0.26 $0.23 $0.30 $0.04 1.97% 2.28%
2002 $2.52 $0.27 $0.23 $0.31 $0.04 1.97% 2.28%
2003 $2.63 $0.28 $0.24 $0.32 $0.04 1.97% 2.28%
2004 $2.76 $0.29 $0.25 $0.33 $0.04 1.97% 2.28%
2005 $2.88 $0.30 $0.26 $0.34 $0.04 1.97% 2.28%
2006 $3.02 $0.30 $0.25 $0.35 $0.04 1.97% 2.28%
2007 $3.16 $0.30 $0.26 $0.36 $0.04 1.97% 2.28%
2008 $3.31 $0.31 $0.26 $0.37 $0.04 1.97% 2.28%
2009 $3.45 $0.32 $0.27 $0.38 $0.04 1.97% 2.28%
2010 $3.62 $0.33 $0.28 $0.39 $0.04 1.97% 2.28%
2011 $3.75 $0.34 $0.29 $0.40 $0.04 1.97% 2.28%
2012 $3.90 $0.35 $0.30 $0.41 $0.04 1.97% 2.28%
2013 $4.05 $0.36 $0.31 $0.43 $0.04 1.97% 2.28%
2014 $4.21 $0.37 $0.30 $0.44 $0.04 1.97% 2.28%
2015 $4.37 $0.36 $0.31 $0.45 $0.04 1.97% 2.28%
</TABLE>
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
Winter Gas Cost
---------------------------------------------------------------------------------
Total
WR2 WRX Winter Winter Winter Winter
NCNG Swing Gas Gas Gas Gas Gas
Year Retainage Retainage Charge Charge Cost Cost Margin Margin
---- --------- --------- ------ ------ ---- ---- ------ ------
(%) (%) ($/MMBtu) ($/kWh) ($/MMBtu) ($/kWh) ($/MMBtu) ($/kWh)
2.00% 3.00%
Escalation 1996-2015
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 2.00% 3.00% $2.93 $0.02605 $2.61 $0.02323 $0.31668 $0.00282
1998 2.00% 3.00% $3.05 $0.02714 $2.72 $0.02423 $0.32729 $0.00291
1999 2.00% 3.00% $3.18 $0.02827 $2.84 $0.02526 $0.33825 $0.00301
2000 2.00% 3.00% $3.32 $0.02955 $2.97 $0.02643 $0.34956 $0.00311
2001 2.00% 3.00% $3.46 $0.03076 $3.10 $0.02755 $0.36096 $0.00321
2002 2.00% 3.00% $3.61 $0.03214 $3.24 $0.02882 $0.37303 $0.00332
2003 2.00% 3.00% $3.76 $0.03345 $3.37 $0.03002 $0.38518 $0.00343
2004 2.00% 3.00% $3.93 $0.03494 $3.53 $0.03140 $0.39805 $0.00354
2005 2.00% 3.00% $4.09 $0.03636 $3.67 $0.03270 $0.41101 $0.00366
2006 2.00% 3.00% $4.25 $0.03784 $3.83 $0.03406 $0.42474 $0.00378
2007 2.00% 3.00% $4.41 $0.03924 $3.97 $0.03534 $0.43857 $0.00390
2008 2.00% 3.00% $4.60 $0.04096 $4.15 $0.03693 $0.45321 $0.00403
2009 2.00% 3.00% $4.79 $0.04261 $4.32 $0.03845 $0.46795 $0.00416
2010 2.00% 3.00% $5.00 $0.04447 $4.51 $0.04016 $0.48356 $0.00430
2011 2.00% 3.00% $5.18 $0.04609 $4.68 $0.04165 $0.49888 $0.00444
2012 2.00% 3.00% $5.37 $0.04778 $4.85 $0.04320 $0.51468 $0.00458
2013 2.00% 3.00% $5.56 $0.04952 $5.03 $0.04480 $0.53098 $0.00473
2014 2.00% 3.00% $5.75 $0.05118 $5.20 $0.04630 $0.54780 $0.00488
2015 2.00% 3.00% $5.94 $0.05288 $5.38 $0.04785 $0.56514 $0.00503
</TABLE>
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
Winter Fuel Oil Cost
--------------------------------------------------------------------------------
Delivered Panda Winter Winter Winter
Fuel Oil Handling Oil Oil Fuel Oil Oil
Year Price Charge Charge Charge Usage Cost Margin Margin
---- ----- ------ ------ ------ ----- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) (%) ($/MMBtu) ($/MMBtu) ($/kWh)
Escalation 1996-2015 3.00%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $3.96 $0.10 $4.06 $0.03617 80.00% $3.69 $0.37008 $0.00329
1998 $4.08 $0.10 $4.18 $0.03719 80.00% $3.81 $0.37304 $0.00332
1999 $4.19 $0.11 $4.30 $0.03825 80.00% $3.92 $0.37629 $0.00335
2000 $4.31 $0.11 $4.42 $0.03933 80.00% $4.04 $0.37661 $0.00335
2001 $4.48 $0.11 $4.59 $0.04083 80.00% $4.20 $0.38534 $0.00343
2002 $4.66 $0.11 $4.76 $0.04240 80.00% $4.37 $0.39203 $0.00349
2003 $4.84 $0.11 $4.95 $0.04402 80.00% $4.54 $0.40125 $0.00357
2004 $5.02 $0.11 $5.13 $0.04568 80.00% $4.72 $0.40780 $0.00363
2005 $5.22 $0.11 $5.33 $0.04742 80.00% $4.91 $0.41752 $0.00372
2006 $5.42 $0.11 $5.53 $0.04922 80.00% $5.10 $0.42744 $0.00380
2007 $5.63 $0.11 $5.74 $0.05109 80.00% $5.30 $0.44091 $0.00392
2008 $5.85 $0.11 $5.96 $0.05303 80.00% $5.51 $0.44862 $0.00399
2009 $6.07 $0.11 $6.18 $0.05502 80.00% $5.72 $0.45934 $0.00409
2010 $6.31 $0.11 $6.42 $0.05710 80.00% $5.95 $0.46745 $0.00416
2011 $6.55 $0.11 $6.66 $0.05927 80.00% $6.18 $0.48270 $0.00430
2012 $6.81 $0.11 $6.91 $0.06154 80.00% $6.42 $0.49886 $0.00444
2013 $7.07 $0.11 $7.18 $0.06387 80.00% $6.66 $0.51531 $0.00459
2014 $7.34 $0.11 $7.45 $0.06631 80.00% $6.91 $0.53658 $0.00478
2015 $7.63 $0.11 $7.73 $0.06884 80.00% $7.18 $0.55840 $0.00497
</TABLE>
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
VEPCO Gas Cost
-------------------------------------------------------------------------------------------------------------
MGT Panda VEPCO VEPCO Plant FA VEPCO VEPCO VEPCO VEPCO
Management Pipeline Gas Gas Variable NCNG Nomination Gas Nomination Gas
Year Fee Charge Charge Charge O&M Costs Retainage Fee Charge Fee Cost Margin
---- --- ------ ------ ------ --------- --------- --- ------ --- ---- ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) ($/kWh) (%) ($/day) ($/kWh) ($/day) ($/kWh) ($/kWh)
2.00% $450 $450
Escalation 1996-2015 0.00% 3.00%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $0.04 $0.13 $0.17 $0.00153 $0.00216 2.00% $7,500 $0.00388 $7,500 $0.00011 $0.00377
1998 $0.04 $0.14 $0.18 $0.00157 $0.00222 2.00% $9,375 $0.00398 $9,375 $0.00011 $0.00387
1999 $0.04 $0.14 $0.18 $0.00161 $0.00229 2.00% $9,375 $0.00409 $9,375 $0.00011 $0.00398
2000 $0.04 $0.14 $0.18 $0.00164 $0.00236 2.00% $9,375 $0.00420 $9,375 $0.00011 $0.00408
2001 $0.04 $0.14 $0.18 $0.00164 $0.00243 2.00% $9,375 $0.00427 $9,375 $0.00011 $0.00416
2002 $0.04 $0.14 $0.18 $0.00164 $0.00250 2.00% $9,375 $0.00434 $9,375 $0.00011 $0.00423
2003 $0.04 $0.14 $0.18 $0.00164 $0.00258 2.00% $11,250 $0.00442 $11,250 $0.00011 $0.00431
2004 $0.04 $0.14 $0.18 $0.00164 $0.00266 2.00% $11,250 $0.00450 $11,250 $0.00011 $0.00439
2005 $0.04 $0.14 $0.18 $0.00164 $0.00274 2.00% $11,250 $0.00458 $11,250 $0.00011 $0.00447
2006 $0.04 $0.14 $0.18 $0.00164 $0.00282 2.00% $11,250 $0.00466 $11,250 $0.00011 $0.00455
2007 $0.04 $0.14 $0.18 $0.00164 $0.00290 2.00% $11,250 $0.00475 $11,250 $0.00011 $0.00464
2008 $0.04 $0.14 $0.18 $0.00164 $0.00299 2.00% $11,250 $0.00484 $11,250 $0.00011 $0.00473
2009 $0.04 $0.14 $0.18 $0.00164 $0.00308 2.00% $11,250 $0.00493 $11,250 $0.00011 $0.00482
2010 $0.04 $0.14 $0.18 $0.00164 $0.00317 2.00% $11,250 $0.00503 $11,250 $0.00011 $0.00491
2011 $0.04 $0.14 $0.18 $0.00164 $0.00327 2.00% $11,250 $0.00512 $11,250 $0.00011 $0.00501
2012 $0.04 $0.14 $0.18 $0.00164 $0.00337 2.00% $11,250 $0.00522 $11,250 $0.00011 $0.00511
2013 $0.04 $0.14 $0.18 $0.00164 $0.00347 2.00% $11,250 $0.00533 $11,250 $0.00011 $0.00521
2014 $0.04 $0.14 $0.18 $0.00164 $0.00357 2.00% $11,250 $0.00543 $11,250 $0.00011 $0.00532
2015 $0.04 $0.14 $0.18 $0.00164 $0.00368 2.00% $11,250 $0.00554 $11,250 $0.00011 $0.00543
</TABLE>
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
Auxiliary Boiler Steam/Chilled Water Fuel Cost
-------------------------------------------------------------------------------------
Texas
Gulf Spot Transco GRI/ACA NCG Transco CNG Gas NCNG
Year Price Commodity Surcharge Mgt. Fee Retainage Retainage Retainage Retainage
---- ----- --------- --------- -------- --------- --------- --------- ---------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%)
3.79% 2.28% 2.00% 1.00%
Escalation 1996-2015 ICF Forecast 3.00% 3.00% 0.00%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.69 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
1998 $1.78 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
1999 $1.89 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2000 $1.99 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2001 $2.09 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2002 $2.19 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2003 $2.30 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2004 $2.41 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2005 $2.52 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2006 $2.65 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2007 $2.78 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2008 $2.91 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2009 $3.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2010 $3.21 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2011 $3.33 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2012 $3.47 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2013 $3.60 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2014 $3.75 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2015 $3.89 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
</TABLE>
FUEL COST ASSUMPTIONS
Auxiliary Boiler Steam/Chilled Water Fuel Cost
----------------------------------------------
Steam Steam
Gas Gas Steam
Year Cost Cost Charge Margin
---- ---- ---- ------ ------
($/MMBtu) ($/klbs) ($/klbs) ($/klbs)
Escalation 1996-2015 0.00%
1997 $1.94 $3.32 $1.15 ($2.17)
1998 $2.04 $3.50 $1.15 ($2.35)
1999 $2.16 $3.70 $1.15 ($2.55)
2000 $2.27 $3.90 $1.15 ($2.75)
2001 $2.38 $4.07 $1.15 ($2.92)
2002 $2.48 $4.26 $1.15 ($3.11)
2003 $2.61 $4.47 $1.15 ($3.32)
2004 $2.73 $4.67 $1.15 ($3.52)
2005 $2.85 $4.88 $1.15 ($3.73)
2006 $2.99 $5.12 $1.15 ($3.97)
2007 $3.14 $5.38 $1.15 ($4.23)
2008 $3.28 $5.61 $1.15 ($4.46)
2009 $3.43 $5.89 $1.15 ($4.74)
2010 $3.60 $6.17 $1.15 ($5.02)
2011 $3.74 $6.41 $1.15 ($5.26)
2012 $3.89 $6.66 $1.15 ($5.51)
2013 $4.03 $6.92 $1.15 ($5.77)
2014 $4.19 $7.18 $1.15 ($6.03)
2015 $4.35 $7.46 $1.15 ($6.31)
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
* * * * * * * * * * * * * * *10-Mar-97
PROJECT FINANCING ASSUMPTIONS
Equal
Annual
Financing Sources of Funds 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
Principal Amortization Option 4
- -----------------------------------------------------
Equal Annual Principal & Interest - No Deferral 1
Equal Annual Principal & Interest - Deferral 2
Equal Annual Principal 3
Custom Principal Amortization 4
Principal Amortization Option 1
- -----------------------------------------------------
Equal Annual Principal & Interest - No Deferral 1
Equal Annual Principal & Interest - Deferral 2
Equal Annual Principal 3
Custom Principal Amortization 4
Custom Principal
Amortization Schedules
----------------------
First Mortgage Subordinate
Year Bonds Debt A
- ------------------------------------
1996 2,752,917 0
1997 5,500,486 0
1998 5,922,470 0
1999 5,092,762 0
2000 5,472,859 0
2001 5,880,138 0
2002 6,293,654 0
2003 6,737,026 0
2004 7,215,155 0
2005 7,696,849 0
2006 4,292,019 0
2007 4,492,094 0
2008 4,704,645 0
2009 4,918,978 0
2010 5,142,670 0
2011 5,422,061 0
2012 5,691,203 0
2013 5,952,770 0
2014 6,188,493 0
2015 6,030,751 0
====================================
111,400,000 0
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
* * * * * * * * * * * * * 10-Mar-97 Page 4
DEBT SERVICE CALCULATIONS 50.00%
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 111,400,000 108,647,083 103,146,597 97,224,127 92,131,365 86,658,506
Interest ... 5,174,789 9,192,905 8,704,839 8,220,862 7,769,317 7,284,110
Principal .. 2,752,917 5,500,486 5,922,470 5,092,762 5,472,859 5,880,138
--------- --------- --------- --------- --------- ---------
Debt Service 7,927,706 14,693,391 14,627,309 13,313,624 13,242,176 13,164,248
Ending Balance ... 108,647,083 103,146,597 97,224,127 92,131,365 86,658,506 80,778,368
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0
Interest ... 0 0 0 0 0 0
Principal .. 0 0 0 0 0 0
--------- --------- --------- --------- --------- ---------
Debt Service 0 0 0 0 0 0
Ending Balance ... 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest ........ 5,174,789 9,192,905 8,704,839 8,220,862 7,769,317 7,284,110
Principal ....... 2,752,917 5,500,486 5,922,470 5,092,762 5,472,859 5,880,138
--------- --------- --------- --------- --------- ---------
Debt Service .... 7,927,706 14,693,391 14,627,309 13,313,624 13,242,176 13,164,248
DEBT SERVICE CALCULATIONS
<CAPTION>
2002 2003 2004 2005 2006
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 80,778,368 74,484,714 67,747,688 60,532,533 52,835,684
Interest ... 6,763,574 6,206,406 5,609,873 4,971,986 4,418,258
Principal .. 6,293,654 6,737,026 7,215,155 7,696,849 4,292,019
--------- --------- --------- --------- ---------
Debt Service 13,057,228 12,943,432 12,825,028 12,668,835 8,710,277
Ending Balance ... 74,484,714 67,747,688 60,532,533 52,835,684 48,543,665
Subordinated Debt A:
Beginning Balance 0 0 0 0 0
Interest ... 0 0 0 0 0
Principal .. 0 0 0 0 0
--------- --------- --------- --------- ---------
Debt Service 0 0 0 0 0
Ending Balance ... 0 0 0 0 0
TOTAL DEBT SERVICE
Interest ........ 6,763,574 6,206,406 5,609,873 4,971,986 4,418,258
Principal ....... 6,293,654 6,737,026 7,215,155 7,696,849 4,292,019
--------- --------- --------- --------- ---------
Debt Service .... 13,057,228 12,943,432 12,825,028 12,668,835 8,710,277
DEBT SERVICE CALCULATIONS
<CAPTION>
2007 2008 2009 2010 2011
--------- --------- --------- --------- ---------
First Mortgage Bonds:
Beginning Balance 48,543,665 44,051,571 39,346,926 34,427,948 29,285,278
Interest ... 4,041,600 3,647,282 3,234,574 2,803,077 2,350,485
Principal .. 4,492,094 4,704,645 4,918,978 5,142,670 5,422,061
--------- --------- --------- --------- ---------
Debt Service 8,533,694 8,351,927 8,153,552 7,945,747 7,772,546
Ending Balance ... 44,051,571 39,346,926 34,427,948 29,285,278 23,863,217
Subordinated Debt A:
Beginning Balance 0 0 0 0 0
Interest ... 0 0 0 0 0
Principal .. 0 0 0 0 0
--------- --------- --------- --------- ---------
Debt Service 0 0 0 0 0
Ending Balance ... 0 0 0 0 0
TOTAL DEBT SERVICE
Interest ........ 4,041,600 3,647,282 3,234,574 2,803,077 2,350,485
Principal ....... 4,492,094 4,704,645 4,918,978 5,142,670 5,422,061
--------- --------- --------- --------- ---------
Debt Service .... 8,533,694 8,351,927 8,153,552 7,945,747 7,772,546
DEBT SERVICE CALCULATIONS
<CAPTION>
2012 2013 2014 2015
---------- ---------- ---------- ---------
First Mortgage Bonds:
Beginning Balance 23,863,217 18,172,014 12,219,244 6,030,751
Interest ... 1,874,128 1,374,801 853,751 325,095 94,821,712
Principal .. 5,691,203 5,952,770 6,188,493 6,030,751 111,400,000
---------- ---------- ---------- ---------
Debt Service 7,565,331 7,327,571 7,042,244 6,355,846
Ending Balance ... 18,172,014 12,219,244 6,030,751 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 ........ 1,874,128 1,374,801 853,751 325,095
Principal ....... 5,691,203 5,952,770 6,188,493 6,030,751
---------- ---------- ---------- ---------
Debt Service .... 7,565,331 7,327,571 7,042,244 6,355,846
</TABLE>
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
* * * * * * * * * * * * 10-Mar-97 Page 5
FUEL COSTS
<TABLE>
<CAPTION>
Dispatch Operations ............... 1997 1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------
<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 Capacity ................... 174.0 174.0 174.0 174.0 174.0 174.0 174.0
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 ................... 511 775 1,038 1,453 1,868 1,960 2,053
Winter Gas Dispatch ............... 117 183 250 241 231 272 320
Winter Oil Dispatch ............... 3 10 17 19 21 37 65
VEPCO Gas Dispatch ................ 400 500 500 500 500 500 600
--------------------------------------------------------------------------------
Total Dispatch Hours ............ 1,031 1,468 1,805 2,213 2,620 2,769 3,038
Percentage ...................... 11.77% 16.76% 20.61% 25.26% 29.91% 31.61% 34.68%
Winter Starts ..................... 3 5 6 6 6 7 8
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 88,914 134,850 180,612 252,822 325,032 341,040 357,222
Winter Gas Output ................. MWh 23,166 36,234 49,500 47,718 45,738 53,856 63,360
Winter Oil Dispatch ............... MWh 594 1,980 3,366 3,762 4,158 7,326 12,870
VEPCO Gas Dispatch MWh ........... 66,000 82,500 82,500 82,500 82,500 82,500 99,000
--------------------------------------------------------------------------------
Net Generation .................... MWh 178,674 255,564 315,978 386,802 457,428 484,722 532,452
Fuel Usage - Electrical Generation
Net Electric Heat Rate
Btu/kWh ......................... 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel ................... MMBtu 791,335 1,200,165 1,607,447 2,250,116 2,892,785 3,035,256 3,179,276
Winter Gas Fuel ................... MMBtu 206,177 322,483 440,550 424,690 407,068 479,318 563,904
Winter Oil Fuel ................... MMBtu 5,287 17,622 29,957 33,482 37,006 65,201 114,543
VEPCO Gas Fuel .................... MMBtu 587,400 734,250 734,250 734,250 734,250 734,250 881,100
--------------------------------------------------------------------------------
Total Fuel Usage MMBtu ......... 1,590,199 2,274,520 2,812,204 3,442,538 4,071,109 4,314,026 4,738,823
Fuel Cost - Electrical Generation
Summer Gas Fuel ................... $/MMBtu $ 2.15 $ 2.26 $ 2.38 $ 2.50 $ 2.61 $ 2.71 $ 2.84
Winter Gas Fuel ................... $/MMBtu $ 2.61 $ 2.72 $ 2.84 $ 2.97 $ 3.10 $ 3.24 $ 3.37
Winter Oil Fuel ................... $/MMBtu $ 3.69 $ 3.81 $ 3.92 $ 4.04 $ 4.20 $ 4.37 $ 4.54
VEPCO Gas Fuel .................... $/kWh $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011
Summer Gas Fuel ................... $ 1,702,000 2,710,000 3,829,000 5,624,000 7,549,000 8,231,000 9,041,000
Winter Gas Fuel ................... $ 538,000 878,000 1,250,000 1,261,000 1,260,000 1,552,000 1,902,000
Winter Oil Fuel ................... $ 20,000 67,000 117,000 135,000 156,000 285,000 521,000
VEPCO Gas Fuel .................... $ 7,500 9,400 9,400 9,400 9,400 9,400 11,300
--------------------------------------------------------------------------------
Total Fuel Cost ................... $ 2,267,500 3,664,400 5,205,400 7,029,400 8,974,400 10,077,400 11,475,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel ................... $ 1,702,000 2,710,000 3,829,000 5,624,000 7,549,000 8,231,000 9,041,000
Winter Gas Fuel ................... $ 538,000 878,000 1,250,000 1,261,000 1,260,000 1,552,000 1,902,000
Winter Oil Fuel ................... $ 20,000 67,000 117,000 135,000 156,000 285,000 521,000
VEPCO Gas Fuel .................... $ 7,500 9,400 9,400 9,400 9,400 9,400 11,300
Fuel Usage - Thermal MMBtu ........ 35,735 51,113 63,196 77,360 91,486 96,944 106,490
Fuel Cost - Thermal [2] ........... $ 69,000 104,000 137,000 176,000 217,000 241,000 278,000
--------------------------------------------------------------------------------
Total Fuel Costs -
Cogen Plant .................. 2,337,000 3,768,000 5,342,000 7,205,000 9,191,000 10,318,000 11,753,000
Average Fuel Cost ($/MMBtu) ..... $ 1.44 $ 1.62 $ 1.86 $ 2.05 $ 2.21 $ 2.34 $ 2.43
Average Fuel Cost ($/kWh) ....... $ 0.0131 $ 0.0147 $ 0.0169 $ 0.0186 $ 0.0201 $ 0.0213 $ 0.0221
[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 Hours .... 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler ... 6,769 6,332 5,995 5,587 5,180 5,031 4,762
Chilled Water Production Hours - Boiler 2,972 2,542 2,212 1,806 1,401 1,268 1,027
Steam Fuel - Boiler ............... MMBtu 580,103 542,652 513,772 478,806 443,926 431,157 408,103
C. Water Fuel - Boiler ............ MMBtu 91,580 78,330 68,161 55,651 43,171 39,073 31,646
--------------------------------------------------------------------------------
Total Boiler Fuel ................. MMBtu 671,683 620,982 581,933 534,457 487,097 470,229 439,750
Boiler Fuel Cost .................. $/MMBtu $ 1.94 $ 2.04 $ 2.16 $ 2.27 $ 2.38 $ 2.48 $ 2.61
Boiler Fuel Cost .................. $ 1,301,000 1,267,000 1,257,000 1,215,000 1,158,000 1,168,000 1,148,000
<CAPTION>
Dispatch Operations ................... 2004 2005 2006 2007 2008 2009
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Hours ........................... 8,760 8,760 8,760 8,760 8,760 8,760
Summer Capacity ....................... 174.0 174.0 174.0 174.0 174.0 174.0
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 ....................... 2,149 2,248 2,130 2,019 1,913 1,813
Winter Gas Dispatch ................... 376 441 418 397 376 356
Winter Oil Dispatch ................... 114 202 186 171 158 145
VEPCO Gas Dispatch .................... 600 600 600 600 600 600
-----------------------------------------------------------------------
Total Dispatch Hours ............. 3,239 3,491 3,334 3,187 3,047 2,914
Percentage ....................... 36.97% 39.85% 38.06% 36.38% 34.78% 33.26%
Winter Starts ......................... 9 11 10 10 9 9
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 373,926 391,152 370,620 351,306 332,862 315,462
Winter Gas Output ..................... MWh 74,448 87,318 82,764 78,606 74,448 70,488
Winter Oil Dispatch ................... MWh 22,572 39,996 36,828 33,858 31,284 28,710
VEPCO Gas Dispatch MWh ............... 99,000 99,000 99,000 99,000 99,000 99,000
-----------------------------------------------------------------------
Net Generation ........................ MWh 569,946 617,466 589,212 562,770 537,594 513,660
Fuel Usage - Electrical Generation
Net Electric Heat Rate ................ Btu/kWh 8900 8900 8900 8900 8900 8900
Summer Gas Fuel ....................... MMBtu 3,327,941 3,481,253 3,298,518 3,126,623 2,962,472 2,807,612
Winter Gas Fuel ....................... MMBtu 662,587 777,130 736,600 699,593 662,587 627,343
Winter Oil Fuel ....................... MMBtu 200,891 355,964 327,769 301,336 278,428 255,519
VEPCO Gas Fuel ........................ MMBtu 881,100 881,100 881,100 881,100 881,100 881,100
-----------------------------------------------------------------------
Total Fuel Usage ................. MMBtu 5,072,519 5,495,447 5,243,987 5,008,653 4,784,587 4,571,574
Fuel Cost - Electrical Generation
Summer Gas Fuel ....................... $/MMBtu $ 2.97 $ 3.10 $ 3.24 $ 3.38 $ 3.53 $ 3.70
Winter Gas Fuel ....................... $/MMBtu $ 3.53 $ 3.67 $ 3.83 $ 3.97 $ 4.15 $ 4.32
Winter Oil Fuel ....................... $/MMBtu $ 4.72 $ 4.91 $ 5.10 $ 5.30 $ 5.51 $ 5.72
VEPCO Gas Fuel ........................ $/kWh $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011
Summer Gas Fuel ....................... $ 9,876,000 10,779,000 10,702,000 10,582,000 10,456,000 10,376,000
Winter Gas Fuel ....................... $ 2,337,000 2,855,000 2,819,000 2,778,000 2,749,000 2,710,000
Winter Oil Fuel ....................... $ 949,000 1,748,000 1,672,000 1,597,000 1,534,000 1,462,000
VEPCO Gas Fuel ........................ $ 11,300 11,300 11,300 11,300 11,300 11,300
-----------------------------------------------------------------------
Total Fuel Cost ....................... $ 13,173,300 15,393,300 15,204,300 14,968,300 14,750,300 14,559,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel ....................... $ 9,876,000 10,779,000 10,702,000 10,582,000 10,456,000 10,376,000
Winter Gas Fuel ....................... $ 2,337,000 2,855,000 2,819,000 2,778,000 2,749,000 2,710,000
Winter Oil Fuel ....................... $ 949,000 1,748,000 1,672,000 1,597,000 1,534,000 1,462,000
VEPCO Gas Fuel ........................ $ 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal .................. MMBtu 113,989 123,493 117,842 112,554 107,519 102,732
Fuel Cost - Thermal [2] ............... $ 311,000 352,000 352,000 353,000 352,000 353,000
-----------------------------------------------------------------------
Total Fuel Costs
- Cogen Plant .................. 13,484,000 15,745,000 15,556,000 15,321,000 15,102,000 14,912,000
Average Fuel Cost ($/MMBtu) ..... $ 2.60 $ 2.80 $ 2.90 $ 2.99 $ 3.09 $ 3.19
Average Fuel Cost ($/kWh) ....... $ 0.0237 $ 0.0255 $ 0.0264 $ 0.0272 $ 0.0281 $ 0.0290
[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 Hours ........ 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler ....... 4,561 4,309 4,466 4,613 4,753 4,886
Chilled Water Production Hours - Boiler 875 711 852 984 1,111 1,231
Steam Fuel - Boiler ................... MMBtu 390,878 369,281 382,736 395,334 407,332 418,730
C. Water Fuel - Boiler ................ MMBtu 26,963 21,909 26,254 30,321 34,235 37,932
-----------------------------------------------------------------------
Total Boiler Fuel ..................... MMBtu 417,840 391,190 408,990 425,655 441,567 456,663
Boiler Fuel Cost ...................... $/MMBtu $ 2.73 $ 2.85 $ 2.99 $ 3.14 $ 3.28 $ 3.43
Boiler Fuel Cost ...................... $ 1,139,000 1,114,000 1,223,000 1,335,000 1,446,000 1,569,000
<CAPTION>
Dispatch Operations ................... 2010 2011 2012 2013 2014 2015
-----------------------------------------------------------------------
Total Hours ........................... 8,760 8,760 8,760 8,760 8,760 8,760
Summer Capacity ....................... 174.0 174.0 174.0 174.0 174.0 174.0
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 ....................... 1,718 1,650 1,581 1,513 1,446 1,380
Winter Gas Dispatch ................... 338 320 303 286 271 257
Winter Oil Dispatch ................... 134 133 132 131 130 129
VEPCO Gas Dispatch .................... 600 600 600 600 600 600
-----------------------------------------------------------------------
Total Dispatch Hours ............. 2,790 2,703 2,616 2,530 2,447 2,366
Percentage ....................... 31.85% 30.86% 29.86% 28.88% 27.93% 27.01%
Winter Starts ......................... 8 8 8 7 7 6
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 298,932 287,100 275,094 263,262 251,604 240,120
Winter Gas Output ..................... MWh 66,924 63,360 59,994 56,628 53,658 50,886
Winter Oil Dispatch ................... MWh 26,532 26,334 26,136 25,938 25,740 25,542
VEPCO Gas Dispatch MWh ............... 99,000 99,000 99,000 99,000 99,000 99,000
-----------------------------------------------------------------------
Net Generation ........................ MWh 491,388 475,794 460,224 444,828 430,002 415,548
Fuel Usage - Electrical Generation
Net Electric Heat Rate
Btu/kWh ............................ 8900 8900 8900 8900 8900 8900
Summer Gas Fuel ....................... MMBtu 2,660,495 2,555,190 2,448,337 2,343,032 2,239,276 2,137,068
Winter Gas Fuel ....................... MMBtu 595,624 563,904 533,947 503,989 477,556 452,885
Winter Oil Fuel ....................... MMBtu 236,135 234,373 232,610 230,848 229,086 227,324
VEPCO Gas Fuel ........................ MMBtu 881,100 881,100 881,100 881,100 881,100 881,100
-----------------------------------------------------------------------
Total Fuel Usage ................. MMBtu 4,373,353 4,234,567 4,095,994 3,958,969 3,827,018 3,698,377
Fuel Cost - Electrical Generation
Summer Gas Fuel ....................... $/MMBtu $ 3.87 $ 4.02 $ 4.15 $ 4.31 $ 4.47 $ 4.64
Winter Gas Fuel ....................... $/MMBtu $ 4.51 $ 4.68 $ 4.85 $ 5.03 $ 5.20 $ 5.38
Winter Oil Fuel ....................... $/MMBtu $ 5.95 $ 6.18 $ 6.42 $ 6.66 $ 6.91 $ 7.18
VEPCO Gas Fuel ........................ $/kWh $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011 $ 0.00011
Summer Gas Fuel ....................... $ 10,293,000 10,263,000 10,168,000 10,101,000 10,020,000 9,926,000
Winter Gas Fuel ....................... $ 2,688,000 2,639,000 2,592,000 2,537,000 2,484,000 2,435,000
Winter Oil Fuel ....................... $ 1,405,000 1,448,000 1,492,000 1,538,000 1,584,000 1,631,000
VEPCO Gas Fuel ........................ $ 11,300 11,300 11,300 11,300 11,300 11,300
-----------------------------------------------------------------------
Total Fuel Cost ....................... $ 14,397,300 14,361,300 14,263,300 14,187,300 14,099,300 14,003,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel ....................... $ 10,293,000 10,263,000 10,168,000 10,101,000 10,020,000 9,926,000
Winter Gas Fuel ....................... $ 2,688,000 2,639,000 2,592,000 2,537,000 2,484,000 2,435,000
Winter Oil Fuel ....................... $ 1,405,000 1,448,000 1,492,000 1,538,000 1,584,000 1,631,000
VEPCO Gas Fuel ........................ $ 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal .................. MMBtu 98,278 95,159 92,045 88,966 86,000 83,110
Fuel Cost - Thermal [2] ............... $ 354,000 356,000 358,000 359,000 360,000 362,000
-----------------------------------------------------------------------
Total Fuel Costs - Cogen Plant ... 14,751,000 14,717,000 14,621,000 14,546,000 14,459,000 14,365,000
Average Fuel Cost ................ ($/MMBtu) $ 3.30 $ 3.40 $ 3.49 $ 3.59 $ 3.70 $ 3.80
Average Fuel Cost ................ ($/kWh) $ 0.0300 $ 0.0309 $ 0.0318 $ 0.0327 $ 0.0336 $ 0.0346
[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 Hours ........ 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler ....... 5,010 5,097 5,184 5,270 5,353 5,434
Chilled Water Production Hours - Boiler 1,344 1,430 1,516 1,601 1,683 1,763
Steam Fuel - Boiler ................... MMBtu 429,357 436,813 444,269 451,639 458,752 465,694
C. Water Fuel - Boiler ................ MMBtu 41,414 44,064 46,714 49,334 51,860 54,326
-----------------------------------------------------------------------
Total Boiler Fuel ..................... MMBtu 470,771 480,877 490,983 500,973 510,613 520,019
Boiler Fuel Cost ...................... $/MMBtu $ 3.60 $ 3.74 $ 3.89 $ 4.03 $ 4.19 $ 4.35
Boiler Fuel Cost ...................... $ 1,695,000 1,799,000 1,908,000 2,021,000 2,140,000 2,263,000
</TABLE>
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
******************************************************** 10-Mar-97 Page 6
PLANT OPERATING COSTS
<TABLE>
<CAPTION>
1996 1997
Estimated Actual Budget Escalation
Fuel Transportation Costs: ------------------------------
<C> <C> <C>
Firm Transportation - Transco $927,350 $1,142,000 0.00%
Less: Capacity Release Revenues $0 ($115,000) 0.00%
Fuel Management Fee $240,000 $240,000 3.00%
----------------------------
Total Fuel Transportation Costs $1,167,350 $1,267,000
Operating Costs:
O&M Contract Fee $1,699,884 $1,728,000 3.00%
General Maintenance & Repairs $165,761 $142,213 8.00%
Planned Plant Maintenance Projects $347,282 $276,637 3.00%
Additional Maintenance Allowance $150,000 $150,000 0.00%
Parts Replacement $178,965 $222,800 3.00%
Other Plant Expenses $44,161 $98,700 3.00%
Panda Management Fee [1] $240,000 $0 0.00%
Office & Admin Expenses $428,375 $182,390 3.00%
Property Taxes $974,986 $945,700 -3.00%
Insurance $289,220 $289,221 3.00%
VEPCO Performance LOC $32,865 $73,500 Input Panda Forecast
Total Operating Costs $4,551,499 $4,109,161
----------------------------
Total Plant Operating Costs $5,718,849 $5,376,161
<CAPTION>
1 2 3 4 5
Plant Operating Costs 1996 1997 1998 1999 2000
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Firm Transportation - Transco .... 927,350 1,142,000 1,142,000 1,142,000 1,142,000
Capacity Release Revenues ........ 0 (115,000) (115,000) (115,000) (115,000)
Fuel Management Fee .............. 240,000 240,000 247,000 255,000 262,000
O&M Contract Fee ................. 1,699,884 1,728,000 1,780,000 1,833,000 1,888,000
General Maintenance & Repairs .... 165,761 142,000 153,000 166,000 179,000
Planned Plant Maintenance Projects 347,282 277,000 285,000 294,000 303,000
Additional Maintenance Allowance . 150,000 150,000 150,000 150,000 150,000
Parts Replacement ................ 178,965 223,000 230,000 237,000 244,000
Other Plant Expenses ............. 44,161 99,000 102,000 105,000 108,000
Panda Management Fee [1] ......... 240,000 0 0 0 0
Office & Admin Expenses .......... 428,375 182,000 187,000 193,000 199,000
Property Taxes ................... 974,986 946,000 918,000 890,000 863,000
Insurance ........................ 289,220 289,000 298,000 307,000 316,000
VEPCO Performance LOC ............ 32,865 74,000 74,000 74,000 84,000
-------------------------------------------------------------------
Plant Operating Costs ............... 5,718,849 5,377,000 5,451,000 5,531,000 5,623,000
0.00% -5.98% 1.38% 1.47% 1.66%
<CAPTION>
6 7 8 9 10
Plant Operating Costs 2001 2002 2003 2004 2005
- --------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Firm Transportation - Transco .... 1,142,000 1,142,000 1,142,000 1,142,000 1,142,000
Capacity Release Revenues ........ (115,000) (115,000) (115,000) (115,000) (115,000)
Fuel Management Fee .............. 270,000 278,000 287,000 295,000 304,000
O&M Contract Fee ................. 1,945,000 2,003,000 2,063,000 2,125,000 2,189,000
General Maintenance & Repairs .... 193,000 209,000 225,000 243,000 263,000
Planned Plant Maintenance Projects 312,000 321,000 331,000 341,000 351,000
Additional Maintenance Allowance . 150,000 150,000 150,000 150,000 150,000
Parts Replacement ................ 251,000 259,000 266,000 274,000 282,000
Other Plant Expenses ............. 111,000 115,000 118,000 122,000 125,000
Panda Management Fee [1] ......... 0 0 0 0 0
Office & Admin Expenses .......... 205,000 211,000 217,000 224,000 231,000
Property Taxes ................... 837,000 812,000 788,000 764,000 741,000
Insurance ........................ 325,000 335,000 345,000 355,000 366,000
VEPCO Performance LOC ............ 84,000 84,000 84,000 84,000 84,000
---------------------------------------------------------------------
Plant Operating Costs ............... 5,710,000 5,804,000 5,901,000 6,004,000 6,113,000
1.55% 1.65% 1.67% 1.75% 1.82%
<CAPTION>
11 12 13 14 15
Plant Operating Costs 2006 2007 2008 2009 2010
- --------------------------------------------------------------------------------------------------------------
Firm Transportation - Transco .... 1,142,000 1,142,000 1,142,000 1,142,000 1,142,000
Capacity Release Revenues ........ (115,000) (115,000) (115,000) (115,000) (115,000)
Fuel Management Fee .............. 313,000 323,000 332,000 342,000 352,000
O&M Contract Fee ................. 2,255,000 2,322,000 2,392,000 2,464,000 2,538,000
General Maintenance & Repairs .... 284,000 307,000 331,000 358,000 386,000
Planned Plant Maintenance Projects 361,000 372,000 383,000 395,000 407,000
Additional Maintenance Allowance . 150,000 150,000 150,000 150,000 150,000
Parts Replacement ................ 291,000 300,000 309,000 318,000 327,000
Other Plant Expenses ............. 129,000 133,000 137,000 141,000 145,000
Panda Management Fee [1] ......... 0 0 0 0 0
Office & Admin Expenses .......... 237,000 245,000 252,000 259,000 267,000
Property Taxes ................... 719,000 698,000 677,000 656,000 637,000
Insurance ........................ 377,000 388,000 400,000 412,000 424,000
VEPCO Performance LOC ............ 84,000 84,000 84,000 84,000 84,000
---------------------------------------------------------------------
Plant Operating Costs ............... 6,227,000 6,349,000 6,474,000 6,606,000 6,744,000
1.86% 1.96% 1.97% 2.04% 2.09%
<CAPTION>
16 17 18 19 20
Plant Operating Costs 2011 2012 2013 2014 2015
- --------------------------------------------------------------------------------------------------------------
Firm Transportation - Transco .... 1,142,000 1,142,000 1,142,000 1,142,000 1,142,000
Capacity Release Revenues ........ (115,000) (115,000) (115,000) (115,000) (115,000)
Fuel Management Fee .............. 363,000 374,000 385,000 397,000 409,000
O&M Contract Fee ................. 2,614,000 2,692,000 2,773,000 2,856,000 2,942,000
General Maintenance & Repairs .... 417,000 450,000 486,000 525,000 567,000
Planned Plant Maintenance Projects 419,000 432,000 445,000 458,000 472,000
Additional Maintenance Allowance . 150,000 150,000 150,000 150,000 150,000
Parts Replacement ................ 337,000 347,000 358,000 369,000 380,000
Other Plant Expenses ............. 150,000 154,000 159,000 164,000 169,000
Panda Management Fee [1] ......... 0 0 0 0 0
Office & Admin Expenses .......... 275,000 284,000 292,000 301,000 310,000
Property Taxes ................... 618,000 599,000 581,000 564,000 547,000
Insurance ........................ 437,000 450,000 464,000 478,000 492,000
VEPCO Performance LOC ............ 84,000 84,000 84,000 84,000 84,000
Plant Operating Costs ............... 6,891,000 7,043,000 7,204,000 7,373,000 7,549,000
---------------------------------------------------------------------
2.18% 2.21% 2.29% 2.35% 2.39%
</TABLE>
[1] Panda Management Fee will be subordinated to all Project costs.
