<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
<TABLE>
<S> <C>
ENRON INTERNATIONAL CPO, L.P. ENRON INTERNATIONAL CPO, INC.
(Exact name of registrant as specified (Exact name of registrant as specified
in its charter) in its charter)
--------------------- ---------------------
DELAWARE DELAWARE
(State or other Jurisdiction of (State or other Jurisdiction of
Incorporation or Organization) Incorporation or Organization)
6199 6199
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
76-0578215 76-0578210
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
1400 SMITH STREET
HOUSTON, TEXAS 77002
(713) 853-6161
(Address, including zip code, and telephone number,
including area code, of both registrants' principal executive offices)
C/O ROBERT G. GAY
333 CLAY STREET
SUITE 2024
HOUSTON, TEXAS 77002
(713) 646-7582
(Name, address, including zip code, and telephone number,
including area code, of agent for service for both registrants)
</TABLE>
---------------------
It is requested that copies of communications be sent to:
<TABLE>
<S> <C> <C>
JAY D. GRUSHKIN, ESQ. NEIL D. MEYER, ESQ. SARAH M. WARD, ESQ.
JONATHAN R. ROD, ESQ. 333 CLAY STREET C. THOMAS KUNZ, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY SUITE 2085 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE CHASE MANHATTAN PLAZA HOUSTON, TEXAS 77002 919 THIRD AVENUE
NEW YORK, NY 10005 (713) 646-6298 NEW YORK, NEW YORK 10022-3897
(212) 530-5000 (212) 735-3000
</TABLE>
---------------------
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 of the Securities Act of 1933
("Securities Act"), 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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Class A Senior Notes............... $ % $ $
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Class B Senior Subordinated
Notes............................ $ % $ $
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Total Notes to be Issued....... $800,000,000 % $ $236,000
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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.
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<PAGE> 2
EXPLANATORY NOTE
[This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent offering outside the United
States and Canada (the "International Prospectus"). The two prospectuses are
identical except for the front and back cover pages, the inside front cover page
and the section entitled "Underwriting." The form of U.S. Prospectus is included
herein and is followed by the alternate pages to be used in the International
Prospectus. Each of the alternate pages for the International Prospectus
included herein is labeled "Alternate Page for International Prospectus." Final
forms of each Prospectus will be filed with the Securities and Exchange
Commission under Rule 424(b).]
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED AUGUST 7, 1998
PRELIMINARY PROSPECTUS
ENRON INTERNATIONAL CPO, L.P.
ENRON INTERNATIONAL CPO, INC.
$ % CLASS A SENIOR NOTES DUE 2018
$ % CLASS B SENIOR SUBORDINATED NOTES DUE 2018
Enron International CPO, L.P. (the "Issuer") and Enron International CPO, Inc.
(the "Co-Issuer" and, together with the Issuer, the "Issuers") are offering
hereby $ aggregate principal amount of % Class A Senior Notes
due 2018 and $ aggregate principal amount of % Class B Senior
Subordinated Notes due 2018. Payments of interest on the Notes (as defined
below) are scheduled to be made quarterly in arrears on each January 10, April
10, July 10 and October 10, commencing January 10, 1999 (each, a "Quarterly
Payment Date"). The principal of the Notes is required to be paid by their
Stated Maturity, unless redeemed or repaid prior thereto. Except as otherwise
described under "Description of the Notes -- Priority of Payments" and
"-- Redemption," payment of principal of, and interest (and premium, if any) on,
the Class B Senior Subordinated Notes and the Class C Subordinated Notes (as
defined below) will be subordinate in right of payment to principal of and
interest on the Class A Senior Notes and payment of principal of and interest on
the Class C Subordinated Notes will be subordinate in right of payment to
principal of and interest (and premium, if any) on the Class B Senior
Subordinated Notes. Only the Class A Senior Notes and the Class B Senior
Subordinated Notes are being offered hereby.
The Notes will be secured by substantially all of the assets of the Issuers
including, among other things, (i) all present and future rights of the Issuer
under Project Loans, (ii) the Temporary Investments, (iii) the Eligible
Investments, (iv) the Hedging Agreements, (v) the Enron Support Agreement and
any other agreements between the Issuer and Enron Corp. ("Enron") or Enron
Affiliates and (vi) the amounts credited to the Accounts (collectively, the
"Collateral"), subject to certain Permitted Liens (all as defined below). See
"Security for the Notes". Enron CPO Management, L.P. (the "Program Manager"), a
limited partnership whose partners are wholly-owned subsidiaries of Enron, will
manage the Issuers and the Portfolio Assets (as defined below) pursuant to a
Management Agreement entered into between the Issuers and the Program Manager
and the Backup Program Managers (the "Management Agreement"). See "Description
of Principal Documents -- Other Material Agreements -- Management Agreement".
The Notes are subject to optional and mandatory redemption under certain
circumstances. See "Description of the Notes -- Redemption -- Optional
Redemption" and "-- Mandatory Redemption".
It is a condition to the issuance of the Notes that the Class A Senior Notes
will be rated at least A2 and A by Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Ratings Group ("S&P"), respectively, and the Class B
Senior Subordinated Notes will be rated at least Ba2 and BB by Moody's and S&P,
respectively.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT
PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO MAKING AN INVESTMENT IN THE
NOTES.
CERTAIN PLEDGED ASSETS AND RIGHTS OF THE ISSUERS ARE THE SOLE SOURCE OF PAYMENTS
ON THE NOTES. THE NOTES DO NOT REPRESENT AN INTEREST IN OR OBLIGATIONS OF, AND
ARE NOT INSURED OR GUARANTEED BY, ENRON, THE GENERAL PARTNER OR THE LIMITED
PARTNER OF THE ISSUER, THE PROGRAM MANAGER, CHASE SECURITIES INC., LEHMAN
BROTHERS OR ANY OF THEIR RESPECTIVE AFFILIATES.
THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND NEITHER THE
COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC(1) DISCOUNT(2) ISSUERS(1)(3)
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<S> <C> <C> <C>
PER CLASS A SENIOR NOTE % % %
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PER CLASS B SENIOR SUBORDINATED NOTE % % %
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TOTAL $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Issuers have agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933.
See "Underwriting".
(3) Before deducting expenses payable by the Issuers estimated at $ .
The Notes are being offered by the Underwriters subject to prior sale, when, as
and if issued by the Issuers and accepted by the Underwriters, and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of each global note will be made in book-entry form through the
facilities of DTC on or about , 1998 (such date of delivery, the
"Closing Date"). The Notes will be issued in minimum denominations specified
herein.
JOINT BOOK RUNNING MANAGERS
CHASE SECURITIES INC./LEHMAN BROTHERS
, 1998
<PAGE> 4
CERTAIN PERSONS PARTICIPATING IN THE OFFERING OF THE NOTES MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVERALLOTMENT, STABILIZING TRANSACTIONS AND SYNDICATE SHORT
COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
---------------------
This Prospectus includes forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 (the "Securities Act"). All statements
other than statements of historical facts included or incorporated by reference
in this Prospectus including, without limitation, statements regarding the
Issuers' future financial position, business strategy, budgets, estimates,
projected costs and plans and objectives of management for future operations,
are forward looking statements. Although the Issuers believe their expectations
reflected in such forward looking statements are based on reasonable
assumptions, no assurance can be given that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the expectations reflected in the forward looking statements
herein include political developments in foreign countries, the ability to make
loans in the EI Regions (as defined below), other actions taken by regulatory
authorities, the timing and extent of changes in commodity prices for crude oil,
natural gas, electricity, interest rates and foreign currencies, the timing and
success of Enron's efforts to develop international power, pipeline and other
infrastructure projects, and the conditions of the capital markets and equity
markets. All subsequent written or oral forward looking statements attributable
to the Issuers or persons acting on their behalf are expressly qualified in
their entirety by the foregoing cautionary statements.
ii
<PAGE> 5
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by, and should be read in conjunction with, the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus and in related documents referred to herein.
THE ISSUER
Enron International CPO, L.P. (the "Issuer"), a Delaware limited
partnership, was established by Enron Corp. ("Enron") to provide construction
and term loans to certain international electricity, energy and other natural
gas-related infrastructure projects sponsored by Enron. During an investment
period of up to 5 years, the Issuer intends to create a diversified portfolio of
project loans in an aggregate principal amount of approximately $5 billion,
financed through the issuance of senior debt, subordinated debt and equity.
As one of the premier infrastructure project developers in the world, Enron
has developed and obtained financing for 14 projects in Europe, Latin America
and Asia since 1989, including power generation and pipeline projects that were
funded with over $5 billion of senior project finance debt. Enron believes that
there is, and will continue to be, significant demand for the development of
such basic infrastructure projects that are critical to a host country's
economic development. Currently, Enron's active project development
opportunities consist of more than 25 projects in nineteen countries, certain of
which the Issuer may have the opportunity to finance. The Issuer has been
established to capitalize on attractive returns available in the project finance
market and to provide financing for projects on a more expeditious basis than
certain traditional sources.
PROJECT LOANS
Over an investment period of up to 5 years, the Issuer expects to finance a
portfolio of project loans (as more fully described herein, "Project Loans")
made to between 12 and 20 projects that will have the traditional benefits of
project finance loans as well as portfolio diversification and credit
enhancements that are typical of collateralized debt obligations. Generally,
project loans, which have an established rating agency methodology, are made to
entities with a specific business purpose and predictable cash flows. Project
loans are also usually supported by a contractual framework, such as long-term
supply and offtake contracts, that seeks to reduce project risk. S&P and Moody's
have assumed that emerging market project finance loans typically benefit from
higher recovery rates following an incidence of default than similarly rated
debt obligations to corporate or sovereign borrowers in the emerging markets.
When fully funded, the Issuer's portfolio of Project Loans will be diversified
by both geographic region and industry.
To be eligible for a Project Loan, a project must meet certain qualifying
criteria, including tests relating to each proposed loan, the overall loan
portfolio and the effect of any proposed loan upon the rating of the Notes. A
Project Loan may only be made to a project that generates revenues from a
permitted industry comprised of any of the electricity, energy and other natural
gas-related infrastructure industries. In addition, each such project must
derive its cash flow from integrated contractual arrangements or have sufficient
access to required feedstock and offtake markets and meet certain alternative,
more restrictive criteria for projects that do not have the contractual
underpinnings typically associated with project financings. Project Loans will
generally have:
- a U.S. dollar denomination;
- required minimum levels of equity and Enron-affiliated equity ownership
in each project;
- the benefit of a perfected security interest in the assets of the project
to the extent practicable under local law;
- review by an independent engineer and independent legal counsel;
<PAGE> 6
- projected minimum and average debt service coverage ratios and debt
service reserve requirements; and
- a scheduled maturity no later than the 20-year scheduled maturity of the
Notes offered hereby.
The composition of the Project Loan portfolio will be subject to certain
criteria governing the maximum size of any individual Project Loan, the weighted
average life of the Project Loan portfolio and the concentration of Project
Loans within both geographic region and industry. The addition of any Project
Loan to the portfolio will require compliance with tests designed to measure (i)
the required level of asset overcollateralization given the diversity and
ratings of the Issuer's Project Loan portfolio, (ii) the Issuer's ability to
fund new Project Loans, and (iii) the Issuer's liquidity. The credit ratings of
each Project Loan are expected to range between Baa2/BBB and B3/B- by Moody's
and S&P, respectively, creating a portfolio which is expected to have a weighted
average portfolio rating between Ba2/BB and B2/B by Moody's and S&P,
respectively. The qualifying criteria for Project Loans prohibit the making of
any Project Loan that would result in the downgrading or removal of the then
current ratings of the Notes.
KEY STRUCTURAL FEATURES
The Notes will have credit characteristics similar to those found in
collateralized debt obligations, yet uniquely tailored to the project finance
market. Key structural features of the financing include:
- $ in equity commitments, consisting of $ from third parties and
up to $ of funded and contingent equity commitments from Enron
supported by a standby letter of credit;
- Enron's commitment to fund, if required, amounts equal to a portion of
the distributions received with respect to its equity investments in the
projects;
- required minimum levels of equity in each project;
- overcollateralization ratios that measure the aggregate principal amount
of assets against the aggregate principal amount of Notes outstanding;
- diversity of the portfolio of Project Loans;
- a reserve generated from the difference between the interest income on
the Project Loans and the financing costs of the Issuer during the
initial five-year investment period;
- the ongoing involvement of Moody's and S&P in the rating of each Project
Loan; and
- the reaffirmation of the ratings on the Notes upon the making of each
Project Loan.
The Issuer has obtained a $ revolving credit liquidity facility to
provide liquidity during the investment period, after which time liquidity will
be provided by the Issuer's accumulated cash reserves and cash flow from Project
Loans. The Issuer may also obtain one or more credit facilities in order to
provide availability for the commitment to fund Project Loans. Drawings under
such facilities will not exceed the amount of Class A Senior Notes that could
otherwise be issued. In addition, to support the operations and activities of
the Issuer, Enron has the option to purchase or commit to purchase up to $
of Class C Subordinated Notes that will be subordinated to the Notes.
2
<PAGE> 7
ENRON
Enron is an integrated natural gas and electricity company headquartered in
Houston, Texas with approximately $24 billion in assets. Enron's operations are
conducted through subsidiaries and affiliates that are principally engaged in
the exploration for and production of natural gas and crude oil in the United
States and internationally; the transportation of natural gas through pipelines
to markets throughout the United States; the generation and transmission of
electricity to markets in the northwestern United States; the marketing of
natural gas, electricity and other commodities and related risk management and
finance services worldwide; and the development, construction and operation of
power plants, pipelines and other energy-related assets in international
markets. Enron's common stock is traded on the New York, Chicago, Pacific,
London and Frankfurt stock exchanges and its long term senior unsecured debt
obligations are rated Baa2 and BBB+ by Moody's and S&P, respectively.
Enron's international activities include management of direct and indirect
ownership interests in and operation of power plants in England, Guatemala, the
Dominican Republic, the Philippines and China; pipeline systems in Argentina,
Colombia and Bolivia; retail gas and propane sales in the Caribbean Basin;
processing of natural gas liquids at Teesside, England; and marketing of natural
gas liquids and other liquid fuels worldwide. Enron is also involved in power,
pipeline and liquefied natural gas projects in varying stages of development
and/or construction in Bolivia, Brazil, Guam, India, Italy, Mozambique,
Nicaragua, Poland, Puerto Rico, Saudi Arabia, Turkey, Venezuela and elsewhere.
Enron announced on July 24, 1998 an offer for all outstanding common shares of
Wessex Water Plc in its pursuit of opportunities in the global water business,
such offer is subject to regulatory and shareholder approvals. Enron also
announced on July 16, 1998 its successful bid for the controlling interest in
Elektro Electricidade e Servicos S.A., Brazil's sixth largest electricity
distributor.
Enron is obliged to use commercially reasonable efforts to give the Issuer
the opportunity to provide Project Loans to projects sponsored by Enron
predominantly in certain emerging markets if Enron determines the loans would
meet the qualifying criteria for Project Loans.
PROGRAM MANAGER
The Issuers will be managed by Enron CPO Management, L.P. (the "Program
Manager"), a limited partnership whose partners are wholly-owned subsidiaries of
Enron, pursuant to a management agreement (the "Management Agreement"). The
Management Agreement sets forth, among other things, guidelines for the pricing
of the Project Loans, management of the selection and documentation of Project
Loans, management of the rating agency process and related matters. In providing
such services, the Program Manager is required to adhere to the standard of care
set forth in the Management Agreement which generally requires the Program
Manager to act as would a reasonable and prudent lender acting for its own
account subject to the terms thereof.
THE FINANCING
In order to finance the Project Loans, the Issuers expect to have no more
than $ of securities outstanding at any time, including the Notes offered
hereby. The Issuer will manage its capital structure based on the credit quality
and diversity of the Project Loans, subject to satisfaction of certain tests and
criteria. In particular, the Issuers may issue Class A Senior Notes and redeem
Class B Senior Subordinated Notes and Class C Subordinated Notes so long as the
then current ratings of the Notes have been affirmed. No such redemptions are
expected to occur during the investment period and, if any redemption does occur
at any time, it would generally be subject to payment of a premium.
3
<PAGE> 8
The following table sets forth (i) the capitalization of the Issuer upon
issuance of the Initial Notes together with other potential capital resources
available to the Issuer and (ii) the pro forma capitalization of the Issuer
together with other potential capital resources available to the Issuer assuming
that the Project Loan portfolio is fully funded and no Notes are redeemed.
<TABLE>
<CAPTION>
AT INITIAL
ISSUANCE PRO FORMA
(IN ) (IN )
------------- -------------
<S> <C> <C>
Liquidity Facility(a)...................................... $ -- $ --
Backup Facility(b)......................................... -- --
Class A Senior Notes....................................... -- --
Class B Senior Subordinated Notes.......................... -- --
Class C Subordinated Notes(c).............................. -- --
Support Notes(d)........................................... -- --
Class I Interests(e)....................................... -- --
Class II Interests and GP Interests(f)..................... -- --
------ ------
Total Capitalization and Potential Capital
Resources...................................... $ -- $ --
====== ======
</TABLE>
- ---------------
(a) $ Liquidity Facility with availability through the five-year
scheduled investment period.
(b) Uncommitted on the Closing Date.
(c) To support the operations and activities of the Issuer, up to $ of
Class C Subordinated Notes may be issued that will be subordinated to the
Notes.
(d) To be issued to Enron, or its permitted assigns, in connection with certain
payments if and when made to the Issuer, including amounts equal to a
portion of the distributions received with respect to equity investments of
Enron or Enron Affiliates in the projects.
(e) Equity funded or to be funded indirectly by third parties pursuant to
certain commitment letters.
(f) $ of which is funded at the Closing Date and $ of which
is committed at the Closing Date but unfunded and contingent, in each case,
from Enron or its permitted assigns. Enron's obligation to make payments in
respect of unfunded amounts is supported by an irrevocable standby letter
of credit issued by a financial institution. See "Enron Support".
4
<PAGE> 9
TRANSACTION STRUCTURE
The chart that follows illustrates the structure of the transaction. This
chart does not purport to be complete and is qualified in its entirety by, and
should be read in conjunction with, the more detailed information appearing
elsewhere in this Prospectus and in related documents referred to herein.
[Transaction Structure Chart]
5
<PAGE> 10
THE OFFERING
The Issuer................. Enron International CPO, L.P.
The Co-Issuer.............. Enron International CPO, Inc.
Securities................. $ aggregate principal amount % Class
A Senior Notes and $ aggregate principal
amount of % Class B Senior Subordinated Notes
are offered hereby.
The Issuer expects to issue between $ and
$ of additional Class A Senior Notes after
the Closing Date which will have the same maturity
and the same terms, other than interest rate, as
the Class A Senior Notes issued on the Closing
Date. See "Description of the Notes -- Issuance of
Class A Senior Notes after the Closing Date".
Ranking.................... The Class A Senior Notes will be senior secured
indebtedness of the Issuer ranking pari passu in
right of payment with all other Senior Secured
Obligations, subject to the Priority of Payments
and Priority of Acceleration Payments, ranking
senior in right of payment to any subordinated
indebtedness of the Issuer. The Class B Senior
Subordinated Notes will be senior subordinated
indebtedness of the Issuer and will be subordinated
in right of payment to all Senior Secured
Obligations, subject to the Priority of Payments
and Priority of Acceleration Payments, ranking
senior in right of payment to all subordinated
indebtedness of the Issuer, including Class C
Subordinated Notes and Support Notes.
Security for the Notes..... The Notes are secured by a pledge of the Collateral
to the Collateral Agent for the benefit of the
holders of the Notes and the other Secured Parties,
subject to Permitted Liens. See "Description of
Principal Documents -- Financing
Documents -- Security Agreement".
Ratings.................... It is a condition to issuance of the Notes that the
Class A Senior Notes will be rated at least A2 and
A by Moody's and S&P, respectively, and the Class B
Senior Subordinated Notes will be rated at least
Ba2 and BB by Moody's and S&P, respectively.
Interest Payment Dates..... Interest on the Notes issued on the Closing Date
will accrue from the Closing Date and will be
payable quarterly in arrears on each Quarterly
Payment Date. Interest on the Notes issued
subsequent to the Closing Date will accrue from the
applicable Subsequent Closing Date and will be
payable on each Quarterly Payment Date thereafter.
Deferred Interest on Class
B Senior Subordinated
Notes.................... So long as any Class A Senior Notes are
outstanding, payments of interest on the Class B
Senior Subordinated Notes are subject to deferral
to the extent that funds are not otherwise
available on any Quarterly Payment Date to pay the
full amount of accrued interest due on the Class B
Senior Subordinated Notes. Any interest deferred as
described above will be added to the aggregate
principal amount of the Class B Senior Subordinated
Notes, and thereafter interest will accrue on the
aggregate principal
6
<PAGE> 11
amount of the Class B Senior Subordinated Notes as
so increased, during each subsequent Interest
Accrual Period until (and including) the Interest
Accrual Period immediately preceding the Quarterly
Payment Date on which all interest due and payable
on the Class B Senior Subordinated Notes as of such
date is paid in full (without any deferral), at a
rate per annum equal to 1.50% in excess of the rate
at which interest otherwise accrues on the Class B
Senior Subordinated Notes. So long as any Class A
Senior Notes are outstanding, the failure to pay
such interest to the holders of the Class B Senior
Subordinated Notes by reason of any such deferral
will not constitute an Event of Default but will,
on the fourth occurrence of such default,
constitute a Deferral Event. A Subordinate Event of
Default will occur 45 days following a Deferral
Event. If a Subordinate Event of Default has
occurred and is continuing, the Holders of a
Majority of the Class B Senior Subordinated Notes
may direct the Issuers to redeem the Class A Senior
Notes, in whole but not in part, at par (including
accrued interest), provided that no such redemption
will be permitted unless all Senior Secured
Obligations will be paid in full through the
anticipated proceeds of a sale or liquidation of
the Project Loans and other Collateral. See
"Description of the Notes -- Interest" and
"Description of the Notes -- Redemption --
Subordinate Event of Default".
Stated Maturity............ , 2018.
Expected Average Life...... The expected average life of the Class A Senior
Notes is approximately years. The expected
average life of the Class B Senior Subordinated
Notes is approximately years. While the
Average Life Test must be satisfied before the
Issuer initially funds a Project Loan, the actual
average life of the Notes will depend on, among
other things, the average life of the Project Loans
and the other Portfolio Assets.
Principal Repayments....... On each Quarterly Payment Date, principal of the
Notes will be payable from Collateral Proceeds and
from certain amounts available under the Enron
Support Agreement, if needed, in accordance with
the Priority of Payments or, following an
Acceleration, the Priority of Acceleration
Payments. No repayment of the principal of the
Notes is expected during the Investment Period.
Optional Redemption........ The Notes are subject to optional redemption,
prepayment or repayment (in whole or in part) by
the Issuers (i) on any Quarterly Payment Date, in
order of seniority, by the issuance of Support
Notes or, in the case of redemption of Class A
Senior Notes, by the issuance of additional Class A
Senior Notes, (ii) on any Quarterly Payment Date on
or after the fifth anniversary of the Closing Date
but prior to the sixth anniversary of the Closing
Date, by the issuance of additional Class A Senior
Notes, the proceeds of which are used to redeem
Class B Senior Subordinated Notes and (iii) on any
Quarterly Payment Date on or after the fifth
anniversary of the Closing Date, by substituting
additional Class B Senior Subordinated Notes for
outstanding Class B Senior Subordinated Notes, in
each case as described under "Description of the
Notes -- Redemption -- Optional Redemption".
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The redemption price for Class A Senior Notes that
are optionally redeemed will be par plus accrued
and unpaid interest plus the Class A Make-Whole
Premium. The redemption price for Class B Senior
Subordinated Notes that are optionally redeemed
will be par plus accrued and unpaid interest plus
the Class B Premium which is based upon a fixed
premium and a make-whole premium through year 5 and
a declining fixed premium thereafter through year
10. Any accrued and unpaid Class A Make-Whole
Premium, Class B Premium, as appropriate, and the
applicable redemption price must be paid in full
for an optional redemption to be effected.
Mandatory Redemption....... The Issuers will be required to effect a mandatory
redemption of the Notes (in whole or in part) in
certain circumstances in accordance with the
Priority of Payments. See "Description of the
Notes -- Redemption -- Mandatory Redemption".
The redemption price will be calculated in the same
manner as for an optional redemption; provided,
however, that in connection with any mandatory
redemption effected due to (i) the occurrence of an
Acceleration, (ii) a failure to satisfy the
Liquidity Test on any two consecutive Quarterly
Payment Dates, (iii) the passage of 60 days after
the occurrence of a Tax Event where the Rating
Condition has not been satisfied, or (iv) upon the
occurrence of a Subordinate Event of Default, the
redemption price for the Class A Senior Notes and
Class B Senior Subordinated Notes will be par, plus
accrued and unpaid interest.
Covenants.................. The financing agreements will contain certain
covenants for the benefit of the Holders of the
Notes which, in addition to customary covenants,
include limitations on modifications to the
documentation governing the Project Loans and
agreement to terminate the Management Agreement and
remove the Program Manager under certain
circumstances. See "Description of Principal
Documents -- Financing Documents".
Priority of Payments....... On each Quarterly Payment Date, Collateral Proceeds
credited to the Collection Account on the related
Determination Date will be applied according to the
Priority of Payments. The application of funds in
the Priority of Payments will generally be governed
by certain over-collateralization and coverage
tests and ratios.
If the Issuers do not have sufficient amounts
available on any Quarterly Payment Date to make all
payments due on the Notes pursuant to the Priority
of Payments, the Issuer will, depending upon the
relevant circumstances, draw on (i) amounts
available under the Liquidity Facility, (ii)
amounts credited to certain reserve accounts or
(iii) amounts available under the Enron Support
Agreement. See "Description of the
Notes -- Priority of Payments", "Enron Support" and
"Description of the Notes -- Priority of
Payments -- Priority of Acceleration Payments".
Form, Registration and
Transfer of Notes........ The Notes will be issued in fully registered form,
without interest coupons. Notes will initially be
available only in book-entry form and will be
registered in the name of Cede & Co. as nominee of
DTC.
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Except as described herein, definitive Notes will
not be issued in exchange for beneficial interests
in Global Notes. See "Description of the Notes,
Form, Denomination and Registration".
Listing.................... The Issuers intend to list the Notes on the
Luxembourg Stock Exchange. See "Listing and General
Information".
Use of Proceeds............ The net proceeds of the Notes are intended to be
used to fund Project Loans. Until such time as they
are invested in Project Loans, such proceeds will
be invested in Temporary Investments. The Temporary
Investments will consist of investments in
Investment Grade securities with maturities not
exceeding one year, subject to the TIP Investment
Policies. See "Use of Proceeds" and "Temporary
Investments".
KEY TRANSACTION FEATURES
Investment Period.......... The Issuer will be authorized to enter into
Commitments to make Project Loans during an
investment period of up to 5 years, which period
may terminate earlier upon the occurrence of
certain events. Each Project Loan must satisfy each
of the Qualifying Criteria as of the Financial
Closing Date for such Project Loan. The Qualifying
Criteria consist of (i) the Project Loan Criteria,
(ii) the Portfolio Criteria, (iii) the Ratings
Criteria and (iv) the Portfolio Financial Tests.
See "Eligible Projects and Qualifying Criteria".
Project Loan Criteria...... The Project Loan Criteria are satisfied if, among
other things: (i) the Project Loan is denominated
in U.S. dollars (or in another currency if an
Intermediate Funding Entity has hedged its foreign
currency risk related to such Project Loan pursuant
to a hedging arrangement with an Acceptable Credit
Provider); (ii) the Project Loan is secured by a
valid, perfected, first priority security interest
in the assets of the Project Borrower and any
Intermediate Funding Entity, if applicable, or, if
it is impractical to create or perfect such a
security interest over any such asset, the Issuer
is the beneficiary of a negative pledge in respect
thereof, in each case, subject to customary
exceptions; (iii) minimum levels of equity are
invested in the Project Borrower; (iv) Enron and/or
Enron Affiliates have committed to maintain
(subject to certain exceptions) a minimum ownership
level in the Project Borrower; (v) engineering and
technical reports and satisfactory legal opinions
are delivered to the Issuer; (vi) the Project
Borrower has a limited business purpose; (vii) the
Base Case Financial Projections prepared by the
Project Borrower indicate certain minimum and
average debt service coverage ratios; (viii) a debt
service reserve account will be established with a
minimum balance of six months debt service upon
commencement of commercial operations of the
relevant Eligible Project, will be initially funded
from financing proceeds or available cash flow and
will be replenished from (and to the extent of)
available cash flow; (ix) distributions by a
Project Borrower to Project Sponsors are subject to
certain restrictions; (x) the final maturity of the
Project Loan is on or before the Stated Maturity;
(xi) the project is in a country outside
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<PAGE> 14
of the United States in which it is not illegal
under U.S. law for United States private sector
entities to invest as of the Financial Closing Date
of such Project Loan; and (xii) if such Project
Loan accrues interest at a floating rate after
commercial operation of the related Eligible
Project, an arrangement is made to hedge any
interest rate exposure relating to such Project
Loan with an Acceptable Credit Provider. Under
certain circumstances, the Issuer may waive the
failure to meet requirement (ii) and the
requirement to deliver satisfactory legal opinions
in requirement (v) upon receipt of a unconditional,
irrevocable guarantee from Enron, an Enron Credit
Counterparty or an Acceptable Credit Provider until
the date such requirements are satisfied. Certain
established projects will be deemed to satisfy
clauses (ii) and (vii) above. See "Eligible
Projects and Qualifying Criteria -- Qualifying
Criteria".
Portfolio Criteria......... The Portfolio Criteria include, but are not limited
to, the following: (i) the maximum outstanding
principal amount of any single Project Loan may not
exceed $ , except that the Issuer may make
up to two Project Loans in separate Regions, each
of which has a maximum outstanding principal amount
of up to $ , (ii) concentration
limitations as to the maximum amount of loans in
certain geographic areas, (iii) satisfaction of the
Average Life Test, (iv) requirements as to the
weighted average rating of all outstanding Project
Loans and (v) requirements as to the weighted
average Enron Ownership Percentage with respect to
all Project Borrowers.
Ratings Criteria........... The Ratings Criteria are satisfied as to any
Project Loan if the Program Manager obtains from
the Rating Agencies a rating of such Project Loan
and obtains confirmation from the Rating Agencies
as to the satisfaction of the Rating Condition
after giving effect to the initial funding of such
Project Loan.
Portfolio Financial
Tests...................... The Portfolio Financial Tests that must be
satisfied at the times specified below are (i) the
Funding Availability Test, (ii) the Credit Support
Tests and (iii) the Liquidity Test.
The Funding Availability Test determines the
Issuer's ability to make Project Loans and must be
satisfied as of the Financial Closing Date for each
Project Loan.
The Credit Support Tests are designed to determine
if sufficient credit support is present for the
Notes. The Credit Support Tests must be satisfied
in order for the Issuer to initially fund or
acquire any Project Loan, to Allocate or draw
amounts under the Backup Facility (other than draws
that are used to reduce amounts previously
Allocated under the Backup Facility), to issue
Class A Senior Notes after the Closing Date (other
than Class A Senior Notes the proceeds of which are
used to reduce amounts previously Allocated, or to
repay amounts drawn, under the Backup Facility), to
reduce the Class C Subordinated Note Purchase
Commitment or to reduce certain commitments of
Enron.
The Liquidity Test measures the Issuer's liquidity
with respect to its ability to service its
near-term operating and financial obliga-
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<PAGE> 15
tions and must be satisfied on or prior to the
Financial Closing Date of each Project Loan. In
addition, a determination as to whether the
Liquidity Test is satisfied will be made on each
Quarterly Payment Date during the Measurement
Period. Failure to satisfy the Liquidity Test on
any two consecutive Quarterly Payment Dates will
terminate the Investment Period.
In the event any of the Funding Availability Test,
the Liquidity Test or either of the Credit Support
Tests is not satisfied, Enron has the option, but
not the obligation, to pay or commit to pay to the
Issuer an amount sufficient to allow the Issuer to
cause such test to be satisfied and be issued
Support Notes therefor in accordance with the terms
of the Enron Support Agreement.
The Program Manager........ Enron CPO Management, L.P., an indirect
wholly-owned subsidiary of Enron, will manage the
business activities of the Issuers and take certain
actions on behalf of the Issuers in connection with
the management of their business and affairs
pursuant to the Management Agreement. See "The
Program Manager".
Under the Management Agreement, the Program Manager
will, among other things, perform the following
services on behalf of the Issuers: (i) selecting
and managing the Project Loans, including
negotiating documentation for the Project Loans,
exercising rights and remedies associated with the
Project Loans and performing certain related
functions, (ii) monitoring the Project Loans and
other Portfolio Assets, including entering into
appropriate amendments and supplements of the
documentation relating to the Project Loans and the
other Portfolio Assets, (iii) providing information
to and entering into discussions with the Rating
Agencies, (iv) enforcing the Enron Support
Agreement, (v) identifying and selecting Hedge
Counterparties and causing the Issuer to enter into
Hedging Agreements, (vi) determining the structure
of Project Loans and forming, establishing and
managing Intermediate Funding Entities through
which the Issuers may indirectly make Project Loans
and (vii) managing the acquisition and disposition
of Permitted Investments. In taking the actions to
be taken by it under the Management Agreement, the
Program Manager will be generally required to act
as would a reasonable and prudent lender acting for
its own account subject to the terms thereof.
The Program Manager will, subject to the Priority
of Payments, in consideration of the management
services rendered by it under the Management
Agreement, receive (i) the Administrative Fee, (ii)
the Management Fee and (iii) the Incentive Fee. The
Program Manager will also be required to pay
certain expenses of the Issuer in connection with
the services provided by the Program Manager under
the Management Agreement. The Management Agreement
will contain provisions for the payment or
reimbursement of certain extraordinary expenses and
indemnification provisions. See "Description of
Principal Documents, Other Material Agreements,
Management Agreement".
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<PAGE> 16
Hedging Arrangements....... The Issuer will enter into certain interest rate
hedging arrangements to seek to minimize certain
exposures arising from timing differences and
mismatches between the Issuer's assets and
liabilities. See "Interest Rate Hedging
Arrangements".
Enron Support.............. The Issuer and Enron will enter into the Enron
Support Agreement to evidence (i) the Enron Class
II Purchase Commitment and the supporting letter of
credit, (ii) Enron's obligation to pay or cause to
be paid to the Issuer on each Quarterly Payment
Date on which a Quarterly Payment Shortfall exists,
up to an amount equal to Quarterly Project
Distributions for such Quarterly Payment Date and
Project Distributions Reserved as of the previous
Quarterly Payment Date, as more fully described
herein, and receive Support Notes in exchange
therefor and Enron's obligation under certain
circumstances to provide a supporting letter of
credit, (iii) Enron's obligation to use
commercially reasonable efforts to notify the
Issuer of all opportunities to make loans to
projects developed or acquired by Enron or
Controlled Enron Affiliates and located in certain
emerging markets (see "Management's Discussion and
Analysis of Financial Condition and Results of
Operations, Business of the Issuer"), to the extent
such projects would be determined by Enron to be
Eligible Projects, and (iv) Enron's agreement not
to sponsor, or permit a Controlled Enron Affiliate
to sponsor, a Competing Issuer for a specified
period of time.
In addition, pursuant to the Enron Support
Agreement, Enron will have the right, but not the
obligation, to (i) indemnify the Issuer upon the
occurrence of a Tax Event, (ii) commit to pay or
cause to be paid an amount sufficient to allow the
Issuer to satisfy any of the Portfolio Financial
Tests, (iii) to pay to the Issuer an amount
sufficient to allow the Issuer to effect a whole or
partial redemption of the Notes and the Class C
Subordinated Notes or to effect a Class B
Refinancing, (iv) purchase or cause to be purchased
Class C Subordinated Notes or enter into a Class C
Subordinated Note Purchase Commitment or (v)
arrange one or more letters of credit to support
certain of its support obligations. Enron may
designate one or more Enron Credit Counterparties
or Acceptable Credit Providers to provide certain
types of Enron Support or assign its obligations
under the Enron Support Agreement subject to the
satisfaction of certain conditions. See "Enron
Support".
Enron will provide a guarantee of up to $ of
the indemnification obligations of the Program
Manager to the Issuer on and subject to the terms
of the Management Agreement, as more fully
described herein. See "The Program Manager".
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<PAGE> 17
The charts that follow illustrate: (1) the Priority of Payments and (2) the
application of credit support. These charts do not purport to be complete and
are qualified in their entirety by, and should be read in conjunction with, the
more detailed information appearing elsewhere in the Prospectus and in related
documents referred to herein.
[Priority of Payments Chart]
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APPLICATION OF CREDIT SUPPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[Flow Chart]
* Amounts not available to the extent shortfall results from a Tax Event.
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<PAGE> 19
RISK FACTORS
An investment in the Notes involves certain risks. Prospective investors
should carefully consider the following factors, in addition to the matters set
forth elsewhere in this Prospectus, prior to investing in the Notes.
RELIANCE UPON ENRON; CERTAIN CONFLICTS OF INTEREST
The Issuer's ability to identify and fund Project Loans and to make timely
payments of debt service on the Notes is dependent in many ways upon the
performance by Enron and Enron Affiliates of their respective obligations to the
Issuer. In addition, various potential and actual conflicts of interest between
the Issuer and Enron and Enron Affiliates, including the Program Manager, may
arise. While these conflicts of interest have been minimized by the existence of
third party equity, rights afforded to such third party investors pursuant to
the Partnership Agreement, Enron's commitment to purchase Class II Interests and
GP Interests in an aggregate amount up to $ , Enron's agreement to fund an
amount equal to Quarterly Project Distributions and Project Distributions
Reserved to cover Quarterly Payment Shortfalls and Enron's limited guaranty of
the indemnity provided by the Program Manager to the Issuer, if these conflicts
do arise, they may materially and adversely affect the Issuers' ability to make
payments on the Notes. The following summarizes the material relationships
between the Issuer and Enron and Enron Affiliates and certain of these
conflicts.
Dependence on Enron for Project Lending Opportunities
The Enron Support Agreement requires Enron to use commercially reasonable
efforts to notify the Issuer, during the Investment Period, of all opportunities
to make loans to projects developed or acquired by Enron and Controlled Enron
Affiliates that are located in EI Regions to the extent any of such projects
would be an Eligible Project (as determined by Enron on a commercially
reasonable basis and in good faith). However, this notification requirement does
not extend to any opportunities required to be offered by Enron or a Controlled
Enron Affiliate to JEDI II under existing partnership arrangements, which
exception to the notification requirement is not expected to have a material and
adverse effect on the availability of opportunities for the Issuer to make
Project Loans. It is a condition to the Issuer's funding of a Project Loan that
Enron or Enron Affiliate(s) provide or commit to provide a specified minimum
equity interest in the related Eligible Project. The success of the Issuer in
entering into Commitments to make Project Loans will depend primarily on Enron's
ability to develop projects successfully and to bring them to the attention of
the Program Manager for possible funding by the Issuer. Although Enron is
seeking actively to develop, finance and construct projects in emerging market
countries, the development and completion of any project is subject to
substantial risk. See "Risks Relating to Project Loans". In certain cases, the
ability of Enron to bring Eligible Projects to the attention of the Issuer and
the ability of the Issuer to fund Project Loans may require the consent of third
parties such as host governments and other participants in an Eligible Project.
If Enron is unsuccessful in its development efforts or if required third-party
consents are not obtained, the Issuer's ability to identify and fund Project
Loans to Eligible Projects could be materially and adversely affected. Although
the Issuer believes (and Enron has informed the Issuer) that Enron will continue
to actively develop Eligible Projects, Enron is under no obligation to do so.
Conflicts of Interest
The role of the Program Manager, acting on behalf of the Issuers on the one
hand, and as an Enron Affiliate on the other, may give rise to potential
conflicts of interest. Conflicts may arise, for example, with respect to (i)
decisions regarding the making of Project Loans, (ii) decisions regarding
Project Loan administration, including amendments to Project Loan documents,
waivers of defaults or decisions whether to foreclose upon or release collateral
securing a Project Loan, (iii) decisions regarding any Hedging Agreement in
which Enron or any Enron Affiliate is a Hedge
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<PAGE> 20
Counterparty, (iv) dealings with EI Services with respect to matters covered by
the Service Contract pursuant to which EI Services will provide certain
administrative and support services and (v) dealings with Enron with respect to
its obligations under the Enron Support Agreement. Pursuant to the Management
Agreement, the Program Manager will be required to conduct its business in
accordance with the standard of care set forth in the Management Agreement,
which generally requires the Program Manager to act as would a reasonable and
prudent lender acting for its own account. See "Description of Principal
Documents -- Other Material Agreements -- Management Agreement" and "Certain
Relationships and Related Transactions".
A majority of the persons who will serve on the Loan Committee and the
board of directors of the Program Manager are officers and employees of Enron.
Each officer of Enron has fiduciary duties imposed by law to manage Enron
(including any investments in Project Borrowers) in a manner beneficial to Enron
and its stockholders. Therefore, the duties of such persons to Enron may
conflict with the duties of such persons as Loan Committee members or directors
of the Program Manager. Enron has advised the Issuer that it does not intend to
take any action that would prevent, prohibit or restrict the Program Manager
from complying with its obligations under the Management Agreement or that would
cause any person serving on the Board of Directors of the Program Manager to
vote in any manner that would effectively prevent, prohibit or restrict the
Program Manager from complying with such obligations. In addition, Enron has
agreed to guarantee up to $ in indemnification obligations of the Program
Manager under the Management Agreement and subject to the terms thereof. See
"Enron Support".
Enron has agreed that neither it nor any Controlled Enron Affiliate,
including the Program Manager but excluding JEDI II, will sponsor or manage a
Competing Issuer until the earliest of (i) the date on which the Issuer has
funded (or committed for investment) at least $ in Project Loans, (ii)
the Investment Termination Date and (iii) the termination of the Support Period.
After such date, there are no restrictions on the activities of Enron or any
Enron Affiliate and, therefore, such entities may sponsor a Competing Issuer.
The Program Manager has certain discretion in making determinations on
behalf of the Issuer with respect to credit spreads, fees and other pricing
terms for any Project Loan. As an equity investor in a Project Borrower, Enron
or an Enron Affiliate may benefit from the terms offered by the Issuer, which
may be more favorable than terms available from other lenders.
Reliance on Enron Support
Under the Enron Support Agreement, Enron is committed to provide, or will
cause certain qualified parties to commit to provide, certain forms of financial
support to the Issuer under the circumstances set forth in the Enron Support
Agreement. Enron also has the options (i) to commit to fund certain amounts in
order to allow the Issuer to satisfy the Portfolio Financial Tests and (ii) to
guarantee the payment obligations of Project Borrowers under Project Loans in
the event such Project Loan would otherwise fail to satisfy certain of the
Project Loan Criteria on the related Financial Closing Date. The obligations of
Enron or such qualified parties under such commitments or guarantees are
unsecured, general obligations of Enron, and an inability to fund such credit
support obligations or to make payments under such guarantees (except to the
extent supported by letters of credit) could have a material and adverse effect
on the Issuer's ability to make full and timely payment of debt service on the
Notes or other amounts. See "Enron Support" and "Eligible Projects and
Qualifying Criteria -- Project Loan Criteria".
Dependence on Program Manager
The Program Manager will manage substantially all of the business
activities of the Issuer. The Program Manager is a newly formed indirect
subsidiary of Enron that has not conducted operations to date. However, the
Program Manager's employees, officers and directors generally have substantial
prior experience in project finance and project development. All of the Program
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<PAGE> 21
Manager's directors, officers and employees are employees, officers or directors
of Enron or Enron Affiliates. As a result of the dual roles of such persons,
their attention may be focused for significant amounts of time on matters
related to Enron or EI business rather than the Issuer's business. Certain key
employees of the Program Manager, however, will be dedicated to the management
of the business activities of the Issuer.
Limitations on Ability of Enron to Control Project Borrowers
In order for the Issuer to make a Project Loan, Enron or Enron Affiliates
will be required to own, directly or indirectly, on average a minimum equity
and/or subordinated debt interest in each of the Project Borrowers of
approximately 25%. As a result of such equity or subordinated debt interest,
Enron will exercise influence with respect to many matters concerning the
Eligible Projects. However, because Enron or Enron Affiliates may not own a
majority (or, in certain cases, a greater proportion) of the equity or
subordinated debt of a Project Borrower, Enron may not be in a position to
direct and control the outcome of all decisions and matters related to the
Project Borrower, some of which could materially adversely affect the Issuer's
interest in such Project Borrower.
Dividends Available for Quarterly Payment Shortfalls Subject to Currency,
Project and Structural Risk
Under the Enron Support Agreement, Enron has agreed to pay up to an amount
equal to Quarterly Project Distributions and Project Distributions Reserved if
and to the extent there is a Quarterly Payment Shortfall on any Quarterly
Payment Date, and will receive Support Notes in consideration therefor. These
distributions (i) will be available only to the extent of excess cashflow
available from the Project Borrowers, (ii) will be structurally subordinate to
all indebtedness of the Project Borrowers and (iii) may be subject to currency,
convertibility and remittance risk. See "Enron Support". To the extent such
distributions are not convertible, directly or indirectly, into Dollars or
cannot be remitted offshore, they will not constitute Quarterly Project
Distributions or Project Distributions Reserved.
ASSIGNMENT/DELEGATION
Under certain circumstances (including the merger or consolidation of Enron
and the sale of a majority interest in EI) and subject to various credit and
other tests, Enron and the Program Manager may assign their respective rights or
delegate their respective obligations under the Enron Support Agreement and the
Management Agreement to third parties. There can be no assurance that such
assignment and/or delegation will not occur. See "Enron Support".
LIMITED-RECOURSE OBLIGATIONS
The Notes are secured, limited-recourse obligations of the Issuers, which
will have no substantial assets other than the Project Loans and the other
Collateral pledged by the Issuers to secure the Notes and the other Senior
Secured Obligations. Except for the obligation of Enron or certain Enron
Affiliates to provide support to the Issuer pursuant to the Enron Support
Agreement, none of the partners in, or officers or directors of, the Issuers,
the Program Manager, the Underwriters, the General Partner, Enron or any of
their respective affiliates or any other person or entity has guaranteed or will
be otherwise obligated to make payments on the Notes. Consequently, holders of
the Notes must rely solely on amounts received in respect of the Project Loans
and the other Collateral pledged to secure the Notes and the other Senior
Secured Obligations for the payment of principal, interest and other amounts
owing on the Notes and the other Senior Secured Obligations. If payments on the
Collateral or, following the occurrence of an Event of Default or a Subordinate
Event of Default, the liquidation proceeds of the Collateral under the
circumstances permitted by the Financing Documents, are insufficient to make
payments on the Notes, the Issuers would have no further assets to cover the
deficiency.
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<PAGE> 22
UNIDENTIFIED PORTFOLIO; COMPETITION; ABILITY TO ISSUE CLASS A SENIOR NOTES
None of the Project Loans to be funded by the Issuer has been identified on
the date hereof and there can be no assurance that the Issuer will be able to
make Project Loans. The Issuer has discretion in deciding to fund Project Loans
and, as a result, prospective investors will not be able to evaluate for
themselves the merits of Project Loans to be funded by the Issuer prior to
purchasing Notes and, instead, must rely on the judgment of the Program Manager
to conduct appropriate evaluations and to make lending decisions for the Issuer
in accordance with the Management Agreement.
In addition, in seeking to make Project Loans, the Issuer will compete with
other lenders, including large financial institutions certain of which will have
greater financial resources than the Issuer. Accordingly, even if potential
Project Loans are identified and pursued, there can be no assurance that the
Issuer will be successful in bidding for such Project Loans.
There can be no assurance that the methodology and base assumptions
currently used by each Rating Agency in rating the Project Loans or the Notes
will not substantially change while the Notes are outstanding. In the event
there are substantial changes to the Rating Agency methodology in rating the
Notes or the Project Loans, such changes may adversely affect the ability of the
Issuers to issue additional Class A Senior Notes after the Closing Date and may
result in the early termination of the Investment Period. Moreover, other
factors, such as market conditions, may impair the ability of the Issuers to
issue Class A Senior Notes after the Closing Date.
NATURE OF COLLATERAL
The Collateral is expected to be comprised primarily of Project Loans to be
funded after the Closing Date. Such Project Loans will be subject to credit,
liquidity and interest rate risk. See "Elements of Project Financing". The
overall quality of the Collateral will be affected by the pricing and
availability of Project Loans. The amount and nature of the Collateral securing
the Notes and the other Senior Secured Obligations and the credit support
provided under the Enron Support Agreement have been established to withstand
certain assumed deficiencies in payment occasioned by defaults in respect of the
Project Loans. See "Description of the Notes" and "Rating of the Notes". If
actual deficiencies exceed such assumed levels, however, principal and interest
payments on the Notes could be adversely affected. Moreover, because each of the
Project Loans will represent long-term obligations of a Project Borrower that is
individually structured to meet the specific needs of a particular Eligible
Project, there may be considerable difficulty in disposing of such Project Loan
upon the occurrence of an event of default with respect to such Project Loan
and, consequently, a restructuring of the Project Loan may result in lieu of a
disposition of such Project Loan. There can be no assurance that the proceeds of
any such sale, disposition or restructuring will be sufficient to cover the
amount of principal, interest and other amounts owing to the Issuer in respect
of such Project Loan. In addition, because of the unique and customized nature
of a loan agreement and the private syndication of a loan, certain Project Loans
may not be purchased or sold as easily as publicly traded securities. Project
Loans may encounter trading delays due to their unique and customized nature,
and transfers may require the consent of lenders or the Project Borrower.
During the Investment Period, the Issuer will invest funds held in the TIP
Accounts in Temporary Investments. These investments (as is the case with
Eligible Investments made with amounts credited to any of the other Accounts)
will be subject to credit, liquidity and interest rate risk. While specific
investment guidelines will govern the Temporary Investments, there can be no
assurance that the Issuer will not experience losses on the Temporary
Investments (and Eligible Investments) either due to default of the underlying
issuer or due to an adverse change in market conditions. Such losses could have
a material and adverse effect on the Issuer's ability, among other things, to
fund committed Project Loans as well as the Issuer's ability to satisfy the
Portfolio Financial Tests enabling it to fund new Project Loans.
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LIMITED NUMBER OF PROJECT LOANS
While there are diversity requirements applicable to the Project Loans, the
number of Project Loans to be funded by the Issuer will be limited, and each
Project Loan may represent a substantial portion of the total assets of the
Issuer. The number of Project Loans may be limited for several reasons,
including the Issuer's decision to terminate the Investment Period early if it
determines that, in light of the composition of the Issuer's portfolio of
Project Loans, general market conditions and other factors, the making of
additional Project Loans would either be impracticable or not beneficial to the
Issuer. As a consequence, the ability of the Issuer to make payment on the Notes
may be adversely affected by the unfavorable performance of a limited number of
the Project Loans.
SUBORDINATION
Payment of principal and interest (but not premium) on the Senior Secured
Obligations will be senior to the payment of principal and interest (and
premium, if any) on the Class B Senior Subordinated Notes, the Class C
Subordinated Notes and the Support Notes (if any). The payment of principal and
interest (and premium, if any) of the Senior Secured Obligations and the Class B
Senior Subordinated Notes will be senior to the payment of principal and
interest on the Class C Subordinated Notes and the Support Notes. Any losses of
the Issuer will be borne first by the holders of the Interests, then by the
holders of any outstanding Support Notes, then by the holders of any outstanding
Class C Subordinated Notes, then by the holders of any outstanding Class B
Senior Subordinated Notes and then by the holders of the Class A Senior Notes
and holders of any other outstanding Senior Secured Obligations. Moreover, in
certain circumstances, if an Event of Default occurs, as long as any Class A
Senior Note or any other Senior Secured Obligation is outstanding, the holders
of the Senior Secured Obligations will be entitled to determine the remedies to
be exercised under the Security Documents in respect of the Collateral, pursuant
to the terms of an Intercreditor Agreement to be entered into among the Issuer,
the Trustee, the Liquidity Facility Agent, any Backup Facility Agent and the
Collateral Agent. Upon the occurrence of a Subordinate Event of Default, holders
of Class B Senior Subordinated Notes will be able to exercise certain remedies
without obtaining the concurrence of the Senior Secured Parties. Remedies
pursued by the holders of the Senior Secured Obligations could be adverse to the
interests of the holders of the Class B Senior Subordinated Notes. See
"Description of Principal Documents -- Financing Documents -- Intercreditor
Agreement" and "Description of the Notes -- Indenture -- Events of Default".
INTEREST RATE RISK
The Issuer anticipates that the Notes and the Project Loans will bear fixed
rates of interest based upon certain benchmark Treasury yields at the times the
Notes and Projects Loans are priced. Since the Notes and Project Loans will be
priced at different times, the Issuer is exposed to the risk that Treasury
yields may change between the time that the Project Loans are priced and the
Notes are priced, and vice versa. The Issuer will seek to minimize this exposure
through the use of hedging instruments such as swaps which are intended to have
termination values that offset the present value difference of higher or lower
than anticipated Project Loan and Note benchmark Treasury yields. The Issuer is
also exposed to the additional risk that credit spreads could change between the
time that the Project Loans are priced and the Notes are priced, and vice versa.
The Issuer anticipates that the Temporary Investments will be invested in
fixed-rate and/or floating-rate instruments. In addition, the Project Loans may
bear interest at a fixed-rate or, prior to commencement of commercial operations
of the relevant Eligible Project, a floating rate. There is a potential mismatch
between the rates at which the Issuer earns interest on the Temporary
Investments and the Project Loans and the interest rate (on a swapped basis) at
which the Issuer is required to make payments with respect to its liabilities
that may result in increased costs for the Issuers. The Issuer will seek to
manage this interest rate mismatch by entering into hedging agreements that will
seek to match the fixed-rate and floating-rate interest on the Temporary
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<PAGE> 24
Investments and Project Loans to the net interest rate that the Issuers are
paying on their liabilities, but there can be no assurance that the Issuer will
be successful in doing so.
The benefits of a hedging agreement entered into as contemplated above may
not be achieved in the event of the early termination of such agreement,
including termination upon the failure of the relevant counterparty to perform
its obligations under such hedging agreement. See "Interest Rate Hedging
Arrangements".
LIMITATION ON ISSUER'S ABILITY TO CONTROL REMEDIES IN RESPECT OF PROJECT
BORROWER INDEBTEDNESS
It is possible that the Issuer may be one of numerous secured lenders
(including Enron or an Enron Affiliate) to a Project Borrower. In such cases,
the Issuer may not be able to direct the remedies in respect of a Project
Borrower upon an occurrence of an event of default under the Project Loan
relating to such Project Borrower, and the Issuer's remedies with respect to the
collateral securing such Project Loan will be subject to the decisions made by,
or including, other secured lenders of such Project Borrower.
NATURE OF REMEDIES AGAINST PROGRAM MANAGER; REMOVAL OF PROGRAM MANAGER BY CLASS
I INTERESTS
Under the Management Agreement, remedies against the Program Manager are
not available unless and until there has been an arbitral determination of the
existence of and damages caused by the bad faith, gross negligence or willful
misconduct of the Program Manager. Furthermore, the Program Manager has agreed
generally to indemnify the Issuer and each Holder of Notes from and against any
actual and direct damages by reason of any action taken or omitted to be taken
under or in connection with the Management Agreement, by the Program Manager or
any of its officers, agents, stockholders, partners, members, directors or
employees, if there is an arbitral determination that such act or omission was
performed or omitted in bad faith or constituted gross negligence or willful
misconduct. Such indemnification will be guaranteed by Enron up to a maximum
amount of $ , subject to the terms of the Enron Support Agreement.
Upon the occurrence of a Class I Trigger Event, the Program Manager may be
removed without cause by the holders of the Class I Interests subject to, among
other conditions, the approval of the Replacement Program Manager by the
Required Lenders.
RISKS RELATING TO PROJECT LOANS
Project Financing; Limited Recourse Obligations
The Project Borrowers will be corporations, partnerships, limited liability
companies or other entities that have been formed for and are generally
restricted to, the limited business purpose of owning an Eligible Project.
Accordingly, payment of amounts due under a Project Loan is dependent upon
successful development, construction and operation of the underlying Eligible
Project. The Project Loans generally will be obligations solely of the Project
Borrowers.
Lack of Operating History, Construction, Operating and Technical Risks
Many of the Project Borrowers are expected to be newly formed companies
with no prior operating history. Many of the Eligible Projects the Issuer
finances are expected to be new projects requiring the construction of their
operating plant and assets. Moreover, the Eligible Projects will likely comprise
complex facilities, the construction and operation of which involve many risks,
including, without limitation, shortages of equipment, material and labor,
delays in delivery of equipment and materials, the risk of the breakdown or
failure of equipment or processes, problems in the application of the relevant
technological processes required for the Eligible Project, fuel and water
quality problems, the failure of the Eligible Projects to perform at expected
levels of output or efficiency, labor disputes, delays in obtaining or inability
to obtain permits, political events, local or political opposition, blockades or
embargoes, litigation, adverse weather conditions, unanticipated increases in
costs, changes in law, natural disasters, accidents, unforeseen engineering,
design, environmental or geological problems, and events such as fires,
hurricanes, earthquakes, floods, explosions and guerrilla attacks.
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<PAGE> 25
Adequacy of Insurance
Insurance coverage varies by country and region and may not be available,
or available on commercially reasonable terms, to cover all of the operating
risks associated with an Eligible Project, and the proceeds of insurance
applicable to covered risks may not be adequate to cover lost revenues or
increased expenses. Furthermore, in the event of total or partial loss to an
Eligible Project, certain items of equipment may not be replaceable promptly due
to their large size and project-specific character.
Reliance on Projections and Underlying Assumptions
The Project Loans will be structured on the basis of certain assumptions
and financial projections of the Project Borrowers. In order to satisfy the
Qualifying Criteria, the Program Manager will be required to receive, at or
prior to the time of the initial disbursement of a Project Loan, a report of an
Independent Engineer (which may have based certain of its opinions on the
opinions of other independent advisers) confirming the technical and economic
feasibility of such Eligible Project and concurring that the assumptions used in
developing the Base Case Financial Projections for the Eligible Project are
commercially reasonable. In preparing the analyses for such report, the
Independent Engineer (and any other relevant advisers) will be required to make
certain assumptions with respect to general business and economic conditions,
certain material contingencies and other matters outside the control of a
Project Borrower. Assumptions that are critical to the economic viability of an
Eligible Project and to the payment of the related Project Loan may include
assumptions as to prices of the product or service being produced, the level of
production, operating expenses, repair and maintenance costs, the performance of
the Eligible Project, revenues, the market for such products or services, tax
rates, inflation and capital costs. Such assumptions and the other assumptions
used in the analyses by the Independent Engineer (and any other relevant
advisers) may contain significant uncertainties. Actual results may differ,
perhaps materially, from those projected. Accordingly, the financial analyses
may not necessarily reflect current or future costs or projected cash flows
relating to the Project Borrower.
Dependence on Limited Number of Customers and Suppliers
In many cases, there may be an absence of a third party market for the
production or services generated by an Eligible Project, and the Project
Borrower's primary source of revenue may be limited to payments by certain
identified customers. Similarly, there may be a limited source of providers of
goods and services necessary for development and operation of an Eligible
Project. In such cases, the Project Borrower will be dependent upon such
customers' performance of their obligations to purchase (or suppliers'
obligation to provide, as the case may be) such product or services, which may
be subject to suspension during the duration of specified force majeure events.
Force majeure events may include, among other things, acts of God, extraordinary
weather conditions, acts of a public enemy, civil disturbances or strikes. Any
material failure by such customers or suppliers to fulfill their obligations, or
the suspension of such customers' or suppliers' obligations upon the occurrence
of specified force majeure events, could have a material adverse effect on the
Project Borrower's ability to meet its obligations under its Project Loan.
Price Fluctuations and Volatility of Earnings
The prices paid or received by Project Borrowers for certain commodity
products, including crude oil and electricity, will be significantly influenced
by the market price of such products. Markets and prices of commodity products
are subject to considerable fluctuation and can be very volatile depending on
many factors beyond the control of the Project Borrowers, including the
aggregate supply/demand balance that fluctuates with changes in the global
economy, the price and availability of substitutes, and international political
and economic events. Adverse movements in the price of commodity products, to
the extent those movements have not been adequately hedged by the Project
Borrower, could have a material adverse effect on a Project Borrower's ability
to repay a Project Loan. While the risk of commodity price fluctuations is
particularly relevant to
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<PAGE> 26
Eligible Merchant Projects whose offtake may not be subject to Integrated
Contractual Arrangements, specific Qualifying Criteria applicable to Eligible
Merchant Projects address this risk.
Environmental and Regulatory Matters
A Project Borrower will be subject to the statutory and regulatory
standards of the jurisdictions in which they operate and may be required to
obtain governmental permits or approvals in connection with an Eligible Project,
which may include those relating to energy and environmental laws. A delay in
the receipt of or a failure to obtain these permits or approvals or to satisfy
any conditions specified in such permits or approvals could delay completion of
the construction of such Eligible Project, restrict the operation of such
Eligible Project or result in additional costs or taxes. In addition, many of
the countries in which the Eligible Projects are located have recently
developed, or are in the process of developing, new regulatory and legal
structures to accommodate private and foreign-owned businesses. The adoption of
such new laws, policies or regulations, or changes in the interpretation or
application of existing laws, policies and regulations, that modify the
regulatory environment at the time or after a Project Loan is made could have a
material adverse effect on such Project Borrower's ability to construct or
operate such Eligible Project and, consequently, upon its ability to repay such
Project Loan.
Realization of Collateral Securing a Project Loan
In the event of a foreclosure on any collateral securing a Project Loan
following an event of default under such Project Loan, the ability of the Issuer
to foreclose on the collateral securing a Project Loan will generally be
subject, in certain instances, to perfection and priority issues and to
practical problems associated with realization of security interests
(particularly if a Project Borrower is in bankruptcy, liquidation or similar
proceedings). In particular, transferring the contract rights relating to the
Eligible Project and the permits and other rights required to operate the
Eligible Project to a person willing to succeed to the defaulting Project
Borrower may require additional governmental proceedings. There can be no
assurance that the appropriate approvals can be obtained in connection with such
transfers following a foreclosure on the collateral securing the Project Loans.
Moreover, no precedent may exist under the laws of a country (particularly a
developing country) where an Eligible Project is located with respect to
foreclosure on properties.
While the Holders of Notes and other Secured Parties will have a security
interest in the Collateral, including a security interest in the Issuer's right,
title and interest in and to each Project Loan and any collateral securing such
Project Loans, they will not be a direct holder of any security interest over
such Project Loan collateral and may not for certain purposes be viewed in a
jurisdiction in which a Project Borrower is domiciled as being entitled to
enforce the Issuer's interest in such Project Loan or the collateral therefor
merely by virtue of their security interest in the collateral granted by the
Issuer.
Lack of Enforcement of Foreign Judgments
All, or a substantial portion of the assets of the Project Borrowers, and
the officers and directors of the Project Borrowers, may be located outside the
United States. As a result, it may be difficult to effect service of process
upon such persons within the United States, or to enforce judgments against a
Project Borrower or any such officer or director in U.S. courts (or elsewhere).
Judgments of United States courts may not be enforceable in certain
countries if there is no treaty, arrangement or other basis for reciprocal
enforcement of judgments between such country and the United States. As a
result, any claim against a Project Borrower or such directors and officers may
be required to be pursued in such country. No assurance can be given that such a
country's courts will protect the interests of the Issuer (and any other senior
lenders) in the same manner or to the same extent as would United States courts.
If the party in whose favor a U.S. judgment is rendered brings a new suit in a
competent court in another country, such country may give binding or evidentiary
effect to the U.S. judgment, provided the jurisdiction of the U.S. court was
based on grounds that were internationally acceptable, that proper legal
procedures were observed
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<PAGE> 27
and that the U.S. judgment does not contravene principles of public policy of
such country. Such country may not, however, give any binding or evidentiary
effect to the U.S. judgment.
Risks Relating to Non-U.S. Obligations
A substantial portion of the Project Loans funded by the Issuer will
consist of obligations of Project Borrowers located in countries with credit
ratings below Investment Grade.
The economies of individual non-U.S. countries, especially emerging market
countries, may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, volatility of
currency exchange rates, capital reinvestment, resource self-sufficiency and
balance of payments position. Most emerging market countries have experienced
substantial, and in some periods extremely high and volatile, rates of
inflation. Moreover, certain emerging market economies depend significantly upon
exports of only one or a few commodities and, therefore, are vulnerable to
changes in the price of such commodities.
In addition, although Project Loans may be U.S. dollar denominated, the
underlying offtake contracts may be payable in local currency and indexed to
U.S. dollars. Such indexing may not match fluctuations in the exchange rate
between such local currency and U.S. dollars.
In addition to the regulation of trade and financial policy, governments of
many emerging market countries have exercised and continue to exercise
substantial influence over many aspects of the private sector including, but not
limited to, ownership of and control over private sector companies, the
imposition of restrictions on the investment and lending activities of foreign
entities such as the Issuer, and the imposition of price controls or limitations
on the convertibility of currency.
Furthermore, in some foreign countries there is the possibility of
expropriation, nationalization or confiscatory taxation, political, economic or
social instability or adverse diplomatic developments, each of which could have
an adverse effect on the Project Borrower's investments in such foreign
countries and consequently on its ability to repay amounts owed to the Issuer
under the Project Loan.
Sovereign Immunity
Although the documentation relating to each Project Loan is generally
expected to contain waivers on the part of the Project Borrower as to any right
to sovereign or other immunity that such entity may have from suit,
jurisdiction, attachment, execution of a judgment or from any other legal or
judicial process or remedy, to the fullest extent such waivers are permitted by
the laws of the country in which such Project Borrower is located, certain
assets of such Project Borrower may nevertheless enjoy such immunity under the
laws of the country in which such Project Borrower is located.
RISKS RELATING TO VOLATILITY IN THE EMERGING MARKETS
Securities of companies in the emerging markets have been, to varying
degrees, influenced by economic and market conditions in other emerging market
countries, e.g., the economic crisis in Mexico that began in late 1994 and the
current economic crisis in the developing Asian economies. Although economic
conditions are different in each emerging market country, investors' reactions
to developments in one country may affect the securities of other emerging
market issuers. The price of the Notes in the secondary markets could thus be
affected adversely by events occurring in emerging market countries outside of
those in which Eligible Projects are located.
AVERAGE LIFE CONSIDERATIONS
The average life of each Class of Notes is expected to be shorter than the
number of years until the Stated Maturity. While the Average Life Test must
initially be satisfied at the time of initial funding of each Project Loan, the
average life of each Class of Notes will be affected by the financial
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<PAGE> 28
condition of the Project Borrowers and the characteristics of, and payments and
prepayments on, the Project Loans. See "Maturity, Prepayment and Yield
Considerations" and "Description of the Notes--Redemption".
LIMITED LIQUIDITY
There is currently no market for the Notes. Although the Underwriters
intend to make a market in the Notes, the Underwriters are under no obligation
to do so and, following the commencement of any market-making, may discontinue
the same at any time. There can be no assurance that a secondary market for any
of the Notes will develop, or if a secondary market does develop, that it will
provide the holders of such Notes with liquidity or that it will continue for
the life of the Notes. Consequently, an investor in the Notes must be prepared
to hold the Notes for an indefinite period of time or until their Stated
Maturity.
TAX RISKS
The Issuer could become liable for U.S. and non-U.S. taxes under certain
circumstances. The imposition of tax on the Issuer could materially impair its
ability to make payments on the Notes and may result in the early termination of
the Investment Period.
Under certain circumstances (including if any Class of Notes were found to
be equity of the Issuer for U.S. tax purposes), the Issuer could be taxed as a
corporation in the United States. Regardless of whether the Issuer were taxed as
a corporation, income attributable to non-U.S. holders of the Notes treated as
equity would be subject to U.S. withholding tax for which the Issuer could be
held liable. Imposition on the Issuer of tax or liability for withholding tax
could materially impair its ability to make payments on the Notes. See "Tax
Considerations -- Possible Alternative Characterizations".
Interest and other amounts received by the Issuer from Project Borrowers
may be subject to withholding and other taxes imposed by jurisdictions in which
the Project Borrowers are organized or operating and which the Issuer is unable
to recover from the Project Borrowers. Rates of tax may change, new taxes may be
imposed and bases for avoiding tax may become unavailable after the Issuer has
made a Project Loan and before the Project Loan has been repaid in full. To the
extent that the Issuer has extended credit to Project Borrowers through
intermediate vehicles, the Issuer bears the same risks in the jurisdictions
where those vehicles are organized or operating.
IMPACT OF BANKRUPTCY OF ISSUER
The Issuer has taken steps to minimize the risks that it could become
subject to a proceeding under the Bankruptcy Code. Notwithstanding the taking of
such steps, it is not possible for the Issuers to eliminate the risk of claims
by all potential creditors. If the Issuer were to seek protection or become the
subject of a filing of an involuntary bankruptcy petition under the Bankruptcy
Code, the ability of Holders of the Issuer's Notes to recover their investment
may be significantly impaired. Under the Bankruptcy Code, a debtor may not
assume an executory contract to make a loan, or extend other debt financing or
financial accommodations, to or for the benefit of the debtor, or to issue a
security of the debtor. Any obligation of Enron or any other person or entity to
purchase Class C Subordinated Notes or Support Notes or to fund amounts equal to
Quarterly Payment Distributions or Project Distributions Reserved would likely
be deemed to be such a financial accommodation, and therefore to be unassumable
by the Issuer. In any event, money that the Issuer receives from third parties,
such as Enron, even if subject to a lien in favor of the Noteholders, may not be
used to pay the Notes in accordance with their terms and might be made available
to other creditors.
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<PAGE> 29
FORWARD LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Since the Issuer is an entity being formed in connection with the offering
and sale of the Notes, certain of the information contained in this Prospectus
necessarily relates to future events and conditions. Accordingly, any
information other than historical information set forth herein, including all
projections, forecasts and estimates contained herein, are forward looking
statements and are based upon certain assumptions regarding future conditions
that the Issuer considers reasonable. Projections and other forward looking
information, because they involve prediction of future events and conditions
which have not yet occurred, are necessarily speculative in nature, and it can
be expected that some or all of the assumptions underlying the projections will
not materialize or will vary significantly from actual results. Accordingly, the
projections are only an estimate. Actual results will vary from the projections,
and the variations may be material.
Some important factors that could cause actual results to differ materially
from those in any forward looking statements include unforeseen changes in
interest rates, market, financial or legal uncertainties, altered political and
economic conditions and the effectiveness of the Hedging Agreements, among
others. Consequently, the inclusion of projections herein should not be regarded
as a representation of the Issuer, the Program Manager, the Trustee, any
Underwriter or any of their respective affiliates or any other person or entity
of the results that will actually be achieved by the Issuer.
None of the issuer or the Underwriters or any of their respective
affiliates has any obligation to update or otherwise revise any projections,
including any revisions to reflect changes in economic conditions or other
circumstances arising after the date hereof or to reflect the occurrence of
unanticipated events, even if the underlying assumptions do not come to
fruition.
USE OF PROCEEDS
The proceeds from the issuance of the Initial Notes and the Initial
Interests, after payment of applicable fees and expenses, are expected to be
approximately $ . Such net proceeds will be credited to the Uncommitted
TIP Account and invested in Temporary Investments until used to fund Project
Loans. As described herein, the Issuers intend to issue additional Class A
Senior Notes after the Closing Date.
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CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Issuers as of the Closing Date as adjusted to give effect to the issuance of the
Initial Notes. This table should be read in conjunction with "Use of Proceeds",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Issuer and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS ADJUSTED
FOR INITIAL ISSUANCE
(IN THOUSANDS)
--------------------
<S> <C>
Long-Term Debt(1):
Class A Senior Notes......................................
Class B Senior Subordinated Notes.........................
----------
Total Long-Term Debt..............................
----------
Owners' Equity(2):
Class I Interests.........................................
GP Interests and Class II Interests.......................
----------
Total Owners' Equity..............................
----------
Total Capitalization..............................
==========
</TABLE>
- ---------------
(1) Excludes a liquidity facility with availability of $ , none of
which is outstanding. See "Liquidity Facility and Backup
Facility -- Liquidity Facility". Excludes up to $ of commitments to
purchase Class C Subordinated Notes that may be undertaken by Enron (or a
permitted assign) and that, if made by Enron (or such assign) at its option,
will obligate Enron (or such assign) to purchase Class C Subordinated Notes
in certain circumstances. See "Enron Support".
(2) Excludes approximately $ of contingent and unfunded commitments
that may obligate Enron (or a permitted assign) to purchase Class II
Interests and GP Interests from the Issuer in certain circumstances. See
"Enron Support".
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<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Issuer, a Delaware limited partnership, was formed on July 30, 1998
pursuant to a Limited Partnership Agreement (the "Partnership Agreement"), to
provide construction and term loans to certain international electricity, energy
and other natural gas-related infrastructure projects sponsored by Enron and has
had no material operations to date. The Issuer intends to create, during an
investment period of up to five years, a diversified portfolio of Project Loans
in an aggregate principal amount of approximately $5 billion. The General
Partner of the Issuer is an Affiliate of the Program Manager and a wholly-owned
subsidiary of Enron.
The Co-Issuer was incorporated under the laws of the State of Delaware on
July 30, 1998 and is wholly-owned by the Issuer. The Co-Issuer has no material
assets or any liabilities other than as Co-Issuer of the Notes. The Co-Issuer's
activities are limited to issuing the Notes and engaging in other activities
incidental thereto. The principal executive offices of the Issuer, the Co-Issuer
and the General Partner are located at 1400 Smith Street, Houston, Texas 77002
and their telephone number is (713) 853-6161.
Subject to the terms of the Partnership Agreement and Financing Documents,
the activities of the Issuer include: (1) the funding, disposition, ownership
and management of Project Loans, (2) making Commitments in respect of Project
Loans, (3) issuing the Notes, the Interests, the GP Interests, the Class C
Subordinated Notes and the Support Notes, (4) entering into Hedging Agreements,
(5) making Temporary Investments and Eligible Investments, (6) the ownership of
the shares of the Co-Issuer, (7) entering into the Backup Facility and the
Liquidity Facility and (8) engaging in other activities incidental to the
foregoing. The Partnership Agreement provides that the affairs of the Issuer are
to be wound up on December 31, 2018 subject to earlier termination upon a
bankruptcy of the Issuer or certain other events.
Under the Management Agreement, the Program Manager will perform all
management services on behalf of the Issuers including, among other things,
manage the selection and funding of Project Loans and Temporary Investments,
manage the ratings process, negotiate the documentation for Project Loans,
monitor compliance by Project Borrowers with Project Loan agreements, take
action to protect the rights of the Issuer in connection with any non-compliance
with Project Loan agreements by any Project Borrower and provide substantially
all of the general and administrative support to the Issuers pursuant to the
Management Agreement. The Issuer will pay the Program Manager quarterly fees for
such services. The Program Manager will also employ third-party investment
managers and Enron Affiliates to manage and invest the Issuer's cash.
CAPITAL STRUCTURE
As of the Closing Date, the Issuer's debt will consist of :
(i) $ of Class A Senior Notes (initially rated A2 and A
by Moody's and S&P, respectively); and
(ii) $ of Class B Senior Subordinated Notes (initially
rated Ba2 and BB by Moody's and S&P, respectively).
As of the Closing Date, the partnership interests in the Issuer will
consist of:
(i) approximately $ of funded GP Interests owned by the
General Partner and commitments by the General Partner to purchase
approximately $ of GP Interests;
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<PAGE> 32
(ii) approximately $ of funded Class I Interests
indirectly owned by persons unaffiliated with Enron and commitments by
persons unaffiliated with Enron to purchase indirectly approximately
$ of Class I Interests; and
(iii) approximately $ of funded Class II Interests owned by
Enron or an Enron Affiliate and commitments by Enron to purchase
approximately $ of Class II Interests to be funded when needed
to cover any Quarterly Payment Shortfalls, in accordance with the Enron
Support Agreement. The unfunded portion of Enron's commitment will be
backed by an irrevocable standby letter of credit issued by a commercial
bank. See "Enron Support".
PORTFOLIO ASSETS
The Issuer's assets will consist primarily of Project Loans and Temporary
Investments. Project Loans are project financing loans that meet Qualifying
Criteria, including a requirement that a Project Borrower be a special purpose
entity with predictable cash flows. While the Issuer believes that Enron will
provide sufficient project financing opportunities to the Issuer to create its
portfolio, the success of the Issuer in entering into Commitments to make
Project Loans is dependent primarily on Enron's ability to develop projects and
the Issuer's ability to successfully bid for such project financing
opportunities. Prior to funding Project Loans, the Issuer will invest the net
proceeds of the Notes and the Interests in Temporary Investments, which consist
of Investment Grade securities with maturities no longer than one year. Interest
income will be recognized as it accrues and fees paid at the inception of a
Project Loan will be amortized over the life of the applicable Project Loan.
As a result, the Issuer's cash flows will be primarily dependent upon (i)
the ability of the Issuer to make Project Loans, (ii) the ability of the Project
Borrowers to generate cash flow sufficient to service Project Loans and other
debt obligations and (iii) the performance of the Temporary Investments.
The Issuer intends to enter into Hedging Arrangements designed to mitigate
the risks created by differences in timing between the issuance of Notes and the
pricing of Project Loans. The Issuer can only enter into Hedging Arrangements
with creditworthy counterparties. See "Interest Rate Hedging Arrangements".
LIQUIDITY AND CAPITAL RESOURCES
During the Investment Period, the Issuer's primary cash requirement is
expected to be the funding of 12-20 Project Loans. Each of these Project Loans
will generally be drawn either in a single disbursement or over a one- to
three-year period. At the Closing Date, the Issuer will have approximately
$ available to commence its operations from the net proceeds of the
Initial Notes and the Initial Interests. The Issuer intends to use such net
proceeds to make Project Loans over the next twelve to eighteen months. In order
to fund additional Project Loans, the Issuers intend to (i) issue up to
$ of additional Class A Senior Notes, and (ii) draw any Class I
Interests that have not been funded. The Issuer believes that such funds will be
sufficient to finance its project lending activities.
Exclusive of these loan funding activities, the Issuer expects to have
ongoing cash requirements, principally consisting of (i) the payment of
Administrative Fees, Management Fees and other fees to the Program Manager and
other providers of services to the Issuer in connection with the Offering and
future issuance of Notes, (ii) the payment of debt service obligations on the
Notes and (iii) payments relating to Hedging Agreements. Principal of and
interest on Project Loans received from Project Borrowers, together with
interest income generated from Temporary Investments and drawings on the
Liquidity Facility, are expected to be used to meet these obligations.
In the event of Quarterly Payment Shortfalls, if any, the Issuer has
arranged for other sources of liquidity, including (i) Enron's obligation to
purchase up to $ of Class II Interests and GP Interests, (ii) Enron's
obligation to purchase Support Notes up to an amount equal to Quarterly
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Project Distributions and Project Distributions Reserved and (iii) the use of
funds in the Excess Spread Account.
YEAR 2000
The Year 2000 problem arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19." If not corrected, many computer applications could fail or create
erroneous results. The extent of the potential impact of the Year 2000 problem
is not yet known, and if not timely corrected, it could affect the global
economy.
The Issuer has entered into the Administrative Services Agreement with an
Enron Affiliate to provide information systems support. Enron's Year 2000
Project Team has developed a coordinated plan to ensure that Enron's systems
will be Year 2000 compatible and to minimize any potential interruption of
business. The plan includes taking inventory of the capabilities of all computer
hardware, embedded chips and software; assessing the effects of Year 2000
problems on all of Enron's business units; modifying systems to correct those
problems to the maximum practicable extent; verifying and testing the
modifications implemented; determining which aspects of the Year 2000 problem
cannot be practicably remediated before January 1, 2000; communicating with
outside entities to identify the progress made in modifying those systems which
affect Enron; and developing contingency plans to cope with the consequences of
potential problems that have not been identified or cannot be remediated by that
date.
Enron has completed a preliminary assessment of its Year 2000 problem.
Remediation efforts are ongoing on all business units. The Issuer anticipates
that its future Year 2000 related costs will not have a material impact on the
Issuer's financial position or results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance, however, SFAS No. 133 cannot be applied retroactively.
The Issuer will adopt SFAS No. 133 in the year ended December 31, 1998.
BUSINESS OF THE ISSUER
GENERAL
The Issuer was established by Enron to provide construction and term loans
to certain international electricity, energy and other natural gas-related
infrastructure projects sponsored by Enron. During an investment period of up to
5 years, the Issuer intends to create a diversified portfolio of project loans
in an aggregate principal amount of approximately $5.0 billion, financed through
the issuance of senior debt, subordinated debt and equity.
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<PAGE> 34
Over an investment period of up to 5 years, the Issuer expects to finance a
portfolio of project loans made to between 12 and 20 projects that will have the
traditional benefits of project finance loans as well as portfolio
diversification and credit enhancements that are typical of collateralized debt
obligations. Generally, project finance loans, which have an established rating
agency methodology, are made to entities with a specific business purpose and
predictable cash flows. Project finance loans are also usually supported by a
contractual framework, such as long-term supply and offtake contracts, that
seeks to reduce project risk. S&P and Moody's have assumed that emerging market
project finance loans typically benefit from higher recovery rates following an
incidence of default than similarly rated debt obligations to corporate or
sovereign borrowers in the emerging markets. When fully funded, the Issuer's
portfolio of Project Loans will be diversified by both geographic region and
industry.
To be eligible for a Project Loan, a project must meet certain qualifying
criteria, including tests relating to each proposed loan, the overall loan
portfolio and the effect of any proposed loan upon the rating of the Notes. A
Project Loan may only be made to a project that generates revenues from a
permitted industry comprised of any of the electricity, energy and other natural
gas-related infrastructure industries. In addition, each such project must
derive its cash flow from integrated contractual arrangements or have sufficient
access to required feedstocks and off-take markets to meet certain alternative,
more restrictive criteria for projects that do not have the contractual
underpinnings typically associated with project financings.
The composition of the Project Loan portfolio will be subject to certain
criteria governing the maximum size of any individual Project Loan, the weighted
average life of the Project Loan portfolio and the concentration of Project
Loans within both geographic region and industry. The addition of any Project
Loan to the portfolio will require compliance with tests designed to measure (i)
the required level of asset overcollateralization given the diversity and
ratings of the Issuer's Project Loan portfolio, (ii) the Issuer's ability to
fund new Project Loans, and (iii) the Issuer's liquidity. The credit ratings of
each Project Loan are expected to range between Baa2/BBB and B3/B- by Moody's
and S&P, respectively, creating a portfolio which is expected to have a weighted
average portfolio rating between Ba2/BB and B2/B by Moody's and S&P,
respectively. The Qualifying Criteria prohibit the making of any Project Loan
that would result in the downgrading or removal of the then current ratings of
the Notes.
Enron will be required to use commercially reasonable efforts to notify the
Issuer of all opportunities (subject to limited exceptions) to make Project
Loans to Eligible Projects developed or acquired by Enron or Enron Affiliates
and located within the EI Regions to the extent such projects would be Eligible
Projects as determined by Enron on a commercially reasonable basis and in good
faith. A Project Loan may be made to a Project Borrower in conjunction with
other senior and/or subordinated debt provided to such Project Borrower by third
parties. See "Enron's International Operations and Development".
THE PROGRAM MANAGER
The Issuers are managed by the Program Manager pursuant to the Management
Agreement.
Responsibilities of the Program Manager
Under the Management Agreement, the Program Manager will have the authority
and responsibility to exercise all powers in connection with the operation and
management of the Issuers, except in very limited circumstances described under
"Description of Principal Documents -- Other Material Agreements -- Management
Agreement". The Program Manager will, among other things, perform the following
services on behalf of the Issuers: (a) selecting and managing the Project Loans,
including negotiating documentation for the Project Loans, exercising rights and
remedies associated with the Project Loans, and performing certain related
functions, (b) monitoring the Project Loans and other Portfolio Assets,
including entering into appropriate amendments and
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supplements of the documentation relating to the Project Loans and the other
Portfolio Assets, (c) providing information to and entering into discussions
with the Rating Agencies, (d) enforcing the Enron Support Agreement, (e)
identifying and selecting Hedge Counterparties and causing the Issuer to enter
into Hedging Agreements, (f) determining the structure of Project Loans and
forming, establishing and managing Intermediate Funding Entities through which
the Issuers may indirectly make Project Loans; and (g) managing the acquisition
and disposition of the Temporary Investments and Eligible Investments.
The Program Manager will devise and implement written credit policies and
procedures designed to provide employees with a framework for ongoing monitoring
of the Program Manager's compliance with the provisions of the Management
Agreement and its responsibilities thereunder and establishing methods for
standardizing (to the extent practicable) the evaluation of loan opportunities
and the documentation of Project Loans.
Employees
The Program Manager anticipates that it will initially utilize
approximately 20 full-time employees, including its five principal officers, and
will obtain certain administrative and support services, including the services
of employees who will work for the Program Manager on a part-time basis pursuant
to arrangements with Enron and/or Enron Affiliates. No officer or full-time
employee of the Program Manager will be permitted to participate in any
compensation plan or arrangement that provides for any payment or other benefit
that is contingent on the funding of any Project Loan. Employees of the Program
Manager will be eligible to participate in other Enron and EI employee benefit
plans, including those that provide for compensation based upon or measured by
the overall success of Enron or EI.
Project Loan Approval and Administration
Project Loans will be made by the Issuer only if such Project Loan is
approved by the unanimous affirmative vote of the Loan Committee. The Loan
Committee will consist of five persons: the Chief Executive Officer and
President of the Program Manager, the Executive Vice President, Finance of EI,
and the designees (who will not be executive officers of EI) of each of the
chief financial officer of Enron, the chief risk officer of Enron, and the
general counsel of Enron. Amendments and waivers relating to Project Loan
documents will also require Loan Committee approval, except that amendments and
waivers that do not materially modify such Project Loan documents may be
approved by the Chief Executive Officer and President of the Program Manager
pursuant to procedures adopted by the Loan Committee.
No member of the Loan Committee will be permitted to participate in any
compensation plan or arrangement that provides for any payment or other benefit
that is contingent on the funding of any Project Loan. Loan Committee members
will be eligible to participate in other Enron and EI employee benefit plans,
including those that provide for compensation based upon or measured by the
overall success of Enron or EI.
Management Structure and Internal Controls
The Program Manager will be operated as a separate and distinct limited
partnership and will conduct no activities other than acting as Program Manager
and engaging in other limited activities permitted by the Management Agreement.
The Program Manager will be managed under the direction of a board of directors
elected by Enron CPO Management Holdings II, Inc., the general partner of the
Program Manager and a direct wholly-owned subsidiary of Enron. The Program
Manager's management structure and internal controls have been designed to
permit its operations on behalf of the Issuers to be conducted in a manner that
is separate from the project development activities of EI or other Enron
business units. Enron and EI have agreed that no member of the Loan Committee or
board of directors of the Program Manager and no officer or employee of the
Program
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<PAGE> 36
Manager, other than the General Counsel of Enron, will serve as a director,
officer or employee of a Project Borrower or potential Project Borrower and that
so long as Enron controls EI, at least two designees of Enron management who are
not officers of EI will serve on the Loan Committee. The General Counsel of
Enron will be permitted to serve on the boards of directors of Project Borrowers
or potential Project Borrowers because it is Enron's policy for corporate
governance purposes that its General Counsel serve on the boards of all of its
subsidiaries, with certain limited exceptions. The board of directors and
officers of the Program Manager will be responsible for ensuring that the
Program Manager complies with the standards of conduct set forth in the
Management Agreement. See "Description of Principal Documents -- Other Material
Agreements -- Management Agreement". See "Risk Factors -- Reliance upon Enron;
Certain Conflicts of Interest".
Prior Experience of Enron Affiliates in Lending and Managing Investments
Although the Program Manager is a newly-formed entity, other Enron
Affiliates have had extensive experience in managing investment entities and in
the negotiation, documentation and administration of loans. Enron Affiliates
have served as managers, servicers or loan arrangers in connection with
extensions of credit totaling approximately $2 billion, including approximately
$1 billion in oil and gas production payments and an additional approximately $1
billion in loans to and debt securities of energy and oil and gas service and
equipment companies. The Issuer believes that this experience, together with the
experience of Enron and its Affiliates as borrowers in connection with emerging
market infrastructure project loans, will be useful to the Program Manager in
discharging its responsibilities under the Management Agreement.
COMPETITION
Project finance lenders are usually selected on a competitive basis.
Generally, pricing, structure, terms and the ability to execute in a timely
fashion are the principal factors in the determination of a project borrower to
select a particular lender and type of financing. The Issuer will compete with a
large number of lenders, including multilateral agencies and commercial banks,
some of which may possess greater financial and other resources than the Issuer.
PROJECT FINANCING IN THE EMERGING MARKETS
INFRASTRUCTURE FINANCING IN THE EMERGING MARKETS
Project financing has become a significant component of capital raised for
infrastructure development in the emerging markets. Project sponsors have
successfully financed, through project finance loans, assets in electrical
generation, distribution and transmission, pipelines for natural gas,
refineries, petrochemical plants, gas liquids fractionation facilities, toll
roads, bridges, telecommunications, airport facilities, water distribution and
supply and waste-water treatment. The table below highlights the growth of
infrastructure finance in the emerging markets and the increasing use of capital
markets financial instruments.
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INFRASTRUCTURE FINANCING RAISED BY DEVELOPING COUNTRIES BY REGION AND TYPE OF
INSTRUMENT, 1986-1996
<TABLE>
<CAPTION>
REGION AND INSTRUMENT 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
--------------------- ----- ----- ---- ----- ----- ----- ----- ------ ------- ------ ------
(MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
All developing countries.... 1,351 2,543 910 3,503 2,641 6,312 8,835 18,027 23,314 22,297 27,197
Loan Syndications......... 1,233 2,490 829 3,215 1,686 2,145 3,334 8,841 8,192 13,479 9,597
Bond Issues............... 118 53 81 289 834 1,488 2,185 6,901 6,813 5,297 10,351
Equity Issues............. 0 0 0 0 121 2,679 3,316 2,284 8,309 3,521 7,250
Sub-Saharan Africa.......... 0 7 0 0 0 6 0 42 0 396 186
Loan Syndications......... 0 7 0 0 0 6 0 42 0 0 0
Bond Issues............... 0 0 0 0 0 0 0 0 0 396 140
Equity Issues............. 0 0 0 0 0 0 0 0 0 0 45
East Asia and the Pacific... 935 693 260 2,210 1,798 1,188 3,831 9,329 10,786 13,712 12,694
Loan Syndications......... 817 640 260 2,210 1,525 797 2,489 5,987 4,146 7,598 5,878
Bond Issues............... 118 53 0 0 250 215 480 2,377 2,557 2,809 3,600
Equity Issues............. 0 0 0 0 23 175 863 965 4,083 3,306 3,216
South Asia.................. 0 93 0 583 117 415 120 489 2,850 1,914 1,968
Loan Syndications......... 0 93 0 583 117 415 115 234 1,030 1,576 1,211
Bond Issues............... 0 0 0 0 0 0 0 180 0 150 432
Equity Issues............. 0 0 0 0 0 0 5 75 1,820 188 325
Europe and Central Asia..... 369 1,162 316 466 334 862 448 2,496 1,662 3,657 2,035
Loan Syndications......... 369 1,162 235 328 0 464 148 1,673 963 3,124 1,180
Bond Issues............... 0 0 81 139 334 398 300 764 253 506 200
Equity Issues............. 0 0 0 0 0 0 0 59 445 27 655
Latin America and the
Caribbean................. 0 382 284 243 392 3,841 4,431 5,630 7,543 2,248 10,013
Loan Syndications......... 0 382 284 93 44 462 578 890 1,579 811 1,141
Bond Issues............... 0 0 0 150 250 875 1,405 3,580 4,003 1,437 5,978
Equity Issues............. 0 0 0 0 98 2,504 2,448 1,160 1,961 0 2,894
Middle East and North
Africa.................... 47 206 50 0 0 0 4 41 474 370 302
Loan Syndications......... 47 206 50 0 0 0 4 16 474 370 187
Bond Issues............... 0 0 0 0 0 0 0 0 0 0 0
Equity Issues............. 0 0 0 0 0 0 0 25 0 0 114
</TABLE>
Source: World Bank, based on Euromoney data
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The Issuer believes that there is, and will continue to be, a significant
demand for private sector provision of electricity and energy infrastructure
development in the emerging markets as a result of overall growth in the
economies of the emerging markets, the trend for public sector entities and
governments to reduce debt obligations associated with these assets, and the
proven successes of the private sector in operating and delivering more reliable
services at lower costs than the public sector.
To facilitate these activities, developing countries are privatizing their
government-controlled utilities and encouraging private development of energy
and other infrastructure projects. The following table summarizes the estimated
aggregate forecasted need over the next period for energy infrastructure
in the primary emerging market sectors in which EI is active and certain of EI's
project development opportunities as of , 1998.
<TABLE>
<CAPTION>
REGION REGIONAL DEMAND EI OPPORTUNITIES
- ------ --------------- ----------------
(IN BILLIONS OF (IN BILLIONS OF
U.S. DOLLARS) U.S. DOLLARS)
<S> <C> <C>
South and Central America....................... $ $
Asia (excluding the Commonwealth of Independent
States).......................................
Africa and Middle East..........................
</TABLE>
ELEMENTS OF PROJECT FINANCING
From a lender's perspective, project finance involves a limited or
non-recourse financing pursuant to which lenders seek repayment of principal and
interest primarily from the cash flow generated by the specific assets
(including associated contractual rights) constituting the project rather than
relying on the credit of the equity sponsors of the project. Because of its
limited or non-recourse nature, project financing involves a high degree of
financial and legal structuring to ensure that project risks, especially
commercial and political risks, have been mitigated in a manner suitable to a
lender's risk/return spectrum. This risk mitigation process which is unique to
project financing involves dividing certain risks among the project
participants, such that the remaining unallocated risks are acceptable to
lenders. Typical project participants include (i) offtakers, (ii) fuel or
feedstock suppliers, (iii) operators, (iv) construction contractors, (v) project
sponsors, which may or may not be equity investors, and (vi) lenders.
Project financings are generally structured so as to establish the rights
and obligations of each participant, create performance standards to measure
each party's adherence to their obligations and establish in advance a cost of
failure to perform as a penalty or liquidated damage for certain breaches. These
quantified limited financial obligations can then be priced by the participants
efficiently and the obligations can (if necessary) be supported by guarantees
from creditworthy sources.
The development of a suitable commercial structure, including the
structuring of the contracts among the participants in the project involves
substantial technical, economic and legal due diligence by the project's
participants and their advisors. In conjunction with reviewing the project's
contractual structure, lenders perform additional due diligence with the
assistance of third party consultants such as an independent engineer and legal
counsel typically consisting of both international and local counsel. Care is
taken to broadly evaluate the commercial and economic feasibility of the project
and its sensitivity to the impact of potentially adverse factors. In addition,
lenders also look for (i) a project sponsor with a proven track record,
expertise in construction, operation, financing and legal matters and the
ability to mobilize monetary and personnel resources to resolve problems; (ii) a
basic need for the product or service that the project will provide; and (iii) a
cost of service that is competitive.
While the project finance process, including the risk allocation process,
is similar in most applications, often the final structure of an individual
transaction is highly specific to the project's
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and host country's characteristics. The discussion below illustrates certain
aspects of the structuring process and the identification and mitigation of
risks. However, the discussion does not address all issues and the various
methods to address such issues.
Legal Framework
The basic project financing techniques need to be adapted to suit the legal
framework of each individual host country in order to ensure the enforceability
of the project financing structure. It is not uncommon for the project financing
structure to isolate certain aspects of the project from the local jurisdiction
in order to rely on a more familiar legal system or to enhance collateral
security packages. For example, project developers may require, among other
things, offshore accounts, provisions relating to choice of law, submission to
foreign jurisdiction, waiver of claims of inconvenient forum and international
arbitration in order to enhance the financeability of a project.
Political Framework
Infrastructure projects are subject to a number of political risks
associated with the host country, including risks of currency inconvertibility
and devaluation, expropriation and the effects of changes in laws and the
regulatory environment. Project companies and lenders apply several tools to
minimize such risks. For example, foreign exchange requirements for repayment of
principal and interest on the dollar-denominated loans can be addressed through
indexing revenues to the dollar or a dollar-denominated commodity. Other
solutions to address foreign exchange risk include dollar reserves created or
provided by one or more participants, letters of credit or other liquidity
components, indemnities or priority enhancements from government entities and
commodity purchase arrangements. In addition, cashflow generated by the project
is typically converted immediately into hard currency and transferred to
offshore accounts. Where a government entity is the purchaser of services, often
expropriation is addressed through provisions establishing due compensation for
such expropriation under the termination provisions in the contracts. Changes in
laws often are addressed through contractual provisions allowing recovery of
increased costs related to such changes in law. Even in cases where political
risk has been minimized through careful structuring of a transaction, it is
unlikely that the rating on the related project finance loan will be higher than
the rating on the sovereign debt of the host country.
Construction
Project financings often include the construction phase of the project.
Such construction is affected by the construction contractor's ability to build
the project on time, on budget and in accordance with agreed upon performance
standards. In addition to selecting a construction contractor (which may be an
affiliate of a project sponsor) with sufficient technical expertise, experience
and financial backing to discharge its obligations, there are several mechanisms
for structuring the construction components so as to enhance the financeability
of a project. These mechanisms include the following:
Payment Terms. Limitation on payments to the contractors and restrictions
on cost recovery are a primary concern in negotiating payment terms. For
example, a construction contract may employ a controlled disbursement process in
which an independent engineer must certify that work has been completed to a
percentage level commensurate with the requested payment draw prior to
disbursements being made to the contractor for such work. The basic payment
terms of the construction contract may be based either on a (i) fixed price
"turnkey" basis, subject to adjustment only for approved change orders or (ii) a
"cost plus" basis (that is, actual costs incurred plus a specified profit margin
for the contractor). It is incumbent upon the project sponsor to evaluate such
payment terms in relation to the specific project to choose the appropriate
alternative. Many traditional project financings have relied on fixed price,
turnkey contracts because these contracts allocate many construction risks to
the contractor.
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<PAGE> 40
Performance Guarantees; Damages; Bonuses. To ensure that the project will
perform in accordance with agreed upon standards, construction contractors often
provide performance guarantees frequently relating to the achievement of certain
operational availability, capacity, consumption or output which vary based on
the type of product or service being provided, and often relate to a specified
test period. Failure to achieve such guarantees usually results in the
contractor's obligation to pay liquidated damages which are often capped at a
percentage of the contract price and may be tied to lost revenues or increased
costs.
To motivate construction contractors to complete construction on time,
project sponsors often (i) require contractors to agree to pay delay damages for
failure to complete construction of the project by a date certain in an amount
tied to the debt service and working capital needs of the project immediately
prior to commercial operations and (ii) award an agreed upon bonus if the
project's performance exceeds guaranteed performance levels or construction is
completed prior to the scheduled commercial operations date.
Construction Period Insurance. Most projects have insurance coverage for
certain commercial risks during the construction period covering, among other
things, acts of God, damage to the facility during construction, liability,
delay in start up and marine cargo. Project companies are typically expected to
obtain coverage based on customary industry practices subject to the
availability and coverages on a commercially reasonable basis for the relevant
project in its particular region.
Operations
Following the construction period, the project commences operations and
begins to produce its product or provide its service. To facilitate such
operations, project sponsors typically (i) seek an experienced operator (which
may be an affiliate of a project sponsor), (ii) enter into a long-term operation
and maintenance agreement, (iii) include provisions in the operation and
maintenance agreement clearly establishing rights and obligations of the
operator and the owner and providing procedures for approval of the proposed
budget and operating plan, (iv) align the incentives of the operator with the
project sponsor and lenders by including provisions in the operation and
maintenance agreement pursuant to which the owner agrees to pay bonuses or
impose penalties on the operator depending on the performance level of the
project and (v) require insurance covering certain commercial risks.
During the operations period, revenues from the project are applied to
certain expenses pursuant to an agreed cashflow structure. Following the payment
of operating expenses, excess revenues are usually applied to principal and
interest payments on the project loan and, only after all relevant costs and
expenses have been paid (and, often to some extent, future costs and expenses
have been reserved against), are available for dividends to the project
sponsors.
Fuel, Feedstock and Offtake
Project sponsors seek to identify fuel supply, feedstock and markets (such
markets referred to as the "offtake") such that (i) an adequate supply of fuel
or feedstock is available for the life of the project, (ii) ready access to a
large and liquid market or an identified buyer exists and (iii) a margin can be
expected between the price of inputs and outputs to cover operating costs, meet
the debt service requirements of the project loans and provide an acceptable
return to the equity investors. Often project sponsors seek to reduce the
uncertainties of each such component and protect a margin by entering into
contracts with other participants that specify the price to be paid and the
amounts to be purchased or sold. However, in projects where there is sufficient
access to fuel at a reasonable price and an efficient developed market for the
offtake, project sponsors and lenders may not require such stringent contracts
(or, in certain instances, any contracts at all). Project sponsors and lenders
often derive comfort in such situations by (i) engaging market and technical
consultants to confirm fuel supply or feedstock availability, market dynamics
and pricing assump-
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tions, (ii) analyzing a range of financial model sensitivities and (iii)
requiring a higher level of equity contribution and higher coverage ratios to
absorb the greater level of risk inherent in the cashflow.
ENRON'S INTERNATIONAL OPERATIONS AND DEVELOPMENT
Enron is one of the premier project developers in the world. Since 1989,
Enron has developed and obtained financing for fourteen projects in Europe,
Latin America and Asia, including power generation and pipeline projects which
were funded with over $5 billion of senior project finance debt. Currently, EI's
project development opportunities consist of more than 25 projects in nineteen
countries with potential project costs of approximately $20 billion.
Enron's development and finance techniques have established Enron as a
leading developer in the infrastructure development industry. Enron has
successfully implemented:
- the first independent power producer in India with an oil fired power
project at Dabhol, India;
- one of the largest gas-fired cogeneration projects in the world and one
of the largest project financings in the United Kingdom (an independent
power project at Teesside England);
- one of the first international power projects to include a merchant
generation period as a part of the structure of a gas-fired power project
at Sutton Bridge, England;
- one of the first non-U.S. investment grade rated limited recourse project
bond offerings in the Rule 144A market (the Centragas pipeline in
Colombia);
- one of the first emerging market limited recourse Rule 144A bond
offerings for an independent power project (a power plant at Subic Bay,
Philippines); and
- one of the first privately sponsored project financings in Central
America (a power plant at Puerto Quetzal, Guatemala).
Enron's international operations and development activities in certain
emerging market sectors are conducted by EI, and principally involve the
development, acquisition, financing, promotion and operation of infrastructure
projects in certain emerging markets and the provision of merchant finance, risk
management, fuel and related services to these projects and other international
customers. EI is organized geographically with divisions covering markets in EI
Regions. EI has identified profitable opportunities in the development of
"greenfield" projects (projects developed from the early conceptual stages
through construction and operation) in emerging market countries and has also
developed an expertise in addressing "fast-track" needs where the development
and startup of operations require a rapid schedule.
EI currently employs approximately developers who identify
projects around the world that are candidates for EI investment, or who provide
various services related to the project, such as operations and fuel management
or supply. Through the identification process, EI evaluates each project
opportunity for consistency with EI's overall development strategy for the
applicable region and the type of project.
EI's strategy is to (i) be one of the first developers in emerging market
countries where it believes the economic environment is favorable, (ii) focus on
development in countries where there is a clear need for private sector
involvement and where EI can add value throughout the energy chain from
exploration and production through to wholesale and retail distribution and
(iii) identify long-term strategic opportunities for electricity, energy and
other natural gas-related infrastructure. EI seeks to identify projects in the
emerging markets having a clear demand for the service to be provided and where
it has a competitive advantage. EI seeks to provide an integrated development
approach to host countries through its engineering, construction, operation,
risk management, offtake and fuel supply services; through active community
relations programs; and through its long-term investment in infrastructure
projects that are important to the host country's economic
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<PAGE> 42
development. The Issuer has been designed to provide the final element of the
development process -- cost effective, long-term financing. Through such a wide
range of services and expertise, EI seeks to address multifaceted aspects of a
country's energy needs and to provide an integrated development and operations
process. In addition, EI seeks to realize efficiencies and synergies through its
portfolio of services.
EI's project development efforts also include coordinating with a variety
of other parties. Usually, EI seeks to work with strong local firms that can
offer valuable technical services to the project and, in some cases, can provide
local equity participation. EI attempts to choose internationally known
equipment vendors who are chosen for their ability to provide technologically
superior equipment to the project at competitive prices.
EI's Executive Committee and Risk Management Committee play active roles in
the development identification and evaluation process. The Executive Committee
is composed of EI's senior operating officers and gives preliminary approval to
the development of each project. Further approval may be sought from the
executive officers and board of directors of Enron. The Risk Management
Committee continuously works with the development team to address allocation of
risks and the resolution of other issues that arise in the development process.
The Risk Management Committee is composed of senior members of each resource
area within EI. EI also normally sets limits on development expenditure that are
tied to the achievement of certain milestones in the development process.
Projects developed by other subsidiaries and Affiliates of Enron may be
funded by the Issuer. While not identical, the identification and evaluation
processes of other Enron entities are substantially similar to those of EI.
SUMMARY PROJECT INFORMATION
The following table sets forth certain information on the projects in which
Enron has been involved (some of which are not within the EI Regions).
Projects in Operation
<TABLE>
<CAPTION>
ESTIMATED
COST(1)
PROJECT LOCATION DESCRIPTION() ($ IN MILLIONS)
---------------- ------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C>
Teesside, England Technology: Gas-fired combined heat and power plant, utilizing $1,200
eight 169 MW combustion turbine engines and two 304
MW steam turbine generators
Size: 1,875 MW
Operation date: March 1993
Revenue source: 15-year power purchase agreements with Midlands
Electricity, Northern Electric, South Western
Electricity and South Wales Electricity
Primary fuel supply: 16-year natural gas purchase agreements with Amoco,
British Gas and Amerada Hess
Enron role: Developer, contractor and operator
Financing: Commercial banks
Subic Bay, Technology: Fuel oil-fired simple cycle power plant utilizing $ 140
Philippines eight medium-speed diesel engine generator sets
Size: 116 MW
Operation date: February 1994
Revenue source: A 15-year purchase obligation under an energy
conversion agreement and build, operate and transfer
agreement with National Power Corp. ("Napocor")
Enron role: Developer, contractor and operator
Financing: Notes issued under Rule 144A
</TABLE>
38
<PAGE> 43
<TABLE>
<CAPTION>
ESTIMATED
COST(1)
PROJECT LOCATION DESCRIPTION() ($ IN MILLIONS)
---------------- ------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C>
Batangas, Technology: Fuel oil-fired simple cycle power plant utilizing $ 135
Philippines eight medium-speed diesel engine generator sets
Size: 110 MW
Operation date: July 1993
Revenue source: A 10-year purchase obligation under an energy
conversion agreement and build, operate and transfer
agreement with Napocor
Enron role: Developer, contractor and operator
Financing: Commercial banks, the Asian Development Bank and the
Overseas Private Investment Corporation ("OPIC")
Puerto Quetzal, Technology: Barge-mounted fuel oil-fired power plant powered by $ 92
Guatemala twenty medium-speed diesel engine generator sets
Size: 110 MW
Operation date: February 1993
Revenue source: A 15-year power purchase agreement with Empresa
Electrica de Guatemala
Primary fuel supply: A 15-year diesel oil purchase agreement with Enron
Fuels, Inc.
Enron role: Developer, operator, owner's engineer and fuel
supplier
Financing: International Finance Corporation ("IFC")
Puerto Plata, Technology: Barge-mounted dual fuel-fired combined cycle power $ 205
Dominican plant, utilizing a combustion turbine, a heat
Republic recovery steam generator, two auxiliary boilers and a
steam turbine
Size: 185 MW
Operation date: Phase I: August 1994
Phase II: January 1996
Revenue source: A 20-year power purchase agreement with Corporacion
Dominicana de Electricidad
Primary fuel supply: A 20-year diesel oil purchase agreement with Enron
Fuels, Inc.
Enron role: Developer, owner's engineer, fuel supplier and
technical services provider
Financing: IFC, U.S. Maritime Administration, Deutsche
Investitiones und Entwicklungsgesellschaft M.B.H. and
Commonwealth Development Corporation
Hainan Island, Technology: Diesel-fired combined cycle power plant utilizing $ 150
China three combustion turbines, three heat recovery steam
generators and a steam turbine
Size: 150 MW
Operation date: January 1996
Revenue source: A 12-year power purchase agreement with Hainan
Electric Industry Limited Stock Company
Primary fuel supply: A 12-year diesel fuel purchase agreement with Enron
Fuels, Inc.
Enron role: Developer, contractor, operator, fuel supplier and
manager
Financing: Enron
Buenos Aires, Technology: Large diameter high pressure natural gas pipelines $ 670
Argentina and small diameter natural gas transfer pipelines
Size: 4,104 miles
Operation date: Privatized in December 1992
Revenue source: Long-term firm transportation contracts, ranging from
11 to 16 years, primarily with four gas distribution
companies in Buenos Aires
Enron role: Technical advisor
Financing: Commercial banks, publicly registered notes and the
United States Export-Import Bank ("US Exim")
</TABLE>
39
<PAGE> 44
<TABLE>
<CAPTION>
ESTIMATED
COST(1)
PROJECT LOCATION DESCRIPTION() ($ IN MILLIONS)
---------------- ------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C>
Northern and Technology: 18 inch natural gas pipeline $ 215
Central Size: 357 miles
Colombia Operation date: February 1996
Revenue source: A 15-year firm transportation contract with Empresa
Colombiana de Petroleos
Enron role: Developer, owner's engineer, pipe procurement
Financing: Notes issued under Rule 144A
Riohacha and Technology: Gas transportation pipelines $ 100
Baranquilla, Size: Approximately 1,600 miles
Colombia Operation date: Privatized in January 1996
Revenue source: Four gas transportation customers
Enron role: Minority shareholder
Financing: IFC, Interamerican Development Bank,
Andean Economic Development Corporation
and commercial banks
Santa Cruz, Technology: Natural gas and oil/liquids pipeline $ 264
Bolivia Size: 1,655 miles for natural gas
1,438 miles for oil/liquids
Operation date: Privatized in May 1997
Revenue source: Long-term firm transportation contracts, ranging from
1 to 16 years, with Empresa Petrolera Andina S.A.,
Empresa Petrolera Chaco S.A., Maxus Bolivia, Inc.,
Tesoro Bolivia Petroleum Co. and Yacimientos
Petroliferos Fiscales Bolivianos
Enron role: Joint manager
Financing: Enron, Interamerican Development Bank, Kreditanstalt
fur Wiederaufbau and OECF
Rio De Janeiro, Technology: Gas distribution system $ 264
Brazil Size: 1,557 miles
Operation date: Purchased in July 1997
Revenue source: 550 residential, 1,000 industrial
Enron role: Member of controlling consortium
Supply: 10-year natural gas and LPG purchase contract with
Petrobras
Financing: Enron
Bahia, Sergipe, Technology: Ownership in 7 local distribution companies $ 150
Alagoas, Size: 1,038 miles total for all distribution companies
Pernambuco, Operation date: Purchased in October 1997
Paraiba, Parana, Revenue source: Long-term distribution contracts ranging from 5 to
and Santa 10 years with Gerdau, Petroflex, Cira, Trikem US and
Catarina, Samarsa
Brazil Enron role: Partner
Financing: Enron
</TABLE>
40
<PAGE> 45
Projects in Construction
<TABLE>
<CAPTION>
ESTIMATED
COST(1)
PROJECT LOCATION DESCRIPTION ($ IN MILLIONS)
---------------- ------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C>
Dabhol, India Technology: Combined cycle naphtha/distillate gas-fired turbines $1,078
Size: 740 MW
Expected operation
date: December 1998
Revenue source: A 20-year power purchase agreement with Maharashtra
State Electricity Board
Primary fuel supply: A 3-year naphtha fuel supply agreement to be executed
with Glencore International AG plus spot distillate
purchases
Enron role: Developer, owner's engineer, fuel manager and
operator
Financing: Commercial banks, US Exim, OPIC and an Indian state-
owned bank
Marmara, Turkey Technology: Combined cycle natural gas-fired turbines $ 606
Size: 478 MW
Expected operation
date: March 1999
Revenue source: A 20-year energy sales agreement with Trakya Elektrik
Uretim Iletim A.S.
Primary fuel supply: A 15-year natural gas sales contract with Boru
Hatlari Ile Petrol Tasima A.S.
Enron role: Joint developer, joint contractor and operator
Financing: Commercial banks, US Exim and OPIC
Sardinia, Italy Technology: Combined cycle gas turbine with integrated $1,350
gasification
Size: 551 MW
Expected operation
date: March 2000
Revenue source: A 20-year power purchase agreement with Ente
Nazionale Energia Elettrica S.p.A.
Primary fuel supply: A 20-year fuel supply purchase contract with SARAS
Enron role: Joint developer
Financing: Commercial banks
Penuelas, Puerto Technology: Combined cycle gas-fired turbines; liquefied natural $ 670
Rico gas terminal and desalinization facility
Size: 507 MW
Expected operation
date: December 1999
Revenue source: A 22-year power purchase agreement with Puerto Rico
Electric Power Authority
Primary fuel supply: A 22-year natural gas purchase contract with Cabot
LNG Corporation
Enron role: Developer, contractor, operations advisor and fuel
manager
Financing: Commercial banks
Piti, Guam Technology: Reciprocating diesel engine $ 154
Size: 85 MW
Expected operation
date: March 1999
Revenue source: A 20-year energy conversion agreement with Guam Power
Authority
Enron role: Developer, contractor and operator
Financing: Commercial banks
</TABLE>
41
<PAGE> 46
<TABLE>
<CAPTION>
ESTIMATED
COST(1)
PROJECT LOCATION DESCRIPTION ($ IN MILLIONS)
---------------- ------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C>
Bolivia and Brazil Technology: Natural gas pipeline $2,000
Size: 1,875 miles
Expected operation
date: October 1999
Revenue source: A 21-year firm transportation agreement with Petroleo
Brasileiro S.A.
Enron role: Joint developer
Financing: All partners in the project
Nowa Sarzyna, Technology: Combined cycle gas-fired turbines $ 132
Poland Size: 116 MW
Expected operation
date: December 1999
Revenue source: A 20-year power purchase agreement with Polskie Sieci
Elektroenergetyczne S.A.
Enron role: Joint developer, contractor and operator
Financing: Commercial banks
Sutton Bridge, Technology: Combined cycle gas-fired turbines $ 500
U.K. Size: 790 MW
Expected operation
date: March 1999
Revenue source: A 15-year tolling agreement with Enron Capital &
Trade Resources Limited; followed by sales to the UK
power pool
Enron role: Developer and contractor
Financing: Commercial banks
Mato Grosso, Technology: Combined cycle gas-fired turbine $ 450
Brazil power plant and pipeline
Size: 480 MW power plant, 390 miles of pipeline
Expected operation
date: Power plant: September 1998
Pipeline: December 1999
Revenue source: Power plant -- A 21-year power purchase agreement
with Centrais Eletricas do Norte do Brasil S.A. -- Eletronorte
Pipeline -- Gas transportation agreements are currently being
negotiated
Enron role: Developer and technical operator
Financing: Enron
Puerto Corinto, Technology: Barge-mounted fuel oil-fired plant powered by four $ 66
Nicaragua medium-speed engine generator sets
Size: 70 MW
Expected operation
date: June 1999
Revenue source: A 15-year power purchase agreement with Empresa
Nicaraguense de Electricidad
Enron role: Joint developer, operator
Financing: Enron
</TABLE>
- ---------------
Note: MW = Megawatt
(1) Estimated Cost is the cost of the projects as of the commercial operation
date or the purchase price for Enron's share of a privatized entity.
42
<PAGE> 47
Project Development Opportunities
The following table sets forth certain information on certain project
development opportunities and is based on current development plans which are
subject to change to reflect changes in project scope and requirements, economic
and political conditions in host countries, general market conditions and other
similar factors. EI is also involved in additional projects which are in earlier
stages of development and certain other projects which are subject to
confidentiality restrictions. Because infrastructure development and finance in
the emerging markets is subject to a wide variety of risks and uncertainties
(see "Risk Factors"), there can be no assurance that these project opportunities
will be completed or that EI will participate therein or that Enron will be
obligated to show them to the Issuer.
<TABLE>
<CAPTION>
ESTIMATED
COST
PROJECT DESCRIPTION ($ IN MILLIONS)
------- ------------------------------------------------ ---------------
<S> <C> <C>
BRAZIL
Champion...................................... 480 MW natural gas-fired combined cycle $ 300
cogeneration plant
Elektro Privatization......................... Electric distribution system serving $1,300
approximately 1.5 million customers
VENEZUELA
Venezuela-Accro III & IV...................... 800 million cubic feet per day extraction and $ 400
50,000 barrels per day natural gas processing
fractionation facility
INDIA
Dabhol Phase II............................... 1,624 MW gas-fired power plant and $1,600
regasification facility
Ranipet, Tamil Nadu........................... 240 MW naphtha-fired power plant $ 170
Metropolis Gas Company........................ 300 mile gas pipeline $ 600
Kannur........................................ 513 MW naphtha-fired power plant $ 400
Ennore........................................ 2.5 million ton LNG import terminal and 2,000 MW $2,300
gas-fired power plant
CHINA
Yu-Wei-Qing................................... 450 mile coal slurry pipeline $ 770
Tarim......................................... 2,000 mile gas pipeline $2,500
THAILAND
Map Ta Phut................................... 150 MW gas-fired cogeneration plant $ 150
Chonburi...................................... 50 MW simple-cycle steam turbine cogeneration $ 45
plant
ABU DHABI
Taweelah...................................... 560 MW gas-fired power plant and 50 million $ 900
gallons per day desalinization plant
SAUDI ARABIA
Shoaiba....................................... 1,050 MW fuel oil-fired power plant $1,100
MOZAMBIQUE
Gas pipeline.................................. 350 mile natural gas pipeline $ 400
Maputo........................................ 3.4 million ton per year direct reduced iron $1,700
facility
BENIN
Cotonou....................................... 120 MW gas-fired power plant, 60 mile gas $ 200
pipeline and gas production facility
</TABLE>
43
<PAGE> 48
ELIGIBLE PROJECTS AND QUALIFYING CRITERIA
OVERVIEW
Proceeds from the issuance of the Notes and the Interests and drawings
under the Backup Facility together with other funds available to the Issuer will
be utilized principally to fund Project Loans in respect of Eligible Projects
that satisfy (1) the Project Loan Criteria, (2) the Portfolio Criteria, (3) the
Ratings Criteria and (4) the Portfolio Financial Tests (collectively, the
"Qualifying Criteria"). The Issuer will enter into Commitments to make such
Project Loans during the period commencing on the Closing Date and ending on the
Scheduled Investment Termination Date, or earlier, upon the occurrence of any of
the following events: (i) at the election of the Program Manager (acting at the
direction of the General Partner) if the aggregate principal amount of Class A
Senior Notes and Class B Senior Subordinated Notes issued as of such date is at
least equal to $ ; (ii) at the election of the Program Manager
(acting at the direction of the General Partner), with the consent of the
holders of a majority in outstanding amount of the Class I Interests, upon
notification to the Collateral Agent and the Trustee that, in light of the
composition of the Issuer's portfolio of Project Loans, general market
conditions and other factors, the making of additional Project Loans would
either be impracticable or not beneficial to the Issuer; (iii) the occurrence of
an Acceleration; (iv) a failure to satisfy the Liquidity Test on any two
consecutive Quarterly Payment Dates; (v) a Tax Redemption Trigger Date; or (vi)
the termination of Enron's obligation to show project development opportunities
upon a Class I Trigger Event (such period, the "Investment Period"). The Issuer
will not enter into a Commitment unless (i) the initial funding under such
Commitment is scheduled to occur no later than the Scheduled Investment
Termination Date and (ii) such Commitment is subject to cancellation in the
event the Qualifying Criteria are not satisfied as of the Financial Closing Date
of such Project Loan.
ELIGIBLE PROJECT
An "Eligible Project" is a business enterprise that generates operating
revenues from a Permitted Industry and that (A) has cash flow based primarily
upon or is subject to Integrated Contractual Arrangements or (B) is an Eligible
Merchant Project (each of the immediately preceding clauses (A) and (B) is
hereinafter referred to as an "Eligible Project Category" and collectively
referred to as the "Eligible Project Categories").
"Integrated Contractual Arrangements" means contractual arrangements (such
as construction, energy sales or other offtake, fuel supply, tolling,
transportation, operation and maintenance and technical advisory services
agreements, including related hedging arrangements) that provide the basis for
projected cash flows and seek to reduce Project Risk or a franchise, concession
or other agreement that provides for a rate-setting mechanism (contractual,
tariff, regulatory or otherwise) for establishing projected cash flows and,
together with other contractual arrangements as may be applicable, seeks to
reduce Project Risk.
"Permitted Industry" means each of the electricity and energy
infrastructure industries (including, without limitation, electricity
generation, transmission and distribution; gas, oil, liquids and refined
products pipelines; liquefied natural gas; refineries; petrochemicals; gas
liquids; energy-related industries with gas as a major feedstock or component or
industries with gas as a major conversion agent), including, in any case,
directly related and integrated businesses (including mining, oil and gas
development and production, and other businesses reasonably related to the
foregoing, and any facility the investment in which is a condition to the
investment in any of the aforesaid industries), but excluding the nuclear
industry.
"Eligible Merchant Project" means a business enterprise that (A) is not an
Eligible Project under clause (A) of the definition of "Eligible Project" in the
third preceding paragraph, (B) is reasonably expected to be competitive on a
delivered cost basis with other business enterprises
44
<PAGE> 49
providing similar services in the same market and (C) notwithstanding the
absence of Integrated Contractual Arrangements, has sufficient access to
required feedstocks and offtake markets.
A project may have attributes that fall into more than one Eligible Project
Category. For example, a project may have (A) some portion of its cash flow
based upon Integrated Contractual Arrangements and (B) some portion of its cash
flow that is not attributable to arrangements or agreements contemplated by
Integrated Contractual Arrangements. In such circumstances, (x) if the Coverage
Ratio Condition can be satisfied based solely on the portion of such project's
cash flow attributable to Integrated Contractual Arrangements, (y) if at least
75% of projected cash flow of such project available for debt service on an
annual basis is attributable to Integrated Contractual Arrangements or (z) if
projected cash flow of such project available for debt service on an annual
basis is based on Integrated Contractual Arrangements for a specified period
during which it is anticipated that at least 75% of such Project Loan (including
interest thereon) will be repaid, then in each such case, such project will be
deemed to be an Eligible Project under the relevant Eligible Project Category
and will not be deemed to be an Eligible Merchant Project (provided that, for
purposes of clauses (y) and (z) of this sentence, projections together with the
Independent Engineer's review of such projections with respect to projected cash
flows that are not attributable to any Integrated Contractual Arrangements
contemplated by such clause will be undertaken as if such project were an
Eligible Merchant Project).
In addition to owning and operating an Eligible Project, Project Borrowers
will be allowed to make investments and conduct business activities that are not
otherwise in a Permitted Industry, provided, however, (i) the cost of such
investment or activity, if financed by a Project Loan or other senior debt, is
limited to 5% of the total capital cost of such Eligible Project as set forth in
the Base Case Financial Projections for such Eligible Project (it being
understood that such limitation will not apply to any such investments and
activities that are not financed by a Project Loan or other senior debt), (ii)
such investments and activities are not reasonably expected to result in any
material adverse effect on such Eligible Project (as determined by the Program
Manager), (iii) the Base Case Financial Projections for such Eligible Project do
not rely on the success of such investments or activities and (iv) the projected
operating expenses for such activities are not material in the context of the
Eligible Project and the payments of such operating expenses are subordinated to
any payments of debt service under the Project Loan.
QUALIFYING CRITERIA
The Issuer will not initially fund a Project Loan unless each of the
Qualifying Criteria is satisfied with respect to such Project Loan as of the
Financial Closing Date of such Project Loan. The Qualifying Criteria consist of
(1) the Project Loan Criteria, (2) the Portfolio Criteria, (3) the Ratings
Criteria and (4) the Portfolio Financial Tests.
Project Loan Criteria
The Project Loan Criteria to be satisfied as of the Financial Closing Date
with respect to a Project Loan as a condition to the initial funding of such
Project Loan (the "Project Loan Criteria") are set forth below:
(1) the Project Loan is denominated in U.S. dollars and is not
contractually or by way of security subordinate to any other indebtedness
for borrowed money of the Project Borrower and contains customary
restrictions with respect to the incurrence of other indebtedness;
provided, however, the Project Loan may be denominated in a currency other
than U.S. dollars if, and only if, it is made through an Intermediate
Funding Entity and an Intermediate Funding Entity has (A) entered into an
Intermediate Funding Loan with the Issuer in U.S. dollars and (B) hedged
its foreign currency risk related to such Project Loan pursuant to a
Currency Hedging Arrangement;
45
<PAGE> 50
(2) the Project Loan is secured by a valid first priority perfected
lien on the tangible and intangible assets of the Project Borrower (to the
extent such collateral security interest may be created or perfected under
applicable law) or if, in the reasonable judgment of the Program Manager it
is impractical to create or perfect such lien over any such asset, the
Issuer is the beneficiary of a negative pledge in respect thereof, in each
case with customary exceptions;
(3) the aggregate amount of Initial Equity in the Project Borrower
represents at least the following percentage of the total capital cost of
the Eligible Project: (x) 10% if the Project Loan is rated Investment Grade
by S&P and Moody's and has been made in connection with any Eligible
Project other than an Eligible Merchant Project; (y) 20% if the Project
Loan has been made in connection with an Eligible Merchant Project; and (z)
15% otherwise;
(4) the Enron Ownership Percentage with respect to such Eligible
Project is at least: (x) 30% prior to the commencement of commercial
operations by such Eligible Project and (y) 20% thereafter;
(5) at or prior to the Financial Closing Date of such Project Loan,
the Issuer will have received:
(x) satisfactory opinions of legal counsel; and
(y) a report of an Independent Engineer dated within a reasonable
period of time prior to the Financial Closing Date of such Project Loan,
confirming:
(I) the technical and economic feasibility of such Eligible
Project and concurring that the assumptions used in developing the
Base Case Financial Projections for the Eligible Project are
commercially reasonable;
(II) that the Eligible Project is expected during its operation
period to generate on an annual basis sufficient operating revenues
to cover its operating costs (including fuel, where applicable) and
debt service over the term of the Project Loan in accordance with the
project's Base Case Financial Projections (taking into account
reserve funds and other forms of credit enhancement and the currency
of payment of debt service and operating costs); and
(III) in the case of an Eligible Merchant Project, that it is
expected during the operating period to generate on an annual basis
sufficient operating revenues to cover its operating costs (including
fuel, where applicable) and debt service over the term of the Project
Loan in accordance with the project's Base Case Financial Projections
(under a reasonable range of economic and operating scenarios and
taking into account reserve funds and other forms of credit
enhancement and the currency of payment of debt service and operating
costs).
In rendering such report such Independent Engineer will rely, as to
matters outside the scope of its expertise, on the reports of other
Independent consultants obtained by the Program Manager;
(6) the Project Borrower has a limited business purpose and would be
protected (subject to customary qualifications) from any claims of the
creditors of any of its project sponsors arising out of the bankruptcy of
such project sponsor;
(7) at or within a reasonable period of time prior to the Financial
Closing Date of such Project Loan, the Issuer will have received Base Case
Financial Projections, reflecting commercially reasonable assumptions,
prepared by the Project Borrower indicating (x) that sufficient funds are
committed through the Project Loan, other debt financing and equity
financing to permit the completion of the Eligible Project under the terms
of the construction arrangements and (y) a minimum annual pre-tax senior
debt service coverage ratio and an average annual pre-tax senior debt
service coverage ratio of at least 1.2 and 1.4, respectively (in each case
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<PAGE> 51
after taking into account the availability of contingent support committed
to be provided by project sponsors) (the requirement set forth in this
paragraph (7) is hereinafter referred to as the "Coverage Ratio
Condition");
(8) the loan agreement will include a provision for the establishment,
on or prior to the commencement of commercial operations of the Eligible
Project, of a debt service reserve in an amount at least equal, as of such
commencement, to the principal and interest due during the ensuing six
month period. Such reserves will be funded from (i) financing proceeds,
(ii) initial operating cash flow available to the Project Borrower or (iii)
project sponsor deposits or commitments, and maintained in U.S. dollars
held in an offshore account. Subsequent to the establishment of the debt
service reserve, it will be replenished from, and to the extent of, cash
flow available for such purpose up to an amount at least equal, as of any
payment date, to the principal and interest due during the six-month period
following such payment date. Any such amounts in the debt service reserve
may be released to the extent the project sponsors provide guaranties for
repayment from Enron, an Enron Credit Counterparty or an Acceptable Credit
Provider to such Project Borrower.
(9) the Project Borrower will be prohibited from paying dividends (or
making distributions) or making payment on any Initial Equity or any
subsequent equity in the Project Borrower in any year in which the debt
service coverage ratio is below 1.10 or there is an event of default under
the Project Loan (provided that if no event of default under the Project
Loan has occurred, accumulated earnings and profits may be distributed as
dividends and interest and principal may be paid on any Initial Equity if
the project sponsors provide a guaranty from Enron, an Enron Credit
Counterparty or an Acceptable Credit Provider to the Project Borrower for
the amount of such payments);
(10) the Project Loan must have a final scheduled maturity date of,
and be expected to be repaid from the operations of the Eligible Project,
no later than the Stated Maturity;
(11) the Project Loan will finance an Eligible Project in a country
outside of the United States in which it is not illegal under the federal
laws of the United States for United States private sector entities to
invest as of the Financial Closing Date of such Project Loan (a "Permitted
Country"); and
(12) the Project Loan will accrue interest at a (i) fixed rate
throughout the term of the Project Loan or (ii) floating rate prior to
commencement of commercial operations of the related Eligible Project and
at a fixed rate thereafter; provided, however, that interest on a Project
Loan may accrue at a floating rate after the commencement of commercial
operations of the related Eligible Project if, and only if, an arrangement
has been made pursuant to which any interest rate exposure relating to such
Project Loan is hedged and any residual exposure relating to any breakage
and termination costs of such arrangement is indemnified by an Acceptable
Credit Provider;
provided that, a Project Loan made to Transportadora de Gas del Sur S.A.,
Promigas S.A., Gas Transboliviano, Compania Estadual de Gas do Rio de
Janeiro -- CEG or Riogas, S.A., or a Majority Affiliate of any of them,
will be deemed to satisfy clauses (2) and (7) above; and provided, further,
that if a Project Loan fails to satisfy the Project Loan Criteria for
failure to meet the conditions specified in clauses (2) or (5)(x) above,
the Issuer, upon receipt of an unconditional, irrevocable guarantee (which
will guarantee the payment obligations of the Project Borrower under the
Project Loan until the date on which such condition or conditions are
satisfied) from Enron, an Enron Credit Counterparty or an Acceptable Credit
Provider, will deem such conditions to be satisfied for purposes of the
Project Loan Criteria.
Project Loans may take the form of loans to Eligible Projects that are
in construction or that have commenced commercial operations, and they may
be used to refinance existing loans made to Eligible Projects.
47
<PAGE> 52
Portfolio Criteria
The portfolio criteria to be satisfied as of the Financial Closing Date for
each Project Loan as a condition to the initial funding of such Project Loan
(the "Portfolio Criteria") are set forth below:
(1) (A) the maximum Project Loan Balance of any single Project Loan
will not exceed $ , except that the Issuer may make up to two
Project Loans in separate Regions, each of which has a maximum Project Loan
Balance of up to $ , (B) the aggregate Project Loan Balance of
outstanding Project Loans to Eligible Merchant Projects will not exceed
$ , (C) the aggregate Project Loan Balance of outstanding Project
Loans to Eligible Merchant Projects having a Standard & Poor's Rating below
BB- or a Moody's Rating below Ba3 will not exceed $ , (D) the
aggregate Project Loan Balance of outstanding Project Loans to Eligible
Projects principally involving solar, wind and geothermal energy will not
exceed $ , and (E) the aggregate Project Loan Balance of Project
Loans to Eligible Projects principally involving solar and wind energy will
not exceed $ ;
(2) after giving effect to the initial funding of the Project Loan,
(a) no more than $ of the Aggregate Project Loan Balance
will be in connection with Eligible Projects located in any one
Continent;
(b) other than as may be permitted in paragraph (c) below, no more
than $ of the Aggregate Project Loan Balance will be in
connection with Eligible Projects located in any one Region;
(c) no more than $ of the Aggregate Project Loan Balance
will be in connection with Eligible Projects located in any one country
whose long-term sovereign debt obligations are rated, on the Financial
Closing Date for the Project Loan to be added, at or above Aa2 and AA by
Moody's and S&P, respectively;
(d) except as set forth in paragraph (e) below, no more than
$ of the Aggregate Project Loan Balance shall be in connection
with Eligible Projects located in any one country whose long-term
sovereign debt obligations are rated, on the Financial Closing Date for
the Project Loan to be added, below AA by S&P; and
(e) in no more than two countries, each of which is located in a
separate S&P Region, no more than $ of the Aggregate Project
Loan Balance shall be in connection with Eligible Projects located in
any one country the long-term sovereign debt obligations of which are
rated, on the Financial Closing Date for the Project Loan to be added,
below AA by S&P;
(3) on the Financial Closing Date (and after giving effect to the
initial funding of such Project Loan), the Average Life Test will be
satisfied;
(4) after giving effect to the initial funding of the Project Loan,
all outstanding Project Loans collectively will have a Weighted Average
Moody's Rating of at least B3; and
(5) at any time on or after the Financial Closing Date of the third
Project Loan initially funded by the Issuer, the weighted average Enron
Ownership Percentage with respect to all Project Borrowers financed by
Project Loans will be at least %.
The "Average Life Test" is satisfied as of any date of determination if the
Average Life Variance is between -1 and 1 years. The "Average Life Variance" is
calculated by dividing:
(a) the product of (x) the Aggregate Project Loan Balance and (y) the
Expected Project Loan Average Life less the Targeted Average Life
by
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<PAGE> 53
(b) the greater of (x) $ and (y) the Aggregate Project Loan
Balance.
"Targeted Average Life" as of any date of determination means years
less the number of years (or portions thereof) that have elapsed from the
Closing Date.
"Expected Project Loan Average Life" as of any date of determination means
the weighted average (by Project Loan Balance) of the Expected Average Lives of
each Project Loan as of the date of determination.
"Expected Average Life" with respect to each Project Loan is determined on
any date of determination by: first, for each principal payment scheduled to be
made subsequent to the date of determination, multiplying (i) such principal
payment by (ii) the number of years from the date of determination until the
date of such principal payment; second, summing the results obtained from clause
first; and third, dividing such sum by the aggregate amount of the principal
payments referred to in clause first.
Ratings Criteria
The ratings criteria to be satisfied on or prior to the Financial Closing
Date as a condition to the initial funding of a Project Loan (the "Ratings
Criteria") are set forth below:
(1) the Issuer will have obtained from both Moody's and S&P a current
rating of the Project Loan, and
(2) the Issuer will have obtained confirmation that the Rating
Condition will be or is satisfied after giving effect to the initial
funding of such Project Loan.
The "Rating Condition" means, with respect to the initial funding of any
Project Loan or when required in connection with the issuance or redemption of
any Notes or Class C Subordinated Notes or the reduction of the Class C
Subordinated Note Purchase Commitment, or any other circumstance where the
context may otherwise require, the condition that the Rating Agencies have
determined that such initial funding, issuance, redemption, reduction or
circumstance, as the case may be, will not result in the reduction or withdrawal
of the then-current ratings of the Notes.
PORTFOLIO FINANCIAL TESTS
The tests to be satisfied (after giving effect to the initial funding of
such Project Loan) on or prior to the Financial Closing Date for a Project Loan
(the "Portfolio Financial Tests"), are the Funding Availability Test, the
Liquidity Test and the Credit Support Tests.
Funding Availability Test
The Funding Availability Test must be satisfied on the related Financial
Closing Date in order for the Issuer to initially fund any Project Loan. The
Issuer will also determine whether the Funding Availability Test is satisfied on
the Business Day immediately after the occurrence of an event of default on a
Committed TIP Investment or any date during the Investment Period on which the
Issuer proposes to transfer funds from the Committed TIP Account to the
Uncommitted TIP Account. See "Temporary Investments".
The "Funding Availability Test" is satisfied on any date of determination
if the aggregate amount of unfunded Commitments (including the Commitment
relating to the Project Loan to be made) is less than or equal to Available
Committed Funds as of such date. "Available Committed Funds" means the sum of
(i) the Committed TIP Account Balance and (ii) the undrawn portion of the Backup
Facility.
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<PAGE> 54
Liquidity Test
The "Liquidity Test" must be satisfied as of the Financial Closing Date of
each Project Loan. In addition, a determination as to whether the Liquidity Test
is satisfied will be made on each Quarterly Payment Date during the Measurement
Period. Failure to satisfy the Liquidity Test on any two consecutive Quarterly
Payment Dates will terminate the Investment Period. The Liquidity Test is
satisfied on any date of determination if the Portfolio Liquidity, as determined
by the Program Manager, on each subsequent Quarterly Payment Date during the
Measurement Period, is at least equal to the Liquidity Expenses, as determined
by the Program Manager, on such dates under both a High Interest Rate Scenario
and a Low Interest Rate Scenario.