[2] Does not reflect costs associated with the hurricane.
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
****************************************************************** 10-Mar-97
VARIABLE PLANT COSTS
1996
Estimated 1997
Actual Summary Escalation
-------- --------
Plant Electricity Usage
Hours Not Dispatched ............... 7729
Average Electric Load (kW) ......... 1150
Electric Rate ($/kWh) .............. $ 0.0502 3.00%
-------- --------
Total Plant Electricity Usage ......... $413,984 $446,195
Water & Chemical Usage
Hours Dispatched ................... 1031
Gallons per Hour Usage - Cogen ..... 40,625
Steam/Chilled Water Production Hours 11,800
Gallons per Hour Usage - Boiler .... 5,000
Total Gallons (1000s) .............. 100,884
Water & Chemical Cost ($/1000 gal) . $ 2.08 3.00%
-------- --------
Total Water & Chemical Usage .......... $165,369 $209,840
Water Discharge
Hours Dispatched ................... 1031
Gallons per Hour Usage - Cogen ..... 2,700
Steam/Chilled Water Production Hours 11,800
Gallons per Hour Usage - Boiler .... 500
Total Gallons (1000s) .............. 8,684
Water Discharge Cost ($/1000 gal) .. $ 1.07 3.00%
-------- --------
Total Water Discharge ................. $ 8,652 $ 9,292
<TABLE>
<CAPTION>
Plant Variable Costs ............... 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched ................... 1031 1468 1805 2213 2620 2769 3038 3239 3491 3334
Hours Not Dispatched ............... 7729 7292 6955 6547 6140 5991 5722 5521 5269 5426
Steam/Chilled Water Production Hours 11,800 11800 11800 11800 11800 11800 11800 11800 11800 11800
Plant Electricity Usage ............ 446,000 434,000 426,000 413,000 399,000 401,000 394,000 392,000 385,000 409,000
Water & Chemical Usage ............. 210,000 254,000 292,000 338,000 387,000 414,000 453,000 488,000 529,000 528,000
Water Discharge .................... 9,000 11,000 12,000 14,000 16,000 17,000 18,000 19,000 21,000 21,000
Total Plant Variable Costs ...... 665,000 699,000 730,000 765,000 802,000 832,000 865,000 899,000 935,000 958,000
<CAPTION>
Plant Variable Costs ............... 2007 2008 2009 2010 2011 2012 2013 2014 2015
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched ................... 3187 3047 2914 2790 2703 2616 2530 2447 2366
Hours Not Dispatched ............... 5573 5713 5846 5970 6057 6144 6230 6313 6394
Steam/Chilled Water Production Hours 11800 11800 11800 11800 11800 11800 11800 11800 11800
Plant Electricity Usage ............ 432,000 457,000 481,000 506,000 529,000 553,000 577,000 602,000 628,000
Water & Chemical Usage ............. 527,000 526,000 526,000 526,000 531,000 536,000 540,000 545,000 549,000
Water Discharge .................... 21,000 21,000 21,000 21,000 21,000 22,000 22,000 22,000 22,000
Total Plant Variable Costs ...... 980,000 1,004,000 1,028,000 1,053,000 1,081,000 1,111,000 1,139,000 1,169,000 1,199,000
</TABLE>
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
****************************************************************** 10-Mar-97
REVENUE GENERATION
<TABLE>
<CAPTION>
Dispatch Operations 1997 1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------
<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 Demonstrated Capacity 174 174 174 174 174 174 174
Summer & VEPCO Contract Capacity 165 165 165 165 165 165 165
Winter Capacity 198 198 198 198 198 198 198
Summer Dispatch 511 775 1,038 1,453 1,868 1,960 2,053
Winter Gas Dispatch 117 183 250 241 231 272 320
Winter Oil Dispatch 3 10 17 19 21 37 65
VEPCO Gas Dispatch 400 500 500 500 500 500 600
----------------------------------------------------------------------------------
Total Dispatch Hours 1,031 1,468 1,805 2,213 2,620 2,769 3,038
Percentage 11.77% 16.76% 20.61% 25.26% 29.91% 31.61% 34.68%
Winter Starts 3 5 6 6 6 7 8
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Load Factor 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Summer Output MWh 88,914 134,850 180,612 252,822 325,032 341,040 357,222
Winter Gas Output MWh 23,166 36,234 49,500 47,718 45,738 53,856 63,360
Winter Oil Dispatch MWh 594 1,980 3,366 3,762 4,158 7,326 12,870
VEPCO Gas Dispatch MWh 66,000 82,500 82,500 82,500 82,500 82,500 99,000
----------------------------------------------------------------------------------
Net Generation MWh 178,674 255,564 315,978 386,802 457,428 484,722 532,452
Capacity Revenues
Capacity Rate $/kw-mo $11.65 $11.65 $10.82 $10.82 $10.82 $10.82 $10.82
Capacity Revenues - Summer 11,537,000 11,537,000 10,713,000 10,713,000 10,713,000 10,713,000 10,713,000
Capacity Revenues - Winter 13,845,000 13,845,000 12,855,000 12,855,000 12,855,000 12,855,000 12,855,000
----------------------------------------------------------------------------------
Total Capacity Revenues 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 $0.02 $0.02 $0.02 $0.03 $0.03 $0.03 $0.03
Winter Gas Charge $/kWh $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Winter Oil Charge $/kWh $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04
VEPCO Gas Charge $/kWh $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Variable O&M Charge $/kWh $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Summer Gas Revenues $ 2,160,000 3,428,000 4,823,000 7,062,000 9,458,000 10,299,000 11,278,000
Winter Gas Revenues $ 654,000 1,064,000 1,513,000 1,522,000 1,518,000 1,866,000 2,283,000
Winter Oil Revenues $ 23,000 78,000 136,000 157,000 180,000 329,000 600,000
VEPCO Gas Revenues $ 256,000 329,000 337,000 346,000 352,000 358,000 438,000
----------------------------------------------------------------------------------
Total Energy Revenues $ 3,093,000 4,899,000 6,809,000 9,087,000 11,508,000 12,852,000 14,599,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 167,000 279,000 335,000 333,000 343,000 409,000 482,000
Thermal Revenues
Steam Production Hours 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
Steam Production pph 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
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Production ktons 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
Chilled Water Charge $/ton $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 141,000 141,000 141,000 141,000 162,000 162,000 162,000
----------------------------------------------------------------------------------
Total Thermal Revenues $ 590,000 590,000 590,000 590,000 611,000 611,000 611,000
<CAPTION>
Dispatch Operations 2004 2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer Demonstrated Capacity 174 174 174 174 174 174 174
Summer & VEPCO Contract Capacity 165 165 165 165 165 165 165
Winter Capacity 198 198 198 198 198 198 198
Summer Dispatch 2,149 2,248 2,130 2,019 1,913 1,813 1,718
Winter Gas Dispatch 376 441 418 397 376 356 338
Winter Oil Dispatch 114 202 186 171 158 145 134
VEPCO Gas Dispatch 600 600 600 600 600 600 600
----------------------------------------------------------------------------------
Total Dispatch Hours 3,239 3,491 3,334 3,187 3,047 2,914 2,790
Percentage 36.97% 39.85% 38.06% 36.38% 34.78% 33.26% 31.85%
Winter Starts 9 11 10 10 9 9 8
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Load Factor 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Summer Output MWh 373,926 391,152 370,620 351,306 332,862 315,462 298,932
Winter Gas Output MWh 74,448 87,318 82,764 78,606 74,448 70,488 66,924
Winter Oil Dispatch MWh 22,572 39,996 36,828 33,858 31,284 28,710 26,532
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000 99,000
----------------------------------------------------------------------------------
Net Generation MWh 569,946 617,466 589,212 562,770 537,594 513,660 491,388
Capacity Revenues
Capacity Rate $/kw-mo $10.82 $10.82 $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
Capacity Revenues - Winter 12,855,000 12,855,000 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
Energy Revenues
Summer Gas Charge $/kWh $0.03 $0.03 $0.03 $0.03 $0.04 $0.04 $0.04
Winter Gas Charge $/kWh $0.03 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04
Winter Oil Charge $/kWh $0.05 $0.05 $0.05 $0.05 $0.05 $0.06 $0.06
VEPCO Gas Charge $/kWh $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.01
Variable O&M Charge $/kWh $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Summer Gas Revenues $ 12,294,000 13,390,000 13,257,000 13,084,000 12,904,000 12,773,000 12,639,000
Winter Gas Revenues $ 2,799,000 3,414,000 3,365,000 3,313,000 3,272,000 3,221,000 3,188,000
Winter Oil Revenues $ 1,091,000 2,006,000 1,916,000 1,828,000 1,753,000 1,668,000 1,599,000
VEPCO Gas Revenues $ 445,000 454,000 462,000 470,000 479,000 488,000 498,000
----------------------------------------------------------------------------------
Total Energy Revenues $ 16,629,000 19,264,000 19,000,000 18,695,000 18,408,000 18,150,000 17,924,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 553,000 696,000 652,000 678,000 623,000 642,000 583,000
Thermal Revenues
Steam Production Hours 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
Steam Production pph 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
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Production ktons 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
Chilled Water Charge $/ton $0.04 $0.04 $0.05 $0.05 $0.05 $0.05 $0.05
Steam Revenues $ 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
----------------------------------------------------------------------------------
Total Thermal Revenues $ 611,000 611,000 631,000 631,000 631,000 631,000 631,000
<CAPTION>
Dispatch Operations 2011 2012 2013 2014 2015
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760
Summer Demonstrated Capacity 174 174 174 174 174
Summer & VEPCO Contract Capacity 165 165 165 165 165
Winter Capacity 198 198 198 198 198
Summer Dispatch 1,650 1,581 1,513 1,446 1,380
Winter Gas Dispatch 320 303 286 271 257
Winter Oil Dispatch 133 132 131 130 129
VEPCO Gas Dispatch 600 600 600 600 600
------------------------------------------------------
Total Dispatch Hours 2,703 2,616 2,530 2,447 2,366
Percentage
Winter Starts 8 8 7 7 6
Winter Start Duration 40 40 40 40 40
Net Generation
Availability Factor 100.00% 100.00% 100.00% 100.00% 100.00%
Load Factor 100.00% 100.00% 100.00% 100.00% 100.00%
Summer Output MWh 287,100 275,094 263,262 251,604 240,120
Winter Gas Output MWh 63,360 59,994 56,628 53,658 50,886
Winter Oil Dispatch MWh 26,334 26,136 25,938 25,740 25,542
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000
---------- ---------- ---------- ---------- ----------
Net Generation MWh 475,794 460,224 444,828 430,002 415,548
Capacity Revenues
Capacity Rate $/kw-mo $8.32 $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 8,238,000 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 9,885,000
---------- ---------- ---------- ---------- ----------
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $0.04 $0.04 $0.04 $0.05 $0.05
Winter Gas Charge $/kWh $0.05 $0.05 $0.05 $0.05 $0.05
Winter Oil Charge $/kWh $0.06 $0.06 $0.06 $0.07 $0.07
VEPCO Gas Charge $/kWh $0.01 $0.01 $0.01 $0.01 $0.01
Variable O&M Charge $/kWh $0.00 $0.00 $0.00 $0.00 $0.00
Summer Gas Revenues $ 12,586,000 12,464,000 12,368,000 12,255,000 12,126,000
Winter Gas Revenues $ 3,128,000 3,068,000 3,001,000 2,938,000 2,878,000
Winter Oil Revenues $ 1,647,000 1,696,000 1,746,000 1,799,000 1,852,000
VEPCO Gas Revenues $ 507,000 517,000 527,000 538,000 549,000
---------- ---------- ---------- ---------- ----------
Total Energy Revenues $ 17,868,000 17,745,000 17,642,000 17,530,000 17,405,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 606,000 631,000 574,000 603,000 542,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000
Chilled Water Production ktons 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.05 $0.05 $0.05 $0.05 $0.05
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 202,000 202,000 202,000 202,000 202,000
---------- ---------- ---------- ---------- ----------
Total Thermal Revenues $ 651,000 651,000 651,000 651,000 651,000
</TABLE>
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
****************************************************************** 10-Mar-97
FINANCIAL FORECAST
<TABLE>
<CAPTION>
REVENUES 1997 1998 1999 2000 2001
--------------------------------------------------------------------
Revenues from Electric Sales:
<S> <C> <C> <C> <C> <C>
Total Capacity Revenues 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000
Energy Charges
Summer Gas Charge 2,160,000 3,428,000 4,823,000 7,062,000 9,458,000
Winter Gas Charge 654,000 1,064,000 1,513,000 1,522,000 1,518,000
Winter Oil Charge 23,000 78,000 136,000 157,000 180,000
VEPCO Gas Charge 256,000 329,000 337,000 346,000 352,000
--------------------------------------------------------------------
Total Energy Revenues 3,093,000 4,899,000 6,809,000 9,087,000 11,508,000
Winter Gas Start Revenues 167,000 279,000 335,000 333,000 343,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 141,000 141,000 141,000 141,000 162,000
--------------------------------------------------------------------
Total Thermal Revenues 590,000 590,000 590,000 590,000 611,000
Total Sales Revenues 29,232,000 31,150,000 31,302,000 33,578,000 36,030,000
Interest - D.S.R. [4] 0.0% 3,011,600 0 0 0 0
Interest - O.R. 4.5% 42,000 48,000 74,000 94,000 65,000
--------------------------------------------------------------------
Total Revenues 32,285,600 31,198,000 31,376,000 33,672,000 36,095,000
EXPENSES
Fuel Costs - Cogen Plant 2,337,000 3,768,000 5,342,000 7,205,000 9,191,000
Fuel Costs - Boiler 1,301,000 1,267,000 1,257,000 1,215,000 1,158,000
Plant Operating Costs 5,377,000 5,451,000 5,531,000 5,623,000 5,710,000
Plant Variable Costs 665,000 699,000 730,000 765,000 802,000
--------------------------------------------------------------------
Total Operating Costs 9,680,000 11,185,000 12,860,000 14,808,000 16,861,000
Rev. Avail. for Debt Service 22,605,600 20,013,000 18,516,000 18,864,000 19,234,000
DEBT SERVICE
Total Interest Costs 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000
Total Principal Payments 5,500,000 5,922,000 5,093,000 5,473,000 5,880,000
--------------------------------------------------------------------
Total Debt Service 14,693,000 14,627,000 13,314,000 13,242,000 13,164,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 7,912,600 5,386,000 5,202,000 5,622,000 6,070,000
Overhaul Reserve Fund Additions (285,000) (1,067,000) (29,000) (468,000) (814,000)
Expected Debt Service Reserve Releases 89,000 399,000 298,000 35,000 49,000
Debt Service Reserve Fund Additions 0 0 0 0 0
Estimated Impact of Hurricane Damage [1] (222,225) 0 0 0 0
NNW Interest (26,000) (14,000) (18,000) (18,000) (20,000)
--------------------------------------------------------------------
Net Balance from Operations [2] 7,468,375 4,704,000 5,453,000 5,171,000 5,285,000
DEBT SERVICE COVERAGE
Rev. Avail. for Debt Service 22,605,600 20,013,000 18,516,000 18,864,000 19,234,000
Total Interest Costs 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000
Total Principal Payments 5,500,000 5,922,000 5,093,000 5,473,000 5,880,000
--------------------------------------------------------------------
Total Debt Service Costs 14,693,000 14,627,000 13,314,000 13,242,000 13,164,000
Times Interest Coverage 2.46 2.3 2.25 2.43 2.64
Times Total Debt Coverage 1.54 1.37 1.39 1.42 1.46
NET INCOME BASIS
Total Revenues 32,285,600 31,198,000 31,376,000 33,672,000 36,095,000
Total Operating Expenses 9,680,000 11,185,000 12,860,000 14,808,000 16,861,000
Interest Expense 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000
Depreciation Expense [3] 4,356,000 4,375,700 4,375,700 4,553,100 4,568,200
Amortization Expense 193,000 193,000 193,000 193,000 193,000
--------------------------------------------------------------------
Net Income 8,863,600 6,739,300 5,726,300 6,348,900 7,188,800
<CAPTION>
REVENUES 2002 2003 2004 2005 2006
--------------------------------------------------------------------
Revenues from Electric Sales:
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 23,568,000 18,123,000
Energy Charges
Summer Gas Charge 10,299,000 11,278,000 12,294,000 13,390,000 13,257,000
Winter Gas Charge 1,866,000 2,283,000 2,799,000 3,414,000 3,365,000
Winter Oil Charge 329,000 600,000 1,091,000 2,006,000 1,916,000
VEPCO Gas Charge 358,000 438,000 445,000 454,000 462,000
--------------------------------------------------------------------
Total Energy Revenues 12,852,000 14,599,000 16,629,000 19,264,000 19,000,000
Winter Gas Start Revenues 409,000 482,000 553,000 696,000 652,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 162,000 162,000 162,000 162,000 182,000
--------------------------------------------------------------------
Total Thermal Revenues 611,000 611,000 611,000 611,000 631,000
Total Sales Revenues 37,440,000 39,260,000 41,361,000 44,139,000 38,406,000
Interest - D.S.R. [4] 0.0% 0 0 0 0 0
Interest - O.R. 4.5% 51,000 49,000 17,000 21,000 40,000
--------------------------------------------------------------------
Total Revenues 37,491,000 39,309,000 41,378,000 44,160,000 38,446,000
EXPENSES
Fuel Costs - Cogen Plant 10,318,000 11,753,000 13,484,000 15,745,000 15,556,000
Fuel Costs - Boiler 1,168,000 1,148,000 1,139,000 1,114,000 1,223,000
Plant Operating Costs 5,804,000 5,901,000 6,004,000 6,113,000 6,227,000
Plant Variable Costs 832,000 865,000 899,000 935,000 958,000
--------------------------------------------------------------------
Total Operating Costs 18,122,000 19,667,000 21,526,000 23,907,000 23,964,000
Rev. Avail. for Debt Service 19,369,000 19,642,000 19,852,000 20,253,000 14,482,000
DEBT SERVICE
Total Interest Costs 6,764,000 6,206,000 5,610,000 4,972,000 4,418,000
Total Principal Payments 6,294,000 6,737,000 7,215,000 7,697,000 4,292,000
--------------------------------------------------------------------
Total Debt Service 13,058,000 12,943,000 12,825,000 12,669,000 8,710,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 6,311,000 6,699,000 7,027,000 7,584,000 5,772,000
Overhaul Reserve Fund Additions (886,000) (1,851,000) (1,100,000) (1,221,000) (1,301,000)
Expected Debt Service Reserve Releases 52,000 54,000 73,000 1,100,000 1,002,000
Debt Service Reserve Fund Additions 0 0 0 0 0
Estimated Impact of Hurricane Damage [1] 0 0 0 0 0
NNW Interest (23,000) (20,000) (22,000) (52,000) (57,000)
--------------------------------------------------------------------
Net Balance from Operations [2] 5,454,000 4,882,000 5,978,000 7,411,000 5,416,000
DEBT SERVICE COVERAGE
Rev. Avail. for Debt Service 19,369,000 19,642,000 19,852,000 20,253,000 14,482,000
Total Interest Costs 6,764,000 6,206,000 5,610,000 4,972,000 4,418,000
Total Principal Payments 6,294,000 6,737,000 7,215,000 7,697,000 4,292,000
--------------------------------------------------------------------
Total Debt Service Costs 13,058,000 12,943,000 12,825,000 12,669,000 8,710,000
Times Interest Coverage 2.86 3.17 3.54 4.07 3.28
Times Total Debt Coverage 1.48 1.52 1.55 1.6 1.66
NET INCOME BASIS
Total Revenues 37,491,000 39,309,000 41,378,000 44,160,000 38,446,000
Total Operating Expenses 18,122,000 19,667,000 21,526,000 23,907,000 23,964,000
Interest Expense 6,764,000 6,206,000 5,610,000 4,972,000 4,418,000
Depreciation Expense [3] 4,729,100 4,986,600 5,003,800 5,135,300 5,347,100
Amortization Expense 193,000 193,000 193,000 193,000 193,000
--------------------------------------------------------------------
Net Income 7,682,900 8,256,400 9,045,200 9,952,700 4,523,900
<CAPTION>
REVENUES 2007 2008 2009 2010 2011
--------------------------------------------------------------------
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 13,084,000 12,904,000 12,773,000 12,639,000 12,586,000
Winter Gas Charge 3,313,000 3,272,000 3,221,000 3,188,000 3,128,000
Winter Oil Charge 1,828,000 1,753,000 1,668,000 1,599,000 1,647,000
VEPCO Gas Charge 470,000 479,000 488,000 498,000 507,000
--------------------------------------------------------------------
Total Energy Revenues 18,695,000 18,408,000 18,150,000 17,924,000 17,868,000
Winter Gas Start Revenues 678,000 623,000 642,000 583,000 606,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 182,000 182,000 182,000 182,000 202,000
Total Thermal Revenues 631,000 631,000 631,000 631,000 651,000
Total Sales Revenues 38,127,000 37,785,000 37,546,000 37,261,000 37,248,000
Interest - D.S.R. [4] 0.0% 0 0 0 0 0
Interest - O.R. 4.5% 19,000 23,000 24,000 25,000 52,000
--------------------------------------------------------------------
Total Revenues 38,146,000 37,808,000 37,570,000 37,286,000 37,300,000
EXPENSES
Fuel Costs - Cogen Plant 15,321,000 15,102,000 14,912,000 14,751,000 14,717,000
Fuel Costs - Boiler 1,335,000 1,446,000 1,569,000 1,695,000 1,799,000
Plant Operating Costs 6,349,000 6,474,000 6,606,000 6,744,000 6,891,000
Plant Variable Costs 980,000 1,004,000 1,028,000 1,053,000 1,081,000
--------------------------------------------------------------------
Total Operating Costs 23,985,000 24,026,000 24,115,000 24,243,000 24,488,000
Rev. Avail. for Debt Service 14,161,000 13,782,000 13,455,000 13,043,000 12,812,000
DEBT SERVICE
Total Interest Costs 4,042,000 3,647,000 3,235,000 2,803,000 2,350,000
Total Principal Payments 4,492,000 4,705,000 4,919,000 5,143,000 5,422,000
--------------------------------------------------------------------
Total Debt Service 8,534,000 8,352,000 8,154,000 7,946,000 7,772,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 5,627,000 5,430,000 5,301,000 5,097,000 5,040,000
Overhaul Reserve Fund Additions (1,182,000) (3,764,000) (1,147,000) (281,000) (1,129,000)
Expected Debt Service Reserve Releases 89,000 97,000 101,000 84,000 101,000
Debt Service Reserve Fund Additions 0 0 0 0 0
Estimated Impact of Hurricane Damage [1] 0 0 0 0 0
NNW Interest (56,000) (43,000) (213,000) (221,000) (202,000)
--------------------------------------------------------------------
Net Balance from Operations [2] 4,478,000 1,720,000 4,042,000 4,679,000 3,810,000
DEBT SERVICE COVERAGE
Rev. Avail. for Debt Service 14,161,000 13,782,000 13,455,000 13,043,000 12,812,000
Total Interest Costs 4,042,000 3,647,000 3,235,000 2,803,000 2,350,000
Total Principal Payments 4,492,000 4,705,000 4,919,000 5,143,000 5,422,000
--------------------------------------------------------------------
Total Debt Service Costs 8,534,000 8,352,000 8,154,000 7,946,000 7,772,000
Times Interest Coverage 3.5 3.78 4.16 4.65 5.45
Times Total Debt Coverage 1.66 1.65 1.65 1.64 1.65
NET INCOME BASIS
Total Revenues 38,146,000 37,808,000 37,570,000 37,286,000 37,300,000
Total Operating Expenses 23,985,000 24,026,000 24,115,000 24,243,000 24,488,000
Interest Expense 4,042,000 3,647,000 3,235,000 2,803,000 2,350,000
Depreciation Expense [3] 5,366,000 5,817,400 5,837,300 5,659,900 5,666,000
Amortization Expense 193,000 193,000 193,000 193,000 193,000
--------------------------------------------------------------------
Net Income 4,560,000 4,124,600 4,189,700 4,387,100 4,603,000
<CAPTION>
REVENUES 2012 2013 2014 2015
------------------------------------------------------
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 12,464,000 12,368,000 12,255,000 12,126,000
Winter Gas Charge 3,068,000 3,001,000 2,938,000 2,878,000
Winter Oil Charge 1,696,000 1,746,000 1,799,000 1,852,000
VEPCO Gas Charge 517,000 527,000 538,000 549,000
------------------------------------------------------
Total Energy Revenues 17,745,000 17,642,000 17,530,000 17,405,000
Winter Gas Start Revenues 631,000 574,000 603,000 542,000
Steam Sales Revenues 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 202,000 202,000 202,000 202,000
------------------------------------------------------
Total Thermal Revenues 651,000 651,000 651,000 651,000
Total Sales Revenues 37,150,000 36,990,000 36,907,000 36,721,000
Interest - D.S.R. [4] 0.0% 0 0 0 0
Interest - O.R. 4.5% 79,000 50,000 1,000 1,000
------------------------------------------------------
Total Revenues 37,229,000 37,040,000 36,908,000 36,722,000
EXPENSES
Fuel Costs - Cogen Plant 14,621,000 14,546,000 14,459,000 14,365,000
Fuel Costs - Boiler 1,908,000 2,021,000 2,140,000 2,263,000
Plant Operating Costs 7,043,000 7,204,000 7,373,000 7,549,000
Plant Variable Costs 1,111,000 1,139,000 1,169,000 1,199,000
------------------------------------------------------
Total Operating Costs 24,683,000 24,910,000 25,141,000 25,376,000
Rev. Avail. for Debt Service 12,546,000 12,130,000 11,767,000 11,346,000
DEBT SERVICE
Total Interest Costs 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,691,000 5,953,000 6,188,000 6,031,000
------------------------------------------------------
Total Debt Service 7,565,000 7,328,000 7,042,000 6,356,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 4,981,000 4,802,000 4,725,000 4,990,000
Overhaul Reserve Fund Additions (1,725,000) (1,221,000) (3,616,000) (2,212,000)
Expected Debt Service Reserve Releases 116,000 134,000 246,000 1,808,000
Debt Service Reserve Fund Additions 0 0 0 0
Estimated Impact of Hurricane Damage [1] 0 0 0 0
NNW Interest (187,000) (189,000) (141,000) (158,000)
------------------------------------------------------
Net Balance from Operations [2] 3,185,000 3,526,000 1,214,000 4,428,000
DEBT SERVICE COVERAGE
Rev. Avail. for Debt Service 12,546,000 12,130,000 11,767,000 11,346,000
Total Interest Costs 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,691,000 5,953,000 6,188,000 6,031,000
------------------------------------------------------
Total Debt Service Costs 7,565,000 7,328,000 7,042,000 6,356,000
Times Interest Coverage 6.69 8.82 13.78 34.91
Times Total Debt Coverage 1.66 1.66 1.67 1.79
NET INCOME BASIS
Total Revenues 37,229,000 37,040,000 36,908,000 36,722,000
Total Operating Expenses 24,683,000 24,910,000 25,141,000 25,376,000
Interest Expense 1,874,000 1,375,000 854,000 325,000
Depreciation Expense [3] 5,897,900 5,762,500 6,103,400 6,194,100
Amortization Expense 193,000 193,000 193,000 193,000
------------------------------------------------------
Net Income 4,581,100 4,799,500 4,616,600 4,633,900
</TABLE>
[1] Represents additional costs for a full transformer rewind.
[2] Available for capital expenditures or distributions to Project owners.
[3] Does not include depreciation expense on future discretionary capital
expenditures.
[4] Assumed that the future interest earnings are monetized in a lump sum
interest payment reflected in 1997.
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
****************************************************************** 10-Mar-97
RESERVE FUNDS
<TABLE>
<CAPTION>
DEBT SERVICE RESERVE FUND 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning Balance 7,466,665 7,377,506 6,978,524 6,680,092 6,645,519
Additions 0 0 0 0 0
Interest Earnings [10] 0.00% 3,011,600 0 0 0 0
Withdrawals (3,011,600) 0 0 0 0
Releases (89,159) (398,982) (298,432) (34,573) (49,052)
-----------------------------------------------------------------------------------------
Ending Balance 7,377,506 6,978,524 6,680,092 6,645,519 6,596,467
OVERHAUL RESERVE FUND
Beginning Balance 913,632 1,198,632 2,068,632 2,097,632 791,632
Additions 285,000 417,000 529,000 668,000 814,000
Additional Overhaul Allowance 0 650,000 (500,000) (200,000) 0
Interest Earnings 4.50% 42,000 48,000 74,000 94,000 65,000
Interest Withdrawal (42,000) (48,000) (74,000) (94,000) (65,000)
Turbine Overhauls 0 (197,000) 0 (1,774,000) (151,000)
Other Withdrawals 0 0 0 0 0
Releases 0 0 0 0 0
-----------------------------------------------------------------------------------------
Ending Balance 1,198,632 2,068,632 2,097,632 791,632 1,454,632
Dispatch Hours [1] 1,031 1,468 1,805 2,213 2,620
Reserve Addition 3.00% $ 276 $ 284 $ 293 $ 302 $ 311
Reserve Addition 285,000 417,000 529,000 668,000 814,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 5,894 7,362 9,167 11,380 14,000
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 16,621 20,761 25,851 32,092 39,480
Combustion Inspection (CI) [2] $ 59,000 $63,000
Hot Gas Path Inspection (HGP) [3]
Major Overhaul (MO) [4]
Frame 7 Operating Hours 4,556 6,024 7,829 10,042 12,662
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 12,848 16,988 22,078 28,318 35,707
Combustion Inspection (CI) [5] $ 85,000 $93,000
Hot Gas Path Inspection (HGP) [6] 1,711,000
Major Overhaul (MO) [7]
Steam Turbine Equiv. Hours 10,060 11,528 13,333 15,546 18,166
Limited ST Overhaul (LO) [8] $53,000 $58,000
Major ST Overhaul (MO) [9]
-----------------------------------------------------------------------------------------
Total Overhaul Costs $ 0 $197,000 $ 0 $1,774,000 $151,000
Additional Depreciation Expense $ 0 $ 19,700 $ 19,700 $ 197,100 $212,200
<CAPTION>
DEBT SERVICE RESERVE FUND 2002 2003 2004 2005 2006
-----------------------------------------------------------------------------------------
Beginning Balance 6,596,467 6,544,349 6,490,302 6,417,399 5,317,247
Additions 0 0 0 0 0
Interest Earnings [10] 0.0% 0 0 0 0 0
Withdrawals 0 0 0 0 0
Releases (52,118) (54,047) (72,903) (1,100,152) (1,001,970)
-----------------------------------------------------------------------------------------
Ending Balance 6,544,349 6,490,302 6,417,399 5,317,247 4,315,277
OVERHAUL RESERVE FUND
Beginning Balance 1,454,632 731,632 7,632 935,632 841,632
Additions 886,000 1,001,000 1,100,000 1,221,000 1,201,000
Additional Overhaul Allowance 0 850,000 0 0 100,000
Interest Earnings 4.50% 51,000 49,000 17,000 21,000 40,000
Interest Withdrawal (51,000) (49,000) (17,000) (21,000) (40,000)
Turbine Overhauls (1,609,000) (2,575,000) (172,000) (1,315,000) (2,118,000)
Other Withdrawals 0 0 0 0 0
Releases 0 0 0 0 0
-----------------------------------------------------------------------------------------
Ending Balance 731,632 7,632 935,632 841,632 24,632
Dispatch Hours [1] 2,769 3,038 3,239 3,491 3,334
Reserve Addition $320 $330 $339 $350 $360
Reserve Addition 886,000 1,001,000 1,100,000 1,221,000 1,201,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 16,769 19,807 23,046 26,537 29,871
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 47,289 55,856 64,990 74,834 84,236
Combustion Inspection (CI) [2] $69,000 $71,000 $75,000
Hot Gas Path Inspection (HGP) [3] 1,211,000
Major Overhaul (MO) [4] $1,513,000
Frame 7 Operating Hours 15,431 18,469 21,708 25,199 28,533
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 43,515 52,083 61,217 71,061 80,463
Combustion Inspection (CI) [5] $96,000 $101,000 $104,000
Hot Gas Path Inspection (HGP) [6] 2,043,000
Major Overhaul (MO) [7] $ 2,445,000
Steam Turbine Equiv. Hours 20,935 23,973 27,212 30,703 34,037
Limited ST Overhaul (LO) [8] $61,000
Major ST Overhaul (MO) [9]
-----------------------------------------------------------------------------------------
Total Overhaul Costs $1,609,000 $2,575,000 $172,000 $1,315,000 $2,118,000
Additional Depreciation Expense $373,100 $630,600 $647,800 $779,300 $991,100
<CAPTION>
Debt Service Reserve Fund 2007 2008 2009 2010 2011
-----------------------------------------------------------------------------------------
Beginning Balance 4,315,277 4,226,685 4,129,809 4,028,318 3,944,730
Additions 0 0 0 0 0
Interest Earnings [10] 0.0% 0 0 0 0 0
Withdrawals 0 0 0 0 0
Releases (88,592) (96,876) (101,491) (83,588) (100,706)
-----------------------------------------------------------------------------------------
Ending Balance 4,226,685 4,129,809 4,028,318 3,944,730 3,844,024
OVERHAUL RESERVE FUND
Beginning Balance 24,632 1,017,632 70,632 1,018,632 1,299,632
Additions 1,182,000 1,164,000 1,147,000 1,131,000 1,129,000
Additional Overhaul Allowance 0 2,600,000 0 (850,000) 0
Interest Earnings 4.50% 19,000 23,000 24,000 25,000 52,000
Interest Withdrawal (19,000) (23,000) (24,000) (25,000) (52,000)
Turbine Overhauls (189,000) (4,711,000) (199,000) 0 (212,000)
Other Withdrawals 0 0 0 0 0
Releases 0 0 0 0 0
-----------------------------------------------------------------------------------------
Ending Balance 1,017,632 70,632 1,018,632 1,299,632 2,216,632
Dispatch Hours [1] 3,187 3,047 2,914 2,790 2,703
Reserve Addition $371 $382 $394 $405 $418
Reserve Addition 1,182,000 1,164,000 1,147,000 1,131,000 1,129,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 33,058 36,105 39,019 41,809 44,512
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 93,224 101,816 110,034 117,901 125,524
Combustion Inspection (CI) [2] 78,000 82,000 87,000
Hot Gas Path Inspection (HGP) [3]
Major Overhaul (MO) [4] $1,806,000
Frame 7 Operating Hours 31,720 34,767 37,681 40,471 43,174
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 89,450 98,043 106,260 114,128 121,751
Combustion Inspection (CI) [5] $111,000 $117,000 $125,000
Hot Gas Path Inspection (HGP) [6]
Major Overhaul (MO) [7] $2,834,000
Steam Turbine Equiv. Hours 37,224 40,271 43,185 45,975 48,678
Limited ST Overhaul (LO) [8] 71,000
Major ST Overhaul (MO) [9]
-----------------------------------------------------------------------------------------
Total Overhaul Costs $189,000 $4,711,000 $199,000 $ 0 $212,000
Additional Depreciation Expense $1,010,000 $1,461,400 $1,481,300 $1,303,900 $1,310,000
<CAPTION>
DEBT SERVICE RESERVE FUND 2012 2013 2014 2015
-------------------------------------------------------------------
Beginning Balance 3,844,024 3,727,964 3,594,360 3,348,247
Additions 0 0 0 0
Interest Earnings [10] 0.0% 0 0 0 0
Withdrawals 0 0 0 0
Releases (116,060) (133,604) (246,113) (1,808,050)
-------------------------------------------------------------------
Ending Balance 3,727,964 3,594,360 3,348,247 1,540,197
OVERHAUL RESERVE FUND
Beginning Balance 2,216,632 13,632 13,632 48,632
Additions 1,125,000 1,121,000 1,116,000 1,112,000
Additional Overhaul Allowance 600,000 100,000 2,500,000 1,100,000
Interest Earnings 4.50% 79,000 50,000 1,000 1,000
Interest Withdrawal (79,000) (50,000) (1,000) (1,000)
Turbine Overhauls (3,928,000) (1,221,000) (3,581,000) (2,222,000)
Other Withdrawals 0 0 0 0
Releases 0 0 0 0
-------------------------------------------------------------------
Ending Balance 13,632 13,632 48,632 38,632
Dispatch Hours [1] 2,616 2,530 2,447 2,366
Reserve Addition 3.00% $430 $443 $456 $470
Reserve Addition 1,125,000 1,121,000 1,116,000 1,112,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 47,128 49,658 52,105 54,471
Estimated Maintenance Factor 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 132,901 140,036 146,936 153,608
Combustion Inspection (CI) [2] 95,000
Hot Gas Path Inspection (HGP) [3] 1,489,000
Major Overhaul (MO) [4] 2,222,000
Frame 7 Operating Hours 45,790 48,320 50,767 53,133
Estimated Maintenance Factor 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 129,128 136,262 143,163 149,835
Combustion Inspection (CI) [5]
Hot Gas Path Inspection (HGP) [6] $2,439,000
Major Overhaul (MO) [7] $3,486,000
Steam Turbine Equiv. Hours 51,294 53,824 56,271 58,637
Limited ST Overhaul (LO) [8]
Major ST Overhaul (MO) [9] $1,221,000
-------------------------------------------------------------------
Total Overhaul Costs $3,928,000 $1,221,000 $3,581,000 $2,222,000
Additional Depreciation Expense $1,541,900 $1,406,500 $1,747,400 $1,838,100
</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 $739,000
(1996$)
[10] Assumed that the future interest earnings are monetized in a lump sum
interest payme
<PAGE>
Burns & McDonnell
94-433-4-002 PANDA
Panda Energy Corporation Alternative: Updated Corporate Offering Base Case
Panda-Rosemary Cogen Project Financing File Name: UPDATE1A.WK4
****************************************************************** 10-Mar-97
NOVA NORTHWEST ANALYSIS
<TABLE>
<CAPTION>
PROJECTIONS WITH EXISTING FUJI DEBT 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue Available for Debt Service 22,605,600 20,013,000 18,516,000 18,864,000 19,234,000
Fuji Debt Service: [1]
Fuji Interest & LC Payments (8,488,014) (7,648,248) (6,795,195) (6,209,392) (5,321,942)
Fuji (Bonds) Principal Payments (7,900,000) (8,025,000) (7,600,000) (8,050,000) (8,525,000)
-----------------------------------------------------------------------------------
Total Fuji Debt Service (16,388,014) (15,673,248) (14,395,195) (14,259,392) (13,846,942)
Capital Expenditures & Reserve Accounts:
Additions to Turbine Overhaul Reserve (285,000) (1,067,000) (29,000) (468,000) (814,000)
Additions to Debt Service Reserve [2] 0 0 0 0 0
-----------------------------------------------------------------------------------
Total Disbursement for Reserves (285,000) (1,067,000) (29,000) (468,000) (814,000)
Net Cash Flow from Project 5,932,586 3,272,752 4,091,805 4,136,608 4,573,058
Ford Distribution 5,339,327 2,945,477 3,682,625 3,722,947 4,115,752
Allocation % 90% 90% 90% 90% 90%
Panda Distribution 593,259 327,275 409,181 413,661 457,306
Allocation % 10% 10% 10% 10% 10%
NNW Interest (4.33% of Panda Distribution) 25,688 14,171 17,718 17,912 19,801
<CAPTION>
PROJECTIONS WITH EXISTING FUJI DEBT 2002 2003 2004 2005 2006
-----------------------------------------------------------------------------------
Revenue Available for Debt Service 19,369,000 19,642,000 19,852,000 20,253,000 14,482,000
Fuji Debt Service: [1]
Fuji Interest & LC Payments (4,382,127) (3,409,240) (2,331,623) (1,091,398) 0
Fuji (Bonds) Principal Payments (8,825,000) (9,775,000) (11,250,000) (9,900,000) 0
-----------------------------------------------------------------------------------
Total Fuji Debt Service (13,207,127) (13,184,240) (13,581,623) (10,991,398) 0
Capital Expenditures & Reserve Accounts:
Additions to Turbine Overhaul Reserve (886,000) (1,851,000) (1,100,000) (1,221,000) (1,301,000)
Additions to Debt Service Reserve [2] 0 0 0 4,000,000 0
-----------------------------------------------------------------------------------
Total Disbursement for Reserves (886,000) (1,851,000) (1,100,000) 2,779,000 (1,301,000)
Net Cash Flow from Project 5,275,873 4,606,760 5,170,377 12,040,602 13,181,000
Ford Distribution 4,748,286 4,146,084 4,653,339 10,836,542 11,862,900
Allocation % 90% 90% 90% 90% 90%
Panda Distribution 527,587 460,676 517,038 1,204,060 1,318,100
Allocation % 10% 10% 10% 10% 10%
NNW Interest (4.33% of Panda Distribution) 22,845 19,947 22,388 52,136 57,074
<CAPTION>
PROJECTIONS WITH EXISTING FUJI DEBT 2007 2008 2009 2010 2011
-----------------------------------------------------------------------------------
Revenue Available for Debt Service 14,161,000 13,782,000 13,455,000 13,043,000 12,812,000
Fuji Debt Service: [1]
Fuji Interest & LC Payments 0 0 0 0 0
Fuji (Bonds) Principal Payments 0 0 0 0 0
-----------------------------------------------------------------------------------
Total Fuji Debt Service 0 0 0 0 0
Capital Expenditures & Reserve Accounts:
Additions to Turbine Overhaul Reserve (1,182,000) (3,764,000) (1,147,000) (281,000) (1,129,000)
Additions to Debt Service Reserve [2] 0 0 0 0 0
-----------------------------------------------------------------------------------
Total Disbursement for Reserves (1,182,000) (3,764,000) (1,147,000) (281,000) (1,129,000)
Net Cash Flow from Project 12,979,000 10,018,000 12,308,000 12,762,000 11,683,000
Ford Distribution 11,681,100 9,016,200 7,384,800 7,657,200 7,009,800
Allocation % 90% 90% 60% 60% 60%
Panda Distribution 1,297,900 1,001,800 4,923,200 5,104,800 4,673,200
Allocation % 10% 10% 40% 40% 40%
NNW Interest (4.33% of Panda Distribution) 56,199 43,378 213,175 221,038 202,350
<CAPTION>
PROJECTIONS WITH EXISTING FUJI DEBT 2012 2013 2014 2015
-----------------------------------------------------------------
Revenue Available for Debt Service 12,546,000 12,130,000 11,767,000 11,346,000
Fuji Debt Service: [1]
Fuji Interest & LC Payments 0 0 0 0
Fuji (Bonds) Principal Payments 0 0 0 0
-----------------------------------------------------------------
Total Fuji Debt Service 0 0 0 0
Capital Expenditures & Reserve Accounts:
Additions to Turbine Overhaul Reserve (1,725,000) (1,221,000) (3,616,000) (2,212,000)
Additions to Debt Service Reserve [2] 0 0 0 0
-----------------------------------------------------------------
Total Disbursement for Reserves (1,725,000) (1,221,000) (3,616,000) (2,212,000)
Net Cash Flow from Project 10,821,000 10,909,000 8,151,000 9,134,000
Ford Distribution 6,492,600 6,545,400 4,890,600 5,480,400
Allocation % 60% 60% 60% 60% 10%
Panda Distribution 4,328,400 4,363,600 3,260,400 3,653,600
Allocation % 40% 40% 40% 40% 10%
NNW Interest (4.33% of Panda Distribution) 187,420 188,944 141,175 158,201
</TABLE>
[1] Reflects outstanding Fuji debt which has been fully defeased.