In making determinations in respect of the Liquidity Test, the Program
Manager will create projections (i) assuming both a High Interest Rate Scenario
and a Low Interest Rate Scenario for purposes of calculating (x) the projected
interest income on Temporary Investments, (y) the projected payments or amounts
to be received in respect of the Hedging Agreements and (z) the projected
interest payable on the Backup Facility and the Liquidity Facility, (ii)
assuming that (x) amounts credited to the Uncommitted TIP Account are liquidated
at current market levels and used to reduce amounts Allocated, if any, under the
Backup Facility and then are used to redeem Notes and repay draws, if any, under
the Backup Facility, in order of seniority, on the first Quarterly Payment Date
of the Measurement Period and (y) amounts credited to the Committed TIP Account
are invested at the contracted rates thereof until maturity and are reinvested
at three-month LIBOR pending reinvestment into Project Loans pursuant to the
assumed drawdown schedule, (iii) assuming that with respect to committed
Eligible Projects, if any, that are in their construction phase, each draw
occurs one year later than the date assumed in the drawdown schedule, (iv)
assuming that amounts, if any, drawn or Allocated under the Backup Facility are
refinanced with Class A Senior Notes at the rate currently payable on the Backup
Facility and with respect to amounts Allocated under the Backup Facility, the
proceeds thereof are credited to the Committed TIP Account on the first
Quarterly Payment Date of the Measurement Period, (v) assuming that no further
Project Loans are committed to by the Issuer and (vi) assuming that all Hedging
Agreements currently in place and, if applicable, those expected to be in place
following addition of the Project Loan proposed to be added to the Portfolio
Assets are terminated on the first Quarterly Payment Date of the Measurement
Period.
"Measurement Period" means, as of any date of determination, the period
commencing on such date and ending on the later of the second succeeding
Quarterly Payment Date and the date which corresponds to the last scheduled
drawdown date for any Commitments in respect of a Project Loan, assuming that
with respect to Eligible Projects for which commitments have been made, if any,
that are in their construction phase, each draw occurs one year later than the
date assumed in the drawdown schedule.
The "Portfolio Liquidity" as of any Quarterly Payment Date during the
Measurement Period means the sum of the (i) projected interest and fees
receivable, directly or indirectly, on (x) Project Loans (including any Project
Loan proposed to be made) in the case of Project Loans made directly by the
Issuer to the Project Borrower, and (y) the Intermediate Funding Loans made by
the Issuer (including any Intermediate Funding Loans proposed to be made) in the
case of Project Loans made indirectly through an Intermediate Funding Entity,
for the relevant Due Period, other than loan origination fees or upfront fees
(excluding expense reimbursements) credited to the Uncommitted TIP Account, (ii)
projected interest receivable on Temporary Investments and Eligible Investments
for the relevant Due Period, (iii) the projected aggregate unfunded commitments
under the Liquidity Facility Loan Agreement as of such date, (iv) projected
amounts to be received under the Hedging Agreements for the relevant Due Period,
(v) the projected amount of Quarterly Project Distributions during the relevant
Due Period and (vi) any projected aggregate unfunded amount of the Liquidity
Test Commitments as of such date.
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<PAGE> 55
The "Liquidity Expenses" as of any Quarterly Payment Date during the
Measurement Period means the sum of the (i) projected operating expenses
described under clauses (i) and (ii) under the Priority of Payments for the
relevant Due Period, (ii) projected interest on amounts drawn and projected to
be drawn under the Liquidity Facility and the Backup Facility and any projected
commitment or agency fees or other amounts due thereunder for the relevant Due
Period, (iii) projected interest on the Class A Senior Notes for the relevant
Interest Accrual Period, (iv) projected amounts to be paid under the Hedging
Agreements for the relevant Due Period, (v) projected interest to be paid on the
Class B Senior Subordinated Notes for the relevant Interest Accrual Period, (vi)
projected Administrative Fees, Management Fees and Incentive Fees to be paid for
the relevant Due Period, (vii) projected interest on the Class C Subordinated
Notes to be paid for the relevant Interest Accrual Period, (viii) projected
expenses relating to the establishment of any Backup Facility Loan Agreements
during the relevant Due Period, (ix) projected Extraordinary Expenses to be paid
during the relevant Due Period and (x) any Initial Issuance Expenses or
Transaction Expenses in excess of the amounts credited to the Operating Account
for such purposes on the Closing Date or the Subsequent Closing Date, as
applicable.
"High Interest Rate Scenario" means the scenario in which three-month LIBOR
is assumed to be the then current three-month LIBOR plus 6%.
"Low Interest Rate Scenario" means the scenario in which three-month LIBOR
is assumed to be the greater of 3% and the then current three-month LIBOR less
6%.
Credit Support Tests
The Moody's Credit Support Test and the S&P Credit Support Test are
designed to determine if sufficient credit support is present for the Notes. The
Credit Support Tests must be satisfied in order for the Issuer to initially fund
any Project Loan, to Allocate or draw amounts under the Backup Facility (other
than draws that are used to reduce amounts Allocated under the Backup Facility),
to issue Class A Senior Notes after the Closing Date (other than Class A Senior
Notes the proceeds of which are used to reduce amounts previously Allocated, or
to repay amounts drawn, under the Backup Facility) or to reduce the Class C
Subordinated Note Purchase Commitment.
Moody's Credit Support Test
The "Moody's Credit Support Test" is satisfied on any date of determination
if, after giving effect to the funding in full of a Project Loan proposed to be
funded, amounts to be withdrawn from or credited to the Uncommitted TIP Account,
Allocations or drawings under the Backup Facility, the proposed issuance of
Class A Senior Notes or Class C Subordinated Notes or the addition to, or
reduction of, the Class C Subordinated Note Purchase Commitment and amounts
credited to the Excess Spread Account for the purpose of satisfying this test
and the Rating Condition, (x) the Net Senior Debt is less than or equal to zero
or (y) the Actual Senior Credit Support Percentage on such date is at least
equal to the Required Senior Credit Support Percentage on such date.
The "Actual Senior Credit Support Percentage" on any date, is the amount,
expressed as a percentage, calculated by dividing (a) Total Assets by (b) Net
Senior Debt.
"Total Assets" means the sum of (i) the Aggregate Project Loan Balance
and (ii) the Uncommitted TIP Account Balance.
"Net Senior Debt" means (i) the sum of (A) the Liquidity Facility
Commitment, (B) the Backup Facility Balance and (C) the outstanding
principal amount of the Class A Senior Notes less the sum of (ii) (A) the
Unused Enron Commitments and (B) the Excess Spread Account Balance for the
purpose of satisfying this test and the Rating Condition, in each case
after giving effect to any proposed issuance of Class A Senior Notes or
Class C Subordinated Notes.
"Unused Enron Commitments" means the sum of the (i) amount of
unfunded Enron Class II Purchase Commitment, (ii) the aggregate unfunded
Class C Subordinated Note
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<PAGE> 56
Purchase Commitment and (iii) for the purpose of the Moody's Credit
Support Test and the S&P Credit Support Test, the aggregate unfunded
Credit Support Test Commitments.
The "Required Senior Credit Support Percentage" on any date is the weighted
average, calculated based upon the Uncommitted TIP Account Balance and the
Aggregate Project Loan Balance, of the Required Senior TIP Credit Support
Percentage and the Required Senior Project Credit Support Percentage.
The "Required Senior TIP Credit Support Percentage" means the
percentage obtained in Table 1 below from the TIP Diversity Score and the
Weighted Average Moody's Ratings of the Uncommitted TIP Investments.
The "Required Senior Project Credit Support Percentage" means the
percentage obtained from Table 2 below from the Diversity Score and the
Weighted Average Moody's Ratings of Project Loans (the "Project Loan Table"
and such percentage, the "Base Percentage") and adjusted according to the
Interest Coverage Adjustment.
The "Interest Coverage Adjustment" means the adjustment to the
Required Senior Project Credit Support Percentage effected as follows:
if the Actual Net Interest Margin is less than or greater than the
Moody's Assumed Net Interest Margin, the Required Senior Project
Credit Support Percentage will be calculated as follows:
the greater of (i)
(a) Base Percentage
multiplied by
(b) 1+ ((Moody's Net Interest Margin Adjustment Factor) X
(Moody's Assumed Net Interest Margin - Actual Net Interest Margin))
and (ii) the Base Percentage assuming the Weighted Average
Moody's Ratings of Project Loans was one level higher than the actual
Weighted Average Moody's Ratings of Project Loans.
The "Actual Net Interest Margin" on any date is calculated
by dividing:
(a) the excess of (i) the product of (x) the Aggregate
Project Loan Balance and (y) the weighted average rate of
interest of all Project Loans over (ii) the product of (x) the
greater of (A) zero and (B) the aggregate outstanding principal
amount of Notes and the Backup Facility Balance less the
Uncommitted TIP Account Balance and (y) the weighted average of
the Class A Senior Note Interest Rate and Class B Senior
Subordinated Note Interest Rate and the current rate of interest
payable (after giving effect to the applicable Hedging
Agreements, if any) on the Backup Facility Balance assuming the
amounts Allocated thereunder were drawn
by
(b) the Aggregate Project Loan Balance.
"Moody's Assumed Net Interest Margin" means the percentage
obtained from Table 3 below from the Weighted Average Moody's
Ratings of Project Loans.
"Moody's Net Interest Margin Adjustment Factor" means the
number obtained from the table set forth below from the Weighted
Average Moody's Ratings of Project Loans.
<TABLE>
<CAPTION>
B3 B2 B1 BA3 BA2 BA1 BAA3 BAA2
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
52
<PAGE> 57
TABLE 1: TIP TABLE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE MOODY'S RATINGS OF UNCOMMITTED TIP INVESTMENTS
---------------------------------------------------------------
TIP DIVERSITY SCORE BA2 BA1 BAA3 BAA2 BAA1 A3
- ------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
7
10
15
20
25
30
35
40
</TABLE>
TABLE 2: PROJECT LOAN TABLE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE MOODY'S RATINGS OF PROJECT LOANS
DIVERSITY -------------------------------------------------------------
SCORE B3 B2 B1 BA3 BA2 BA1 BAA3 BAA2
- --------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2
3
4
5
6
7
8
9
10
</TABLE>
TABLE 3: MOODY'S ASSUMED NET INTEREST MARGIN TABLE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE MOODY'S RATINGS OF PROJECT LOANS
DIVERSITY -------------------------------------------------------------
SCORE B3 B2 B1 BA3 BA2 BA1 BAA3 BAA2
- --------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2
3
4
5
6
7
8
9
10
</TABLE>
If a value required to be obtained from Tables 1 through 3 falls between
two rows and/or two columns, then the value will be obtained by linearly
interpolating between such rows and columns.
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<PAGE> 58
"Weighted Average Moody's Rating" means, on any date of determination made
in respect of Project Loans or Temporary Investments, the rating associated with
the Moody's Rating Factor closest to, but not less than, the number obtained by
(i) summing the products obtained by multiplying the Project Loan Balance of
each Project Loan or the principal balance of each Temporary Investment, as
applicable, by its Moody's Rating Factor, (ii) dividing such sum by the
Aggregate Project Loan Balance or TIP Account Balance, as applicable, and (iii)
rounding the result up to the nearest whole number. The "Moody's Rating Factor"
relating to any Project Loan or Temporary Investment is the number assigned in
the table below opposite the Rating of such Project Loan or Temporary
Investment:
<TABLE>
<CAPTION>
MOODY'S MOODY'S
MOODY'S RATING MOODY'S RATING
RATING FACTOR RATING FACTOR
- ------- ------- ------- -------
<S> <C> <C> <C>
Aaa 1 Ba1 940
Aa1 10 Ba2 1,350
Aa2 20 Ba3 1,780
Aa3 40 B1 2,220
A1 70 B2 2,720
A2 120 B3 3,490
A3 180 Caa1 4,770
Baa1 260 Caa2 6,500
Baa2 360 Caa3 8,070
Baa3 610 Ca 10,000
</TABLE>
The Diversity Score and TIP Diversity Score definitions are found in
Appendix A.
S&P Credit Support Test
The "S&P Credit Support Test" is satisfied on any date of determination if
Net Senior Debt is less than or equal to the Maximum Senior Indebtedness, after
giving effect to the funding in full of a Project Loan proposed to be funded,
amounts to be withdrawn from or credited to the Uncommitted TIP Account,
Allocations or drawings under the Backup Facility, the proposed issuance of
Class A Senior Notes or Class C Subordinated Notes or the addition to, or
reduction of, the Class C Subordinated Note Purchase Commitment and amounts
credited to the Excess Spread Account for the purpose of satisfying this test
and the Rating Condition.
The "Maximum Senior Indebtedness" means an amount provided by S&P to the
Issuer upon request by the Issuer that S&P will determine by running a cash flow
model which uses, among others, the following inputs:
(i) The Standard & Poor's Ratings of the Project Loans, except that if
the sum of the Project Loan Balances to Eligible Projects located in a
single country exceeds $500,000,000, then the Standard & Poor's Ratings of
such Project Loans shall be deemed to be two levels below the actual
Standard & Poor's Ratings of such Project Loans for purposes of running the
cash flow model;
(ii) The principal balance, interest rate and amortization profile of
the Project Loans;
(iii) If the sum of the Project Loans Balances to Eligible Projects
located in a single S&P Region exceeds $1.5 billion, then the S&P Regions
in which such Eligible Projects are located;
(iv) For each Project Loan, the recovery rate assumed by S&P in the
event of default of such Project Loan (as of the Closing Date such rate is
assumed to be 50%);
(v) The interest rate payable on the Notes and the Backup Facility
after taking into account any Hedging Agreements as well as any other
expenses of the Issuer; and
(vi) In the case of the Class A Senior Notes, the amount of projected
Quarterly Project Distributions in the event and to the extent that such
amount is supported by a letter of credit or
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<PAGE> 59
similar arrangement satisfactory to S&P from a provider rated A or higher
by S&P, and in the case of the Class B Senior Subordinated Notes, the
projected Quarterly Project Distributions.
From the characteristics of the Project Loans, S&P will derive two default
rates to be applied to the portfolio of Project Loans. One default rate will be
used to assess the credit quality of the Class A Senior Notes (the "Class A
Default Rate") and the other default rate will be used to assess the credit
quality of the Class B Senior Subordinated Notes (the "Class B Default Rate").
For each Project Loan assumed by S&P to default, S&P will assume that the
assumed recovery rate percentage for the principal balance of the Defaulted
Project Loan is recovered one year after default. A number of default timing
scenarios will be considered. The Maximum Senior Indebtedness will correspond to
the maximum amount of Class A Senior Notes that may be paid timely interest and
ultimate principal assuming the Class A Default Rate while at the same time
permitting the Class B Senior Subordinated Notes to be paid ultimate interest
and ultimate principal assuming the Class B Default Rate.
The "S&P Region" means each of (a) Latin America and the Caribbean (other
than countries rated AA or higher by S&P), (b) Chile and Colombia (other than
countries rated AA or higher by S&P), (c) Southeast Asia and Korea (other than
countries rated AA or higher by S&P), (d) India and Pakistan (other than
countries rated AA or higher by S&P), (e) Sri Lanka, Bangladesh and Nepal (other
than countries rated AA or higher by S&P), (f) China, Hong Kong and Taiwan
(other than countries rated AA or higher by S&P), (g) Russia and CIS (other than
countries rated AA or higher by S&P), (h) Eastern and Central Europe and Turkey
(other than countries rated AA or higher by S&P), (i) North Africa and the
Middle East (other than countries rated AA or higher by S&P), (j) Sub-Saharan
Africa (other than countries rated AA or higher by S&P), (k) South Africa (other
than countries rated AA or higher by S&P), (l) Gulf States (other than countries
rated AA or higher by S&P), (m) Pacific Islands (other than countries rated AA
or higher by S&P) and (n) each country rated AA or higher by S&P, in each case,
as of the Closing Date.
Maximum Senior Indebtedness Example. As an example of S&P's calculation of
Maximum Senior Indebtedness, the table below was calculated by running S&P's
cash flow model assuming a portfolio of ten $500 million Project Loans all of
which pertain to Eligible Projects located in separate countries and all of
which have the same Standard & Poor's Rating. Additionally, no more than $1.5
billion of the portfolio is in connection with Eligible Projects located in a
single S&P Region and further, the assumed recovery rate for those Project Loans
assumed to default is 50%. The table below shows the Maximum Senior Indebtedness
for a given Standard & Poor's Rating of Project Loans and Actual Net Interest
Margin.
<TABLE>
<CAPTION>
S&P'S
RATING OF PROJECT LOANS MAXIMUM SENIOR INDEBTEDNESS ACTUAL NET INTEREST MARGIN
- ----------------------- --------------------------- --------------------------
<S> <C> <C>
B- $ %
B $ %
B+ $ %
BB- $ %
BB $ %
BB+ $ %
BBB- $ %
</TABLE>
The actual portfolio of the Issuer will differ from the hypothetical
portfolio above. Because S&P ascribes a disproportionate weighting to projects
of varying credit quality and the variables in their numerical analyses are
inter-dependent, the actual Maximum Senior Indebtedness is likely to vary
significantly from the Maximum Senior Indebtedness set forth in the analysis
above. No representation is made that the results indicated above will be
achieved.
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<PAGE> 60
Intermediate Funding Loans and Intermediate Funding Loan Criteria
The Issuer may also, from time to time during the Investment Period, make
loans in respect of Eligible Projects through one or more entities (each, an
"Intermediate Funding Entity") that are (i) wholly-owned, directly or
indirectly, by the Issuer and established for the limited purpose of making
Project Loans (including Project Loans denominated in a currency other than
Dollars as contemplated in clause (1) of the Project Loan Criteria) or (ii)
wholly-owned by, or wholly-owning, a particular Project Borrower and established
in a jurisdiction other than the jurisdiction of such Project Borrower for the
sole purpose of obtaining a loan or loans from the Issuer or another
Intermediate Funding Entity and making a Project Loan which satisfies the
Qualifying Criteria to such Project Borrower by using proceeds thereof (each
such loan, an "Intermediate Funding Loan"). Each Intermediate Funding Loan must
meet the following criteria (the "Intermediate Funding Loan Criteria"):
(A) the initial funding to an Intermediate Funding Entity by the
Issuer, or by an Intermediate Funding Entity to another Intermediate
Funding Entity, occurs on or after the Financial Closing Date for the
related Project Loan;
(B) in the case of an Intermediate Funding Entity that is
wholly-owned, directly or indirectly, by the Issuer, the ownership
interests of such Intermediate Funding Entity are pledged to the Collateral
Agent;
(C) any operating expenses and tax liabilities of an Intermediate
Funding Entity are paid first, from fees, if any, received by such
Intermediate Funding Entity in connection with the related Intermediate
Funding Loan, and second, from interest payments received by such
Intermediate Funding Entity from the related Project Borrower or
Intermediate Funding Entity, as the case may be, and third, from principal
payments received by such Intermediate Funding Entity from the related
Project Loan or Intermediate Funding Loan, as the case may be;
(D) each Rating Agency is provided with reasonable details regarding
the structure of the Intermediate Funding Entities related to a Project
Loan; and
(E) the Intermediate Funding Loan made by the Issuer to such
Intermediate Funding Entity and, to the extent applicable, by one
Intermediate Funding Entity to another Intermediate Funding Entity, each
satisfy the following criteria:
(I) such Intermediate Funding Loan is secured by a valid first
priority perfected lien on the relevant Intermediate Funding Entity's
tangible and intangible assets relating (directly or indirectly) to a
particular Project Loan (to the extent such collateral security interest
may be perfected under applicable law) and in the case of an
Intermediate Funding Entity making loans (directly or indirectly) in
respect of more than one Project Borrower, the obligations of such
Intermediate Funding Entity in respect of loans advanced to it by the
Issuer or by another Intermediate Funding Entity are limited solely to
the tangible and intangible assets of such Intermediate Funding Entity
directly relating to the relevant Project Loan;
(II) the notes evidencing the Project Loan, and to the extent
applicable, any Intermediate Funding Loan, are pledged by the applicable
Intermediate Funding Entity to the Issuer (either directly or indirectly
through one or more Intermediate Funding Entities) and, pursuant to the
Security Agreement, indirectly to the Collateral Agent;
(III) such Intermediate Funding Loan, if made by the Issuer, is
denominated in Dollars; provided, however, that any other Intermediate
Funding Loan may be denominated in currency other than Dollars if such
loan complies with the requirements of clause (1) of the Project Loan
Criteria;
(IV) on or prior to the Financial Closing Date of such Intermediate
Funding Loan, the Issuer will have received satisfactory opinions of
Independent counsel (which counsel may
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<PAGE> 61
rely, to the extent customary, on opinions of in-house counsel and
assume the accuracy thereof);
(V) payment provisions of such Intermediate Funding Loan provide
that such Intermediate Funding Entity make principal and interest (and
any other) payments to the Issuer or Intermediate Funding Entity (as
applicable) in amounts and under payment terms substantially similar to
(x) the amounts and payment terms of the related Project Loan, in the
case of an Intermediate Funding Loan made to an Intermediate Funding
Entity directly making a Project Loan or (y) the amounts and payment
terms of the related Intermediate Funding Loan, in the case of an
Intermediate Funding Loan made to another Intermediate Funding Entity;
provided, however, the amounts owing under the Intermediate Funding Loan
may be reduced from the amounts payable under the related Project Loan,
in the case of foregoing clause (x) and the related Intermediate Funding
Loan, in the case of foregoing clause (y), to the extent, and only to
the extent, necessary to pay the operating expenses and tax liabilities
of such Intermediate Funding Entity that is the borrower of such
Intermediate Funding Loan; and
(VI) any event of default under the related Project Loan will
constitute an event of default under such Intermediate Funding Loan.
ENRON SUPPORT
In connection with the issuance of the Notes, the Issuer and Enron will
enter into the Enron Support Agreement pursuant to which Enron will provide
certain commitments and undertake certain obligations to the Issuer as described
below. The following constitutes a summary of the Enron Support Agreement and is
qualified in its entirety by reference to the full text of the Enron Support
Agreement, which is filed as an exhibit to the registration statement of which
this Prospectus is a part.
COMMITMENT TO PURCHASE CLASS II INTERESTS
Enron has committed to purchase up to approximately $ of
Class II Interests (and GP Interests in the Issuer, to the extent necessary to
maintain a GP Interest in the Issuer of at least 1%) to the extent required
under the Enron Support Agreement (the "Enron Class II Purchase Commitment").
Payments under the Enron Class II Purchase Commitment will be used as support
for Quarterly Payment Shortfalls. See "-- Support for Quarterly Payment
Obligations". Enron will obtain an irrevocable standby letter of credit to
secure its unfunded obligations under the Enron Class II Purchase Commitment.
Enron has the right to assign (i) any portion of the Enron Class II Purchase
Commitment to a Majority Affiliate of Enron that meets the standards of an Enron
Credit Counterparty, (ii) up to 50% of the Enron Class II Purchase Commitment to
an Acceptable Credit Provider upon a change in generally accepted accounting
principles in the U.S. or in the methodology used by the Rating Agencies that
would cause the percentage of the indebtedness of the Issuer consolidated on
Enron's balance sheet for accounting or ratings purposes to be materially
increased, to the extent necessary to cause the Issuer's indebtedness not to be
consolidated on Enron's balance sheet, provided certain conditions are
satisfied, (iii) any of the funded Class II Interests to a Majority Affiliate of
Enron and (iv) up to 50% of the funded Class II Interests to any person or
entity. Subject to the limitations on transfers discussed above, third parties
may hold up to a maximum of 50% of the aggregate of the funded Class II
Interests.
ENRON RIGHT TO PURCHASE CLASS C SUBORDINATED NOTES
In connection with the evaluation of an Eligible Project that (if included
in the Collateral) would cause the Issuer not to satisfy a Credit Support Test
or the Rating Condition, Enron has the option to either (i) purchase or cause to
be purchased Class C Subordinated Notes or (ii) commit to purchase Class C
Subordinated Notes, in each case in a principal amount sufficient to allow the
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<PAGE> 62
Issuer to satisfy the Rating Condition and the Credit Support Tests assuming
such Project Loan is included in the Collateral. The aggregate principal amount
of Class C Subordinated Notes that may be purchased or that Enron may commit to
purchase may not exceed $ . Payments by Enron under outstanding
Class C Subordinated Note Purchase Commitments will be used to cover Quarterly
Payment Shortfalls or fund Project Loans. See "-- Support for Quarterly Payment
Obligations". At any time prior to the first anniversary of the Investment
Termination Date, Enron may reduce the Class C Note Purchase Commitment or
redeem Class C Subordinated Notes if, after giving effect to such reduction or
redemption, the Rating Condition, the Reserve Test and the Credit Support Tests
are satisfied. Provided certain conditions have been satisfied, Enron has the
right to assign any portion of the Class C Note Purchase Commitment to an
Acceptable Credit Provider or an Enron Credit Counterparty.
SUPPORT FOR QUARTERLY PAYMENT OBLIGATIONS
On the business day immediately preceding any Quarterly Payment Date, if a
Quarterly Payment Shortfall exists, Enron will be obligated to make payments not
to exceed the amount of the Quarterly Payment Shortfall. Such payments will be
made, to the extent that funds are available, in the following priority, as set
forth below from:
(a) the purchase of Class C Subordinated Notes in a principal amount
up to the amount of any unfunded Class C Note Purchase Commitment;
(b) the funding of Class II Interests up to the amount of the unfunded
Enron Class II Purchase Commitment;
(c) the amount of the Quarterly Project Distributions;
(d) the amount of Project Distributions Reserved as of the previous
Quarterly Payment Date; and
(e) proceeds from outstanding Credit Support Test Commitments to the
extent that a Quarterly Payment Shortfall exists after application of
amounts credited to the Reserve Account and the Excess Spread Account as of
such Quarterly Payment Date.
Enron has the option to secure any obligations to pay Quarterly Project
Distributions or Project Distributions Reserved with an irrevocable standby
letter of credit for the benefit of the Senior Secured Lenders and the Holders
of the Class B Senior Subordinated Notes for purposes of maintaining the ratings
of the Notes. In addition, if Moody's downgrades Enron's rating on its senior
unsecured debt below Baa2, Enron will be obligated to obtain an irrevocable
standby letter of credit for the benefit of the Senior Secured Lenders and the
Holders of the Class B Senior Subordinated Notes in the amount of
$ (or, alternatively, pay cash to a secured account if Enron is
unable to obtain a letter of credit) to secure such obligations within 30 days
of such downgrade.
"Quarterly Project Distributions" means, with respect to any Quarterly
Payment Date, an amount equal to 25% of the Enron Distributions attributable to
the Designated Enron Ownership Interest for all Project Borrowers during each of
the four Due Periods immediately preceding such Quarterly Payment Date (or, in
the case of the first three Quarterly Payment Dates following the Closing Date,
such lesser number of Due Periods as have ended following the Closing Date).
"Enron Distributions" means, with respect to each Project Borrower to which
the Issuer has made a Project Loan, any dividends, distributions or payments on
subordinated loans, in each case net of any withholding taxes, paid to or for
the benefit of the holder of the Enron Initial Equity in
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respect of the Enron Initial Equity of such Project Borrower; provided that, in
the event such dividends, distributions or payments on subordinated debt are
made in a currency other than Dollars, such dividends, distributions or payments
on subordinated debt shall be deemed to be paid in Dollars based on the
prevailing rate of exchange on the first date following payment thereof on which
such amounts are capable of being converted, directly or indirectly, into
Dollars and remitted abroad; and provided further that,
(a) in the event of an assignment by Enron of its rights and
obligations under the Enron Support Agreement, Enron Distributions will
include any and all dividends or distributions, in each case net of any
withholding taxes, attributable to the Designated Enron Ownership Interest
in the Project Borrower that has been transferred or assigned directly or
indirectly to the permitted assignee or an Affiliate of the permitted
assignee;
(b) Enron Distributions will not, except as provided in clause (c)
below, include payments received from a Project Borrower following the
repayment or prepayment in full of the Project Loan made to such Project
Borrower; and
(c) If (i) an event occurs that causes the Enron Ownership Percentage
to fall below the Designated Enron Ownership Interest with respect to a
Project Loan (an "Equity Disposition") or (ii) a Project Loan is prepaid or
refinanced in its entirety (a "Refinancing"), then the Enron Distributions
from such Project Borrower for the Due Period in which such Equity
Disposition or Refinancing has occurred and for each Due Period thereafter
will be calculated using the lesser of (x) the Enron Distributions that
would have been received from such Project Borrower during such Due Period
as determined by the Base Case Financial Projections for such Project
Borrower revised as of, or immediately prior to, the date of such Equity
Disposition or Refinancing and (y) the portion of the amount in (x) above
that would enable the Rating Condition to be satisfied (which portion may
be zero) assuming a prepayment of the Project Loan in an amount equal to
the Disposition Amount and a redemption of the Notes in an amount equal to
the Note Redemption Amount on the next Quarterly Payment Date.
"Designated Enron Ownership Interest" means, with respect to each Project
Borrower, a percentage of ownership in such Project Borrower designated by Enron
on the Financial Closing Date of the applicable Project Loan that (i) is less
than or equal to the Enron Ownership Percentage and (ii) satisfies the Enron
Ownership Requirement after taking into account the Designated Enron Ownership
Interests of all Project Borrowers on the date of determination. The Designated
Enron Ownership Interest will be subject to adjustment thereafter by the Program
Manager at the direction of Enron upon each subsequent Financial Closing Date of
a Project Loan; provided that, the Enron Ownership Requirement is satisfied
after giving effect to such adjustment, and that no such adjustment will
increase the Designated Enron Ownership Interest in respect of a Project
Borrower with a Defaulted Project Loan.
"Enron Ownership Percentage" means, with respect to a Project Borrower, the
portion, expressed as a percentage, owned by Enron or an Enron Affiliate of the
following: (i) shares, if such Project Borrower is a corporation, (ii)
partnership interests, if such Project Borrower is a partnership or (iii)
membership interests, if such Project Borrower is a limited liability company.
SUPPORT UPON THE OCCURRENCE OF CERTAIN EVENTS
Enron may, at its option, (i) indemnify the Issuer for the amount necessary
to satisfy the Rating Condition following a Tax Event, (ii) pay to the Issuer
amounts to effect a redemption of the Notes or the Class C Subordinated Notes or
a Class B Refinancing under the Common Agreement or (iii) pay or make
commitments to pay funds to the Issuer to allow the Issuer to satisfy any of the
Funding Availability Test (such commitment, the "Funding Availability
Commitment"), the Liquidity Test (such commitment, the "Liquidity Test
Commitment") or either of the Credit Support Tests (such commitment, the "Credit
Support Test Commitment"). Enron would be obligated to fund
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such commitments if the Issuer experiences certain shortages of funds. There can
be no assurance that Enron will exercise any such options if the Issuer
experiences a Tax Event, an event requiring the redemption of the Notes or a
Class B Refinancing or a failure to satisfy the Funding Availability Test, the
Liquidity Test or either of the Credit Support Tests.
SALE OF EQUITY IN A PROJECT BORROWER
Enron is required to notify the Issuer in writing of any proposed Equity
Disposition. Thereafter, the Issuer will as soon as practicable, but no later
than ten days after the Issuer has received the revised Base Case Financial
Projections for such Eligible Project, seek to confirm that the Rating Condition
would be satisfied based on the Assumptions.
If the Issuer obtains a confirmation of the Rating Condition based on the
Assumptions, it will notify Enron of such confirmation and the amount of Enron
Distributions calculated pursuant to clause (c) of the definition of Enron
Distributions set forth above. Upon consummation of the Equity Dispositions,
Enron is required to pay or cause to be paid to the Issuer the Disposition
Amount, the Issuer is required to cause the Collateral Agent to release the lien
on the relevant Project Loan contemporaneously with the payment of the
Disposition Amount and the Issuer shall assign and transfer the Project Loan to
Enron or its designee. However, no such Disposition Amount shall be payable to
the Issuer if the Required Lenders vote to maintain such Project Loan in the
Collateral despite such Equity Disposition.
If the Issuer fails to obtain confirmation that the Rating Condition has
been satisfied based upon the Assumptions, (i) the Issuer is required to notify
Enron that the Rating Condition has not been so confirmed, (ii) upon such Equity
Disposition, no Disposition Amount shall be payable, (iii) the Issuer is
required to retain the Project Loan as Collateral and (iv) Enron Distributions
are required to be calculated pursuant to clause (c) of the definition of Enron
Distributions set forth above without adjustment pursuant to subclause (y)
thereof.
ENRON OBLIGATIONS TO SHOW INVESTMENT OPPORTUNITIES TO THE ISSUER; LIMITATION ON
FORMATION
OF COMPETING ISSUER
Enron will use commercially reasonable efforts to notify the Issuer of all
opportunities to make loans to projects (a) developed or acquired by Enron or
Controlled Enron Affiliates and (b) located in EI Regions (other than any
opportunities required to be offered by Enron or an Enron Affiliate to JEDI II
under existing partnership arrangements) to the extent any of such projects
would be an Eligible Project, as determined by Enron on a commercially
reasonable basis and in good faith.
Neither Enron nor any Controlled Enron Affiliates will compete with the
Issuer, in the commencement, acquisition, development, sponsorship, organization
or marketing of any Competing Issuer until the earliest of (a) the termination
of the Support Period, (b) the date on which the Issuer has an aggregate
principal amount of Project Loans outstanding plus unfunded Commitments equal to
or greater than $ and (c) the Investment Termination Date. A
"Competing Issuer" means an entity other than the Issuer or JEDI II that has as
its primary purpose the making of Project Loans with respect to Eligible
Projects developed by Enron or its subsidiaries which Eligible Projects are
located in EI Regions.
GUARANTY OF INDEMNIFICATION OBLIGATIONS OF PROGRAM MANAGER UNDER MANAGEMENT
AGREEMENT
Enron has guaranteed to the Issuer the payment by the Program Manager of
its obligation to indemnify the Issuer under the Management Agreement under
certain circumstances in a maximum aggregate amount of up to $ .
See "Description of Principal Documents -- Other Material
Agreements -- Management Agreement".
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ISSUANCE OF LIQUIDITY NOTES, FUNDING AVAILABILITY NOTES AND SUPPORT NOTES
The Issuer is required to issue certain promissory notes to Enron in
exchange for the following support: (i) notes with terms and conditions
equivalent to the terms and conditions of the Liquidity Facility in exchange for
the funding of Liquidity Test Commitments up to $50 million, (ii) notes with
terms and conditions equivalent to the terms and conditions of the Backup
Facility in exchange for the funding of Funding Availability Commitments and
(iii) Support Notes in exchange for (A) payment to the Issuer of amounts equal
to Quarterly Project Distributions, (B) payment to the Issuer of amounts equal
to Project Distributions Reserved, (C) payments under outstanding Credit Support
Test Commitments, (D) payments made to indemnify the Issuer to satisfy the
Rating Condition following a Tax Event, (E) payments made to the Issuer for the
redemption of Notes or Class C Subordinated Notes or a Class B Refinancing and
(F) funding of Liquidity Test Commitments in excess of $50 million.
ASSIGNMENTS
The Issuer and Enron will be allowed to assign all of their respective
rights and obligations under the Enron Support Agreement to any successor of
such party by merger or consolidation provided that any such successor to Enron
has obtained a rating by S&P or Moody's and, if such successor to Enron has a
rating from S&P or Moody's that is below Investment Grade at the time of
assignment, the financial obligations of such successor will be guaranteed by an
Acceptable Credit Provider. Enron will be allowed to assign its rights and
obligations under the Enron Support Agreement (i) in the case of a sale by
Enron, an offering to third parties or a distribution to the shareholders of
Enron of 10% or more of the securities of a person or entity owning a majority
interest in Enron International, to such person or entity and (ii) in the case
of a transfer or sale by Enron to a person or entity of a majority interest of
EI, to such person or entity; provided that in each case, certain conditions
have been met, including satisfaction of the Rating Condition and minimum credit
ratings of such successor.
TEMPORARY INVESTMENTS
The "Temporary Investment Portfolio" will consist of short-term investments
(the "Temporary Investments" and, together with the Eligible Investments, the
"Permitted Investments") which satisfy certain criteria. The Temporary
Investments will be held in two accounts established with the Account Bank in
accordance with the Security Agreement and designated the "Committed TIP
Account" and the "Uncommitted TIP Account". See "Description of the
Notes -- Accounts -- TIP Accounts".
The objectives of the Temporary Investment Portfolio will be to earn a high
level of current interest income in order to minimize any negative net interest
margin experienced by the Issuer, while seeking to preserve principal to ensure
that the Issuer has sufficient capital available to invest in Project Loans. The
Temporary Investment Portfolio will consist of short-term investments which will
be invested according to the requirements and guidelines regarding the Temporary
Investments, including the Uncommitted TIP Investment Policies and Committed TIP
Investment Policies. The TIP Advisor will be responsible for investing the
Temporary Investments according to the investment policies determined by the
Issuer.
UNCOMMITTED TIP ACCOUNT
On the Closing Date, all net proceeds from the issuance of the Initial
Notes, and the Initial Interests and, during the Investment Period, the net
proceeds from the issuance of the Class I Interests funded after the Closing
Date (other than the net proceeds from funding Class I Interests in connection
with a Quarterly Payment Shortfall or upon Acceleration), all payments of
principal (including prepayments) and loan origination or upfront fees
(excluding expense reimbursements) received on Project Loans and all Hedging
Proceeds, will be credited to the Uncommitted TIP
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Account; provided that, the Issuer will have the option of crediting or
transferring to the Collection Account an amount equal to the origination or
upfront fees relating to the last Project Loan to be initially funded by the
Issuer. During the Investment Period, the Issuer may issue additional Class A
Senior Notes, the net proceeds of which (other than amounts used to reduce
amounts drawn under the Backup Facility or to redeem the Notes) will be credited
to the Uncommitted TIP Account. The Issuer will invest amounts credited to or
re-invested in the Uncommitted TIP Account according to the Uncommitted TIP
Investment Policies.
Uncommitted TIP Investment Policies. Amounts credited to or re-invested in
the Uncommitted TIP Account will be invested in a portfolio of (a) U.S.
Government Securities, (b) TIP Eligible Investments and (c) Dollar-denominated
senior term loans, revolving credits or other senior liabilities of United
States borrowers or corporate issuers located in countries whose long-term
sovereign debt obligations are rated at least Aa2 by Moody's or at least AA by
S&P, in each case, with direct or implied ratings of at least Baa3 by Moody's
and at least BBB- by S&P. Each of the investments described in the foregoing
clauses (a) through (c) (each, an "Uncommitted TIP Investment") will be required
to satisfy the following criteria:
(i) all Uncommitted TIP Investments will mature no later than, or
prior to, one year from the date on which they were acquired, provided that
in no event will any Uncommitted TIP Investment mature after the Scheduled
Investment Termination Date;
(ii) with respect to amounts re-invested in Uncommitted TIP
Investments, such investments will have the same or higher rating as the
maturing Uncommitted TIP Investments;
(iii) the Uncommitted TIP Account Balance represented by Uncommitted
TIP Investments referred to in clause (c) above will be zero after the
12-month period following the Closing Date; and
(iv) Uncommitted TIP Investments referred to in clause (c) above will
have a TIP Diversity Score of at least 20 and an Industry Concentration
Factor no greater than 10% while complying with the restrictions in the
Security Agreement with respect to the sale of Collateral. The list of
Standard & Poor's Industries and the list of Moody's Industries used to
calculate the TIP Diversity Score and the Industry Concentration Factor are
set forth in Appendix A to the Common Agreement (see "Description of
Principal Documents -- Financing Documents -- Security Agreement -- Sale
and Release of Collateral");
provided that, Uncommitted TIP Investments shall not include any
interest-only security, any security purchased at a price in excess of 100%
of the par value thereof, unless such security is non-callable to maturity
(unless callable with a make-whole premium), or any security whose
repayment is subject to substantial non-credit related risk as determined
in the sole judgment of the Program Manager.
"Industry Concentration Factor" means, on any date of determination, with
respect to a Standard & Poor's Industry to which one or more of the investments
credited to the Uncommitted TIP Account described in clause (c) of Uncommitted
TIP Investment Policies pertain, the aggregate principal amount of such
investments divided by the aggregate principal amount of all Uncommitted TIP
Investments credited to the Uncommitted TIP Account described in clause (c) of
Uncommitted TIP Investment Policies and (ii) with respect to a Standard & Poor's
Industry to which one or more of the investments credited to the Committed TIP
Account described in clause (c) of Committed TIP Investment Polices pertain, the
aggregate principal amount of such investments divided by the aggregate
principal amount of all Committed TIP Investments credited to the Committed TIP
Account described in clause (c) of Committed TIP Investment Policies.
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COMMITTED TIP ACCOUNT
On the Closing Date, the balance of the Committed TIP Account will be zero.
During the Investment Period, the Issuer may on or prior to the Financial
Closing Date of a Project Loan, transfer amounts credited to the Uncommitted TIP
Account to the Committed TIP Account up to an amount Committed for such Project
Loan. The Issuer may, on or prior to the dates on which drawdowns are to occur
under Project Loans, draw amounts Allocated under the Backup Facility Loan
Agreement(s) and/or any Funding Availability Commitments and credit such amounts
to the Committed TIP Account. The Issuer will use funds credited to the
Committed TIP Account to fund drawdowns under the Project Loans and, in certain
circumstances, to redeem Notes as described under clause (ii) of "Description of
the Notes -- Redemption -- Mandatory Redemption". The Issuer will invest amounts
in the Committed TIP Account according to the Committed TIP Investment Policies.
During the Investment Period, the Issuer may transfer amounts credited to the
Committed TIP Account to the Uncommitted TIP Account provided that after giving
effect to such transfer the Funding Availability Test would be satisfied.
Immediately after the occurrence of an event of default with respect to a
Committed TIP Investment, the Issuer will be required to determine whether the
Funding Availability Test is satisfied as of such date, and to the extent the
Funding Availability Test is not satisfied as of such date, the Issuer will (i)
in the case of an event of default that has occurred at or prior to the
Investment Termination Date, transfer such amounts as is necessary to satisfy
the Funding Availability Test (such amount, the "Funding Availability Shortfall
Amount") from the Uncommitted TIP Account to the Committed TIP Account and (ii)
in all other cases (x) retain in the Committed TIP Account, the interest
proceeds received in respect of any Committed TIP Investment up to an amount
equal to the Funding Availability Shortfall Amount and (y) to the extent the
Funding Availability Test is not satisfied after giving effect to such amounts,
transfer funds from the Collection Account equal to the Funding Availability
Shortfall Amount.
Committed TIP Investment Policies. Amounts credited to or re-invested in
the Committed TIP Account will be invested in (a) U.S. Government Securities,
(b) TIP Eligible Investments and (c) Dollar-denominated senior term loans,
revolving credits or other senior liabilities of United States borrowers or
corporate issuers located in countries whose long-term sovereign debt
obligations are rated at least Aa2 by Moody's or at least AA by S&P, in each
case, with direct or implied ratings of at least Baa3 by Moody's and at least
BBB- by S&P (each of the investments described in the foregoing clauses (a), (b)
and (c), a "Committed TIP Investment"). All Committed TIP Investments will
mature on the earlier of, or prior to, one year from the date that they were
acquired, or as to the relevant portion of such amounts and after giving effect
to amounts Allocated under the Backup Facility the date(s) on which the Issuer
is legally obligated to fund drawdowns under the related Project Loans in
accordance with the agreed upon drawdown schedules. The investments described in
the foregoing clause (c) will satisfy the following criteria:
(i) The balance of all such investments will be zero by the end of the
12-month period following the Closing Date;
(ii) Such investments will have a TIP Diversity Score of at least 20
and an Industry Concentration Factor no greater than 10% while complying
with the restrictions in the Security Agreement with respect to the sale of
Collateral. The list of Standard & Poor's Industries and the list of
Moody's Industries used to calculate TIP Diversity Score and the Industry
Concentration Factor are set forth in Appendix A to the Common Agreement;
and
(iii) With respect to maturing investments, such amount will be
reinvested in Committed TIP Investments described in clause (a) or clause
(b) of the Committed TIP Investment Policies;
provided, that Committed TIP Investments will not include any interest-only
security, any security purchased at a price in excess of 100% of the par
value thereof, unless such security is non-callable to maturity (unless
callable with a make-whole premium), or any security whose
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repayment is subject to substantial non-credit related risk as determined
in the sole judgment of the Program Manager.
"TIP Eligible Investments" means any Dollar-denominated investment that, at
the time it is delivered to the Collateral Agent (directly or through a
securities intermediary), is one or more of the following obligations or
securities:
(i) direct registered obligations of, and registered obligations the
timely payment of principal and interest on which is fully and expressly
guaranteed by, the United States of America or any agency or
instrumentality of the United States of America the obligations of which
are expressly backed by the full faith and credit of the United States of
America;
(ii) demand and time deposits in, certificates of deposit of, bankers'
acceptances payable within 365 days of issuance by, or Federal funds sold
by, any depository institution or trust company incorporated under the laws
of the United States of America or any state thereof and subject to
supervision and examination by Federal and/or state banking authorities so
long as the commercial paper and/or the debt obligations of such depository
institution or trust company (or, in the case of the principal depository
institution in a holding company system, the commercial paper or debt
obligations of such holding company) at the time of such investment or
contractual commitment providing for such investment have a credit rating
of not less than A2 by Moody's or A by Standard & Poor's, in the case of
long-term debt obligations, or not less than P-1 by Moody's or A-1 by
Standard & Poor's in the case of commercial paper and short-term debt
obligations;
(iii) unleveraged repurchase obligations with respect to (a) any
security described in clause (i) above or (b) any other registered security
issued or guaranteed by an agency or instrumentality of the United States
of America (in each case without regard to the stated maturity of such
security), in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii) above or
entered into with a corporation (acting as principal) whose long-term
rating is not less than A2 by Moody's or A by Standard & Poor's or whose
short-term credit rating is not less than P-1 by Moody's or A-1 by Standard
& Poor's at the time of such investment;
(iv) registered debt securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States
of America or any state thereof that have a credit rating of not less than
A1 by Moody's or A+ by Standard & Poor's at the time of such investment or
contractual commitment providing for such investment;
(v) commercial paper or other short-term obligations with a maturity
of not more than 365 days from the date of issuance and having at the time
of such investment a credit rating of not less than P-1 by Moody's or A-1
by Standard & Poor's;
(vi) a reinvestment agreement issued by any bank (if treated as a
deposit by such bank), or a registered reinvestment agreement issued by any
insurance company or other corporation or entity, in each case that has a
credit rating of not less than P-1 by Moody's or A-1 by Standard & Poor's;
and
(vii) Dollar-denominated senior term loans, revolving credits or other
senior liabilities of United States borrowers or corporate issuers located
in countries whose long-term sovereign rating is at least Aa2 by Moody's
and AA by S&P, in each case, with direct or implied ratings of at least A2
by Moody's and A by S&P.
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INTEREST RATE HEDGING ARRANGEMENTS
The Issuer anticipates four principal sources of interest rate risk arising
in the course of its activities: movements in Treasury yields over the period
that Project Loans and Notes are priced ("Treasury Risk"), movements in credit
spreads on Project Loans and Notes over the period that Project Loans and Notes
are priced ("Credit Spread Risk"), movements in LIBOR during the time funds are
on deposit in the TIP Account ("TIP Rate Risk"), and to the extent draws are
outstanding on the Backup Facility or the Liquidity Facility after all the
Project Loans have been priced, increases in LIBOR during the time such floating
rate debt remains outstanding ("Floating Rate Risk"). The Issuer will seek to
reduce these risks and potentially other sources of interest rate risk that it
identifies through the use of interest rate and credit spread hedging
instruments ("Hedging Instruments") such as swaps, swaptions and options.
Treasury Risk. The Issuer anticipates that the Notes and substantially all
the Project Loans will bear fixed rates of interest on or after the commencement
of commercial operations of the related Eligible Project. These fixed rates of
interest will be based upon the then current level of certain benchmark Treasury
yields at the times the Notes and Projects Loans are priced. Since the Issuer
has the ability to price Notes either before or after pricing the related
Project Loans, the Issuer may be exposed to the risk that Treasury yields could
move between the time that the Project Loans are priced and the Notes are priced
causing the interest rate spread between the Project Loans and the Notes to be
lower than anticipated. The Issuer will seek to minimize this exposure through
the use of Hedging Instruments such as swaps whose termination values would be
intended to offset the present value difference of lower or higher than
anticipated Project Loan and Note benchmark Treasury yields. Thus if Treasury
yields move so that the interest rate spread between the Project Loans and Notes
is lower than anticipated, the Hedging Instruments should have a positive
termination value which would offset the present value impact to the Issuer of
this lower interest rate spread. Alternatively, if movements in Treasury yields
cause the interest rate spread between the Project Loans and the Notes to be
higher than anticipated, the Hedging Instruments should have a negative
termination value which would offset the present value impact to the Issuer of
this higher interest rate spread. The Issuer will fund negative termination
payments, if any, from available Collateral Proceeds and from draws under the
Liquidity Facility, as provided in the Priority of Payments. To the extent
required to mitigate the risk that negative termination payments could exceed
these available amounts and to the extent required to enable the Issuer to
comply with the Liquidity Test, the Issuer will enter into additional Hedging
Instruments such as swaptions that are intended to limit the amount of net
negative termination payments regardless of movements in Treasury yields.
Credit Spread Risk. Since the Issuer has the ability to price Notes either
before or after pricing the related Project Loan, the Issuer is exposed to the
additional risk that Note credit spreads could move between the time that the
Project Loans are priced and the Notes are priced. If Notes are priced after the
related Project Loans are priced, the Issuer may seek to reduce this exposure
through the use of Hedging Instruments such as Note credit spread derivatives
whose termination values would be intended to offset the present value
difference of lower or higher than anticipated Note credit spreads. The Issuer
will only enter into such Hedging Instruments to the extent such protection is
obtainable at a reasonable cost and the nature of such instruments do not
introduce significant other risk. Such risks may, alternatively, be mitigated
through loan pricing management techniques. If Hedging Instruments are entered
into and Note credit spreads widen between the time the Project Loan is priced
and the Notes are priced, resulting in an interest rate spread between the
Project Loans and Notes that is lower than anticipated, the Hedging Instrument
should have a positive termination value which would offset the present value
impact to the Issuer of this lower interest rate spread. Alternatively, if Note
credit spreads narrow between the time the Project Loan is priced and the Notes
are priced, resulting in an interest rate spread between the Project Loans and
the Notes that is higher than anticipated, the Hedging Instruments should have a
negative termination value which would offset the present value impact to the
Issuer of this higher interest
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rate spread. The Issuer will fund negative termination payments, if any, from
available Collateral Proceeds and from draws under the Liquidity Facility, as
provided in the Priority of Payments. To the extent required to mitigate the
risk that negative termination payments could exceed these available amounts and
to the extent required to enable the Issuer to comply with the Liquidity Test,
the Issuer will enter into additional Hedging Instruments such as Note credit
spread options that are intended to limit the amount of net negative termination
payments regardless of movements in Note credit spreads.
TIP Rate Risk. Funds on deposit in the TIP Account may be invested in
either fixed rate or LIBOR-based instruments. The Notes and Class C Notes, if
issued, will bear interest at a fixed rate and draws, if any, under the Backup
Facility and the Liquidity Facility will bear interest based upon LIBOR. In
addition, Hedging Instruments entered into to reduce Treasury Risk as described
above will require the Issuer to either pay or receive a LIBOR-based rate.
Furthermore, Project Loans may bear interest at either a fixed or floating rate
prior to commencement of commercial operations of the related Eligible Project.
To the extent these LIBOR-based assets and liabilities are not match funded,
movements in LIBOR could have the effect of reducing the interest rate spread
between these assets and liabilities. The Issuer will seek to manage this risk
by entering into Hedging Instruments such as swaps that are intended to lock in
this interest rate spread regardless of movements in LIBOR. The Issuer would not
expect to terminate the Hedging Instruments for TIP Rate Risk prior to maturity.
But in the event the LIBOR rate profile of the Issuer's assets or liabilities
unexpectedly changes, such as funds on deposit in the TIP Account are invested
in Project Loans sooner than anticipated, the Issuer will terminate these
Hedging Agreements to maintain the asset-liability LIBOR rate match. Depending
upon the level of interest rates between the time these Hedging Instruments were
entered into and the time they are terminated, the Issuer may incur negative
termination payments on these Hedging Instruments. The Issuer will fund negative
termination payments from available Collateral Proceeds and from draws under the
Liquidity Facility, as provided in the Priority of Payments. To the extent
required to mitigate the risk that negative termination payments could exceed
these available amounts and to the extent required to comply with the Liquidity
Test, the Issuer will enter into additional Hedging Instruments such as
swaptions that are intended to limit the amount of net negative termination
payments regardless of movements in interest rates.
Floating Rate Risk. The Issuer anticipates that substantially all the
Project Loans will bear fixed rates of interest on or after commencement of
commercial operations. To the extent that these loans are funded with draws on
the Backup Facility or there are draws on the Liquidity Facility and either of
such draws remain outstanding, increases in LIBOR after the Project Loans have
been priced will reduce the interest rate spread between these assets and
liabilities. The Issuer will seek to manage this interest rate spread by
entering into Hedging Instruments such as receive LIBOR and pay fixed rate swaps
which are intended to lock in this interest rate spread regardless of increases
in LIBOR during the time the floating rate debt is expected to remain
outstanding. The Issuer would not expect to terminate the Hedging Instruments
for Floating Rate Risk prior to maturity, but in the event any of the Project
Loans pay principal sooner than anticipated, the floating rate debt will in turn
pay principal sooner than anticipated. In this event, the Issuer will terminate
Hedging Agreements to match the amortization of the floating rate debt. If
interest rates have decreased between the time these Hedging Instruments were
entered into and the time they are terminated, the Issuer may incur negative
termination payments on these Hedging Instruments. The Issuer will fund negative
termination payments from available Collateral Proceeds and from draws under the
Liquidity Facility, as provided in the Priority of Payments. To mitigate the
risk that negative termination payments could exceed these available amounts and
to enable the Issuer to comply with the Liquidity Test, the Issuer will enter
into additional Hedging Instruments such as swaptions that are intended to limit
the amount of net negative termination payments regardless of movements in
interest rates or Project Borrowers will agree to assume any swap breakage costs
in the event of a prepayment of a Project Loan.
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<PAGE> 71
MANAGEMENT
THE ISSUERS
Enron CPO Holdings, Inc., a newly created, bankruptcy remote, special
purpose corporation incorporated under the laws of the State of Delaware on
February 23, 1998, will be the general partner of the Issuer (the "General
Partner"). The Board of Directors of the General Partner consists of three
members, Ms. Cheryl I. Lipshutz, Mr. James V. Derrick, Jr. and an independent
outside director to be named prior to the Closing Date. The following table sets
forth certain information with respect to the directors and executive officers
of the General Partner.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Cheryl I. Lipshutz............. 42 Director, Chief Executive Officer and
President
James V. Derrick, Jr........... 53 Director
Joseph M. Deffner.............. 30 Vice President, Finance and Treasurer
Leesa M. White................. 47 Vice President and Tax Counsel
Peggy B. Menchaca.............. 60 Vice President and Secretary
</TABLE>
Ms. Lipshutz has served as Vice President of ECM since July 1998. Prior to
joining Enron, Ms. Lipshutz was Senior Vice President and Director of ABN Amro
Bank from December 1997 to July 1998, Group Vice President and Director from
December 1995 to December 1997 and Vice President from February 1993 to December
1995.
Mr. Derrick has been Senior Vice President and General Counsel of Enron
since June 1991. Mr. Derrick is currently a director of Enron Oil & Gas Company,
an Enron Affiliate.
Mr. Deffner has served as Director, Corporate Finance of ECM since April
1995. Prior to that time, Mr. Deffner earned a Master's Degree in Business
Administration from Duke University.
Ms. White has served as Vice President and Tax Counsel of EI since
September 1997, prior to which she served as Vice President, Tax of EI from
February 1997 to September 1997 and Vice President, Tax of EDC from June 1995 to
February 1997. Ms. White joined Enron in March 1993 as Senior Counsel I and
between March 1993 and June 1995 was primarily responsible for tax matters
relating to Enron's project development efforts in South America.
Ms. Menchaca was named Vice President and Secretary of Enron in April 1987,
a position she has held continuously since that date.
The Board of Directors of the Co-Issuer consists of two members, Mr. James
V. Derrick, Jr. and Ms. Cheryl I. Lipshutz. Each of the officers of the General
Partner serves in the same capacity for the Co-Issuer.
Neither the General Partner nor the Co-Issuer pays compensation to its
directors or officers.
PROGRAM MANAGER
Directors and Executive Officers of the Program Manager
The Board of Directors of the general partner of the Program Manager
consists of four members, Ms. Rebecca P. Mark, Mr. James V. Derrick, Jr., Mr.
Andrew S. Fastow and Mr. Jeffrey P.
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<PAGE> 72
McMahon. The following table sets forth certain information with respect to the
directors and executive officers of the Program Manager.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Rebecca P. Mark......................... 43 Director
James V. Derrick, Jr.................... 53 Director
Andrew S. Fastow........................ 36 Director
Jeffrey P. McMahon...................... 37 Director
Robert G. Gay........................... 41 Chief Executive Officer and President
Neil D. Meyer........................... 44 Senior Counsel and Secretary
Glenn E. Matthys........................ 36 Chief Financial Officer and Treasurer
Robert J. Hermann....................... 54 Vice President and Tax Counsel
</TABLE>
Ms. Mark has served as Vice Chairman of Enron since May 1998, as Chairman
of EI since January 1996, and as Chairman and Chief Executive Officer of EDC
since July 1991. She was also Chief Executive Officer of EI from January 1996 to
May 1998, and Vice President and Chief Development Officer of Enron Power Corp.
from July 1990 to July 1991. EDC and Enron Power Corp. are wholly owned
subsidiaries of Enron Corp. Ms. Mark is also a Director of Brunswick Corp.
Mr. Fastow has served as Senior Vice President and Chief Financial Officer
of Enron since March 1998, as Senior Vice President, Finance, of Enron from
January 1997 to March 1998, as Managing Director, Retail and Treasury, of ECT
from October 1995 to January 1997, and as Vice President of ECT from January
1993 to October 1995. ECT is a wholly-owned subsidiary of Enron.
Mr. McMahon has served as Vice President, Finance and Treasurer of Enron
since May 1998, and served as Vice President and Chief Financial Officer of
Enron Europe Ltd. from February 1994 to April 1998. Prior to joining Enron, Mr.
McMahon was Senior Vice President and Chief Financial Officer of MG Natural Gas
Corp. from May 1989 to February 1994.
Mr. Gay was appointed Chief Executive Officer of the Program Manager in
July 1998. Mr. Gay was a Principal with EI from February 1998 until his
appointment as Chief Executive Officer of the Program Manager. From May 1995
until February 1998 he was Vice President -- International Project Finance for
EI, during which time he headed EI's project financing efforts for Latin
America. From January 1994 through May 1995 he was Director -- International
Project Finance of EI. Prior to joining EI in January 1994, Mr. Gay was a Vice
President in the Energy Group of Banc One, Texas, N.A. and Vice President and
Manager of Project Finance for Mitsubishi Bank, Houston Agency.
Mr. Meyer was appointed Senior Counsel and Secretary of the Program Manager
in July, 1998. Mr. Meyer joined EI as Senior Counsel in April 1995 with
responsibility for legal aspects of a variety of matters in international
project development and finance. Mr. Meyer has over 19 years of legal
experience. He served as legal counsel to BHP Petroleum from September 1987 to
March 1995 and as legal counsel to Aramco Services Company and Cooper
Industries, Inc. prior to September 1987.
Mr. Matthys was appointed Chief Financial Officer and Treasurer of the
Program Manager in July of 1998, prior to which he served as Controller of EGPP
since February 1995. Mr. Matthys worked in the Corporate Reporting Group of
Enron from September 1993 through January 1995. Prior to joining Enron, Mr.
Matthys worked as a manager for Coopers & Lybrand in Houston, Texas. EGPP was a
publicly-traded Enron Affiliate until November 1997 when it was merged into a
subsidiary of Enron.
Mr. Hermann was appointed Vice President and Tax Counsel of the Program
Manager in July, 1998. Mr. Hermann has also served as Vice President and General
Tax Counsel of Enron since January 1990.
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<PAGE> 73
Loan Committee
The Loan Committee of the Program Manager is comprised of five members,
including Mr. Robert G. Gay, Chief Executive Officer and President of the
Program Manager. The following table sets forth certain information with respect
to the members of the Loan Committee.
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C>
Rodney L. Gray......................................... 46
Robert G. Gay.......................................... 41
Raymond M. Bowen, Jr................................... 39
Richard B. Buy......................................... 46
Rex R. Rogers.......................................... 49
</TABLE>
Mr. Gray has served as Executive Vice President, Finance of EI since
January 1997. In addition, Mr. Gray was Chairman and Chief Executive Officer of
EGPP from June 1995 until November 1997 and was also President of EGPP from
November 1995 to November 1997. Mr. Gray has also served as a Managing Director
of EDC from August 1995 through December 1996, as Chairman and Chief Executive
Officer of Enron International Inc. from June 1993 to December 1996, and as
Senior Vice President, Finance & Treasurer of Enron from October 1992 through
June 1993. Mr. Gray is also a Director of Harmon Industries Inc.
Mr. Bowen has served as Vice President of ECM, since December 1997 and as
Vice President of Enron Energy Services, from February 1996 to November 1997.
Prior to joining Enron, Mr. Bowen was Vice President and Senior Banker at
Citibank, N.A. for more than four years. Mr. Bowen is the current designee of
the chief financial officer of El serving on the Loan Committee.
Mr. Buy has served as Vice President and Chief Risk Officer of Enron since
May 1998, as Managing Director/Chief Credit Officer of ECM, from January 1998 to
May 1998, and as President and Principal of ECT Securities Corp. since October
1994. Mr. Buy was Vice President/Chief Credit Officer of ECT from August 1995 to
January 1998, and was Director, Credit Management, for ECT from April 1994 to
August 1995. Prior to joining Enron, Mr. Buy was a Vice President of Bankers
Trust for more than six years.
Mr. Rogers has been Vice President and Associate General Counsel of Enron
since October 1997. Prior to that time Mr. Rogers served as Assistant General
Counsel of Enron for more than five years.
Executive Compensation
The Program Manager was formed in July 1998 and has paid no compensation to
its directors and officers for the 1997 fiscal year, nor did any obligations
accrue with respect to management incentive or retirement benefits for the
directors and officers during such year. The employees of the Program Manager
will be provided to the Program Manager pursuant to the Administrative Services
Agreement. Therefore, for administrative convenience, all officers of the
Program Manager will be employees of EI Services and will continue to
participate in employee benefit plans, including but not limited to, Enron stock
option plans, the Enron Savings Plan, health and life insurance plans and other
plans that are maintained by Enron or that are established by Enron in the
future. The Program Manager will reimburse EI Services for the costs of such
compensation, the costs of providing benefits to such persons under Enron's
employee benefit plans and for the costs of health and life insurance. The
compensation, including any incentive compensation of the officers and employees
of the Program Manager, will be approved by the Board of Directors of the
Program Manager.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding Common Stock, no par
value, of Enron ("Enron Common Stock") owned by each of the directors and
executive officers of the Issuer and
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<PAGE> 74
by the directors and officers of the Issuer as a group. None of the directors or
executive officers of the Issuer own any equity securities of the Issuer or of
the corporate general partner of the Issuer.
<TABLE>
<CAPTION>
SOLE VOTING
AND LIMITED
SOLE VOTING OR PERCENT
AND INVESTMENT NO INVESTMENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER POWER POWER(1)(2) CLASS
- -------------- ------------------------ -------------- ------------- -------
<S> <C> <C> <C> <C>
Enron Corp.
Common Stock Cheryl I. Lipshutz................. -- -- *
James V. Derrick, Jr............... 638,424(3) 6,449 *
Joseph M. Deffner.................. 3,461(4) *
Leesa M. White..................... 2,000(5) 200 *
Peggy B. Menchaca.................. 76,519(6) 1,888 *
All directors and executive
officers as a group (5 in
number).......................... 728,941 *
</TABLE>
- ---------------
* Less than 1%.
(1) Includes restricted shares of Common Stock held under Enron's 1991 and 1994
Stock Option Plans (the "Plans") for certain individuals. Participants in
those Plans have sole voting power and no investment power for restricted
shares awarded under the Plans until such shares vest in accordance with the
Plans' provisions. After vesting, the participant has sole investment and
voting powers.
(2) Includes shares held under the Enron Corp. Savings Plan (the "Savings Plan")
and/or Employee Stock Ownership Plan (the "ESOP"). Participants in the
Savings Plan instruct the Savings Plan Trustee as to how the participant's
shares should be voted. Additionally, participants have limited investment
power with respect to shares in the Savings Plan. Participants in the ESOP
have sole voting power and no investment power prior to distribution of
shares from the ESOP.
(3) Includes 620,938 shares issuable upon the exercise of stock options
exercisable within sixty days hereof.
(4) Includes 3,461 shares issuable upon the exercise of stock options
exercisable within sixty days hereof.
(5) Includes 2,000 shares issuable upon the exercise of stock options
exercisable within sixty days hereof.
(6) Includes 70,515 shares issuable upon the exercise of stock options
exercisable within sixty days hereof.
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<PAGE> 75
ENRON
Enron is an integrated natural gas and electricity company headquartered in
Houston, Texas. Essentially all of Enron's operations are conducted through its
subsidiaries and Affiliates that are principally engaged in the exploration for
and production of natural gas and crude oil in the United States and
internationally; the transportation of natural gas through pipelines to markets
throughout the United States; the generation and transmission of electricity to
markets in the northwestern United States; the marketing of natural gas,
electricity and other commodities and related risk management and finance
services worldwide; and the development, construction and operation of power
plants, pipelines and other energy related assets in international markets.
ENRON FINANCIAL INFORMATION
Enron is a publicly-traded company whose common stock is listed on the New
York, Chicago, Pacific, London and Frankfurt Stock Exchanges under the symbol
"ENE". The following tables set forth selected summary consolidated financial
data for Enron for the periods and at the dates indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- ------- ------
(IN MILLIONS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................. $20,273 $13,289 $9,189
Income before interest, minority interests and
income taxes...................................... 565 1,238 1,165
Net income........................................... 105 584 520
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................ $23,422 $16,137 $13,239
Long-term debt...................................... 6,254 3,349 3,065
Shareholders' equity................................ 5,618 3,723 3,165
</TABLE>
Current Ratings. The Rating Agencies have assigned Enron the following
ratings:
<TABLE>
<CAPTION>
S&P MOODY'S
---- -------
<S> <C> <C>
Commercial Paper............................................ A2 P2
Senior Unsecured............................................ BBB+ Baa2
</TABLE>
ENRON AVAILABLE INFORMATION
Enron is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports, proxy or
information statements and other information with the Commission. Such reports,
proxy or information statements, schedules and other information filed by Enron
with the Commission (File No. 1-13159) can be inspected and copies obtained from
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington,
D.C. 20549, and at the following regional offices of the Commission: 75 Park
Place, Room 1400, New York, New York 10007 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov.
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<PAGE> 76
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OWNERSHIP STRUCTURE
The Issuer is a limited partnership of which Enron CPO Holdings, Inc., a
wholly owned subsidiary of Enron, is the one percent general partner and third
party investors initially have an approximately 98% interest through indirect
ownership of limited partnership interests. Enron CPO Holdings Intermediate,
L.P. directly owns a 99% limited partnership interest in the Issuer. Enron CPO
Holdings Intermediate, L.P. is a limited partnership of which Enron CPO Partners
II, Inc., a wholly-owned subsidiary of Enron, is the 1% general partner and
Enron CPO Partners I, L.P., a limited partnership wholly owned indirectly by
Enron, is a limited partner with a contingent limited partnership interest of up
to approximately 48% based on the Class II Interests that Enron may be required
to purchase under the Support Agreement. See "Enron Support". The 99% limited
partnership interest of Enron CPO Holdings Intermediate, L.P. is owned by
, a grantor trust, the beneficiaries of which are third
party investors.
(CHART)
- ---------------
(1) Class I Interests will be diluted proportionally by any purchase of Class II
Interests to a minimum of 50% limited partner interest. Aggregate Class I
Interests and Class II Interests shall at all times represent 99% limited
partner interest.
(2) Commitment to purchase Class II Interests shall be funded, if and when
necessary, to cover Quarterly Payment Shortfalls up to a maximum percentage
of approximately 48% of the total partnership interests.
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<PAGE> 77
PROGRAM MANAGER
The Program Manager is a limited partnership owned by subsidiaries of
Enron. The Program Manager has entered into the Management Agreement with the
Issuers pursuant to which the Program Manager provides certain management and
operations services to the Issuers. See "The Program Manager" and "Description
of Principal Documents" for a more detailed description of the terms and
conditions of the Management Agreement.
ENRON SUPPORT AGREEMENT
The Issuer and Enron have entered into the Enron Support Agreement pursuant
to which Enron has agreed to provide the Issuer with certain financial support
and to provide access to lending opportunities. See "Enron Support" for a more
detailed description of the terms and conditions of the Support Agreement.
LICENSES FOR THE USE OF ENRON'S NAME AND TRADEMARKS
Each of the Issuer and Enron CPO Holdings Intermediate, L.P., the 99%
limited partner of the Issuer, have entered into non-exclusive license
agreements with Enron pursuant to which the Issuer and Enron CPO Holdings
Intermediate are entitled to use the Enron name and related trademarks in
association with their businesses. The initial term of each license agreement is
one year, and each is renewable and extendable automatically annually unless
otherwise terminated. The licenses are terminable at will by either party to
such licenses.
ADMINISTRATIVE SERVICES AGREEMENT
In connection with the services to be provided under the Management
Agreement, the Program Manager has entered into the Administrative Services
Agreement (the "Administrative Services Agreement") with EIS, a wholly-owned
subsidiary of Enron, pursuant to which EIS provides various services, such as,
among other things, payroll services, accounts payable processing, provision of
telecommunications and information systems and support, tax consulting, lease of
office space and certain other staff and support services. The Program Manager
has agreed to reimburse Enron for all of its direct costs of the employees
dedicated full-time to the Program Manager and $1.2 million per year escalating
4% per year for certain indirect costs incurred in rendering services to the
Program Manager under the Administrative Services Agreement. The Administrative
Services Agreement is for an initial term of five years and will continue
thereafter until terminated by either party upon written notice to the other
party. The Administrative Services Agreement may contain provisions that differ
from those that would have resulted from negotiations with an independent third
party.
INVESTMENT MANAGEMENT AGREEMENT
The Program Manager has entered into an investment management agreement
(the "Investment Management Agreement") with Enron pursuant to which Enron will
provide the Program Manager with wire transfer execution services and act as an
advisor with regard to Eligible Investments in which the funds of the Issuer
from all Accounts, except the TIP Accounts and the Note Payment Account, will be
invested. Under the Investment Management Agreement, the Program Manager will
pay Enron an annual fee of $6,000. Although the Program Manager believes that
the terms and conditions of the Investment Management Agreement are not
substantially different than the terms and conditions which the Program Manager
could obtain from third parties, it may contain provisions that differ from
those that would have resulted from negotiations with an independent third
party.
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<PAGE> 78
CONFLICTS OF INTEREST
Certain conflicts of interest exist and may arise in the future as a result
of the extensive relationships between Enron, the Program Manager and the
Issuer. The directors and officers of Enron have fiduciary duties to manage
Enron, including its investments in subsidiaries and affiliates such as the
Issuer, in a manner beneficial to Enron and its stockholders. Similarly, the
directors and officers of the Issuer have fiduciary duties and the Program
Manager has a contractual obligation to manage the Issuer in a manner beneficial
to the Issuer and its owners. Therefore, the duties of the directors and
officers of Enron may conflict with the duties of the Program Manager and the
directors and officers of the Issuer. The nature of the businesses of the
Program Manager, acting on behalf of the Issuers, on the one hand and as an
Enron Affiliate on the other, is such as to give rise to potential conflicts of
interest. Conflicts may arise, for example, with respect to (i) decisions
regarding Project Loan administration, including amendments to Project Loan
documents, waivers of defaults or decisions whether to foreclose upon or release
Collateral, (ii) decisions regarding any Hedging Agreement in which Enron or any
Enron Affiliate is a Hedge Counterparty, (iii) dealings with EIS with respect to
matters covered by the Administrative Services Agreement and (iv) dealings with
Enron with respect to its obligations under the Enron Support Agreement.
Conflicts that may arise under the Enron Support Agreement include those
relating to Enron's obligation to purchase Class II Interests, Enron's
obligation to fund up to an amount equal to Quarterly Project Distributions and
Project Distributions Reserved under certain circumstances, Enron's right to
purchase Class C Subordinated Notes and to provide other forms of support,
transactions between Project Borrowers and Enron or its Affiliates, Enron's
obligation to show investment opportunities to the Issuer, Enron's obligation
not to sponsor a Competing Issuer except in certain events and Enron's indemnity
obligations. See "Description of Principal Documents -- Financing
Documents -- Enron Support Agreement".
Enron Affiliates are expected to provide various services to the Project
Borrowers and their subsidiaries and affiliates through contractual arrangements
which may include (i) engineering and construction, (ii) administrative and
commercial services, (iii) operations and maintenance services, (iv) technical
support and (v) fuel supply and management services. Project Borrowers may pay
Enron Affiliates amounts for similar services provided under various contractual
arrangements. These project agreements may contain provisions that differ from
those that would have resulted from negotiations with an independent third
party. The role of an Enron Affiliate as a service provider to a Project
Borrower may result in conflicts of interest between Enron and the Program
Manager.
A majority of the persons who will serve on the Loan Committee and the
Board of Directors of the Program Manager are officers of Enron or EI. Each
officer of Enron or EI has fiduciary duties imposed by law to manage Enron or EI
(including any investments in Project Borrowers) in a manner beneficial to Enron
and its stockholders. Therefore, the duties of such persons to Enron or EI may
conflict with the duties of the Program Manager under the Management Agreement.
Enron and EI have advised the Issuer that they do not intend to take any action
that would prohibit the Program Manager from complying with its obligations
under the Management Agreement or that would cause any person serving on the
Board of Directors of the Program Manager to vote in any manner that would
effectively prevent, prohibit or restrict the Program Manager from complying
with such obligations. Under the Enron Support Agreement, Enron has agreed to
guarantee up to $ in indemnification obligations of the Program
Manager under the Management Agreement and subject to the terms thereof. See
"Description of Principal Documents -- Enron Support Agreement" and "Enron
Support".
Enron has agreed that neither it nor any Controlled Enron Affiliate,
including the Program Manager but excluding JEDI II, will sponsor or manage a
Competing Issuer until the earliest of (a) the date all of the Notes have been
paid in full and the Class I Interests have been terminated, retired or
liquidated, (b) the date on which the Issuer has an aggregate principal amount
of Project Loans outstanding plus unfunded Commitments equal to or greater than
$ and (c) the Investment Termination Date. After such date, there
are no restrictions on the activities of Enron or
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<PAGE> 79
any Enron Affiliate and, therefore, such entities may sponsor a Competing Issuer
which could compete with the Issuer for Eligible Projects. In addition, Enron is
required under an existing partnership arrangement with JEDI II, the general
partner of which is an Enron subsidiary, to offer certain investment
opportunities relating to projects developed by certain "Enron covered
entities", including Enron International Capital & Trade Services Group, a
division of EI, which meet certain specified criteria. Although the Issuer
expects, and has been advised by Enron, that opportunities obligated to be
offered by Enron to JEDI II will generally not meet the Qualifying Criteria, it
is possible that certain loans to Eligible Projects may pose conflicts.
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<PAGE> 80
DESCRIPTION OF THE NOTES
The Issuer will issue the following securities on the Closing Date:
$ % Class A Senior Notes (the "Initial Class A Senior Notes")
and $ % Class B Senior Subordinated Notes (the "Initial Class B
Senior Subordinated Notes" and, together with the Initial Class A Senior Notes,
the "Initial Notes"). The Notes, together with any Class C Subordinated Notes,
will be issued pursuant to an Indenture.
The following summary describes certain provisions of the Notes. This
summary does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of the Indenture and the other
Financing Documents. Copies of the Indenture and the other Financing Documents
may be obtained by prospective investors upon request in writing to the Issuer.
Requests and inquiries regarding such documents should be directed to the
Program Manager, Attention Chief Executive Officer and President, at 333 Clay
Street, Suite 2024, Houston, Texas 77002.
STATUS AND SECURITY
The Notes will be secured debt of the Issuers and will not be insured or
guaranteed by any person or entity. The obligations of the Issuers with respect
to the Notes will be payable solely from the Collateral.
INTEREST
The Initial Class A Senior Notes will bear interest at a rate per annum
equal to (the "Class A Senior Note Interest Rate"). The Initial Class
B Senior Subordinated Notes will bear interest at a rate per annum equal to
(the "Class B Senior Subordinated Note Interest Rate").
Interest will accrue on the outstanding principal amount of the Notes
during each Interest Accrual Period. Interest on the Initial Notes will accrue
from the Closing Date and will be payable quarterly in arrears on each January
10, April 10, July 10 and October 10 (or, if such day is not a business day, on
the next succeeding business day), commencing January 10, 1999 (each, a
"Quarterly Payment Date"). Interest on the Notes issued subsequent to the
Closing Date will accrue from the applicable Subsequent Closing Date and will be
payable on each Quarterly Payment Date thereafter. The Class A Senior Notes are
senior to the Class B Senior Subordinated Notes on each Quarterly Payment Date
or on any date following an Acceleration with respect to the payment of interest
(but not premium). Additionally, payments of interest on the Class B Senior
Subordinated Notes are subject to deferral (pro rata in accordance with the
amounts of accrued and unpaid interest to be paid) on any Quarterly Payment Date
to the extent that Class A Senior Notes are outstanding and funds are not
available on any Quarterly Payment Date to pay the full amount of accrued
interest due on the Class B Senior Subordinated Notes. Any interest deferred as
described above will be added to the aggregate principal amount of the Class B
Senior Subordinated Notes with respect to which such deferral has occurred, and
thereafter, interest will accrue on the aggregate principal amount of the Class
B Senior Subordinated Notes as so increased during each subsequent Interest
Accrual Period until (and including) the Interest Accrual Period immediately
preceding the Quarterly Payment Date on which all interest due and payable on
the Class B Senior Subordinated Notes for the Interest Accrual Period then
ending is paid in full (without any deferral), at a rate per annum equal to 1.5%
in excess of the rate at which interest otherwise accrues on the Class B Senior
Subordinated Notes. So long as any Class A Senior Notes are outstanding, the
failure to pay such interest to the holders of the Class B Senior Subordinated
Notes by reason of any such deferral will not constitute an Event of Default. A
"Deferral Event" will occur on the fourth Quarterly Payment Date (which need not
be consecutive) on which payment of interest on the Class B Senior Subordinated
Notes is deferred. A Subordinate Event of Default will occur 45 days following a
Deferral Event, vesting in the Holders of Class B Senior Subordinated Notes
certain
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<PAGE> 81
rights, including the right to terminate the Management Agreement and to require
certain redemptions. See "-- Redemption -- Redemption Upon Subordinate Event of
Default" and "Description of Principal Documents -- Other Material
Agreements -- Management Agreement -- Termination of Management Agreement".
Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months. Each "Interest Accrual Period" will be a period from, and
including, a Quarterly Payment Date to, but excluding, the next Quarterly
Payment Date, except that the initial Interest Accrual Period for each issuance
of Notes will commence on, and include, the Closing Date or the Subsequent
Closing Date, as applicable.
PRINCIPAL
The "Stated Maturity" of the Notes is , 2018. The Notes will
mature at par at their Stated Maturity unless redeemed or repaid prior thereto.
It is expected that the Notes will be paid in full prior to their Stated
Maturity. See "Maturity, Prepayment and Yield Considerations".
Payment of principal of the Class A Senior Notes will be senior to the
payment of principal and premium, if any, on the Class B Senior Subordinated
Notes, the Class C Subordinated Notes and the Support Notes (if any) and the
payment of principal of the Class B Senior Subordinated Notes will be senior to
the payment of principal and interest on the Class C Subordinated Notes and the
Support Notes (if any).
Any payment of principal with respect to a Class of Notes will be made by
the Trustee on a pro rata basis among the Notes of such Class, according to the
respective unpaid principal amounts thereof outstanding immediately prior to
such payment.
On each Quarterly Payment Date and on any date following an Acceleration,
principal of the Notes, the Class C Subordinated Notes and the Support Notes
will be payable from Collateral Proceeds and, in the case of the Notes, from
certain amounts available under the Enron Support Agreement, if needed, in
accordance with the Priority of Payments or the Priority of Acceleration
Payments, as applicable. Principal of the Notes is not expected to be paid
during the Investment Period. Principal of the Support Notes will in no event be
payable while the Notes are outstanding.
The payments on the Notes will depend upon, among other things, the extent
to which payments are received with respect to the Project Loans and the other
Portfolio Assets.
REDEMPTION
Optional Redemption
The Notes, the amounts drawn under the Liquidity Facility and Backup
Facility, the Class C Subordinated Notes and Support Notes are subject to
optional redemption, prepayment or repayment (in whole or in part) by the
Issuers on any Quarterly Payment Date, in order of seniority, upon the
determination to do so by the Issuer (acting at the direction of the General
Partner) in a minimum aggregate principal amount (as to the Notes) of $250,000
using amounts received by the Issuer from Enron or other persons or entities
specifically for such purpose, in the following order: first, if after the
stated maturity of the Liquidity Facility, to reduce the amounts drawn under the
Liquidity Facility; second, ratably, (i) to redeem the Class A Senior Notes,
(ii) to reduce the amounts drawn under the Backup Facility, (iii) for
termination payments to Hedge Counterparties in connection with any termination
of Hedging Agreements associated with the foregoing clauses (i) or (ii), and
(iv) to repay the amounts drawn under the Liquidity Facility (without
duplication of the preceding clause first); and third, to redeem the Class B
Senior Subordinated Notes, the Class C Subordinated Notes and the Support Notes,
in the order of seniority.
The Class A Senior Notes and the Class B Senior Subordinated Notes are
subject to optional redemption by the Issuers (in whole or in part) on any
Quarterly Payment Date on or after the fifth
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anniversary of the Closing Date but prior to the sixth anniversary of the
Closing Date, in a minimum aggregate principal amount equal to $250,000 which
redemption need not be in order of seniority, upon the determination to do so by
the Issuer (acting at the direction of the General Partner), through (a) the
issuance of new Class A Senior Notes, (b) drawings under the Backup Facility in
the case of a redemption of the Class B Senior Subordinated Notes and/or (c)
from applying amounts credited to the Uncommitted TIP Account; provided that (i)
the Credit Support Tests and, the Rating Condition are satisfied (after taking
into account such proposed redemption or repayment); (ii) no Default has
occurred and is continuing on such date; (iii) (A) the Senior Coverage Test is
satisfied, (B) the Senior Overcollateralization Ratio is at least equal to the
Target Senior Overcollateralization Ratio and (C) the Total
Overcollateralization Ratio is at least equal to the Target Total
Overcollateralization Ratio (in each case, after taking into account such
proposed redemption or repayment); (iv) to the extent the Collateral is
comprised of less than ten Project Loans, no such Project Loan is a Defaulted
Project Loan as of such date; and (v) the maximum amount of Class B Senior
Subordinated Notes that may be redeemed with an issuance of Class A Notes is the
following:
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM
AVERAGE S&P CLASS B SENIOR
RATINGS OF SECURED NOTES
PROJECT LOANS (IN $)
- ------------- --------------
<S> <C>
Ba1
Ba2
Ba3
B1
B2
B3
</TABLE>
The Class B Senior Subordinated Notes are subject to optional redemption
(in whole or in part) by the Issuers on any Quarterly Payment Date on or after
the fifth anniversary of the Closing Date, in a minimum aggregate principal
amount equal to $250,000, upon the determination to do so by the Issuer (acting
at the direction of the General Partner) through (a) the issuance of a new
series of Class B Senior Subordinated Notes with the same maturity and other
terms, other than interest rate, as the Class B Senior Subordinated Notes being
redeemed in a principal amount equal to the principal of the Class B Senior
Subordinated Notes so redeemed, plus the Class B Premium, if any, and/or (b)
amounts provided by Enron or other persons or entities specifically for such
purpose (such redemption and reissuance, a "Class B Refinancing"); provided that
(i) the Credit Support Tests and the Rating Condition are satisfied (after
taking into account such proposed redemption) and (ii) no Default has occurred
and is continuing on such date.
The Class C Subordinated Notes are subject to optional redemption (in whole
or in part) by the Issuers on any Quarterly Payment Date prior to one year
following the Investment Termination Date through the issuance of new Class A
Senior Notes, drawings under the Backup Facility or from applying amounts
credited to the Uncommitted TIP Account upon the determination to do so by the
Issuer (acting at the direction of the General Partner) provided that (i) the
Credit Support Tests and the Rating Condition are satisfied (after taking into
account such proposed redemption) and (ii) no Default has occurred and is
continuing on such date.
The redemption price for Class A Senior Notes that are subject to optional
redemption will be par (including accrued and unpaid interest) plus the Class A
Make-Whole Premium. The redemption price for Class B Senior Subordinated Notes
that are optionally redeemed will be par (including accrued and unpaid interest)
plus the Class B Premium. Any accrued and unpaid Class A Make-Whole Premium or
Class B Premium, as appropriate, and the applicable redemption price must be
paid in full for an optional redemption to be effected.
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<PAGE> 83
Mandatory Redemption
On each Quarterly Payment Date specified below, the Issuers will effect a
mandatory redemption of the Notes and Class C Subordinated Notes (in whole or in
part) and a mandatory repayment of amounts drawn under the Backup Facility by
applying the amounts set forth below in accordance with the Priority of
Payments:
(i) on the Quarterly Payment Date immediately following an Investment
Termination Date (such date, the "Initial Redemption Date") that is not
also a Tax Redemption Trigger Date and to the extent the Uncommitted TIP
Account Balance exceeds $250,000, and on each Quarterly Payment Date
thereafter until the Uncommitted TIP Account Balance is reduced to zero, in
an amount equal to (A) the Uncommitted TIP Account Balance on the Initial
Redemption Date (see "Description of Principal Documents -- Financing
Documents -- Security Documents -- Sale and Release of Collateral") less
(B) amounts, if any, applied towards the optional redemption of Class B
Senior Subordinated Notes and/or Class C Subordinated Notes on such
Quarterly Payment Date; provided, that, so long as any sale of an
Uncommitted TIP Investment on any Quarterly Payment Date is deferred to
avoid selling such investment at a loss prior to its maturity, the amount
of redemption referred to in the preceding clause (A) will be reduced by
the principal amount of the Uncommitted TIP Investments whose sale is so
deferred. Any Premium which may be payable in connection with such
redemption will be calculated based on the amount referred to in the
preceding sentence.
(ii) on any Quarterly Payment Date following the Investment
Termination Date if a Commitment expires, terminates or is cancelled or
reduced (in whole or in part) and any such reduced Commitment exceeds the
amount Allocated under the Backup Facility for such Commitment, in an
amount equal to the excess amount; provided, that, so long as any sale of a
Committed TIP Investment is deferred to avoid selling such investment at a
loss prior to its maturity, such amount will be reduced by the principal
amount of the Committed TIP Investments whose sale is so deferred (see
"Description of Principal Documents -- Financing Documents -- Security
Documents -- Sale and Release of Collateral");
(iii) on any Quarterly Payment Date upon the occurrence of (A) an
Equity Disposition and the Disposition Amount is required to be paid (see
"Enron Support") or (B) a Refinancing, in an amount equal to the Note
Redemption Amount; and
(iv) upon the occurrence of a Tax Event and the failure to satisfy the
Rating Condition, after giving effect to amounts, if any, provided under
the Enron Support Agreement in connection with a Tax Event, by the 60th day
following the occurrence of such event (such date, the "Tax Redemption
Trigger Date"), on the Quarterly Payment Date following such Tax Redemption
Trigger Date and on each Quarterly Payment Date thereafter, in an amount
equal to the Note Redemption Amount.
"Note Redemption Amount" means, in the case of (i) a Refinancing or Equity
Disposition resulting in a mandatory redemption of the Notes or Class C
Subordinated Notes, the lesser of the Disposition Amount and the Target Note
Redemption Amount and (ii) a Tax Event, the proceeds from the sale of Project
Loans sold in accordance with the Security Agreement.
"Disposition Amount" means, with respect to any Project Loan that is the
subject of an Equity Disposition or a Refinancing, an amount equal to the sum of
the principal of and accrued interest on such Project Loan plus any premium (in
the case of a fixed rate Project Loan) received by the Issuer with respect to
such Project Loan. "Target Note Redemption Amount" means, in respect of any
Project Loan subject to an Equity Disposition or a Refinancing, an amount equal
to the sum of the principal of such Project Loan or the Intermediate Funding
Loan, as applicable, made by the Issuer plus the present value, discounted at
the weighted average rate of interest then currently payable on the Notes and
the Backup Facility (the "Debt Rate"), of the amounts of interest, if any,
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<PAGE> 84
that would have been received on such Project Loan in excess of the Debt Rate
assuming such Equity Disposition or Refinancing had not occurred.
The redemption price for Class A Senior Notes will be par (including
accrued and unpaid interest) plus the Class A Make-Whole Premium and for the
Class B Senior Subordinated Notes will be par (including accrued and unpaid
interest) plus the Class B Premium; provided, however, the redemption price for
a mandatory redemption resulting (x) from the termination of the Investment
Period for reasons specified in clauses (iii), (iv) or (v) of the definition of
Investment Period and (y) an expiration, termination, cancellation or redemption
in a Commitment after the Investment Period (other than for reasons attributable
to the Issuer) will be par (including accrued and unpaid interest).
Any Premium due as a result of any mandatory redemption but not paid on
such Redemption Date will be payable on each succeeding Quarterly Payment Date
in accordance with the Priority of Payments, to the extent Collateral Proceeds
are available therefor, until all amounts payable have been paid in full.
Redemption Upon a Subordinate Event of Default
The Class A Senior Notes will be subject to mandatory redemption on any
Quarterly Payment Date if a Subordinate Event of Default has occurred and is
continuing and the Holders of a majority of the Class B Senior Subordinated
Notes direct the Issuers to redeem the Class A Senior Notes, in whole but not in
part, at par, provided that no such redemption will be permitted unless all
amounts then owing under the Backup Facility and the Liquidity Facility and all
termination amounts payable under the Hedging Agreements have been paid in full
or will be paid in full through the anticipated proceeds of a sale or
liquidation of the Project Loans and the other Collateral and the Collateral
Agent has determined that the anticipated proceeds of a sale or liquidation of
the Project Loans and other Collateral would be sufficient to so redeem the
Class A Senior Notes and repay all amounts owing under the Backup Facility and
the Liquidity Facility and make all termination payments payable under the
Hedging Agreements. The redemption price for Class A Senior Notes and Class B
Senior Subordinated Notes redeemed upon a Subordinate Event of Default will be
par (including accrued and unpaid interest).
Redemption Premiums
The "Class A Make-Whole Premium" will be an amount equal to the excess, if
any, of the present value of the remaining principal and interest scheduled to
have been paid pursuant to the Note Payment Assumptions in respect of any Class
A Senior Notes discounted at the Class A Present Value Rate over the amount of
principal of the Class A Senior Notes to be prepaid. "Class A Present Value
Rate" will be equal to (i) the as bid yield on United States treasury securities
with a maturity most closely correlating to the then interpolated remaining
average life of the Class A Senior Notes immediately prior to such prepayment
(determined in accordance with the Note Payment Assumptions), plus (ii) %.
The "Class B Premium" (i) prior to the fifth anniversary of the Closing
Date, will be an amount equal to the applicable Fixed Rate Premium plus the
excess, if any, of (A) the present value of the remaining principal, interest
and Fixed Rate Premium scheduled to have been paid pursuant to the Note Payment
Assumptions in respect of the Class B Senior Subordinated Notes, assuming such
Class B Senior Subordinated Notes were to be redeemed on the fifth anniversary
of the Closing Date at an amount equal to par plus the product of (I) the amount
of principal of the Class B Senior Subordinated Notes to be prepaid and (II) 50%
of the Class B Senior Subordinated Note Interest Rate, discounted at the Class B
Present Value Rate, over (B) the amount of principal on the Class B Senior
Subordinated Notes to be prepaid and the Fixed Rate Premium and (ii) on or after
the fifth anniversary of the Closing Date, an amount equal to the applicable
Fixed Rate Premium. The "Class B Present Value Rate" will be equal to (i) the as
bid yield on United States treasury
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<PAGE> 85
securities with a maturity most closely correlating to the then interpolated
remaining average life of the Class B Senior Subordinated Notes, assuming such
redemption would occur on the fifth anniversary of the Closing Date immediately
prior to the applicable prepayment, plus (ii) %.
The "Fixed Rate Premium" payable in respect of the Class B Senior
Subordinated Notes will be the product of (i) the amount of principal of the
Class B Senior Subordinated Notes to be redeemed and (ii) the applicable
percentage of the Class B Senior Subordinated Note Interest Rate for the periods
set forth below:
<TABLE>
<CAPTION>
NUMBER OF YEARS
ELAPSED FROM CLOSING DATE APPLICABLE PERCENTAGE
------------------------- ---------------------
<S> <C>
%
%
%
%
%
thereafter %
</TABLE>
The following assumptions (the "Note Payment Assumptions") will be used to
calculate interest and principal scheduled to be paid to Holders of the Notes
for the purpose of calculating the Premiums:
(i) No further redemptions of Notes are assumed to occur;
(ii) Project Loans are assumed to make scheduled payments on each
subsequent due date therefor until the maturity dates of such Project
Loans;
(iii) Amounts credited to the Uncommitted TIP Account are immediately
invested in a Project Loan that makes payments of interest and principal on
a quarterly basis, has a maturity date equal to the Stated Maturity, bears
interest at a rate equal to 9%, and beginning on the Investment Termination
Date, amortizes on a mortgage-style basis and no further initial fundings
of Project Loans are made by the Issuer;
(iv) Amounts credited to the Committed TIP Account followed by draws
under the Backup Facility in respect of amounts previously Allocated
thereunder are assumed to be reinvested in previously Committed but
unfunded Project Loans pursuant to the assumed drawdown schedules;
(v) Amounts credited to the Committed TIP Account are assumed to earn
interest at the contracted rates thereof until maturity and are assumed to
be reinvested at LIBOR pending reinvestment into Project Loans;
(vi) Amounts invested in other Project Loans or Permitted Investments
not otherwise specified are assumed to earn interest at 4% per annum;
(vii) Hedging Agreements would be terminated and or entered into in
the amounts consistent with managing interest rate risk given these Note
Payment Assumptions;
(viii) Quarterly Payment Dates are assumed to fall on the 10th day of
the applicable month regardless of when such Quarterly Payment Date would
actually occur;
(ix) Distributions on the Notes are made in accordance with the
Priority of Payments;
(x) LIBOR is assumed to be the current LIBOR rate and does not change;
and
(xi) LIBOR is the basis for payments under the Backup Facility and
Hedging Agreements.
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<PAGE> 86
Redemption Procedures
Notice of any redemption will be published in an Authorized Newspaper and
will be given by the Trustee by first-class mail, postage-prepaid, mailed at
least ten business days prior to the record date specified for redemption
pursuant to the Indenture to each Holder of Notes at such Holder's address in
the register maintained by the registrar under the Indenture. Notes called for
redemption must be surrendered at the office of any Paying Agent appointed under
the Indenture in order to receive the redemption price.
In the event of any redemption, the Issuer will, as soon as practicable
upon knowledge thereof, notify the Trustee of such Redemption Date, the Record
Date applicable to such Redemption Date, the principal amount of the Notes to be
redeemed on such Redemption Date and the redemption price of such Notes.
Any such notice of redemption may be withdrawn by the Issuers up to the
sixth business day prior to the scheduled Redemption Date by written notice to
the Trustee. Notice of any such withdrawal will be published once in an
Authorized Newspaper or sent by the Trustee to each Holder of Notes at such
Holder's address not later than the fourth business day prior to the scheduled
Redemption Date by overnight courier guaranteeing next day delivery.
CANCELLATION
All Notes that are redeemed and surrendered for cancellation as described
herein will forthwith be canceled and may not be reissued or resold.
ISSUANCE OF CLASS A SENIOR NOTES AFTER THE CLOSING DATE
The Issuers expect to issue $ to $ of
additional Class A Senior Notes after the Closing Date, which additional Class A
Senior Notes will have the same maturity and the same terms, other than interest
rate, as the Initial Class A Senior Notes. On each Subsequent Class A Closing
Date, it will be a condition to the issuance of such Class A Senior Notes (the
"Class A Senior Note Issuance Requirements") that (i) after giving effect to any
application of the proceeds of such issuance, the sum of the aggregate
outstanding principal balance of the Notes and the aggregate principal amount
Allocated plus amounts drawn under Backup Facility does not exceed the Maximum
Class A Principal Amount, (ii) if such Class A Senior Notes are issued after the
Investment Termination Date, the proceeds of such issuance will be applied (A)
to reduce amounts Allocated, (B) to repay amounts drawn under the Backup
Facility or (C) to redeem all or a portion of the Class A Senior Notes, Class B
Senior Subordinated Notes or Class C Subordinated Notes issued and outstanding,
(iii) the Liquidity Test is satisfied on such date, (iv) unless the proceeds of
such issuance are used to reduce amounts Allocated, or to repay amounts drawn,
under the Backup Facility, the Credit Support Tests and the Rating Condition are
satisfied as of such date (after taking into account such issuance) and (v) no
Default has occurred and is continuing on such date. Proceeds from the issuance
of the Class A Senior Notes will be (i) credited to the TIP Accounts as
described in "Security for the Notes -- Temporary Investments" below, (ii) used
to repay amounts drawn under the Backup Facility and/or (iii) used to repay the
principal of Class A Senior Notes, Class B Senior Subordinated Notes and Class C
Subordinated Notes, as permitted.
ISSUANCE OF CLASS B SENIOR SUBORDINATED NOTES AFTER THE CLOSING DATE
On any Quarterly Payment Date on or after the fifth anniversary of the
Closing Date, the Issuers may issue additional Class B Senior Subordinated Notes
in connection with a Class B Refinancing. The additional Class B Senior
Subordinated Notes will have the same maturity and the same terms, other than
interest rate, as the Class B Senior Subordinated Notes being redeemed. On each
date on which additional Class B Senior Subordinated Notes are issued, it will
be a condition to the issuance of such Class B Senior Subordinated Notes that
(i) the Credit Support Tests and the
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<PAGE> 87
Rating Condition are satisfied after giving effect to such Class B Refinancing
and (ii) no Default has occurred and is continuing on such date. See
"Redemption -- Optional Redemption".
PAYMENTS
Payments in respect of principal and interest will be made to the person in
whose name the Note is registered on the applicable Record Date. Payments will
be made by a check delivered to DTC or its nominee or by wire transfer in
immediately available funds to a U.S. Dollar account maintained by DTC or its
nominee. Final payments in respect of principal of the Notes will be made
against surrender of such Notes at the office of the Paying Agent appointed
under the Indenture. None of the Issuers, the Trustee, the Program Manager or
the Paying Agent will have any responsibility or liability for any aspects of
the records maintained by DTC or its nominee or any of its direct or indirect
participants (including Euroclear or Cedel or any of their respective direct or
indirect participants) relating to or payments made on account of beneficial
interests in a Global Note.
The Issuers expect that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note held by DTC or its nominee,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Global Note as
shown on the records of DTC or its nominee. The Issuers also expect that
payments by participants (i.e., direct participants) to owners of beneficial
interests in such Global Note held through such participants (i.e., indirect
participants) will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
For so long as any Class of Notes is listed on the Luxembourg Stock
Exchange and the rules of such exchange so require, the Issuer will have a
paying agent and a transfer agent with an office in Luxembourg.
ACCOUNTS
On or prior to the Closing Date and pursuant to the terms of the Security
Agreement, the Issuer will establish with the Account Bank for the benefit of
the Noteholders and the other Secured Parties: (i) the Collection Account, (ii)
the TIP Accounts, (iii) the Reserve Account, (iv) the Excess Spread Account and
(v) the Operating Account. The Issuer will also establish the Expense Reserve
Account on or prior to the Scheduled Investment Termination Date. If requested
by Enron in accordance with the Enron Support Agreement, the Issuer may also
establish the Distribution Obligation Escrow Account. In addition, the Trustee
will establish the Note Payment Account, as described below. Each Account other
than the Note Payment Account will be established in the name of the Issuer with
the Account Bank pursuant to the Security Agreement and pledged to the
Collateral Agent for the benefit of the Secured Parties.
Collection Account
All Collateral Proceeds will be remitted to the Account Bank for the
benefit of the Collateral Agent and credited to an account designated the
"Collection Account" and will be available for application as described under
"-- Priority of Payments" or "-- Priority of Acceleration Payments", as the case
may be.
TIP Accounts
The Temporary Investment Portfolio will consist of Temporary Investments
which satisfy certain criteria. The Temporary Investments will be held in the
TIP Accounts and managed by the TIP Investment Manager in accordance with the
investment policies of the Issuer. See "Temporary Investments".
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<PAGE> 88
Reserve Account
Prior to the Closing Date and on each Quarterly Payment Date, an amount
(the "Reserve Amount") equal to the lesser of (i) the amount necessary to cause
the Reserve Test to be satisfied and (ii) Collateral Proceeds remaining after
application as provided in clauses (i) through (ix) of the Priority of Payments
will be credited to an account established with the Account Bank and designated
the "Reserve Account". On each Quarterly Payment Date, after giving effect to
all withdrawals, if any, in respect of any Quarterly Payment Shortfall, all
amounts credited to the Reserve Account in excess of the Reserve Amount will be
released from the Reserve Account and credited to the Collection Account for
application in accordance with clause (xi) of the Priority of Payments. See
"-- Priority of Payments".
Excess Spread Account
All Collateral Proceeds remaining on any Quarterly Payment Date during the
Investment Period after application as provided in clauses (i) through (xi)(h)
of the Priority of Payments will be credited to an account established with the
Account Bank and designated the "Excess Spread Account". In the event there
occurs a Quarterly Payment Shortfall in respect of a Quarterly Payment Date, the
Issuer will instruct the withdrawal and application of amounts credited to the
Excess Spread Account to cover such Quarterly Payment Shortfall. See
"-- Priority of Payments". On each Quarterly Payment Date after the Investment
Termination Date after giving effect to the withdrawal, if any, in respect of
any Quarterly Payment Shortfall, all amounts in the Excess Spread Account in
excess of the Retention Amount as of such Quarterly Payment Date will be
released from the Excess Spread Account and applied in accordance with clauses
(xi)(j) and (xi)(k) of the Priority of Payments. Notwithstanding the foregoing,
amounts that otherwise would be credited to the Excess Spread Account on any
Quarterly Payment Date will be distributed to each person or entity who
otherwise would have been entitled thereto but for such credit requirement if
such person or entity delivers to the Issuers (x) an agreement to repay (a
"Repayment Agreement") such amounts to the Issuers if and to the extent that
amounts in the Excess Spread Account are required by the Issuers to cover any
Quarterly Payment Shortfall (it being understood and agreed that payments to
cover any Quarterly Payment Shortfall will be made ratably from amounts credited
to the Excess Spread Account and payment obligations under the Repayment
Agreements) and (y) if such person is not an Acceptable Credit Provider, a
guarantee, letter of credit or the credit support for such person's or entity's
obligations under the Repayment Agreement is provided by an Acceptable Credit
Provider. Any amount which is subject to repayment pursuant to a Repayment
Agreement will be deemed to be credited to the Excess Spread Account for
purposes of calculating the Excess Spread Account Balance. The "Retention
Amount," on the Investment Termination Date, means the amount credited to the
Excess Spread Account which is being used to satisfy the Credit Support Tests
and Rating Condition as of such date, and on any date after the Investment
Termination Date, means (a) the greater of (i) zero and (ii) the greater of (x)
the Retention Amount as of the Investment Termination Date minus the Retention
Percentage of the amount of principal that has been received on the Project
Loans since the Investment Termination Date and (y) the amount, if any, that if
added to the amount credited to in the Reserve Account, would satisfy the
Reserve Test plus (b) amounts, if any, designated to be retained in such account
by the holders of Class I Interests, at their option, in accordance with the
Partnership Agreement. The "Retention Percentage" means a fraction, determined
on the Investment Termination Date, the numerator of which is the sum of the
Unused Enron Commitments and the Retention Amount and the denominator of which
is the Aggregate Project Loan Balance.
Expense Reserve Account
On each Quarterly Payment Date, the Issuer will credit to an account
established with the Account Bank and designated the "Expense Reserve Account'
an amount equal to, and for the payment of, the Operating Expenses estimated to
be paid during the next Due Period, as set forth in the Valuation Report, in
accordance with clause (xi)(j) of the Priority of Payments; provided,
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<PAGE> 89
however, the funds credited to the Expense Reserve Account will not exceed $2
million at any time. The Issuer may withdraw funds from the Expense Reserve
Account on any date to pay such Operating Expenses.
Operating Account
The Issuer will credit to an account established with the Account Bank and
designated the "Operating Account" the following amounts to be applied for the
respective purposes specified below:
(a) any amounts withdrawn, so long as the Issuer determines that in
good faith it can meet its obligations under clauses (i)-(v) of the
Priority of Payments on the immediately succeeding Quarterly Payment Date,
from the Collection Account on a date other than a Quarterly Payment Date,
in an amount equal to, and for the payment of, regularly scheduled payments
or the termination costs payable under any Hedging Agreement referred to in
clauses (v)(b) and (vi), respectively, of the Priority of Payments;
(b) any amounts drawn under the Liquidity Facility for application in
respect of a Shortfall or for payment of Operating Expenses;
(c) from the proceeds of the issuance of Notes and the Class C
Subordinated Notes, an amount equal to and for the payment of, the Initial
Issuance Expenses or Transaction Expenses, as the case may be, relating to
such issuance;
(d) any amounts received pursuant to the Enron Support Agreement,
other than amounts credited to the Committed TIP Account pursuant to a
Funding Availability Commitment, for application in accordance with the
Priority of Payments or the Priority of Acceleration Payments, as the case
may be; and
(e) any amounts received under Class I Stage Funding Commitment
Letters to cover any Shortfall or Acceleration Shortfall.
Note Payment Account
The Trustee will, from time to time, credit all payments received from the
Collection Account in respect of payments due to the Noteholders to a single,
segregated trust account designated the "Note Payment Account". All monies or
property collected or received by or on behalf of the Trustee on any Quarterly
Payment Date pursuant to the Priority of Payments or on any date following an
Acceleration pursuant to the Priority of Acceleration Payments, as applicable,
will be paid out from the Note Payment Account on such date to the Noteholders
in the order specified in the Priority of Payments or the Priority of
Acceleration Payments, as applicable, and to the extent available. All monies or
property collected or received by or on behalf of the Trustee from the
Collateral Agent on any Redemption Date in connection with the redemption of any
Notes will be credited to and paid out to the Holders of the Notes being so
redeemed in accordance with and to the extent provided in the Priority of
Payments.
Distribution Obligation Escrow Account
In the event of a downgrade by Moody's of the rating of the senior
unsecured long term debt of Enron below Baa2 and the failure of Enron to obtain
a standby letter of credit pursuant to the Enron Support Agreement, within 30
days thereof the Issuer, upon receipt of notice from Enron, will cause to be
established with the Account Bank an account designated the "Distribution
Obligation Escrow Account" and Enron will deposit cash in an amount equal to
$ pursuant to the Enron Support Agreement. Funds credited to the
Distribution Obligation Escrow Account will be applied in accordance with the
Enron Support Agreement in connection with a Quarterly Payment Shortfall on
which Enron fails to make certain payments Enron is obligated to make pursuant
to the Enron Support Agreement. See "Enron Support".
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PRIORITY OF PAYMENTS
On each Quarterly Payment Date, Collateral Proceeds credited to the
Collection Account on the related Determination Date will be applied in the
following order of priority ("Priority of Payments"):
(i) to the payment of any filing fees and taxes then due and payable
by the Issuer and/or the Co-Issuer;
(ii) to the payment of accrued and unpaid ordinary fees and expenses
owing by the Issuers to the Trustee, the Collateral Agent, any other
Representative, the TIP Advisors and the Rating Agencies;
(iii) to the payment of the accrued and unpaid Administrative Fee
payable to the Program Manager;
(iv) (A) prior to the stated maturity of the Liquidity Facility, to
the payment of any accrued and unpaid fees, expenses or interest on amounts
drawn under the Liquidity Facility and (B) after the stated maturity of the
Liquidity Facility, to the payment of accrued and unpaid interest on and
principal of the Liquidity Facility, until the outstanding principal
balance is reduced to zero, and any other amounts due and payable
thereunder;
(v) ratably, as to the payment of the following items: (A) to the Note
Payment Account in an amount equal to, and for the payment of, accrued and
unpaid interest on the Class A Senior Notes; (B) payments (other than
termination costs) payable by the Issuer under the Hedging Agreements; and
(C) to the payment of commitment fees, any accrued and unpaid interest on
amounts drawn under the Backup Facility or any other amounts (other than
principal) due and payable thereunder;
(vi) to the Operating Account for payment of termination costs payable
under any Hedging Agreement on such Quarterly Payment Date or during the
Due Period immediately succeeding the Due Period relating to such Quarterly
Payment Date;
(vii) if the Senior Coverage Test is not satisfied on such Quarterly
Payment Date, to the repayment of (A) first, principal of the Liquidity
Facility (such repayment or prepayment to be made in the order in which
principal installments are due if after the Liquidity Facility Availability
Period), until the outstanding principal balance of the Liquidity Facility
is reduced to zero and (B) second, principal of the Backup Facility and to
the Note Payment Account in an amount equal to, and for the payment of, the
principal amount of Class A Senior Notes, pro rata according to the
principal of the Backup Facility and the principal amount of the Class A
Senior Notes (it being understood that, for purposes of this clause,
principal of the Backup Facility will refer to amounts drawn or Allocated
thereunder and payments made in respect of amounts Allocated under the
Backup Facility will be credited to the Committed TIP Account to reduce the
amounts then Allocated under the Backup Facility), in each case, to the
extent necessary to satisfy the Senior Coverage Test;
(viii) if the Senior Coverage Test is satisfied on such Quarterly
Payment Date, to the Note Payment Account in an amount equal to, and for
the payment of, accrued and unpaid interest on the Class B Senior
Subordinated Notes to the extent the Senior Coverage Test remains
satisfied;
(ix) to the repayment of principal of the Liquidity Facility, the
Backup Facility and the Notes and, to the extent not paid in (viii) above,
to the Note Payment Account in an amount equal to, and for the payment of,
interest on the Class B Senior Subordinated Notes, in the priority set
forth below:
(a) after the expiration of the Liquidity Facility Availability
Period, to the payment of the quarterly principal installment then due
under the Liquidity Facility (each such installment to be made in an
amount equal to one-eighth of the outstanding principal as of the last
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day of the Liquidity Facility Availability Period) together with any
accrued interest and any other amounts owing thereunder;
(b) ratably, to the repayment of the principal of the Backup
Facility and to the Note Payment Account in an amount equal to, and for
the payment of, the principal amount of the Class A Senior Notes (it
being understood that, for purposes of this clause, principal of the
Backup Facility will refer to amounts drawn or Allocated thereunder and
payments made in respect of Allocated amounts will be credited to the
Committed TIP Account to reduce amounts Allocated under the Backup
Facility) to the extent necessary to cause the Senior
Overcollateralization Ratio on such Quarterly Payment Date to be at
least equal to the Target Senior Overcollateralization Ratio or if the
Calculated Senior Debt Balance is less than zero, to the extent
necessary to pay in full the principal amount of and accrued interest
and other amounts owing in respect of the Backup Facility and the Class
A Senior Notes;
(c) to the Note Payment Account in an amount equal to, and for the
payment of, accrued and unpaid interest on the Class B Senior
Subordinated Notes to the extent not paid in (viii) above; and
(d) to the Note Payment Account in an amount equal to, and for the
payment of, the principal amount of the Class B Senior Subordinated
Notes to the extent necessary to cause the Total Overcollateralization
Ratio on such Quarterly Payment Date to be equal to the Target Total
Overcollateralization Ratio or if the Calculated Total Debt Balance is
less than zero, to the extent necessary to pay in full the Class B
Senior Subordinated Notes;
(x) if the Reserve Test is not satisfied on such Quarterly Payment
Date, to the Reserve Account in an amount equal to the Reserve Amount; and
(xi) the remaining Collateral Proceeds plus the amount of cash
credited to the Reserve Account in excess of the Reserve Amount will be
applied in the priority set forth below:
(a) after the Liquidity Facility Availability Period, to the
repayment of the outstanding principal installments under the Liquidity
Facility (in the order in which such installments are due) until the
outstanding principal balance of the Liquidity Facility is reduced to
zero;
(b) to the Note Payment Account in an amount equal to and for the
payment of all accrued and unpaid Class A Make-Whole Premiums;
(c) to the Note Payment Account in an amount equal to and for the
payment of all accrued and unpaid Class B Premiums;
(d) to the Note Payment Account in an amount equal to, and for the
payment of, the accrued and unpaid interest on Class C Subordinated
Notes;
(e) to the payment of the Management Fee and Incentive Fee accrued
during the related Due Period, and to the payment of any accrued and
unpaid Management Fee and/ or Incentive Fee accrued during any prior Due
Period and any other amounts due under the Management Agreement;
(f) prior to the stated maturity of the Liquidity Facility, to the
repayment of the Liquidity Facility until the outstanding principal
balance of the Liquidity Facility is reduced to zero;
(g) to the payment of any Extraordinary Expenses and Permitted
Capital Expenditures;
(h) to the Note Payment Account in an amount equal to, and for the
payment of, the Class C Principal Distributable Amount, if any;
(i) during the Investment Period, to the Excess Spread Account;
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(j) on or after the expiration of the Liquidity Facility
Availability Period, to the Expense Reserve Account in an amount equal
to, and for the payment of, the Operating Expenses expected to be
payable prior to the next Determination Date; and
(k) to the Issuer for payment of principal and interest on the
Support Notes and for distribution in respect of the Interests in
accordance with the provisions of the Partnership Agreement; provided
that no such application shall be made for distributions in respect of
any Class II Interests or Support Notes held by Enron or any Enron
Affiliate if (and during the period in which) an Event of Default shall
have occurred and be continuing for a period of 180 days, after which
180-day period distributions may be made in respect of such Class II
Interests or Support Notes in accordance with this clause (xi)(k).
If the Issuer does not have sufficient amounts available on any Quarterly
Payment Date to make all payments pursuant to clauses (i) through (xi)(e) of the
"Priority of Payments" above (a "Shortfall"), the following actions will be
taken by the Issuer:
(i) first, during the Liquidity Facility Availability Period, draw on
amounts available under the Liquidity Facility Loan Agreements to make such
payments; provided, however, the Liquidity Facility will not be available
for payments under clauses (iv)(B), (vii), (ix), (x), (xi)(a), (xi)(b) and
(xi)(c), and to the extent there is a shortfall in the amounts necessary to
make payments pursuant to clauses (i) through (xi)(c), such amounts will
not be available for payments under clauses (xi)(d) and (xi)(e) (such
amounts, the "Liquidity Shortfall Amounts");
(ii) second, to the extent a Shortfall remains, such Shortfall will be
covered by amounts paid to the Issuer under Liquidity Test Commitments, if
any; provided, however, the Liquidity Test Commitments will not be
available for payments under clauses (iv)(B), (vii), (ix), (x), (xi)(a),
(xi)(b) and (xi)(c), and to the extent there is a shortfall in the amounts
necessary to make payments pursuant to clauses (i) through (xi)(c), such
amounts will not be available for payments under clauses (xi)(d) and
(xi)(e); and
(iii) third, to the extent a Shortfall remains under any of clauses
(i) through (ix) of the Priority of Payments on such Quarterly Payment Date
(a "Quarterly Payment Shortfall"), such Quarterly Payment Shortfall will be
covered to the extent funds are available from the amounts paid to the
Issuer under the Enron Support Agreement (see "Enron Support") and the
amounts credited to the Reserve Account and the Excess Spread Account as
set forth in the Security Agreement (see "-- Accounts"), in the following
order of priority:
(a) proceeds received from issuing the Class C Subordinated Notes
in accordance with the Enron Support Agreement as described under "Enron
Support";
(b) proceeds from funding the Class I Interests in accordance with
the terms of the Class I Stage Funding Commitment Letters.
(c) proceeds from funding the Class II Interests in accordance with
the Enron Support Agreement as described under "Enron Support";
(d) except to the extent such Quarterly Payment Shortfall results
from a Tax Event, an amount equal to Quarterly Project Distributions
with respect to such Quarterly Payment Date;
(e) except to the extent such Quarterly Payment Shortfall results
from a Tax Event, an amount equal to the Project Distributions Reserved
as of the prior Quarterly Payment Date;
(f) amounts credited to the Reserve Account as of such Quarterly
Payment Date;
(g) amounts credited to the Excess Spread Account as of such
Quarterly Payment Date; and
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(h) payments under Credit Support Test Commitments, if any.
On any Quarterly Payment Date that a payment is made to the Issuer in
accordance with priority (ii) or clause (d), (e) or (h) of clause (iii) above,
the Issuer will issue Support Notes in an aggregate principal amount equal to
the amount of such payment. Interest and principal will be payable on the
Support Notes as described in the Enron Support Agreement (see "Enron Support")
and in accordance with the Priority of Payments or Priority of Acceleration
Payments, as applicable.
PRIORITY OF ACCELERATION PAYMENTS
Following an Acceleration, all amounts credited to the Collection Account
and any other Collateral Account (other than the Reserve Account, the Excess
Spread Account, the Committed TIP Account and the Distribution Obligation Escrow
Account) will be applied in the following order of priority ("Priority of
Acceleration Payments"):
(i) to the payment of any filing fees and taxes then due and payable
by the Issuer and/or the Co-Issuer (as certified by an authorized officer
of the Issuer to the Collateral Agent);
(ii) to the payment of accrued and unpaid fees and expenses owing by
the Issuers to the Trustee, the Collateral Agent, any other Representative,
the TIP Advisor(s) and the Rating Agencies;
(iii) to the Program Manager in an amount equal to, and for payment
of, any accrued and unpaid Administrative Fees as of such date;
(iv) Liquidity Lenders for payment of the outstanding principal
balance plus accrued and unpaid interest and any other amounts owing under
the Liquidity Facility;
(v) pro rata, to the (a) Holders of the Class A Senior Notes for
payment of the outstanding principal amount of Class A Senior Notes and
interest (excluding premium) payable thereon of such date, (b) Backup
Lenders for payment of the outstanding principal balance plus accrued and
unpaid interest and any other amounts owing under the Backup Facility (it
being understood that, for purposes of this clause, principal of the Backup
Facility will refer to amounts drawn or Allocated thereunder and payments
made in respect of Allocated amounts will be credited to the Committed TIP
Account to reduce amounts Allocated under the Backup Facility) and (c) the
Hedge Counterparties for payments due under each Hedging Agreement;
(vi) to the Holders of the Class B Senior Subordinated Notes in an
amount equal to, and for payment of, the outstanding principal amount of
Class B Senior Subordinated Notes and interest (excluding premium) payable
thereon as of such date;
(vii) to the Holders of the Class A Senior Notes in an amount equal
to, and for payment of, all accrued and unpaid Class A Make-Whole Premium
as of such date;
(viii) to the Holders of the Class B Senior Subordinated Notes in an
amount equal to, and for payment of, all accrued and unpaid Class B Premium
as of such date;
(ix) to the Holders of the Class C Subordinated Notes in an amount
equal to, and for payment of, the outstanding principal amount of the Class
C Subordinated Notes and interest payable thereon as of such date;
(x) to the Program Manager in an amount equal to, and for payment of,
any accrued and unpaid Management Fees as of such date;
(xi) to the Holders of the Support Notes, in an amount equal to, and
for payment of, principal and interest payable thereon as of such date; and
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(xii) to the Issuer in an amount equal to the amounts required for
distribution in respect of the Interests in accordance with the provisions
of the Partnership Agreement.
If the Issuer does not have sufficient amounts available following an
Acceleration to make all payments pursuant to clauses (i) through (x) of the
Priority of Acceleration Payments above (an "Acceleration Shortfall"), the
Issuer will make up such Acceleration Shortfall in the manner and in the
priority set forth below, from:
(i) first, proceeds received upon the funding of all unfunded Class I
Interests pursuant to the terms of the Class I Stage Funding Commitment
Letters;
(ii) second, proceeds received from issuing the Class C Subordinated
Notes in a principal amount up to the maximum amount of any unutilized
Class C Subordinated Note Purchase Commitment;
(iii) third, proceeds from funding the Class II Interests up to the
maximum amount of the unutilized Enron Class II Purchase Commitment;
(iv) fourth, proceeds from issuing Support Notes in an amount equal to
the Quarterly Project Distributions;
(v) fifth, proceeds from issuing Support Notes in an amount equal to
the Project Distributions Reserved as of the prior Quarterly Payment Date;
(vi) sixth, amounts credited to the Reserve Account;
(vii) seventh, amounts credited to the Excess Spread Account; and
(viii) eighth, proceeds from issuing Support Notes in an amount equal
to payments pursuant to Credit Support Test Commitments, if any, in
accordance with the Enron Support Agreement.
COLLATERAL PROCEEDS
As used herein, "Collateral Proceeds" means, with respect to any Quarterly
Payment Date, the sum of (i) all payments of interest received by the Issuer in
Cash during the related Due Period on the Project Loans, (ii) except as
otherwise provided in the Security Agreement with respect to an event of default
that has occurred and is continuing on a Committed TIP Investment, all payments
of interest received in Cash during the related Due Period on the Temporary
Investments, (iii) all accrued interest on any Project Loan or Temporary
Investment received by the Issuer as a result of the sale of such Project Loan
or Temporary Investment during such Due Period, (iv) all premiums (including
prepayment premiums) received by the Issuer during such Due Period on the
Project Loans and Temporary Investments, (v) if after the Investment Termination
Date, all payments of principal (including prepayments) received by the Issuer
during such Due Period on Project Loans and Temporary Investments credited to
the Uncommitted TIP Account, (vi) all amendment and waiver fees, all late
payment fees and all other fees and commissions received in Cash during such Due
Period in connection with Project Loans and the Temporary Investments other than
loan origination fees or upfront fees (excluding expense reimbursements)
credited to the Uncommitted TIP Account, (vii) if after the Investment
Termination Date, any amount received by the Issuer during such Due Period from
the sale or other disposition of Project Loans and Temporary Investments
credited to the Uncommitted TIP Account, (viii) any amount received by the
Issuer pursuant to the Hedging Agreements during such Due Period, other than
Hedging Proceeds received during the Investment Period, (ix) all earnings from
Permitted Investments made with amounts credited to the Accounts (other than any
amounts credited to the Reserve Account and the Excess Spread Account and the
Distribution Obligation Escrow Account) during such Due Period, (x) proceeds
from the sale of any Committed TIP Investments in connection with an expiration,
termination, cancellation or reduction of a Commitment after the Investment
Termination Date,
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(xi) payments received pursuant to the terms of the Enron Support Agreement
other than payments credited to the Operating Account or shortfall relating to
the funding of a Project Loan or amounts credited to the Distribution Obligation
Escrow Account and (xii) amounts transferred from the Operating Account at the
end of the immediately preceding Due Period pursuant to the Security Agreement,
at the discretion of the Issuer; provided, that, without duplicating the
foregoing, amounts referred to in clauses (i) through (vii) above shall include
amounts received by the Issuer through an Intermediate Funding Entity and any
other loans made by the Issuer.
COLLATERAL COVERAGE RATIOS AND TEST
The collateral coverage ratios and test consist of the Senior Coverage
Test, Senior Overcollateralization Ratio, Target Senior Overcollateralization
Ratio, Total Overcollateralization Ratio and Target Total Overcollateralization
Ratio. The collateral coverage ratios and test affect the application of funds
in the Priority of Payments and the availability and application of Enron
Support.
Senior Overcollateralization Ratio
The "Senior Overcollateralization Ratio" as of any date of determination,
is the ratio calculated by dividing (a) the sum of (i) the Project Loan Balance
for each non-Defaulted Project Loan, (ii) for each Defaulted Project Loan, the
excess of (x) the Project Loan Balance therefor over (y) the Issuer Determined
Loss for such Defaulted Project Loan, (iii) the Uncommitted TIP Account Balance
corresponding to all non-defaulted Temporary Investments in the Uncommitted TIP
Account and (iv) for each defaulted Temporary Investment, the excess of (x) the
principal balance of such Temporary Investment over (y) the Assumed Loss Amount
for such Temporary Investment, by (b) the sum of (i) the aggregate outstanding
principal amount of the Class A Senior Notes and (ii) the Backup Facility
Balance.
"Issuer Determined Loss" means, with respect to any Project Loan that is in
default as to payment of principal or interest as of the originally scheduled
due date therefor (a "Defaulted Project Loan"), the amount of non-recoverable
accrued and unpaid interest and non-recoverable unpaid outstanding principal on
such Defaulted Project Loan, as determined by the Program Manager on behalf of
the Issuer. Whenever the Program Manager obtains new information concerning the
likelihood that the Issuer may not receive a payment of principal of or interest
on a Project Loan, the Program Manager will determine whether the Issuer
Determined Loss should be adjusted to reflect such new information.
Target Senior Overcollateralization Ratio
The "Target Senior Overcollateralization Ratio" on any date is calculated
by dividing (a) the Calculated Asset Balance by (b) the Calculated Senior Debt
Balance, so long as the Calculated Senior Debt Balance is greater than zero.
The "Calculated Asset Balance" means (x) prior to the Investment
Termination Date, the sum of (i) the Aggregate Project Loan Balance and (ii) the
Uncommitted TIP Account Balance and (y) on or after the Investment Termination
Date, the sum of (i) (A) the Aggregate Project Loan Balance on the Investment
Termination Date, (B) the Uncommitted TIP Account Balance and (C) the Committed
TIP Account Balance relating to any terminated, canceled, expired or reduced
Commitment minus the sum of (ii) (A) the aggregate amount of all Commitments
terminated, canceled, expired or reduced and (B) the sum of all Note Redemption
Amounts.
The "Calculated Senior Debt Balance" means the Calculated Asset Balance
minus (x) the sum of (i) all Hedging Proceeds, (ii) the principal amount of the
Class B Senior Subordinated Notes issued on the Closing Date, (iii) the
principal amount of Class C Subordinated Notes issued in connection with the
initial funding of a particular Project Loan, (iv) the Class I Interests issued,
(v) the GP Interests issued and (vi) the Class II Interests issued on or prior
to the Closing Date plus (y) the sum of (i) the Deferred Issuance Costs, and
(ii) the principal amount, if any, of Class B
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Senior Subordinated Notes (including any Class B Premium) and Class C
Subordinated Notes redeemed with Class A Senior Notes, with drawings under the
Backup Facility or with amounts credited to the Uncommitted TIP Account.
The "Deferred Issuance Costs" mean, with respect to (i) the Closing Date,
Initial Issuance Expenses; (ii) any Quarterly Payment Date on or prior to the
Investment Termination Date, the Initial Issuance Expenses plus the Transaction
Expenses minus any upfront fees received from Project Borrowers; and (iii) any
Quarterly Payment Date after the Investment Termination Date, the greater of (A)
the Deferred Issuance Costs on the prior Quarterly Payment Date minus
one-quarter of the Deferred Issuance Costs on the Investment Termination Date
and (B) zero.
Senior Coverage Test
The "Senior Coverage Test" is satisfied on any date of determination if the
Senior Overcollateralization Ratio on such date is at least equal to 75% of the
Target Senior Overcollateralization Ratio.
Total Overcollateralization Ratio
The "Total Overcollateralization Ratio" as of any date of determination, is
the ratio calculated by dividing (a) the sum of (i) the Project Loan Balance for
each non-Defaulted Project Loan, (ii) for each Defaulted Project Loan, the
excess of (x) the Project Loan Balance therefor over (y) the Issuer Determined
Loss for such Defaulted Project Loan, (iii) the Uncommitted TIP Account Balance
corresponding to all non-defaulted Temporary Investments in the Uncommitted TIP
Account and (iv) for each defaulted Temporary Investment, the excess of (x) the
principal balance of such Temporary Investment over (y) the Assumed Loss Amount
for such Temporary Investment, by (b) the sum of (i) the aggregate outstanding
principal amount of the Notes and (ii) the Backup Facility Balance.
The "Target Total Overcollateralization Ratio" on any date is calculated by
dividing (a) the Calculated Asset Balance by (b) the Calculated Total Debt
Balance, so long as the Calculated Total Debt Balance is greater than zero.
"Calculated Total Debt Balance" means the Calculated Asset Balance minus
(x) the sum of (i) all Hedging Proceeds, (ii) the principal amount of Class C
Subordinated Notes issued in connection with the initial funding of a particular
Project Loan, (iii) the Class I Interests issued, (iv) the GP Interests issued
and (v) the Class II Interests issued on or prior to the Closing Date plus (y)
the sum of (i) the Deferred Issuance Costs, (ii) the Class B Premium and (iii)
the principal amount, if any, of Class C Subordinated Notes redeemed with Class
A Senior Notes or drawings under the Backup Facility or with amounts credited to
the Uncommitted TIP Account.
THE RESERVE TEST; PROJECT DISTRIBUTIONS RESERVED
The "Reserve Test" is satisfied on a Quarterly Payment Date if the sum of
(a) the amounts credited to the Reserve Account, (b) the unutilized portion of
the Enron Class II Purchase Commitment and the Class C Subordinated Note
Purchase Commitment and (c) the Project Distributions Reserved is at least equal
to the Required Reserve Amount.
"Required Reserve Amount" means, as of any Quarterly Payment Date, the
greater of (i) the Assumed Loss Amount in respect of all Defaulted Project Loans
minus the Issuer Determined Loss in respect of all such Defaulted Project Loans
and (ii) zero.
"Assumed Loss Amount" means, with respect to any Defaulted Project Loan or
a defaulted Temporary Investment, an amount equal to the product of (a) the
outstanding principal amount of such Project Loan or Temporary Investment, as
the case may be, and (b) 100% minus the assumed recovery rate of (i) 45%, in the
case of Project Loans and (ii) 50%, in the case of Temporary Investments.
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"Project Distributions Reserved" means, with respect to a Quarterly Payment
Date, after giving effect to all payments made on such Quarterly Payment Date,
the amount calculated as the excess of the Required Reserve Amount over the sum
of the unutilized portion of the Enron Class II Purchase Commitment and the
unutilized portion of the Class C Subordinated Note Purchase Commitment;
provided that, Project Distributions Reserved will not exceed the sum of (i)
Project Distributions Reserved as of the previous Quarterly Payment Date, if
any, and (ii) the Quarterly Project Distributions for the current Quarterly
Payment Date less the amount of any such Quarterly Project Distributions used to
satisfy any Quarterly Payment Shortfall on such Quarterly Payment Date.
In the event there exists a Quarterly Payment Shortfall on any Quarterly
Payment Date, Enron will have the obligation to provide, among other things, an
amount up to the Project Distributions Reserved as of the previous Quarterly
Payment Date to cover such shortfall. See "Enron Support".
FORM, DENOMINATION AND REGISTRATION
General
The Noteholders will hold their Notes through DTC (in the United States) or
Cedel or Euroclear (in Europe) if they are participants in the DTC systems.
Except as set forth below, the Initial Notes will be registered in the name of a
nominee of DTC and deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, as custodian for DTC on or about the
Closing Date. The Notes will be issued in the form of one or more Global Notes
in fully registered form without interest coupons (each, a "Global Note").
Owners of beneficial interests in Global Notes will be entitled or
required, as the case may be, under certain circumstances described below, to
receive physical delivery of certificated Notes ("Certificated Notes") in fully
registered definitive form. The Notes are not issuable in bearer form.
The Issuers will appoint Chase Bank of Texas, National Association to serve
as Note Registrar, Trustee, Paying Agent and Transfer Agent of the Notes and
[ ] as Offshore Paying Agent, each at its offices specified
below. The Trustee, Note Registrar and Paying Agent will be responsible for,
among other things, (i) maintaining a record of the registration of ownership,
exchange and transfer of the Notes and accepting Notes for exchange and
transfer, (ii) ensuring that payments of the principal and interest received
from the Issuer in respect of the Notes are duly paid to the registered holders
thereof, (iii) transmitting to the Issuer any notices or other communications
from Noteholders and (iv) transmitting to the Noteholders notice of the
occurrence of any Event of Default as soon as practicable after obtaining
knowledge thereof.
Notes will be issued in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof; provided, that any interest in a Global
Note equal to or in excess of the minimum denomination at the time of the
issuance thereof which ceases or fails to be such minimum or multiple as a
result of the repayment of principal pursuant to the Priority of Payments or
Priority of Acceleration Payments, as applicable, may be transferred in its
entirety.
Global Notes
So long as the depositary for a Global Note, or its nominee, is the
registered holder of such Global Note, such depositary or such nominee, as the
case may be, will be considered the absolute owner or Holder of the Notes
represented by such Global Note for all purposes under the Financing Documents
and the Notes and Agent Members, as well as any other persons on whose behalf
Agent Members may act (including Euroclear and Cedel and account holders and
participants therein) will have no rights under the Financing Documents or under
a Global Note. Owners of beneficial interests in a Global Note will not be
considered to be the owners or holders of any Note under the Financing Documents
or the Notes. In addition, no beneficial owner of an interest in a Global Note
will be able to exchange or transfer that interest, except in accordance with
the applicable
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procedures of the depositary, Euroclear and Cedel, in each case to the extent
applicable (the "Applicable Procedures").
Investors may hold their interests in a Global Note directly through Cedel
or Euroclear, if they are participants in the DTC system, or indirectly through
organizations that are participants in such system. Such investors may also hold
such interests through organizations other than Cedel or Euroclear that are
participants in the DTC system. Cedel and Euroclear will hold interests in a
Global Note on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositories, that in turn will hold such interests in such Global Note in
customers' securities accounts in the depositories' names on the books of DTC.
Payments of the principal of, and interest and additional amounts on,
individual Notes represented by a Global Note registered in the name of a
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner of the Global Note representing such Notes.
None of the Issuer, the Trustee or any Paying Agent will have an responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests, except for the Trustee's duties in respect of payments made
on account of, and the recordation of ownership of interests in, a Global Note.
The Issuer expects that the depositary for the Global Notes or its nominee,
upon receipt of any payment of principal or interest in respect of a Global Note
representing any Notes held by such depositary or its nominee, will immediately
credit the accounts of Agent Members with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such global
security as shown on the records of the depositary or its nominee. The Issuer
also expects that payments by Agent Members to owners of beneficial interests in
such Global Note held through such Agent Members will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the name of nominees for such
customers. Such payments will be the responsibility of such participants.
Certificated Notes
Interests in a Global Note will be exchangeable or transferable, as the
case may be, for Certificated Notes in fully registered form without interest
coupons if DTC notifies the Issuer that it is unwilling or unable to continue as
depositary for such Global Note or DTC ceases to be a Clearing Agency, and a
successor depository is not appointed by the Issuers within 90 days of such
notice. Upon the occurrence of the events described in the preceding sentence,
the Issuers will cause the appropriate Certificated Notes to be delivered.
Certificated Notes will be exchangeable or transferable for interests in other
Certificated Notes or a Global Note as described below.
Transfer and Exchange
Transfers between participants in DTC will be effected in the ordinary way
in accordance with the Applicable 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.
Certificated Notes may be exchanged or transferred in whole or in part in
the principal amount of authorized denominations by surrendering such
Certificated Notes at the office of the Note Registrar or the Transfer Agent
(or, in the case of Certificated Notes, at a co-transfer agent located in
Luxembourg) with a written instrument of transfer as provided in the Indenture.
With respect to any transfer of a portion of a definitive registered note, the
transferor will be entitled to receive, at any aforesaid office, a new
definitive registered note representing the principal amount retained by the
transferor after giving effect to such transfer.
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The costs and expenses of effecting any exchange or registration of
transfer pursuant to the foregoing provisions, except for the expense of
delivery by other than regular mail (if any) and except for the payment of a sum
sufficient to cover any tax or other governmental charges or insurance charges
that may be imposed in relation hereto, will be borne by the Issuer.
All Notes issued upon any exchange or registration of transfer of
securities will be valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits, as the Notes surrendered upon exchange or
registration of transfer.
The Note Registrar will effect transfers of Global Notes and, along with
the Transfer Agent, will effect exchanges and transfers of Certificated Notes.
In addition, the Note Registrar will keep books for the ownership, exchange and
transfer of any Notes in definitive form.
The laws of some states require that certain persons take physical delivery
of securities in definitive form. Consequently, any transfer of beneficial
interests in a Global Note to such persons may require that such interests in a
Global Note be exchanged for Certificated Notes. Because DTC can only act on
behalf of Agent Members, that in turn act on behalf of indirect Agent Members
and certain banks, the ability of a person having a beneficial interest in a
Global Note to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may require that such interest in a Global Note be exchanged for
Certificated Notes. Interests in a Global Note will be exchangeable for
Certificated Notes only as described above.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Cedel participants, on the other, will be
effected in DTC in accordance with DTC 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 its rules and
procedures and within its established deadlines (Brussels time). 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 the effect final settlement on its behalf by delivering or receiving
interests in a Global Note in DTC and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
participants and Euroclear participants may not deliver instructions directly to
the depositories of Cedel or Euroclear.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a DTC Agent
Member will be credited during the securities settlement processing day
immediately following the DTC settlement date and such credit of any
transactions in interests in such Global Note settled during such processing
will be reported to the relevant Euroclear or Cedel participant on such business
day. Cash received in Euroclear or Cedel as a result of sales of interests in a
Global Note by or through a Euroclear or Cedel participant to a DTC participant
will be received with value on the DTC settlement date but will be available in
the relevant Euroclear or Cedel cash account only as of the business day
following settlement in DTC.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder of Notes (including, without limitation, the presentation of
Notes for exchange as described above) only at the direction of one or more
Agent Members to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to that such Agent Member or Agent Members has or have given
such direction. However, if there is an Event of Default under the Notes, DTC
will exchange the Global Notes for Certificated Notes and distribute such
definitive notes to its Agent Members.
DTC has advised the Issuer as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the
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meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its Agent Members and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its Agent Members, thereby
eliminating the need for physical movement of certificates. Agent Members
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of interests in a Global Note among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Issuers nor the Trustee will have any
responsibility for the performance by the DTC, Cedel or Euroclear or their
respective Agent Members or indirect participants of their respective
obligations under the rules and procedures governing their operations.
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LIQUIDITY FACILITY AND BACKUP FACILITY
LIQUIDITY FACILITY
The Issuer will arrange for the provision of a five-year revolving credit
facility, converting into a two-year term loan facility thereafter (such credit
facilities together with the Liquidity Test Commitments, if any, collectively
referred to as the "Liquidity Facility") pursuant to the Liquidity Facility Loan
Agreement in an aggregate amount at any one time outstanding of up to
$ . The five-year revolving period under the Liquidity Facility may be
extended under certain circumstances, for an additional five-year revolving
period, subject to the consent of the Liquidity Lenders and to the Rating
Condition being satisfied on the date of such extension. In addition, the
Liquidity Facility Commitment may be increased by an amount equal to or less
than $ in accordance with the terms of the Liquidity Facility Loan
Agreement or by obtaining Liquidity Test Commitments from Enron pursuant to the
Enron Support Agreement, so long as (i) the Rating Condition would be satisfied
after giving effect to such increase and (ii) in the case where the Issuer
obtains Liquidity Test Commitments, notice is provided to the Liquidity Facility
Agent of the amount and payment terms of such commitment. The Issuer may reduce
its commitment under the Liquidity Facility provided that the Liquidity Test and
the Rating Condition are satisfied.
If, in respect of any Quarterly Payment Date, there is a Shortfall, the
Issuer will make a drawing under the Liquidity Facility to pay any Liquidity
Facility Shortfall Amounts as described under "Description of the
Notes -- Priority of Payments". The Issuer will also be permitted to draw
amounts under the Liquidity Facility to pay any due and payable Operating
Expenses to the extent amounts are available to be drawn thereunder. Principal
and interest and other amounts due under the Liquidity Facility will be paid in
accordance with the Priority of Payments or Priority of Acceleration Payments,
as applicable. Outstanding principal as of the last day of the Liquidity
Facility Availability Period will be payable in eight equal installments after
the expiration of the Liquidity Facility Availability Period as set forth in the
Priority of Payments. See "Description of the Notes -- Priority of Payments".
BACKUP FACILITY
At any time after the Closing Date, the Issuer may enter into one or more
revolving credit facilities, with a revolving period ending on the seventh
anniversary of the Closing Date (extendable, under certain circumstances, for an
additional two-year period), each converting into a term loan facility with the
same final maturity as the Stated Maturity (such credit facilities, together
with the Funding Availability Commitments, if any, as described under "Enron
Support", collectively referred to as the "Backup Facility"). Such Backup
Facility may be provided to the Issuer by Enron or an Enron Affiliate or one or
more financial institutions in an aggregate amount such that the sum of the
Backup Facility Commitment Amount and the aggregate outstanding principal amount
of Class A Senior Notes and the Class B Senior Subordinated Notes does not
exceed the Maximum Class A Principal Amount. Each Backup Facility Loan Agreement
must conform to the standards set forth in Annex B to the Common Agreement. The
Issuer will be permitted to draw or Allocate amounts committed under the Backup
Facility subject to the following conditions: on each date on which additional
draws or Allocations are to be made under the Backup Facility, it will be a
condition to such draw or Allocation that (i) after giving effect to the
application of such amounts the aggregate outstanding principal amount of Notes
and the Backup Facility Balance does not exceed the Maximum Class A Principal
Amount, (ii) the Liquidity Test is satisfied as of such date, (iii) in the case
of draws, unless such draws are used to reduce amounts Allocated under the
Backup Facility, the Credit Support Tests and the Rating Condition are satisfied
and (iv) no Default has occurred and is continuing on such date.
The Issuer expects to repay any amounts drawn under the Backup Facility
with issuances of Class A Senior Notes during the Backup Facility Revolving
Period. However, in the event amounts remain outstanding under the Backup
Facility at the end of the revolving period, the Backup Facility will convert
into a term loan with a stated maturity equal to the Stated Maturity.
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MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS
The Stated Maturity of the Notes is , 2018. The actual maturity
of each Class of Notes is, however, expected to occur prior to the Stated
Maturity. The expected weighted average life of the Class A Senior Notes is
years, and the expected weighted average life of the Class B Senior Subordinated
Notes is years.
Average life refers to the average number of years that will elapse from
the date of delivery of a security until each dollar of the principal of such
security will be paid to the investor. The average life of a Class of Notes will
be determined by the amount and frequency of principal payments, that are
dependent upon any payments received at or in advance of the scheduled maturity
of Project Loans (whether through prepayment, sale, maturity, redemption,
default or other liquidation or disposition). The actual average life and actual
maturity of a Class of Notes will also be affected by the financial condition of
the obligors of the underlying Project Loans and the characteristics of the
Project Loans. Any disposition of a Project Loan may change the composition and
characteristics of the Project Loans and the rate of payment thereon, and,
accordingly, may affect the actual average life of the respective Classes of
Notes. The rate of future defaults and the amount and timing of any cash
realization from Defaulted Project Loans also will affect the maturity and
average life of the Notes.
Accordingly, prospective investors should make their own determinations of
the expected weighted average lives and maturities of the Notes. See "Risk
Factors -- Average Life and Prepayment Considerations".
SECURITY FOR THE NOTES
Under the Security Documents, the Issuers will grant to the Collateral
Agent a first priority security interest in, among other things, the following,
as collateral security for the repayment of all present and future obligations
of the Issuers under the Notes, the Class C Subordinated Notes, the Indenture,
the Liquidity Facility, the Backup Facility, the Security Documents, the Hedging
Agreements and any other Financing Document (the "Secured Obligations"): (i) all
present and future rights of the Issuer under the Project Loans, all
Intermediate Funding Loans, including the Issuer's interest in any collateral at
the project level that secures such Project Loans or Intermediate Funding Loans,
(ii) the Temporary Investments, (iii) the Eligible Investments, (iv) the
Assigned Agreements and (v) the Accounts other than the Note Payment Account
(together with (i) through (iv), the "Collateral").
PROJECT LOANS
All present and future rights of the Issuer under the Project Loans
(including the proceeds of any collateral securing such Project Loans) will be
security for the repayment of all Secured Obligations.
TEMPORARY INVESTMENTS
On the Closing Date, net proceeds from the issuance of the Initial Notes
and the Initial Interests and, during the Investment Period, net proceeds from
(i) the issuance of Class A Senior Notes issued after the Closing Date other
than amounts used to reduce amounts drawn under the Backup Facility or to redeem
the Notes and/or the Class C Subordinated Notes, (ii) the issuance of Class C
Subordinated Notes or the funding of Class I Interests after the Closing Date
(other than the net proceeds from issuing Class C Subordinated Notes or funding
Class I Interests in connection with a Quarterly Payment Shortfall or upon
Acceleration), (iii) all payments of principal (including prepayments) and loan
origination or upfront fees (excluding expense reimbursements) received on
Project Loans and (iv) all Hedging Proceeds will be credited to the TIP Accounts
and invested in Temporary Investments. See "Temporary Investments".
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ELIGIBLE INVESTMENTS
All funds received into the Accounts, other than the TIP Accounts, during a
Due Period and amounts received in prior Due Periods and retained in such
Accounts will be invested in Eligible Investments having stated maturities no
later than the next Quarterly Payment Date. "Eligible Investments" are
Dollar-denominated investments that, at the time it is delivered to the
Collateral Agent, are one or more of the following obligations or securities:
(i) direct registered obligations of, and registered obligations the
timely payment of principal and interest on which is fully and expressly
guaranteed by, the United States of America or any agency or
instrumentality of the United States of America the obligations of which
are expressly backed by the full faith and credit of the United States of
America;
(ii) demand and time deposits in, certificates of deposit of, bankers'
acceptances payable within 90 days of issuance by, or Federal funds sold
by, any depository institution or trust company incorporated under the laws
of the United States of America or any state thereof and subject to
supervision and examination by Federal and/or state banking authorities so
long as the commercial paper and/or the debt obligations of such depository
institution or trust company (or, in the case of the principal depository
institution in a holding company system, the commercial paper or debt
obligations of such holding company) at the time of such investment or
contractual commitment providing for such investment have a credit rating
of not less than A2 by Moody's or A by S&P, in the case of long-term debt
obligations, or P-1 by Moody's or A-1 by S&P in the case of commercial
paper and short-term debt obligations;
(iii) unleveraged repurchase obligations with respect to (a) any
security described in clause (i) above or (b) any other registered security
issued or guaranteed by an agency or instrumentality of the United States
of America (in each case without regard to the stated maturity of such
security), in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii) above or
entered into with a corporation (acting as principal) whose long-term
rating is not less than A2 by Moody's or A by S&P or whose short-term
credit rating is P-1 by Moody's or A-1 by S&P at the time of such
investment;
(iv) registered debt securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States
of America or any state thereof that have a credit rating of not less than
A1 by Moody's or A+ by S&P at the time of such investment or contractual
commitment providing for such investment;
(v) commercial paper or other short-term obligations with a maturity
of not more than 90 days from the date of issuance and having at the time
of such investment a credit rating of P-1 by Moody's or A-1 by S&P; and
(vi) a reinvestment agreement issued by any bank (if treated as a
deposit by such bank), or a registered reinvestment agreement issued by any
insurance company or other corporation or entity, in each case that has a
credit rating of not less than P-1 by Moody's or A-1 by S&P;
and, in each case, with a stated maturity (giving effect to any applicable grace
period) no later than the Quarterly Payment Date next following the Due Period
in which the date of investment occurs; provided that, Eligible Investments will
not include any interest-only security, any security purchased at a price in
excess of 100% of the par value thereof, unless such security is non-callable to
maturity (unless callable with a make-whole premium) or any security whose
repayment is subject to substantial non-credit related risk as determined in the
sole judgment of the Program Manager. Eligible Investments may include those
investments with respect to which the Trustee or an Affiliate of the Trustee
provides services.
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HEDGING AGREEMENTS AND CURRENCY HEDGING ARRANGEMENTS
The Issuer anticipates that the Notes and the Project Loans will be priced
at fixed interest rates, but as some of the Notes and Project Loans are expected
to price at different times during the Investment Period, the underlying
Treasury benchmark yields may move between the time that the Project Loans are
priced and the Notes are priced, and vice versa. The Issuer will seek to
minimize this exposure through the use of interest rate hedging instruments,
including swaps, swaptions and options. See "Interest Rate Hedging
Arrangements".
Project Loans may be denominated in a currency other than U.S. dollars if
such Project Loan is made through an Intermediate Funding Entity and the
Intermediate Funding Entity has, among other things, hedged its foreign currency
risk related to such Project Loan pursuant to a hedging arrangement with an
Acceptable Credit Provider. See "Eligible Projects and Qualifying Criteria --
Qualifying Criteria -- Project Loan Criteria".
ACCOUNTS
On or prior to the Closing Date, the Account Bank will establish and
thereafter maintain the Accounts, other than the Note Payment Account, for the
benefit of the Noteholders. See "Description of the Notes -- Accounts".
ASSIGNED AGREEMENTS
The following agreements (the "Assigned Agreements") will be pledged as
part of the Collateral: (i) the Hedging Agreements, (ii) any currency hedging
agreement entered into pursuant to any Currency Hedging Arrangement, (iii) the
Enron Support Documents, (iv) the Management Agreement, (v) the Backup Facility
Loan Agreement, (vi) the Liquidity Facility Loan Agreement, (vii) the TIP
Investment Management Agreement(s), (viii) the Repayment Agreements, (ix) the
Class I Stage Funding Commitment Letters, (x) all instruments underlying any
Project Loan, Intermediate Funding Loan or Permitted Investment and (xi) all
additional transaction documents. See "Description of Principal Documents".
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DESCRIPTION OF PRINCIPAL DOCUMENTS
FINANCING DOCUMENTS
The "Financing Documents" include the Indenture, the Common Agreement, the
Security Documents, the Intercreditor Agreement, the Liquidity Facility Loan
Agreement, the Backup Facility Loan Agreement(s), the Notes, the Class C
Subordinated Notes, the Support Notes, the Hedging Agreements, the Class I Stage
Funding Commitment Letters and the Enron Support Agreement.
Indenture
The Notes are issued pursuant to an Indenture, dated as of ,
1998 (the "Indenture"), among the Issuer, the Co-Issuer and the Trustee. See
"Description of the Notes".
Common Agreement
The Common Agreement, dated as of , 1998 (the "Common
Agreement") among the Issuer, the Co-Issuer, the Trustee, the Liquidity Facility
Agent, the Backup Facility Agents from time to time party thereto and the
Collateral Agent, establishes (i) certain uniform conditions precedent,
representations and warranties, affirmative and negative covenants, events of
default, remedies, and prepayment and redemption provisions applicable to the
Backup Facility, the Liquidity Facility and the Notes, (ii) general criteria for
(a) the acquisition of Portfolio Assets, (b) the provision of accountings and
reports, (c) assumptions used for calculations, (d) the Hedging Agreements and
(e) Backup Facility Loan Agreements, (iii) reimbursement and indemnification
obligations, and (iv) defined terms for each of the Financing Documents.
Portfolio Acquisition. The Issuer may, under the terms of the Common
Agreement, commit to make Project Loans in respect of Eligible Projects during
the Investment Period which satisfy the Qualifying Criteria as of the Financial
Closing Date therefor. The Issuer may make such Project Loans directly or
indirectly through one or more Intermediate Funding Entities subject to the
Intermediate Funding Loan Criteria. The Issuer may not enter into a Commitment
unless such Commitment is subject to cancellation in the event any of the
Qualifying Criteria is not satisfied as of the Financial Closing Date for such
Project Loan. Initial funding under all Project Loans or Intermediate Funding
Loans will be required to occur no later than the Scheduled Investment
Termination Date. The terms of the Common Agreement also provide for the
mechanics to effect, and the consequences of, an Equity Disposition.
The Common Agreement also includes provisions relating to the Temporary
Investment Portfolio and a covenant on the part of the Issuers to engage the
Program Manager for the management of the Portfolio Assets.
Calculations. The Common Agreement sets forth the assumptions used in
connection with all calculations required to be made pursuant to any of the
Financing Documents with respect to Scheduled Payments on any Project Loan and
Permitted Investment, or any payments on any other assets included in the
Collateral, and with respect to the income that can be earned on Scheduled
Payments on such Project Loan and Permitted Investment and on any other amounts
that may be received for credit to the Collection Account.
Hedging Agreements. The Common Agreement sets forth general guidelines with
respect to the Hedging Agreements and includes covenants on the part of the
Issuer to enter into and terminate one or more Hedging Agreements only to the
extent they are consistent with the objectives described herein. See "Hedging
Agreements".
Backup Facility and Liquidity Facility. The Common Agreement provides that
the Issuer may, from time to time subsequent to the Closing Date, (i) enter into
one or more Backup Facility Loan Agreements conforming to the standards set
forth in an appendix thereto or (ii) increase the Liquidity Facility Commitment
by up to $ , in accordance with the terms of the Liquidity
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Facility Loan Agreement, or by obtaining Liquidity Test Commitments from Enron
pursuant to the Enron Support Agreement, in each case provided, that, the Issuer
will obtain confirmation, on or prior to entering into such agreement, that the
Rating Condition would be satisfied after giving effect to such increase and
give notice to the Liquidity Facility Agent in the case it obtains Liquidity
Test Commitments. See "Liquidity Facility and Backup Facility".
Representations and Warranties. Pursuant to the Common Agreement, the
Issuers will make certain representations and warranties to, and in favor of,
the Secured Parties as of the Closing Date. Such representations and warranties
include representations and warranties as to the: (i) due formation and
organization, valid existence and good standing of the Issuers; (ii) necessary
power and authority on the part of the Issuers to execute and deliver
Transaction Documents and to perform its obligations under such agreements;
(iii) absence of any violation or conflict with the organizational documents of
the Issuers, applicable laws and certain agreements to which the Issuer or the
Co-Issuer is a party in consummating the transactions contemplated by the
Transaction Documents; (iv) obtaining of all governmental and other consents
required to have been obtained by the Issuers; (v) absence of pending or (to
their knowledge) threatened actions or suits against the Issuer or the Co-Issuer
that would have a material adverse effect on the Issuer, the Co-Issuer or the
Collateral; and (vi) absence of a violation or necessity to register under the
Investment Company Act.
Conditions Precedent. Under the terms of the Common Agreement, the issuance
of Notes on the Closing Date and the effectiveness of the Liquidity Facility and
Backup Facility will be subject to the satisfaction of numerous conditions
precedent including, among others, the conditions that: (i) each Transaction
Document required to exist will have been executed and delivered to the
Collateral Agent; (ii) opinions from appropriate counsel to the parties have
been received by the Collateral Agent; (iii) $ of Class I
Interests will have been funded or committed to be funded; (iv) at least five
(5) percent of the total funded capitalization of the Issuer consist of funded
Class I Interests; (v) the Trustee will have received letters from each of the
Rating Agencies confirming that the Class A Senior Notes and the Class B Senior
Subordinated Notes have each been rated the appropriate rating; and (vi) the
Collateral Agent will have received evidence of the establishment of each of the
Accounts.
Affirmative Covenants. The Common Agreement sets forth certain affirmative
covenants of the Issuers made for the benefit of the Collateral Agent, the
Representatives and each other Secured Party including covenants: (i) to
maintain their existence and qualification to do business; (ii) to comply in all
material respects with applicable laws; (iii) to terminate the Management
Agreement in accordance with the provisions thereof upon the direction of the
Collateral Agent; (iv) not to take any actions, and use reasonable best efforts
not to permit any action to be taken by others, that would release any party to
any Financing Document from its obligations thereunder; (v) to take any action
necessary to secure the rights and remedies under the Financing Documents and to
preserve and defend title to the Collateral; (vi) to provide the Collateral
Agent, each Representative and each Hedge Counterparty with notice of any
Default; (vii) to annually provide to the Collateral Agent, each Representative
and each Rating Agency a statement of compliance with the Financing Documents,
noting the occurrence of any Default; (viii) to cause at least five (5) percent
of the total funded capitalization of the Issuer to consist of funded Class I
Interests; (ix) so long as any Notes are outstanding, to obtain an annual review
of the ratings by Moody's and S&P of such Notes unless such Notes were otherwise
fully reviewed and reaffirmed during such year; (x) to comply in all material
respects with all tax obligations; (xi) to furnish, or cause to be furnished, to
the Collateral Agent and each Representative annual audited and quarterly
unaudited financial statements of the Issuers; and (xii) to deliver, and cause
to be delivered, all certificates evidencing interests held in any Intermediate
Funding Entities.
Negative Covenants. In addition, the Common Agreement includes certain
negative covenants of the Issuers including covenants not to (i) sell or
encumber any part of the Collateral, except as expressly permitted by the terms
of the Financing Documents; (ii) permit any Lien to be created on
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the Collateral or any portion thereof, other than Permitted Liens; (iii) incur
any capital expenditures other than certain permitted capital expenditures; and
(iv) with respect to the Co-Issuer, have any material assets or material income
or have any right to the proceeds of the Notes.
The Issuers will also covenant not to enter into any amendments,
modifications, waivers or supplements to any Underlying Instruments in respect
of Project Loans or Intermediate Funding Loans that will: (A) in the reasonable
judgment of the Issuer, cause a Project Loan or an Intermediate Funding Loan to
be less likely to be repaid in full than prior to such amendment, modification,
waiver or supplement; (B) cause an Event of Default to occur; (C) unless an
event of default has occurred and is continuing in respect of a Project Loan, in
which case clause (D) below will apply, cause a Project Loan or an Intermediate
Funding Loan to no longer satisfy the Project Loan Criteria or Intermediate
Funding Loan Criteria, as the case may be (determined as if the Financial
Closing Date for such Project Loan or such Intermediate Funding Loan were on the
date of any such amendment, modification, waiver or supplement); provided, that
for purposes of this clause (C), clause (3) of the definition of Project Loan
Criteria will be deemed satisfied if the Initial Equity for a Project Borrower
on the date of such amendment, modification, waiver or supplement is at least
equal to the Initial Equity for such Project Borrower on the Financial Closing
Date of such Project Loan or if the Initial Equity for such Project Borrower
expressed as a percentage of the total capitalization on the date of such
amendment, modification, waiver or supplement is at least equal to the Initial
Equity expressed as a percentage of the total capitalization for such Project
Borrower on the Financial Closing Date of such Project Loan; or (D) if such
amendment, modification, waiver or supplement is a Material Modification, cause
the Rating Condition not to be satisfied (as if the Financial Closing Date for
such Project Loan were the date of such amendment, modification, waiver or
supplement), except that if such Material Modification is made during the
continuance of an event of default under such Project Loan, such Material
Modification may be made so long as (1) in the reasonable judgment of the Issuer
after consultation with the Rating Agencies, such Material Modification would
not be expected to cause a reduction or withdrawal of the rating of any of the
Class A Senior Notes and Class B Senior Subordinated Notes that would not
otherwise occur in the absence of such Material Modification and (2) if the
result thereof is to cause such Project Loan or Intermediate Funding Loan to no
longer satisfy the Project Loan Criteria or the Intermediate Funding Loan
Criteria, the Issuer shall have first considered any practicable alternatives to
such Material Modification that would enable the Issuer to satisfy the Project
Loan Criteria or the Intermediate Funding Loan Criteria, as the case may be, and
shall have concluded in good faith that agreeing to such Material Modification
was reasonable.
Reports. Under the Common Agreement, the following reports are required to
be delivered to the Collateral Agent, each Representative and each Rating
Agency: (a) annual reports of the Independent accountants; and (b) for each
Quarterly Payment Date, a valuation report (the "Valuation Report") containing
certain information with respect to the business of the Issuer, including
information regarding (i) the Project Loans and Intermediate Funding Loans, (ii)
the Permitted Investments, (iii) the Liquidity Facility, (iv) the Backup
Facility, (v) the calculations to determine compliance with the Portfolio
Financial Tests, (vi) the Notes (including the outstanding principal and the
interest payable), (vii) the amount of Collateral Proceeds received, (viii) the
Operating Expenses payable in the next Due Period, (ix) the Accounts, (x) the
Diversity Score, (xi) the various ratios, (xii) Hedging Agreements, (xiii) the
Quarterly Project Distributions and Project Distributions Reserved and (xiv) the
application of moneys in connection with the Priority of Payments.
Events of Default. The Common Agreement defines the term "Event of Default"
as any of the following events:
(a) default in the payment of any interest or fees owing with respect
to the Liquidity Facility, the Backup Facility or the Notes or Class C
Subordinated Notes, or default in any payment due to a Hedge Counterparty
under any Hedging Agreement, in any event when the
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same becomes due and payable, which default shall continue for a period of
three business days;
(b) (i) default at its Stated Maturity in the payment of principal of
any Class of Notes, or (ii) default at the applicable stated maturity in
the payment of principal amounts outstanding under the Liquidity Facility
or the Backup Facility;
(c) the failure on any Quarterly Payment Date to disburse amounts
(other than amounts described in clauses (a) or (b) above) available in the
Collection Account in accordance with the Priority of Payments and
continuation of such failure for a period of five business days;
(d) either of the Issuers becomes an investment company required to be
registered under the Investment Company Act;
(e) default in the performance, or breach, of any other covenant of
the Issuer or the Co-Issuer under the Indenture or any other Financing
Document to which it is a party or of the Program Manager under the
Management Agreement, or any representation or warranty of the Issuer or
the Co-Issuer made in the Indenture or any other Financing Document to
which it is a party or of the Program Manager made in the Management
Agreement, or in any certificate or writing delivered by the Issuer or the
Co-Issuer pursuant to the Indenture, any other Financing Document to which
it is a party or by the Program Manager pursuant to the Management
Agreement, proves to be incorrect in any material respect when made, and
such default, breach or misrepresentation continues for a period of 90 days
after notice to the Issuer and the Program Manager by the Collateral Agent
or the Required Lenders, provided, however, that such cure period will
apply only to those defaults, breaches or misrepresentations capable of
being cured;
(f) default in the performance, or breach, of any covenant of Enron or
any of its subsidiaries under the Enron Support Agreement or any
representation or warranty of Enron or any of its subsidiaries thereunder,
or in any certificate or writing delivered pursuant thereto, proves to be
incorrect in any material respect when made, and such default, breach or
misrepresentation continues for a period of 30 days after notice to the
Issuer and the Program Manager by the Collateral Agent or the Required
Lenders; provided, however, that such cure period will apply only to the
defaults, breaches or misrepresentations capable of being cured;
(g) default in the performance, or breach, of any covenant of the
purchaser of Class I Interests pursuant to its Class I Stage Funding
Commitment Letter or any representation or warranty thereunder proves to be
incorrect in any material respect when made and such default, breach, or
misrepresentation continues for a period of 30 days after notice to the
Issuer and the Program Manager by the Collateral Agent or the Required
Lenders; provided, however, that such cure period will apply only to the
defaults, breaches or misrepresentations capable of being cured;
(h) an involuntary proceeding is commenced or an involuntary petition
is filed seeking (i) liquidation, reorganization or other relief in respect
of the Issuer or the Co-Issuer or Enron or its debts, or of a substantial
part of its assets, under any bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for the Issuer or the Co-Issuer or Enron or for a substantial part of its
assets, and, in any such case, such proceeding or petition continues
undismissed for 60 days; or an order or decree approving or ordering any of
the foregoing is entered;
(i) the Issuer or the Co-Issuer or Enron (i) voluntarily commences any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consents to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
involving it and described in (h) above, (iii) applies for or consents to
the appointment of a receiver, trustee,
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custodian, sequestrator, conservator or similar official for it or for a
substantial part of its assets, (iv) files an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v)
makes a general assignment for the benefit of creditors or (vi) takes any
action for the purpose of effecting any of the foregoing; or
(j) the failure of the Issuer to cause the Collateral Agent to have a
first priority perfected security interest with respect to the Collateral
(subject only to Permitted Liens), and, in the case of a failure that is
capable of being cured, the continuance of such failure for a period of 30
days.
Remedies. Upon the occurrence and during the continuation of an Event of
Default, the Collateral Agent and each Representative on behalf of the Secured
Parties for whom such Representative is acting may exercise any or all right and
remedies at law or in equity including the following: (i) declare any and all
amounts outstanding under the Financing Documents to be immediately due and
payable (such event, an "Acceleration") (provided that, upon an Event of Default
relating to the bankruptcy or insolvency of the Issuer all such amounts will
automatically become due and payable) and (ii) exercise all other rights and
remedies available to them under any Financing Document. The exercise of any
such remedies is subject in all respects to the Intercreditor Agreement. See
"-- Intercreditor Agreement".
Repayments and Redemptions. Provisions of the Common Agreement set forth
the circumstances under which the Notes may be redeemed at the option of the
Issuers and the circumstances under which the Notes are required to be redeemed
by the Issuers. The Notes which may be redeemed, the amounts of such
redemptions, the date on which such redemptions may be effected and the order of
payments are also specified therein. See "Description of the Notes --
Redemptions".
Security Documents
The Security Agreement, dated as of , 1998 (the "Security
Agreement"), among the Issuer, the Co-Issuer, the Collateral Agent and the
Account Bank and any financing statements required by the Security Agreement
(together with the Security Agreement, the "Security Documents") will secure the
payment of, and performance by the Issuers of, all of the Secured Obligations.
Grant of Security Interest. Under the Security Agreement, the Issuers will
grant to the Collateral Agent, on behalf of and for the benefit of the Secured
Parties, all of their respective right, title and interest in and to the
Collateral. See "Security for the Notes".
Covenants. In addition to the covenants of the Issuers set forth in the
Common Agreement, the Issuers will covenant, among other things, to: (i) warrant
and defend their respective title to, and the interest of the Collateral Agent
in, the Collateral; and (ii) do nothing to impair the rights of the Collateral
Agent and the other Secured Parties in the Collateral or sell or cause any
portion of the Collateral to be released from the lien of the Security Agreement
except as otherwise provided in the Security Agreement and the other Financing
Documents.
Sale and Release of Collateral. Under the Security Agreement, so long as no
Event of Default has occurred and is continuing, the Issuer may (and in certain
specified circumstances will), be required to sell and direct the Collateral
Agent in writing to release the security interest of the Collateral Agent in the
following: (i)(a) the Issuer may, prior to the Investment Termination Date and,
the Issuer will be required, on or after the Investment Termination Date, to
sell a non-defaulted Uncommitted TIP Investment so long as the Sale Proceeds to
be obtained together with any breakage costs which would be incurred would not,
in the good faith determination of the Issuer, increase the Quarterly Payment
Shortfall on the next succeeding Quarterly Payment Date, and (b) a non-defaulted
Committed TIP Investment the Issuer may, and, (in the case an event in clause
(I) occurs after the Investment Termination Date), will, effect a sale of any
non-defaulted
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Committed TIP Investment (I) upon a reduction, withdrawal or cancellation in a
Commitment to make Project Loans the amount of which exceeds the amount then
Allocated under the Backup Facility, or (II) upon an unanticipated acceleration
in the drawdown schedule of a Project Loan, in each case so long as the Funding
Availability Test is satisfied after giving effect to such sale and the Sale
Proceeds to be obtained together with any breakage costs which would be incurred
would not in the good faith determination of the Program manager increase the
Quarterly Payment Shortfall on the next succeeding Quarterly Payment Date;
except that the Issuers will be entitled to defer a sale of any Temporary
Investment to the extent necessary to avoid selling such Temporary Investment
prior to its stated maturity at a loss (see "Description of the
Notes -- Redemption -- Mandatory Redemption"); (ii) the Issuer may sell a
defaulted Temporary Investment if the Issuer expects to realize greater value by
such sale than by retaining the defaulted Temporary Investment; (iii) the Issuer
may sell a defaulted Eligible Investment if the Issuer expects to realize
greater value by such sale then by retaining the defaulted Eligible Investment;
(iv) a Defaulted Project Loan if such sale is not made to an Enron Affiliate and
the Issuer expects to realize greater value by such sale than by retaining the
Defaulted Project Loan; (v) the Issuer will be required to sell a non-Defaulted
Project Loan following a Tax Redemption Trigger Date at a price no less than an
amount calculated by multiplying (I) the outstanding principal balance of such
Project Loan and (II) a percentage, the numerator of which is the sum of the
outstanding amount of the Notes, the amounts drawn under the Liquidity Facility
and the Backup Facility and termination amounts, if any, to be payable under any
Hedging Agreement and the denominator of which is the Total Assets; the minimum
price specified in the Security Agreement unless approved by the Collateral
Agent acting at the direction of the Required Lenders; (vi) the Issuer will be
required to sell a non-Defaulted Project Loan, in the event of an Equity
Disposition or Refinancing, upon receipt of the Disposition Amount; and (vii)
the Issuer may sell all Collateral in the event of an optional redemption of the
Notes and the other Secured Obligations, in whole but not in part, under the
Common Agreement (see "Description of the Notes -- Redemption -- Optional
Redemption"); provided, however, that the Issuer may at any time defer a sale of
any Temporary Investment to the extent necessary to avoid selling such Temporary
Investment prior to its stated maturity at a loss.
The Collateral Agent will credit Sale Proceeds to the Collection Account,
except that (i) any Sale Proceeds received in respect of a Project Loan prior to
the Investment Termination Date will be credited to the Uncommitted TIP Account
and (ii) any Sale Proceeds received in respect of any Temporary Investments
prior to the Investment Termination Date will be credited to the TIP Account in
respect of which such Temporary Investment was made.
Assigned Agreements. The Issuers will undertake to obtain the agreement and
consent of each party to the Assigned Agreements to the effect that, among other
things, (i) such party acknowledges that the Issuers are assigning all of their
respective right, title and interest in, to and under the relevant Assigned
Agreement for the benefit of the Secured Parties, (ii) such party will not
institute any bankruptcy-related proceeding against the Issuer or the Co-Issuer
until the passage of the appropriate preference period after the payment in full
of the Secured Obligations; and (iii) in the case of the Program Manager, that
the Program Manager will, among other things, continue to serve in such capacity
under the Management Agreement, notwithstanding that it will not have received
amounts due it under the Management Agreement because sufficient funds were not
then available under the Financing Documents to pay such amounts. With respect
to the Assigned Agreements (other than any Backup Facility Loan Agreement,
Liquidity Facility Loan Agreement, the TIP Investment Management Agreement, the
Currency Hedging Agreement, the Hedging Agreements, any Underlying Instruments
and any Additional Transaction Documents entered into in replacement of the
foregoing (other than in replacement of the Liquidity Facility Agreement), the
Issuers will agree not to amend or modify the terms thereof (other than the type
of amendment or modification that may be made to any of the Financing Documents
without the requirement that the Collateral Agent seek the consent of the
Required Lenders as set forth in the Intercreditor Agreement) (a) without 10
days' prior notice to the Rating Agencies and Collateral Agent, (b) without
prior written confirmation of each Rating Agency that such amendment or
modification will not result in
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the reduction or withdrawal of the rating of the Class A Senior Notes or Class B
Senior Subordinated Notes and (c) if the Collateral Agent has objected to such
amendment or modification within the time specified in the Security Agreement.
Upon the occurrence of an Event of Default, the Collateral Agent will be
entitled to, among other things, do all the things that the Issuer and/or
Co-Issuer is or may be entitled to do under such Assigned Agreements.
Collateral Accounts. Pursuant to the terms of the Security Agreement, the
Issuers will, prior to the Closing Date, establish the following accounts with
the Account Bank: (i) the Collection Account; (ii) the Uncommitted TIP Account;
(iii) the Committed TIP Account; (iv) the Reserve Account; (v) the Excess Spread
Account; and (vi) the Operating Account. Additionally, the Issuers will
establish the Expense Reserve Account with the Account Bank prior to the
Scheduled Investment Termination Date and establish the Distribution Obligation
Escrow Account in connection with any cash-collateralization by Enron of certain
of its obligations under the Enron Support Agreement. For a more detailed
description of such Accounts, see "Description of the Notes -- Accounts".
Priority of Payments. The Security Agreement provides that, in the absence
of an Acceleration and subject to the subordination provisions of the
Intercreditor Agreement, on each Quarterly Payment Date the Issuer will instruct
the Account Bank to apply the Collateral Proceeds credited to the Collection
Account in accordance with the Priority of Payments. In the event of a
Shortfall, the Issuer will cover such shortfall in accordance with the terms of
the Security Agreement. See "Description of the Notes -- Priority of Payments".
Priority of Acceleration Payments. The Security Agreement provides that in
the event of an Acceleration, the Collateral Agent will withdraw from the
Collection Account and any other Collateral Account (other than the Reserve
Account, the Excess Spread Account, the Committed TIP Account and the
Distribution Obligation Escrow Account) all amounts credited to such accounts
and make disbursements in accordance with the Priority of Acceleration Payments.
In the event that funds credited to the Collateral Accounts are insufficient to
make payments in accordance with clauses (i) through (x) of the Priority of
Acceleration Payments, the Collateral Agent will cover such shortfall in the
manner and in the priority as set forth in the Security Agreement. See
"Description of the Notes -- Priority of Acceleration Payments".
Remedies Upon an Event of Default. Subject to the terms of the Common
Agreement and the Intercreditor Agreement, upon the occurrence of and during the
continuation of an Event of Default, the Collateral Agent may exercise certain
rights under the Security Agreement, including the following: (i) causing any
action at law or suit in equity or other proceeding to be instituted and
prosecuted to collect or enforce any Secured Obligations or rights under the
Security Agreement or included in the Collateral and (ii) selling or liquidating
any or all of the Collateral; provided, however, the Collateral Agent may not
sell or dispose of the Collateral unless (A) the Collateral Agent determines
that the anticipated proceeds of a sale or liquidation of the Collateral (after
deducting the reasonable expenses of such sale or liquidation) would be
sufficient to discharge in full the amounts then due and unpaid in respect of
the Secured Obligations and the Required Lenders agree with such determination;
or (B) the Required Lenders direct the sale and liquidation of the Collateral.
Intercreditor Agreement
The Collateral Agency and Intercreditor Agreement, dated as of
, 1998 (the "Intercreditor Agreement") among the Issuer, the
Co-Issuer, the Trustee, the Liquidity Facility Agent, the Backup Facility Agents
from time to time party thereto and the Collateral Agent, contains provisions
appointing the Collateral Agent and setting out its rights and obligations and
governs the relative rights and obligations of each of the Secured Parties in
respect of (i) the Issuers' property and assets, (ii) the exercise of remedies
and (iii) the taking of other actions in the case of an Event of Default by
either of the Issuers under the Financing Documents. The Intercreditor Agreement
also
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sets forth voting requirements in connection with amendments, waivers, consents
and modifications under the Financing Documents.
Appointment of the Collateral Agent. Chase Bank of Texas, National
Association, will be authorized, as the Collateral Agent, to take actions on
behalf of each Representative under the provisions of the Financing Documents
and to exercise such rights, powers, authorities and discretion and perform such
duties as are specifically delegated to the Collateral Agent by the terms of the
Financing Documents together with all such rights, powers, authorities and
discretion as are reasonably incidental thereto.
Sharing of Payments. Under the terms of the Intercreditor Agreement, except
as contemplated by the other Financing Documents, the security interest of each
of the Senior Secured Parties in any Collateral ranks equally in priority with
the security interest of the other Senior Secured Parties in the Collateral,
subject to the Priority of Payments and the Priority of Acceleration Payments.
The security interest of the Holders of the Class B Senior Subordinated
Notes and the Class C Subordinated Notes in and to the Collateral (the
"Subordinate Interests") will be subordinate and junior to the security interest
of each Senior Secured Party and until the Senior Secured Obligations have been
paid in full, the Trustee, on behalf of each Class B Noteholder and Class C
Subordinated Noteholder, will not (A) initiate any judicial or other remedial
action against the Issuers to collect any moneys under the Class B Senior
Subordinated Notes or the Class C Subordinated Notes or (B) directly or
indirectly, exercise or enforce any rights or remedies against the Issuers of
any nature whatsoever, whether at law or in equity, that it may have under the
Class B Senior Subordinated Notes, the Class C Subordinated Notes or any of the
Financing Documents or otherwise, in connection with or as the result of any
default under, or breach of any representation, warranty, covenant or agreement
set forth in the Financing Documents in respect to the Subordinate Interests.
The Trustee, on behalf of each Class B Noteholder and Class C Subordinated
Noteholder, will not cause the filing of a petition in bankruptcy against the
Issuer or the Co-Issuer for failure to pay to them amounts due under the Class B
Senior Subordinated Notes and the Class C Subordinated Notes or under any
Financing Document until the payment in full of the Senior Secured Obligations
and not before one year and one day have elapsed since such payment or, if
longer, the applicable preference period then in effect. If any Acceleration has
occurred and is continuing, all principal of and interest on the Senior Secured
Obligations, and all other amounts owing to the Senior Secured Parties under the
Financing Documents, will be paid in full in cash before any further
distribution is made on account of the Subordinate Interests.
Decisionmaking. Generally, at any time it proposes to act, the Collateral
Agent will be required to notify each Representative and each Hedge Counterparty
of the matter in question specifying, among other things, the Required Lenders
applicable to the decision and act at the direction of such Required Lenders,
except that the Collateral Agent is authorized to make decisions on behalf of
the Secured Parties, without seeking instructions from the Secured Parties with
respect to (i) any corrections to or confirmations of the calculation of any
information set forth in the Valuation Report, (ii) any decisions specified in
any Financing Document to be made by the Collateral Agent after consultation
with an Independent consultant and (iii) all other routine, administrative or
ministerial matters under the Financing Documents so long as such decisions are
not inconsistent with the provisions of the Financing Documents and could not
reasonably be expected to have a material adverse effect on the Collateral
(taken as a whole), the Issuer or the Co-Issuer.
Exercise of Rights. So long as any Secured Obligation remains outstanding,
the Collateral Agent will administer the Collateral in the manner contemplated
by the Intercreditor Agreement and the Security Agreement and only upon the
occurrence and continuance of an Event of Default, will the Collateral Agent
exercise, upon the written instruction of, and on behalf of, the Required
Lenders, such rights and remedies with respect to the Collateral as are granted
to it under the Intercreditor Agreement, the other Financing Documents and
applicable law.
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No Secured Party and no class or classes of Secured Parties will have any
right to (i) sell, exchange, release, not perfect and otherwise deal with any
Collateral at any time pledged, assigned or mortgaged to secure the Secured
Obligations in accordance with the Financing Documents, (ii) exercise or refrain
from exercising any rights to direct the Collateral Agent to take any action in
respect of the Collateral or (iii) take any other action with respect to the
Collateral in accordance with the Intercreditor Agreement (A) independently of
the Collateral Agent or (B) other than to direct the Collateral Agent to take
action; provided, that if an Event of Default exists as a result of a bankruptcy
event, the Collateral Agent is automatically authorized to take such action
without the written request of the Required Lenders.
Except with the prior written consent of the Required Lenders, no
Representative and no Secured Party will: (i) exercise any right under any
Financing Document to accelerate, cancel or terminate any commitment under any
Financing Document or declare any commitment under any Financing Document, or
declare any obligation or commitment, prematurely payable, canceled or
terminated, but the foregoing will not restrict scheduled or mandatory
repayment, prepayments, or reductions taking effect in accordance with the terms
of the Financing Documents; (ii) enforce or require the Collateral Agent to
enforce any rights with respect to the Collateral conferred by the Transaction
Documents by sale, taking possession, appointment of a receiver or an
administrative receiver or otherwise bring suit or arbitration against the
Issuer, the Co-Issuer, Enron or the Program Manager in connection with any
transactions contemplated by the Transaction Documents; or (iii) exercise any
right to set-off against any account or combination of accounts whether arising
under applicable law or under the Financing Documents unless the relevant right
to set-off would otherwise be lost and except in respect of the netting of
payments by a Hedge Counterparty under a Hedging Agreement.
Unless otherwise expressly provided in the Intercreditor Agreement, the
Collateral Agent will not take any action under the Financing Documents in its
capacity as Collateral Agent, without the prior consent of the Required Lenders.
The "Required Lenders" means, as of a date of determination,
(A) if any Senior Secured Obligation is outstanding at such time,
Senior Lenders (each acting through its respective Representative)
representing at least 50% of the Aggregate Senior Loan Balance;
(B) if Class B Senior Subordinated Notes, but no Senior Secured
Obligations, are outstanding at such time, the Class B Senior Subordinated
Notes representing at least 50% of the outstanding principal amount of
Class B Senior Subordinated Notes; and
(C) if Class C Subordinated Notes, but no Senior Secured Obligations
or Class B Senior Subordinated Notes, are outstanding at such time, the
Class C Subordinated Notes representing at least 50% of the outstanding
principal amount of Class B Senior Subordinated Notes;
provided, however, in the case of (i) an exercise of remedies under the
Intercreditor Agreement following an Event of Default (other than Events of
Default specified in (i) and (ii) under "Common Agreement -- Events of
Default") (see "Intercreditor Agreement -- Exercise of Rights") and the
Security Agreement (see "Security Agreement -- Remedies"), "Required
Lenders" will be determined in accordance with the foregoing clauses (A),
(B) and (C) but substituting "33%" in each place "50%" is used, (ii) an
exercise of remedies in accordance with the Intercreditor Agreement
following an Event of Default (see "Intercreditor Agreement -- Exercise of
Rights") specified in (i) and (ii) under "Common Agreement -- Events of
Default", "Required Lenders" will be determined in accordance with the
foregoing clauses (A), (B) and (C) but substituting "25%" in each place
"50%" is used, (iii) in connection with a mandatory redemption following an
Equity Disposition (see "Description of the Notes --
Redemption -- Mandatory Redemption"), "Required Lenders" will mean Holders
representing at least 50% of the outstanding principal amount of each of
the Class A Senior Notes, the
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Class B Senior Subordinated Notes, the aggregate outstanding principal
amount under the Liquidity Facility and the aggregate principal amount of
[Allocations and] drawn amounts under the Backup Facility, voting as a
single class, (iv) consent of the Required Lenders given pursuant to the
Intercreditor Agreement in connection with certain sales of non-Defaulted
Project Loans following a Tax Event (see "-- Security Documents -- Sale and
Release of Collateral"), "Required Lenders" will also include, to the
extent the Senior Secured Obligations and Class B Senior Subordinated Notes
are outstanding at such time, the Holders of the Class B Senior
Subordinated Notes representing at least 50% of the outstanding principal
amount of the Class B Senior Subordinated Notes and (v) consent of the
Required Lenders given pursuant to the Intercreditor Agreement for actions
to be taken pursuant to Section 4.5 of the Common Agreement and, in
connection with a Class I Trigger Event, the termination of the Program
Manager without cause at the direction of the Class I Interest holders,
"Required Lenders" shall be determined in accordance with the foregoing
clauses (A), (B) and (C) but substituting "66 2/3%" in each place 50% is
used and shall also include, to the extent the Senior Secured Obligations
and Class B Notes are outstanding at such time, Holders of the Class B
Notes representing at least 66 2/3% of the Outstanding Amount of the Class
B Notes.
Indemnification. The Secured Parties agree to indemnify the Collateral
Agent acting in its capacity as Collateral Agent, except in cases of its gross
negligence or willful misconduct or, in the case of handling of money, its
negligence, for acting as Collateral Agent on their behalf.
Amendments to the Intercreditor Agreement. The terms of the Intercreditor
Agreement may not be amended, modified, waived or supplemented without the
consent of the Issuers and the Representatives; provided that, the Intercreditor
Agreement will not be amended in any manner that is adverse to the Collateral
Agent without its consent, which consent will not be unreasonably withheld.
Amendments to and Waivers Under the Other Financing Documents. Subject to
certain provisions of the Financing Documents, (a) the Collateral Agent may
(with the consent of the Required Lenders) modify any provisions of the Assigned
Agreement or any other Financing Document to which it is a party or change the
rights of the Secured Parties under any such Agreement or waive any Event of
Default and (b) each of the Representatives may act to modify any provision of
any Financing Document to which such Representative is a party, provided,
however that without the written consent of each Representative, no waiver,
amendment, modification or consent may (i) change the time of payment of or
increase the rate of interest due on any Secured Obligation or the amount of any
premium payable upon prepayment of any Secured Obligation; (ii) change the
payment date for or increase the amount of principal or other amount (other than
interest) due on any Secured Obligation; (iii) permit the Issuer or the
Co-Issuer to assign its rights under any Financing Document (except in
accordance with the Financing Documents); (iv) increase the Liquidity Facility
Commitment or Backup Facility Commitment other than in accordance with the
Common Agreement; (v) change any of the percentages specified in the definition
of Required Lenders; (vi) change the currency in which payments by the Issuers
are required to be made; (vii) release any Collateral from the lien granted
under any of the Security Documents or of any funds from any Account other than
as contemplated in the Financing Documents; (viii) extend the Investment Period;
(ix) modify certain provisions of the Common Agreement or any provisions of the
Security Agreement; or (x) change the time or increase the amount of payment of
any fee due or payable under or in connection with the Financing Documents.
Liquidity Facility Loan Agreement
The Issuer will enter into the Liquidity Facility Loan Agreement prior to
the Closing Date as described under "Liquidity Facility and Backup Facility".
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Backup Facility Loan Agreement
The Issuer may enter into one or more Backup Facility Loan Agreements
conforming to the standards set forth in the Common Agreement. See "Liquidity
Facility and Backup Facility".
Hedging Agreements
The provisions of each Hedging Agreement will be required to comply with
guidelines promulgated by the Rating Agencies. Each Hedging Agreement will
provide for termination at the option of the Issuer for, among other reasons,
the failure of the Hedge Counterparty to agree to provide Hedge Counterparty
Credit Support within two business days after the failure of the Reference
Obligations of the Hedge Counterparty (or any person or entity that will have
absolutely and unconditionally guaranteed the obligations of the Hedge
Counterparty under the Hedging Agreement) fails to be rated at least A and A2 by
Moody's and S&P, respectively.
Enron Support Agreement
The Issuer will enter into the Enron Support Agreement with Enron to
evidence, among other things, Enron's obligation to provide certain support and
the obligation of Enron to bring to the attention of the Program Manager for
possible investment by the Issuer certain opportunities to make loans to
projects and Enron's agreement not to sponsor a Competing Issuer for a specified
period. Enron has the right to assign certain of its obligations under the Enron
Support Agreement in certain limited circumstances. See "Enron Support".
OTHER MATERIAL AGREEMENTS
Management Agreement
Management of the Issuer and the Co-Issuer and the Portfolio Assets will be
conducted by the Program Manager pursuant to the Management Agreement dated as
of , 1998 (the "Management Agreement") among the Issuer, the
Co-Issuer, the Program Manager and the Backup Program Managers.
"Portfolio Assets" means all present and future rights of the Issuer under
the Project Loans and the Intermediate Funding Loans, including the Issuers'
interest in any collateral at the project level which secures such loans, the
Permitted Investments, the Hedging Agreements, the Currency Hedging
Arrangements, the Enron Support Documents, the Repayment Agreements, any other
agreement entered into by the Issuer (other than the Management Agreement) and
amounts credited to the Accounts.
Management Services. Under the Management Agreement, the Program Manager
will perform all management services on behalf of the Issuer and the Co-Issuer,
including the following services (the "Services"): (a) (i) evaluating all
opportunities to invest in Project Loans offered by Enron pursuant to the Enron
Support Agreement, (ii) if appropriate, bidding to make a Project Loan and (iii)
if such bid to make a Project Loan is accepted by the relevant Project Borrower,
implementing the making of such Project Loan; (b) monitoring the Project Loans
and other Portfolio Assets; (c) determining and making Permitted Investments and
selecting the dates for acquisitions or sales of Permitted Investments and
acquiring or selling such Permitted Investments on such dates; (d) negotiating
Hedging Agreements and identifying and selecting Hedge Counterparties; (e)
negotiating commitment letters and underlying instruments and any
confidentiality agreements in respect of Project Loans and documentation
providing for the purchase and sale of other Portfolio Assets; (f) negotiating
Backup Facility Loan Agreements and TIP Investment Management Agreements, as
necessary; (g) determining the structure of Project Loans and forming,
establishing and managing Intermediate Funding Entities through which the Issuer
may make Project Loans; (h) negotiating amendments, modifications, waivers and
supplements to the underlying instruments in respect of Project Loans and of
documentation relating to the other Portfolio Assets;
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(i) exercising rights and remedies associated with Portfolio Assets; (j)
providing information to, and entering into discussions with, the Rating
Agencies; (k) after payment in full of the Notes, (i) determining when, in the
opinion of the Program Manager, it would be in the best interests of the limited
partners to dissolve the Issuer and the shareholder of the Co-Issuer to dissolve
the Co-Issuer and (ii) liquidating Portfolio Assets in accordance with the
Partnership Agreement; (l) selling or otherwise disposing of Project Loans; (m)
liquidating all or a portion of any other Collateral; (n) determining whether
investments in additional Project Loans would at any time during the Investment
Period either be impracticable or not beneficial to the Issuer; (o) determining
whether a borrowing or prepayment should be made with respect to the Backup
Facility or the Liquidity Facility and whether additional Class A Senior Notes
should be issued after the Closing Date; (p) determining whether the term of the
Issuer should be extended; (q) implementing any redemption or refinancing; (r)
determining the existence and amount of an Issuer Determined Loss; (s) enforcing
the obligations of Enron under the Enron Support Agreement; (t) furnishing such
information, certificates, opinions and other documents to the Issuers, the
Representatives, the Collateral Agent, the Hedge Counterparties and either
Rating Agency as may be required from time to time; (u) selecting and retaining
counsel, engineers and other consultants as may be necessary or appropriate to
perform its duties; (v) executing and delivering all documents and instruments
and taking such other actions as the Program Manager determines are necessary or
appropriate to perform its duties; (w) ensuring that the underlying instruments
in respect of a particular Project Loan permit transactions entered into after
the Financial Closing Date therefor between the relevant Project Borrower and
Affiliates of the equity sponsors only on an "arm's-length" basis or better; (x)
filing all reports, proxy or information statements and other information with
the Commission required pursuant to the informational requirements of the
Exchange Act; (y) making determinations as to the transfer of funds from the
Collection Account on a date other than a Quarterly Payment Date under the
Security Agreement; and (z) maintaining the books and records of the Issuers
including preparation and filing of any financial statements as may be required
under the Financing Documents.
Management Fee. In consideration of the performance by the Program Manager
under the Management Agreement and to the extent permitted by the Financing
Documents, the Issuer will pay (a) a quarterly administrative fee (the
"Administrative Fee") of $1.5 million, as automatically adjusted for inflation
on an annual basis during the term of the Management Agreement, commencing
[ ], 1998, by multiplying the Administrative Fee in effect on such
date by the sum of 1.00 plus an inflation factor based upon the "Consumer Price
Index for All Urban Consumers (CPI-U) U.S. City Average for All Items" with
respect to the immediately preceding year, accruing on each Quarterly Payment
Date, (b) a quarterly management fee (the "Management Fee") at a rate per annum
equal to 0.25% of the Aggregate Book Value of the Issuer's Assets and (c) a
quarterly Incentive Fee (the "Incentive Fee") in an amount for each quarter
(greater than zero) equal to the product of (x) the Aggregate Project Loan
Balance with respect to all non-Defaulted Project Loans, (y) the excess of (I)
the Actual Net Interest Margin over (II) the Base Net Interest Margin and (z)
5%. The first payment of the Administrative Fee will be made on the Closing Date
out of the proceeds of the issuance of the Notes. Subsequent fees payable to the
Program Manager will, subject to the Priority of Payments and the Priority of
Acceleration Payments, be payable on each Quarterly Payment Date or on any date
following an Acceleration. Any portion of such fees not paid on any Quarterly
Payment Date will be payable on the next succeeding Quarterly Payment Date on
which funds are available therefor in accordance with the Priority of Payments.
"Aggregate Book Value of the Issuer's Assets" for any Accrual Period means
(i) at any time prior to Final Termination Date, the book value (determined in
accordance with generally accepted accounting principles in the U.S.) of all
Project Loans, all amounts credited to the Accounts and (without duplication)
all Permitted Investments (collectively, the "Relevant Assets") for the related
Quarterly Payment Date, and (ii) at any time after the Final Termination Date,
the book value (determined as aforesaid) of all Relevant Assets on the last day
of such Accrual Period, as such book value is determined in good faith by the
Program Manager.
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"Base Net Interest Margin" means the percentage obtained from the table
below from the Weighted Average Moody's Ratings of Project Loans.
BASE NET INTEREST MARGIN TABLE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE MOODY'S
RATINGS OF PROJECT LOANS BASE NET INTEREST MARGIN
------------------------ ------------------------
<S> <C>
B3 %
B2 %
B1 %
Ba3 %
Ba2 %
Ba1 %
Baa3 %
Baa2 %
</TABLE>
Expenses. The Program Manager is obligated to pay the following expenses
incurred by the Issuer, the Co-Issuer and the Program Manager: (i) salaries,
compensation and expenses of the directors, officers and employees of the
Issuers and the Program Manager, (ii) general and administrative expenses of the
Issuers and the Program Manager including shared service allocations from EIS,
(iii) computer software and hardware and information management systems expenses
of the Issuers and the Program Manager, (iv) audit fees and out-of-pocket
expenses incurred by the Issuers and the Program Manager for the annual audit of
the Issuer pursuant to the Common Agreement, (v) expenses related to the annual
and quarterly financial statements of the Issuer, (vi) legal fees and
out-of-pocket expenses relating to general partnership and corporate matters of
the Issuer and the Co-Issuer, respectively, and (vii) fees and expenses of tax
and other consultants relating to general partnership and corporate matters of
the Issuer and the Co-Issuer, respectively. All other expenses will be the
responsibility of the Issuer.
Limitations on Actions of Program Manager. In rendering the Services and
taking the actions to be taken by it under the Management Agreement, the Program
Manager is generally required (except when acting pursuant to certain agreed
directions) to act as would a reasonable and prudent lender acting for its own
account (the "Standard of Care"). Although the Program Manager need not maintain
policies and procedures similar to those followed by a financial institution, it
will devise and implement appropriate policies and procedures in connection with
rendering the services set forth in the Management Agreement.
In making determinations with respect of the Pricing Terms for any Project
Loan, the Program Manager will be deemed to have complied with the Standard of
Care so long as such Pricing Terms equal or exceed 90% of the lowest available
Pricing Terms of Comparable Debt; provided that in the event that the Program
Manager is unable to identify Comparable Debt, the Program Manager may determine
Pricing Terms for a Project Loan by any reasonable means, including the
consideration of Pricing Terms available for any of the following categories of
Debt, to the extent applicable:
(1) senior debt provided to, or available for, projects regardless of
their type and located in Comparable Countries and having a credit risk
similar to that of the Eligible Project; and/or
(2) senior debt provided to, or available for, sovereign or corporate
borrowers in Comparable Countries;
in any case having similar maturities (or, if not available, shorter and/or
longer, maturities).
Notwithstanding anything to the contrary in the preceding paragraph, in
determining the Pricing Terms for any Project Loan the Program Manager may
ignore the impact of current market aberrations and volatility.
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"Pricing Terms" means, with respect to any Debt, the "all-in" cost of such
debt, including but not limited to base rates, credit spreads, fees and
withholding tax gross-ups, all for the extent applicable.
"Comparable Debt" means Debt having similar maturities and similar payment
terms (i.e. fixed or floating rate) which is available to either (x) the
potential Project Borrower from financing sources other than the Issuer or (y)
projects similar to that owned by the potential Project Borrower and which are
located in Comparable Countries. For purposes of this definition, "Comparable
Debt" shall include but not be limited to U.S. Dollar denominated senior debt
provided through commercial banks, private placements, public or private capital
markets offerings and debt provided by export credit agencies, multilateral
lending agencies, bilateral lending agencies, regional development banks, local
development banks and other local financing sources.
"Comparable Countries" means countries with credit ratings and/or
characteristics similar to that of the country in which the potential Project
Borrower is located.
In considering any of the aforesaid factors, the Program Manager may
extrapolate or interpolate Pricing Terms for differing maturities and average
lives in any reasonable manner. Notwithstanding the foregoing, in an instance
where a governmental authority having jurisdiction imposes a ceiling on the
Pricing Terms (or any other economic terms) associated with any Eligible
Project, the Program Manager may, in satisfaction of its Standard of Care,
determine Pricing Terms for such Project Loan at or beneath such ceiling, so
long as the Credit Support Tests are satisfied.
In taking action and making determinations in respect of maturity dates and
amortization of any Project Loan, the Program Manager will be deemed to have
complied with the Standard of Care so long as the Average Life Test is
satisfied.
With respect to the initial funding, maintenance and enforcement of any
Project Loan, the Program Manager will apply the Standard of Care in evaluating
any transactions between a Project Borrower and any of its Affiliates, including
(where relevant) development fees, construction contracts, operations and
maintenance agreements, fuel agreements and power purchase agreements.
In rendering the Services and in taking the actions to be taken by the
Program Manager pursuant to the Management Agreement, the Program Manager will
not take any action, that would cause: (i) the Issuer or the Co-Issuer to
violate any applicable laws, rules and regulations, including any applicable
United States federal and state securities laws, (ii) the Issuer to breach its
Partnership Agreement or the Co-Issuer to breach its Certificate of
Incorporation and Bylaws, (iii) the Issuer or the Co-Issuer to breach any
Transaction Document or Additional Transaction Documents, (iv) the Issuer or the
Co-Issuer to be required to register as an investment company under the
Investment Company Act or (v) in the Program Manager's reasonable belief, a
reduction or withdrawal of the then current ratings of the Notes unless such
failure to act would cause the Issuer or the Co-Issuer to fail to satisfy clause
(i) of this paragraph.
Indemnification Provisions. The Management Agreement contains indemnities
by the Issuer for loss or other damages or liabilities incurred by the Program
Manager and any Affiliates of the Program Manager arising out of any action
taken or omitted to be taken by such person (i) under or in connection with the
Management Agreement, except for damages that have been finally determined by an
arbitral decision to result from such person's gross negligence, bad faith or
willful misconduct, (ii) at the express direction of any of the Issuer, the
Co-Issuer, the Collateral Agent or the Required Lenders and (iii) in good faith
by the Program Manager in accordance with the advice or opinion of counsel or
accountants.
The Management Agreement also contains indemnities by the Program Manager
for loss or other damages or liabilities incurred (subject to certain
limitations) (i) by the Issuers and in connection with actions taken or omitted
to be taken by the Program Manager under or in connection with the Management
Agreement if there is a final arbitral decision that such act or
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omission was performed or omitted in bad faith or constituted gross negligence
or willful misconduct or (ii) by the Issuers or any Noteholder in investigating,
preparing or prosecuting any claim against the Program Manager (but in no event
will such indemnification to any Noteholder exceed unpaid principal and interest
on its Notes plus such Noteholder's share of costs and expenses of one law firm
representing all of the Noteholders. Such indemnification will be guaranteed by
Enron under the Enron Support Agreement up to a maximum amount of $ .
See "Enron Support".
Obligations of the Program Manager. The obligations of the Program Manager
under the Management Agreement are solely the obligations of the Program Manager
and, other than the Enron guarantee of the indemnification obligations of the
Program Manager referred to in the preceding paragraph, there is no recourse to
Enron or, in any event, to any limited partner of the Program Manager. The
Program Manager may assign its rights and obligations under the Management
Agreement to any successor to or assignee of Enron's rights and obligations
under the Enron Support Agreement or any other person or entity that is
controlled, directly or indirectly, by Enron.
Termination of Management Agreement. Under the terms of the Management
Agreement, the Management Agreement will be terminated (a) automatically upon
the earliest to occur of (i) the dissolution of the Issuer and (ii) the
bankruptcy or insolvency of the Program Manager or (b) at the option of the
Issuers (i) under certain circumstances, including, without limitation, (A) the
occurrence of an Event of Default or a Subordinate Event of Default, (B) the
Program Manager's failure to comply with its obligations under the Management
Agreement after notice and a 30-day cure period, (C) any representation,
warranty or certification made by the Program Manager under the Management
Agreement being proved to have been materially false or misleading, (D) the
taking of any action by the Program Manager constituting fraud against the
Issuer or the Co-Issuer, (E) the conviction of the Program Manager of a felony
or (F) the general partner of the Program Manager no longer being controlled,
directly or indirectly, by Enron or any of its respective successors or assigns
or (ii) upon a Class I Trigger Event.
No optional termination will be effective unless and until (a) notice of
such termination (specifying the event that is the basis for such termination)
is given to the Program Manager by the Issuers (which notice must be delivered
not later than 90 days after notice of any of the events triggering optional
termination is given to the Issuers) (b) the date as of which a replacement
manager will have entered into a replacement management agreement and (c) the
Issuers will have received one or more written instruments to the effect that
such replacement manager is acceptable to the Required Lenders or a majority of
the Class B Senior Subordinated Notes, as required, and, so long as no Event of
Default has occurred, the Limited Partners.
Backup Program Managers. In the case of an automatic termination, all
duties, authority and power of the Program Manager under the Management
Agreement will pass to and be vested in the Backup Program Managers.
Arbitration. Under the terms of the Management Agreement, all disputes
related to the Management Agreement will be resolved by arbitration by a panel
of three arbitrators. Each party will choose one arbitrator with the third
arbitrator to be chosen by the first two arbitrators. All arbitration
proceedings will be held in New York.
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RATING OF THE NOTES
It is a condition to the issuance of the Notes that the Class A Senior
Notes and the Class B Senior Subordinated Notes be rated at least A2 and Ba2,
respectively, by Moody's and at least A and BB, respectively, by S&P.
The ratings of the Notes address the likelihood of the timely payment of
interest and the ultimate payment of principal in the case of the Class A Senior
Notes and the ultimate payment of interest and the ultimate payment of principal
in the case of the Class B Senior Subordinated Notes. The Issuer's ability to
pay the Class A Makewhole Premium or the Class B Premium has not been rated by
the Rating Agencies. In addition, the ratings assigned to the Notes do not
address the effect of any imposition of any withholding tax on any payments
under the Project Loans, the Notes or otherwise.
A rating is not a recommendation to buy, sell or hold Notes inasmuch as
ratings do not comment as to market price or suitability for a particular
investor and may be subject to revision, suspension or withdrawal at any time by
the assigning Rating Agency. In the event that a rating initially assigned to
any of the Notes is subsequently lowered, suspended or withdrawn for any reason,
no person or entity is obliged to provide any additional support or credit
enhancement with respect to the Notes.
THE PARTNERSHIP INTERESTS
The Issuer is a Delaware limited partnership which has not conducted any
operations (other than activities incidental to its formation) prior to the
closing of the offering and sale of the Notes. The Interests in the Issuer are
comprised of the GP Interest, which is a general partnership interest in the
Issuer, and the Class I Interests and Class II Interests, which are limited
partner interests in the Issuer. The GP Interest, which will be owned by an
Enron Affiliate, will be entitled to exercise control over the business and
affairs of the Issuer. However, the General Partner has delegated its rights to
manage the business and affairs of the Issuer to the Program Manager pursuant to
the Management Agreement. The GP Interest also bears the obligation to
contribute to the capital of the Issuer the lesser of 1% of the aggregate
capital contributions made by all partners of the Issuer or $ , of
which cash or assets having a value of approximately $ will be
contributed prior to or contemporaneously with the closing of the offering and
sale of the Notes. The GP Interest will also have the right to receive
distributions from the Issuer as described below and the right to share (ratably
in proportion to contributed capital) in the distribution of assets of the
Issuer available (after payment of the Issuer's liabilities) upon liquidation.
The GP Interest will not be transferable (except to an Enron Affiliate) without
the vote or consent of two-thirds in interest of the Class I Interests, and
there may be no more than one holder of the GP Interest at any time.
An aggregate of $ of Class I Interests will be issued or
committed to be purchased contemporaneously with the closing of the offering and
sale of the Notes. All of such Class I Interests will be beneficially owned by
third parties not Affiliated with Enron. The Class I Interests generally do not
have any right to participate in control of the business and affairs of the
Issuer, although the Class I Interests will have the right to vote on specific
matters set forth in the Partnership Agreement of the Issuer. In addition,
beneficial owners of the Class I Interests acting by a vote of two-thirds in
interest of such beneficial owners have the right to (i) approve any decision by
the Program Manager to cause the Issuer to redeem all or any part of the Class B
Senior Subordinated Notes at any time following the fifth anniversary of the
Closing Date through the issuance of additional Class B Senior Subordinated
Notes, (ii) approve any extension of the term of the Issuer's existence and
(iii) approve the decision made by the Program Manager to terminate the
Investment Period on the basis of market conditions and other factors.
Further, the Class I Interests may (i) with the concurrent approval of the
Required Lenders, remove the Program Manager and the General Partner without
cause, which would (a) cause the
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Investment Period to terminate and (b) terminate Enron's obligation to use
commercially reasonable efforts to notify the Issuer of opportunities to make
loans to projects developed or acquired by Enron or Enron Affiliates and located
in the EI Regions, and (ii) subject to approval by the Required Lenders of a
Replacement Program Manager, without the approval of the Required Lenders,
remove the Program Manager and the General Partner without cause if,
concurrently, (a) Enron's obligation to use commercially reasonable efforts to
notify the Issuer of opportunities to make loans to projects developed or
acquired by Enron or Enron Affiliates and located in the EI Regions is
terminated, (b) the GP Interest and the funded Class II Interests are, if Enron
so elects, purchased from Enron or Enron Affiliates, (c) the unfunded portion of
Enron's commitment in respect of Class II Interests is assumed by an Acceptable
Credit Provider, (d) Enron's obligation to provide credit support and any
unfunded commitment in respect thereof (other than funded Class C Notes and
Support Notes) under the Enron Support Agreement to pay or cause to be paid
amounts in respect of Quarterly Project Distributions and Project Distributions
Reserved is replaced by credit support of equivalent value without further
liability to Enron, (e) the agreement of Enron not to sponsor a Competing Issuer
for a specified period time is terminated, and (f) the then effective ratings of
the Class A Senior Notes and Class B Senior Subordinated Notes are reaffirmed by
Moody's and S&P (each of clause (i) and (ii), a "Class I Trigger Event").
Beneficial ownership of the Class I Interests may be held by no more than
49 persons in the aggregate and may only be transferred (i) with the consent of
the General Partner, (ii) to persons who are either (a) a U.S. Person for tax
purposes, or (b) a foreign person acting through a U.S. branch and which would
own less than 10% of the equity interests in the Issuer, or (iii) to persons who
are either (a) not pass-through entities for tax purposes, or (b) not formed for
the purpose of acquiring the Interests and no more than 50% of the value of the
equity securities of which will be attributable to the Interests. Class I
Interests are entitled to share (ratably in proportion to contributed capital)
in the distribution of assets available (after payment of the Issuer's
liabilities) upon liquidation.
Enron has agreed that Enron or an Enron Affiliate will purchase up to an
aggregate of $ of Class II Interests, of which approximately
$ will be funded at or prior to the closing of the sale of the
Notes and the balance of which will be purchased by Enron to the extent
necessary to make up any Quarterly Payment Shortfall as required by the Enron
Support Agreement.
The Class II Interests generally do not have any right to participate in
control of the business and affairs of the Issuer, although the Class II
Interests will have the right to vote on specific matters set forth in the
Partnership Agreement. The Class II Interests are subject to restrictions or
transfer described elsewhere in the Prospectus under "Enron Support-Commitment
to Purchase Class II Interests" and are entitled to share (ratably in proportion
to contributed capital) in the distribution of assets available (after payment
of the Issuer's liabilities) upon liquidation as well as those described for
Class I Interests above (except Class II Interests may be beneficially owned by
no more than 46 persons).
In addition, the Issuer will use reasonable efforts to prevent ownership by
benefit plan investors of Class I Interests or Class II Interests, as the case
may be, from being significant, as determined under regulations promulgated by
the U.S. Department of Labor at 29 C.F.R. sec.2510.3-101.
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TAX CONSIDERATIONS
The following is a general discussion based on present law of certain U.S.
federal income tax considerations for prospective purchasers of the Class A
Senior Notes and Class B Senior Subordinated Notes. The discussion addresses
only persons that purchase in the original offering, hold the Notes as capital
assets, and use the U.S. dollar as their functional currency. The discussion
does not consider the circumstances of particular purchasers, some of which
(such as banks, insurance companies, dealers, and persons holding the Notes as
part of a straddle, hedging, conversion, or integrated transaction) are subject
to special tax regimes. EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT ITS OWN
TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES UNDER THE
FEDERAL, STATE AND LOCAL LAWS OF THE UNITED STATES AND THE LAWS OF ANY OTHER
JURISDICTION WHERE THE PURCHASER MAY BE SUBJECT TO TAXATION.
For purposes of this discussion, "U.S. Holder" means a beneficial owner of
Notes that is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity organized in or under the laws of the
United States or any of its political subdivisions, (iii) a trust subject to the
control of a U.S. person and the primary supervision of a U.S. court, or (iv) an
estate the income of which is subject to United States federal income taxation
regardless of its source.
TAXATION OF THE ISSUER
Milbank, Tweed, Hadley & McCloy, special counsel to the Issuer, is of the
opinion, based in part on its conclusion the Notes are debt for U.S. federal
income tax purposes, that the Issuer will not be subject to U.S. federal income
taxation because it is a partnership the interests in which are not publicly
traded. The Issuer intends to conduct its activities so that no more than half
of the debt obligations that it holds are principally secured by real property.
Should more than half of its debt obligations be so secured, the Issuer could be
treated as a taxable mortgage pool and taxed as a corporation. In certain
circumstances, the imposition of corporate income tax on the Issuer could
materially impair its ability to make payments on the Notes.
TAXATION OF THE HOLDERS
U.S. Holders. Milbank, Tweed, Hadley & McCloy is of the opinion that, while
there is no directly relevant authority and the tax authorities could take a
different position, the Notes will be treated as debt for U.S. federal income
tax purposes. Interest will be includible in the income of a U.S. Holder in
accordance with the Holder's regular method of tax accounting. Interest on the
Notes generally will be income from sources within the United States.
If there is more than a remote likelihood that the Issuer will defer
interest payments on Class B Senior Subordinated Notes, all interest payable on
Notes of that class (including interest on accrued but unpaid interest) will be
treated as original issue discount ("OID"). A U.S. Holder must include OID in
ordinary income on a constant yield to maturity basis, whether or not it
receives a cash payment. The Issuer has determined that the likelihood of
interest deferral is, for purposes of these rules, remote. If the Issuer defers
an interest payment, the holder thereafter must accrue OID on the principal
amount of the Note plus the amount of the deferred interest. A U.S. Holder's tax
basis will increase by the amount of undistributed OID accrued on a Note.
A U.S. Holder will recognize gain or loss on the disposition of a Note in
an amount equal to the difference between the amount realized (less accrued but
unpaid interest) and the holder's adjusted basis in the Note. The gain or loss
generally will be capital gain or loss from sources within the United States.
Non-U.S. Holders. Interest on a Note paid to a Holder other than a U.S.
Holder (a "Non-U.S. Holder") generally will be eligible for the portfolio
interest exemption from U.S. withholding tax if the interest is not effectively
connected with the holder's conduct of a trade or business in the United
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States and the holder timely certifies (on Internal Revenue Service Form W-8 or
successor forms) that it is not a U.S. person. The portfolio interest exemption
is not available to a controlled foreign corporation related to the Issuer or to
any holder (directly or by attribution) of at least 10 percent of the Interests.
Interest effectively connected with a Non-U.S. Holder's conduct of a U.S. trade
or business is subject to the U.S. federal income tax on net income. Gain
realized by a Non-U.S. Holder on the disposition of a Note will not be subject
to U.S. federal income tax unless (i) the gain is effectively connected with the
holder's conduct of a U.S. trade or business or (ii) the holder is an individual
present in the United States for at least 183 days during the taxable year of
disposition and certain other conditions are met.
Foreign, State, and Local Taxes. Noteholders may be liable for foreign,
state, and local taxes in the country, state, or locality in which they are
resident or doing business or in a state or locality in which the Issuer
conducts or is deemed to conduct business. A Noteholder's tax liability in such
jurisdictions may differ depending upon whether the Class B Senior Subordinated
Notes are treated as debt or as equity of the Issuer for tax purposes. Since the
tax laws of each country, state, and locality differ, a prospective investor
should consult its own tax counsel with respect to any taxes other than U.S.
federal income taxes that may be payable as a result of an investment in the
Notes.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS
The Internal Revenue Service could take the position that the Class B
Senior Subordinated Notes should be treated as equity of the Issuer rather than
debt for U.S. federal income tax purposes. Were that position to be asserted and
sustained, the tax treatment of the Issuer and the Holders would be
substantially different than the treatment described above.
If the Class B Senior Subordinated Notes were treated as equity, the Issuer
could be a publicly-traded partnership taxable as a corporation. In that case,
no deduction would be allowed for interest on Notes treated as equity. Whether
or not the Issuer were taxed as a corporation, income attributable to Non-U.S.
Holders of Class B Senior Subordinated Notes would be subject to withholding tax
for which the Issuer could be held liable. Imposition on the Issuer of tax or
liability for withholding tax could materially impair its ability to make
payments on the Notes.
Both U.S. and Non-U.S. Holders of the Class B Senior Subordinated Notes
would be taxed differently if the Class B Senior Subordinated Notes were treated
as equity. A U.S. Holder would be treated as the holder of a partnership
interest or, if the Issuer were treated as a publicly-traded partnership, the
stock of a corporation. A Non-U.S. Holder would be subject to U.S. federal
income tax. If the Issuer were treated as a partnership for tax purposes, the
Non-U.S. Holder would be subject to income tax on its share of the Issuer's net
income and, in the case of a corporate Non-U.S. Holder, to branch profits tax on
distributions deemed to have been received from the Issuer. Both taxes are
collectible by withholding, but the Non-U.S. Holder also would be required to
file U.S. income tax returns. If the Issuer instead were treated as a
corporation for tax purposes, amounts paid to a Non-U.S. Holder of Class B
Senior Subordinated Notes would be treated as dividends subject to withholding
tax at a 30% rate (unless an applicable income tax treaty provides a lower
rate).
THE ABOVE DISCUSSION IS ONLY A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX
MATTERS THAT MAY BE IMPORTANT TO A PARTICULAR INVESTOR. EACH PROSPECTIVE
INVESTOR IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX
CONSEQUENCES TO IT OF AN INVESTMENT IN THE NOTES.
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CERTAIN ERISA CONSIDERATIONS
ERISA, and/or Section 4975 of the Code) prohibit certain direct or indirect
transactions between (a) an employee benefit plan (as defined in Section 3(3) of
ERISA) that is subject to Title I of ERISA, (b) a plan described in Section
4975(e)(1) of the Code, including individual retirement accounts and Keogh
plans, and (c) an entity whose underlying assets are deemed to include plan
assets by reason of the investment in such entity by any such plan (each a
"Plan") and persons who have certain specified relationships to such Plan
("Parties-in-Interest" under ERISA and "Disqualified Persons" under the Code).
ERISA also imposes certain duties on persons who are fiduciaries of Plans
subject to ERISA, including, investment prudence, diversification and
maintaining an appropriate level of liquidity, and investing Plan assets in
accordance with applicable Plan documents.
The U.S. Department of Labor has issued regulations, at 29 C.F.R.
2510.3-101, (the "Plan Assets Regulation") that, under specified circumstances,
require Plan fiduciaries to look through investment vehicles (such as the
Issuer) and treat as an asset of the Plan each portfolio investment made by the
investment vehicle. The term "plan assets" is not defined in ERISA or the Code;
however, the Plan Assets Regulation describes what constitutes the assets of a
Plan when a Plan invests in another entity such as the Issuer for purposes of
the fiduciary responsibility provisions of ERISA and the prohibited transaction
rules of ERISA and Section 4975 of the Code. Generally, the Plan Assets
Regulation states that the term "plan assets" includes both the equity interest
of a Plan in an entity such as the Issuer and an undivided interest in the
assets of such entity, unless it is established that ownership of any class of
equity interests in such entity by benefit plan investors is not significant,
that the class of held by the Plan constitutes a publicly offered security or
that some other exception is applicable. If the assets of the Issuer are deemed
to constitute plan assets, transactions involving the assets of the Issuer could
be subject to the fiduciary responsibility provisions of ERISA and to the
prohibited transaction rules of ERISA and Section 4975 of the Code unless a
statutory or administrative exemption is applicable to the transaction.
It is anticipated that the Class B Senior Subordinated Notes should not be
treated as equity interests of the Issuer, although there is no directly
relevant authority, and the U.S. Department of Labor could take a different
position. Accordingly, the extent to which Class B Senior Subordinated Notes may
be owned by benefit plan investors will not be monitored. In addition, although
the Class B Senior Subordinated Notes will be sold as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933 and will be freely transferable, there can be no
assurance that the Class B Senior Subordinated Notes will be widely held, as
defined in the Plan Assets Regulation, immediately after the sale of the Notes
by the Underwriters. However, the General Partner will monitor the beneficial
owners of the Class I Interests and the beneficial owners of Class II Interests,
together with the beneficial owners of Class C Subordinated Notes and/or Support
Notes, to ensure that ownership of by benefit plan investor of each such class
of Interests or Notes by benefit plan investors will not be significant.
Regardless of whether the assets of the Issuer are deemed to be plan
assets, the acquisition of Notes by a Plan could, depending upon the facts and
circumstances of such acquisition, result in a prohibited transaction. Each of
the Issuers, the Underwriters, the Program Manager and Enron as a result of
their own activities or because of the activities of an affiliate, may be
considered to be a Party-in-Interest or a Disqualified Person with respect to
one or more Plans. Accordingly, prohibited transactions within the meaning of
Section 406 of ERISA and Section 4975 of the Code may arise if Notes are
acquired and held by a Plan with respect to which any of the Issuers, an
Underwriter, the Program Manager, Enron or any of their respective affiliates,
is a Party-in-Interest or Disqualified Person. In addition, if a
Party-in-Interest or Disqualified Person with respect to a Plan owns or acquires
a material beneficial interest in the Issuer, the acquisition or holding of
Notes by or on behalf of such a Plan could result in an indirect prohibited
transaction.
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Certain exemptions from the prohibited transaction rules ("PTEs") could be
applicable to any such potential prohibited transaction, however, depending in
part upon the type of Plan fiduciary making the decision to acquire a Note and
the circumstances under which such decision is made. Included among these
exemptions are PTE 90-1, regarding investments by an insurance company pooled
separate account; PTE 91-38, regarding investments by a bank collective
investment fund; PTE 84-14, regarding transactions effected by a "qualified
professional asset manager"; PTE 96-23, regarding transactions effected by
certain in-house asset managers; and PTE 95-60, regarding investments by an
insurance company general account. Even if the conditions specified in one or
more of these exemptions are met, the scope of the relief provided by these
exemptions might not cover all acts that might be construed as prohibited
transactions. In order to ensure that no prohibited transactions under ERISA and
the Code will take place in connection with the acquisition or holding of a Note
by or on behalf of a Plan, each prospective purchaser of a Note that is a Plan
or is acquiring a Note on behalf of a Plan will be deemed to represent that the
acquisition and holding of such Note, throughout the term of such holding will
not constitute or result in a non-exempt prohibited transaction.
Any potential investor that is an insurance company investing assets out of
its general account should consider the United States Supreme Court's decision
in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 114
S. Ct. 517 (1993), which in certain circumstances treats such general account
assets as assets of an ERISA Plan for purposes of the prohibited transaction
rules, as well as the effect of Section 401(c) of ERISA enacted in 1996 as
interpreted by the Regulations to be issued by the U.S. Department of Labor. The
U.S. Department of Labor issued proposed regulations under Section 404(c) in
December 1997.
Government plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of ERISA and Section 4975 of the Code, may nevertheless be subject to
local, state or other federal laws that are substantially similar to the
foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should
consult with their counsel before purchasing any Notes.
The sale of any Notes to a Plan is in no respect a representation by the
Issuers, the Underwriters, the Program Manager, Enron or any of their affiliates
that such an investment meets all relevant legal requirements with respect to
investments by Plans generally or by any particular Plan, or that such an
investment is appropriate for a Plan generally or for any particular Plan.
Any Plan fiduciary that proposes to cause a Plan to purchase Notes, should
consult with its counsel with respect to the potential applicability of ERISA
and Section 4975 of the Code to such investment and whether any exemption would
be applicable (and should determine on its own whether all the conditions any
such exemption have been satisfied). Moreover, each fiduciary of a Plan subject
to ERISA should determine whether, under the general fiduciary standards of
ERISA, an investment in the Notes is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
THE ABOVE DISCUSSION IS ONLY A GENERAL SUMMARY. IT DOES NOT COVER ALL ERISA
AND PROHIBITED TRANSACTION MATERS THAT MAY BE IMPORTANT TO A PARTICULAR
INVESTOR. EACH PROSPECTIVE PLAN INVESTOR IS STRONGLY URGED TO CONSULT ITS OWN
COUNSEL ABOUT THE POTENTIAL CONSEQUENCES TO IT UNDER ERISA AND SECTION 4975 OF
THE CODE OF AN INVESTMENT IN THE NOTES.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Issuers and the several underwriters
named below (the "Underwriters"), the Issuers have agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase from the
Issuers, the following respective principal amounts of the Notes:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
PRINCIPAL AMOUNT OF CLASS B SENIOR
CLASS A SENIOR SUBORDINATED
UNDERWRITER NOTES NOTES
----------- ------------------- -------------------
<S> <C> <C>
Chase Securities Inc. ...................... $ $
Lehman Brothers Inc. ....................... $ $
======== ========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of various legal matters by
counsel and various other conditions. In the Underwriting Agreement, the
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all of the Notes offered hereby if any of the Notes are purchased.
The Issuers have been advised by the Underwriters that the Underwriters propose
initially to offer the Notes to the public at the public offering prices set
forth on the cover page of this Prospectus and to certain selected dealers at
such price less a concession not in excess of % per Note. The Underwriters
may allow, and such selected dealers may reallow, a concession not in excess of
% per Note to certain other dealers. After the initial public offering, the
public offering price and selling concessions may be changed.
Each of the Underwriters has represented and agreed that: (i) it has not
offered or sold, and prior to the date six months after the date of issue of the
Notes will not offer or sell, to persons in the United Kingdom other than to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances that have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemption) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.
The Notes are new securities for which there currently is no market. The
Underwriters have advised the Issuers that they presently intend to make a
market in the Notes as permitted by applicable law. The Underwriters are not
obligated, however, to make a market in the Notes and any such market-making may
be discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the development or liquidity of any
market for the Notes.
The Issuers have agreed that, for a period of days, commencing on the
date of this Prospectus, without the prior consent of the Underwriters, they
will not, directly or indirectly, sell, offer to sell, contract to sell or
announce or file a registration statement for the offering of any debt
securities of the Issuers designed to be traded or distributed in the public or
private securities markets (other than the Notes).
The Issuers have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments which the Underwriters may be required to make in respect thereof.
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In connection with the Offering the Underwriters, may engage in
overallotment, stabilizing transactions and syndicate covering transactions in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended. Overallotment involves sales in excess of the offering size, which
creates a short position for the Underwriters. Stabilizing transactions involve
bids to purchase the Notes in the open market for the purpose of pegging, fixing
or maintaining the price of the Notes. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. Such stabilizing transactions and
syndicate covering transactions may cause the price of the Notes to be higher
than it would otherwise be in the absence of such transactions. Such activities,
if commenced, may be discontinued at any time.
The Underwriters and their affiliates perform various investment banking
and commercial banking services from time to time for Enron Corp. and its
affiliates. Affiliates of Chase Securities Inc. will act as Trustee, Collateral
Agent and Backup Program Manager and may act as a Backup Facility Agent, Backup
Lender, Liquidity Facility Agent, Liquidity Lender or a Hedge Counterparty.
Affiliates of Lehman Brothers Inc. may act as a Backup Facility Agent, Backup
Lender, Liquidity Facility Agent, Liquidity Lender or a Hedge Counterparty.
Each of the Underwriters has acted as a financial advisor to EI in
connection with structuring and arranging financing for the Issuer. In addition,
the Underwriters and their affiliates may perform various financial advisory,
investment banking and commercial banking services from time to time in the
future for the Issuer, Enron and Enron Affiliates or for non-affiliated third
parties (including Project Borrowers, project sponsors and competitors of the
Issuer and Enron) with respect to project finance transactions that may
constitute Eligible Projects.
LISTING AND GENERAL INFORMATION
Application has been made to list the Notes on the Luxembourg Stock
Exchange. Prior to the listing, a legal notice ("Notice Legale") relating to the
issue of the Notes, the Certificate of Limited Partnership and the Partnership
Agreement of the Issuer and the Certificate of Incorporation and Bylaws of the
Co-Issuer will be deposited with the Chief Registrar of the District of
Luxembourg ("Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg"),
where copies thereof may be obtained, free of charge, upon request.
As long as any of the Notes are outstanding, copies of the Certificate of
Limited Partnership and the Partnership Agreement of the Issuer, the Certificate
of Incorporation and Bylaws of the Co-Issuer, the Indenture, the other Financing
Documents and the Management Agreement will be available for inspection and the
annual and any interim semi-annual financial statements of each of the Issuer
and the Co-Issuer will be obtainable at the offices of the Listing Agent in the
city of Luxembourg, where copies thereof may be obtained upon request.
Copies of the Certificate of Limited Partnership and the Partnership
Agreement of the Issuer, the Certificate of Incorporation and Bylaws of the
Co-Issuer, the resolutions of the Board of Directors of the General Partner of
the Issuer and of the Co-Issuer, authorizing the issuance of the Notes, the
Indenture, the other Financing Documents and the Management Agreement, will be
available for inspection during the term of the Notes in the City of
at the office of the Trustee and at the office of the Paying
Agent in Luxembourg.
Each of the Issuer and the Co-Issuer represents that there has been no
material adverse change in its financial position since its date of creation.
The Issuers are not involved in any litigation or arbitration proceedings
relating to claims on amounts which are material in the context of the issue of
the Notes, nor, so far as either of the Issuers is aware, is any such litigation
or arbitration involving it pending or threatened.
The issuance of the Notes was authorized by the Board of Directors of the
General Partner of the Issuer and of the Co-Issuer by resolution passed on
.
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LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Issuers by Milbank, Tweed, Hadley & McCloy, New York, New York, for the Program
Manager by Vinson & Elkins, L.L.P., Houston, Texas and for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain matters
with respect to United States tax law will be passed upon for the Issuers by
Milbank, Tweed, Hadley & McCloy, New York, New York. Certain partners of
Skadden, Arps, Slate, Meagher & Flom LLP own common shares of Enron and from
time to time, Skadden, Arps, Slate, Meagher & Flom LLP provides legal services
to Enron and Enron Affiliates.
EXPERTS
The consolidated balance sheet of Enron International CPO, L.P. and
Subsidiary as of August 6, 1998 included herein has been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
AVAILABLE INFORMATION
The Issuers have filed a Registration Statement on Form S-1 with respect to
the Class A Senior Notes and the Class B Senior Subordinated Notes being offered
hereby with the Commission under the Securities Act. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which are
omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus concerning the provisions of documents
filed with the Registration Statement as exhibits are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed as an exhibit to the
Registration Statement. Upon the consummation of the Offerings, the Issuers will
be subject to the informational requirements of the Exchange Act and, in
accordance therewith, will file reports and other information with the
Commission. The Registration Statement and the exhibits and schedules thereto
filed by the Issuers with the Commission, as well as such reports and other
information filed by the Issuers with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; at its Chicago Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and at its New
York Regional Office, Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the public reference section
of the Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
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<PAGE> 129
GLOSSARY
"ACCELERATION" has the meaning specified under "Description of Principal
Documents -- Financing Documents -- Common Agreement".
"ACCELERATION SHORTFALL" has the meaning specified under "Description of
the Notes -- Priority of Acceleration Payments".
"ACCEPTABLE CREDIT PROVIDER" means any person or entity whose long-term
unsecured debt is rated at least A by S&P and A2 by Moody's or whose obligation
is secured by a letter of credit by a person or entity whose long-term,
unsecured debt is rated at least A by S&P and A2 by Moody's (or, in certain
specified circumstances, Investment Grade).
"ACCOUNT BANK" means Citibank, N.A., solely in its capacity as account bank
under the Security Agreement.
"ACCOUNTS" means (i) the Collection Account, (ii) the TIP Accounts, (iii)
the Reserve Account, (iv) the Excess Spread Account, (v) the Operating Account,
(vi) the Expense Reserve Account, (vii) the Distribution Obligation Escrow
Account and (viii) the Note Payment Account.
"ACTUAL NET INTEREST MARGIN" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"ACTUAL SENIOR CREDIT SUPPORT PERCENTAGE" has the meaning specified under
"Eligible Projects and Qualifying Criteria -- Portfolio Financial
Tests -- Credit Support Tests -- Moody's Credit Support Test".
"ADMINISTRATIVE FEE" has the meaning specified under "Description of
Principal Documents -- Other Material Agreements -- Management Agreement".
"ADMINISTRATIVE SERVICES AGREEMENT" means the Administrative Services
Agreement between EIS and the Program Manager.
"AFFILIATE" means, with respect to a specified person or entity, (a) any
person or entity directly or indirectly owning, controlling or holding the power
to vote 5% or more of the outstanding voting securities or other voting
ownership interests of the specified person or entity, (b) any person or entity
directly or indirectly controlling, controlled by or under common control with
the specified person or entity or (c) any general partner of the specified
person or entity.
"AFRICA" means the geographic areas that are within the boundaries (as of
the date hereof) of Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi,
Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Democratic
Republic of the Congo, The Congo, Cote d'Ivoire, Djibouti, Egypt, Equatorial
Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya,
Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius,
Morocco, Mozambique, Namibia, Niger, Nigeria, Principe, Reunion, Rwanda, Sao
Tome, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan,
Swaziland, Tanzania, Togo, Tunisia, Uganda, Western Sahara, Zambia and Zimbabwe.
"AGENT MEMBERS" means members of, or participants in, the depositary.
"AGGREGATE BOOK VALUE OF THE ISSUER'S ASSETS" has the meaning specified
under "Description of Principal Documents -- Other Material
Agreements -- Management Agreement".
"AGGREGATE PROJECT LOAN BALANCE" means the aggregate Project Loan Balance
for all Project Loans.
"AGGREGATE SENIOR LOAN BALANCE" means, as of any date of determination, the
sum of (i) the outstanding principal amount of the Class A Senior Notes, (ii)
the Liquidity Facility Balance and (iii) the Backup Facility Balance.
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<PAGE> 130
"ALLOCATION" means a commitment under the Backup Facility to fund a
particular Project Loan. "Allocated" shall have a correlative meaning.
"APPLICABLE PROCEDURES" has the meaning specified under "Description of the
Notes -- Form, Denomination and Registration -- Global Notes".
"ASIA" means the geographic areas that are within the boundaries (as of the
date hereof) of Bangladesh, Bhutan, Brunei, Cambodia, China, Hong Kong, India,
Indonesia, Japan, Laos, Macau, Malaysia, Maldives, Marshall Islands, Mongolia,
Myanmar, Nepal, North Korea, Pakistan, Paracel Islands, Papua New Guinea,
Philippines, Solomon Islands, Singapore, South Korea, Spratley Islands, Sri
Lanka, Taiwan, Thailand and Vietnam.
"ASSIGNED AGREEMENTS" has the meaning specified under "Security for the
Notes -- Assigned Agreements".
"ASSUMED LOSS AMOUNT" has the meaning specified under "Description of the
Notes -- The Reserve Test; Project Distributions Reserved".
"ASSUMPTIONS" means the following assumptions: (a) the sale of the Project
Loan for an amount equal to the Disposition Amount therefor, (b) mandatory
redemption of the Notes or Class C Notes or mandatory repayment of amounts drawn
under the Backup Facility in connection with an Equity Disposition or a
Refinancing and (c) Enron Distributions are calculated pursuant to clause (c) of
the definition of Enron Distributions.
"AUSTRALASIA" means the geographic areas that are within the boundaries (as
of the date hereof) of Australia, New Zealand, American Samoa, Fiji, Nauru, New
Caledonia, Papua New Guinea, the Solomon Islands, Tuvalu and Vanuatu.
"AUTHORIZED NEWSPAPER" means the Luxemburger Wort or any successor
publication or substitute publication of similar circulation selected by the
Trustee.
"AVAILABLE COMMITTED FUNDS" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Tests -- Funding Availability
Test".
"AVERAGE LIFE TEST" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Qualifying Criteria -- Portfolio Criteria".
"BACKUP FACILITY" has the meaning specified under "Liquidity Facility and
Backup Facility -- Backup Facility".
"BACKUP FACILITY AGENT" means each entity appointed as agent by the Backup
Lenders pursuant to each Backup Facility Loan Agreement and in the case of
Funding Availability Commitments provided under the Enron Support Agreement, an
agent appointed by Enron.
"BACKUP FACILITY BALANCE" means the aggregate principal amount of (i)
Allocations and drawn amounts under the Backup Facility Loan Agreement(s) and
(ii) any drawn and undrawn amounts under the Funding Availability Commitments.
"BACKUP FACILITY COMMITMENT" means committed amounts by the Backup Lenders
under (i) all Backup Facility Loan Agreements and (ii) Funding Availability
Commitments.
"BACKUP FACILITY REVOLVING PERIOD" means the period during which Backup
Lenders are required to make advances to the Issuer pursuant to the terms of a
Backup Facility Loan Agreement.
"BACKUP LENDERS" means the parties to the Backup Facility Loan Agreement(s)
identified therein as "Lenders" and, to the extent there are any outstanding
Funding Availability Commitments, Enron or an Enron Affiliate providing such
Commitment.
"BACKUP PROGRAM MANAGER" means Chase Bank of Texas, National Association
and/or another affiliate of the Chase Manhattan Bank, as applicable.
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"BANKRUPTCY CODE" means the United States Bankruptcy Code, Title 11 of the
United States Code, as amended.
"BASE CASE FINANCIAL PROJECTIONS" means projections presented to the Issuer
by the sponsors of each individual Project Borrower as to the revenues,
expenses, debt service and cash available for debt service and distributions of
such Project Borrower over a period at least equal to the term of the Project
Loan to be made to such Project Borrower.
"BASE NET INTEREST MARGIN" has the meaning specified under "Description of
Principal Documents -- Other Material Agreements -- Management Agreement".
"CALCULATED ASSET BALANCE" has the meaning specified under "Description of
the Notes -- Collateral Coverage Ratios and Test -- Target Senior
Overcollateralization Ratio".
"CALCULATED SENIOR DEBT BALANCE" has the meaning specified under
"Description of the Notes -- Collateral Coverage Ratios and Test -- Target
Senior Overcollateralization Ratio".
"CALCULATED TOTAL DEBT BALANCE" has the meaning specified under
"Description of the Notes -- Collateral Coverage Ratios and Test -- Total
Overcollateralization Ratio".
"CASH" means such coin or currency of the United States of America as at
the time shall be legal tender for payment of all public and private debts.
"CEDEL" means Cedel Bank, societe anonyme, a corporation organized under
the laws of the Grand Duchy of Luxembourg.
"CERTIFICATED NOTE" has the meaning specified under "Description of the
Notes -- Form, Denomination and Registration -- General".
"CHASE" means Chase Securities Inc.
"CLASS" means all of the Notes having the same designation given pursuant
to the Indenture.
"CLASS A MAKE-WHOLE PREMIUM" has the meaning specified under "Description
of the Notes -- Redemption -- Redemption Premiums".
"CLASS A PRESENT VALUE RATE" has the meaning specified under "Description
of the Notes -- Redemption -- Redemption Premiums".
"CLASS A SENIOR NOTE INTEREST RATE" has the meaning specified under
"Description of the Notes -- Interest".
"CLASS A SENIOR NOTE ISSUANCE REQUIREMENTS" has the meaning specified under
"Description of the Notes -- Issuance of Class A Senior Notes After the Closing
Date".
"CLASS A SENIOR NOTES" means the Class A Senior Notes due 2018.
"CLASS B PREMIUM" has the meaning specified under "Description of the
Notes -- Redemption -- Redemption Premiums".
"CLASS B PRESENT VALUE RATE" has the meaning specified under "Description
of the Notes -- Redemption -- Redemption Premiums".
"CLASS B REFINANCING" has the meaning specified under "Description of the
Notes -- Redemption -- Optional Redemption".
"CLASS B SENIOR SUBORDINATED NOTE INTEREST RATE" has the meaning specified
under "Description of the Notes -- Interest".
"CLASS B SENIOR SUBORDINATED NOTES" means the Class B Subordinated Notes
due 2018.
"CLASS C PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to a Due
Period, the amount equal to the principal proceeds received during such Due
Period multiplied by a fraction, the
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<PAGE> 132
numerator of which equals the principal amount of the Class C Subordinated Notes
and the denominator of which equals the aggregate amount of funded
capitalization of the Issuer.
"CLASS C SUBORDINATED NOTE PURCHASE COMMITMENT" means the commitment of
Enron to purchase or cause to be purchased Class C Subordinated Notes pursuant
to the Enron Support Agreement.
"CLASS C SUBORDINATED NOTES" means the Class C Notes due 2018.
"CLASS I INTERESTS" means the Class I Interests in the Issuer.
"CLASS I STAGE FUNDING COMMITMENT LETTER" means the commitment letter
evidencing the commitment of an Acceptable Credit Provider to fund Class I
Interests after the Closing Date.
"CLASS I TRIGGER EVENT" has the meaning specified under "The Partnership
Interests".
"CLASS II INTERESTS" means the Class II Interests in the Issuer.
"CLOSING DATE" means , 1998.
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"CO-ISSUER" means Enron International CPO, Inc.
"COLLATERAL" has the meaning specified under "Security for the Notes".
"COLLATERAL ACCOUNTS" means the Accounts other than the Note Payment
Account.
"COLLATERAL AGENT" means Chase Bank of Texas, National Association, solely
in its capacity as collateral agent for the Secured Parties under the Security
Agreement and the other Financing Documents.
"COLLATERAL PROCEEDS" has the meaning specified under "Description of the
Notes -- Collateral Proceeds".
"COLLECTION ACCOUNT" has the meaning specified under "Description of the
Notes -- Accounts -- Collection Account".
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMMITMENT" means a legally binding commitment to make a Project Loan as
determined by legal counsel to the Program Manager (subject to the satisfaction
of customary conditions precedent, including any of the Qualifying Criteria the
satisfaction of which may be deferred to any date on or prior to the initial
funding of such Project Loan). "Committed" will have a correlative meaning.
"COMMITTED TIP ACCOUNT" has the meaning specified under "Temporary
Investments".
"COMMITTED TIP ACCOUNT BALANCE" means (i) with respect to non-defaulted
Committed TIP Investments credited to the Uncommitted TIP Account, the principal
balance of investments credited to the Committed TIP Account, except that with
respect to Committed TIP Investments credited to the Committed TIP Account which
are described in clause (c) of the Committed TIP Investment Policies, only 95%
of the principal balance of each such investment shall be deemed credited to the
Committed TIP Account and (ii) with respect to defaulted Committed TIP
Investments credited to the Committed TIP Account, only 50% of the principal
balance of each such investment shall be deemed credited to the Committed TIP
Account.
"COMMITTED TIP INVESTMENT" has the meaning specified under "Temporary
Investments -- Committed TIP Account".
"COMMON AGREEMENT" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Common Agreement".
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"COMPARABLE COUNTRIES" has the meaning specified under "Description of
Principal Documents -- Other Material Agreements -- Management Agreement".
"COMPARABLE DEBT" has the meaning specified under "Description of Principal
Documents -- Other Material Agreements -- Management Agreement".
"COMPETING ISSUER" has the meaning specified under "Enron Support -- Enron
Obligations to Show Investment Opportunities to the Issuer; Limitation on
Formation of Competing Issuer".
"CONTINENT" means each of Antarctica, Africa, Asia, Australasia, Europe,
North America and South and Central America.
"CONTROLLED ENRON AFFILIATE" means any Enron Affiliate (other than Enron
Oil & Gas Company, EOTT Energy Partners, L.P. and Enron Energy Services L.L.C.)
of which 50% or more of the equity securities or other voting equity interests
are owned, directly or indirectly, by Enron or as to which Enron or a wholly
owned direct or indirect subsidiary of Enron is the sole or managing general
partner, managing member or other similar position having the right to exercise
actual control of the management and policies of such Enron Affiliate.
"COVERAGE RATIO CONDITION" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Qualifying Criteria -- Project Loan
Criteria".
"CREDIT SPREAD RISK" has the meaning specified under "Interest Rate Hedging
Arrangements".
"CREDIT SUPPORT TEST" means each of the Moody's Credit Support Test and the
S&P Credit Support Test.
"CREDIT SUPPORT TEST COMMITMENT" has the meaning specified under "Enron
Support -- Support Upon the Occurrence of Certain Events".
"CURRENCY HEDGING ARRANGEMENT" means, with respect to any Project Loan or
an Intermediate Funding Loan denominated in a currency other than U.S. Dollars,
one or more currency hedging agreements entered into between an Intermediate
Funding Entity and an Acceptable Credit Provider, such that payments anticipated
to be made from such Project Borrower or Intermediate Funding Entity, as
applicable, are converted into U.S. dollars at an agreed upon exchange rate and
any residual exposure relating to any breakage and termination costs of such
hedging agreement are indemnified by an Acceptable Credit Provider.
"DEBT RATE" has the meaning specified under "Description of the
Notes -- Redemption -- Mandatory Redemption".
"DEFAULT" means any Event of Default or any occurrence that is, or with
notice or the lapse of time or both would become, an Event of Default.
"DEFERRAL EVENT" has the meaning specified under "Description of the
Notes -- Interest".
"DEFERRED ISSUANCE COSTS" has the meaning specified under "Description of
the Notes -- Collateral Coverage Ratios and Test -- Target Senior
Overcollateralization Ratio".
"DESIGNATED ENRON OWNERSHIP INTEREST" has the meaning specified under
"Enron Support -- Support for Quarterly Payment Obligations".
"DETERMINATION DATE" means the last business day of a Due Period.
"DISPOSITION AMOUNT" has the meaning specified under "Description of the
Notes -- Redemption -- Mandatory Redemption".
"DISTRIBUTION OBLIGATION ESCROW ACCOUNT" has the meaning specified under
"Description of the Notes -- Accounts -- Distribution Obligation Escrow
Account".
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"DIVERSITY SCORE" has the meaning specified under "I. Diversity Score" in
Appendix A hereto.
"DOLLARS" or "U.S. Dollars" or "$" means United States Dollars.
"DTC" means the Depository Trust Company, a New York corporation.
"DUE PERIOD" means, with respect to any Quarterly Payment Date, the
calendar quarter ending immediately prior to such Quarterly Payment Date or, in
the case of the initial Due Period, the period commencing on (but excluding) the
Closing Date and ending on the last day of the calendar quarter ending
immediately prior to the initial Quarterly Payment Date or, in the case of a Due
Period that is applicable to the Quarterly Payment Date relating to the Stated
Maturity, the period commencing on (and including) the day immediately following
the last day of the prior Due Period and ending on the date of such Stated
Maturity.
"ECM" means Enron Capital Management, a division of Enron.
"ECT" means Enron Capital & Trade Resources Corp.
"EDC" means Enron Development Corp.
"EGPP" means Enron Global Power & Pipelines L.L.C.
"EI" means Enron International, a business unit of Enron.
"EI REGIONS" means the geographic areas that are within the boundaries of
South and Central America, Africa, the Middle East, Asia and Australasia (as
such terms are defined herein).
"EI SERVICES" or "EIS" means Enron International Services, Inc.
"ELIGIBLE INVESTMENTS" has the meaning specified under "Security for the
Notes -- Eligible Investments".
"ELIGIBLE PROJECT" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Eligible Project".
"ENRON" means Enron Corp.
"ENRON AFFILIATE" means an Affiliate of Enron.
"ENRON CLASS II PURCHASE COMMITMENT" has the meaning specified under "Enron
Support -- Commitment to Purchase Class II Interests".
"ENRON CREDIT COUNTERPARTY" means an Enron Affiliate (i) that has and
maintains a credit rating at least equivalent to Enron's credit rating at the
time such Enron Affiliate makes a commitment, (ii) whose commitment is
guaranteed by Enron or (iii) whose commitment is supported by a letter of credit
issued by an Acceptable Credit Provider.
"ENRON DISTRIBUTIONS" has the meaning specified under "Enron
Support -- Support for Quarterly Payment Obligations".
"ENRON INITIAL EQUITY" has the meaning specified under "Enron
Support -- Support for Quarterly Payment Obligations".
"ENRON OWNERSHIP PERCENTAGE" has the meaning specified under "Enron
Support -- Support for Quarterly Payment Obligations".
"ENRON OWNERSHIP REQUIREMENT" means the requirements set forth in paragraph
(4) of Project Loan Criteria and paragraph (5) of Portfolio Criteria.
"ENRON SUPPORT AGREEMENT" means the Enron Support Agreement dated as of the
Closing Date between the Issuer and Enron.
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"ENRON SUPPORT DOCUMENTS" means the Enron Support Agreement and any
assumption agreements, election notices and guaranties or letters of credit, if
any, delivered by Enron, an Enron Credit Counterparty or an Acceptable Credit
Provider pursuant to the Enron Support Agreement.
"EQUITY DISPOSITION" has the meaning specified under "Enron
Support -- Support for Quarterly Payment Obligations".
"ERISA" means the United States Employee Retirement Income Security Act of
1974, as amended.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"EVENT OF DEFAULT" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Common Agreement".
"EXCESS SPREAD ACCOUNT" has the meaning specified under "Description of the
Notes -- Accounts -- Excess Spread Account".
"EXCESS SPREAD ACCOUNT BALANCE" means amounts credited to or deemed to be
credited to the Excess Spread Account.
"EXPENSE RESERVE ACCOUNT" has the meaning specified under "Description of
the Notes -- Accounts -- Expense Reserve Account".
"EXTRAORDINARY EXPENSES" means reasonable expenses of the Issuers not
otherwise paid pursuant to clauses (i) through (xi)(f) of the Priority of
Payments.
"FINAL TERMINATION DATE" means the date on which all amounts due or payable
by the Issuers in respect of the Secured Obligations have been paid in full.
"FINANCIAL CLOSING DATE" means, with respect to a Project Loan or one or
more related Intermediate Funding Loans, the date on which all conditions
precedent to the initial funding thereto have been satisfied.
"FINANCING DOCUMENTS" has the meaning specified under "Description of
Principal Documents -- Financing Documents".
"FIXED RATE PREMIUM" has the meaning specified under "Description of the
Notes -- Redemption -- Redemption Premiums".
"FLOATING RATE RISK" has the meaning specified under "Interest Rate Hedging
Arrangements".
"FUNDING AVAILABILITY COMMITMENT" has the meaning specified under "Enron
Support -- Support Upon the Occurrence of Certain Events".
"FUNDING AVAILABILITY SHORTFALL AMOUNT" has the meaning specified under
"Temporary Investments -- Committed TIP Account".
"FUNDING AVAILABILITY TEST" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Funding
Availability Test".
"GENERAL PARTNER" means Enron CPO Holdings, Inc.
"GLOBAL NOTE" has the meaning specified under "Description of the
Notes -- Form, Denomination and Registration -- General".
"GP INTERESTS" means the general partner interests in the Issuer.
"HEDGE COUNTERPARTY" means any counterparty (a) whose Reference Obligations
are rated (or whose counterparty rating is) at least A2 by Moody's and at least
A by Standard & Poor's, (b) whose obligations under the relevant Hedging
Agreement are absolutely and unconditionally guaranteed by an Affiliate of such
counterparty if such Affiliate's Reference Obligations are rated at
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least A2 by Moody's and at least A by Standard & Poor's or (c) that agrees to
provide Hedge Counterparty Credit Support.
"HEDGE COUNTERPARTY CREDIT SUPPORT" means the agreement by a Hedge
Counterparty to cause to become effective, so long as the Reference Obligations
of the Hedge Counterparty (or any Person that shall have absolutely and
unconditionally guaranteed the obligations of the Hedge Counterparty under a
Hedging Agreement) shall fail to be rated at least A2 by Moody's and at least A
by Standard & Poor's, the obligation to deliver collateral under an ISDA Credit
Support Annex having, among others, the following terms: (a) no collateral
delivery obligations for the Issuer; (b) no collateral delivery obligations for
the Hedge Counterparty except when such delivery obligation is effective by
reason of the agreement of the Hedge Counterparty; and (c) a provision to the
effect that, in calculating the amount of collateral required to be delivered to
the Issuer, the mark to market value of any amount owing to the Issuer upon
termination of the Hedging Agreement shall be deemed to be equal to [100%] of
such mark to market value calculated in accordance with normal procedures under
the ISDA Credit Support Annex.
"HEDGING AGREEMENT" has the meaning specified under "Interest Rate Hedging
Arrangements".
"HEDGING PROCEEDS" means, with respect to any Quarterly Payment Date, all
net termination payments received by the Issuer under any Hedging Agreement
during the related Due Period.
"HIGH INTEREST RATE SCENARIO" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Liquidity
Test".
"HOLDER" or "NOTEHOLDER" means, with respect to any Note or Class C
Subordinated Note, the person in whose name the Note or Class C Subordinated
Note is registered on the note register.
"INCENTIVE FEE" has the meaning specified under "Description of Principal
Documents -- Other Material Agreements -- Management Agreement".
"INDENTURE" has the meaning specified under "Description of Principal
Documents -- Financing Documents -- Indenture".
"INDEPENDENT" as to any person or entity, means any other person or entity
(including, in the case of an accountant, or lawyer, a firm of accountants or
lawyers and any member thereof) who (i) does not have and is not committed to
acquire any material direct or any material indirect financial interest in such
person or entity or in any Affiliate of such person or entity, and (ii) is not
connected with such person or entity as an officer, employee, promoter,
underwriter, voting trustee, partner, director or person or entity performing
similar functions. "Independent" when used with respect to any accountant may
include an accountant who audits the books of such Person if in addition to
satisfying the criteria set forth above the accountant is independent with
respect to such person or entity within the meaning of Rule 101 of the Code of
Ethics of the American Institute of Certified Public Accountants.
"INDEPENDENT ENGINEER" means any Independent and internationally recognized
firm of engineers with expertise in the relevant Permitted Industry.
"INDUSTRY CONCENTRATION FACTOR" has the meaning specified under "Temporary
Investments -- Uncommitted TIP Account".
"INITIAL CLASS A SENIOR NOTES" has the meaning specified under "Description
of the Notes".
"INITIAL CLASS B SENIOR SUBORDINATED NOTES" has the meaning specified under
"Description of the Notes".
"INITIAL EQUITY" means any contribution by project sponsors to the initial
total capital cost of a Project Borrower in the form of (i) equity or any
financial instrument (including subordinated loans), the expected timing and
amounts of payments under which and the associated rights and
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<PAGE> 137
remedies of which are substantially similar to those of an equity interest
and/or (ii) an irrevocable and unconditional commitment to purchase or acquire
any of the foregoing by an Acceptable Credit Provider.
"INITIAL INTEREST" means any Interest funded on or prior to the Closing
Date.
"INITIAL ISSUANCE EXPENSES" means all Transactions Expenses of the Issuers
with respect to the Notes issued on the Closing Date, all expenses related to
the establishment of any Backup Facility existing as of the Closing Date, all
expenses relating to the establishment of the Liquidity Facility, the initial
Administrative Fee and the time and expenses of Enron employees directly
involved in the formation of the Issuers.
"INITIAL NOTES" has the meaning specified under "Description of the Notes".
"INTEGRATED CONTRACTUAL ARRANGEMENTS" has the meaning specified under
"Eligible Projects and Qualifying Criteria -- Eligible Project".
"INTERCREDITOR AGREEMENT" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Intercreditor Agreement".
"INTEREST ACCRUAL PERIOD" has the meaning specified under "Description of
the Notes -- Interest".
"INTEREST COVERAGE ADJUSTMENT" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"INTERESTS" means the Class I Interests, the Class II Interests and the GP
Interests.
"INTERMEDIATE FUNDING ENTITY" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Intermediate Funding Loans and Intermediate
Funding Criteria".
"INTERMEDIATE FUNDING LOAN" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Intermediate Funding Loans and Intermediate
Funding Criteria".
"INTERMEDIATE FUNDING LOAN CRITERIA" has the meaning specified under
"Eligible Projects and Qualifying Criteria -- Intermediate Funding Loans and
Intermediate Funding Criteria".
"INVESTMENT COMPANY ACT" means the U.S. Investment Company Act of 1940, as
amended.
"INVESTMENT GRADE" means a rating of BBB- or higher, in the case of S&P,
and Baa3 or higher, in the case of Moody's.
"INVESTMENT MANAGEMENT AGREEMENT" has the meaning specified under "Certain
Relationships and Related Transactions -- Investment Management Agreement".
"INVESTMENT PERIOD" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Overview".
"INVESTMENT TERMINATION DATE" means the date of termination for the
Investment Period.
"ISSUER" means Enron International CPO, L.P.
"ISSUER DETERMINED LOSS" has the meaning specified under "Description of
the Notes -- Collateral Coverage Ratios and Test -- Senior Overcollateralization
Ratio".
"ISSUERS" means the Issuer and the Co-Issuer.
"JEDI II" means Joint Energy Development Investments II, Limited
Partnership.
"LEHMAN" means Lehman Brothers Inc.
"LIBOR" means the London interbank offered rate.
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"LIQUIDITY EXPENSES" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Portfolio Financial Tests -- Liquidity Test".
"LIQUIDITY FACILITY" has the meaning specified under "Liquidity Facility
and Backup Facility -- Liquidity Facility".
"LIQUIDITY FACILITY AGENT" means the entity named as the agent under the
Liquidity Facility.
"LIQUIDITY FACILITY AVAILABILITY PERIOD" means the period during which
Liquidity Lenders are required to make advances to the Issuer pursuant to the
terms of the Liquidity Facility Loan Agreement.
"LIQUIDITY FACILITY COMMITMENT" means funded and unfunded commitments under
(i) the Liquidity Facility Loan Agreement and (ii) any Liquidity Test
Commitments.
"LIQUIDITY FACILITY LOAN AGREEMENT" means the Liquidity Facility Loan
Agreement among the Issuer, the Liquidity Facility Agent and the Liquidity
Lenders dated as of , 1998.
"LIQUIDITY LENDERS" means the parties to the Liquidity Facility Loan
Agreement identified therein as "Lenders" and to the extent there are any
outstanding Liquidity Facility Commitments, Enron or an Enron Affiliate
providing such commitment.
"LIQUIDITY SHORTFALL AMOUNTS" has the meaning specified under "Description
of the Notes -- Priority of Payments".
"LIQUIDITY TEST" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Portfolio Financial Tests -- Liquidity Test".
"LIQUIDITY TEST COMMITMENT" has the meaning specified under "Enron
Support -- Support Upon the Occurrence of Certain Events".
"LISTING AGENT" means .
"LOAN COMMITTEE" means the Loan Committee of the Program Manager.
"LOW INTEREST RATE SCENARIO" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Liquidity
Test".
"MAJORITY AFFILIATE" means, with respect to a specified entity (a) any
entity directly or indirectly owning, controlling or holding the power to vote
50% or more of the outstanding voting securities or other voting ownership
interests of the specified entity, (b) any entity directly or indirectly
controlling, controlled by or under common control with the specified entity or
(c) any general partner of the specified entity.
"MANAGEMENT AGREEMENT" has the meaning specified under "Description of
Principal Documents -- Other Material Agreements -- Management Agreement".
"MANAGEMENT FEE" has the meaning specified under "Description of Principal
Documents -- Other Material Agreements -- Management Agreement".
"MATERIAL MODIFICATION" means an amendment, modification, waiver or
supplement that relates to any material economic or legal term.
"MAXIMUM CLASS A PRINCIPAL AMOUNT" means $[ ] billion.
"MAXIMUM SENIOR INDEBTEDNESS" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- S&P Credit Support Test".
"MEASUREMENT PERIOD" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Portfolio Financial Tests -- Liquidity Test".
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"MIDDLE EAST" means the geographic areas that are within the boundaries (as
of the date hereof) of Afghanistan, Bahrain, Iran, Iraq, Israel, Jordan, Kuwait,
Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates and Yemen.
"MOODY'S" means Moody's Investors Service, Inc.
"MOODY'S ASSUMED NET INTEREST MARGIN" has the meaning specified under
"Eligible Projects and Qualifying Criteria -- Portfolio Financial
Tests -- Credit Support Tests -- Moody's Credit Support Test".
"MOODY'S CREDIT SUPPORT TEST" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"MOODY'S INDUSTRY" has the meaning specified under Appendix A to the Common
Agreement.
"MOODY'S NET INTEREST MARGIN ADJUSTMENT FACTOR" has the meaning specified
under "Eligible Projects and Qualifying Criteria -- Portfolio Financial
Tests -- Credit Support Tests -- Moody's Credit Support Test".
"MOODY'S RATING FACTOR" has the meaning specified under "Eligible Projects
and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"MOODY'S REGION" means each of (a) Africa (other than countries rated
Investment Grade by Moody's), (b) Asia Pacific (other than countries rated
Investment Grade by Moody's), (c) the Caribbean (other than countries rated
Investment Grade by Moody's), (d) Europe (other than countries rated Investment
Grade by Moody's), (e) Latin America (other than countries rated Investment
Grade by Moody's), (f) the Middle East (other than countries rated Investment
Grade by Moody's), (g) Central Asia (other than countries rated Investment Grade
by Moody's) and (h) individually, all countries rated Investment Grade by
Moody's in each case, as of the Closing Date.
"NET SENIOR DEBT" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"NON-U.S. HOLDER" has the meaning specified under "Tax Considerations".
"NOTE PAYMENT ASSUMPTIONS" has the meaning specified under "Description of
the Notes -- Redemption -- Redemption Premiums".
"NOTE REGISTRAR" means the Trustee.
"NOTES" means the Class A Senior Notes and the Class B Senior Subordinated
Notes.
"OECD" means Organization for Economic Cooperation and Development.
"OFFSHORE PAYING AGENT" means [ ], solely in its capacity as
offshore paying agent under the Indenture and the other Financing Documents.
"OID" has the meaning specified under "Tax Considerations -- Taxation of
the Holders".
"OPERATING ACCOUNT" has the meaning specified under "Description of the
Notes -- Accounts -- Operating Account".
"OPERATING EXPENSES" means (i) any expense of the Issuer or the Co-Issuer
described under priorities (i), (ii), (v)(B) and (vi) of the Priority of
Payments and not otherwise paid on a Quarterly Payment Date; (ii) expenses
relating to the establishment of Backup Facility Loan Agreements after the
Closing Date; and (iii) any Initial Issuance Expenses or Transaction Expenses in
excess of the amounts credited to the Operating Account for such purpose on the
Closing Date.
"PARTNERSHIP AGREEMENT" has the meaning specified under "Management's
Discussion and Analysis of Financial Condition and Results Of
Operations -- Overview".
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"PAYING AGENT" means the Trustee.
"PERMITTED CAPITAL EXPENDITURE" means a capital expenditure of the Issuer
reasonably necessary (as determined by the Program Manager on behalf of the
Issuer) for the performance of the acts and obligations of the Issuer under the
Financing Documents.
"PERMITTED COUNTRY" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Qualifying Criteria -- Project Loan Criteria".
"PERMITTED INDUSTRY" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Eligible Projects".
"PERMITTED INVESTMENTS" means the Eligible Investments and the Temporary
Investments.
"PERMITTED LIENS" means any lien on all or a portion of the Collateral (i)
for taxes, assessments or governmental charges either not yet due or being
contested in good faith, where such lien would not have a material adverse
effect on the Collateral (taken as a whole), the Issuer or the Co-Issuer, (ii)
arising from any litigation or other legal proceeding that is being contested in
good faith, where such lien would not have a material adverse effect on the
Collateral (taken as a whole), the Issuer or the Co-Issuer or (iii) liens
granted pursuant to the Security Documents.
"PLAN" has the meaning specified under "Certain ERISA Considerations".
"PORTFOLIO ASSETS" has the meaning specified under "Description of
Principal Documents -- Other Material Agreements -- Management Agreement".
"PORTFOLIO CRITERIA" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Qualifying Criteria -- Portfolio Criteria".
"PORTFOLIO FINANCIAL TESTS" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests".
"PORTFOLIO LIQUIDITY" has the meaning specified under "Eligible Projects
and Qualifying Criteria -- Portfolio Financial Tests -- Liquidity Test".
"PREMIUM" means any of the Class A Make-Whole Premium or the Class B
Premium.
"PRICING TERMS" has the meaning specified under "Description of Principal
Documents -- Other Material Agreements -- Management Agreement".
"PRIORITY OF ACCELERATION PAYMENTS" has the meaning specified under
"Description of the Notes -- Priority of Acceleration Payments".
"PRIORITY OF PAYMENTS" has the meaning specified under "Description of the
Notes -- Priority of Payments".
"PROGRAM MANAGER" means Enron CPO Management, L.P.
"PROJECT BORROWER" means an entity that owns a project and borrows funds in
the form of loans from the Issuer directly or through an Intermediate Funding
Entity.
"PROJECT DISTRIBUTIONS RESERVED" has the meaning specified under
"Description of the Notes -- The Reserve Test; Project Distributions Reserved".
"PROJECT LOAN" means, with respect to an Eligible Project, a loan made by
the Issuer or an Intermediate Funding Entity to a Project Borrower. References
herein to any rights or interests that the Issuer may have in or with respect to
a Project Loan shall, insofar as such rights or interests are derived through
one or more Intermediate Funding Entities will be deemed to be references to
such derivative and indirect rights or interests.
"PROJECT LOAN BALANCE" means, with respect to each Project Loan, the
outstanding principal balance of such Project Loan plus unfunded Commitments to
make such Project Loan.
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"PROJECT LOAN CRITERIA" has the meaning specified under "Eligible Projects
and Qualifying Criteria -- Qualifying Criteria -- Project Loan Criteria".
"PROJECT RISK" means construction, commodity price, offtake and currency
risk.
"PTE" has the meaning specified under "Certain ERISA Considerations".
"QUALIFYING CRITERIA" has the meaning specified under "Eligible Projects
and Qualifying Criteria -- Overview".
"QUARTERLY PAYMENT DATES" has the meaning specified under "Description of
the Notes -- Interest".
"QUARTERLY PAYMENT SHORTFALL" has the meaning specified under "Description
of the Notes -- Priority of Payments".
"QUARTERLY PROJECT DISTRIBUTIONS" has the meaning specified under "Enron
Support -- Support for Quarterly Payment Obligations".
"RATING AGENCIES" means each of Moody's and S&P.
"RATING CONDITION" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Qualifying Criteria -- Ratings Criteria".
"RATINGS CRITERIA" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Qualifying Criteria -- Ratings Criteria".
"RECORD DATE" means the date on which the Holders of Notes are determined
for purposes of (i) receipt of payment in respect of principal or interest on
the succeeding Quarterly Payment Date, (ii) an Acceleration or (iii) a
redemption of Notes or Class C Subordinated Notes pursuant to the Common
Agreement, which date is the 15th day (whether or not a business day) prior to
the applicable date.
"REDEMPTION DATE" means any date specified for a redemption of the Notes or
Class C Subordinated Notes and the repayment of amounts drawn under the
Liquidity Facility and Backup Facility or, if such date is not a business day,
the next following business day.
"REFERENCE OBLIGATION" means with respect to any Hedge Counterparty or any
other person or entity, the unsecured, unguaranteed and unsupported senior
long-term debt or deposit obligations of such Hedge Counterparty or such other
person or entity.
"REFINANCING" has the meaning specified under "Enron Support -- Support for
Quarterly Payment Obligations".
"REGION" means each of the S&P Region and Moody's Region, as applicable.
"RELEVANT ASSETS" has the meaning specified under "Description of Principal
Documents -- Other Material Agreements -- Management Agreement".
"REPAYMENT AGREEMENT" has the meaning specified under "Description of the
Notes -- Accounts -- Excess Spread Account".
"REPRESENTATIVES" means each of the Backup Facility Agents, the Liquidity
Facility Agent and the Trustee.
"REQUIRED LENDERS" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Intercreditor Agreement".
"REQUIRED RESERVE AMOUNT" has the meaning specified under "Description of
the Notes -- The Reserve Test; Project Distributions Reserved".
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"REQUIRED SENIOR CREDIT SUPPORT PERCENTAGE" has the meaning specified under
"Eligible Projects and Qualifying Criteria--Portfolio Financial Tests -- Credit
Support Tests -- Moody's Credit Support Test".
"REQUIRED SENIOR PROJECT CREDIT SUPPORT PERCENTAGE" has the meaning
specified under "Eligible Projects and Qualifying Criteria -- Portfolio
Financial Tests -- Credit Support Tests -- Moody's Credit Support Test".
"REQUIRED SENIOR TIP CREDIT SUPPORT PERCENTAGE" has the meaning specified
under "Eligible Projects and Qualifying Criteria -- Portfolio Financial
Tests -- Credit Support Tests -- Moody's Credit Support Test".
"RESERVE ACCOUNT" has the meaning specified under "Description of the
Notes -- Accounts -- Reserve Account".
"RESERVE AMOUNT" has the meaning specified under "Description of the
Notes -- Accounts -- Reserve Account".
"RESERVE TEST" has the meaning specified under "Description of the
Notes -- The Reserve Test; Project Distributions Reserved".
"RETENTION AMOUNT" has the meaning specified under "Description of the
Notes -- Accounts -- Excess Spread Account".
"RETENTION PERCENTAGE" has the meaning specified under "Description of the
Notes -- Accounts -- Excess Spread Account".
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"S&P CREDIT SUPPORT TEST" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- S&P Credit Support Test".
"S&P INDUSTRY" has the meaning specified under Appendix A to the Common
Agreement.
"S&P REGION" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Portfolio Financial Tests -- Credit Support Tests -- S&P
Credit Support Test".
"SALE PROCEEDS" means all proceeds received as a result of sales or other
dispositions of Collateral pursuant to the Security Agreement, net of any
reasonable amounts expended by the Program Manager or the Collateral Agent in
connection with such sale or other disposition.
"SCHEDULED INVESTMENT TERMINATION DATE" means the fifth anniversary of the
Closing Date.
"SECURED OBLIGATIONS" has the meaning specified under "Security for the
Notes".
"SECURED PARTY" means each of the Class A Senior Noteholders, the Class B
Senior Subordinated Noteholders, the Class C Subordinated Noteholders, the
Liquidity Lenders, the Backup Lenders, the Hedge Counterparties, the Collateral
Agent and the Representatives.
"SECURITY AGREEMENT" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Security Documents".
"SECURITY DOCUMENTS" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Security Documents".
"SENIOR COVERAGE TEST" has the meaning specified under "Description of the
Notes -- Collateral Coverage Ratios and Test -- Senior Coverage Test".
"SENIOR LENDERS" means the Class A Noteholders, the Liquidity Lenders and
the Backup Lenders.
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"SENIOR OVERCOLLATERALIZATION RATIO" has the meaning specified under
"Description of the Notes -- Collateral Coverage Ratios and Test -- Senior
Overcollateralization Ratio".
"SENIOR SECURED OBLIGATION" means all indebtedness, liabilities and
obligations of the Issuer and/or the Co-Issuer to the Class A Senior
Noteholders, the Liquidity Lenders, the Backup Lenders and the Hedge
Counterparties.
"SERVICE CONTRACT" means the Service Contract dated as of ,
1998 between EI Services and the Program Manager.
"SERVICES" has the meaning specified under "Description of Principal
Documents -- Other Material Agreements -- Management Agreement".
"SHORTFALL" has the meaning specified under "Description of the
Note -- Priority of Payments".
"SOUTH AND CENTRAL AMERICA" means the geographic areas that are within the
boundaries (as of the date hereof) of Anguilla, Antigua, Argentina, Aruba, The
Bahamas, Barbados, Barbuda, Belize, Bermuda, Bolivia, Bonaire, Brazil, the
British Virgin Islands, the Cayman Islands, Chile, Colombia, Costa Rica, Cuba,
Curacao, Dominica, Dominican Republic, Ecuador, El Salvador, the Falkland
Islands, French Guiana, French West Indies, Grenada, The Grenadines, Guadeloupe,
Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Montserrat, Netherlands
Antilles, Nevis, Nicaragua, Panama, Paraguay, Peru, Pitcairn, [Puerto Rico,]
Saba, Saint Kitts, Saint Lucia, Saint Vincent, St. Barthelemy, St. Eustatius,
St. Martin, Suriname, Trinidad & Tobago, Turks & Caicos Islands, Uruguay, [the
U.S. Virgin Islands] and Venezuela.
"STANDARD OF CARE" has the meaning specified under "Description of
Principal Documents -- Other Material Agreements -- Management Agreement".
"STATED MATURITY" has the meaning specified under "Description of the
Notes -- Principal".
"SUBORDINATE EVENT OF DEFAULT" has the meaning specified under "Description
of the Notes -- Redemption -- Redemption Upon a Subordinate Event of Default".
"SUBORDINATE INTERESTS" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Intercreditor Agreement".
"SUBSEQUENT CLASS A CLOSING DATE" means any date on which additional Class
A Senior Notes are issued.
"SUBSEQUENT CLOSING DATE" means any Subsequent Class A Closing Date or date
on which additional Class B Senior Subordinated Notes are issued.
"TARGET NOTE REDEMPTION AMOUNT" has the meaning specified under
"Description of the Notes -- Redemption -- Mandatory Redemption".
"TARGET SENIOR OVERCOLLATERALIZATION RATIO" has the meaning specified under
"Description of the Notes -- Collateral Coverage Ratios and Test -- Target
Senior Overcollateralization Ratio".
"TARGET TOTAL OVERCOLLATERALIZATION RATIO" has the meaning specified under
"Description of the Notes -- Collateral Coverage Ratios and Test -- Total
Overcollateralization Ratio".
"TAX EVENT" means a final determination that the Issuer is subject to U.S.
federal income tax on a net income basis.
"TAX REDEMPTION TRIGGER DATE" has the meaning specified under "Description
of the Notes -- Redemption -- Mandatory Redemption".
"TEMPORARY INVESTMENT PORTFOLIO" has the meaning specified under "Temporary
Investments".
"TEMPORARY INVESTMENTS" has the meaning specified under "Temporary
Investments".
"TIP ACCOUNTS" means the Uncommitted TIP Account and the Committed TIP
Account.
139
<PAGE> 144
"TIP ADVISOR" means [ ], solely in its capacity as TIP Advisor
under the TIP Investment Management Agreement or permitted successors or
assigns.
"TIP DIVERSITY SCORE" has the meaning specified under "Eligible Projects
and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Credit Support Test Tables".
"TIP ELIGIBLE INVESTMENTS" has the meaning specified under "Temporary
Investments -- Committed TIP Account".
"TIP INVESTMENT MANAGEMENT AGREEMENT" means the Investment Management
Agreement between the Issuer and a TIP Advisor which agreement satisfies the
Committed TIP Investment Policies and the Uncommitted TIP Investment Policies.
"TIP INVESTMENT POLICIES" means the Committed TIP Investment Policies and
the Uncommitted TIP Investment Policies.
"TIP RATE RISK" has the meaning specified under "Interest Rate Hedging
Arrangements".
"TOTAL ASSETS" has the meaning specified under "Eligible Projects and
Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"TOTAL OVERCOLLATERALIZATION RATIO" has the meaning specified under
"Description of the Notes -- Collateral Coverage Ratios and Test -- Senior
Coverage Test".
"TRANSACTION DOCUMENTS" means the Financing Documents and the Management
Agreement.
"TRANSACTION EXPENSES" means all expenses of the Issuers related to the
issuance of the Notes, including, without limitation, (i) underwriting fees,
(ii) filing and listing fees associated with the registration and sale of the
Notes, (iii) legal, accounting and other consultant fees associated with the
registration and sale of the Notes, (iv) expenses associated with the marketing
and sales of the Notes, (v) printing costs for registration statements and other
similar documents, (vi) Trustee and Collateral Agent fees related to such
issuance and (vii) rating agency fees.
"TREASURY RISK" has the meaning specified under "Interest Rate Hedging
Arrangements".
"TRUSTEE" means Chase Bank of Texas, National Association, solely in its
capacity as trustee under the Indenture and the other Financing Documents.
"U.S. GOVERNMENT SECURITIES" means any security issued or guaranteed as to
principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States; or
any certificate of deposit for any of the foregoing.
"U.S. HOLDER" has the meaning specified under "Tax Considerations".
"UNCOMMITTED TIP ACCOUNT" has the meaning specified under "Temporary
Investments".
"UNCOMMITTED TIP ACCOUNT BALANCE" means the principal balance of
investments credited to the Uncommitted TIP Account.
"UNCOMMITTED TIP INVESTMENT" has the meaning specified under "Temporary
Investments -- Uncommitted TIP Account".
"UNDERWRITERS" means Lehman and Chase.
"UNDERWRITING AGREEMENT" has the meaning specified under "Underwriting".
"UNUSED ENRON COMMITMENTS" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
"VALUATION REPORT" has the meaning specified under "Description of
Principal Documents -- Financing Documents -- Common Agreement".
140
<PAGE> 145
"WEIGHTED AVERAGE MOODY'S RATING" has the meaning specified under "Eligible
Projects and Qualifying Criteria -- Portfolio Financial Tests -- Credit Support
Tests -- Moody's Credit Support Test".
141
<PAGE> 146
ENRON INTERNATIONAL CPO, L.P. AND SUBSIDIARY
INDEX TO CONSOLIDATED BALANCE SHEET
ENRON INTERNATIONAL CPO, L.P. AND SUBSIDIARY
<TABLE>
<S> <C>
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheet as of August 6, 1998........... F-3
Notes to the Consolidated Balance Sheet................... F-4
</TABLE>
F-1
<PAGE> 147
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Enron International CPO, L.P.:
We have audited the accompanying consolidated balance sheet of Enron
International CPO, L.P. (a Delaware limited partnership) and Subsidiary as of
August 6, 1998. This consolidated balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Enron International
CPO, L.P. and Subsidiary as of August 6, 1998 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
August 6, 1998
F-2
<PAGE> 148
ENRON INTERNATIONAL CPO, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF AUGUST 6, 1998
ASSETS
<TABLE>
<S> <C>
Cash........................................................ $1,000
======
PARTNERS' EQUITY
Partners' Equity:
General Partner, Enron CPO Holdings, Inc.................. $ 10
Limited Partner, Enron CPO Holdings Intermediate, L.P..... 990
------
Partners' Equity............................................ $1,000
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 149
ENRON INTERNATIONAL CPO, L.P. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED BALANCE SHEET
AS OF AUGUST 6, 1998
1. BUSINESS AND ORGANIZATION
Enron International CPO, L.P. ("Partnership"), a Delaware limited
partnership, was formed on July 30, 1998 pursuant to a limited partnership
agreement, the "Partnership Agreement"), to provide construction and term loans
primarily to certain international electricity, energy and natural gas-related
infrastructure projects sponsored by Enron Corp. ("Enron") and has had no
material operations to date. The Partnership intends to create, during an
investment period of up to five years, a diversified portfolio of project loans.
Enron CPO Holdings, Inc. (the "General Partner") is an affiliate of Enron CPO
Management, L.P. (the "Program Manager"), wholly-owned subsidiaries of Enron.
Enron International CPO, Inc. (the "Co-Issuer" or "Subsidiary") was
incorporated under the laws of the State of Delaware on July 30, 1998 and is
wholly-owned by the Partnership. The Co-Issuer has no material assets or any
liabilities other than as Co-Issuer of the Notes. The Co-Issuer's activities are
limited to issuing the Notes and engaging in other activities incidental
thereto.
Enron International Services, a wholly-owned subsidiary of Enron, has
incurred certain costs in connection with the Partnership's organization and
proposed issuance of Notes that will be charged to the Partnership upon their
issuance.
2.EVENTS SUBSEQUENT TO THE DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
The Partnership was formed to provide construction and term loans primarily
to certain international electricity, energy and natural gas-related
infrastructure projects. The Partnership's proposed activities include: (1)
funding, owning and managing project loans, (2) making commitments in respect of
project loans, (3) issuing the Notes, the Interests (as defined below), the
Class C Subordinated Notes and the Support Notes (as more fully described
below), (4) entering into hedging agreements, (5) making temporary investments
and eligible investments, (6) the ownership of the shares of the Co-Issuer, (7)
entering into backup and liquidity facilities and (8) engaging in other
activities incidental to the foregoing. The Partnership's affairs will cease on
December 31, 2018 subject to earlier termination upon a bankruptcy of the
Partnership or certain other events. The Program Manager will perform all
management services on behalf of the Partnership.