[2] Reflects release of debt service reserve for Fuji debt.
[Burns & McDonnell Letterhead]
Officer's Certificate
I, Michael W. McComas, Vice President of Burns & McDonnell
Engineering Company, Inc., DO HEREBY CERTIFY that:
Since April 11, 1997, no event affecting our report entitled
"Panda-Rosemary Cogeneration Project Condition Assessment Report
for Potential Investors at the Request of Panda Energy
Corporation," dated April 11 (the "Independent Engineer's
Report") or the matters referred to therein has occurred (i)
which makes untrue or incorrect in any material respect, as the
date hereof, any information or statement contained in the
Independent Engineer's Report or in the Prospectus relating to
the offering of 12-1/2% Registered Senior Secured Notes due 2004
by Panda Global Energy Company (the "Prospectus") under the
captions "Summary -- Independent Engineers' and Consultants'
Reports -- Consolidating Financial Analyst's Pro Forma Report,"
"Description of the Projects -- The Rosemary Facility --
Independent Engineers' and Consultants' Reports -- Rosemary
Engineering Report," "Description of the Projects -- The Rosemary
Facility -- Independent Engineers' and Consultants' Reports --
Rosemary Fuel Consultant's Report," "Independent Engineers and
Consultants -- Consolidated Pro Forma," and "Independent
Engineers and Consultants -- Rosemary Facility" in the Prospectus
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 captions set forth above in the light of the
circumstances under which they were made, not misleading.
WITNESS my hand this 6th day of June 1997.
By: /s/ Michael W. McComas
Name: Michael W. McComas
Title: Vice President
EXHIBIT 99.04
Assessment of Fuel Price, Supply
and Delivery Risks for the
Panda-Rosemary Cogeneration 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
September 20, 1996
Updated April 11, 1997
April 11, 1997
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
Officer's Update 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 "Rosemary 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 attached Rosemary Fuel Consultant's Report or
(ii) which is not reflected in the Offering Memorandum relating
to the offering of the Panda Global Energy Company Senior Secured
Notes due 2004 (the "Offering Memorandum") but should be
reflected therein in order to make the statements and information
contained in the Rosemary Fuel Consultant's Report, or in the
Summary of the Rosemary Fuel Consultant's Report contained in the
Offering Memorandum, in light of the circumstances under which
they were made, not misleading.
We have reviewed the fuel supply and transportation pricing
projections used by Burns & McDonnell Engineering Company, Inc.
in their report, dated April 11, 1997 (the "B&M Report"),
regarding the Rosemary Cogeneration Project. We have concluded
that the projections developed by Burns & McDonnell in the B&M
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 that the B&M Report 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.
We have also reviewed the Amendment effective January 1,
1997 (the "Amendment") to the Service Agreement which the Panda-
Rosemary Partnership entered into with Transcontinental Gas Pipe
Line Corporation ("Transco") in July 1996. We have concluded
that the Amendment properly executes the same kind and quality of
firm backhaul transportation service which was put into place
under the FT-NT contract which the Panda-Rosemary Partnership
executed with Transco in October 1991, and which was envisioned
in the Description of the Project's Fuel Supply and Delivery
Arrangements contained in the Rosemary Fuel Consultant's Report.
WITNESS my hand this 11th day of April, 1997.
By: /s/Benjamin Schlesinger
Benjamin Schlesinger, Ph.D.
President
FINAL REPORT - Updated April 11, 1997
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.(2)
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).
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.
- 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)
TABLE ONE
MONTHLY FUEL CONSUMPTION
FOR
ELECTRICITY GENERATION VERSUS FCP MMBtu
<TABLE>
<CAPTION>
Spot Gas
Dispatch Oil Burn Appala-
Hours Burn Gulf Coast chia FCP NCP Gas
<S> <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 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 12.7% 64.0% 23.3%
FUEL (2)
</TABLE>
1991-1992 1993-1995
% Oil Burned in WOP 11.6% 77.9%
Months =
% Appalachian Gas 22.5% 0.0%
Burned in WGCP Months =
% Gulf Coast Gas 90.3% 93.1%
Burned in SGCP Months =
(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).
TABLE TWO
PANDA-ROSEMARY COGENERATION FACILITY
Oil Consumption by Fuel Compensation Price Period
MMBtu
<TABLE>
<CAPTION>
Total WGP SGP
Oil WOP
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.
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
(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 showing Historical Monthly Dispatch Hours
from January, 1991 through July, 1995]
Figure Two
Yearly Dispatch Hours
[Graph showing Historical Yearly Dispatch Hours
from 1991 through 1995]
- 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. For this reason, we believe
TABLE THREE
PANDA-ROSEMARY COGENERATION FACILITY
Monthly Fuel Consumption for Electric Generation, 1991-1995
<TABLE>
<CAPTION>
FUEL CONSUMPTION
Dis- ------Oil------ Gas Total % %
patch
Hours Gallons MMBtu MMBtu MMBtu Oil Gas
<C> <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%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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%
JUNE-95 251 0 0 312,786 312,786 0.0% 100.0%
JULY-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%
SEPT-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.
that numerous creditworthy suppliers could access the Panda
receipt 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 creditworthy
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.
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 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 redelivered 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 previously existing FT-NT agreement.(6) No such
backhaul is involved with respect to the Project's gas
transportation on either TGT or CNG, thus we conclude 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.
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
service 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 it would not represent a significant or
material increase the Project's overall fuel expenditures. In
summary, the switch to Part 284 FT rates enhances the Project's
operational flexibility, is likely to provide lower gas
transportation costs 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.
_______________________________
(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 purposes 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.
(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.
(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.
(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.
(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.
(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.
[Schlesinger Letterhead]
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
Officer's Certificate
I, Benjamin Schlesinger, Principal of Benjamin Schlesinger
and Associates, Inc., DO HEREBY CERTIFY that:
Since April 11, 1997, no event affecting our report entitled
"Assessment of Fuel Price, Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project" dated September 20, 1996 and
updated April 11, 1997 (the "Fuel Consultant's Report") or the
matters referred to therein has occurred (i) which makes untrue
or incorrect in any material respect, as the date hereof, any
information or statement contained in the Fuel Consultant's
Report or in the Prospectus relating to the offering of 12-1/2%
Registered Senior Secured Notes due 2004 by Panda Global Energy
Company (the "Prospectus") under the captions "Description of the
Projects -- The Rosemary Facility -- Independent Engineers' and
Consultants' Reports -- Rosemary Fuel Consultant's Report" and
"Independent Engineers and Consultants -- Rosemary Facility" in
the Prospectus 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 captions set forth above, in the light
of the circumstances under which they were made, not misleading.
WITNESS my hand this 6th day of June 1997.
By: /s/ Benjamin Schlesinger
Name: Benjamin Schlesinger, Ph.D.
Title: President
EXHIBIT 99.05
PANDA-BRANDYWINE COGENERATION PROJECT
INDEPENDENT ENGINEER'S REPORT
DATED JULY 22, 1996
UPDATED APRIL 11, 1997
/s/ John R. Martin
------------------
John R. Martin
Registered Professional Engineer
9446
Oregon
September 23, 1977
Prepared for
PANDA-BRANDYWINE L.P.
Prepared by
PACIFIC ENERGY SYSTEMS, INC.
Portland, Oregon
April 11, 1997
Panda Global Energy Company
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Ladies and Gentlemen:
This document has been prepared by Pacific Energy Systems, Inc.,
as an update to the July 22, 1996, Independent Engineer's Report
for the Panda-Brandywine Cogeneration Project. That report was
prepared in support of the Pooled Project Bonds, Series A due
2012, issued by Panda Funding Corporation on July 31, 1996. This
update is provided in connection with the offering by Panda
Global Energy Company of its Senior Secured Notes due 2004.
Pacific Energy Systems' review, assessment, and update are based
on previously completed due diligence work, periodic construction
monitoring of the Panda-Brandywine facility, review of
significant project agreements, and witness of performance tests
conducted by others. This update was not written to stand on its
own but as part of the July 22 Independent Engineer's Report;
interested parties should read that report before this update.
CONCLUSION
It is Pacific Energy Systems' opinion that the Panda-Brandywine
Cogeneration Project is substantially complete, capable of
meeting all commercial operating requirements under the Power
Purchase Agreement and Steam Sales Agreement, and has received or
is expected to receive all necessary operating permits. There is
no reason to believe that any necessary operation permit not yet
received will not be obtained.
Pacific Energy Systems has witnessed most key testing and is of
the opinion that the plant meets or exceeds all guarantees or
design conditions based on the information supplied during
testing by Raytheon, GE Power Systems, and others.
Pacific Energy Systems has independently reviewed the project
engineering, costs, construction, permits, contract, operation
and maintenance, and performance for completeness, risk,
variation from practices typical in the industry, and the ability
of the Panda-Brandywine facility to perform as intended.
Provided future operation and maintenance are performed according
to standard industry practices, Pacific Energy Systems can find
no technical constraints to prevent the facility from being able
to perform at a level consistent with that anticipated in Panda's
pro forma.
PROJECT STATUS
The Panda-Brandywine Cogeneration Project, since the end of July,
has reached a number of key milestones and is now in Commercial
Operation. While final completion has not been declared because
of remaining punch list items, the facility is fully operational.
Ogden Brandywine Operations, Inc. (Ogden), has assumed its role
as operator and is responsible for day-to-day operation and
maintenance as well as completing a few punchlist, and minor
warranty items. Permanent financing through a sale/leaseback
pursuant to the Construction Loan Agreement and Lease Commitment
with General Electric Capital Corporation (GE Capital) and Credit
Suisse has taken place.
Panda-Brandywine, L.P. (Panda), declared the Actual Commercial
Operation Date under the Power Purchase Agreement to be October
31, 1996, and turned the plant over to Potomac Electric Power
Company (PEPCO) for dispatch at midnight on
October 30, 1996. Since November 1, PEPCO has dispatched the
unit at the minimum requirement of one gas turbine online, with
the steam turbine producing a combined net output of 99 MW 12
hours per day, on weekdays. In late November, the plant suffered
the loss of one of the gas turbine-generator rotors. It was
repaired by GE Power Systems under warranty in their shop, and
Panda returned the unit to service Christmas Day so that it was
available for PEPCO's dispatch on December 26, 1996. This caused
the availability factor to drop below 88 percent. As of February
28, the average availability factor had increased to slightly
above 88 percent. The capacity penalty for January 1997
resulting from the availability being below 88 percent for the
first 3 months was less than 1 percent. There were no capacity
payments under the terms of the PPA and during November and
December 1996, and thus no adjustments were made.
PLANT ASSESSMENT
On the basis of our review of the design, construction, and
performance tests, Pacific Energy Systems believes that the Panda-
Brandywine Cogeneration Project has been built and tested
consistent with industry standards and, with proper operation and
maintenance, is capable of meeting the contractual operating
requirements specified in the Power Purchase Agreement and Steam
Sales Agreement. The plant has a nominal rated capacity of 230
MW at 92 degrees Fahrenheit (?F) and 50 percent relative
humidity. In the opinion of Pacific Energy Systems, the Panda-
Brandywine plant has been subjected to a reasonable testing
program. The results of this program indicate that the plant
meets its contract guarantees.
All equipment components are widely used in similar utility and
industrial applications. The gas turbine is a field-proven
member of the General Electric Company (GE) line of gas turbines.
If operated and maintained according to design criteria and
manufacturers' recommendations, and if critical parts are
properly renewed and replaced, the plant will perform as
anticipated and last for its projected life.
CONSTRUCTION COMPLETION
As of the end of December Raytheon has no construction force on
site. Primary areas of work remaining are a few punch list
items, which are customary for a project in the early stages of
operations, such as oil leaks, mis-labeled devices, missing
reports or calibration data, painting, modifications necessary to
comply with permitted noise levels, and the Mattawoman-Cedarville
Road interchange. The punchlist has less than twenty-five items
which are being completed by Panda and invoiced to Raytheon.
Warranty items are being handled as they occur by Ogden and OEMs
(original equipment manufacturers) at no additional cost to the
project. A few offsite items remain at the effluent pumping
plant, as well as some cleanup along the pipeline right-of-way.
The bulk of the remaining work should be completed in early April
and, except for the oil cooler, will not require any scheduled
outages to complete.
As part of the loan conversion, a completion account of about
$5.3 million has been established which should be sufficient to
cover the remaining construction, legal, and engineering costs.
It will be managed in the same way as the original construction
loan, with monthly draws certified by the Lender's engineer. As
of February 28, about $3.9 million remained in that account,
including major milestone payments for Raytheon and performance
bonuses due Raytheon. Most of these should be completed by the
March or April draw.
SPECIFIC ISSUES, CONCERNS, AND RESOLUTIONS
With any project of this size, it is typical to have a number of
issues and concerns tend to accumulate toward the end of the job.
This section describes such issues and concerns at Panda-
Brandywine, including how most were resolved and how Panda is
likely to resolve the remaining few issues. Pacific Energy
Systems believes that none of these issues represents any major
impact (technically or financially) to the future operation of
the plant. These issues and concerns are described below:
- - Combustion liner change
- - Steam turbine bearing and oil cooling
- - Disputed punchlist items
- - Substantial completion date, Raytheon's claim
- - Effluent line
- - Transmission line trees
- - Qualifying Facility status
- - Base-load operation
Combustion Liner Change
During the initial plant testing in October 1996, the gas
turbines failed to meet guaranteed emissions. GE Power Systems
corrected this by modifying the firing curves which, in turn,
lowered the units' output. Although the units were then able to
meet output, heat rate, and emission guarantees, GE Power
Systems, Panda, and Raytheon all agreed that under normal wear,
the units might not pass PEPCO's net capability test in the
future. GE Power Systems agreed to install new combustion liners
in the gas turbines if Panda would buy the liners. Liners were
originally scheduled for purchase in August 1997 and GE agreed to
defer payment of the October 1996 deliveries until that date.
The liners were then installed during October with subsequent
testing confirming that the new liners more than met the expected
increase in output and decrease in heat rate and emissions.
Payment for the liners will be made in August 1997 and an
allowance of approximately $1 million has been provided in the
Budget and Pro Forma Projections.
Steam Turbine Bearing and Oil Cooling
During initial operation, the steam turbine developed a vibration
that was considered excessive in the number one bearing, although
it was well below GE Power Systems' defined limits. During the
outage for the liner change, GE Power Systems installed a newly
designed bearing, which reduced the vibration to an acceptable
level. The vibration on the old bearing was made worse by high-
temperature oil. During cooler weather, it appears that this is
easily controlled, but warm temperatures next summer may cause
additional problems. GE Power Systems has stated that the hot
oil is still within limits and should not cause any short-term
problems. GE Power Systems has admitted that the oil cooler was
undersized and has ordered a new oil cooler which will be covered
under their warranty, which is expected to be installed in early
April 1997, and should resolve this issue. Pacific Energy
Systems does not anticipate any short-term effects on plant
operation by running the existing oil cooler in the interim.
Disputed Punchlist Items
Raytheon initially disputed about 150 to 175 items on Panda's
punchlist, a number of which appeared to be disputed because of
misunderstanding or a lack of communication. Panda and Raytheon
have been working to resolve all of these items. Pacific Energy
Systems believes that most of the disputed punchlist items have
been resolved. The remaining few will be done by Panda as
betterment items if Panda feels they are required. Adequate
funds are available in the completion account to cover these
items.
Substantial Completion Date, Raytheon Claims
As a result of the initial emission problems with the gas
turbines, an improperly installed continuous emissions monitoring
system (CEMS), and the timing of various tests, Panda and
Raytheon disagree on the specific date Substantial Completion and
Commercial Operation were reached. The disputed amount is
$880,000 in bonuses to Raytheon. If found to be payable, this
money would be paid in three equal installments from
distributable cash from operations, starting next spring. On the
basis of the 1997 budget and pro forma, there appears to be
sufficient cash available from distributable cash to cover these
bonuses if Raytheon prevails.
Raytheon has three outstanding claims: a force majeure for severe
winter storms; an owner-caused delay for effluent line flushing;
and an owner-caused delay for low gas pressure. These claims are
for a total of $124,093 and 11 schedule days.
Money has been retained in the completion account to cover the
monetary amount if Raytheon prevails. Pacific Energy Systems
believes that these claims are minor and should be resolved
without going to arbitration.
Effluent Line Problems, Claims, and Suits
A number of claims and lawsuits have resulted from the effluent
pipeline construction because of poor engineering and performance
by several subcontractors. Drilling under Highway 301 was the
catalyst for many of the problems. The drilling contractor, a
subcontractor to the pipeline contractor, had a number of
drilling problems. He ultimately terminated the casing outside
the right-of-way, which had been improperly surveyed. Poor
construction practices caused part of the highway's center median
to collapse. The owner of the adjacent property filed suit for
damages to his property outside the right-of-way, and the drilling
contractor was forced to redrill the line under the highway. The
contractor believes that the incorrect survey marks caused his
problems and wants to be paid for redrilling under the highway.
It is beyond Pacific Energy Systems' scope of work to assess any
specific responsibilities or the reasonableness of the various
claims. Adequate funds of approximately $100,000 have been set
aside in the completion account for litigation-related costs of
these issues.
On the basis of tests and observations, the State Highway
Department believes that no further subsidence is expected in or
around Highway 301. Pacific Energy Systems sees no further
technical risk to the pipeline in this area, and nothing appears
to be hampering its operation to date.
Right-of-way restoration is being redone in several areas to meet
landowner and county requirements. This should be completed in
early spring without significant additional costs.
Transmission Line Trees
PEPCO has taken exception to several trees adjacent to the
transmission line right-of-way and Panda was unable to obtain
permission from the property owner to remove the trees. Panda
and PEPCO have worked out an agreement concerning responsibility
if these trees fall into the line at a later date. Pacific
Energy Systems believes the overall risk here is small and that
PEPCO is being overly cautious.
Qualifying Facility Status
Pacific Energy Systems has been informed by Ogden that the Panda-
Brandywine facility met the minimum Qualifying Facility (QF)
requirements of 5 percent useful thermal and 45 percent
efficiency in 1996. While Pacific Energy Systems has not had the
opportunity to review the data and calculations, it was
recognized that the plant did have the potential to overcome
initial problems associated with acid injection at the distilled-
water plant and sell enough steam to meet minimum QF
requirements. If Panda-Brandywine had not met these minimum
requirements, it had until August 1997 to make up the difference:
thereafter, the plant must be in compliance during each calendar
year. Pacific Energy Systems is of the opinion that the Panda-
Brandywine should be in QF compliance and should be able to
provide steam in sufficient quantities to remain in compliance.
Base-Load Operation
Pacific Energy Systems does not consider base-load operation
(full plant output at a greater than 90 percent capacity factor)
likely at this time because of the dispatch arrangement with
PEPCO and the Dispatch Report updated in November 1996 as
prepared by ICF Resources which shows capacity factors at a
maximum of 54 percent. If the plant were operated at base load
however, the following three areas would need to be monitored
closely or corrected:
- - The present permit for water use from onsite wells is not
sufficient to maintain the boiler feedwater makeup at base
load year round. This could be corrected with a permit
change; well water conservation measures, such as changing
the evaporation coolers over to effluent water; or extending
the Washington Suburban Sanitary Commission (WSSC)
industrial water supply line to the site from Cedarville
Road, a distance of about 1,500 feet. Cooling tower needs
are more than adequately met by the effluent pipeline at any
load, including base load.
- - The distilled-water plant is designed to use 40,000 lb/hr of
steam. At full load, the plant must sell about 42,000 lb/hr
to meet QF requirements. During the performance testing, it
was demonstrated that the distilled-water plant could use
42,000 lb/hr of steam. While this is sufficient, at base
load there would be no room for distilled-water plant
outages without reducing plant load. Monitoring of QF
status will be very important at base load.
- - Because output would nearly double under base-load
operation, the additional quantity of distilled water would
require Panda to upgrade its distilled-water sales program.
RECOMMENDATIONS
Although the previous section points out several issues that have
arisen over the last few months during startup, Pacific Energy
Systems believes them to be consistent with similar startups of
large power plants. It should be possible to resolve all issues
within the budget limits contained in the completion account.
Pacific Energy Systems also recommends the following changes to
improve plant operation. While the plant can operate without
these changes, they will improve the quality of operation and
likely will reduce lonterm maintenance costs. Our
recommendations are as follows:
- - Ogden should prepare a written plan to protect the heat
recovery steam generators (HRSGs) from freezing if one or
both fail to operate during freezing weather. Panda needs
to ensure that necessary equipment and monitoring are in
place to implement the freeze protection plan.
- - Panda should purchase and install an online heat rate
program as part of the distributed control system (DCS).
This will ensure that optimal efficiencies and maximum
income are maintained at all times.
- - In the July 1996 Independent Engineer's Report, Pacific
Energy Systems made a number of suggestions for improved
cyclic operation; these should be reviewed to determine the
cost effectiveness of each. All can be readily retrofitted.
- - To improve distilled-water production, a recycle line should
be added. This will make the product more pure and likely
increase its value and market.
- - Panda needs to continue to work with GE Power Systems on the
replacement oil cooler for the steam turbine to ensure that
any outage requirements are minimized.
PLANT OPERATION
In order to strengthen its onsite staff, Ogden made several
changes to its supervisory staff just before Commercial
Operation; these changes were supported by Panda. Ogden was
fortunate to hire people from the local labor pool who have a
great deal of operation and maintenance experience in power
plants. This has made training easier and more thorough, which
will reduce the time needed for operators to become experienced
in the specific day-to-day operation of this particular plant.
Pacific Energy Systems has observed Ogden's operators during
plant checkout and testing and believes that they can safely and
effectively operate the facility. Time and ongoing training,
including annual reviews, will further sharpen these skills.
Ogden has the plant's maintenance support software (Datastream,
MP-2) on-line and functional. All spare parts and small tools
were ordered through this program. The completion punch list
items have been entered as work order items and are being tracked
as if they were normal work orders, saving both time and effort.
Panda-Brandywine has placed initial orders for spare parts
totaling approximately $1.2 million. Another $500,000 has been
spent on tools, vehicles, and other maintenance support
equipment. In addition, Panda has budgeted another $2 million in
combustion replacement parts to be delivered before the first
scheduled outage in September 1997 which have been provided for
in the 1997 Budget and Pro Forma Projections.
The operating plan for Panda-Brandywine is simple: Except for
electricity production of 99 MW between 8:00 a.m. and 8:00 p.m.
on weekdays, the plant will be fully dispatchable by PEPCO.
PEPCO will dispatch the plant on an as-needed basis according to
the utility's economic dispatch regulations. Initial studies
indicate that Panda-Brandywine can expect about 4,000 to 5,000
fired hours per year for each of the two gas turbine-generators.
A mild winter on the PJM system has kept the Panda-Brandywine
plant primarily at minimum load.
PEPCO and Panda have worked together to develop a joint operating
procedure and a joint performance procedure. These two documents
help clarify how the plant will respond under specific dispatch
requirements, when notification must be given, and how fuel needs
will be coordinated. Panda has also provided PEPCO with a fuel
management plan which meets the requirements under the PPA and
was approved by PEPCO.
It should be noted that PEPCO is in the process of merging with
Baltimore Gas and Electric. While regional needs will remain the
same (PJM System electrical requirements), the new company will
have a different relationship with Panda than PEPCO does today.
Pacific Energy Systems cannot determine how that might affect the
operating plan.
FINANCES
The Panda-Brandywine Cogeneration Project was constructed with
funds provided by GE Capital under a conventional project
construction loan. The construction loan has been converted to
permanent financing through a sale/leaseback pursuant to the
Construction Loan Agreement and Lease Commitment. The final,
agreed purchase price was $217.5 million. Panda was able to
build the project and all ancillary facilities for less than the
capital budget of $215 million. Excess funds will ultimately be
distributed to Panda.
Pacific Energy Systems has reviewed the operating budget details
for the Panda-Brandywine 1996-97 budget and finds that it is
consistent with similar budgets of other plants. This budget
(upon which the pro forma is based) appears adequate to operate
and maintain the project according to the operating plan.
Pacific Energy Systems has also reviewed the various technical
assumptions used to develop the pro forma projections in the
Brandywine Pro Forma Report prepared by ICF Resources dated April
11, 1997, and believes that such items as output, heat rate,
degradation, availability, startup times, fuel, water, chemical
quantities, maintenance reserves and schedules, and other
expenses are reasonable for the assumed hours of operation based
on the dispatch study performed by ICF Resources.
PERMITS
Like all power plants, the Panda-Brandywine Cogeneration Project
was required to obtain a substantial number of governmental
approvals before, during, and after construction. On the basis
of available information, Pacific Energy Systems believes that
Panda has carefully tracked government requirements, made timely
submittals, and obtained all permits, consents, approvals, and
actions needed to date. The Maryland Department of the
Environment issued the State Permit to Operate on January 31,
1997. This was one of the last major permits required for
continued plant operation. The remaining major permit is the
County Occupancy Permit which is expected to be issued shortly.
While a number of the permits require periodic updating or
renewal, Panda has demonstrated that dealing with the various
agencies and tracking requirements is something they do very
well.
ACCEPTANCE TESTING
The Panda-Brandywine Cogeneration Project has been thoroughly
tested in accordance with the appropriate codes, standards, and
contract specifications. It is Pacific Energy Systems' opinion
that the project has demonstrated that it has been engineered,
designed, and constructed properly and is capable of meeting
guarantees under specified conditions.
Acceptance testing of Panda-Brandywine can be divided into three
types: construction, startup, and performance testing. These
are discussed below:
Construction Testing
Construction testing is generally aligned with quality assurance
rather than actual testing. Raytheon has provided routine
testing throughout the construction period to ensure that the
plant was built to meet the codes and standards specified in the
scope of work and in its detailed design. Construction testing
ranged from checking soil compaction and concrete strength to
boiler hydros.
Although Pacific Energy Systems' representatives were not present
throughout the entire construction period; they were onsite at
least once a month which was enough to observe both construction
and testing methods and are satisfied that Raytheon demonstrated
that all relevant construction codes and standards were met.
Startup Testing
Startup testing is the checking, testing, and turnover of various
plant systems and pieces of equipment. The primary goal of
startup testing is to ensure that each system works the way it
should. Testing is performed with equipment both on-line and off-
line. Most startup testing is related to electrical and control
activities.
PEPCO has played an active role with Raytheon's startup group in
checking the transmission line, switchyard, and interconnection
equipment.
Pacific Energy Systems has monitored the ongoing efforts of the
startup group and is satisfied that Raytheon has properly checked
out and tested the Panda facility.
Performance Testing
For the purposes of this document, performance testing is
described in three categories:
- - Demonstration of dependable capacity
- - Guaranteed performance
- - Compliance testing
Dependable Capacity Test: To fulfill a PEPCO requirement before
PEPCO could accept energy and capacity from the Panda-Brandywine
cogeneration plant, Panda was required to demonstrate that the
plant could produce 230,000 kW continuously during a 2-hour
period. Output was to be corrected (by GE-supplied gas turbine
and steam turbine curves) to ambient conditions of 92?F dry bulb
and 50 percent relative humidity, with 34,000 lb/hr of saturated
steam at 15 psig going to process (distilled-water plant) and 80
percent condensate returned.
This test was run on September 12, 1996, between 9:00 a.m. and
11:00 a.m. The corrected output during this period was 232,085
kW. While it was later determined that the plant was out of
compliance in nitrous oxides (NOx) emission by several parts per
million, tests on September 30 and October 30 demonstrated the
plant could produce more than the required 230 MW (corrected to
92 degrees F on 50 percent relative humidity and fully meet the
required emission limits.
As a result of this test, Panda-Brandywine has met PEPCO's
Dependable Capacity Test as required under Article VIII
subsection 8.2(a) of the Power Purchase Agreement. Panda staff
completed the PEPCO-supplied PJM forms in accordance with the Net
Capability Test and supplied copies to the PEPCO engineers who
witnessed the test and confirmed its accuracy in meeting their
requirements. In the future, the Dependable Capacity Test will
be run during the winter and summer peak seasons. Pacific Energy
Systems believes the facility should be able to meet future
tests, assuming proper operation and maintenance of the facility.
Guaranteed Performances: The engineering, procurement, and
construction (EPC) contract guarantees the Panda-Brandywine
project will comply with a number of performance variables.
Output, efficiency, and reliability are the three most important
of these variables. These were tested in accordance with the EPC
Contract and Scope Document as a 48-hour net electrical output
test, a net plant heat rate test, and a 200-hour capacity test.
The prescribed testing (48-hour test) had to be modified to meet
the design condition of no boiler blowdown during the
determination of capacity and heat rate as required under the EPC
contract. Although a 48-hour test was run, capacity and heat
rate were determined by a 6-hour test during the 48-hour test
without boiler blowdown. GE Power Systems supplied several sets
of correction curves based on various operating curves in the gas
turbine control logic. Problems with the CEM produced unreliable
emission data during the 48-hour test and actual emissions were
determined to be out of compliance on the basis of stack testing.
In general, the 48-hour test run on September 12, 1996, was not
reliable. Raytheon will continue to claim differently with
Panda, since the earlier completion of testing is worth about
$720,000 in completion bonus to Raytheon which has been provided
for in the 1997 operating budget and pro forma projections.
After GE Power Systems made adjustments to the gas turbine firing
curves and Raytheon (with the help of the vendor) got the CEM to
operate correctly, a new test was run on September 30, 1996, that
demonstrated the plant could operate at or better than the
guaranteed output and heat rate.
A third test was run on October 30, 1996, after GE Power Systems
installed new combustion liners in the gas turbines and made
additional modifications to the firing curves. The results of
this test show that the net power output is 236,393 kW and the
net plant heat rate is 7,035 Btu/kWh (LHV) [7,804 Btu/kWh (HHV)]
when correct to design conditions and for degradation.
Compliance Testing: The EPC contract guarantees the Panda-
Brandywine project must be in compliance with a number of
conditions of the Certificate of Public Convenience and Necessity
(CPCN), including stack emission and noise, and must meet
specific performance guarantees and CPCN conditions while burning
oil. Pacific Energy Systems has witnessed many of these tests,
has reviewed the final reports on most, and is of the opinion
that the plant is in compliance with CPCN requirements.
Raytheon ran a preliminary noise test on January 14, 1997, and
found that the plant meets noise requirements at full load, but
during startup, the plant exceeds noise limits at the property
line in two locations. The cause of this excess noise was
identified and Raytheon has ordered additional silencers for
several vents and acoustical blankets for several valves which
will be installed at Raytheon's expense. The plant has until
September 1997 to demonstrate compliance.
CONFIRMATION AND CONSENT
We confirm the accuracy of the information contained in our
Independent Engineer's Report dated July 22, 1996, as
supplemented by this letter.
We consent to the use of the Independent Engineer's Report dated
July 22, 1996, and this update letter in the Offering Memorandum
of Panda Global Energy Company relating to the offering of Senior
Secured Notes due 2004.
Sincerely,
/s/ David G. Young
David G. Young
Project Manager
DGY:sz
PANDA-BRANDYWINE COGENERATION PROJECT
INDEPENDENT ENGINEER'S REPORT
Dated July 22, 1996
Updated April 11, 1997
/s/ John R. Martin
------------------
John R. Martin
Registered Professional Engineer
9446
Oregon
September 23, 1977
Prepared for
PANDA-BRANDYWINE L.P.
Prepared by
PACIFIC ENERGY SYSTEMS, INC.