The Program Manager will, among other things, manage the selection and
funding of project loans and temporary investments, manage the ratings process,
negotiate the documentation for project loans, monitor compliance by project
borrowers with project loan agreements, take action to protect the rights of the
Partnership in connection with any non-compliance with project loan agreements
by any project borrower and provide substantially all of the general and
administrative support to the Partnership. The Partnership will pay the Program
Manager quarterly fees for such services. The Program Manager will also employ
third-party investment managers and Enron affiliates to manage and invest the
Partnership's cash. The Program Manager may be removed by approval of 66 2/3% of
the Class I Interests (as discussed below) in certain situations.
CAPITAL STRUCTURE
The Partnership's Notes will consist of :
(i) Class A Senior Notes
(ii) Class B Senior Subordinated Notes.
F-4
<PAGE> 150
The partnership interests ("Interests") will consist of:
(i) funded GP Interests owned by the General Partner and commitments
by the General Partner to purchase GP Interests;
(ii) funded Class I Interests indirectly owned by persons unaffiliated
with Enron and commitments by persons unaffiliated with Enron to purchase
indirectly Class I Interests; and
(iii) funded Class II Interests owned by Enron or an Enron affiliate
and commitments by Enron to purchase Class II Interests to be funded in
certain situations, in accordance with the Enron Support Agreement. The
unfunded portion of Enron's commitment will be backed by an irrevocable
standby letter of credit issued by a commercial bank.
ENRON SUPPORT
The Partnership and Enron will enter into the Enron Support Agreement to
evidence (i) Enron's commitment to fund Class II Interests under certain
circumstances and to provide a supporting letter of credit, (ii) Enron's
obligation to pay, subject to certain limitations, the Partnership quarterly
when a shortfall in funds available for the payment of debt service and other
operating expenses exists, (iii) Enron's obligation to use commercially
reasonable efforts to notify the Partnership of all opportunities to make loans
to projects developed or acquired by Enron or certain Enron controlled
affiliates and located in certain emerging markets, to the extent such projects
would be determined by Enron to be eligible projects, and (iv) the agreement of
Enron and certain Enron controlled affiliates not to sponsor a competing entity
for a specified period of time.
In addition, pursuant to the Enron Support Agreement, Enron will have the
right, but not the obligation, to (i) indemnify the Partnership upon the
occurrence of a tax event, (ii) commit to pay or cause to be paid an amount
sufficient to allow the Partnership to satisfy any of the portfolio financial
tests, (iii) pay to the Partnership an amount sufficient to allow the
Partnership to effect a whole or partial redemption of the Notes and the Class C
Subordinated Notes or to effect a refinancing of the Class B Senior Subordinated
Notes, (iv) purchase Class C Subordinated Notes or commit to purchase Class C
Subordinated Notes or (v) arrange one or more letters of credit to support
certain of its support obligations. Enron may designate or assign to
creditworthy affiliates or third parties certain types of Enron support subject
to the satisfaction of certain conditions. In the event that Enron funds any
obligations in (i) or (ii) above, Enron will receive Support Notes.
Enron will guaranty the limited indemnity of certain obligations of the
Program Manager to the Partnership under the terms of the Management Agreement.
PORTFOLIO ASSETS
The Partnership's assets will consist primarily of project loans and
temporary investments. Project loans must meet qualifying criteria. While the
Partnership believes that Enron will provide sufficient project financing
opportunities to the Partnership to create its portfolio, the success of the
Partnership in entering into commitments to make project loans is dependent
primarily on Enron's ability to develop projects and the Partnership's ability
to successfully bid for such project financing opportunities. Prior to funding
project loans, the Partnership will invest the net proceeds of the Notes and the
Interests in temporary investments, which will consist of investment grade
securities with maturities no longer than one year. Interest income will be
recognized as it accrues and fees paid at the inception of a project loan will
be amortized over the life of the applicable project loan.
The Partnership's financial condition will be primarily dependent upon (i)
the ability of the Partnership to appropriately evaluate and make project loans,
(ii) the ability of the project borrowers to generate cash flow sufficient to
service project loans and other debt obligations, (iii) the performance of the
temporary investments, (iv) the performance of Enron and Enron affiliates of
their respective obligations, (v) the ability of the Program Manager to manage
the Partnership's affairs in accordance with the Management Agreement, (vi) the
ability of the
F-5
<PAGE> 151
Partnership to manage potential conflicts of interest as a result of the Program
Manager acting on behalf of the Partnership on one hand, and as an Enron
affiliate on the other, and (vii) the ability to mitigate the possible adverse
effects of expropriation, nationalization or confiscatory taxation, political,
economic or social instability or diplomatic developments in foreign countries
in which project loans may exist. For a more thorough discussion of risks
related to the Partnership, see "Risk Factors" included elsewhere in this
Registration Statement.
F-6
<PAGE> 152
APPENDIX A
NUMERICAL SUPPLEMENT
I. DIVERSITY SCORE
"Diversity Score" on any date of determination, means a score calculated by
summing each of the Regional Diversity Scores, calculated as follows:
(i) An "Average Par Amount" is calculated by dividing the Aggregate
Project Loan Balance by the number of Project Borrowers.
(ii) A "Relative Contribution" is calculated for each country by
adding the lesser of (A) (w) 1.0 if there is a Project Borrower in such
country, (x) 1.3 if there are two Project Borrowers in such country, (y)
1.5 if there are three Project Borrowers in such country, and (z) 1.6 if
there are four [or more] Project Borrowers in such country; and (B) the sum
of the Project Loan Balances pertaining to such country divided by the
Average Par Amount.
(iii) An "Aggregate Regional Equivalent Unit Score" is then calculated
for each of the six regions (i.e., Latin America, Central Asia, Asia
Pacific, Africa and the Middle East, Eastern Europe and the Caribbean) by
summing the Relative Contributions for each country in the region; provided
that for purposes of calculating the Diversity Score, any country whose
unguaranteed, unsecured and otherwise unsupported long-term sovereign debt
obligations have a Moody's Rating of at least Baa3 will be treated as a
separate region.
(iv) A "Regional Diversity Score" is then established for each region
(other than Latin America if there is more than one Latin American country
represented in the portfolio) by reference to Table 4 hereto for the
related Aggregate Regional Equivalent Unit Score. If the Aggregate Regional
Equivalent Unit Score falls between any two scores shown in such table,
then the Regional Diversity Score will be interpolated from the two
Diversity Scores in such table.
(v) If there are Project Loans of more than one Project Borrower
located in a Latin American country, the Regional Diversity Score for Latin
America is calculated under the following formula:
Latin America Regional Diversity Score = ((unadjusted Regional Diversity
Score minus 1) divided by 2) + 1
where the unadjusted Regional Diversity Score is established by
reference to Table 4 for the related Aggregate Regional Equivalent Unit
Score with respect to Latin America.
II. TIP DIVERSITY SCORE
"TIP Diversity Score" on any date of determination, means a score
calculated by summing up the Industry Diversity Scores. An Industry Diversity
Score is calculated for underlying assets that consist of Temporary Investments
described under clause (c) of the Uncommitted TIP Investment Policies or clause
(c) of the Committed TIP Investment Policies. The Industry Diversity Score is
calculated as follows:
(i) For purposes of calculating the TIP Diversity Score, any borrowers
and issuers affiliated with one another will be considered one borrower or
issuer.
(ii) An "Issuer Par Amount" is calculated for each issuer represented
in the underlying assets by summing the par amounts of all underlying
assets issued by that issuer or an affiliate of that issuer.
(iii) An "Average Par Amount" is calculated by summing the Issuer Par
Amounts and dividing by the sum of the number of issuers.
<PAGE> 153
(iv) An "Equivalent Unit Score" is calculated for each issuer by
taking the lesser of (A) one and (B) the Issuer Par Amount for such issuer
divided by the Average Par Amount.
(v) An "Aggregate Industry Equivalent Unit Score" is then calculated
for each Moody's Industry, by summing the Equivalent Unit Scores for each
issuer in the industry.
(vi) An "Industry Diversity Score" is then established by reference to
Table A below for the related Aggregate Industry Equivalent Unit Score;
provided, that if any Aggregate Industry Equivalent Unit Score falls
between any two scores appearing on such table, then the applicable
Industry Diversity Score will be the lower of the two Industry Diversity
Scores in such Table.
<PAGE> 154
TABLE A: DIVERSITY AND TIP DIVERSITY SCORE TABLE
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE AGGREGATE AGGREGATE
REGIONAL/ REGIONAL/ REGIONAL/ REGIONAL/ REGIONAL/ REGIONAL/ REGIONAL/ REGIONAL/
INDUSTRY INDUSTRY INDUSTRY INDUSTRY INDUSTRY INDUSTRY INDUSTRY INDUSTRY
EQUIVALENT DIVERSITY EQUIVALENT DIVERSITY EQUIVALENT DIVERSITY EQUIVALENT DIVERSITY
UNIT SCORE SCORE UNIT SCORE SCORE UNIT SCORE SCORE UNIT SCORE SCORE
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0000 0.0000 5.0500 2.7000 10.1500 4.0200 15.2500 4.5300
0.0500 0.1000 5.1500 2.7333 10.2500 4.0300 15.3500 4.5400
0.1500 0.2000 5.2500 2.7667 10.3500 4.0400 15.4500 4.5500
0.2500 0.3000 5.3500 2.8000 10.4500 4.0500 15.5500 4.5600
0.3500 0.4000 5.4500 2.8333 10.5500 4.0600 15.6500 4.5700
0.4500 0.5000 5.5500 2.8667 10.6500 4.0700 15.7500 4.5800
0.5500 0.6000 5.6500 2.9000 10.7500 4.0800 15.8500 4.5900
0.6500 0.7000 5.7500 2.9333 10.8500 4.0900 15.9500 4.6000
0.7500 0.8000 5.8500 2.9667 10.9500 4.1000 16.0500 4.6100
0.8500 0.9000 5.9500 3.0000 11.0500 4.1100 16.1500 4.6200
0.9500 1.0000 6.0500 3.0250 11.1500 4.1200 16.2500 4.6300
1.0500 1.0500 6.1500 3.0500 11.2500 4.1300 16.3500 4.6400
1.1500 1.1000 6.2500 3.0750 11.3500 4.1400 16.4500 4.6500
1.2500 1.1500 6.3500 3.1000 11.4500 4.1500 16.5500 4.6600
1.3500 1.2000 6.4500 3.1250 11.5500 4.1600 16.6500 4.6700
1.4500 1.2500 6.5500 3.1500 11.6500 4.1700 16.7500 4.6800
1.5500 1.3000 6.6500 3.1750 11.7500 4.1800 16.8500 4.6900
1.6500 1.3500 6.7500 3.2000 11.8500 4.1900 16.9500 4.7000
1.7500 1.4000 6.8500 3.2250 11.9500 4.2000 17.0500 4.7100
1.8500 1.4500 6.9500 3.2500 12.0500 4.2100 17.1500 4.7200
1.9500 1.5000 7.0500 3.2750 12.1500 4.2200 17.2500 4.7300
2.0500 1.5500 7.1500 3.3000 12.2500 4.2300 17.3500 4.7400
2.1500 1.6000 7.2500 3.3250 12.3500 4.2400 17.4500 4.7500
2.2500 1.6500 7.3500 3.3500 12.4500 4.2500 17.5500 4.7600
2.3500 1.7000 7.4500 3.3750 12.5500 4.2600 17.6500 4.7700
2.4500 1.7500 7.5500 3.4000 12.6500 4.2700 17.7500 4.7800
2.5500 1.8000 7.6500 3.4250 12.7500 4.2800 17.8500 4.7900
2.6500 1.8500 7.7500 3.4500 12.8500 4.2900 17.9500 4.8000
2.7500 1.9000 7.8500 3.4750 12.9500 4.3000 18.0500 4.8100
2.8500 1.9500 7.9500 3.5000 13.0500 4.3100 18.1500 4.8200
2.9500 2.0000 8.0500 3.5250 13.1500 4.3200 18.2500 4.8300
3.0500 2.0333 8.1500 3.5500 13.2500 4.3300 18.3500 4.8400
3.1500 2.0667 8.2500 3.5750 13.3500 4.3400 18.4500 4.8500
3.2500 2.1000 8.3500 3.6000 13.4500 4.3500 18.5500 4.8600
3.3500 2.1333 8.4500 3.6250 13.5500 4.3600 18.6500 4.8700
3.4500 2.1667 8.5500 3.6500 13.6500 4.3700 18.7500 4.8800
3.5500 2.2000 8.6500 3.6750 13.7500 4.3800 18.8500 4.8900
3.6500 2.2333 8.7500 3.7000 13.8500 4.3900 18.9500 4.9000
3.7500 2.2667 8.8500 3.7250 13.9500 4.4000 19.0500 4.9100
3.8500 2.3000 8.9500 3.7500 14.0500 4.4100 19.1500 4.9200
3.9500 2.3333 9.0500 3.7750 14.1500 4.4200 19.2500 4.9300
4.0500 2.3667 9.1500 3.8000 14.2500 4.4300 19.3500 4.9400
4.1500 2.4000 9.2500 3.8250 14.3500 4.4000 19.4500 4.9500
4.2500 2.4333 9.3500 3.8500 14.4500 4.4500 19.5500 4.9600
4.3500 2.4667 9.4500 3.8750 14.5500 4.4600 19.6500 4.9700
4.4500 2.5000 9.5500 3.9000 14.6500 4.4700 19.7500 4.9800
4.5500 2.5333 9.6500 3.9250 14.7500 4.4800 19.8500 4.9900
4.6500 2.5667 9.7500 3.9500 14.8500 4.4900 19.9500 5.0000
4.7500 2.6000 9.8500 3.9750 14.9500 4.5000
4.8500 2.6333 9.9500 4.0000 15.0500 4.5100
4.9500 2.6667 10.0500 4.0100 15.1500 4.5200
</TABLE>
<PAGE> 155
III. HYPOTHETICAL ANALYSIS OF MOODY'S CREDIT SUPPORT TEST
The following is an analysis of the Moody's Credit Support Tests based upon
a hypothetical portfolio. The actual portfolio of the Issuer will differ from
the hypothetical characteristics and performance used in preparing the analysis.
Changes in the assumptions may have a material impact on the information set
forth in the analysis. No representation is made that the results indicated
herein will be achieved.
<TABLE>
<S> <C>
Moody's Information
Temporary Investment Portfolio:
Weighted Average Moody's Rating of Uncommitted TIP
Investments...........................................
TIP Diversity Score....................................
Project Loan Portfolio:
Weighted Average Moody's Rating of Project Loan
Portfolio.............................................
Project Loan Portfolio Diversity Score.................
Issuer Balances (in millions of $)
Aggregate Project Loan Balance............................ $
Uncommitted TIP Account Balance...........................
Committed TIP Account Balance.............................
Class A Senior Note Balance...............................
Class B Senior Subordinated Note Balance..................
Class I Interests.........................................
Backup Facility Balance...................................
Liquidity Facility Commitment.............................
Unused Enron Commitment...................................
Excess Spread Account Balance.............................
Actual Net Interest Margin................................ %
Calculation of Required Senior Credit Support Percentage
Required Senior TIP Credit Support Percentage from Table
1...................................................... %
Required Senior Project Credit Support Percentage from
Table 2................................................
Base Percentage from Table 2......................... %
Moody's Assumed Net Interest Margin from Table 3..... %
Actual Net Interest Margin........................... %
Difference........................................... %
Moody's Net Interest Margin Adjustment Factor........
REQUIRED SENIOR PROJECT CREDIT SUPPORT PERCENTAGE........... %
Calculation of Actual Senior Credit Support Percentage
Total Assets divided by Net Senior Debt...................
Total Assets..............................................
Aggregate Project Loan Balance....................... $
Uncommitted TIP Account Balance......................
Total Assets.........................................
Net Senior Debt...........................................
Liquidity Facility Commitment........................
Backup Facility Balance..............................
Class A Note Balance.................................
Less Unused Enron Commitments............................
Less Excess Spread Account Balance.......................
Net Senior Debt......................................
ACTUAL SENIOR CREDIT SUPPORT PERCENTAGE..................... %
</TABLE>
Actual Senior Credit Support Percentage is greater than Required Senior
Credit Support Percentage; therefore, Issuer passes the Moody's Credit Support
Test
<PAGE> 156
IV. HYPOTHETICAL ANALYSIS OF COLLATERAL COVERAGE RATIOS
The following is a sample analysis of the Collateral Coverage Ratios based
upon a hypothetical portfolio of Project Loans. The actual characteristics and
performance of the Issuer will differ from the hypothetical characteristics and
performance used in preparing the analysis. Changes in the assumptions may have
a material impact on the information set forth in the analysis. No
representation is made that the characteristics and performance indicated herein
will be achieved.
COLLATERAL COVERAGE RATIOS
<TABLE>
<S> <C>
Issuer Balances
Aggregate Project Loan Balance on the Investment
Termination Date....................................... $
Defaulted Project Loan Balance............................
Uncommitted TIP Account Balance...........................
Committed TIP Account Balance.............................
Class A Senior Note Balance...............................
Class B Senior Subordinated Note Balance..................
Class C Notes Issued with initial funding of a Project
Loan...................................................
Class I Interests Issued..................................
Class II Interests Issued on or prior to the Closing
Date...................................................
GP Interests Issued.......................................
Backup Facility Balance...................................
Liquidity Facility Commitment.............................
Unused Enron Commitment...................................
Excess Spread Account Balance.............................
All Hedging Proceeds......................................
Aggregate amount of all Commitments terminated, canceled
expired, or reduced....................................
Sum of all Note Redemption Amounts........................
Deferred Issuance Costs...................................
Class B Premium...........................................
Principal Amount of Class B and Class C Notes redeemed
with Class A Notes, Drawings under the Backup Facility,
or amounts credited to the Uncommitted TIP Account.....
Calculation of Senior Overcollateralization Ratio
Project Loan Balance -- Non-defaulted Project Loans....... $
Project Loan Balance -- Defaulted Project Loans...........
Uncommitted TIP Account Balance...........................
--------
Total.....................................................
Divided by
Aggregate Outstanding Principal of Class A Senior Notes.....
Backup Facility Balance.....................................
--------
Total.....................................................
</TABLE>
<PAGE> 157
<TABLE>
<S> <C>
SENIOR OVERCOLLATERALIZATION RATIO.......................... %
Calculation of Target Senior Overcollateralization Ratio
Calculated Asset Balance
Aggregate Project Loan Balance on the Investment
Termination Date.................................. $
Uncommitted TIP Account Balance...................
Committed TIP Account Balance relating to any
terminated, canceled, expired or reduced
Commitment........................................
Less Aggregate amount of all Commitments terminated,
canceled, expired or reduced........................
Less Sum of All Note Redemption Amounts..................
--------
Calculated Asset Balance..........................
Divided by
Calculated Senior Debt Balance
Calculated Asset Balance..........................
Less All Hedging Proceeds................................
Less Principal of Class B Notes issued on Closing Date...
Less Principal of Class C Notes issued with initial
funding of a Project Loan..............................
Less Class I Interests Issued............................
Less GP Interests Issued.................................
Less Class II Interests Issued on Closing Date...........
Plus Deferred Issuance Costs.............................
Plus Principal Amount of Class B (including Premium) and
Class C Notes redeemed with Class A Notes, Drawings
under the Backup Facility or with amounts credited
to the Uncommitted TIP Account......................
--------
Calculated Senior Debt Balance....................
TARGET SENIOR OVERCOLLATERALIZATION RATIO................. %
Calculation of Total Overcollateralization Ratio
Project Loan Balance -- Non-defaulted Project Loans....... $
Project Loan Balance -- Defaulted Project Loans...........
Uncommitted TIP Account Balance...........................
Total.....................................................
--------
Divided by
Aggregate Outstanding Principal of the Notes..............
Backup Facility Balance...................................
--------
Total.....................................................
TOTAL OVERCOLLATERALIZATION RATIO.........................
</TABLE>
<PAGE> 158
<TABLE>
<S> <C>
Calculation of Target Total Overcollateralization Ratio
Calculated Asset Balance........................................................................... $
Divided by
Calculated Total Debt Balance
Calculated Asset Balance................................................................... $
Less Hedging Proceeds.............................................................................
Less Principal of Class C Notes issued with initial funding of a Project Loan.....................
Less Class I Interests Issued.....................................................................
Less GP Interests Issued..........................................................................
Less Class II Interests Issued on Closing Date....................................................
Plus Deferred Issuance Costs......................................................................
Plus Class B Premium..............................................................................
Plus Principal Amount of Class C Notes redeemed with Class A Notes, Drawings under the Backup
Facility or with amounts credited to the Uncommitted TIP Account................................
----------
Calculated Total Debt Balance..............................................................
TARGET TOTAL OVERCOLLATERALIZATION RATIO........................................................... %
</TABLE>
<PAGE> 159
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE ISSUER, THE CO-ISSUER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR
THE CO-ISSUER SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- ------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.........................................
Risk Factors....................................
Use of Proceeds.................................
Capitalization..................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operation.....................................
Business of the Issuer..........................
Project Financing in the Emerging Markets.......
Enron's International Operations and
Development...................................
Eligible Projects and Qualifying Criteria.......
Enron Support...................................
Temporary Investments...........................
Interest Rate Hedging Arrangements..............
Management......................................
Enron...........................................
Certain Relationships and Related
Transactions..................................
Description of the Notes........................
Liquidity Facility and Backup Facility..........
Maturity, Prepayment and Yield Considerations...
Security for the Notes..........................
Description of Principal Documents..............
Rating of the Notes.............................
The Partnership Interests.......................
Tax Considerations..............................
Certain ERISA Considerations....................
Underwriting....................................
Listing and General Information.................
Legal Matters...................................
Experts.........................................
Available Information...........................
Glossary........................................
Financial Statements............................ F-1
Appendix........................................ A-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PRELIMINARY PROSPECTUS
ENRON INTERNATIONAL CPO, L.P.
ENRON INTERNATIONAL CPO, INC.
$
% CLASS A SENIOR NOTES DUE 2018
$
% CLASS B SENIOR SUBORDINATED
NOTES DUE 2018
CHASE SECURITIES INC./LEHMAN BROTHERS
, 1998
<PAGE> 160
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrants in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
SEC Registration Fee........................................ $236,000
NASD Filing Fee............................................. 30,500
Blue Sky Filing Fees and Expenses........................... *
Printing and Engraving Costs................................ *
Transfer Agent Fees......................................... *
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Miscellaneous............................................... *
--------
Total............................................. $
========
</TABLE>
All amounts are estimated except for the SEC Registration Fee and the NASD
filing fee.
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Section of the Prospectus entitled " " is incorporated
herein by reference.
The Partnership Agreement of the Issuer will provide that the Issuer will
indemnify the General Partner and the members of the Board of Directors and the
officers of the General Partner from liabilities arising in the course of such
persons' service to the General Partner, provided that the indemnitee acted in
good faith. Such liabilities include all losses, claims, damages, expenses
(including, without limitation, legal fees and expenses) judgments, fines,
penalties, interest, settlements and other amounts, provided that with respect
to any criminal proceeding, the indemnitee had no reasonable cause to believe
its conduct was unlawful. The officers and directors of the General Partner are,
in certain circumstances, protected by and covered under the directors' and
officers' liability insurance policy coverage of Enron for potential liability
under such indemnification. The holders of limited partnership interests will
not be personally liable for such indemnification.
Article XII of the Certificate of Incorporation of the Co-Issuer contains
the following provisions relating to indemnification of directors and officers:
"4. Each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the
legal representative, is or was a director of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide
prior to such amendment), against all expense, liability
II-1
<PAGE> 161
and loss (including attorney's fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that except
as provided in paragraph 5 hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law requires,
the payment of such expenses incurred by a director or officer in his or
her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or
officer, including without limitation, service to an employee benefit plan)
in advance of the final disposition of a proceeding, shall be made only
upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to
be indemnified under this Section or otherwise. The Corporation may, by
action of its Board of Directors, provide indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
5. If a claim under paragraph 4 of this Article XII is not paid in
full by the Corporation within 30 days after a written claim has been
received by the Corporation, the claimant may any time thereafter bring
suit 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 be
paid 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 defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation
Law 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 of Directors,
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 not
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the claimant has not met such applicable standard of conduct, shall be
a defense to the action or create a presumption that the claimant has not
met the applicable standard of conduct.
6. The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in
this Article shall be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
7. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law."
Section 145 of the Delaware General Corporation Law gives corporations the
power to indemnify officers and directors under certain circumstances.
II-2
<PAGE> 162
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In July 1998, Enron CPO Holdings Intermediate, L.P. acquired a 99% limited
partnership interest in the Issuer for aggregate consideration of $9,990.
In July 1998, Enron CPO Partners II, Inc. acquired a 1% general partnership
interest in the Issuer for aggregate consideration of $10.
In August 1998, the Issuer acquired all of the 1,000 shares of common stock
of the Co-Issuer for aggregate consideration of $1,000.
All such sales of unregistered securities were transactions not involving a
public offering exempt from registration under Section 4(2) of the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Certificate of Limited Partnership of the Issuer dated
July 30, 1998.
3.2* -- Amended and Restated Agreement of Limited Partnership
dated , 1998.
3.3 -- Articles of Incorporation of the Co-Issuer dated July 30,
1998.
3.4* -- Bylaws of the Co-Issuer.
4.1 -- Form of Indenture among the Issuers and the Trustee.
4.2* -- Form of Class A Senior Note.
4.3* -- Form of Class B Senior Subordinated Note.
4.4 -- Form of Common Agreement among the Issuers, Chase Bank of
Texas, National Association, as Trustee, ,
as Liquidity Facility Agent, the Backup Facility Agents
from time to time party thereto, and Chase Bank of Texas,
National Association, as Collateral Agent.
4.5 -- Form of Security Agreement among the Issuer and Chase
Bank of Texas, National Association as Collateral Agent.
4.6 -- Form of Collateral Agency and Intercreditor Agreement
among the Issuers, Chase Bank of Texas, National
Association, as Trustee, , as Liquidity
Facility Agent, the Backup Facility Agents from time to
time party thereto, and Chase Bank of Texas, National
Association, as Collateral Agent.
5.1* -- Opinion and consent of Milbank, Tweed, Hadley & McCloy,
counsel to the Issuers.
8.1* -- Opinion of Milbank, Tweed, Hadley & McCloy re Tax
Matters.
10.1* -- Form of Liquidity Facility Loan Agreement among the
Issuer and the Liquidity Lenders named therein.
10.2 -- Form of Management Agreement among the Issuer, the
Co-Issuer, the Program Manager and the Backup Program
Managers
10.3 -- Form of Enron Support Agreement between the Issuer and
Enron Corp.
23.1 -- Consent of Arthur Andersen LLP.
</TABLE>
II-3
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.2* -- Consent of counsel (included in their opinions filed as
exhibits 5.1 and 8.1).
25* -- Statement of Eligibility and Qualification on Form T-1
for Indenture.
</TABLE>
- ---------------
* To be filed by amendment. All other exhibits have been filed herewith.
(b) Financial Statement Schedules. All schedules have been omitted and are
either inapplicable or not required under the instructions contained in
Regulation S-X.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
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 Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants 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 Registrants will, unless in the opinion of its counsel that
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.
(b) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrants have duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Houston, State of
Texas, on this seventh day of August, 1998.
ENRON INTERNATIONAL CPO, L.P.
By: Enron CPO Holdings, Inc.,
its general partner
By: /s/ CHERYL I. LIPSHUTZ
----------------------------------
Name: Cheryl I. Lipshutz
Title: Director, Chief
Executive Officer
and President
ENRON INTERNATIONAL CPO, INC.
By: /s/ CHERYL I. LIPSHUTZ
----------------------------------
Name: Cheryl I. Lipshutz
Title: Director, Chief
Executive Officer
and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert G. Gay and Glenn E. Matthys and each or
any of them, as his true and lawful attorney-in-fact and agent, with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto, which
amendments may make such changes in this Registration Statement as such agent
deems appropriate, and to file any new registration statement (in any post
effective amendment thereto) which registers additional securities of the same
class and for the same offering as this Registration Statement in accordance
with Rule 462(b) under the Securities Act (each, a "462(b) registration
statement"), and the Registrant and each such person hereby appoints each such
Agent as attorney-in-fact to execute in the name and on behalf of the Registrant
and each such person, individually and in each capacity stated below, any such
amendments to this registration statement and any such 462(b) Registration
Statements, and other documents in connection therewith, with the Commission.
II-5
<PAGE> 165
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES V. DERRICK, JR. Director, August 7, 1998
- ----------------------------------------------------- Enron CPO Holdings, Inc.,
James V. Derrick, Jr. general partner of the registrant
Director,
Enron International CPO, Inc.,
co-registrant
/s/ CHERYL I. LIPSHUTZ Director, Chief Executive Officer and August 7, 1998
- ----------------------------------------------------- President,
Cheryl I. Lipshutz Enron CPO Holdings, Inc.
(principal executive officer
of the registrant)
Director, Chief Executive Officer and
President,
Enron International CPO, Inc.
(principal executive officer
of the co-registrant)
/s/ JOSEPH M. DEFFNER Vice President and Treasurer, August 7, 1998
- ----------------------------------------------------- Enron CPO Holdings, Inc.
Joseph M. Deffner (principal financial and accounting
officer of the registrant)
Vice President and Treasurer,
Enron International CPO, Inc.
(principal financial and accounting
officer of the co-registrant)
</TABLE>
II-6
<PAGE> 166
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Certificate of Limited Partnership of the Issuer dated
July 30, 1998.
3.2* -- Amended and Restated Agreement of Limited Partnership
dated , 1998.
3.3 -- Articles of Incorporation of the Co-Issuer dated July 30,
1998.
3.4* -- Bylaws of the Co-Issuer.
4.1 -- Form of Indenture among the Issuers and the Trustee.
4.2* -- Form of Class A Senior Note.
4.3* -- Form of Class B Senior Subordinated Note.
4.4 -- Form of Common Agreement among the Issuers, Chase Bank of
Texas, National Association, as Trustee, ,
as Liquidity Facility Agent, the Backup Facility Agents
from time to time party thereto, and Chase Bank of Texas,
National Association, as Collateral Agent.
4.5 -- Form of Security Agreement among the Issuer and Chase
Bank of Texas, National Association as Collateral Agent.
4.6 -- Form of Collateral Agency and Intercreditor Agreement
among the Issuers, Chase Bank of Texas, National
Association, as Trustee, , as Liquidity
Facility Agent, the Backup Facility Agents from time to
time party thereto, and Chase Bank of Texas, National
Association, as Collateral Agent.
5.1* -- Opinion and consent of Milbank, Tweed, Hadley & McCloy,
counsel to the Issuers.
8.1* -- Opinion of Milbank, Tweed, Hadley & McCloy re Tax
Matters.
10.1* -- Form of Liquidity Facility Loan Agreement among the
Issuer and the Liquidity Lenders named therein.
10.2 -- Form of Management Agreement among the Issuer, the
Co-Issuer, the Program Manager and the Backup Program
Managers
10.3 -- Form of Enron Support Agreement between the Issuer and
Enron Corp.
23.1 -- Consent of Arthur Andersen LLP.
23.2* -- Consent of counsel (included in their opinions filed as
exhibits 5.1 and 8.1).
25* -- Statement of Eligibility and Qualification on Form T-1
for Indenture.
</TABLE>
- ---------------
* To be filed by amendment. All other exhibits have been filed herewith.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
ENRON INTERNATIONAL CPO, L.P.
This Certificate of Limited Partnership dated July 30, 1998, has been
duly executed and is filed pursuant to Section 17-201 of the Delaware Revised
Uniform Limited Partnership Act (the "Act") to form a limited partnership under
the Act.
1. NAME. The name of the limited partnership is Enron
International CPO, L.P.
2. REGISTERED OFFICE; REGISTERED AGENT. The address of the
registered office required to be maintained by Section 17-104 of the Act is:
The Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The name and the address of the registered agent for service of process
required to be maintained by Section 17-104 of the Act are:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
3. GENERAL PARTNER. The name and the business, residence, or
mailing address of the general partner is:
Enron CPO Holdings, Inc.
1400 Smith Street
Houston, Texas 77002
EXECUTED as of the date written first above.
ENRON CPO HOLDINGS, INC.
General Partner
By: /s/ PEGGY B. MENCHACA
----------------------------------
Name: Peggy B. Menchaca
--------------------------------
Title: Vice President and Secretary
-------------------------------
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
ENRON INTERNATIONAL CPO, INC.
****
ARTICLE I.
The name of the Corporation is Enron International CPO, Inc.
ARTICLE II.
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.
The name and address of its registered agent is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware.
ARTICLE III.
(a) The purpose and nature of the business to be conducted by the
Corporation shall be to engage exclusively in the following business and
financial activities: (1) to issue, in conjunction with Enron International
CPO, L.P., the sole stockholder of the Corporation (the "Sole Stockholder"),
various promissory notes of the Corporation, to enter into and perform a
management agreement providing for the management of certain business affairs
of the Corporation, and to enter into and perform various financing and
security agreements and other contracts related to such promissory notes, (2)
subject to the limitations set forth herein, to engage in any other limited
business or activity that now or hereafter may be necessary or incidental to
accomplish the purposes set forth in (1) above (including, without limitation,
the investment of funds) and that is not forbidden by the law of the
jurisdiction in which the Corporation engages in that business.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law that otherwise so empowers the
Corporation, the Corporation shall not take any action, including the
following, if the effect of any such action would be to adversely affect the
performance of the Corporation of the activities set forth in Article III(a)
above: (1) dissolve or liquidate the Corporation, in whole or in part; (2)
merge or consolidate the Corporation with any other enterprise; (3) cause the
Corporation to engage in any business activity other than as permitted by this
Article III or (4) amend this Certificate of Incorporation to alter in any
manner or delete this Article III.
(c) The Corporation shall not, without the consent of the Sole
Stockholder and the affirmative vote of all of the members of the Board of
Directors, take any of the actions described in Article III (b) or institute
any proceedings to adjudicate the Corporation as bankrupt or insolvent, consent
to the institution of bankruptcy or insolvency proceedings against the
Corporation, file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to bankruptcy, and shall not
-1-
<PAGE> 2
solicit others to take any such action against the Corporation, consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Corporation or a substantial part of its property or
admit its inability to pay its debts generally as they become due or authorize
any of the foregoing to be done or taken on behalf of the Corporation.
ARTICLE IV.
1. The total number of shares of stock which the Corporation
shall have authority to issue is ten thousand (10,000) shares, all of which are
to be of the par value of $1.00 each and all of one class and all to be
designated as the Common Stock of the Corporation.
2. The shares of Common Stock may be issued from time to time for
such consideration, no less than the par value thereof and upon such terms as
from time to time shall be determined by the Board of Directors.
ARTICLE V.
The minimum amount of capital with which the Corporation shall
commence business is one thousand dollars ($1,000).
ARTICLE VI.
The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ------------------
Geneva H. Hiroms 1400 Smith Street, Suite 4802
Houston, Texas 77002
ARTICLE VII.
The Corporation shall have perpetual existence.
ARTICLE VIII.
The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever, but shall be exempt from
corporate liability.
ARTICLE IX.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(a) To make, alter, amend and rescind the Bylaws of the
Corporation.
- 2 -
<PAGE> 3
(b) To set apart out of any of the available funds of the
Corporation such reserves for proper purposes as the Board of Directors may
deem expedient, and to abolish any such reserves.
(c) To determine the use and distribution of any surplus and net
profits.
(d) To authorize and cause to be executed and delivered, without
limit as to amount, mortgages and instruments of pledge of, and other
instruments creating liens upon, the real and personal property of the
Corporation.
(e) From time to time, to determine whether and to what extent and
at what times and places and under what conditions and regulations the accounts
and books of the Corporation (other than the stock ledger) or any of them,
shall be open to the inspection of the stockholders, and no stockholder shall
have any right to inspect any account or book or document of the Corporation,
except as conferred by statute, or authorized by the directors or by a
resolution of the stockholders.
(f) By resolution or resolutions, passed by a majority of the
entire Board of Directors, to designate one or more committees, each committee
to consist of two or more of the directors of the Corporation, which, to the
extent provided to said resolution or resolutions or in the Bylaws of the
Corporation, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be stated in the Bylaws of the Corporation or as may be determined
from time to time by resolution adopted by the Board of Directors.
The Corporation may in its Bylaws confer powers and authority upon its
Board of Directors in addition to the foregoing and in addition to the powers
and authorities expressly conferred upon it by statute.
ARTICLE X.
No contract or other transaction between the Corporation and any other
corporation and no act of the Corporation shall in any way be affected or
invalidated by the fact that any of the directors of the Corporation are
pecuniarily or otherwise interested in, or are directors of such other
corporation.
ARTICLE XI.
The stockholders and Board of Directors shall have power, if the
Bylaws so provide, to hold their meetings and to keep the books of the
Corporation (except such as are required by the laws of Delaware to be kept in
Delaware) and documents and papers of the Corporation outside the State of
Delaware and have one or more offices within or without the State of Delaware
at such places as may be designated from time to time by the Board of
Directors.
- 3 -
<PAGE> 4
ARTICLE XII.
1. The number of directors of the Corporation shall be specified
in the Bylaws and such number may be increased or decreased from time to time
in such manner as may be prescribed in the Bylaws. The directors need not be
stockholders.
2. In case of an increase in the number of directors, the
additional directors may be elected by the Board of Directors to hold office
until the next annual meeting of the stockholders and until their successors
are elected and qualified. In case of vacancies in the Board of Directors, a
majority of the remaining directors may elect directors to fill such vacancies.
3. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (I) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of laws, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
4. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in paragraph 5 hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
- 4 -
<PAGE> 5
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
5. If a claim under paragraph 4 of this Article XII is not paid
in full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
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 be paid 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 defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law 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 of Directors, 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 standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
6. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
7. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
ARTICLE XIII.
Except as set forth in Article III, the Corporation reserves the right
to amend, alter, change or repeal any provision contained in this Certificate
of Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the sole incorporator for the purpose of
forming a corporation in pursuance of an Act of the Legislature of the State of
Delaware entitled "An Act Providing A General Corporation Law" (approved
- 5 -
<PAGE> 6
March 10, 1899) and the acts amendatory thereof and supplemental thereto, do
make and file this Certificate of Incorporation, hereby declaring and certifying
that the facts herein stated are true, and accordingly hereunto have set my hand
this 30th day of July, 1998.
/s/ GENEVA H. HIROMS
____________________________________
Geneva H. Hiroms
Sole Incorporator
- 6 -
<PAGE> 1
EXHIBIT 4.1
Draft
8/7/98
==============================================================================
ENRON INTERNATIONAL CPO, L.P.,
Issuer
ENRON INTERNATIONAL CPO, INC.,
Co-Issuer
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
not in its individual capacity (except as expressly set
forth herein) but solely as Trustee
INDENTURE
Dated as of _________, 1998
==============================================================================
<PAGE> 2
Enron International CPO, L.P.
Enron International CPO, Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318, inclusive, of the
Trust Indenture Act of 1939;
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C>
Section 310(a)(1) 6.10
(a)(2) 6.10
(a)(3) Not Applicable
(a)(4) Not Applicable
(a)(5) 6.10
(b) 6.9, 6.11
Section 311(a) 6.16
(b) 6.16
Section 312(a) 10.6, 10.7
(b) 10.7
(c) 10.7
Section 313(a) 10.2(a)
(b) 10.2(a)
(c) 10.2(a)
(d) 10.2(b)
Section 314(a) 10.3
(a)(4) 7.5
(b) 1.4
(c)(1) 1.4
(c)(2) 1.4
(c)(3) Not Applicable
(d) 1.4
(e) 1.4
Section 315(a) 6.1
(b) 6.2
(c) 6.1
(d) 6.1
(e) 5.13
Section 316(a)(1)(A) 5.1
(a)(1)(B) 5.12
(a)(2) Not Applicable
(b) 5.6
(c) 2.7
Section 317(a)(1) 5.3
(a)(2) 5.2
(b) 7.3
Section 318(a) 1.3
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS....................................................................................2
Section 1.1. Definitions......................................................................2
Section 1.2. Rules of Interpretation..........................................................2
Section 1.3. Conflict with Trust Indenture Act................................................2
Section 1.4. Compliance with Certificates and Opinions........................................2
ARTICLE 2. THE NOTES......................................................................................3
Section 2.1. Forms Generally..................................................................3
Section 2.2. Authorized Amount; Class A Notes and Class B Notes Issuable in
Series; Note Interest Rate; Stated Maturity; Denominations.....................4
Section 2.3. Execution, Authentication, Delivery and Dating...................................5
Section 2.4. Registration, Transfer and Exchange of Notes; Dealings with Depositary...........6
Section 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Notes.............................10
Section 2.6. Payment of Principal and Interest; Rights Preserved.............................11
Section 2.7. Persons Deemed Owners...........................................................14
Section 2.8. Cancellation....................................................................14
Section 2.9. New Issuances; Class C Issuances................................................14
Section 2.10 Temporary Notes.................................................................17
Section 2.11. Parity of Notes within each Class; Ranking......................................17
ARTICLE 3. CONDITIONS PRECEDENT..........................................................................17
Section 3.1. Conditions to the Issuance of Notes on the Closing Date.........................17
Section 3.2. Conditions to the Issuance of Class A Notes After the Closing Date..............18
Section 3.3. Conditions to the Issuance of Class B Notes After the Closing Date..............18
Section 3.4. Conditions to the Issuance of Class C Notes After Closing Date..................18
ARTICLE 4. SATISFACTION AND DISCHARGE; DEFEASANCE........................................................19
Section 4.1. Satisfaction and Discharge of Indenture.........................................19
Section 4.2. Application of Trust Money......................................................20
Section 4.3. Repayment of Monies Held by Paying Agent........................................20
Section 4.4. Defeasance of Notes.............................................................20
Section 4.5. Conditions to Defeasance........................................................21
Section 4.6. Indemnification for U.S. Government Obligations.................................22
Section 4.7. Reinstatement...................................................................22
ARTICLE 5. EVENTS OF DEFAULT; REMEDIES...................................................................23
Section 5.1. Events of Default...............................................................23
Section 5.2. Collection of Indebtedness and Suits for Enforcement by Trustee.................24
Section 5.3. Remedies....................................................................... 25
Section 5.4. Trustee May Enforce Claims Without Possession of Notes..........................26
Section 5.5. Application of Money Collected..................................................26
Section 5.6. Limitation on Suits.............................................................26
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 5.7. Unconditional Rights of Noteholders to Receive Principal and Interest...........27
Section 5.8. Restoration of Rights and Remedies..............................................27
Section 5.9. Rights and Remedies Cumulative..................................................27
Section 5.10. Delay or Omission Not Waiver...................................................28
Section 5.11. Control by Noteholders.........................................................28
Section 5.12. Waiver of Past Defaults........................................................28
Section 5.13. Undertaking for Costs..........................................................29
Section 5.14. Waiver of Stay or Extension Laws...............................................29
Section 5.15. Action on the Notes............................................................29
Section 5.16. Inconsistency with Common Agreement and Intercreditor Agreement
and the Security Agreement...................................................30
Section 5.17. Actions to be taken by the Trustee under Intercreditor Agreement...............30
ARTICLE 6. THE TRUSTEE...................................................................................30
Section 6.1. Certain Duties and Responsibilities.............................................30
Section 6.2. Notice of Default...............................................................32
Section 6.3. Certain Rights of Trustee.......................................................32
Section 6.4. Authenticating Agents...........................................................34
Section 6.5. Not Responsible for Recitals or Issuance of Notes...............................34
Section 6.6. May Hold Notes..................................................................34
Section 6.7. Money Held in Trust.............................................................35
Section 6.8. Compensation and Reimbursement..................................................35
Section 6.9. Disqualification; Conflicting Interests.........................................36
Section 6.10. Corporate Trustee Required; Eligibility........................................36
Section 6.11. Resignation and Removal; Appointment of Successor..............................36
Section 6.12. Acceptance of Appointment by Successor.........................................37
Section 6.13. Merger, Conversion, Consolidation or Succession to Business
of Trustee...................................................................38
Section 6.14. Representations and Warranties of Chase Texas..................................38
Section 6.15. Collateral Trust Provisions....................................................39
Section 6.16. Preferential Collection of Claims Against Issuer...............................39
ARTICLE 7. COVENANTS.....................................................................................39
Section 7.1. Payment of Principal and Interest...............................................39
Section 7.2. Maintenance of Office or Agency.................................................40
Section 7.3. Money for Note Payments to be Held in Trust.....................................40
Section 7.4. Listing.........................................................................42
Section 7.5. Statement by Officers as to Default.............................................42
Section 7.6. Other Covenants of the Issuers..................................................42
ARTICLE 8. SUPPLEMENTAL INDENTURES; AMENDMENTS TO OTHER
FINANCING DOCUMENTS.........................................................................43
Section 8.1. Supplemental Indentures Without Consent of Noteholders..........................43
Section 8.2. Supplemental Indentures With Consent of Noteholders.............................44
Section 8.3. Execution of Supplemental Indentures............................................46
Section 8.4. Effect of Supplemental Indentures...............................................46
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 8.5. Conformity with Trust Indenture Act.............................................46
Section 8.6. Reference in Notes to Supplemental Indentures...................................46
Section 8.7. Amendments, Modifications, Waivers, etc. to Other Financing Documents...........46
ARTICLE 9. REDEMPTION OF NOTES...........................................................................47
Section 9.1. Redemption at the Option of the Issuers; Election to Redeem.....................47
Section 9.2. Notice to Trustee of Optional Redemption........................................47
Section 9.3. Notice of Mandatory Redemption or Maturity by the Trustee.......................47
Section 9.4. Mandatory Redemption............................................................48
Section 9.5. Notice to Trustee of Mandatory Redemption.......................................48
Section 9.6. Notice of Mandatory Redemption or Maturity by the Trustee.......................48
Section 9.7. Notes Payable on Redemption Date................................................49
Section 9.8. Pro Rata Application............................................................49
ARTICLE 10. ACCOUNTS, ACCOUNTINGS AND RELEASES...........................................................50
Section 10.1. Note Payment Account; Payment on the Notes.....................................50
Section 10.2. Reports by Trustee.............................................................50
Section 10.3. Reports by Issuer..............................................................51
Section 10.4. Accountings....................................................................51
Section 10.5. Reports to Rating Agencies.....................................................52
Section 10.6. Issuers to Furnish Trustee Names and Addresses of Holders......................53
Section 10.7. Preservation of Information; Communication to Holders..........................53
ARTICLE 11. APPLICATION OF MONIES........................................................................53
Section 11.1. Trust Accounts.................................................................53
ARTICLE 12. NOTEHOLDERS' RELATIONS.......................................................................54
Section 12.1. Subordination..................................................................54
Section 12.2. Standard of Conduct............................................................55
Section 12.3. Right to List of Holders.......................................................55
ARTICLE 13. MISCELLANEOUS................................................................................55
Section 13.1. Form of Documents Delivered to Trustee.........................................55
Section 13.2. Acts of Noteholders............................................................56
Section 13.3. Notices, etc., to Trustee, the Issuers, the Program Manager and
the Rating Agencies..........................................................57
Section 13.4. Notices and Reports to Noteholders; Waiver.....................................58
Section 13.5. Effect of Headings and Table of Contents.......................................59
Section 13.6. Successors and Assigns.........................................................59
Section 13.7. Separability...................................................................59
Section 13.8. Benefits of Indenture..........................................................59
Section 13.9. Legal Holidays.................................................................59
Section 13.10. Governing Law.................................................................59
Section 13.11. Execution of other Transaction Documents; Conflicts...........................60
Section 13.12. Counterparts..................................................................60
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C>
Section 13.13. Incorporation of Certain Terms of the Common Agreement........................60
Section 13.14. Submission to Jurisdiction....................................................60
</TABLE>
EXHIBITS
Exhibit A Form of Class A Fixed Rate Senior Note
Exhibit B Form of Class B Fixed Rate Subordinated Note
Exhibit C Form of Class C Fixed Rate Subordinated Note
Exhibit D Form of Certificated Note
Exhibit E Form of Supplemental Indenture
Exhibit F Form of Tax Certification
Exhibit G Form of Assignment of Class C Notes
-iv-
<PAGE> 7
INDENTURE dated as of _________, 1998 among:
ENRON INTERNATIONAL CPO, L.P., a limited partnership organized and
existing under the laws of the State of Delaware (the "Issuer");
ENRON INTERNATIONAL CPO, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Co-Issuer", and together with the
Issuer, the "Issuers"); and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, not in its individual
capacity (except as expressly set forth herein) but solely as trustee (in such
capacity, the "Trustee" and in its individual capacity, "Chase Texas").
W I T N E S S E T H:
WHEREAS, the Issuers have duly authorized the creation of their (i) Class
A Senior Notes due 2018 (the "Class A Notes"), up to the Maximum Class A
Principal Amount to be issued in one or more series, with the tenor and the
amount to be set forth in the Supplemental Indenture relating to each Series,
(ii) $__________ Class B Senior Subordinated Notes due 2018 to be issued in
one or more series (the "Class B Notes") and (iii) Class C Subordinated Notes
due 2018 (the "Class C Notes" and together with the Class A Notes and the Class
B Notes, the "Notes") up to an aggregate principal amount of $___________;
WHEREAS, the Trustee, the Liquidity Facility Agent (acting on behalf of
itself and the Liquidity Lenders) and the Backup Facility Agent (acting on
behalf of itself and the Backup Lenders), the Collateral Agent and the Issuers
are entering into a Common Agreement dated as of the date hereof which sets
forth, among other things, (i) common covenants of the Issuers in favor of the
Class A Noteholders, the Class B Noteholders, the Class C Noteholders, the
Collateral Agent, the Trustee, the Liquidity Lenders, the Backup Lenders and the
Hedge Counterparties and (ii) common Events of Default;
WHEREAS, the Issuers are entering into a Security Agreement dated as of
the date hereof with Chase Texas, as collateral agent (the "Collateral Agent")
pursuant to which the Issuer will grant to the Collateral Agent for the benefit
of the Secured Parties, a first priority security interest in and to the
Collateral and which sets forth, among other things, provisions authorizing and
directing the establishment of certain accounts for the purpose of collecting
and distributing Collateral Proceeds and certain other accounts;
WHEREAS, the Issuers, the Representatives and the Collateral Agent are
entering into an Intercreditor Agreement dated as of the date hereof which sets
forth, among other things, certain intercreditor provisions, including the
method of voting and decision making for the Secured Parties, the arrangements
applicable to joint consultations and actions in respect of approval rights and
waivers and the limitations on rights of enforcement upon default; and
WHEREAS, the Issuers have duly authorized the execution and delivery of
this Indenture to provide for the issuance of the Notes and to provide for the
authentication and delivery thereof by the Trustee;
<PAGE> 8
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the covenants contained herein and in the
Common Agreement and the other Financing Documents and in consideration of the
purchases of the Notes by the Noteholders, it is mutually covenanted and agreed,
for the benefit of the parties hereto, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions.
For all purposes of this Indenture and any Supplemental
Indenture, except as otherwise expressly provided herein or in any Supplemental
Indenture hereto, or unless the context otherwise requires,
(a) capitalized terms used in this Indenture, its schedules and
exhibits have the meanings given in Appendix A to the Common Agreement;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein; and
(c) unless otherwise specified, section references are to the
applicable Sections in this Indenture.
Section 1.2. Rules of Interpretation.
Except as otherwise expressly provided herein, the rules of
interpretation set forth in Appendix A to the Common Agreement shall apply to
this Agreement.
Section 1.3. Conflict with Trust Indenture Act.
After the qualification of this Indenture under the Trust
Indenture Act, if any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be part
of and govern this Indenture, the latter 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 excluded, as the case may
be.
Section 1.4. Compliance with Certificates and Opinions.
Upon any application or request by the Issuer or the Co-Issuer to
the Trustee to take any action under any provision under this Indenture, the
Issuer or the Co-Issuer, as the case may be, shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act. Each
such certificate or opinion shall be given in the form of an Officer's
-2-
<PAGE> 9
Certificate, if to be given by an Authorized Officer of the Issuer or the
Co-Issuer, or an Opinion of Counsel, if to be given by counsel, and shall comply
with the requirements of the Trust Indenture Act and any other requirements set
forth in this Indenture.
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 statement 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.
ARTICLE 2
THE NOTES
Section 2.1. Forms Generally.
(a) The Notes and the Trustee's or Authenticating Agent's
certificate of authentication thereon (the "Certificate of Authentication")
shall be in substantially the forms required by this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon,
as may be consistent herewith, determined by the Authorized Officers of the
Issuers executing such notes as evidenced by their execution of such Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
(b) Notes of any Series or Class offered and sold under the
Securities Act shall be issued in the form of one or more Global Notes in fully
registered form without interest coupons, substantially in the form attached as
Exhibit A hereto, in the case of Class A Notes, and Exhibit B hereto, in the
case of Class B Notes (each, a "Global Note"), with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and such legends as may be applicable thereto, which shall be
deposited with the Trustee at its Corporate Trust Office, as custodian for DTC
and registered in the name of a nominee of DTC, duly executed by or on behalf of
the Issuers and authenticated by the Trustee or Authenticating Agent as
hereinafter provided. The Issuers in issuing the Notes may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee will indicate the "CUSIP"
numbers of the Notes in notices of redemption and related materials as a
convenience to Holders; provided that any such
-3-
<PAGE> 10
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption and related materials.
(c) Notes of any Series or Class may also be issued under the
limited circumstances set forth in Section 2.4 in definitive fully registered
form without interest coupons, substantially in the form of the certificated
note attached as Exhibit D hereto (the "Certificated Notes) which shall be duly
executed by the Issuers and authenticated by the Trustee or the Authenticating
Agent as hereinafter provided.
(d) Notwithstanding anything else herein, Class C Notes may be
issued by the Issuers only as provided in Section 2.3(f) in definitive fully
registered form without interest coupons, and shall not constitute Certificated
Notes for purposes of this Indenture. Class C Notes shall be issued
substantially in the form attached as Exhibit C hereto and shall be subject to
the limitations on transfers set forth therein.
Section 2.2. Authorized Amount; Class A Notes and Class B Notes Issuable in
Series; Note Interest Rate; Stated Maturity; Denominations.
(a) The outstanding aggregate principal amount of each Class of
Notes that is authenticated and delivered under this Indenture at any time may
not exceed the amounts set forth below (excluding Notes issued upon registration
of, transfer of, or in exchange for, or in lieu of, other Notes pursuant to
Section 2.4, 2.5, 8.6 or 9.1) and shall have the Stated Maturities set forth
below:
<TABLE>
<CAPTION>
Principal Stated
Designation Amount Maturity
----------- ------ --------
<S> <C> <C>
Class A Notes Up to the Maximum [___] 2018
Class A Principal Amount
Class B Notes $[700,000,000] [___] 2018
Class C Notes Up to $125,000,000 [___] 2018
</TABLE>
(b) The Class A Notes and Class B Notes may be issued in one or
more Series in accordance with Section 2.9. The Notes of each Class represent
the right to receive, to the extent necessary to make the required payments with
respect to the Notes of such Class at the times and in the amounts specified in
the Priority of Payments and the Priority of Acceleration Payments, and in this
Indenture or any related Supplemental Indenture (as the case may be), the
portion of the Collateral Proceeds allocable to Holders of such Class pursuant
to the Security Agreement, the Intercreditor Agreement and this Indenture or
such Supplemental Indenture (as the case may be).
(c) Interest on (i) the initial Series of Class A Notes issued
under this Indenture shall accrue at [__]% per annum, (ii) each Series of Class
A Notes issued subsequent to the initial series thereof shall accrue at the
respective Note Interest Rate specified in the Supplemental Indenture relating
to such Series, (iii) the initial Series of Class B Notes issued under this
Indenture shall accrue at ___% per annum, (iv) each Series of Class B Notes
issued in connection with a Class B Refinancing shall accrue at the rate
specified in the Supplemental Indenture relating thereto and (v) the Class C
Notes shall accrue at the Class C Note Interest
-4-
<PAGE> 11
Rate. The Notes shall accrue interest on the Outstanding Amounts of such Notes
(determined as of the first day of each Interest Accrual Period and after giving
effect to any payment of principal occurring on such day) from the Closing Date
(or, in the case of any Notes issued subsequent to the Closing Date, from the
date of issuance thereof) until the principal thereof has been paid in full and
will be payable quarterly in arrears on each Quarterly Payment Date. Interest on
the Notes and interest on Defaulted Interest in respect of such Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
(d) The Notes shall be redeemable as provided in Article 9.
(e) Unless otherwise specified in the relevant Supplemental
Indenture, the Class A Notes and Class B Notes shall be issuable and
transferable in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof; provided, that any interest in a Global Note equal to or in
excess of the applicable minimum denomination at the time of issuance thereof
which ceases or fails to be such minimum or multiple as a result of the
repayment of principal pursuant to the Priority of Payments or Priority of
Acceleration Payments, as applicable, may be transferred in its entirety. The
Class C Notes shall be issuable in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The Depositary for the Global Notes shall
initially be DTC.
(f) The Notes shall be numbered, lettered or otherwise
distinguished in such manner as may be consistent herewith, determined by an
Authorized Officer of the Program Manager executing such Notes as evidenced by
its execution of such Notes.
Section 2.3. Execution, Authentication, Delivery and Dating.
(a) The Notes shall be executed on behalf of the Issuers by an
Authorized Officer of the Program Manager. The signatures of any such Authorized
Officer on the Notes may be manual or facsimile. As provided in the Management
Agreement, each of the Issuer and the Co-Issuer irrevocably (subject to
termination of the Management Agreement) appointed and designated the Program
Manager as its attorney-in-fact, acting through any Authorized Officer thereof,
to (inter alia) execute and deliver in its name and on its behalf any Note
issued hereunder.
(b) Notes bearing the manual or facsimile signatures of
individuals who were at any time the Authorized Officers of either of the
Issuers (or of the Program Manager as their attorney-in-fact) shall bind the
Issuer and/or the Co-Issuer (as the case may be), notwithstanding the fact that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Notes or did not hold such offices at the
date of issuance of such Notes.
(c) At any time and from time to time after the execution and
delivery of this Indenture, the Issuers may deliver Notes executed by or on
behalf of the Issuers to the Trustee or the Authenticating Agent for
authentication and the Trustee or the Authenticating Agent, upon Issuer Order,
shall authenticate and deliver such Notes as provided in this Indenture and not
otherwise.
(d) Each Note shall be dated the date of its authentication.
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(e) Notes issued upon transfer, exchange or replacement of other
Notes shall be issued in authorized denominations reflecting the original
aggregate principal amount of the Notes so transferred, exchanged or replaced,
but shall represent only the current Outstanding Amount of the Notes so
transferred, exchanged or replaced. In the event that any Note is divided into
more than one Note in accordance with this Article 2, the original principal
amount of such Note shall be proportionately divided among the Notes delivered
in exchange therefor and shall be deemed to be the original aggregate principal
amount of such subsequently issued Notes.
(f) The Issuers shall issue Class C Notes from time to time,
after the Closing Date, upon an exercise by Enron of its option to purchase or
cause to be purchased Class C Notes (i) pursuant to Section 2.1 of the Support
Agreement, to the Persons and in the amounts set forth in the Election Notice
delivered in connection therewith or (ii) pursuant to Sections 4.1(b) or 4.2 of
the Support Agreement, to the Persons and in the amounts set forth in the Final
Credit Support Notice delivered in connection therewith, in each case against
payment therefor. Upon any such issuance, the Issuers shall execute, and the
Trustee shall authenticate and deliver, to the intended Holder thereof, one or
more Class C Notes of any authorized denomination.
(g) No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears on such Note a
Certificate of Authentication, substantially in the form provided for herein,
executed by the Trustee or by the Authenticating Agent by the manual signature
of one of their Authorized Officers, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 2.4. Registration, Transfer and Exchange of Notes; Dealings with
Depositary.
(a) The Trustee is hereby appointed as the Note Registrar and a
Transfer Agent with respect to the Class A Notes and Class B Notes. The Note
Registrar shall, on behalf of the Issuers, keep a register (the "Note Register")
at the Corporate Trust Office in which, subject to such reasonable regulations
as it may prescribe, the Note Registrar shall provide for the registration of
Class A Notes and Class B Notes and the registration of transfers of Class A
Notes and Class B Notes. The Issuer shall assume the duties of Note Registrar
and Transfer Agent with respect to the Class C Notes. Upon any resignation or
removal of the Trustee as Note Registrar with respect to the Class A Notes and
the Class B Notes, the Issuer shall promptly appoint a successor or, in the
absence of such appointment, assume the duties of Note Registrar with respect to
the Class A Notes and Class B Notes.
If a Person other than the Trustee is appointed by the Issuers as
Note Registrar, the Issuers will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register. The Trustee shall have the right to inspect the
Note Register at all reasonable times and to obtain copies thereof and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Authorized Officer thereof as to the names and
addresses of the Holders of the Notes, and the principal amounts and numbers of
such Notes.
The Issuer may appoint any co-transfer agent and co-registrar,
including, if and so long as any Series or Class is listed on the Luxembourg
Stock Exchange and such exchange shall
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so require, a co-transfer agent and co-registrar in Luxembourg. Any reference in
this Indenture to the Note Registrar shall include any co-transfer agent and
co-registrar unless the context requires otherwise.
Subject to this Section 2.4, upon surrender for registration of
transfer of any Notes at the office or agency of the Issuers to be maintained as
provided in Section 7.2, the Issuers shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denomination and of a like
aggregate principal amount.
The Issuers will notify the Trustee in writing of any Note
beneficially owned by or pledged to the Issuer, the Co-Issuer, Enron, the
Program Manager or any other obligor upon the Notes or any of their respective
Affiliates promptly upon its knowledge of the acquisition thereof or the
creation of such pledge.
At the option of a Holder, Notes may be exchanged for Notes (of
the same Series and Class) of authorized denominations of like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Note is surrendered for exchange, the Issuers shall execute
and the Trustee or Authenticating Agent shall authenticate and deliver the Notes
that the Noteholder making the exchange is entitled to receive.
All Notes issued and authenticated upon any registration of
transfer or exchange of Notes shall be the valid obligations of the Issuers,
evidencing the same debt, and entitled to the same benefits under this Indenture
and the other Financing Documents, as the Notes surrendered upon such
registration of transfer or exchange.
Every Note 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 Issuers and the Note Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration
of transfer or exchange of Notes, but the Transfer Agent may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Issuers shall execute and deliver to the Trustee, Notes in
such amounts and at such times as are necessary to enable the Trustee to fulfill
its responsibilities under this Indenture, each Supplemental Indenture and the
Notes.
The Issuers shall not be required to (i) issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before any selection of Notes to be redeemed and ending at the
close of business on the day of the first publication in an Authorized Newspaper
of the relevant notice of redemption or, if there is no publication, the mailing
of the relevant notice of redemption, or (ii) register the transfer of or
exchange any Note so selected for redemption.
(b) Subject to the restrictions on transfer and exchange set
forth in this Section 2.4 and to any additional restrictions on transfer or
exchange specified in the Certificated Notes,
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the Noteholder of any Certificated Note may transfer or exchange the same in
whole or in part (in a principal amount equal to the minimum authorized
denomination or any authorized greater amount) by surrendering such Certificated
Note at the Corporate Trust Office or at the office of any Transfer Agent.
Following a proper request for transfer or exchange, the Trustee shall (provided
it has available in its possession an inventory of Certificated Notes and proper
transfer documentation has been provided), within five Business Days of such
request if made at such Corporate Trust Office, or within ten Business Days if
made at the office of a Transfer Agent (other than the Trustee), authenticate
and make available at such Corporate Trust Office or at the office of such
Transfer Agent, as the case may be, to the transferee (in the case of transfer)
or Noteholder (in the case of exchange) or send by first class mail (at the risk
of the transferee in the case of transfer or Noteholder in the case of exchange)
to such address as the transferee or Noteholder, as applicable, may request, a
Certificated Note or Notes, as the case may require, for a like aggregate
principal amount and in such authorized denomination or denominations as may be
requested. The presentation for transfer or exchange of any Certificated Note
shall not be valid unless made at the Corporate Trust Office (in the case of the
Class A Notes and Class B Notes) or at the office of a Transfer Agent by the
registered Noteholder in person, or by a duly authorized attorney-in-fact.
Beneficial interests in the Global Notes shall be exchangeable for Certificated
Notes only under the limited circumstances described in sub-paragraph (e) of
this Section 2.4. and shall not be valid unless made at the Corporate Trust
Office or at the office of a Transfer Agent by the registered Noteholder in
person, or by a duly authorized attorney-in-fact.
(c) Transfer, registration and exchange shall be permitted as
provided in this Section 2.4 without any charge to the Noteholder except for the
expenses of delivery (if any) not made by regular mail. Registration of the
transfer of a Note by the Trustee shall be deemed to be the acknowledgement of
such transfer on behalf of the Issuers.
(d) The Issuers may purchase, redeem, prepay or otherwise
acquire, directly or indirectly, any of the Outstanding Notes.
(e) Interests in a Global Note deposited with the Depositary
pursuant to Section 2.1 hereunder shall be transferred to the owners of such
interests as provided in clause (f) below in the form of Certificated Notes only
if such transfer otherwise complies with this Section 2.4 and the Depositary
notifies the Issuers that it is unwilling or unable to continue as Depositary
for the Notes or the Depositary ceases to be a "clearing agency" registered
under the Exchange Act and a successor Depositary is not appointed by the
Issuers within 90 days of such notice, in which event the Issuers will promptly
make available to the Trustee a reasonable supply of Certificated Notes in
definitive, fully registered form, without interest coupons.
(f) If interests in any Global Note are to be transferred to the
Beneficial Owners thereof in the form of Certificated Notes pursuant to Section
2.4(e), such Global Note shall be surrendered by the Depositary, or its
custodian on its behalf, to the Corporate Trust Office or to the Transfer Agent
located in the Borough of Manhattan, the City of New York, and the Trustee shall
authenticate and deliver without charge, upon such transfer of interests in such
Global Note, an equal aggregate principal amount of Certificated Notes of
authorized denominations. The Certificated Notes transferred pursuant to this
Section 2.4 shall be executed, authenticated and delivered only in the
denominations specified in Section 2.2(e) and registered in such names as the
Depositary shall direct in writing.
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(g) For so long as one or more Global Notes are Outstanding:
(1) the Trustee and its directors, officers, employees
and agents may deal with the Depositary for all purposes (including
the making of distributions on, and the giving of notices with
respect to, the Global Notes);
(2) unless otherwise provided herein, the rights of
Beneficial Owners shall be exercised only through the Depositary and
shall be limited to those established by law and agreements between
such Beneficial Owners and the Depositary;
(3) for purposes of determining the identity of and
principal amount of Notes beneficially owned by a Beneficial Owner,
the records of the Depositary shall be conclusive evidence of such
identity and principal amount and the Issuers and the Trustee may
conclusively rely on such records when acting hereunder;
(4) the Depositary will make book-entry transfers among
the Depositary Participants of the Depositary and will receive and
transmit distributions of principal and interest on the Global Notes
to such Depositary Participants; and
(5) the Depositary Participants of the Depositary shall
have no rights under this Indenture or any other Financing Document
under or with respect to any of the Global Notes held on their
behalf by the Depositary, and the Depositary may be treated by the
Trustee and its agents, employees, officers and directors as the
absolute owner of the Global Notes for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and the Depositary Participants, the
operation of any customary practices governing the exercise of the rights of a
Holder of any Note.
(h) Notwithstanding anything contained herein to the contrary,
neither the Trustee nor the Note Registrar shall be responsible for ascertaining
whether any transfer complies with the registration provisions of or exemptions
from applicable state securities laws, ERISA, the Code or the Investment Company
Act; provided that if a certificate is specifically required by the express
terms of this Section 2.4 to be delivered to the Trustee by a purchaser or
transferee of a Note, the Trustee shall be under a duty to receive and examine
the same to determine whether it conforms on its face to the requirements of
this Indenture and shall promptly notify the party delivering the same if such
certificate does not conform.
(i) The provisions of this Section 2.4 (other than clauses (a),
(d) and (h)) shall not apply to the Class C Notes. No transfer or assignment of
a Class C Note shall be registered or effective and no such Note shall be
delivered to a transferee unless the following conditions are satisfied:
(1) the transferee of such Notes shall have delivered to the
Program Manager certification in the Form of Exhibit G, with relevant
tax forms duly completed and attached, that (A) either (x) such
transferee is a United States person as defined by the
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Code or (y) all income received by such transferee with respect to
such Note will be entitled to complete exemption from the
withholding of United States federal income tax (whether the Class C
Notes are treated as debt or partnership interests in the Issuer for
U.S. federal income tax purposes) and (B) either (x) such transferee
is not for United States federal income tax purposes a partnership,
grantor trust, S corporation or other pass-through entity or (y)
such transferee was not formed for the purpose of acquiring Class C
Notes, Support Notes or Interests in the Issuer and not more than
50% of the value of a beneficial owner's interest in such transferee
will be attributable to Class C Notes, Support Notes or Interests in
the Issuer held by such transferee;
(2) the transferee shall have represented that it will
do nothing that would cause the Issuer to become a publicly-traded
partnership taxable as a corporation; and
(3) the principal amount of Class C Notes transferred or
assigned to the transferee is an integral multiple of $10,000,000.
Section 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Notes.
If (a) any mutilated or defaced Note is surrendered to a Transfer
Agent, or if there shall be delivered to the Issuers, the Trustee and the
Transfer Agent evidence to their reasonable satisfaction of the destruction,
loss or theft of any Note, and (b) there is delivered to the Issuers, the
Transfer Agent and the Trustee such security or indemnity as may reasonably be
required by them to save each of them harmless then, in the absence of notice to
the Issuers, the Trustee or such Transfer Agent that such Note has been acquired
by a bona fide purchaser, the Issuers shall execute and, upon Issuer Request,
the Trustee shall authenticate and deliver, in lieu of any such mutilated,
defaced, destroyed, lost or stolen Note, a new Note of the same Series and Class
as such mutilated, defaced, destroyed, lost or stolen Note, of like tenor
(including the same date of issuance) and equal principal amount, registered in
the same manner, dated the date of its authentication, bearing interest from the
date to which interest has been paid on the mutilated, defaced, destroyed, lost
or stolen Note and bearing a number not contemporaneously outstanding.
If, after delivery of such new Note, a bona fide purchaser of the
predecessor Note presents for payment, transfer or exchange such predecessor
Note, the Issuer, the Co-Issuer, the Note Registrar and the Trustee shall be
entitled to demand return of such new Note from the Person to whom it was
delivered or any Person taking therefrom, and 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 Co-Issuer, the Trustee and the Note
Registrar in connection therewith.
In case any such mutilated, defaced, destroyed, lost or stolen
Note has become due and payable, the Issuers in their discretion may, instead of
issuing a new Note, pay such Note without requiring surrender thereof except
that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section 2.5, the
Issuers, the Trustee or any Transfer Agent may require the payment by the
registered holder thereof of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
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Every new Note issued pursuant to this Section 2.5 in lieu of any
mutilated, defaced, destroyed, lost or stolen Note, shall constitute an original
additional contractual obligation of the Issuers and such new Note shall be
entitled, subject to the second paragraph of this Section 2.5, to all the
benefits of this Indenture.
The provisions of this Section 2.5 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, defaced, destroyed, lost or stolen
Notes.
Section 2.6. Payment of Principal and Interest; Rights Preserved.
(a) Each Series of Class A Notes and Class B Notes shall accrue
interest during each Interest Accrual Period at the applicable Note Interest
Rate specified in Section 2.2(c), in the case of the initial Series of Class A
Notes and Class B Notes issued under this Indenture, and in the case of any
subsequent Series of Class A Notes or Class B Notes, at the applicable Note
Interest Rate specified in the Supplemental Indenture for such Series. The Class
C Notes shall accrue interest during each Interest Accrual Period at the
applicable Note Interest Rate as specified in Section 2.2. Interest on each
Class of Notes shall be due and payable on each Quarterly Payment Date
immediately following the related Interest Accrual Period; provided that (i)
payment of interest on the Class B Notes (and premium, if any) and the Class C
Notes is subordinated to the payment on each Quarterly Payment Date or on any
date following an Acceleration, of the interest (but not premium) due and
payable on the Class A Notes of each Series (together with Defaulted Interest,
if any) and may be paid only in accordance with the Priority of Payments or the
Priority of Acceleration Payments, as applicable, (ii) payment of interest on
the Class C Notes is subordinated to the payment on each Quarterly Payment Date
or on any date following an Acceleration, of the interest (but not premium) due
and payable on the Class A Notes and the interest (but not premium) due and
payable on the Class B Notes (together with Defaulted Interest, if any) and may
be paid only in accordance with the Priority of Payments or the Priority of
Acceleration Payments, as applicable, and (iii) payments of interest on all
Notes are subordinated to the payment on each Quarterly Payment Date or on any
date following an Acceleration, of other amounts senior to such payments of
interest in accordance with the Priority of Payments or the Priority of
Acceleration Payments, as applicable.
So long as any Class A Notes are Outstanding, any interest due on
the aggregate outstanding principal of the Class B Notes which is not available
to be paid as a result of the operation of the Priority of Payments on any
Quarterly Payment Date (such interest, "Class B Deferred Interest") shall not be
considered "due and payable" for the purposes of Section 5.1(a) of the Common
Agreement (and the failure to pay such interest shall not be an Event of
Default, but may constitute a Deferral Event) until the Quarterly Payment Date
on which such interest is available to be paid in accordance with the Priority
of Payments or until the first Quarterly Payment Date on or after which the
Class A Notes are no longer Outstanding. Any Class B Deferred Interest shall be
added to the aggregate principal amount of the Class B Notes and interest shall
accrue on the aggregate principal amount of Class B Notes as so increased at the
Class B Deferral Interest Rate until (and including) the Interest Accrual Period
immediately preceding the Quarterly Payment Date on which all interest due and
payable on the Class B Notes as of such Quarterly Payment Date is paid in full
(without any deferral), and thereafter,
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interest shall accrue on the aggregate principal amount of the Class B Notes at
the Class B Note Interest Rate.
So long as any Class A Notes and Class B Notes are Outstanding,
any interest due on the Class C Notes which is not available to be paid as a
result of the operation of the Priority of Payments on any Quarterly Payment
Date (such interest, the "Class C Deferred Interest") shall not be considered
"due and payable" for the purposes of Section 5.1(a) of the Common Agreement
(and the failure to pay such interest shall not be an Event of Default) until
the Quarterly Payment Date on which such interest is available to be paid in
accordance with the Priority of Payments or until the first Quarterly Payment
Date on or after which the Class A Notes and the Class B Notes are no longer
Outstanding. Any Class C Deferred Interest shall be added to the aggregate
principal of the Class C Notes and interest shall accrue on the aggregate
principal amount as so increased at the Class C Note Interest Rate. Interest
will cease to accrue on each Note, or in the case of a partial repayment or
redemption, on such part, from the date of repayment or redemption or Stated
Maturity unless payment of principal is improperly withheld or unless Default is
otherwise made with respect to such payments. To the extent lawful and
enforceable, interest on any Defaulted Interest shall accrue at the applicable
Note Interest Rate until paid as provided herein.
(b) The principal of each Class A Note shall be due and payable
no later than the Stated Maturity thereof unless the unpaid principal of such
Note becomes due and payable at an earlier date by declaration of Acceleration,
call for redemption or otherwise. The principal of each Class B Note and each
Class C Note shall be due and payable no later than the Stated Maturity thereof
unless the unpaid principal of such Note becomes due and payable at an earlier
date by declaration of Acceleration, call for redemption or otherwise; provided,
except as otherwise provided in Article 9 and the Priority of Payments, the
payment of principal of the Class B Notes and the Class C Notes may only occur
after principal of the Class A Notes has been paid in full and is subordinated
to the payment on each Quarterly Payment Date or on any date following an
Acceleration, to the principal due and payable on the Class A Notes and other
amounts in accordance with the Priority of Payments or the Priority of
Acceleration Payments, as applicable; and any payment of principal of the Class
B Notes which is not paid, in accordance with the Priority of Payments, on any
Quarterly Payment Date, shall not be considered "due and payable" for purposes
of Section 5.1(b) of the Common Agreement until the Quarterly Payment Date on
which such principal may be paid in accordance with the Priority of Payments or,
if earlier, the Quarterly Payment Date on which all of the Class A Notes have
been paid in full; provided, further, except as provided in Article 9 and the
Priority of Payments, the payment of principal of the Class C Notes may only
occur after principal of the Class A Notes and Class B Notes has been paid in
full and is subordinated to the payment of the principal and interest due and
payable on the Class A Notes and Class B Notes and other amounts in accordance
with the Priority of Payments or the Priority of Acceleration Payments, as
applicable; and any payment of principal of the Class C Notes which is not paid,
in accordance with the Priority of Payments, on any Quarterly Payment Date shall
not be considered "due and payable" for purposes of Section 5.1(b) of the Common
Agreement until the Quarterly Payment Date on which such principal may be paid
in accordance with the Priority of Payments or, if earlier, the Quarterly
Payment Date on which all of the Class A Notes and Class B Notes have been paid
in full.
(c) Subject to the provisions of Sections 2.6(a) and (b) hereof,
the Holders of Notes as of the most recent Record Date shall be entitled to the
interest accrued and principal
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payable in accordance with Section 4.1 or 4.3 (as applicable) of the Security
Agreement. All such payments that are mailed or wired and returned to the Paying
Agent shall be held for payment as herein provided at the office or agency of
the Issuers to be maintained as provided in Section 7.2.
(d) Any Paying Agent may require certification acceptable to it
to enable the Issuers, the Trustee and any Paying Agent to determine their
duties and liabilities with respect to any taxes or other charges that they may
be required to deduct or withhold from payments in respect of such Note under
any present or future law or regulation of any taxing authority or to comply
with any reporting or other requirements under any such law or regulation.
(e) Payments in respect of principal and interest on the Notes
shall be payable by a Dollar check drawn on a bank in the U.S. or by wire
transfer in immediately available funds to a Dollar account maintained by a
Noteholder in accordance with wire transfer instructions received by any Paying
Agent on or before the Record Date; provided that any such wire transfer
instructions may indicate that they are applicable to all future payments until
such Noteholder informs the Paying Agent to the contrary.
(f) Payments of principal to Holders of the Notes of each Class
shall be made in the proportion that the Outstanding Amount of the Notes of such
Class registered in the name of each such Holder on such Record Date bears to
the Outstanding Amount of all Notes of such Class on such Record Date.
(g) All reductions in the principal amount of a Note (or one or
more predecessor Notes) effected by payments of principal made on any Quarterly
Payment Date or Redemption Date shall be binding upon all future Holders of such
Note and of any Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, whether or not such payment is noted on
such Note.
(h) Upon final payment due on the Maturity of a Note, the Holder
thereof shall present and surrender such Note at the Corporate Trust Office of
the Trustee or at the office of any Paying Agent on or prior to such Maturity;
provided, however, that if there is delivered to the Issuers and the Trustee
such security or indemnity as may be required by them to save each of them
harmless and an undertaking thereafter to surrender such Note, then, in the
absence of notice to the Issuers or the Trustee that the applicable Note has
been acquired by a bona fide purchaser, such final payment shall be made without
presentation or surrender. In the case where any final payment of principal and
interest is to be made on any Note (other than on the Stated Maturity thereof)
the Issuers or, upon Issuer Request, the Trustee, in the name and at the expense
of the Issuers shall, not more than 30 nor less than 10 days prior to the date
on which such payment is to be made, mail to the Persons entitled thereto at
their addresses appearing on the Note Register, a notice which shall state the
date on which such payment will be made, the amount of such payment per $100,000
initial principal amount of Notes and shall specify the place where such Notes
may be presented and surrendered for such payment.
(i) Subject to the foregoing provisions of this Section 2.6 and
the provisions of Sections 2.4 and 2.5, each Note delivered under this Indenture
and upon registration of transfer of or in exchange for or in lieu of any other
Note shall carry the rights of unpaid interest and principal that were carried
by such other Note.
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(j) For so long as Class A Notes or Class B Notes are listed on
the Luxembourg Stock Exchange, the Issuers, or upon the Issuer Request, the
Trustee, in the name and at the expense of the Issuers, shall notify the
Luxembourg Stock Exchange in the event that the Class A Notes or the Class B
Notes do not receive scheduled payments of principal or interest on any
Quarterly Payment Date.
Section 2.7. Persons Deemed Owners.
The Issuers, the Trustee and any agent of any of them may treat
the Person in whose name any Note is registered as the owner of such Note on the
Note Register on the applicable Record Date for the purpose of receiving
payments of principal and interest on such Note and on any other date for all
other purposes whatsoever (whether or not such Note is overdue), and neither the
Issuers nor the Trustee nor any agent of any of them shall be affected by notice
to the contrary; provided, however, that the Depositary, or its nominee, shall
be deemed the owner of the Global Notes, and owners of beneficial interest in
Global Notes will not be considered the owners of any Notes for the purpose of
receiving notices.
Section 2.8. Cancellation.
All Notes surrendered for payment, registration of transfer,
exchange or redemption, or deemed lost or stolen, shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee, shall promptly be
canceled by it and may not be reissued or resold. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section 2.8, except as expressly permitted by this Indenture. All canceled
Notes held by the Trustee shall be destroyed or held by the Trustee in
accordance with its standard retention policy unless the Issuers shall direct by
an Issuer Order that they be returned to it. Any Notes purchased by the Issuers
(or either of them) shall be immediately delivered to the Trustee for
cancellation.
Section 2.9. New Issuances; Class C Issuances.
(a) The Issuers may from time to time issue one or more new
Series of Class A Notes and, in connection with a Class B Refinancing, issue one
or more new Series of Class B Notes, in each case in accordance with the terms
of this Indenture (each, a "New Issuance"; the date of such issuance being the
"Subsequent Closing Date"). The Issuer may from time to time issue Class C Notes
in accordance with the terms of this Indenture and the Enron Support Agreement
(each, a "Class C Issuance"; the date of any such issuance being a "Class C
Issuance Date").
(b) On or before the Subsequent Closing Date relating to any new
Series of Class A Notes or Class B Notes, the parties hereto will execute and
deliver a Supplemental Indenture which will specify the Principal Terms of such
New Issuance. The terms of such Supplemental Indenture may modify or amend the
terms of this Indenture solely as applied to such new Series; except for any
such modification or amendment relating solely to such new Series, in the event
of any inconsistency between such Supplemental Indenture and this Indenture,
this Indenture shall prevail.
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The consummation of a New Issuance, the obligation of the Trustee
to execute and deliver a Supplemental Indenture hereto, and the obligation of
the Trustee or the Authenticating Agent to authenticate any Notes in connection
with a New Issuance, are subject to the satisfaction of the following
conditions:
(1) on or before the fifteenth Business Day immediately
preceding the Subsequent Closing Date, the Issuers shall have given
the Trustee and each Rating Agency notice of such issuance and the
related Subsequent Closing Date;
(2) the Issuers shall have delivered to the Trustee the
related Supplemental Indenture, in substantially the form of Exhibit
E and otherwise reasonably satisfactory to the Trustee, executed by
the Issuers;
(3) each of the conditions set forth in Section 3.2
shall have been satisfied with respect to an issuance of Class A
Notes; and each of the conditions set forth in Section 3.3 shall
have been satisfied with respect to an issuance of Class B Notes;
(4) each of the other conditions precedent specified in
the related Supplemental Indenture shall have been satisfied;
(5) the Issuers shall have delivered to the Trustee an
Officer's certificate of each of the Issuers (i) evidencing the
authorization by Board Resolution of the Issuer, and the Co-Issuer,
of the execution and delivery of the related Supplemental Indenture,
the execution, authentication and delivery of the Notes to be issued
and the execution and delivery of each other document to be executed
and delivered by the Issuers in connection with such issuance, (ii)
specifying the Principal Terms of the Notes to be executed,
authenticated and delivered and (iii) certifying that (x) the
attached copy of such Board Resolutions is a true and complete copy
thereof, (y) such Board Resolutions have not been rescinded and are
in full force and effect and (z) the Officers authorized to execute
and deliver such documents hold the offices and have the signatures
indicated thereon;
(6) the Issuers shall have delivered to the Trustee an
Officer's certificate stating that no Event of Default has occurred
and is continuing or would result from the issuance of the Notes
proposed to be issued; the issuance of the Notes applied for will
not result in a breach of any of the terms, conditions or provisions
or, or constitute a default under the organizational documents of
the Issuer, any indenture or other agreements or instrument to which
the Issuer is a party or by which it is bound, or any order of any
court or administrative agency entered in any Proceeding to which
the Issuer is a party or by which it may be bound or to which it may
be subject; and that all conditions precedent provided in this
Indenture relating to the execution, authentication and delivery of
the Notes proposed to be issued (including in Section 3.3) have been
complied with;
(7) the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that neither of the Issuers will be
required, as a result of the New Issuance, to be registered as an
investment company under the Investment Company Act;
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(8) the Issuers shall have delivered to the Trustee
copies of any other instrument or document, fully executed (as
applicable), necessary to consummate and perfect the grant of a
first priority security interest in favor of the Collateral Agent
for the benefit of the Secured Parties in all of the Issuer's right,
title and interest in and to the Collateral;
(9) the Issuers shall have delivered to the Trustee an
Opinion of Counsel as regards the Lien of the Collateral Agent on
the Collateral in substantially the form of that delivered to the
Collateral Agent on the Closing Date;
(10) the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Class A Notes and the
Class B Notes will be debt for federal income tax purposes; and
(11) pursuant to the Management Agreement, the Program
Manager shall have certified to the Issuers that procedures have
been followed to ensure that no more than 50% of the debt
obligations held by the Issuer are principally secured by real
property [within the meaning of Code section 7701(i)].
Upon satisfaction of the above conditions, (i) the Trustee or the Authenticating
Agent, as the case may be, will authenticate the relevant Notes to be issued in
connection with such New Issuance, (ii) the Trustee will execute and deliver the
related Supplemental Indenture and will take the actions and execute the
documents specified in such Supplemental Indenture to be taken or executed in
connection with such issuance and (iii) to the extent not inconsistent with this
Indenture or any Supplemental Indenture, the Trustee will take the actions and
execute the documents authorized by the Issuers in the Board Resolutions
delivered pursuant to clause (5) above to be taken or executed in connection
with such issuance.
(c) On or before the Class C Issuance Date relating to any Class
C Notes, the parties hereto will execute and deliver a Supplemental Indenture
which will specify (i) the Class C Note Interest Rate with respect to such Class
C Notes and (ii) the principal amount of such Class C Notes. The consummation of
a Class C Issuance and the obligation of the Trustee or the Authenticating Agent
to authenticate any Class C Notes in connection with a Class C Issuance, are
subject to the satisfaction of the following conditions:
(1) on or before the fifth Business Day immediately preceding the
Class C Issuance Date, the Issuer shall have given the Trustee and each
Rating Agency notice of such issuance and of each purchaser;
(2) each of the conditions set forth in Section 3.4 shall have
been satisfied; and
(3) each purchaser of any Note shall have delivered to the
Trustee certification in the form of Exhibit F, with relevant tax forms
duly completed and attached, that (A) either (x) such purchaser is a
United States Person or (y) all income to be received by such purchaser
with respect to such Note (whether the Note is treated as a partnership
interest or an indebtedness of the Issuer for United States federal
income tax purposes) will be entitled to complete exemption from the
withholding of United States federal income tax; and (B) either (x) such
purchaser is not (for United States federal income tax
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purposes) a partnership, grantor trust, S corporation or other
pass-through entity or (y) such purchaser was not formed for the
purpose of acquiring Class C Notes, Support Notes or Interests and
no more than 50% of the value of a beneficial owner's interest in
such purchaser will be attributable to any Class C Notes, Support
Notes, Interests or other profit interest in the Issuer held by such
purchaser.
Upon satisfaction of the above conditions, the Trustee or the Authenticating
Agent, as the case may be, will, authenticate the relevant Class C Notes to be
issued in connection with such Class C Issuance.
(d) The Issuer shall pay all Transaction Expenses related to each
New Issuance from the proceeds of such New Issuance by allocating and crediting
to the Operating Account, on the relevant Subsequent Closing Date, an amount
equal to such Transaction Expenses, as determined by the Program Manager on
behalf of the Issuer, and apply the amounts so credited to the Operating Account
for payment of such expenses as they become due.
Section 2.10 Temporary Notes.
Pending preparation of definitive Notes, the Issuers may issue,
and, upon its written request, the Trustee shall authenticate, in lieu of
definitive Notes, one or more temporary printed or typewritten Notes in the form
recited in this Indenture, in any Authorized Denomination. Upon written request
of the Issuers, the Trustee shall authenticate definitive Notes in exchange for
and upon surrender of an equal principal amount of temporary Notes. Until so
exchanged, temporary Notes shall have the same rights, remedies and security
hereunder as definitive Notes.
Section 2.11. Parity of Notes within each Class; Ranking.
All Notes of a Class issued and Outstanding hereunder rank on a
parity with each other Note of such Class, and each Note shall be secured
equally and ratably by the Security Agreement with each other Note of such
Class, without preference, priority or distinction of any one thereof over any
other by reason of difference in time of issuance or otherwise, and each Note of
a Class shall be entitled to the same benefits and security in this Indenture
and the Security Agreement as each other Note of such Class.
ARTICLE 3
CONDITIONS PRECEDENT
Section 3.1. Conditions to the Issuance of Notes on the Closing Date.
The Notes to be issued on the Closing Date may be executed by the
Issuers and delivered to the Trustee for authentication and thereupon the same
shall be authenticated and delivered by the Trustee (or an Authenticating Agent
on its behalf) upon Issuer Request, upon satisfaction of the conditions
precedent set forth in Article 8 of the Common Agreement.
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Section 3.2. Conditions to the Issuance of Class A Notes After the Closing
Date.
The issuance of any Series of Class A Notes on a Subsequent
Closing Date shall be subject to the satisfaction of the following conditions:
(i) the additional Class A Notes will have the same Stated
Maturity and the same terms, other than interest rate, as the Initial
Class A Notes;
(ii) after giving effect to any application of the proceeds
of such issuance, the sum of aggregate outstanding principal balance
of the Class A Notes and Class B Notes and the aggregate principal
amount of advances Allocated plus amounts drawn under the Backup
Facility does not exceed the Maximum Class A Principal Amount;
(iii) if such Class A Notes are issued after the Investment
Termination Date, the proceeds of such issuance shall be applied (A)
to reduce amounts Allocated or (B) to repay amounts drawn, under the
Backup Facility or (C) to redeem in accordance with Article 10 of the
Common Agreement all or a portion of Class A Notes, Class B Notes or
Class C Notes issued and outstanding,
(iv) the Liquidity Test is satisfied on such date,
(v) unless the proceeds of such issuance are used to reduce
amounts Allocated, or to repay amounts drawn, under the Backup
Facility, the Rating Condition and the Credit Support Tests are
satisfied on such date (after taking into account such issuance), and
(vi) no Default has occurred and is continuing on such date.
Section 3.3. Conditions to the Issuance of Class B Notes After the Closing
Date.
The issuance of any Class B Notes on any Quarterly Payment Date
on or after the fifth anniversary of the Closing Date in connection with a Class
B Refinancing shall be subject to the satisfaction of the following conditions:
(i) no Default has occurred and is continuing on such date;
and
(ii) the Rating Condition is satisfied after giving effect
to such Class B Refinancing.
Section 3.4. Conditions to the Issuance of Class C Notes After Closing Date.
The issuance of any Class C Notes on a date after the Closing
Date shall be subject to the satisfaction of the conditions set forth in the
Enron Support Agreement.
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ARTICLE 4
SATISFACTION AND DISCHARGE; DEFEASANCE
Section 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of
further effect with respect to the Notes except as to (i) rights of registration
of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed,
lost or stolen Notes, (iii) rights of Noteholders to receive payments of
principal thereof and interest thereon as provided herein, (iv) the rights,
obligations and immunities of the Trustee hereunder and (v) the rights of
Noteholders as beneficiaries hereof with respect to the property deposited with
the Trustee and payable to all or any of them; and the Trustee, on demand of and
at the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when:
(a) either:
(i) all Notes theretofore authenticated and delivered
(other than (A) Notes which have been mutilated, defaced, destroyed,
lost or stolen and which have been replaced or paid as provided in
Section 2.5 and (B) Notes for whose payment Money has theretofore
irrevocably been deposited in trust and thereafter repaid to the Issuer
or discharged from such trust, as provided in Section 7.3) have been
delivered to the Trustee for cancellation; or
(ii) all Notes not theretofore delivered to the Trustee
for cancellation (A) have become due and payable, or (B) will become
due and payable at their Stated Maturity within one year, or (C) are to
be called for redemption pursuant to Section 9.1 under an arrangement
satisfactory to the Trustee for the giving of notice of redemption by
the Issuers pursuant to Section 9.3 and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee, in trust for such
purpose, Cash or noncallable direct obligations of the United States of
America, provided that such obligations are entitled to the full faith
and credit of the United States of America or are debt obligations
which are rated not less than "Aaa" by Moody's and not less than "AAA"
by Standard & Poor's in an amount sufficient, as verified by a firm of
Independent certified public accountants which are nationally
recognized, to pay and discharge the entire indebtedness on such Notes,
including any Premium, not theretofore delivered to the Trustee for
cancellation, for principal and interest to the date of such deposit
(in the case of Notes which have become due and payable), or to the
Stated Maturity or the Redemption Date, as the case may be; provided
that this subsection (ii) shall not apply if an election to act in
accordance with the provisions of Section 5.2 of the Security Agreement
shall have been made and not rescinded;
(b) the Issuers have paid or caused to be paid all other sums
payable hereunder and no other amounts will become due and payable by the Issuer
and under the other Financing Documents; and
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(c) the Issuers have delivered to the Trustee Officer's
certificates and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the rights and obligations of the Issuers, the Trustee, the Program Manager and,
if applicable, the Noteholders, as the case may be, under Sections 2.6, 4.2,
5.7, 5.15, 6.7, 6.8, 7.1 and 7.3 and Article 12 shall survive.
Section 4.2. Application of Trust Money.
All property deposited with the Trustee pursuant to this Article
4, including but not limited to money and U.S. Government Obligations deposited
pursuant to Section 4.5 hereof, held in trust and applied by it in accordance
with the provisions of the Notes and this Indenture, including, without
limitation, the Priority of Payments and the Priority of Acceleration Payments,
for the payment either directly or through any Paying Agent, as the Trustee may
determine, to the Person entitled thereto of the respective amounts in respect
of which such property has been deposited with the Trustee; but such property
need not be segregated from other funds except to the extent required herein or
required by law.
Section 4.3. Repayment of Monies Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture with respect to the Notes, all Monies then held by any Paying Agent
other than the Trustee under the provisions of this Indenture shall, upon demand
of the Issuers, be paid to the Trustee to be held and applied pursuant to
Section 7.3 and in accordance with the Priority of Payments or the Priority of
Acceleration Payments, as applicable (and as applicable to the Trustee and
Holders) and thereupon such Paying Agent shall be released from all further
liability with respect to such Monies.
Section 4.4. Defeasance of Notes.
(a) Subject to the provisions of Sections 4.4(b), 4.5 and 4.7
below, the Issuers at any time may terminate (i) all their obligations under
this Indenture and the Notes (a "Legal Defeasance") or (ii) their obligations
under any of its covenants, other than under Section 7.2 hereof and their
obligation to make payments on the Notes pursuant to Section 2.6 hereof (a
"Covenant Defeasance"). With respect to any Covenant Defeasance, except as
specified in clause (ii) of the preceding sentence, the remainder of this
Indenture and the Notes shall be unaffected thereby. The Issuers may exercise a
Legal Defeasance notwithstanding the prior exercise of a Covenant Defeasance. If
the Issuers exercise a Legal Defeasance, payment of the Notes may not be
accelerated due to an Event of Default. Upon satisfaction of the conditions set
forth herein and on demand of the Issuers, the Trustee (x) shall acknowledge in
writing the discharge of the obligations terminated by the Issuers, (y) shall
execute documents and deliver such instruments in writing as shall be required
to reconvey, release, assign and deliver to the Issuers any and all of the
Trustee's interest in the Collateral, the right, title and interest in and to
any and all rights conveyed, assigned or pledged to the Trustee or otherwise
subject to this Indenture and (z) shall turn over to the Issuers or to any such
person, body or authority as may be entitled to receive the same all balances
then held by it hereunder. Covenant Defeasance, as
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effected hereby, means that the Issuers may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth under any
of the covenants in this Indenture except as set forth hereinabove, whether
directly or indirectly by reason of any reference elsewhere herein to any such
covenant or to any other provision herein or in any other document and such
omission to comply shall not constitute an Event of Default under Section 5.1 of
the Common Agreement.
(b) Notwithstanding Section 4.4(a) above, the obligations of the
Issuers pursuant to Sections 2.4, 2.5, 2.6, Articles 4 and 6 hereof and Section
1.22 of the Common Agreement shall survive until the Notes have been paid in
full.
Section 4.5. Conditions to Defeasance. Either the Legal Defeasance or the
Covenant Defeasance may be exercised by the Issuers only if:
(a) The Issuers shall have irrevocably deposited in trust with
the Trustee (i) Cash in an amount which, when added to any other moneys held by
the Trustee and available for such payment, would be sufficient to pay (A) the
principal of and interest on, all Notes issued hereunder and under any
Supplemental Indenture when due, whether on any Quarterly Payment Date or upon
redemption, Acceleration, or otherwise and (B) all other sums payable hereunder
and under any Supplemental Indenture, (ii) U.S. Government Obligations, (iii)
securities evidencing ownership interest in obligations or in specified portions
thereof (which shall consist of specified portions of the principal of or
interest on such obligations) of the character described in clause (ii) above
sufficient to make all of the payments specified in clause (i) above or (iv) any
combination of such Cash and such obligations (the "Obligations") specified in
(ii) or (iii) above when due, are or will be sufficient to make all the payments
specified in clause (i) above, and such deposit shall not cause the Trustee to
have a conflicting interest as defined in and for the purposes of the Trust
Indenture Act;
(b) The Issuers shall have delivered to the Trustee a certificate
from a nationally recognized firm of Independent accountants expressing their
opinion that the deposited Cash and/or the Obligations without any reinvestment
thereof will provide Cash at such times and in such amounts as will be
sufficient to pay principal of and interest on, all Outstanding Notes when due,
whether on any Quarterly Payment Date or upon redemption, Acceleration, or
otherwise;
(c) The Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) all preference periods applicable to the
defeasance trust have expired under any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (ii) the
defeasance trust resulting from the deposit does not constitute, or is qualified
as, a regulated investment company under the U.S. Investment Company Act of
1940, as amended and (iii) the Holders shall have a perfected security interest
under applicable law in the Obligations so deposited;
(d) No Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 123rd
day after the date of deposit (it being understood that this condition shall not
be deemed satisfied until the expiration of such period);
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(e) Such Legal Defeasance or Covenant Defeasance, as the case may
be, shall not result in a breach or violation of or constitute a Default under
this Indenture, or any other material agreement or instrument to which either
the Issuer or the Co-Issuer is a party or by which the Issuer or the Co-Issuer
is bound;
(f) In the case of a Legal Defeasance or a Covenant Defeasance,
as the case may be, the Issuers shall have delivered to the Trustee an Opinion
of Counsel confirming that (i) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (ii) since the date of
this Indenture there has been a change in the applicable United States Federal
income tax law, in case of either clause (i) or (ii) above to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders will
not recognize income, gain or loss for United States federal income tax purposes
as a result of such Legal Defeasance or Covenant Defeasance and will be subject
to United States federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance or
Covenant Defeasance had not occurred; and
(g) The Issuers shall have delivered to the Trustee an Officer's
Certificate and Opinion of Counsel, each stating that all conditions precedent
provided for relating to either the Legal Defeasance or the Covenant Defeasance,
as the case may be, have been complied with.
Neither the Obligations nor moneys deposited with the Trustee
pursuant to this section shall be substituted, withdrawn, reinvested or used for
any purpose other than, and shall be segregated and held in trust for, the
payment of the principal of and interest on the Notes.
Section 4.6. Indemnification for U.S. Government Obligations.
The Issuers shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 4.5 hereof or the principal and
interest received on such U.S. Government Obligations.
Section 4.7. Reinstatement
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 4.5 hereof by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuers'
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 4.5 hereof, until such
time as the Trustee or Paying Agent is permitted to apply all such Cash or U.S.
Government Obligations in accordance with Section 4.5 hereof; provided, however,
that, if the Issuer has made any payment of interest or principal on the Notes
because of the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Noteholders to receive such payment from Cash or U.S.
Government Obligations held by the Trustee or Paying Agent.
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ARTICLE 5
EVENTS OF DEFAULT; REMEDIES
Section 5.1. Events of Default.
(a) If an Event of Default (as set forth in the Common Agreement)
has occurred and is continuing (other than an Event of Default specified in
paragraphs (h) or (i) of Section 5.1 of the Common Agreement), then, subject to
Article 3 of the Intercreditor Agreement, (i) the Trustee by notice to the
Issuers or (ii) the Holders of not less than (A) 25% of the Controlling Class in
the case of an Event of Default specified in paragraphs (a) or (b) of Section
5.1 of the Common Agreement and (B) 33% of the Controlling Class in all other
cases, by notice to the Issuers and the Trustee, may (A) declare the principal
of all the Notes to be immediately due and payable, and upon any such
declaration such principal, together with all accrued and unpaid interest
thereon, and other amounts payable hereunder, shall become immediately due and
payable and (B) terminate the Investment Period. If an Event of Default
specified in paragraphs (h) or (i) of Section 5.1 of the Common Agreement
occurs, (A) all unpaid principal, together with all accrued and unpaid interest
thereon, of all the Notes, and other amounts payable hereunder, shall
automatically become due and payable without any declaration or other act on the
part of the Trustee or any Noteholder and (B) the Investment Period shall
terminate.
(b) At any time after an Acceleration has been declared and
before a judgment or decree for payment of the Money due has been obtained by
the Trustee as hereinafter provided in this Article 5, 25% of the Controlling
Class, by written notice to the Issuers and the Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer or the Co-Issuer has paid or deposited with
the Trustee an amount sufficient to pay:
(A) all overdue installments of interest on and principal
of the Notes, and
(B) all unpaid expenses and unpaid taxes of the Trustee and
all other sums paid or advanced by the Trustee hereunder and the
reasonable compensation, disbursements and advances of the
Trustee, its agents and its counsel; and
(ii) the Trustee has determined that all Events of Default,
other than the nonpayment of the interest on or principal of Notes
that have become due solely as a result of such Acceleration, have
been cured and a Majority of the Controlling Class by written notice
to the Trustee has agreed with such determination (which agreement
shall not be unreasonably withheld) or waived as provided in Section
5.12.
No such rescission shall affect any subsequent Default or impair
any right consequent thereon.
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Section 5.2. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Issuers covenant that if a Default shall occur in respect of
the payment of any principal of or interest or other amounts owing on any Note
to the extent then due and payable pursuant to the terms hereof and the Priority
of Payments or the Priority of Acceleration Payments, as applicable, the Issuers
will, upon demand of the Trustee or any affected Noteholder, pay to the Trustee,
for the benefit of the Holder of such Note, the whole amount, if any, then due
and payable on such Note for principal and interest, with interest upon the
overdue principal and, to the extent that payments of such interest shall be
legally enforceable, upon overdue installments of interest, at the applicable
Note Interest Rate and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee and
such Noteholder and their respective agents and counsel.
If the Issuer or the Co-Issuer fails to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may, subject to the Intercreditor Agreement, institute a
Proceeding for the collection of the sums so due and unpaid, and may, and shall,
upon the direction by a Majority of the Controlling Class, prosecute such
Proceeding to judgment or final decree, and may enforce the same against the
Issuers or any other obligor upon the Notes and collect the Monies adjudged or
decreed to be payable in the manner provided by law out of the Collateral or
other property of the Issuers.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion, but subject to the Intercreditor Agreement, proceed to
protect and enforce its rights and the rights of the Noteholders by such
appropriate Proceedings as the Trustee shall deem most effectual (if no
direction by a Majority of the Controlling Class is received by the Trustee) or
as the Trustee may be directed by a Majority of the Controlling Class, to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or any other Financing Document or in
aid of the exercise of any power granted herein or therein, or to enforce any
other proper remedy or legal or equitable right vested in the Trustee by this
Indenture, by any other Financing Document or by law.
In case there shall be pending Proceedings relative to the Issuer
or the Co-Issuer or any other obligor upon the Notes under the Bankruptcy Code
or any other applicable bankruptcy, insolvency or other similar law, or in case
a receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Issuer, the Co-Issuer or such other obligor or its property,
or in case of any other comparable Proceedings relative to the Issuer, the
Co-Issuer or such other obligor upon the Notes, or the creditors or property of
the Issuer, the Co-Issuer or such other obligor, the Trustee, regardless of
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and regardless of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.2, shall
be entitled and empowered, by intervention in such Proceedings or otherwise, to
take any and all actions authorized under the Trust Indenture Act. In
particular, the Trustee shall be authorized:
(a) to file and prove a claim or claims for the whole amount of
principal, interest and other amounts owing and unpaid in respect of the Notes
upon direction by the Holders of
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such Notes, and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee) and of the Noteholders allowed in any Proceedings relative
to the Issuer, the Co-Issuer or other obligor upon the Notes or to the creditors
or property of the Issuer, the Co-Issuer or such other obligor;
(b) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of the Notes, upon the direction of such Holders, in
any election of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency Proceedings or person performing
similar functions in comparable Proceedings; and
(c) to collect and receive any Monies or other property payable
to or deliverable on any such claims, and to distribute all amounts received
with respect to the claims of the Noteholders and of the Trustee on behalf of
the Noteholders and the Trustee; and any trustee, receiver or liquidator,
custodian or other similar official is hereby authorized by each of the
Noteholders to make payments to the Trustee, and, in the event that the Trustee
shall consent to the making of payments directly to the Noteholders, to pay to
the Trustee such amounts as shall be sufficient to cover reasonable compensation
to the Trustee, each predecessor Trustee and their respective agents, attorneys
and counsel, and all other reasonable expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a result of
negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder, any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such Proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any action or Proceedings instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the reasonable expenses,
disbursements and compensation of the Trustee, each predecessor Trustee and
their respective agents and attorneys and counsel, shall be for the ratable
benefit of the Holders of the Notes of each Class payable to the Holders in
accordance with the Priority of Payments or the Priority of Acceleration
Payments, as applicable.
In any Proceedings brought by the Trustee on behalf of the
Holders, the Trustee shall be held to represent all the Holders of the Notes.
Section 5.3. Remedies.
If an Event of Default shall have occurred and be continuing, and
the Notes have been declared due and payable and such declaration and its
consequences have not been
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rescinded and annulled, the Trustee, on behalf of the Noteholders, shall have
the rights provided thereto under the Security Agreement which rights will be
enforced by the Collateral Agent on behalf of all the Secured Parties in
accordance with the terms of the Security Agreement and subject to the
Intercreditor Agreement.
Section 5.4. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any Proceeding relating thereto, and any
such Proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall be applied as
set forth in Section 5.5.
Section 5.5. Application of Money Collected.
Any Money collected by the Trustee with respect to the Notes
pursuant to this Article 5 and any Money that may then be held or thereafter
received by the Trustee with respect to the Notes hereunder shall be applied,
subject to Section 12.1 hereof, Section 4.3 of the Security Agreement and
Section 3.1 of the Intercreditor Agreement, at the date or dates fixed by the
Trustee.
Section 5.6. Limitation on Suits.
Subject to Section 5.16, no Holder of any Note shall have any
right to institute any Proceedings, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given to the Trustee written
notice of an Event of Default;
(b) except as otherwise provided in Section 5.7, a Majority of
the Controlling Class shall have made written request to the Trustee to
institute Proceedings in respect of such Event of Default in its own name as
Trustee hereunder and such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(c) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such Proceeding; and
(d) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by a Majority of the Controlling
Class;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes of the same Class or to obtain or to seek to obtain priority or
preference over any other Holders of the Notes of the same Class or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders of Notes of the same Class subject
to and in accordance
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with Section 12.1 of the Security Agreement, and the Priority of Payments or
Priority of Acceleration Payments, as applicable.
Section 5.7. Unconditional Rights of Noteholders to Receive Principal and
Interest.
(a) Notwithstanding any other provision in this Indenture but
subject to the terms of the Intercreditor Agreement, the Holder of any Class A
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest and other amounts owing on such Note as
such principal, interest and other amounts become due and payable and, subject
to the provisions of Section 5.6, to institute proceedings for the enforcement
of any such payment, and such right shall not be impaired without the consent of
such Holder.
(b) Notwithstanding any other provision in this Indenture but
subject to the terms of the Intercreditor Agreement, the Holder of any Class B
Note or Class C Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest and other amounts owing on
such Class B Note or to receive payment of the principal of and interest and
other amounts owing on such Class C Note, as the case may be, as such principal
and/or interest become due and payable in accordance with Section 12.1, and the
Priority of Payments or the Priority of Acceleration Payments, as applicable.
Holders of Class B Notes shall have no right to institute proceedings for the
enforcement of any such payment until such time as no Class A Note remains
Outstanding, which right shall be subject to the provisions of Section 5.6 and
shall not be impaired without the consent of any such Holder. Holders of Class C
Notes shall have no right to institute proceedings for the enforcement of any
such payment until such time as no Class A Note or Class B Note remains
Outstanding, which right shall be subject to the provisions of Section 5.6, and
shall not be impaired without the consent of any such Holder.
Section 5.8. Restoration of Rights and Remedies.
If the Trustee or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case the Issuers, the
Trustee and the Noteholder shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Noteholders shall continue as though no such Proceeding had been instituted.
Section 5.9. Rights and Remedies Cumulative.
Except as otherwise expressly provided in this Indenture, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing by law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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Section 5.10. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Noteholder to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article 5 or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
Section 5.11. Control by Noteholders.
Notwithstanding any other provision of this Indenture, but
subject to the terms of the Intercreditor Agreement, a Majority of the
Controlling Class shall have the right to cause the institution of and direct
the time, method and place of conducting any Proceeding for any remedy available
to the Trustee for exercising any trust, right, remedy or power conferred on the
Trustee; provided that:
(a) such direction shall not conflict with any rule of law or
with this Indenture;
(b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; provided that, subject to
Section 6.1, the Trustee need not take any action that it determines might
involve it in liability (unless the Trustee has received satisfactory indemnity
against such liability as set forth below); and
(c) the Trustee shall have been provided with indemnity
satisfactory to it.
Section 5.12. Waiver of Past Defaults.
Subject to the Intercreditor Agreement, prior to the time a
judgment or decree for payment of the Money due has been obtained by the
Trustee, as provided in this Article 5, a Majority of the Controlling Class may
on behalf of the Holders of all the Notes waive any past Default and its
consequences, except a Default:
(a) in the payment of the principal of and Premium on any Note or
in the payment of interest on the Class A Notes or, after the Class A Notes have
been paid in full, the Class B Notes or, after the Class B Notes have been paid
in full, the Class C Notes; or
(b) in respect of a covenant or provision hereof that under
Section 8.2 cannot be modified or amended without the waiver or consent of the
Holder of each Outstanding Note affected thereby; or
(c) arising under Section 5.1(h) or 5.1(i) of the Common
Agreement.
In the case of any such waiver, the Issuers, the Trustee and the
Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
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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 thereto.
Section 5.13. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note
by its acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
or omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant, as provided in
the Trust Indenture Act; provided that neither the provisions of this Section
5.13 nor the Trust Indenture Act shall apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than 10% in aggregate Outstanding Amount of the
Controlling Class, or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of or interest or other amounts
owing on any Note on or after the Stated Maturity expressed in such Note (or, in
the case of redemption, on or after the applicable Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws.
The Issuers covenant (to the extent that they may lawfully do so)
that they will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants, the performance of or any remedies under this Indenture; and the
Issuers (to the extent that they may lawfully do so) hereby expressly waive all
benefit or advantage of any such law, and covenant that they will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 5.15. Action on the Notes.
(a) The Trustee's right to seek and recover judgment on the Notes
or under this Indenture shall not be affected by the seeking or obtaining of or
application for any other relief under or with respect to this Indenture. None
of the rights or remedies of the Trustee or the Noteholders shall be impaired by
the recovery of any judgment by the Trustee against the Issuer or the Co-Issuer
or by the levy of any execution under such judgment upon any portion of the
Collateral or upon any of the assets of the Issuer or the Co-Issuer.
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(b) The Trustee is authorized to take all of the other actions
that it is permitted to take under any other Financing Document.
Section 5.16. Inconsistency with Common Agreement, Intercreditor Agreement and
Security Agreement.
Each Holder of a Note acknowledges that the Trustee has entered
into the Common Agreement and the Intercreditor Agreement on behalf of the
Holders of the Notes and all future Holders of the Notes. Notwithstanding
anything to the contrary expressed or implied herein, all rights, powers and
remedies available to the Trustee and the Holders of the Notes, and all future
Holders of the Notes, shall be subject to the Common Agreement, the
Intercreditor Agreement and the Security Agreement. In the event of any conflict
or inconsistency between the terms and provisions of this Indenture, the Common
Agreement, the Intercreditor Agreement and the Security Agreement, the terms of
the Common Agreement, the Intercreditor Agreement and the Security Agreement
shall govern and control.
Section 5.17. Actions to be taken by the Trustee under Intercreditor Agreement.
Notwithstanding any other provision contained herein to the
contrary, in the event that any consent, approval, waiver or other direction of
the Representatives, the Lenders or the Required Lenders is sought by the
Collateral Agent pursuant to the Intercreditor Agreement and the matter with
respect to which such consent, approval, waiver or direction is sought is a
matter that the Trustee is entitled to vote on under the Intercreditor
Agreement, the Trustee, promptly upon the receipt of notice from the Collateral
Agent describing the action to be voted on in accordance with the Intercreditor
Agreement, shall promptly notify the Noteholders thereof and of the Decision
Period (as defined in the Intercreditor Agreement) so as to allow the
Noteholders to direct the Trustee in accordance with Section 13.2 as to votes to
be cast by the Trustee in respect of such matter. The Trustee shall vote only in
accordance with instructions issued by the Noteholders at such meeting.
ARTICLE 6
THE TRUSTEE
Section 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and in any other
Trustee Document, and no implied covenants or obligations shall be read
into this Indenture or any other Trustee Document 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 to the requirements of
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this Indenture or any other Trustee Document; provided that in the case
of any such certificates or opinions which by any provision hereof or of
any other Trustee Document are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they substantially conform to the requirements
of this Indenture or such other Trustee Document and shall promptly, but
in any event within three Business Days in the case of an Officer's
certificate furnished by the Issuer and/or the Co-Issuer, notify the
party delivering the same if such certificate or opinion does not
conform. If a corrected form shall not have been delivered to the
Trustee within 15 days after such notice from the Trustee, the Trustee
shall so notify the Noteholders.
(b) In case an Event of Default known to the Trustee has occurred
and is continuing, the Trustee shall, prior to the receipt of directions, if
any, from 25% of the Controlling Class in the case of an Event of Default
specified in Sections 5.1(a) or 5.1(b) of the Common Agreement and 33% of the
Controlling Class in all other cases, exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
(c) No provision of this Indenture or of any other Trustee
Document 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) this subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it shall be
proven that the Trustee was negligent in ascertaining the pertinent
facts;
(iii) 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 Issuer, the Co-Issuer or the
Program Manager in accordance with this Indenture, or exercising any
trust or power conferred upon the Trustee, under this Indenture or any
other Financing Document;
(iv) no provision of this Indenture or any other Trustee
Document shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder or thereunder, or in the exercise of any of its rights
or powers contemplated hereunder or thereunder, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it (if the amount of such funds or risk or liability does not
exceed the amount payable to the Trustee pursuant to Article 4 of the
Security Agreement, the Trustee shall be deemed to be reasonably assured
of such repayment) unless such risk or liability relates to performance
of its ordinary services, including under Article 5, under this
Indenture or any other Trustee Document; and
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(v) the Trustee shall not be liable to the Noteholders
for any action taken or omitted by it at the direction of the Issuers,
the Program Manager and/or the Controlling Class under circumstances
in which such direction is required or permitted by the terms of this
Indenture or any other Trustee Document.
(d) For all purposes under this Indenture and each other Trustee
Document, the Trustee shall not be deemed to have notice or knowledge of any
Default unrelated to payment on the Notes unless a Trust Officer assigned to and
working in the Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a Default is received by the
Trustee at the Corporate Trust Office and such notice references the Notes
generally, the Issuers or this Indenture. For purposes of determining the
Trustee's responsibility and liability hereunder, whenever reference is made in
this Indenture or any other Trustee Document to such a Default, such reference
shall be construed to refer only to such a Default of which the Trustee is
deemed to have notice as described in this Section 6.1.
(e) Whether or not therein expressly so provided, every provision
of this Indenture or any other Trustee Document relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 6.1.
Section 6.2. Notice of Default.
Promptly (and in no event later than two Business Days) after the
occurrence of any Event of Default known to the Trustee or after any declaration
of Acceleration has been made or delivered to the Trustee pursuant to the
Intercreditor Agreement, the Trustee, in accordance with the requirements under
the Trust Indenture Act, shall mail to all Holders of Notes, as their names and
addresses appear on the Note Register, and each Rating Agency, notice of all
Events of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
In addition, for so long as the Class A Notes or the Class B
Notes are listed on the Luxembourg Stock Exchange and so long as the rules of
such stock exchange so require, such notices to the Holders of such Class A
Notes and Class B Notes shall also be given by publication in an Authorized
Newspaper.
Section 6.3. Certain Rights of Trustee.
Except as otherwise provided in Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, note or other paper
or document reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Issuer or the Co-Issuer
mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer
Order, as the case may be;
(c) whenever in the administration of this Indenture or any other
Trustee Document the Trustee shall deem it desirable that a matter be proved or
established prior to
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taking, suffering or omitting any action hereunder or thereunder, 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;
(d) as a condition to the taking or omitting of any action by it
hereunder or under any other Trustee Document, the Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action taken or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise or to
honor any of the rights or powers vested in it by this Indenture or any other
Trustee Document at the request or direction of any of the Noteholders pursuant
to this Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might reasonably be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, note or
other paper documents, but the Trustee, in its discretion, may and, upon the
written direction of a Majority of the Controlling Class shall make such further
inquiry or investigation into such facts or matters as it may see fit or as it
shall be directed, and, the Trustee shall be entitled, on reasonable prior
notice to the Issuers and the Program Manager, to examine the books and records
of the Issuers and the Program Manager relating to the Notes, personally or by
agent or attorney at a time acceptable to the Issuers or the Program Manager in
their reasonable judgment during normal business hours; provided that the
Trustee shall, and shall cause its agents, to hold in confidence all such
information, except (i) to the extent disclosure may be required by law by any
regulatory authority and (ii) to the extent that the Trustee, in its sole
judgment, may determine that such disclosure is consistent with its obligations
hereunder;
(g) the Trustee may execute any of the trusts or powers hereunder
or under any other Trustee Document or perform any duties hereunder or
thereunder either directly or by or through agents or attorneys; provided that
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent (other than any Affiliate of the Trustee) appointed and
supervised, or attorney appointed, with due care by it hereunder or thereunder;
(h) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it reasonably and, after the occurrence and
during the continuance of an Event of Default, prudently believes to be
authorized or within its rights or powers hereunder;
(i) nothing herein shall be construed to imply an obligation on
the part of the Trustee to recalculate, evaluate or verify any report,
certificate or information received from the Issuer, the Co-Issuer or the
Program Manager (unless and except to the extent expressly required hereby); and
(j) the Trustee shall not be responsible or liable for any
inaccuracies in the records of any Custodian, Clearing Agency, Euroclear, Cedel
or other Securities Intermediary, or for the actions or omissions of any such
Person.
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Section 6.4. Authenticating Agents.
Upon the request of the Issuers, the Trustee shall, and if the
Trustee so chooses the Trustee may, appoint one or more Authenticating Agents
with power to act on its behalf and subject to its direction in the
authentication of Notes in connection with issuance, transfers and exchanges
under Sections 2.3, 2.4, 2.5 and 8.6, as fully to all intents and purposes as
though each such Authenticating Agent had been expressly authorized by those
Sections to authenticate such Notes. For all purposes of this Indenture, the
authentication of Notes by an Authenticating Agent pursuant to this Section 6.4
shall be deemed to be the authentication of Notes "by the Trustee".
Any corporation into which any Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, without the execution or filing of any further act on the part of the
parties hereto or such Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and the Issuers. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and the Issuers. Upon receiving such
notice of resignation or upon such a termination, the Trustee shall promptly
appoint a successor Authenticating Agent and shall give written notice of such
appointment to the Issuers.
The Trustee agrees to pay to each Authenticating Agent from time
to time reasonable compensation for its services, and reimbursement for its
reasonable expenses relating thereto and the Trustee shall be entitled to be
reimbursed for such payments, subject to Section 6.8. The provisions of Sections
2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent.
Section 6.5. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, other than the
Certificate of Authentication thereon, shall be taken as the statements of the
Issuers, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representation as to the validity or sufficiency of this
Indenture (except as may be made with respect to the validity of the Trustee's
obligations hereunder), of the Collateral or of the Notes or of any other
Financing Document. The Trustee shall not be accountable for the use or
application by the Issuers of the Notes or the proceeds thereof or any Money
paid to the Issuers pursuant to the provisions hereof or of any other Financing
Document.
Section 6.6. May Hold Notes.
The Trustee, any Paying Agent, Note Registrar or any other agent
of the Issuers, in its individual or any other capacity, may become the owner or
pledgee of Notes and, may
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otherwise deal with the Issuers or any of their Affiliates, with the same rights
it would have if it were not Trustee, Paying Agent, Note Registrar or such other
agent.
Section 6.7. Money Held in Trust.
Money held by the Trustee hereunder shall be held in trust to the
extent required herein. The Trustee shall be under no liability for interest on
any Money received by it hereunder except as otherwise agreed upon with the
Issuers and except to the extent of income or other gain on investments which
are deposits in or certificates of deposit of the Trustee in its commercial
capacity and income or other gain actually received by the Trustee on Permitted
Investments.
Section 6.8. Compensation and Reimbursement.
(a) The Issuer agrees to pay the Trustee, on each Quarterly
Payment Date, reasonable compensation for all services rendered by it hereunder
and to reimburse and indemnify the Trustee in a timely manner as set forth in
Sections 1.21 and 1.22 of the Common Agreement.
(b) The Issuer shall cause the Collateral Agent to remit payment
for such fees and expenses to the Trustee in accordance with the Priority of
Payments or the Priority of Acceleration Payments, as applicable.
(c) The Trustee hereby agrees not to cause the filing of a
petition in bankruptcy against the Issuer or the Co-Issuer for the non-payment
to the Trustee of any amounts provided by this Section 6.8 until at least one
year and one day, or if longer the applicable preference period then in effect,
after the payment in full of all Notes issued under this Indenture.
(d) The amounts payable to the Trustee pursuant to Section 6.8(a)
shall be payable on any Quarterly Payment Date as provided in Section 4.1 of the
Security Agreement, and the Trustee shall have a Lien ranking senior to that of
the Noteholders upon all property and funds held or collected as part of the
Collateral (including funds deposited in the Note Payment Account) to secure
payment of amounts payable to the Trustee under this Section 6.8 not to exceed
such amount with respect to any Quarterly Payment Date; provided that the
Trustee shall not institute any proceeding for enforcement of such Lien except
in connection with an action pursuant to Section 5.3.
Fees applicable to periods shorter than a calendar quarter shall
be prorated based on the number of days within such period. The Trustee shall
receive amounts pursuant to this Section 6.8 and Section 4.1 of the Security
Agreement only to the extent that the payment thereof will not result in an
Event of Default and the failure to pay such amounts to the Trustee will not, by
itself, constitute an Event of Default. Subject to Section 6.11, the Trustee
shall continue to serve as Trustee under this Indenture notwithstanding the fact
that the Trustee shall not have received amounts due it hereunder. No direction
by a Majority of the Controlling Class shall affect the right of the Trustee to
collect amounts owed to it under this Indenture.
If on any date when a fee shall be payable to the Trustee
pursuant to this Indenture insufficient funds are available for the payment
thereof, any portion of a fee not so paid shall be
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deferred and payable on such later date on which a fee shall be payable and
sufficient funds are available therefor.
Section 6.9. 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 6.10. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such, has
a combined capital and surplus of at least $[200,000,000], has long-term debt
rated at least "[A2]" by Moody's and "[A]" by Standard & Poor's and has an
office within the United States. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 6.10, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.10, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article 6.
Section 6.11. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.12.
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuers, the Noteholders, the Program Manager and each Rating
Agency. Upon receiving such notice of resignation, the Issuers shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate,
executed by an Authorized Officer of the Issuer, and an authorized Officer of
the Co-Issuer, one copy of which shall be delivered to the Trustee so resigning
and one copy to the successor trustee or trustees, together with a copy to each
Noteholder and the Program Manager; provided that such successor Trustee shall
be appointed only upon the written consent of a Majority of the Controlling
Class. If no successor trustee shall have been appointed and an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 90 days after the giving of such notice of resignation, the resigning
Trustee, or any Noteholder, on behalf of itself and all others similarly
situated, may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(c) The Trustee may be removed at any time by the Issuer or by a
Majority of the Controlling Class by an instrument delivered to the Trustee at
any time with or without cause.
(d) If at any time:
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(i) the Trustee shall fail to comply with Section 6.10
after written request therefor by the Issuer or by any Noteholder who
has been a bona fide Noteholder for at least six months;
(ii) the Trustee shall cease to be eligible under Section
6.10 and shall fail to resign after written request therefor by the
Issuer or by any Noteholder; or
(iii) the Trustee shall become incapable of acting or shall
be adjudged as bankrupt or insolvent or a receiver or liquidator 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 (subject to Section 6.11(a)), (A) the Issuers, by Issuer
Order, may remove the Trustee with respect to all Notes, or (B) subject to
Section 5.13, any Noteholder who has been a bona fide Noteholder for at least
six months may, on behalf of itself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee with respect
to all Notes and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of the Trustee for any
reason, the Issuers, by Issuer Order, shall promptly appoint a successor Trustee
or Trustees. If the Issuers shall fail, at a time when no Event of Default shall
have occurred and be continuing, to appoint a successor Trustee within 60 days
after such resignation, removal or incapability or the occurrence of such
vacancy, a successor Trustee may be appointed by Act of the Holders of a
Majority of the Controlling Class delivered to the Issuers and the retiring
Trustee. The successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee and supersede any successor
Trustee proposed by the Issuers. If no successor Trustee shall have been so
appointed by the Issuers or such Holders and shall have accepted appointment in
the manner hereinafter provided, any Noteholder may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Issuers shall give prompt notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first class mail, postage prepaid, to
the Program Manager, each Rating Agency and to the Holders as their names and
addresses appear in the Note Register. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office. If the Issuers
fail to mail such notice within ten days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be given at
the expense of the Issuers.
Section 6.12. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuers, the Program Manager and the retiring
Trustee an instrument accepting such appointment. Upon delivery of the required
instruments, the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any other act, deed or conveyance,
shall become vested with all the rights, powers, trusts, duties and obligations
of the retiring Trustee; but, on request of the Issuers or a Majority of any
Class or the successor Trustee, such retiring Trustee shall, upon payment of its
charges then unpaid, execute and deliver
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an instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee, and shall duly assign, transfer and deliver to
such successor Trustee all property and Money held by such retiring Trustee
hereunder, subject nevertheless to its Lien, if any, provided for in Section
6.8(d). Upon request of any such successor Trustee, the Issuers shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor shall be qualified and eligible under
this Article 6.
Section 6.13. Merger, Conversion, Consolidation or Succession to Business of
Trustee.
Any corporation 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 corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article 6, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any of the Notes have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
Section 6.14. Representations and Warranties of Chase Texas.
(a) Organization and Good Standing. Chase Texas has been duly
organized and is validly existing under the laws of the United States and has
the power to conduct its business and affairs as a trustee.
(b) Authorization; Binding Obligations. Chase Texas has the
corporate power and authority to perform the duties and obligations of the
Trustee under this Indenture and the other Trustee Documents. Chase Texas has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Indenture, and all of the documents required to be executed
by Chase Texas pursuant hereto. Upon execution and delivery by the Issuers, this
Indenture will constitute the legal, valid and binding obligation of Chase Texas
enforceable in accordance with its terms.
(c) Eligibility. Chase Texas is eligible under Section 6.10 to
serve as Trustee hereunder.
(d) No Conflict. Neither the execution, delivery and performance
of this Indenture or any other Trustee Document, nor the consummation of the
transactions contemplated hereby or thereby, (i) is prohibited by, or requires
Chase Texas to obtain any consent, authorization, approval or registration
under, any law, statute, rule, regulation, judgment, order, writ, injunction or
decree that is binding upon Chase Texas or any of its properties or assets, or
(ii) will violate any provision of, result in any default or acceleration of any
obligations under, result in the creation or imposition of any Lien pursuant to,
or require any consent under, any agreement to which Chase Texas is a party or
by which it or any of its property is bound.
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(e) No Proceedings. There are no proceedings pending, or to the
best knowledge of Chase Texas, threatened against Chase Texas before any
Federal, provincial or other governmental agency, authority, administrator or
regulatory body, arbitrator, court or other tribunal, foreign or domestic, that
could have a material adverse effect on any action taken or to be taken by Chase
Texas under this Indenture or any of the other Trustee Documents.
Section 6.15. Collateral Trust Provisions.
The Trustee and the Issuers hereby acknowledge and recognize the
appointment of Chase Texas (and its successors and assigns) as Collateral Agent
pursuant to the terms of the Intercreditor Agreement with the power to hold the
Collateral on behalf of the Secured Parties (including the Trustee for the
benefit of the Noteholders).
Section 6.16. Preferential Collection of Claims Against Issuer.
If and when the Trustee shall be or become a creditor, directly
or indirectly, secured or unsecured of the Issuer or the Co-Issuer (or any other
obligor upon the Notes), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Issuer or the
Co-Issuer (or any other such obligor).
ARTICLE 7
COVENANTS
Section 7.1. Payment of Principal and Interest.
The Issuers will duly and punctually pay the principal of and
interest and other amounts owing on the Notes, in accordance with the terms of
the Notes and this Indenture. Amounts properly deducted or withheld under the
Code or other applicable law by any Person from a payment to any Noteholder of
interest and/or principal and/or other amounts shall be considered as having
been paid by the Issuers to such Noteholder for all purposes of this Indenture.
The Trustee shall, unless prevented from doing so for reasons
beyond its reasonable control, give notice to each Noteholder of any such
requirement to deduct or withhold no later than 10 days prior to the date of the
payment from which amounts are required to be deducted or withheld; provided
that despite the failure of the Trustee to give such notice, amounts deducted or
withheld pursuant to applicable tax laws shall be considered as having been paid
by the Issuers as provided above.
For so long as the Class A Notes or the Class B Notes are listed
on the Luxembourg Stock Exchange, the Issuers, or upon Issuer Request, the
Trustee in the name and at the expense of the Issuers, will notify the
Luxembourg Stock Exchange in the event the Class A Notes or the Class B Notes do
not receive scheduled payments of principal or interest on any Quarterly Payment
Date.
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Section 7.2. Maintenance of Office or Agency.
The Issuers hereby appoint the Trustee as Paying Agent for the
payment of principal of and interest and other amounts owing on the Notes and
[LUXEMBOURG PAYING AGENT] as Offshore Paying Agent. The Issuers hereby appoint
the Trustee as the Issuers' agent where notices and demands to or upon the
Issuers in respect of the Notes or this Indenture may be served and where Notes
may be surrendered for registration of transfer or exchange; and for so long as
any Notes are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, the Issuers hereby appoint the Offshore Paying Agent as the
Issuers' agent where notices and demands to or upon the Issuers in respect of
any Class of Notes listed on the Luxembourg Stock Exchange may be served and
where such Notes may be surrendered for registration of transfer or exchange.
The Issuers may at any time and from time to time vary or
terminate the appointment of any such agent or appoint any additional agents for
any or all of such purposes; provided that the Issuers will maintain in Houston,
Texas an agency where notices and demands to or upon the Issuers in respect of
the Notes and this Indenture may be served and, subject to any laws or
regulations applicable thereto, and so long as any Notes are listed on the
Luxembourg Stock Exchange and the rules of such exchange so require, a Paying
Agent and an agent where such Notes may be surrendered for registration of
transfer or exchange having a specified office in Luxembourg; provided, further,
that no Paying Agent shall be appointed in a jurisdiction other than the United
States which subjects payments on the Notes to withholding tax. The Issuers
shall give prompt written notice to the Trustee, each Rating Agency and the
Noteholders of the appointment or termination of any such agent and of the
location and any change in the location of any such office or agency.
If at any time the Issuers shall fail to maintain any such
required office or agency in Houston, Texas or Luxembourg, or shall fail to
furnish the Trustee with the address thereof, presentations and surrenders may
be made (subject to the limitations described in the preceding paragraph) at and
notices and demands may be served on the Issuers, and Notes may be presented and
surrendered for payment to the appropriate Paying Agent for each Class of Notes
at its office (and the Issuers hereby appoint the same as its agent to receive
such respective presentations, surrenders, notices and demands).
Section 7.3. Money for Note Payments to be Held in Trust.
All payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Note Payment Account shall
be made on behalf of the Issuers by the Trustee or a Paying Agent with respect
to payments on the Notes.
When the Issuers shall have a Paying Agent that is not also the
Note Registrar, they shall furnish, or cause the Note Registrar to furnish, no
later than the fifth calendar day after each Record Date a list, if necessary,
in such form as such Paying Agent may reasonably request, of the names and
addresses of the Holders and of the certificate numbers of individual Notes held
by each such Holder.
Whenever the Issuers shall have a Paying Agent other than the
Trustee, they shall, on or before the Quarterly Payment Date or Redemption Date,
as the case may be, direct the
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Trustee to deposit on such Quarterly Payment Date or Redemption Date with such
Paying Agent, if necessary, an aggregate sum sufficient to pay the amounts then
becoming due (to the extent funds are then available for such purpose in the
Note Payment Account), such sum to be held in trust for the benefit of the
Persons entitled thereto and (unless such Paying Agent is the Trustee) the
Issuers shall promptly notify the Trustee of its action or failure so to act.
Any Moneys deposited with a Paying Agent (other than the Trustee) in excess of
an amount sufficient to pay the amounts then becoming due on the Notes with
respect to which such deposit was made shall be paid over by such Paying Agent
to the Trustee for application in accordance with Article 10.
The initial Paying Agents shall be as set forth in Section 7.2.
Any additional or successor Paying Agents shall be appointed by Issuer Order
with written notice thereof to the Trustee[; provided that so long as the Class
A Notes or Class B Notes are rated by the Rating Agencies and with respect to
any additional or successor Paying Agent for the Notes, either (i) the Paying
Agent for the Notes has a rating of not less than "Aa3" or "P-1" by Moody's and
a rating of not less than "AA-" or "A-1+" by Standard & Poor's or (ii) each
Rating Agency confirms that employing such Paying Agent will not adversely
affect its ratings on the Class A Notes or the Class B Notes]. In the event that
such successor Paying Agent ceases to have a rating of at least "Aa3" or "P-1"
by Moody's and a rating of at least "AA-" or "A-1+" by Standard & Poor's and the
ratings on the Class A Notes and the Class B Notes have not been confirmed, the
Issuers shall promptly remove such Paying Agent and appoint a successor Paying
Agent. The Issuers shall not appoint any Paying Agent (other than an initial
Paying Agent) that is not, at the time of such appointment, a depository
institution or trust company subject to supervision and examination by federal
and/or state and/or national banking authorities. The Issuers shall cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee (and if the
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section 7.3, that such Paying Agent will:
(a) allocate all sums received for payment to the Holders of
Notes for which it acts as Paying Agent on each Quarterly Payment Date and
Redemption Date among such Holders in the proportion specified in the applicable
Note Valuation Report or Redemption Date Statement, in each case to the extent
permitted by applicable law;
(b) hold all sums held by it for the payment of amounts due with
respect to the Notes for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and pay such sums to such Persons as herein provided;
(c) if such Paying Agent is not the Trustee, immediately resign
as a Paying Agent and forthwith pay to the Trustee all sums held by it for the
payment of Notes if at any time it ceases to meet the standards set forth above
required to be met by a Paying Agent at the time of its appointment;
(d) if such Paying Agent is not the Trustee, immediately give the
Trustee notice of any Default by the Issuer or Co-Issuer of which it becomes
aware in the making of any payment required to be made; and
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(e) if such Paying Agent is not the Trustee 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 by such Paying Agent for the
payment of the Notes.
The Issuers may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Issuers or by such Paying Agent for the payment of the Notes, such
sums to be held by the Trustee in trust for the benefit of the same Persons for
whom such sums were held by the Issuers or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such Money.
Except as otherwise required by applicable law, any Money
deposited with the Trustee in trust hereunder or with any Paying Agent for the
payment of the principal of or interest or any other amount owing on any Note
and remaining unclaimed for two years after such principal or interest or other
amount has become due and payable shall be paid to the Issuer on Issuer Request;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Issuer or the Co-Issuer for payment of such amounts and all
liability of the Trustee or such Paying Agent with respect to such Money (but
only to the extent of the amounts so paid to the Issuers) shall thereupon cease.
The Trustee or such Paying Agent, before being required to make any such release
of payment, may, but shall not be required to, adopt and employ, at the expense
of the Issuers, any reasonable means of notification of such release of payment,
including, but not limited to, mailing notice of such release to Holders whose
Notes have been called but have not been surrendered for redemption or whose
right to or interest in Monies due and payable but not claimed is determinable
from the records of any Paying Agent, at the last address of record of each such
Holder.
Section 7.4. Listing.
In the case of any Class of Notes with respect to which the
Issuer Order specifies that such Notes are to be listed on any stock exchange,
the Issuer will use its best efforts to obtain and maintain the listing of such
Notes on such stock exchange.
Section 7.5. Statement by Officers as to Default.
The Issuer and the Co-Issuer will deliver to the Trustee an
Officer's certificate as required by Section 4.12 of the Common Agreement.
Section 7.6. Other Covenants of the Issuers.
The Issuers shall duly perform, observe and comply with each of
their obligations, covenants and agreements set forth in Article 3 of the Common
Agreement, all of which are hereby incorporated by reference, mutatis mutandis.
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ARTICLE 8
SUPPLEMENTAL INDENTURES;
AMENDMENTS TO OTHER FINANCING DOCUMENTS
Section 8.1. Supplemental Indentures Without Consent of Noteholders.
Without the consent of the Holders of any Notes, but subject to
Section 4.2 of the Intercreditor Agreement, the Issuers, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, subject
to the requirements of this Section 8.1, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(a) to establish the form and terms of Notes of any Series or
Class C Notes permitted by Sections 2.1 and 2.2 and in accordance with Section
2.9;
(b) to evidence the succession of another Person to the Issuer or
the Co-Issuer and the assumption by any such successor Person of the covenants
of the Issuer or the Co-Issuer herein and in the Notes;
(c) to add to the covenants of the Issuers or the Trustee for the
benefit of the Holders of all of the Notes or to surrender any right or power
herein conferred upon the Issuers;
(d) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee, or add to the conditions, limitations or restrictions on
the authorized amount, terms and purposes of the issue, authentication and
delivery of the Notes;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Article 6; or
(f) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision herein or
to make any other provisions with respect to matters or questions arising under
this Indenture; provided such other provisions shall not adversely affect the
interest of the Holders in any material respect.
The Trustee is hereby authorized to join in the execution of any
such Supplemental Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such Supplemental Indenture which affects the
Trustee's own rights, duties, liabilities or indemnities under this Indenture or
otherwise, except to the extent required by law.
If any Class A or Class B Note is Outstanding, the Trustee shall
not enter into any such Supplemental Indenture if, as a result of such
Supplemental Indenture, the rating of any such Notes would be reduced or
withdrawn. At the cost of the Issuers, the Trustee shall provide to Moody's and
Standard & Poor's, for so long as any Class A or Class B Notes shall remain
Outstanding, and to all Holders of Notes, as their names and addresses appear on
the Note Registrar, a copy of any proposed Supplemental Indenture at least 10
days prior to the execution thereof by the Trustee, and, for so long as such
Notes are Outstanding, request written
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confirmation that each Rating Agency will not, as a result of such Supplemental
Indenture, cause the rating of any such Class of Notes to be reduced or
withdrawn, and, as soon as practicable after the execution by the Trustee and
the Issuers of any such Supplemental Indenture, provide to each Rating Agency
and to all Holders of Notes, as their names and addresses appear on the Note
Registrar, copy of the executed Supplemental Indenture.
Subject to clause (f) above of this Section 8.1, unless notified
by a Majority of any Class of Notes that such Class will be adversely affected,
the Trustee may determine whether or not the Holders would be adversely affected
by such change (after giving notice of such change to the Holders). Such
determination shall be conclusive and binding on all present and future Holders.
The Trustee shall not be liable for any such determination made in good faith
and in reliance in good faith upon an Opinion of Counsel delivered to the
Trustee.
Section 8.2. Supplemental Indentures With Consent of Noteholders.
With the consent of the Holders of not less than a Majority in
Outstanding Amount of each Class adversely affected thereby, by Act of said
Holders delivered to the Trustee and the Issuers, the Trustee and Issuers may,
subject to Section 4.2 of the Intercreditor Agreement and the requirements of
this Section 8.2, enter into one or more indentures supplemental hereto to add
any provisions to, or change in any manner or eliminate any of the provisions
of, this Indenture or modify in any manner the rights of the Holders of the
Notes of such Class under this Indenture; provided that notwithstanding anything
in this Indenture to the contrary, no such Supplemental Indenture shall, without
the consent of each Holder affected thereby:
(a) change the Stated Maturity of the principal of or the due
date of any installment of interest on or principal of any Note, reduce the
principal amount thereof or the Note Interest Rate thereon, or the Redemption
Price with respect thereto, or change the earliest date on which any Note may be
redeemed, or change any place where, or the coin or currency in which, any Note
or the principal thereof or interest thereon is payable;
(b) reduce the percentage of the Outstanding Amount of Holders of
Notes of each Class whose consent is required for the authorization of any
Supplemental Indenture or for any waiver of compliance with certain provisions
of this Indenture or certain Events of Default or their consequences provided
for in this Indenture or the other Financing Documents;
(c) modify any of the provisions of this Section, except to
increase any such percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(d) modify the definition of the terms "Outstanding", "Priority
of Payments" or "Priority of Acceleration Payments";
(e) reduce the permitted minimum denominations of any Class of
Notes;
(f) modify any of the provisions of this Indenture or the
Financing Documents in such a manner as to affect the calculation of the amount
of any payment of interest or Premium
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on or principal of any Note on any Quarterly Payment Date or to affect the
rights of the Holders of Notes to the benefit of any provisions for the
redemption of such Notes contained herein;
(g) change the provisions of this Indenture or any of the
Financing Documents relating to the application of proceeds of any Collateral to
the payment of principal of or interest on the Notes;
(h) impair the right to institute suit for the enforcement of any
payment of principal or interest on the Notes on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the applicable Redemption
Date);
(i) impair or adversely affect the Collateral except as otherwise
expressly permitted in the Financing Documents;
(j) permit the creation of any Lien ranking prior to or on a
parity with the Lien of the Security Documents with respect to any part of the
Collateral, or terminate such Lien on any Collateral subject to the Security
Documents except as otherwise expressly permitted therein, or deprive the Holder
of any Note of the security afforded by the Lien of the Security Documents; or
(k) modify any provision of this Section 8.2.
Not later than 15 Business Days prior to the execution of any
proposed Supplemental Indenture pursuant to this Section 8.2, the Trustee, at
the expense of the Issuers shall mail to the Noteholders and for so long as any
Class A Notes or Class B Notes are Outstanding, each Rating Agency, a copy of
such Supplemental Indenture, or a description of the substance thereof together
with a written notice reciting in substance the provisions of the next following
paragraph and the Issuers shall request each Rating Agency to determine and
certify to the Trustee and the Issuers whether, as a result of such Supplemental
Indenture, such Rating Agency would cause the rating of any such Class of Notes
to be reduced or withdrawn.
Unless notified by a Majority of any Class of Notes that such
Class will be adversely affected, the Trustee may determine whether or not the
Holders would be adversely affected by such change (after giving notice of such
change to the Holders). Such determination shall be conclusive and binding on
all present and future Holders. The Trustee shall not be liable for any such
determination made in good faith and in reliance in good faith upon an Opinion
of Counsel delivered to the Trustee.
It shall not be necessary for any Act of Noteholders under this
Section 8.2 to approve the particular form of any proposed Supplemental
Indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuers and the Trustee of
any Supplemental Indenture pursuant to this Section 8.2, the Trustee, at the
expense of the Issuers, shall mail to the Holders of the Notes, the Program
Manager, and, for so long as any Class A Notes or Class B Notes are outstanding,
each Rating Agency, a copy thereof. Any failure of the Trustee to publish or
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such Supplemental Indenture.
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Any Supplemental Indenture executed in accordance with the
provisions of Section 2.9 shall not be considered an amendment to this Indenture
for the purposes of this Section.
Section 8.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
Supplemental Indenture permitted by this Article 8 or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in
relying in good faith upon an Opinion of Counsel stating that the execution of
such Supplemental Indenture is authorized or permitted by this Indenture and
that all conditions precedent thereto have been complied with. The Trustee may,
but shall not be obligated to, enter into any such Supplemental Indenture which
affects the Trustee's own rights, duties or indemnities under this Indenture or
otherwise. The Program Manager shall not be bound by any amendment to this
Indenture which imposes greater duties on the Program Manager unless the Program
Manager shall have consented thereto in writing.
Section 8.4. Effect of Supplemental Indentures.
Upon the execution of any Supplemental Indenture under this
Article 8, this Indenture shall be modified in accordance therewith, and such
Supplemental Indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes theretofore and thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 8.5. Conformity with Trust Indenture Act.
Every Supplemental Indenture executed pursuant to this Article 8
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 8.6. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
Supplemental Indenture pursuant to this Article 8 may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such Supplemental Indenture. If the Issuers shall so determine,
new Notes, so modified as conform in the opinion of the Trustee and the Issuers
to any such Supplemental Indenture, may be prepared and executed by the Issuers
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
Section 8.7. Amendments, Modifications, Waivers, etc. to Other Financing
Documents.
In the event that under the terms of any Financing Document, the
consent of the Trustee on behalf of the Noteholders is required with respect to
any amendment, modification, waiver, supplement, or authorization of a breach or
proposed breach, with respect to such Financing Document, of a type described in
Section 8.1 with respect to this Indenture, the Trustee may in its discretion,
on the same terms and with the same effect as provided in Section 8.1, determine
to grant such consent. The Trustee shall not be liable for any such
determination made in good faith and on reliance upon an Opinion of Counsel
delivered to the Trustee. In the
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event that under the terms of any Financing Document a vote of all or any of the
Noteholders is required with respect to any amendment, modification, waiver,
supplement, or authorization of a breach or proposed breach not referred to in
the preceding sentence, the Trustee shall, in accordance with the directions
received from the Noteholders in accordance with Section 13.2 cast votes on
their behalf (individually and not as a whole).
ARTICLE 9
REDEMPTION OF NOTES
Section 9.1. Redemption at the Option of the Issuers; Election to Redeem.
The Notes will be subject to optional redemption as set forth in
Section 10.2 of the Common Agreement. No optional redemption shall be effective
until the Redemption Price has been paid in full.
Section 9.2. Notice to Trustee of Optional Redemption.
In the event of any redemption pursuant to Section 10.2 of the
Common Agreement, the Issuer shall, as soon as practicable upon knowledge
thereof, notify the Trustee of such Redemption Date, the applicable Record Date,
the principal amount of Notes to be redeemed on such Redemption Date and the
Redemption Price of such Notes in accordance with Section 10.2 of the Common
Agreement.
Section 9.3. Notice of Optional Redemption or Maturity by the Trustee.
Notice of redemption pursuant to Section 10.2 of the Common
Agreement shall be given by the Trustee by first class mail, postage prepaid,
mailed at least ten Business Days (but not more than thirty Business Days) prior
to the applicable Record Date to each Holder of Notes at such Holder's address
in the Note Register. In addition, the Trustee shall cause to be published in
the Authorized Newspaper the notice of redemption given pursuant to Section 10.2
of the Common Agreement at least ten Business Days (but not more than thirty
Business Days) prior to the applicable Record Date.
All notices of redemption shall state:
(a) the applicable Redemption Date;
(b) the applicable Record Date;
(c) the Redemption Price;
(d) the principal amount of each Class (and, in the case of Class
A Notes or Class B Notes, each Series) of Notes to be redeemed and that interest
on such principal amount of Notes shall cease to accrue on the date specified in
the notice;
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(e) the place or places where such Notes to be redeemed in whole
are to be surrendered for payment of the Redemption Price, which shall be the
office or agency of the Paying Agent to be maintained as provided in Section
7.2; and
(f) that the Issuers have the option to withdraw such redemption
notice up to the sixth Business Day prior to the Redemption Date.
The Issuers shall have the option to withdraw the notice of
redemption up to the sixth Business Day prior to the scheduled Redemption Date
by written notice to the Trustee.
At the cost of the Issuers, the Trustee shall give notice of any
withdrawal by publication once in an Authorized Newspaper or overnight courier
guaranteeing next day delivery, sent not later than the fourth Business Day
prior to the scheduled Redemption Date, to each Holder of Notes to be redeemed
at such Holder's address in the Note Register.
Notice of redemption shall be given by the Issuers or, at the
Issuers' request, by the Trustee in the name and at the expense of the Issuers.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Note selected for redemption shall not impair or affect the validity of the
redemption of any other Notes.
Section 9.4. Mandatory Redemption.
The Notes will be subject to mandatory redemption as set forth in
Section 10.3 of the Common Agreement.
Section 9.5. Notice to Trustee of Mandatory Redemption.
In the event of any redemption pursuant to Section 10.3 of the
Common Agreement, the Issuer shall, as soon as practicable upon knowledge
thereof, notify the Trustee of such Redemption Date, the applicable Record Date,
the principal amount of Notes to be redeemed on such Redemption Date and the
Redemption Price of such Notes in accordance with Section 10.3 of the Common
Agreement.
Section 9.6. Notice of Mandatory Redemption or Maturity by the Trustee.
Notice of redemption pursuant to Section 10.3 of the Common
Agreement shall be given by the Issuer, or at the Issuer's request, by the
Trustee by first class mail, postage prepaid, mailed at least ten Business Days
(but not more than thirty Business Days) prior to the applicable Record Date to
each Holder of Notes at such Holder's address in the Note Register. In addition,
the Trustee shall cause to be published in the Authorized Newspaper the notice
of redemption given pursuant to Section 10.3 of the Common Agreement at least
ten Business Days (but not more than thirty Business Days) prior to the
applicable Record Date.
All notices of redemption shall state:
(a) the applicable Redemption Date;
(b) the applicable Record Date;
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(c) the amount of the redemption;
(d) the principal amount of each Class (and, in the case of Class
A Notes or Class B Notes, each Series) of Notes to be redeemed and that interest
on such principal amount of Notes shall cease to accrue on the date specified in
the notice; and
(e) the place or places where such Notes to be redeemed in whole
are to be surrendered for payment of the amount of such redemption, which shall
be the office or agency of the Paying Agent to be maintained as provided in
Section 7.2.
Notice of redemption shall be given by the Issuers or, at the
Issuers' request, by the Trustee in the name and at the expense of the Issuers.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Note selected for redemption shall not impair or affect the validity of the
redemption of any other Notes.
Section 9.7. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after the Redemption Date
(unless the Issuers shall default in the payment of the Redemption Price and
accrued interest) such Notes shall cease to bear interest on the Redemption
Date. Upon final payment on a Note to be redeemed, the Holder shall present and
surrender such Note at the place specified in the notice of redemption on or
prior to such Redemption Date; provided that if there is delivered to the
Issuers and the Trustee such security or indemnity as may be required by them to
save each of them harmless and an undertaking thereafter to surrender such Note,
then, in the absence of notice to the Issuers or the Trustee that the applicable
Note has been acquired by a bona fide purchaser, such final payment shall be
made without presentation or surrender. Installments of interest on Notes of a
Class (and, in the case of Class A and/or Class B Notes, a Series) so to be
redeemed whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Notes, or one or more predecessor Notes,
registered as such at the close of business on the relevant Record Date
according to the terms and provisions of Section 2.6(e).
If any Note called for redemption shall not be paid upon
surrender thereof for redemption, the principal thereof shall, until paid, bear
interest from the Redemption Date at the applicable Note Interest Rate for each
successive Interest Accrual Period the Note remains Outstanding.
Section 9.8. Pro Rata Application.
All redemptions of Notes pursuant to this Article 9 shall be
allocated on a pro rata basis according to their respective Outstanding
principal amounts among all Outstanding Notes
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of a particular Class, without preference or priority of any kind among the
Notes of such Class (or any Series thereof).
ARTICLE 10
ACCOUNTS, ACCOUNTINGS AND RELEASES
Section 10.1. Note Payment Account; Payment on the Notes.
(a) The Trustee shall, prior to the Closing Date, establish a
single, segregated trust account which shall be designated as the Note Payment
Account, which shall be held in trust in the name of the Trustee for the benefit
of the Noteholders, and over which the Trustee shall have exclusive control and
the sole right of withdrawal into which the Trustee shall from time to time
deposit all payments received from the Collateral Agent in respect of payments
due to the Noteholders. The only permitted withdrawal from or application of
funds on deposit in, or otherwise to the credit of, the Note Payment Account
shall be to pay the interest, premium, if any, on and the principal of the Notes
in accordance with their terms and the provisions of this Indenture, each in
accordance with the Priority of Payments or the Priority of Acceleration
Payments, as applicable. The Trustee agrees to give the Issuers immediate notice
if the Note Payment Account or any funds on deposit therein, or otherwise to the
credit of the Note Payment Account, shall become subject to any writ, order,
judgment, warrant of attachment, execution or similar process. The Issuers shall
not have any legal, equitable or beneficial interest in the Note Payment
Account. The Note Payment Account shall remain at all times with a financial
institution [having a long-term debt rating of at least "Aa2" by Moody's and
"AA" by S&P].
(b) All monies or property collected or received by or on behalf
of the Trustee from the Collateral Agent on any Quarterly Payment Date or on any
date following an Acceleration pursuant to the Security Agreement shall be paid
out of the Note Payment Account on such date to the Noteholders in the order
specified in the Priority of Payments or the Priority of Acceleration Payments,
as applicable, and to the extent available.
(c) Any drawings under the Backup Facility or the Net Proceeds
from an issuance of Class A Notes or Class B Notes made, in each instance, for
the purpose of redeeming and/or refinancing Class A Notes, Class B Notes or
Class C Notes pursuant to Sections 10.2(a)(ii), 10.2(a)(iii) or 10.2(a)(iv) of
the Common Agreement and all monies or property collected or received by or on
behalf of the Trustee on any Redemption Date in connection with the redemption
of any Notes shall be credited to and paid out from the Note Payment Account to
the Holders of the Notes being so redeemed in accordance with and to the extent
provided in the Priority of Payments.
Section 10.2. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant
thereto.
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(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Notes are listed, with the Commission, with the Issuer and with the
Program Manager. The Issuer will notify the Trustee in accordance with Section
13.3 when any Notes are listed on any stock exchange.
(c) The Trustee shall supply in a timely fashion to the Issuers
and the Program Manager any information regularly maintained by the Trustee that
the Issuers or the Program Manager may from time to time reasonably request in
order to complete the Note Valuation Report or to provide any other information
reasonably available to the Trustee by reason of its acting as Trustee hereunder
and required to be provided by this Article 10 or to permit the Program Manager
to perform its obligations under the Management Agreement.
Section 10.3. Reports by Issuer.
The Issuer shall:
(a) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports and
the information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if
the Issuer is not required to file information, documents or reports pursuant to
either of said Sections, then it shall file with the Trustee and the Commission,
in accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, as their names and addresses
appear in the Note Register, within 30 days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required to be
filed by the Issuer pursuant to paragraphs (a) and (b) of this Section as may be
required by rules and regulations prescribed from time to time by the
Commission.
Section 10.4. Accountings.
(a) Valuation Report. Not later than the Business Day immediately
following the Determination Date the Trustee shall provide the Program Manager
with any information necessary to complete the Valuation Report contemplated by
Section 6.1 of the Common Agreement. The Trustee shall deliver to each
Noteholder, upon written request therefor, at the address shown on the Note
Register, a copy of the Valuation Report and a copy of the statement
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prepared by a firm of Independent certified public accountants pursuant to
Section 6.2 of the Common Agreement promptly after receipt thereof from the
Program Manager.
(b) Quarterly Payment Date Instructions. Promptly following
completion of the Valuation Report and transfer of any amounts from the
Collection Account to the Note Payment Account pursuant to the Security
Agreement, the Issuers (or the Program Manager acting on behalf of the Issuers)
shall provide instructions to the Trustee to withdraw on the related Quarterly
Payment Date from the Note Payment Account and pay or transfer amounts set forth
in such report in the manner specified, and in accordance with the priorities
established, in Section 10.1(b).
(c) Redemption Date Instructions. Not less than five Business
Days after receiving an Issuer Request requesting information regarding a
redemption of the Notes of a Class as of a proposed Redemption Date set forth in
such Issuer Request, the Trustee shall provide the necessary information (to the
extent it is available to the Trustee) to the Program Manager, and the Program
Manager shall compute the following information and provide such information in
a statement (the "Redemption Date Statement") delivered to the Trustee:
(i) the Outstanding Amount of the Notes of the Class or
Classes to be redeemed as of such Redemption Date;
(ii) the amount of accrued interest due on such Notes as
of the last day of the Interest Accrual Period immediately preceding
such Redemption Date;
(iii) the Redemption Price of the Notes to be redeemed as
of such Redemption Date; and
(iv) the amount in the Collection Account available for
application to the redemption of such Notes.
(d) If the Trustee shall not have received any accounting
provided for in this Section 10.4 on the first Business Day after the date on
which such accounting is due to the Trustee, the Trustee shall use reasonable
efforts to cause such accounting to be made by the applicable Quarterly Payment
Date or Redemption Date and shall be reimbursed therefor in accordance with
Section 6.8 hereof.
Section 10.5. Reports to Rating Agencies.
In addition to the information and reports specifically required
to be provided to the Rating Agencies pursuant to the terms of this Indenture
and the other Financing Documents, the Issuers shall provide or procure to
provide the Rating Agencies with (a) all information or reports delivered to the
Trustee hereunder and (b) such additional information as the Rating Agencies may
from time to time reasonably request and the Issuers determine in their sole
discretion may be obtained and provided without unreasonable burden or expense.
The Issuers shall promptly notify the Trustee if the rating of any Class of
Notes has been, or it is known by the Issuers that such rating will be, changed
or withdrawn. Upon receipt of such notice, the Trustee, in the name and at the
expense of the Issuers, shall notify the Luxembourg Stock Exchange of any
reduction or withdrawal in the rating of any Class of Notes.
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Section 10.6. Issuers to Furnish Trustee Names and Addresses of Holders.
The Issuers will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than [15] days after each regular
Record Date, a list, is such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within [30] days after receipt of the Issuer of any such request, a list of
similar form and content as of a date not more than [15] days prior to the time
such list is furnished.
Section 10.7. Preservation of Information; Communication to Holders.
(a) The Trustee shall preserve, in as current a form as
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 10.6 and the names
and addresses of Holders received by the Trustee in its capacity as Note
Registrar or Paying Agent. The Trustee may destroy any list furnished to it as
provided in Section 10.6 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Notes, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
ARTICLE 11
APPLICATION OF MONIES
Section 11.1. Trust Accounts.
By Issuer Order, the Trustee shall invest all monies held by, or
deposited with, the Trustee in the Note Payment Account, in Eligible Investments
having stated maturities no later than the next Quarterly Payment Date. All
interest and other income from such investments shall be deposited in the Note
Payment Account, any gain realized from such investments shall be credited to
the Note Payment Account, and any loss resulting from such investments shall be
charged to the Note Payment Account. Chase Texas and/or its Affiliates may
receive compensation in connection with the investment of funds in Eligible
Investments, as specified by Issuer Order. The Trustee shall not in any way be
held liable by reason of any insufficiency of funds in the Note Payment Account
resulting from any loss relating to any such investment, except with respect to
investments in obligations of the Trustee in its commercial capacity or any
Affiliate thereof. To the extent not so invested in Eligible Investments as
herein provided, such Monies shall be deposited in one or more trust accounts,
maintained at a financial institution whose long-term rating is at least
"[Baa1]" by Moody's and at least "[BBB+]" by Standard & Poor's, to be held in
trust for the benefit of the Noteholders. To the extent Monies deposited in a
trust account exceed amounts insured by the Bank Insurance Fund or Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation, or any agencies
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succeeding to the insurance functions thereof, and are not fully collateralized
by direct obligations of the United States of America, the Trustee shall invest
such excess in Eligible Investments as provided above.
ARTICLE 12
NOTEHOLDERS' RELATIONS
Section 12.1. Subordination.
(a) Anything in this Indenture or the Notes or any other
Financing Document to the contrary notwithstanding, the Issuers and the Holders
of the Class B Notes and the Class C Notes agree for the benefit of the Holders
of the Class A Notes and the other Senior Secured Parties that the Class B Notes
and the Class C Notes and the Issuers' rights in and to the Collateral (the
"Subordinate Interests") shall be subordinate and junior to the Class A Notes
and the other Senior Secured Obligations to the extent and in the manner set
forth in Section 3.1 of the Intercreditor Agreement. If any Event of Default has
not been cured or waived and Acceleration occurs in accordance with Article 5,
including, without limitation, as a result of an Event of Default specified in
Section 5.1(h) or (i) of the Common Agreement, all principal of and interest on
the Class A Notes, and all other amounts owing hereunder to the Holders of the
Class A Notes, shall be paid in full in Cash before any further payment or
distribution is made to the Holders of the Subordinate Interests. The Holders of
the Class B Notes and the Holders of the Class C Notes agree, for the benefit of
the Holders of the Class A Notes, not to cause the filing of a petition in
bankruptcy against the Issuer or the Co-Issuer for failure to pay them amounts
due under the Class B Notes or the Class C Notes, respectively or hereunder
until the payment in full of the Class A Notes and not before one year and one
day have elapsed since such payment or, if longer, the applicable preference
period then in effect.
(b) Anything in this Indenture or the Notes or any other
Financing Document to the contrary notwithstanding, the Issuers and the Holders
of the Class C Notes agree for the benefit of the Holders of the Class B Notes
that the Class C Notes and the Issuers' rights in and to the Collateral (also,
"Subordinate Interests") shall be subordinate and junior to the Class B Notes to
the extent and in the manner set forth in this Indenture and the other Financing
Documents. If any Event of Default has not been cured or waived and Acceleration
occurs in accordance with Article 5, including, without limitation, as a result
of an Event of Default specified in Section 5.1(g) or (h) of the Common
Agreement, all principal of and interest on the Class B Notes, and all other
amounts owing hereunder to the Holders of Class B Notes, shall be paid in full
in Cash before any further payment or distribution is made on account of the
Subordinate Interests. The Holders of the Class C Notes agree, for the benefit
of the Holders of the Class B Notes, not to cause the filing of a petition in
bankruptcy against the Issuer or the Co-Issuer for failure to pay to them
amounts due under the Class C Notes or hereunder until the payment in full of
the Class B Notes and not before one year and one day have elapsed since such
payment or, if longer, the applicable preference period then in effect.
(c) In the event that notwithstanding the provisions of this
Indenture, any holder of any Subordinate Interests shall have received any
payment or distribution in respect of such Subordinate Interests contrary to the
provisions of this Indenture and the other Financing
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Documents, then, unless and until the Class A Notes and the other Senior Secured
Obligations or Class B Notes, as the case may be, and all other amounts owing
hereunder to the Holders thereof, shall have been paid in full in Cash, such
payment or distribution shall be received and held in trust for the benefit of,
and shall forthwith be paid over and delivered to, the Collateral Agent, which
shall pay and deliver the same to the Holders of Class A Notes and the other
Senior Secured Parties or Class B Notes, as the case may be, in accordance with
the Security Agreement.
(d) Each Holder of Subordinate Interests agrees with all Holders
of Class A Notes and all other Senior Secured Parties or of Class B Notes, as
the case may be, that such Holder of Subordinate Interests shall not demand,
accept, or receive any payment or distribution in respect of such Subordinate
Interests in violation of the provisions of this Indenture including, without
limitation, this Section 12.1; provided that after the Class A Notes and the
other Senior Secured Obligations or Class B Notes, as the case may be, and all
other amounts owing hereunder to the Holders thereof, have been paid in full in
Cash, the Holders of Subordinate Interests shall be fully subrogated to the
rights of the Holders of the Class A Notes and all other Senior Secured Parties
or Class B Notes, as the case may be. Nothing in this Section 12.1 shall affect
the obligation of the Issuers to pay Holders of Subordinate Interests.
Section 12.2. Standard of Conduct.
In exercising any of its or their voting rights, rights to direct
and consent or any other rights as a Noteholder under this Indenture, subject to
the terms and conditions of this Indenture, including, without limitation,
Article 5, a Noteholder or Noteholders shall not have any obligation or duty to
any Person or to consider or take into account the interests of any Person and
shall not be liable to any Person for any action taken by it or them or at its
or their direction or any failure by it or them to act or to direct that an
action be taken, without regard to whether such action or inaction benefits or
adversely affects any Noteholder, the Issuers or any other Person.
Section 12.3. Right to List of Holders.
The Issuers and any Beneficial Owner shall have the right, upon
five Business Days' prior notice to the Trustee, to inspect the Note Register.
ARTICLE 13
MISCELLANEOUS
Section 13.1. Form of Documents Delivered to Trustee.
In the 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 or covered 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.
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Any certificate or opinion of an Authorized Officer of the
Issuer, the Co-Issuer or the Program Manager may be based, insofar as it relates
to legal matters, upon a certificate or opinion of, or representations by,
counsel, unless such Authorized 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 of an Authorized Officer of the Issuer or the
Co-Issuer or the Program Manager or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, the Issuer, the Co-Issuer, the Program Manager or any other
Persons, stating that the information with respect to such factual matters is in
the possession of the Issuer, the Co-Issuer, the Program Manager or such other
Person, unless such Authorized Officer of the Issuer or the Co-Issuer or such
counsel knows that the certificate or opinion or representations with respect to
such matters are erroneous. Any Opinion of Counsel may also be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer of the Issuer, the Co-Issuer or the
Program Manager, stating that the information with respect to such matters is in
the possession of the Issuer, the Co-Issuer or the Program Manager, unless such
counsel knows that the certificate or opinion or representations with respect to
such matters are erroneous. 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.
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Trustee at the request or direction
of the Issuer or the Co-Issuer, then notwithstanding that the satisfaction of
such condition is a condition precedent to the Issuer's or the Co-Issuer's
rights to make such request or direction, the Trustee shall be protected in
acting in accordance with such request or direction if it does not have
knowledge of the occurrence and continuation of such Default or Event of Default
as provided in Section 6.1(d).
Section 13.2. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuers. Such instrument or instruments (and the action or actions embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. 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 conclusive in favor of the
Trustee and the Issuers, if made in the manner provided in this Section 13.2.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
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(c) The principal amount and registered numbers of Notes held by
any Person, and the date of his holding the same, shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
(and any transferee thereof) of such Note and of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be done by the Trustee or the Issuers in
reliance thereon, whether or not notation of such action is made upon such Note.
Section 13.3. Notices, etc., to Trustee, the Issuers, the Program Manager and
the Rating Agencies.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Noteholder or by the Issuer or the
Co-Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to and mailed, by certified mail, return receipt
requested, hand delivered, sent by overnight courier service guaranteeing next
day delivery or by telecopy in legible form, to the Trustee addressed to it at
its Corporate Trust Office, telecopy no. 713-216-2101, Attention: Global Trust
Services - Enron International CPO, L.P., or at any other address previously
furnished in writing to the Issuers or Noteholder by the Trustee;
(b) the Issuers by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first class postage prepaid, hand delivered,
sent by overnight courier service or by telecopy in legible form, to the Issuer
addressed to it at ____________________, Attention: _____________, telecopy no.
[____________], or at any other address previously furnished in writing to the
Trustee by the Issuer or the Co-Issuer, as the case may be;
(c) the Program Manager by the Issuers or the Trustee shall be
sufficient for every purpose hereunder if in writing and mailed, first class
postage prepaid, hand delivered, sent by overnight courier service or by
telecopy in legible form, to the Program Manager addressed to it at
_____________________, Attention: ____________, telecopy no. ________________,
or at any other address previously furnished in writing to the Issuers or the
Trustee by the Program Manager; or
(d) the Rating Agencies by the Issuers, the Program Manager or
the Trustee shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first class postage
prepaid, hand delivered, sent by overnight courier service or by telecopy in
legible form, addressed to Moody's Investors Service, 99 Church Street, New
York, New York 10007, telecopy no. (212) 553-0355, Attention: CBO/CLO Monitoring
and to Standard & Poor's, 26 Broadway, 10th Floor, New York, New York 10004,
Attention: Surveillance Group, telecopy no. (212) 208-0020.
Delivery of any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents made as provided above will be
deemed effective: (i) if in
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writing and delivered in person or by overnight
courier service, on the date it is delivered; (ii) if sent by facsimile
transmission, on the date that transmission is received by the recipient in
legible form (it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the sender's
facsimile machine); and (iii) if sent by mail, on the date that mail is
delivered or its delivery is attempted; in each case, unless the date of that
delivery (or attempted delivery) or that receipt, as applicable, is not a
Business Day or that communication is delivered (or attempted) or received, as
applicable, after the close of business on a Business Day, in which case that
communication shall be deemed given and effective on the first following day
that is a Business Day.
Section 13.4. Notices and Reports to Noteholders; Waiver.
Except as otherwise expressly provided herein, where this
Indenture provides for a report to Holders or for a notice to Holders of Notes
of any event,
(a) such report or notice shall be sufficiently given to Holders
of Notes if in writing and mailed, first class postage prepaid, to each Holder
of a Note affected by such event, at the address of such Holder as it appears in
the Note Register, not earlier than the earliest date and not later than the
latest date, prescribed for the giving of such report or notice; and
(b) such report or notice shall be in the English language.
Such reports or notices will be deemed to have been given on the
date of such mailing.
The Trustee will deliver to the Holder of any Class A or Class B
Note shown on the Note Register (or the Issuer will deliver to the Holder of any
Class C Note) any readily available information or notice requested to be so
delivered, at the expense of the Issuers. In addition, for so long as any Class
of Notes is listed on the Luxembourg Stock Exchange and so long as the rules of
such exchange so require, notices to the Holders of such Notes shall also be
given by publication in the Authorized Newspaper.
Neither the failure to mail any notice, nor any defect in any
notice so mailed, to any particular Holder of a Note shall affect the
sufficiency of such notice with respect to other Holders of Notes. In case by
reason of the suspension of regular mail service or by reason of any other cause
it shall be impracticable to give such notice by mail, then such notification to
Holders of Notes as shall be made with the approval of the Trustee (or, in the
case of Class C Notes, the Issuer) shall constitute a sufficient notification to
such Holders for every purpose hereunder.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any 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 Noteholders 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 the event that, by reason of the suspension of the regular
mail service as a result of a strike, work stoppage or similar activity, it
shall be impractical to mail notice of any
-58-
<PAGE> 65
event to Noteholders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
Section 13.5. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 13.6. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuers
shall bind their respective successors and assigns, whether so expressed or not.
Except as expressly permitted by the Financing Documents, the Issuers may not
transfer any interest or obligation in or under this Indenture (whether by way
of security or otherwise).
Section 13.7. Separability.
In case any provision in this Indenture or in the Notes 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 13.8. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the Program Manager, the Noteholders and the Senior Secured Parties,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 13.9. Legal Holidays.
In the event that the date of any Quarterly Payment Date or
Redemption Date shall not be a Business Day, then notwithstanding any other
provision of the Notes or this Indenture, payment shall not be made on such
date, but shall be made on the next succeeding Business Day with the same force
and effect as if made on the nominal date of any such Quarterly Payment Date or
Redemption Date, as the case may be, and no interest shall accrue on such
payment for the period from and after any such nominal date.
Section 13.10. Governing Law.
THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW.
-59-
<PAGE> 66
Section 13.11. Execution of other Transaction Documents; Conflicts.
Simultaneously with the execution and delivery of this
Indenture, the Trustee shall enter into the Intercreditor Agreement and the
Common Agreement, on behalf of itself and all Holders of the Outstanding Notes
and all future Holders of any of the Notes. All rights, powers and remedies
available to the Trustee and the Holders of the Outstanding Notes, and all
future Holders of any of the Notes, with respect to the Collateral, or otherwise
pursuant to the Security Agreement, shall be subject to the Intercreditor
Agreement and the Common Agreement. In the event of any conflict or
inconsistency between the terms and provisions of this Indenture and the terms
and provisions of the Common Agreement, the Security Agreement and the
Intercreditor Agreement, the terms and provisions of the Common Agreement, the
Security Agreement and the Intercreditor Agreement shall govern and control.
Section 13.12. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 13.13. Incorporation of Certain Terms of the Common Agreement.
Without in any way limiting the provisions of the Common
Agreement applicable to this Agreement, the provisions of Article 12 of the
Common Agreement is incorporated in this Agreement by reference, as if set out
in this Agreement in full, mutatis mutandis.
Section 13.14. Submission to Jurisdiction.
(a) Except as set forth in subsection (b), the Issuers hereby
irrevocably submit to the non-exclusive jurisdiction of any New York State or
federal court sitting in the Borough of Manhattan in The City of New York in any
action or proceeding arising out of or relating hereto or to the Notes, and the
Issuers hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such New York State or federal court.
The Issuers hereby irrevocably waive, to the fullest extent that they may
legally do so, any defense which they may now or hereafter have to the laying of
the venue of any such proceeding brought in such court and any claim that any
such proceeding brought in such court has been brought in an inconvenient forum
and to the maintenance of such action or proceeding. The Issuers irrevocably
consent to the service of any and all process in any action or proceeding by the
mailing or delivery of copies of such process to it at the address set forth in
Section 13.3. The Issuers agree that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Notwithstanding the
foregoing, no document filed, assertion made, or issue adjudicated in any court
or other arbitral proceeding shall have a collateral, judicial, or other
estoppel or res judicata effect on any arbitral proceeding that is subject to
Section 11.11 of the Management Agreement.
(b) The foregoing submission to jurisdiction is not intended to
and shall not apply to any claim, controversy, issue or accounting bearing on
Article 9 of the Enron Support Agreement except insofar as such claim,
controversy, issue or accounting arises in connection with a motion to confirm,
vacate, or modify an arbitration award rendered pursuant to Section 11.11 of the
Management Agreement.
-60-
<PAGE> 67
IN WITNESS WHEREOF, we have set our hands on this Indenture as of
the ____ day of ______, 1998.
ENRON INTERNATIONAL CPO, L.P.,
By: Enron CPO Holdings, Inc.,
its general partner
By:
--------------------------------------
Name:
Title:
ENRON INTERNATIONAL CPO, INC.,
By:
--------------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
not in its individual capacity (except
as expressly set forth herein) but
solely as Trustee
By:
--------------------------------------
Name:
Title:
-61-
<PAGE> 1
EXHIBIT 4.4
Draft
8/7/98
- --------------------------------------------------------------------------------
ENRON INTERNATIONAL CPO, L.P.,
as Issuer,
ENRON INTERNATIONAL CPO, INC.,
as Co-Issuer,
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
[NAME OF LIQUIDITY FACILITY AGENT],
as Liquidity Facility Agent
BACKUP FACILITY AGENTS
from time to time party hereto
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Collateral Agent
COMMON AGREEMENT
Dated as of __________, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS..........................................................................................................1
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.........................................................................................2
SECTION 1.2. Rules of Interpretation.............................................................................2
SECTION 1.3. Form of Documents Delivered to Collateral Agent or the Representatives..............................2
SECTION 1.4. Notices.............................................................................................2
SECTION 1.5. Execution in Counterparts...........................................................................4
SECTION 1.6. Effect of Heading and Table of Contents.............................................................4
SECTION 1.7. Successors and Assigns..............................................................................4
SECTION 1.8. Further Assurances..................................................................................4
SECTION 1.9. Delay and Waiver....................................................................................4
SECTION 1.10. Waiver of Jury Trial...............................................................................5
SECTION 1.11. Severability Clause................................................................................5
SECTION 1.12. Benefits of Common Agreement.......................................................................5
SECTION 1.13. Subject to Intercreditor Agreement.................................................................5
SECTION 1.14. Amendments.........................................................................................6
SECTION 1.15. Governing Law......................................................................................6
SECTION 1.16. Entire Agreement...................................................................................6
SECTION 1.17. Limitation on Liability............................................................................6
SECTION 1.18. Reinstatement......................................................................................6
SECTION 1.19. No Partnership, Etc................................................................................6
SECTION 1.20. No Petition........................................................................................6
SECTION 1.21. Costs and Expenses.................................................................................7
SECTION 1.22. Indemnities........................................................................................7
SECTION 1.23. Submission to Jurisdiction.........................................................................7
SECTION 1.24. Additional Parties.................................................................................8
ARTICLE 2
PORTFOLIO ACQUISITION
SECTION 2.1. Project Loans and Qualifying Criteria...............................................................8
SECTION 2.2. Temporary Investment Portfolio.....................................................................11
SECTION 2.3. Program Manager....................................................................................11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Issuer.......................................................12
SECTION 3.2. Representations and Warranties of the Co-Issuer....................................................13
</TABLE>
i
<PAGE> 3
ARTICLE 4
COVENANTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.1. Existence of Issuers...............................................................................14
SECTION 4.2. Compliance with Laws...............................................................................14
SECTION 4.3. Maintenance of Books and Records...................................................................15
SECTION 4.4. Information........................................................................................15
SECTION 4.5. Program Manager Removal............................................................................15
SECTION 4.6. Performance of Obligations.........................................................................15
SECTION 4.7. Preservation of Collateral.........................................................................16
SECTION 4.8. Opinions as to Collateral..........................................................................16
SECTION 4.9. Notices............................................................................................17
SECTION 4.10. Noninterference; Etc..............................................................................17
SECTION 4.11. Negative Covenants................................................................................17
SECTION 4.12. Statement as to Compliance........................................................................20
SECTION 4.13. Issuers May Consolidate, Etc., Only on Certain Terms..............................................20
SECTION 4.14. Successor Substituted.............................................................................23
SECTION 4.15. No Other Business.................................................................................24
SECTION 4.16. Funding of Class I Interests of the Issuer........................................................24
SECTION 4.17. Ratings Review....................................................................................24
SECTION 4.18. Tax Returns.......................................................................................24
SECTION 4.19. Financial Statements..............................................................................24
SECTION 4.20. Pledge of Interests in Intermediate Funding Entities..............................................25
SECTION 4.21. Utilization of Amounts Available under Project Borrower
Debt Service Reserve Account...................................................................25
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.1. Events of Default..................................................................................25
SECTION 5.2. Remedies...........................................................................................27
ARTICLE 6
ACCOUNTINGS; REPORTS
SECTION 6.1. Accountings........................................................................................27
SECTION 6.2. Reports by Independent Accountants.................................................................31
SECTION 6.3. Reports by Issuers.................................................................................31
ARTICLE 7
CALCULATIONS
SECTION 7.1. Assumptions as to Project Loans; Etc...............................................................32
ARTICLE 8
CONDITIONS PRECEDENT
SECTION 8.l. General Provisions.................................................................................33
SECTION 8.2. Additional Conditions..............................................................................35
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 9
HEDGING AGREEMENTS; BACKUP FACILITY LOAN AGREEMENTS; LIQUIDITY
FACILITY LOAN AGREEMENT
<S> <C> <C>
SECTION 9.1. Hedging Agreements.................................................................................35
SECTION 9.3. Increase in the Commitments under the Liquidity Facility Loan Agreement............................36
ARTICLE 10
REPAYMENTS AND REDEMPTIONS
SECTION 10.1. General Terms.....................................................................................37
SECTION 10.2. Redemption at the Option of the Issuers; Election to Redeem.......................................37
SECTION 10.3. Mandatory Redemption..............................................................................38
SECTION 10.4. Pro Rata Application..............................................................................40
ARTICLE 11
LIMITED RECOURSE LIABILITY OF THE ISSUERS
SECTION 11.1. Limited Recourse Liability........................................................................40
ARTICLE 12
PROVISIONS REGARDING THE ISSUERS
SECTION 12.1. Limitation on Benefit of Provisions regarding the Issuers.........................................41
</TABLE>
iii
<PAGE> 5
SCHEDULES, EXHIBITS, APPENDICES AND ANNEXES
APPENDIX A Definitions
APPENDIX B Summary of Principal Terms and Conditions of Backup Facility
Loan Agreement
EXHIBIT A Form of Guaranty regarding Waiver of Certain Project Loan
Criteria
EXHIBIT B Form of Opinion of Milbank, Tweed, Hadley & McCloy
EXHIBIT C Form of Opinion of Vinson & Elkins
EXHIBIT D Form of Opinion of General Counsel to Enron
EXHIBIT E Form of Opinion of Counsel pursuant to Section 4.8
EXHIBIT F Form of Designation Letter
iv
<PAGE> 6
THIS COMMON AGREEMENT (this "Agreement") dated as of
_________, 1998, is by and among ENRON INTERNATIONAL CPO, L.P., a limited
partnership organized under the laws of the State of Delaware (the "Issuer"),
ENRON INTERNATIONAL CPO, INC., a corporation organized under the laws of the
State of Delaware (the "Co-Issuer" and together with the Issuer, the "Issuers"),
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as trustee (in such capacity, the
"Trustee") for the Noteholders under the Indenture dated as of _________, 1998
among the Issuers and the Trustee, [NAME OF LIQUIDITY FACILITY AGENT], acting on
behalf of itself and as agent for the other Liquidity Lenders (in such capacity,
the "Liquidity Facility Agent"), the Backup Facility Agents from time to time
made party hereto pursuant to Section 1.24 hereof and CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as collateral agent for the Secured Parties (in such
capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Issuers may issue, from time to time, their
Class A Senior Notes due 2018, Class B Senior Subordinated Notes due 2018, and
Class C [___]% Subordinated Notes due 2018, in each case pursuant to the
Indenture;
WHEREAS, the Issuer is, simultaneously with the execution
hereof, entering into the Liquidity Facility Loan Agreement with the Liquidity
Lenders;
WHEREAS, the Issuer may, subsequent to the date hereof, enter
into one or more Backup Facilities with the Backup Lenders;
WHEREAS, it is a condition precedent to the issuance of the
Notes under the Indenture and to the effectiveness of the Liquidity Facility and
the Backup Facility that this Agreement be executed and delivered by each of the
parties hereto;
WHEREAS, the Issuers, the Representatives and the Collateral
Agent are simultaneously with the execution hereof entering into the
Intercreditor Agreement which sets forth, among other things, certain
intercreditor provisions, including the method of voting and decision making for
the Secured Parties, the arrangements applicable to joint consultation and
actions in respect of approval rights and waivers and the limitations on rights
of enforcement upon default;
WHEREAS, the Issuers and the Collateral Agent are
simultaneously with the execution hereof entering into the Security Agreement
pursuant to which the Issuer will grant to the Collateral Agent for the benefit
of the Secured Parties, a first priority security interest in and to the
Collateral and which sets forth, among other things, provisions authorizing and
directing the Collateral Agent to establish certain accounts for the purpose of
collecting and distributing Collateral Proceeds;
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants and agreements contained herein and in the other Financing
Documents, the parties hereby agree as follows:
<PAGE> 7
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
capitalized terms used in this Agreement, its schedules and its exhibits have
the meanings given in Appendix A.
SECTION 1.2. Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth in Appendix A
hereto shall apply to this Agreement.
SECTION 1.3. Form of Documents Delivered to Collateral Agent
or the Representatives. 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, the
Co-Issuer or the Program Manager may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such Officer knows or has reason to believe that the certificate or
opinion or representations with respect to the matters upon which his or her
certificate or opinion is based are erroneous or contain any material omissions.
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, the Co-Issuer or the Program Manager, stating
that the information with respect to such factual matters is in the possession
of the Issuer, the Co-Issuer or the Program Manager (as the case may be), unless
such counsel knows or in the exercise of reasonable care should know that the
certificate or opinion or representations with respect to such matters are
erroneous or contain any material omissions.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement or any other Financing Document, they
may, but need not, be consolidated and form one instrument.
SECTION 1.4. Notices. Any communications between the parties
hereto or notices provided herein to be given shall be given to the following
addresses:
If to the Issuer:
Address:
-------------------------
Attention:
-----------------------
Telephone:
-----------------------
Telecopy:
-----------------------
2
<PAGE> 8
with a copy to the Program Manager:
Address:
-------------------------
Attention:
-----------------------
Telephone:
-----------------------
Telecopy:
-----------------------
If to the Co-Issuer:
Address:
-------------------------
Attention:
-----------------------
Telephone:
-----------------------
Telecopy:
-----------------------
with a copy to the Program Manager:
Address:
-------------------------
Attention:
-----------------------
Telephone:
-----------------------
Telecopy:
-----------------------
If to the Trustee:
Address: 600 Travis, 8th Floor
Houston, Texas 77002
Attention: Global Trust Services
--Enron International CPO, L.P.
Telephone: 713-216-4181
Telecopy: 713-216-2101
If to the Liquidity Facility Agent:
Address:
-------------------------
Attention:
-----------------------
Telephone:
-----------------------
Telecopy:
-----------------------
If to the Backup Facility Agent:
As specified in the Designation Letter delivered
pursuant to Section 1.24 hereof.
If to the Collateral Agent:
3
<PAGE> 9
Address: 600 Travis, 8th Floor
Houston, Texas 77002
Attention: Global Trust Services
--Enron International CPO, L.P.
Telephone: 713-216-4181
Telecopy: 713-216-2101
or to such other addresses as to which any such party may specify to each of the
other parties hereto in the manner set forth below. All notices or other
communications required or permitted to be given hereunder shall be in writing
and shall be considered as properly given (a) if delivered in person, (b) if
sent by overnight delivery service, (c) in the event overnight delivery services
are not readily available, if mailed by first class mail, postage prepaid,
registered or certified with return receipt requested or (d) if sent by prepaid
telex, or by telecopy with correct answer back received. Notice so given shall
be effective upon receipt by the addressee, except that any communication or
notice so transmitted by telecopy or other direct written electronic means shall
be deemed to have been validly and effectively given on the day (if a Business
Day and, if not, on the next following Business Day) on which it is validly
transmitted if transmitted before 4:00 p.m., recipient's time, and if
transmitted after that time, on the next following Business Day; provided,
however, that if any notice is tendered to an addressee and the delivery thereof
is refused by such addressee, such notice shall be effective upon such tender.
Any party hereto shall have the right to change its address for notice hereunder
to any other location by giving no less than 20 days' notice to the other
parties in the manner set forth hereinabove.
SECTION 1.5. Execution in Counterparts. This Agreement 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 of the same agreement.
SECTION 1.6. Effect of Heading and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind and, to the extent
permitted hereby, shall be enforceable against its successors and assigns,
whether so expressed or not. Unless expressly provided in Section 4.13 or 4.14
hereof, neither the Issuer nor the Co-Issuer may assign or otherwise transfer
any of its rights or obligations under this Agreement.
SECTION 1.8. Further Assurances. The Issuers shall fully
cooperate with the Collateral Agent and the Representatives, and perform all
additional acts reasonably requested by any such Person to effect the purposes
of the Financing Documents, including, without limitation, enabling the
Collateral Agent to exercise and enforce its rights under the Security
Documents.
SECTION 1.9. Delay and Waiver. No delay or omission to
exercise any right, power or remedy accruing upon the occurrence of any Event of
Default or any other breach or default of the Issuers under this Agreement or
any other Financing Document shall impair any
4
<PAGE> 10
such right, power or remedy of the Lenders, the Collateral Agent or the
Representatives nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or in any similar breach or default
thereafter occurring, nor shall any single or partial exercise by any such party
of any right, power or remedy under this Agreement or any other Financing
Document preclude any other or future exercise thereof or the exercise of any
other right, power or remedy, 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 any
Lender, the Collateral Agent or any Representative of any Event of Default or
other breach or default under this Agreement or any other Financing Document or
any waiver on the part of any Lender, the Collateral Agent or any
Representative, of any provision or condition of this Agreement or any other
Financing Document, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or any other Financing Document or by law or otherwise afforded to any
Lender, the Collateral Agent or any Representative, shall be cumulative and not
alternative.
SECTION 1.10. Waiver of Jury Trial. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION, PROCEEDING OR COUNTERCLAIM BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER FINANCING DOCUMENT TO WHICH SUCH PERSON IS A PARTY, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
THE OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF
THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT AND ANY OTHER FINANCING DOCUMENT
TO WHICH IT IS A PARTY.
SECTION 1.11. Severability Clause. If any provision in this
Agreement or in any other Financing Document is invalid, illegal or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
applicable law, (i) the other provisions hereof or of any such other Financing
Document shall remain in full force and effect in such jurisdiction, (ii) the
invalidity, illegality or unenforceability of any provision hereof or of any
other Financing Document in any jurisdiction shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction and (iii)
the parties hereto shall enter into good faith negotiations to replace the
invalid, illegal or unenforceable provision.
SECTION 1.12. Benefits of Common Agreement. Nothing in this
Agreement or any other Financing Document, expressed or implied, shall give to
any Person, other than the parties hereto and thereto and their successors
hereunder and thereunder and the Lenders, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
SECTION 1.13. Subject to Intercreditor Agreement. The rights
of the Lenders under this Agreement and each other Financing Document shall be
subject to the terms and provisions of the Intercreditor Agreement.
5
<PAGE> 11
SECTION 1.14. Amendments. Except as otherwise expressly
provided in this Agreement or the Intercreditor Agreement, any provision of this
Agreement may be amended or modified only by an instrument in writing signed by
the Issuers and the Collateral Agent.
SECTION 1.15. Governing Law. THIS AGREEMENT AND THE RIGHTS
AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.
SECTION 1.16. Entire Agreement. This Agreement and any
agreement, document or instrument attached hereto or referred to herein,
including (without limitation) all other Financing Documents, integrate all the
terms and conditions mentioned herein or incidental hereto and supersede all
oral negotiations and prior writings with respect to the subject matter hereof.
SECTION 1.17. Limitation on Liability. No claim shall be made
by the Issuers or any of their Affiliates against any of the Representatives,
the Collateral Agent, the Noteholders or any of their Affiliates, directors,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages (whether or not the claim therefor is based on contract, tort
or duty imposed by law), in connection with, arising out of or in any way
related to the transactions contemplated by this Agreement or the other
Financing Documents or any act or omission or event occurring in connection
therewith; and the Issuers hereby waive, release and agree not to sue upon any
such claim for any such damages, whether or not known or suspected to exist in
its favor.
SECTION 1.18. Reinstatement. This Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Issuers' obligations under any Financing Document, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any Representative, the Collateral
Agent or the Noteholders. If any payment or any part thereof is so rescinded,
reduced, restored or returned, such obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
SECTION 1.19. No Partnership, Etc. The Secured Parties and the
Issuers intend that the relationship between them shall be solely that of
creditor and debtor. Nothing contained in this Agreement or in any other
Financing Document shall be deemed or construed to create a partnership,
tenancy-in-common, joint tenancy, joint venture or co-ownership by or between
the Secured Parties and the Issuers or by the Secured Parties and any other
Person.
SECTION 1.20. No Petition. Each party hereto hereby covenants
and agrees that, prior to the date which is one year and one day after the
payment in full of all amounts payable in respect of the Financing Documents, it
will not institute against, or join any other Person in instituting against, the
Issuer or the Co-Issuer, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law. This Section 1.20 shall survive any termination of
this Agreement.
6
<PAGE> 12
SECTION 1.21. Costs and Expenses. The Issuers shall pay the
legal and other professional fees and costs of any consultants and advisors to
the Representatives and the Collateral Agent and the travel expenses and other
out-of-pocket costs, all of which shall be reasonably incurred by the
Representatives and the Collateral Agent and such consultants and advisors in
connection with the preparation, negotiation, execution and delivery, and, where
appropriate, registration, of this Agreement and any other Financing Documents
(and all matters incidental thereto), the administration of the transactions
contemplated by this Agreement and any other Financing Documents (including,
without limitation, the monitoring of this Agreement and any other Financing
Documents), and the preservation or enforcement of any of their respective
rights or in connection with any amendments, waivers or consents or other
implementation and administrative actions required under this Agreement and any
other Financing Documents. Provided that no Event of Default has occurred and is
continuing, the Representatives and the Collateral Agent will not hire any
consultants or advisors whose fees and costs shall be borne by the Issuers
without the prior written consent of the Issuers on the terms and conditions of
such fees and expenses, which consent shall not be unreasonably withheld or
delayed.
SECTION 1.22. Indemnities. The Issuer agrees, to the fullest
extent permitted by law, to indemnify and hold harmless each Representative and
the Collateral Agent and each of their respective directors, officers, employees
and agents (each, an "Indemnitee") from and against any and all claims, damages,
liabilities and expenses (including, without limitation, reasonable fees and
disbursements of counsel and claims, damages, liabilities and expenses) for
which any of them may become liable or which may be incurred by or asserted
against such Indemnitee (other than by such Indemnitee or any of their
respective successors or assigns), in each case in connection with or arising
out of or by reason of any investigation, litigation, or proceeding, whether or
not such Indemnitee is a party thereto, arising out of, related to or in
connection with this Agreement or any other Financing Document (EXPRESSLY
INCLUDING ANY SUCH CLAIM, DAMAGES, LIABILITY OR EXPENSE, ATTRIBUTABLE TO THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE, BUT EXCLUDING ANY
SUCH CLAIM, DAMAGE, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE). IT IS THE INTENT OF THE PARTIES HERETO
THAT EACH INDEMNITEE, SHALL, TO THE EXTENT PROVIDED IN THIS SECTION 1.22, BE
INDEMNIFIED FOR THEIR OWN ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE.
SECTION 1.23. Submission to Jurisdiction.
(a) Except as set forth in subsection (b), the Issuers hereby
irrevocably submit to the non-exclusive jurisdiction of any New York State or
federal court sitting in the Borough of Manhattan in The City of New York in any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, and the Issuers hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or federal court. The Issuers hereby irrevocably waive,
to the fullest extent that they may legally do so, any defense which they now or
hereafter have to the laying of the venue of any such proceeding brought in such
court and any claim that any such proceeding brought in such court has been
brought in an inconvenient forum and to the maintenance of such action or
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proceeding. The Issuers irrevocably consent to the service of any and all
process in any action or proceeding by the mailing or delivery of copies of such
process to it at the address set forth in Section 1.4. The Issuers agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Notwithstanding the foregoing, no document filed, assertion
made, or issue adjudicated in any court or other arbitral proceeding shall have
a collateral, judicial, or other estoppel or res judicata effect on any arbitral
proceeding that is subject to Section 11.11 of the Management Agreement.
(b) The foregoing submission to jurisdiction is not intended
to and shall not apply to any claim, controversy, issue or accounting bearing on
Article 9 of the Enron Support Agreement except insofar as such claim,
controversy, issue or accounting arises in connection with a motion to confirm,
vacate, or modify an arbitration award rendered pursuant to Section 11.11 of the
Management Agreement.
SECTION 1.24. Additional Parties
In the event the Issuer enters into one or more Backup
Facilities after the Closing Date, each Person acting as Backup Facility Agent
for such Backup Facility is required to become a party to this Agreement on
behalf of the Backup Lenders for whom such Person is acting by executing and
delivering to the Issuer and the Collateral Agent a Designation Letter
substantially in the form set forth in Exhibit F hereto. Each Backup Facility
Agent made party to this Agreement pursuant to this section shall be bound by,
and be subject, to the terms and conditions hereof and the covenants,
stipulations and agreements contained herein.
ARTICLE 2
PORTFOLIO ACQUISITION
SECTION 2.1. Project Loans and Qualifying Criteria.
(a) (i) The Issuer may, from time to time during the
Investment Period, make Project Loans to a Project Borrower or acquire Project
Loans of a Project Borrower, in each case in respect of Eligible Projects which
satisfy the Qualifying Criteria as of the Financial Closing Date therefor. The
Issuer shall not initially fund any Project Loan, unless (as evidenced by an
Officer's certificate of the Program Manager delivered to the Collateral Agent
and the Representatives) each of the Qualifying Criteria is satisfied with
respect to such Project Loan on the Financial Closing Date for such Project
Loan, after giving effect to the support provided, if any, by Enron, an Enron
Credit Counterparty or an Acceptable Credit Provider, pursuant to the terms of
the Enron Support Agreement and/or as contemplated by the final proviso to the
definition of Project Loan Criteria in Appendix A hereto.
The Issuer shall not enter into a Commitment unless such
Commitment is subject to cancellation in the event any of the Qualifying
Criteria is not satisfied as of the Financial Closing Date for the related
Project Loan. Initial funding under all Project Loans shall occur no later than
the Scheduled Investment Termination Date.
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(ii) Without limiting the generality of the foregoing clause
(a)(i), the Issuer may make loans in respect of Eligible Projects through one or
more Intermediate Funding Entities so long as:
(A) the initial funding to an Intermediate Funding Entity by
the Issuer, or by an Intermediate Funding Entity to
another Intermediate Funding Entity, occurs on or after
the Financial Closing Date for the related Project Loan;
(B) in the case of an Intermediate Funding Entity that is
wholly-owned, directly or indirectly, by the Issuer, the
ownership interests of such Intermediate Funding Entity
are pledged to the Collateral Agent;
(C) any operating expenses and tax liabilities of an
Intermediate Funding Entity are paid first, from fees,
if any, received by such Intermediate Funding Entity in
connection with the related Intermediate Funding Loan,
and second, from interest payments received by such
Intermediate Funding Entity from the related Project
Borrower or Intermediate Funding Entity, as the case may
be, and third, from principal payments received by such
Intermediate Funding Entity from the related Project
Loan or Intermediate Funding Loan, as the case may be;
(D) each Rating Agency is provided with reasonable details
regarding the structure of the Intermediate Funding
Entities related to a Project Loan; and
(E) the Intermediate Funding Loan made by the Issuer to such
Intermediate Funding Entity and, to the extent
applicable, by one Intermediate Funding Entity to
another Intermediate Funding Entity, each satisfy the
following criteria:
(I) such Intermediate Funding Loan is secured by a
valid first priority perfected lien on the
relevant Intermediate Funding Entity's tangible
and intangible assets relating (directly or
indirectly) to a particular Project Loan (to the
extent such collateral security interest may be
perfected under applicable law) and in the case
of an Intermediate Funding Entity making loans
(directly or indirectly) in respect of more than
one Project Borrower, the obligations of such
Intermediate Funding Entity in respect of loans
advanced to it by the Issuer or by another
Intermediate Funding Entity are limited solely to
the tangible and intangible assets of such
Intermediate Funding Entity directly relating to
the relevant Project Loan;
(II) the notes evidencing the Project Loan, and to the
extent applicable, any Intermediate Funding Loan,
are pledged by the applicable Intermediate
Funding Entity to the Issuer (either directly or
indirectly through one or more Intermediate
Funding Entities) and,
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pursuant to the Security Agreement,
indirectly to the Collateral Agent;
(III) such Intermediate Funding Loan, if made by
the Issuer, is denominated in Dollars;
provided, however, that any other
Intermediate Funding Loan may be denominated
in currency other than Dollars if such loan
complies with the requirements of clause (1)
of the definition of "Project Loan Criteria"
set forth in Appendix A hereto;
(IV) on or prior to the Financial Closing Date of
such Intermediate Funding Loan, the Issuer
will have received satisfactory opinions of
Independent counsel (which counsel may rely,
to the extent customary, on opinions of
in-house counsel and assume the accuracy
thereof);
(V) payment provisions of such Intermediate
Funding Loan provide that such Intermediate
Funding Entity make principal and interest
(and any other) payments to the Issuer or
Intermediate Funding Entity (as applicable)
in amounts and under payment terms
substantially similar to (x) the amounts and
payment terms of the related Project Loan,
in the case of an Intermediate Funding Loan
made to an Intermediate Funding Entity
directly making a Project Loan or (y) the
amounts and payment terms of the related
Intermediate Funding Loan, in the case of an
Intermediate Funding Loan made to another
Intermediate Funding Entity; provided,
however, the amounts owing under the
Intermediate Funding Loan may be reduced
from the amounts payable under the related
Project Loan, in the case of foregoing
clause (x) and the related Intermediate
Funding Loan, in the case of foregoing
clause (y), to the extent, and only to the
extent, necessary to pay the operating
expenses and tax liabilities of such
Intermediate Funding Entity that is the
borrower of such Intermediate Funding Loan;
and
(VI) any event of default under the related
Project Loan will constitute an event of
default under such Intermediate Funding
Loan.
(iii) The provisions hereof or of any other Transaction
Document shall, as the context may reasonably permit or require, be construed to
reflect the intent of the foregoing provisions of this Section 2.1 to allow the
Issuer to make Project Loans indirectly to Project Borrowers through one or more
Intermediate Funding Entities. Without limiting the generality of the foregoing
sentence, references herein or in any other Transaction Document to any rights
or interests that the Issuer may have in or with respect to a Project Loan or a
Project Borrower shall, insofar as such rights or interests are derived through
one or more Intermediate Funding Entities and notwithstanding any provision of
any Transaction Document to the contrary, be deemed to be references to such
derivative and indirect rights or interests.
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(b) (i) Notwithstanding Section 2.1(a)(i) or any provision in
any Financing Document to the contrary, if, on any date after the Closing Date,
there shall be a transfer of the ownership of EI to a Person (the "Transferee")
as set forth in Section 14.8 of the Enron Support Agreement, then the Enron
Ownership Requirement shall be deemed satisfied so long as the requirements
therein are satisfied after (and the definitions of Enron Ownership Percentage
and Enron Ownership Requirement in said Appendix A shall be construed by)
substituting, in lieu of Enron or any Enron Affiliate (as relevant) for all
purposes thereof, the Transferee.
(ii) Upon receipt of prior notification by Enron of a proposed
Equity Disposition, the Issuer shall, as soon as practicable, but in no event
later than ten days following receipt of such notice, seek to confirm that the
Rating Condition would be satisfied based on the following assumptions (the
"Assumptions"): (A) the sale of the Project Loan for an amount equal to the
Disposition Amount therefor, (B) redemption or prepayment pursuant to Section
10.3(a)(iii) and (C) Enron Distributions are calculated pursuant to clause (c)
of the definition of Enron Distributions. If the Issuer obtains a confirmation
of the Rating Condition based on the Assumptions, the Issuer shall notify Enron
of such confirmation and the amount of Enron Distributions calculated pursuant
to clause (c) of the definition of Enron Distributions. Upon payment of the
Disposition Amount by Enron or its designee to the Issuer, (x) the Issuer shall
transfer, or cause to be transferred, such Project Loan to Enron or its
designee, (y) the Lien of the Security Agreement with respect to such Project
Loan shall be released in accordance with Section 2.6 of the Security Agreement
and (z) the Issuer shall effect a redemption pursuant to Section 10.3(a)(iii);
provided, however, the Issuer shall not effect such mandatory redemption (and no
such payment of the Disposition Amount shall be payable to the Issuer) in the
event such Project Loan is retained as Collateral by the Issuer upon the
approval of the Required Lenders.
If the Issuer fails to obtain a confirmation of the Rating
Condition based upon the Assumptions, (A) the Issuer shall notify Enron that the
Rating Condition has not been so confirmed, (B) the Issuer shall be required to
retain the Project Loan as Collateral, (C) Enron Distributions shall be
calculated pursuant to clause (c) of the definition of "Enron Distributions"
without adjustment pursuant to subclause (y) thereof and (D) no mandatory
redemption shall be effected (and no payment of the Disposition Amount shall be
payable to the Issuer) as a result of such Equity Disposition.
SECTION 2.2. Temporary Investment Portfolio. On or prior to
the Closing Date, the Issuer shall enter into a TIP Investment Management
Agreement pursuant to which ___________________ shall act as the initial TIP
Advisor in respect of the Temporary Investments. The TIP Investment Management
Agreement shall contain, among other things, the requirements and investment
guidelines regarding the Temporary Investments, including the Committed TIP
Investment Policies and the Uncommitted TIP Investment Policies.
SECTION 2.3. Program Manager.
(a) The Issuer hereby covenants with each party hereto and
each other Secured Party that until the Final Termination Date:
(i) the Issuer will engage the Program Manager to manage and
administer the Portfolio Assets in accordance with the provisions of
the Management Agreement; and
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(ii) the Issuer will not give any instructions to the Program
Manager in respect of its performance of the Management Agreement or
the sale, acquisition or disposition of Portfolio Assets in
contravention of the terms hereof or any other Financing Document.
(b) Each party hereto agrees that the Program Manager is
empowered and authorized to take any and all actions on behalf of the Issuer and
the Co-Issuer hereunder and under the other Financing Documents, subject to the
provisions of the Management Agreement, and each such party agrees that it will
accept any act or discretion on the part of the Program Manager as the act or
discretion of the Issuer and/or the Co-Issuer, as the case may be. Specifically
and without limiting the foregoing, each party hereto agrees, on its behalf and,
in the case of each Representative, on behalf of each Secured Party for whom
such Representative is acting, that any direct or indirect claim, counterclaim,
issue or accounting of such Person of any nature whatsoever against the Program
Manager arising out of or in connection with the Financing Documents, other than
in connection with a motion to confirm, modify or vacate an arbitration award,
shall be subject to Sections 2.02, 2.07 and 11.11 of the Management Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Issuer. The
Issuer hereby represents and warrants to the Secured Parties as follows as of
the date hereof:
(a) Status. The Issuer is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of
Delaware, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals,
necessary to own its assets and carry on its business as now being or
as proposed to be conducted and is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have
a Material Adverse Effect with respect to the Issuer.
(b) Powers. The Issuer has all necessary power and authority
to execute and deliver this Agreement and each Transaction Document to
which it is a party and to perform its obligations under this Agreement
and each such Transaction Document and has taken all necessary action
to authorize such execution, delivery and performance. This Agreement
and each Transaction Document to which the Issuer is a party has been
duly executed and delivered by the Issuer. This Agreement constitutes,
and each such Transaction Document when executed and delivered by the
Issuer shall constitute, the legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its
respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(c) No Violation or Conflict. None of the execution and
delivery of this Agreement by the Issuer, the consummation by it of the
transactions contemplated herein and in the Transaction Documents and
compliance by it with the terms and provisions
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hereof and thereof will contravene or result in a breach of or require
any consent under the Partnership Agreement or the Certificate of
Limited Partnership of the Issuer, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or governmental
authority or agency, or any agreement or instrument to which the Issuer
is a party or by which the Issuer is bound or to which the Issuer is
subject, or result in the creation or imposition of any Lien (except
for any Permitted Liens) upon any property of the Issuer, in any case
which could reasonably be expected to have a Material Adverse Effect.
(d) Consents. All governmental and other consents that are
required to have been obtained by the Issuer with respect to its
execution, delivery and performance of this Agreement and each
Transaction Document have been obtained and are in full force and
effect and all conditions of any such consents have been complied with.
(e) Absence of Litigation. There is not pending or, to its
knowledge, threatened against the Issuer, any action, suit or
proceeding at law or in equity or before any court, governmental body,
agency or official or any arbitrator which could reasonably be expected
to have a Material Adverse Effect.
(f) No Required Registration. The Issuer has not engaged in
any transaction in connection with this Agreement or the Transaction
Documents that would result in the violation of, or require
registration as an investment company under, the Investment Company Act
of 1940, as amended.
SECTION 3.2. Representations and Warranties of the Co-Issuer.
The Co-Issuer hereby represents and warrants to the Secured Parties as follows
as of the date hereof:
(a) Status. The Co-Issuer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals,
necessary to own its assets and carry on its business as now being or
proposed to be conducted and is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have
a Material Adverse Effect with respect to the Co-Issuer.
(b) Powers. The Co-Issuer has all necessary corporate power
and authority to execute and deliver this Agreement and each
Transaction Document to which it is a party and to perform its
obligations under this Agreement and each such Transaction Document and
has taken all necessary corporate action to authorize such execution,
delivery and performance. This Agreement and each Transaction Document
to which the Co-Issuer is a party has been duly executed and delivered
by the Co-Issuer. This Agreement constitutes, and each such Transaction
Document when executed and delivered by the Co-Issuer shall constitute,
the legal, valid and binding obligation of the Co-Issuer, enforceable
against the Co-Issuer in accordance with its respective terms (subject
to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity
or at law)).
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(c) No Violation or Conflict. None of the execution and
delivery of this Agreement by the Co-Issuer, the consummation by it of
the transactions contemplated herein and in the Transaction Documents
and compliance by it with the terms and provisions hereof and thereof
will contravene or result in a breach of or require any consent under
the certificate of incorporation or bylaws of the Co-Issuer, or any
applicable 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 the Co-Issuer is a party or by which
the Co-Issuer is bound or to which the Co-Issuer is subject, or result
in the creation or imposition of any Lien (except for any Permitted
Liens) upon any property of the Co-Issuer, in any case which could
reasonably be expected to have a Material Adverse Effect.
(d) Consents. All governmental and other consents that are
required to have been obtained by the Co-Issuer with respect to its
execution, delivery and performance of this Agreement and each
Transaction Document have been obtained and are in full force and
effect and all conditions of any such consents have been complied with.
(e) Absence of Litigation. There is not pending or, to its
knowledge, threatened against the Co-Issuer, any action, suit or
proceeding at law or in equity or before any court, governmental body,
agency or official or any arbitrator in which could reasonably be
expected to have a Material Adverse Effect.
(f) No Required Registration. The Co-Issuer has not engaged in
any transaction in connection with this Agreement or the Transaction
Documents that would result in the violation of, or require
registration as an investment company under, the Investment Company Act
of 1940, as amended.
ARTICLE 4
COVENANTS
Each of the Issuer and the Co-Issuer hereby covenants and
agrees (as applicable) with and for the benefit of the Collateral Agent, the
Representatives and each other Secured Party, that until the Final Termination
Date, and so long as the Collateral Agent, acting pursuant to the Intercreditor
Agreement, has not waived compliance in writing:
SECTION 4.1. Existence of Issuers. Each of the Issuer and the
Co-Issuer shall maintain in full force and effect its existence and rights as a
limited partnership organized under the laws of the State of Delaware, in the
case of the Issuer, and a corporation organized under the laws of the State of
Delaware, in the case of the Co-Issuer and shall comply with the provisions of
its respective organizational documents and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of the
Transaction Documents or Additional Transaction Documents or any of the
Collateral.
SECTION 4.2. Compliance with Laws. The Issuers will comply in
all material respects with applicable laws, rules, regulations, writs,
judgments, injunctions, decrees, awards
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and orders with respect to them, their businesses and their properties, except
where failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
SECTION 4.3. Maintenance of Books and Records.
(a) The Issuers shall maintain and implement administrative
and operating procedures reasonably necessary in the performance of their
obligations hereunder and the Issuer shall keep and maintain at all times, or
cause to be kept and maintained at all times in its office located at
[___________________], all documents, books, records, accounts and other
information reasonably necessary for the performance of its obligations
hereunder.
(b) The Issuers shall, at any reasonable time and from time to
time after reasonable notice, permit the Collateral Agent or any Representative
or any representative thereof to examine the records and books of the Issuers
and to discuss the affairs, finances and accounts of each of the Issuers with
any of the Issuers' representatives, officers or directors.
SECTION 4.4. Information. The Issuers shall provide any
information regarding the condition or operations, financial or otherwise, of
either of the Issuers as the Collateral Agent or any Representative shall
reasonably request.
SECTION 4.5. Program Manager Removal. If an event specified
under Section 10.02(a) of the Management Agreement shall have occurred and
be continuing, the Issuers shall (i) terminate the Program Manager in accordance
with the provisions thereof upon the direction of the Collateral Agent acting on
behalf of the Required Lenders and (ii) appoint a Replacement Manager as
directed by the Collateral Agent acting on behalf the Required Lenders; provided
that if at any time the Senior Secured Obligations are outstanding, either (x)
the Collateral Agent on behalf of the Required Lenders fails to direct the
Issuers to terminate the rights and obligations of the Program Manager within 60
days following a Subordinate Event of Default or (y) in the case of a
termination following an Event of Default a Subordinate Event of Default, the
Collateral Agent on behalf of the Required Lenders fails to propose a
Replacement Manager within 120 days after directing the Issuers to terminate the
rights and obligations of the Program Manager, then a Majority of the Class B
Notes will be permitted to direct the Issuers to terminate the rights and
obligations of the Program Manager under the Agreement and propose a Replacement
Manager.
SECTION 4.6. Performance of Obligations.
(i) The Issuers shall not take any action, and will use their
reasonable best efforts not to permit any action to be taken by others, that
would release any Person from any of such Person's covenants or obligations
under any instrument included in the Collateral, except as otherwise permitted
hereunder or under any other Financing Document.
(ii) The Issuers may contract with other Persons, including
the Program Manager, for the performance of actions and obligations to be
performed by the Issuers hereunder. Notwithstanding any such arrangement, the
Issuers shall remain primarily liable with respect thereto.
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SECTION 4.7. Preservation of Collateral. Each of the Issuer
and the Co-Issuer shall from time to time execute and deliver all such
supplements and amendments hereto and to the other Financing Documents and all
such Financing Statements, continuation statements, instruments of further
assurance and other instruments, and shall take such other action as may be
necessary or advisable or desirable to secure the rights and remedies of the
Secured Parties hereunder and under the other Financing Documents and to:
(i) Grant more effectively all or any portion of the
Collateral;
(ii) maintain or preserve the Lien (and the priority thereof)
of the Security Agreement or any other Security Document or to carry
out more effectively the purposes thereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by the Security Agreement or any other
Security Document (including, without limitation, any and all actions
necessary or desirable as a result of changes in law or regulations);
(iv) preserve and defend title to the Collateral and the
rights therein of the Secured Parties in the Collateral against the
claims of all Persons and parties; or
(v) pay or cause to be paid any and all taxes levied or
assessed upon all or any part of the Collateral;
provided, that in the case of any third party consent relating to any
Additional Transaction Document with cumulative payments and receipts
less than or equal to $5 million, each of the Issuer and the Co-Issuer
shall be deemed to have satisfied this Section 4.7 (including clause
(iii) above) so long as the Issuers shall have used good faith
reasonable efforts to take such actions.
Each of the Issuer and the Co-Issuer hereby designates the
Collateral Agent its agent and attorney-in-fact to execute any Financing
Statement, continuation statement or other instrument required pursuant to this
Section 4.7.
SECTION 4.8. Opinions as to Collateral. On the Closing Date
and within 10 Business Days of each subsequent anniversary thereafter, the
Issuer shall furnish to each Representative, the Collateral Agent, each Hedge
Counterparty and each Rating Agency an Opinion of Counsel stating that, in the
opinion of such counsel, as of the date of such opinion, the Lien and security
interest created by the Security Agreement and the other Security Documents with
respect to the Collateral remains a valid and perfected first priority Lien;
provided, that such opinion need not address the perfection and priority of a
security interest in any Additional Transaction Document with cumulative
payments and receipts of less than or equal to $5 million and that no further
action (other than as specified in such opinion) needs to be taken (under the
law then in effect) to ensure the continued effectiveness and perfection of such
Lien over the next year (substantially in the form, in pertinent part, attached
as Exhibit B hereto, and which may include assumptions and qualifications
substantially similar to those set forth in Exhibit B hereto, as and to the
extent relevant).
The Issuers agree to comply in all material respects with all
requirements applicable to the Issuers set forth in any Opinion of Counsel
furnished pursuant to this Section
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4.8, including satisfaction of any condition identified in such Opinion as a
prerequisite for obtaining or maintaining a first priority perfected security
interest in any Collateral.
SECTION 4.9. Notices. In the event the Issuer acquires
knowledge of the occurrence of any Default, the Issuer shall immediately, and in
any event, within three Business Days, give notice thereof to the Collateral
Agent, each Representative and each Hedge Counterparty, which notice shall set
forth the details of such Default and the actions taken or proposed to be taken
in response thereto.
SECTION 4.10. Noninterference; Etc. The Issuer shall not (i)
waive or alter any of its material rights under the Assigned Documents without
the prior written consent of the Collateral Agent upon the written direction of
the Required Lenders; (ii) fail to pay any tax, assessment, charge or fee levied
or assessed against the Collateral, or to defend any action, if such failure to
pay or defend may adversely affect the priority or enforceability of the
Issuer's right, title or interest in and to the Collateral or the Collateral
Agent's Liens on, and security interests in, the Collateral; or (iii) take any
action, or fail to take any action, if such action or failure to take action
will interfere with the enforcement of any material rights under the Assigned
Documents.
SECTION 4.11. Negative Covenants.
(a) The Issuer shall not and the Co-Issuer, except with
respect to (xiv) below, shall not:
(i) sell, transfer, assign, exchange or otherwise dispose of,
or pledge, mortgage, hypothecate or otherwise encumber (by security
interest, Lien (statutory or otherwise), preference, priority or other
security agreement or preferential arrangement of any kind whatsoever
or otherwise) (or permit such to occur or suffer such to exist), any
part of the Collateral, except as expressly permitted by the terms of
the Financing Documents;
(ii) claim any credit on, make any deduction from, or dispute
the enforceability of, the payment of the principal or interest (or any
other amount) payable in respect of the Secured Obligations (other than
amounts withheld in accordance with the Code or other applicable law)
or assert any claim against any present or future Secured Party, by
reason of the payment of any taxes levied or assessed upon any part of
the Collateral;
(iii) except as expressly contemplated by this Agreement, the
Indenture, the Enron Support Agreement and the other Financing
Documents, (A) incur or assume or guarantee any indebtedness or any
contingent obligations or (B) issue any additional securities;
(iv) (A) permit the validity or effectiveness of the Security
Documents or any Grant thereunder to be impaired, or permit the Lien
created by the Security Documents to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the
Financing Documents in contravention of any Financing Document, (B)
permit any Lien (other than Permitted Liens) to be created on or extend
to or otherwise arise upon or burden the
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Collateral or any part thereof, any interest therein or the proceeds
thereof, or (C) take any action that would permit the Liens created by
the Security Documents not to constitute valid first priority security
interests in the Collateral (subject only to Permitted Liens);
(v) make or incur any capital expenditures other than
Permitted Capital Expenditures;
(vi) become liable in any way, whether directly or by
assignment or as guarantor or other surety, for the obligations of the
lessee under any lease other than any lease reasonably necessary (as
determined by the Program Manager on behalf of the Issuer) for the
performance of the acts and obligations of the Issuer under the
Financing Documents and the cumulative payments and receipts under
which is less than or equal to $5 million individually and $20 million
in the aggregate;
(vii) enter into any transaction with any Affiliate or any
Holder of a Note other than (A) the transactions contemplated by the
Financing Documents, the Management Agreement and the Underlying
Instruments or (B) transactions on terms no less favorable than those
obtainable in an arm's-length transaction with a wholly unaffiliated
Person
(viii) maintain any bank accounts other than the Collection
Account, the Uncommitted TIP Account, the Committed TIP Account, the
Excess Spread Account, the Expense Reserve Account, the Operating
Account and the Reserve Account, unless (x) such bank account (A) is
necessary for the transactions contemplated by the Transaction
Documents, as reasonably determined by the Issuer and (B) is pledged to
the Collateral Agent as Collateral and (y) each of the Issuer and the
Co-Issuer have taken all actions as may be necessary to Grant to the
Collateral Agent a perfected first priority security interest in such
account;
(ix) change its name without first delivering to the
Collateral Agent and each Representative 30 days' notice thereof
together with an Opinion of Counsel as to the continued first priority
perfection of the Lien of the Security Agreement;
(x) have any subsidiaries other than, with respect to the
Issuer, the Co-Issuer and any Intermediate Funding Entity;
(xi) except as otherwise contemplated in the Financing
Documents or the Partnership Agreement, directly or indirectly, (A)
declare or pay any dividend, or make any distribution, of any kind or
character (whether in cash, property or securities) in respect of any
partnership interest in the Issuer or stock in the Co-Issuer or (B)
purchase, redeem or otherwise acquire or retire for value, directly or
indirectly (1) any partnership interests in the Issuer, (2) any shares
in the Co-Issuer or (3) any options, warrants or rights to purchase or
acquire any such interest or share;
(xii) use any of the proceeds of the Backup Facility, the
Liquidity Facility or the Notes issued under the Indenture for any
purpose other than as contemplated hereunder or under the other
Financing Documents or use any such proceeds (A) to extend "purpose
credit" within the meaning given to such term in Regulation U, (B) to
purchase or otherwise acquire any Margin Security or (C) in any manner
that violates or results in any violation of any law or regulation;
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(xiii) enter into any amendments, modifications, waivers and
supplements to the Underlying Instruments in respect of Project Loans
or Intermediate Funding Loans which amendment, modification, waiver or
supplement will:
(A) in the reasonable judgment of the Issuer, cause a
Project Loan or an Intermediate Funding Loan to be less likely
to be repaid in full than prior to such amendment,
modification, waiver or supplement;
(B) cause an Event of Default to occur;
(C) unless an event of default has occurred and is
continuing in respect of a Project Loan, in which case clause
(D) below shall apply, cause such Project Loan or an
Intermediate Funding Loan to no longer satisfy the Project
Loan Criteria or Intermediate Funding Loan Criteria, as the
case may be (determined as if the Financial Closing Date for
such Project Loan or such Intermediate Funding Loan were on
the date of any such amendment, modification, waiver or
supplement); provided, that for purposes of this clause (C),
clause (3) of the definition of Project Loan Criteria will be
deemed satisfied if, the Initial Equity for a Project Borrower
on the date of such amendment, modification, waiver or
supplement is at least equal to the Initial Equity for such
Project Borrower on the Financial Closing Date of such Project
Loan or if the Initial Equity for such Project Borrower
expressed as a percentage of the total capitalization on the
date of such amendment, modification, waiver or supplement is
at least equal to the Initial Equity expressed as a percentage
of the total capitalization for such Project Borrower on the
Financial Closing Date of such Project Loan; or
(D) if such amendment, modification, waiver or
supplement relates to any material economic or legal term (a
"Material Modification"), cause the Rating Condition not to be
satisfied (as if the Financial Closing Date for such Project
Loan were the date of such amendment, modification, waiver or
supplement), except that if such Material Modification is made
during the continuance of an event of default under such
Project Loan, such Material Modification may be made so long
as (1) in the reasonable judgment of the Issuer after
consultation with the Rating Agencies, such Material
Modification would not be expected to cause a reduction or
withdrawal of the rating of any of the Class A Notes and Class
B Notes that would not otherwise occur in the absence of such
Material Modification and (2) if the result thereof is to
cause such Project Loan or Intermediate Funding Loan to no
longer satisfy the Project Loan Criteria or the Intermediate
Funding Loan Criteria, the Issuer shall have first considered
any practicable alternatives to such Material Modification
that would enable the Issuer to satisfy the Project Loan
Criteria or the Intermediate Funding Loan Criteria and shall
have concluded in good faith that agreeing to such Material
Modification was reasonable;
(xiv) hire any employees if the hiring of such employees
would cause the incurrence by either the Issuer or the Co-Issuer of any
liabilities under ERISA or the Code; or
(xv) dissolve or liquidate in whole or in part, except as
permitted hereunder.
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(b) Neither the Issuer nor the Co-Issuer nor the Collateral
Agent shall sell, transfer, exchange or otherwise dispose of Collateral, or
enter into or engage in any business with respect to any part of the Collateral,
except as expressly permitted by the Financing Documents.
(c) Other than as contemplated under the Transaction Documents
or the Underlying Instruments or the transactions contemplated thereby
(including, without limitation, to effectuate any issuance of Notes, the
Liquidity Notes, Funding Availability Notes or Support Notes after the Closing
Date), the Issuers shall not enter into any Additional Transaction Documents
without the prior written consent of the Required Lenders unless such agreement
(i) is related to or in furtherance of the transactions contemplated by the
Transaction Documents or the Underlying Instruments, (ii) could not reasonably
be expected to have a Material Adverse Effect and (iii) is not in violation of
any provisions of the Transaction Documents. The Issuers shall provide to the
Collateral Agent and each Representative notice of all Additional Transaction
Documents entered into pursuant to this Section 4.11(c) with cumulative payments
and receipts greater than or equal to $5 million, other than any confidentiality
agreements with Project Borrowers or Project Sponsors; provided, that the Issuer
shall provide to the Collateral Agent copies of all legally binding commitment
letters in respect of Project Loans or Intermediate Funding Loans.
(d) Notwithstanding anything herein or in any other Financing
Document to the contrary, the Co-Issuer shall not have, and shall take no action
that would cause it to have, any material assets or material income, and it
shall not succeed to, or have any right or entitlement to, proceeds from the
issuance of any Notes, the Collateral or any income or assets of the Issuer. The
Co-Issuer hereby waives any right or entitlement to proceeds from the issuance
of any Notes, the Collateral and any income or assets of the Issuer or any other
Person.
SECTION 4.12. Statement as to Compliance. Contemporaneously
with the delivery of the annual financial statements in accordance with Section
6.3, or immediately if there has been a Default, the Issuer shall deliver to the
Collateral Agent, each Representative and each Rating Agency, an Officer's
certificate stating, as to each signer thereof, that:
(a) a review of the activities of the Issuer and of the
Issuer's performance under this Agreement, the Indenture and the other Financing
Documents during the twelve-month period ending on December 31 of the year most
recently ended (or from the Closing Date until December 31, 1998, in the case of
the first such Officer's certificate) has been made under such Officer's
supervision; and
(b) to the best of such Officer's knowledge, based on such
review, the Issuer has fulfilled all of its obligations under the Financing
Documents throughout such period, or, if there has been a Default, specifying
each such Default known to such Officer and the nature and status thereof,
including actions undertaken to remedy the same.
SECTION 4.13. Issuers May Consolidate, Etc., Only on Certain
Terms.
(a) The Issuer shall not consolidate or merge with or into any
other Person or transfer or convey all or substantially all of its assets to any
Person, unless:
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(i) the Issuer shall be the surviving entity, or the Person
(if other than the Issuer) formed by such consolidation or into which
the Issuer is merged or to which all or substantially all of the assets
of the Issuer are transferred shall expressly assume the due and
punctual payment of all Secured Obligations and the performance of
every covenant and agreement of the Transaction Documents and any
Additional Transaction Documents on the part of the Issuer to be
performed or observed, all as provided therein;
(ii) each Rating Agency shall have been notified of such
consolidation, merger or transfer and the Trustee shall have received
written confirmation from each Rating Agency that its ratings issued
with respect to the Class A Notes and the Class B Notes are not and
will not be reduced or withdrawn as a result of the consummation of
such transaction;
(iii) if the Issuer is not the surviving entity, the Person
formed by such consolidation or into which the Issuer is merged or to
which all or substantially all of the assets of the Issuer are
transferred shall have agreed with the Collateral Agent (A) to observe
the same legal requirements for the recognition of such formed or
surviving entity as a legal entity separate and apart from any of its
Affiliates as are applicable to the Issuer with respect to its
Affiliates and (B) not to consolidate or merge with or into any other
Person or transfer or convey the Collateral or all or substantially all
of its assets to any other Person except in accordance with the
provisions of this Section 4.13;
(iv) if the Issuer is not the surviving entity, the Person
formed by such consolidation or into which the Issuer is merged or to
which all or substantially all of the assets of the Issuer are
transferred shall have delivered to the Collateral Agent, each
Representative, each Hedge Counterparty and each Rating Agency an
Officer's certificate and an Opinion of Counsel that is Independent
each stating that such Person shall be duly organized, validly existing
and in good standing in the jurisdiction in which such Person is
organized; that such Person has sufficient power and authority to
assume the obligations set forth in subsection (a)(i) above; that such
Person has duly authorized the execution, delivery and performance of
any documents necessary for assuming such obligations and that each
such document is a valid, legal and binding obligation of such Person,
enforceable against it in accordance with its terms, subject only to
bankruptcy, reorganization, insolvency, moratorium and other laws
affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); provided that,
immediately following the event which causes such Person to become the
successor to the Issuer, (A) such Person has good and marketable title,
free and clear of any Lien, security interest or charge, other than the
Lien and security interest of the Security Documents and other
Permitted Liens, to the Collateral; and (B) the Collateral Agent
continues to have a valid perfected first priority security interest in
the Collateral (subject only to Permitted Liens); and such other
matters as the Collateral Agent, any Representative or any Hedge
Counterparty may reasonably require;
(v) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing;
(vi) the Issuer shall have notified each Rating Agency of such
consolidation, merger, transfer or conveyance and shall have delivered
to the Collateral Agent, each
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Representative and each Hedge Counterparty an Officer's certificate and
an Opinion of Counsel that is Independent each stating that such
consolidation, merger, transfer or conveyance and related documentation
comply with this Article 4, that all conditions precedent in this
Article 4 provided for relating to such transaction have been complied
with and that no adverse tax consequences will result therefrom to the
Secured Parties; and
(vii) the Issuer shall have delivered to the Collateral Agent,
each Representative and each Hedge Counterparty an Opinion of Counsel
that is Independent stating that after giving effect to such
transaction, (i) the Issuer will not be required to register as an
investment company under the Investment Company Act, (ii) the Class A
Notes and Class B Notes will be treated as debt for U.S. federal income
tax purposes, (iii) the Issuer (or if the Issuer is not the surviving
entity, the Person formed by such transaction or into which the Issuer
has merged or transferred substantially all its assets) will not be
subject to tax on its net income, (iv) payments made on the Class A
Notes and Class B Notes will not be subject to withholding taxes that
exceed the taxes to which such payments would have been subject had
such transaction not been effected and (vi) payments received on the
Collateral will not be subject to withholding or other tax that exceed
the taxes to which such payments would have been subject had such
transaction not been effected.
(b) The Co-Issuer shall not consolidate or merge with or into
any other Person or transfer or convey all or substantially all of its assets to
any Person, unless:
(i) the Co-Issuer shall be the surviving corporation, or the
Person (if other than the Co-Issuer) formed by such consolidation or
into which the Co-Issuer is merged or to which all or substantially all
of the assets of the Co-Issuer are transferred shall expressly assume
the due and punctual payment of all Secured Obligations and the
performance of every covenant and agreement of the Transaction
Documents and any Additional Transaction Documents on the part of the
Co-Issuer to be performed or observed, all as provided therein;
(ii) each Rating Agency shall have been notified of such
consolidation, merger or transfer and the Trustee shall have received
written confirmation from each Rating Agency that its ratings issued
with respect to the Class A Notes and the Class B Notes are not and
will not be reduced or withdrawn as a result of the consummation of
such transaction;
(iii) if the Co-Issuer is not the surviving corporation, the
Person formed by such consolidation or into which the Co-Issuer is
merged or to which all or substantially all of the assets of the
Co-Issuer are transferred shall have agreed with the Collateral Agent
(A) to observe the same legal requirements for the recognition of such
formed or surviving corporation or other entity as a legal entity
separate and apart from any of its Affiliates as are applicable to the
Co-Issuer with respect to its Affiliates and (B) not to consolidate or
merge with or into any other Person or transfer or convey the
Collateral or all or substantially all of its assets to any other
Person except in accordance with the provisions of this Section 4.13;
(iv) if the Co-Issuer is not the surviving corporation, the
Person formed by such consolidation or into which the Co-Issuer is
merged or to which all or substantially all of the assets of the
Co-Issuer are transferred shall have delivered to the Collateral Agent,
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each Representative, each Hedge Counterparty and each Rating Agency an
Officer's certificate and an Opinion of Counsel that is Independent
each stating that such Person shall be duly organized, validly existing
and in good standing in the jurisdiction in which such Person is
organized; that such Person has sufficient power and authority to
assume the obligations set forth in subsection (a)(i) above and that
such Person has duly authorized the execution, delivery and performance
of any documents necessary for assuming such obligations and that each
such document is a valid, legal and binding obligation of such Person,
enforceable against it in accordance with its terms, subject only to
bankruptcy, reorganization, insolvency, moratorium and other laws
affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and such other matters
as the Collateral Agent, any Representative or any Hedge Counterparty
may reasonably require; provided that, immediately following the event
which causes such Person to become the successor to the Co-Issuer, (A)
such Person has good and marketable title, free and clear of any Lien,
security interest or charge, other than the Lien and security interest
of the Security Documents and other Permitted Liens, to the Collateral;
and (B) the Collateral Agent continues to have a valid perfected first
priority security interest in the Collateral (subject only to Permitted
Liens); and such other matters as the Collateral Agent, any
Representative or any Hedge Counterparty may reasonably require;
(v) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing;
(vi) the Co-Issuer shall have notified each Rating Agency of
such consolidation, merger, transfer or conveyance and shall have
delivered to the Collateral Agent, each Representative and each Hedge
Counterparty an Officer's certificate and an Opinion of Counsel that is
Independent each stating that such consolidation, merger, transfer or
conveyance and related documentation comply with this Article 4, that
all conditions precedent in this Article 4 provided for relating to
such transaction have been complied with and that no adverse tax
consequences will result therefrom to the Secured Parties;
(vii) the Co-Issuer shall have delivered to the Collateral
Agent, each Representative and each Hedge Counterparty an Opinion of
Counsel that is Independent stating that after giving effect to such
transaction, the Co-Issuer will not be required to register as an
investment company under the Investment Company Act; and
(viii) after giving effect to such transaction, the
outstanding stock of the Co-Issuer will not be beneficially owned by
any Person other than the Issuer.
SECTION 4.14. Successor Substituted. Upon any consolidation or
merger, or transfer or conveyance of all or substantially all of the assets of
the Issuer or the Co-Issuer, in accordance with Section 4.13 hereof, the Person
formed by or surviving such consolidation or merger (if other than the Issuer or
the Co-Issuer, as the case may be), or, the Person to which such consolidation,
merger, transfer or conveyance is made, shall succeed to, and be substituted
for, and may exercise every right and power of, and shall be bound by each
obligation or covenant of, the Issuer or the Co-Issuer, as the case may be,
under each Transaction Document or any Additional Transaction Document to which
either is a party with the same effect as if such
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Person had been named as the Issuer or the Co-Issuer therein. In the event of
any such consolidation, merger, transfer or conveyance, the Person named as the
"Issuer" or the "Co-Issuer" in the first paragraph of this Agreement and any of
the Transaction Documents and Additional Transaction Documents or any successor
which shall theretofore have become such in the manner prescribed in this
Article 4 may be dissolved, wound-up and liquidated at any time thereafter, and
such Person thereafter shall be released from its liabilities as obligor and
maker on all the Notes and from its obligations under each Transaction Document
or any Additional Transaction Document to which it is a party.
SECTION 4.15. No Other Business. The Issuer shall not engage
in any business or activity other than (1) the funding, disposition, ownership
and management of Project Loans, (2) making Commitments in respect of Project
Loans, (3) issuing, from time to time, the Notes, the Interests, the GP
Interests and the Support Notes, (4) pledging the Collateral as security for the
Secured Obligations, (5) entering into Hedging Agreements, (6) establishing and
owning, from time to time, the interests in one or more Intermediate Funding
Entities, (7) making Temporary Investments and Eligible Investments, (8) owning
the shares of the Co-Issuer and (9) entering into Backup Facility Loan
Agreements and the Liquidity Facility Loan Agreement; and the Co-Issuer shall
not engage in any business or activity other than issuing and selling the Notes
pursuant to the Indenture, and with respect to the Issuer and the Co-Issuer,
such other activities which are necessary, required or advisable to accomplish
the foregoing or are incidental thereto or connected therewith. The Issuers will
not amend their organizational documents if such amendment could reasonably be
expected to result in the rating of the Class A Notes or the Class B Notes being
reduced or withdrawn; provided that Sections ____ and ____ of the Partnership
Agreement shall not be amended without the prior written consent of the
Required Lenders.
SECTION 4.16. Funding of Class I Interests of the Issuer. The
Issuer shall, at all times on and after the Closing Date, cause at least five
(5) percent of the total funded capitalization of the Issuer to consist of
funded Class I Interests.
SECTION 4.17. Ratings Review. So long as any of the Class A
Notes or the Class B Notes remain Outstanding, on or before December 31 in each
year commencing in 1999, the Issuers shall obtain and pay for an annual review
of the ratings by Moody's and S&P of such Class A Notes and Class B Notes unless
the ratings of such Notes were otherwise fully reviewed and reaffirmed during
such year. The Issuers shall promptly notify the Collateral Agent and each
Representative in writing if at any time the ratings of any such Class of Notes
have been, or are known will be, changed or withdrawn.
SECTION 4.18. Tax Returns. The Issuers shall each comply in
all material respects with all foreign, federal, state and local tax obligations
including filing applicable tax returns, paying applicable taxes (including
withholding taxes) and complying with information reporting requirements.
SECTION 4.19. Financial Statements. Each of the Issuer and
Co-Issuer shall furnish, or cause to be furnished, to each Representative and
the Collateral Agent, any financial statements filed with the Commission from
time to time pursuant to Section 6.3, within 15 days after the date the Issuer
or Co-Issuer is required to file the same with the Commission.
SECTION 4.22. Allocations under Backup Facility. Immediately
prior to the end of the revolving period of each Backup Facility, the Issuer
shall request a drawdown hereunder in an aggregate principal amount equal to all
amounts Allocated thereunder and deposit the proceeds thereof in the Committed
TIP Account.
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SECTION 4.20. Pledge of Interests in Intermediate Funding
Entities. The Issuer shall deliver all certificates evidencing all of its
ownership interests in each Intermediate Funding Entity that it may now or
hereafter establish, and cause such Intermediate Funding Entity and any direct
or indirect subsidiary of such Intermediate Funding Entity to deliver all
certificates evidencing all of its ownership interests in any direct or indirect
subsidiary of such entity, to the Collateral Agent for the benefit of the
Secured Parties.
SECTION 4.21. Utilization of Amounts Available under Project
Borrower Debt Service Reserve Accounts. In the event a Project Borrower fails to
make any payment on its Project Loan when such amount becomes due and payable in
accordance with the terms of such Project Loan, the Issuer shall withdraw, to
the extent practicable and subject to any applicable laws and regulations, from
amounts on deposit in the debt service reserve account of such Project Borrower,
an amount equal to such defaulted payment and cause such funds to be credited to
the Collection Account as Collateral Proceeds.
ARTICLE 5
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.1. Events of Default. Subject to the provisions of
Article 12, the term "Event of Default", whenever used in any Financing
Document, 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
effected by operation of law, or be pursuant to or in compliance with any
applicable law), and any such event shall continue to be an Event of Default if
and for so long as it shall not have been remedied or waived:
(a) default in the payment of any interest or fees owing with
respect to the Liquidity Facility, the Backup Facility or the Notes, or
default in any payment due to a Hedge Counterparty under any Hedging
Agreement, in any event when the same becomes due and payable, which
default shall continue for a period of three Business Days;
(b) (i) default at its Stated Maturity in the payment of
principal of any Class of Notes or (ii) default at the applicable
Stated Maturity in the payment of principal of amounts outstanding
under the Liquidity Facility or the Backup Facility;
(c) the failure on any Quarterly Payment Date to disburse
amounts (other than amounts described in clauses (a) or (b) above)
available in the Collection Account in accordance with the Priority of
Payments and continuation of such failure for a period of five Business
Days;
(d) either of the Issuers becomes an investment company
required to be registered under the Investment Company Act;
(e) default in the performance, or breach, of any other
covenant of the Issuer or the Co-Issuer under the Indenture or any
other Financing Document to which it is a party or of the Program
Manager under the Management Agreement, or any representation or
warranty of the Issuer or the Co-Issuer made in the Indenture or any
other Financing Document to which it is a party or of the Program
Manager made in the Management
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Agreement, or in any certificate or writing delivered by the Issuer or
the Co-Issuer pursuant to the Indenture, any other Financing Document
to which it is a party or by the Program Manager pursuant to the
Management Agreement, proves to be incorrect in any material respect
when made, and such default, breach or misrepresentation continues for
a period of 90 days after notice to the Issuer and the Program Manager
by the Collateral Agent or the Required Lenders, provided, however,
that such cure period shall apply only to those defaults, breaches or
misrepresentations capable of being cured;
(f) default in the performance, or breach, of any covenant of
Enron or any of its subsidiaries under the Enron Support Agreement or
any representation or warranty of Enron or any of its subsidiaries
thereunder, or in any certificate or writing delivered pursuant
thereto, proves to be incorrect in any material respect when made, and
such default, breach or misrepresentation continues for a period of 30
days after notice to the Issuer and the Program Manager by the
Collateral Agent or the Required Lenders; provided, however, that such
cure period shall apply only to the defaults, breaches or
misrepresentations capable of being cured;
(g) default in the performance, or breach, of any covenant of
the purchaser of Class I Interests pursuant to its Class I Commitment
Letter or any representation or warranty thereunder proves to be
incorrect in any material respect when made and such default, breach,
or misrepresentation continues for a period of 30 days after notice to
the Issuer and the Program Manager by the Collateral Agent or the
Required Lenders; provided, however, that such cure period shall apply
only to the defaults, breaches or misrepresentations capable of being
cured;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Issuer or the
Co-Issuer or Enron or its debts, or of a substantial part of its
assets, under any bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
the Issuer or the Co-Issuer or Enron or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall
continue undismissed for 60 days; or an order or decree approving or
ordering any of the foregoing shall be entered;
(i) the Issuer or the Co-Issuer or Enron shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to
the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition involving it and described in
Section 5.1(h), (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for it or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against
it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing; or
(j) the failure of the Issuer to cause the Collateral Agent to
have a first priority perfected security interest with respect to the
Collateral (subject only to Permitted Liens), and, in the case of a
failure that is capable of being cured, the continuance of such failure
for a period of 30 days.
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Upon the occurrence of an Event of Default, the Issuer shall
promptly notify the Collateral Agent, each Representative, the Program Manager,
each Hedge Counterparty and each Rating Agency in writing.
SECTION 5.2. Remedies. Subject to Article 3 of the
Intercreditor Agreement, upon the occurrence and during the continuation of an
Event of Default, the Collateral Agent and each Representative on behalf of the
Secured Parties for whom such Representative is acting may, without further
notice of default, presentment or demand for payment, protest or notice of
non-payment or dishonor, or other notices or demands of any kind, all such
notices and demands being waived (to the extent permitted by applicable law),
exercise any or all rights and remedies at law or in equity (in any combination
or order that the Secured Parties may elect), including without limitation or
prejudice to the Secured Parties' other rights and remedies, the following:
(a) declare and make all sums of accrued and outstanding
principal and accrued but unpaid interest remaining under the Notes,
the Indenture, the Liquidity Facility and the Backup Facility together
with all unpaid fees, costs and charges due thereunder or under any
other Financing Document, immediately due and payable (such event, an
"Acceleration"), provided that in the event of an Event of Default
occurring under Section 5.1(h) or Section 5.1(i), all such amounts
shall become immediately due and payable without further act of any
Secured Party; and
(b) exercise any and all other rights and remedies available
to it under any of the Financing Documents.
ARTICLE 6
ACCOUNTINGS; REPORTS
SECTION 6.1. Accountings.
(a) Quarterly Payment Date Account. The Issuer shall render an
accounting (each, a "Valuation Report"), determined as of each Determination
Date, and to deliver such report to each Rating Agency, the Collateral Agent and
each Representative not later than the third Business Day immediately preceding
the Quarterly Payment Date. The Valuation Report shall contain the following
information:
(i) the Aggregate Book Value of the Issuer's Assets;
(ii) the aggregate Principal Balance of all Permitted
Investments;
(iii) the aggregate Principal Balance of all Permitted
Investments purchased since the Determination Date for the last
Valuation Report;
(iv) Permitted Investments any payments in respect of which
are in default since the Determination Date for the last Valuation
Report and the circumstances and amount of each default;
(v) for each Project Loan:
(A) the Project Borrower;
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(B) the Industry of the Eligible Project;
(C) the Designated Enron Ownership Interest in the
Project Borrower;
(D) the actual percentage of Initial Equity owned by
Enron or any Enron Affiliate, or the acquisition of which
Enron or such Enron Affiliate has entered into a legally
binding commitment;
(E) the annual interest rate;
(F) the maturity date;
(G) Standard & Poor's Rating and Moody's Rating;
(H) its Principal Balance;
(I) unfunded Commitments;
(J) the Project Loan Balance;
(K) the difference, if any, between the principal
balance and the annual interest rate of each Intermediate
Funding Loan and the principal balance and the annual interest
rate of the related Project Loan and the total operating
expenses and taxes of all Intermediate Funding Entities
relating to each Project Loan for the applicable Due Period;
(vi) a list of the Project Loans that were initially funded
since the Determination Date of the last Valuation Report and the
amortization schedule and Expected Average Life for each;
(vii) a list of the Project Loans that became Defaulted
Project Loans since the Determination Date of the last Valuation Report
and the circumstances and amount of each default;
(viii) the Project Loan Balance for all Defaulted Project
Loans;
(ix) the Principal Balance, the unfunded Commitments and
Project Loan Balance of all Project Loans aggregated by country,
Continent and Region and the Aggregate Project Loan Balance;
(x) the number and identity of any Project Loans that were
released for Sale (indicating whether such Project Loan was sold or
disposed of pursuant to Section 2.5 (a)(iii), Section 2.5 (a)(iv) or
Section 2.5 (a)(v) of the Security Agreement) or Granted to the
Collateral Agent since the Determination Date for the last Valuation
Report;
(xi) the Principal Balance, unfunded Commitments and the
Project Loan Balance of all Project Loans that are obligations of
issuers or obligors located in any one country whose long-term
sovereign debt obligations are rated, on the Financial Closing Date
applicable to each such Project Loan, at or above "AA" by Standard &
Poor's and "Aa2" by Moodys;
(xii) the Principal Balance, the unfunded Commitments and the
Project Loan Balance of all Project Loans that are obligations of
issuers or obligors located in any one country whose long-term
sovereign debt obligations are rated, on the Financial Closing Date
applicable to each such Project Loan, below "AA" by Standard & Poor's
or "Aa2" by Moody's;
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(xiii) the outstanding commitments and amounts drawn under the
Backup Facility (including amounts drawn under any Funding Availability
Commitments) and Liquidity Facility and amounts Allocated under the
Backup Facility (including the amount of any unused Funding
Availability Commitment) and the outstanding commitments and amounts
drawn under the Credit Support Commitments;
(xiv) a calculation in reasonable detail necessary to
determine compliance with the Portfolio Financial Tests (to the extent
required to have been made since the date of determination of the last
Valuation Report in connection with any Project Loan);
(xv) (A) the Outstanding Amount of the Notes of each Class
and, in the case of Class A Notes and the Class B Notes, each Series
thereof, such Outstanding Amount of each such Series as a percentage of
the aggregate principal amount of such Series on the issuance date
thereof, in each case, on the first day of the Interest Accrual Period
preceding the next Quarterly Payment Date, (B) the amount of principal
payments to be made on the Notes of each Class on the next Quarterly
Payment Date, (C) the amount of any Class B Deferred Interest on the
next Quarterly Payment Date, and (D) the Outstanding Amount of the
Notes of each Class and, in the case of Class A Notes and the Class B
Notes, each Series thereof, such Outstanding Amount of each such Series
as a dollar figure and as a percentage of the aggregate principal
amount of such Series on the issuance date thereof, in each case, after
giving effect to the principal payments, if any, on the next Quarterly
Payment Date;
(xvi) the interest payable to the Holders of the Notes for
such Quarterly Payment Date (in the aggregate and by Class and Series);
(xvii) the amount of Collateral Proceeds received during the
related Due Period;
(xviii) if such Quarterly Payment Date occurs after the
expiration of the Liquidity Facility Availability Period, the estimated
Operating Expenses payable during the Due Period immediately following
such Determination Date;
(xix) for each Account:
(A) the Balance of such Account at the close of
business on such Determination Date; and
(B) the Balance, if any, expected to remain in such
Account after giving effect to all payments and deposits to be
made on the related Quarterly Payment Date;
(xx) the Diversity Score as of the close of business on such
Determination Date;
(xxi) the Senior Overcollateralization Ratio as of the close
of business on such Determination Date;
(xxii) the Total Overcollateralization Ratio as of the close
of business on such Determination Date;
(xxiii) the Target Senior Overcollateralization Ratio as of
the close of business on such Determination Date;
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(xxiv) the Target Total Overcollateralization Ratio as of the
close of business on such Determination Date;
(xxv) a calculation in reasonable detail necessary to
determine whether the Senior Coverage Test and the Reserve Test have
been satisfied;
(xxvi) the amounts to be paid and to be received under each
Hedging Agreement during the immediately succeeding Due Period together
with a copy of the confirmation for each Hedging Agreement;
(xxviii) amounts, if any, transferred to the Operating Account
pursuant to Section 3.2(c) of the Security Agreement and a calculation
in reasonable detail necessary to make the determination required
pursuant to such section; and
(xxix) the Quarterly Project Distributions and Project
Distributions Reserved on such Determination Date.
Each Valuation Report shall be compiled based upon the
information contained in the records maintained by the Program Manager on behalf
of the Issuer as well as information provided by the Collateral Agent and each
Representative with respect to the Collateral.
(b) In addition to the information described under Section 6.1
(a), each Valuation Report shall set forth, in respect of the Quarterly Payment
Date related to such Valuation Report, the following amounts:
(i) the amounts to be applied in respect of each clause under
the Priority of Payments; and
(ii) the amounts to be applied in respect of each clause under
Sections 4.1(b), 4.3(a) and 4.3(b) of the Security Agreement, to the
extent applicable.
Notwithstanding anything in this Section 6.1 to the contrary,
however, in the event there shall be deposited in the Collection Account any
Collateral Proceeds otherwise scheduled to have been received on or prior to a
Determination Date, and such deposit is made no later than the Business Day
immediately preceding the related Quarterly Payment Date, the Issuer shall
render a revised Valuation Report prepared as though such amounts were credited
to the Collection Account on the original Determination Date and cause such
Valuation Report to be delivered to each Rating Agency, the Collateral Agent and
each Representative no later than such Quarterly Payment Date, which report
shall replace and substitute the Valuation Report previously delivered in
respect of such Determination Date. Collateral Proceeds received after a
Determination Date but applied for payment on the Quarterly Payment Date
relating to such Determination Date in accordance with the foregoing sentence
shall be deemed excluded from Collateral Proceeds for the purposes of the Due
Period ending on the subsequent Determination Date.
(c) If the Collateral Agent shall not have received any
accounting provided for in this Section 6.1 by the first Business Day after the
date on which such accounting was due to have been received by the Collateral
Agent, the Collateral Agent shall use reasonable efforts to cause such
accounting to be made by the applicable Quarterly Payment Date. To the extent
the Collateral Agent is required to provide any information or reports pursuant
to this Section 6.1 as a result of the failure of the Program Manager to provide
such information or reports, the Collateral Agent shall be entitled to retain an
Independent certified public accountant in
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connection therewith, and the reasonable costs incurred by the Collateral Agent
for such Independent certified accountant shall be reimbursed as an
Extraordinary Expense pursuant to Section 4.1 of the Security Agreement.
SECTION 6.2. Reports by Independent Accountants.
(a) At the Closing Date the Issuer shall appoint a firm of
Independent certified public accountants of recognized international reputation
for purposes of preparing and delivering the reports or certificates of such
accountants required by any of the Financing Documents. Upon any resignation by
such firm, the Issuer shall promptly appoint, by Issuer Request delivered to the
Collateral Agent, each Representative and each Rating Agency, a successor
thereto that shall also be a firm of Independent certified public accountants of
recognized international reputation and deliver notice thereof to each
Representative. the Collateral Agent and each Rating Agency. If the Issuer shall
fail to appoint a successor to a firm of Independent certified public
accountants which has resigned within 30 days after such resignation, the Issuer
shall promptly notify the Collateral Agent and the Representatives of such
failure in writing. If the Issuer shall not have appointed a successor within
ten days thereafter, the Collateral Agent shall promptly appoint a successor
firm of Independent certified public accountants of recognized international
reputation upon approval of the Issuer. The fees of such Independent certified
public accountants and its successor shall be payable as provided in (and to the
extent set forth in) Section 8(a) of the Management Agreement.
(b) Contemporaneously with the delivery of the annual
financial statements in accordance with Section 6.3, the Issuer shall cause to
be delivered to the Collateral Agent, each Representative and each Rating Agency
a statement from a firm of Independent certified public accountants indicating
(i) that such firm has reviewed the Valuation Reports and Redemption Date
Statements received since the last review and applicable information from the
Collateral Agent and the Representatives, and (ii) that the calculations within
those Valuation Reports and Redemption Date Statements have been performed in
accordance with the applicable provisions of this Agreement and the other
Financing Documents; provided that in the event of a conflict between such firm
of Independent certified public accountants and the Issuer with respect to any
matter in this Section 6.2, the determination by such firm of Independent public
accountants shall be conclusive.
SECTION 6.3. Reports by Issuers. The Issuers shall file with
the Commission, with copies to the Collateral Agent and each Representative to
be provided within 15 days after the Issuer is required to file the same with
the Commission, the annual reports, the financial statements and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Issuers may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Issuers
are not required to file information, documents or reports pursuant to either of
said Sections, then they shall file with the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such of
the supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
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ARTICLE 7
CALCULATIONS
SECTION 7.1. Assumptions as to Project Loans; Etc. In
connection with all calculations required to be made pursuant to this Agreement
or any of the other Financing Documents with respect to Scheduled Payments on
any Project Loan and Permitted Investment, or any payments on any other assets
included in the Collateral, and with respect to the income that can be earned on
Scheduled Payments on such Project Loan and Permitted Investment and on any
other amounts that may be received for deposit in the Collection Account, the
provisions set forth in this Section 7.1 shall be applied.
(a) All calculations with respect to Scheduled Payments on the
Project Loans and Permitted Investments shall be made on the basis of
information as to the terms of each such Project Loan or Permitted Investment
and upon report of payments, if any, received on such Project Loan and Permitted
Investment that are furnished by or on behalf of the issuer of such Project Loan
or Permitted Investment and, to the extent they are not manifestly in error,
such information or report may be conclusively relied upon in making such
calculations.
(b) For each Due Period, the Scheduled Payment on any Project
Loan or Permitted Investment (other than a Defaulted Project Loan or Defaulted
Permitted Investment which shall be assumed to have a Scheduled Payment equal to
the product of the original Scheduled Payment and 100% minus the Assumed Loss
Amount shall be the total amount of payments and collections in respect of such
Project Loan or Permitted Investment received during the Due Period.
(c) Each Scheduled Payment receivable with respect to a
Project Loan or Permitted Investment (other than a Defaulted Project Loan or
Defaulted Permitted Investment which shall be assumed to have a Scheduled
Payment equal to the product of the original Scheduled Payment and 100% minus
the Assumed Loss Amount shall be assumed to be received on the applicable Due
Date, and each such Scheduled Payment shall be assumed to be immediately
deposited in the Collection Account (or any other Account in accordance with the
terms of the Financing Documents) and, except as otherwise specified, to earn
interest at the Assumed Reinvestment Rate. All such funds shall be assumed to
continue to earn interest until the date on which they are required to be
available in the Collection Account (or otherwise) for application, in
accordance with the terms hereof, to payments of principal of or interest on the
Secured Obligations or other amounts payable pursuant to this Agreement and the
other Financing Documents.
(d) With respect to (i) any Project Loan as to which any
interest or other payment thereon is subject to withholding tax of any relevant
jurisdiction or (ii) any Intermediate Funding Loan as to which any payments of
operating expenses of the related Intermediate Funding Entity are deducted from
principal or interest thereon or fees relating thereto, each Scheduled Payment
thereon shall, for purposes of the Portfolio Financial Tests including the
Actual Net Interest Margin, be deemed to be payable net of such withholding tax
or such operating expenses unless the issuer thereof or obligor thereon is
required to make additional payments to fully compensate the Issuer for such
withholding taxes or such operating expenses (including in respect of any such
additional payments). On any date of determination, the amount of any Scheduled
Payment due on any future date shall be assumed to be made net of any such
withholding tax or such
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operating expenses based upon withholding tax rates or such operating expenses
in effect on such date of determination, unless the issuer thereof or obligor
thereon is required to make additional payments to fully compensate the Issuer
for such withholding taxes or such operating expenses (including in respect of
any such additional payments).
(e) Without limiting the generality of the foregoing, in
making determinations in respect of the Liquidity Test, the Program Manager will
create projections (i) assuming both a High Interest Rate Scenario and a Low
Interest Rate Scenario for purposes of calculating (1) the projected interest
income on Temporary Investments, (2) the projected payments or amounts to be
received in respect of the Hedging Agreements and (3) the projected interest
payable on the Backup Facility and the Liquidity Facility, (ii) assuming that
(1) amounts credited to the Uncommitted TIP Account are liquidated at current
market levels and used to reduce amounts Allocated, if any, under the Backup
Facility and then are used to redeem Notes and repay draws, if any, under the
Backup Facility, in order of seniority, on the first Quarterly Payment Date of
the Measurement Period and (2) amounts credited to the Committed TIP Account are
invested at the contracted rates thereof until maturity and are reinvested at
three-month LIBOR pending reinvestment into Project Loans pursuant to the
assumed drawdown schedule, (iii) assuming that with respect to committed
Eligible Projects, if any, that are in their construction phase, each draw
occurs one year later than the date assumed in the drawdown schedule, (iv)
assuming that amounts, if any, drawn or Allocated under the Backup Facility are
refinanced with Class A Senior Notes at the rate currently payable on the Backup
Facility and with respect to amounts Allocated under the Backup Facility, the
proceeds thereof are credited to the Committed TIP Account on the first
Quarterly Payment Date of the Measurement Period, (v) assuming that no further
Project Loans are committed to by the Issuer and (vi) assuming that all Hedging
Agreements currently in place and, if applicable, those expected to be in place
following addition of the Project Loan proposed to be added to the Portfolio
Assets are terminated on the first Quarterly Payment Date of the Measurement
Period.
ARTICLE 8
CONDITIONS PRECEDENT
SECTION 8.l. General Provisions. The Notes to be issued on the
Closing Date may be executed by the Issuers and delivered to the Trustee for
authentication and thereupon the same shall be authenticated and delivered by
the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, and
the effectiveness of the Notes, the Liquidity Facility Loan Agreement and any
Backup Facility Loan Agreement, are subject to receipt by the Collateral Agent
(with sufficient copies for each Representative) of the following:
(a) an Officer's certificate of the Issuer (i) evidencing the
authorization by Board Resolution of the execution and delivery by the Issuer of
each of the Financing Documents, the Management Agreement and the Hedging
Agreements then in place and the execution, authentication and delivery by the
Issuer of the Notes and specifying the Stated Maturity, the principal amount and
Class (and, as to Class A Notes and Class B Notes, Series designation) of the
Notes to be authenticated and delivered, and (ii) certifying that (A) the
attached copy of such Board Resolution is a true and complete copy thereof, (B)
such Board Resolution has not been rescinded and is in full force and effect on
and as of the Closing Date, (C) the Officers
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authorized to execute and deliver such documents hold the offices and have the
signatures indicated thereon and (D) no other Board Resolution is in effect
related to matters set forth therein;
(b) an Officer's certificate of the Co-Issuer (i) evidencing
the authorization by Board Resolution of the execution and delivery by the
Co-Issuer of each of the Financing Documents to which it is a party and the
Management Agreement, and the execution, authentication and delivery of the
Notes and specifying the Stated Maturity, the principal amount and Class (and as
to Class A Notes and Class B Notes, Series designation) of the Notes to be
authenticated and delivered, and (ii) certifying that (A) the attached copy of
such Board Resolution is a true and complete copy thereof, (B) such Board
Resolution has not been rescinded and is in full force and effect on and as of
the Closing Date, (C) the Officers authorized to execute and deliver such
documents hold the offices and have the signatures indicated thereon and (D) no
other Board Resolution is in effect related to matters set forth therein;
(c) any other instrument or document, fully executed (as
applicable), necessary to consummate and perfect the Grant of a first priority
security interest (subject only to Permitted Liens) in favor of the Collateral
Agent for the benefit of the Secured Parties, in all of the Issuers' right,
title and interest in and to the Collateral;
(d) an opinion of Milbank, Tweed, Hadley & McCloy, special New
York counsel to the Issuers, dated the Closing Date, substantially in the form
of Exhibit B hereto;
(e) an opinion of Vinson & Elkins, L.L.P. counsel to Enron
dated the Closing Date, substantially in the form of Exhibit C hereto;
(f) an opinion of the General Counsel of Enron, dated the
Closing Date, substantially in the form of Exhibit D hereto;
(g) an executed copy of the Common Agreement;
(h) an executed copy of the Security Agreement;
(i) an executed copy of the Intercreditor Agreement;
(j) an executed copy of the Management Agreement;
(k) an executed copy of each Hedging Agreement then in place
(and all acknowledgements thereto);
(l) an executed copy of the Liquidity Facility Loan Agreement;
(m) an executed copy of each Backup Facility Loan Agreement in
effect on such date, if any;
(n) an executed copy of the Enron Support Agreement;
(o) an executed copy of the TIP Investment Management
Agreement;
(p) an executed copy of the Partnership Agreement and
certified copies of the Certificate of Incorporation and the By-laws of the
Co-Issuer;
(q) executed copies of all Class I Stage Funding Commitment
Letters; and
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(r) certified copies of the [organizational documents of
intermediate equityholders].
SECTION 8.2. Additional Conditions. On the Closing Date, the
Issuers shall cause the following conditions to be satisfied:
(a) Funding of Class I Interests of the Issuer. Interests in
an amount at least equal to $250,000,000 shall have been funded or committed to
be funded (pursuant to one or more Class I Stage Funding Commitment Letters in
the case of Class I Interests); provided, that at least five (5) percent of the
total funded capitalization of the Issuer shall consist of funded Class I
Interests on the Closing Date, and provided, further, that each holder of a
Class I Stage Funding Commitment shall be an Acceptable Credit Provider.
(b) Rating Letters. The delivery to the Trustee of an
Officer's certificate of the Issuer to the effect that attached thereto is a
true and correct copy of (i) a letter signed by Moody's confirming that the
Class A Notes and the Class B Notes have been rated at least "A2" and "Ba2",
respectively, by Moody's and that such ratings are in full force and effect on
the Closing Date; and (ii) a letter signed by Standard & Poor's confirming that
the Class A Notes and the Class B Notes have been rated at least "A" and "BB",
respectively, by Standard & Poor's and that such ratings are in full force and
effect on the Closing Date.
(c) Accounts. The delivery by the Account Bank of evidence of
the establishment of each of the Accounts (other than the Expense Reserve
Account and the Distribution Obligation Escrow Account).
(d) Payment of Issuance Related Expenses. The Issuer shall pay
all Initial Issuance Expenses of the Issuers from the proceeds of such issuance.
ARTICLE 9
HEDGING AGREEMENTS; BACKUP FACILITY LOAN AGREEMENTS; LIQUIDITY
FACILITY LOAN AGREEMENT
SECTION 9.1. Hedging Agreements.
(a) The Issuer will enter into and terminate one or more
Hedging Agreements only to the extent they are consistent with the objectives
described in the Prospectus under the caption "Hedging Agreements" (and shall
deliver to the Collateral Agent original counterpart copies of each such Hedging
Agreement).
(b) Subject to the Intercreditor Agreement, amounts due to the
Hedge Counterparties under the Hedging Agreements shall be paid when such
amounts are due thereunder, in accordance with the Priority of Payments or the
Priority of Acceleration Payments, as applicable, and otherwise as provided
under the Security Agreement (it being understood and agreed that payments owing
by the Issuer to any Hedge Counterparty under a Hedging Agreement may be setoff
against payments owing to the Issuer by such Hedge Counterparty under such
Hedging Agreement (but not against any other obligations owing to or by the
Issuer) without regard to the Priority of Payments or Priority of Acceleration
Payments).
(c) Each Hedging Agreement shall provide:
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(i) that such Hedging Agreement shall be governed by and
construed in accordance with the laws of the State of New York; and
(ii) that such Hedging Agreement shall terminate at the option
of the Issuer upon the failure of the related Hedge Counterparty to
agree to provide Hedge Counterparty Credit Support within two Business
Days after the failure of the senior, unsecured debt or deposit
obligations of the related Hedge Counterparty (or any Person that shall
have absolutely and unconditionally guaranteed the obligations of such
Hedge Counterparty under such Hedging Agreement) to be rated at least
"A2" by Moody's and at least "A" by Standard & Poor's.
(d) In the event the Collateral Agent becomes aware that a
Hedge Counterparty has defaulted in the payment when due of its obligations to
the Issuer under the related Hedging Agreement, the Collateral Agent shall
request the Issuer to make a demand on such Hedge Counterparty, or any
guarantor, if applicable, demanding payment by 12:30 p.m., New York time, on
such date (or by such time on the next succeeding Business Day if such knowledge
is obtained after 11:30 a.m., New York time). The Collateral Agent shall give
notice to the Representatives upon the continuing failure by such Hedge
Counterparty to perform its obligations during the two Business Days following a
demand made by the Issuer or such Hedge Counterparty.
(e) If at any time any Hedging Agreement becomes subject to
early termination due to the occurrence of an event of default or a termination
event, the Issuer and the Collateral Agent shall take such actions (following
the expiration of any applicable grace period) to enforce the rights of the
Issuer and the Collateral Agent thereunder and under the Security Agreement as
may be permitted by the terms of such Hedging Agreement and consistent with the
terms hereof and of the other Financing Documents, and shall apply the proceeds
of any such actions (including, without limitation, the proceeds of the
liquidation of any collateral pledged by the related Hedge Counterparty) to
enter into a replacement Hedging Agreement on substantially identical terms or
on such other terms as would satisfy the Rating Condition. Any costs
attributable to entering into a replacement Hedging Agreement which exceed the
sum of the proceeds of the liquidation of the terminated Hedging Agreement shall
be borne solely by the Issuer and shall constitute expenses payable under clause
(v) of Section 4.1(a) of the Security Agreement or clause (iv) of the Priority
of Acceleration Payments. In determining the amount payable under the terminated
Hedging Agreement, the Issuer will seek quotations from reference market-makers
who satisfy the definition of Hedge Counterparty herein. In addition, the Issuer
will use its best efforts to cause the termination of a Hedging Agreement to
become effective simultaneously with the entry into of a replacement Hedging
Agreement described as aforesaid.
SECTION 9.2. Backup Facility Loan Agreements. The Issuer may,
from time to time subsequent to the date hereof, enter into one or more Backup
Facility Loan Agreements conforming to the standards set forth in Appendix B
hereto; provided that, the Issuer shall obtain confirmation, on or prior to
entering into such agreement, that the Rating Condition would be satisfied after
giving effect to such additional Backup Facility Loan Agreement and shall
deliver to the Collateral Agent an executed copy of each such agreement.
SECTION 9.3. Increase in the Commitments under the Liquidity
Facility Loan Agreement. The Issuer may, from time to time subsequent to the
date hereof, increase the Liquidity Facility Commitment by up to $50 million, in
accordance with the terms of the
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Liquidity Facility Loan Agreement or by obtaining Liquidity Facility Commitments
from Enron pursuant to the Enron Support Agreement, provided, that the Issuer
shall (i) obtain confirmation, on or prior to effecting such increase, that the
Rating Condition would be satisfied after giving effect to such increase and
(ii) in the case where the Issuer obtains Liquidity Facility Commitments, notify
the Liquidity Facility Agent of the amount and payment terms under the related
Liquidity Commitment Note.
ARTICLE 10
REPAYMENTS AND REDEMPTIONS
SECTION 10.1. General Terms. Upon the repayment or redemption
of any Secured Obligation (whether such repayment or redemption is mandatory or
optional), the Issuers shall satisfy all applicable provisions under each of the
relevant Financing Documents.
SECTION 10.2. Redemption at the Option of the Issuers;
Election to Redeem.
(a) The Issuers may redeem Notes and/or the Support Notes at
the applicable Redemption Price and/or repay amounts drawn under the Liquidity
Facility and Backup Facility and pay termination amounts under Hedging
Agreements (exclusive of installments of principal or interest due on or prior
to such date, provided payment shall have been made or duly provided therefor)
as follows:
(i) the Class A Notes and Class B Notes, in a minimum
aggregate principal amount of $250,000, the amounts drawn under the
Backup Facility, Liquidity Facility, the Class C Notes and the Support
Notes (in whole or in part), on any Quarterly Payment Date, upon the
determination to do so by the Issuer (acting at the direction of the
General Partner), using amounts provided by Enron or other Persons
specifically for such purpose pursuant to Section 5.3 of the Enron
Support Agreement, in the following order: first, if after the Stated
Maturity of the Liquidity Facility, to reduce the amounts drawn under
the Liquidity Facility, second, ratably, (A) to redeem the Class A
Notes, (B) to reduce the amounts drawn under the Backup Facility, (C)
for termination payments to Hedge Counterparties in connection with any
termination of Hedging Agreements associated with any of the foregoing
clauses (A) or (B), and (D) to repay the amounts drawn under the
Liquidity Facility (without duplication of the preceding clause
"first") and third, to redeem the Class B Notes, the Class C Notes and
the Support Notes, in the order of seniority;
(ii) the Class A Notes and the Class B Notes (in whole or in
part) on any Quarterly Payment Date on or after the fifth anniversary
of the Closing Date but prior to the sixth anniversary of the Closing
Date in a minimum aggregate principal amount equal to $250,000 which
redemption need not be in order of seniority, upon the determination to
do so by the Issuer (acting at the direction of the General Partner)
through (A) the issuance of new Class A Notes, (B) drawings under the
Backup Facility in the case of a redemption of the Class B Notes and/or
(C) from applying amounts credited to the Uncommitted TIP Account, in
an aggregate principal amount equal to the aggregate Redemption Price
of the Class A Notes and Class B Notes being so redeemed; provided
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that (A) the Credit Support Tests and, if such redemption is not
effected in order of seniority, the Rating Condition, are satisfied
(after taking into account such proposed redemption or repayment); (B)
no Default has occurred and is continuing on such date; (C) (1) the
Senior Coverage Test is satisfied, (2) the Senior Overcollateralization
Ratio is at least equal to the Target Senior Overcollateralization
Ratio and (3) the Total Overcollateralization Ratio is at least equal
to the Target Total Overcollateralization Ratio (in each case, after
taking into account such proposed redemption or repayment); and (D) to
the extent the Collateral is comprised of less than 10 Project Loans,
no such Project Loan is a Defaulted Project Loan as of such date;
(iii) subject to the satisfaction of the conditions set forth
in Section 3.3 of the Indenture, on any Quarterly Payment Date on or
after the fifth anniversary of the Closing Date and from time to time
all or any part of the Class B Notes issued and Outstanding as of such
date in a minimum aggregate principal amount equal to $250,000, upon
the determination to do so by the Issuer (acting at the direction of
the General Partner), through (A) the issuance of a new Series of Class
B Notes with the same maturity and other terms, other than interest
rate, as the Class B Notes being redeemed, in a principal amount equal
to the principal of the Class B Notes so redeemed plus the Class B
Premium, if any, and/or (B) amounts provided by Enron or other Persons
specifically for such purpose pursuant to Section 5.3 of the Enron
Support Agreement (such redemption and reissuance, a "Class B
Refinancing") which will accrue interest at a fixed rate per annum set
forth in the related Supplemental Indenture; provided, that (A) the
Credit Support Tests and the Rating Condition are satisfied (after
taking into account such proposed redemption) and (B) no Default has
occurred and is continuing on such date; and
(iv) the Class C Notes (in whole or in part) on any Quarterly
Payment Date through the issuance of new Class A Notes, drawings under
the Backup Facility or from applying amounts credited to the
Uncommitted TIP Account upon the determination to do so by the Issuer
(acting at the direction of the General Partner) provided that (A) the
Credit Support Tests and the Rating Condition are satisfied (after
taking into account such proposed redemption) and (B) no Default has
occurred and is continuing on such date.
(b) No redemptions pursuant to Section 10.2(a) shall be
permitted unless the payment of the entire Redemption Price, including the
applicable Premium, is made on the Redemption Date.
(c) All repayments and redemptions pursuant to this Section
10.2 shall be made in accordance with the applicable provisions of the Financing
Documents.
SECTION 10.3. Mandatory Redemption.
(a) On each Quarterly Payment Date specified below, the
Issuers shall effect a mandatory redemption of the Notes (in whole or in part)
and a mandatory repayment of amounts drawn under the Backup Facility by applying
the amounts set forth below in accordance with the Priority of Payments:
(i) on the Quarterly Payment Date immediately following
an Investment Termination Date (such date, the
"Initial Redemption Date") that is not
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<PAGE> 44
also a Tax Redemption Trigger Date and to the extent the Uncommitted
TIP Account Balance exceeds $250,000, and on each Quarterly Payment
Date thereafter until the Uncommitted TIP Account Balance is reduced to
zero, in an amount equal to the (A) Uncommitted TIP Account Balance on
the Initial Redemption Date less (B) amounts, if any, applied towards
the redemption of Class B Notes and/or Class C Notes in accordance with
Sections 10.2(a)(ii) and 10.2(a)(iv) on such Quarterly Payment Date;
provided, that, so long as any Sale of any Uncommitted TIP Investment
is deferred in accordance with Section 2.5(a) of the Security
Agreement, the amount referred to in the preceding clause (A) shall be
reduced by the aggregate principal amount of the Uncommitted TIP
Investments whose sales are so deferred. Any Premium which may be
payable in connection with this Section 10.3(a)(i) in accordance with
clause (c) below will be calculated based on the amount referred to in
the immediately preceding sentence;
(ii) on the Quarterly Payment Date following the Investment
Termination Date and on each Quarterly Payment Date thereafter if a
Commitment expires, terminates or is cancelled or reduced (in whole or
in part) and any such reduced Commitment exceeds the amount Allocated
under the Backup Facility for such Commitment, in an amount equal to
such excess amount; provided, that, so long as any Sale of a Committed
TIP Investment is deferred in accordance with Section 2.5(a) of the
Security Agreement the amount referred to in the immediately preceding
clause shall be reduced by the aggregate principal amount of the
Committed TIP Investments whose sales are so deferred.
(iii) on any Quarterly Payment Date upon the occurrence of (A)
an Equity Disposition and the Disposition Amount is required to be paid
pursuant to Article 8 of the Enron Support Agreement or (B) a
Refinancing, in an amount equal to the Note Redemption Amount; and
(iv) upon the occurrence of a Tax Event and the failure to
satisfy the Rating Condition, after giving effect to any amounts, if
any, provided under Section 5.1 of the Enron Support Agreement, by the
60th day following the occurrence of such event (such date, the "Tax
Redemption Trigger Date"), on the Quarterly Payment Date following such
Tax Redemption Trigger Date and on each Quarterly Payment Date
thereafter, in an amount equal to the Note Redemption Amount.
(b) The Class A Notes shall be subject to mandatory redemption
on any Quarterly Payment Date if a Subordinate Event of Default shall occur and
be continuing and the Holders of
39
<PAGE> 45
a Majority of the Class B Notes direct the Issuers to redeem the Class A Notes,
in whole but not in part, at par, provided that no such redemption shall be
permitted unless all amounts then owing under the Backup Facility and the
Liquidity Facility and all termination amounts paid under the Hedging Agreements
have been paid in full or will be paid in full through the anticipated proceeds
of a sale or liquidation of the Project Loans and the other Collateral and the
Collateral Agent has determined that the anticipated proceeds of a sale or
liquidation of the Project Loans and other Collateral would be sufficient, in
accordance with the Priority of Payments, to so redeem the Class A Notes and
repay all amounts owing under the Backup Facility and the Liquidity Facility and
make all Termination Payments payable under the Hedging Agreements.