Portland, Oregon
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. . . . . . . . . . . . . . . . . 1
Section 2 EXECUTIVE SUMMARY AND CONCLUSIONS . . . . . . 4
Introduction. . . . . . . . . . . . . . . . . 4
Current Assessment of Project Status. . . . . 5
Summary of Due Diligence. . . . . . . . . . . 8
Facility Description. . . . . . . . . . . . . 13
Facility Performance. . . . . . . . . . . . . 15
Permits and Licenses. . . . . . . . . . . . . 17
Construction Status . . . . . . . . . . . . . 17
Ancillary Facilities. . . . . . . . . . . . . 17
Section 3 ENGINEERING . . . . . . . . . . . . . . . . . 19
Overall Plant Description . . . . . . . . . . 19
Design Concepts and Technology Assessment . . 20
Major Equipment Selection and
Vendor/Supplier Qualifications. . . . . . . 22
Specifications. . . . . . . . . . . . . . . . 22
Systems and Equipment Descriptions. . . . . . 23
Civil/Structural/Architectural. . . . . . . . 31
Section 4 ANCILLARY FACILITIES. . . . . . . . . . . . . 31
Effluent Water Supply Line. . . . . . . . . . 32
230-kV Electrical Transmission Line . . . . . 32
Natural Gas Line. . . . . . . . . . . . . . . 32
Distilled-Water Plant . . . . . . . . . . . . 34
Betty Boulevard . . . . . . . . . . . . . . . 34
Section 5 COST AND SCHEDULE ESTIMATES . . . . . . . . . 35
Capital Costs . . . . . . . . . . . . . . . . 35
Startup Costs . . . . . . . . . . . . . . . . 36
ICF Projections . . . . . . . . . . . . . . . 40
Schedule. . . . . . . . . . . . . . . . . . . 45
Section 6 PERMITS AND LICENSES. . . . . . . . . . . . . 45
Federal Approvals . . . . . . . . . . . . . . 45
State Approvals . . . . . . . . . . . . . . . 47
Right-of-Way Easements. . . . . . . . . . . . 48
Section 7 CONTRACTS & AGREEMENTS. . . . . . . . . . . . 50
Power Purchase Agreement. . . . . . . . . . . 50
Engineering, Procurement, and Construction
Contract . . . . . . . . . . . . . . . . . . 57
Treated Effluent Water Purchase Agreement . . 62
Steam Sales Agreement . . . . . . . . . . . . 63
Natural Gas Agreements. . . . . . . . . . . . 65
Owner's Engineer. . . . . . . . . . . . . . . 67
Effluent Line Construction. . . . . . . . . . 68
Transmission Line Construction. . . . . . . . 68
Section 8 OPERATIONS AND MAINTENANCE. . . . . . . . . . 68
Operating Experience. . . . . . . . . . . . . 68
Operations and Maintenance Costs. . . . . . . 69
O&M Agreement . . . . . . . . . . . . . . . . 71
Termination . . . . . . . . . . . . . . . . . 73
Other Provisions. . . . . . . . . . . . . . . 73
Section 9 PERFORMANCE GUARANTEES AND TESTING. . . . . . 76
Completion Guarantees . . . . . . . . . . . . 76
Performance Guarantees. . . . . . . . . . . . 76
Plant Performance Testing . . . . . . . . . . 79
Liquidated Damages and Bonuses. . . . . . . . 80
Appendix A DOCUMENT LIST . . . . . . . . . . . . . . . . 83
Appendix B PROJECT DRAWINGS. . . . . . . . . . . . . . . 98
Appendix C LIST OF ABBREVIATIONS . . . . . . . . . . . . 101
Appendix D PANDA GATECYCLE SUMMARY . . . . . . . . . . . 105
List of Tables 1-1 Project Relationships . . . . . . . . . 3
5-1 Capital Budget Details. . . . . . . . . 38
5-2 Similar Gas Turbine Projects. . . . . . 39
5-3 Commissioning Budget. . . . . . . . . . 40
5-4A Unit 1. . . . . . . . . . . . . . . . . 42
5-4B Unit 2. . . . . . . . . . . . . . . . . 43
5-5 Maintenance Requirement . . . . . . . . 44
7-1 PEPCO Dispatch Segments . . . . . . . . 53
8-1 Operations and Maintenance Costs. . . . 70
8-2 Comparisons of O&M Budgets for Gas
Turbine Projects. . . . . . . . . . . 71
9-1 Performance Guarantees. . . . . . . . . 76
9-2 Design Base Conditions for Plant
Operation . . . . . . . . . . . . . . 77
9-3 Summary of Raytheon's Liquidated
Damages and Bonuses . . . . . . . . . 81
List of Figures 8-1 Organization Chart. . . . . . . . . . . 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 lonterm
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 lonterm
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.
</PAGE>
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 lonterm
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 lonterm 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.
<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.
<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>
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 lonterm
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
<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."
<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."
<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.
<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:
1 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 324
Water discharge & chemical usage 269
Distilled-water plant operating costs 200
PRO FORMA TOTAL $7,138
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.
<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 106.3 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 240.0 1994 12,629 53
H 1 Frame7E Combined 120.6 1995 6,082 50
I 1 Frame7E Combined 126.4 1995 6,266 50
J (Panda-
Brandywine) 2 Frame7E Combined 230.0 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.
<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.
<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.
<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>
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
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
[PES Letterhead]
PACIFIC ENERGY SYSTEMS, INC.
Officer's Certificate
I, John R. Martin, President of Pacific Energy Systems,
Inc., DO HEREBY CERTIFY that to the best of my knowledge and
belief since April 11, 1997, no event affecting our report
entitled "Independent Engineer's Report, Panda-Brandywine
Cogeneration Project," dated July 22, 1996 and updated April 11,
1997 (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 12-1/2%
Registered Senior Secured Notes due 2004 by Panda Global Energy
Company (the "Prospectus") under the captions "Description of the
Projects - The Brandywine Facility - Independent Engineers' and
Consultants' Reports - Brandywine Pro Forma Report," "Description
of the Projects - The Brandywine Facility - Independent
Engineers' and Consultants' Reports - Brandywine Engineering
Report," and "Independent Engineers and Consultants - Brandywine
Facility" in the Prospectus 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 captions set
forth above in light of the circumstances under which they were
made, not misleading.
WITNESS my hand this 6 day of June, 1997
By: /s/ John R. Martin
Name: John R. Martin, P.E.
Title: President
EXHIBIT 99.06
CC PACE
R E S O U R C E S
PANDA-BRANDYWINE, L.P.
GENERATING FACILITY
FUEL CONSULTANT'S REPORT
Dated July 2, 1996
with a Supplemental Update
Dated April 11, 1997
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
SUPPLEMENTAL UPDATE LETTER SUPP-1
I. EXECUTIVE SUMMARY 1
INTRODUCTION 1
FUEL PLAN OVERVIEW 1
KEY CHARACTERISTICS 3
POWER PURCHASE AGREEMENT 4
GAS SUPPLY 6
GAS TRANSPORTATION 9
BACKUP FUEL OIL 11
FUEL MANAGEMENT 12
II. PPA REQUIREMENTS 13
OPERATIONAL REQUIREMENTS 13
PAYMENTS 16
PPA SECTION 11.2 21
AVAILABILITY REQUIREMENTS 22
III. NATURAL GAS SUPPLY 23
FUEL REQUIREMENTS 23
GAS SUPPLY CONTRACT TERMS 25
GAS SUPPLY SECURITY 28
GAS COST LINKAGE WITH PPA ENERGY PAYMENTS 34
PRO FORMA MODEL 39
IV. NATURAL GAS TRANSPORTATION 40
CONTRACTUAL ARRANGEMENTS 40
SUFFICIENCY OF CONTRACTED CAPACITY 43
TRANSPORTATION COSTS 44
OPERATIONAL ISSUES 46
PEAK PERIOD RELEASE 48
PRO FORMA MODEL 49
V. BACK-UP FUEL OIL 52
FUEL OIL REQUIREMENTS 52
FUEL OIL AVAILABILITY 54
AIR PERMIT 53
FUEL OIL PRICING 53
PRO FORMA MODEL 54
VI. FUEL MANAGEMENT 55
FUEL MANAGEMENT AGREEMENT AND PLAN 55
EXPERTISE OF CDC FUEL MANAGEMENT 58
EXHIBIT A: STATISTICAL ANALYSIS OF GSA AND
PPA FUELRELATED INDICES 59
PRICE DIFFERENTIAL BETWEEN LOUISIANA AND
APPALACHIA SUPPLY 60
FGMR REVENUE VERSUS TIER 2 GAS COST 62
EXHIBIT B: LNG GAS QUALITY ISSUES 68
EXHIBIT C: PEAK PERIOD RELEASE DETAILS 70
April 11, 1997
Panda Global Energy Company
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Supplemental Update to the Panda-Brandywine, L.P. Generating
Facility Fuel Consultant's Report Dated July 2, 1996.
Ladies and Gentlemen:
This letter is a supplemental update by C.C. Pace Resources,
Inc. ("Pace) of material changes that have occurred since
issuance of our July 2, 1996 "Panda-Brandywine, L.P. Generating
Facility Fuel Consultant's Report ("the Report"). This
supplemental update is provided for use in the offering by Panda
Global Energy Company of its Senior Secured Notes due 2004.
Unless otherwise noted, capitalized terms used herein are defined
as in the Report.
Pace confirms the information in the Report and that Pace's
fundamental findings contained in the Report have not changed, as
supplemented and updated by this letter. The rest of this letter
provides discussion of material changes since issuance of the
Report, organized as follows:
1. Completion of firm natural gas transportation construction.
2. Completion of a Final Fuel Management Plan.
3. Potomac Electric Power Company ("PEPCO") approval of Final
Fuel Management Plan.
4. Firm fuel oil supply and transportation contracts for the
winter heating season.
5. Pro forma modeling issues.
6. Payments from PEPCO.
COMPLETION OF FIRM NATURAL GAS TRANSPORTATION CONSTRUCTION
Pace observed in the Report that appropriate firm
transportation contractual arrangements were in place and that
required construction remained for one pipeline, Columbia Gas
Transmission Corporation ("TCO"). Since the Report, all pipeline
Construction including TCO construction has been completed and
all of the firm natural gas transportation contracts of Panda-
Brandywine, L.P. ( "Panda") are in effect.
COMPLETION OF A FINAL FUEL MANAGEMENT PLAN
In the Report, Pace reviewed a draft Fuel Management and
found it generally sound at that stage of development. Pace has
since reviewed Panda's Final Fuel Management Plan dated October
24, 1996 ("the Final Fuel Management Plan") and finds it to be
sufficient, if followed, to assure that the Project will operate
in a manner to meet PEPCO electric dispatch orders while
maintaining compliance with all fuel supply contract and tariff
obligations.
PEPCO APPROVAL OF FINAL FUEL MANAGEMENT PLAN
In the Report, Pace reported that PEPCO had approved Panda's
fuel supply arrangements as fulfilling the contractual
requirements of the PPA, at that time. Since the Report, PEPCO
has approved the Final Fuel Management Plan.
FIRM FUEL OIL SUPPLY AND TRANSPORTATION CONTRACTS FOR THE WINTER
HEATING SEASON
In the Report, Pace observed that Panda's backup fuel plan
provided Panda the capability to meet dispatch requirements,
assuming fuel oil supply and transportation contracts are in
place before each winter heating season (November-March).
Since the Report, Panda has developed sufficient fuel oil
procurement procedures which are included in the Final Management
Plan. Under the Final Fuel Management Plan, Panda will execute
firm fuel oil supply and transportation contracts by October 10
of each year for the next winter heating period (November-March).
In terms of fuel oil contracts for the 1996-1997 Winter Heating
Period, Panda has executed the following:
1. Fuel Oil Coordinator Agreement.
2. Fuel Oil Sales and Storage Agreement.
3. Fuel Oil Trucking Agreement.
FUEL OIL COORDINATOR AGREEMENT
This is a best efforts contract for fuel oil procurement
services from ERK Energy, Inc. ("ERK"). ERK expertise may provide
Panda additional ability to obtain fuel oil as needed on a spot
basis (without prearranged contracts). Panda can at any time
replace ERK or purchase oil in any quantity from any other source.
FUEL OIL SALES AND STORAGE AGREEMENT
This is an agreement with Koch Refining Company, LP,
("Koch") for storage of 1,000,000 gallons of low sulfur #2 fuel
oil December 1, 1996 - February 28, 1997 at a Baltimore terminal
with certain requirements for Koch to refill the storage.
This agreement provides Panda access to an additional 1
million gallons corresponds to the worst case oil usage scenario
discussed b Pace in the Report of a two week period of maximum
PEPCO dispatch, constant curtailment if IT service to Unit 2, and
maximum Peak Period Release activity by Washington Gas Light
("WGL") (2 days of WGL recall each week). The term of the Koch
agreement corresponds to the months in which WGL may call a Peak
Period Release.
FUEL OIL TRUCKING AGREEMENT
This is a one year effective October 1, 1996, with Hardesty
& Son, Inc., ("Hardesty") providing Panda firm rights to a
maximum of 10 truckloads of oil per day March - November and 20
trucks of oil per day for operating both units or 20 truckloads
per day for operating only Unit on oil. Hardesty is under best
efforts to supply Panda with additional truckloads.
This agreement provides firm rights to oil transportation to
enable Panda to keep pace with maximum oil consumption of one
turbine during December - February. Combined with the on-site and
off-site Koch storage and with the procurement assistance of the
Fuel Oil Coordinator, Panda should be able to meet all oil needs
at the Facility for the 1996-1997 winter heating season.
PRO FORMA MODELING ISSUES
Pace observed in the Report that the pro forma modeling of
the Facility reflected the Facility's fuel supply arrangements.
Since the Report, several changes have occurred which are
reflected in the current pro forma modeling of the facility. The
fuel-related pro forma changes concern the following: 1) FGGR
index adjustment and 2) Market prices of natural gas and No.2
fuel oil.
FGRR INDEX ADJUSTMENT
Final data available to forecast the one-time inflation
adjustment to the FGRR. The data for October 1996 shows a 8.43%
inflation adjustment, a decrease from the assumption used
previously in the pro forma model. Table 1 provides the revised
FGRR figures.
Table 1. Unit 1 Fixed Price Gas Rate
<TABLE>
<CAPTION>
Unadjusted FGRR Adjusted
Contract Year ($/MMBtu) FGRR($/MMBtu)
<S> <C> <C>
1 2.58 2.80
2 2.68 2.91
3 2.79 3.03
4 2.90 3.14
5 3.02 3.27
6 3.14 3.40
7 3.26 3.53
8 3.33 3.61
9 3.40 3.69
10 3.46 3.75
11 3.53 3.83
12 3.60 3.90
13 3.68 3.99
14 3.75 4.07
15 3.82 4.14
</TABLE>
Note: The adjusted FGRR rates are based on Bureau of Labor
Statistics date for October 1996 extracted on April 9, 1997.
MARKET PRICES OF NATURAL GAS AND NO 2. FUEL OIL
In the Report, Pace found that the gas commodity costs in
the pro forma model accurately reflect the Facility's gas prices
based on forecasts by ICF Resources, Inc., ("ICF"). Since the
Report, ICF has revised its commodity price forecasts. Lowering
the annual average rate of real price increase to near 1% for
natural gas and the 1996 start price of natural gas by several
cents per MMBtu.
Pace finds that the market prices of natural gas and No.2
fuel oil in the model for 1996 do not reflect actual historic
1996 market prices. However, for the following reasons, we find
the pro forma model commodity prices reasonable for long-term pro
forma modeling purposes:
1. ICF is a recognized forecaster of energy prices.
2. ICF reports that is used the same forecasts in ICF's
dispatch study of the Facility.
3. The pro forma model is designed to "pass-through" gas
commodity costs to energy payments.
4. Changing the prices for 1996 would only affect 2 months of
Facility operation, since the Facility's declaration of
commercial operation occurred on October 31, 1996.
PAYMENTS FROM PEPCO
Panda has received four payments invoices from PEPCO for
commercial operation of the Project (November 1996, December
1996, January 1997, and February 1997.) In the December 1996
And subsequent payment invoices, PEPCO's calculation of the FGRR
Is $2.80/MMBtu, equal to the FGRR calculated by Pace. In the
November 1996 invoice, PEPCO's calculation of the FGGR is
$2.65/MMBtu. A FGRR of $2.65/MMBtu could have a material adverse
effect on the financial results of the Project.
While Pace has not seen any underlying details of PEPCO's
fuel rate calculations or correspondence from PEPCO which
confirms that the payment discrepancy has been resolved, Pace
does not believe PEPCO's calculation of a $2.65/MMBtu FGRR in
November 1996 is materially significant. First, Pace is not aware
of any reason why the FGRR determined by Pace should not match
that calculated by PEPCO in actual energy payment calculations.
Second, as discussed above PEPCO's calculations have matched
Pace's calculations in the subsequent payment invoices. Finally,
Pace has been informed by Panda that PEPCO has verbally agreed
with the FGRR payment calculation method which was used in Pace's
calculations.
Respectfully Submitted,
/S/
C.C.PACE RESOURCES, INC.
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
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.
- ----------------------------
(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.
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 degrees 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 degrees 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
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.
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 20 degrees 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>
<CAPTION>
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
<S> <C> <C> <S> <C> <C>
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
</TABLE>
- ------------------------------------------------------------------------------
* 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 degrees F balancing service is made available to
Panda. Between 20 and 30 degrees F balancing service is availabl only at WGL's
option. Below 20 degrees F, 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 degrees 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 degrees 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
degrees 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
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)
- -------------------
(28) January 1995 was the coldest month since December 1989 and the coldest
January in 14 years.
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
GRAPH
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 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.
- --------------------------
(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.
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 C-1 presents a flow chart
description of the possible outcomes under such a scenario and is discussed
below.
FIGURE C-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.
[CC Pace Letterhead]
Officer's Certificate
I, Daniel E. White, Senior Vice President of C.C. Pace
Resources, Inc. ("Pace"), DO HEREBY CERTIFY that:
Except as set forth in our supplemental update letter dated
April 11, 1997, 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 used in the Prospectus constituting part of
the Registration Statement on Form S-1 by Panda Global Energy
Company and Panda Global Holdings, Inc.
WITNESS my hand this 6th day of June 1997.
By: /s/ Daniel E. White
Name: Daniel E. White
Title: Senior Vice President
EXHIBIT 99.07
Independent Panda-Brandywine Pro Forma Projections
Prepared for:
Panda Energy International, Inc.
Prepared by:
ICF Resources Incorporated,
a subsidiary of ICF Kaiser International
April 11, 1997
TABLE OF CONTENTS
Page
TABLE OF CONTENTS i
EXECUTIVE SUMMARY ii
Conclusions i
Sources of Information ii
Assumptions v
INTRODUCTION 1
Description of Brandywine 1
ICF's Role 1
SCHEDULE A-INCOME STATEMENT AND SCHEDULE B-CASH FLOW
STATEMENT 3
SCHEDULE C-DEVELOPMENT ASSUMPTIONS 3
SCHEDULE D-OPERATING ASSUMPTIONS 4
Operating assumptions 4
Electricity Revenues-Capacity 4
Electricity Revenues - Energy 5
Distilled Water Revenues and Costs 6
Fixed Operating Expenses 6
Turbine Overhaul and Lease Reserve 6
SCHEDULE E-LEASE PAYMENTS AND CAPACITY ADJUSTMENTS 6
SCHEDULE F-GAS SUPPLY INCOME STATEMENT AND SCHEDULE
G-GAS SUPPLY OPERATING ASSUMPTIONS 7
Dispatch Hours 7
Gas and Fuel Oil Volumes and Compensation Price 8
Energy-Based Revenues (Gas Supply Income Statement) 9
Fuel Costs 10
Transportation 11
CONCLUSIONS 13
APPENDIX: PANDA-BRANDYWINE PRO FORMA 15
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 "Brandywine Pro Forma") for the
Panda-Brandywine Cogeneration Project ("Brandywine") contained
herein pursuant to a Consulting Agreement with Panda Energy
International, Inc. ("Panda"). This report has been provided
for use in the offering circular for the offering of the Panda
Global Energy Company Senior Secured Notes due 2004. In
developing its projections, ICF reviewed Brandywine's fuel
supply and transportation contracts and its Power Purchase
Agreement, as amended ("PPA"), as well as the independent
reports on Brandywine prepared by Brandywine'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.
Conclusions
Set forth below are the principal opinions that we have
reached regarding our review of Brandywine. For a complete
understanding of the estimates, assumptions and calculations
upon which these opinions are based, this Report, including
the attached Brandywine Pro Forma, should be read in its
entirety. On the basis of our review and analyses of
Brandywine and the assumptions set forth in this Report, we
are of the opinion that:
1. The financial projections in the Brandywine Pro
Forma provide a reasonable reflection of Brandywine's
expected costs, revenues and cash flows.
2. The energy and capacity revenue calculations
contained in the Brandywine Pro Forma are appropriate
and consistent with the PPA. Expectations for
capacity payment adjustments under the PPA in regard
to the interest rate adjustment and the peak
adjustment are presented at the most conservative
positions.
3. Over the 20-year initial term of the Facility
Lease, Brandywine's cash flow available for lease
payments will average approximately $46.5 million per
year, reflecting a range of $18.1 million in 1998 to
$58.9 million in 2020.
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 Facility Lease, Brandywine's
lease coverage will range from 1.35:1 in 2012 to
1.75:1 in 2004, the last full year of lease payments
with an average coverage ratio of 1.59:1.
Sensitivity Analysis
ICF has conducted a sensitivity analysis on the pro forma
model using assumptions representing a less conservative
assessment of Brandywine's capacity revenues (the "Sensitivity
Case").1 These assumptions include:
1. Brandywine passes through the benefits of its
interest rate savings on its lease payments to
Potomac Electric Power Company ("PEPCO") on a 1:1
basis. This represents a reasonable "middle ground"
settlement to the dispute between PEPCO and
Brandywine.
2. PEPCO surpasses the weather normalized peak
capacity of 5,697 MW during 1998. This is consistent
with the non-weather normalized peak of 5,732 in
August 1995 and the possibility that in a merged
BG&E/PEPCO system the PEPCO-specific system peak will
no longer be calculated.
3. All other assumptions remain the same as in the
base case.
Sensitivity Conclusions
The Sensitivity Case provides the following results:
1. Under the Sensitivity Case, Brandywine's cash
flow averages $51.0 million per year over the 20-year
term of the Facility Lease, reflecting a range of
$22.3 million in 1998 to $68.5 million in 2014.
2. The estimated lease obligation coverage ratios
under the Sensitivity Case are presented in Table
ES-2. During the term of the Facility Lease,
Brandywine's lease coverage ranges from 1.59:1 in
2015 to 2.14:1 in 1997 with an average coverage ratio
of 1.75:1.
<TABLE>
<CAPTION>
TABLE ES-1
Summary Pro Forma Projections-Base Case
(Costs and Revenues in $000)
Year Total Operating EBIT GAAP Cash Flow Annual Lease
Ended Revenues Expenses Depre- Available Lease Coverages
ciation for Lease Payments
Payments
(a) (b) (c) (d)= (e) (f) = (g) (f)/(g)
(b)-(c) (d)+(e)
<C> <C> <C> <C> <C> <C> <C> <C>
1997 45,665 35,433 10,232 8,000 18,232 10,442 1.75
1998 46,940 36,931 10,009 8,100 18,109 10,412 1.74
1999 64,560 37,822 26,738 8,167 34,905 19,976 1.75
2000 66,572 38,734 27,838 8,241 36,080 20,660 1.75
2001 80,416 41,119 39,297 8,313 47,610 27,265 1.75
2002 83,939 43,641 40,297 8,517 48,814 27,938 1.75
2003 83,180 43,010 40,169 8,653 48,823 27,907 1.75
2004 81,684 42,287 39,398 8,733 48,130 27,456 1.75
2005 84,605 45,109 39,496 8,821 48,317 27,602 1.75
2006 86,995 47,150 39,845 9,167 49,011 28,188 1.74
2007 89,344 48,123 41,222 9,531 50,752 30,071 1.69
2008 89,671 48,834 40,837 9,522 50,359 30,529 1.65
2009 90,549 49,694 40,855 9,622 50,477 31,285 1.61
2010 93,743 50,727 43,016 9,646 52,662 33,212 1.59
2011 95,135 50,152 44,982 9,836 54,818 35,922 1.53
2012 94,970 50,100 44,870 9,894 54,765 40,437 1.35
2013 97,799 50,386 47,413 9,875 57,288 41,855 1.37
2014 100,007 51,051 48,956 9,907 58,863 42,739 1.38
2015 97,281 51,510 45,770 10,379 56,150 41,168 1.36
2016 92,601 52,576 40,026 10,154 50,179 31,934* 1.57
2017 95,975 54,184 41,791 10,303 52,095 14,584* -
2018 99,784 55,823 43,961 10,341 54,302 14,584* -
2019 104,318 57,729 46,589 10,317 56,906 14,584* -
2020 108,230 59,793 48,438 10,672 59,110 14,584* -
2021 92,471 52,576 39,895 10,564 50,459 10,938* -
</TABLE>
*Annual Lease Payments from the fourth quarter of 2016 through the third
quarter of 2021 are presented assuming Brandywine exercises the first
five-year renewal option available under the Brandywine Facility Lease
for which lease payments equal 50 percent of the average lease payment
during the initial 20-year term of the Brandywine Facility Lease.
<TABLE>
<CAPTION>
TABLE ES-2
Summary Pro Forma Projections-Sensitivity Case
(Costs and Revenues in $000)
Year Total Operating EBIT GAAP Cash Flow Annual Lease
Ended Revenues Expenses Depre- Available Lease Coverages
ciation for Lease Payments
Payments
(a) (b) (c) (d) = (e) (f) = (g) (f)/(g)
(b)-)c) (d)+(e)
<C> <C> <C> <C> <C> <C> <C> <C>
1997 49,796 35,433 14,364 8,000 22,364 10,442 2.14
1998 51,127 36,931 14,197 8,100 22,297 10,412 2.14
1999 67,914 37,822 30,093 8,167 38,260 19,976 1.92
2000 69,907 38,734 31,173 8,241 39,414 20,660 1.91
2001 83,162 41,119 42,044 8,313 50,357 27,265 1.85
2002 86,669 43,641 43,028 8,517 51,545 27,938 1.84
2003 85,967 43,010 42,956 8,653 51,610 27,907 1.85
2004 84,571 42,287 42,284 8,733 51,017 27,456 1.86
2005 87,527 45,109 42,418 8,821 51,239 27,602 1.86
2006 89,943 47,150 42,792 9,167 51,959 28,188 1.84
2007 92,159 48,123 44,036 9,531 53,567 30,071 1.78
2008 92,489 48,834 43,655 9,522 53,177 30,529 1.74
2009 93,343 49,694 43,649 9,622 53,271 31,285 1.70
2010 96,392 50,727 45,666 9,646 55,311 33,212 1.67
2011 98,841 50,152 48,689 9,836 58,524 35,922 1.63
2012 104,824 50,100 54,724 9,894 64,618 40,437 1.60
2013 107,518 50,386 57,132 9,875 67,007 41,855 1.60
2014 109,644 51,051 58,593 9,907 68,500 42,739 1.60
2015 106,524 51,510 55,014 10,379 65,393 41,168 1.59
2016 99,945 52,576 47,369 10,154 57,523 31,934* 1.80
2017 104,833 54,184 50,649 10,303 60,952 14,584* -
2018 108,640 55,823 52,817 10,341 63,158 14,584* -
2019 113,173 57,729 55,444 10,317 65,761 14,584* -
2020 117,085 59,793 57,292 10,672 67,964 14,584* -
2021 99,983 52,576 47,407 10,564 57,970 10,938* -
</TABLE>
*Annual Lease Payments from the fourth quarter of 2016 through the
third quarter of 2021 are presented assuming Brandywine exercises the
first five-year renewal option available under the Brandywine
Facility Lease for which lease payments equal 50 percent of the
average lease payment during the initial 20-year term of the
Brandywine Facility Lease.
Sources of Information
In developing the Brandywine Pro Forma contained herein, ICF
reviewed and assessed the pro forma financial projections
prepared in connection with the closing of the lease
conversion with GECC on December 30, 1996 (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:
1. Operating specifications and cost, Brandywine
cost, and maintenance schedules and cost: Pacific
Energy Systems' report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project, dated
July 22, 1996 and updated on April 11, 1997 (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.
2. Dispatch projections: ICF Resources
Incorporated, Independent Assessment of the
Dispatchability of the Panda-Brandywine Project, May
1996, Updated on November 11, 1996 (the
"Dispatchability Analysis").
3. Fuel cost projections: 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 Consultant's Report -
July 2, 1996, updated on April 11, 1997 (the "Pace
Report").
4. The Brandywine Facility Lease with GECC terms
and conditions: the Closing Pro Forma.
5. Lease payment projections assuming an 8 percent
yield to maturity on U.S Treasury Securities with a
maturity of 12 years in effect as of the date that
the interest rate for permanent financing of
Brandywine was designated (the "12-Year T-Bond
Rate") and lease amortization schedule: Calculations
provided by Panda.
6. Macroeconomic escalators: Bureau of Labor
Statistics, Department of Commerce.
Assumptions
The principal assumptions that we made in developing the
Brandywine Pro Forma include:
Brandywine Project Assumptions:
1. We have not evaluated the validity and
enforceability of any contract, agreement, rule or
regulation applicable to Brandywine 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") has completed the construction of the
Brandywine facility in accordance with their EPC
contract, subject to certain punch list items, as
discussed in the PES Report and Commercial
Operations commenced October 31, 1996.
3. Raytheon will be entitled to the early
completion bonus of $2.1 million to be paid in 1997,
including $880,000 that it claims and Brandywine
disputes, representing the most conservative case
relative to Brandywine cash flows.
4. Ogden Brandywine, Inc. (the "Operator") will
operate Brandywine as required under its contract
with Panda-Brandywine L.P., the owner of Brandywine,
which contract has been reviewed by PES; and we
further assume that PES's conclusions as to that
agreement contained in the PES Report are correct.
5. Brandywine has been built and will be operated
in accordance with all necessary permits and
approvals as described by PES.
6. PES's conclusion contained in the PES Report
that Brandywine's design and results of the
performance tests will enable it to "perform at a
level consistent with that anticipated in the
Brandywine Pro Forma" is reasonable.
7. The Facility Lease is valued at $217,448,645.
8. In projecting the energy payment, we have
assumed a contractual heat rate of 8,461 Btu/kWh
(HHV), even though under many dispatch scenarios
Brandywine would be entitled to base the energy
payment on a higher (and therefore more favorable to
Brandywine) contractual heat rate. This results in
a more conservative set of projections.
9. Brandywine's capacity payments are fixed at
5.54 percent above the schedule provided in the PPA,
Appendix L, based on the actual escalation of the
Gross National Product ("GNP") between June 1, 1994
and the Actual Commercial Operation Date.
10. 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 Brandywine's
energy payment is corrected for the cost of fuel
used for various startups during the month.
11. The capacity payment adjustment factor based
upon the 12-Year T-Bond Rate is fixed at 6.36
percent using the assumed 12-Year T-Bond Rate on
December 30, 1996, the closing date of the Facility
Lease with GECC (the "Lease Closing Date").
Brandywine is currently in a dispute with PEPCO over
the 12-Year T-Bond Rate which should be used for
this adjustment factor. Using the lease closing rate
of 6.36 percent 12-Year T-Bond Rate represents
PEPCO's position and provides the most conservative
estimate of Brandywine's capacity revenues regarding
the interest rate adjustment in PEPCO's capacity
payment to Brandywine.
12. PEPCO's system peak load exceeds the threshold
level of 5,697 MW during 1999 or thereafter,
providing the most conservative estimate of the
adjustment to capacity revenues.
13. Changes associated with the proposed
PEPCO/Baltimore Gas & Electric merger do not affect
the pro forma's assumptions regarding PEPCO's peak
capacity for the purposes of determining the
capacity payment adjustment. This is the subject of
a current dispute with PEPCO and represents the most
conservative estimate of the adjustment to
Brandywine's capacity revenues.
Operating Assumptions:
1. The Operator has employed 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 Brandywine
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. Brandywine will be dispatched as projected in
our Dispatchability Analysis.
4. Long-term fuel cost inputs will be consistent
with those used in our Dispatchability Analysis, as
found reasonable for modeling purposes by C.C. Pace
in the Pace Report.
5. There is a strong linkage between changes in
Brandywine'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. The cost of natural gas transportation on
Columbia Transmission and Columbia LNG will escalate
at half the GNP (1.5 percent) annually.
9. Balancing costs and capacity release revenues
will be consistent with those described in the Pace
Report.
10. Brandywine operating expenses will be
consistent with its updated 1996-1997 operating
budget, inflated annually, where appropriate, by the
change in the GNP escalator, 3.0 percent per year.
Insurance and purchased electricity costs will also
increase at a rate of 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. The levels of dispatch indicated in the
Dispatch Analysis are consistent with an operating
pattern where Brandywine 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.
12. Brandywine's Firm Gas Reserve Rate ("FGRR") has
been fixed at 8.53 percent above the fixed price
stream provided in Appendix M of the PPA based on
the actual escalation of the Producer Price Index
("PPI") for Oil and Gas Field Services between
June 1, 1994 and the October 1996. This is
consistent with the FGRR price stream in the Pace
Report.
13. Unit availability will be consistent with the
availability estimates confirmed in the PES Report.
14. The Consumer Price Index escalator used for the
transportation portion of Brandywine's Firm Gas
Market Rate ("FGMR") and Interruptible Gas Rate
("IGR") is 158.3 as of October 1, 1996 (versus 129.9
in June 1990). The Brandywine Pro Forma assumes a
3.0 percent annual escalator thereafter.
15. Brandywine will maintain an additional $1
million in spare parts inventory purchased in 1997,
consistent with the recommendations of PES.
Steam Sales Assumptions:
1. As discussed by PES in the PES Report, thermal
energy in the form of steam will be exported from
Brandywine, operating in the cogeneration mode, to
Brandywine Water Company's distilled water plant
such that the "useful thermal energy" produced by
Brandywine, as defined in PURPA and the regulations
promulgated thereunder, has met and will continue to
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. Brandywine Water Company's sales will occur, on
average for 150 days per year.
Financing Assumptions:
1. The $217.5 million Facility Lease with GECC was
entered into on the Lease Closing Date.
2. The actual Brandywine lease payments will be as
provided in the Brandywine Facility Lease agreement.
3. The CPI, the Gross National Product Implicit
Price Deflator, and the Producer Price Index for Oil
and Gas Field Services will increase at a rate of
3.0 percent per year.
4. Brandywine will maintain a lease reserve of the
next two quarterly lease payments consistent with
the provisions of its Brandywine Facility Lease
agreement with GECC.
5. Brandywine will maintain a turbine overhaul
reserve of $5 million, escalated at the GNP deflator
after the year 2000 consistent with the provisions
of its Brandywine Facility Lease agreement with
GECC.
6. Panda-Brandywine, L.P., as a limited
partnership, will not be subject to federal and
state income tax.
INTRODUCTION
ICF was retained by Panda pursuant to a Consulting Agreement
develop pro forma financial projections for Brandywine. This
section describes Brandywine and discusses the scope of ICF's
review.
Description of Brandywine
Brandywine is a 230 MW gas- and oil-fired power project
located in Brandywine, Maryland developed by Panda.
Brandywine sells power to PEPCO under a 25-year Power Purchase
Agreement. The Power Purchase Agreement 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. Brandywine also provides
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.
The Brandywine facility consists of two combustion turbine
generators and one steam turbine generator producing a net
electrical output of 230 MW. Brandywine has a gas supply
agreement with Cogen Development Company, a wholly owned
subsidiary of MCN Corporation, for up to Brandywine's full gas
requirements. On December 30, 1996 (the "Lease Closing
Date"), Brandywine converted its Construction Loan Agreement
with General Electric Capital Corporation ("GECC") to a $217.5
million Facility Lease.
ICF's Role
Panda requested that ICF review and assess the financial
projections contained in the Closing Pro Forma prepared in
connection with the closing lease conversion with GECC to
determine whether it represented a reasonable model of
Brandywine's operations, taking into account Brandywine'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 independently
reviewed and updated the assumptions based on information from
the following sources:
1. Operating specifications and cost, Brandywine
cost, and maintenance schedules and cost: Pacific
Energy Systems report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project, dated
July 22, 1996 and updated on April 11, 1997 (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.
2. Dispatch projections: ICF Resources
Incorporated, Independent Assessment of the
Dispatchability of the Panda-Brandywine Project, May
1996, Updated on November 11, 1996 ("the
Dispatchability Analysis").
3. Fuel cost projections: 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, updated on April 11, 1997 (the "Pace
Report").
4. The Brandywine Facility Lease with GECC terms
and conditions: the Closing Pro Forma.
5. Lease payment projections assuming an 8 percent
yield to maturity on U.S Treasury Securities with a
maturity of 12 years in effect as of the date that
the interest rate for permanent financing of
Brandywine was designated (the "12-Year T-Bond
Rate") and lease amortization schedule: Calculations
provided by Panda.
6. Macroeconomic escalators: Bureau of Labor
Statistics, Department of Commerce.
Based on these updated assumptions, ICF prepared the attached
Brandywine Pro Forma. ICF has based its work on an analysis
of the Closing Pro Forma, Brandywine'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 Brandywine Pro Forma is divided into six schedules.
1. Schedule A-Income Statement
2. Schedule B-Cash Flow Statement
3. Schedule C-Development Assumptions
4. Schedule D-Operating Assumptions
5. Schedule E-Lease Payments and Capacity Adjustments
6. Schedule F-Gas Supply Income Statement
7. 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 Brandywine Pro Forma has
been included as an appendix to this report. This review
focuses on how the assumptions behind these latter schedules
contribute to the development of estimated Brandywine earnings
and cash flows.
SCHEDULE A-INCOME STATEMENT AND
SCHEDULE B-CASH FLOW STATEMENT
Schedules A and B summarize Brandywine'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;
1. Contract capacity revenues are calculated as
the contract capacity price multiplied by the
Brandywine capacity of 230 MW. The GNP-escalated
capacity adjustment is calculated separately.
Brandywine's capacity price and GNP escalator are
calculated separately in Schedule D.
2. Brandywine 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 Brandywine as well as estimates of the overall
Brandywine costs. Many of these assumptions are discussed
more fully in the detailed review of the schedules below.
Macroeconomic assumptions provided in the Development
Assumptions include the 12-Year T-Bond Rate for capacity price
adjustments under the PPA, the GNP deflator and tax rates.
The Facility Lease is valued at $217.5 million .
This Schedule also provides the Commercial Operations Date of
October 31, 1996, which represents the date declared by
Brandywine for the plant to be turned over to PEPCO for
dispatch. This assumption is used throughout the model to
adjust contract year data to a calendar year basis.
SCHEDULE D-OPERATING ASSUMPTIONS
Schedule D provides the basis for calculating the costs and
revenues for Brandywine's operations. It also provides some
unit measures of Brandywine's costs and rates.
Operating assumptions
The Brandywine Pro Forma assumes capacity equals 230 MW, which
corresponds to Brandywine's capacity commitment under the PPA.
This value is an input to calculate capacity-based payments
under the PPA in the Income Statement. The PES Report
indicates that the facility "meets its contract guarantees."
Brandywine performance factors are adjusted to reflect the
expected operation of Brandywine. Moreover, 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 Brandywine
will qualify for its full capacity payment.
The Brandywine 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 Brandywine under the
terms of the PPA can vary between single-turbine and dual-
turbine, the Brandywine 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., Brandywine could operate either of the turbines
during the periods when only one is dispatched).
Electricity Revenues-Capacity
The Brandywine 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)). The escalation of the GNP between June 1, 1994 and
the Commercial Operation Date was 5.54 percent.
The PPA also adjusts Brandywine's capacity rate based on the
cost of financing on the date Brandywine closed on its
financing agreement with GECC (PPA, Section 6.1(c)).
Brandywine is currently in a dispute with PEPCO over the 12-
Year T-Bond Rate which should be used for this adjustment
factor. It is PEPCO's position to use the 12-Year T-Bond Rate
on the Lease Closing Date. It is Brandywine's position that
GECC's initial "Commitment Date" of October 6, 1994 should be
used to determine the appropriate date. The base case pro
forma uses the PEPCO position, reflecting a 12-Year T-Bond
Rate of 6.36 percent rate as of the Lease Closing Date. This
represents the most conservative presentation of the dispute
and projects capacity payments significantly lower than would
be calculated using Brandywine's position of a 7.94 percent
rate. A Sensitivity Analysis is presented to show the impact
on project capacity payments under a reasonable settlement
case, representing a 1:1 passthrough of interest rate savings
to PEPCO through capacity adjustments. The basis for the
calculation estimating the PEPCO passthrough is described
below under Schedule E.
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 Brandywine
Pro Forma implements this adjustment through an equivalent
offsetting adjustment derived from the income statement. In
the Amendment, Brandywine agreed to a scheduled adjustment of
annual capacity payments (Schedule Q). This adjustment
reduces Brandywine'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 Brandywine Pro Forma as the "Contingent Adjustment."
The Contingent Adjustment estimates the net potential cost to
PEPCO of having excess capacity due to Brandywine, 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 Brandywine 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.
Under the Contingent Adjustment, Brandywine would pay 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.
Because Brandywine'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 Base Case for the
Brandywine Pro Forma assumes that PEPCO reaches the 5,697 MW
peak, adjusted for weather, during 1999 or thereafter.
Consistent with the Commercial Operation Date, the CPWIRR
equals approximately $46.4 million. Based on these
assumptions, there is a $24.8 million net present value
("NPV") reduction in the form of a Contingent Adjustment to
Brandywine's capacity revenues, which represents the most
conservative case. If, as in the Sensitivity Case, the peak
is reached in 1998, the Contingent Adjustment would be $14.8
million NPV and if the peak was reached in 1997 there would be
no Contingent Adjustment made.2 It should be noted that the
PPA did not anticipate the planned PEPCO/BG&E merger. This
merger would create a single system with a peak load much
higher than the threshold level, and thus, the calculation of
the peak would be affected by such merger. This is the
subject of a dispute with PEPCO.
The Brandywine 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.
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 Brandywine's cogeneration function are consistent with
the expected sales under the Purchase Order Contract with
Indianhead Naval Base, assuming 150 days of 80,000 gallons of
water delivery per year at a price of $1.50 per gallon.
The operating specifications for the distilled water unit are
the manufacturer's own. Operating costs, which are estimated
to equal $339,316 escalating with the GNP, are based on
manufacturers' estimates and the trucking agreement signed for
water transportation to the Naval facility. The discharge and
chemical usage fees come from the manufacturer and the
operator.
Fixed Operating Expenses
Brandywine's firm gas transportation costs are calculated in
the fuel schedules discussed below. Other fixed operating
expenses are based on Brandywine's operating budget. In
Brandywine'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 Brandywine 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 Lease Agreement requires that Brandywine maintain a Rent
Reserve equal to the greater of $2.4 million or the sum of the
succeeding two rent payments. The Brandywine Pro Forma refers
to the Rent Reserve as the "Lease Reserve."
The Lease requires that Brandywine 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 Brandywine draws on the O&M Reserve,
it must replenish it to its required balance using up to 50
percent of Brandywine's available cash flow. The Brandywine
Pro Forma refers to this reserve as the Turbine Overhaul
Reserve. PES provided this schedule.
The interest Brandywine earns on these reserves are credited
to Brandywine as revenue that is included in the Income
Statement. This is consistent with the terms of the Lease.
SCHEDULE E-LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
The Brandywine Facility Lease was based on the total
Brandywine cost of $217.5 million. The Basic Rent Factors
applied quarterly to Brandywine cost are provided the
Brandywine Facility Lease Agreement.
For the purpose of the Sensitivity Case, this section also
calculates the difference between what the lease payments
would have been if the 12-Year T-Bond Rate on the Lease
Closing Date had been 8.0 percent rather than the scheduled
lease payments under the Brandywine Facility Lease. The
difference between the two lease schedules is applied as an
adjustment to the capacity rates for the Sensitivity Case
representing a 1:1 pass through to PEPCO of Brandywine's
savings from the reduction in interest rates.
The 12-Year T-Bond Rate adjustment in the capacity payment is
a function of the difference between the appropriate 12-Year T-
Bond Rate and 8.0 percent. It is Panda's assertion that the
initial intention of the T-Bill adjustment in the capacity
payment was to provide PEPCO with the benefits of advantageous
changes in interest rates in the process of financing
Brandywine. Panda maintains that the October 6, 1994
"Commitment Date" from GECC is the appropriate point in time
for determining the 12-Year T-Bond Rate under the language of
the PPA, and Panda considers the adjustment associated with a
6.36 percent 12-Year T-Bond Rate on the Lease Closing Date
excessive in relation to the original intent of the
adjustment. The Brandywine Pro Forma, therefore, has been
designed to show a "Sensitivity Case" representing one
possible settlement of the dispute, where Panda passes through
the benefits of financing consistent with a 6.36 percent 12-
Year T-Bond Rate without following the adjustment calculation
in the PPA.3 The "Sensitivity Case" presents the effects of
this settlement as part of our analysis.
The Pro Forma also presents an amortization schedule for the
Brandywine Facility Lease in order to conform more closely to
GAAP standards with regard to treatment of the Brandywine
Facility Lease as a capital lease.
SCHEDULE F-GAS SUPPLY INCOME STATEMENT AND SCHEDULE G-GAS
SUPPLY OPERATING ASSUMPTIONS
In Schedules F and G reside the calculations that estimate
Brandywine'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 Brandywine
Pro Forma and in the context of the PPA and the gas supply
contract. C.C. Pace has reviewed the fuel-related input
components of the Brandywine Pro Forma and in the Pace Report,
determined that they are reasonable.
The calculation of Brandywine's energy payment costs are
discussed below.
Dispatch Hours
ICF has provided a dispatch profile in the "Independent
Assessment of the Dispatchability of the Panda-Brandywine
Project" based on the results of our own model runs.4 This
dispatch profile provides the basis for the amount of
electricity sold and the amount of fuel used in the Brandywine
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,
Brandywine fuel supplies can be divided conceptually into four
pricing categories representing the four different fuel
recovery mechanisms in the PPA:
1. the Firm Gas Reserve Rate ("FGRR")
2. the Firm Gas Market Rate ("FGMR")
3. the Interruptible Gas Rate ("IGR")
4. 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 Brandywine 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
Brandywine 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. This corresponds to the
price schedule in the Pace Report. The actual escalation
between June 1, 1994 and October 31, 1996, equaled 8.53
percent providing a starting FGRR price of $2.80 in Year 1
escalating according to the PPA to $4.15 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 Brandywine Pro Forma 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 October 31, 1996 was 21.9
percent total (3.0 percent per year). The Brandywine Pro
Forma assumes a 3.0 percent annual escalator after Commercial
Operation.
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 Brandywine Pro Forma
assumes that Unit 2 will operate on fuel oil for one-third of
its winter hours. A more precise calculation of Brandywine's
fuel oil requirements is possible only with greater detail in
the expected dispatch profile. In actuality Brandywine will
likely only burn fuel oil on those days that its firm gas
transportation capacity and balancing capabilities are not
sufficient to meet Brandywine's full dispatch requirements or
when the benefits of selling its gas supply and transportation
exceeds its oil costs.
Brandywine 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 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 Gas Transmission ("Columbia") offer balancing
services for a fee - WGL under its contract with Brandywine,
Columbia under its Storage in Transit service. These
balancing services can be limited by the providers under
circumstances of capacity constraint on their systems.
The Pace Report estimates Brandywine's need for balancing
services. The availability of balancing services from Cove
Point LNG, WGL and Columbia as well as Brandywine'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)). For
consistency with the dispatch forecast, ICF has incorporated
its own oil price forecast into the Brandywine Pro Forma. The
Pace Report found the Brandywine Pro Forma's modeling of fuel
oil prices to be reasonable.
Energy-Based Revenues (Gas Supply Income Statement)
The PPA provides an elaborate series of formulas to calculate
Brandywine's energy payment from PEPCO. PEPCO pays Brandywine
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 Brandywine 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 Brandywine operations based on a
contractually defined relationship between level of operation
and performance.
The Brandywine Pro Forma simplifies Brandywine'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
Brandywine revenues because:
1. The heat rates implicit in the UCP and DP
payments considered together are greater than or
equal to 8,461 Btu per kWh.
2. The revenue calculation in the Brandywine 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.5 The Brandywine Pro Forma meets the goal
of providing a reasonable, conservative estimate of
Brandywine's energy revenues without requiring additional
assumptions about the details of Brandywine's forecasted
operations.
Fuel Costs
The cost of Brandywine's contracted firm supply is fixed in
its gas supply contract with MCN's Cogen Development Company
("Cogen Development") 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 Brandywine Pro Forma.
Brandywine has a minimum contractual obligation to purchase
2,299,500 MMBtu per year at a rate of between 6,000 and 8,000
MMBtu per day. This gas, the "Limited Dispatch Quantity," is
applied to the delivered FGRR requirements in the Brandywine
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, Brandywine 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.
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 Brandywine Pro Forma,
but given the Must Run requirements of Brandywine and
Brandywine's flexibility in Limited Dispatch takes on
Columbia, the Demand Charge is unlikely to be assessed.
Brandywine 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 gas supply contract delivery point in Ohio. Brandywine is
obligated to take 80 percent of the Scheduled Dispatch
Quantity that it nominates prior to the beginning of the
month.
The gas supply contract also provides interruptible gas at a
$0.10 premium over the daily price of gas into Columbia.
Brandywine may also purchase its interruptible requirements
from Cogen Development.
The Brandywine 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 Brandywine's
transportation arrangements. Those arrangement are described
below.
Transportation
The transportation rates in the Closing Pro Forma for Columbia
and Columbia LNG were taken from their respective 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 Brandywine 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 Brandywine Pro Forma uses
the tariff fuel rates to build up the fuel purchase
requirements for Brandywine. For each of the three gas
segments (FGRR, FGMR, and IGR), the amount of gas purchased
under the Brandywine 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 gas supply contract at the
Scheduled Dispatch rate. In the Brandywine 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 Brandywine 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 Brandywine'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 Brandywine using its IT
offset the cost of IT used for the IGR volumes.
C.C. Pace reviewed the transportation costs used in the
Brandywine Pro Forma and found that the Brandywine Pro Forma
is based on a reasonable forecast of transportation costs.
The Brandywine Pro Forma assumes that Brandywine's unused firm
capacity can be resold for 50 percent of the tariff rate
(Schedule A). Brandywine will be most likely to resell its
firm capacity during the winter when dispatch is the lowest.
This happens to be the period when interruption is most likely
on Columbia and, therefore, the time when firm capacity is the
most valuable on the resale market. 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. The Pace
Report has indicated that this assumption is reasonable to
expect recovery of 43 percent of the transportation costs
associated with unused firm capacity. C.C. Pace also
concluded that gas transportation volumes assumed for purposes
of the Brandywine Pro Forma are reasonable.
The levels of dispatch indicated in the Dispatch Analysis are
consistent with an operating pattern where Brandywine 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.
For the purpose of estimating Brandywine's overhaul schedule
PES has assumed 225 start-ups for Unit 1 and 200 start-ups for
Unit 2.
CONCLUSIONS
Set forth below are the principal opinions that we have
reached regarding our review of Brandywine. For a complete
understanding of the estimates, assumptions and calculations
upon which these opinions are based, this Report, including
the attached Brandywine Pro Forma, should be read in its
entirety. On the basis of our review and analyses of
Brandywine and the assumptions set forth in this Report, we
are of the opinion that:
1. The financial projections in the Brandywine Pro
Forma provide a reasonable reflection of
Brandywine's expected costs, revenues and cash
flows.
2. The energy and capacity revenue calculations
contained in the Brandywine Pro Forma are
appropriate and consistent with the PPA.
Expectations for capacity payment adjustments under
the PPA in regard to the interest rate adjustment
and the peak adjustment are presented at the most
conservative positions.
3. Over the 20-year initial term of the Facility
Lease, Brandywine's cash flow available for lease
payments will average approximately $46.5 million
per year, reflecting a range of $18.1 million in
1998 to $58.9 million in 2020.
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 Facility Lease, Brandywine's
lease coverage will range from 1.35:1 in 2012 to
1.75:1 in 2004, the last full year of lease payments
with an average coverage ratio of 1.59:1.
Sensitivity Analysis
ICF has conducted a sensitivity analysis on the pro forma
model using assumptions representing a less conservative
assessment of Brandywine's capacity revenues (the "Sensitivity
Case").6 These assumptions include:
1. Brandywine passes through the benefits of its
interest rate savings on its lease payments to PEPCO
on a 1:1 basis. This represents a reasonable
"middle ground" settlement to the dispute between
PEPCO and Brandywine.
2. PEPCO surpasses the weather normalized peak
capacity of 5,697 MW during 1998. This is
consistent with the non-weather normalized peak of
5,732 in August 1995 and the possibility that in a
merged BG&E/PEPCO system the PEPCO-specific system
peak will no longer be calculated.
3. All other assumptions remain the same as in the
base case.
Sensitivity Conclusions
The Sensitivity Case provides the following results:
1. Under the Sensitivity Case, Brandywine's cash
flow averages $51.0 million per year over the 20-
year term of the Facility Lease, reflecting a range
of $22.3 million in 1998 to $68.5 million in 2014.
2. The estimated lease obligation coverage ratios
under the Sensitivity Case are presented in Table
ES-2. During the term of the Facility Lease,
Brandywine's lease coverage ranges from 1.59:1 in
2015 to 2.14:1 in 1997 with an average coverage
ratio of 1.75:1.
Respectfully Submitted,
/s/ ICF Resources Incorporated
_______________________________
1 ICF has not performed an independent assessment regarding
the ultimate resolution of Panda's disputes with PEPCO.
2 ICF has not forecast when or if PEPCO will reach the
threshold peak.
3 ICF has not forecast the terms of a settlement on this
issue.
4 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 November 11, 1996.
5 In essence, the Brandywine 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.
6 ICF has not performed an independent assessment regarding
the ultimate resolution of Panda's disputes with PEPCO.
APPENDIX
PANDA-BRANDYWINE PRO FORMA
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
INCOME STATEMENT - CASH FLOW BASIS
Schedule A
<TABLE>
<CAPTION>
BASE CASE 1 2 3 4 5
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Payments $ 0 $21,932,151 $21,420,365 $37,939,669 $38,759,180
Energy Sales - Unit #1 2,247,247 12,335,863 13,063,601 13,467,031 13,978,187
Energy Sales - Unit #2 1,390,760 7,973,892 8,738,588 9,165,628 9,603,410
Energy - Variable O&M 501,742 2,921,953 3,104,449 3,188,704 3,273,583
Distilled Water Sales 3,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity Release 33,727 245,276 216,774 217,845 218,984
Interest Income 26,758 237,915 378,235 540,136 697,848
-------------------------------------------------------------------
Total Revenues 4,203,234 45,665,049 46,940,011 64,537,013 66,549,192
Operating Expenses:
Fuel Expenses (incl. Transportation) 3,481,854 19,696,879 21,053,784 21,881,189 22,725,017
Water Usage 115,284 671,437 705,609 715,662 725,617
Water Discharge & Chemical Usage 79,801 468,400 496,083 507,091 518,181
Distilled Water Operating Costs 56,553 339,316 349,495 359,980 370,780
O&M Contract Costs 254,800 1,581,190 1,628,626 1,677,484 1,727,809
Consumables 27,364 587,352 604,973 623,122 641,815
Administrative Expenses 39,700 403,200 415,296 427,755 440,588
Insurance 95,733 488,600 503,258 518,356 533,906
Purchased Electricity 77,350 470,888 485,015 499,565 514,552
Letters of Credit Fee 17,500 105,000 105,000 105,000 105,000
Property Taxes 266,000 2,620,500 2,483,407 2,339,772 2,189,399
GAAP Depreciation 0 8,000,000 8,100,000 8,166,861 8,241,418
-------------------------------------------------------------------
Total Operating Expenses 4,511,939 35,432,762 36,930,546 37,821,838 38,734,083
EBIT (308,705) 10,232,287 10,009,465 26,715,175 27,815,110
Annual Lease Payments 0 10,442,037 10,411,906 19,975,918 20,660,454
-------------------------------------------------------------------
Net Income $ (308,705) $ (209,749) $ (402,441) $ 6,739,257 $ 7,154,655
===================================================================
<CAPTION>
BASE CASE 6 7 8 9 10
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005
Sales Revenue: -------------------------------------------------------------------
Capacity Payments $48,959,993 $49,738,974 $50,357,619 $50,387,168 $50,252,685
Energy Sales - Unit #1 16,043,523 17,404,168 17,309,925 17,178,247 18,232,421
Energy Sales - Unit #2 10,808,443 11,903,802 10,720,713 9,435,532 11,139,565
Energy - Variable O&M 3,621,366 3,912,660 3,718,100 3,510,789 3,850,304
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity Release 155,920 101,210 187,650 276,312 223,732
Interest Income 808,475 859,874 867,830 870,673 880,564
-------------------------------------------------------------------
Total Revenues 80,415,719 83,938,689 83,179,837 81,676,720 84,597,272
Operating Expenses:
Fuel Expenses (incl. Transportation) 24,968,934 27,218,912 26,573,667 25,815,568 28,344,527
Water Usage 781,032 837,913 786,318 733,157 775,511
Water Discharge & Chemical Usage 562,144 607,843 574,927 540,310 576,068
Distilled Water Operating Costs 381,903 393,360 405,161 417,316 429,835
O&M Contract Costs 1,779,643 1,833,033 1,888,024 1,944,664 2,003,004
Consumables 661,070 680,902 701,329 722,369 744,040
Administrative Expenses 453,805 467,419 481,442 495,885 510,762
Insurance 549,924 566,421 583,414 600,916 618,944
Purchased Electricity 529,989 545,888 562,265 579,133 596,507
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000
Property Taxes 2,032,074 1,867,581 1,695,695 1,599,555 1,583,926
GAAP Depreciation 8,313,041 8,517,135 8,653,244 8,732,654 8,821,204
-------------------------------------------------------------------
Total Operating Expenses 41,118,558 43,641,408 43,010,485 42,286,527 45,109,328
EBIT 39,297,161 40,297,281 40,169,352 39,390,193 39,487,943
Annual Lease Payments 27,265,071 27,938,252 27,906,988 27,456,191 27,602,191
-------------------------------------------------------------------
Net Income $12,032,090 $12,359,029 $12,262,364 $11,934,002 $11,885,753
===================================================================
<CAPTION>
BASE CASE 11 12 13 14 15
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
Sales Revenue: -------------------------------------------------------------------
Capacity Payments $50,543,408 $52,639,104 $52,637,845 $53,227,873 $55,613,526
Energy Sales - Unit #1 18,679,732 18,752,137 18,883,190 18,979,218 19,340,994
Energy Sales - Unit #2 12,563,328 12,672,731 12,800,534 12,919,888 13,229,399
Energy - Variable O&M 4,062,009 4,063,946 4,074,169 4,087,597 4,153,451
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity Release 221,994 256,512 287,193 316,194 337,602
Interest Income 906,282 941,277 969,448 999,797 1,049,656
-------------------------------------------------------------------
Total Revenues 86,994,754 89,343,706 89,670,380 90,548,566 93,742,629
Operating Expenses:
Fuel Expenses (incl. Transportation) 29,829,313 30,331,386 30,925,404 31,553,474 32,426,682
Water Usage 819,069 809,994 801,772 794,457 787,908
Water Discharge & Chemical Usage 613,274 611,327 609,971 609,262 609,107
Distilled Water Operating Costs 442,730 456,012 469,693 483,783 498,297
O&M Contract Costs 2,063,094 2,124,987 2,188,737 2,254,399 2,322,031
Consumables 766,361 789,352 813,033 837,424 862,546
Administrative Expenses 526,085 541,867 558,123 574,867 592,113
Insurance 637,512 656,638 676,337 696,627 717,526
Purchased Electricity 614,402 632,834 651,819 671,374 691,515
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000
Property Taxes 1,567,032 1,532,315 1,512,427 1,491,130 1,468,376
GAAP Depreciation 9,166,603 9,530,906 9,522,031 9,622,482 9,645,540
-------------------------------------------------------------------
Total Operating Expenses 47,150,476 48,122,619 48,834,346 49,694,279 50,726,641
EBIT 39,844,277 41,221,087 40,836,034 40,854,287 43,015,988
Annual Lease Payments 28,188,414 30,071,266 30,528,635 31,284,930 33,212,359
-------------------------------------------------------------------
Net Income $11,655,864 $11,149,821 $10,307,399 $ 9,569,357 $ 9,803,630
===================================================================
<CAPTION>
BASE CASE 16 17 18 19 20 21
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Payments $56,766,183 $55,942,127 $58,736,375 $60,198,041 $57,607,161 $51,830,115
Energy Sales - Unit #1 19,821,007 20,665,931 20,885,543 21,560,181 21,776,725 22,335,104
Energy Sales - Unit #2 12,916,275 12,640,803 12,384,800 12,352,001 12,006,864 12,705,511
Energy - Variable O&M 4,103,535 4,071,895 4,049,422 4,109,050 4,074,948 4,205,986
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity Release 383,705 422,550 459,684 486,073 535,174 542,273
Interest Income 1,125,321 1,208,543 1,264,349 1,283,202 1,261,146 963,597
---------------------------------------------------------------------------------
Total Revenues 95,134,026 94,969,849 97,798,174 100,006,546 97,280,018 92,600,587
Operating Expenses:
Fuel Expenses (incl. Transportation) 31,541,901 31,304,052 31,475,198 31,966,788 31,804,738 32,900,398
Water Usage 770,618 755,077 741,487 729,883 720,780 734,680
Water Discharge & Chemical Usage 600,551 593,205 587,258 582,772 580,200 596,228
Distilled Water Operating Costs 513,246 528,643 544,503 560,838 577,663 594,993
O&M Contract Costs 2,391,692 2,463,442 2,537,346 2,613,466 2,691,870 2,772,626
Consumables 888,423 915,075 942,528 970,803 999,927 1,029,925
Administrative Expenses 609,876 628,172 647,018 666,428 686,421 707,014
Insurance 739,051 761,223 784,060 807,581 831,809 856,763
Purchased Electricity 712,260 733,628 755,637 778,306 801,655 825,705
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000 105,000
Property Taxes 1,444,116 1,418,298 1,390,870 1,361,777 1,330,965 1,298,375
GAAP Depreciation 9,835,567 9,894,187 9,874,682 9,907,288 10,379,215 10,153,809
---------------------------------------------------------------------------------
Total Operating Expenses 50,152,301 50,100,004 50,385,586 51,050,931 51,510,243 52,575,515
EBIT 44,981,725 44,869,845 47,412,588 48,955,616 45,769,776 40,025,072
Annual Lease Payments 35,922,147 40,437,452 41,855,210 42,739,415 41,168,222 31,933,556
---------------------------------------------------------------------------------
Net Income $ 9,059,578 $ 4,432,393 $ 5,557,378 $ 6,216,201 $ 4,601,554 $ 8,091,516
=================================================================================
<CAPTION>
BASE CASE 22 23 24 25 26
Year Ended Year Ended Year Ended Year Ended Year Ended Total
Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Contract
Sales Revenue: ------------------------------------------------------------------- -------------
Capacity Payments $53,970,580 $56,191,057 $58,441,539 $60,731,882 $52,265,163
Energy Sales - Unit #1 22,934,808 23,550,046 24,536,466 25,130,212 21,412,060 480,503,567
Energy Sales - Unit #2 13,463,457 14,276,427 15,348,777 16,215,493 13,795,743 303,172,364
Energy - Variable O&M 4,347,556 4,495,983 4,717,294 4,866,079 4,162,468 99,249,036
Distilled Water Sales 18,000 18,000 18,000 18,000 15,000 450,000
Firm Transportation Capacity Release 545,596 546,190 538,523 539,437 452,968 8,749,098
Interest Income 694,612 705,606 716,930 728,594 367,256 21,353,926
------------------------------------------------------------------- -------------
Total Revenues 95,974,609 99,783,309 104,317,529 108,229,698 92,470,657 2,170,567,774
Operating Expenses:
Fuel Expenses (incl. Transportation) 34,157,797 35,552,156 37,268,502 38,756,753 33,029,645 746,584,519
Water Usage 749,686 765,553 782,336 800,180 675,713 19,086,734
Water Discharge & Chemical Usage 613,397 631,531 650,696 671,040 571,358 14,662,028
Distilled Water Operating Costs 612,842 631,228 650,165 669,669 574,800 12,312,804
O&M Contract Costs 2,855,805 2,941,479 3,029,724 3,120,615 2,678,528 57,368,119
Consumables 1,060,823 1,092,648 1,125,427 1,159,190 994,971 21,242,792
Administrative Expenses 728,224 750,071 772,573 795,750 683,019 14,603,472
Insurance 882,466 908,940 936,208 964,294 827,686 17,744,192
Purchased Electricity 850,476 875,990 902,270 929,338 797,682 17,086,044
Letters of Credit Fee 105,000 105,000 105,000 105,000 87,500 2,625,000
Property Taxes 1,263,949 1,227,626 1,189,346 1,149,042 1,091,590 40,415,143
GAAP Depreciation 10,303,392 10,340,807 10,316,831 10,671,736 10,563,632 235,274,266
------------------------------------------------------------------- -------------
Total Operating Expenses 54,183,857 55,823,029 57,729,078 59,792,609 52,576,123 1,199,005,112
EBIT 41,790,752 43,960,280 46,588,451 48,437,089 39,894,535 971,562,662
Annual Lease Payments 14,583,866 14,583,866 14,583,866 14,583,866 10,937,900 656,273,975
------------------------------------------------------------------- -------------
Net Income $27,206,886 $29,376,414 $32,004,585 $33,853,223 $28,956,635 $ 315,288,687
=================================================================== =============
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
CASH FLOW STATEMENT
Schedule B
<TABLE>
<CAPTION>
BASE CASE 1 2 3 4 5 6 7
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>
Net Income ($308,705) ($209,749) ($402,441) $6,739,257 $7,154,655 $12,032,090 $12,359,029
+ Depreciation & Amortization 0 8,000,000 8,100,000 8,166,861 8,241,418 8,313,041 8,517,135
+ Lease Payments 0 10,442,037 10,411,906 19,975,918 20,660,454 27,265,071 27,938,252
----------------------------------------------------------------------------------------
Cash Flow Available for Lease Payment (308,705) 18,232,287 18,109,465 34,882,036 36,056,528 47,610,202 48,814,416
Lease Payments 0 (10,442,037) (10,411,906) (19,975,918) (20,660,454) (27,265,071) (27,938,252)
Reserves:
Overhaul Reserve / Capital Expenditures (125,000) (2,615,000) (1,418,610) (2,245,573) (1,841,232) (2,190,936) (1,515,589)
Lease Reserve (210,509) (2,602,976) (2,383,470) (2,562,137) (1,822,288) (1,819,449) (160,479)
+ Contingency / Raytheon 7,986,000 (689,000) 0 0 0 0 0
----------------------------------------------------------------------------------------
Total Reserves 7,650,491 (5,906,976) (3,802,080) (4,807,710) (3,663,520) (4,010,385) (1,676,068)
Net Cash Flow $7,341,786 $1,883,274 $3,895,479 $10,098,408 $11,732,554 $16,334,746 $19,200,096
========================================================================================
Lease Coverages 1.75 1.74 1.75 1.75 1.75 1.75
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
CASH FLOW STATEMENT
Schedule B
<TABLE>
<CAPTION>
BASE CASE 8 9 10 11 12 13 14
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>
Net Income 12,262,364 $11,934,002 $11,885,753 $11,655,864 $11,149,821 $10,307,399 $9,569,357
+ Depreciation & Amortization 8,653,244 8,732,654 8,821,204 9,166,603 9,530,906 9,522,031 9,622,482
+ Lease Payments 27,906,988 27,456,191 27,602,191 28,188,414 30,071,266 30,528,635 31,284,930
----------------------------------------------------------------------------------------
Cash Flow Available for Lease Payment 48,822,596 48,122,847 48,309,148 49,010,881 50,751,993 50,358,065 50,476,769
Lease Payments (27,906,988) (27,456,191) (27,602,191) (28,188,414) (30,071,266) (30,528,635) (31,284,930)
Reserves:
Overhaul Reserve / Capital Expenditures (953,234) (1,049,415) (3,622,816) (3,816,916) (1,090,355) (1,857,606) (1,166,166)
Lease Reserve 120,515 76,199 (183,056) (617,269) (585,055) (303,416) (670,931)
+ Contingency / Raytheon 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------
Total Reserves (832,719) (973,216) (3,805,872) (4,434,184) (1,675,410) (2,161,022) (1,837,097)
Net Cash Flow $20,082,889 $19,693,439 $16,901,085 $16,388,283 $19,005,317 $17,668,407 $17,354,742
========================================================================================
Lease Coverages 1.75 1.75 1.75 1.74 1.69 1.65 1.61
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
CASH FLOW STATEMENT
Schedule B
<TABLE>
<CAPTION>
BASE CASE 15 16 17 18 19 20 21
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $9,803,630 $9,059,578 $4,432,393 $5,557,378 $6,216,201 $4,601,554 $8,091,516
+ Depreciation & Amortization 9,645,540 9,835,567 9,894,187 9,874,682 9,907,288 10,379,215 10,153,809
+ Lease Payments 33,212,359 35,922,147 40,437,452 41,855,210 42,739,415 41,168,222 31,933,556
----------------------------------------------------------------------------------------
Cash Flow Available for Lease Payment 52,661,528 54,817,291 54,764,032 57,287,270 58,862,904 56,148,990 50,178,881
Lease Payments (33,212,359) (35,922,147) (40,437,452) (41,855,210) (42,739,415) (41,168,222) (31,933,556)
Reserves:
Overhaul Reserve / Capital Expenditures (2,812,214) (2,828,729) (1,373,678) (1,334,019) (5,825,052) (1,426,826) (5,372,541)
Lease Reserve (1,159,304) (1,806,273) (1,483,266) (575,491) 171,747 1,255,657 12,429,319
+ Contingency / Raytheon 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------
Total Reserves (3,971,519) (4,635,002) (2,856,944) (1,909,510) (5,653,305) (171,169) 7,056,778
Net Cash Flow $15,477,651 $14,260,143 $11,469,636 $13,522,551 $10,470,184 $14,809,599 $25,302,103
========================================================================================
Lease Coverages 1.59 1.53 1.35 1.37 1.38 1.36 1.57
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
CASH FLOW STATEMENT
Schedule B
<TABLE>
<CAPTION>
BASE CASE 22 23 24 25 26
Year Ended Year Ended Year Ended Year Ended Year Ended Total
Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Contract
---------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $27,206,886 $29,376,414 $32,004,585 $33,853,223 $28,956,635 $315,288,687
+ Depreciation & Amortization 10,303,392 10,340,807 10,316,831 10,671,736 10,563,632 235,274,266
+ Lease Payments 14,583,866 14,583,866 14,583,866 14,583,866 10,937,900 656,273,975
---------------------------------------------------------------- -------------
Cash Flow Available for Lease Payment 52,094,143 54,301,087 56,905,283 59,108,825 50,458,166 1,206,836,928
Lease Payments (14,583,866) (14,583,866) (14,583,866) (14,583,866) (10,937,900) (656,273,975)
Reserves:
Overhaul Reserve / Capital Expenditures (1,526,110) (1,681,291) (4,780,564) (1,798,482) 5,324,714 (50,943,239)
Lease Reserve 0 0 0 0 7,291,933 2,400,000
+ Contingency / Raytheon 0 0 0 7,000,000 0 14,297,000
---------------------------------------------------------------- -------------
Total Reserves (1,526,110) (1,681,291) (4,780,564) 5,201,518 12,616,647 (34,246,239)
Net Cash Flow $35,984,168 $38,035,929 $37,540,852 $49,726,477 $52,136,914 $516,316,713
================================================================ ============
Lease Coverages 3.57 3.72 3.90 4.05 4.61
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
DEVELOPMENT ASSUMPTIONS
Schedule C
<TABLE>
<CAPTION>
LEASE FINANCING: PROJECT COSTS
<S> <C> <C> <C>
Leased Amount $217,488,645 Cogen Construction Costs 119,884,197
Lease Term (Years) 20 Distilled Water Construction Costs 3,400,000
Electrical Transmission Line & Fiber Optics 4,005,843
OTHER FINANCING ASSUMPTIONS: Effluent Water Pipeline 9,791,490
Debt Service Reserve $2,400,000 Columbia Gas Pipeline Expansion 9,058,249
Letters of Credit (PEPCO, Fuel Supplier, etc.) $7,000,000 PEPCO - Electrical Interconnect 2,785,269
Annual Letter of Credit Fee 1.50% PEPCO - RTU/AGC Communications 92,403
Interest Income Rate 4.50% Sales Tax on 10% of Construction Costs 156,033
12 Year Treasury Bill Rate (Capacity Adjustment) 6.36% Water Wells on Site 401,825
Annual GNP Deflator 3.00% Building Permit 287,297
Actual Commercial Operations Date Oct-96 Builder's Risk Insurance 594,645
Months of Operation During 1996 (1st calendar year) 2 Other Construction Costs 58,682
Months of Operation During 2021 (last calendar year) 10 Land Purchase Costs (Including Title Insurance) 3,914,213
Annual CPI Deflator 3.00% Right-of Way Payments 1,020,270
Outside Engineering Costs 2,505,267
DEPRECIATION ASSUMPTIONS: Permitting & Regulatory Costs 1,654,055
Depreciable Base $200,000,000 Legal Costs 2,732,018
Life of Starting Plant (Years) 25 Public Relations 326,076
Life of Plant Additions (Years) 10 Interest During Development/Construction 20,052,787
Other Financing Costs 10,141,274
CASE: Management & Administrative Costs 4,203,859
(0-Base Case, 1-Sensitivity Case) 0 Natural Gas Reserves Development 3,165,981
Base Case Furniture & Office Equipment 419,879
O&M Contractor 1,079,261
Fuel Purchased During Construction (272,413)
General Liability Insurance 91,338
Spare Parts Inventory 1,369,672
Fuel Oil Inventory 1,516,187
Initial Lease Reserve (Cash) 2,400,000
Initial O&M Reserve (Cash) 1,000,000
Initial Warranty Reserve (Cash) 750,000
Contingency 8,902,988
-----------
Total Project Costs 217,488,645
===========
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
OPERATING ASSUMPTIONS
SCHEDULE D
<TABLE>
<CAPTION>
BASE CASE 1 2 3
Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998
OPERATING ASSUMPTIONS: ----------------------------------------
<S> <C> <C> <C>
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 120,040 118,280 117,840
Weighted Average Energy Output - Unit #2 120,040 118,280 117,840
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 809 4,565 4,664
Hours Per Year Running Unit #2 (Full Load) 491 2,895 3,061
Availability Factor 96.5% 96.5% 96.4%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 7,939 8,048 8,075