(c) The redemption price for Class A Notes will be par
(including accrued and unpaid interest) plus the Class A Premium and for the
Class B Notes will be par (including accrued and unpaid interest) plus the Class
B Premium; provided, however, the redemption price for a redemption pursuant to
(x) Section 10.3(a)(i) resulting from the termination of the Investment Period
for reasons specified in clauses (iii) or (iv) of the definition of Investment
Period and (y) Sections 10.3(a)(ii) (to the extent the expiration, termination,
cancellation or reduction resulted from reasons other than those attributable to
the Issuer), 10.3(a)(iv) or Section 10.3(b), will be par (including accrued and
unpaid interest).
(d) Any mandatory redemption, repayment or Premium due as a
result of such redemption but not paid on such Redemption Date shall be payable
on each succeeding Quarterly Payment Date in accordance with the Priority of
Payments or the Priority of Acceleration Payments, as applicable, to the extent
Collateral Proceeds are available therefor, until all amounts payable have been
paid in full.
SECTION 10.4. Pro Rata Application. Unless otherwise specified
herein, all redemptions of Notes, Support Notes or amounts Outstanding under the
Backup Facility pursuant to this Article 10 shall be allocated on a pro rata
basis according to their respective Outstanding principal amounts among all
Outstanding Notes of a particular Class and amounts Outstanding under the Backup
Facility, without preference or priority of any kind among the Notes of such
Class (or any Series thereof) or among the Class A Notes and the Backup
Facility.
ARTICLE 11
LIMITED RECOURSE LIABILITY OF THE ISSUERS
SECTION 11.1. Limited Recourse Liability. It is expressly
agreed and understood that recourse for the obligations of the Issuers under
this Agreement and each other Financing Document to which either is a party
shall be limited to the Collateral and the Collateral Proceeds and that no
personal liability in respect of or recourse under or upon any obligation,
covenant or agreement contained in any Financing Document to which either is a
party or in this Agreement or under or upon any indebtedness secured by or
arising out of any Financing Document to which either is a party shall attach
to, be incurred by or be had against the Issuer, the Co-Issuer, any holder of an
equity interest in or officer or director as such, past, present or future, of
the Issuers or any shareholder, any holder of partnership interests, or any
affiliates, employees, agents and direct or indirect controlling persons of such
persons, or of any predecessor or successor of any thereof (each an "Exempt
Person"), whether by virtue of any
40
<PAGE> 46
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or by any legal or equitable proceeding or otherwise. It is further
expressly agreed and understood that any and all such personal liability of
every name and nature either at common law or in equity or by statute or
constitution, of every such Exempt Person is hereby expressly WAIVED AND
RELEASED as a condition of, and as part of the consideration for, the issuance
of the Notes and the execution of this Agreement and the other Financing
Documents; provided, however, that nothing herein or in this Agreement shall be
taken to prevent the institution of proceedings against any Person to the extent
necessary to realize the benefit of the Collateral granted under the Security
Documents.
The limitations on recourse set forth in this Article 11 shall
survive termination of this Agreement and the payment and performance of all
obligations under the Financing Documents.
ARTICLE 12
PROVISIONS REGARDING THE ISSUERS
SECTION 12.1. Limitation on Benefit of Provisions regarding
the Issuers. The representations, warranties, covenants, agreements and Events
of Default made by or relating to the Issuers hereunder and under the other
Financing Documents shall be for the benefit of the Secured Parties and,
notwithstanding anything contained herein or therein to the contrary, no other
Person shall be entitled to take any action against the Issuers as a result of
the breach of, or failure to comply with, any such representation, warranty,
covenant, agreement or Event of Default.
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<PAGE> 47
IN WITNESS WHEREOF, the parties have caused this Common Agreement to be duly
executed by their respective officers duly authorized as of the day and year
first above written.
ENRON INTERNATIONAL CPO, L.P.
By: Enron CPO Holdings, Inc.
its General Partner
By:
----------------------------------
Name:
Title:
ENRON INTERNATIONAL CPO, INC.
By:
----------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
as Trustee
By:
----------------------------------
Name:
Title:
[NAME OF LIQUIDITY FACILITY AGENT]
as Liquidity Facility Agent
By:
----------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
as Collateral Agent
By:
----------------------------------
Name:
Title:
42
<PAGE> 48
Draft
8/7/98
Appendix A to Common Agreement
RULES OF INTERPRETATION
For all purposes of the Transaction Documents (as defined
below) or any other instrument or agreement that incorporates provisions of any
Transaction Document by reference, except as otherwise expressly provided or
unless the context otherwise requires:
(1) the terms not otherwise defined in any such
Transaction Document have the respective meanings assigned to them in this
Appendix A, and such definitions shall equally apply to the plural and singular
form of such terms;
(2) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP (as defined below);
(3) unless otherwise expressly specified, any agreement,
contract or document defined or referred to in any Transaction Document shall
mean such agreement, contract or document as in effect as of the Closing Date
(as defined below), as the same may thereafter be amended, supplemented or
otherwise modified from time to time;
(4) unless the context clearly intends to the contrary,
pronouns having a masculine or feminine gender shall be deemed to include the
other;
(5) any reference to any Person (as defined below) shall
include its permitted successors and assigns; and
(6) The terms "initially fund" or "initial funding" when
used in the context of a Project Loan shall include the acquisition by the
Issuer of an existing project loan.
DEFINITIONS
"Acceleration": The meaning specified in Section 5.2(a) of
the Common Agreement.
"Acceptable Credit Provider": A Person whose long-term,
unsecured debt is rated at least "A" by S&P and "A2" by Moody's or whose
obligation is secured by a letter of credit by a Person whose long-term,
unsecured debt is rated at least "A" by S&P and "A2" by Moody's, in each case
at the time of the initial determination thereof under the Financing Documents,
except that, with respect to (i) clauses (8) and (9) and the final proviso of
the definition of Project Loan Criteria in this Appendix A, (ii) clause (ii) of
the definition of "Initial Equity" in this Appendix A and (iii) Section 14.8(i)
of the Enron Support Agreement, "Acceptable Credit Provider" shall mean a
Person whose long-term, unsecured debt is rated at least Investment Grade at
the time of the initial determination thereof.
<PAGE> 49
"Account": Any of (i) the Uncommitted TIP Account, (ii) the
Committed TIP Account, (iii) the Collection Account, (iv) the Reserve Account,
(v) the Excess Spread Account, (vi) the Operating Account, (vii) the Expense
Reserve Account, (viii) the Distribution Obligation Escrow Account or (ix) the
Note Payment Account.
"Account Bank": Citibank, N.A., solely in its capacity as
account bank under the Security Agreement.
"Act": The meaning specified in Section 13.2 of the
Indenture.
"Actual Net Interest Margin": On any date is calculated by
dividing:
(a) the excess of (i) the product of (x) the Aggregate Project
Loan Balance and (y) the weighted average rate of interest of all Project Loans
over (ii) the product of (x) the greater of (A) zero and (B) the Outstanding
Amount of Class A Notes and Class B Notes and the Backup Facility Balance less
the Uncommitted TIP Account Balance and (y) the weighted average of the Class A
Note Interest Rate and Class B Note Interest Rate and the current rate of
interest payable (after giving effect to the applicable Hedging Agreements, if
any) on the Backup Facility Balance assuming the amounts Allocated thereunder
were drawn
by
(b) the Aggregate Project Loan Balance.
"Actual Senior Credit Support Percentage": On any date, the
amount, expressed as a percentage, calculated by dividing:
(a) Total Assets
by
(b) Net Senior Debt.
"Additional Transaction Documents": Any contracts or
agreements entered into by the Issuer or the Co-Issuer subsequent to the
Closing Date; provided, that, for purposes of Section 4.11(c) of the Common
Agreement, Additional Transaction Documents shall not include any Hedging
Agreements, Liquidity Facility Loan Agreement, Backup Facility Loan Agreements,
Replacement Management Agreements or Enron Support Documents entered into
subsequent to the Closing Date.
"Administrative Expenses": Any filing fees and taxes then due
and payable by the Issuer and/or the Co-Issuer (as certified by an Authorized
Officer of the Issuer to the Collateral Agent) and ordinary fees and expenses
owing by the Issuer to the Trustee, the Collateral Agent, other Representatives
and the TIP Advisors.
"Administrative Fee": The meaning specified in Section 7.01
of the Management Agreement.
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<PAGE> 50
"Affiliate": With respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding the power to vote
5% or more of the outstanding voting securities or other voting ownership
interests of the specified Person, (b) any Person directly or indirectly
controlling, controlled by or under common control with the specified Person or
(c) any general partner of the specified Person.
"Aggregate Book Value of the Issuer's Assets": The meaning
specified in Section 1.01 of the Management Agreement.
"Aggregate Project Loan Balance": The aggregate Project Loan
Balance for all Project Loans.
"Aggregate Senior Loan Balance": As of any date of
determination, the sum of (i) the Outstanding Amount of the Class A Notes, (ii)
the Liquidity Facility Balance and (iii) the Backup Facility Balance.
"Allocation": A commitment under the Backup Facility to fund
a particular Project Loan. "Allocated" shall have a correlative meaning.
"Antarctica": The geographic area that is within the
boundaries (as of the date hereof) of Antarctica.
"Assigned Agreements": The meaning specified in Section
2.1(a) of the Security Agreement.
"Assumed Loss Amount": With respect to any Defaulted Project
Loan or a defaulted Temporary Investment, an amount equal to the product of (a)
the Principal Balance of such Project Loan or Temporary Investment, as the case
may be, and (b) 100% minus the assumed recovery rate of (x) ___%, in the case
of Project Loans and (y) ___%, in the case of Temporary Investments.
"Assumed Reinvestment Rate": With respect to any Account or
fund securing the Secured Obligations, 4% per annum.
"Assumption Agreement": The meaning specified in Section 1.2
of the Enron Support Agreement.
"Assumptions": The meaning specified in Section 2.1(b)(ii) of
the Common Agreement.
"Authenticating Agent": With respect to the Notes or any
Class of the Notes, the Person designated by the Trustee, if any, to
authenticate such Notes on behalf of the Trustee pursuant to Section 6.4 of the
Indenture.
"Authorized Newspaper": The Luxemburger Wort or any successor
publication or substitute publication of similar circulation selected by the
Trustee.
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<PAGE> 51
"Authorized Officer": With respect to the Issuer or the
Co-Issuer, any partner or Officer who is authorized to act for the General
Partner or any Officer who is authorized to act for the Co-Issuer, as
applicable, in matters relating to, and binding upon, the Issuer or the
Co-Issuer or, in any case, an Authorized Officer of the Program Manager (for so
long as the Program Manager is authorized to act for the Issuers pursuant to
the Management Agreement). With respect to the Program Manager, any Officer,
employee or agent of the Program Manager who is authorized to act for the
Program Manager in matters relating to, and binding upon, the Program Manager
with respect to the subject matter of the request, certificate or order in
question. With respect to the Trustee, a Trust Officer and with respect to any
other bank or trust company acting as trustee of an express trust or as
custodian, any Officer authorized to act for and on behalf of such bank or
trust company who has knowledge of and familiarity with the applicable subject.
With respect to any other Person, the officer authorized to act on behalf of
such Person by its Board of Directors or any other governing body of such
Person. Each party may receive and accept a certification of the authority of
any other party as conclusive evidence of the authority of any Person to act,
and such certification may be considered as in full force and effect until
receipt by such other party of written notice to the contrary.
"Available Committed Funds": The meaning specified under
"Funding Availability Test" in this Appendix A.
"Average Life Test": A test satisfied on any date of
determination if the Average Life Variance is between -1 and 1 years. The
"Average Life Variance" is calculated by dividing:
(a) The product of (x) the Aggregate Project Loan Balance and
(y) the Expected Project Loan Average Life less the Targeted Average
Life
by
(b) the greater of (x) __________ and (y) the Aggregate
Project Loan Balance.
"Targeted Average Life" as of any date of determination means
[________] less the number of years (or portions thereof) that have
elapsed from the Closing Date.
"Expected Project Loan Average Life" as of any date of determination
means the weighted average (by Project Loan Balance) of the Expected
Average Lives of each Project Loan as of the date of determination.
"Expected Average Life" with respect to each Project Loan is
determined on any date of determination by: first, for each principal
payment scheduled to be made subsequent to the date of determination,
multiplying (i) such principal payment by (ii) the number of years
from the date of determination until the date of such principal
payment; second, summing the results obtained from clause first; and
third, dividing such sum by the aggregate amount of the principal
payments referred to in clause first.
"Backup Facility": Collectively, one or more revolving credit
and term loan facilities provided to the Issuer pursuant to the Backup Facility
Loan Agreement(s) and any Funding Availability Commitments.
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<PAGE> 52
"Backup Facility Agent": Each Person appointed as agent by
the Backup Lenders pursuant to each Backup Facility Loan Agreement and in the
case of Funding Availability Commitments provided under the Enron Support
Agreement, an agent appointed by Enron.
"Backup Facility Balance": The aggregate principal amount of
(i) Allocations and drawn amounts under the Backup Facility Loan Agreement(s)
and (ii) any drawn and undrawn amounts under the Funding Availability
Commitments.
"Backup Facility Commitment": Committed amounts by the Backup
Lenders under (i) all Backup Facility Loan Agreements and (ii) Funding
Availability Commitments.
"Backup Facility Loan Agreement": A loan agreement providing
for a Backup Facility, other than the Funding Availability Commitments, and
conforming to the standards set forth in Appendix B to the Common Agreement.
"Backup Lenders": The parties to the Backup Facility Loan
Agreements identified therein as "Lenders" and to the extent there are any
outstanding Funding Availability Commitments, Enron or an Enron Affiliate
providing such Commitment; provided, that in determining whether the Backup
Lenders with the requisite Backup Facility Balance have given any request,
demand, authorization, direction, notice, consent or waiver under any Financing
Document, any portion of the Backup Facility Balance attributable to funds
provided by Enron or any Enron Affiliate shall be disregarded and deemed not to
be outstanding.
"Backup Program Manager": Chase Texas or ___________________,
as applicable.
"Balance": At any time, with respect to Cash or Permitted
Investments in any Account at such time, the aggregate (i) current balance of
Cash, demand deposits, time deposits, certificates of deposit and federal
funds; (ii) principal amount of interest-bearing corporate and government
securities, money market accounts, and repurchase obligations; and (iii)
purchase price (but not greater than the face amount) of non-interest-bearing
government and corporate securities and commercial paper.
"Bankruptcy Code": The United States Bankruptcy Code, Title
11 of the United States Code, as amended.
"Base Case Financial Projections": Projections presented to
the Issuer by the sponsors of each individual Project Borrower as to the
revenues, expenses, debt service and cash available for debt service and
distributions of such Project Borrower over a period at least equal to the term
of the Project Loan to be made to such Project Borrower.
"Base Net Interest Margin": The percentage obtained from
Table 4 set forth in Annex A hereto (the "Base Net Interest Margin Table").
"Base Net Interest Margin Table": The meaning specified under
"Base Net Interest Margin" in this Appendix A.
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<PAGE> 53
"Base Percentage": The meaning specified under "Required
Senior Project Credit Support Percentage" in this Appendix A.
"Beneficial Owner": Any Person owning an interest in a Global
Note as reflected on the books of the Depositary or on the books of a
Depositary Participant or on the books of an indirect participant for which a
Depositary Participant of the Depositary acts as agent.
"Board of Directors": With respect to any Person, the
directors of such Person duly appointed by the stockholders of such Person.
"Board Resolution": With respect to a limited partnership, a
resolution of the Board of Directors of the general partner of such limited
partnership; and with respect to a corporation, a resolution of the Board of
Directors of such corporation.
"Business Day": A day on which commercial banks and foreign
exchange markets settle payments in each of New York City, Houston, London,
Luxembourg and any other city in which the Corporate Trust Office is located
and, in the case of the final payment of principal of any Note, the place of
presentation of such Note.
"Calculated Asset Balance": (x) Prior to the Investment
Termination Date, the sum of (i) the Aggregate Project Loan Balance and (ii)
the Uncommitted TIP Account Balance and (y) on or after the Investment
Termination Date, the sum of (i)(A) the Aggregate Project Loan Balance on the
Investment Termination Date, (B) the Uncommitted TIP Account Balance and (C)
the Committed TIP Account Balance relating to any terminated, canceled, expired
or reduced Commitment minus the sum of (ii)(A) the aggregate amount of all
Commitments terminated, canceled, expired or reduced and (B) the sum of all
Note Redemption Amounts.
"Calculated Senior Debt Balance": The Calculated Asset Balance
minus (x) the sum of (i) all Hedging Proceeds, (ii) the principal amount of the
Class B Notes issued on the Closing Date, (iii) the principal amount of Class C
Notes issued in connection with the initial funding of a particular Project
Loan, (iv) the Class I Interests issued, (v) the GP Interests issued and (vi)
the Class II Interests issued on the Closing Date plus (y) the sum of (i) the
Deferred Issuance Costs and (ii) the principal amount, if any, of Class B Notes
(including any Class B Premium) and Class C Notes redeemed with Class A Notes,
with drawings under the Backup Facility or with amounts credited to the
Uncommitted TIP Account.
"Calculated Total Debt Balance": The Calculated Asset Balance
minus (x) the sum of (i) all Hedging Proceeds, (ii) the principal amount of
Class C Notes issued in connection with the initial funding of a particular
Project Loan, (iii) the Class I Interests issued, (iv) the GP Interests issued
and (v) the Class II Interests issued on the Closing Date plus (y) the sum of
(i) the Deferred Issuance Costs, (ii) the Class B Premium and (iii) principal
amount, if any, of Class C Notes redeemed with Class A Notes or with drawings
under the Backup Facility or with amounts credited to the Uncommitted TIP
Account.
"Cash": Such coin or currency of the United States of America
as at the time shall be legal tender for payment of all public and private
debts.
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"Cedel": Cedel Bank, societe anonyme, a corporation organized
under the laws of the Grand Duchy of Luxembourg.
"Certificate of Authentication": The meaning specified in
Section 2.1(a) of the Indenture.
"Certificated Note": The meaning specified in Section 2.1(c)
of the Indenture.
"Certificated Security": A Security that is represented by a
certificate.
"Chase Texas": Chase Bank of Texas, National Association.
"Class": All of the Notes having the same designation given
pursuant to Section 2.2 of the Indenture.
"Class A Make-Whole Premium": An amount equal to the excess,
if any, of the present value of the remaining principal and interest scheduled
to have been paid pursuant to the Note Payment Assumptions in respect to any
Class A Notes discounted at the Class A Present Value Rate over the amount of
principal of the Class A Notes to be prepaid.
"Class A Note Issuance Requirements": The conditions set
forth in Sections 2.9 and 3.2 of the Indenture.
"Class A Note Interest Rate": With respect to any Class A
Note of any Series, the rate per annum at which interest accrues on such Note
as set forth in the Indenture or in the Supplemental Indenture relating to such
Series (as applicable).
"Class A Notes": The Class A Senior Notes due 2018 of any
Series, having the Class A Note Interest Rate and the Stated Maturity set forth
in the Indenture or in the Supplemental Indenture relating to such Series (as
applicable).
"Class A Present Value Rate": (i) The as bid yield on United
States treasury securities with a maturity most closely correlating to the then
interpolated remaining average life of the Class A Notes immediately prior to
such prepayment (determined in accordance with the Note Payment Assumptions),
plus (ii) ___%.
"Class B Deferral Interest Rate": 1.5% in excess of the Class
B Note Interest Rate.
"Class B Deferred Interest": The meaning specified in Section
2.6(a) of the Indenture.
"Class B Note Interest Rate": With respect to any Class B
Note of any Series, the rate per annum at which interest accrues on such Note
as set forth in the Indenture or in the Supplemental Indenture relating to any
Class B Refinancing.
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<PAGE> 55
"Class B Notes": The ___% Class B Senior Subordinated Notes
due 2018, or in the case of a Class B Refinancing, the Class B Notes having the
Class B Note Interest Rate set forth in the Supplemental Indenture relating to
such Class B Refinancing.
"Class B Premium":
(a) Prior to the fifth anniversary of the Closing Date, an
amount equal to (i) the excess, if any, of (A) the present value of
the remaining principal, interest and Fixed Rate Premium scheduled to
have been paid pursuant to the Note Payment Assumptions in respect of
the Class B Notes, assuming such Class B Notes were to be redeemed on
the fifth anniversary of the Closing Date at an amount equal to par
plus the product of (I) the amount of principal on the Class B Notes
to be prepaid and (II) ___% of the Class B Note Interest Rate,
discounted at the Class B Present Value Rate, over (B) the amount of
principal on the Class B Notes to be prepaid and the applicable Fixed
Rate Premium plus (ii) the applicable Fixed Rate Premium; and
(b) on or after the fifth anniversary of the Closing Date, an
amount equal to the applicable Fixed Rate Premium.
"Class B Present Value Rate": (i) The as bid yield on United
States treasury securities with a maturity equal to the then interpolated
remaining average life of the Class B Notes, assuming the applicable redemption
would occur on the fifth anniversary of the Closing Date, immediately prior to
the applicable prepayment, plus (ii) ____%.
"Class B Refinancing": The meaning specified in Section
10.2(a)(iii) of the Common Agreement.
"Class C Deferred Interest": The meaning specified in Section
2.6(a) of the Indenture.
"Class C Issuance": The meaning specified in Section 2.9(a)
of the Indenture.
"Class C Issuance Date": The meaning specified in Section
2.9(a) of the Indenture.
"Class C Note Interest Rate": With respect to any Class C
Note, the rate per annum at which interest accrues on such Note equal to ___%.
"Class C Note Purchase Commitment": The meaning specified in
the Enron Support Agreement.
"Class C Notes": The Class C Subordinated Notes due 2018
having the Class C Note Interest Rate and the Stated Maturity set forth in the
Indenture.
"Class C Principal Distributable Amount": With respect to a
Due Period, the amount equal to the principal proceeds received during such Due
Period multiplied by a fraction, the numerator of which equals the principal
amount of the Class C Notes and the denominator of which equals the aggregate
amount of funded capitalization of the Issuer.
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"Class I Interests": The meaning specified in the Partnership
Agreement.
"Class I Stage Funding": Funding of Class I Interests after
the Closing Date.
"Class I Stage Funding Commitment": The commitment of
Acceptable Credit Providers to provide Class I Stage Funding.
"Class I Stage Funding Commitment Letter": A letter evidencing
a Class I Stage Funding Commitment [in the form set forth in Annex [ ] to the
Partnership Agreement.]
"Class I Trigger Event": (i) The removal of the Program
Manager and the General Partner without cause, with the concurrent approval of
the Required Lenders, which would (a) cause the Investment Period to terminate
and (b) terminate Enron's obligation to use commercially reasonable efforts to
notify the Issuer of opportunities to make loans to projects developed or
acquired by Enron or Enron Affiliates and located in the El Regions, or (ii)
removal of the Program Manager and the General Partner without cause (without
the approval of the Required Lenders) if, concurrently, (a) Enron's obligation
to use commercially reasonable efforts to notify the Issuer of opportunities to
make loans to projects developed or acquired by Enron or Enron Affiliates and
located in the El Regions is terminated, (b) the GP Interest and the funded
Class II Interests are, if Enron so elects, purchased from Enron or Enron
Affiliates for cash in the amount equal to Enron's aggregate capital
contributions in respect of such GP Interest and funded Class II Interests, (c)
the unfunded portion of Enron's commitment in respect of Class II Interests is
assumed by an Acceptable Credit Provider, (d) Enron's obligation to provide
credit support and any unfunded commitment in respect thereof (other than
funded Class C Notes and Support Notes) under the Enron Support Agreement to
pay or cause to be paid amounts in respect of Quarterly Project Distributions
and Project Distributions Reserved is replaced by credit support of equivalent
value without further liability to Enron, (e) the agreement of Enron not to
sponsor a Competing Issuer for a specified period time is terminated, and (f)
the then effective ratings of the Class A Senior Notes and Class B Senior
Subordinated Notes are reaffirmed by Moody's and S&P.
"Class II Interests": The meaning specified in the
Partnership Agreement.
"Clearing Agency": An organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Corporation": The meaning specified in Section
8-102(a)(5) of the UCC.
"Closing Date": __________, 1998.
"Code": The United States Internal Revenue Code of 1986, as
amended.
"Co-Issuer": Enron International CPO, Inc., a corporation
organized under the laws of the State of Delaware.
"Collateral": The meaning specified in Section 2.1(a) of the
Security Agreement.
"Collateral Account": Any of the Accounts pledged by the
Issuer to the Collateral Agent as part of the Collateral.
"Collateral Agent": Chase Texas solely in its capacity as
collateral agent for the Secured Parties under the Security Agreement and the
other Financing Documents.
"Collateral Proceeds": With respect to any Quarterly Payment
Date, the sum of (i) all payments of interest received by the Issuer in Cash
during the related Due Period on the Project Loans, (ii) except as otherwise
provided in Section 3.3(b) of the Security Agreement with respect to an event
of default that has occurred and is continuing on a Committed TIP Investment,
all payments of interest received in Cash during the related Due Period on the
Temporary Investments, (iii) all accrued interest on any Project Loan or
Temporary Investment received by the Issuer as a result of the Sale of such
Project Loan or Temporary Investment during such Due Period, (iv) all premiums
(including prepayment premiums) received by the Issuer during such Due Period
on the Project Loans and Temporary Investments, (v) if after the Investment
Termination Date, all payments of principal (including prepayments) received by
the Issuer during such Due Period on Project Loans and Temporary Investments
credited to the Uncommitted TIP Account, (vi) all amendment and waiver fees,
all late payment fees and all other fees and commissions received in Cash
during such Due Period in connection with Project Loans and the Temporary
Investments other than loan origination fees or upfront fees (excluding expense
reimbursements) credited to the Uncommitted TIP Account, (vii) if after the
Investment
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Termination Date, any amount received by the Issuer during such Due Period from
the sale or other disposition of Project Loans and Temporary Investments
credited to the Uncommitted TIP Account, (viii) any amount received by the
Issuer pursuant to the Hedging Agreements during such Due Period, other than
Hedging Proceeds received during the Investment Period, (ix) all earnings from
Eligible Investments made with amounts credited to the Accounts (other than any
amounts credited to the Reserve Account, the Excess Spread Account and the
Distribution Obligation Escrow Account) during such Due Period, (x) proceeds
from the Sale of Committed TIP Investments in connection with any mandatory
redemption pursuant to Section 10.3(a)(ii) of the Common Agreement, (xi)
payments received pursuant to the terms of the Enron Support Agreement other
than payments made under Sections 4.1, 4.2, 4.3, 5.4 and 5.5 thereunder and
(xii) amounts which remain credited to the Operating Account at the end of the
immediately preceding Due Period, other than amounts applied towards uses
specified in Section 3.7 of the Security Agreement for the next following Due
Period; provided, that, without duplicating the foregoing, amounts referred to
in clauses (i) through (vii) above shall include amounts received by the Issuer.
"Collection Account": The account designated the "Collection
Account" and established pursuant to Section 3.2 of the Security Agreement
which account shall initially be account number [________] and shall include
any successor or replacement accounts thereof.
"Commission": The U.S. Securities and Exchange Commission.
"Commitment": A legally binding commitment to make a Project
Loan as determined by legal counsel to the Program Manager (subject to the
satisfaction of customary conditions precedent, including any of the Qualifying
Criteria the satisfaction of which may be deferred to any date on or prior to
the initial funding of such Project Loan). "Committed" shall have a
correlative meaning.
"Committed TIP Account": The account designated the
"Committed TIP Account" and established pursuant to Section 3.3(b) of the
Security Agreement which account shall initially be account number
[______________] and shall include any successor or replacement accounts
thereof.
"Committed TIP Account Balance": (i) With respect to
non-defaulted Committed TIP Investments credited to the Committed TIP
Investment, the principal balance of investments credited to the Committed TIP
Account, except that with respect to Committed TIP Investments credited to the
Committed TIP Account which are described in clause (c) of the Committed TIP
Investment Policies, only [__]% of the principal balance of each such
investment shall be deemed credited to the Committed TIP Account and (ii) with
respect to defaulted Committed TIP Investments on deposit in the Committed TIP
Account, only [__]% of the principal balance of each such investment shall be
deemed credited to the Committed TIP Account.
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"Committed TIP Investment": The meaning specified under the
definition of "Committed TIP Investment Policy" in this Appendix A.
"Committed TIP Investment Policies": Amounts credited to or
re-invested in the Committed TIP Account shall be invested in (a) U.S.
Government Securities, (b) TIP Eligible Investments and (c) Dollar-denominated
senior term loans, revolving credits or other senior liabilities of United
States borrowers or corporate issuers located in countries whose long-term
sovereign debt obligations are rated at least "Aa2" by Moody's or at least "AA"
by S&P, in each case, with direct or implied ratings of at least "Baa3" by
Moody's and "BBB-" by S&P (each of the investments described in the foregoing
clauses (a), (b) and (c), a "Committed TIP Investment"). All Committed TIP
Investments shall mature on the earlier of, or prior to, one year from the date
that they were acquired, or as to the relevant portion of such amounts and
after giving effect to amounts Allocated under the Backup Facility the date(s)
on which the Issuer is legally obligated to fund drawdowns under the related
Project Loans in accordance with the agreed upon drawdown schedules. The
investments described in the foregoing clause (c) shall satisfy the following
criteria:
(i) The balance of all such investments shall be zero by
the end of the 12-month period beginning on the Closing Date;
(ii) Such investments shall have a TIP Diversity Score of
at least 20 and an Industry Concentration Factor no greater than 10%
while complying with the restrictions in Section 2.5(a)(i)(A) of the
Security Agreement with respect to the Sale of Collateral; and
(iii) With respect to maturing investments, such amount
will be reinvested in Committed TIP Investments described in clause
(a) or clause (b) of the Committed TIP Investment Policies;
provided, that Committed TIP Investments shall not include any
interest-only security, any security purchased at a price in excess of
100% of the par value thereof, unless such security is non-callable to
maturity (unless callable with a make-whole premium), or any security
whose repayment is subject to substantial non-credit related risk as
determined in the sole judgment of the Program Manager.
"Common Agreement": The Common Agreement dated as of
____________, 1998 among the Issuers, the Collateral Agent and the
Representatives.
"Comparable Countries": The meaning specified in Section 2.02
of the Management Agreement.
"Comparable Debt": The meaning specified in Section 2.02 of
the Management Agreement.
"Competing Issuer": The meaning specified in Section 1.2 of
the Enron Support Agreement.
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"Continent": Each of Antarctica, Africa, Asia, Australasia,
Europe, North America and South and Central America.
"Controlling Class": As of a date of determination, (A) if
Class A Notes are outstanding at such time, the Class A Notes and (B) if Class
B Notes, but no Class A Notes, are outstanding at such time, the Class B Notes,
and (C) if Class C Notes, but no Class A Notes or Class B Notes, are
outstanding at such time, the Class C Notes other than Class C Notes held by
Enron or an Enron Affiliate.
"Corporate Trust Office": The principal corporate trust
office of the Trustee, currently located at 600 Travis, 8th Floor, Houston,
Texas 77002, Attention: Global Trust Services - Enron International CPO, L.P.,
telephone number 713-216-4181, or such other address as the Trustee may
designate from time to time by notice to the Noteholders, the Program Manager
and the Issuers or the principal corporate trust office of any successor
Trustee.
"Coverage Ratio Condition": The meaning specified in
paragraph (7) under "Project Loan Criteria" in this Appendix A.
"Credit Support Test Commitment": A commitment made by Enron
pursuant to Section 5.2 of the Enron Support Agreement to satisfy any Credit
Support Test.
"Credit Support Tests": The Moody's Credit Support Test and
the S&P Credit Support Test, as applicable.
"Currency Hedging Arrangement": With respect to any Project
Loan or an Intermediate Funding Loan denominated in a currency other than U.S.
Dollars, one or more currency hedging agreements entered into between an
Intermediate Funding Entity and an Acceptable Credit Provider, such that
payments anticipated to be made from such Project Borrower or Intermediate
Funding Entity, as applicable, are converted into U.S. dollars at an agreed
upon exchange rate and any residual exposure relating to any breakage and
termination costs of such hedging agreement are indemnified by an Acceptable
Credit Provider.
"Debt Rate": The meaning specified under "Target Note
Redemption Amount" in this Appendix A.
"Default": Any Event of Default or any occurrence that is, or
with notice or the lapse of time or both would become, an Event of Default.
"Defaulted Interest": Any interest due and payable in respect
of any of the Notes which is not punctually paid or duly provided for on the
applicable Quarterly Payment Date or at the Stated Maturity thereof and which
remains unpaid.
"Defaulted Project Loan": Any Project Loan as to which,
pursuant to the related Underlying Instruments, there has occurred and is
continuing any default or event of default for failure to pay which entitles
the holders of such Project Loan to accelerate the maturity (whether by
mandatory prepayment or otherwise) of all or a portion of the principal amount
of such Project Loan (with respect to which default or event of default the
applicable grace or cure periods has lapsed).
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"Deferral Event": An event which shall occur on the fourth
Quarterly Payment Date (which need not be consecutive) on which payment of
interest on the Class B Notes is deferred.
"Deferred Issuance Costs": With respect to (i) the Closing
Date, Initial Issuance Expenses; (ii) any Quarterly Payment Date on or prior to
the Investment Termination Date, the Initial Issuance Expenses plus the
Transaction Expenses minus any upfront fees received from Project Borrowers;
and (iii) any Quarterly Payment Date after the Investment Termination Date, the
greater of (x) the Deferred Issuance Costs on the prior Quarterly Payment Date
minus one-fourth of the Deferred Issuance Costs on the Investment Termination
Date and (y) zero.
"Depositary": With respect to the Notes issued in the form of
one or more Global Notes, the Person designated as Depositary pursuant to
Section 2.2(e) of the Indenture or any successor thereto pursuant to the
applicable provisions of the Indenture.
"Depositary Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time the Depositary
effects book-entry transfers and pledges of notes deposited with the
Depositary.
"Designated Enron Ownership Interest": The meaning specified
in Section 1.2 of the Enron Support Agreement.
"Designation Letter": A letter substantially in the form of
Exhibit F to the Common Agreement.
"Determination Date": The last Business Day of a Due Period.
"Disposition Amount": With respect to a Project Loan that is
the subject of an Equity Disposition or a Refinancing, an amount equal to the
sum of the principal of and accrued interest on such Project Loan plus any
premium (in the case of a fixed rate Project Loan) received by the Issuer with
respect to such Project Loan.
"Distribution Obligation Escrow Account": The account to be
designated the "Distribution Obligation Escrow Account" and to be established
pursuant to Section 3.8 of the Security Agreement and shall include any
replacement or successor account.
"Diversity Score": On any date of determination, a score
calculated by summing each of the Regional Diversity Scores, calculated as
follows:
(i) An "Average Par Amount" is calculated by dividing the
Aggregate Project Loan Balance by the number of Project Borrowers.
(ii) A "Relative Contribution" is calculated for each country
by adding the lesser of (A) (w) ___ if there is one Project Borrower
in such country, (x) ___ if there are two Project Borrowers in such
country, (y) ___ if there are three Project Borrowers in such country
and (z) ___ if there are four or more Project Borrowers in such
country; and (B) the Project Loan Balance for such country divided by
the Average Par Amount.
(iii) An "Aggregate Regional Equivalent Unit Score" is then
calculated for each of the six regions (i.e., Latin America, Central
Asia, Asia Pacific, Africa and the Middle East, Eastern Europe and
the Caribbean) by summing the Relative Contributions for each country
in the region; provided that for purposes of calculating the Diversity
Score, any
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<PAGE> 61
country whose unguaranteed, unsecured and otherwise unsupported
long-term sovereign debt obligations have a Moody's Rating of at least
"Baa3" will be treated as a separate region.
(iv) A "Regional Diversity Score" is then established for
each region (other than Latin America if there is more than one Latin
American country represented in the portfolio) by reference to Table 6
hereto for the related Aggregate Regional Equivalent Unit Score. If
the Aggregate Regional Equivalent Unit Score falls between any two
scores shown in such table, then the Regional Diversity Score shall be
interpolated from the two Diversity Scores in such table.
(v) If there are debt obligations of more than one Latin
American country represented in the portfolio, the Regional Diversity
Score for Latin America is calculated under the following formula:
Latin America Regional Diversity Score = ((unadjusted Regional
Diversity Score minus 1) divided by 2) + 1
where the unadjusted Regional Diversity Score is established by
reference to Table 6 for the related Aggregate Regional Equivalent
Unit Score with respect to Latin America.
"Dollar" or "$": A dollar or other equivalent unit in such
coin or currency of the United States of America as at the time shall be legal
tender for all debts, public and private.
"DTC": The Depository Trust Company, a New York corporation.
"Due Date": Each date on which a Payment is due on a Project
Loan or a Permitted Investment.
"Due Period": With respect to any Quarterly Payment Date, the
calendar quarter ending immediately prior to such Quarterly Payment Date or, in
the case of the initial Due Period, the period commencing on (but excluding)
the Closing Date and ending on the last day of the calendar quarter ending
immediately prior to the initial Quarterly Payment Date or, in the case of a
Due Period that is applicable to the Quarterly Payment Date relating to the
Stated Maturity of any Note, the period commencing on (and including) the day
immediately following the last day of the prior Due Period and ending on the
date of such Stated Maturity.
"EI" or "Enron International": The legal persons, business,
operations, assets, management and operating personnel and related functions of
Enron that conduct the development, financing, construction and operation of
projects in Permitted Industries in the EI Regions.
"Election Notices": The meaning specified in Section 2.3 of
the Enron Support Agreement.
"Eligible Investments": Any Dollar-denominated investment
made using amounts credited to any Account (other than the TIP Accounts) that,
at the time it is delivered to the
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Collateral Agent or the Trustee, as the case may be (directly or through a
Securities Intermediary), is one or more of the following obligations or
securities:
(i) direct Registered obligations of, and Registered
obligations the timely payment of principal and interest on which is
fully and expressly guaranteed by, the United States of America or any
agency or instrumentality of the United States of America the
obligations of which are expressly backed by the full faith and credit
of the United States of America;
(ii) demand and time deposits in, certificates of deposit
of, bankers' acceptances payable within 90 days of issuance by, or
Federal funds sold by, any depository institution or trust company
incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by Federal
and/or state banking authorities so long as the commercial paper
and/or the debt obligations of such depository institution or trust
company (or, in the case of the principal depository institution in a
holding company system, the commercial paper or debt obligations of
such holding company) at the time of such investment or contractual
commitment providing for such investment have a credit rating of not
less than "A2" by Moody's or "A" by Standard & Poor's, in the case of
long-term debt obligations, or "P-1" by Moody's or "A-1" by Standard &
Poor's in the case of commercial paper and short-term debt
obligations;
(iii) unleveraged repurchase obligations with respect to
(a) any security described in clause (i) above or (b) any other
Registered security issued or guaranteed by an agency or
instrumentality of the United States of America (in each case without
regard to the Stated Maturity of such security), in either case
entered into with a depository institution or trust company (acting as
principal) described in clause (ii) above or entered into with a
corporation (acting as principal) whose long-term rating is not less
than "A2" by Moody's or "A" by Standard & Poor's or whose short-term
credit rating is "P-1" by Moody's or "A-1" by Standard & Poor's at the
time of such investment;
(iv) Registered debt securities bearing interest or sold
at a discount issued by any corporation incorporated under the laws of
the United States of America or any state thereof that have a credit
rating of not less than "A1" by Moody's or "A+" by Standard & Poor's
at the time of such investment or contractual commitment providing for
such investment;
(v) commercial paper or other short-term obligations with
a maturity of not more than 90 days from the date of issuance and
having at the time of such investment a credit rating of not less than
"P-1" by Moody's or "A-1" by Standard & Poor's; and
(vi) a Reinvestment Agreement issued by any bank (if
treated as a deposit by such bank), or a Registered Reinvestment
Agreement issued by any insurance company or other corporation or
entity, in each case that has a credit rating of not less than "P-1"
by Moody's or "A-1" by Standard & Poor's;
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and, in each case, with a Stated Maturity (giving effect to any applicable
grace period) no later than the Quarterly Payment Date next following the Due
Period in which the date of investment occurs; provided that Eligible
Investments shall not include any interest-only security, any security
purchased at a price in excess of 100% of the par value thereof, unless such
security is non-callable to maturity (unless callable with a make-whole
premium) or any security whose repayment is subject to substantial non-credit
related risk as determined in the sole judgment of the Program Manager.
"Eligible Merchant Project": A business enterprise that (A)
is not an Eligible Project under clause (A) of the definition of "Eligible
Project", (B) is reasonably expected to be competitive on a delivered cost
basis with other business enterprises providing similar services in the same
market and (C) notwithstanding the absence of Integrated Contractual
Arrangements, has sufficient access to required feedstocks and offtake markets.
"Eligible Project": A business enterprise that generates
operating revenues from a Permitted Industry and that (A) has cash flow based
primarily upon or is subject to Integrated Contractual Arrangements or (B) is
an Eligible Merchant Project (each of the immediately preceding clauses (A) and
(B) is hereinafter referred to as an "Eligible Project Category" and
collectively referred to as the "Eligible Project Categories"). In the event a
project has (A) some portion of its cash flow based upon Integrated Contractual
Arrangements and (B) some portion of its cash flow that is not attributable to
arrangements or agreements contemplated by Integrated Contractual Arrangements,
(x) if the Coverage Ratio Condition can be satisfied based solely on the
portion of such project's cash flow attributable to Integrated Contractual
Arrangements, (y) if at least 75% of projected cash flow of such project
available for debt service on an annual basis is attributable to Integrated
Contractual Arrangements or (z) if projected cash flow of such project
available for debt service on an annual basis is based on Integrated
Contractual Arrangements for a specified period during which it is anticipated
that at least 75% of such Project Loan (including interest thereon) will be
repaid, then in each such case, such project will be deemed to be an Eligible
Project under the relevant Eligible Project Category and will not be deemed to
be an Eligible Merchant Project (provided that, for purposes of clauses (y) and
(z) of this sentence, projections together with the Independent Engineer's
review of such projections with respect to projected cash flows that are not
attributable to any Integrated Contractual Arrangements contemplated by such
clause will be undertaken as if such project were an Eligible Merchant
Project).
"Eligible Project Category": The meaning specified under
"Eligible Project" in this Appendix A.
"Enron": Enron Corp., a corporation organized under the laws
of the State of Oregon.
"Enron Affiliate": An Affiliate of Enron.
"Enron Class II Purchase Commitment": The meaning specified
in Section 3.1 of the Enron Support Agreement.
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"Enron Competitor": Any Person other than a Financial
Institution that is engaged in the development, operation or ownership of
international energy, electric, water or other infrastructure projects in any
Permitted Industry, or which otherwise has any significant portion of its
operations in the natural gas, crude oil, coal, electricity, water or other
energy related industries (or risk management activities related thereto).
"Financial Institution" shall mean any Person whose principal business is that
of a bank holding company, insurance holding company, savings and loan holding
company, bank, insurance company, savings and loan company, investment company
or private or governmental employee benefit plan, together, in each case, with
their respective subsidiaries, controlled affiliates and affiliates under
common control.
"Enron Credit Counterparty": An Enron Affiliate (i) that has
and maintains a credit rating at least equivalent to Enron's credit rating at
the time such Enron Affiliate makes a commitment, (ii) whose commitment is
guaranteed by Enron or (iii) whose commitment is supported by a letter of
credit issued by an Acceptable Credit Provider.
"Enron Distributions": The meaning specified in Section 1.2
of the Enron Support Agreement.
"Enron International CPO, L.P.": Enron International CPO,
L.P., a limited partnership organized under the laws of the State of Delaware.
"Enron Ownership Percentage": With respect to a Project
Borrower, the portion, expressed as a percentage, owned by Enron or an Enron
Affiliate of the following: (i) shares, if such Project Borrower is a
corporation, (ii) partnership interests, if such Project Borrower is a
partnership or (iii) membership interests, if such Project Borrower is a
limited liability company.
"Enron Ownership Requirement": The requirements set forth in
paragraph (4) of the definition of "Project Loan Criteria" and paragraph (5) of
the definition of "Portfolio Criteria" in this Appendix A.
"Enron Support Agreement": The Support Agreement dated as of
____________, 1998 between the Issuer and Enron.
"Enron Support Documents": The Enron Support Agreement, any
Assumption Agreements, Election Notices, Liquidity Notes, Funding Availability
Notes, certificates evidencing Class I Interests and guaranties or letters of
credit, if any, delivered by Enron, an Enron Credit Counterparty or an
Acceptable Credit Provider thereunder.
"Entitlement Holder": A Person identified in the records of a
Securities Intermediary as the Person having a Securities Entitlement against
the Securities Intermediary.
"Entitlement Order": A notification communicated to a
Securities Intermediary directing transfer or redemption of a Financial Asset
to which the Entitlement Holder has a Security Entitlement.
"Equity Disposition": Has the meaning specified in Section
1.2 of the Enron Support Agreement.
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"ERISA": The United States Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Plan": An "employee benefit plan" (as defined in
Section 3(3) of ERISA) which is subject to the provisions of Part 4 of Title I
of ERISA, and any entity whose underlying assets include the assets of any such
plan.
"Euroclear": Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Europe": The geographic areas that are within the boundaries
(as of the date hereof) of Albania, Andorra, Austria, Belarus, Belgium, Bosnia
and Herzegovina, Bulgaria, Croatia, the Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia,
Liechtenstein, Lithuania, Luxembourg, the Former Yugoslav Republic of
Macedonia, Malta, Moldova, Monaco, Netherlands, Norway, Poland, Portugal,
Romania, Russia, San Marino, Serbia and Montenegro, Slovakia, Slovenia, Spain,
Sweden, Switzerland, Turkmenistan, Ukraine, United Kingdom, Vatican City and
Yugoslavia (former).
"Event of Default": The meaning specified in Section 5.1 of
the Common Agreement.
"Excess Spread Account": The account designated the "Excess
Spread Account" and established pursuant to Section 3.5 of the Security
Agreement which account shall initially be account number ______ and shall
include any successor or replacement accounts thereof.
"Excess Spread Account Balance": Amounts credited to or
deemed to be credited to the Excess Spread Account pursuant to Section 3.5 of
the Security Agreement.
"Exchange Act": The United States Securities Exchange Act of
1934, as amended, and the rules promulgated thereunder.
"Exempt Person": The meaning specified in Section 11.1 of the
Common Agreement.
"Expense Reserve Account": The account designated the
"Expense Reserve Account" and established pursuant to Section 3.6 of the
Security Agreement and shall include any replacement or successor account.
"Extraordinary Expenses": Reasonable expenses of the Issuer
not otherwise paid pursuant to clauses (i) through (xi)(F) of the Priority of
Payments.
"Final Support Notice": The meaning specified in Section 4.4
of the Enron Support Agreement.
"Final Termination Date": The date on which all amounts due
and payable by the Issuers in respect of the Secured Obligations have been paid
in full.
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"Financial Asset": Except as otherwise provided in Section
8-103 of the UCC: (a) a Security; (b) an obligation of a Person or a share,
participation or other interest in a Person or in property or an enterprise of
a Person, which is, or is of a type, dealt in or traded on financial markets,
or which is recognized in any area in which it is issued or dealt in as a
medium for investment; or (c) any property that is held by a Securities
Intermediary for another Person in a Securities Account if the Securities
Intermediary has expressly agreed with the other Person that the property is to
be treated as a financial asset under Article 8 of the UCC.
"Financial Closing Date": With respect to a Project Loan or
one or more related Intermediate Funding Loans, the date on which all
conditions precedent to the initial funding thereto have been satisfied.
"Financial Institution": The meaning specified under "Enron
Competitor" in this Appendix A.
"Financing Documents": The Common Agreement, the Security
Documents, the Intercreditor Agreement, the Liquidity Facility Loan Agreement,
the Backup Facility Loan Agreement(s), the Indenture, the Class A Notes, the
Class B Notes, the Class C Notes, the Support Notes, the Hedging Agreements,
the Class I Stage Funding Commitment Letters and the Enron Support Documents.
"Financing Statements": Financing statements relating to the
Collateral naming the Issuer as debtor and the Collateral Agent as secured
party.
"Fixed Rate Premium": With respect to the Initial Class B Notes
to be redeemed, the product of (A) the amount of principal of such Class B Notes
and (B) the applicable percentage of the Class B Note Interest Rate for the
periods set forth below:
Number of years elapsed from Closing
Date (rounded up to the nearest year) Applicable Percentage
------------------------------------- ----------------------
0 to 6 %
7
8
9
10
thereafter
"Funding Availability Commitment": The meaning specified in
Section 1.2 of the Enron Support Agreement
"Funding Availability Note": Each of the notes representing
amounts drawn under Funding Availability Commitments in substantially the form
set forth in Exhibit __ to the Enron Support Agreement.
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"Funding Availability Shortfall Amount": The meaning specified
in Section 3.3(b) of the Security Agreement.
"Funding Availability Test": A test satisfied on any date of
determination if the aggregate amount of unfunded Commitments (including the
Commitment relating to the Project Loan to be made) is less than or equal to
Available Committed Funds as of such date. "Available Committed Funds" means
the sum of (i) the Committed TIP Account Balance and (ii) the undrawn portion
of the Backup Facility.
"GAAP": With respect to any Person, generally accepted
accounting principles in the U.S., as in effect from time to time.
"General Intangibles": The meaning specified in Section 9-106
of the UCC.
"General Partner": Enron CPO Holdings, Inc., a special
purpose bankruptcy remote corporation organized under the laws of the State of
Delaware, which is an indirect, wholly-owned subsidiary of Enron.
"Global Notes": The meaning specified in Section 2.1(b) of
the Indenture.
"GP Interests": The meaning specified in Section ____ of the
Partnership Agreement.
"Grant": To grant, bargain, sell, warrant, alienate, remise,
demise, release, convey, assign, transfer, mortgage, pledge, create or grant a
security interest in and right of set-off against, deposit, set over and
confirm. A Grant of the Pledged Securities, or of any other instrument, shall
include all rights, powers and options (but none of the obligations) of the
granting party thereunder, including without limitation the immediate
continuing right to claim for, collect, receive and receipt for principal and
interest payments in respect of the Pledged Securities or such other
instruments, and all other Monies payable thereunder, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring Proceedings in the name of the
granting party or otherwise, and generally to do and receive anything that the
granting party is or may be entitled to do or receive thereunder or with
respect thereto.
"Hedge Counterparty": Any counterparty (a) whose Reference
Obligations are rated (or whose counterparty rating is) at least "A2" by
Moody's and at least "A" by Standard & Poor's, (b) whose obligations under the
relevant Hedging Agreement are absolutely and unconditionally guaranteed by an
Affiliate of such counterparty if such Affiliate's Reference Obligations are
rated at least "A2" by Moody's and at least "A" by Standard & Poor's or (c)
that agrees to provide Hedge Counterparty Credit Support.
"Hedge Counterparty Credit Support": The agreement by a Hedge
Counterparty to cause to become effective, so long as the Reference Obligations
of the Hedge Counterparty (or any Person that shall have absolutely and
unconditionally guaranteed the obligations of the Hedge Counterparty under a
Hedging Agreement) shall fail to be rated at least "A2" by Moody's and at least
"A" by Standard & Poor's, the obligation to deliver collateral under an ISDA
Credit Support Annex having, among others, the following terms: (a) no
collateral delivery obligations
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for the Issuer; (b) no collateral delivery obligations for the Hedge
Counterparty except when such delivery obligation is effective by reason of the
agreement of the Hedge Counterparty; and (c) a provision to the effect that, in
calculating the amount of collateral required to be delivered to the Issuer,
the mark to market value of any amount owing to the Issuer upon termination of
the Hedging Agreement shall be deemed to be equal to [100%] of such mark to
market value calculated in accordance with normal procedures under the ISDA
Credit Support Annex.
"Hedging Agreement": Any interest rate protection agreement
or agreements evidenced by an ISDA Master Agreement and the schedule thereto
and the confirmation thereunder, between the Issuer and a Hedge Counterparty,
and any replacement Hedging Agreement entered into by the Issuer pursuant to
Article 9 of the Common Agreement.
"Hedging Proceeds": With respect to any Quarterly Payment
Date, all net termination payments received by the Issuer under any Hedging
Agreement during the related Due Period.
"High Interest Rate Scenario": The meaning specified under
"Liquidity Test" in this Appendix A.
"Holder" or "Noteholder": With respect to any Note, the
Person in whose name such Note is registered in the Note Register.
"Incentive Fee": The meaning specified in Section 7.01 of the
Management Agreement.
"Indenture": The Indenture dated as of ___________, 1998
between the Issuers and Chase Texas as Trustee, as originally executed and, if
from time to time supplemented or amended by one or more indentures
supplemental thereto entered into pursuant to the applicable provisions
thereof, as so supplemented or amended.
"Independent": As to any Person, any other Person (including,
in the case of an accountant, or lawyer, a firm of accountants or lawyers and
any member thereof) who (i) does not have and is not committed to acquire any
material direct or any material indirect financial interest in such Person or
in any Affiliate of such Person, and (ii) is not connected with such Person as
an Officer, employee, promoter, underwriter, voting trustee, partner, director
or Person performing similar functions. "Independent" when used with respect
to any accountant may include an accountant who audits the books of such Person
if in addition to satisfying the criteria set forth above the accountant is
independent with respect to such Person within the meaning of Rule 101 of the
Code of Ethics of the American Institute of Certified Public Accountants.
Whenever any Independent Person's opinion or certificate is to
be furnished to the Trustee, such opinion or certificate shall state that the
signer has read this definition and, that the signer is Independent within the
meaning hereof.
"Independent Engineer": Any Independent and internationally
recognized firm of engineers with expertise in the relevant Permitted Industry.
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"Indorsement": The meaning specified in Section 8-102(a)(11)
of the UCC. "Indorsed" shall have a correlative meaning.
"Industry Concentration Factor": On any date of
determination, with respect to a Standard & Poor's Industry to which one or
more of the investments credited to the Uncommitted TIP Account described in
clause (a) of Uncommitted TIP Investment Policies pertain, the aggregate
principal amount of such investments divided by the aggregate principal amount
of all Uncommitted TIP Investments credited to the Uncommitted TIP Account
described in clause (a) of Uncommitted TIP Investment Policies and (ii) with
respect to a Standard & Poor's Industry to which one or more of the investments
credited to the Committed TIP Account described in clause (c) of Committed TIP
Investment Polices pertain, the aggregate principal amount of such investments
divided by the aggregate principal amount of all Committed TIP Investments
credited to the Committed TIP Account described in clause (c) of Committed TIP
Investment Policies.
"Initial Class B Notes":
"Initial Class I Interests": The meaning specified in Section
__ of the Partnership Agreement.
"Initial Equity": Any contribution by Project Sponsors to the
initial total capital cost of a Project Borrower in the form of (i) equity or
any financial instrument (including subordinated loans), the expected timing
and amounts of payments under which and the associated rights and remedies of
which are substantially similar to those of an equity interest and/or (ii) an
irrevocable and unconditional commitment to purchase or acquire any of the
foregoing by an Acceptable Credit Provider.
"Initial Interest": Any Interest funded on or prior to the
Closing Date.
"Initial Issuance Expenses": All Transactions Expenses of the
Issuers with respect to the Notes issued on the Closing Date, all expenses
related to the establishment of any Backup Facility existing as of the Closing
Date, all expenses related to the establishment of the Liquidity Facility, the
initial Administrative Fee and the time and expenses of Enron employees
directly involved in the formation of the Issuers.
"Initial Note": Any Note issued by the Issuers on the Closing
Date.
"Instruction": The meaning specified in Section 8-102(a)(12)
of the UCC.
"Instrument": The meaning specified in Section 9-105(1)(i) of
the UCC.
"Integrated Contractual Arrangements": The contractual
arrangements (such as construction, energy sales or other offtake, fuel supply,
tolling, transportation, operation and maintenance and technical advisory
services agreements, including related hedging arrangements) that provide the
basis for projected cash flows and seek to reduce Project Risk or a franchise,
concession or other agreement that provides for a rate-setting mechanism
(contractual, tariff, regulatory or otherwise) for establishing projected cash
flows and, together with other contractual arrangements as may be applicable,
seeks to reduce Project Risk.
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"Intercreditor Agreement": The Collateral Agency and
Intercreditor Agreement dated as of ____________, 1998, among the Issuer, the
Representatives and the Collateral Agent.
"Interest Accrual Period": The period from, and including, a
Quarterly Payment Date to, but excluding, the next Quarterly Payment Date,
except that the initial Interest Accrual Period (i) for any Note issued on the
Closing Date will commence on, and include, the Closing Date and (ii) for any
Note issued after the Closing Date will commence on, and include, the date of
issuance thereof.
"Interest Coverage Adjustment": Adjustment to the Required
Senior Project Credit Support Percentage effected as follows:
if the Actual Net Interest Margin is less than or greater than
the Moody's Assumed Net Interest Margin, the Required Senior Project Credit
Support Percentage shall be calculated as follows:
the greater of (i)
(a) Base Percentage
multiplied by
(b) 1+ (Moody's Net Interest Margin Adjustment Factor x
(Moody's Assumed Net Interest Margin - Actual Net
Interest Margin))
and (ii) the Base Percentage assuming the Weighted Average Moody's
Rating of the Project Loans is one level higher than the actual Weighted
Average Moody's Rating of Project Loans.
"Interests": The Class I Interests, the Class II Interests
and the GP Interests of the Issuer issued pursuant to the Partnership
Agreement.
"Intermediate Funding Entity": A Person (i) wholly-owned,
directly or indirectly, by the Issuer and established for the limited purpose
of making Project Loans (including Project Loans denominated in a currency
other than Dollars as contemplated in clause (1) of the definition of "Project
Loan Criteria" in this Appendix A) or (ii) wholly-owned by, or wholly-owning, a
particular Project Borrower and established in a jurisdiction other than the
jurisdiction of such Project Borrower for the sole purpose of obtaining a loan
or loans from the Issuer or another Intermediate Funding Entity and making a
Project Loan which satisfies the Qualifying Criteria to such Project Borrower
by using proceeds thereof.
"Intermediate Funding Loan": A loan made by (i) the Issuer to
an Intermediate Funding Entity or (ii) one Intermediate Funding Entity to
another Intermediate Funding Entity.
"Intermediate Funding Loan Criteria": The conditions relating
to Intermediate Funding Entities set forth in Section 2.1(ii) of the Common
Agreement.
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"Investment Company Act": The United States Investment
Company Act of 1940, as amended, and the rules thereunder.
"Investment Grade": Rating of "BBB-" or higher, in the case
of S&P, and "Baa3" or higher, in the case of Moody's.
"Investment Period": The period commencing on the Closing
Date and ending on the Scheduled Investment Termination Date or earlier, upon
the occurrence of any of the following events: (i) at the election of the
Program Manager (acting at the direction of the General Partner) if the
aggregate principal amount of Class A Notes and Class B Notes issued as of such
date is at least equal to $____; (ii) at the election of the Program Manager
(acting at the direction of the General Partner), with consent of the holders
of a majority in outstanding principal amount of the Class I Interests, upon
notification to the Collateral Agent and the Trustee that, in light of the
composition of the Issuer's portfolio of Project Loans, general market
conditions and other factors, the making of additional Project Loans would
either be impracticable or not beneficial to the Issuer; (iii) the occurrence
of an Acceleration; (iv) a failure to satisfy the Liquidity Test on any two
consecutive Quarterly Payment Dates; (v) the Tax Redemption Trigger Date; or
(vi) the removal of the Program Manager by the Issuer upon being so directed by
the Limited Partners pursuant to Section 10.02(b) of the Management Agreement.
"Investment Termination Date": The date of termination of the
Investment Period.
"Issuer": Enron International CPO, L.P.
"Issuer Determined Loss": With respect to any Defaulted
Project Loan, the amount of non-recoverable accrued and unpaid interest and
non-recoverable unpaid outstanding principal on such Defaulted Project Loan, as
determined by the Program Manager on behalf of the Issuer.
"Issuer Order" and "Issuer Request": A written order or
request dated and signed in the name of the Issuer by an Authorized Officer of
the Issuer and (if appropriate) the Co-Issuer or by an Authorized Officer of
the Program Manager where permitted pursuant to the Indenture, the Management
Agreement or any other Financing Document, as the context may require or
permit.
"Issuers": The Issuer and the Co-Issuer; provided that
reference to the Issuer alone shall be construed as a reference only to the
Issuer.
"Lenders": The Class A Note Holders, the Class B Note
Holders, the Class C Note Holders, the Liquidity Lenders and the Backup
Lenders.
"LIBOR": Generally, the London interbank offered rate.
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"Lien": Any mortgage, charge, pledge, lien (statutory or
other), privilege, security interest, hypothecation, collateral assignment or
preference, priority or other security agreement, preferential arrangement or
other encumbrance upon or with respect to any property of any kind, real or
personal, movable or immovable, now owned or hereafter acquired (including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC or comparable
law of any jurisdiction).
"Liquidity Expenses": The meaning specified under "Liquidity
Test" in this Appendix A.
"Liquidity Facility": Collectively, a five-year revolving
credit facility (extendable up to an additional five-years) converting into a
2-year term loan facility to be provided to the Issuer by the Liquidity Lenders
pursuant to the Liquidity Facility Loan Agreement and any Liquidity Test
Commitments.
"Liquidity Facility Agent": The Person named as the agent
under the Liquidity Facility.
"Liquidity Facility Availability Period": The period during
which Liquidity Lenders are required to make advances to the Issuer pursuant to
the terms of the Liquidity Facility Loan Agreement.
"Liquidity Facility Balance": The aggregate principal amount
of (i) drawn amounts under the Liquidity Facility Loan Agreement and (ii) any
drawn amounts under the Liquidity Test Commitments.
"Liquidity Facility Commitment": Funded and unfunded
commitments under (i) the Liquidity Facility Loan Agreement and (ii) any
Liquidity Test Commitments.
"Liquidity Facility Loan Agreement": The Liquidity Facility
Loan Agreement among the Issuer, the Liquidity Facility Agent and the Liquidity
Lenders dated as of ___________, 1998.
"Liquidity Lenders": The parties to the Liquidity Facility
Loan Agreement identified therein as "Lenders" and to the extent there are any
outstanding Liquidity Facility Commitments, Enron or an Enron Affiliate
providing such commitment; provided that in determining whether the Liquidity
Lenders with the requisite Liquidity Facility Balance have given any request,
demand, authorization, direction, notice, consent or waiver under any Financing
Document, any portion of the Liquidity Facility Balance attributable to funds
provided by Enron or any Enron Affiliate shall be disregarded and deemed not to
be outstanding.
"Liquidity Note": The meaning specified in Section 1.2 the
Enron Support Agreement.
"Liquidity Shortfall": The meaning specified in Section
4.2(a)(ii) of the Security Agreement.
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"Liquidity Shortfall Amounts": The meaning specified in
Section 4.2(a) of the Security Agreement.
"Liquidity Test": A test satisfied on any date of
determination if Portfolio Liquidity, as determined by the Program Manager, on
each subsequent Quarterly Payment Date during the Measurement Period, is at
least equal to the Liquidity Expenses, as determined by the Program Manager, on
such dates under both a High Interest Rate Scenario and a Low Interest Rate
Scenario.
The "Portfolio Liquidity" as of any Quarterly Payment
Date during the Measurement Period means the sum of the (i)
projected interest and fees receivable, directly or
indirectly, on (x) Project Loans (including any Project Loan
proposed to be made) in the case of Project Loans made
directly to the Project Borrower, and (y) the Intermediate
Funding Loans made by the Issuer (including any Intermediate
Funding Loans proposed to be made) in the case of Project
Loans made indirectly through an Intermediate Funding Entity
for the relevant Due Period other than loan origination fees
or upfront fees (excluding expense reimbursements) credited to
the Uncommitted TIP Account, (ii) projected interest
receivable on Temporary Investments and Eligible Investments
for the relevant Due Period (iii) the projected aggregate
unfunded commitments under the Liquidity Facility Loan
Agreement as of such date, (iv) projected amounts to be
received under the Hedging Agreements for the relevant Due
Period, (v) the projected amount of Quarterly Project
Distributions during the relevant Due Period and (vi) the
projected aggregate unfunded amounts under the Liquidity Test
Commitments as of such date.
The "Liquidity Expenses" as of any Quarterly Payment
Date during the Measurement Period means the sum of (i)
projected operating expenses described under clauses (i) and
(ii) under the Priority of Payments for the relevant Due
Period, (ii) projected interest on amounts drawn and projected
to be drawn under the Liquidity Facility and the Backup
Facility and any projected commitment or agency fees or other
amounts due thereunder for the relevant Due Period, (iii)
projected interest on the Class A Notes for the relevant
Interest Accrual Period, (iv) projected amounts to be paid
under the Hedging Agreements for the relevant Due Period, (v)
projected interest to be paid on the Class B Notes for the
relevant Interest Accrual Period, (vi) projected
Administrative Fees, Management Fees and Incentive Fees to be
paid for the relevant Due Period , (vii) projected interest on
the Class C Notes to be paid for the relevant Interest Accrual
Period, (viii) projected expenses relating to the
establishment of any Backup Facility Loan Agreements during
the relevant Due Period, (ix) projected Extraordinary Expenses
to be paid during the relevant Due Period and (x) any Initial
Issuance Expenses or Transaction Expenses in excess of the
amounts credited to the Operating Account for such purpose on
the Closing Date or the Subsequent Closing Date.
"High Interest Rate Scenario": The scenario in which
three-month LIBOR is assumed to be the then current
three-month LIBOR plus 6%.
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"Low Interest Rate Scenario": The scenario in which
three-month LIBOR is assumed to be the greater of 3% and the
then current three-month LIBOR less 6%.
"Liquidity Test Commitment": A commitment made by Enron
pursuant to Section 5.2 of the Enron Support Agreement to satisfy the Liquidity
Test.
"Low Interest Rate Scenario": The meaning specified under
"Liquidity Test" in this Appendix A.
"Majority": With respect to any Class or Classes of Notes,
the Holders of more than 50% of the Outstanding Amount of the Notes of such
Class or Classes of Notes, other than Notes held by Enron or an Enron
Affiliate, except that in the event 100% of the Class C Notes are held by Enron
or Enron Affiliates, "Majority" of the Class C Notes shall mean Enron or such
Enron Affiliate.
"Majority Affiliate": With respect to a specified Person, any
Person directly or indirectly owning, controlling or holding the power to vote
50% or more of the outstanding voting securities or other voting ownership
interests of the specified Person.
"Management Agreement": The Management Agreement, dated as of
_________, 1998 among the Issuers and the Program Manager.
"Management Fee": The meaning specified in Section 7.01 of
the Management Agreement.
"Margin Security": "Margin stock" within the meaning given to
such term in Regulation U.
"Material Adverse Effect": With respect to the Issuer or the
Co-Issuer, a material adverse effect on the Collateral (taken as a whole),
business, operations, financial condition or capitalization of the Issuer or
the Co- Issuer, as the case may be, or the ability of the Issuer or the
Co-Issuer to perform its obligations under any of the Financing Documents or
the validity or enforceability thereof or the rights and remedies of any other
Person party thereto.
"Material Modification": The meaning specified in Section
4.11(a)(xiii)(D) of the Common Agreement.
"Maturity": With respect to any Note, the date on which all
outstanding unpaid principal of such Note becomes due and payable as therein or
in the Indenture provided, whether at the Stated Maturity or by acceleration,
call for redemption or otherwise.
"Maximum Class A Principal Amount": $[___] billion.
"Maximum Senior Indebtedness": An amount provided by S&P to
the Issuer upon request by the Issuer that S&P will determine by running a cash
flow model utilizing the following inputs:
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(i) The Standard & Poor's Ratings of the Project Loans,
except that if the sum of the Project Loan Balances to Eligible
Projects located in a single country exceeds $___________, then the
Standard & Poor's Ratings of such Project Loans shall be deemed to be
two notches below the actual Standard & Poor's Ratings of such Project
Loans for purposes of running the cash flow model;
(ii) The principal balance, interest rate and amortization
profile of the Project Loans;
(iii) If the sum of the Project Loans Balances to Eligible
Projects located in a single S&P Region exceeds $___ billion, then the
S&P Regions in which such Eligible Projects are located;
(iv) For each Project Loan, the recovery rate assumed by
S&P in the event of default of such Project Loan (as of the Closing
Date such rate is assumed to be 50%);
(v) The interest rate payable on the Notes and the Backup
Facility after taking into account any Hedging Agreements as well as
any other expenses of the Issuer; and
(vi) In the case of the Class A Senior Notes, the
projected amount of the Quarterly Project Distributions in the event
and to the extent that such amount will be supported by a letter of
credit or similar arrangement satisfactory to S&P from a provider
rated "A" or higher by S&P, and in the case of the Class B Senior
Subordinated Notes, the projected Quarterly Project Distributions.
From the characteristics of the Project Loans in (i), (ii) and (ii) above, S&P
will derive two default rates to be applied to the portfolio of Project Loans.
One default rate will be used to assess the credit quality of the Class A
Senior Notes (the "Class A Default Rate") and the other default rate will be
used to assess the credit quality of the Class B Senior Subordinated Notes (the
"Class B Default Rate"). For each Project Loan assumed by S&P to default, S&P
will assume that the assumed recovery rate percentage for the principal balance
of the Defaulted Project Loan is recovered one year after default. A number of
default timing scenarios will be considered. The Maximum Senior Indebtedness
will correspond to the maximum amount of Class A Senior Notes that may be paid
timely interest and ultimate principal assuming the Class A Default Rate while
at the same time permitting the Class B Notes to be paid ultimate interest and
ultimate principal assuming the Class B Default Rate.
"Measurement Period": As of any date of determination, the
period commencing on such date and ending on the later of the second succeeding
Quarterly Payment Date and the date which corresponds to the last scheduled
drawdown date for any Commitments in respect of a Project Loan, assuming that
with respect to Eligible Projects for which Commitments have been made, if any,
that are in their construction phase, each draw occurs one year later than the
date assumed in the drawdown schedule.
"Money": The meaning specified in Section 1-201(24) of the
UCC.
"Moody's": Moody's Investors Service, Inc.
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"Moody's Assumed Net Interest Margin": The percentage
obtained from Table 3 set forth in Annex A hereto (the "Moody's Assumed Net
Interest Margin Table").
"Moody's Assumed Net Interest Margin Table": The meaning
specified under "Moody's Assumed Net Interest Margin" in this Appendix A.
"Moody's Credit Support Test": A test satisfied on any date
of determination if, after giving effect to the funding in full of a Project
Loan proposed to be funded, amounts to be withdrawn from or credited to the
Uncommitted TIP Account, Allocations or drawings under the Backup Facility, the
proposed issuance of Class A Notes or Class C Notes or the addition to, or
reduction of, the Class C Note Purchase Commitment and amounts credited to the
Excess Spread Account for the purpose of satisfying this test and the Rating
Condition, the (x) Net Senior Debt is less than or equal to zero or (y) the
Actual Senior Credit Support Percentage on such date is at least equal to the
Required Senior Credit Support Percentage on such date.
"Moody's Industry": Those industries found in Table 5 hereto.
"Moody's Net Interest Margin Adjustment Factor": The number
obtained from the table set forth below.
- --------------------------------------------------------------------------------
B3 B2 B1 Ba3 Ba2 Ba1 Baa3 Baa2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
"Moody's Rating": With respect to any Project Loan or
Temporary Investment, the rating by Moody's of that Project Loan or Temporary
Investment, which rating may be a private letter rating; provided, that if the
Project Loan is being paid in a currency other than U.S. dollars, the rating
shall take into consideration the Currency Hedging Arrangements necessary to
cover currency risk, each such rating as subsequently updated by Moody's in
accordance with the Financing Documents.
"Moody's Region": Each of (a) Africa (other than countries
rated Investment Grade by Moody's), (b) Asia Pacific (other than countries
rated Investment Grade by Moody's), (c) Central Asia (other than countries
rated Investment Grade by Moody's), (d) the Caribbean (other than countries
rated Investment Grade by Moody's), (e) Europe (other than countries rated
Investment Grade by Moody's), (f) Latin America (other than countries rated
Investment Grade by Moody's), (g) the Middle East (other than countries rated
Investment Grade by Moody's) and (h) individually, all countries rated
Investment Grade by Moody's in each case, as of the Closing Date. [DEFINITIONS
TO COME FROM MOODY'S]
"Net Proceeds": Proceeds from an issuance of Notes and
Interests net of any Transaction Expenses for such issuance.
"Net Senior Debt": (i) The sum of (A) the Liquidity Facility
Commitment, (B) the Backup Facility Balance and (C) the outstanding principal
amount of the Class A Notes less (ii) (A) the Unused Enron Commitments and (B)
the Excess Spread Account Balance for the purpose of satisfying the Credit
Support Tests and
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the Rating Condition, in each case after giving effect to any proposed issuance
of Class A Notes or Class C Notes.
"New Issuance": The meaning specified in Section 2.9(a) of
the Indenture.
"North America": The geographic areas that are within the
boundaries (as of the date hereof) of Canada, Mexico and the United States.
"Note Interest Rate": With respect to the Notes of any Class
or any Series, the annual rate at which interest accrues on the Notes of such
Class or such Series, as specified in the Indenture or in the related
Supplemental Indenture (as applicable).
"Note Payment Account": The account designated as the "Note
Payment Account" and established pursuant to Section 10.1 of the Indenture
which account shall initially be account number [_____] and shall include any
successor or replacement accounts thereof.
"Note Payment Assumptions": The assumptions used to calculate
interest and principal scheduled to be paid to Noteholders for the purpose of
calculating the Premiums shall consist of the following:
(1) No further redemptions of Class A Notes and Class B
Notes are assumed to occur;
(2) Project Loans are assumed to make Scheduled Payments
on each subsequent Due Date therefor until the
maturity dates of such Project Loans;
(3) Amounts credited to the Uncommitted TIP Account are
immediately invested in a Project Loan the payments
of principal and interest of which are made on a
quarterly basis, has a maturity date equal to the
Stated Maturity of the Notes, bears an interest rate
equal to 9% and beginning on the Scheduled Investment
Termination Date, amortizing on a mortgage-style
basis and no further initial fundings of Project
Loans are made by the Issuer;
(4) Amounts credited to the Committed TIP Account
followed by draws under the Backup Facility in
respect of amounts previously Allocated thereunder
are assumed to be reinvested in previously Committed
but unfunded Project Loans pursuant to the assumed
drawdown schedules;
(5) Amounts credited to the Committed TIP Account are
assumed to earn interest at the contracted rates
thereof until maturity and are assumed to be
reinvested at LIBOR pending reinvestment into Project
Loans;
(6) Amounts invested in other Project Loans or Permitted
Investments not otherwise specified are assumed to
earn interest at the Assumed Reinvestment Rate;
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(7) Hedging Agreements would be terminated and or entered
into in the amounts consistent with managing interest
rate risk given these Note Payment Assumptions;
(8) Quarterly Payment Dates are assumed to fall on the
10th day of the applicable month regardless of when
such Quarterly Payment Date would actually occur;
(9) Distributions on the Notes are made in accordance
with the Priority of Payments;
(10) LIBOR is assumed to be the current LIBOR rate and
does not change; and
(11) LIBOR is the basis for payments under the Backup
Facility and Hedging Agreements.
"Note Redemption Amount": In the case of (i) a Refinancing or
Equity Disposition resulting in a mandatory redemption of Notes, the lesser of
the Disposition Amount and the Target Note Redemption Amount and, (ii) a Tax
Event, the proceeds received by the Issuer from the sale of Project Loans sold
in accordance with Section 2.5 of the Security Agreement.
"Note Register": The meaning specified in Section 2.4(a) of
the Indenture.
"Note Registrar": The Person appointed as registrar under
Section 2.4(a) of the Indenture, in the case of the Class A Notes and Class B
Notes, and the Issuer, in the case of the Class C Notes.
"Noteholder": See "Holder", above.
"Notes": The Class A Notes and the Class B Notes of any
Series and the Class C Notes authorized by, and authenticated and delivered
under, the Indenture and any related Supplemental Indenture .
"OECD": Organization for Economic Cooperation and
Development.
"Offering": The offering of the Class A Notes and Class B
Notes under the Prospectus.
"Officer": With respect to any corporation, the Chairman of
the Board of Directors (or any director, with respect to the Issuer), the
President, any Vice President, the Secretary, an Assistant Secretary, the
Treasurer, the Chief Financial Officer or an Assistant Treasurer of such
entity; with respect to any partnership, any general partner thereof; and with
respect to any bank or trust company acting as trustee of an express trust or
as custodian, any Trust Officer.
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"Offshore Paying Agent": Any Person operating through an
office outside the United States that is authorized by the Issuer to make
payments on behalf of the Issuer as specified in Section 7.2 of the Indenture.
"Operating Account": The account designated the "Operating
Account" and established pursuant to Section 3.7 of the Security Agreement
which account shall initially be account number _______ and shall include any
successor or replacement accounts thereof.
"Operating Expenses": (i) Any expense of the Issuer or the
Co-Issuer described under priorities (i), (ii), (v)(B) and (vi) of the Priority
of Payments and not otherwise paid on a Quarterly Payment Date; (ii) expenses
relating to the establishment of Backup Facility Loan Agreements after the
Closing Date; (iii) any Initial Issuance Expenses or Transaction Expenses in
excess of the amounts credited to the Operating Account for such purpose on the
Closing Date or the Subsequent Closing Date.
"Opinion of Counsel": A written opinion addressed to the
Trustee or the Collateral Agent, as the case may be, and each Rating Agency, in
form and substance reasonably satisfactory to the Collateral Agent and each
Rating Agency, of an attorney at law admitted to practice before the highest
court of any state of the United States or the District of Columbia, which
attorney may, except as otherwise expressly provided in the relevant Financing
Document, be counsel for the Issuer or the Co-Issuer or the Program Manager, as
the case may be, and which attorney shall be reasonably satisfactory to the
Collateral Agent or Trustee, as the case may be. Whenever an Opinion of
Counsel is required under any Financing Document, such Opinion of Counsel may
rely on opinions of other counsel who are so admitted and so satisfactory,
which opinions of other counsel shall accompany such Opinion of Counsel and
shall either be addressed to the Collateral Agent or Trustee, as the case may
be and the Rating Agencies or shall state that the Collateral Agent or Trustee,
as the case may be, and the Rating Agencies shall be entitled to rely thereon.
"Outstanding": With respect to the Notes, as of any date of
determination, all of such Class of Notes or the Notes, as the case may be,
theretofore authenticated and delivered under the Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof for whose payment or
redemption funds in the necessary amount have been theretofore
irrevocably deposited with the Trustee or any Paying Agent in trust
for the Holders of such Notes; provided that, if such Notes or
portions thereof are to be redeemed, notice of such redemption has
been duly given pursuant to the Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Notes in exchange for, or in lieu of, other Notes which
have been authenticated and delivered pursuant to the Indenture,
unless proof satisfactory to the Trustee is presented that any such
Notes are held by a holder in due course; and
(iv) Notes alleged to have been mutilated, destroyed, lost or
stolen for which replacement Notes have been issued as provided in
Section 2.5 of the Indenture;
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provided that in determining whether the Holders of the requisite Outstanding
Amount have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or any other Financing Document, Notes
owned by or pledged to the Issuer, the Co-Issuer, Enron, the Program Manager or
any other obligor upon the Notes or any Affiliate of any of them shall be
disregarded and deemed not to be Outstanding (except where only the Holders of
Class C Notes are involved in such act), except that, in determining whether
the Trustee or the Collateral Agent shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Notes that the Trustee or the Collateral Agent knows to be so owned or pledged
shall be so disregarded.
"Outstanding Amount": When used with respect to any of the
Notes at any time, the aggregate principal amount of such Notes Outstanding at
such time. Except as otherwise provided herein, the Outstanding Amount of
Class B Notes and Class C Notes at any time shall include all Class B Deferred
Interest or Class C Deferred Interest, as the case may be, at such time.
"Partnership Agreement: The Amended and Restated Agreement of
Limited Partnership of the Issuer dated [_____], among the General Partner and
[the holders of the Class I Interests and the Class II Interests].
"Paying Agent": Any Person authorized by the Issuer to pay
the principal of or interest on any Notes on behalf of the Issuer as specified
in Section 7.2 of the Indenture.
"Payment": Any payment of principal or interest or any
dividend or premium payment made on, or any other distribution in respect of,
an obligation or Security.
"Permitted Capital Expenditure": A capital expenditure of the
Issuer reasonably necessary (as determined by the Program Manager on behalf of
the Issuer) for the performance of the acts and obligations of the Issuer under
the Financing Documents.
"Permitted Country": The meaning set forth in paragraph (11)
under "Project Loan Criteria" in this Appendix A.
"Permitted Industry": Each of the electricity and energy
infrastructure industries (including, without limitation, electricity
generation, transmission and distribution; gas, oil, liquids and refined
products pipelines; liquefied natural gas; refineries; petrochemicals; gas
liquids; energy-related industries with gas as a major feedstock or component
or industries with gas as a major conversion agent), including, in any case,
directly related and integrated businesses (including mining, oil and gas
development and production, and other businesses reasonably related to the
foregoing, and any facility the investment in which is a condition to the
investment in any of the aforesaid industries), but excluding the nuclear
industry.
"Permitted Investments": The Eligible Investments and
Temporary Investments.
"Permitted Liens": Any Lien on all or a portion of the
Collateral (i) for taxes, assessments or governmental charges either not yet
due or being contested in good faith, where such Lien would not have a Material
Adverse Effect, (ii) arising from any litigation or other legal
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proceeding that is being contested in good faith, where such Lien would not
have a Material Adverse Effect or (iii) Liens granted pursuant to the Security
Documents.
"Person": An individual, corporation (including a business
trust), partnership, limited liability company, joint venture, association,
joint stock company, trust (including any beneficiary thereof), unincorporated
association or government or any agency or political subdivision thereof.
"Plan": An ERISA Plan and any other "plan" (as defined in
Section 4975(e)(1) of the Code) which is subject to the provisions of Section
4975 of the Code.
"Portfolio Assets": All present and future rights of the
Issuer under the Project Loans and the Intermediate Funding Loans, including
the Issuers' interest in any collateral at the project level which secures such
loans, the Permitted Investments, the Hedging Agreements, the Currency Hedging
Arrangements, the Enron Support Documents, the Repayment Agreements, any other
agreement entered into by the Issuer and amounts credited to the Accounts.
"Portfolio Criteria": The following conditions to the
acquisition or initial funding of a Project Loan:
(1) (A) the maximum Project Loan Balance of any single Project
Loan will not exceed $___________, except that the Issuer may
make up to two Project Loans in separate Regions, each of
which has a maximum Project Loan Balance of up to
$___________, (B) the aggregate Project Loan Balance of
outstanding Project Loans to Eligible Merchant Projects shall
not exceed $_____________, (C) the aggregate Project Loan
Balance of outstanding Project Loans to Eligible Merchant
Projects having a Standard & Poor's Rating below "BB-" or a
Moody's Rating below "Ba3" shall not exceed $___________, (D)
the aggregate Project Loan Balance of outstanding Project
Loans to Eligible Projects principally involving solar, wind
and geothermal energy shall not exceed $___________, and (E)
the aggregate Project Loan Balance of Project Loans to
Eligible Projects principally involving solar and wind energy
shall not exceed $___________;
(2) after giving effect to the initial funding of the
Project Loan,
(a) no more than $_____________ of the Aggregate
Project Loan Balance will be in connection
with Eligible Projects located in any one
Continent;
(b) other than as may be permitted in paragraph
(c) below, no more than $_____________ of the
Aggregate Project Loan Balance shall be in
connection with Eligible Projects located in
any one Region;
(c) no more than $_____________ of the Aggregate
Project Loan Balance shall be in connection
with Eligible Projects located in any one
country whose long-term sovereign debt
obligations are rated, on the Financial
Closing Date for the Project Loan to be
added, at or above "Aa2" and "AA" by Moody's
and S&P, respectively; and
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(d) except as set forth in (e), no more than
$___________ of the Aggregate Project Loan
Balance shall be in connection with Eligible
Projects located in any one country whose
long-term sovereign debt obligations are
rated, on the Financial Closing Date for the
Project Loan to be added, below "AA" by S&P;
and
(e) in no more than two countries, each of which
is located in a separate S&P Region, no more
than $___________ of the Aggregate Project
Loan Balance shall be in connection with
Eligible Projects located in any such country
the long-term sovereign debt obligations of
which are rated, on the Financial Closing Date
for the Project Loan to be added, below AA by
S&P;
(3) on the Financial Closing Date (and after giving effect to the
initial funding of such Project Loan), the Average Life Test
shall be satisfied;
(4) after giving effect to the initial funding or acquisition of
the Project Loan, all outstanding Project Loans collectively
will have a Weighted Average Moody's Rating of at least "B3";
and
(5) at any time on or after the Financial Closing Date of the
third Project Loan initially funded by the Issuer, the
weighted average Enron Ownership Percentage with respect to
all Project Borrowers financed by Project Loans will be at
least [__]%.
"Portfolio Financial Tests": The Funding Availability Test,
the Credit Support Tests and the Liquidity Test.
"Portfolio Liquidity": The meaning specified under "Liquidity
Test" in this Appendix A.
"Premium": Any of the Class A Make-Whole Premium or Class B
Premium.
"Pricing Terms": The meaning specified in Section 2.02(a) of
the Management Agreement.
"Principal Balance" or "par": With respect to any Project
Loan or Permitted Investment, as of any date of determination, the outstanding
principal amount of such Project Loan or Permitted Investment.
"Principal Terms": With respect to any Series:
(1) the name or designation of such Series;
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(2) the Note Interest Rate (or method of determination
thereof) for the Notes of such Series;
(3) the principal amount of the Notes of such Series; and
(4) the extent to which the Notes of such Series will be
issuable in temporary or permanent global form (and,
in such case, the depositary for such Global Note or
Notes), the terms and conditions, if any, upon which
such Global Note may be exchanged, in whole or in
part, for Certificated Notes, and the manner in which
any interest payable on a temporary or Global Note
will be paid.
"Priority of Payments": The payment priorities with respect
to the Collateral Proceeds provided by Section 4.1(a) of the Security
Agreement.
"Pro Rata": In respect of any Senior Secured Party, in
relation to all other Senior Secured Parties, on any date of determination, the
ratio, the numerator of which shall be (i) in the case of the Class A
Noteholders, the sum of the Outstanding Amount of all Class A Notes and
interest (and premium, if any) payable thereon as of such date, (ii) in the
case of the Liquidity Lenders, the Liquidity Facility Balance plus accrued but
unpaid interest and any other amounts owing under the Liquidity Facility, (iii)
in the case of the Backup Lenders, the Backup Facility Balance plus accrued but
unpaid interest and any other amounts owing under the Backup Facility and (iv)
in the case of the Hedge Counterparties, the sum of all payments due under each
Hedging Agreement, and the denominator of which shall be the sum of amounts
referred to in the immediately preceding clauses (i), (ii), (iii) and (iv).
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Program Manager": Enron CPO Management, L.P., a limited
partnership duly formed and validly existing under the laws of the State of
Delaware, which is a wholly-owned subsidiary of Enron.
"Project Borrower": A corporation, partnership, limited
liability company or other entity which owns an Eligible Project and borrows
funds in the form of loans from the Issuer directly or through an Intermediate
Funding Entity; provided that, in addition to owning and operating an Eligible
Project, Project Borrowers may make investments and conduct business activities
that are not otherwise in a Permitted Industry, provided, however, (i) the cost
of such investment or activity, if financed by a Project Loan or other senior
debt, is limited to 5% of the total capital cost of such Eligible Project as
set forth in the Base Case Financial Projections for such Eligible Project (it
being understood that such limitation shall not apply to any such investments
and activities that are not financed by a Project Loan or other senior debt),
(ii) such investments and activities are not reasonably expected to result in
any material adverse effect on such Eligible Project (as determined by the
Program Manager), (iii) the Base Case Financial Projections for such Eligible
Project do not rely on the success of such investments or activities and (iv)
the projected operating expenses for such activities are not material in the
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context of the Eligible Project and the payments of such operating expenses are
subordinated to any payments of debt service under the Project Loan.
"Project Distributions Reserved": The meaning specified in
Section 1.2 of the Enron Support Agreement.
"Project Loan": With respect to an Eligible Project, a loan
made by the Issuer or an Intermediate Funding Entity to a Project Borrower.
"Project Loan Balance": With respect to each Project Loan,
the outstanding principal balance of such Project Loan plus unfunded
Commitments to make such Project Loan.
"Project Loan Criteria": The following conditions to be
satisfied for the initial funding of, or in respect of, a Project Loan:
(1) the Project Loan is denominated in U.S. dollars and
is not contractually or by way of security
subordinate to any other indebtedness for borrowed
money of the Project Borrower and contains customary
restrictions with respect to the incurrence of other
indebtedness; provided, however, the Project Loan may
be denominated in a currency other than U.S. dollars
if, and only if, it is made through an Intermediate
Funding Entity and the Intermediate Funding Entity
has (A) entered into an Intermediate Funding Loan
with the Issuer in U.S. dollars and (B) hedged its
foreign currency risk related to such Project Loan
pursuant to a Currency Hedging Arrangement;
(2) the Project Loan is secured by a valid first priority
perfected lien on the tangible and intangible assets
of the Project Borrower (to the extent such
collateral security interest may be created or
perfected under applicable law) or if, in the
reasonable judgment of the Program Manager it is
impractical to create or perfect such lien over any
such asset, the Issuer is the beneficiary of a
negative pledge in respect thereof, in each case with
customary exceptions;
(3) the aggregate amount of Initial Equity in the Project
Borrower representing at least the following
percentage of the total capital cost of the Eligible
Project: (x) 10% if the Project Loan is rated
Investment Grade by S&P and Moody's and has been made
in connection with any Eligible Project other than an
Eligible Merchant Project; (y) 20% if the Project
Loan has been made in connection with an Eligible
Merchant Project; and (z) 15% otherwise;
(4) the Enron Ownership Percentage with respect to such
Eligible Project is at least: (x) 30% prior to the
commencement of commercial operations by such
Eligible Project and (y) 20% thereafter;
(5) at or prior to the Financial Closing Date of such
Project Loan, the Issuer will have received:
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(x) satisfactory opinions of legal counsel; and
(y) a report of an Independent Engineer
confirming:
(I) the technical and economic
feasibility of such Eligible Project
and concurring that the assumptions
used in developing the Base Case
Financial Projections for the
Eligible Project are commercially
reasonable;
(II) that the Eligible Project is
expected during its operation period
to generate on an annual basis
sufficient operating revenues to
cover its operating costs (including
fuel, where applicable) and debt
service over the term of the Project
Loan in accordance with the
project's Base Case Financial
Projections (taking into account
reserve funds and other forms of
credit enhancement and the currency
of payment of debt service and
operating costs); and
(III) in the case of an Eligible Merchant
Project, that it is expected during
the operating period to generate on
an annual basis sufficient operating
revenues to cover its operating
costs (including fuel, where
applicable) and debt service over
the term of the Project Loan in
accordance with the project's Base
Case Financial Projections (under a
reasonable range of economic and
operating scenarios and taking into
account reserve funds and other
forms of credit enhancement and the
currency of payment of debt service
and operating costs).
In rendering such report such Independent
Engineer shall rely, as to matters outside
the scope of its expertise, on the reports of
other Independent consultants obtained by the
Program Manager;
(6) the Project Borrower has a limited business
purpose and would be protected (subject to
customary qualifications) from any claims of
the creditors of any of its Project Sponsors
arising out of the bankruptcy of such Project
Sponsor;
(7) at or within a reasonable period of time
prior to the Financial Closing Date of such
Project Loan, the Issuer shall have received
Base Case Financial Projections, reflecting
commercially reasonable assumptions, prepared
by the Project Borrower indicating (x) that
sufficient funds are committed through the
Project Loan, other debt financing and equity
financing to permit the completion of the
Eligible Project under the terms of the
construction arrangements and (y) a minimum
annual pre-tax senior debt service coverage
ratio and an average annual pre-tax senior
debt service coverage ratio of at least 1.2
and 1.4, respectively (in each case after
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taking into account the availability of
contingent support committed to be provided
by Project Sponsors) (the requirement set
forth in this paragraph (7) is hereinafter
referred to as the "Coverage Ratio
Condition");
(8) the loan agreement shall include a provision
for the establishment, on or prior to the
commencement of commercial operations of the
Eligible Project, of a debt service reserve in
an amount at least equal, as of such
commencement, to the principal and interest
due during the ensuing six month period. Such
reserves shall be funded from (i) financing
proceeds, (ii) initial operating cash flow
available to the Project Borrower or (iii)
Project Sponsor deposits or commitments, and
maintained in U.S. dollars held in an offshore
account. Subsequent to the establishment of
the debt service reserve, it will be
replenished from, and to the extent of,
available cash flow up to an amount at least
equal, as of any payment date, to the
principal and interest due during the
six-month period following such payment date.
Notwithstanding the above, any debt service
reserve amounts may be released to the extent
the Project Sponsors provide guaranties for
repayment from Enron, an Enron Credit
Counterparty or an Acceptable Credit Provider
to such Project Borrower;
(9) the Project Borrower will be prohibited from
paying dividends (or making distributions) or
making payment on any Initial Equity or any
subsequent equity in the Project Borrower in
any year in which the debt service coverage
ratio is below ____ or there is an event of
default under the Project Loan (provided that
if no event of default under the Project Loan
has occurred, accumulated earnings and
profits may be distributed as dividends and
interest and principal may be paid on any
Initial Equity if the Project Sponsors
provide a guaranty from Enron, an Enron
Credit Counterparty or an Acceptable Credit
Provider to the Project Borrower for the
amount of such payments);
(10) the Project Loan must have a final scheduled
maturity date of, and be expected to be
repaid from the operations of the Eligible
Project, no later than the Stated Maturity of
the Notes;
(11) the Project Loan will finance an Eligible
Project in a country outside of the United
States in which it is not illegal under the
federal laws of the United States for United
States private sector entities to invest as
of the Financial Closing Date of such Project
Loan (a "Permitted Country"); and
(12) the Project Loan shall accrue interest at a
(i) fixed rate throughout the term of the
Project Loan or (ii) floating rate prior to
commencement of commercial operations of the
related Eligible Project and at a fixed rate
thereafter; provided, however, interest on a
Project Loan may accrue at a floating rate
after the commencement of commercial
operations of the related Eligible Project,
if, and only if, an arrangement has been made
pursuant to which any interest rate exposure
relating to such Project Loan is hedged and
any residual exposure relating to any
breakage and termination costs of such
arrangement is indemnified by an Acceptable
Credit Provider;
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provided that, a Project Loan made to Transportadora de Gas del Sur
S.A., Promigas S.A., Gas Transboliviano, Compania Estadual de Gas do
Rio de Janeiro - CEG or Riogas, S.A., or a Majority Affiliate of any
of them, shall be deemed to satisfy clauses (2) and (7) above; and
provided, further, that if a Project Loan fails to satisfy the Project
Loan Criteria for failure to meet the conditions specified in clauses
(2) or (5)(x) above, the Issuer, upon receipt of an unconditional,
irrevocable guarantee (which shall guarantee the payment obligations
of the Project Borrower under the Project Loan until the date on which
such condition or conditions are satisfied) from Enron, an Enron
Credit Counterparty or an Acceptable Credit Provider, shall deem such
conditions to be satisfied for purposes of the Project Loan Criteria.
"Project Loan Table": The meaning specified under "Required
Senior Project Credit Support Percentage" in this Appendix A.
"Project Risk": Construction, commodity price, offtake and
currency risk.
"Project Sponsor": With respect to a Project Borrower, any
Person who owns (i) shares, if such Project Borrower is a corporation, (ii)
membership interests, if such Project Borrower is a limited liability company
and (iii) partnership interests, if such Project Borrower is a partnership.
"Prospectus": The Prospectus dated _____________, 1998
relating to the Class A Notes and the Class B Notes to be issued on the Closing
Date.
"Qualifying Criteria": (1) The Project Loan Criteria, (2) the
Portfolio Criteria, (3) the Ratings Criteria and (4) the Portfolio Financial
Tests.
"Quarterly Payment Dates": January 10, April 10, July 10 and
October 10 of each year, commencing on January 10, 1999 or, if any such date is
not a Business Day, the immediately following Business Day.
"Quarterly Payment Shortfall": The meaning specified in
Section 4.1(b) of the Security Agreement.
"Quarterly Project Distributions": The meaning specified in
Section 1.2 of the Enron Support Agreement.
"Rating Agency": Each of Moody's, for so long as any of the
outstanding Notes are rated by Moody's, and Standard & Poor's, for so long as
any of the outstanding Notes are rated by Standard & Poor's or, with respect to
Pledged Securities generally, if at any time Moody's or Standard & Poor's
ceases to provide rating services with respect to high yield debt securities,
any other nationally recognized investment rating agency selected by the
Issuer. In the event that at any time Moody's ceases to be a Rating Agency,
references to rating categories of Moody's in the Indenture or in any other
Financing Document shall be deemed instead to be references to the equivalent
categories of such other rating agency as of the most recent date on which such
other rating agency and Moody's published ratings for the type of security in
respect of which such alternative rating agency is used. In the event that at
any time Standard & Poor's ceases to be a Rating Agency, references to rating
categories of Standard & Poor's in the
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Indenture or in any other Financing Document shall be deemed instead to be
references to the equivalent categories of such other rating agency as of the
most recent date on which such other rating agency and Standard & Poor's
published ratings for the type of security in respect of which such alternative
rating agency is used.
"Rating Condition": With respect to the initial funding of
any Project Loan or when required in connection with the issuance or redemption
of any Notes or the reduction of the Class C Note Purchase Commitment, or any
other circumstance where the context may otherwise require, the condition that
the Rating Agencies have determined that such initial funding, issuance,
redemption, reduction or circumstance, as the case may be, will not result in
the reduction or withdrawal of the then-current ratings of the Class A Notes or
Class B Notes.
"Ratings Criteria": The criteria to be satisfied as a
condition to the initial funding of a Project Loan that the Issuer shall have a
current rating of such Project Loan from the Rating Agencies and the Rating
Agencies shall have confirmed that the Rating Condition will be or is satisfied
after giving effect to the initial funding of such Project Loan.
"Record Date": The date on which the Holders of Notes are
determined for purposes of (i) receipt of payment in respect of principal or
interest on the succeeding Quarterly Payment Date, (ii) an Acceleration or
(iii) a redemption of Notes pursuant to Article 10 of the Common Agreement,
which date is the 15th day (whether or not a Business Day) prior to the
applicable date.
"Redemption Date": Any date specified for a redemption of
Notes and the repayment of amounts drawn under the Liquidity Facility and
Backup Facility pursuant to Sections 10.2 or 10.3 of the Common Agreement or,
if such date is not a Business Day, the next following Business Day.
"Redemption Date Statement": The meaning specified in Section
10.4(c) of the Indenture.
"Redemption Price": When used with respect to:
(i) a Class A Note of any Series, an amount equal to the
principal amount of such Class A Note to be redeemed plus all unpaid
interest thereon accrued to but excluding the Redemption Date plus the
Class A Make-Whole Premium;
(ii) a Class B Note of any Series, an amount equal to the
principal amount of such Class B Note to be redeemed plus all unpaid
interest thereon accrued to but excluding the Redemption Date plus the
Class B Premium;
(iii) any Class C Note, an amount equal to the principal
amount of such Class C Note to be redeemed plus all unpaid interest
thereon to but excluding the Redemption Date; and
(iv) any Support Note, an amount equal to the principal
amount of such Support Note to be redeemed plus all unpaid interest
thereon to but excluding the Redemption Date.
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"Reference Obligation": With respect to any Hedge
Counterparty or any other Person, the unsecured, unguaranteed and unsupported
senior long-term debt or deposit obligations of such Hedge Counterparty or such
other Person.
"Refinancing": The refinancing or prepayment of a Project
Loan in its entirety.
"Region": The Moody's Region or the S&P Region, as
applicable.
"Registered": With respect to any debt obligation, a debt
obligation (a) in the case of a U.S. issuer, issued after July 18, 1984 and (b)
in registered form for purposes of the Code.
"Registered Form": When used with respect to a Certificated
Security, means a form in which: (a) the Security Certificate specifies a
Person entitled to the Security; and (b) a transfer of the Security may be
registered upon books maintained for that purpose by or on behalf of the issuer
of such Security, or the Security Certificate so states.
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Section 21, or any successor regulation.
"Reinvestment Agreement": A guaranteed reinvestment agreement
from a bank, insurance company or other corporation or entity incorporated
under the laws of the United States of America or any state thereof under which
no payments are subject to any withholding tax; provided, that such agreement
provides that it is terminable by the purchaser, without premium or penalty, in
the event that the rating assigned to such agreement by either Rating Agency is
at any time lower than the rating required pursuant to the terms of the
relevant Financing Document to be assigned to such agreement in order to permit
the purchase thereof.
"Relevant Jurisdiction": As to any obligor on any Project
Loan, any jurisdiction (a) in which the obligor is incorporated, organized,
managed and controlled or considered to have its seat, (b) where an office
through which the obligor is acting for purposes of the relevant Project Loan
is located, (c) in which the obligor executes Underlying Instruments or (d) in
relation to any payment, from or through which such payment is made.
"Repayment Agreement": The meaning specified in Section 3.5
of the Security Agreement.
"Representatives": Each of the Backup Facility Agents, the
Liquidity Facility Agent and the Trustee.
"Required Lenders": As of a date of determination (A) if any
Senior Secured Obligation is outstanding at such time, Senior Lenders (each
acting through its respective Representative) representing at least 50% of the
Aggregate Senior Loan Balance; (B) if Class B Notes, but no Senior Secured
Obligations, are outstanding at such time, the Class B Notes representing at
least 50% of the Outstanding Amount of Class B Notes; and (C) if Class C Notes,
but no Senior Secured Obligations or Class B Notes, are outstanding at such
time, the Class C Notes representing at least 50% of the Outstanding Amount of
Class B Notes; provided, however, in the case of
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(i) an exercise of remedies in accordance with Section
3.3(a) of the Intercreditor Agreement following an Event of Default
specified in Section 5.1 of the Common Agreement (other than Events of
Default specified in Sections 5.1(a) and 5.1(b)) and Section 5.1(a) of
the Security Agreement, "Required Lenders" shall be determined in
accordance with the foregoing clauses (A), (B) and (C) but
substituting "33%" in each place "50%" is used,
(ii) an exercise of remedies in accordance with Section
3.3(a) of the Intercreditor Agreement following an Event of Default
specified in Sections 5.1(a) and 5.1(b) of the Common Agreement,
"Required Lenders" shall be determined in accordance with the
foregoing clauses (A), (B) and (C) but substituting "25%" in each
place "50%" is used,
(iii) Section 2.1(b)(ii) of the Common Agreement, and
Article VIII of the Enron Support Agreement, "Required Lenders" shall
mean Holders representing at least 50% of the Outstanding Amount of
each of the Class A Notes, the Class B Notes, the aggregate
outstanding principal amount under the Liquidity Facility and the
aggregate principal amount of [Allocations and] drawn amounts under
the Backup Facility, voting as a single class,
(iv) consent of the Required Lenders given pursuant to
Section 3.3(e) of the Intercreditor Agreement for actions to be taken
pursuant to Section 2.5(a)(iv) of the Security Agreement, "Required
Lenders" shall also include, to the extent the Senior Secured
Obligations and Class B Notes are outstanding at such time, the
Holders of the Class B Notes representing at least 50% of the
Outstanding Amount of the Class B Notes, and
(v) consent of the Required Lenders given pursuant to
Section 3.3(e) of the Intercreditor Agreement for actions to be taken
pursuant to Section 4.5 of the Common Agreement and Sections 10.02(b)
and 10.03(a)(iv) of the Management Agreement, "Required Lenders" shall
be determined in accordance with the foregoing clauses (A), (B) and (C)
but substituting "66 2/3%" in each place 50% is used and shall also
include, to the extent the Senior Secured Obligations and Class B Notes
are outstanding at such time, Holders of the Class B Notes representing
at least 66 2/3% of the Outstanding Amount of the Class B Notes.
"Required Reserve Amount": As of any Quarterly Payment Date,
the greater of (i) the Assumed Loss Amount in respect of all Defaulted Project
Loans minus the Issuer Determined Loss in respect of all such Defaulted Project
Loans and (ii) zero.
"Required Senior Credit Support Percentage": On any date, the
weighted average, calculated based upon the Uncommitted TIP Account Balance and
the Aggregate Project Loan Balance, of the Required Senior TIP Credit Support
Percentage and the Required Senior Project Credit Support Percentage.
"Required Senior Project Credit Support Percentage": The
percentage obtained from Table 2 set forth in Annex A hereto (the "Project Loan
Table" and such percentage, the
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"Base Percentage") and adjusted according to the Interest Coverage Adjustment
set forth in this Appendix A.
"Required Senior TIP Credit Support Percentage": The
percentage obtained in Table 1 (the "TIP Table") set forth in Annex B hereto.
"Reserve Account": The account designated as the "Reserve
Account" and established pursuant to Section 3.4 of the Security Agreement
which account shall initially be account number [______] and shall include any
successor or replacement accounts thereof.
"Reserve Amount": With respect to any Quarterly Payment Date,
the lesser of (i) the amount necessary to cause the Reserve Test to be
satisfied and (ii) Collateral Proceeds remaining after application as provided
in clauses (i) through (ix) of the Priority of Payments.
"Reserve Test": A test satisfied on a Quarterly Payment Date
if the sum of (a) the amounts credited to the Reserve Account, (b) the
unutilized portion of the Enron Class II Purchase Commitment and the Class C
Note Purchase Commitment and (c) the Project Distributions Reserved is at least
equal to the Required Reserve Amount.
"Retention Amount": On the Investment Termination Date, the
amount credited to the Excess Spread Account which is used to satisfy the
Credit Support Tests and Rating Condition as of such date and on any date after
the Investment Termination Date,
(a) the greater of (i) zero and (ii) the greater of (x) the
Retention Amount as of the Investment Termination Date minus the
Retention Percentage of the amount of principal which has been
received on the Project Loans since the Investment Termination Date
and (y) the amount, if any, that if added to the amount credited to
the Reserve Account, would satisfy the Reserve Test
plus
(b) amounts, if any, designated to be retained in such account
by the holders of the Class I Interests, at their option, in
accordance with the Partnership Agreement.
"Retention Percentage": A fraction, determined on the
Investment Termination Date, the numerator of which is the sum of the Unused
Enron Commitments and the Retention Amount and the denominator of which is the
Aggregate Project Loan Balance.
"S&P Credit Support Test": A test satisfied on any date of
determination if Net Senior Debt is less than or equal to the Maximum Senior
Indebtedness, after giving effect to the funding in full of a Project Loan
proposed to be funded, amounts to be withdrawn from or credited to the
Uncommitted TIP Account, Allocations or drawings under the Backup Facility, the
proposed issuance of Class A Notes or Class C Notes or the addition to, or
reduction of, the Class C Note Purchase Commitment and amounts credited to the
Excess Spread Account for the purpose of satisfying this test and the Rating
Condition.
"S&P Region": Each of (a) Latin America and the Caribbean
(other than countries rated "AA" or higher by S&P), (b) Chile and Colombia
(other than countries rated
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"AA" or higher by S&P), (c) Southeast Asia and Korea (other than countries
rated "AA" or higher by S&P), (d) India and Pakistan (other than countries
rated "AA" or higher by S&P), (e) Sri Lanka, Bangladesh and Nepal (other than
countries rated "AA" or higher by S&P), (f) China, Hong Kong and Taiwan (other
than countries rated "AA" or higher by S&P), (g) Russia and CIS (other than
countries rated "AA" or higher by S&P), (h) Eastern and Central Europe and
Turkey (other than countries rated "AA" or higher by S&P), (i) North Africa and
the Middle East (other than countries rated "AA" or higher by S&P), (j)
Sub-Saharan Africa (other than countries rated "AA" or higher by S&P), (k)
South Africa (other than countries rated "AA" or higher by S&P), (l) Gulf
States (other than countries rated "AA" or higher by S&P), (m) Pacific Islands
(other than countries rated "AA" or higher by S&P) and (n) each country rated
"AA" or higher by S&P, in each case, as of the Closing Date.
"Sale": The meaning specified in Section 2.5(a) of the
Security Agreement.
"Sale Proceeds": All proceeds received as a result of sales
or other dispositions of Collateral pursuant to Section 2.5 of the Security
Agreement, net of any reasonable amounts expended by the Program Manager or the
Collateral Agent in connection with such sale or other disposition.
"Scheduled Investment Termination Date": ________, 2003 [five
years after the Closing Date].
"Scheduled Payment": With respect to any Project Loan or
Permitted Investment, for each Due Date, the scheduled payment of principal
and/or interest with respect to such Project Loan or Permitted Investment as
calculated pursuant to Article 7 of the Common Agreement.
"Secured Obligations": As of any date, all indebtedness,
liabilities and obligations of the Issuers of whatsoever nature and however
evidenced (including, but not limited to, principal, interest, fees, penalties,
indemnities and legal and other expenses, whether due after acceleration or
otherwise), to the Secured Parties under or pursuant to all Outstanding Class A
Notes, Class B Notes and Class C Notes, the Indenture, the Liquidity Facility,
the Backup Facility, the Security Documents, the Hedging Agreements or any
other Financing Document, whether direct or indirect, primary or secondary,
fixed or contingent, now or hereafter arising.
"Secured Party": Each of the Class A Noteholders, Class B
Noteholders, Class C Noteholders, the Liquidity Lenders, the Backup Lenders,
the Hedge Counterparties, the Collateral Agent and the Representatives.
"Securities Account": An account to which a Financial Asset
is or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise the rights that comprise the Financial
Asset.
"Securities Act": The United States Securities Act of 1933,
as amended and the rules promulgated thereunder.
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"Securities Entitlement": Is acquired by a Person if a
Securities Intermediary: (a) indicates by book entry that a Financial Asset
has been credited to the Person's Securities Account; (b) receives a Financial
Asset from the Person or acquires a Financial Asset for the Person and, in
either case, accepts it for credit to the Person's Securities Account; or (c)
becomes obligated under other law, regulation or rule to credit a Financial
Asset to the Person's Securities Account; provided that if a Securities
Intermediary holds a Financial Asset for another Person, and the Financial
Asset is registered in the name of, payable to the order of, or specially
Indorsed to the other Person, and has not been Indorsed to the Securities
Intermediary or in blank, the other Person is treated as holding the Financial
Asset directly rather than as having a Securities Entitlement with respect to
the Financial Asset.
"Securities Intermediary": (a) A Clearing Corporation; or (b)
a Person, including a bank or broker, that in the ordinary course of its
business maintains Securities Accounts for others and is acting in that
capacity.
"Security": Except as otherwise provided in Section 8-103 of
the UCC, means an obligation of an issuer or a share, participation or other
interest in an issuer or in property or an enterprise of an issuer: (a) which
is represented by a Security Certificate in bearer or registered form, or the
transfer of which may be registered upon books maintained for that purpose by
or on behalf of the issuer; (b) which is one of a class or series or by its
terms is divisible into a class or series of shares, participations, interests
or obligations; and (c) which either (i) is, or is of a type, dealt in or
traded on securities exchanges or securities markets; or (ii) is a medium for
investment and by its terms expressly provides that it is a security governed
by Article 8 of the UCC.
"Security Agreement": The Security Agreement dated as of
___________, 1998, among the Issuers, the Collateral Agent and the Account
Bank.
"Security Certificate": A certificate representing a
Security.
"Security Documents": Individually and collectively, the
Security Agreement and any financing statements required by the Security
Agreement and any of the other agreements or documents entered into on or prior
to or after the Closing Date which provides any lien, charge or security
interest to the Secured Parties (or any of them) to secure the Secured
Obligations, including in each case any amendments to the foregoing in
accordance with the terms thereof and of the Common Agreement.
"Security Interest": Each security interest and lien granted
pursuant to Section 2.1 of the Security Agreement.
"Senior Coverage Test": A test satisfied on any date of
determination if the Senior Overcollateralization Ratio on such date is at
least equal to __% of the Target Senior Overcollateralization Ratio.
"Senior Lenders": The Class A Noteholders, the Liquidity
Lenders and the Backup Lenders.
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"Senior Overcollateralization Ratio": As of any date of
determination, the ratio calculated by dividing:
(a) the sum of (i) the Project Loan Balance for each
non-Defaulted Project Loan, (ii) for each Defaulted Project Loan, the
excess of (x) the Project Loan Balance therefor over (y) the Issuer
Determined Loss for such Defaulted Project Loan, (iii) the Uncommitted
TIP Account Balance corresponding to all non-defaulted Temporary
Investments in the Uncommitted TIP Account and (iv) for each defaulted
Temporary Investment, the excess of (x) the principal balance of such
Temporary Investment over (y) the Assumed Loss Amount for such
Temporary Investment,
by
(b) the sum of (i) the aggregate outstanding principal amount
of the Class A Notes and (ii) the Backup Facility Balance.
"Senior Secured Obligation": As of any date, all
indebtedness, liabilities and obligations of the Issuer and/or the Co-Issuer of
whatsoever nature and however evidenced (including, but not limited to,
principal, interest (including interest that accrues subsequent to the
commencement of any bankruptcy, insolvency or similar proceedings with respect
to such Person whether or not a claim for post-filing interest is allowed in
such proceeding), fees, penalties, indemnities and legal and other expenses,
whether due after acceleration or otherwise) to the Senior Secured Parties.
"Senior Secured Party": Each of the Class A Noteholders, the
Liquidity Lenders, the Backup Lenders and the Hedge Counterparties.
"Series": With respect to Class A Notes and Class B Notes,
Notes issued by the Issuers on the same date pursuant to the Indenture or a
Supplemental Indenture relating to such series.
"Shortfall": The meaning specified in Section 4.1(b) of the
Security Agreement.
"South and Central America": The meaning specified in Section
1.2 of the Enron Support Agreement.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
"Standard & Poor's Industry": Each industry found in
Table [ ] hereto.
"Standard & Poor's Rating": With respect to any Project Loan
or a Temporary Investment, the rating by Standard & Poor's of that Project Loan
or Temporary Investment, which rating may be a private letter rating; provided,
that if the Project Loan is being paid in a currency other than U.S. dollars,
the rating shall take into consideration the Currency Hedging Arrangements
necessary to cover currency risk, each such rating as subsequently updated by
S&P in accordance with the Financing Documents.
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"Stated Maturity": With respect to (i) any security, the date
specified in such security, (ii) any Note, the date specified in such Note and
in Section 2.2 of the Indenture, as the fixed date on which the final payment
of principal of such Note is due and payable, or, if such date is not a
Business Day, the next following Business Day, (iii) the Backup Facility, the
date specified as such in the applicable Backup Facility Loan Agreement or
under the applicable Funding Availability Note (in each case as such date may
be extended pursuant to the terms thereof) and (iv) the Liquidity Facility, the
date specified as such in the Liquidity Facility Loan Agreement or under the
applicable Liquidity Commitment Note (in each case as such date may be extended
pursuant to the terms thereof).
"Subordinate Event of Default": The occurrence of a Deferral
Event and the continuation thereof for 45 days.
"Subordinate Interests": The meaning specified in Section 3.1
of the Intercreditor Agreement.
"Subsequent Closing Date": The meaning specified in Section
2.9(a) of the Indenture.
"Support": The meaning specified in the Enron Support
Agreement.
"Support Notes": The meaning specified in the Enron Support
Agreement.
"Supplemental Indenture": An indenture supplemental to the
Indenture executed by the Issuers and the Trustee pursuant to Article 8 of the
Indenture.
"Target Note Redemption Amount": In respect of any Project
Loan subject to an Equity Disposition or a Refinancing, an amount equal to the
sum of the principal of such Project Loan or the related Intermediate Funding
Loan, as applicable, plus the present value, discounted at the weighted average
rate of interest currently payable on the Class A Notes and the Class B Notes
and the Backup Facility (the "Debt Rate"), of the amounts of interest, if any,
that would have been received on such Project Loan in excess of the Debt Rate
assuming such Equity Disposition or Refinancing had not occurred.
"Target Senior Overcollateralization Ratio": On any date is
calculated by dividing (a) the Calculated Asset Balance by (b) the Calculated
Senior Debt Balance, so long as the Calculated Senior Debt Balance is greater
than zero.
"Target Total Overcollateralization Ratio": On any date is
calculated by dividing
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(a) the Calculated Asset Balance
by
(b) the Calculated Total Debt Balance, so long as the
Calculated Total Debt Balance is greater than zero.
"Tax Event": A final determination that the Issuer is subject
to U.S. federal income tax on a net income basis.
"Tax Redemption Trigger Date": The meaning specified in
Section 10.3(a)(iv) of the Common Agreement.
"Temporary Investments": The Uncommitted TIP Investments
and/or Committed TIP Investments.
"TIP Accounts": The Committed TIP Account and the Uncommitted
TIP Account.
"TIP Account Balance": The Uncommitted TIP Account Balance or
the Committed TIP Account Balance, as applicable.
"TIP Advisor": The Person designated as manager under a TIP
Investment Management Agreement.
"TIP Diversity Score": On any date of determination, a score
calculated by summing up the Industry Diversity Scores. An Industry Diversity
Score is calculated for underlying assets issued by borrowers or issuers
located in the U.S. and other OECD countries and other countries, whose
sovereign debt is rated at least "Aa2" by Moody's. The Industry Diversity
Score is calculated as follows:
(i) For purposes of calculating the TIP Diversity Score,
any borrowers and issuers affiliated with one another will be
considered one borrower or issuer.
(ii) An "Issuer Par Amount" is calculated for each issuer
represented in the underlying assets by summing the par amounts of all
underlying assets in the Collateral issued by that issuer or an
affiliate of that issuer.
(iii) An "Average Par Amount" is calculated by summing the
Issuer Par Amounts and dividing by the sum of the number of issuers.
(iv) An "Equivalent Unit Score" is calculated for each
issuer by taking the lesser of (A) one and (B) the Issuer Par Amount
for such issuer divided by the Average Par Amount.
(v) An "Aggregate Industry Equivalent Unit Score" is then
calculated for each of the Moody's Industry groups, by summing the
Equivalent Unit Scores for each issuer in the industry.
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(vi) An "Industry Diversity Score" is then established by
reference to Table 6 hereto for the related Aggregate Industry
Equivalent Unit Score; provided, that if any Aggregate Industry
Equivalent Unit Score falls between any two scores appearing on such
table, then the applicable Industry Diversity Score will be the lower
of the two Industry Diversity Scores in such Table.
"TIP Eligible Investments": Any Dollar-denominated investment
that, at the time it is delivered to the Collateral Agent (directly or through
a Securities Intermediary), is one or more of the following obligations or
securities:
(i) direct Registered obligations of, and Registered
obligations the timely payment of principal and interest on which is
fully and expressly guaranteed by, the United States of America or any
agency or instrumentality of the United States of America the
obligations of which are expressly backed by the full faith and credit
of the United States of America;
(ii) demand and time deposits in, certificates of deposit
of, bankers' acceptances payable within 365 days of issuance by, or
Federal funds sold by, any depository institution or trust company
incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by Federal
and/or state banking authorities so long as the commercial paper
and/or the debt obligations of such depository institution or trust
company (or, in the case of the principal depository institution in a
holding company system, the commercial paper or debt obligations of
such holding company) at the time of such investment or contractual
commitment providing for such investment have a credit rating of not
less than "A2" by Moody's or "A" by Standard & Poor's, in the case of
long-term debt obligations, or "P-1" by Moody's or "A-1" by Standard &
Poor's in the case of commercial paper and short-term debt
obligations;
(iii) unleveraged repurchase obligations with respect to
(a) any security described in clause (i) above or (b) any other
Registered security issued or guaranteed by an agency or
instrumentality of the United States of America (in each case without
regard to the Stated Maturity of such security), in either case
entered into with a depository institution or trust company (acting as
principal) described in clause (ii) above or entered into with a
corporation (acting as principal) whose long-term rating is not less
than "A2" by Moody's or "A" by Standard & Poor's or whose short-term
credit rating is "P-1" by Moody's or "A-1" by Standard & Poor's at the
time of such investment;
(iv) Registered debt securities bearing interest or sold
at a discount issued by any corporation incorporated under the laws of
the United States of America or any state thereof that have a credit
rating of not less than "A1" by Moody's or "A+" by Standard & Poor's
at the time of such investment or contractual commitment providing for
such investment;
(v) commercial paper or other short-term obligations with
a maturity of not more than 365 days from the date of issuance and
having at the time of such investment a credit rating of not less than
"P-1" by Moody's or "A-1" by Standard & Poor's;
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(vi) a Reinvestment Agreement issued by any bank (if
treated as a deposit by such bank), or a Registered Reinvestment
Agreement issued by any insurance company or other corporation or
entity, in each case that has a credit rating of not less than "P-1"
by Moody's or "A-1" by Standard & Poor's; and
(vii) Dollar-denominated senior term loans, revolving
credits or other senior liabilities of United States borrowers or
corporate issuers located in countries whose long-term sovereign
rating is at least "Aa2" by Moody's and "AA" by S&P, in each case,
with direct or implied ratings of at least "A2" by Moody's and "A" by
S&P.
"TIP Investment Management Agreement": The [Investment
Management] Agreement between the Issuer and a TIP Advisor which agreement
satisfies the Committed TIP Investment Policies and Uncommitted TIP Investment
Policies.
"Total Assets": The sum of (i) the Aggregate Project Loan
Balance and (ii) the Uncommitted TIP Account Balance.
"Total Overcollateralization Ratio": As of any date of
determination, the ratio calculated by dividing:
(a) the sum of (i) the Project Loan Balance for each
non-Defaulted Project Loan, (ii) for each Defaulted Project Loan, the
excess of (x) the Project Loan Balance therefor over (y) the Issuer
Determined Loss for such Defaulted Project Loan, (iii) the Uncommitted
TIP Account Balance corresponding to all non-defaulted Temporary
Investments in the Uncommitted TIP Account and (iv) for each defaulted
Temporary Investment, the excess of (x) the principal balance of such
Temporary Investment over (y) the Assumed Loss Amount for such
Temporary Investment,
by
(b) the sum of (i) the aggregate outstanding principal amount
of the Class A Notes and the Class B Notes and (ii) the Backup
Facility Balance.
"Transaction Expenses": All expenses of the Issuers related
to the issuance of the Class A Notes and Class B Notes, including, without
limitation, (i) underwriting fees, (ii) filing and listing fees associated with
the registration and sale of the Class A Notes and Class B Notes, (iii) legal,
accounting and other consultant fees associated with the registration and sale
of the Class A Notes and Class B Notes, (iv) expenses associated with the
marketing and sales of the Class A Notes and Class B Notes, (v) printing costs
for registration statements and other similar documents, (vi) Trustee and
Collateral Agent fees related to such issuance and (vii) rating agency fees.
"Transaction Documents": The Financing Documents and the
Management Agreement.
"Transferee": The meaning specified in Section 2.1(b) of the
Common Agreement.
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"Transfer Agent": The Person or Persons, which may be the
Issuer, authorized by the Issuer to exchange or register the transfer of Notes.
"Trust Indenture Act": The Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as otherwise
provided in Section 8.5 of the Indenture; provided, however, that in the event
the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Trust Officer": When used with respect to the Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Trustee) authorized to act for and on behalf of the Trustee, including any vice
president, assistant vice president or other officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred at the Corporate Trust Office because of such person's knowledge of
and familiarity with the particular subject.
"Trustee": Chase Texas, solely in its capacity as trustee
under the Indenture and the other Financing Documents.
"Trustee Document": Any Financing Document to which the
Trustee is a party.
"Trustee's Fee": The accrued and unpaid fees and expenses of
the Trustee and any custodian used by the Trustee to hold Project Loans and any
other amount due and owing to the Trustee by the Issuer hereunder or under the
Trustee's Fee Letter, in each case, to the extent the Trustee is entitled to
payment thereof pursuant to Section 6.8(a) of the Indenture.
"Trustee's Fee Letter": The fee letter agreement dated
[_______], 1998 between the Issuer and the Trustee.
"UCC": The Uniform Commercial Code as in effect in the State
of New York.
"Uncertificated Security": A Security that is not represented
by a certificate.
"Uncommitted TIP Account": The account designated the
Uncommitted TIP Account and established pursuant to Section 3.3(a) of the
Security Agreement which account shall initially be account number
[______________] and shall include any successor or replacement accounts
thereof.
"Uncommitted TIP Account Balance": The principal balance of
investments credited to the Uncommitted TIP Account.
"Uncommitted TIP Investment": The meaning specified under the
definition of "Uncommitted TIP Investment Policies" in this Appendix A.
"Uncommitted TIP Investment Policies": Amounts credited to or
re-invested in the Uncommitted TIP Account shall be invested in a portfolio of
(a) U.S. Government Securities, (b) TIP Eligible Investments and (c) Dollar-
denominated senior term loans, revolving credits or
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other senior liabilities of United States borrowers or corporate issuers
located in countries whose long-term sovereign debt obligations are rated at
least "Aa2" by Moody's or "AA" by S&P, in each case, with direct or implied
ratings of at least "Baa3" by Moody's and "BBB-" by S&P. Each of the
investments described in the foregoing clauses (a) through (c) (each, an
"Uncommitted TIP Investment") shall satisfy the following criteria:
(i) all Uncommitted TIP Investments shall mature no later
than, or prior to, one (1) year from the date that they were acquired,
provided that in no event shall any Uncommitted TIP Investment mature
after the Scheduled Investment Termination Date;
(ii) with respect to amounts re-invested in Uncommitted
TIP Investments, such investments shall have the same or higher rating
as the maturing Uncommitted TIP Investments;
(iii) the Uncommitted TIP Account Balance represented by
Uncommitted TIP Investments referred to in clause (a) above shall be
zero after the 12-month period from the Closing Date; and
(iv) Uncommitted TIP Investments referred to in clause (a)
above shall have a TIP Diversity Score of at least 20 and an Industry
Concentration Factor no greater than 10%, while complying with the
restrictions in Section 2.5(a)(i)(A) of the Security Agreement with
respect to the Sale of Collateral;
provided that, Uncommitted TIP Investments shall not include any
interest-only security, any security purchased at a price in excess of
100% of the par value thereof, unless such security is non-callable to
maturity (unless callable with a make-whole premium), or any security
whose repayment is subject to substantial non-credit related risk as
determined in the sole judgment of the Program Manager.
"Underlying Instruments": The credit agreement, loan
agreement or other agreement pursuant to which a Project Loan, Intermediate
Funding Loan or Permitted Investment has been issued or created or may in the
future be made, issued or extended and each other agreement that governs the
terms of or secures the obligations represented by such Project Loan,
Intermediate Funding Loan or Permitted Investment or of which the holders of
such Project Loan, Intermediate Funding Loan or Permitted Investment are the
beneficiaries.
"Underwriters": Chase Securities Inc. and Lehman Brothers, in
their capacities as Underwriters under the Underwriting Agreement.
"Underwriting Agreement": The agreement dated as of
_________, 1998 between the Issuers and the Underwriters, relating to the offer
and sale of the Class A Notes and the Class B Notes comprising the Initial
Notes.
"United States" or "U.S.": The United States of America,
including the states thereof and the District of Columbia.
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"Unscheduled Principal Payments": With respect to the Project
Loans, principal repayments received as a result of optional redemptions or
prepayments.
"Unused Enron Commitments": The sum of the (i) amount of
unfunded Enron Class II Purchase Commitment, (ii) the aggregate unfunded Class
C Note Purchase Commitment and (iii) for the purpose of the definition of
"Moody's Credit Support Test" and the "S&P Credit Support Test" in this
Appendix A, the aggregate unfunded Credit Support Test Commitments.
"U.S. Government Obligations": The direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States is pledged and which
are not callable at the issuer's option.
"U.S. Government Securities": Any security issued or
guaranteed as to principal or interest by the United States, or by a person
controlled or supervised by and acting as an instrumentality of the Government
of the United States pursuant to authority granted by the Congress of the
United States; or any certificate of deposit for any of the foregoing.
"Valuation Report": The meaning specified in Section 6.1(a)
of the Common Agreement.
"Weighted Average Moody's Rating": On any date of
determination made in respect of Project Loans or Temporary Investments, the
rating associated with the Moody's Rating Factor closest to, but not less than,
the number obtained by (i) summing the products obtained by multiplying the
Project Loan Balance of each Project Loan or the Principal Balance of each
Temporary Investment, as applicable, by its Moody's Rating Factor, (ii)
dividing such sum by the Aggregate Project Loan Balance or TIP Account Balance,
as applicable, and (iii) rounding the result up to the nearest whole number.
The "Moody's Rating Factor" relating to any Project Loan or a Temporary
Investment is the number assigned in the table below opposite the Rating of
such Project Loan or Temporary Investment:
Moody's Moody's
Moody's Rating Moody's Rating
Rating Factor Rating Factor
------ ------ ------ ------
Aaa 1 Ba1 940
Aa1 10 Ba2 1,350
Aa2 20 Ba3 1,780
Aa3 40 B1 2,220
A1 70 B2 2,720
A2 120 B3 3,490
A3 180 Caa1 4,770
Baa1 260 Caa2 6,500
Baa2 360 Caa3 8,070
Baa3 610 Ca 10,000
-54-
<PAGE> 102
ANNEX A
TABLE 1: TIP Table
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
TIP WEIGHTED AVERAGE MOODY'S RATINGS OF UNCOMMITTED TIP INVESTMENTS
DIVERSITY
SCORE
BA2 BA1 BAA3 BAA2 BAA1 A3
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7
10
15
20
25
30
35
40
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-1-
TABLE 2: Project Loan Table
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSITY WEIGHTED AVERAGE MOODY'S RATINGS OF PROJECT LOANS
SCORE
B3 B2 B1 BA3 BA2 BA1 BAA3 BAA2
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2
3
4
5
6
7
8
9
10
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE> 103
TABLE 3: Moody's Assumed Net Interest Margin Table
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSITY WEIGHTED AVERAGE MOODY'S RATINGS OF PROJECT LOANS
SCORE
B3 B2 B1 BA3 BA2 BA1 BAA3 BAA2
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2
3
4
5
6
7
8
9
10
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE 4: Base Net Interest Margin Table
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MOODY'S BASE NET INTEREST
RATINGS OF PROJECT LOANS MARGIN
- --------------------------------------------------------------------------------
<S> <C>
B3 %
B2 %
B1 %
Ba3 %
Ba2
Ba1
Baa3
Baa2
- --------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 104
TABLE 5: Industry Classification Table
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
1. Aerospace and defense 21. Food/drug retailers
Aircraft manufacturer/components 22. Food products
Arms and Ammunition 23. Food service
2. Air transport Food service/restaurants
3. Automotive Vending
Manufacturers 24. Forest products
Parts and equipment Building materials
Tire and rubber Paper products and containers
4. Beverage and tobacco 25. Health care
5. Broadcast radio and television Medical equipment/supply
6. Brokerage/securities dealers/investment Hospital management
houses 26. Home furnishings
7. Building and development Appliances
Builders Furniture, fixtures
Land development/real estate Housewares
Mobile homes 27. Hotels/motels/inns and casinos
REITs 28. Industrial equipment
8. Business equipment and services Machinery
Graphic arts Manufacturing/industrial
Office equipment/computers Specialty instruments
Data processing service bureaus 29. Insurance
Computer software 30. Leisure
9. Cable television Leisure goods
10. Chemical/plastics Leisure activities/motion pictures
Coatings/paints/varnishes 31. Nonferrous metals/minerals
11. Clothing/textiles Aluminum producers
12. Conglomerates Other metal/mineral producers
13. Containers and glass products Mining (including coal)
14. Cosmetics/toiletries 32. Oil and gas
15. Drugs Producers/refiners
16. Ecological services and equipment Gas pipelines
Waste disposal services and equipment 33. Publishing
17. Electronics/electric 34. Rail industries
Equipment Railroads
Component Rail equipment
18. Equipment leasing 35. Retailers (other than food/drug)
Auto leasing/rentals 36. Steel
Equipment leasing 37. Surface transport
Data processing equipment Shipping/shipbuilding
Service/leasing Trucking
19. Farming/agriculture 38. Telecommunications/cellular communications
Agricultural products and equipment 39. Utilities
Fertilizers Electric
20. Financial intermediaries Local gas
Banking Water
Finance companies
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 105
TABLE 6: Diversity Score Table
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Aggregate
Industry Industry Industry Industry Industry Industry Industry Industry
Equivalent Diversity Equivalent Diversity Equivalent Diversity Equivalent Diversity
Unit Score Score Unit Score Score Unit Score Score Unit Score Score
- ------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0000 0.0000 5.0500 2.7000 10.1500 4.0200 15.2500 4.5300
0.0500 0.1000 5.1500 2.7333 10.2500 4.0300 15.3500 4.5400
0.1500 0.2000 5.2500 2.7667 10.3500 4.0400 15.4500 4.5500
0.2500 0.3000 5.3500 2.8000 10.4500 4.0500 15.5500 4.5600
0.3500 0.4000 5.4500 2.8333 10.5500 4.0600 15.6500 4.5700
0.4500 0.5000 5.5500 2.8667 10.6500 4.0700 15.7500 4.5800
0.5500 0.6000 5.6500 2.9000 10.7500 4.0800 15.8500 4.5900
0.6500 0.7000 5.7500 2.9333 10.8500 4.0900 15.9500 4.6000
0.7500 0.8000 5.8500 2.9667 10.9500 4.1000 16.0500 4.6100
0.8500 0.9000 5.9500 3.0000 11.0500 4.1100 16.1500 4.6200
0.9500 1.0000 6.0500 3.0250 11.1500 4.1200 16.2500 4.6300
1.0500 1.0500 6.1500 3.0500 11.2500 4.1300 16.3500 4.6400
1.1500 1.1000 6.2500 3.0750 11.3500 4.1400 16.4500 4.6500
1.2500 1.1500 6.3500 3.1000 11.4500 4.1500 16.5500 4.6600
1.3500 1.2000 6.4500 3.1250 11.5500 4.1600 16.6500 4.6700
1.4500 1.2500 6.5500 3.1500 11.6500 4.1700 16.7500 4.6800
1.5500 1.3000 6.6500 3.1750 11.7500 4.1800 16.8500 4.6900
1.6500 1.3500 6.7500 3.2000 11.8500 4.1900 16.9500 4.7000
1.7500 1.4000 6.8500 3.2250 11.9500 4.2000 17.0500 4.7100
1.8500 1.4500 6.9500 3.2500 12.0500 4.2100 17.1500 4.7200
1.9500 1.5000 7.0500 3.2750 12.1500 4.2200 17.2500 4.7300
2.0500 1.5500 7.1500 3.3000 12.2500 4.2300 17.3500 4.7400
2.1500 1.6000 7.2500 3.3250 12.3500 4.2400 17.4500 4.7500
2.2500 1.6500 7.3500 3.3500 12.4500 4.2500 17.5500 4.7600
2.3500 1.7000 7.4500 3.3750 12.5500 4.2600 17.6500 4.7700
</TABLE>
-4-
<PAGE> 106
DIVERSITY SCORE TABLE (CONT'D)
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Aggregate
Industry Industry Industry Industry Industry Industry Industry Industry
Equivalent Diversity Equivalent Diversity Equivalent Diversity Equivalent Diversity
Unit Score Score Unit Score Score Unit Score Score Unit Score Score
- ------------ ----------- ------------ ----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
2.4500 1.7500 7.5500 3.4000 12.6500 4.2700 17.7500 4.7800
2.5500 1.8000 7.6500 3.4250 12.7500 4.2800 17.8500 4.7900
2.6500 1.8500 7.7500 3.4500 12.8500 4.2900 17.9500 4.8000
2.7500 1.9000 7.8500 3.4750 12.9500 4.3000 18.0500 4.8100
2.8500 1.9500 7.9500 3.5000 13.0500 4.3100 18.1500 4.8200
2.9500 2.0000 8.0500 3.5250 13.1500 4.3200 18.2500 4.8300
3.0500 2.0333 8.1500 3.5500 13.2500 4.3300 18.3500 4.8400
3.1500 2.0667 8.2500 3.5750 13.3500 4.3400 18.4500 4.8500
3.2500 2.1000 8.3500 3.6000 13.4500 4.3500 18.5500 4.8600
3.3500 2.1333 8.4500 3.6250 13.5500 4.3600 18.6500 4.8700
3.4500 2.1667 8.5500 3.6500 13.6500 4.3700 18.7500 4.8800
3.5500 2.2000 8.6500 3.6750 13.7500 4.3800 18.8500 4.8900
3.6500 2.2333 8.7500 3.7000 13.8500 4.3900 18.9500 4.9000
3.7500 2.2667 8.8500 3.7250 13.9500 4.4000 19.0500 4.9100
3.8500 2.3000 8.9500 3.7500 14.0500 4.4100 19.1500 4.9200
3.9500 2.3333 9.0500 3.7750 14.1500 4.4200 19.2500 4.9300
4.0500 2.3667 9.1500 3.8000 14.2500 4.4300 19.3500 4.9400
4.1500 2.4000 9.2500 3.8250 14.3500 4.4000 19.4500 4.9500
4.2500 2.4333 9.3500 3.8500 14.4500 4.4500 19.5500 4.9600
4.3500 2.4667 9.4500 3.8750 14.5500 4.4600 19.6500 4.9700
4.4500 2.5000 9.5500 3.9000 14.6500 4.4700 19.7500 4.9800
4.5500 2.5333 9.6500 3.9250 14.7500 4.4800 19.8500 4.9900
4.6500 2.5667 9.7500 3.9500 14.8500 4.4900 19.9500 5.0000
4.7500 2.6000 9.8500 3.9750 14.9500 4.5000
4.8500 2.6333 9.9500 4.0000 15.0500 4.5100
4.9500 2.6667 10.0500 4.0100 15.1500 4.5200
</TABLE>
-5-
<PAGE> 1
EXHIBIT 4.5
Draft
8/7/98
================================================================================
ENRON INTERNATIONAL CPO, L.P.
as Issuer
ENRON INTERNATIONAL CPO, INC.
as Co-Issuer
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
as Collateral Agent
and
CITIBANK, N.A.
as Account Bank
SECURITY AGREEMENT
Dated as of __________, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS.................................................................2
Section 1.1. Definitions.........................................................2
Section 1.2. Rules of Interpretation.............................................2
Section 1.3. Inconsistency with Financing Documents..............................2
ARTICLE 2 THE COLLATERAL..............................................................2
Section 2.1. Security Interests..................................................2
Section 2.2. Transfer of Collateral..............................................5
Section 2.3. Covenants...........................................................6
Section 2.4. Attorney-In-Fact....................................................7
Section 2.5. Sale of Collateral..................................................7
Section 2.6. Release of Security Interest........................................9
Section 2.7. Termination of Security Interests...................................9
ARTICLE 3 COLLATERAL ACCOUNTS........................................................10
Section 3.1. Collection of Funds; the Account Bank..............................10
Section 3.2. Collection Account.................................................12
Section 3.3. TIP Accounts.......................................................13
Section 3.4. Reserve Account....................................................14
Section 3.5. Excess Spread Account..............................................14
Section 3.6. Expense Reserve Account............................................15
Section 3.7. Operating Account..................................................15
Section 3.8. Distribution Obligation Escrow Account.............................16
Section 3.9. Investment of Amounts in Collateral Accounts.......................16
ARTICLE 4 APPLICATION OF FUNDS.......................................................17
Section 4.1. Priority of Payments...............................................17
Section 4.2. Liquidity Facility Drawdowns.......................................21
Section 4.3. Priority of Payments Following an Acceleration.....................22
Section 4.4. Drawdowns under certain Letters of Credit arranged by Enron........24
ARTICLE 5 REMEDIES IN RESPECT OF COLLATERAL..........................................24
Section 5.1. Remedies...........................................................24
Section 5.2. Preservation of Collateral.........................................27
Section 5.3. Application of Money Collected.....................................27
Section 5.4. Restoration of Rights and Remedies.................................28
Section 5.5. Rights and Remedies Cumulative.....................................28
Section 5.6. Delay or Omission Not Waiver.......................................29
Section 5.7. Control by Required Lenders........................................29
Section 5.8. Sale of Collateral.................................................29
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.9. Waiver of Past Defaults.............................................30
ARTICLE 6 ASSIGNED AGREEMENTS........................................................30
Section 6.1. Agreements of the Issuer Regarding the Assigned Agreements.........30
Section 6.2. Additional Provisions Regarding the Assigned Agreements............32
ARTICLE 7 MISCELLANEOUS..............................................................33
Section 7.1. Notices............................................................33
Section 7.2. Execution in Counterparts..........................................35
Section 7.3. Effect of Headings.................................................35
Section 7.4. Assignments........................................................35
Section 7.5. Waiver of Jury Trial...............................................35
Section 7.6. Subject to Intercreditor Agreement.................................35
Section 7.7. Amendments.........................................................35
Section 7.8. Governing Law......................................................36
Section 7.9. Reinstatement......................................................36
Section 7.10 Submission to Jurisdiction.........................................36
</TABLE>
ii
<PAGE> 4
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is made as of
__________, 1998 by and among ENRON INTERNATIONAL CPO, L.P., a limited
partnership duly organized and validly existing under the laws of the State of
Delaware (the "Issuer"), ENRON INTERNATIONAL CPO, INC., a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Co-Issuer" and together with the Issuer, the "Issuers"), CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as collateral agent for the Secured Parties (in such
capacity, the "Collateral Agent") and CITIBANK, N.A. ( the "Account Bank").
W I T N E S S E T H:
WHEREAS, the Issuers may issue, from time to time, certain Class
A Senior Notes due 2018 (the "Class A Notes"), Class B Senior Subordinated
Notes due 2018 (the "Class B Notes") and Class C Subordinated Notes due 2018
(the "Class C Notes" and together with the Class A Notes and the Class B Notes,
the "Notes"), in each case pursuant to the Indenture;
WHEREAS, the Issuer is, simultaneously with the execution
hereof, entering into the Liquidity Facility Loan Agreement;
WHEREAS, the Issuer may, subsequent to the date hereof, enter
into one or more Backup Facilities with the Backup Lenders;
WHEREAS, the Representatives, the Collateral Agent and the
Issuers are, simultaneously with the execution hereof, entering into the Common
Agreement which sets forth, among other things, (i) common covenants of the
Issuer and/or the Co-Issuer in favor of the Secured Parties and (ii) common
Events of Default;
WHEREAS, the Issuers, the Representatives and the Collateral
Agent are, simultaneously with the execution hereof, entering into the
Intercreditor Agreement which sets forth, among other things, certain
intercreditor provisions, including the method of voting and decision making
for the Secured Parties, the arrangements applicable to joint consultations and
actions in respect of approval rights and waivers, and the limitations on
rights of enforcement upon default;
WHEREAS, the Issuer will from time to time enter into certain
Hedging Agreements with the Hedge Counterparties named therein pursuant to
which the Issuer shall be required to make certain payments thereunder;
WHEREAS, in order to provide security for the Secured
Obligations, the Issuers have agreed to Grant to the Collateral Agent, on
behalf of and for the benefit of the Secured Parties, a security interest in
the Collateral in the manner set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and of the
agreements herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Issuers and the
Collateral Agent hereby agree as follows:
<PAGE> 5
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, capitalized terms used in this Agreement, its schedules and its
exhibits have the meanings given in Appendix A to the Common Agreement.
Section 1.2. Rules of Interpretation. Except as otherwise
expressly provided herein, the rules of interpretation set forth in Appendix A
to the Common Agreement shall apply to this Agreement.
Section 1.3. Inconsistency with Financing Documents.
Notwithstanding anything to the contrary expressed or implied in any other
Financing Document, all rights, powers and remedies available to the Secured
Parties shall be subject to the Intercreditor Agreement. In the event of any
conflict or inconsistency between the terms and provisions of the Intercreditor
Agreement and any other Financing Document, the terms of the Intercreditor
Agreement shall govern and control.
ARTICLE 2
THE COLLATERAL
Section 2.1. Security Interests.
(a) Grant to the Collateral Agent, on behalf of and for the
benefit of the Secured Parties. In order to secure the full and punctual
payment of, and the performance by the Issuers of, all of the Secured
Obligations, the Issuers hereby Grant to the Collateral Agent, on behalf of and
for the benefit of the Secured Parties (to the extent of their respective
interests hereunder and under the other Financing Documents, including under
the Priority of Payments), all of their respective right, title and interest
in, under and to the following property (herein, collectively the
"Collateral"), in each ---------- case, wherever located, whether now owned or
existing, or hereafter acquired or arising (and whether held directly by the
Issuer and/or the Co-Issuer or through a Securities Intermediary):
(i) all Project Loans, all Intermediate Funding Loans and any
other loans made by the Issuer and all instruments, documents and
records evidencing or relating to any such Project Loan, Intermediate
Funding Loan or other loan, including any security interest granted in
favor of the Issuer in connection with such Project Loans,
Intermediate Funding Loans and other loans;
(ii) the Committed TIP Account and the Uncommitted TIP Account,
all Temporary Investments credited to the TIP Accounts, all income
from such Temporary
2
<PAGE> 6
Investments and all money, securities and other financial assets now
or hereafter credited to such Accounts;
(iii) the Collection Account, the Excess Spread Account, the
Reserve Account, the Operating Account, the Expense Reserve Account
and the Distribution Obligation Escrow Account and Eligible
Investments credited to said accounts and all income from the
investment of funds therein and all money, securities and other
financial assets now or hereafter credited to such Accounts;
(iv) the Liquidity Facility Loan Agreement and all instruments,
documents and records evidencing or relating to the Liquidity Facility
Loan Agreement;
(v) the Backup Facility Loan Agreement and all instruments,
documents and records evidencing or relating to the Backup Facility
Loan Agreement;
(vi) the Hedging Agreements and all payments thereunder or with
respect thereto;
(vii) the currency hedging agreements pursuant to any Currency
Hedging Arrangements and all payments thereunder or with respect
thereto;
(viii) the TIP Investment Management Agreement(s) and all
payments thereunder or with respect thereto;
(ix) the Management Agreement and each Replacement Management
Agreement;
(x) the Enron Support Documents;
(xi) the Repayment Agreements;
(xii) the Class I Stage Funding Commitment Letters;
(xiii) the Assumption Agreements;
(xiv) all Additional Transaction Documents other than any
confidentiality agreements with Project Borrowers or Project Sponsors;
(xv) all Underlying Instruments;
(xvi) all General Intangibles;
(xvii) all Cash delivered to the Collateral Agent (directly or
through a Securities Intermediary);
(xviii) all accounts, chattel paper, documents, deposit accounts,
equipment, fixtures, goods, instruments, inventory, investment
property, money and securities accounts (as each such term is defined
in Article 9 of the New York UCC) and all other
3
<PAGE> 7
property of the Issuer or Co-Issuer whether or not subject to the
Uniform Commercial Code other than the shares owned by the Issuer in
the Co-Issuer;
(xix) all proceeds, accessions, profits, income, benefits,
substitutions and replacements, whether voluntary or involuntary, of
and to any of the property of the Issuer described in the preceding
clauses; and
(xx) all of the Issuers' shares or certificates evidencing
ownership interests in each Intermediate Funding Entity.
The assignment and security interest of the Collateral Agent
under this Agreement extends to all Collateral of the kind described in the
preceding sentence which the Issuer may acquire at any time during the
continuation of this Agreement.
Each of the items in clauses (iv) through (xv) shall be referred
to as an "Assigned Agreement." Notwithstanding anything herein to the contrary,
the Collateral Agent on behalf of the Secured Parties hereby grants the Issuer a
license to exercise all of the Issuer's rights pursuant to the Assigned
Agreements without notice to or the consent of the Collateral Agent or any
Secured Party, which license may be revoked by the Collateral Agent upon the
occurrence of an Event of Default hereunder until such time, if any, as such
Event of Default is cured or waived.
(b) Secured Obligations. This Agreement secures the payment of
all Secured Obligations of the Issuers, now existing or hereafter arising.
(c) Events of Default. The occurrence of an Event of Default
(under and as defined in the Common Agreement), whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any governmental instrumentality, shall
constitute an Event of Default hereunder.
(d) No Transfer of Duties. The Grant herein is intended as
security only and shall not (i) transfer or in any way affect or modify, or
relieve the Issuer or the Co-Issuer from, any obligation to perform or satisfy,
any term, covenant, condition or agreement to be performed or satisfied by the
Issuer or the Co-Issuer under or in connection with the Collateral, this
Agreement or any other Financing Document to which the Issuer or the Co-Issuer
is a party or (ii) impose any obligation on the Collateral Agent or any Secured
Party to perform or observe any such term, covenant, condition or agreement or
impose any liability on the Collateral Agent or any other Secured Party for any
act or omission on the part of the Issuer or the Co-Issuer relative thereto or
for any breach of any representation or warranty on the part of the Issuer or
the Co-Issuer contained therein or made in connection therewith.
4
<PAGE> 8
Section 2.2. Transfer of Collateral.
(a) Issuer Order. Whenever the Issuer acquires or makes a Project
Loan or an Intermediate Funding Loan, the Program Manager shall, on behalf of
the Issuer, deliver to the Collateral Agent an Issuer Order to the effect that:
(i) the Issuer is the owner of such Project Loan or Intermediate
Funding Loan free and clear of any Liens except for Permitted Liens;
(ii) the Issuer has acquired its ownership in such Project Loan
or Intermediate Funding Loan in good faith without notice of any
adverse claim, except as described in paragraph (i) above;
(iii) the Issuer has not assigned, pledged or otherwise
encumbered any interest in such Project Loan or Intermediate Funding
Loan (or, if any such interest has been assigned, pledged or otherwise
encumbered, it has been released) other than pursuant to the Security
Documents;
(iv) the Issuer has full right to Grant a security interest in
and assign and pledge all of its right, title and interest in such
Project Loan or Intermediate Funding Loan to the Collateral Agent;
(v) such Issuer Order contains a true and correct description of
such Project Loan or Intermediate Funding Loan;
(vi) such Project Loan or Intermediate Funding Loan meets the
requirements of the Financing Documents;
(vii) the Collateral Agent has a first priority perfected
security interest in such Project Loan or Intermediate Funding Loan
(assuming that any Securities Intermediary or other entity not within
the control of the Issuer involved in such Grant takes the actions
required of it for perfection of that interest).
(b) All Collateral comprised of Certificated Securities and
instruments purchased or acquired with funds credited to a Collateral Account
shall be credited to such Account.
(c) The Issuer shall cause all security interests in the
Collateral Granted to the Collateral Agent to be perfected by one of the
following means (and shall take any and all other actions necessary to create in
favor of the Collateral Agent for the benefit of the Secured Parties a valid,
perfected, first-priority security interest (subject to Permitted Liens) in such
Collateral Granted to the Collateral Agent under laws and regulations (including
without limitation Articles 8 and 9 of the UCC) in effect at the time of such
Grant):
(i) in the case of an Instrument or a Certificated Security
other than an instrument or security covered by clauses (iv) or (v)
below, by delivering such Instrument or
5
<PAGE> 9
Security Certificate to the Account Bank on behalf of the Collateral
Agent Indorsed to the Collateral Agent or Indorsed in blank;
(ii) in the case of an Uncertificated Security (other than an
Uncertificated Security covered by clause (iii), (iv) or (v) below),
by causing the Account Bank on behalf of the Collateral Agent to
become the registered owner of such Uncertificated Security;
(iii) in the case of an Uncertificated Security registered in the
name of the Issuer, by (A) causing the issuer of such Uncertificated
Security to agree that it will comply with Instructions originated by
the Collateral Agent without further consent by the Issuer and (B)
causing such agreement to remain in effect;
(iv) in the case of a Securities Entitlement held through a
Securities Intermediary and as to which the Entitlement Holder is the
Issuer, by (A) causing such Securities Intermediary to agree that it
will comply with Entitlement Orders originated by the Collateral
Agent without further consent of the Issuer, (B) causing such
agreement to remain in effect and (C) not consenting to the Issuer
agreeing to comply with Entitlement Orders of any person other than
the Collateral Agent (except to the limited extent set forth in
Section 3.1(e) hereof);
(v) in the case of any Securities Entitlement (other than a
Securities Entitlement covered by clause (iv) above), by causing the
Collateral Agent to become the Entitlement Holder of such Securities
Entitlement;
(vi) in the case of General Intangibles (including any
participation interest in which neither the participation interest
nor the underlying debt are represented by Instruments) by (A)
notifying the obligor (and, in the case of participation interests,
both the institution which has sold the participation interest and
the obligor of the debt underlying the participation interest)
thereunder of the transfer and (B) causing a financing statement to
be filed in all appropriate jurisdictions naming the Issuer as debtor
and the Collateral Agent as secured party and describing such
property; and
(vii) in the case of participation interests in which the
underlying debt is represented by an Instrument or Instruments by (A)
causing the delivery of each such Instrument to the Account Bank on
behalf of the Collateral Agent or (B) notifying the institution which
sold the participation interest that it holds such Instruments for
the account of the Collateral Agent.
Section 2.3. Covenants. The Issuers jointly and severally
covenant as follows:
(a) Any action or proceeding to enforce this Agreement may be
taken by the Collateral Agent either in the Issuer's name, the Co-Issuer's
name, in the Collateral Agent's name or in the name of Collateral Agent's
designee, as the Collateral Agent may deem necessary.
6
<PAGE> 10
(b) The Issuers will, so long as any Secured Obligations shall
be outstanding, warrant and defend their respective title to the Collateral and
the interest of the Collateral Agent in the Collateral against any claim or
demand of any Persons which may, in the reasonable judgment of the Collateral
Agent, have a material adverse effect on the Issuers' respective title to or
the Collateral Agent's right or interest in such Collateral.
(c) The Issuers will do nothing to impair the rights of the
Collateral Agent or the other Secured Parties in the Collateral or sell or
cause any portion of the Collateral to be released from the lien of this
Agreement except as set forth in Sections 2.5, 2.6 and 2.7; provided, however,
that nothing herein shall prevent the Issuer or the Co-Issuer, prior to the
exercise by the Collateral Agent of any such right, from undertaking its
operations in the ordinary course of business in accordance with the Financing
Documents.
Section 2.4. Attorney-In-Fact. Without limiting any other rights
or powers granted to the Collateral Agent hereunder or under any of the
Financing Documents, each of the Issuer and the Co-Issuer does hereby
constitute and appoint the Collateral Agent, or any other Person empowered by
the Collateral Agent, acting for and on behalf of itself and the Secured
Parties and each successor or assign of the Collateral Agent and the Secured
Parties, its true and lawful attorney-in-fact, with full power (in its name or
otherwise) to enforce all rights of the Issuers with respect to the Collateral:
(i) to ask, require, demand, receive and give acquittance for
any and all moneys and claims for moneys due and to become due under
or arising out of the Collateral;
(ii) to exercise rights and elect remedies thereunder, to
endorse any checks or other instruments or orders in connection
therewith; and
(iii) to file any claims or take any action or institute any
proceedings in connection therewith which the Collateral Agent may
deem to be necessary or advisable;
provided, however, that the Collateral Agent shall not exercise any such rights
except upon the occurrence and during the continuation of an Event of Default.
The Collateral Agent shall endeavor to provide notice to the Issuers promptly
after taking any such action, provided that the failure of the Collateral Agent
to provide such notice shall not affect (i) the liens, rights or remedies of the
Collateral Agent and Secured Parties hereunder, nor (ii) the effectiveness of
any such action. This power of attorney is a power coupled with an interest and
shall be irrevocable.
Section 2.5. Sale of Collateral.
(a) The Issuers will not sell or otherwise dispose of any
Collateral (such sale or disposition, a "Sale"); provided that, so long as no
Event of Default has occurred and is continuing and subject to the satisfaction
of the conditions specified in this Section 2.5, the Issuer may sell and direct
the Collateral Agent in writing to release pursuant to Section 2.6, the
security interest of the Collateral Agent in, the following:
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(i) Temporary Investments:
(A) The Issuer may, prior to the Investment Termination Date
(and shall, on or after the Investment Termination Date) effect
a Sale of a non-defaulted Uncommitted TIP Investment so long as
the Sale Proceeds to be obtained together with any breakage
costs which would be incurred would not, in the good faith
determination of the Issuer, increase the Quarterly Payment
Shortfall on the next succeeding Quarterly Payment Date. The
Issuer may (and in the case an event in clause (x) occurs after
the Investment Termination Date, shall) effect a Sale of any
non-defaulted Committed TIP Investment (x) upon a reduction,
withdrawal or cancellation in a Commitment to make Project Loans
the amount of which exceeds the amount then Allocated under the
Backup Facility, or (y) upon an unanticipated acceleration in
the drawdown schedule of a Project Loan, in each case so long as
the Funding Availability Test is satisfied after giving effect
to such Sale and the Sale Proceeds to be obtained together with
any breakage costs which would be incurred would not in the good
faith determination of the Program Manager increase the
Quarterly Payment Shortfall on the next succeeding Quarterly
Payment Date.
(B) The Issuer may effect a Sale of any defaulted Temporary
Investment if, in the good faith determination of the Issuer
(which may be based upon the advice of the TIP Advisor(s)), the
Issuer expects to realize greater value by such Sale than by
retaining such Temporary Investment.
(C) Notwithstanding any provision in clause (A) above, the
Issuers shall be entitled to defer a Sale of any Temporary
Investment to the extent necessary to avoid selling such
Temporary Investment prior to its stated maturity at a loss.
(ii) Eligible Investments: The Issuer may effect a Sale of any
defaulted Eligible Investment if, in the good faith determination of
the Issuer, the Issuer expects to realize greater value by such Sale
than by retaining such Eligible Investment.
(iii) Defaulted Project Loans: The Issuer may effect a Sale of a
Defaulted Project Loan if (A) such Sale is not made to an Enron
Affiliate, and (B) in the good faith determination of the Issuer, the
Issuer expects to realize greater value by such Sale than by
retaining such Defaulted Project Loan.
(iv) Non-Defaulted Project Loan following a Tax Event: The Issuer
shall be required to sell each Project Loan as soon as practicable
following a Tax Redemption Trigger Date for a minimum price equal to
an amount calculated by multiplying (I) the outstanding principal
balance of such Project Loan and (II) a percentage, the numerator of
which is the sum of the Outstanding Amount of the Notes, the amounts
drawn under the Liquidity Facility and the Backup Facility and
termination amounts, if any, to be payable under any Hedging
Agreement and the denominator of which is the Total Assets; provided,
however, the Issuer may effect a Sale of one or more Project Loans at
a price
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below that described in the immediately preceding clause if it
obtains the prior consent of the Collateral Agent for such Sale.
(v) Non-defaulted Project Loans following receipt of the
Disposition Amount: Upon receipt of the Disposition Amount in respect
of any Project Loan, the Issuer shall instruct the Collateral Agent
to release the Lien of this Agreement therein pursuant to Section 2.6
hereof and, in the case of an Equity Disposition, transfer the
related Project Loan to the Person designated in accordance with
Section 2.1(b)(ii) of the Common Agreement.
(b) Contemporaneously with the optional redemption of the Notes
and the other Secured Obligations, in whole but not in part, in accordance with
Section 10.2(a)(i) of the Common Agreement, the Issuer may sell, and direct the
Collateral Agent in writing to release, pursuant to Section 2.7, the security
interest of the Collateral Agent in all Collateral.
Section 2.6. Release of Security Interest.
(a) If no Event of Default has occurred and is continuing, the
Issuers may, by Issuer Order executed by an Authorized Officer of the Program
Manager delivered to the Collateral Agent at least two Business Days prior to
the financial closing of a Sale of a Project Loan, or on or prior to the
settlement date for a Sale of any other Collateral, as applicable, certifying
as to compliance with the terms of Section 2.5 applicable to such Sale, direct
the Collateral Agent to release such security from the Lien of this Agreement
in compliance with the terms of Section 2.5 applicable to such Sale against
deposit by the Account Bank in a Collateral Account of the Sale Proceeds
therefor.
(b) If, in respect of a Project Loan constituting a part of the
Collateral, there is a an Equity Disposition or a Refinancing and a mandatory
redemption of Notes is required pursuant to Section 10.3(a)(iii) of the Common
Agreement, then upon receipt by the Collateral Agent of an amount equal to the
Disposition Amount for such Project Loan, the Issuer shall, by Issuer Order
executed by an Authorized Officer of the Program Manager delivered to the
Collateral Agent, direct the Collateral Agent to release, and the Collateral
Agent shall so release, such Project Loan (and all Collateral relating thereto)
from the Lien of this Agreement contemporaneously with the receipt by the
Account Bank of such Disposition Amount.
(c) The Account Bank shall credit any Sale Proceeds to the
Collection Account; except that (i) any Sale Proceeds received in respect of a
Project Loan prior to the Investment Termination Date shall be credited to the
Uncommitted TIP Account and (ii) any Sale Proceeds received in respect of any
Temporary Investments prior to the Investment Termination Date, shall be
credited to the TIP Account in respect of which such Temporary Investment was
made.
Section 2.7. Termination of Security Interests. On the Final
Termination Date, this Agreement shall terminate and all rights to the
Collateral shall revert to the Issuers; provided, however, that each of the
Secured Parties and the Collateral Agent, if requested in writing by the
Issuers, shall execute and deliver such instruments of release in favor of the
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Issuers as the Issuers may reasonably request to effectuate such release, and
any such instruments so executed and delivered shall be fully binding on the
Secured Parties and the Collateral Agent.
ARTICLE 3
COLLATERAL ACCOUNTS
Section 3.1. Collection of Funds; the Account Bank.
(a) Except as otherwise expressly provided herein or in any
other Financing Document, the Collateral Agent may demand payment or delivery
of, and shall receive and collect, directly and without intervention or
assistance of any fiscal agent or other intermediary, any amounts or property
payable to or receivable by the Collateral Agent pursuant to the Financing
Documents, including all payments due on the Collateral, in accordance with the
terms and conditions of such Collateral. The Collateral Agent shall segregate
and hold all such funds and property received by it for the benefit of the
Secured Parties (to the extent of their respective interests hereunder,
including under the Priority of Payments or the Priority of Acceleration
Payments, as applicable) and shall apply it as provided in this Agreement.
(b) The Account Bank acknowledges, confirms and agrees that (i)
the Account Bank has established the Collateral Accounts as set forth in
Section 3.2, 3.3, 3.4, 3.5 and 3.7 hereof, (ii) each Collateral Account is a
"securities account" within the meaning of Section 8-501 of the UCC, (iii) the
Issuer is the Entitlement Holder of the Collateral Accounts, (iv) all Cash and
other property delivered to the Account Bank pursuant to this Agreement or the
other Security Documents will be promptly credited to a Collateral Account, (v)
all Financial Assets in registered form or payable to, or to order of a person,
and credited to any Collateral Account shall be registered in the name of,
payable to or to the order of, or specially Indorsed to, the Account Bank or in
blank, or credited to another Securities Account maintained in the name of the
Account Bank, and in no case will any Financial Assets credited to any
Collateral Account be registered in the name of, payable to or to the order of,
or specially Indorsed to, the Issuer except to the extent the foregoing have
been specially Indorsed by the Issuer to the Account Bank or in blank, (vi) the
Account Bank shall promptly comply with all instructions of the Collateral
Agent and, to the limited extent set forth in Section 3.1(e), the Issuer in
connection with the transfer or withdrawal of amounts in the Collateral
Accounts and (vii) the Account Bank shall not change the name or account number
of any Collateral Account without the prior written consent of the Collateral
Agent and at least 5 Business Days prior notice to the Issuer.
(c) Each of the Issuer, the Collateral Agent and the Account
Bank agrees that each item of property (whether Cash, a Security, an Instrument
or obligation, share, participation, interest or any other property whatsoever)
credited to any Collateral Account shall be treated as a Financial Asset under
Article 8 of the UCC.
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(d) Anything herein to the contrary notwithstanding, the Issuer
irrevocably agrees that the Account Bank may, and the Account Bank agrees that
it shall, comply with Entitlement Orders originated by the Collateral Agent and
relating to any of the Collateral Accounts without further consent by the
Issuer or any other Person. If there is any conflict between the Entitlement
Orders originated by the Issuer and Entitlement Orders originated by the
Collateral Agent, the latter shall control. Each Collateral Account shall be
governed by the laws of the State of New York. The Collateral Agent and the
Account Bank hereby represent that they have not, and hereby agree that they
will not, enter into any agreement or take any action which gives any Person
other than the Collateral Agent "control" (as defined in Section 8-106 of the
UCC) over any Collateral Account.
(e) Until the Final Termination Date, the Issuer shall not have
any rights to withdraw Cash or other property held in or credited to the
Collateral Accounts, except for the right to give instructions to the Account
Bank to make withdrawals of moneys held in the Collateral Accounts as permitted
by this Agreement and the right to direct the investment of moneys held in the
Collateral Accounts as permitted by Section 3.8.
(f) In the event that the Account Bank has or subsequently
obtains by agreement, operation of law or otherwise a security interest in any
of the Collateral Accounts or any Security Entitlement credited thereto, the
Account Bank hereby agrees that such security interest shall be subordinate to
the security interest of the Collateral Agent. The Financial Assets standing to
the credit of any of the Collateral Accounts will not be subject to deduction,
set-off, banker's lien, or any other right in favor of any Person other than
the Collateral Agent (except the face amount of any checks which have been
credited to any of the Collateral Accounts but are subsequently returned unpaid
because of uncollected or insufficient funds).
(g) There are no other agreements entered into between the
Account Bank, the Collateral Agent and the Issuer with respect to any of the
Collateral Accounts. In the event of any conflict between this Section 3.1 (or
any portion thereof), any other provision of this Agreement or any other
agreement now existing or hereafter entered into, the terms of this Section 3.1
shall prevail.
(h) Except for the claims and interest of the Collateral Agent
and the Issuer in any of the Collateral Accounts, the Account Bank does not
have actual knowledge (without any independent review or investigation) of any
claim to, or interest in, any of the Collateral Accounts or in any Financial
Asset credited thereto. If any Person asserts any lien, encumbrance or adverse
claim (including any writ, garnishment, judgment, warrant of attachment,
execution or similar process) against any of the Collateral Accounts or in any
Financial Asset credited thereto, the Account Bank will promptly notify the
Collateral Agent and the Issuer thereof.
(i) The Account Bank hereby makes the following representations,
warranties and covenants:
(i) The Collateral Accounts have been established as set forth
in this Section 3.1 and such Collateral Accounts will be maintained
in the manner set forth herein until termination of this Agreement.
The Account Bank shall not change the names or account
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numbers of any of the Collateral Accounts without the prior written
consent of the Collateral Agent and the Issuer.
(ii) No Financial Asset is or will be registered in the name of
the Issuer, payable to the Issuer's order, or specially Indorsed to
the Issuer, except to the extent such Financial Asset has been
Indorsed to the Account Bank or in blank.
(iii) This Agreement is the valid and legally binding obligation
of the Account Bank.
(iv) The Account Bank has not entered into, and until the
termination of this Agreement shall not enter into, any agreement
with any other Person relating to any of the Collateral Accounts
and/or any Financial Assets credited thereto pursuant to which it has
agreed to comply with Entitlement Orders of such Person. The Account
Bank has not entered into any other agreement with the Issuer, the
Collateral Agent or any other Person purporting to limit or condition
the obligation of the Account Bank to comply with Entitlement Orders
originated by the Collateral Agent as set forth in paragraph (b) of
this Section 3.1 hereof.
(j) The Issuer hereby agrees to indemnify the Account Bank and
to reimburse the Account Bank for its out-of-pocket expenses to the same extent
it has agreed to indemnify or reimburse the Collateral Agent as set forth in
Sections 1.21 and 1.22 of the Common Agreement.
(k) The rights and powers granted herein to the Collateral Agent
have been granted in order to perfect its security interest in each of the
Collateral Accounts, are powers coupled with an interest and will neither be
affected by the bankruptcy of the Issuer or the Collateral Agent nor the lapse
of time. The obligations of the Account Bank hereunder shall continue in effect
until the security interest of the Collateral Agent in each of the Collateral
Accounts has been terminated pursuant to the terms of this Agreement and the
Collateral Agent has notified the Account Bank of such termination in writing.
Section 3.2. Collection Account.
(a) The Issuer shall, prior to the Closing Date, cause to be
established with the Account Bank a single, segregated Securities Account which
shall be designated as the Collection Account, to which shall be credited from
time to time all Collateral Proceeds. All funds credited from time to time to
the Collection Account pursuant to this Agreement shall be applied for the
purposes herein provided.
(b) On each Quarterly Payment Date, amounts credited to the
Collection Account equal to the Collateral Proceeds at the close of business on
the related Determination Date (such amount to be set forth in the Valuation
Report prepared by the Program Manager on behalf of the Issuer pursuant to
Section 6.1 of the Common Agreement) shall be applied in accordance with the
Priority of Payments; except that, so long as any Collateral Proceeds otherwise
scheduled to have been received by such Determination Date are credited to the
Collection Account no later than the close of business on the Business Day
immediately preceding the related Quarterly
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Payment Date, such amounts shall be included as part of the Collateral Proceeds
available for disbursement on such Quarterly Payment Date notwithstanding that
such amounts were received after the applicable Determination Date, and applied
in accordance with the revised Valuation Report prepared by the Program Manager
and delivered to the Collateral Agent no later than such Business Day.
(c) If regularly scheduled payments or termination costs under
any Hedging Agreement referred to in clauses (v)(B) or (vi), respectively, of
the Priority of Payments are due on a date other than a Quarterly Payment Date,
the Issuer shall, so long as the Issuer in good faith determines that it would
meet its obligations under clauses (i) - (v) of the Priority of Payments on the
immediately succeeding Quarterly Payment Date, instruct the Account Bank to
withdraw from the Collection Account an amount equal to such payment and credit
such amounts in the Operating Account for payment to the appropriate Hedge
Counterparty.
Section 3.3. TIP Accounts. On or prior to the Closing Date, the
Issuer shall cause to be established with the Account Bank two segregated
Securities Accounts which shall be designated as the Uncommitted TIP Account
and the Committed TIP Account, into which the Issuer shall credit or cause to
be credited amounts described below in this Section 3.3. The TIP Accounts shall
be managed by the TIP Advisor(s).
(a) The Uncommitted TIP Account: On the Closing Date, all Net
Proceeds from the issuance of the Initial Notes, and the Initial Interests and,
during the Investment Period, the Net Proceeds from the issuance of the Class I
Interests funded after the Closing Date (other than the net proceeds from
funding Class I Interests in connection with a Quarterly Payment Shortfall or
upon Acceleration), all payments of principal (including prepayments) and loan
origination or upfront fees (excluding expense reimbursements) received on
Project Loans and all Hedging Proceeds, shall be credited to the Uncommitted
TIP Account; provided that, the Issuer shall have the option of crediting or
transferring to the Collection Account an amount equal to the origination or
upfront fees relating to the last Project Loan to be initially funded by the
Issuer. During the Investment Period, the Issuer may issue additional Class A
Notes, the Net Proceeds of which other than amounts used to reduce amounts
drawn under the Backup Facility or to redeem the Notes shall be credited to the
Uncommitted TIP Account. The Issuer shall invest amounts credited to or
re-invested in the Uncommitted TIP Account according to the Uncommitted TIP
Investment Policies.
(b) The Committed TIP Account: On the Closing Date, the balance
of the Committed TIP Account shall be zero. During the Investment Period, the
Issuer may on or prior to the Financial Closing Date of a Project Loan,
transfer amounts credited to the Uncommitted TIP Account to the Committed TIP
Account up to an amount Committed for such Project Loan. The Issuer may, on or
prior to the dates on which drawdowns are to occur under Project Loans, draw
amounts Allocated under the Backup Facility Loan Agreement(s) and/or any
Funding Availability Commitments and credit such amounts to the Committed TIP
Account. The Issuer shall use funds credited to the Committed TIP Account to
fund drawdowns under the Project Loans and, in certain circumstances, to redeem
Notes pursuant to Section 10.3 of the Common Agreement. The Issuer shall invest
amounts in the Committed TIP Account according to the Committed TIP Investment
Policies. During the Investment Period, the Issuer may transfer
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amounts credited to the Committed TIP Account to the Uncommitted TIP Account
provided that after giving effect to such transfer the Funding Availability
Test would be satisfied. On any Business Day immediately after the occurrence
of an event of default with respect to a Committed TIP Investment, the Issuer
shall be required to determine whether the Funding Availability Test is
satisfied as of such date, and to the extent the Funding Availability Test is
not satisfied as of such date, the Issuer shall (i)(x) in the case of an event
of default that has occurred at or prior to the Investment Termination Date,
transfer such amounts as is necessary to satisfy the Funding Availability Test
(such amount, the "Funding Availability Shortfall Amount") from the Uncommitted
TIP Account to the Committed TIP Account and (y) to the extent the Funding
Availability Test is still not satisfied, transfer such remaining Funding
Availability Shortfall Amount from the Collection Account to the Committed TIP
Account and (ii) in all other cases, retain in the Committed TIP Account, the
interest proceeds received in respect of any Committed TIP Investment up to an
amount equal to the Funding Availability Shortfall Amount.
Section 3.4. Reserve Account. The Issuer shall, prior to the
Closing Date, cause to be established with the Account Bank, a single,
segregated Securities Account which shall be designated as the Reserve Account,
to which shall be credited an amount equal to the Reserve Amount. In the event
there occurs a Quarterly Payment Shortfall in respect of a Quarterly Payment
Date (as indicated in the Valuation Report prepared by the Program Manager),
the Issuer shall direct the Account Bank to withdraw and apply amounts credited
to the Reserve Account as provided in Section 4.1(b). On each Quarterly Payment
Date, after giving effect to all withdrawals, if any, in respect of any
Quarterly Payment Shortfall, all amounts credited to the Reserve Account in
excess of the Reserve Amount shall be released from the Reserve Account and
credited to the Collection Account for application in accordance with clause
(xi) of the Priority of Payments.
Section 3.5. Excess Spread Account. The Issuer shall, prior to
the Closing Date, cause to be established with the Account Bank, a single,
segregated Securities Account which shall be designated as the Excess Spread
Account, to which shall be credited all Collateral Proceeds remaining on any
Quarterly Payment Date during the Investment Period after application as
provided in clauses (i) through (xi)(H) of the Priority of Payments. In the
event there occurs a Quarterly Payment Shortfall in respect of a Quarterly
Payment Date (as indicated in the Valuation Report prepared by the Program
Manager), the Issuer shall instruct the Account Bank to withdraw and apply
amounts credited to the Excess Spread Account as provided in Section 4.1(b). On
each Quarterly Payment Date after the Investment Termination Date and after
giving effect to the withdrawal, if any, in respect of any Quarterly Payment
Shortfall, all amounts in the Excess Spread Account in excess of the Retention
Amount (as indicated in the Valuation Report prepared by the Program Manager)
as of such Quarterly Payment Date will be released by the Account Bank from the
Excess Spread Account and shall be applied in accordance with clauses (xi)(J)
and (xi)(K) of the Priority of Payments. Notwithstanding the foregoing, amounts
that otherwise would be credited to the Excess Spread Account on any Quarterly
Payment Date shall be distributed by the Account Bank to each Person who
otherwise would have been entitled thereto but for such credit requirement if
such Person delivers to the Issuers (x) an agreement to repay (a "Repayment
Agreement") such amounts to the Issuers if and
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to the extent that amounts in the Excess Spread Account are required by the
Issuers to cover any Quarterly Payment Shortfall (it being understood and
agreed that payments to cover any Quarterly Payment Shortfall shall be made
ratably from amounts credited to the Excess Spread Account and payment
obligations under the Repayment Agreements) and (y) if such Person is not an
Acceptable Credit Provider, a guarantee, letter of credit or the credit support
for such Person's obligations under the Repayment Agreement is provided by an
Acceptable Credit Provider. Any amount which is subject to repayment pursuant
to a Repayment Agreement shall be deemed to be credited to the Excess Spread
Account for purposes of calculating the Excess Spread Account Balance.
Section 3.6. Expense Reserve Account. The Issuer shall, prior to
the Scheduled Investment Termination Date, cause to be established with the
Account Bank, a single, segregated Securities Account which shall be designated
as the Expense Reserve Account, to which shall be credited, in accordance with
clause (xi)(J) of the Priority of Payments, an amount equal to and for the
payment of, the Operating Expenses estimated to be paid during the next Due
Period, as set forth in the Valuation Report; provided, however, the funds
credited to the Expense Reserve Account shall not exceed $2 million at any
time. The Issuer may withdraw funds from the Expense Reserve Account on any
date to pay such Operating Expenses.
Section 3.7. Operating Account. The Issuer shall, prior to the
Closing Date, cause to be established with the Account Bank, a single,
segregated Securities Account which shall be designated as the Operating
Account, to which shall be credited the following amounts:
(a) any amounts withdrawn, so long as the Issuer determines that
in good faith it can meet its obligations under clauses (i) - (v) of the
Priority of Payments on the immediately succeeding Quarterly Payment Date, from
the Collection Account on a date other than a Quarterly Payment Date, in an
amount equal to, and for the payment of, regularly scheduled payments or the
termination costs payable under any Hedging Agreement referred to in clauses
(v)(B) and (vi), respectively, of the Priority of Payments;
(b) any amounts drawn under the Liquidity Facility in accordance
with Section 4.2(a) and 4.2(b) for application in respect of a Shortfall or for
payment of Operating Expenses;
(c) from the proceeds of the issuance of Notes, an amount equal
to and for the payment of, the Initial Issuance Expenses or Transaction
Expenses, as the case may be, relating to such issuance;
(d) any amounts received pursuant to the Enron Support
Agreement, other than amounts credited to the Committed TIP Account pursuant to
Section 3.3(b), for application in accordance with Section 4.1(b) or 4.3(b);
and
(e) any amounts received under Class I Stage Funding Commitment
Letters for application in accordance with Section 4.1(b) or 4.3(b).
The Issuer shall apply the amounts credited to the Operating
Account in the amounts and for the purposes specified above. Amounts that
remain credited to the Operating
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Account at the end of any Due Period, other than amounts to be applied during
the next Due Period for the purposes specified above in clauses (a) and (c),
shall be credited to the Collection Account.
Section 3.8. Distribution Obligation Escrow Account. The Issuer
shall, at any time upon receipt of notice from Enron pursuant to Section 5.5 of
the Enron Support Agreement, cause to be established with the Account Bank, a
single, segregated Securities Account which shall be designated as the
Distribution Obligation Escrow Account, to which shall be credited all amounts
received by the Issuer from Enron under such section. The Issuer shall instruct
the Account Bank to withdraw funds credited to such account on any Quarterly
Payment Date that Enron fails to make all or a portion of the payments Enron is
obligated to make under Sections 4(c) or 4.1(d) of the Enron Support Agreement,
up to an amount equal to such defaulted payment, and such amounts shall be
applied in respect of payments otherwise due under clauses fourth and fifth
under Sections 4.1(b)(iii) and 4.3(b), as applicable. Any income or other gain
realized from any Eligible Investments credited to the Distribution Obligation
Escrow Account shall be released to Enron on each Quarterly Payment Date.
Section 3.9. Investment of Amounts in Collateral Accounts.
(a) Subject to the provisions of Section 3.3(a) and Section
3.3(b), all amounts credited to the Collateral Accounts will be invested or
reinvested in Eligible Investments during the term of this Agreement. Any
income or other gain realized from any Eligible Investment shall be held by
Account Bank in the Collection Account as part of the Collateral subject to
disbursement and withdrawal as provided herein; provided, that, any income from
the investment or reinvestment of amounts credited to the Reserve --------
Account, the Excess Spread Account or the Distribution Obligation Escrow
Account shall be credited to such accounts. By Issuer Order (which may be in
the form of standing instructions), the Issuer shall at all times direct the
Account Bank to, and, upon receipt of such Issuer Order, the Account Bank
shall, invest all funds received into the Collateral Accounts during a Due
Period, and as so directed in Eligible Investments having Stated Maturities no
later than the next Quarterly Payment Date. The Account Bank, within one
Business Day after receipt of any distributions or proceeds in respect of any
Collateral which is not Cash, shall so notify the Issuer and the Issuer shall,
within five Business Days of receipt of such notice from the Account Bank, sell
such distributions or proceeds for Cash in an arm's length transaction and
credit the proceeds thereof to the Collection Account for investment pursuant
to this Section 3.8; provided that the Issuer need not sell such distributions
or proceeds during the Investment Period if it delivers an Officer's
certificate to the Account Bank certifying that such distributions or proceeds
constitute Eligible Investments.
(b) If the Issuer shall not have given any investment directions
pursuant to Section 3.8(a), the Account Bank shall invest and reinvest the
funds held in the Collateral Accounts, as fully as practicable, but only in one
or more Eligible Investments of the type described in clause (i) of the
definition thereof maturing no later than the Business Day immediately
preceding the next Quarterly Payment Date. All interest and other income from
such investments shall be credited to the Collection Account, and any proceeds
from the Sale or other disposition of any Eligible Investment at any time and,
any Temporary Investment sold after the Investment Period shall be credited to
the Collection Account; provided, that, any
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income or Sales Proceeds from the investments credited to the Reserve Account
or the Excess Spread Account shall be credited to such accounts. The Account
Bank shall not in any way be held liable by reason of any insufficiency of such
Collateral Accounts resulting from any loss relating to any such investment,
except with respect to investments in obligations of the Account Bank or any
Affiliate thereof.
ARTICLE 4
APPLICATION OF FUNDS
Section 4.1. Priority of Payments.
(a) Notwithstanding any other provision in this Agreement, but
subject to Section 4.3 hereof and Section 3.1 of the Intercreditor Agreement,
on each Quarterly Payment Date, the Issuer shall instruct the Account Bank to
make the following disbursements in the following order of priority from
amounts credited to the Collection Account in an amount equal to the Collateral
Proceeds as of the close of business on the related Determination Date:
(i) to the payment of any filing fees and taxes then due and
payable by the Issuer and/or the Co-Issuer;
(ii) to the payment of accrued and unpaid ordinary fees and
expenses owing by the Issuers to the Trustee, the Collateral Agent,
any other Representative, the TIP Advisors and the Rating Agencies;
(iii) to the payment of the accrued and unpaid Administrative Fee
payable to the Program Manager;
(iv) (A) prior to the Stated Maturity of the Liquidity Facility,
to the payment of any accrued and unpaid fees, expenses or interest
on amounts drawn under the Liquidity Facility and (B) after the
Stated Maturity of the Liquidity Facility, to the payment of accrued
and unpaid interest on and principal of the Liquidity Facility, until
the outstanding principal balance is reduced to zero, and any other
amounts due and payable thereunder;
(v) ratably, as to the payment of the following items: (A) to
the Note Payment Account in an amount equal to, and for the payment
of, accrued and unpaid interest on the Class A Notes; (B) payments
(other than termination costs) payable by the Issuer under the
Hedging Agreements; and (C) to the payment of commitment fees, any
accrued and unpaid interest on amounts drawn under the Backup
Facility or any other amounts (other than principal) due and payable
thereunder;
(vi) to the Operating Account for payment of termination costs
payable under any Hedging Agreement on such Quarterly Payment Date or
during the Due Period immediately succeeding the Due Period relating
to such Quarterly Payment Date;
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(vii) if the Senior Coverage Test is not satisfied on such
Quarterly Payment Date, to the repayment of (A) first, principal of
the Liquidity Facility (such repayment to be made in the order in
which principal installments are due if after the Liquidity Facility
Availability Period) until the outstanding principal balance of the
Liquidity Facility is reduced to zero and (B) second, principal of
the Backup Facility and to the Note Payment Account in an amount
equal to, and for the payment of, the principal amount of Class A
Notes, pro rata according to the principal of the Backup Facility and
the principal amount of the Class A Notes (it being understood that,
for purposes of this clause, principal of the Backup Facility shall
refer to amounts drawn or Allocated thereunder and payments made in
respect of amounts Allocated under the Backup Facility shall be
credited to the Committed TIP Account to reduce the amounts then
Allocated under the Backup Facility), in each case, to the extent
necessary to satisfy the Senior Coverage Test;
(viii) if the Senior Coverage Test is satisfied on such
Quarterly Payment Date, to the Note Payment Account in an amount
equal to, and for the payment of, accrued and unpaid interest on the
Class B Notes to the extent the Senior Coverage Test remains
satisfied;
(ix) to the repayment of principal of the Liquidity Facility,
the Backup Facility and the Class A Notes and Class B Notes and, to
the extent not paid in (viii) above, to the Note Payment Account in
an amount equal to, and for the payment of, the interest on the Class
B Notes, in the priority set forth below:
(A) after the expiration of the Liquidity Facility
Availability Period, to the payment of the quarterly principal
installment then due under the Liquidity Facility (each such
installment to be made in an amount equal to one-eighth of the
outstanding principal as of the last day of the Liquidity
Facility Availability Period) together with any accrued interest
and any other amounts owing thereunder;
(B) ratably, to the repayment of the principal of the
Backup Facility and to the Note Payment Account in an amount
equal to, and for the payment of, the principal amount of the
Class A Notes (it being understood that, for purposes of this
clause, principal of the Backup Facility shall refer to amounts
drawn or Allocated thereunder and payments made in respect of
Allocated amounts shall be credited to the Committed TIP Account
to reduce amounts Allocated under the Backup Facility) to the
extent necessary to cause the Senior Overcollateralization Ratio
on such Quarterly Payment Date to be at least equal to the
Target Senior Overcollateralization Ratio or if the Calculated
Senior Debt Balance is less than zero, to the extent necessary
to pay in full the principal amount of and accrued interest and
other amounts owing in respect of the Backup Facility and the
Class A Notes;
(C) to the Note Payment Account in an amount equal to, and
for the payment of, the accrued and unpaid interest on the Class
B Notes to the extent not paid in (viii) above;
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(D) to the Note Payment Account in an amount equal to, and
for the payment of, the principal amount of the Class B Notes to
the extent necessary to cause the Total Overcollateralization
Ratio on such Quarterly Payment Date to be equal to the Target
Total Overcollateralization Ratio or if the Calculated Total
Debt Balance is less than zero, to the extent necessary to pay
in full the Class B Notes;
(x) if the Reserve Test is not satisfied on such Quarterly
Payment Date, to the Reserve Account in an amount equal to the
Reserve Amount; and
(xi) the remaining Collateral Proceeds, plus the amount of cash
credited to the Reserve Account in excess of the Reserve Amount, for
application in the priority indicated below:
(A) after the Liquidity Facility Availability Period, to the
repayment of the outstanding principal installments under the
Liquidity Facility (in the order in which such installments are
due) until the outstanding principal balance of the Liquidity
Facility is reduced to zero;
(B) to the Note Payment Account in an amount equal to and
for the payment of all accrued and unpaid Class A Make-Whole
Premiums;
(C) to the Note Payment Account in an amount equal to and
for the payment of all accrued and unpaid Class B Premiums;
(D) to the Note Payment Account in an amount equal to, and
for the payment of, the accrued and unpaid interest on Class C
Notes;
(E) to the payment of the Management Fee and Incentive Fee
accrued during the related Due Period, and to the payment of any
accrued and unpaid Management Fee and/or Incentive Fee accrued
during any prior Due Period and any other amounts due under the
Management Agreement;
(F) prior to the Stated Maturity of the Liquidity Facility,
to the repayment of the Liquidity Facility until the outstanding
principal balance of the Liquidity Facility is reduced to zero;
(G) to the payment of any Extraordinary Expenses and any
Permitted Capital Expenditures;
(H) to the Note Payment Account in an amount equal to, and
for the payment of, the Class C Principal Distributable Amount,
if any;
(I) during the Investment Period, to the Excess Spread
Account;
(J) on or after the expiration of the Liquidity Facility
Availability Period, to the Expense Reserve Account in an amount
equal to, and for the
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payment of, the Operating Expenses expected to be payable prior
to the next Determination Date; and
(K) to the Issuer for payment of principal and interest on
the Support Notes and for distribution in respect of the
Interests in accordance with the provisions of the Partnership
Agreement provided that no such application shall be made for
distributions in respect of any Class II Interests or Support
Notes held by Enron or any Enron Affiliate if (and during the
period in which) an Event of Default shall have occurred and be
continuing for a period of 180 days, after which 180 day-period
distributions may be made in respect of such Class II Interests.
(b) In the event that on any Quarterly Payment Date, the amount
available in the Collection Account from amounts received in the related Due
Period is insufficient to make all payments pursuant to clauses (i) through
(xi)(E) of Section 4.1(a) (a "Shortfall"), the Issuer shall make up for such
Shortfall by making the following disbursements in the manner and in the
priority set forth below, in each case to the extent funds are available
therefor:
(i) first, from the Operating Account, amounts drawn under the
Liquidity Facility Loan Agreement pursuant to Section 4.2(a);
(ii) second, from the Operating Account, amounts drawn under
Liquidity Test Commitments, if any, in accordance with Section 4.2(b); and
(iii) third, to the extent a Shortfall remains under any of
clauses (i) through (ix) of Section 4.1(a) on such Quarterly Payment Date
(a "Quarterly Payment Shortfall"), the Issuer shall direct the Account
Bank to apply funds from each of the Accounts set forth below in the
following order of priority:
first, from the Operating Account, proceeds received from
issuing the Class C Notes in accordance with Section 4.1(a) of
the Enron Support Agreement;
second, from amounts in the Operating Account, proceeds from
funding the Class I Interests [in accordance with the terms of
the Class I Stage Funding Commitment Letters].
third, from the Operating Account, proceeds from funding the
Class II Interests in accordance with Section 4.1(b) of the
Enron Support Agreement;
fourth, from the Operating Account, proceeds from issuing
Support Notes under Section 4.1(c) of the Enron Support
Agreement;
fifth, from the Operating Account, proceeds from issuing
Support Notes under Section 4.1(d) of the Enron Support
Agreement;
sixth, from amounts credited to the Reserve Account as of
such Quarterly Payment Date;
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seventh, from amounts credited to the Excess Spread Account
as of such Quarterly Payment Date; and
eighth, from the Operating Account, payments under Credit
Support Test Commitments, if any, in accordance with Section
4.1(e) of the Enron Support Agreement.
Section 4.2. Liquidity Facility Drawdowns.
(a) If, in respect of any Quarterly Payment Date,
(i) the amount available in the Collection Account from amounts
received in the related Due Period is less than the amounts necessary
to make payments pursuant to clauses (i) through (xi)(C) of Section
4.1(a) on such Quarterly Payment Date; or
(ii) there is no shortfall under the immediately preceding
clause (a)(i) but the amount available in the Collection Account from
amounts received in the related Due Period is less than the amounts
necessary to make payments pursuant to clauses (i) through (xi)(E) of
Section 4.1(a) on such Quarterly Payment Date,
the Issuer shall so notify the Liquidity Facility Agent and make a drawing under
the Liquidity Facility Loan Agreement in a principal amount equal to (A) in the
case of clause (a)(i) above, the amount of the shortfall referred to in such
clause (a)(i) less the sum of shortfalls under clauses (iv)(B), (vii), (ix),
(x), (xi)(A), (xi)(B) and (xi)(C) under the Priority of Payments, and (B) in the
case of clause (a)(ii) above, the amount of the shortfall referred to in such
clause (a)(ii) (such amounts, the "Liquidity Shortfall Amounts"), in each case
in accordance with the terms of the Liquidity Facility Loan Agreement, to the
extent amounts are available to be drawn thereunder with the terms of the
Liquidity Facility Loan Agreement. The Liquidity Shortfall Amounts shall be set
forth in the Valuation Report relating to the Quarterly Payment Date. Funds
received under the Liquidity Facility in connection with a Shortfall shall be
credited to the Operating Account pursuant to Section 3.7.
(b) If, in respect of a Quarterly Payment Date, amounts
available to be drawn under the Liquidity Facility Loan Agreement are less than
the Liquidity Shortfall Amount, the Issuer shall draw amounts under the
Liquidity Test Commitments, if any, in accordance with Section 4.3 of the Enron
Support Agreement.
(c) If there shall be due and payable any Operating Expenses on
a date that is not a Quarterly Payment Date, the Issuer shall so notify the
Liquidity Facility Agent and make a drawing (i) first, under the Liquidity
Facility Loan Agreement in an amount equal to such Operating Expenses in
accordance with the terms of the Liquidity Facility Loan Agreement, and (ii)
second, to the extent amounts available to be drawn thereunder are less than
such Operating Expenses, under the Liquidity Test Commitments, if any, in
accordance with Section 4.3 of the Enron Support Agreement.
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Section 4.3. Priority of Payments Following an Acceleration.
(a) Notwithstanding any other provision in this Agreement, but
pursuant to Article 5 hereof, the Collateral Agent shall, upon an Acceleration,
immediately direct the Account Bank to withdraw from the Collection Account and
any other Collateral Account (other than the Reserve Account, the Excess Spread
Account, the Committed TIP Account and the Distribution Obligation Escrow
Account) all amounts credited to such accounts, apply all monies otherwise
received, and make the following disbursements in the following order of
priority:
(i) to the payment of any filing fees and taxes then due and
payable by the Issuer and/or the Co-Issuer;
(ii) to the payment of accrued and unpaid fees and expenses
owing by the Issuers to the Trustee, the Collateral Agent, any other
Representative, the TIP Advisor(s) and the Rating Agencies;
(iii) to the Program Manager in an amount equal to, and for
payment of, any accrued and unpaid Administrative Fees as of such
date;
(iv) to the Liquidity Lenders for payment of the outstanding
principal balance plus accrued and unpaid interest and any other
amounts owing under the Liquidity Facility;
(v) Pro Rata, to the (A) Holders of the Class A Notes for
payment of the Outstanding Amount of Class A Notes and interest
(excluding premium) payable thereon of such date, and (B) Backup
Lenders for payment of the outstanding principal balance plus accrued
and unpaid interest and any other amounts owing under the Backup
Facility and (C) the Hedge Counterparties for payments due under each
Hedging Agreement (it being understood that, for purposes of this
clause, principal of the Backup Facility shall refer to amounts drawn
or Allocated thereunder and payments made in respect of Allocated
amounts shall be credited to the Committed TIP Account to reduce
amounts Allocated under the Backup Facility);
(vi) to the Holders of the Class B Notes in an amount equal to,
and for payment of, the Outstanding Amount of Class B Notes and
interest (excluding premium) payable thereon as of such date;
(vii) to the Holders of the Class A Notes in an amount equal to,
and for payment of, all accrued and unpaid Class A Make-Whole Premium
as of such date;
(viii) to the Holders of the Class B Notes in an amount equal
to, and for payment of, all accrued and unpaid Class B Premium as of
such date;
(ix) to the Holders of the Class C Notes in an amount equal to,
and for payment of, the Outstanding Amount of the Class C Notes and
interest payable thereon as of such date;
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(x) to the Program Manager in an amount equal to, and for
payment of, any accrued and unpaid Management Fees as of such date;
(xi) to the Holders of the Support Notes, in an amount equal to,
and for payment of, principal and interest payable thereon as of such
date; and
(xii) to the Issuer in an amount equal to the amounts required
for distribution in respect of the Interests in accordance with the
provisions of the Partnership Agreement.
(b) In the event funds credited to the Collateral Accounts are
insufficient to make payments in accordance with clauses (i) through (x) of
Section 4.3(a), the Collateral Agent shall direct the Account Bank to make up
such shortfall in the manner and in the priority set forth below, from:
first, proceeds received upon the funding of all unfunded
Class I Interests pursuant to the terms of the Class I Stage
Funding Commitment Letters;
second, proceeds received from issuing the Class C Notes in
accordance with Section 4.1(a) of the Enron Support Agreement;
third, proceeds from funding the Class II Interests in
accordance with Section 4.1(b) of the Enron Support Agreement;
fourth, proceeds from issuing Support Notes under Section
4.1(c) of the Enron Support Agreement;
fifth, proceeds from issuing Support Notes under Section
4.1(d) of the Enron Support Agreement;
sixth, amounts credited to the Reserve Account;
seventh, amounts credited to the Excess Spread Account; and
eighth, payments pursuant to Credit Support Test
Commitments, if any, in accordance with Section 4.1(e) of the
Enron Support Agreement.
Section 4.4. Drawdowns under certain Letters of Credit arranged
by Enron.
(a) In the event that Enron has exercised its option to secure
its obligations under Sections 4.1(c), 4.1(d) and 4.2 of the Enron Support
Agreement pursuant to Section 5.5 thereof by arranging a letter of credit, the
Issuer shall be entitled to make a drawing under such letter of credit, at any
time that Enron fails to make all or a portion of the payments obligated to be
made under Sections 4.1(c), 4.1(d)or 4.2 of the Enron Support Agreement, up to
an amount equal to such defaulted payment and such amounts shall be applied in
respect of payments otherwise due under clauses fourth and fifth under Sections
4.1(b)(iii) and 4.3(b) herein, as applicable.
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(b) In the event that Enron fails to make all or a portion of the
payments obligated to be made under Section 4.1(b) (as regards the aforesaid
Section) or 4.2 of the Enron Support Agreement, the Issuer shall be entitled to
make a drawing under the letter of credit arranged by Enron pursuant to Section
5.5 of the Enron Support Agreement, up to an amount equal to such defaulted
payment, and such amount shall be applied in respect of payments otherwise due
under clause third under Section 4.1(b)(iii) and clause third under Section
4.3(b) herein, as applicable.
ARTICLE 5
REMEDIES IN RESPECT OF COLLATERAL
Section 5.1. Remedies.
(a) Subject to Section 5.2 of the Common Agreement and Section
3.4 and 3.5 of the Intercreditor Agreement, if an Event of Default shall have
occurred and be continuing, and such declaration and its consequences have not
been rescinded and annulled, the Collateral Agent may, upon written direction
from the Required Lenders, to the extent permitted by applicable law, exercise
one or more of the following rights, privileges and remedies:
(i) proceed to protect and enforce the rights vested in it by
this Agreement, including, but not limited to, the right to cause all
revenues hereby pledged as security and all other moneys pledged hereunder
to be paid directly to it, and to enforce its rights hereunder to such
payments and all other rights hereunder by such appropriate judicial
proceedings as it shall deem most effective to protect and enforce any of
such rights, either at law or in equity or otherwise, in the exercise of
any power herein granted, or for any foreclosure hereunder and sale under
a judgment or decree in any judicial proceeding, or to enforce any other
legal or equitable right vested in it by this Agreement or by law;
(ii) cause any action at law or suit in equity or other
proceedings to be instituted and prosecuted to collect or enforce any
Secured Obligations or rights hereunder or included in the Collateral, or
to foreclose or enforce any other agreement or other instrument by or
under or pursuant to which such Secured Obligations are issued or secured,
subject in each case to the provisions and requirements thereof;
(iii) sell, assign or otherwise liquidate any or all of the
Collateral or cause the Collateral to be sold or otherwise disposed of and
take possession of the proceeds of any such sale or liquidation;
(iv) incur reasonable expenses, including reasonable attorneys'
fees, consultants' fees and other costs appropriate to the exercise of any
right or power under this Agreement;
(v) make payments, purchase, contest or compromise any
encumbrance, charge or lien, and pay taxes and expenses, without, however,
any obligation so to do;
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(vi) take possession of the Collateral or any part thereof, by
directing the Issuers in writing to deliver the same to the Collateral
Agent at any reasonable place or places designated by the Collateral
Agent, it being understood that the Issuers' obligation so to deliver the
Collateral is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Collateral Agent
shall (to the fullest extent permitted by applicable law) be entitled to a
decree requiring specific performance by the Issuers of such obligation;
(vii) at any time after an Acceleration has been declared and
before a judgment or decree for payment of the Money due has been obtained
by the Collateral Agent as provided in this Section 5.1, upon the written
request of the Required Lenders, rescind and annul such declaration and
its consequences if:
(A) the Issuer or the Co-Issuer has paid or deposited with
the Collateral Agent an amount sufficient to pay:
(I) all overdue installments of interest on and
principal of the Senior Secured Obligations and
the Class B Notes,
(II) to the extent that payment of such interest is
lawful, interest on the Defaulted Interest at the
applicable rate, and
(III) all unpaid expenses and unpaid taxes of the
Collateral Agent and the reasonable compensation,
disbursements and advances of the Collateral
Agent, each of the Representatives and their
respective agents and counsel; and
(B) the Collateral Agent has determined that all Events of
Default, other than the nonpayment of the interest on or
principal of the Senior Secured Obligations and the Class B
Notes that have become due solely as a result of such
Acceleration, have been cured and the Required Lenders by
written notice to the Collateral Agent have agreed with such
determination or waived any such Events of Default as provided
in Section 5.9 hereof.
No such recission shall affect any subsequent Default or impair any
right consequent thereon.
(viii) exercise any other rights and remedies that may be available at
law or in equity; and
(ix) exercise any other or additional rights or remedies granted to a
secured party under the UCC. If, pursuant to applicable law, prior notice
of any such action is required to be given to the Issuers, the Issuers
hereby acknowledge that the minimum time required by such applicable law,
or if no minimum is specified, of ten (10) Business Days, shall be deemed
a reasonable notice period;
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provided that the Collateral Agent may not sell or liquidate the Collateral or
institute Proceedings in furtherance thereof pursuant to this Section 5.1
unless either of the conditions specified in Section 5.2(a) is met.
The Collateral Agent may, but need not, obtain and rely upon an
opinion of an Independent investment banking firm of national reputation as to
the feasibility and methodology of any action proposed to be taken in
accordance with this Section 5.1 and as to the sufficiency of the proceeds and
other amounts receivable with respect to the Collateral to make the required
payments under the Secured Obligations, which opinion shall be conclusive
evidence as to such feasibility or sufficiency.
(b) All reasonable costs and expenses (including, but without
being limited to, reasonable attorneys' fees and expenses and taxes) paid or
incurred by the Collateral Agent in connection with any suit or proceeding
arising from this Agreement, or in connection with the performance by the
Collateral Agent of any of the Issuer's agreements contained in any exercise of
its rights or remedies hereunder pursuant to the terms of this Agreement,
together with interest thereon (to the extent permitted by law) computed at a
rate per annum equal to [ ] from the date on which such costs or expenses are
incurred to the date of payment thereof, shall constitute additional
indebtedness secured by this Agreement and shall be paid by the Issuer to the
Collateral Agent on behalf of the Secured Parties on demand.
(c) The Collateral Agent shall apply any proceeds from time to
time held by it and the proceeds of any collection, recovery, receipt,
appropriation, realization or sale in accordance with this Agreement. For the
avoidance of doubt, in the case of a collection, recovery, receipt,
appropriation, realization or sale in respect of a portion (but not all) of the
Collateral, it is understood that the Issuers shall remain liable to the extent
of any deficiency between the amount of the proceeds of such Collateral and the
aggregated amount of the Secured Obligations, and only to the extent provided
in Section 11.1 of the Common Agreement.
(d) If an Event of Default as described in Section 5.1(e) of the
Common Agreement shall have occurred and be continuing, the Collateral Agent
may, and at the request of the Required Lenders shall, institute a Proceeding
solely to compel performance of the covenant or agreement or to cure the
representation or warranty, the breach of which gave rise to the Event of
Default under such Section, and enforce any equitable decree or order arising
from such proceeding.
(e) Upon any sale, whether made under the power of sale hereby
given or by virtue of judicial proceedings, any Secured Party may bid for and
purchase the Collateral or any part thereof and, upon compliance with the terms
of sale, may hold, retain, possess or dispose of such property in its or their
own absolute right without accountability.
The Issuers' covenant (to the extent that they may lawfully do
so) that they will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants, the performance of or any remedies under this Agreement; and the
Issuers (to the extent that they may lawfully do so) hereby expressly waive all
benefit or
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advantage of any such law, and covenant that they will not hinder,
delay or impede the execution of any power herein granted to the Collateral
Agent, but will suffer and permit the execution of every such power as though
no such law had been enacted.
Upon any sale, whether made under the power of sale hereby given
or by virtue of judicial proceedings, the receipt of the Collateral Agent, or
of the Officer making a sale under judicial proceedings, shall be a sufficient
discharge to the purchaser or purchasers at any sale for its or their purchase
amounts, and such purchaser or purchasers shall not be obliged to see to the
application thereof.
Any such sale, whether under any power of sale hereby given or
by virtue of judicial proceedings, shall bind the Issuers, the Collateral Agent
and the Secured Parties, shall operate to divest all right, title and interest
whatsoever, either at law or in equity, of each of them in and to the property
sold, and shall be a perpetual bar, both at law and in equity, against each of
them and their successors and assigns, and against any and all Persons claiming
through or under them. Any portion of the Collateral so sold shall be released
from the lien of this Agreement pursuant to Section 2.6 or 2.7.
(f) Notwithstanding any other provision of this Agreement and in
accordance with Section 3.1(b)(i) of the Intercreditor Agreement, the
Collateral Agent may not, prior to the date which is one year and one day, or
if longer the applicable preference period then in effect, after the payment in
full of all Secured Obligations, institute against, or join any other Person in
instituting against, the Issuer or the Co-Issuer any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings,
or other proceedings under Federal or state bankruptcy or similar laws. Nothing
in this Section 5.1(f) shall preclude, or be deemed to stop, the Collateral
Agent (i) from taking any action prior to the expiration of the aforementioned
one year and one day period, or if longer the applicable preference period then
in effect, in (A) any case or proceeding voluntarily filed or commenced by the
Issuer or the Co-Issuer or (B) any involuntary insolvency proceeding filed or
commenced by a Person other than the Collateral Agent, or (ii) from commencing
against the Issuer or the Co-Issuer or any of its properties any legal action
which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium,
liquidation or similar proceeding.
Section 5.2. Preservation of Collateral.
(a) If an Event of Default shall have occurred and be
continuing, the Collateral Agent shall hold the Collateral securing the Secured
Obligations intact, collect and cause the collection of the proceeds thereof
and make and apply all payments and deposits and maintain all accounts in
respect of the Collateral and the Secured Obligations in accordance with the
Priority of Payments or the Priority of Acceleration Payments, as applicable,
and Article 3 hereof and the provisions of Articles 2 and Section 3.1 of the
Intercreditor Agreement and shall not foreclose on or dispose of the Collateral
unless:
(i) the Collateral Agent determines that the anticipated
proceeds of a sale or liquidation of the Collateral (after deducting the
reasonable expenses of such sale or liquidation) would be sufficient to
discharge in full the amounts then due and unpaid in
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respect of the Secured Obligations and the Required Lenders agree with
such determination; or
(ii) the Required Lenders direct the sale and liquidation of the
Collateral.
(b) Nothing contained in Section 5.2(a) shall be construed to
require the Collateral Agent to preserve the Collateral securing the Secured
Obligations if prohibited by applicable law.
(c) The Collateral Agent shall deliver to each Representative
and the Issuers a report stating the results of any determination required
pursuant to Section 5.2(a)(i) no later than 10 days after making such
determination but in any case after such sale. The Collateral Agent shall make
the determinations required by Section 5.2(a)(i) within 90 days after an Event
of Default and at the request of the Required Lenders at any time during which
the Collateral Agent retains the Collateral pursuant to Section 5.2(a)(i). In
the case of each calculation made by the Collateral Agent pursuant to Section
5.2(a)(i), the Collateral Agent shall obtain a letter of an Independent
certified public accountant confirming the accuracy of the computations of the
Collateral Agent and certifying their conformity to the requirements of this
Agreement.
(d) In determining whether the condition specified in Section
5.2(a)(i) exists, the Collateral Agent may retain and rely on an opinion of an
Independent investment banking firm of national reputation.
Section 5.3. Application of Money Collected.
Any Money collected by the Collateral Agent with respect to the
Secured Obligations pursuant to this Article 5 and any money that may then be
held or thereafter received by the Collateral Agent with respect to the Secured
Obligations shall be applied subject to Section 3.1 of the Intercreditor
Agreement and in accordance with Section 4.3.
Section 5.4. Restoration of Rights and Remedies.
Subject to the Intercreditor Agreement, if the Collateral Agent
has instituted any Proceeding to enforce any right or remedy under this
Agreement or any other Financing Document and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Collateral Agent, then and in every such case the Issuers and the
Collateral Agent shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Collateral Agent shall continue as
though no such Proceeding had been instituted.
Section 5.5. Rights and Remedies Cumulative.
Except as otherwise expressly provided in this Agreement or in
any other Financing Document, no right or remedy herein conferred upon or
reserved to the Collateral Agent is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy
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given hereunder or now or hereafter existing by law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.6. Delay or Omission Not Waiver.
No delay or omission of the Collateral Agent to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article 5 or by law
to the Collateral Agent may be exercised from time to time, and as often as may
be deemed expedient, by the Collateral Agent.
Section 5.7. Control by Required Lenders.
Notwithstanding any other provision of this Agreement, the
Required Lenders shall, pursuant to the terms of the Intercreditor Agreement,
have the right to cause the institution of and direct the time, method and
place of conducting any Proceeding for any remedy available to the Collateral
Agent for exercising any trust, right, remedy or power conferred on the
Collateral Agent; provided, however, with respect to any sale of a
non-Defaulted Project Loan, the Collateral Agent shall not be entitled to
direct the sale thereof to an Enron Competitor. The Issuers acknowledge that
the foregoing restriction on Sale is being made at the request of the Issuers
and may affect the price at which the Collateral is sold and the Issuers agree
not to raise such restriction as a challenge to the commercial reasonableness
of any sale of Collateral hereunder.
Section 5.8. Sale of Collateral.
(a) The power to effect any sale of any portion of the
Collateral pursuant to Sections 5.1 and 5.2 shall not be exhausted by any one
or more Sales as to any portion of such Collateral remaining unsold, but shall
continue unimpaired until the entire Collateral shall have been sold or all
amounts secured by the Collateral shall have been paid. The Collateral Agent
may upon notice to each Representative, and shall, upon direction of the
Required Lenders from time to time postpone any Sale by announcement made at
the time and place of such Sale.
(b) The Collateral Agent may bid for and acquire any portion of
the Collateral in connection with a public Sale thereof, by crediting against
amounts owing on the Secured Obligations all or part of the net proceeds of
such Sale after deducting the reasonable costs, charges and expenses incurred
by the Collateral Agent in connection with such Sale. The Collateral Agent may
hold, lease, operate, manage or otherwise deal with any property so acquired in
any manner permitted by law in accordance with this Agreement.
(c) The Collateral Agent shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion
of the Collateral in connection with a Sale thereof. In addition, the
Collateral Agent is hereby irrevocably appointed the agent and attorney-in-fact
of the Issuers to transfer and convey their respective interests in any portion
of the Collateral in connection with a sale thereof, and to take all action
necessary to effect such sale.
29
<PAGE> 33
No purchaser or transferee at such a sale shall be bound to ascertain the
Collateral Agent's authority, to inquire into the satisfaction of any
conditions precedent or see to the application of any funds.
Section 5.9. Waiver of Past Defaults.
Prior to the time a judgment or decree for payment of the Money
due has been obtained by the Collateral Agent as provided in Section 5.1, the
Collateral Agent upon the written request of the Required Lenders may waive any
past Default and its consequences, except a Default:
(a) in the payment of the principal of and interest or Premium
on the Senior Secured Obligations or the Class B Notes; or
(b) in respect of a covenant or provision hereof or under any
other Financing Document that under Section 4.1 or 4.2 of the Intercreditor
Agreement may not be modified or amended without the waiver or consent of each
Representative; or
(c) arising under Section 5.1(h) or 5.1(i) of the Common
Agreement.
In the case of any such waiver, the Issuers, the Collateral
Agent, the Trustee, the Backup Facility Agents and the Liquidity Facility Agent
shall be restored to their former positions and rights hereunder and under the
Intercreditor Agreement, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
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 Agreement, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
ARTICLE 6
ASSIGNED AGREEMENTS
Section 6.1. Agreements of the Issuer Regarding the Assigned
Agreements.
(a) Each of the Issuer and the Co-Issuer represents that it has
not executed and will not execute any assignment of any Assigned Agreement
other than the assignment thereof under this Agreement. The Issuers agree that
such assignment is irrevocable, and that they will not take any action which is
inconsistent with such assignment or make any other assignment inconsistent
with the assignment under this Agreement. The Issuers will, from time to time
upon the request of the Collateral Agent or any representative execute all
instruments of further assurance and all such supplemental instruments with
respect to such assignment as the Collateral Agent or such representative may
reasonably specify. The Issuers hereby agree, and hereby undertake to obtain
the agreement and consent of each party (other than the Issuer and the
30
<PAGE> 34
Co-Issuer), directly or through the respective Representative of such party, as
appropriate to the Assigned Agreement (insofar as the following relate to each
such party), to the following:
(i) each such party consents to the provisions of such
assignment and agrees to perform any provisions of the Financing Documents
applicable to such party;
(ii) each such party acknowledges that the Issuers are assigning
all of their respective right, title and interest in, to and under the
relevant Assigned Agreement, to the Collateral Agent for the benefit of
the Secured Parties and each such party agrees that all of the
representations, covenants and agreements made by it under the Assigned
Agreement to which it is a party are also for the benefit of the
Collateral Agent and the Secured Parties;
(iii) with respect to the Liquidity Facility Loan Agreement,
each Backup Facility Loan Agreement and each of the Hedging Agreements,
each of the parties thereto agrees and acknowledges that all of its rights
in respect of the Collateral as a Secured Party under the Security
Agreement shall be subject to the Intercreditor Agreement, and expressly
agrees to be bound by each provision of the Intercreditor Agreement
insofar as such provision relates to a Secured Party or a Senior Secured
Party; and further confirms that it or its Representative, as the case may
be, has received and read the provisions of the Security Agreement and the
other Financing Documents relating to the Assigned Agreement to which it
is a party;
(iv) with respect to each of the Assigned Agreements (other than
any Backup Facility Loan Agreement, the Liquidity Facility Loan Agreement,
the TIP Investment Management Agreement, the Currency Hedging Agreements,
the Hedging Agreements, any Underlying Instruments and any Additional
Transaction Documents entered into in replacement of any of the foregoing,
other than the Liquidity Facility Loan Agreement) the Issuers will not
directly or indirectly amend, modify, terminate, supplement or waive a
right or permit or consent to the amendment, modification, termination,
supplement or waiver of a right with respect to any such Assigned
Agreement (other than in respect of an amendment or modification of the
type that may be made to any of the Financing Documents without the
requirement that the Collateral Agent seek the consent of the Required
Lenders as set forth in Section 3.2(c)(iv) of the Intercreditor Agreement)
(A) without 10 days' prior notice to each Rating Agency, (B) without 10
days' prior notice thereof to the Collateral Agent, which notice shall
specify the action proposed to be taken by the Issuer (and the Collateral
Agent shall promptly deliver a copy of such notice to each Representative
and Hedge Counterparty), (C) without the prior written confirmation of
each Rating Agency that such amendment, modification, termination,
supplement or waiver will not cause its rating of the Class A Notes or the
Class B Notes to be reduced or withdrawn and (D) if the Collateral Agent
within 20 days after the date of the related notice to the Collateral
Agent given as provided in clause (B) above objects to such amendment,
modification, termination, supplement or waiver, failing which objection
the Issuer may take the action specified in the related notice to the
Collateral Agent; and
31
<PAGE> 35
(v) each such party agrees not to institute against, or join any
other Person in instituting against, the Issuer or the Co-Issuer any
bankruptcy, reorganization, arrangement, insolvency, moratorium or
liquidation proceedings or other proceedings under federal or state
bankruptcy or similar laws until at least one year and one day, or if
longer the applicable preference period then in effect, after the payment
in full of all Secured Obligations; provided that nothing in the foregoing
clause shall be construed to preclude, or be deemed to stop, such party
(A) from taking any action prior to the expiration of the aforementioned
one year and one day period, or if longer the applicable preference period
then in effect, in (1) any case or proceeding voluntarily filed or
commenced by the Issuer or the Co-Issuer or (2) any involuntary insolvency
proceeding filed or commenced against the Issuer or the Co-Issuer by a
Person other than such party or (B) from commencing against the Issuer or
the Co-Issuer or any properties of the Issuer or the Co-Issuer (but
subject to any restrictions on such commencement in the Financing
Documents) any legal action which is not a bankruptcy, reorganization,
arrangement, insolvency, moratorium or liquidation proceeding.
(b) The Issuers further agree, and hereby undertake to obtain
the agreement and consent of the Program Manager in respect to the Management
Agreement, to the following:
(i) the Program Manager agrees to perform any provisions of any
of the Financing Documents applicable to the Program Manager;
(ii) neither the Issuers nor the Program Manager will terminate
the Management Agreement or select or consent to a successor Program
Manager under the Management Agreement except as expressly permitted by
the Management Agreement; and
(iii) the Program Manager will continue to serve as Program
Manager under the Management Agreement, notwithstanding that the Program
Manager shall not have received amounts due it under the Management
Agreement because sufficient funds were not then available under the
Financing Documents to pay such amounts.
Section 6.2. Additional Provisions Regarding the Assigned
Agreements.
(a) It is understood and agreed that the pledge of the Assigned
Agreements hereunder shall include all rights thereunder and, without limiting
the generality of the foregoing, the Collateral Agent shall have the right,
subject to the last paragraph of Section 2.1(a), following the occurrence and
during the continuance of an Event of Default, to (i) give all notices,
consents and releases thereunder, (ii) give all notices of termination and to
take any legal action upon the breach of an obligation of the Issuer and/or the
Co-Issuer thereunder, including the commencement, conduct and consummation of
proceedings at law or in equity, (iii) request and receive all notices,
accountings, consents, releases and statements thereunder and (iv) do any and
all other things whatsoever that the Issuer and/or the Co-Issuer is or may be
entitled to do thereunder.
(b) The assignment made hereby is executed as collateral
security, and the execution and delivery hereby shall not in any way impair or
diminish the obligations of the
32
<PAGE> 36
Issuer and/or the Co-Issuer under the provisions of each of the Assigned
Agreements, nor shall any of the obligations contained in each of the Assigned
Agreements be imposed on the Collateral Agent.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Notices. Any request, demand, authorization,
direction, notice, consent, waiver or other document provided or permitted by
this Agreement may be made upon, given or furnished to the following addresses:
If to the Issuer:
Address:
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Telecopy:
-------------------------------------
with a copy to the Program Manager:
Address:
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Telecopy:
-------------------------------------
If to the Co-Issuer
Address:
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Telecopy:
-------------------------------------
with a copy to the Program Manager:
Address:
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Telecopy:
-------------------------------------
33
<PAGE> 37
If to the Collateral Agent:
Address: 600 Travis, 8th Floor
Houston, TX 77002
Attention: Global Trust Services --
Enron International CPO, L.P.
Telephone: 713-216-4181
Telecopy: 713-216-2101
If to Account Bank:
Address:
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Telecopy:
-------------------------------------
If to the Liquidity Facility Agent:
Address:
-------------------------------------
Attention:
-------------------------------------
Telephone:
-------------------------------------
Telecopy:
-------------------------------------
If to the Backup Facility Agents:
As specified in the Designation Letters delivered
pursuant to Section 1.24 of the Common Agreement.
If to the Rating Agencies:
to S&P:
Address: 26 Broadway, 10th Fl.
New York, NY 10004
Attention: Surveillance Group
Telephone:
Telecopy: 212-208-0020
to Moody's Investors Service:
Address: 99 Church Street
New York, NY 10007
Attention: CBO/CLO Monitoring
Telephone:
Telecopy: 212-553-0355
or to such other addresses as to which any such party may specify to each of the
other parties hereto in the manner set forth below. All notices or other
communications required or permitted to be given hereunder shall be in writing
and shall be considered as properly given (a) if
34
<PAGE> 38
delivered in person, (b) if sent by overnight delivery service, (c) in the
event overnight delivery services are not readily available, if mailed by first
class mail, postage prepaid, registered or certified with return receipt
requested or (d) if sent by prepaid telex, or by telecopy with correct answer
back received. Notice so given shall be effective upon receipt by the
addressee, except that communication or notice so transmitted by telecopy or
other direct written electronic means shall be deemed to have been validly and
effectively given on the day (if a Business Day and, if not, on the next
following Business Day) on which it is validly transmitted if transmitted
before 4:00 p.m., recipient's time, and if transmitted after that time, on the
next following Business Day; provided, however, that if any notice is tendered
to an addressee and the delivery thereof is refused by such addressee, such
notice shall be effective upon such tender. Any party hereto shall have the
right to change its address for notice hereunder to any other location by
giving no less than 20 days' notice to the other parties in the manner set
forth herein above.
Section 7.2. Execution in Counterparts. This Agreement may be
executed in any number of counterparts by the parties hereto, each of which
shall be an original, and all such counterparts shall constitute one and the
same instrument.
Section 7.3. Effect of Headings. The Article and Section
headings herein are for convenience of reference only and shall not affect the
interpretation hereof.
Section 7.4. Assignments. This Agreement shall be a continuing
obligation of the Issuers and shall (a) be binding upon the Issuers and their
respective successors and assigns, and (b) inure to the benefit of and be
enforceable by the Collateral Agent and its successors and assigns. Neither the
Issuer nor the Co-Issuer may assign this Agreement, or delegate any of its
duties hereunder, without the prior written consent of the Collateral Agent,
and any such attempted assignment shall be null and void.
Section 7.5. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION, PROCEEDING OR COUNTERCLAIM BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER FINANCING DOCUMENT TO WHICH SUCH PERSON IS A PARTY, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
THE OTHER PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF
THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT AND ANY OTHER FINANCING
DOCUMENT TO WHICH IT IS A PARTY.
Section 7.6. Subject to Intercreditor Agreement. The rights of
the Secured Parties under this Agreement and each other Security Document and
Financing Document shall be subject to the terms and provisions of the
Intercreditor Agreement.
Section 7.7. Amendments. This Agreement may be amended or
modified only by the written consent of the parties hereto.
35
<PAGE> 39
Section 7.8. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW.
Section 7.9. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the Collateral Agent in respect of the Secured Obligations is
rescinded or must otherwise be restored or returned by the Collateral Agent
upon the insolvency, bankruptcy, reorganization, liquidation of the Issuers or
upon the dissolution of, or appointment of any intervenor or conservator of, or
trustee or similar official for, the Issuers or any substantial part of the
Issuer's assets, or otherwise, all as though such payments had not been made.
Section 7.10 Submission to Jurisdiction. Except as set forth in
subsection (b) of this Section 7.10, the Issuers hereby irrevocably submit to
the non-exclusive jurisdiction of any New York State or federal court sitting
in the Borough of Manhattan in The City of New York in any action or proceeding
arising out of or relating hereto, and the Issuers hereby irrevocably agree
that all claims in respect of such action or proceeding may be heard and
determined in such New York State or federal court. The Issuers hereby
irrevocably waive, to the fullest extent that they may legally do so, any
defense which they now or hereafter have to the laying of the venue of any such
proceeding brought in such court and any claim that any such proceeding brought
in such court has been brought in an inconvenient forum and to the maintenance
of such action or proceeding. The Issuers irrevocably consent to the service of
any and all process in any action or proceeding by the mailing or delivery of
copies of such process to it at the office set forth in Section 7.1. The
Issuers agree (to the fullest extent permitted by applicable law) that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Notwithstanding the foregoing, no document filed, assertion
made, or issue adjudicated in any court or other arbitral proceeding shall have
a collateral, judicial, or other estoppel or res judicata effect on any
arbitral proceeding that is subject to Section 11.11 of the Management
Agreement.
(b) The foregoing submission to jurisdiction is not intended to
and shall not apply to any claim, controversy, issue or accounting bearing on
Article 9 of the Enron Support Agreement except insofar as such claim,
controversy, issue or accounting arises in connection with a motion to confirm,
vacate, or modify an arbitration award rendered pursuant to Section 11.11 of
the Management Agreement.
36
<PAGE> 40
IN WITNESS WHEREOF, the Issuer, the Collateral Agent and the
Account Bank have duly executed this Security Agreement as of the date first
set forth above.
ENRON INTERNATIONAL CPO, L.P.,
By: Enron CPO Holdings, Inc.,
its General Partner
By:
---------------------------
Title:
Name:
ENRON INTERNATIONAL CPO, INC.
By:
---------------------------
Title:
Name:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION,
as Collateral Agent
By:
---------------------------
Title:
Name:
CITIBANK, N.A.,
as Account Bank
By:
---------------------------
Title:
Name:
37
<PAGE> 1
EXHIBIT 4.6
Draft
8/7/98
================================================================================
ENRON INTERNATIONAL CPO, L.P.,
as Issuer
ENRON INTERNATIONAL CPO, INC.,
as Co-Issuer
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee
[NAME OF LIQUIDITY FACILITY AGENT],
as Liquidity Facility Agent
BACKUP FACILITY AGENTS,
from time to time party hereto
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Collateral Agent
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
Dated as of ____________, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE 1 DEFINITIONS; CONFLICTS WITH FINANCING DOCUMENTS
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Inconsistency with Financing Documents. . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 COLLATERAL AGENT
SECTION 2.1. Appointment of the Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2. Collateral Agent's Rights and Obligations. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.3. Reliance Upon Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.4. Successor Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.6. Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.7. Representations and Warranties of Chase Texas. . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.8. Waiver of Setoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 CERTAIN AGREEMENTS AMONG THE SECURED PARTIES
SECTION 3.1. Priority of Security Interests; Subordination. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.2. Decisionmaking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.3. Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.4. Actions Upon An Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.5. Exercise of Remedies and Application of Proceeds. . . . . . . . . . . . . . . . . . . 12
SECTION 3.6. Receipt of Money or Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.7. Additional Secured Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4 AMENDMENTS; WAIVERS; INSTRUCTIONS; OTHER RELATIONSHIPS
SECTION 4.1. Amendments to this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.2. Amendments to, Waiver under, and Instructions with Respect to the Other Financing
Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5 MISCELLANEOUS
SECTION 5.1. Agreement for Benefit of Parties Hereto. . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.3. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.4. Effect of Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.5. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.6. No Petition Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.7. TRIAL BY JURY WAIVED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.9. Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.10. Term of This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.11. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.12. Submission to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.13. Additional Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 3
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
This COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT, dated as
of _________, 1998 (this "Agreement"), by and among ENRON INTERNATIONAL CPO,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "Issuer"), ENRON INTERNATIONAL CPO, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (the "Co-Issuer" and
together with the Issuer, the "Issuers"), CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION as Trustee (in such capacity, the "Trustee"), on behalf of itself
and the Noteholders, [NAME OF LIQUIDITY FACILITY AGENT] as Liquidity Facility
Agent (in such capacity, the "Liquidity Facility Agent"), for itself and on
behalf of itself and the other Liquidity Lenders, the BACKUP FACILITY AGENTS
from time to time made party hereto pursuant to Section 5.13 hereof and CHASE
BANK OF TEXAS, NATIONAL ASSOCIATION as Collateral Agent (in such capacity, the
"Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Issuers desire to issue, from time to time, their Class A
Senior Notes due 2018 (the "Class A Notes"), Class B Senior Subordinated Notes
due 2018 (the "Class B Notes") and Class C Subordinated Notes due 2018 (the
"Class C Notes" and together with the Class A Notes and the Class B Notes, the
"Notes"), in each case pursuant to the Indenture;
WHEREAS, the Issuer is, simultaneously with the execution hereof,
entering into the Liquidity Facility Loan Agreement with the Liquidity Lenders;
WHEREAS, the Issuer may, subsequent to the Closing Date, enter into
one or more Backup Facilities with the Backup Lenders;
WHEREAS, the Issuers, the Representatives and the Collateral Agent are
entering into a Common Agreement dated as of the date hereof (as amended,
modified and/or supplemented from time to time, the "Common Agreement") which
sets forth, among other things, (i) common covenants of the Issuer and the
Co-Issuer in favor of the Secured Parties and (ii) common Events of Default;
WHEREAS, the Issuer will from time to time enter into certain Hedging
Agreements with the Hedge Counterparties named therein pursuant to which the
Issuer will be required to make certain payments thereunder;
WHEREAS, the Issuers and the Collateral Agent are entering into a
Security Agreement dated as of the date hereof pursuant to which the Issuers
will pledge the Collateral to the Collateral Agent for the benefit of the
Secured Parties;
WHEREAS, the parties hereto desire to enter into this Agreement in
order to set forth their mutual understanding with respect to certain
intercreditor provisions, including certain methods of voting and decision
making for the Secured Parties, the arrangements applicable to joint
consultation and actions in respect of certain approval rights and waivers, the
limitations on
<PAGE> 4
rights of enforcement upon an Event of Default and the appointment of the
Collateral Agent for the purposes set forth herein and in the other Financing
Documents;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements contained herein and in the other Financing Documents,
the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS; CONFLICTS WITH FINANCING DOCUMENTS
SECTION 1.1. Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires,
capitalized terms used in this Agreement, its schedules and its exhibits have
the meanings given in Appendix A to the Common Agreement.
SECTION 1.2. Rules of Interpretation. Except as otherwise expressly
provided herein, the rules of interpretation set forth in Appendix A to the
Common Agreement shall apply to this Agreement.
SECTION 1.3. Inconsistency with Financing Documents. Notwithstanding
anything to the contrary expressed or implied in any other Financing Document,
all rights, powers and remedies available to the Secured Parties shall be
subject to this Agreement. In the event of any conflict or inconsistency between
the terms and provisions of this Agreement and any other Financing Document, the
terms of this Agreement shall govern and control.
ARTICLE 2
COLLATERAL AGENT
SECTION 2.1. Appointment of the Collateral Agent. Each of the parties
hereto hereby appoints Chase Texas to act as its collateral agent in connection
with this Agreement, the Security Agreement and the other Financing Documents
and authorizes it, as the Collateral Agent, to take such actions on its behalf,
under the provisions of this Agreement and the other Financing Documents and to
exercise such rights, powers, authorities and discretion and perform such duties
as are specifically delegated to the Collateral Agent by the terms hereof, the
Security Agreement and the other Financing Documents together with all such
rights, powers, authorities and discretion as are reasonably incidental thereto.
By its signature hereto, Chase Texas accepts such appointment and agrees to act
as Collateral Agent in accordance with the provisions of this Agreement, the
Security Agreement and the other Financing Documents to which it is a party.
SECTION 2.2. Collateral Agent's Rights and Obligations.
(a) The Collateral Agent may perform any of its duties hereunder and
under the other Financing Documents to which it is a party directly or by or
through agents, employees or attorneys-in-fact and shall be entitled to consult
with counsel and to act in reliance upon the
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advice of such counsel concerning matters pertaining to the agencies created
hereby and its duties hereunder and under the other Financing Documents to
which it is a party, and shall not be liable for any action taken or omitted to
be taken by it in good faith and in reasonable reliance upon and in accordance
with the advice of counsel selected by it. The Collateral Agent undertakes to
perform only such duties as are expressly set forth herein and in the other
Financing Documents to which it is a party, and no fiduciary relationship or
implied covenants or obligations shall be read into this Agreement or any other
Financing Document to which the Collateral Agent is a party, or otherwise exist
against the Collateral Agent. No provision hereof shall be construed to
relieve the Collateral Agent from liability for its own gross negligence or
willful misconduct; provided, that (i) the Collateral Agent shall not be liable
with respect to any action taken, suffered or omitted by it in good faith
reasonably believed by it to be authorized or within the discretion or rights
or powers conferred on it by this Agreement or any other Financing Document, or
in accordance with any written direction or request of the Issuer, the Required
Lenders or the Program Manager (other than those that require the consent of
other parties and such consent has been withheld), unless in either case the
Collateral Agent was grossly negligent in ascertaining the pertinent facts or
negligent in determining the requirements imposed by this Agreement, the
Security Agreement or any other Financing Document to which it is a party, or
such written direction or request, and (ii) the Collateral Agent shall not be
liable for error of judgment made in good faith by any of its officers or
employees, unless the Collateral Agent was grossly negligent in ascertaining
the pertinent facts or in determining the requirements imposed by, this
Agreement, the Security Agreement or any other Financing Document to which it
is a party. Whenever in this Agreement or the Security Agreement or in any
other Financing Document to which the Collateral Agent is a party, it is
provided that the absence of the occurrence and continuation of an Event of
Default is a condition precedent to the taking of any action by the Collateral
Agent at the request of the Issuer or the Co- Issuer, then notwithstanding that
the satisfaction of such condition is a condition precedent to the right of the
Issuer or the Co-Issuer to make such request or direction, the Collateral Agent
shall not be liable for acting in accordance with such request or direction if
it does not have knowledge of the occurrence and continuance of such Event of
Default.
(b) The Collateral Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Financing Document
(i) if such action would, in the reasonable opinion of the Collateral Agent, be
contrary to law or the terms of this Agreement or the other Financing Documents,
(ii) if such action is not specifically provided for in this Agreement or any
other Financing Agreement and the Collateral Agent shall not have received any
such advice or concurrence of the requisite Lenders as it deems appropriate, or
(iii) if, in connection with the taking of any such action that would constitute
an exercise of remedies under this Agreement or such other Financing Document,
it shall not first be indemnified to its satisfaction by the Secured Parties
(other than any agent or trustee under the Financing Documents) against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take such action. The Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Financing Document in accordance with a request of the Required Lenders
(to the extent the Required Lenders are expressly authorized to direct the
Collateral Agent to take or refrain from taking such action), and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Secured Parties.
(c) Notwithstanding anything in this Agreement to the contrary, in no
event shall the Collateral Agent be liable under or in connection with this
Agreement for indirect, special,
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incidental or consequential losses or damages of any kind whatsoever, including
lost profits, even if the Collateral Agent has been advised of the possibility
thereof and regardless of the form of action in which such damages are sought;
provided, however, that this clause shall not be deemed to apply in the event
of a finding by a court of competent jurisdiction of gross negligence or
willful misconduct on the part of the Collateral Agent.
SECTION 2.3. Reliance Upon Documents.
(a) In the absence of gross negligence or bad faith on its part, the
Collateral Agent (i) may rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any note, notice,
resolution, consent, certificate, affidavit, letter, telegram, teletype message,
statement, order or other document reasonably believed by it to be genuine and
correct and to have been signed or sent by the proper Person or Persons, (ii)
shall not be obligated to make any investigation into facts or matters stated in
any such document or instrument and (iii) shall have no liability in acting, or
in omitting to act, where such action or omission to act is in reliance upon any
statement or opinion contained in any such document or instrument. Neither the
Collateral Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates assume any responsibility for the correctness of
the recitals to this Agreement or any other Financing Document to which it is a
party, nor for the validity, effectiveness, value, sufficiency or enforceability
of this Agreement or any other Financing Document or for the failure of the
Issuer or Co-Issuer to perform its obligations thereunder. The Collateral Agent
shall not be under any obligation to any other Secured Party to ascertain or to
inquire as to the observance or performance of any agreements contained in, or
conditions of, this Agreement or any other Financing Document, or to inspect the
properties, books or records of the Issuer or the Co-Issuer. The Collateral
Agent shall have no responsibility for maintaining the value of the Collateral
or, ensuring that any Collateral is properly delivered to it; provided that the
Collateral Agent shall be responsible for holding the Collateral in accordance
with the provisions hereof and of the other Financing Documents. The Collateral
Agent shall take or cause to be taken all action recommended pursuant to any
Opinion of Counsel received by the Collateral Agent pursuant to Section 4.8 of
the Common Agreement as may be necessary or appropriate to perfect and protect
the security interests granted by the Security Agreement.
(b) Notwithstanding any provision to the contrary contained in Article
4 of the Security Agreement, in performing its obligations to transfer amounts
and make payments to any Person in accordance with Article 4 of the Security
Agreement, the Collateral Agent is entitled to rely upon the information
furnished to it by the Program Manager on behalf of the Issuer pursuant to
Article 6 of the Common Agreement. If the Collateral Agent has been given notice
that a transfer or payment by the Collateral Agent under Article 4 of the
Security Agreement is required to be made on a specified date and on the
Business Day prior to such specified date the Collateral Agent shall not have
received all information necessary for the making of such transfer or payment,
then the Collateral Agent shall promptly give notice to the Issuers, specifying,
to the extent reasonably within the knowledge of the Collateral Agent, such
absence of information or any inability to confirm information necessary for the
making of such transfer or payment. If the Collateral Agent has been given
notice that a transfer or payment by the Collateral Agent under Article 4 of the
Security Agreement is required to be made on a specified date and on the
Business Day prior to such specified date any information necessary for the
making of such transfer or payment is not furnished by the Program Manager and
instructions necessary for the making of such transfer or payment are not
received from the Issuer in sufficient time to effect such transfer or payment,
then upon notice by the Collateral Agent to the
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Program Manager and the Issuer the Collateral Agent's obligations with respect
to such transfer or payment shall be suspended and the Collateral Agent shall
not be liable for the failure to make such transfer or payment.
Notwithstanding the foregoing, the Collateral Agent may carry out transfers and
payments of amounts specified in Article 4 of the Security Agreement without
specific instructions from the Program Manager or the Issuer if the Collateral
Agent has actual knowledge of the information required for the making of such
transfer and payments. For avoidance of doubt, the parties hereto confirm that
the Collateral Agent shall be entitled to indemnification pursuant to Section
2.5 with respect to any actions taken by it pursuant to the preceding sentence.
SECTION 2.4. Successor Collateral Agent.
(a) Merger. Any Person into which the Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, sale, merger,
consolidation or transfer to which the Collateral Agent is a party, shall
(provided it is otherwise qualified to serve as the Collateral Agent hereunder)
be and become a successor Collateral Agent hereunder and be vested with all of
the title to the Collateral and all of the trusts, powers, discretion,
immunities, privileges and other matters as was its predecessor without the
execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
(b) Resignation. The Collateral Agent and any successor Collateral
Agent may at any time resign by giving at least 90 days' written notice by
registered, certified or express mail to each Representative and the Issuers;
provided, that such resignation shall take effect only upon the date which is
the later of the effective date of the appointment of a successor Collateral
Agent acceptable to the Issuers and the acceptance in writing by such successor
Collateral Agent of such appointment and of its obligation to perform its duties
hereunder and under the other Financing Documents in accordance with the
provisions hereof and thereof. Notwithstanding the preceding sentence, if on the
90th day after written notice of resignation is delivered by a resigning
Collateral Agent as described above no successor Collateral Agent or temporary
successor Collateral Agent has been appointed in accordance herewith, the
resigning Collateral Agent may petition a court of competent jurisdiction for
the appointment of a successor.
(c) Removal. The Collateral Agent may be removed by the Required
Lenders at any time, with or without cause, by an instrument or concurrent
instruments in writing delivered to the Collateral Agent, each Representative,
the Program Manager and the Issuers. A temporary successor may be removed at any
time to allow a successor Collateral Agent acceptable to the Issuers to be
appointed pursuant to paragraph (d) below. Any removal pursuant to the
provisions of this paragraph (c) shall take effect only upon the date which is
the latest of the effective date of the appointment of a successor Collateral
Agent acceptable to the Issuers and the acceptance in writing by such successor
Collateral Agent of such appointment and of its obligation to perform its duties
hereunder and in the other Financing Documents to which it is a party in
accordance with the provisions hereof and thereof.
(d) Acceptance by Successor. Any successor Collateral Agent shall be a
bank or trust company (i) having its principal office in [Houston, Texas] or
such other jurisdiction as the Issuers may approve and (ii) having a net worth
of at least $200,000,000 as of the effective date of appointment. The Required
Lenders shall have the right to appoint each successor Collateral Agent, subject
only to the requirements set forth in the preceding sentence and to the approval
of
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the Issuers, which approval shall not be unreasonably withheld. If the Issuers
and the Required Lenders shall not have agreed within ten days as to the
selection of a successor Collateral Agent, the Issuers shall have the right to
appoint a temporary successor to act as the Collateral Agent. If by the 90th
day after appointment of such temporary successor Collateral Agent, the
Required Lenders and the Issuers shall have remained unable to agree as to the
selection of a successor Collateral Agent, such temporary successor shall
automatically become the successor Collateral Agent hereunder. Every temporary
or permanent successor Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to each Representative and the
Issuers an instrument in writing accepting such appointment hereunder and the
relevant predecessor shall execute, acknowledge and deliver such other
documents and instruments as will effectuate such appointment, whereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessors. Except as provided in Section 2.5, upon such appointment
of a successor Collateral Agent, the former Collateral Agent's rights, powers
and duties as Collateral Agent shall be terminated, without any other or
further act or deed on the part of such former Collateral Agent (except that
the resigning Collateral Agent shall deliver all Collateral then in its
possession to the successor Collateral Agent). After any retiring Collateral
Agent's resignation or removal hereunder as Collateral Agent, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent.
SECTION 2.5. Indemnification. By authorizing the Representatives to
enter into this Agreement on their behalf, and, in the case of a Hedge
Counterparty, by signing such Hedging Agreement, the Secured Parties (other than
the Representatives) agree to indemnify the Collateral Agent and (each in its
capacity as such) its officers, employees and its agents for, and hold the
Collateral Agent, its officers, employees and its agents harmless against, any
loss, liability, damage, claim, action, demand or expense (including the costs
and expenses of defending against any claim of liability) arising out of or in
connection with the Collateral Agent's acting as Collateral Agent hereunder and
under any other Financing Document, except such loss, liability, damage, claim,
action, demand or expense as shall result from the Collateral Agent's gross
negligence or willful misconduct or, in the case of handling of money, the
Collateral Agent's negligence. The obligation of the Secured Parties under this
Section shall survive the termination of this Agreement and the resignation or
removal of the Collateral Agent and shall be Pro Rata (determined for this
purpose, mutatis mutandis, as if the Class B Noteholders and Class C Noteholders
were Senior Secured Parties holding Class A Notes in the amount of their
respective Notes). None of the Representatives shall have any liability under
this Section.
SECTION 2.6. Compensation and Reimbursement. No provision of this
Agreement or any other Financing Document shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or under any other Financing Document
or in the exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
The Issuer agrees to pay to the Collateral Agent from time to time,
reasonable compensation for all services rendered by it hereunder and under the
other Financing Documents to which it is a party and to reimburse the Collateral
Agent for all reasonable expenses, disbursements and advances incurred or made
by the Collateral Agent in accordance with any provision of, or carrying out its
duties and obligations under, this Agreement (including the
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reasonable compensation and fees and the expenses and disbursements of its
agents and Independent counsel) and under the other Financing Documents to
which it is a party, in each case in accordance with Section 1.21 of the Common
Agreement. The obligations of the Issuer under this Section shall survive the
termination of this Agreement and the resignation and removal of the Collateral
Agent.
SECTION 2.7. Representations and Warranties of Chase Texas. Chase
Texas represents and warrants to the Issuers and to each Secured Party as
follows:
(a) Due Organization. Chase Texas is duly organized and validly
existing under the laws of the United States and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.
(b) Corporate Power. Chase Texas has all requisite right, power and
authority to execute and deliver this Agreement, the Security Agreement and each
of the other Financing Documents to which it is a party and to perform all of
its duties as Collateral Agent hereunder, under the Security Agreement and under
each of the other Financing Documents to which it is a party.
(c) Due Authorization. The execution and delivery of this Agreement,
the Security Agreement and each of the other Financing Documents to which it is
a party by Chase Texas, and the performance by the Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
proceedings and no further approvals or filings, including any governmental
approvals, are required for the valid execution and delivery by Chase Texas, or
the performance by Chase Texas, of this Agreement, the Security Agreement and
each of the other Financing Documents to which it is a party.
(d) Valid and Binding Agreement. Chase Texas has duly executed and
delivered this Agreement, the Security Agreement and each of the other Financing
Documents to which it is a party, and each such Agreement constitutes the legal,
valid and binding obligation of Chase Texas, enforceable against Chase Texas in
accordance with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors, rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(e) Compliance with Law. Neither the execution, delivery or
performance of this Agreement nor the consummation of any of the transactions
contemplated hereby nor performance or compliance with the terms and conditions
hereof (i) contravenes any material requirement of law applicable to it or (ii)
constitutes (x) a default under or results in the violation of the provisions in
its [charter, certificate of incorporation, by-laws] or other governance
document or (y) a material default of any indenture, loan or credit agreement or
any other agreement, lease instrument or document to which it is a party or by
which it or its properties may be bound.
(f) Litigation, etc. To the best of its knowledge, there are no
Proceedings now pending or threatened which could reasonably be expected to have
a material and adverse effect on its performance of its obligations hereunder or
which questions the validity, binding effect or enforceability hereof, any
action to be taken pursuant hereto or any transactions contemplated hereby.
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SECTION 2.8. Waiver of Setoffs. Chase Texas hereby expressly waives
any and all rights of setoff that Chase Texas may otherwise at any time have
under applicable law with respect to any Collateral Account and agrees that
amounts in any of the Collateral Accounts shall at all times be held and applied
in accordance with the provisions of the Security Agreement.
ARTICLE 3
CERTAIN AGREEMENTS AMONG THE SECURED PARTIES
SECTION 3.1. Priority of Security Interests; Subordination.
(a) Except as contemplated by the other Financing Documents, each
Representative, on behalf of all Senior Lenders for whom such Representative is
acting, agrees that the security interest of each Senior Secured Party in any
Collateral ranks and will rank equally in priority with the security interest of
the other Senior Secured Parties in the Collateral, subject to Section 4.1 of
the Security Agreement absent an Acceleration that has occurred and is
continuing, and subject to Section 4.3 of the Security Agreement if an
Acceleration shall have occurred and is continuing.
(b) (i) Anything in the Indenture or the Notes or any other Financing
Document to the contrary notwithstanding, each Representative, on behalf of
all Senior Lenders for whom such Representative is acting, agrees and the
Trustee, on behalf of each Class B Noteholder and Class C Noteholder
agrees, that the security interest of the Holders of the Class B Notes and
the Class C Notes in and to the Collateral (the "Subordinate Interests")
shall be subordinate and junior to the security interest of each Senior
Secured Party and the Trustee, on behalf of each Class B Noteholder and
Class C Noteholder agrees that until the Senior Secured Obligations have
been paid in full, it will not (A) initiate any judicial or other remedial
action against the Issuers to collect any moneys under the Class B Notes or
the Class C Notes or (B) directly or indirectly, exercise or enforce any
rights or remedies against the Issuers of any nature whatsoever, whether at
law or in equity, that it may have under the Class B Notes, the Class C
Notes or any of the Financing Documents or otherwise, in connection with or
as the result of any default under, or breach of any representation,
warranty, covenant or agreement set forth in the Financing Documents in
respect to the Subordinate Interests including any Class B Notes or Class C
Notes. Without limiting the generality of the foregoing sentence, the
Trustee, on behalf of each Class B Noteholder and Class C Noteholder agrees
for the benefit of the Senior Secured Parties, not to cause the filing of a
petition in bankruptcy against the Issuer or the Co-Issuer for failure to
pay to them amounts due under the Class B Notes and the Class C Notes or
under any Financing Document until the payment in full of the Senior
Secured Obligations and not before one year and one day have elapsed since
such payment or, if longer, the applicable preference period then in
effect. If any Acceleration has occurred and is continuing including,
without limitation, as a result of an Event of Default specified in Section
5.1(h) or (i) of the Common Agreement, all principal of and interest on the
Senior Secured Obligations, and all other amounts owing to the Senior
Secured Parties under the Financing Documents, shall be paid in full in
Cash before any further distribution is made on account of the Subordinate
Interests.
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(ii) The Trustee on behalf of each holder of a Subordinate Interest
agrees for the benefit of each Senior Secured Party that such holders of
Subordinate Interests shall not demand, accept or receive any payment or
distribution in respect of such Subordinate Interests in violation of the
provisions of the Financing Documents; provided that after the Senior
Secured Obligations and all other amounts owing thereunder, have been paid
in full in Cash, the holders of Subordinate Interests shall be fully
subrogated to the rights of the Senior Secured Parties. Nothing in this
Section 3.1(b) shall affect the obligation of the Issuers to pay holders of
Subordinate Interests.
In furtherance of the foregoing, but not by way of limitation thereof,
in the event that the Issuer or the Co-Issuer shall file or have filed against
it a petition under any bankruptcy or other insolvency law or be adjudicated a
bankrupt thereunder, with the result that the Issuer or the Co-Issuer is excused
from the obligation to pay all or any part of the interest otherwise payable in
respect to any Senior Secured Obligation during the period subsequent to the
commencement of any such proceedings thereunder, each holder of any portion of
the Subordinate Interests by its acceptance thereof, does hereby agree that all
or such part of such interest in the Senior Secured Obligations, as the case may
be, shall be payable in full in money out of, and to that extent diminish and be
at the expense of, reorganization dividends or other distributions or payments
in respect to the Subordinate Interests.
(c) The priorities specified in this Agreement and in the Security
Agreement with respect to the Collateral and the Collateral Proceeds are
applicable irrespective of any statement to the contrary in any Financing
Document (but subject, as to the Subordinate Interests, to the priorities
thereof specified in the Indenture) or any other agreement, the time or order or
method of attachment or perfection of Liens, the time or order of filing of
financing statements, or the giving or failure to give notice of the acquisition
or expected acquisition of purchase money or other security interests and to the
extent not provided for in this Agreement and the other Financing Documents, the
rights and priorities of the Secured Parties shall be determined in accordance
with applicable law.
SECTION 3.2. Decisionmaking.
(a) Notwithstanding anything to the contrary in this Agreement or any
Financing Document, the Collateral Agent, the Representatives and each other
Secured Party may not exercise or enforce any right, remedy, power or other
discretion, give any consent or enter into any agreement amending, modifying,
supplementing or waiving, or make any determination under or in respect of any
provisions of the Financing Documents except in accordance with this Agreement.
(b) If, at any time, (i) the Collateral Agent proposes to act as
contemplated under Financing Documents or (ii) any Representative, in accordance
with this Agreement, notifies the Collateral Agent of a matter with respect to
which it believes the Collateral Agent should exercise discretion, then the
Collateral Agent shall promptly notify each other Representative and each Hedge
Counterparty of the matter in question specifying:
(i) if relevant, the manner in which the Collateral Agent proposes to
act;
(ii) the Required Lenders applicable to the decision; and
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(iii) the period determined by the Collateral Agent by which the
relevant Secured Parties must provide it with instructions in relation to
such decision (the "Decision Period").
(c) Notwithstanding anything to the contrary in this Section 3.2 or in
any Financing Document, the Collateral Agent shall not be required to seek
instructions from the parties hereto, as applicable, and the Collateral Agent
shall give or withhold consent, approve or disapprove and otherwise make
decisions on behalf of the Secured Parties, with respect to the following:
(i) any corrections to or confirmations of the calculation of any
information set forth in the Valuation Report;
(ii) any decisions which are specified in any Financing Documents to
be made by the Collateral Agent after consultation with an Independent
consultant; and
(iii) all other routine, administrative or ministerial matters under
the Financing Documents, including any additions, modifications or
amendments to any provision of any Financing Document to cure any ambiguity
or to cure, correct or supplement any provision contained therein which is
inconsistent with any other provision contained therein, the decision in
all such cases with respect to which matters is not inconsistent with the
provisions of the other Financing Documents and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.3. Exercise of Rights. So long as any Secured Obligation
remains outstanding, each of the Representatives, on behalf of all the Secured
Parties for whom such Representative is acting, and each other Person that is a
party hereto, acknowledges and agrees as follows:
(a) Subject to Section 2.2 hereof, the Collateral Agent shall
administer the Collateral in the manner contemplated by this Agreement and the
Security Agreement and only upon the occurrence and continuance of an Event of
Default (subject to the requirement that the Collateral Agent shall have
received written notice thereof pursuant to Section 3.4(a) hereof and shall have
given written notice of the occurrence of such an Event of Default to the
Issuers), the Collateral Agent shall exercise, upon the written instruction of,
and on behalf of, the Required Lenders in accordance with this Article 3 and
subject to Article 5 of the Security Agreement, such rights and remedies with
respect to the Collateral as are granted to it under this Agreement, the other
Financing Documents and applicable law.
(b) No Secured Party and no class or classes of Secured Parties shall
have any right, other than in accordance with this Article 3, to (i) sell,
exchange, release, not perfect and otherwise deal with any Collateral at any
time pledged, assigned or mortgaged to secure the Secured Obligations in
accordance with the Financing Documents, (ii) exercise or refrain from
exercising any rights to direct the Collateral Agent to take any action in
respect of the Collateral, or (iii) take any other action with respect to the
Collateral (A) independently of the Collateral Agent or (B) other than to direct
the Collateral Agent to take action in accordance with this Article 3; provided,
however, that if an Event of Default exists under Section 5.1(h) or (i) of the
Common Agreement, the Collateral Agent shall automatically be authorized to take
such action without the written request of the Required Lenders.
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(c) Upon the request of the Collateral Agent, each Representative will
give the Collateral Agent notice of the outstanding Secured Obligation amount
owed by the Issuers under the Financing Documents to the Secured Parties for
whom such Representative is acting and any other information with respect to
such Secured Obligation that the Collateral Agent may reasonably request. The
Collateral Agent may request such information in respect of the Hedging
Agreements from each Hedge Counterparty and the Program Manager.
(d) Each Representative shall provide to each other Representative and
to the Collateral Agent copies of any amendments to any Financing Document to
which such Representative is, and to which the Collateral Agent is not, a party.
(e) Unless otherwise expressly provided herein, the Collateral Agent
shall not take any action under the Financing Documents, without the prior
written consent of the Required Lenders.
(f) Each decision required to be made in accordance with the terms of
this Agreement shall be binding upon each of the parties to this Agreement, each
Secured Party for whom any Representative acts, each other party to any
Financing Document, and their respective successors and assigns.
(g) Without limiting the generality of the foregoing, except with the
prior written consent of the Required Lenders, no Representative and no Secured
Party shall:
(i) exercise any right under any Financing Document to accelerate,
cancel or terminate any commitment under any Financing Document or declare
any commitment under any Financing Document, or declare any obligation or
commitment, prematurely payable, canceled or terminated, but the foregoing
shall not restrict scheduled or mandatory repayment, prepayments, or
reductions taking effect in accordance with the original terms of the
Financing Documents;
(ii) enforce or require the Collateral Agent to enforce any rights
with respect to the Collateral conferred by the Transaction Documents by
sale, taking possession, appointment of a receiver or an administrative
receiver or otherwise bring suit or arbitration in connection with any
transactions contemplated by the Transaction Documents against the Issuer,
the Co-Issuer, the Program Manager or Enron; or
(iii) exercise any right to set-off against any account or combination
of accounts whether arising under applicable law or under the Financing
Documents unless the relevant right to set-off would otherwise be lost and
except in respect of the netting of payments by a Hedge Counterparty under
a Hedging Agreement.
SECTION 3.4. Actions Upon An Event of Default. So long as any Secured
Obligation remains outstanding, the following provisions shall apply:
(a) Each Representative hereby agrees to give each other
Representative and the Collateral Agent, at the address specified in Section 5.1
hereof, written notice of the occurrence of an Event of Default of which it is
aware.
(b) Upon receipt by the Collateral Agent of written notice of the
occurrence and continuance of an Event of Default pursuant to Section 3.4(a)
hereof or by written notice of the
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occurrence and continuance of a default from the Hedge Counterparties pursuant
to the Hedging Agreements, the Collateral Agent shall give written notice of
the occurrence of such Event of Default or default to the Issuers.
(c) The Collateral Agent shall not be deemed to have actual,
constructive, direct or indirect knowledge or notice of the occurrence of any
Event of Default unless and until an Authorized Officer of the Collateral Agent
has received a written notice or a certificate from a Secured Party stating that
an Event of Default has occurred under their respective Financing Documents. The
Collateral Agent shall have no obligation whatsoever either prior to or after
receiving such notice or certificate to inquire whether an Event of Default has
in fact occurred and shall be entitled to rely conclusively, and shall be fully
protected in so relying, on any notice or certificate so furnished to it.
SECTION 3.5. Exercise of Remedies and Application of Proceeds. So long
as any Secured Obligation remains outstanding to more than one Secured Party,
the following provisions shall apply:
(a) If an Event of Default shall have occurred and be continuing, upon
the written request of the Required Lenders, the Collateral Agent shall request
the Account Bank to render an accounting of the current balance of each
Collateral Account.
(b) If an Event of Default shall have occurred and be continuing, and
only in such event, upon the written request of the Required Lenders, the
Collateral Agent shall be authorized to take any and all actions and to exercise
any and all rights, remedies and options which it may have under the Security
Documents and which the Required Lenders direct it to take, including, subject
to Article 5 of the Security Agreement, realization and foreclosure on the
Collateral.
(c) The proceeds of any sale, disposition or other realization or
foreclosure by the Collateral Agent upon the Collateral or any portion thereof
pursuant to the Security Documents shall be governed by Section 4.3 of the
Security Agreement. Any non-Cash proceeds resulting from such liquidation of the
Collateral shall be held by the Collateral Agent for the benefit of the Secured
Parties until later sold or otherwise converted into Cash, at which time the
Collateral Agent shall apply such Cash in accordance with Section 4.3 of the
Security Agreement.
SECTION 3.6. Receipt of Money or Proceeds.
(a) Each Representative hereby agrees on behalf of all Secured Parties
for whom such Representative is acting, and each other Person that becomes a
party hereto agrees, that if at any time during the term of this Agreement, any
Representative receives any payment or distribution of assets of the Issuers of
any kind or character, whether monies or Cash proceeds resulting from
liquidation of the Collateral, other than in accordance with the terms of this
Agreement and the Security Agreement, such Representative shall hold such
payment or distribution in trust for the benefit of the Secured Parties and
shall immediately remit such payment or distribution to the Collateral Agent.
(b) In the event that notwithstanding the provisions of this Agreement
and the other Financing Documents, any holder of any Subordinate Interests shall
have received any payment or distribution in respect of such Subordinate
Interests contrary to the provisions of this Agreement and the other Financing
Documents, then, unless and until the Senior Secured Obligations and all other
amounts owing thereunder shall have been paid in full in Cash, such
12
<PAGE> 15
payment or distribution shall be received and held in trust for the benefit of,
and shall forthwith be paid over and delivered to, the Collateral Agent, which
shall pay and deliver the same to the Senior Secured Parties in accordance with
Article 4 of the Security Agreement.
SECTION 3.7. Additional Secured Parties. The parties hereto hereby
agree that each Person replacing any of the Secured Parties that are party
hereto and each Person (or trustee or agent thereof) holding a Secured
Obligation of the Issuers is required to become a party to this Agreement either
individually or by authorizing the Representative acting for it to make and
perform this Agreement.
ARTICLE 4
AMENDMENTS; WAIVERS; INSTRUCTIONS;
OTHER RELATIONSHIPS
SECTION 4.1. Amendments to this Agreement. This Agreement shall not be
amended, modified, supplemented or waived without the consent of the Issuers and
each of the Representatives; provided that, this Agreement shall not be amended
in any manner that is adverse to the Collateral Agent without its consent, which
consent shall not be unreasonably withheld.
SECTION 4.2. Amendments to, Waiver under, and Instructions with
Respect to the Assigned Agreements and the Other Financing Documents.
(a) Notwithstanding anything in this Agreement to the contrary, but
subject to Section 3.2(c)(iii) hereof and Section 6.1(a)(iv) of the Security
Agreement, (x) the Collateral Agent (with the consent in writing of the Required
Lenders) may act to directly or indirectly amend, modify, terminate, supplement
or waive a right or permit or consent to the amendment, modification,
termination, supplement or waiver of a right with respect to any provision of
the Common Agreement (including Appendix A thereto as used therein and as
incorporated by reference in any other Financing Document), the Assigned
Agreements or any other Financing Document to which it is a party (other than
this Agreement) or change in any manner the rights of the Secured Parties under
any provision thereof or waive any Event of Default or Defaults (and the
Required Lenders may give instructions to the Collateral Agent under the
Financing Documents) and (y) each of the Representatives may act to directly or
indirectly amend, modify, terminate, supplement or waive a right or permit or
consent to the amendment, modification, termination, supplement or waiver of a
right with respect to any provision of any Financing Document to which such
Representative is a party (other than this Agreement); provided, however,
without the written consent of each Representative, no such waiver, amendment,
modification, supplement or consent shall:
(i) change the time of payment of or increase the rate of interest due
on any Secured Obligation or the amount of any premium payable upon
prepayment of any Secured Obligation;
(ii) change the payment date for or increase the amount of principal
or other amount (other than interest) due on any Secured Obligation;
13
<PAGE> 16
(iii) permit the Issuer or the Co-Issuer to assign its rights under
any Financing Document (except in accordance with the Financing Documents);
(iv) increase the Liquidity Facility Commitment or Backup Facility
Commitment other than in accordance with Section 9.2 or 9.3 of the Common
Agreement, as the case may be;
(v) change any of the percentages specified in the definition of
Required Lenders;
(vi) change the currency in which payments by the Issuers are required
to be made;
(vii) release any Collateral from the Lien granted under any of the
Security Documents or of any funds from any Account other than as
contemplated in the Financing Documents;
(viii) extend the Investment Period;
(ix) modify any of the provisions of Articles 2, 10 and 11 of the
Common Agreement or any provisions of the Security Agreement; or
(x) change the time or increase the amount of payment of any fee due
or payable under or in connection with the Financing Documents.
(b) Except as to the matters contemplated by the proviso to the
preceding clause (a), any Representative may at any time, and from time to time,
without any consent of or prior notice to the other Representatives or the
Collateral Agent (except to the extent required by any Financing Document) and
without impairing or releasing the obligations of any Person under this
Agreement: (i) waive, amend, modify or supplement any Financing Document to
which such Secured Party is a party, (ii) release anyone liable in any manner
under or in respect of the Secured Obligations owing under any such Financing
Document, or (iii) apply any sums from time to time received for payment or
satisfaction of the Secured Obligations of such Secured Parties except as
otherwise provided in Section 3.6.
(c) Any Representative taking any of the actions described in (b)
shall promptly notify the other Secured Parties.
14
<PAGE> 17
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. Agreement for Benefit of Parties Hereto. Nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon,
or to give to, any Person other than the parties hereto and their respective
successors and assigns and Persons for whom the parties hereto are acting as
agents or representatives, any right remedy or claim under or by reason of this
Agreement or any covenant, condition or stipulation hereof; and the covenants,
stipulations and agreements contained in this Agreement are and shall be for the
sole and exclusive benefit of the parties hereto and their respective successors
and assigns and Persons for whom the parties hereto are acting as agents or
representatives.
SECTION 5.2. Notices. Any request, demand, authorization, direction,
notice, consent, waiver or other document provided or permitted by this
Agreement may be made upon, given or furnished to the following addresses:
If to the Issuer:
Address:
----------------------------------
Attention:
----------------------------------
Telephone:
----------------------------------
Telecopy:
----------------------------------
with a copy to the Program Manager:
Address:
----------------------------------
Attention:
----------------------------------
Telephone:
----------------------------------
Telecopy:
----------------------------------
If to the Co-Issuer:
Address:
----------------------------------
Attention:
----------------------------------
Telephone:
----------------------------------
Telecopy:
----------------------------------
with a copy to the Program Manager:
Address:
----------------------------------
Attention:
----------------------------------
Telephone:
----------------------------------
Telecopy:
----------------------------------
15
<PAGE> 18
If to the Trustee:
Address: 600 Travis, 8th Floor, Houston, Texas 77002
Attention: Global Trust Services - Enron International CPO, L.P.
Telephone:
----------------------------------
Telecopy:
----------------------------------
If to the Liquidity Facility Agent:
Address:
----------------------------------
Attention:
----------------------------------
Telephone:
----------------------------------
Telecopy:
----------------------------------
If to the Backup Facility Agents:
As specified in the Designation Letters delivered
pursuant to Section 1.24 of the Common Agreement.
If to the Collateral Agent:
Address:
----------------------------------
Attention:
----------------------------------
Telephone:
----------------------------------
Telecopy:
----------------------------------
If to the Hedge Counterparties:
As specified in the executed counterparts of the
related Hedging Agreement delivered pursuant to
Section 9.1(a) of the Common Agreement.
or to such other addresses as to which any such party may specify to each of
the other parties hereto in the manner set forth below. All notices or other
communications required or permitted to be given hereunder shall be in writing
and shall be considered as properly given (a) if delivered in person, (b) if
sent by overnight delivery service, (c) in the event overnight delivery
services are not readily available, if mailed by first class mail, postage
prepaid, registered or certified with return receipt requested or (d) if sent
by prepaid telex or by telecopy, with correct answerback received. Notice so
given shall be effective upon receipt by the addressee, except that
communication or notice so transmitted by telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day (if a Business Day and, if not, on the next following Business Day) on
which it is validly transmitted if transmitted before 4:00 p.m., recipient's
time, and if transmitted after that time, on the next following Business Day;
provided, however, that if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. Any party hereto shall have the right to change its address
for notice hereunder to any other location by giving no less than 20 days'
notice to the other parties in the manner set forth hereinabove.
16
<PAGE> 19
SECTION 5.3. Execution in Counterparts. This Agreement may be executed
in any number of counterparts by the parties hereto, each of which shall be an
original, and all such counterparts shall constitute one and the same
instrument.
SECTION 5.4. Effect of Headings. The Article and Section headings
herein are for convenience of reference only and shall not affect the
interpretation hereof. __ __________SECTION 5.5. Assignments. This Agreement
shall be a continuing obligation of the Issuers and shall (a) be binding upon
the Issuers and their respective successors and assigns, and (b) inure to the
benefit of and be enforceable by each Secured Party, the Collateral Agent, and
by their respective successors, transferees and assigns. Except as provided in
Section 4.13 of the Common Agreement, the Issuers may not assign this Agreement,
or delegate any of their duties hereunder, without the prior written consent of
each other party hereto, and any such attempted assignment shall be null and
void.
SECTION 5.6. No Petition Agreement. The Collateral Agent covenants and
agrees that, for a period of one year plus one day after payment in full of all
amounts payable under or in respect of the Financing Documents, it will not
institute against, or join any other Person in instituting against, the Issuer
or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law. This section shall survive any termination of this
Agreement.
SECTION 5.7. TRIAL BY JURY WAIVED. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT.
SECTION 5.8. Severability. If any provision in this Agreement is
invalid, illegal or unenforceable in any jurisdiction, then, to the fullest
extent permitted by applicable law, (i) the other provisions hereof shall remain
in full force and effect in such jurisdiction and (ii) the invalidity,
illegality or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction.
SECTION 5.9. Integration. This Agreement, together with the other
Financing Documents, constitutes the entire agreement and understanding among
the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 5.10. Term of This Agreement. This Agreement shall take effect
on the Closing Date, and shall continue in effect until the Final Termination
Date.
17
<PAGE> 20
SECTION 5.11. Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES
OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW.
SECTION 5.12. Submission to Jurisdiction.
(a) Except as set forth in subsection (b), the Issuers hereby
irrevocably submit to the non-exclusive jurisdiction of any New York State or
federal court sitting in the Borough of Manhattan in The City of New York in any
action or proceeding arising out of or relating to this Agreement, and the
Issuers hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such New York State or federal court.
The Issuers hereby irrevocably waive, to the fullest extent that they may
legally do so, any defense which they now or hereafter have to the laying of the
venue of any such proceeding brought in such court and any claim that any such
proceeding brought in such court has been brought in an inconvenient forum and
to the maintenance of such action or proceeding. The Issuers irrevocably consent
to the service of any and all process in any action or proceeding by the mailing
or delivery of copies of such process to it at the address set forth in Section
5.2. The Issuers agree that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Notwithstanding the foregoing,
no document filed, assertion made, or issue adjudicated in any court or other
arbitral proceeding shall have a collateral, judicial, or other estoppel or res
judicata effect on any arbitral proceeding that is subject to Section 11.11 of
the Management Agreement.
(b) The foregoing submission to jurisdiction is not intended to and
shall not apply to any claim, controversy, issue or accounting bearing on
Article 9 of the Enron Support Agreement except insofar as such claim,
controversy, issue or accounting arises in connection with a motion to confirm,
vacate, or modify an arbitration award rendered pursuant to Section 11.11 of the
Management Agreement.
SECTION 5.13. Additional Parties. In the event the Issuer enters into
one or more Backup Facilities after the Closing Date, each Person acting as the
Backup Facility Agent is required to become a party to this Agreement on behalf
of the Backup Lenders for whom such Person is acting by executing and delivering
to the Issuer and the Collateral Agent a Designation Letter substantially in the
form set forth in Exhibit F to the Common Agreement. Each Person made party to
this Agreement pursuant to this section shall be bound by and be subject to the
terms and conditions hereof and the covenants, stipulations and agreements
contained herein.
18
<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Collateral Agency and
Intercreditor Agreement to be duly executed by their officers thereunto duly
authorized as of the day and year first above written.
ENRON INTERNATIONAL CPO, L.P.
By: Enron CPO Holdings, Inc.,
its general partner
By
------------------------------
Name:
Title:
ENRON INTERNATIONAL CPO, INC.
By:
-------------------------------
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Trustee
By:
-------------------------------
Name:
Title:
----------------------------------,
not in its individual capacity,
but solely as Liquidity Facility Agent
By:
-------------------------------,
Name:
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
in its capacity as Collateral Agent and,
with respect to Sections 2.7 and 2.8
hereof, in its individual capacity
By:
--------------------------------
Name:
Title:
19
<PAGE> 1
EXHIBIT 10.2
Draft
8/7/98
================================================================================
ENRON INTERNATIONAL CPO, L.P.,
AS ISSUER
ENRON INTERNATIONAL CPO, INC.,
AS CO-ISSUER
ENRON CPO MANAGEMENT, L.P.,
AS PROGRAM MANAGER
AND
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
-----------------------------
AS BACKUP PROGRAM MANAGERS
MANAGEMENT AGREEMENT
DATED AS OF _____, 1998
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Management Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Services to be Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Standard of Care; Indemnity; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.03 Support for Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.04 Additional Activities of the Program Manager and its Affiliates . . . . . . . . . . . . . . . . . . .11
2.05 Authorization to Act; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.06 Information; Further Assurances; Agreement under Financing Documents . . . . . . . . . . . . . . . . .12
2.07 Indemnity of Program Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.08 Compensation to the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 3. Representations and Warranties of the Program Manager. . . . . . . . . . . . . . . . . . . . . . . . .13
3.01 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.02 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.03 No Violation or Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.04 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.05 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.06 Registration as Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.07 Ownership of Program Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.08 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 4. Representations and Warranties of the Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.01 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.02 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.03 No Violation or Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.04 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.05 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.06 No Required Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 5. Representations and Warranties of the Co-Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
5.01 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.02 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.03 No Violation or Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.04 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.05 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.06 No Required Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 6. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.01 No Petition for Bankruptcy or Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.02 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.03 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
6.04 Compliance with Laws and the Financing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . .19
6.05 Interested Party Transactions; Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
</TABLE>
<PAGE> 3
- 2 -
<TABLE>
<S> <C> <C>
Section 7. Management Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.01 Payment of Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
7.02 Status upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 8. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 9. No Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 10. Termination of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
10.01 Automatic Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
10.02 Optional Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
10.03 Effectiveness of Termination under Certain Circumstances . . . . . . . . . . . . . . . . . . . . . .22
10.04 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
10.05 Replacement Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
10.06 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
11.03 Amendment, Modification or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
11.04 Successors and Assigns .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
11.05 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
11.06 Survival of Representations, Warranties and Indemnities . . . . . . . . . . . . . . . . . . . . . . .24
11.07 Benefit of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
11.08 Priority of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
11.09 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
11.11 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
11.12 Realty Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
11.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
11.14 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.16 Conflict with the Financing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.17 Limitation on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.18 Limitation on Recovery of Certain Types of Damages . . . . . . . . . . . . . . . . . . . . . . . . .28
11.19 Limitation on Amendment of Financing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . .29
</TABLE>
<PAGE> 4
MANAGEMENT AGREEMENT dated as of [_______ __], 1998 among ENRON
INTERNATIONAL CPO, L.P., a limited partnership formed under the laws of the
State of Delaware (the "Issuer"), ENRON INTERNATIONAL CPO, INC., a corporation
organized under the laws of the State of Delaware (the "Co-Issuer" and
collectively with the Issuer, the "Issuers"), ENRON CPO MANAGEMENT, L.P., a
limited partnership formed under the laws of the State of Delaware (the "Program
Manager"), CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association, and THE CHASE MANHATTAN BANK (each a "Backup Program Manager").
The Issuers desire to have the Program Manager provide certain
services to the Issuers, and the Program Manager is willing, and has the
capacity, to provide such services to the Issuers, all on the terms and
conditions of this Agreement.
The Issuers desire to have the Backup Program Managers provide
certain services to the Issuers, and each Backup Program Manager is willing,
and has the capacity, to provide such services to the Issuers, all on the terms
and conditions to this agreement.
In consideration of the foregoing and the mutual agreements
hereinafter contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. Terms used but not defined
herein have the respective meanings given to such terms in Appendix A to the
Common Agreement ("Appendix A") dated as of ________, 1998 among the Issuer, the
Co-Issuer, __________________ as Trustee, ____________________ as Liquidity
Facility Agent, _____________________ as Backup Facility Agent and
__________________ as Collateral Agent (as amended, modified and supplemented
from time to time, the "Common Agreement"), or if not defined therein, in the
Partnership Agreement referred to in Appendix A. Except as otherwise expressly
provided herein, the rules or interpretations set forth in Appendix A shall
apply to this Agreement. As used herein, the following terms have the following
respective meanings:
"Accrual Period" means (a) prior to the Final Termination
Date, each Interest Accrual Period and (b) after the Final Termination Date,
each period beginning on the day (the "First Date") following the last day of
the immediately preceding Accrual Period and ending on the ___ day of the month
of _______, ________, _______ or ________ that occurs closest to the date 90
days after the First Date; provided that no Accrual Period shall extend beyond,
and the final Accrual Period shall end on, the earlier of (i) the date on which
this Agreement is terminated and (ii) the date on which the Issuer is
terminated.
"Administrative Fee" has the meaning specified in Section
7.01.
"Agreement" means this Management Agreement as modified and
supplemented and in effect from time to time (subject to, prior to the Final
Termination Date, the applicable provisions of the Common Agreement).
"Aggregate Book Value of the Issuer's Assets" for any Accrual
Period means (i) at any time prior to the Final Termination Date, the book
value (determined in accordance with GAAP) of all Project Loans, all amounts
credited to the Accounts and (without duplication) all
<PAGE> 5
- 2 -
Permitted Investments (collectively, the "Relevant Assets") and (ii) at any
time after the Final Termination Date, the book value (determined as aforesaid)
of all Relevant Assets on the last day of such Accrual Period, as such book
value is determined in good faith by the Program Manager.
"Bankruptcy or Insolvency" of any Person means such Person (a)
is dissolved (other than pursuant to a consolidation, amalgamation or merger),
(b) becomes insolvent or is generally unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become due,
(c) makes a general assignment, arrangement or composition with or for the
benefit of its creditors, (d) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (i) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the making of
an order for its winding-up or liquidation or (ii) is not dismissed,
discharged, stayed or restrained in each case within 90 days of the institution
or presentation thereof, (e) has a resolution passed for its winding-up or
liquidation (other than pursuant to a consolidation, amalgamation or merger),
(f) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets, (g) has a
secured party take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its assets and such
secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter, (h)
causes or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect on any of the
events specified in clauses (a) to (g) (inclusive) or (i) takes any material
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts.
"Comparable Countries" means countries with credit ratings
and/or characteristics similar to that of the country in which the potential
Project Borrower is located.
"Comparable Debt" means debt having similar maturities and
similar payment terms (i.e. fixed or floating rate) which is available to either
(x) the potential Project Borrower from financing sources other than the Issuer
or (y) projects similar to that owned by the potential Project Borrower and
which are located in Comparable Countries. For purposes of this definition,
"Comparable Debt" shall include but not be limited to U.S. Dollar denominated
senior debt provided through commercial banks, private placements, public or
private capital markets offerings and debt provided by export credit agencies,
multilateral lending agencies, bilateral lending agencies, regional development
banks, local development banks and other local financing sources.
"Covered Party" has the meaning specified in Section 8.
"Damages" has the meaning specified in Section 2.02(b).
"Enron Offered Opportunities" means the investment
opportunities offered to the Issuer by Enron pursuant to Section 7.1 of the
Enron Support Agreement and other opportunities offered to the Issuer by Enron
or an Enron Affiliate.
"Indemnified Party" has the meaning specified in Section
2.02(b).