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 7,863 7,954 7,984
Actual Annual Energy - Unit #1 (MWH) 97,149 539,966 549,547
Actual Annual Energy - Unit #2 (MWH) 58,921 342,452 360,677
Annual Fuel Usage - Unit #1 (DT's) 771,263 4,345,650 4,437,592
Annual Fuel Usage - Unit #2 (DT's) 463,298 2,723,860 2,879,648
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $13.74 $13.92 $14.12
Capital Costs/KW Year $27.48 $165.24 $167.44
Capital Costs Per KWH $0.03396 $0.03620 $0.03590
GNP Deflator Adjustment/KW Year $1.52 $9.16 $9.28
GNP Deflator Adjustment Per KWH $0.00188 $0.00201 $0.00199
Interest Rate Adjustment/KW Year ($3.54) ($21.29) ($21.52)
Interest Rate Adjustment Per KWH ($0.00438) ($0.00466) ($0.00461)
Scheduled Adjustment/KW Year ($26.72) ($65.22) ($69.57)
Scheduled Adjustment Per KWH ($0.03301) ($0.01429) ($0.01492)
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 ($1.26) $87.90 $85.64
Total Capacity Rate/KW Month ($0.10) $7.32 $7.14
Total Capacity Rate Per KWH ($0.00155) $0.01925 $0.01836
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.02331 $0.02302 $0.02395
Variable O&M Rate Per KWH 3.00% $0.00321 $0.00331 $0.00341
Total Energy Rate Per KWH $0.02652 $0.02633 $0.02736
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.02497 $0.04558 $0.04573
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 25 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $2.80 $2.91 $3.03
FGMR - Firm Gas Market Rate ($/DT) $2.35 $2.41 $2.52
IGR - Interruptible Gas Rate ($/DT) $2.62 $2.69 $2.81
OR - Oil Rate ($/DT) $4.28 $4.19 $4.31
UNIT #1 - FUEL COST:
FGRR (Reserves) % 80% 57% 56%
FGMR (Market) % 20% 43% 44%
Blended Unit #1 Rate ($/DT) $2.71 $2.70 $2.81
Blended Unit #1 Rate ($/KWH) $0.02150 $0.02170 $0.02266
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 92% 94% 94%
OR (Fuel Oil) % 8% 6% 6%
Blended Unit #2 Rate ($/DT) $2.74 $2.78 $2.90
Blended Unit #2 Rate ($/KWH) $0.02158 $0.02215 $0.02316
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $1.97 $2.00 $2.03
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $5.12 $5.22 $5.32
Chemical Usage Rate ($/000 Gallons) 3.00% $2.10 $2.16 $2.22
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $56,553 $339,316 $349,495
FIXED OPERATING EXPENSES:
Firm Transportation $434,618 $2,646,824 $2,686,526
O&M Contract Costs 3.00% $254,800 $1,581,190 $1,628,626
Consumables 3.00% $27,364 $587,352 $604,973
Administrative Expenses 3.00% $39,700 $403,200 $415,296
Insurance 3.00% $95,733 $488,600 $503,258
Purchased Electricity 3.00% $77,350 $470,888 $485,015
Property Taxes $266,000 $2,620,500 $2,483,407
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $1,000,000 $1,125,000 $1,625,000
Additions to Reserve $0 Per Turbine Hour $125,000 $1,500,000 $1,418,610
Turbine Overhauls 100.00% of Contract Amount $0 ($1,000,000) ($668,610)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $1,125,000 $1,625,000 $2,375,000
LEASE RESERVE:
Lease Reserve - Beginning of Year $2,400,000 $2,610,509 $5,213,486
Additions to Reserve $210,509 $2,602,976 $2,383,470
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $2,610,509 $5,213,486 $7,596,956
<CAPTION>
BASE CASE 4 5 6
Year Ended Year Ended Year Ended
Dec-1999 Dec-2000 Dec-2001
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,600 117,340 118,840
Weighted Average Energy Output - Unit #2 117,600 117,340 118,840
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,624 4,581 4,841
Hours Per Year Running Unit #2 (Full Load) 3,094 3,129 3,336
Availability Factor 96.4% 96.4% 96.4%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,106 8,141 8,086
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,011 8,041 8,024
Actual Annual Energy - Unit #1 (MWH) 543,799 537,563 575,269
Actual Annual Energy - Unit #2 (MWH) 363,899 367,155 396,414
Annual Fuel Usage - Unit #1 (DT's) 4,408,031 4,376,297 4,651,629
Annual Fuel Usage - Unit #2 (DT's) 2,915,191 2,952,292 3,180,823
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $14.33 $16.97 $18.03
Capital Costs/KW Year $169.86 $177.24 $205.76
Capital Costs Per KWH $0.03673 $0.03869 $0.04251
GNP Deflator Adjustment/KW Year $9.42 $9.83 $11.41
GNP Deflator Adjustment Per KWH $0.00204 $0.00215 $0.00236
Interest Rate Adjustment/KW Year ($21.88) ($22.07) ($22.27)
Interest Rate Adjustment Per KWH ($0.00473) ($0.00482) ($0.00460)
Scheduled Adjustment/KW Year $0.00 ($4.35) $8.70
Scheduled Adjustment Per KWH $0.00000 ($0.00095) $0.00180
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 $157.40 $160.65 $203.59
Total Capacity Rate/KW Month $13.12 $13.39 $16.97
Total Capacity Rate Per KWH $0.03404 $0.03507 $0.04206
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.02493 $0.02607 $0.02763
Variable O&M Rate Per KWH 3.00% $0.00351 $0.00362 $0.00373
Total Energy Rate Per KWH $0.02845 $0.02968 $0.03136
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.06249 $0.06475 $0.07342
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $3.15 $3.28 $3.41
FGMR - Firm Gas Market Rate ($/DT) $2.63 $2.80 $3.18
IGR - Interruptible Gas Rate ($/DT) $2.93 $3.06 $3.18
OR - Oil Rate ($/DT) $4.43 $4.55 $4.73
UNIT #1 - FUEL COST:
FGRR (Reserves) % 57% 58% 54%
FGMR (Market) % 43% 42% 46%
Blended Unit #1 Rate ($/DT) $2.93 $3.08 $3.30
Blended Unit #1 Rate ($/KWH) $0.02372 $0.02504 $0.02670
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 94% 95% 94%
OR (Fuel Oil) % 6% 5% 6%
Blended Unit #2 Rate ($/DT) $3.02 $3.14 $3.27
Blended Unit #2 Rate ($/KWH) $0.02419 $0.02526 $0.02626
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.06 $2.09 $2.12
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $5.43 $5.54 $5.65
Chemical Usage Rate ($/000 Gallons) 3.00% $2.29 $2.36 $2.43
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $359,980 $370,780 $381,903
FIXED OPERATING EXPENSES:
Firm Transportation $2,726,824 $2,767,727 $2,809,242
O&M Contract Costs 3.00% $1,677,484 $1,727,809 $1,779,643
Consumables 3.00% $623,122 $641,815 $661,070
Administrative Expenses 3.00% $427,755 $440,588 $453,805
Insurance 3.00% $518,356 $533,906 $549,924
Purchased Electricity 3.00% $499,565 $514,552 $529,989
Property Taxes $2,339,772 $2,189,399 $2,032,074
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $2,375,000 $3,875,000 $5,000,000
Additions to Reserve $0 Per Turbine Hour $2,245,573 $1,841,232 $2,190,936
Turbine Overhauls 100.00% of Contract Amount ($745,573) ($716,232) ($2,040,936)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $3,875,000 $5,000,000 $5,150,000
LEASE RESERVE:
Lease Reserve - Beginning of Year $7,596,956 $10,159,093 $11,981,381
Additions to Reserve $2,562,137 $1,822,288 $1,819,449
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $10,159,093 $11,981,381 $13,800,831
<CAPTION>
BASE CASE 7 8 9
Year Ended Year Ended Year Ended
Dec-2002 Dec-2003 Dec-2004
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,940 117,690 117,450
Weighted Average Energy Output - Unit #2 117,940 117,690 117,450
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 5,098 4,920 4,742
Hours Per Year Running Unit #2 (Full Load) 3,544 3,070 2,598
Availability Factor 96.4% 96.5% 96.7%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,141 8,174 8,209
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,053 8,077 8,103
Actual Annual Energy - Unit #1 (MWH) 601,249 579,052 556,957
Actual Annual Energy - Unit #2 (MWH) 418,016 361,319 305,119
Annual Fuel Usage - Unit #1 (DT's) 4,894,765 4,733,169 4,572,059
Annual Fuel Usage - Unit #2 (DT's) 3,366,286 2,918,370 2,472,377
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $18.27 $18.27 $18.26
Capital Costs/KW Year $216.84 $219.24 $219.22
Capital Costs Per KWH $0.04253 $0.04456 $0.04623
GNP Deflator Adjustment/KW Year $12.02 $12.16 $12.16
GNP Deflator Adjustment Per KWH $0.00236 $0.00247 $0.00256
Interest Rate Adjustment/KW Year ($22.47) ($22.66) ($22.86)
Interest Rate Adjustment Per KWH ($0.00441) ($0.00461) ($0.00482)
Scheduled Adjustment/KW Year $0.00 $0.00 $0.00
Scheduled Adjustment Per KWH $0.00000 $0.00000 $0.00000
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 $206.40 $208.73 $208.51
Total Capacity Rate/KW Month $17.20 $17.39 $17.38
Total Capacity Rate Per KWH $0.04049 $0.04242 $0.04397
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.02875 $0.02981 $0.03087
Variable O&M Rate Per KWH 3.00% $0.00384 $0.00395 $0.00407
Total Energy Rate Per KWH $0.03259 $0.03376 $0.03494
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.07308 $0.07619 $0.07892
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $3.54 $3.61 $3.69
FGMR - Firm Gas Market Rate ($/DT) $3.31 $3.45 $3.59
IGR - Interruptible Gas Rate ($/DT) $3.31 $3.45 $3.59
OR - Oil Rate ($/DT) $4.91 $5.10 $5.30
UNIT #1 - FUEL COST:
FGRR (Reserves) % 52% 53% 56%
FGMR (Market) % 48% 47% 44%
Blended Unit #1 Rate ($/DT) $3.43 $3.54 $3.65
Blended Unit #1 Rate ($/KWH) $0.02791 $0.02891 $0.02993
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 94% 93% 93%
OR (Fuel Oil) % 6% 7% 7%
Blended Unit #2 Rate ($/DT) $3.42 $3.56 $3.71
Blended Unit #2 Rate ($/KWH) $0.02752 $0.02876 $0.03008
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.15 $2.19 $2.22
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $5.76 $5.88 $5.99
Chemical Usage Rate ($/000 Gallons) 3.00% $2.50 $2.58 $2.66
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $393,360 $405,161 $417,316
FIXED OPERATING EXPENSES:
Firm Transportation $2,851,381 $2,894,152 $2,937,564
O&M Contract Costs 3.00% $1,833,033 $1,888,024 $1,944,664
Consumables 3.00% $680,902 $701,329 $722,369
Administrative Expenses 3.00% $467,419 $481,442 $495,885
Insurance 3.00% $566,421 $583,414 $600,916
Purchased Electricity 3.00% $545,888 $562,265 $579,133
Property Taxes $1,867,581 $1,695,695 $1,599,555
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $5,150,000 $5,304,500 $5,463,635
Additions to Reserve $0 Per Turbine Hour $1,515,589 $953,234 $1,049,415
Turbine Overhauls 100.00% of Contract Amount ($1,361,089) ($794,099) ($885,506)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $5,304,500 $5,463,635 $5,627,544
LEASE RESERVE:
Lease Reserve - Beginning of Year $13,800,831 $13,961,310 $13,840,795
Additions to Reserve $160,479 $0 $0
Reserve Disbursement $0 ($120,515) ($76,199)
Lease Reserve - End of Year $13,961,310 $13,840,795 $13,764,595
<CAPTION>
BASE CASE 10 11 12
Year Ended Year Ended Year Ended
Dec-2005 Dec-2006 Dec-2007
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 120,000 118,120 117,760
Weighted Average Energy Output - Unit #2 120,000 118,120 117,760
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,791 4,838 4,728
Hours Per Year Running Unit #2 (Full Load) 2,859 3,121 3,027
Availability Factor 96.6% 96.5% 96.5%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,166 8,051 8,085
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,131 8,029 7,997
Actual Annual Energy - Unit #1 (MWH) 574,883 571,503 556,780
Actual Annual Energy - Unit #2 (MWH) 343,023 368,668 356,443
Annual Fuel Usage - Unit #1 (DT's) 4,694,496 4,601,171 4,501,569
Annual Fuel Usage - Unit #2 (DT's) 2,789,122 2,960,039 2,850,472
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $18.26 $19.10 $19.10
Capital Costs/KW Year $219.12 $220.80 $229.20
Capital Costs Per KWH $0.04574 $0.04564 $0.04848
GNP Deflator Adjustment/KW Year $12.15 $12.24 $12.71
GNP Deflator Adjustment Per KWH $0.00254 $0.00253 $0.00269
Interest Rate Adjustment/KW Year ($23.09) ($23.45) ($23.65)
Interest Rate Adjustment Per KWH ($0.00482) ($0.00485) ($0.00500)
Scheduled Adjustment/KW Year $0.00 $1.20 $8.04
Scheduled Adjustment Per KWH $0.00000 $0.00025 $0.00170
Contingent Adjustment/KW Year $0.00 ($2.33) ($15.71)
Contingent Adjustment Per KWH $0.00000 ($0.00048) ($0.00332)
Total Capacity Rate/KW Year $208.18 $208.46 $210.59
Total Capacity Rate/KW Month $17.35 $17.37 $17.55
Total Capacity Rate Per KWH $0.04345 $0.04308 $0.04454
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.03200 $0.03323 $0.03441
Variable O&M Rate Per KWH 3.00% $0.00419 $0.00432 $0.00445
Total Energy Rate Per KWH $0.03619 $0.03755 $0.03886
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.07965 $0.08064 $0.08340
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $3.76 $3.83 $3.91
FGMR - Firm Gas Market Rate ($/DT) $3.74 $3.90 $4.06
IGR - Interruptible Gas Rate ($/DT) $3.74 $3.89 $4.05
OR - Oil Rate ($/DT) $5.50 $5.72 $5.93
UNIT #1 - FUEL COST:
FGRR (Reserves) % 54% 54% 56%
FGMR (Market) % 46% 46% 44%
Blended Unit #1 Rate ($/DT) $3.75 $3.86 $3.98
Blended Unit #1 Rate ($/KWH) $0.03060 $0.03108 $0.03214
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 92% 91% 90%
OR (Fuel Oil) % 8% 9% 10%
Blended Unit #2 Rate ($/DT) $3.88 $4.06 $4.23
Blended Unit #2 Rate ($/KWH) $0.03158 $0.03262 $0.03386
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.25 $2.29 $2.32
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $6.11 $6.24 $6.36
Chemical Usage Rate ($/000 Gallons) 3.00% $2.74 $2.82 $2.90
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $429,835 $442,730 $456,012
FIXED OPERATING EXPENSES:
Firm Transportation $2,981,627 $3,026,352 $3,071,747
O&M Contract Costs 3.00% $2,003,004 $2,063,094 $2,124,987
Consumables 3.00% $744,040 $766,361 $789,352
Administrative Expenses 3.00% $510,762 $526,085 $541,867
Insurance 3.00% $618,944 $637,512 $656,638
Purchased Electricity 3.00% $596,507 $614,402 $632,834
Property Taxes $1,583,926 $1,567,032 $1,532,315
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $5,627,544 $5,796,370 $5,970,261
Additions to Reserve $0 Per Turbine Hour $3,622,816 $3,816,916 $1,090,355
Turbine Overhauls 100.00% of Contract Amount ($3,453,990) ($3,643,025) ($911,247)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $5,796,370 $5,970,261 $6,149,369
LEASE RESERVE:
Lease Reserve - Beginning of Year $13,764,595 $13,947,651 $14,564,920
Additions to Reserve $183,056 $617,269 $585,055
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $13,947,651 $14,564,920 $15,149,975
<CAPTION>
BASE CASE 13 14 15
Year Ended Year Ended Year Ended
Dec-2008 Dec-2009 Dec-2010
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,530 117,270 118,400
Weighted Average Energy Output - Unit #2 117,530 117,270 118,400
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,626 4,531 4,443
Hours Per Year Running Unit #2 (Full Load) 2,937 2,852 2,771
Availability Factor 96.5% 96.5% 96.5%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,119 8,153 8,118
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 7,997 8,021 8,045
Actual Annual Energy - Unit #1 (MWH) 543,639 531,401 526,078
Actual Annual Energy - Unit #2 (MWH) 345,215 334,409 328,056
Annual Fuel Usage - Unit #1 (DT's) 4,413,806 4,332,509 4,270,705
Annual Fuel Usage - Unit #2 (DT's) 2,760,688 2,682,297 2,639,213
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $19.18 $20.02 $20.57
Capital Costs/KW Year $229.36 $231.84 $241.34
Capital Costs Per KWH $0.04959 $0.05116 $0.05432
GNP Deflator Adjustment/KW Year $12.72 $12.86 $13.38
GNP Deflator Adjustment Per KWH $0.00275 $0.00284 $0.00301
Interest Rate Adjustment/KW Year ($23.85) ($24.04) ($24.21)
Interest Rate Adjustment Per KWH ($0.00516) ($0.00531) ($0.00545)
Scheduled Adjustment/KW Year $13.26 $18.48 $23.70
Scheduled Adjustment Per KWH $0.00287 $0.00408 $0.00533
Contingent Adjustment/KW Year ($25.95) ($36.24) ($46.03)
Contingent Adjustment Per KWH ($0.00561) ($0.00800) ($0.01036)
Total Capacity Rate/KW Year $205.54 $202.89 $208.18
Total Capacity Rate/KW Month $17.13 $16.91 $17.35
Total Capacity Rate Per KWH $0.04444 $0.04477 $0.04685
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.03565 $0.03684 $0.03813
Variable O&M Rate Per KWH 3.00% $0.00458 $0.00472 $0.00486
Total Energy Rate Per KWH $0.04023 $0.04156 $0.04300
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.08467 $0.08634 $0.08985
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $3.99 $4.07 $4.15
FGMR - Firm Gas Market Rate ($/DT) $4.23 $4.40 $4.59
IGR - Interruptible Gas Rate ($/DT) $4.22 $4.39 $4.58
OR - Oil Rate ($/DT) $6.16 $6.40 $6.64
UNIT #1 - FUEL COST:
FGRR (Reserves) % 57% 58% 59%
FGMR (Market) % 43% 42% 41%
Blended Unit #1 Rate ($/DT) $4.10 $4.21 $4.33
Blended Unit #1 Rate ($/KWH) $0.03326 $0.03432 $0.03515
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 90% 90% 90%
OR (Fuel Oil) % 10% 10% 10%
Blended Unit #2 Rate ($/DT) $4.41 $4.59 $4.79
Blended Unit #2 Rate ($/KWH) $0.03528 $0.03683 $0.03852
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.36 $2.39 $2.43
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $6.49 $6.62 $6.75
Chemical Usage Rate ($/000 Gallons) 3.00% $2.99 $3.08 $3.17
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $469,693 $483,783 $498,297
FIXED OPERATING EXPENSES:
Firm Transportation $3,117,823 $3,164,591 $3,212,060
O&M Contract Costs 3.00% $2,188,737 $2,254,399 $2,322,031
Consumables 3.00% $813,033 $837,424 $862,546
Administrative Expenses 3.00% $558,123 $574,867 $592,113
Insurance 3.00% $676,337 $696,627 $717,526
Purchased Electricity 3.00% $651,819 $671,374 $691,515
Property Taxes $1,512,427 $1,491,130 $1,468,376
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $6,149,369 $6,333,850 $6,523,866
Additions to Reserve $0 Per Turbine Hour $1,857,606 $1,166,166 $2,812,214
Turbine Overhauls 100.00% of Contract Amount ($1,673,125) ($976,150) ($2,616,498)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $6,333,850 $6,523,866 $6,719,582
LEASE RESERVE:
Lease Reserve - Beginning of Year $15,149,975 $15,453,391 $16,124,322
Additions to Reserve $303,416 $670,931 $1,159,304
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $15,453,391 $16,124,322 $17,283,626
<CAPTION>
BASE CASE 16 17 18
Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,860 117,620 117,380
Weighted Average Energy Output - Unit #2 117,860 117,620 117,380
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,324 4,218 4,126
Hours Per Year Running Unit #2 (Full Load) 2,628 2,492 2,366
Availability Factor 96.5% 96.6% 96.6%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,151 8,183 8,216
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,020 8,049 8,067
Actual Annual Energy - Unit #1 (MWH) 509,582 496,163 484,358
Actual Annual Energy - Unit #2 (MWH) 309,709 293,132 277,719
Annual Fuel Usage - Unit #1 (DT's) 4,153,606 4,060,098 3,979,484
Annual Fuel Usage - Unit #2 (DT's) 2,483,864 2,359,423 2,240,357
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $22.79 $23.35 $23.63
Capital Costs/KW Year $251.28 $274.60 $280.76
Capital Costs Per KWH $0.05812 $0.06510 $0.06804
GNP Deflator Adjustment/KW Year $13.93 $15.23 $15.57
GNP Deflator Adjustment Per KWH $0.00322 $0.00361 $0.00377
Interest Rate Adjustment/KW Year ($24.21) ($24.21) ($24.21)
Interest Rate Adjustment Per KWH ($0.00560) ($0.00574) ($0.00587)
Scheduled Adjustment/KW Year $28.91 $34.13 $39.35
Scheduled Adjustment Per KWH $0.00669 $0.00809 $0.00954
Contingent Adjustment/KW Year ($68.28) ($136.32) ($136.60)
Contingent Adjustment Per KWH ($0.01579) ($0.03232) ($0.03310)
Total Capacity Rate/KW Year $201.64 $163.43 $174.87
Total Capacity Rate/KW Month $16.80 $13.62 $14.57
Total Capacity Rate Per KWH $0.04664 $0.03874 $0.04238
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.03996 $0.04220 $0.04366
Variable O&M Rate Per KWH 3.00% $0.00501 $0.00516 $0.00531
Total Energy Rate Per KWH $0.04497 $0.04736 $0.04897
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.09160 $0.08610 $0.09135
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $4.23 $4.32 $4.41
FGMR - Firm Gas Market Rate ($/DT) $4.76 $4.93 $5.10
IGR - Interruptible Gas Rate ($/DT) $4.74 $4.91 $5.09
OR - Oil Rate ($/DT) $6.89 $7.16 $7.43
UNIT #1 - FUEL COST:
FGRR (Reserves) % 25% 0% 0%
FGMR (Market) % 75% 100% 100%
Blended Unit #1 Rate ($/DT) $4.63 $4.93 $5.10
Blended Unit #1 Rate ($/KWH) $0.03770 $0.04033 $0.04194
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 90% 90% 90%
OR (Fuel Oil) % 10% 10% 10%
Blended Unit #2 Rate ($/DT) $4.96 $5.13 $5.31
Blended Unit #2 Rate ($/KWH) $0.03976 $0.04130 $0.04285
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.46 $2.50 $2.54
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $6.88 $7.02 $7.16
Chemical Usage Rate ($/000 Gallons) 3.00% $3.27 $3.37 $3.47
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $513,246 $528,643 $544,503
FIXED OPERATING EXPENSES:
Firm Transportation $3,260,240 $3,309,144 $3,358,781
O&M Contract Costs 3.00% $2,391,692 $2,463,442 $2,537,346
Consumables 3.00% $888,423 $915,075 $942,528
Administrative Expenses 3.00% $609,876 $628,172 $647,018
Insurance 3.00% $739,051 $761,223 $784,060
Purchased Electricity 3.00% $712,260 $733,628 $755,637
Property Taxes $1,444,116 $1,418,298 $1,390,870
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $6,719,582 $6,921,169 $7,128,804
Additions to Reserve $0 Per Turbine Hour $2,828,729 $1,373,678 $1,334,019
Turbine Overhauls 100.00% of Contract Amount ($2,627,141) ($1,166,043) ($1,120,155)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $6,921,169 $7,128,804 $7,342,669
LEASE RESERVE:
Lease Reserve - Beginning of Year $17,283,626 $19,089,900 $20,573,165
Additions to Reserve $1,806,273 $1,483,266 $575,491
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $19,089,900 $20,573,165 $21,148,656
<CAPTION>
BASE CASE 19 20 21
Year Ended Year Ended Year Ended
Dec-2014 Dec-2015 Dec-2016
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 119,240 118,000 117,750
Weighted Average Energy Output - Unit #2 119,240 118,000 117,750
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,050 3,992 3,961
Hours Per Year Running Unit #2 (Full Load) 2,246 2,134 2,190
Availability Factor 96.6% 96.7% 96.6%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,134 8,053 8,085
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,087 8,108 8,008
Actual Annual Energy - Unit #1 (MWH) 482,917 471,025 466,466
Actual Annual Energy - Unit #2 (MWH) 267,858 251,833 257,906
Annual Fuel Usage - Unit #1 (DT's) 3,928,047 3,793,163 3,771,378
Annual Fuel Usage - Unit #2 (DT's) 2,166,167 2,041,865 2,065,312
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $22.69 $18.83 $19.14
Capital Costs/KW Year $281.68 $264.56 $226.58
Capital Costs Per KWH $0.06955 $0.06628 $0.05720
GNP Deflator Adjustment/KW Year $15.62 $14.67 $12.56
GNP Deflator Adjustment Per KWH $0.00386 $0.00368 $0.00317
Interest Rate Adjustment/KW Year ($24.21) ($21.94) ($10.63)
Interest Rate Adjustment Per KWH ($0.00598) ($0.00550) ($0.00268)
Scheduled Adjustment/KW Year $44.57 $49.78 $55.00
Scheduled Adjustment Per KWH $0.01100 $0.01247 $0.01388
Contingent Adjustment/KW Year ($134.47) ($135.88) ($136.17)
Contingent Adjustment Per KWH ($0.03320) ($0.03404) ($0.03437)
Total Capacity Rate/KW Year $183.19 $171.18 $147.34
Total Capacity Rate/KW Month $15.27 $14.27 $12.28
Total Capacity Rate Per KWH $0.04523 $0.04288 $0.03719
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.04517 $0.04674 $0.04837
Variable O&M Rate Per KWH 3.00% $0.00547 $0.00564 $0.00581
Total Energy Rate Per KWH $0.05064 $0.05237 $0.05418
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.09587 $0.09526 $0.09137
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $4.49 $4.58 $4.67
FGMR - Firm Gas Market Rate ($/DT) $5.29 $5.48 $5.67
IGR - Interruptible Gas Rate ($/DT) $5.27 $5.45 $5.65
OR - Oil Rate ($/DT) $7.72 $8.02 $8.32
UNIT #1 - FUEL COST:
FGRR (Reserves) % 0% 0% 0%
FGMR (Market) % 100% 100% 100%
Blended Unit #1 Rate ($/DT) $5.29 $5.48 $5.67
Blended Unit #1 Rate ($/KWH) $0.04301 $0.04410 $0.04586
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 91% 91% 91%
OR (Fuel Oil) % 9% 9% 9%
Blended Unit #2 Rate ($/DT) $5.50 $5.69 $5.89
Blended Unit #2 Rate ($/KWH) $0.04446 $0.04613 $0.04714
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.58 $2.61 $2.65
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $7.31 $7.45 $7.60
Chemical Usage Rate ($/000 Gallons) 3.00% $3.57 $3.68 $3.79
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $560,838 $577,663 $594,993
FIXED OPERATING EXPENSES:
Firm Transportation $3,409,163 $3,460,300 $3,512,205
O&M Contract Costs 3.00% $2,613,466 $2,691,870 $2,772,626
Consumables 3.00% $970,803 $999,927 $1,029,925
Administrative Expenses 3.00% $666,428 $686,421 $707,014
Insurance 3.00% $807,581 $831,809 $856,763
Purchased Electricity 3.00% $778,306 $801,655 $825,705
Property Taxes $1,361,777 $1,330,965 $1,298,375
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $7,342,669 $7,562,949 $7,789,837
Additions to Reserve $0 Per Turbine Hour $5,825,052 $1,426,826 $5,372,541
Turbine Overhauls 100.00% of Contract Amount ($5,604,772) ($1,199,938) ($5,138,846)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $7,562,949 $7,789,837 $8,023,532
LEASE RESERVE:
Lease Reserve - Beginning of Year $21,148,656 $20,976,909 $19,721,252
Additions to Reserve $0 $0 $0
Reserve Disbursement ($171,747) ($1,255,657) ($12,429,319)
Lease Reserve - End of Year $20,976,909 $19,721,252 $7,291,933
<CAPTION>
BASE CASE 22 23 24
Year Ended Year Ended Year Ended
Dec-2017 Dec-2018 Dec-2019
OPERATING ASSUMPTIONS: ----------------------------------------
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,540 117,300 118,680
Weighted Average Energy Output - Unit #2 117,540 117,300 118,680
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 3,935 3,909 3,886
Hours Per Year Running Unit #2 (Full Load) 2,250 2,314 2,379
Availability Factor 96.6% 96.6% 96.5%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,118 8,148 8,091
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 7,968 7,986 8,006
Actual Annual Energy - Unit #1 (MWH) 462,470 458,482 461,164
Actual Annual Energy - Unit #2 (MWH) 264,476 271,386 282,326
Annual Fuel Usage - Unit #1 (DT's) 3,754,328 3,735,708 3,731,278
Annual Fuel Usage - Unit #2 (DT's) 2,107,345 2,167,289 2,260,302
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $19.48 $19.83 $20.19
Capital Costs/KW Year $230.36 $234.46 $238.68
Capital Costs Per KWH $0.05855 $0.05999 $0.06142
GNP Deflator Adjustment/KW Year $12.77 $13.00 $13.23
GNP Deflator Adjustment Per KWH $0.00325 $0.00333 $0.00341
Interest Rate Adjustment/KW Year ($10.63) ($10.63) ($10.63)
Interest Rate Adjustment Per KWH ($0.00270) ($0.00272) ($0.00273)
Scheduled Adjustment/KW Year $60.22 $65.43 $70.65
Scheduled Adjustment Per KWH $0.01530 $0.01674 $0.01818
Contingent Adjustment/KW Year ($136.42) ($136.70) ($135.11)
Contingent Adjustment Per KWH ($0.03467) ($0.03497) ($0.03477)
Total Capacity Rate/KW Year $156.31 $165.57 $176.83
Total Capacity Rate/KW Month $13.03 $13.80 $14.74
Total Capacity Rate Per KWH $0.03973 $0.04236 $0.04551
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.05007 $0.05183 $0.05365
Variable O&M Rate Per KWH 3.00% $0.00598 $0.00616 $0.00634
Total Energy Rate Per KWH $0.05605 $0.05799 $0.05999
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.09578 $0.10035 $0.10550
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $4.75 $4.84 $4.93
FGMR - Firm Gas Market Rate ($/DT) $5.88 $6.09 $6.31
IGR - Interruptible Gas Rate ($/DT) $5.85 $6.06 $6.27
OR - Oil Rate ($/DT) $8.64 $8.98 $9.32
UNIT #1 - FUEL COST:
FGRR (Reserves) % 0% 0% 0%
FGMR (Market) % 100% 100% 100%
Blended Unit #1 Rate ($/DT) $5.88 $6.09 $6.31
Blended Unit #1 Rate ($/KWH) $0.04770 $0.04960 $0.05103
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 91% 92% 92%
OR (Fuel Oil) % 9% 8% 8%
Blended Unit #2 Rate ($/DT) $6.09 $6.30 $6.52
Blended Unit #2 Rate ($/KWH) $0.04853 $0.05033 $0.05221
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.69 $2.73 $2.78
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $7.75 $7.91 $8.07
Chemical Usage Rate ($/000 Gallons) 3.00% $3.90 $4.02 $4.14
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $612,842 $631,228 $650,165
FIXED OPERATING EXPENSES:
Firm Transportation $3,564,888 $3,618,361 $3,672,637
O&M Contract Costs 3.00% $2,855,805 $2,941,479 $3,029,724
Consumables 3.00% $1,060,823 $1,092,648 $1,125,427
Administrative Expenses 3.00% $728,224 $750,071 $772,573
Insurance 3.00% $882,466 $908,940 $936,208
Purchased Electricity 3.00% $850,476 $875,990 $902,270
Property Taxes $1,263,949 $1,227,626 $1,189,346
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $8,023,532 $8,264,238 $8,512,165
Additions to Reserve $0 Per Turbine Hour $1,526,110 $1,681,291 $4,780,564
Turbine Overhauls 100.00% of Contract Amount ($1,285,404) ($1,433,364) ($4,525,199)
Reserve Disbursement $0 $0 $0
Overhaul Reserve - End of Year $8,264,238 $8,512,165 $8,767,530
LEASE RESERVE:
Lease Reserve - Beginning of Year $7,291,933 $7,291,933 $7,291,933
Additions to Reserve ($0) $0 $0
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $7,291,933 $7,291,933 $7,291,933
<CAPTION>
BASE CASE 25 26
Year Ended Year Ended
Dec-2020 Dec-2021
OPERATING ASSUMPTIONS: ------------------------
<S> <C> <C>
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) 3,866 3,206
Hours Per Year Running Unit #2 (Full Load) 2,447 2,046
Availability Factor 96.5% 96.5%
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) 455,980 377,437
Actual Annual Energy - Unit #2 (MWH) 288,622 240,948
Annual Fuel Usage - Unit #1 (DT's) 3,711,223 3,082,527
Annual Fuel Usage - Unit #2 (DT's) 2,316,479 1,928,064
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 $0.06287 $0.06420
GNP Deflator Adjustment/KW Year $13.48 $11.41
GNP Deflator Adjustment Per KWH $0.00349 $0.00356
Interest Rate Adjustment/KW Year ($10.63) ($8.86)
Interest Rate Adjustment Per KWH ($0.00275) ($0.00276)
Scheduled Adjustment/KW Year $75.87 $66.85
Scheduled Adjustment Per KWH $0.01963 $0.02085
Contingent Adjustment/KW Year ($135.94) ($113.49)
Contingent Adjustment Per KWH ($0.03516) ($0.03540)
Total Capacity Rate/KW Year $185.84 $161.72
Total Capacity Rate/KW Month $15.49 $13.48
Total Capacity Rate Per KWH $0.04807 $0.05045
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.05553 $0.05694
Variable O&M Rate Per KWH 3.00% $0.00654 $0.00673
Total Energy Rate Per KWH $0.06206 $0.06367
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.11013 $0.11411
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 125
Daily Distilled Water Sales Volume (Gal) 80,000 80,000
Distilled Water Sales Price ($/000 Gal) 0.00% $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $5.01 $5.10
FGMR - Firm Gas Market Rate ($/DT) $6.53 $6.77
IGR - Interruptible Gas Rate ($/DT) $6.50 $6.73
OR - Oil Rate ($/DT) $9.68 $10.05
UNIT #1 - FUEL COST:
FGRR (Reserves) % 0% 0%
FGMR (Market) % 100% 100%
Blended Unit #1 Rate ($/DT) $6.53 $6.77
Blended Unit #1 Rate ($/KWH) $0.05318 $0.05530
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 92% 94%
OR (Fuel Oil) % 8% 6%
Blended Unit #2 Rate ($/DT) $6.75 $6.94
Blended Unit #2 Rate ($/KWH) $0.05416 $0.05554
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0
Charles County Waste Water Rate ($/000 Gallons) 1.50% $2.82 $2.86
WSSC Water Usage Rate ($/000 Gallons) 0.00% $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21
WSSC Water Discharge Rate ($/000 Gallons) 2.00% $8.23 $8.39
Chemical Usage Rate ($/000 Gallons) 3.00% $4.26 $4.39
DISTILLED WATER COSTS:
Annual Operating Costs 3.00% $669,669 $574,800
FIXED OPERATING EXPENSES:
Firm Transportation $3,727,726 $3,153,035
O&M Contract Costs 3.00% $3,120,615 $2,678,528
Consumables 3.00% $1,159,190 $994,971
Administrative Expenses 3.00% $795,750 $683,019
Insurance 3.00% $964,294 $827,686
Purchased Electricity 3.00% $929,338 $797,682
Property Taxes $1,149,042 $1,091,590
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 Required Balance $8,767,530 $9,030,556
Additions to Reserve $0 Per Turbine Hour $1,798,482 $3,976,759
Turbine Overhauls 100.00% of Contract Amount ($1,535,456) ($3,705,842)
Reserve Disbursement $0 ($9,301,473)
Overhaul Reserve - End of Year $9,030,556 $0
LEASE RESERVE:
Lease Reserve - Beginning of Year $7,291,933 $7,291,933
Additions to Reserve $0 $0
Reserve Disbursement $0 ($7,291,933)
Lease Reserve - End of Year $7,291,933 $0
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 1 2 3 4
Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999
--------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (1,003,187) (1,000,294) (1,919,130)
Savings ($/KW Year) (4.16) (4.15) (7.96)
QUARTERLY LEASE PAYMENTS (8.0%): 1996 1997 1998 1999
1st Quarter Lease Payment (April 30th) 0 2,861,306 2,853,050 5,473,762
2nd Quarter Lease Payment (July 31st) 0 2,861,306 2,853,050 5,473,762
3rd Quarter Lease Payment (October 31st) 0 2,861,306 2,853,050 5,473,762
4th Quarter Lease Payment (January 31st) 0 2,861,306 2,853,050 5,473,762
--------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 0 11,445,224 11,412,200 21,895,048
QUARTERLY LEASE PAYMENTS (6.4%): 1996 1997 1998 1999
1st Quarter Lease Payment (April 30th) 0 2,610,509 2,602,976 4,993,980
2nd Quarter Lease Payment (July 31st) 0 2,610,509 2,602,976 4,993,980
3rd Quarter Lease Payment (October 31st) 0 2,610,509 2,602,976 4,993,980
4th Quarter Lease Payment (January 31st) 0 2,610,509 2,602,976 4,993,980
--------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 0 10,442,037 10,411,906 19,975,918
7,831,527 10,419,439 17,584,915
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th) 0 5,303,665 5,573,758 5,871,694
2nd Quarter interest Payment (July 31st) 0 5,368,788 5,645,594 5,892,918
3rd Quarter interest Payment (October 31st) 0 5,435,485 5,719,167 5,914,655
4th Quarter interest Payment (January 31st) 1,844,276 5,503,796 5,794,520 5,936,918
1st Quarter Principal Payment (April 30th) 0 (2,693,156) (2,970,782) (877,714)
2nd Quarter Principal Payment (July 31st) 0 (2,758,279) (3,042,618) (898,938)
3rd Quarter Principal Payment (October 31st) 0 (2,824,976) (3,116,191) (920,675)
4th Quarter Principal Payment (January 31st) (1,844,276) (2,893,287) (3,191,543) (942,938)
EOY 219,332,921 230,502,618 242,823,751 246,464,017
Interest Rate 3.39% 9.85% 9.86% 9.73%
CAPACITY ADJUSTMENTS - AMENDMENT #1
SCHEDULED ADJUSTMENT:
Calendar Year Adj (Appendix Q - Column 2) (6,144,895) (15,000,000) (16,000,000) 0
Contract Year Adj (Appendix Q - Column 4) 0 0 0 0
--------------------------------------------------------
Net Calendar Year Adjustment PEPCO Peak Yr (6,144,895) (15,000,000) (16,000,000) 0
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 0 0 0 0
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 0 0
Unrecovered Amount - Contract Yr ---------- 0 0 0 0
Carry Over Adjustment - Contract Yr PC 24,828,571 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 0 0
NPV/Uncov (7,597,005) --------------------------------------------------------
Net Calendar Year Adjustment 0 0 0 0
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 5 6 7 8
Year Ended Year Ended Year Ended Year Ended
Dec-2000 Dec-2001 Dec-2002 Dec-2003
---------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (1,984,894) (2,619,413) (2,684,088) (2,681,084
Savings ($/KW Year) (8.24) (10.87) (11.14) (11.11
QUARTERLY LEASE PAYMENTS (8.0%): 2000 2001 2002 2003
1st Quarter Lease Payment (April 30th) 5,661,337 7,471,121 7,655,585 7,647,018
2nd Quarter Lease Payment (July 31st) 5,661,337 7,471,121 7,655,585 7,647,018
3rd Quarter Lease Payment (October 31st) 5,661,337 7,471,121 7,655,585 7,647,018
4th Quarter Lease Payment (January 31st) 5,661,337 7,471,121 7,655,585 7,647,018
---------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 22,645,348 29,884,484 30,622,340 30,588,072
QUARTERLY LEASE PAYMENTS (6.4%): 2000 2001 2002 2003
1st Quarter Lease Payment (April 30th) 5,165,114 6,816,268 6,984,563 6,976,747
2nd Quarter Lease Payment (July 31st) 5,165,114 6,816,268 6,984,563 6,976,747
3rd Quarter Lease Payment (October 31st) 5,165,114 6,816,268 6,984,563 6,976,747
4th Quarter Lease Payment (January 31st) 5,165,114 6,816,268 6,984,563 6,976,747
---------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 20,660,454 27,265,071 27,938,252 27,906,988
20,489,320 25,613,917 27,769,957 27,914,804
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th) 5,959,719 6,039,409 5,961,499 5,858,890
2nd Quarter interest Payment (July 31st) 5,978,933 6,020,624 5,936,760 5,831,859
3rd Quarter interest Payment (October 31st) 5,998,612 6,001,384 5,911,421 5,804,175
4th Quarter interest Payment (January 31st) 6,018,767 5,981,680 5,885,469 5,775,821
1st Quarter Principal Payment (April 30th) (794,605) 776,859 1,023,064 1,117,857
2nd Quarter Principal Payment (July 31st) (813,820) 795,644 1,047,893 1,144,888
3rd Quarter Principal Payment (October 31st) (833,498) 814,883 1,073,232 1,172,572
4th Quarter Principal Payment (January 31st) (853,653) 834,588 1,099,184 1,200,926
EOY 249,759,593 246,537,619 242,294,246 237,658,003
Interest Rate 9.72% 9.63% 9.61% 9.60
CAPACITY ADJUSTMENTS - AMENDMENT #1
SCHEDULED ADJUSTMENT:
Calendar Year Adj (Appendix Q - Column 2) (1,000,000) 2,000,000 0 0
Contract Year Adj (Appendix Q - Column 4) 0 0 0 0
---------------------------------------------------------
Net Calendar Year Adjustment PEPCO Peak Yr (1,000,000) 2,000,000 0 0
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 0 0 0 0
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 0 0
Unrecovered Amount - Contract Yr ---------- 0 0 0 0
Carry Over Adjustment - Contract Yr PC 24,828,571 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 0 0
NPV/Uncov (7,597,005) ---------------------------------------------------------
Net Calendar Year Adjustment 0 0 0 0
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 9 10 11 12
Year Ended Year Ended Year Ended Year Ended
Dec-2004 Dec-2005 Dec-2006 Dec-2007
---------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (2,637,777) (2,651,805) (2,708,118) (2,889,010)
Savings ($/KW Year) (10.92) (10.99) (11.23) (11.98)
QUARTERLY LEASE PAYMENTS (8.0%): 2004 2005 2006 2007
1st Quarter Lease Payment (April 30th) 7,523,492 7,563,499 7,724,133 8,240,069
2nd Quarter Lease Payment (July 31st) 7,523,492 7,563,499 7,724,133 8,240,069
3rd Quarter Lease Payment (October 31st) 7,523,492 7,563,499 7,724,133 8,240,069
4th Quarter Lease Payment (January 31st) 7,523,492 7,563,499 7,724,133 8,240,069
---------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 30,093,968 30,253,996 30,896,532 32,960,276
QUARTERLY LEASE PAYMENTS (6.4%): 2004 2005 2006 2007
1st Quarter Lease Payment (April 30th) 6,864,048 6,900,548 7,047,103 7,517,816
2nd Quarter Lease Payment (July 31st) 6,864,048 6,900,548 7,047,103 7,517,816
3rd Quarter Lease Payment (October 31st) 6,864,048 6,900,548 7,047,103 7,517,816
4th Quarter Lease Payment (January 31st) 6,864,048 6,900,548 7,047,103 7,517,816
---------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 27,456,191 27,602,191 28,188,414 30,071,266
27,568,890 27,565,691 28,041,858 29,600,553
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th) 5,746,782 5,634,732 5,507,785 5,353,409
2nd Quarter interest Payment (July 31st) 5,719,765 5,604,124 5,470,563 5,301,072
3rd Quarter interest Payment (October 31st) 5,692,095 5,572,775 5,432,441 5,247,469
4th Quarter interest Payment (January 31st) 5,663,756 5,540,668 5,393,397 5,192,570
1st Quarter Principal Payment (April 30th) 1,117,266 1,265,815 1,539,318 2,164,407
2nd Quarter Principal Payment (July 31st) 1,144,283 1,296,424 1,576,540 2,216,745
3rd Quarter Principal Payment (October 31st) 1,171,952 1,327,773 1,614,662 2,270,348
4th Quarter Principal Payment (January 31st) 1,200,291 1,359,879 1,653,706 2,325,247
EOY 233,024,211 227,774,320 221,390,093 212,413,347
Interest Rate 9.60% 9.59% 9.57% 9.53%
CAPACITY ADJUSTMENTS - AMENDMENT #1
SCHEDULED ADJUSTMENT:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 0 0 1,650,000 2,850,000
---------------------------------------------------------
Net Calendar Year Adjustment PEPCO Peak Yr 0 0 275,000 1,850,000
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 0 0 (9,981,086) (9,981,086)
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 (1,650,000) (2,850,000)
Unrecovered Amount - Contract Yr ---------- 0 0 (8,331,086) (7,131,086)
Carry Over Adjustment - Contract Yr PC 24,828,571 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 (1,650,000) (2,850,000)
NPV/Uncov (7,597,005) ---------------------------------------------------------
Net Calendar Year Adjustment 0 0 (275,000) (1,850,000)
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 13 14 15 16
Year Ended Year Ended Year Ended Year Ended
Dec-2008 Dec-2009 Dec-2010 Dec-2011
---------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (2,932,953) (3,005,614) (3,190,781) (3,451,117)
Savings ($/KW Year) (12.16) (12.46) (13.23) (14.30)
QUARTERLY LEASE PAYMENTS (8.0%): 2008 2009 2010 2011
1st Quarter Lease Payment (April 30th) 8,365,397 8,572,636 9,100,785 9,843,316
2nd Quarter Lease Payment (July 31st) 8,365,397 8,572,636 9,100,785 9,843,316
3rd Quarter Lease Payment (October 31st) 8,365,397 8,572,636 9,100,785 9,843,316
4th Quarter Lease Payment (January 31st) 8,365,397 8,572,636 9,100,785 9,843,316
--------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 33,461,588 34,290,544 36,403,140 39,373,264
QUARTERLY LEASE PAYMENTS (6.4%): 2008 2009 2010 2011
1st Quarter Lease Payment (April 30th) 7,632,159 7,821,232 8,303,090 8,980,537
2nd Quarter Lease Payment (July 31st) 7,632,159 7,821,232 8,303,090 8,980,537
3rd Quarter Lease Payment (October 31st) 7,632,159 7,821,232 8,303,090 8,980,537
4th Quarter Lease Payment (January 31st) 7,632,159 7,821,232 8,303,090 8,980,537
--------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 30,528,635 31,284,930 33,212,359 35,922,147
30,414,293 31,095,856 32,730,502 35,244,700
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th) 5,136,343 4,886,041 4,591,675 4,219,461
2nd Quarter interest Payment (July 31st) 5,075,992 4,815,066 4,501,929 4,104,334
3rd Quarter interest Payment (October 31st) 5,014,182 4,742,374 4,410,014 3,986,423
4th Quarter interest Payment (January 31st) 4,950,877 4,667,924 4,315,876 3,865,661
1st Quarter Principal Payment (April 30th) 2,495,815 2,935,191 3,711,415 4,761,075
2nd Quarter Principal Payment (July 31st) 2,556,166 3,006,167 3,801,160 4,876,202
3rd Quarter Principal Payment (October 31st) 2,617,977 3,078,859 3,893,076 4,994,113
4th Quarter Principal Payment (January 31st) 2,681,282 3,153,308 3,987,214 5,114,875
2EOY 202,062,106 189,888,582 174,495,716 154,749,450
Interest Rate 9.50% 9.46% 9.38% 9.27%
CAPACITY ADJUSTMENTS - AMENDMENT #1
SCHEDULED ADJUSTMENT:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 4,050,000 5,250,000 6,450,000 7,650,000
--------------------------------------------------------
Net Calendar Year Adjustment PEPCO Peak Yr 3,050,000 4,250,000 5,450,000 6,650,000
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 (9,981,086) (9,981,086) (9,981,086) (9,981,086)
Maximum Adjustment Cap - Contract Yr TC 21,600,000 (4,050,000) (5,250,000) (6,450,000) 0
Unrecovered Amount - Contract Yr ---------- (5,931,086) (4,731,086) (3,531,086) 0
Carry Over Adjustment - Contract Yr PC 24,828,571 0 0 0 (6,053,294)
Contingent Adjustment - Contract Yr (4,050,000) (5,250,000) (6,450,000) (16,034,379)
NPV/Uncov (7,597,005) -------------- -----------------------------------------
Net Calendar Year Adjustment (3,050,000) (4,250,000) (5,450,000) (8,047,397)
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 17 18 19 20
Year Ended Year Ended Year Ended Year Ended
Dec-2012 Dec-2013 Dec-2014 Dec-2015
---------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (3,884,792) (4,021,118) (4,106,069) (3,955,122)
Savings ($/KW Year) (16.09) (16.65) (16.99) (16.36)
QUARTERLY LEASE PAYMENTS (8.0%): 2012 2013 2014 2015
1st Quarter Lease Payment (April 30th) 11,080,561 11,469,082 11,711,371 11,280,836
2nd Quarter Lease Payment (July 31st) 11,080,561 11,469,082 11,711,371 11,280,836
3rd Quarter Lease Payment (October 31st) 11,080,561 11,469,082 11,711,371 11,280,836
4th Quarter Lease Payment (January 31st) 11,080,561 11,469,082 11,711,371 11,280,836
---------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 44,322,244 45,876,328 46,845,484 45,123,344
QUARTERLY LEASE PAYMENTS (6.4%): 2012 2013 2014 2015
1st Quarter Lease Payment (April 30th) 10,109,363 10,463,802 10,684,854 10,292,055
2nd Quarter Lease Payment (July 31st) 10,109,363 10,463,802 10,684,854 10,292,055
3rd Quarter Lease Payment (October 31st) 10,109,363 10,463,802 10,684,854 10,292,055
4th Quarter Lease Payment (January 31st) 10,109,363 10,463,802 10,684,854 10,292,055
---------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 40,437,452 41,855,210 42,739,415 41,168,222
39,308,626 41,500,770 42,518,364 41,561,020
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th) 3,741,979 3,103,402 2,365,237 1,530,873
2nd Quarter interest Payment (July 31st) 3,588,010 2,925,421 2,164,061 1,319,020
3rd Quarter interest Payment (October 31st) 3,430,318 2,743,136 1,958,021 1,102,044
4th Quarter interest Payment (January 31st) 3,268,813 2,556,444 1,746,998 879,821
1st Quarter Principal Payment (April 30th) 6,367,384 7,360,400 8,319,617 8,761,182
2nd Quarter Principal Payment (July 31st) 6,521,353 7,538,381 8,520,793 8,973,036
3rd Quarter Principal Payment (October 31st) 6,679,045 7,720,666 8,726,833 9,190,012
4th Quarter Principal Payment (January 31st) 6,840,550 7,907,359 8,937,855 9,412,234
EOY 128,341,118 97,814,312 63,309,215 26,972,751
Interest Rate 9.07% 8.83% 8.42% 7.63%
CAPACITY ADJUSTMENTS - AMENDMENT #1
SCHEDULED ADJUSTMENT:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 8,850,000 10,050,000 11,250,000 12,450,000
-------------------------------------------------------
Net Calendar Year Adjustment PEPCO Peak Yr 7,850,000 9,050,000 10,250,000 11,450,000
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 (9,981,086) (9,981,086) (9,981,086) (9,981,086)
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 0 0
Unrecovered Amount - Contract Yr ---------- 0 0 0 0
Carry Over Adjustment - Contract Yr PC 24,828,571 (6,053,294) (6,053,294) (6,053,294) (6,053,294)
Contingent Adjustment - Contract Yr (16,034,379) (16,034,379) (16,034,379) (16,034,379)
NPV/Uncov (7,597,005) --------------------------------------------------------
Net Calendar Year Adjustment (16,034,379) (16,034,379) (16,034,379) (16,034,379)
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 21 22 23 24
Year Ended Year Ended Year Ended Year Ended
Dec-2016 Dec-2017 Dec-2018 Dec-2019
----------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (3,118,511) (1,603,442) (1,603,442) (1,603,442)
Savings ($/KW Year) (12.91) (6.64) (6.64) (6.64)
QUARTERLY LEASE PAYMENTS (8.0%): 2016 2017 2018 2019
1st Quarter Lease Payment (April 30th) 10,335,080 4,046,827 4,046,827 4,046,827
2nd Quarter Lease Payment (July 31st) 10,335,080 4,046,827 4,046,827 4,046,827
3rd Quarter Lease Payment (October 31st) 10,335,080 4,046,827 4,046,827 4,046,827
4th Quarter Lease Payment (January 31st) 4,046,827 4,046,827 4,046,827 4,046,827
----------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 35,052,067 16,187,308 16,187,308 16,187,308
QUARTERLY LEASE PAYMENTS (6.4%): 2016 2017 2018 2019
1st Quarter Lease Payment (April 30th) 9,429,196 3,645,967 3,645,967 3,645,967
2nd Quarter Lease Payment (July 31st) 9,429,196 3,645,967 3,645,967 3,645,967
3rd Quarter Lease Payment (October 31st) 9,429,196 3,645,967 3,645,967 3,645,967
4th Quarter Lease Payment (January 31st) 3,645,967 3,645,967 3,645,967 3,645,967
----------------------------------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 31,933,556 14,583,866 14,583,866 14,583,866
38,579,645
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th) 652,225
2nd Quarter interest Payment (July 31st) 439,990
3rd Quarter interest Payment (October 31st) 222,623
4th Quarter interest Payment (January 31st)
1st Quarter Principal Payment (April 30th) 8,776,971
2nd Quarter Principal Payment (July 31st) 8,989,206
3rd Quarter Principal Payment (October 31st) 9,206,573
4th Quarter Principal Payment (January 31st)
EOY (0)
Interest Rate 4.87%
CAPACITY ADJUSTMENTS - AMENDMENT #1
SCHEDULED ADJUSTMENT:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 13,650,000 14,850,000 16,050,000 17,250,000
-------------------------------------------------------
Net Calendar Year Adjustment PEPCO Peak Yr 12,650,000 13,850,000 15,050,000 16,250,000
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 (9,981,086) (9,981,086) (9,981,086) (9,981,086)
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 0 0
Unrecovered Amount - Contract Yr ---------- 0 0 0 0
Carry Over Adjustment - Contract Yr PC 24,828,571 (6,053,294) (6,053,294) (6,053,294) (6,053,294)
Contingent Adjustment - Contract Yr (16,034,379) (16,034,379) (16,034,379) (16,034,379)
NPV/Uncov (7,597,005) -------------------------------------------------------
Net Calendar Year Adjustment (16,034,379) (16,034,379) (16,034,379) (16,034,379)
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
Schedule E
<TABLE>
<CAPTION>
BASE CASE 25 26
Year Ended Year Ended
Dec-2020 Dec-2021
-------------------------------
<S> <C> <C>
LEASE PAYMENTS:
Savings (Base-8.0%; Current-6.4%) (1,603,442) (1,202,581)
Savings ($/KW Year) (6.65) (4.99)
QUARTERLY LEASE PAYMENTS (8.0%): 2020 2021
1st Quarter Lease Payment (April 30th) 4,046,827 4,046,827
2nd Quarter Lease Payment (July 31st) 4,046,827 4,046,827
3rd Quarter Lease Payment (October 31st) 4,046,827 4,046,827
4th Quarter Lease Payment (January 31st) 4,046,827 0
-------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 16,187,308 12,140,481
QUARTERLY LEASE PAYMENTS (6.4%): 2020 2021
1st Quarter Lease Payment (April 30th) 3,645,967 3,645,967
2nd Quarter Lease Payment (July 31st) 3,645,967 3,645,967
3rd Quarter Lease Payment (October 31st) 3,645,967 3,645,967
4th Quarter Lease Payment (January 31st) 3,645,967 0
-------------------------------
Total Annual Lease Pymts (Cash Flow Basis) 14,583,866 10,937,900
GAAP CAPITALIZED LEASE PRESENTATION
1st Quarter interest Payment (April 30th)
2nd Quarter interest Payment (July 31st)
3rd Quarter interest Payment (October 31st)
4th Quarter interest Payment (January 31st)
1st Quarter Principal Payment (April 30th)
2nd Quarter Principal Payment (July 31st)
3rd Quarter Principal Payment (October 31st)
4th Quarter Principal Payment (January 31st)
EOY
Interest Rate
CAPACITY ADJUSTMENTS - AMENDMENT #1
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 PEPCO Peak Yr 17,450,000 15,375,000
1999
CONTINGENT ADJUSTMENT:
Levelized Adjustment - Contract Yr CPWIRR 46,428,571 (9,981,086) 0
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0
Unrecovered Amount - Contract Yr ---------- 0 0
Carry Over Adjustment - Contract Yr PC 24,828,571 (6,053,294) 0
Contingent Adjustment - Contract Yr (16,034,379) 0
NPV/Uncov (7,597,005) -------------------------------
Net Calendar Year Adjustment (16,034,379) (13,361,983)
</TABLE>
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
GAS SUPPLY INCOME STATEMENT
SCHEDULE F
<TABLE>
<CAPTION>
BASE CASE 1 2 3
Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998
-------------------------------------
<S> <C> <C> <C>
REVENUES:
FGRR (Unit #1) 1,830,013 7,622,125 7,934,974
FGMR (Unit #1) 417,233 4,713,738 5,128,627
IGR (Unit #2) 1,229,845 7,194,714 7,910,153
OR (Unit #2) 160,915 779,178 828,435
Firm Transportation Demand 434,618 2,646,824 2,686,526
-------------------------------------
4,072,624 22,956,579 24,488,715
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 1,490,207 6,289,569 6,553,093
Firm Gas - Market (Unit #1) 340,873 3,821,460 4,199,949
Interruptible Gas (Unit #2) 902,436 5,281,839 5,868,341
Delivered Fuel Oil (Unit #2) 149,542 732,488 781,731
Firm Transportation - Demand 434,618 2,646,824 2,686,526
Firm Transportation - Commodity 68,095 386,228 397,034
Firm Transportation - Fuel 61,808 342,453 363,943
Interruptible Transportation - Commodity 151,473 849,081 909,206
Interruptible Transportation - Fuel 30,069 183,300 203,536
IT Savings From FT Utilization - Commodity (151,473) (849,081) (909,206)
IT Savings From FT Utilization - Fuel (30,069) (183,300) (203,536)
WGL Balancing Fee 34,275 196,017 203,167
-------------------------------------
3,481,854 19,696,879 21,053,784
-------------------------------------
Total Fuel Margin $590,771 $3,259,700 $3,434,930
=====================================
<CAPTION>
Base Case 4 5 6
Year Ended Year Ended Year Ended
Dec-1999 Dec-2000 Dec-2001
-------------------------------------
REVENUES:
FGRR (Unit #1) 8,247,822 8,589,111 8,930,401
FGMR (Unit #1) 5,219,209 5,389,076 7,113,122
IGR (Unit #2) 8,363,799 8,830,305 9,861,792
OR (Unit #2) 801,829 773,105 946,652
Firm Transportation Demand 2,726,824 2,767,727 2,809,242
-------------------------------------
25,359,483 26,349,324 29,661,208
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 6,831,337 7,125,181 7,362,630
Firm Gas - Market (Unit #1) 4,314,565 4,415,396 5,331,765
Interruptible Gas (Unit #2) 6,269,544 6,686,926 7,489,415
Delivered Fuel Oil (Unit #2) 759,183 734,729 897,758
Firm Transportation - Demand 2,726,824 2,767,727 2,809,242
Firm Transportation - Commodity 397,038 396,841 424,670
Firm Transportation - Fuel 377,856 391,802 430,759
Interruptible Transportation - Commodity 934,945 961,710 1,044,702
Interruptible Transportation - Fuel 217,400 231,833 259,204
IT Savings From FT Utilization - Commodity (934,945) (961,710) (1,044,702)
IT Savings From FT Utilization - Fuel (217,400) (231,833) (259,204)
WGL Balancing Fee 204,841 206,417 222,694
-------------------------------------
21,881,189 22,725,017 24,968,934
-------------------------------------
Total Fuel Margin $3,478,294 $3,624,307 $4,692,275
=====================================
<CAPTION>
Base Case 7 8 9
Year Ended Year Ended Year Ended
Dec-2002 Dec-2003 Dec-2004
-------------------------------------
REVENUES:
FGRR (Unit #1) 9,271,690 9,470,775 9,669,860
FGMR (Unit #1) 8,132,478 7,839,150 7,508,386
IGR (Unit #2) 10,790,785 9,668,654 8,450,601
OR (Unit #2) 1,113,017 1,052,059 984,931
Firm Transportation Demand 2,851,381 2,894,152 2,937,564
-------------------------------------
32,159,351 30,924,790 29,551,343
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 7,711,235 8,053,712 8,412,742
Firm Gas - Market (Unit #1) 6,170,229 6,008,930 5,814,960
Interruptible Gas (Unit #2) 8,268,027 7,464,337 6,570,152
Delivered Fuel Oil (Unit #2) 1,059,346 1,004,312 943,257
Firm Transportation - Demand 2,851,381 2,894,152 2,937,564
Firm Transportation - Commodity 449,915 438,044 426,049
Firm Transportation - Fuel 470,930 476,733 481,960
Interruptible Transportation - Commodity 1,115,391 974,853 831,272
Interruptible Transportation - Fuel 285,671 257,744 226,833
IT Savings From FT Utilization - Commodity (1,115,391) (974,853) (831,272)
IT Savings From FT Utilization - Fuel (285,671) (257,744) (226,833)
WGL Balancing Fee 237,849 233,447 228,883
-------------------------------------
27,218,912 26,573,667 25,815,568
-------------------------------------
Total Fuel Margin $4,940,439 $4,351,123 $3,735,775
=====================================
<CAPTION>
Base Case 10 11 12
Year Ended Year Ended Year Ended
Dec-2005 Dec-2006 Dec-2007
-------------------------------------
REVENUES:
FGRR (Unit #1) 9,840,505 10,039,590 10,238,676
FGMR (Unit #1) 8,391,916 8,640,142 8,513,461
IGR (Unit #2) 9,798,482 10,889,617 10,958,061
OR (Unit #2) 1,341,083 1,673,711 1,714,670
Firm Transportation Demand 2,981,627 3,026,352 3,071,747
-------------------------------------
32,353,614 34,269,412 34,496,615
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 8,703,927 8,924,606 9,320,286
Firm Gas - Market (Unit #1) 6,500,173 6,634,433 6,600,794
Interruptible Gas (Unit #2) 7,676,630 8,457,585 8,515,914
Delivered Fuel Oil (Unit #2) 1,288,778 1,588,255 1,620,637
Firm Transportation - Demand 2,981,627 3,026,352 3,071,747
Firm Transportation - Commodity 440,488 434,737 428,302
Firm Transportation - Fuel 514,365 526,042 538,057
Interruptible Transportation - Commodity 942,812 1,007,307 982,802
Interruptible Transportation - Fuel 263,836 289,459 290,840
IT Savings From FT Utilization - Commodity (942,812) (1,007,307) (982,802)
IT Savings From FT Utilization - Fuel (263,836) (289,459) (290,840)
WGL Balancing Fee 238,538 237,303 235,648
-------------------------------------
28,344,527 29,829,313 30,331,386
-------------------------------------
Total Fuel Margin $4,009,087 $4,440,100 $4,165,228
=====================================
<CAPTION>
Base Case 13 14 15
Year Ended Year Ended Year Ended
Dec-2008 Dec-2009 Dec-2010
-------------------------------------
REVENUES:
FGRR (Unit #1) 10,466,202 10,665,287 10,864,373
FGMR (Unit #1) 8,416,988 8,313,931 8,476,622
IGR (Unit #2) 11,047,994 11,123,638 11,373,461
OR (Unit #2) 1,752,540 1,796,250 1,855,937
Firm Transportation Demand 3,117,823 3,164,591 3,212,060
-------------------------------------
34,801,548 35,063,696 35,782,452
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 9,732,854 10,163,042 10,522,178
Firm Gas - Market (Unit #1) 6,588,231 6,566,179 6,698,480
Interruptible Gas (Unit #2) 8,621,425 8,740,309 8,999,433
Delivered Fuel Oil (Unit #2) 1,656,431 1,702,839 1,764,687
Firm Transportation - Demand 3,117,823 3,164,591 3,212,060
Firm Transportation - Commodity 422,905 418,050 415,014
Firm Transportation - Fuel 551,213 564,811 581,054
Interruptible Transportation - Commodity 964,792 949,798 947,374
Interruptible Transportation - Fuel 293,859 297,295 305,506
IT Savings From FT Utilization - Commodity (964,792) (949,798) (947,374)
IT Savings From FT Utilization - Fuel (293,859) (297,295) (305,506)
WGL Balancing Fee 234,520 233,653 233,775
-------------------------------------
30,925,404 31,553,474 32,426,682
-------------------------------------
Total Fuel Margin $3,876,144 $3,510,222 $3,355,771
<CAPTION>
Base Case 16 17 18
Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013
-------------------------------------
REVENUES:
FGRR (Unit #1) 4,613,014 0 0
FGMR (Unit #1) 15,207,992 20,665,931 20,885,543
IGR (Unit #2) 11,121,953 10,909,644 10,708,723
OR (Unit #2) 1,794,322 1,731,159 1,676,077
Firm Transportation Demand 3,260,240 3,309,144 3,358,781
-------------------------------------
35,997,522 36,615,878 36,629,125
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 4,568,567 0 0
Firm Gas - Market (Unit #1) 12,019,621 16,490,739 16,776,463
Interruptible Gas (Unit #2) 8,796,443 8,682,342 8,563,441
Delivered Fuel Oil (Unit #2) 1,700,799 1,646,862 1,598,028
Firm Transportation - Demand 3,260,240 3,309,144 3,358,781
Firm Transportation - Commodity 406,517 400,217 395,101
Firm Transportation - Fuel 558,939 545,784 555,601
Interruptible Transportation - Commodity 902,921 869,055 835,869
Interruptible Transportation - Fuel 298,772 295,042 291,151
IT Savings From FT Utilization - Commodity (902,921) (869,055) (835,869)
IT Savings From FT Utilization - Fuel (298,772) (295,042) (291,151)
WGL Balancing Fee 230,776 228,964 227,784
-------------------------------------
31,541,901 31,304,052 31,475,198
-------------------------------------
Total Fuel Margin $4,455,620 $5,311,826 $5,153,927
<CAPTION>
Base Case 19 20 21
Year Ended Year Ended Year Ended
Dec-2014 Dec-2015 Dec-2016
-------------------------------------
REVENUES:
FGRR (Unit #1) 0 0 0
FGMR (Unit #1) 21,560,181 21,776,725 22,335,104
IGR (Unit #2) 10,701,061 10,430,384 11,080,000
OR (Unit #2) 1,650,939 1,576,480 1,625,511
Firm Transportation Demand 3,409,163 3,460,300 3,512,205
-------------------------------------
37,321,344 37,243,889 38,552,821
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 0 0 0
Firm Gas - Market (Unit #1) 17,189,008 17,231,862 17,788,170
Interruptible Gas (Unit #2) 8,600,075 8,424,961 8,863,454
Delivered Fuel Oil (Unit #2) 1,577,963 1,510,708 1,538,481
Firm Transportation - Demand 3,409,163 3,460,300 3,512,205
Firm Transportation - Commodity 392,821 382,096 382,684
Firm Transportation - Fuel 569,546 571,129 589,670
Interruptible Transportation - Commodity 818,619 782,138 802,537
Interruptible Transportation - Fuel 292,552 286,728 301,808
IT Savings From FT Utilization - Commodity (818,619) (782,138) (802,537)
IT Savings From FT Utilization - Fuel (292,552) (286,728) (301,808)
WGL Balancing Fee 228,213 223,682 225,733
-------------------------------------
31,966,788 31,804,738 32,900,398
-------------------------------------
Total Fuel Margin $5,354,556 $5,439,151 $5,652,423
=====================================
<CAPTION>
Base Case 22 23 24
Year Ended Year Ended Year Ended
Dec-2017 Dec-2018 Dec-2019
-------------------------------------
REVENUES:
FGRR (Unit #1) 0 0 0
FGMR (Unit #1) 22,934,808 23,550,046 24,536,466
IGR (Unit #2) 11,787,346 12,548,373 13,542,308
OR (Unit #2) 1,676,112 1,728,054 1,806,470
Firm Transportation Demand 3,564,888 3,618,361 3,672,637
-------------------------------------
39,963,153 41,444,834 43,557,880
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 0 0 0
Firm Gas - Market (Unit #1) 18,384,538 18,991,394 19,692,558
Interruptible Gas (Unit #2) 9,407,490 10,064,295 10,917,619
Delivered Fuel Oil (Unit #2) 1,578,449 1,631,041 1,709,325
Firm Transportation - Demand 3,564,888 3,618,361 3,672,637
Firm Transportation - Commodity 383,757 384,678 387,078
Firm Transportation - Fuel 609,556 629,831 653,242
Interruptible Transportation - Commodity 830,813 866,910 917,215
Interruptible Transportation - Fuel 320,474 342,996 372,237
IT Savings From FT Utilization - Commodity (830,813) (866,910) (917,215)
IT Savings From FT Utilization - Fuel (320,474) (342,996) (372,237)
WGL Balancing Fee 229,119 232,556 236,044
-------------------------------------
34,157,797 35,552,156 37,268,502
-------------------------------------
Total Fuel Margin $5,805,356 $5,892,678 $6,289,378
=====================================
<CAPTION>
Base Case 25 26
Year Ended Year Ended Total
Dec-2020 Dec-2021 Contract
-------------------------------------
REVENUES:
FGRR (Unit #1) 0 0 138,294,419
FGMR (Unit #1) 25,130,212 21,412,060 342,209,148
IGR (Unit #2) 14,370,326 12,513,863 267,205,883
OR (Unit #2) 1,845,167 1,281,879 35,966,481
Firm Transportation Demand 3,727,726 3,153,035 79,375,540
-------------------------------------
45,073,432 38,360,837 863,051,471
FUEL COSTS:
Firm Gas - Reserves (Unit #1) 0 0 121,765,168
Firm Gas - Market (Unit #1) 20,332,404 17,368,378 272,271,550
Interruptible Gas (Unit #2) 11,644,183 10,146,231 209,922,848
Delivered Fuel Oil (Unit #2) 1,750,303 1,212,339 34,138,270
Firm Transportation - Demand 3,727,726 3,153,035 79,375,540
Firm Transportation - Commodity 387,874 324,585 10,170,819
Firm Transportation - Fuel 674,678 581,898 13,213,662
Interruptible Transportation - Commodity 954,205 804,603 22,952,403
Interruptible Transportation - Fuel 397,134 348,731 7,184,014
IT Savings From FT Utilization - Commodity (954,205) (804,603) (22,952,403)
IT Savings From FT Utilization - Fuel (397,134) (348,731) (7,184,014)
WGL Balancing Fee 239,585 243,179 5,726,662
-------------------------------------
38,756,753 33,029,645 740,857,857
-------------------------------------
Total Fuel Margin $6,316,679 $5,331,192 $122,193,614
=====================================
</TABLE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
Schedule G
<TABLE>
<CAPTION>
BASE CASE 1 2 3
Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998
--------------------------------
<S> <C> <C> <C> <C> <C>
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 0 1,316 1,352
Shoulder Hours (Mar-May & Oct-Nov) 410 2,052 2,071
Winter Hours (Dec-Feb) 399 1,197 1,241
--------------------------------
Total Unit #1 Hours 809 4,565 4,664
UNIT #2
Summer Hours (Jun-Sept) 0 883 950
Shoulder Hours (Mar-May & Oct-Nov) 270 1,350 1,422
Winter Hours (Dec-Feb) 221 663 689
--------------------------------
Total Unit #2 Hours 491 2,895 3,061
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
Demand Volumes through ANR 0.00% 24,824 1,510,138 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 1,474,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 1,460,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 80% 57% 56%
FGRR Volumes at Wellhead - 7,064 634,314 2,578,297 2,586,947
FGRR Volumes through ANR 0.00% 7,064 634,314 2,578,297 2,586,947
FGRR Volumes through Columbia Gas 2.41% 6,898 619,386 2,517,622 2,526,069
FGRR Volumes through CLNG & WGL 1.00% 6,829 613,254 2,492,696 2,501,058
UNIT #1 - FGMR SUPPLY 20% 43% 44%
FGMR Volumes at Wellhead - 5,251 163,435 1,916,587 2,003,036
FGMR Volumes through ANR 0.00% 5,251 163,435 1,916,587 2,003,036
FGMR Volumes through Columbia Gas 2.41% 5,127 159,589 1,871,484 1,955,899
FGMR Volumes through CLNG & WGL 1.00% 5,077 158,009 1,852,954 1,936,534
UNIT #2 - IGR SUPPLY 92% 94% 94%
IGR Volumes at Wellhead - 7,223 443,086 2,636,402 2,790,721
IGR Volumes through Columbia Gas 2.41% 7,053 432,658 2,574,360 2,725,048
IGR Volumes through Columbia LNG 1.00% 6,983 428,375 2,548,872 2,698,067
IGR Volumes through Washington Gas 0.00% 6,983 428,375 2,548,872 2,698,067
UNIT #2 - OR SUPPLY 8% 6% 6%
OR Volumes Delivered to Plant 34,923 174,989 181,581
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $2.58 $2.68 $2.79
------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $2.80 $2.91 $3.03
FGMR - Base Yr Oct-96
------- ------
Commodity Index - Summer 6.46 6.96 6.96 7.34
Commodity Index - Shoulder 6.46 7.42 7.60 8.00
Commodity Index - Winter 6.46 7.88 8.32 8.74
Transportation Index 129.9 158.3 3.00% 158.3 163.0 167.9
Contract Discount 90% 90% 90%
Calculated FGMR - Summer $2.29 $2.24 $2.25 $2.35
Calculated FGMR - Shoulder $2.29 $2.35 $2.41 $2.51
Calculated FGMR - Winter $2.29 $2.46 $2.58 $2.69
IGR -
Calculated FGMR - Summer $2.29 $2.49 $2.50 $2.61
Calculated FGMR - Shoulder $2.29 $2.61 $2.67 $2.78
Calculated FGMR - Winter $2.29 $2.76 $2.90 $3.03
OR -
Oil Index 151 167 163 168
Calculated OR $3.89 $4.28 $4.19 $4.31
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 2.43 $ 2.52 $ 2.62
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $1.79 $1.79 $1.89
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $1.93 $1.98 $2.08
Spot Price - Winter 3 - NGI - Columbia Gas 7 $2.07 $2.18 $2.29
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ - $ - $ -
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $1.92 $1.97 $2.07
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $1.79 $1.79 $1.89
Spot Price - Shoulder 7 $1.93 $1.98 $2.08
Spot Price - Winter 7 $2.07 $2.18 $2.29
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $1.97 $2.02 $2.12
Delivered Fuel Oil (Unit #2) $4.28 $4.19 $4.31
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.0000 $0.00 $0.00
Commodity 0.00% $0.0000 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.2727 $0.28 $0.28
Commodity 1.50% $0.0290 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.0222 $0.02 $0.02
Commodity - CLNG & WGL 0.25% $0.0590 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.216 $0.22 $0.22
Commodity - Shoulder 1.50% $0.260 $0.26 $0.27
Commodity - Winter 1.50% $0.304 $0.31 $0.31
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.023 $0.02 $0.02
Commodity - Shoulder 1.50% $0.023 $0.02 $0.02
Commodity - Winter 1.50% $0.023 $0.02 $0.02
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.050 $0.05 $0.05
Commodity - Shoulder 0.00% $0.050 $0.05 $0.05
Commodity - Winter 0.00% $0.050 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 389,488 2,194,553 2,240,984
Columbia Balancing Fee ($/DT) 1.50% $0.088 $0.09 $0.09
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.13 $0.13 $0.13
FT Release Volumes (DT's) 260,363 1,865,479 1,624,341
<CAPTION>
BASE CASE 4 5 6
Year Ended Year Ended Year Ended
Dec-1999 Dec-2000 Dec-2001
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,358 1,362 1,502
Shoulder Hours (Mar-May & Oct-Nov) 2,093 2,113 2,162
Winter Hours (Dec-Feb) 1,174 1,106 1,177
--------------------------------
Total Unit #1 Hours 4,624 4,581 4,841
UNIT #2
Summer Hours (Jun-Sept) 961 974 1,061
Shoulder Hours (Mar-May & Oct-Nov) 1,484 1,546 1,564
Winter Hours (Dec-Feb) 649 609 710
--------------------------------
Total Unit #2 Hours 3,094 3,129 3,336
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 57% 58% 54%
FGRR Volumes at Wellhead - 7,064 2,596,878 2,608,091 2,590,471
FGRR Volumes through ANR 0.00% 7,064 2,596,878 2,608,091 2,590,471
FGRR Volumes through Columbia Gas 2.41% 6,898 2,535,766 2,546,715 2,529,510
FGRR Volumes through CLNG & WGL 1.00% 6,829 2,510,660 2,521,500 2,504,465
UNIT #1 - FGMR SUPPLY 43% 42% 46%
FGMR Volumes at Wellhead - 5,251 1,962,529 1,918,492 2,220,899
FGMR Volumes through ANR 0.00% 5,251 1,962,529 1,918,492 2,220,899
FGMR Volumes through Columbia Gas 2.41% 5,127 1,916,345 1,873,345 2,168,635
FGMR Volumes through CLNG & WGL 1.00% 5,077 1,897,371 1,854,797 2,147,164
UNIT #2 - IGR SUPPLY 94% 95% 94%
IGR Volumes at Wellhead - 7,223 2,837,952 2,886,792 3,093,779
IGR Volumes through Columbia Gas 2.41% 7,053 2,771,167 2,818,857 3,020,973
IGR Volumes through Columbia LNG 1.00% 6,983 2,743,730 2,790,948 2,991,062
IGR Volumes through Washington Gas 0.00% 6,983 2,743,730 2,790,948 2,991,062
UNIT #2 - OR SUPPLY 6% 5% 6%
OR Volumes Delivered to Plant 171,461 161,344 189,761
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $2.90 $3.02 $3.14
------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $3.15 $3.28 $3.41
FGMR - Base Yr Oct-96
------- ------
Commodity Index - Summer 6.46 7.78 8.19 8.58
Commodity Index - Shoulder 6.46 8.41 8.85 9.25
Commodity Index - Winter 6.46 9.18 9.63 10.06
Transportation Index 129.9 158.3 3.00% 173.0 178.2 183.5
Contract Discount 90% 92% 100%
Calculated FGMR - Summer $2.29 $2.47 $2.63 $2.98
Calculated FGMR - Shoulder $2.29 $2.62 $2.79 $3.16
Calculated FGMR - Winter $2.29 $2.81 $2.99 $3.39
IGR -
Calculated FGMR - Summer $2.29 $2.74 $2.85 $2.96
Calculated FGMR - Shoulder $2.29 $2.90 $3.02 $3.13
Calculated FGMR - Winter $2.29 $3.16 $3.31 $3.44
OR -
Oil Index 151 172 177 184
Calculated OR $3.89 $4.43 $4.55 $4.73
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 2.72 $ 2.83 $ 2.94
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $2.00 $2.10 $2.20
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $2.19 $2.30 $2.40
Spot Price - Winter 3 - NGI - Columbia Gas 7 $2.40 $2.52 $2.63
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ - $ - $ 0.01
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $2.18 $2.29 $2.39
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $2.00 $2.10 $2.20
Spot Price - Shoulder 7 $2.19 $2.30 $2.40
Spot Price - Winter 7 $2.40 $2.52 $2.63
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $2.23 $2.34 $2.44
Delivered Fuel Oil (Unit #2) $4.43 $4.55 $4.73
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.29 $0.29 $0.29
Commodity 1.50% $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.02 $0.02 $0.02
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.23 $0.23 $0.23
Commodity - Shoulder 1.50% $0.27 $0.28 $0.28
Commodity - Winter 1.50% $0.32 $0.32 $0.33
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.02 $0.02 $0.02
Commodity - Shoulder 1.50% $0.02 $0.02 $0.02
Commodity - Winter 1.50% $0.02 $0.02 $0.02
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 2,226,056 2,210,030 2,349,073
Columbia Balancing Fee ($/DT) 1.50% $0.09 $0.09 $0.09
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.14 $0.14 $0.14
FT Release Volumes (DT's) 1,608,239 1,592,755 1,117,309
<CAPTION>
BASE CASE 7 8 9
Year Ended Year Ended Year Ended
Dec-2002 Dec-2003 Dec-2004
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,640 1,507 1,375
Shoulder Hours (Mar-May & Oct-Nov) 2,210 2,200 2,190
Winter Hours (Dec-Feb) 1,248 1,213 1,178
Total Unit #1 Hours 5,098 4,920 4,742
UNIT #2
Summer Hours (Jun-Sept) 1,149 1,042 935
Shoulder Hours (Mar-May & Oct-Nov) 1,584 1,289 994
Winter Hours (Dec-Feb) 811 739 668
Total Unit #2 Hours 3,544 3,070 2,598
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 52% 53% 56%
FGRR Volumes at Wellhead - 7,064 2,608,091 2,618,663 2,629,876
FGRR Volumes through ANR 0.00% 7,064 2,608,091 2,618,663 2,629,876
FGRR Volumes through Columbia Gas 2.41% 6,898 2,546,715 2,557,039 2,567,987
FGRR Volumes through CLNG & WGL 1.00% 6,829 2,521,500 2,531,721 2,542,562
UNIT #1 - FGMR SUPPLY 48% 47% 44%
FGMR Volumes at Wellhead - 5,251 2,454,765 2,277,047 2,099,192
FGMR Volumes through ANR 0.00% 5,251 2,454,765 2,277,047 2,099,192
FGMR Volumes through Columbia Gas 2.41% 5,127 2,396,998 2,223,462 2,049,792
FGMR Volumes through CLNG & WGL 1.00% 5,077 2,373,265 2,201,447 2,029,497
UNIT #2 - IGR SUPPLY 94% 93% 93%
IGR Volumes at Wellhead - 7,223 3,258,886 2,815,062 2,373,202
IGR Volumes through Columbia Gas 2.41% 7,053 3,182,195 2,748,816 2,317,353
IGR Volumes through Columbia LNG 1.00% 6,983 3,150,688 2,721,600 2,294,409
IGR Volumes through Washington Gas 0.00% 6,983 3,150,688 2,721,600 2,294,409
UNIT #2 - OR SUPPLY 6% 7% 7%
OR Volumes Delivered to Plant 215,598 196,771 177,967
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $3.26 $3.33 $3.40
-------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $3.54 $3.61 $3.69
FGMR - Base Yr Oct-96
-------- ------
Commodity Index - Summer 6.46 8.98 9.45 9.88
Commodity Index - Shoulder 6.46 9.72 10.16 10.62
Commodity Index - Winter 6.46 10.56 11.02 11.55
Transportation Index 129.9 158.3 3.00% 189.0 194.7 200.5
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $3.10 $3.24 $3.37
Calculated FGMR - Shoulder $2.29 $3.30 $3.44 $3.57
Calculated FGMR - Winter $2.29 $3.53 $3.67 $3.83
IGR -
Calculated FGMR - Summer $2.29 $3.08 $3.21 $3.34
Calculated FGMR - Shoulder $2.29 $3.27 $3.39 $3.52
Calculated FGMR - Winter $2.29 $3.60 $3.74 $3.91
OR -
Oil Index 151 191 199 206
Calculated OR $3.89 $4.91 $5.10 $5.30
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 3.06 $ 3.18 $ 3.31
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $2.30 $2.42 $2.53
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $2.52 $2.63 $2.75
Spot Price - Winter 3 - NGI - Columbia Gas 7 $2.76 $2.88 $3.01
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.01 $ 0.02 $ 0.02
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $2.51 $2.63 $2.75
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $2.30 $2.42 $2.53
Spot Price - Shoulder 7 $2.52 $2.63 $2.75
Spot Price - Winter 7 $2.76 $2.88 $3.01
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $2.56 $2.67 $2.79
Delivered Fuel Oil (Unit #2) $4.91 $5.10 $5.30
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.30 $0.30 $0.31
Commodity 1.50% $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.02 $0.02 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.24 $0.24 $0.24
Commodity - Shoulder 1.50% $0.28 $0.29 $0.29
Commodity - Winter 1.50% $0.33 $0.34 $0.34
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 2,471,857 2,390,250 2,308,890
Columbia Balancing Fee ($/DT) 1.50% $0.10 $0.10 $0.10
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.14 $0.14 $0.15
FT Release Volumes (DT's) 714,546 1,305,232 1,893,532
<CAPTION>
BASE CASE 10 11 12
Year Ended Year Ended Year Ended
Dec-2005 Dec-2006 Dec-2007
DISPATCH HOURS: (AVAILABILITY ADJUSTED) --------------------------------
UNIT #1
Summer Hours (Jun-Sept) 1,475 1,575 1,497
Shoulder Hours (Mar-May & Oct-Nov) 2,030 1,871 1,854
Winter Hours (Dec-Feb) 1,285 1,392 1,377
Total Unit #1 Hours 4,791 4,838 4,728
UNIT #2
Summer Hours (Jun-Sept) 1,005 1,076 1,011
Shoulder Hours (Mar-May & Oct-Nov) 997 1,000 982
Winter Hours (Dec-Feb) 857 1,046 1,034
Total Unit #2 Hours 2,859 3,121 3,027
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 54% 54% 56%
FGRR Volumes at Wellhead - 7,064 2,616,100 2,579,258 2,590,151
FGRR Volumes through ANR 0.00% 7,064 2,616,100 2,579,258 2,590,151
FGRR Volumes through Columbia Gas 2.41% 6,898 2,554,536 2,518,561 2,529,197
FGRR Volumes through CLNG & WGL 1.00% 6,829 2,529,244 2,493,625 2,504,156
UNIT #1 - FGMR SUPPLY 46% 46% 44%
FGMR Volumes at Wellhead - 5,251 2,239,610 2,179,921 2,066,007
FGMR Volumes through ANR 0.00% 5,251 2,239,610 2,179,921 2,066,007
FGMR Volumes through Columbia Gas 2.41% 5,127 2,186,905 2,128,621 2,017,388
FGMR Volumes through CLNG & WGL 1.00% 5,077 2,165,253 2,107,546 1,997,413
UNIT #2 - IGR SUPPLY 92% 91% 90%
IGR Volumes at Wellhead - 7,223 2,642,689 2,774,270 2,665,881
IGR Volumes through Columbia Gas 2.41% 7,053 2,580,499 2,708,983 2,603,145
IGR Volumes through Columbia LNG 1.00% 6,983 2,554,950 2,682,162 2,577,371
IGR Volumes through Washington Gas 0.00% 6,983 2,554,950 2,682,162 2,577,371
UNIT #2 - OR SUPPLY 8% 9% 10%
OR Volumes Delivered to Plant 234,173 277,877 273,101
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $3.46 $3.53 $3.60
-------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $3.76 $3.83 $3.91
FGMR - Base Yr Oct-96
-------- ------
Commodity Index - Summer 6.46 10.33 10.86 11.41
Commodity Index - Shoulder 6.46 11.14 11.64 12.21
Commodity Index - Winter 6.46 12.06 12.63 13.18
Transportation Index 129.9 158.3 3.00% 206.5 212.7 219.1
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $3.51 $3.66 $3.83
Calculated FGMR - Shoulder $2.29 $3.73 $3.88 $4.05
Calculated FGMR - Winter $2.29 $3.98 $4.15 $4.31
IGR -
Calculated FGMR - Summer $2.29 $3.47 $3.61 $3.77
Calculated FGMR - Shoulder $2.29 $3.67 $3.81 $3.97
Calculated FGMR - Winter $2.29 $4.07 $4.25 $4.42
OR -
Oil Index 151 214 222 231
Calculated OR $3.89 $5.50 $5.72 $5.93
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 3.44 $ 3.58 $ 3.72
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $2.65 $2.78 $2.92
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $2.88 $3.01 $3.16
Spot Price - Winter 3 - NGI - Columbia Gas 7 $3.14 $3.29 $3.43
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.03 $ 0.03 $ 0.04
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $2.88 $3.01 $3.16
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $2.65 $2.78 $2.92
Spot Price - Shoulder 7 $2.88 $3.01 $3.16
Spot Price - Winter 7 $3.14 $3.29 $3.43
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $2.92 $3.05 $3.20
Delivered Fuel Oil (Unit #2) $5.50 $5.72 $5.93
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.31 $0.32 $0.32
Commodity 1.50% $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.03 $0.03 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.25 $0.25 $0.25
Commodity - Shoulder 1.50% $0.30 $0.30 $0.31
Commodity - Winter 1.50% $0.35 $0.35 $0.36
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 2,370,721 2,323,591 2,273,292
Columbia Balancing Fee ($/DT) 1.50% $0.10 $0.10 $0.10
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.15 $0.15 $0.15
FT Release Volumes (DT's) 1,510,554 1,476,668 1,681,060
<CAPTION>
BASE CASE 13 14 15
Year Ended Year Ended Year Ended
Dec-2008 Dec-2009 Dec-2010
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,425 1,362 1,304
Shoulder Hours (Mar-May & Oct-Nov) 1,838 1,822 1,806
Winter Hours (Dec-Feb) 1,362 1,348 1,333
--------------------------------
Total Unit #1 Hours 4,626 4,531 4,443
UNIT #2
Summer Hours (Jun-Sept) 950 892 839
Shoulder Hours (Mar-May & Oct-Nov) 966 949 934
Winter Hours (Dec-Feb) 1,021 1,010 998
--------------------------------
Total Unit #2 Hours 2,937 2,852 2,771
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 57% 58% 59%
FGRR Volumes at Wellhead - 7,064 2,601,043 2,611,936 2,600,723
FGRR Volumes through ANR 0.00% 7,064 2,601,043 2,611,936 2,600,723
FGRR Volumes through Columbia Gas 2.41% 6,898 2,539,833 2,550,469 2,539,520
FGRR Volumes through CLNG & WGL 1.00% 6,829 2,514,686 2,525,217 2,514,377
UNIT #1 - FGMR SUPPLY 43% 42% 41%
FGMR Volumes at Wellhead - 5,251 1,964,338 1,869,356 1,816,642
FGMR Volumes through ANR 0.00% 5,251 1,964,338 1,869,356 1,816,642
FGMR Volumes through Columbia Gas 2.41% 5,127 1,918,111 1,825,364 1,773,892
FGMR Volumes through CLNG & WGL 1.00% 5,077 1,899,120 1,807,291 1,756,328
UNIT #2 - IGR SUPPLY 90% 90% 90%
IGR Volumes at Wellhead - 7,223 2,577,454 2,499,072 2,454,964
IGR Volumes through Columbia Gas 2.41% 7,053 2,516,799 2,440,262 2,397,192
IGR Volumes through Columbia LNG 1.00% 6,983 2,491,880 2,416,101 2,373,457
IGR Volumes through Washington Gas 0.00% 6,983 2,491,880 2,416,101 2,373,457
UNIT #2 - OR SUPPLY 10% 10% 10%
OR Volumes Delivered to Plant 268,808 266,196 265,755
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $3.68 $3.75 $3.82
------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $3.99 $4.07 $4.15
FGMR - Base Yr Oct-96
------- ------
Commodity Index - Summer 6.46 11.92 12.51 13.13
Commodity Index - Shoulder 6.46 12.80 13.36 14.01
Commodity Index - Winter 6.46 13.80 14.39 15.07
Transportation Index 129.9 158.3 3.00% 225.7 232.5 239.4
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $3.98 $4.16 $4.34
Calculated FGMR - Shoulder $2.29 $4.22 $4.39 $4.58
Calculated FGMR - Winter $2.29 $4.49 $4.67 $4.87
IGR -
Calculated FGMR - Summer $2.29 $3.91 $4.08 $4.25
Calculated FGMR - Shoulder $2.29 $4.14 $4.30 $4.48
Calculated FGMR - Winter $2.29 $4.62 $4.80 $5.01
OR -
Oil Index 151 240 249 258
Calculated OR $3.89 $6.16 $6.40 $6.64
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 3.87 $ 4.02 $ 4.18
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $3.05 $3.20 $3.36
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $3.31 $3.45 $3.62
Spot Price - Winter 3 - NGI - Columbia Gas 7 $3.59 $3.74 $3.92
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.04 $ 0.05 $ 0.05
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $3.30 $3.45 $3.62
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $3.05 $3.20 $3.36
Spot Price - Shoulder 7 $3.31 $3.45 $3.62
Spot Price - Winter 7 $3.59 $3.74 $3.92
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $3.34 $3.49 $3.66
Delivered Fuel Oil (Unit #2) $6.16 $6.40 $6.64
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.33 $0.33 $0.34
Commodity 1.50% $0.03 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.03 $0.03 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.26 $0.26 $0.27
Commodity - Shoulder 1.50% $0.31 $0.32 $0.32
Commodity - Winter 1.50% $0.36 $0.37 $0.37
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 2,228,972 2,187,917 2,156,706
Columbia Balancing Fee ($/DT) 1.50% $0.11 $0.11 $0.11
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.15 $0.16 $0.16
FT Release Volumes (DT's) 1,854,314 2,011,391 2,115,838
<CAPTION>
BASE CASE 16 17 18
Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,285 1,268 1,251
Shoulder Hours (Mar-May & Oct-Nov) 1,771 1,739 1,712
Winter Hours (Dec-Feb) 1,268 1,211 1,163
--------------------------------
Total Unit #1 Hours 4,324 4,218 4,126
UNIT #2
Summer Hours (Jun-Sept) 818 796 776
Shoulder Hours (Mar-May & Oct-Nov) 879 828 780
Winter Hours (Dec-Feb) 931 868 810
--------------------------------
Total Unit #2 Hours 2,628 2,492 2,366
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 25% 0% 0%
FGRR Volumes at Wellhead - 7,064 1,086,012 0 0
FGRR Volumes through ANR 0.00% 7,064 1,086,012 0 0
FGRR Volumes through Columbia Gas 2.41% 6,898 1,060,455 0 0
FGRR Volumes through CLNG & WGL 1.00% 6,829 1,049,956 0 0
UNIT #1 - FGMR SUPPLY 75% 100% 100%
FGMR Volumes at Wellhead - 5,251 3,210,232 4,199,526 4,116,144
FGMR Volumes through ANR 0.00% 5,251 3,210,232 4,199,526 4,116,144
FGMR Volumes through Columbia Gas 2.41% 5,127 3,134,686 4,100,699 4,019,279
FGMR Volumes through CLNG & WGL 1.00% 5,077 3,103,650 4,060,098 3,979,484
UNIT #2 - IGR SUPPLY 90% 90% 90%
IGR Volumes at Wellhead - 7,223 2,313,983 2,202,494 2,094,964
IGR Volumes through Columbia Gas 2.41% 7,053 2,259,528 2,150,663 2,045,664
IGR Volumes through Columbia LNG 1.00% 6,983 2,237,157 2,129,369 2,025,410
IGR Volumes through Washington Gas 0.00% 6,983 2,237,157 2,129,369 2,025,410
UNIT #2 - OR SUPPLY 10% 10% 10%
OR Volumes Delivered to Plant 246,707 230,054 214,947
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $3.90 $3.98 $4.06
------ ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $4.23 $4.32 $4.41
FGMR - Base Yr Oct-96
------- ------
Commodity Index - Summer 6.46 13.65 14.19 14.74
Commodity Index - Shoulder 6.46 14.55 15.12 15.70
Commodity Index - Winter 6.46 15.64 16.24 16.86
Transportation Index 129.9 158.3 3.00% 246.6 254.0 261.6
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $4.49 $4.66 $4.82
Calculated FGMR - Shoulder $2.29 $4.74 $4.91 $5.09
Calculated FGMR - Winter $2.29 $5.04 $5.22 $5.40
IGR -
Calculated FGMR - Summer $2.29 $4.40 $4.56 $4.72
Calculated FGMR - Shoulder $2.29 $4.63 $4.79 $4.96
Calculated FGMR - Winter $2.29 $5.20 $5.38 $5.58
OR -
Oil Index 151 268 279 289
Calculated OR $3.89 $6.89 $7.16 $7.43
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 4.35 $4.53 $4.71
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $3.49 $3.63 $3.77
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $3.75 $3.90 $4.05
Spot Price - Winter 3 - NGI - Columbia Gas 7 $4.07 $4.22 $4.38
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.06 $ 0.06 $ 0.07
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $3.76 $3.90 $4.05
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $3.49 $3.63 $3.77
Spot Price - Shoulder 7 $3.75 $3.90 $4.05
Spot Price - Winter 7 $4.07 $4.22 $4.38
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $3.79 $3.94 $4.09
Delivered Fuel Oil (Unit #2) $6.89 $7.16 $7.43
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.34 $0.35 $0.35
Commodity 1.50% $0.04 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.03 $0.03 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.27 $0.27 $0.28
Commodity - Shoulder 1.50% $0.32 $0.33 $0.33
Commodity - Winter 1.50% $0.38 $0.39 $0.39
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 2,097,571 2,050,349 2,009,640
Columbia Balancing Fee ($/DT) 1.50% $0.11 $0.11 $0.11
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.16 $0.16 $0.17
FT Release Volumes (DT's) 2,369,237 2,570,533 2,755,106
<CAPTION>
BASE CASE 13 19 20
Year Ended Year Ended Year Ended
Dec-2008 Dec-2014 Dec-2015
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,425 1,237 1,223
Shoulder Hours (Mar-May & Oct-Nov) 1,838 1,688 1,670
Winter Hours (Dec-Feb) 1,362 1,125 1,098
--------------------------------
Total Unit #1 Hours 4,626 4,050 3,992
UNIT #2
Summer Hours (Jun-Sept) 950 757 737
Shoulder Hours (Mar-May & Oct-Nov) 966 734 692
Winter Hours (Dec-Feb) 1,021 756 705
--------------------------------
Total Unit #2 Hours 2,937 2,246 2,134
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 57% 0% 0%
FGRR Volumes at Wellhead - 7,064 2,601,043 0 0
FGRR Volumes through ANR 0.00% 7,064 2,601,043 0 0
FGRR Volumes through Columbia Gas 2.41% 6,898 2,539,833 0 0
FGRR Volumes through CLNG & WGL 1.00% 6,829 2,514,686 0 0
UNIT #1 - FGMR SUPPLY 43% 100% 100%
FGMR Volumes at Wellhead - 5,251 1,964,338 4,062,940 3,923,424
FGMR Volumes through ANR 0.00% 5,251 1,964,338 4,062,940 3,923,424
FGMR Volumes through Columbia Gas 2.41% 5,127 1,918,111 3,967,328 3,831,095
FGMR Volumes through CLNG & WGL 1.00% 5,077 1,899,120 3,928,047 3,793,163
UNIT #2 - IGR SUPPLY 90% 91% 91%
IGR Volumes at Wellhead - 7,223 2,577,454 2,029,104 1,917,034
IGR Volumes through Columbia Gas 2.41% 7,053 2,516,799 1,981,354 1,871,921
IGR Volumes through Columbia LNG 1.00% 6,983 2,491,880 1,961,736 1,853,387
IGR Volumes through Washington Gas 0.00% 6,983 2,491,880 1,961,736 1,853,387
UNIT #2 - OR SUPPLY 10% 9% 9%
OR Volumes Delivered to Plant 268,808 204,430 188,479
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $3.68 $4.14 $4.22
------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $3.99 $4.49 $4.58
FGMR - Base Yr Oct-96
------- ------
Commodity Index - Summer 6.46 11.92 15.32 15.92
Commodity Index - Shoulder 6.46 12.80 16.31 16.94
Commodity Index - Winter 6.46 13.80 17.50 18.17
Transportation Index 129.9 158.3 3.00% 225.7 269.5 277.6
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $3.98 $5.00 $5.18
Calculated FGMR - Shoulder $2.29 $4.22 $5.27 $5.46
Calculated FGMR - Winter $2.29 $4.49 $5.59 $5.79
IGR -
Calculated FGMR - Summer $2.29 $3.91 $4.88 $5.06
Calculated FGMR - Shoulder $2.29 $4.14 $5.13 $5.31
Calculated FGMR - Winter $2.29 $4.62 $5.78 $5.99
OR -
Oil Index 151 240 300 312
Calculated OR $3.89 $6.16 $7.72 $8.02
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $ 3.87 $4.89 $5.09
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $3.05 $3.92 $4.07
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $3.31 $4.21 $4.37
Spot Price - Winter 3 - NGI - Columbia Gas 7 $3.59 $4.55 $4.72
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.04 $ 0.07 $ 0.08
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $3.30 $4.21 $4.37
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $3.05 $3.92 $4.07
Spot Price - Shoulder 7 $3.31 $4.21 $4.37
Spot Price - Winter 7 $3.59 $4.55 $4.72
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $3.34 $4.24 $4.40
Delivered Fuel Oil (Unit #2) $6.16 $7.72 $8.02
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.33 $0.36 $0.36
Commodity 1.50% $0.03 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.03 $0.03 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.26 $0.28 $0.29
Commodity - Shoulder 1.50% $0.31 $0.34 $0.34
Commodity - Winter 1.50% $0.36 $0.40 $0.40
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 2,228,972 1,983,664 1,915,548
Columbia Balancing Fee ($/DT) 1.50% $0.11 $0.12 $0.12
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.15 $0.17 $0.17
FT Release Volumes (DT's) 1,854,314 2,870,217 3,113,450
<CAPTION>
BASE CASE 21 22 23
Year Ended Year Ended Year Ended
Dec-2016 Dec-2017 Dec-2018
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,232 1,242 1,254
Shoulder Hours (Mar-May & Oct-Nov) 1,636 1,602 1,569
Winter Hours (Dec-Feb) 1,094 1,090 1,086
--------------------------------
Total Unit #1 Hours 3,961 3,935 3,909
UNIT #2
Summer Hours (Jun-Sept) 767 798 831
Shoulder Hours (Mar-May & Oct-Nov) 723 755 790
Winter Hours (Dec-Feb) 700 696 693
--------------------------------
Total Unit #2 Hours 2,190 2,250 2,314
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 8,760,000
UNIT #1 - FGRR SUPPLY 0% 0% 0%
FGRR Volumes at Wellhead - 7,064 0 0 0
FGRR Volumes through ANR 0.00% 7,064 0 0 0
FGRR Volumes through Columbia Gas 2.41% 6,898 0 0 0
FGRR Volumes through CLNG & WGL 1.00% 6,829 0 0 0
UNIT #1 - FGMR SUPPLY 100% 100% 100%
FGMR Volumes at Wellhead - 5,251 3,900,891 3,883,255 3,863,996
FGMR Volumes through ANR 0.00% 5,251 3,900,891 3,883,255 3,863,996
FGMR Volumes through Columbia Gas 2.41% 5,127 3,809,092 3,791,871 3,773,065
FGMR Volumes through CLNG & WGL 1.00% 5,077 3,771,378 3,754,328 3,735,708
UNIT #2 - IGR SUPPLY 91% 91% 92%
IGR Volumes at Wellhead - 7,223 1,945,073 1,990,812 2,053,744
IGR Volumes through Columbia Gas 2.41% 7,053 1,899,300 1,943,963 2,005,413
IGR Volumes through Columbia LNG 1.00% 6,983 1,880,495 1,924,716 1,985,558
IGR Volumes through Washington Gas 0.00% 6,983 1,880,495 1,924,716 1,985,558
UNIT #2 - OR SUPPLY 9% 9% 8%
OR Volumes Delivered to Plant 184,817 182,629 181,731
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $4.30 $4.38 $4.46
------- ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $4.67 $4.75 $4.84
FGMR - Base Yr Oct-96
------- ------
Commodity Index - Summer 6.46 16.55 17.19 17.87
Commodity Index - Shoulder 6.46 17.59 18.27 18.98
Commodity Index - Winter 6.46 18.86 19.57 20.32
Transportation Index 129.9 158.3 3.00% 285.9 294.5 303.3
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $5.37 $5.56 $5.76
Calculated FGMR - Shoulder $2.29 $5.65 $5.86 $6.07
Calculated FGMR - Winter $2.29 $6.00 $6.21 $6.43
IGR -
Calculated FGMR - Summer $2.29 $5.23 $5.42 $5.61
Calculated FGMR - Shoulder $2.29 $5.50 $5.69 $5.89
Calculated FGMR - Winter $2.29 $6.21 $6.44 $6.67
OR -
Oil Index 151 324 336 349
Calculated OR $3.89 $8.32 $8.64 $8.98
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $5.29 $5.51 $5.73
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $4.23 $4.39 $4.56
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $4.53 $4.71 $4.89
Spot Price - Winter 3 - NGI - Columbia Gas 7 $4.89 $5.08 $5.27
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.08 $ 0.09 $ 0.09
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $4.54 $4.72 $4.90
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $4.23 $4.39 $4.56
Spot Price - Shoulder 7 $4.53 $4.71 $4.89
Spot Price - Winter 7 $4.89 $5.08 $5.27
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $4.57 $4.75 $4.93
Delivered Fuel Oil (Unit #2) $8.32 $8.64 $8.98
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.37 $0.37 $0.38
Commodity 1.50% $0.04 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.03 $0.03 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.29 $0.30 $0.30
Commodity - Shoulder 1.50% $0.35 $0.36 $0.36
Commodity - Winter 1.50% $0.41 $0.42 $0.42
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 1,904,546 1,904,546 1,904,546
Columbia Balancing Fee ($/DT) 1.50% $0.12 $0.12 $0.12
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.17 $0.18 $0.18
FT Release Volumes (DT's) 3,108,127 3,080,957 3,038,734
<CAPTION>
BASE CASE 24 25 26
Year Ended Year Ended Year Ended
Dec-2019 Dec-2020 Dec-2021
--------------------------------
DISPATCH HOURS: (AVAILABILITY ADJUSTED)
UNIT #1
Summer Hours (Jun-Sept) 1,267 1,283 1,283
Shoulder Hours (Mar-May & Oct-Nov) 1,536 1,505 1,204
Winter Hours (Dec-Feb) 1,082 1,077 718
--------------------------------
Total Unit #1 Hours 3,886 3,866 3,206
UNIT #2
Summer Hours (Jun-Sept) 865 900 900
Shoulder Hours (Mar-May & Oct-Nov) 826 863 690
Winter Hours (Dec-Feb) 688 684 456
--------------------------------
Total Unit #2 Hours 2,379 2,447 2,046
GAS & FUEL OIL VOLUMES (DT'S):
FIRM TRANSPORTATION Fuel % Daily Yr 1
------ ----------
Demand Volumes at Wellhead - 24,824 9,060,827 9,060,827 7,550,689
Demand Volumes through ANR 0.00% 24,824 9,060,827 9,060,827 7,550,689
Demand Volumes through Columbia Gas 2.41% 24,240 8,847,600 8,847,600 7,373,000
Demand Volumes through CLNG & WGL 1.00% 24,000 8,760,000 8,760,000 7,300,000
UNIT #1 - FGRR SUPPLY 0% 0% 0%
FGRR Volumes at Wellhead - 7,064 0 0 0
FGRR Volumes through ANR 0.00% 7,064 0 0 0
FGRR Volumes through Columbia Gas 2.41% 6,898 0 0 0
FGRR Volumes through CLNG & WGL 1.00% 6,829 0 0 0
UNIT #1 - FGMR SUPPLY 100% 100% 100%
FGMR Volumes at Wellhead - 5,251 3,859,414 3,838,670 3,188,384
FGMR Volumes through ANR 0.00% 5,251 3,859,414 3,838,670 3,188,384
FGMR Volumes through Columbia Gas 2.41% 5,127 3,768,591 3,748,335 3,113,352
FGMR Volumes through CLNG & WGL 1.00% 5,077 3,731,278 3,711,223 3,082,527
UNIT #2 - IGR SUPPLY 92% 92% 94%
IGR Volumes at Wellhead - 7,223 2,148,246 2,209,006 1,869,539
IGR Volumes through Columbia Gas 2.41% 7,053 2,097,692 2,157,022 1,825,543
IGR Volumes through Columbia LNG 1.00% 6,983 2,076,923 2,135,665 1,807,468
IGR Volumes through Washington Gas 0.00% 6,983 2,076,923 2,135,665 1,807,468
UNIT #2 - OR SUPPLY 8% 8% 6%
OR Volumes Delivered to Plant 183,379 180,813 120,596
FUEL COMPENSATION PRICE:
FGRR - PPI OIL AND GAS FIELD SERVICES
Fixed Contract Price Jun-94 Oct-96 $4.54 $4.62 $4.70
------ ------
Adjusted Contract Price (Contract Year) 103.20 112.00 108.53% $4.93 $5.01 $5.10
FGMR - Base Yr Oct-96
Commodity Index - Summer 6.46 18.57 19.29 20.05
Commodity Index - Shoulder 6.46 19.71 20.47 21.26
Commodity Index - Winter 6.46 21.09 21.89 22.73
Transportation Index 129.9 158.3 3.00% 312.4 321.8 331.4
Contract Discount 100% 100% 100%
Calculated FGMR - Summer $2.29 $5.97 $6.19 $6.42
Calculated FGMR - Shoulder $2.29 $6.29 $6.51 $6.75
Calculated FGMR - Winter $2.29 $6.66 $6.90 $7.15
IGR -
Calculated FGMR - Summer $2.29 $5.81 $6.02 $6.23
Calculated FGMR - Shoulder $2.29 $6.10 $6.32 $6.54
Calculated FGMR - Winter $2.29 $6.91 $7.17 $7.43
OR -
Oil Index 151 363 377 391
Calculated OR $3.89 $9.32 $9.68 $10.05
Fuel Costs: Escalation
----------
Firm Gas - Contract Price (Unit #1) 4.00% $5.95 $6.19 $6.44
Firm Gas - Market Price (Unit #1) Index Cost Options Option
---------------------- ------
Spot Price - Summer 1 - NGC - Columbia Gas 7 $4.74 $4.92 $5.12
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $5.08 $5.27 $5.47
Spot Price - Winter 3 - NGI - Columbia Gas 7 $5.47 $5.68 $5.89
FGMR Premium - Summer 4 - NGW - Columbia Gas $ - $ - $ -
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $ - $ - $ -
FGMR Premium - Winter 6 - Gulf Coast Avg $ 0.10 $ 0.10 $ 0.11
Firm Gas Market Cost - Weighted Average 7 - Appalachian Avg $5.09 $5.28 $5.48
Interruptible Gas (Unit #2) Option
------
Spot Price - Summer 7 $4.74 $4.92 $5.12
Spot Price - Shoulder 7 $5.08 $5.27 $5.47
Spot Price - Winter 7 $5.47 $5.68 $5.89
IGR Premium - Summer $ 0.05 $ 0.05 $ 0.05
IGR Premium - Shoulder $ 0.05 $ 0.05 $ 0.05
IGR Premium - Winter $ 0.05 $ 0.05 $ 0.05
Interruptible Gas Cost - Weighted Average $5.11 $5.31 $5.51
Delivered Fuel Oil (Unit #2) $9.32 $9.68 $10.05
FIRM TRANSPORTATION:
ANR Tariff Rates Escalation
----------
Demand 0.00% $0.00 $0.00 $0.00
Commodity 0.00% $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand 1.50% $0.38 $0.39 $0.40
Commodity 1.50% $0.04 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only 1.50% $0.03 $0.03 $0.03
Commodity - CLNG & WGL 0.25% $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer 1.50% $0.30 $0.31 $0.31
Commodity - Shoulder 1.50% $0.37 $0.37 $0.38
Commodity - Winter 1.50% $0.43 $0.43 $0.44
Fuel % 2.41% 2.41% 2.41%
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer 1.50% $0.03 $0.03 $0.03
Commodity - Shoulder 1.50% $0.03 $0.03 $0.03
Commodity - Winter 1.50% $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer 0.00% $0.05 $0.05 $0.05
Commodity - Shoulder 0.00% $0.05 $0.05 $0.05
Commodity - Winter 0.00% $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00%
Balancing Fee (SIT):
Annual Balance Volumes (DT's) (1/2 Unit #1) 1,904,546 1,904,546 1,904,546
Columbia Balancing Fee ($/DT) 1.50% $0.12 $0.13 $0.13
Capacity Release Revenue
% of Columbia Gas Demand Charge 50% 50% 50%
MCN Release Fee (% of total $) 5% 5% 5%
Capacity Release Values (less MCN Fee) $0.18 $0.19 $0.19
FT Release Volumes (DT's) 2,951,799 2,913,112 2,410,004
</TABLE>
[ICF Kaiser Letterhead]
Officer's Certificate
I, Theodore Breton, of ICF Resources Incorporated, DO
HEREBY CERTIFY that:
Since April 11, 1997, to our knowledge, no event affecting
our reports entitled "Independent Panda-Brandywine Pro Forma
Projections," dated April 11, 1997 and "Summary of the
Consolidated Pro Forma of Panda Global Holdings, Inc." dated
April 11, 1997 (the "Pro Forma Reports") or the matters referred
to therein has occurred which makes untrue or incorrect in any
material respect, as the date hereof, any information or
statement contained in the Pro Forma Reports or in the Prospectus
relating to the offering of 12-1/2% Registered Senior Secured
Notes due 2004 by Panda Global Energy Company (the "Prospectus")
under the captions "Summary - Independent Engineers' and
Consultants' Reports - Consolidating Financial Analyst's Pro
Forma Report," "Description of the Projects - The Rosemary
Facility - Independent Engineers' and Consultants' Reports -
Rosemary Engineering Report," "Description of the Projects - The
Brandywine Facility - Disagreement with PEPCO Over Calculation of
Capacity Payment," "Description of the Projects - The Brandywine
Facility - Independent Engineers' and Consultants' Reports -
Brandywine Pro Forma Report," "Description of the Projects - The
Brandywine Facility - Independent Engineers' and Consultants'
Reports - Brandywine Fuel Consultants' Report," "Independent
Engineers and Consultants - Consolidated Pro Forma" and
"Independent Engineers and Consultants - Brandywine Facility" in
the Prospectus.
WITNESS my hand this 6th day of June 1997.
By: /s/ Theodore R. Breton
Name: Theodore R. Breton
Title: 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 GLOBAL ENERGY COMPANY PANDA GLOBAL HOLDINGS, INC.
(Exact name of obligor as (Exact name of Co-Registrant as
specified in its charter) specified in its charter)
CAYMAN ISLANDS NOT APPLICABLE DELAWARE 75-2697755
(State or other (I.R.S. employer (State or other (I.R.S. employer
jurisdiction of Identification no.) jurisdiction of Identification no.)
Incorporation or incorporation or
organization) organization)
C/O PANDA ENERGY INTERNATIONAL, INC. C/O PANDA ENERGY INTERNATIONAL, INC.
4100 SPRING VALLEY ROAD 4100 SPRING VALLEY ROAD
SUITE 1001 SUITE 1001
DALLAS, TX 75244 DALLAS, TX 75244
(Address, including zip code (Address, including zip code of
principal executive offices) principal executive offices)
12 1/2% SENIOR SECURED NOTES DUE 2004
12 1/2% REGISTERED SENIOR SECURED NOTES DUE 2004
(Title of the indenture securities)
<PAGE>
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, Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
33-65171, and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company
dated March 20, 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, as
amended on February 18, 1997, Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 333-24509-01.
-2-
<PAGE>
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 March 31, 1997.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE>
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 2nd day
of June, 1997.
BANKERS TRUST COMPANY
By: /s/ SCOTT THIEL
Scott Thiel
Assistant Vice President
-4-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/97 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 MARCH 31, 1997
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 1,589,000|1.a.
b. Interest-bearing balances(2) ..................................................... | 0071 2,734,000|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 4,433,000|2.b.
3 Federal funds sold and securities purchased under agreements to resell | 1350 26,490,000|3
4. Loans and lease financing receivables: | /////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 15,941,000 | /////////// |4.a.
b. LESS: Allowance for loan and lease losses..................... RCFD 3123 708,000 | /////////// |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 15,233,000|4.d.
5. Assets held in trading accounts ......................................................... | 3545 38,115,000|5.
6. Premises and fixed assets (including capitalized leases) ................................ | 2145 924,000|6.
7. Other real estate owned (from Schedule RC-M) ............................................ | 2150 188,000|7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 175,000|8.
9. Customers' liability to this bank on acceptances outstanding ............................ | 2155 618,000|9.
10. Intangible assets (from Schedule RC-M) .................................................. | 2143 17,000|10.
11. Other assets (from Schedule RC-F) ....................................................... | 2160 4,424,000|11.
12. Total assets (sum of items 1 through 11) ................................................ | 2170 94,940,000|12.
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/97 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 14,450,000 |13.a.
(1) Noninterest-bearing(1) .............................RCON 6631 2,917,000 | ///////////////// |13.a.(1)
(2) Interest-bearing ...................................RCON 6636 11,533,000 | ///////////////// |13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | ///////////////// |
part II) | RCFN 2200 23,456,000 |13.b.
(1) Noninterest-bearing ................................RCFN 6631 1,062,000 | ///////////////// |13.b.(1)
(2) Interest-bearing ...................................RCFN 6636 22,394,000 | ///////////////// |13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase | RCFD 2800 15,195,000 |14
15. a. Demand notes issued to the U.S. Treasury .......................................... | RCON 2840 0 |15.a.
b. Trading liabilities (from Schedule RC-D)........................................... | RCFD 3548 18,911,000 |15.b.
16. Other borrowed money: (includes mortgage indebtedness and obligations under | ///////////////// |
capitalized leases): | ///////////////// |
a. With original maturity of one year or less ........................................ | RCFD 2332 7,701,000 |16.a.
b. With original maturity of more than one year ...................................... | RCFD 2333 4,438,000 |16.b.
17. Not applicable ........................................ | |17.
18. Bank's liability on acceptances executed and outstanding ............................... | RCFD 2920 618,000 |18.
19. Subordinated notes and debentures ...................................................... | RCFD 3200 1,226,000 |19.
20. Other liabilities (from Schedule RC-G) ................................................. | RCFD 2930 3,971,000 |20.
21. Total liabilities (sum of items 13 through 20) ......................................... | RCFD 2948 89,966,000 |21.
| ///////////////// |
22. Not applicable | |22.
EQUITY CAPITAL | ///////////////// |
23. Perpetual preferred stock and related surplus .......................................... | RCFD 3838 600,000 |23.
24. Common stock ........................................................................... | RCFD 3230 1,002,000 |24.
25. Surplus (exclude all surplus related to preferred stock) ............................... | RCFD 3839 540,000 |25.
26. a. Undivided profits and capital reserves ............................................ | RCFD 3632 3,241,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities | RCFD 8434 ( 31,000)|26.b.
27. Cumulative foreign currency translation adjustments .................................... | RCFD 3284 ( 378,000)|27.
28. Total equity capital (sum of items 23 through 27) ...................................... | RCFD 3210 4,974,000 |28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | ///////////////// |
and 28) ................................................................................ | RCFD 3300 94,940,000 |29.
----------------------------
</TABLE>
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 NUMBER auditors as of any date
during 1996 ........................................| RCFD 6724 1 | 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
(but not on the bank separately)
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 = Directors' 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.
<PAGE>
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
<PAGE>
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."
<PAGE>
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 of New York Office of the Superintendent of
No. 31-4942101 Banks, State of New York,
Qualified in New York County This 21st day of March, 1996
Commission Expires September 19, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule for Panda Global Energy Company 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> <C>
<PERIOD-TYPE> 3-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 6,289 506,289 6,289
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 6,289 506,289 6,289
<PP&E> 6,613,923 3,292,492 1,058,774
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 6,620,212 3,798,781 1,065,063
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 2 2 2
<OTHER-SE> (2,856,000) (2,301,000) (647,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,620,212 3,798,781 1,065,063
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 555,000 1,654,000 444,000
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (555,000) (1,654,000) (444,000)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (555,000) (1,654,000) (444,000)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (555,000) (1,654,000) (444,000)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule for Panda Global Holdings, Inc. 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> <C>
<PERIOD-TYPE> 3-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 16,313,286 19,145,007 3,042,527
<SECURITIES> 0 0 0
<RECEIVABLES> 9,219,619 9,402,685 5,199,999
<ALLOWANCES> 0 0 0
<INVENTORY> 6,897,908 7,913,777 3,084,168
<CURRENT-ASSETS> 32,665,398 36,626,374 11,339,358
<PP&E> 299,019,948 295,264,490 241,152,592
<DEPRECIATION> (29,488,416) (26,539,539) (21,008,036)
<TOTAL-ASSETS> 342,276,066 345,470,212 246,955,617
<CURRENT-LIABILITIES> 13,939,025 19,667,144 18,457,226
<BONDS> 208,454,461 209,830,918 234,608,361
0 0 0
0 0 0
<COMMON> 10 10 10
<OTHER-SE> (102,986,127) (101,516,505) (42,945,646)
<TOTAL-LIABILITY-AND-EQUITY> 342,276,066 345,470,212 246,955,617
<SALES> 17,460,275 32,776,493 30,331,515
<TOTAL-REVENUES> 17,890,002 34,294,499 31,226,783
<CGS> 8,261,187 12,050,495 9,347,707
<TOTAL-COSTS> 10,656,209 17,237,843 11,898,083
<OTHER-EXPENSES> 3,122,685 8,963,561 10,344,460
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 10,801,629 19,414,012 11,715,929
<INCOME-PRETAX> (6,690,521) (11,320,917) (2,731,689)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (6,690,521) (11,320,917) (2,731,689)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 (21,336,550) 0
<CHANGES> 0 0 0
<NET-INCOME> (6,690,521) (32,657,467) (2,731,689)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