"Inflation Factor" means with respect to any calendar year the
quotient (expressed as a decimal) obtained by dividing (i) the CPI published in
respect of the most recently ended calendar year (the "New Year"), by (ii) the
CPI published in respect of the calendar year immediately preceding the New
Year. "CPI", for purposes hereof, means with respect to any calendar year or
any period during any calendar year the "Consumer Price Index for All Urban
<PAGE> 6
- 3 -
Consumers (CPI-U) U.S. City Average for All Items" published by the Bureau of
Labor Statistics for the United States Department of Labor (1982-1984=100). If
the CPI shall be converted to a different standard reference base or otherwise
revised after the date hereof, CPI shall thereafter be calculated with use of
such new or revised statistical measure published by the Bureau of Labor
Statistics or, if not so published, as may be published by any other reputable
publisher of such price index selected by the Program Manager.
"Limited Partner" means any Person which owns a Class I
Interest or a Class II Interest.
"Management Fee" has the meaning specified in Section 7.01.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the Property (taken as a whole), business,
operations, financial condition or capitalization of such Person or the ability
of such Person to perform its obligations under this Agreement or any Related
Agreement with respect to such Person or the validity or enforceability hereof
or thereof or the rights and remedies of any other Person party hereto or
thereto.
"Misfeasance" has the meaning specified in Section 2.02(b).
"Pricing Terms" means, with respect to any debt, the "all-in"
cost of such debt, including but not limited to base rates, credit spreads, fees
and withholding tax gross-ups, all to the extent applicable.
"Proceeding" has the meaning specified in Section 2.02(b).
"Property" means any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Related Agreement" means, in respect of any party hereto, any
document relating to this Agreement to which such Person is a party.
"Replacement Management Agreement" means any agreement
substantially in the form hereof entered into after the termination of this
Agreement between the Issuers and a Replacement Manager that obligates the
Replacement Manager to perform all or a substantial portion of the Services.
"Replacement Manager" means any Person that, simultaneously
with, or at any time after, the termination of this Agreement, enters into a
Replacement Management Agreement with the Issuers.
"Services" has the meaning specified in Section 2.01.
"Standard of Care" has the meaning specified in Section
2.02(a).
<PAGE> 7
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Section 2. Management Services.
2.01 Services to be Provided. (a) Subject to the terms
and conditions set forth in this Agreement and the Financing Documents, the
Program Manager hereby agrees to provide the Issuer and the Co-Issuer with the
following services (the "Services"), consistent with the covenants and
agreements of the Issuer and/or the Co-Issuer in the Financing Documents:
(i) (A) evaluating Enron Offered Opportunities, (B) if
appropriate, bidding to make a Project Loan (it being understood and
agreed that the Program Manager is under no obligation to cause the
Issuer to make such a bid if it concludes that such Project Loan is
not in the best interest of the Issuer taking into consideration the
interests of the Holders of Notes, Support Notes and the Holders of
Interests, solely in their capacities as such), and (C) if such bid to
make a Project Loan is accepted by the relevant Project Borrower,
implementing the making of such Project Loan;
(ii) monitoring the Project Loans and other Portfolio Assets
and taking actions such that (A) reasonable inquiries are made and
appropriate actions are taken with respect to (1) construction and
operating performance of the Eligible Projects to which a Project Loan
has been made, (2) scheduled payments, if any, not made when due
pursuant to any Underlying Instruments, (3) the occurrence of any
default or event of default (when it has reason to know of the same)
under, any Underlying Instrument or (4) any periodic reports or other
information provided to the Issuer pursuant to the Underlying
Instruments, (B) Commitments to fund Project Loans are made by the
Program Manager, on behalf of the Issuer, only if the Issuer would be
able to fund such Project Loans in accordance with the terms of the
Common Agreement and (C) administration and collection efforts are
attended to in respect of the Project Loans and other Portfolio Assets
in a timely manner;
(iii) determining and making Permitted Investments and
selecting the dates for acquisitions or sales of Permitted
Investments, and implementing the acquisition and sale of such
Permitted Investments on such dates;
(iv) negotiating Hedging Agreements and identifying and
selecting Hedge Counterparties;
(v) negotiating commitment letters and Underlying Instruments
and any confidentiality agreements in respect of Project Loans and
documentation providing for the purchase and sale of other Portfolio
Assets, including, without limitation, Permitted Investments and the
Hedging Agreements;
(vi) negotiating Backup Facility Loan Agreements and TIP
Investment Management Agreements, as necessary;
(vii) determining the structure of Project Loans and forming,
establishing and managing Intermediate Funding Entities through which
the Issuer may make Project Loans;
(viii) negotiating amendments, modifications, waivers and
supplements to the Underlying Instruments in respect of Project Loans
and of documentation relating to the other Portfolio Assets;
<PAGE> 8
- 5 -
(ix) exercising rights and remedies associated with Portfolio
Assets, including, without limitation, the Project Loans and the
Hedging Agreements;
(x) providing information (including without limitation
information regarding (A) the Project Loans and other Portfolio Assets
and (B) the satisfaction of any Portfolio Financial Test, the Reserve
Test, the Senior Coverage Test or the Average Life Test) to, and
entering into discussions with, the Rating Agencies;
(xi) after payment in full of the Notes, (A) determining
when, in the opinion of the Program Manager, it would be in the best
interests of (1) the Limited Partners to dissolve the Issuer and (2)
the shareholder of the Co-Issuer to dissolve the Co-Issuer and (B)
liquidating assets of the Issuer in accordance with the Partnership
Agreement and the Co-Issuer in accordance with its organizational
documents;
(xii) selling or otherwise disposing of Project Loans;
(xiii) liquidating all or a portion of any other Collateral;
(xiv) at anytime prior to the Investment Termination Date,
determining whether, in light of the composition of the Issuer's
portfolio of Project Loans, general market conditions and other
pertinent factors, investments in additional Project Loans would
either be impracticable or not beneficial to the Issuer;
(xv) determining whether a borrowing or prepayment should be
made with respect to the Backup Facility or the Liquidity Facility and
whether additional Class A Notes should be issued after the Closing
Date, and taking such action as may be necessary to effect such a
borrowing, prepayment or issuance, as the case may be;
(xvi) determining whether the term of the Issuer should be
extended after _______, 2018;
(xvii) implementing any redemption or refinancing pursuant to
the terms of Article 10 of the Common Agreement and any applicable
Financing Document;
(xviii) determining the existence and amount of an Issuer
Determined Loss;
(xix) enforcing the obligations of Enron under the Enron
Support Agreement;
(xx) furnishing such information (including, but not limited
to, the Valuation Report pursuant to Section 6.1 of the Common
Agreement), certificates, opinions and other documents to the Issuers,
the Representatives, the Collateral Agent, the Hedge Counterparties
and either Rating Agency as may be required from time to time to
determine compliance by the Issuers and/or the Program Manager with
the terms of this Agreement, any of the Financing Documents and/or the
Partnership Agreement, as well as such other information,
certificates, opinions and other documents as may be reasonably
requested from time to time;
<PAGE> 9
- 6 -
(xxi) selecting and retaining counsel, engineers and other
consultants as may be necessary or appropriate to perform its duties
hereunder;
(xxii) executing and delivering all documents and instruments
and taking such other actions as the Program Manager determines are
necessary or appropriate to perform its duties hereunder or in taking
any other actions or exercising any other discretions of the Issuer or
the Co-Issuer under any Financing Document or otherwise associated
with the management of either;
(xxiii) ensuring that the Underlying Instruments in respect of
a particular Project Loan permit transactions entered into after the
Financial Closing Date therefor between the relevant Project Borrower
and Affiliates of the equity sponsors only on an "arms-length" basis
or better;
(xxiv) filing all reports, proxy or information statements and
other information with the Commission required pursuant to the
informational requirements of the Exchange Act;
(xxv) making determinations as to the transfer of funds from
the Collection Account on a date other than a Quarterly Payment Date
under Section 3.2(c) of the Security Agreement; and
(xxvi) maintaining the books and records of the Issuers
including preparation and filing of any financial statements as may be
required under the Financing Documents.
(b) In providing the Services hereunder, the Program Manager
may employ third parties, including its Affiliates, to render advice and
assistance; provided, however, that (subject to Section 2.02) the Program
Manager shall not be released from any of its duties hereunder regardless of
the performance of any services by third parties.
(c) The Program Manager shall take steps to prevent the
Issuer from becoming subject to taxation on net income in any jurisdiction in
which a Project Borrower is located other than on income arising from a Project
Loan to the Project Borrower in such jurisdiction.
2.02 Standard of Care; Indemnity; Etc.
(a) Standard of Care. In rendering the Services and in taking
the actions to be taken by the Program Manager pursuant to Section 2.05 hereof,
the Program Manager shall (except when acting pursuant to Section 2.01(a)(xi),
Section 2.01(a)(xiv) and Section 2.01(a)(xvii) or otherwise taking any
particular action as directed by the General Partner or the Required Lenders
pursuant to the express terms of this Agreement or any Financing Document) act
as would a reasonable and prudent lender acting for its own account (subject to
the terms hereof and of the Financing Documents). The standard of care set
forth in this paragraph (a) shall hereinafter be referred to as the "Standard
of Care."
In making determinations with respect to the Pricing Terms for
any Project Loan, the Program Manager shall be deemed to have complied with the
Standard of Care
<PAGE> 10
- 7 -
so long as such Pricing Terms equal or exceed 90% the lowest available Pricing
Terms of Comparable Debt; provided that in the event that the Program Manager is
unable to identify Comparable Debt, the Program Manager may determine Pricing
Terms for a Project Loan by any reasonable means, including the consideration of
Pricing Terms available for any of the following categories of Debt, to the
extent applicable:
(1) Senior debt provided to, or available for, projects
regardless of their type and located in Comparable
Countries and having a credit risk similar to that of
the Eligible Project; and/or
(2) Senior debt provided to, or available for, sovereign
or corporate borrowers in Comparable Countries;
in any case having similar maturities (or, if not
available, shorter and/or longer, maturities).
Notwithstanding anything to the contrary in the preceding
paragraph, in determining the Pricing Terms for any Project Loan the Program
Manager may ignore the impact of current market aberrations and volatility.
In considering any of the aforesaid factors, the Program
Manager may extrapolate or interpolate Pricing Terms for differing maturities
and average lives in any reasonable manner.
Notwithstanding the foregoing, in an instance where a governmental authority
having jurisdiction imposes a ceiling on the Pricing Terms (or any other
economic terms) associated with any Eligible Project, the Program Manager may,
in satisfaction of its Standard of Care, determine Pricing Terms for such
Project Loan at or beneath such ceiling, so long as the Credit Support Tests
are satisfied.
In taking action and making determinations in respect of
maturity dates and amortization of any Project Loans, the Program Manager shall
be deemed to have complied with the Standard of Care so long as the Average
Life Test is satisfied.
<PAGE> 11
- 8 -
With respect to the acquisition or initial funding,
maintenance and enforcement of any Project Loan, the Program Manager will apply
the Standard of Care in evaluating any transactions between a Project Borrower
and any of its Affiliates, including (where relevant) development fees,
construction contracts, operations and maintenance agreements, fuel agreements
and power purchase agreements.
In rendering the Services and in taking the actions to be
taken by the Program Manager pursuant to Section 2.05 hereof, the Program
Manager shall not take any action, which would cause: (i) the Issuer or the
Co-Issuer to violate any applicable laws, rules and regulations, including any
applicable United States federal and state securities laws, (ii) the Issuer to
breach the Partnership Agreement or the Co-Issuer to breach its Certificate of
Incorporation and Bylaws, (iii) the Issuer or the Co-Issuer to breach any
Transaction Document or Additional Transaction Documents, (iv) the Issuer or
the Co-Issuer to be required to register as an investment company under the
Investment Company Act or (v) in the Program Manager's reasonable belief, a
reduction or withdrawal of the then current ratings of the Class A Notes or the
Class B Notes unless such failure to act would cause the Issuer or the
Co-Issuer to fail to satisfy clause (i) of this paragraph.
Notwithstanding the foregoing or any other provision of this
Agreement, neither the Program Manager, any Affiliate of the Program Manager,
nor any officer, agent, stockholder, partner, member, director or employee of
the Program Manager or any Affiliate of the Program Manager shall, except to
the extent otherwise expressly provided by applicable law, have any liability,
whether direct or indirect and whether in contract, tort or otherwise, (i) for
any action taken or omitted to be taken by it or any of such Persons hereunder
or in connection herewith, unless there has been a determination in accordance
with Section 11.11 hereof that such act or omission was performed or omitted in
bad faith or constituted gross negligence or willful misconduct, or (ii) for
any action taken or omitted to be taken by the Program Manager as required or
prohibited by the Issuer and/or the Co-Issuer under the Partnership Agreement
or the Financing Documents or at the express direction of any of the Collateral
Agent or the Required Lenders (it being understood that the Program Manager
need follow such directions only when expressly required pursuant to the
Financing Documents). The Program Manager may consult with counsel,
accountants, appraisers, technical or other advisers (which may also be
counsel, accountants or technical or other advisers (including but not limited
to the TIP Advisor) for the Issuer, Enron or any of their respective
Affiliates) and shall be fully protected to the extent permitted by applicable
law, in acting or failing to act hereunder if such counsel, accountants,
technical or other advisers are consulted in good faith by the Program Manager
and such action or inaction is taken or not taken in good faith by the Program
Manager in accordance with the advice or opinion of such counsel, accountants,
technical or other advisers. In soliciting the advice or opinion of any
counsel, accountant, technical or other adviser that is an employee of Enron or
any Affiliate of Enron, the Program Manager shall ensure that such employee is
aware that such advice is being solicited by the Program Manager in its
capacity as Program Manager for the Issuer and the Co-Issuer.
(b) Indemnity. The Issuer hereby indemnifies and holds
harmless the Program Manager, Affiliates of the Program Manager, and officers,
agents, stockholders, partners, members, directors and employees of the Program
Manager and Affiliates of the Program
<PAGE> 12
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Manager (each, an "Indemnified Party") from and against any loss, claim,
expense, damage, liability or injury suffered or sustained by any of them,
including, without limitation, judgments, interest thereon, fines, charges,
costs, amounts paid in settlement, expenses and attorneys' fees incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or any appeal taken from the foregoing by or before
any court or governmental, administrative or other regulatory agency, body or
commission (each, a "Proceeding"), whether pending or threatened and whether or
not any Indemnified Party is or may be a party thereto (collectively
"Damages"), by reason of (i) any action taken or omitted to be taken by any
Indemnified Party hereunder or in connection herewith, except for Damages that
have been determined in accordance with Section 11.11 hereof to result from
such Indemnified Party's gross negligence, bad faith or willful misconduct
(collectively, "Misfeasance"), (ii) any action taken or omitted to be taken by
the Program Manager at the express direction of any of the Issuer, the
Co-Issuer, the Collateral Agent or the Required Lenders and (iii) any action
taken or omitted to be taken in good faith by the Program Manager in accordance
with the advice or opinion of counsel or accountants as provided in the last
two sentences of Section 2.02(a).
If a Proceeding is brought against any Indemnified Party with
respect to which indemnity may be sought from the Issuer pursuant hereto, or if
any Indemnified Party receives notice from any potential litigant of a claim
that such Indemnified Party reasonably believes will result in the commencement
against such Indemnified Party of any such Proceeding, such Indemnified Party
shall, (i) as promptly as practicable and, in any event, within 30 days, after
receiving notice thereof, give written notice to the Issuer of the commencement
of such Proceeding or of the existence of any such claim, which notice shall
specify in reasonable detail the nature of the claim and the amount (or an
estimate of the amount) of the claim; provided, however, that any failure to
give or any delay in giving any such notice to the Issuer of any such action,
proceeding or claim shall not relieve the Issuer from its obligations under
this Section 2.02(b) except to the extent that the amount payable by the Issuer
pursuant to its indemnity in this Section 2.02(b) is increased as a result of
such failure or delay, (ii) provide the Issuer such information and cooperation
with respect to such claim as the Issuer may reasonably request, including, but
not limited to, making appropriate personnel available to the Issuer at such
reasonable times as the Issuer may request and (iii) cooperate and take all
steps as the Issuer may reasonably request to preserve and protect any defense
to such claim. In case any such Proceeding shall be brought against any
Indemnified Party, the Issuer will be entitled to participate in the defense of
such Proceeding, and, after written notice from the Issuer to such Indemnified
Party, to assume the defense of such Proceeding with counsel of its choice, or,
as provided in the second to last sentence of this paragraph, compromise or
settle such Proceeding, at its expense (in which case the Issuer will not
thereafter be responsible for the fees and expenses of any separate counsel
retained by such Indemnified Party); provided that such counsel shall be
satisfactory to the Indemnified Party in the exercise of its reasonable
judgment. Notwithstanding the preceding sentence, an Indemnified Party will be
entitled to employ counsel separate from counsel for the Issuer and from any
other party in such action if such Indemnified Party reasonably determines that
a conflict of interest exists or may arise which makes representation by
counsel chosen by the Issuer not advisable. In the event an Indemnified Party
is entitled to employ separate counsel pursuant to the preceding sentence, the
reasonable fees and disbursements of such separate counsel will be paid by the
Issuer; provided that the Issuer will not be obligated to pay in advance of a
final judicial determination of a Proceeding or settlement
<PAGE> 13
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of such Proceeding any fees and disbursements of such separate counsel
otherwise payable in accordance with the terms of this Agreement except to the
extent (i) such Indemnified Party undertakes to repay to the Issuer any amounts
paid pursuant to this sentence in the event of a determination in accordance
with Section 11.11 hereof that such Indemnified Party is liable in such action
due to its Misfeasance and (ii) in the case of any Indemnified Party which is
not a natural person, if such Indemnified Party has either a net worth or
unencumbered liquid assets equal to or less than the aggregate amount which the
Indemnified Party could be obligated to repay pursuant to this paragraph, the
obligation of the Indemnified Party to repay fees and disbursements of separate
counsel is guaranteed by a Person that has, at the time it enters into such
guarantee, both a net worth and unencumbered liquid assets equal to or greater
than the aggregate amount which the Indemnified Party could be obligated to
repay pursuant to this paragraph. Notwithstanding the election by the Issuer
to assume the defense of such Proceeding, (x) the Issuer may not enter into any
compromise or settlement of such Proceeding, without such Indemnified Party's
prior written consent, if such compromise or settlement (A) does not discharge
and release such Indemnified Party from any and all Damages related to or
arising from all matters forming the basis for the claim in respect of which
such Proceeding was brought or (B) imposes any other material liability or
obligation on such Indemnified Party and (y) such Indemnified Party shall have
the right, at its own expense, to employ separate counsel and to participate in
the defense of such Proceeding. No Indemnified Party shall enter into a
settlement of any action, claim or proceeding as to which an Indemnified Party
would be entitled to indemnification hereunder without the Issuer's prior
written consent (which consent may not be unreasonably withheld).
(c) Advance of Expenses. Upon written request from any
Indemnified Party, the Issuer shall advance promptly to such Indemnified Party
any reasonable legal expenses and other costs for which the Indemnified Party
is indemnified hereunder incurred by such Indemnified Party as a result of any
claim made or Proceeding commenced against such Indemnified Party which arises
out of, relates to or is connected with the Services; provided that the Issuer
shall not be obligated to make any payments to an Indemnified Party pursuant to
this Section 2.02(c) unless (i) such Indemnified Party undertakes to repay the
advanced funds to the Issuer in the event that it is not entitled to
indemnification pursuant to this Section 2.02 and (ii) in the case of any
Indemnified Party which is not a natural person, if such Indemnified Party has
either a net worth or unencumbered liquid assets equal to less than the
aggregate amount which the Indemnified Party could be obligated to repay
pursuant to this Section 2.02(c), the obligation of such Indemnified Party to
repay advanced funds is guaranteed by a Person that has, at the time it enters
into such guarantee, both a net worth and unencumbered liquid assets equal to
or greater than the aggregate amount which the Indemnified Party could be
obligated to repay pursuant to this Section 2.02(c).
(d) Payments Permitted by the Financing Documents.
Notwithstanding any provision of this Section 2.02, prior to the Final
Termination Date, amounts payable or to be advanced by the Issuer pursuant to
this Section 2.02 shall be paid only if and to the extent that such payment or
advance is permitted by the Financing Documents (including, without limitation,
Article 4 of the Security Agreement). In the event that an Indemnified Party
is entitled to receive a payment or advance from the Issuer pursuant to this
Section 2.02 but the Issuer is prohibited from making such payment or advance
pursuant to the Financing Documents,
<PAGE> 14
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such Indemnified Person may offset against any amount it owes to the Issuer the
amounts that such Indemnified Party is entitled to receive pursuant to this
Section 2.02.
(e) Policies and Procedures. The Program Manager will devise
and implement policies and procedures (which may be revised from time to time)
that it believes are appropriate in connection with its rendering of the
Services, it being understood that the Program Manager is not a financial
institution and need not maintain policies and procedures similar to those
followed by such an institution.
2.03 Support for Services. The Program Manager shall, at
its own expense (subject to Section 8), maintain such equipment, materials and
expertise, and employ such professional and other personnel, as shall be
necessary to perform the Services.
2.04 Additional Activities of the Program Manager and its
Affiliates.
(a) The Program Manager shall not engage in businesses or
render services of any kind to the Issuers or any other Person, except as
contemplated hereby and except that the Program Manager may be engaged in other
businesses that provide only services for any funding program(s) similar to
that contemplated hereby in which Enron or an Affiliate of Enron is a sponsor.
None of the directors, officers or employees of the Program Manager may serve
as directors, officers or employees of any Project Borrower (except for the
General Counsel of Enron serving as director of the Program Manager), receive
fees for services rendered to any Project Borrower or be a secured or unsecured
creditor of, or hold an equity interest in, any Project Borrower or in any
other issuer of Collateral, except if such equity is publicly-traded.
(b) Nothing herein shall prevent the Program Manager's
Affiliates or the directors, officers, employees and agents thereof from
engaging in other businesses, or from rendering services of any kind to the
Issuers and their Affiliates, the Collateral Agent, the Representatives, the
Noteholders or any other Person to the extent permitted by applicable law.
Without prejudice to the generality of the foregoing, Affiliates of the Program
Manager and directors, officers, employees and agents of such Affiliates may,
among other things:
(i) serve as directors (whether supervisory or managing),
officers, partners, members, employees, agents, nominees or
signatories for the Issuers, Affiliates of the Issuers, Project
Borrowers or any issuer of any other Portfolio Asset or their
respective Affiliates; provided, that such activity will not have a
material adverse effect on the enforceability of Collateral; provided,
further, that nothing in this paragraph shall be deemed to limit the
duties of the Program Manager set forth in Section 2 hereof;
(ii) receive fees for services of any nature rendered to
any Project Borrower or issuer of any Portfolio Asset or their
respective Affiliates; provided, that such activity will not have a
material adverse effect on the enforceability of Collateral; and
(iii) be a secured or unsecured creditor of, or hold an
equity interest in, any Project Borrower, the Issuers, Affiliates of
the Issuers, any Project Borrower or any issuer of any Collateral.
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(c) It is understood that the Program Manager, any of its
Affiliates and any of their respective directors, officers, employees and
agents may (subject, as to the Program Manager, to Section 2.04(a)) engage in
any other business and furnish investment management and advisory services to
others, including Persons which may have investment objectives similar to those
followed by the Program Manager with respect to the Collateral and which may
own securities of the same class, or which are the same type, as the Project
Loans included in the Collateral. The Program Manager will be free, in its
sole discretion, to make recommendations to others, or effect transactions on
behalf of itself or for others, which may be the same as or different from
those effected with respect to the Collateral.
2.05 Authorization to Act; Power of Attorney. Each of the
Issuer and the Co-Issuer hereby appoints and authorizes and, pursuant to
Section 17-403 of the Delaware Uniform Limited Partnership Act, the General
Partner of the Issuer hereby delegates authority to, the Program Manager, and
the Program Manager hereby agrees, to perform, on behalf of the Issuer and the
Co-Issuer, each of the Services and any other action expressly contemplated by
the Financing Documents or the Partnership Agreement to be performed by the
Issuer, the Co-Issuer or the Program Manager, together with such other powers
as are reasonably incidental to such appointment and authorization. In
furtherance thereof, each of the Issuer and the Co-Issuer hereby makes,
constitutes and appoints the Program Manager, with full power of substitution,
as its true and lawful agent and attorney-in-fact, with full power and
authority in its name, place and stead, to sign, execute, certify, swear to,
acknowledge, deliver, file, receive and record any and all documents which the
Program Manager reasonably deems appropriate or necessary in connection with
its duties under this Agreement. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, and it shall
survive and not be affected by the subsequent dissolution or termination of the
Co-Issuer; provided, that the foregoing power of attorney will expire, and the
Program Manager will cease to have any power to act as the Issuer's or the
Co-Issuer's attorney-in-fact, upon termination of this Agreement in accordance
with its terms. The Issuer and the Co-Issuer shall execute and deliver to the
Program Manager or cause to be executed and delivered to the Program Manager
all such other powers of attorney, proxies, dividend and other orders, and all
such instruments, without recourse to the Issuer or the Co-Issuer, as the
Program Manager may reasonably request for the purpose of enabling the Program
Manager to exercise the rights and powers which it is entitled to exercise
pursuant to this Section 2.05. Notwithstanding the foregoing or any other
provision of this Agreement, the Program Manager shall not have any power or
authority to act on behalf of the Issuer or the Co-Issuer in respect of a
voluntary filing of bankruptcy of, or the conduct of any bankruptcy proceeding
of, the Issuer or the Co-Issuer and shall not be authorized to sign, execute,
certify, swear to, acknowledge, deliver, file, receive or record any document
relating thereto.
2.06 Information; Further Assurances; Agreement under
Financing Documents. The Program Manager shall give notice of any
determination made by the Program Manager pursuant to any of clause (xiii),
clause (xv) (only insofar as a determination is made to issue additional Class
A Notes) and clause (xvi) of Section 2.01(a) hereof to the Collateral Agent,
each Representative, each Hedge Counterparty and each Rating Agency. Each of
the Program Manager, the Issuer and the Co-Issuer shall take such actions, and
furnish such certificates, opinions and other documents, as may be reasonably
requested by any other party hereto in order
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to effectuate the purposes of this Agreement and to ensure compliance with
applicable laws and regulations and the terms of the Partnership Agreement and
the Financing Documents. The Program Manager hereby consents and agrees to the
assignment and pledge by the Issuers of this Agreement as set forth in Sections
2.1 and 6.1 of the Security Agreement.
2.07 Indemnity of Program Manager. The Program Manager
hereby indemnifies and holds harmless each of the Issuers and each Holder of
Notes from and against (a) any loss, expense, damage or injury (subject to the
limitations set forth in Section 11.18 hereof) and any costs, expenses and
attorneys' fees incurred in investigating, preparing or prosecuting any claim
against the Program Manager, and, further subject to the limitation that the
indemnification granted to the Holders of the Notes hereunder shall not exceed,
in the aggregate, unpaid principal and interest on the Notes and the reasonable
costs, expenses and attorneys' fees of one firm of counsel to represent the
interest of the Holders of the Notes and the Issuers and, in each case, without
duplication of the amount of any indemnification claim made by the Issuer or
the Co-Issuer) and (b) any Damages in connection with any claim by any third
party (other than a Holder of Notes or any other party to any Financing
Document) against the Issuer or the Co-Issuer, in any such case suffered,
sustained or incurred by the Issuer or the Co-Issuer by reason of any action
taken or omitted to be taken hereunder or in connection herewith by the Program
Manager or any of its officers, agents, stockholders, partners, members,
directors or employees, in each case if there is a determination made in an
arbitration conducted under and in accordance with the terms of Section 11.11
hereof (but not otherwise) that such act or omission was performed or omitted
in bad faith or constituted gross negligence or willful misconduct, except for
any indemnification that is expressly prohibited by applicable law. The
indemnities by the Program Manager set forth in this Section 2.07 apply solely
to it, and none of the Affiliates, officers, agents, stockholders, partners,
members, directors or employees of the Program Manager shall be liable (either
directly, indirectly as a controlling person, vicariously or otherwise) either
hereunder or otherwise arising out of or related to any action taken or omitted
to be taken hereunder or in connection herewith by the Program Manager or any
of its Affiliates or any of their respective officers, agents, stockholders,
partners, members, directors or employees. Subject to the limitations set
forth herein, each Holder of Notes shall be an express third party beneficiary
of the indemnity granted by the Program Manager under this Section 2.07.
2.08 Compensation to the Issuer. The Program Manager
hereby agrees that any payment directly related to the making or maintaining of
any Project Loan shall be paid or payable only to the Issuer; provided that
nothing herein or in any Financing Document shall in any way limit the right of
any Person (including Enron and any of its Affiliates) to receive compensation
for services rendered to a Project Borrower in conformity with the Standard of
Care and consistent with the Services to be provided hereunder, nor shall
anything herein or in any Financing Document restrict the right of the
shareholders of any Project Borrower to agree to any differential equity
distributions.
Section 3. Representations and Warranties of the Program
Manager. The Program Manager hereby represents and warrants to the Issuers as
follows as of the date hereof:
3.01 Status. The Program Manager is a limited partnership
duly formed, validly existing and in good standing under the laws of the State
of Delaware, has all requisite
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power and authority, and has all material governmental licenses,
authorizations, consents and approvals, necessary to own its assets and carry
on its business as now being or as proposed to be conducted and is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure so to qualify would
have a Material Adverse Effect with respect to the Program Manager.
3.02 Powers. The Program Manager has all necessary power
and authority to execute and deliver this Agreement and each Related Agreement
and to perform its obligations under this Agreement and each Related Agreement
and has taken all necessary action to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by the
Program Manager. Each Related Agreement, when delivered by the Program
Manager, will have been duly executed and delivered by the Program Manager.
This Agreement constitutes, and each Related Agreement when executed and
delivered by the Program Manager shall constitute, the legal, valid and binding
obligation of the Program Manager, enforceable against the Program Manager in
accordance with its respective terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
3.03 No Violation or Conflict.
(a) None of the execution and delivery of this Agreement by
the Program Manager, the consummation by it of the transactions contemplated
herein and in the Related Agreements and compliance by it with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the partnership agreement or the certificate of
limited partnership of the Program Manager, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Program Manager is a party or by which the Program Manager is bound or to which
the Program Manager is subject, or constitute a default under any such
agreement or instrument or result in the creation or imposition of any Lien
upon any Property of the Program Manager pursuant to the terms of any such
agreement or instrument; except in any such case where the conflict, breach or
requirement of consent would not have a Material Adverse Effect.
(b) The Program Manager is not in violation of any of its
constitutional documents. The Program Manager is not in breach or violation of
or in default under (i) the terms of any indenture, contract, lease, mortgage,
deed of trust, note agreement or other evidence of indebtedness or other
agreement, obligation, condition, covenant or instrument to which the Program
Manager is a party or is bound, (ii) any statute applicable to the Program
Manager or (iii) any law, decree, order, rule or regulation applicable to the
Program Manager of any court or regulatory, administrative or governmental
agency, body or authority, or arbitrator having or asserting jurisdiction over
the Program Manager, or its properties; except in any such case where the
default, breach or violation would not have a Material Adverse Effect on the
Program Manager.
<PAGE> 18
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3.04 Consents. All governmental and other consents that
are required to have been obtained by the Program Manager with respect to its
execution, delivery and performance of this Agreement and each Related
Agreement have been obtained and are in full force and effect and all
conditions of any such consents have been complied with.
3.05 Absence of Litigation. There is not pending against
the Program Manager, or against any entity controlled, directly or indirectly,
by the Program Manager, any entity that controls, directly or indirectly, the
Program Manager or any entity directly or indirectly under common control with
the Program Manager, any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or any
arbitrator that could reasonably be expected to have a Material Adverse Effect
with respect to the Program Manager.
3.06 Registration as Investment Adviser. The Program
Manager is not required to be registered as an investment adviser under the
Investment Adviser's Act of 1940, as amended.
3.07 Ownership of Program Manager. All of the issued and
outstanding general partnership interests of the Program Manager are owned by
Enron CPO Management Holdings II, Inc. and all of the issued and outstanding
limited partnership interests of the Program Manager are owned by Enron CPO
Management Holdings I, Inc.
3.08 Disclosure. The information heretofore furnished in
writing by or on behalf of the Program Manager to the Issuers in connection
with the negotiation, preparation or delivery of this Agreement, when taken as
a whole, does not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
Section 4. Representations and Warranties of the Issuer.
The Issuer hereby represents and warrants to the Program Manager as follows as
of the date hereof:
4.01 Status. The Issuer is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals, necessary to own
its assets and carry on its business as now being or as proposed to be
conducted and is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a Material Adverse Effect with respect
to the Issuer.
4.02 Powers. The Issuer has all necessary power and
authority to execute and deliver this Agreement and each Related Agreement and
to perform its obligations under this Agreement and each Related Agreement and
has taken all necessary action to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by the
Issuer. Each Related Agreement, when delivered by the Issuer, will have been
duly executed and delivered by the Issuer. This Agreement constitutes, and
each Related Agreement when executed and delivered by the Issuer shall
constitute, the legal, valid and binding obligation of
<PAGE> 19
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the Issuer, enforceable against the Issuer in accordance with its respective
terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at law)).
4.03 No Violation or Conflict.
(a) None of the execution and delivery of this Agreement by
the Issuer, the consummation by it of the transactions contemplated herein and
in the Related Agreements and compliance by it with the terms and provisions
hereof and thereof will conflict with or result in a breach of, or require any
consent under, the Partnership Agreement or the Certificate of Limited
Partnership of the Issuer, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any agreement or instrument to which the Issuer is a party or by which the
Issuer is bound or to which the Issuer is subject, or constitute a default
under any such agreement or instrument or (except for the Lien of Security
Agreement and any Permitted Liens) result in the creation or imposition of any
Lien upon any Property of the Issuer pursuant to the terms of any such
agreement or instrument.
(b) The Issuer is not in violation of any of its
constitutional documents. The Issuer is not in breach or violation of or in
default under (i) the terms of any indenture, contract, lease, mortgage, deed
of trust, note agreement or other evidence of indebtedness or other agreement,
obligation, condition, covenant or instrument to which the Issuer is a party or
is bound, (ii) any statute applicable to the Issuer or (iii) any law, decree,
order, rule or regulation applicable to the Issuer of any court or regulatory,
administrative or governmental agency, body or authority, or arbitrator having
or asserting jurisdiction over the Issuer, or its properties; except in any
such case where the default, breach or violation would not have a Material
Adverse Effect on the Issuer.
4.04 Consents. All governmental and other consents that
are required to have been obtained by the Issuer with respect to its execution,
delivery and performance of this Agreement and each Related Agreement have been
obtained and are in full force and effect and all conditions of any such
consents have been complied with.
4.05 Absence of Litigation. There is not pending or, to
its knowledge, threatened against the Issuer, or against any entity controlled,
directly or indirectly, by the Issuer, any entity that controls, directly or
indirectly, the Issuer or any entity directly or indirectly under common
control with the Issuer, any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or any
arbitrator that could reasonably be expected to have a Material Adverse Effect
with respect to the Issuer.
4.06 No Required Registration. The Issuer has not engaged
in any transaction that would result in the violation of, or require
registration as an investment company under, the Investment Company Act of
1940, as amended.
Section 5. Representations and Warranties of the
Co-Issuer. The Co-Issuer hereby represents and warrants to the Program Manager
as follows as of the date hereof:
<PAGE> 20
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5.01 Status. The Co-Issuer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals, necessary to own
its assets and carry on its business as now being or as proposed to be
conducted and is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a Material Adverse Effect with respect
to the Co-Issuer.
5.02 Powers. The Co-Issuer has all necessary power and
authority to execute and deliver this Agreement and any Related Agreement and
to perform its obligations under this Agreement and each Related Agreement and
has taken all necessary action to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by the
Co-Issuer. Each Related Agreement, when delivered by the Co-Issuer, will have
been duly executed and delivered by the Co-Issuer. This Agreement constitutes,
and each Related Agreement when executed and delivered by the Co-Issuer shall
constitute, the legal, valid and binding obligation of the Co-Issuer,
enforceable against the Co-Issuer in accordance with its respective terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at law)).
5.03 No Violation or Conflict.
(a) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated herein and in the Related
Agreements and compliance with the terms and provisions hereof and thereof will
conflict with or result in a breach of, or require any consent under, the
Certificate of Incorporation or bylaws of the Co-Issuer, or any applicable law
or regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Co-Issuer is a party or by which the Co-Issuer is bound or to which the
Co-Issuer is subject, or constitute a default under any such agreement or
instrument or result in the creation or imposition of any Lien upon any
Property of the Co-Issuer pursuant to the terms of any such agreement or
instrument.
(b) The Co-Issuer is not in violation of any of its
constitutional documents. The Co-Issuer is not in breach or violation of or in
default under (i) the terms of any indenture, contract, lease, mortgage, deed
of trust, note agreement or other evidence of indebtedness or other agreement,
obligation, condition, covenant or instrument to which the Co-Issuer is a party
or is bound, (ii) any statute applicable to the Co-Issuer or (iii) any law,
decree, order, rule or regulation applicable to the Co-Issuer of any court or
regulatory, administrative or governmental agency, body or authority, or
arbitrator having or asserting jurisdiction over the Co-Issuer, or its
properties; except in any such case where the default, breach or violation
would not have a Material Adverse Effect on the Co-Issuer.
5.04 Consents. All governmental and other consents that
are required to have been obtained by the Co-Issuer with respect to its
execution, delivery and performance of this
<PAGE> 21
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Agreement and each Related Agreement have been obtained and are in full force
and effect and all conditions of any such consents have been complied with.
5.05 Absence of Litigation. There is not pending or, to
its knowledge, threatened against the Co-Issuer, or against any entity
controlled, directly or indirectly, by the Co-Issuer, any entity that controls,
directly or indirectly, the Co-Issuer or any entity directly or indirectly
under common control with the Co-Issuer, any action, suit or proceeding at law
or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that could reasonably be expected to have a Material
Adverse Effect with respect to the Co-Issuer.
5.06 No Required Registration. The Co-Issuer has not
engaged in any transaction that would result in the violation of, or require
registration as an investment company under, the Investment Company Act of
1940, as amended.
Section 6. Covenants. The Program Manager hereby agrees
with the Issuer and the Co-Issuer as follows:
6.01 No Petition for Bankruptcy or Insolvency. The
Program Manager will not petition for the Bankruptcy or Insolvency of the
Issuer or the Co-Issuer so long as this Agreement shall remain in effect and in
no event any earlier than one year and one day, or if longer the applicable
preference period then in effect, after the payment in full of all Secured
Obligations.
6.02 Books and Records.
(a) The Program Manager shall keep books and records relating
to the Services, including such books and records in which the Program Manager
shall record entries of each transaction effected by the Issuer and/or the
Co-Issuer in accordance with instructions given by the Program Manager by reason
of, or by the Program Manager acting on behalf of the Issuer and/or the
Co-Issuer in accordance with, the provision of the Services. The Program
Manager shall permit the Issuers access at all reasonable times to its books
and records as they pertain to the Services.
(b) If the Program Manager is required to use or retain any
documents or other records of the Issuer or the Co-Issuer, it shall keep such
documents and other records clearly marked as pertaining to the assets and
operations of the Issuer or the Co-Issuer and separate and apart from the
documents and records pertaining to the assets of the Program Manager or Enron;
and to the extent that such documents or other records are maintained solely in
computer-generated form, such computer records shall be clearly marked to
reflect that they pertain to the assets and operations of the Issuer or the
Co-Issuer and are in the possession of Program Manager only in its capacity as
manager under this Agreement.
(c) The Program Manager shall not make copies of the books
and records of the Issuer or the Co-Issuer available to any of the creditors of
the Program Manager or Enron or available for any purpose other than to verify
the services rendered or to be rendered by the Program Manager in its capacity
as manager under this Agreement and, in each such instance,
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the Program Manager shall inform any such third party that such documents and
records pertain to the assets and operations of the Issuer or the Co-Issuer and
that the Program Manager has possession of such documents and records for the
sole purpose of permitting it to perform its duties under this Agreement.
6.03 Governmental Authorizations. The Program Manager
will, both on its own behalf and on behalf of the Issuers, obtain all material
permits, licenses, certificates or other administrative or regulatory
authorizations as may be necessary for the performance of the Services and the
actions taken or to be taken by the Program Manager pursuant to Section 2.05
hereof.
6.04 Compliance with Laws and the Financing Documents.
The Program Manager will comply in all material respects with all of the terms
of the Financing Documents applicable to it and to the Issuers and all laws,
rules and regulations applicable to the performance of the Services (including,
without limitation, all applicable provisions of U.S. and other applicable
securities laws) and the actions taken or to be taken by the Program Manager
pursuant to Section 2.05 hereof and will cause, insofar as within the Program
Manager's control pursuant to terms of this Agreement, the Issuers and the
assets of the Issuers to comply in all material respects with (a) all laws,
rules and regulations applicable to the Issuers, (b) all undertakings
applicable to the Issuers set forth in the Financing Documents and (c) all of
the terms of the Partnership Agreement and the organizational documents of the
Co-Issuer; provided, however, that the Program Manager shall not be bound by
any amendment to any of the Financing Documents that materially increases the
duties or liabilities of the Program Manager unless the Program Manager shall
have consented thereto.
6.05 Interested Party Transactions; Conflicts. The
Program Manager will not enter into any transaction with the Issuers that would
be prohibited by the organizational documents of the Issuers. The Program
Manager will not engage in any transaction after the date hereof which
conflicts with the interests of the Issuers if any such transaction would have
a Material Adverse Effect on the Issuers, it being understood and agreed, for
the avoidance of doubt, that any Transaction Documents in effect as of the
Closing Date will be deemed not to conflict with the interests of the Issuers.
Section 7. Management Fee.
7.01 Payment of Management Fee. In consideration for the
performance by the Program Manager of its obligations hereunder, the Issuer
shall pay, or cause the Account Bank to pay to the Program Manager (a) a
quarterly administrative fee (the "Administrative Fee") of $1,500,000, as
automatically adjusted as of each [ ] during the term of this Agreement,
commencing [ ] 1998, for inflation by multiplying the Administrative Fee
in effect on such date by the sum of 1.00 plus the Inflation Factor with
respect to the immediately preceding calendar year, which shall accrue on each
Quarterly Payment Date thereafter, (b) a quarterly management fee (the
"Management Fee") which shall accrue on the Aggregate Book Value of the Issuer's
Assets, for each Accrual Period, at a rate per annum equal to 0.25% and (c) a
quarterly incentive fee (the "Incentive Fee", and collectively with the
Administrative Fee and the Management Fee, the
<PAGE> 23
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"Fees") in an amount (greater than zero) equal to the product of (x) the
Aggregate Project Loan Balance with respect to all non-Defaulted Project Loans,
(y) the excess of (I) the Actual Net Interest Margin over (II) the Base Net
Interest Margin and (z) 5%. Any accrued and unpaid Fees shall be paid to the
Program Manager on each Quarterly Payment Date; provided that, prior to the
Final Termination Date, any accrued and unpaid Fees shall be paid to the
Program Manager only if and to the extent such payment is permitted by the
Financing Documents (including, without limitation, Article 4 of the Security
Agreement), it being understood and agreed that any accrued and unpaid
Administrative Fee and Management Fee not paid on any Quarterly Payment Date as
a result of the application of this proviso shall, subject to the provisions of
the Financing Documents, be payable on the next Quarterly Payment Date and
thereafter as available on subsequent Quarterly Payment Dates; and provided,
further, that the first payment of the Administrative Fee shall be made on the
Closing Date out of the proceeds of issuance of the Notes. After the Final
Termination Date, each reference herein to a "Quarterly Payment Date" shall
instead refer to the 10th day of each January, April, July and October in each
calendar year; provided that if any such day is not a Business Day, then the
relevant date shall be the next succeeding date that is a Business Day.
7.02 Status upon Termination.
(a) If this Agreement shall be terminated pursuant to Section
10.01 or 10.02 hereof, any Fees hereunder accrued to the date of such
termination shall thereafter be paid to the Program Manager as provided in
Section 7.01 hereof (but only after the prior payment in full of any accrued
and unpaid Fees payable to any Replacement Manager under any Replacement
Management Agreement).
(b) If this Agreement shall be terminated pursuant to Section
10 hereof or otherwise, the Fees shall be prorated for any partial periods
between Quarterly Payment Dates during which this Agreement was in effect and
shall be due and payable on the first Quarterly Payment Date following the date
of such termination.
Section 8. Expenses.
(a) Expenses Paid by Program Manager. The Program Manager
shall pay only the following expenses incurred by the Program Manager, the
Issuer or the Co-Issuer (each, a "Covered Party") in connection with the
rendering of the Services and the actions taken or to be taken by the Program
Manager pursuant to Section 2.05: (i) salaries, compensation and expenses of
the directors, officers and employees of the Covered Parties, (ii) general and
administrative expenses of the Covered Parties including shared service
allocations from Enron International Services, Inc., (iii) computer software
and hardware and information management systems expenses of the Covered
Parties, (iv) audit fees and out-of-pocket expenses incurred by the Covered
Parties for the annual audit of the Issuer pursuant to Section 6.3 of the
Common Agreement, (v) expenses related to the annual and quarterly financial
statements of the Issuer, (vi) legal fees and out-of-pocket expenses relating
to general partnership and corporate matters of the Issuer and the Co-Issuer,
respectively and (vii) fees and expenses of tax and other
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consultants relating to general partnership and corporate matters of the Issuer
and the Co-Issuer, respectively.
(b) Expenses Paid by the Issuer. The Issuer shall pay all
other expenses of the Covered Parties, including without limitation, (i)
Transaction Expenses, (ii) expenses related to the Backup Facility and the
Liquidity Facility, (iii) fees of the Rating Agencies, (iv) Administrative
Expenses, (v) all expenses to be paid by the Project Borrowers to the extent
not recovered from the Project Borrowers, (vi) expenses related to a default of
Portfolio Assets or restructuring of Project Loans, (vii) any and all Premiums
related to the Notes, (viii) expenses related to tax audits not covered by
Section 8(a), (ix) any fees and expenses payable to the Program Manager
pursuant to this Agreement, (x) any non-routine legal costs and (xi)
Extraordinary Expenses not covered by Section 8(a).
Section 9. No Joint Venture. The Issuer, the Co-Issuer
and the Program Manager are not partners or joint venturers with each other and
nothing herein shall be construed to make them such partners or joint venturers
or impose any liability as such on any of them. The Program Manager's relation
to the Issuer, the Co-Issuer and to the holders of Secured Obligations and the
Interests shall be deemed to be that of an independent contractor and no
fiduciary relationship shall exist between the Program Manager and the Issuer
or between the Program Manager and the Co- Issuer or between the Program
Manager and the holder of any Secured Obligation or Interest.
Section 10. Program Manger Termination.
10.01 Automatic Termination. The rights and obligations of
the Program Manager under this Agreement will automatically terminate upon the
earliest to occur of the following events:
(a) the dissolution of the Issuer; and
(b) the Bankruptcy or Insolvency of the Program Manager.
10.02 Optional Termination.
(a) The rights and obligations when required of the Program
Manager under this Agreement shall be terminated by the Issuers pursuant to
Section 4.5 of the Common Agreement if any of the following events shall have
occurred (and, in the case of any such event which can be remedied or cured, be
continuing):
(i) an Event of Default or a Subordinate Event of Default
shall have occurred;
(ii) the Program Manager shall fail to comply with or perform
in any material respect any agreement or obligation under this Agreement and
such failure shall not be remedied within 30 days after notice of such failure
is given to the Program Manager;
(iii) any representation, warranty or certification made or
deemed made herein by the Program Manager shall prove to have been false or
misleading as of the time made or
<PAGE> 25
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furnished in any respect that would have a Material Adverse Effect with respect
to the Program Manager, the Issuer or the Co-Issuer;
(iv) any action shall be taken by the Program Manager that
constitutes fraud against the Issuer or the Co-Issuer;
(v) the Program Manager shall be convicted of a felony; or
(vi) the general partner of the Program Manager no longer is,
directly or indirectly, controlled by Enron, or any successor to or assignee of
Enron's rights and obligations under the Support Agreement (as such succession
or assignment is contemplated by Section 14.8 of the Support Agreement).
(b) The rights and obligations of the Program Manager under
this Agreement may be terminated by the Issuers at any time upon a Class I
Trigger Event.
10.03 Effectiveness of Termination under Certain
Circumstances.
(a) No termination pursuant to Section 10.02 hereof shall
be effective unless and until:
(i) notice of such termination (specifying the event that
is the basis for such termination) is given to the Program Manager by
the Issuers (which notice must be delivered not later than 90 days
after notice of any of the events specified in Section 10.02 is given
to the Issuers pursuant to Section 10.04 hereof);
(ii) the date as of which a Replacement Manager shall have
entered into a Replacement Management Agreement;
(iii) so long as no Event of Default has occurred, the
Issuers shall have received one or more written instruments to the
effect that such Replacement Manager is acceptable to the holders of
the Interests (in accordance with the Partnership Agreement); and
(iv) in the case of a termination pursuant to Section
10.02(b), the Required Lenders shall have approved the appointment of
the Replacement Program Manager proposed by the Class I Interest
holders.
(b) In the case of a termination pursuant to Section 10.01:
(i) all duties, authority and power of the Program Manager
under this Agreement shall pass to and be vested in
________________________, except that all duties, authority and power
of the Program Manager under Sections 2.01(x)(B), (xxiv) and (xxvi)
shall pass to and be vested in Chase Bank of Texas, in each case, as
Backup Program Manager; and, without limiting the generality of the
foregoing, each Backup
<PAGE> 26
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Program Manager is hereby authorized and empowered to execute and
deliver, on behalf of the terminated Program Manager, as
attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the terminated Program Manager to execute or
deliver such documents or instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes
of such termination; and
(ii) the Program Manager agrees to cooperate with the Backup
Program Managers in effecting the termination of the responsibilities
and rights of the Program Manager hereunder, including the transfer to
such Backup Program Managers of all authority of the Program Manager
to service the Project Loans and the other Portfolio Assets; and
without limiting the generality of the foregoing, the Program Manager
shall assist and cooperate with the Backup Program Managers in
transferring all material and data (other than software) used by the
Program Manager and necessary to service the Project Loans and the
other Portfolio Assets effectively in accordance with the terms of
this Agreement.
10.04 Certain Notices. The Program Manager shall give
prompt written notice to the Issuer, each Representative, the Collateral Agent,
each Hedge Counterparty and each Rating Agency:
(a) of the occurrence of any event described in any of
paragraphs (a) through (f) of Section 10.02 hereof, which notice shall describe
such event in reasonable detail; and
(b) of any termination of the Program Manager, whether
pursuant to Section 10.01 or 10.02 hereof or otherwise.
10.05 Replacement Management Agreement. Upon any
termination of this Agreement, the Program Manager or the Backup Program
Managers, as the case may be, shall cooperate with the Issuers, the Collateral
Agent, each Representative and any Replacement Manager in connection with the
assumption by the Replacement Manager of its duties under a Replacement
Management Agreement and shall forthwith deliver to the Issuer any and all
property and documents of the Issuer and the Co-Issuer then in custody of the
Program Manager or the Backup Program Managers, as the case may be.
10.06 Survival. The provisions of Sections 7.02, 8, 10.05,
11.17 and 11.18 shall survive the termination of this Agreement. In addition,
the exculpation and indemnification provisions of Section 2.02 shall survive
the termination of this Agreement with respect to any action or failure to act
referred to in said Section arising prior to such termination.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of either party
hereto to exercise and no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial waiver of any
right, power or privilege under this Agreement preclude any further exercise
thereof or the exercise of any other right, power or privilege.
<PAGE> 27
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11.02 Notices. All notices and other communications
provided for herein (including, without limitation, any modifications of, or
waivers or consents under, or instructions, directions or requests given under,
this Agreement) shall be given or made in writing (including, without
limitation, by telecopy) to the intended recipient at the "Address for Notices"
specified below its name on the signature page hereof; or, as to any party, at
such other address as shall be designated by such party in a notice to the
other parties. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid. The Program Manager
shall deliver to the Collateral Agent and each Representative duplicate
original copies of all notices, statements, communications and instruments
delivered or required to be delivered to the Issuer or the Co-Issuer pursuant
to this Agreement.
11.03 Amendment, Modification or Waiver. No provision of
this Agreement may be amended, modified or waived except (a) by an instrument
in writing signed by the Program Manager and the Issuer and the Co-Issuer and
(b) so long as any of the Senior Secured Obligations are outstanding, as
permitted pursuant to Section 6.1(a)(iv) of the Security Agreement.
11.04 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.05 Assignments. No party hereto may assign or delegate
any of its rights or obligations under this Agreement (whether by way of
security or otherwise); provided, however (i) the Issuers may grant a Lien on
their rights hereunder as provided in the Security Agreement (and the
Collateral Agent may, upon exercise of its rights in respect of such Lien,
exercise all rights and remedies of the Issuers hereunder), and the Program
Manager hereby acknowledges and consents to the creation of such Lien and
consents to any such exercise, and (ii) the Program Manager (x) may assign its
rights and obligations under this Agreement to any successor to or assignee of
Enron's rights and obligations under the Support Agreement (as such succession
or assignment is contemplated by Section 14.8 of the Support Agreement) or (y)
may assign its rights and obligations under this Agreement to any other Person
that is controlled, directly or indirectly, by Enron.
11.06 Survival of Representations, Warranties and
Indemnities. Each representation and warranty made or deemed to be made herein
or pursuant hereto, and each indemnity provided for hereby, shall survive
indefinitely.
11.07 Benefit of the Agreement. The Program Manager agrees
that its obligations hereunder shall be enforceable at the instance of the
Issuers or the Collateral Agent, on behalf of the Secured Parties, as provided
in the Financing Documents.
11.08 Priority of Payments. The Program Manager agrees
that all amounts to which it is entitled pursuant to this Agreement shall be
due only in accordance with Sections 4.1(a) and 4.3(a) of the Security
Agreement and only to the extent funds are available for such
<PAGE> 28
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payments in accordance thereunder. The Program Manager hereby consents to the
collateral assignment of this Agreement as provided in the Security Agreement.
11.09 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.
11.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be identical and all of which,
taken together, shall constitute one and the same instrument, and each of the
parties hereto may execute this Agreement by signing any such counterpart.
11.11 Arbitration.
(a) Disputes. Any and all disputes, claims or controversies
arising out of or in connection with this Agreement, including (without
limitation) its breach, termination or validity shall be solely and finally
settled by arbitration by a panel of three (3) arbitrators under the auspices
of the New York Regional Office of the American Arbitration Association in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association existing at the time the arbitration is notified pursuant to
Section 11.11(b) as modified herein (the "AAA Rules") (without limiting the
foregoing, the Issuer and the Co-Issuer each agree not to raise any claims,
counterclaims, issues or accounting in any proceeding other than in accordance
with this Section 11.11). The parties agree that the award of the arbitrators
shall be the sole and exclusive remedy among them regarding any claims,
counterclaims, issues or accounting presented to the arbitrators.
(b) Selection of Arbitrators. The party electing arbitration
shall so notify the other party in writing in accordance with the AAA Rules,
and such notice shall be accompanied by the name of the arbitrator selected by
the party serving the notice. The second arbitrator, to be chosen by the
respondent, shall be named in the respondent's answering statement and the
third arbitrator, who shall serve as chairperson, shall be chosen by the two
arbitrators so selected within 30 days of service of the respondent's answering
statement. If any arbitrator has not been appointed within the time limits
specified herein or in the AAA Rules, such appointment shall be made by the
American Arbitration Association in the New York Regional Office. For purposes
of this Section 11.11(b), the Issuers shall be deemed to be one and the same
party.
(c) Arbitration Proceedings. All arbitration proceedings
shall be conducted in New York in the English language and shall be governed by
the Federal Arbitration Act (9 U.S.C. Sections 1 et seq.). The parties hereto
agree to facilitate the arbitration by (i) making available to each other and
to the arbitrators for inspection all documents, books, records and personnel
under their control as the arbitrators shall determine to be relevant to the
dispute; (ii) conducting arbitration hearings to the greatest extent possible
on successive, contiguous days; and (iii) observing strictly the time periods
established by the AAA Rules or by the arbitrators for the submission of
evidence and briefs. The arbitrators shall render all decisions, including the
final award, by majority vote and shall state in writing the reasons for such
decisions.
<PAGE> 29
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(d) Arbitral Award. Any monetary award of the arbitrators
shall be made and payable freely available U.S. Dollars free of any tax and
reductions. Any such monetary award shall include interest from the date of
any breach or any violation of this Agreement. The arbitrators shall fix an
appropriate rate of interest from the date of the breach or other violation to
the date when the award is paid in full. In no event shall the interest rate
during such period be lower than the lowest prime, base or equivalent
commercial lending rate announced by any member banks of the New York
Clearinghouse Association of New York, New York for ninety-day loans for
responsible and substantial commercial borrowers.
(e) Costs. Notwithstanding anything to the contrary herein,
the party prevailing on substantially all of its claims shall be entitled to
recover its costs, including reasonable attorneys' fees, for the arbitration
proceedings as well as for any ancillary proceedings, including any proceeding
to compel or enjoin arbitration, to request interim measures, or to confirm or
set aside an award.
(f) Estoppel and Res Judicata. No document filed,
assertion made or issue adjudicated in any court or arbitral proceeding other
than pursuant to this Section 11.11 shall have any collateral, judicial or
other estoppel or res judicata effect on any arbitral proceeding that is
subject to this Section 11.11.
(g) Enforcement of Award. The parties agree that judgment on
an arbitration award may be entered in any court of competent jurisdiction.
11.12 Realty Procedures. The Program Manager will
implement the following procedures:
(i) conduct its business so that no more than 50% of the debt
obligations held by the Issuer are principally secured by interests in
real property within the meaning of [Code section 7701(i)];
(ii) designate an employee or contractor (the "Designee")
whose duties will include monitoring compliance with the limitation in
clause (i) and corporate status issues;
(iii) require each Project Borrower to provide the following
information to the Issuer: (A) an initial representation letter
describing the anticipated use of the total amount of funds to be
borrowed under the Project Loan to such Project Borrower (this letter
must be obtained before the first draw on, or initial funding of, such
Project Loan is made), (B) a revised representation letter if there is
a material change in the actual or intended use of such Project Loan
funds (this letter must be obtained on a timely basis), (C) an
itemized listing by major asset categories (as determined by the
Program Manager) of the estimated fair market value of all assets or
other property that are or will be collateral for such Project Loan
(this listing must be obtained before the first draw on, or initial
funding of, a Project Loan is made), (D) a revised itemized listing of
all such property if there is a material change in the actual or
intended collateral for such Project Loan (this listing must be
obtained on a timely basis), (E) a summary by major asset
<PAGE> 30
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categories (as determined by the Program Manager) of the actual or
estimated future use of the Project Borrower's cumulative construction
payments and other expenditures for assets pledged as collateral for
such Project Loan (this information must be obtained before each draw
on such Project Loan beginning with the month of the first draw on
such Project Loan and ending with the month in which the construction
of the underlying Eligible Project is completed), (F) the balance of
any loans from other lenders that are in parity with such Project Loan
and secured by the same assets that secure the Project Loan from the
Issuer (this information must be obtained on a month-end basis
beginning with the month of the first draw on such Project Loan and
ending with the month in which the construction of the underlying
Eligible Project is completed), and (G) other information that the
Designee believes relevant to monitoring as required by clause (ii);
(iv) to the extent practical, cause the Issuer to incur its
debt obligations and advance funds to Project Borrowers at month-end;
(v) to determine, in consultation with outside counsel, the
legal classification of assets or other property securing a Project
Loan as real or personal property [for purposes of Code section
7701(i)];
(vi) cause Designee to calculate whether the Issuer is a
corporation for purposes of the Code in accordance with guidelines
developed in consultation with outside counsel and to discuss these
calculations with the Chief Executive Officer of the Program Manager
on at least a monthly basis;
(vii) ensure that the initial draw on, or initial funding of,
any Project Loan is at least equal to 130% of the fair market value of
any real estate assets securing such Project Loan on the date of the
first draw or funding;
(viii) ensure that the collateral for the initial draw on, or
initial funding of, any Project Loan includes assets other than real
estate;
(ix) annually prepare a pro-forma corporate reporting as if
the Issuer were a corporation; and
(x) implement an appropriate record retention policy. The
Program Manager will modify the policies and procedures listed above
as it determines to be reasonably necessary in consultation with
external counsel and the Collateral Agent. Prior to the issuance of
Class A Notes or Class B Notes, and no less frequently than
semi-annually, the Program Manager will certify to the Collateral
Agent that the procedures in this section, as modified pursuant to
this section, have been followed and that no more than 50% of the debt
obligations held by the Issuer are principally secured by real
property within the meaning of Code section 7701(i).
11.13 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW.
<PAGE> 31
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11.14 Complete Agreement. This Agreement (together with
the Financing Documents) sets forth the entire understanding of the parties
relating to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties hereto.
11.15 Severability. If any provision in this Agreement is
invalid, illegal or unenforceable in any jurisdiction, then, to the fullest
extent permitted by applicable law, (i) the other provisions hereof shall
remain in full force and effect in such jurisdiction, (ii) the invalidity,
illegality or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity, legality or enforceability of such provision in
any other jurisdiction and (iii) the parties hereto shall enter into good faith
negotiations to replace the invalid, illegal or unenforceable provision.
11.16 Conflict with the Financing Documents. Subject to
proviso contained in Section 6.04 hereof, in the event that this Agreement
requires any action to be taken with respect to any matter and the Financing
Documents requires that a different action be taken with respect to such
matter, and such actions are mutually exclusive, as long as any Senior Secured
Obligations remain outstanding, the provisions of the Financing Documents in
respect thereof shall control.
11.17 Limitation on Recourse.
(a) Only the Issuers shall be liable for the duties,
obligations and liabilities of the Issuers hereunder. Without prejudice to the
foregoing, (a) none of the assets of any Limited Partner shall be considered to
be assets of the Issuer except to the extent they have been contributed to, and
are retained by, the Issuer and (b) none of the duties, obligations or
liabilities of the Issuer hereunder shall be duties, obligations or liabilities
of any Partner, subject to Section 17-607 of the Delaware Revised Uniform
Limited Partnership Act.
(b) Only the Program Manager shall be liable for the duties,
obligations and liabilities of the Program Manager hereunder. Without
prejudice to the foregoing, none of the assets of any limited partner of the
Program Manager shall be considered to be assets of the Program Manager and no
such limited partner shall be liable for the obligations of the Program Manager
hereunder.
11.18 Limitation on Recovery of Certain Types of Damages.
In connection with any claim made by a party against another party hereunder,
the claiming party shall be entitled to recover, and any arbitrators appointed
hereunder shall have the power to award, only actual damages or direct damages,
together with the costs and expenses incurred by the claiming party in
investigating, preparing and prosecuting the claim for damages, and without
limiting the generality of the foregoing, no such party shall be entitled to
recover, and any such arbitrators are hereby divested of the power to award,
any other damages, whether expressed as punitive, consequential, special,
incidental, indirect, exemplary or treble damages, as damages for loss of
profits, opportunity or income or as penalties, whether based on statute or in
tort, contract or otherwise, regardless of whether such damages may be
available under applicable law or otherwise, and whether or not arising from a
party's sole, joint or concurrent negligence, strict
<PAGE> 32
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liability, or other fault, the parties hereto waiving their right, if any, to
recover any damages in connection with claims hereunder other than actual
damages or direct damages, as so defined. The provisions of this Section 11.18
shall in no manner limit the meaning of "Damages" as used in Section 2.07 with
respect to claims of third parties (excluding Holders of Notes and any other
party to any Financing Document) against the Issuer or the Co-Issuer for which
the Issuer or the Co-Issuer is entitled to be indemnified under Section 2.07
(it being understood that actual and direct damages suffered by the Issuer or
the Co-Issuer may include amounts paid by the Issuer or the Co-Issuer in
respect of a third party claim, regardless of the nature of the damages claimed
by such third party).
11.19 Limitation on Amendment of Financing Documents.
The Issuers shall not permit any amendment to any of the Financing Documents
that (i) materially increases the duties or liabilities of the Program Manager
or (ii) affects the amount or priority of any fees payable to the Program
Manager without the prior written consent of the Program Manager.
<PAGE> 33
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IN WITNESS WHEREOF, the parties hereto have caused this Management Agreement to
be duly executed and delivered as of the day and year first above written.
ENRON INTERNATIONAL CPO, L.P.
By: Enron CPO Holdings, Inc.,
its general partner
By:
---------------------------------------
Name:
Title:
Address for Notices:
ENRON INTERNATIONAL CPO, INC.
By:
---------------------------------------
Name:
Title:
Address for Notices:
ENRON CPO MANAGEMENT, L.P.
By: Enron CPO Management Holdings II, Inc.,
its general partner
By:
---------------------------------------
Name:
Title:
Address for Notices:
<PAGE> 34
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CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
By
---------------------------------------
Name
Title:
Address for Notices:
THE CHASE MANHATTAN BANK
By:
---------------------------------------
Name:
Title:
Address for Notices:
<PAGE> 1
EXHIBIT 10.3
DRAFT
August 6, 1998
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "AGREEMENT") is entered into on, and
effective as of, __________, 1998 by and between ENRON CORP., an Oregon
corporation ("ENRON"), and ENRON INTERNATIONAL CPO, L.P., a Delaware limited
partnership ("EICPO").
RECITALS:
WHEREAS Enron and EICPO desire by their execution of this Agreement to
evidence their understanding concerning the provision of certain credit and
equity support and other services to be provided by Enron to EICPO and to
evidence other agreements, as more fully set forth in this Agreement;
In consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 REFERENCE TO COMMON AGREEMENT. Capitalized terms used herein but
not defined shall have the meanings given to them in Appendix A to the Common
Agreement dated as of the date hereof among EICPO, Enron International CPO,
Inc., Chase Texas, as Trustee, ________ as Liquidity Facility Agent, ________,
as Backup Facility Agent and Chase Texas, as Collateral Agent (as amended,
modified or supplemented from time to time, the "COMMON AGREEMENT"). In
addition, the "Rules of Interpretation" set forth in the aforesaid Appendix A
shall apply to this Agreement.
1.2 OTHER DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
"ASSUMPTION AGREEMENT" means an assumption agreement in the
form set forth as Exhibit A attached hereto.
"AVAILABLE CLASS C OPTION" has the meaning given to it in
Section 2.1.
"CLASS C NOTE PURCHASE COMMITMENT" has the meaning given to it
in Section 2.1.
"CLASS C OPTION" has the meaning given to it in Section 2.1.
<PAGE> 2
"COMPETING ISSUER" means an entity other than EICPO and JEDI
that has as its primary purpose or activity the making of Project Loans
with respect to Eligible Projects that (i) satisfy clause (4) of the
definition of Project Loan Criteria and (ii) are located in the EI
Regions.
"CONTROLLED ENRON AFFILIATE" means any Enron Affiliate (other
than Enron Oil & Gas Company, EOTT Energy Partners, L.P. and Enron
Energy Services L.L.C.) of which 50% or more of the equity securities
or other voting equity interests are owned, directly or indirectly, by
Enron or of which Enron or a wholly owned direct or indirect subsidiary
of Enron is the sole or managing general partner, managing member or
similar position having the right to exercise actual control of the
management and policies os such Enron Affiliate.
"DESIGNATED ENRON OWNERSHIP INTEREST" means, with respect to
each Project Borrower, a percentage of ownership in such Project
Borrower designated by Enron on the Financial Closing Date of the
applicable Project Loan that (i) is less than or equal to the Enron
Ownership Percentage and (ii) satisfies the Enron Ownership Requirement
after taking into account the Designated Enron Ownership Interests of
all Project Borrowers on the date of determination. The Designated
Enron Ownership Interest shall be subject to adjustment thereafter by
the Program Manager at the direction of Enron upon each subsequent
Financial Closing Date of a Project Loan; provided that, the Enron
Ownership Requirement is satisfied after giving effect to such
adjustment, and that no such adjustment shall increase the Designated
Enron Ownership Interest in respect of a Project Borrower with a
Defaulted Project Loan.
"EICPO" means Enron International CPO, L.P. and its successors
and permitted assignees.
"EI REGIONS" means the geographic areas that are within the
boundaries (as of the date hereof) of Afghanistan, Algeria, American
Samoa, Angola, Anguilla, Antigua, Argentina, Aruba, Australia, The
Bahamas, Bahrain, Bangladesh, Barbados, Barbuda, Belize, Benin,
Bermuda, Bhutan, Bolivia, Bonaire, Botswana, Brazil, the British Virgin
Islands, Brunei, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde,
the Cayman Islands, Central African Republic, Chad, Chile, China,
Colombia, Comoros, Democratic Republic of the Congo, The Congo, Costa
Rica, Cote d'Ivoire, Cuba, Curacao, Djibouti, Dominica, Dominican
Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eritrea,
Ethiopia, the Falkland Islands, Figi, French Guiana, French West
Indies, Gabon, Gambia, Ghana, Grenada, The Grenadines, Guadeloupe,
Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong,
India, Indonesia, Iran, Iraq, Israel, Jamaica, Japan, Jordan, Kenya,
Kuwait, Laos Lebanon, Lesotho, Liberia, Libya, Macau, Madagascar,
Malaysia, Malawi, Maldives, Mali, Maldives, Martinique, Mauritius,
Mongolia, Montserrat, Morocco, Mozambique, Myanmar, Namibia, Nauru,
Nepal, Netherlands Antilles, Nevis, New Caledonia, New Zealand,
Nicaragua, Niger, Nigeria, North Korea, Oman, Pakistan, Panama, Papua
New Guinea, Paraguay, Paracel Islands, Peru, Philippines, Pitcairn,
Principe, Puerto Rico, Qatar, Reunion, Rwanda, Saba, Saint Kitts, Saint
Lucia, Saint Vincent, Sao Tome, Saudi Arabia, Senegal,
- 2 -
<PAGE> 3
Seychelles, Sierra Leone, Singapore, Solomon Islands, Somalia, South
Africa, South Korea, Spratley Islands, Sri Lanka, St. Barthelemy, St.
Eustatius, St. Martin, Sudan, Suriname, Swaziland, Syria, Taiwan,
Tanzania, Thailand, Togo, Trinidad & Tobago, Tunisia, Turks & Caicos
Islands, Tuvalu, Uganda, The United Arab Emirates, Uruguay, the U.S.
Virgin Islands, Vanuatu, Venezuela, Vietnam, Western Sahara, Yemen,
Zambia and Zimbabwe.
"ELECTION NOTICE" has the meaning given to it in Section 2.3.
"ENRON" means Enron Corp. and its successors and permitted
assignees.
"ENRON AFFILIATE" means any Affiliate of Enron.
"ENRON CLASS II PURCHASE COMMITMENT" has the meaning given to
it in Section 3.1.
"ENRON CREDIT COUNTERPARTY" has the meaning given to it in
Appendix A to the Common Agreement; provided that, with respect to an
Enron Credit Counterparty that has obligations under this Agreement
that are guaranteed by Enron, Enron shall be obligated to issue a
guaranty of such obligations in the form of Exhibit C attached hereto.
"ENRON DISTRIBUTIONS" means, with respect to each Project
Borrower to which EICPO has made a Project Loan, any dividends,
distributions or payments on subordinated loans (in each case net of
any withholding taxes) paid to or for the benefit of the holder of the
Enron Initial Equity in respect of the Enron Initial Equity of such
Project Borrower; provided that, in the event such dividends,
distributions or payments on subordinated debt are made in a currency
other than Dollars, such dividends, distributions or payments on
subordinated debt shall be deemed to be paid in Dollars based on the
prevailing rate of exchange on the first date following payment thereof
on which such amounts are capable of being converted, directly or
indirectly, into Dollars and remitted abroad; and provided further
that,
(a) in the event of an assignment in accordance with
Article 14.8 of this Agreement, Enron Distributions shall
include any and all dividends or distributions, in each case
net of any withholding taxes, attributable to the Designated
Enron Ownership Interest in the Project Borrower that has been
transferred or assigned directly or indirectly to the
permitted assignee or an Affiliate of the permitted assignee
under Section 14.8;
(b) Enron Distributions shall not, except as provided
in clause (c) below, include payments received from a Project
Borrower following the repayment or prepayment in full of the
Project Loan made to such Project Borrower; and
(c) If (i) an event occurs that causes the Enron
Ownership Percentage to fall below the Designated Enron
Ownership Interest with respect to a Project Loan (an "EQUITY
DISPOSITION") or (ii) a Project Loan is prepaid or refinanced
in its entirety (a "REFINANCING"), then the Enron
Distributions from such Project Borrower for the
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Due Period in which such Equity Disposition or Refinancing has
occurred and for each Due Period thereafter shall be
calculated using the lesser of (x) the Enron Distributions
that would have been received from such Project Borrower
during such Due Period as determined by the Base Case
Financial Projections for such Project Borrower revised as of,
or immediately prior to, the date of such Equity Disposition
or Refinancing and (y) the portion of the amount in (x) above
that would enable the Rating Condition to be satisfied (which
portion may be zero) assuming a prepayment of the Project Loan
in an amount equal to the Disposition Amount and a redemption
of Notes under Article 10 of the Common Agreement in an amount
equal to the Note Redemption Amount on the next Quarterly
Payment Date.
"ENRON INITIAL EQUITY" means the Initial Equity of a Project
Borrower held by Enron or an Enron Affiliate and their respective
successors and assigns pursuant to Section 14.8.
"EQUITY DISPOSITION" has the meaning given to it in the
definition of "ENRON DISTRIBUTIONS."
"FINAL CREDIT SUPPORT NOTICE" has the meaning given to it in
Section 4.4.
"FUNDING AVAILABILITY COMMITMENT" means a commitment made by
Enron under Section 5.2 pursuant to an Election Notice to allow EICPO
to pass the Funding Availability Test.
"FUNDING AVAILABILITY NOTE" has the meaning given to it in
Section 5.4.
"GUARANTEED CREDITOR" has the meaning given to it in Section
9.1.
"GUARANTEED OBLIGATIONS" has the meaning given to it in
Section 9.1.
"JEDI" has the meaning given to it in Section 7.1.
"LIQUIDITY NOTE" has the meaning given to it in Section 4.3.
"MAXIMUM CLASS C NOTE PURCHASE COMMITMENT" has the meaning
given to it in Section 2.1.
"PRELIMINARY CREDIT SUPPORT NOTICE" has the meaning given to
it in Section 4.4.
"PROJECT DISTRIBUTIONS RESERVED" means, with respect to a
Quarterly Payment Date, after giving effect to all payments made on
such Quarterly Payment Date, the amount calculated as the excess of the
Required Reserve Amount over the unutilized portion of the Enron Class
II Purchase Commitment and the unutilized portion of the Class C Note
Purchase Commitment; provided that, Project Distributions Reserved
shall not exceed the Project Distributions Reserved as of the previous
Quarterly Payment Date, if any, plus the Quarterly Project
Distributions for the current Quarterly Payment Date less the amount of
any
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such Quarterly Project Distributions used to satisfy any Quarterly
Payment Shortfall under Section 4.1(c) on such Quarterly Payment Date.
"QUARTERLY PROJECT DISTRIBUTIONS" means, with respect to any
Quarterly Payment Date, an amount equal to 25% of the Enron
Distributions attributable to the Designated Enron Ownership Interest
for all Project Borrowers during each of the four Due Periods
immediately preceding such Quarterly Payment Date (or, in the case of
the first three Quarterly Payment Dates following the Closing Date,
such lesser number of Due Periods as have ended following the Closing
Date).
"REFINANCING" has the meaning given to it in the definition of
"ENRON DISTRIBUTIONS."
"SUPPORT" means the obligations of Enron under Sections 2.1,
3.1, Article IV, Article V, Article VII, Article VIII and Article IX.
"SUPPORT NOTES" means the notes payable by EICPO in the form
of Exhibit C attached hereto issuable pursuant to Article VI.
"SUPPORT PERIOD" means the period commencing on the Closing
Date and ending on the date that (i) subject to the proviso to Article
X hereof, all Notes have been paid in full, including any accrued
interest and Premium, if any, and (ii) the Class I Interests have been
terminated, retired or liquidated pursuant to the Partnership
Agreement.
ARTICLE II.
OPTION TO PURCHASE CLASS C NOTES
2.1 OPTION. Upon notification by EICPO to Enron that the Program
Manager has determined, in connection with the evaluation of an Eligible
Project, that the Rating Condition or a Credit Support Test would not be
satisfied if the related prospective Project Loan were included in the
Collateral, Enron shall have the right to either (a) purchase or cause to be
purchased Class C Notes pursuant to and in accordance with the terms and
conditions set forth on Exhibit D attached hereto or (b) commit to purchase
Class C Notes pursuant to Section 2.3 (the commitment to purchase Class C Notes
under (b) is referred to herein as the "CLASS C NOTE PURCHASE COMMITMENT" and
together, the rights under clauses (a) and (b) are the "CLASS C OPTION"), in
each case in a principal amount sufficient to allow EICPO to satisfy the Rating
Condition and the Credit Support Tests assuming such Project Loan is included in
the Collateral. The aggregate principal amount of Class C Notes that may be
purchased or that Enron may commit to purchase under the Class C Option shall
not at any time exceed U.S. $___________ (the "MAXIMUM CLASS C NOTE PURCHASE
COMMITMENT"). The "AVAILABLE CLASS C OPTION" shall be calculated as the excess
of the Maximum Class C Note Purchase Commitment over the aggregate principal
amount of Class C Notes that have been purchased or that Enron and/or any
permitted assignees under Section 2.5 have previously committed to purchase
pursuant to then outstanding Election Notices (as hereinafter defined) by
exercise of the Class C Option. For the avoidance of doubt, if the Class C Note
Purchase Commitment is reduced
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pursuant to Section 2.4 or any of the Class C Notes are redeemed pursuant to
their terms, the Available Class C Option shall be increased by the amount of
such reduction or redemption.
2.2 TERM OF OPTION. The Class C Option shall be exercisable on or after
the date hereof. The Available Class C Option (excluding any outstanding
commitments thereunder to purchase Class C Notes) shall expire on the Investment
Termination Date.
2.3 NOTICE OF EXERCISE. If Enron elects to exercise the Class C Option
with respect to a proposed initial funding of a Project Loan, Enron shall
deliver to EICPO, the Collateral Agent and the Rating Agencies a notice of such
election in the form of Exhibit E attached hereto (an "ELECTION NOTICE") no
later than five (5) Business Days prior to the consummation of the proposed
initial funding of such Project Loan. Such Election Notice shall state (i) the
principal amount of Class C Notes for which the Class C Option will be
exercised, (ii) whether the Class C Option will be exercised by purchasing Class
C Notes, committing to purchase Class C Notes or a combination thereof; provided
that, in the case of any combination thereof, Enron shall specify the amount of
Class C Notes that will be purchased and the amount of Class C Notes that Enron
will commit to purchase, (iii) the date on which Enron intends to make or cause
to be made such purchase, commitment or combination thereof which date shall be
on or before the date of the proposed initial funding of such Project Loan, (iv)
if Enron commits to purchase Class C Notes, a commitment by Enron in the form
set forth in the Election Notice, and (v) if an entity other than Enron will
purchase Class C Notes, the name of such entity. Any Election Notice may be
revoked prior to the initial funding of the Project Loan to which it relates if,
after giving effect to such revocation, EICPO is able to satisfy the Rating
Condition and the Credit Support Tests.
2.4 RIGHT TO REDUCE CLASS C NOTE PURCHASE COMMITMENT. At any time prior
to the date that is 12 months after the Investment Termination Date, Enron shall
have the right to reduce the Class C Note Purchase Commitment or redeem Class C
Notes if, after giving effect to such reduction or redemption, EICPO is able to
satisfy the Rating Condition, the Reserve Test and the Credit Support Tests;
provided that, prior to any reduction of the Class C Note Purchase Commitment,
the Program Manager shall provide written notice to the Collateral Agent that
the Rating Condition has been satisfied (assuming the proposed reduction in the
Class C Note Purchase Commitment) and that the Reserve Test and the Credit
Support Tests would be satisfied after giving effect to the proposed reduction
in the Class C Note Purchase Commitment. Such written notice shall include a
copy of any statement from the Rating Agencies that confirms that the Rating
Condition would be satisfied after the proposed reduction of the Class C Note
Purchase Commitment.
2.5 ASSIGNMENT AND TRANSFER. Enron may assign or transfer its rights
and obligations under the Class C Option, including related rights and
obligations under Sections 2.2 and 2.3, but excluding the rights and obligations
under Section 2.4, to an Enron Credit Counterparty or an Acceptable Credit
Provider pursuant to an Assumption Agreement if, and only if, (a) the assignee
or transferee shall have delivered to EICPO certification in the form of Exhibit
F with relevant tax forms duly completed and attached, that (i) either (A) such
assignee or transferee is a United States person as defined by the Code or (B)
all income to be received by such assignee or transferee with respect to the
Class C Note (whether it is treated as a partnership interest in or debt of
EICPO) will be entitled to a complete exemption from the withholding of United
States federal income tax and
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<PAGE> 7
(ii) either (A) such assignee or transferee is not for United States federal
income tax purposes a partnership, grantor trust, S corporation or other
pass-through entity or (B) such assignee or transferee was not formed for the
purpose of acquiring Class C Notes, Support Notes or Interests and not more than
50% of the value of a beneficial owner's interest in such assignee or transferee
will be attributable to Class C Notes, Support Notes or Interests held by the
transferee or assignee, (b) the assignee or transferee represents that it will
take no action that would cause EICPO to become a publicly traded partnership
taxable as a corporation for United States federal income tax purposes and (c)
the Program Manager shall have determined (treating any unfunded obligations as
having been funded for purposes of this determination) that, after giving effect
to the transfer or assignment, there would be no more than forty-six (46)
holders of the aggregate of the Support Notes, the Class II Interests and the
Class C Notes for purposes of Code Section 7704 of the United States Internal
Revenue Code.
ARTICLE III.
CLASS II INTERESTS
3.1 COMMITMENT TO PURCHASE CLASS II INTERESTS. Enron hereby agrees that
Enron will, or will cause an Enron Affiliate to, purchase Class II Interests to
the extent required from time to time under Section 4.1 of this Agreement for an
aggregate purchase price not to exceed U.S. $___________ which purchase price
shall equal the value of the Class II Interests purchased (the "ENRON CLASS II
PURCHASE COMMITMENT"). Enron, EICPO and any Enron Affiliate shall follow the
terms and provisions of Exhibit G attached hereto in connection with any Class
II Interests that Enron may be obligated to purchase from time to time under
Section 4.1. Enron shall obtain an irrevocable standby letter of credit from an
Acceptable Credit Provider for the benefit of the Collateral Agent, on behalf of
the Senior Lenders and the Class B Noteholders in an amount equal to the Enron
Class II Purchase Commitment on or prior to the Closing Date. The Collateral
Agent, on behalf of the Senior Lenders and the Class B Noteholders, shall have
the right to receive payments from such standby letter of credit, if and only if
Enron has breached its obligations under Section 4.1(b) or Section 4.2 and only
for the amount payable by Enron under Section 4.1(b) or Section 4.2. Enron
shall have the right to reduce the stated amount of the irrevocable standby
letter of credit by the amount of Class II Interests purchased under Section
4.1(b) or Section 4.2.
3.2 ASSIGNMENT AND TRANSFER. Enron shall have the following rights to
assign or transfer the Enron Class II Purchase Commitment and the funded Class
II Interests:
(a) in the event that either (i) solely as a result of a
change since the Closing Date in generally accepted accounting
principles in the United States, the indebtedness of EICPO would be
required to be consolidated on Enron's balance sheet (as advised by
Enron's Independent auditors) or (ii) solely as a result of a change
since the Closing Date in the methodology utilized by the Rating
Agencies, the percentage of EICPO's indebtedness that
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would be required to be consolidated for purposes of the rating of
Enron is materially increased from the percentage of such indebtedness
so consolidated as of the Closing Date, Enron shall have the right to
assign or transfer up to fifty percent (50%) of the Enron Class II
Purchase Commitment and the obligations under Section 3.1 in respect
thereof to an Acceptable Credit Provider if, and only to the extent
that, (A) in the case of clause (i) above, such assignment or transfer
would cause EICPO's indebtedness not to be required to be consolidated
on Enron's balance sheet, (B) in the case of clause (ii) above, such
assignment or transfer would materially decrease the amount of EICPO's
indebtedness that is required to be consolidated for purposes of the
rating of Enron, (C) Enron has in good faith considered and concluded
in good faith not to pursue all reasonably practicable alternatives to
avoid the consequences described in clauses (i) and/or (ii) above
(including the sale of funded Class II Interests under clause (c) of
this Section 3.2 below), (d) no Default shall have occurred and be
continuing (immediately prior to and after giving effect to such
assignment or transfer) and (e) the Rating Condition shall be satisfied
after giving effect to such assignment or transfer;
(b) Enron shall have the right to transfer any or all of the
Enron Class II Purchase Commitment to an Enron Credit Counterparty that
is a Majority Affiliate of Enron pursuant to an Assumption Agreement;
and
(c) Enron shall have the right to transfer (i) up to fifty
percent (50%) of the funded Class II Interests to any Person or Persons
and (ii) any or all of the funded Class II Interests to a Majority
Affiliate of Enron;
provided that, Persons that are not Majority Affiliates of Enron shall not in
aggregate hold in excess of fifty percent (50%) of the Class II Interests; and
provided further that, (a) the assignee or transferee shall have delivered to
EICPO certification in the form of Exhibit F, with relevant tax forms duly
completed and attached, that (i) either (A) such assignee or transferee is a
United States person as defined by the Code or (B) all income to be received by
such assignee or transferee with respect to the Class II Interest will be
entitled to a complete exemption from the withholding of United States federal
income tax and (ii) either (A) such assignee or transferee is not for United
States federal income tax purposes a partnership, grantor trust, S corporation
or other pass-through entity or (B) such assignee or transferee was not formed
for the purpose of acquiring Class C Notes, Support Notes or Interests and not
more than 50% of the value of a beneficial owner's interest in such assignee or
transferee will be attributable to Class C Notes, Support Notes or Interests
held by the transferee or assignee, (b) the assignee or transferee represents
that it will take no action that would cause EICPO to become a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes and (c) the Program Manager shall have determined (treating any
unfunded obligations as having been funded for purposes of this determination)
that, after giving effect to the transfer or assignment of the funded Class II
Interests or the Enron Class II Purchase Commitment (and in the case of any
Enron Class II Purchase Commitment transferred or assigned, assuming the Enron
Class II Purchase Commitment has been exercised), there would be no more than
forty-six (46) holders of the aggregate of the Support Notes, the Class II
Interests and the Class C Notes for purposes of Code Section 7704 of the United
States Internal Revenue Code.
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ARTICLE IV.
SUPPORT FOR PAYMENT OBLIGATIONS
4.1 INSUFFICIENT COLLATERAL PROCEEDS ON A QUARTERLY PAYMENT DATE. On
the Business Day immediately preceding any Quarterly Payment Date, if a
Quarterly Payment Shortfall exists, the following payments shall be made by
Enron or its permitted designees in an aggregate amount not to exceed the
Quarterly Payment Shortfall on such Quarterly Payment Date and in the order set
forth below:
(a) first, Enron shall purchase or cause to be purchased from
EICPO Class C Notes in principal amount and for a purchase price up to
the unfunded Class C Note Purchase Commitment;
(b) second, Enron shall purchase from EICPO Class II Interests
for a purchase price up to the unfunded Enron Class II Purchase
Commitment;
(c) third, Enron shall pay or cause to be paid to EICPO an
amount not exceeding the Quarterly Project Distributions for such
Quarterly Payment Date;
(d) fourth, Enron shall pay or cause to be paid to EICPO an
amount not exceeding the Project Distributions Reserved as of the
previous Quarterly Payment Date;
(e) fifth, to the extent that a Quarterly Payment Shortfall
exists after application of the amounts on deposit in the Reserve
Account as of such Quarterly Payment Date and the Excess Spread Account
as of such Quarterly Payment Date pursuant to Section 4.1(b) of the
Security Agreement, Enron shall pay or cause to be paid to EICPO an
amount not exceeding the total outstanding Credit Support Test
Commitments provided under Section 5.2. (less amounts funded to date
under such commitments).
Notwithstanding anything to the contrary herein, Enron shall not be
obligated to make payments under (c) and (d) to cover Quarterly Payment
Shortfalls to the extent such shortfalls result from a Tax Event.
If more than one party is required to make payments under a particular
clause of this Section 4.1, such parties shall make the payment under such
clause ratably based on the respective commitments of such parties.
EICPO shall use any payments received under this Section 4.1 solely to
pay Quarterly Payment Shortfalls in accordance with terms and conditions of the
Financing Documents.
4.2 INSUFFICIENT COLLATERAL PROCEEDS UPON AN ACCELERATION. Upon and
after the occurrence of an Acceleration in which funds in the Collateral
Accounts are insufficient to make the payments set forth in clauses (i) through
(ix) of Section 4.3(a) of the Security Agreement, such shortfall shall be
treated hereunder in the same manner as a Quarterly Payment Shortfall and the
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provisions of Section 4.1 shall apply mutatis mutandis to a shortfall under
Section 4.3(b) of the Security Agreement; provided that, calculations of amounts
as of a Quarterly Payment Date shall be calculated as of the date of the
Acceleration and on each Quarterly Payment Date thereafter and obligations
taking effect on a Quarterly Payment Date shall take effect on the date of
Acceleration and on each Quarterly Payment Date thereafter.
4.3 LIQUIDITY SHORTFALLS. (a) Upon the occurrence of a Shortfall as
defined in Section 4.2(a) of the Security Agreement pursuant to which the amount
available to be drawn under the Liquidity Facility is less than the Liquidity
Shortfall Amounts, Enron shall pay or cause to be paid to EICPO an amount not
exceeding the lesser of (i) the remaining Liquidity Shortfall Amounts not
covered by drawdowns of the Liquidity Facility and (ii) the Liquidity Test
Commitments provided under Section 5.2 less amounts previously funded under such
commitments.
(b) On each date on which a payment is made to EICPO under this Section
4.3, EICPO shall issue to Enron or its designee a note payable to Enron or its
designee in substantially the form of Exhibit H attached hereto (a "LIQUIDITY
NOTE") in principal amount equal to the amount paid by Enron under this Section
4.3; provided that, EICPO shall not be obligated to issue Liquidity Notes in
aggregate principal amount exceeding _____________ Dollars ($_____________).
EICPO shall issue Support Notes to Enron pursuant to Section 6.1 for amounts
funded under this Section 4.3 in excess of _____________ Dollars
($_____________).
4.4 NOTICE OF CREDIT SUPPORT OBLIGATION. EICPO shall notify Enron and
any relevant Enron Credit Counterparties and Acceptable Credit Providers in
writing (a "PRELIMINARY CREDIT SUPPORT NOTICE") no later than three (3) Business
Days prior to the Quarterly Payment Date regarding any obligation of Enron, such
Enron Credit Counterparty or Acceptable Credit Provider to provide Support that,
in the reasonable judgment of EICPO, will occur on such Quarterly Payment Date.
The Preliminary Credit Support Notice shall provide (i) a description of the
Support to be provided and (ii) the estimated amounts and forms of Support,
including calculations and supporting information. EICPO shall also notify Enron
in writing of the exact amounts and forms of Support to be provided no later
than two (2) Business Days prior to such Quarterly Payment Date (the "FINAL
CREDIT SUPPORT NOTICE"), which Final Credit Support Notice shall be conclusive
absent manifest error. Upon a determination by Enron that the amount of Support
actually provided on a Quarterly Payment Date was in excess of the amount
required to be provided under the terms of this Agreement, Enron shall be
entitled to a reduction of amounts due and payable hereunder on subsequent
Quarterly Payment Dates to the extent of such overstatement. Failure to provide
any notice under this Section 4.4 within the time specified shall not constitute
a waiver by EICPO of Enron's obligations (or the obligations of an Enron Credit
Counterparty or Acceptable Credit Provider) under Section 4.1.
4.5 RECORD KEEPING AND AUDIT RIGHT. During the term of this Agreement,
Enron shall maintain an ongoing record on a quarterly basis of the Quarterly
Project Distributions. On the first Business Day following each Determination
Date, Enron shall provide a summary in writing of such amounts to EICPO. EICPO
shall have the right to reasonable access to Enron's records of the Quarterly
Project Distributions for the sole purpose of reviewing and auditing such
records.
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ARTICLE V.
SUPPORT UPON THE OCCURRENCE OF CERTAIN EVENTS
5.1 SUPPORT UPON THE OCCURRENCE OF A TAX EVENT. In the event of an
occurrence of a Tax Event, Enron shall have the option (but not the obligation)
to indemnify EICPO for the amount (if any) necessary for the satisfaction of the
Rating Condition after giving effect to the Tax Event.
5.2 SUPPORT UPON A FAILURE BY EICPO TO SATISFY CERTAIN TESTS UNDER THE
COMMON AGREEMENT. In the event that EICPO fails to satisfy any of the Funding
Availability Test, the Liquidity Test or either of the Credit Support Tests,
Enron shall have the option (but not the obligation) to pay or commit to pay to
EICPO pursuant to an Election Notice, an amount sufficient to allow EICPO to
satisfy any or all such tests. Enron shall have the right to reduce any
outstanding commitments under this Section 5.2 if, after giving effect to such
reduction, EICPO is able to satisfy the Funding Availability Test, the Liquidity
Test or the Credit Support Tests, as the case may be; provided that, (i) prior
to any reduction of such commitment, the Program Manager shall provide written
notice to the Collateral Agent that the test to which the commitment applies
would be satisfied after giving effect to the proposed reduction in such
commitment, and (ii) in the case of a reduction of a commitment made in
connection with the satisfaction of a Credit Support Test, the Rating Condition
shall have been satisfied after giving effect to such reduction and, provided
further that, any Credit Support Commitments outstanding on the first
anniversary of the Investment Termination Date shall not be reduced and shall
remain outstanding for the term of this Agreement. Funding Availability
Commitments shall terminate no earlier than the termination of the revolving
period of the Backup Facility as provided for in the terms and conditions of
the Backup Facility set forth on Appendix B to the Common Agreement.
Liquidity Test Commitments shall terminate no earlier than the maturity date of
the Liquidity Facility.
5.3 SUPPORT FOR REDEMPTIONS. Enron shall have the option (but not the
obligation) to pay to EICPO an amount which shall be used by EICPO to redeem
Notes or to effect a Class B Refinancing, in each case pursuant to Article 10 of
the Common Agreement.
5.4 SUPPORT FOR SHORTFALLS IN FUNDING OF PROJECT LOANS. (a) In the
event that (i) Enron has made a Funding Availability Commitment under Section
5.2 and (ii) EICPO will be unable to fund any draw on a Project Loan due solely
to the lack of available funds for such purposes, EICPO shall notify Enron in
writing of the amount of any unused Funding Availability Commitments necessary
to fund such Project Loan. No later than three (3) Business Days after receipt
of such notice, Enron shall pay or cause to be paid to EICPO such amount;
provided that, the aggregate amount paid pursuant to all such notifications
shall not exceed the sum of the Funding Availability Commitments provided under
Section 5.2 to satisfy the Funding Availability Test less any reductions of such
commitments under Section 5.2.
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(b) On each date on which a payment is made to EICPO under this Section
5.4, EICPO shall issue to Enron or its designee a note payable to Enron or its
designee in substantially the form of Exhibit I attached hereto (a "FUNDING
AVAILABILITY NOTE") in principal amount equal to the amount paid by Enron under
this Section 5.4.
5.5 ADDITIONAL SECURITY FOR QUARTERLY PROJECT DISTRIBUTIONS AND
PROJECT DISTRIBUTIONS RESERVED.
(a) Enron shall have the option (but not the obligation) to
obtain an irrevocable standby letter of credit from an Acceptable
Credit Provider for the benefit of the Collateral Agent, on behalf of
the Senior Lenders and the Class B Noteholders, to secure all or any
portion of the payment obligations of Enron set forth in Sections
4.1(c), (d) and 4.2, as may be incurred from time to time. Enron shall
have the right to reduce or cancel all or any portion of any standby
letter of credit outstanding under this Section 5.5(a) if, after giving
effect to such reduction, the Rating Condition has been satisfied.
(b) In the event that Moody's downgrades the rating of the
senior unsecured long-term debt of Enron below Baa2, no later than
thirty (30) days following the date that the rating of Enron has been
so downgraded, Enron shall obtain an irrevocable standby letter of
credit from an Acceptable Credit Provider for the benefit of the
Collateral Agent, on behalf of the Senior Lenders and the Class B
Noteholders in an amount equal to ____ million Dollars ($__________) to
secure all or any portion of the payment obligations of Enron set forth
in Sections 4.l(c), (d) and 4.2, as may be incurred from time to time;
provided, however, that Enron shall not be obligated to obtain or
maintain such standby letter of credit if (i) the then current rating
by Moody's with respect to the Class A Senior Notes is lower than or
equal to the then current rating by Moody's with respect to the senior
unsecured long term debt of Enron or (ii) Moody's upgrades the rating
of the senior unsecured long-term debt of Enron to A2 or higher.
(c) In the event that Enron is required to obtain a standby
letter of credit pursuant to Section 5.5(b) above and no such letter
of credit is obtained by Enron, Enron shall, no later than thirty (30)
days following the date the rating has been downgraded, deposit cash
in an account designated by EICPO in the amount set forth in Section
5.5(b) and enter into security arrangements acceptable to the
Collateral Agent with respect to such account. Funds deposited in such
account shall be invested by the Program Manager in Eligible
Investments and any income on or accretions to such Eligible
Investment shall be paid periodically to Enron.
(d) If any standby letter of credit has been issued under
Section 5.5(a) or (b) is outstanding, or Enron has deposited cash in
accordance with Section 5.5(c), the Collateral Agent, on behalf of the
Senior Lenders and the Class B Noteholders, shall have the right to
receive payments from such standby letter of credit or the principal
amount of such account, as the case may be, if and only if Enron has
breached its obligations under Section 4.1(c), 4.1(d) or 4.2 and only
for the amount payable by Enron under Sections 4.1(c), 4.1(d) or 4.2.
The stated amount of any standby letter of credit hereunder shall be
reduced by any amount paid by Enron to the Collateral Agent under
Section 4.1(c), 4.1(d) and 4.2.
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5.6 ASSIGNMENTS AND TRANSFERS. Enron may assign or transfer its rights
and obligations under this Section 5 to any Person pursuant to an Assumption
Agreement; provided that, Enron's obligations under Section 5.1 and any Funding
Availability Commitments, Liquidity Test Commitments and Credit Support
Commitments made under Section 5.2 shall only be assigned to an Enron Credit
Counterparty or an Acceptable Credit Provider; and provided further that, with
respect to transfers or assignments of rights and obligations under Sections
5.1, 5.2 in connection with any Credit Support Commitments, 5.3 and 5.5(d), (a)
such Person shall have delivered to EICPO certification in the form of Exhibit F
with relevant tax forms duly completed and attached, that (i) either (A) such
Person is a United States person as defined by the Code or (B) all income to be
received by such assignee or transferee with respect to Support Notes to be
issued in respect of payments made under Section 5.1 or 5.3 (whether such Notes
are treated as a partnership interest in or debt of EICPO) will be entitled to a
complete exemption from the withholding of United States federal income tax and
(ii) either (A) such Person is not for United States federal income tax purposes
a partnership, greater trust, S corporation or other pass-through entity or (B)
such Person was not formed for the purpose of acquiring Class C Notes, Support
Notes or Interests and not more than 50% of the value of a beneficial owner's
interest in such Person will be attributable to Class C Notes, Support Notes or
Interests held by the Person, (b) the assignee or transferee represents that it
will take no action that would cause EICPO to become a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes and (c) the Program Manager shall have determined (treating any
unfunded obligations as having been funded for purposes of this determination),
that, after giving effect to the transfer or assignment, there would be no more
than forty-six (46) holders of the aggregate of the Support Notes, the Class II
Interests and the Class C Notes for purposes of Code Section 7704 of the United
States Internal Revenue Code.
ARTICLE VI.
SUPPORT NOTES
6.1 ISSUANCE OF SUPPORT NOTES. On each date on which a payment is made
under Section 4.1, (c), (d) or (e), Section 5.1, 5.2 in connection with any
Credit Support Commitments, 5.3 or 5.5(d) or as may be required for certain
payments made under Section 4.3, EICPO shall issue notes ("SUPPORT NOTES")
payable to Enron (or to its designee) in substantially the form of Exhibit C
attached hereto in an aggregate principal amount equal to the amount paid under
the relevant Section or clause thereof.
6.2 RESTRICTIONS ON DESIGNEES. Enron may designate any Person to
provide Support under Sections 4.1 (c), (d) or (e), Section 5.1, 5.2 in
connection with any Credit Support Commitments, and 5.3, and as may be required
for certain payments made under Section 4.3, including Enron's right to receive
Support Notes under Section 6.1, if, and only if, (a) such Person shall have
delivered to EICPO certification in the form of Exhibit F with relevant tax
forms duly completed and attached, that (i) either (A) such Person is a United
States person as defined by the Code or (B) all income to be received by such
designee with respect to the Support Note (whether it is treated as a
partnership interest in or debt of EICPO) will be entitled to a complete
exemption from the withholding of United States federal income tax and (ii)
either (A) such Person is not for
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United States federal income tax purposes a partnership, grantor trust, S
corporation or other pass-through entity or (B) such Person was not formed for
the purpose of acquiring Class C Notes, Support Notes or Interests and not more
than 50% of the value of a beneficial owner's interest in such Person will be
attributable to Class C Notes, Support Notes or Interests held by such Person,
(b) the designee represents that it will take no action that would cause EICPO
to become a publicly traded partnership taxable as a corporation for United
States federal income tax purposes and (c) the Program Manager shall have
determined (on the basis of EICPO's registers of the holders of the Support
Notes, Class C Notes and Class II Interests and treating any unfunded
obligations as having been funded for purposes of this determination) that,
after giving effect to the aforesaid designation, there would be no more than
forty-six (46) holders of the aggregate of the Support Notes, the Class II
Interests and the Class C Notes for the purposes of Code Section 7704 of the
United States Internal Revenue Code.
ARTICLE VII.
NOTIFICATION OF INVESTMENT OPPORTUNITIES; LIMITATION ON COMPETITION;
MAINTENANCE OF ENRON CREDIT COUNTERPARTIES
7.1 NOTIFICATION OF INVESTMENT OPPORTUNITIES. Enron shall use
commercially reasonable efforts to notify EICPO in writing (the "INVESTMENT
NOTICE") of all opportunities to make loans to projects developed or acquired by
Enron or controlled Enron Affiliates and located within the EI Regions to the
extent any of such projects would be an Eligible Project as determined by Enron
on a commercially reasonable basis and in good faith and excluding any loan that
constitutes a "Qualified Investment" as such term is defined in, or which is
offered as such by Enron or an Enron Affiliate to Joint Energy Development
Investments II Limited Partnership ("JEDI") under, the terms of the Limited
Partnership Agreement of JEDI dated as of December 30, 1997 (the "JEDI
PARTNERSHIP AGREEMENT"). Enron shall provide the Investment Notice in a manner
sufficient to allow EICPO to prepare a timely bid to make a Project Loan in
light of the project's financing requirements. Upon request by EICPO, Enron
shall provide or cause to be provided to EICPO a description of the location and
physical components of the relevant project and a description of the ownership
interests therein held by the parties together with any available project
documents for such project; one or more sets of the current financial
projections for such project and the Project Loan in United States dollars
(together with the assumptions upon which such financial projections are based)
and such additional materials and information regarding the proposed project as
are commonly provided to lenders in such transactions. Enron's obligations under
this Section 7.1 shall terminate on the Investment Termination Date, including a
termination of the Investment Period as a result of the removal of the Program
Manager pursuant to Section ___ of the Partnership Agreement.
7.2 LIMITATION ON COMPETITION. Enron agrees that from and after the
Closing Date until the earliest of (a) the termination of the Support Period,
(b) the date on which EICPO has an aggregate principal amount of Project Loans
outstanding plus unfunded Commitments equal to or greater than $_____________
and (c) the Investment Termination Date, neither Enron nor any Controlled Enron
Affiliate shall compete with EICPO, directly or indirectly, in the commencement,
acquisition, development, sponsorship, organization or marketing of any
Competing Issuer.
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<PAGE> 15
7.3 LIMITATION ON AMENDMENT OF JEDI PARTNERSHIP AGREEMENT. Enron shall
not amend, modify, waive, or cause to be amended, modified or waived, any
provision of the JEDI Partnership Agreement in any manner that would expand the
projects excluded from Enron's obligations to show opportunities to EICPO under
Section 7.1 hereof.
7.4 MAINTENANCE OF ENRON CREDIT COUNTERPARTIES. With respect to any
Enron Credit Counterparty that has outstanding obligations hereunder that are
guaranteed by Enron, Enron shall provide to EICPO a guaranty from Enron of such
Enron Credit Counterparty's obligations in the form attached hereto as Exhibit
A. Upon the failure of an entity that has then outstanding obligations under any
Financing Document as an Enron Credit Counterparty to qualify as an Enron Credit
Counterparty, Enron shall promptly cause such entity to requalify as an Enron
Credit Counterparty or cause an Enron Credit Counterparty to assume such
entity's outstanding obligations.
ARTICLE VIII.
EQUITY DISPOSITION
Enron shall notify EICPO in writing of any proposed Equity Disposition.
Upon such notification by Enron to EICPO, EICPO shall as soon as practicable,
but no later than ten days after EICPO has received the revised Base Case
Financial Projections for such Eligible Project, seek to confirm that the Rating
Condition would be satisfied based on the Assumptions.
If EICPO obtains a confirmation of the Rating Condition based on the
Assumptions, EICPO shall notify Enron of such confirmation and the amount of
Enron Distributions calculated pursuant to clause (c) of the definition of Enron
Distributions. Upon consummation of the Equity Disposition, Enron shall pay or
cause to be paid to EICPO the Disposition Amount, EICPO shall cause the
Collateral Agent to release the Lien on the relevant Project Loan under Section
2.6 of the Security Agreement contemporaneously with the payment of the
Disposition Amount and EICPO shall assign and transfer the Project Loan to Enron
or its designee; provided that, no such Disposition Amount shall be payable to
EICPO if the Required Lenders vote to maintain such Project Loan in the
Collateral despite such Equity Disposition.
If EICPO fails to obtain confirmation that the Rating Condition has
been satisfied based upon the Assumptions, (i) EICPO shall notify Enron that the
Rating Condition has not been so confirmed, (ii) upon such Equity Disposition,
no Disposition Amount shall be payable, (iii) EICPO shall retain the Project
Loan as Collateral and (iv) Enron Distributions shall be calculated pursuant to
clause (c) of the definition of Enron Distributions without adjustment pursuant
to subclause (y) thereof.
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ARTICLE IX.
GUARANTY OF CERTAIN OBLIGATIONS OF PROGRAM MANAGER
UNDER MANAGEMENT AGREEMENT
9.1 GUARANTY. Subject to Article X hereof, Enron hereby unconditionally
and irrevocably guarantees to EICPO and its assigns (the "GUARANTEED CREDITORS")
the full payment of any and all amounts due and payable by the Program Manager
to EICPO under Section 2.07 of the Management Agreement up to a maximum
aggregate amount of $___________ (the "GUARANTEED OBLIGATIONS"). Such guaranty,
subject to Article X hereof, is an absolute, unconditional, present and
continuing guaranty of payment and not of collection, is not conditioned or
contingent upon any attempt to collect from the Program Manager or upon any
other event, contingency or circumstance whatsoever (it being understood and
agreed, however that any determination of any and all such amounts due and
payable by the Program Manager to EICPO under Section 2.07 of the Management
Agreement shall be made in an arbitration conducted under and in accordance with
the terms of Section 11.11 of the Management Agreement) and that no party shall
have any right to have such a determination made by any court or other
non-arbitral body). All payments by Enron under this guaranty shall be made
within five (5) Business Days following demand therefor given in writing to
Enron (which demand will set forth the basis and calculation of the amount for
which demand is made and shall include a copy of the determination of the
arbitrator); provided that any failure to give such demand, to the extent
prohibited by law, shall not waive any rights hereunder. All such payments by
Enron of the Guaranteed Obligations shall be made to the Guaranteed Creditor in
Dollars in New York City.
9.2 OBLIGATION ABSOLUTE AND UNCONDITIONAL, CONTINUING, ETC. Enron
agrees that the obligation of Enron to pay the Guaranteed Obligations shall be a
direct obligation of Enron and such obligation, subject to the terms hereof (i)
shall be absolute, unconditional and irrevocable, (ii) to the extent permitted
by applicable government rules, shall not be subject to any counterclaims,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment or
reduction (other than full and strict compliance by Enron with its obligations
hereunder) based upon any claim Enron, the Program Manager, or any other Person
may have against the Guaranteed Creditor or upon any claim Enron may have
against the Program Manager or any other Person and (iii) shall remain in full
force and effect during the Support Period without regard to, and shall not be
released, discharged or in any way affected or impaired by any circumstance or
condition whatsoever (whether or not Enron shall have any knowledge or notice
thereof) except in accordance with Article X or as expressly consented to by the
Guaranteed Creditor, including, without limitation, (a) any amendment or
modification of or supplement to or other change in any Financing Document or
any assignment, mortgaging or transfer thereof or of any interest therein;
provided, however, that any amendment or modification of the amount of the
Guaranteed Obligations shall be consented to by Enron in writing; (b) any
failure, omission or delay on the part of any other Person to conform or comply
with any term of any Financing Document; (c) any waiver, consent, extension,
indulgence, compromise, release or other action or inaction under or in respect
of any Financing Document or any exercise or nonexercise of any right, remedy,
power or privilege under or in respect of any Financing Document; (d) any
bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation
or similar
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<PAGE> 17
proceeding with respect to the Program Manager or any other Person or any of
their respective properties, or any action taken by any trustee or receiver or
by any court in any such proceeding; (e) any illegality, invalidity or
unenforceability, in whole or in part, of this Agreement, any Financing Document
or any term or provision thereof or hereof; (f) any merger or consolidation of
the Program Manager or Enron into or with any other Person or any sale, lease or
transfer of all or any of the assets of the Program Manager or Enron to any
other Person, except, in each case, pursuant to an assignment in accordance with
the terms and provisions of Section 14.8 hereof; (g) any change in the ownership
of any shares of capital stock of Enron or the Program Manager, except, in each
case, pursuant to an assignment in accordance with the terms and provisions of
Section 14.8 hereof; (h) to the extent as may be waived by applicable law, the
benefit of all principles or provisions of law, statutory or otherwise, which
may be in conflict with the terms hereof, including, without limitation, any law
which provides that the obligation of a surety or guarantor must neither be
larger in amount nor in other respects more burdensome than that of the
principal or which reduces a surety's or guarantor's obligation in proportion to
the principal obligation; and (i) to the extent permitted under applicable law,
any other occurrence or circumstance whatsoever, whether similar or dissimilar
to the foregoing which might otherwise constitute a legal or equitable defense
or discharge of the liabilities of a guarantor or surety or which might
otherwise limit recourse against Enron. The obligation of Enron set forth herein
constitutes the full recourse obligation of Enron enforceable against it to the
full extent of all its assets and properties. Without limiting the generality of
the foregoing, Enron agrees that in the event that any Guaranteed Obligations
are paid by the Program Manager or Enron hereunder, and thereafter all or any
part of such payment is recovered as a preferential or fraudulent transfer under
any bankruptcy code, any applicable insolvency law, or any other similar law now
or hereafter in effect, the liability of Enron hereunder with respect to such
Guaranteed Obligations so paid and recovered shall continue and remain in full
force and effect as if, to the extent of such recovery, such payment had not
been made. Nothing in this Section 9.2 shall in any manner affect the maximum
amount of Guaranteed Obligations as set forth in Section 9.1.
9.3 WAIVER OF DEMANDS, NOTICES, ETC. Enron hereby unconditionally and
irrevocably waives, to the extent permitted by applicable law, (a) notice of any
of the matters referred to in Section 9.2; (b) all notices which may be required
by statute, rule or law or otherwise, now or hereafter in effect, to preserve
any rights against Enron hereunder, including, without limitation, any demand,
proof or notice of non-payment of the Guaranteed Obligations; (c) acceptance of
this Agreement, demand, protest, presentment, notice of default or dishonor and
any requirement of diligence; (d) any requirement to exhaust any remedies under
any Financing Document, subject to the provisions of Section 9.1; and (e) any
other circumstance whatsoever which might otherwise constitute a discharge,
release or defense of a guarantor or surety, or which might otherwise limit
recourse against Enron or exonerate Enron from its obligations under this
Article IX (including although not limited to any such defense related to any
requirement for the prior exhaustion of the Program Manager's property, the
extension of the date for payment of any Guaranteed Obligations under the
Management Agreement or any other obligations under any Financing Document by
the Guaranteed Creditor, the novation of any of the Guaranteed Obligations under
the Management Agreement or any other obligations under any Financing Document,
the release of the Program Manager from its Guaranteed Obligations under the
Management Agreement or any other obligations under any Financing Document and
the amendment or waiver of the terms of the Management Agreement or any
Financing Document) except, in each case, pursuant to an assignment in
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accordance with the terms and provisions of Section 14.8 hereof and subject to
the maximum amount of Guaranteed Obligations as set forth in Section 9.1.
ARTICLE X.
TERMINATION OF SUPPORT AGREEMENT AND OBLIGATIONS HEREUNDER
This Agreement shall terminate and all obligations of Enron (or any
Enron Credit Counterparty or Acceptable Credit Provider) to provide Support
hereunder shall terminate at the end of the Support Period provided, however,
that this Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time payment made pursuant to this Agreement is rescinded or
must otherwise be returned upon the insolvency, bankruptcy or reorganization of
Enron, any Enron Credit Counterparty or any Acceptable Credit Provider, either
of the Issuers or otherwise, all as though such payment had not been made.
ARTICLE XI.
REPRESENTATIONS AND WARRANTIES OF EICPO
EICPO hereby represents and warrants to Enron as follows as of the date
hereof:
11.1 STATUS. EICPO is a limited partnership duly formed, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals, necessary to own
its assets and carry on its business as now being or as proposed to be conducted
and is qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure so
to qualify would have a Material Adverse Effect with respect to EICPO.
11.2 POWERS. EICPO has all necessary power and authority to execute and
deliver this Agreement and any other documentation relating to this Agreement to
which it is a party and to perform its obligations under this Agreement and has
taken all necessary partnership action to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by EICPO. This
Agreement constitutes the legal, valid and binding obligation of EICPO,
enforceable against EICPO in accordance with its terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally and subject, as to enforceability, to equitable
principles of general application (regardless of whether enforcement is sought
in a proceeding in equity or at law).
11.3 NO VIOLATION OR CONFLICT. None of the execution and delivery of
this Agreement, the consummation of the transactions contemplated herein and in
the other Financing Documents and
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compliance with the terms and provisions hereof and thereof will contravene or
result in a breach of, the Partnership Agreement or the Certificate of Limited
Partnership of EICPO, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
agreement or instrument to which EICPO is a party or by which EICPO is bound or
to which EICPO is subject, or constitute a default under any such agreement or
instrument the violation or breach of or default under which would have a
Material Adverse Effect with respect to EICPO, or result in the creation or
imposition of any lien (other than Permitted Liens) upon any property of EICPO.
(b) EICPO is not in violation of any of its constitutional documents.
EICPO is not in breach or violation of or in default under (i) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement or other
evidence of indebtedness or other agreement, obligation, condition, covenant or
instrument to which EICPO is a party or is bound, (ii) any statute applicable to
EICPO or (iii) any law, decree, order, rule or regulation applicable to EICPO of
any court or regulatory, administrative or governmental agency, body or
authority, or arbitrator having or asserting jurisdiction over EICPO, or its
properties; except in any case referred to in clauses (i) through (iii) above
where the default, breach or violation would not have a Material Adverse Effect
on EICPO.
11.4 CONSENTS. All governmental and other consents that are required to
have been obtained by EICPO with respect to its execution, delivery and
performance of this Agreement have been obtained and are in full force and
effect and all conditions of any such consents have been complied with.
11.5 ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against EICPO, or against any entity controlled, directly or
indirectly, by EICPO, any entity that controls, directly or indirectly, EICPO or
any entity directly or indirectly under common control with EICPO, any action,
suit or proceeding at law or in equity or before any court, governmental body,
agency or official or any arbitrator in which there is a reasonable possibility
of an adverse decision that, if adversely determined, could have a Material
Adverse Effect with respect to EICPO.
11.6 NO REQUIRED REGISTRATION. EICPO has not engaged in any transaction
that would result in the violation of, or require registration of EICPO as an
investment company under, the Investment Company Act of 1940, as amended.
ARTICLE XII.
REPRESENTATIONS AND WARRANTIES OF ENRON
Enron hereby represents and warrants to EICPO as follows as of the date
hereof:
12.1 STATUS. Enron is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, has
all requisite power and authority, and has all material governmental licenses,
authorizations, consents and approvals, necessary to carry on its material
business as now being conducted.
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12.2 POWERS. Enron has all necessary corporate power and authority to
execute and deliver this Agreement and any other documentation relating to this
Agreement to which it is a party and to perform its obligations under this
Agreement and has taken all necessary corporate action to authorize such
execution, delivery and performance. This Agreement has been duly executed and
delivered by Enron. This Agreement constitutes the legal, valid and binding
obligation of Enron, enforceable against Enron in accordance with its terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or law)).
12.3 NO VIOLATION OR CONFLICT. None of the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein and
compliance with the terms and provisions hereof will contravene or result in a
breach of, the amended and restated articles of incorporation, as amended, or
by-laws, as amended, of Enron, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any material ("material" for the purposes of this representation
meaning creating a liability of $50,000,000 or more) agreement or instrument to
which Enron is a party or by which Enron is bound or to which Enron is subject,
or result in the creation or imposition of any Lien upon any property of Enron.
12.4 CONSENTS. All governmental and other consents that are required to
have been obtained by Enron with respect to its execution, delivery and
performance of this Agreement have been obtained and are in full force and
effect and all conditions of any such consents have been complied with.
12.5 ABSENCE OF LITIGATION. Except as disclosed in Enron's Form 10-K
for the year ended December 31, 1997 or Enron's Form 10-Q for the quarter ended
June 30, 1998, there is not pending or, to its knowledge, threatened against
Enron or its consolidated subsidiaries, any action, suit or proceeding at law or
in equity or before any court, governmental body, agency or official or any
arbitrator in which there is a reasonable possibility of an adverse decision
that, if adversely determined, could have a material adverse effect on the
ability of Enron to perform its obligations hereunder.
12.6 NO REQUIRED REGISTRATION. Enron has not engaged in any transaction
in connection with this Agreement that would result in the violation of, or
require registration of EICPO as an investment company under, the Investment
Company Act of 1940, as amended.
ARTICLE XIII.
INDEMNIFICATION
13.1 INDEMNIFICATION OF EICPO. From and after the date hereof, and
subject to the remaining provisions of this Article XIII, Enron shall indemnify,
defend and hold harmless EICPO, its officers and authorized representatives (the
"EICPO INDEMNIFIED PARTIES") from and against any
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loss, cost, claim, liability, damage or expense (collectively, "LOSSES")
incurred by EICPO as a result of a breach by Enron of its obligations under this
Agreement.
13.2 INDEMNIFICATION OF ENRON. From and after the date hereof and
subject to the remaining provisions of this Article XIII, EICPO shall indemnify,
defend and hold harmless Enron, its officers and authorized representatives (the
"ENRON INDEMNIFIED PARTIES") from and against any Losses incurred by Enron as a
result of a breach by EICPO of its obligations under this Agreement.
13.3 LIMITATION ON RECOVERY OF CERTAIN TYPES OF DAMAGES. In connection
with any claim made by a party against another party hereunder, the claiming
party shall be entitled to recover only actual damages or direct damages,
together with the costs and expenses incurred by the claiming party in
investigating, preparing and prosecuting the claim for damages, and, without
limiting the generality of the foregoing, no such party shall be entitled to
recover any other damages, whether expressed as punitive, consequential,
special, incidental, indirect, exemplary or treble damages, as damages for loss
of profits, opportunity or income or as penalties, whether based on statute or
in tort, contract or otherwise, regardless of whether such damages may be
available under applicable law or otherwise, and whether or not arising from a
party's sole, joint or concurrent negligence, strict liability, or other fault,
the parties hereto waiving their right, if any, to recover any damages in
connection with claims hereunder other than actual damages or direct damages, as
so defined. The provisions of this Section 13.3 shall in no manner limit the
meaning of "Losses" as used in Section 13.1 with respect to claims of third
parties (including, without limitation, holders of Notes) against a party for
which such party is entitled to be indemnified under Section 13.1 or Section
13.2, as the case may be (it being understood that actual and direct damages
suffered by a party may include amounts paid by such party in respect of a third
party claim, regardless of the nature of the damages claimed by the third
party).
13.4 INDEMNIFICATION PROCEDURES. Promptly after receipt by a party
indemnified (the "INDEMNIFIED PARTY") under this Article XIII of notice of the
commencement of any action or the written assertion of any claim or demand that
may give rise to a Loss, the Indemnified Party shall, if a claim in respect
thereof is to be made against an indemnifying party (the "INDEMNIFYING PARTY")
under this Article XIII, notify the Indemnifying Party in writing of the
commencement or the written assertion thereof; but the omission so to notify the
Indemnifying Party shall not relieve it from any liability which it may
otherwise have to the Indemnified Party. In case any such action, claim or
demand shall be brought or asserted against any Indemnified Party and it shall
notify the Indemnifying Party of the commencement or assertion thereof, the
Indemnifying Party shall be entitled to participate therein or, upon request by
the Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. Upon assumption by the Indemnifying Party
of the defense of such action, claim or demand, the Indemnified Party shall have
the right to participate in such action, claim or demand and to retain its own
counsel, but the Indemnifying Party shall not be liable to the Indemnified Party
under this Article XIII for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by the Indemnified Party, in
connection with the defense thereof other than reasonable costs of investigation
and preparation, unless the Indemnifying Party and the Indemnified Party are
named parties to any such action, claim or demand (including any impleaded
parties) and representation of both parties
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by the same counsel would be inappropriate due to actual or potential differing
interests between them.
ARTICLE XIV.
MISCELLANEOUS
14.1 UNCONDITIONAL OBLIGATION; WAIVER OF DEFENSES. Enron hereby agrees
that its obligations hereunder shall be irrevocable and unconditional,
irrespective of the validity or enforceability of the Secured Obligations or the
absence of any action to enforce the same. Enron hereby irrevocably waives
promptness, diligence, notice of acceptance and any other notice with respect
to any of its obligations under this Agreement and any requirement that EICPO or
any other Person protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right or take any action or pursue any other
remedy in the power of EICPO.
14.2 NO PETITION. Enron hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of all outstanding
Notes, it will not institute against, or join with any other Person in
instituting against, the Issuer or Co-Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar proceeding
under the laws of any jurisdiction.
14.3 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW.
14.4 NOTICES. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing the same in the United States mail, addressed to the Person
to be notified, postpaid, and registered or certified with return receipt
requested or by delivering such notice in person or by facsimile to such party.
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telecopier shall be effective upon actual receipt if
received during the recipient's normal business hours, or at the beginning of
the recipient's next business day after receipt if not received during the
recipient's normal business hours. All notices to be sent to a party pursuant to
this Agreement shall be sent to or made at the address set forth below such
party's signature to this Agreement, or at such other address as such party may
stipulate to the other parties in the manner provided in this Section 14.4.
14.5 ENTIRE AGREEMENT; SUPERSEDURE. This Agreement constitutes the
entire agreement of the parties relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written, relating
to the matters contained herein.
14.6 EFFECT OF WAIVER OR CONSENT. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of such Person
hereunder.
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Failure on the part of a party to complain of any act of any Person or to
declare any Person in default, irrespective of how long such failure continues,
shall not constitute a waiver by such party of its rights hereunder until the
applicable statute of limitations period has run.
14.7 AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified from time to time only by a written instrument signed by both parties
hereto. Each such instrument shall be reduced to writing and shall be designated
on its face an "AMENDMENT" or an "ADDENDUM" to this Agreement.
14.8 ASSIGNMENT. Except as otherwise provided in this Agreement, no
party shall have the right to assign its rights or obligations under this
Agreement except as otherwise set forth below:
(i) either of the parties hereto shall be entitled to assign
all of its rights and delegate all of its duties and obligations under
this Agreement to any successor of such party by merger or
consolidation; provided, however, that any such successor to Enron has
obtained a rating from S&P or Moody's and in the event that any such
successor to Enron has a rating from either S&P or Moody's that is
below Investment Grade at the time of the assignment, the financial
obligations of such successor under this Agreement shall be guaranteed
by an Acceptable Credit Provider;
(ii) in the case of a sale by Enron, an offering to third
parties or a distribution to the shareholders of Enron (as a dividend
or otherwise) of 10% or more of the securities of a Person owning a
majority interest in Enron International, including (a) all of the
interests attributable to the Designated Enron Ownership Interests held
by Enron or any Enron Affiliates in all of the Project Borrowers and
(b) control and authority over substantially all of the financing
activities, development activities and operations of Enron
International, Enron shall be entitled to assign all of its rights and
delegate all of its duties and obligations under this Agreement to such
Person; provided that, (A) if the Program Manager assigns all of its
duties and obligations under the Management Agreement to such Person or
an Affiliate of such Person, in the reasonable opinion of Enron such
Person or its Affiliate, as the case may be, has the capability or has
committed to provide the capability to perform the services of the
Program Manager under the Management Agreement in accordance with the
Standard of Care, as such term is defined in the Management Agreement,
(B) the Rating Condition shall have been satisfied after giving effect
to such assignment, (C) such Person succeeding Enron under this
Agreement shall be rated by S&P and Moody's and shall not have a credit
rating that is less than Investment Grade by either of S&P or Moody's
at the time of assignment, (D) no Default has occurred and is
continuing prior to and immediately after giving effect to such
offering, distribution or sale, (E) the Holders of the Class A Notes
and Class B Notes have been notified of such offering, distribution or
sale and related assignment, and (F) Enron shall have obtained an
Opinion of Counsel from external counsel of the entity that has
acquired the interest in Enron International that the Support Agreement
is the valid and binding obligation of such acquiring entity
enforceable against such entity in accordance with its terms, subject
to customary exceptions;
(iii) in the case of a transfer or sale by Enron to a Person
of a majority interest of Enron International, including (a) all of the
interests attributable to Designated Enron
- 23 -
<PAGE> 24
Ownership Interests held by Enron and any Enron Affiliates in all of
the Project Borrowers and (b) control and authority over substantially
all of the financing activities, development activities and operations
of Enron International, Enron shall be entitled to assign all of its
rights and delegate all of its duties and obligations under this
Agreement to the purchaser thereof; provided that, (A) if the Program
Manager assigns all of its duties and obligations under the Management
Agreement to such Person or an Affiliate of such Person, in the
reasonable opinion of Enron such Person or its Affiliate, as the case
may be, has the capability or has committed to provide the capability
to perform the services of the Program Manager under the Management
Agreement in accordance with the Standard of Care, as such term is
defined in the Management Agreement, (B) the Rating Condition shall
have been satisfied after giving effect to such assignment, (C) such
person shall be rated by Moody's or S&P and shall not have a credit
rating that is less than Investment Grade by either Moody's or S&P; (D)
no Default has occurred and is continuing prior to and immediately
after giving effect to such transfer or sale, (E) the Holders of the
Class A Notes and Class B Notes have been notified of such transfer or
sale and related assignment, and (F) Enron shall have obtained an
Opinion of Counsel from external counsel of the entity that has
acquired the interest in Enron International that the Support Agreement
is the valid and binding obligation of such acquiring entity
enforceable against such entity in accordance with its terms, subject
to customary exceptions;
(iv) EICPO shall be entitled to assign all of its rights under
this Agreement to the Collateral Agent if and to the extent that such
assignment is required under the Security Agreement; and
(v) Enron shall be entitled to assign all of its obligations
hereunder upon a termination of the Program Manager pursuant to Section
____ of the Partnership Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall constitute
one and the same instrument.
14.10 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
14.11 FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.
- 24 -
<PAGE> 25
14.12 U.S. CURRENCY. All sums and amounts payable or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is legal
tender for the payment of public and private debts in the United States of
America.
14.13 LAWS AND REGULATIONS. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.
14.14 NEGATION OF RIGHTS OF LIMITED PARTNERS, ASSIGNEES, AND THIRD
PARTIES. The provisions of this Agreement are enforceable solely by the parties
to this Agreement and the Collateral Agent under the Security Agreement. No
limited partner of EICPO, any assignee or other Person shall have the right,
separate and apart from the parties hereto, to enforce any provision of this
Agreement or to compel any party to this Agreement to comply with the terms of
this Agreement except the Collateral Agent in accordance with the Security
Agreement.
14.15 BINDING EFFECT. This Agreement is binding on and inures to the
benefit of the parties hereto and their respective successors and assigns.
- 25 -
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the date first set forth above.
ENRON CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address for Notice:
1400 Smith Street
Houston, Texas 77002
Attention:
------------------------------
Facsimile:
------------------------------
ENRON INTERNATIONAL CPO, L.P.
By: ENRON CPO HOLDINGS, INC.,
General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Notice:
----------------------------------------
----------------------------------------
----------------------------------------
Attention:
------------------------------
Facsimile No.:
--------------------------
- 26 -
<PAGE> 27
EXHIBIT A
FORM OF ASSUMPTION AGREEMENT OF
ENRON CREDIT COUNTERPARTY OR ACCEPTABLE CREDIT PROVIDER
This Assignment and Assumption Agreement is entered into as of
_____________ between _____________, (the ["Acceptable Credit Provider"] ["Enron
Credit Counterparty"] ), Enron Corp. ("Enron") and its permitted successors and
assigns and Enron International CPO, L.P. ("EICPO") and its permitted successors
and assigns.
RECITALS:
Enron and EICPO have entered into that certain Support Agreement (the
"Support Agreement") dated ______________, 1998;
Enron desires to assign all of Enron's rights, duties and obligations
in connection with certain support to be provided under the Support Agreement as
more fully described below and the [Acceptable Credit Provider][Enron Credit
Counterparty] desires to assume all of Enron's rights, duties and obligations
with respect to such support.
AGREEMENTS
1. REFERENCE TO SUPPORT AGREEMENT. All capitalized terms used herein
but not defined shall have the meanings given to them in the Support Agreement.
2. SUPPORT OBLIGATION. The Support Obligation [insert description of
Support Obligation] (the "Support Obligation").
3. ASSIGNMENT. Enron hereby assigns, transfers and conveys to the
[Acceptable Credit Provider][Enron Credit Counterparty] the Support Obligation
together with all of Enron's rights and privileges under the Support Obligation.
4. ASSUMPTION. The [Acceptable Credit Provider][Enron Credit
Counterparty] hereby accepts the Support Obligation and assumes all of Enron's
duties and obligations under the Support Obligation, subject to the terms of the
Support Agreement.
5. RELEASE. EICPO hereby releases and forever discharges Enron from the
Support Obligation and any and all claims, demands, actions or liability under
the Support Obligation. Notwithstanding the foregoing, this Agreement shall not
be construed to limit Enron's other obligations under the Support Agreement or
any guarantee by Enron of the Support Obligation.
6. REPRESENTATIONS AND WARRANTIES. The [Acceptable Credit
Provider][Enron Credit Counterparty] hereby represents and warrants to EICPO as
follows as of the date hereof:
<PAGE> 28
(a) STATUS. The [Acceptable Credit Provider][Enron Credit Counterparty]
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation, has all requisite power and authority, and has all
material governmental licenses, authorizations, consents and approvals,
necessary to carry on its material business as now being conducted.
(b) POWERS. The [Acceptable Credit Provider][Enron Credit Counterparty]
has all necessary power and authority to execute and deliver this Agreement and
any other documentation relating to this Agreement to which it is a party and to
perform its obligations under this Agreement and has taken all necessary
corporate action to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered by the [Acceptable Credit
Provider][Enron Credit Counterparty]. This Agreement constitutes the legal,
valid and binding obligation of the [Acceptable Credit Provider][Enron Credit
Counterparty], enforceable against the [Acceptable Credit Provider][Enron Credit
Counterparty] in accordance with its terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a proceeding
in equity or law)).
(c) NO VIOLATION OR CONFLICT. None of the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein and
compliance with the terms and provisions hereof will contravene or result in a
breach of, charter or formation documents, or by-laws, as amended, of the
[Acceptable Credit Provider][Enron Credit Counterparty], or any applicable 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 the [Acceptable Credit Provider][Enron Credit Counterparty] is a party or
by which the [Acceptable Credit Provider][Enron Credit Counterparty] is bound or
to which the [Acceptable Credit Provider][Enron Credit Counterparty] is subject,
or result in the creation or imposition of any lien upon any property of the
[Acceptable Credit Provider][Enron Credit Counterparty].
(d) CONSENTS. All governmental and other consents that are required to
have been obtained by the [Acceptable Credit Provider][Enron Credit
Counterparty] with respect to its execution, delivery and performance of this
Agreement have been obtained and are in full force and effect and all conditions
of any such consents have been complied with.
(e) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against the [Acceptable Credit Provider][Enron Credit Counterparty]
or its consolidated subsidiaries, any action, suit or proceeding at law or in
equity or before any court, governmental body, agency or official or any
arbitrator in which there is a reasonable possibility of an adverse decision
that, if adversely determined, would have a Material Adverse Effect with respect
to the [Acceptable Credit Provider][Enron Credit Counterparty]'s obligations
hereunder.
(f) NO REQUIRED REGISTRATION. The [Acceptable Credit Provider] [Enron
Credit Counterparty] has not engaged in any transaction in connection with this
Agreement that would result in the violation of, or require registration of
EICPO as an investment company under, the Investment Company Act of 1940, as
amended.
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<PAGE> 29
7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW.
8. IRREVOCABLE OBLIGATION; WAIVER. The [Acceptable Credit
Provider][Enron Credit Counterparty] hereby agrees that its obligations
hereunder shall be irrevocable and unconditional, irrespective of the validity
or enforceability of the Secured Obligations under the Financing Documents or
the absence of any action to enforce the same. The [Acceptable Credit
Provider][Enron Credit Counterparty] hereby irrevocably waives promptness,
diligence, notice of acceptance and any other notice with respect to any of its
obligations under this Agreement and any requirement that EICPO or any other
Person protect, secure, perfect or insure any lien or any property subject
thereto or exhaust any right or take any action or pursue any other remedy in
the power of EICPO.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Enron,
EICPO, the [Acceptable Credit Provider][Enron Credit Counterparty], and their
respective successors and assigns, and shall inure to the benefit of such
persons and their successors and assigns.
10. MULTIPLE COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
11. ASSIGNMENT. The [Acceptable Credit Provider][Enron Credit
Counterparty] shall not have the right to assign its rights or obligations under
this Agreement except to another Enron Credit Counterparty or Acceptable Credit
Provider pursuant to the applicable provisions of the Support Agreement;
provided that, such assignee has provided EICPO with the documentation
requirements set forth under Section 2.5(a), 3.2 or 6.2 of the Support
Agreement, as the case may be.
EXECUTED as of the date first set forth above.
ENRON CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 30
ENRON INTERNATIONAL CPO, L.P.
By: ENRON CPO HOLDINGS, INC.,
its general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
----------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
A-4
<PAGE> 31
EXHIBIT B
FORM OF GUARANTY OF ENRON CORP.
OF OBLIGATIONS OF ENRON CREDIT COUNTERPARTY
GUARANTY, dated as of ___________ , 1998 (the "Agreement" or the
"Guaranty"), by ENRON CORP., a corporation organized under the laws of Oregon
("Enron" or the "Guarantor"), in favor of and for the benefit of ENRON
INTERNATIONAL CPO, L.P., a Delaware limited partnership ("EICPO").
WHEREAS, EICPO has entered into that certain Support Agreement dated
___________, 1998 with Enron Corp. (the "Support Agreement");
WHEREAS, the Guarantor desires by its execution of this Guaranty to
evidence its understanding concerning the guaranty to be provided by the
Guarantor to EICPO, as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the covenants,
conditions, and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
All capitalized terms used herein but not defined shall have the
meanings given to them in Appendix "A" of the Common Agreement dated
___________, 1998 among EICPO, Enron International CPO I Inc., Chase Texas, as
Trustee, ___________, as Liquidity Facility Agent and _______, as Backup
Facility Agent and Chase Texas, as Collateral Agent (as amended, modified or
supplemented from time to time, the "Common Agreement").
SECTION 2. GUARANTY OF THE OBLIGATIONS. Subject to Section 3 hereof,
the Guarantor hereby unconditionally and irrevocably guarantees to EICPO the
full payment by ________________ (the "Enron Credit Counterparty") under the
Support Agreement of any and all amounts due and payable by the Enron Credit
Counterparty to EICPO under that certain Assumption Agreement dated as of the
date hereof for the [describe obligation and amount] (the "Guaranteed
Obligations"). Such guaranty, subject to Section 3 hereof, is an absolute,
unconditional, present and continuing guaranty of payment and not of collection,
is not conditioned or contingent upon any attempt to collect from the Enron
Credit Counterparty or upon any other event, contingency or circumstance
whatsoever. Notwithstanding the foregoing, all payments by Enron under this
guaranty shall be made within five (5) Business Days following demand therefor
given in writing to Enron (which demand will set forth the basis and calculation
of the amount for which demand is made); provided that, any failure to give such
demand, to the extent prohibited by law, shall not waive any rights hereunder.
SECTION 3. TERMINATION OF THE GUARANTOR'S OBLIGATION. The obligation of
the Guarantor to pay the Guaranteed Obligations as set forth in this Agreement
shall terminate upon the payment in full of all obligations of the Guarantor
under this Guaranty or the termination of the obligations
B-1
<PAGE> 32
of the Enron Credit Counterparty with respect to the Guaranteed Obligations in
accordance with their terms; provided, however, that this Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of the Guaranteed Obligations is rescinded or must otherwise be
returned upon the insolvency, bankruptcy or reorganization of the Guarantor, the
Enron Credit Counterparty, either of the Issuers or otherwise, all as though
such payment had not been made.
SECTION 4. OBLIGATION ABSOLUTE AND UNCONDITIONAL, CONTINUING, ETC. The
Guarantor agrees that the obligation of the Guarantor to pay the Guaranteed
Obligations as set forth in this Agreement shall be a direct obligation of the
Guarantor and such obligation, subject to the terms hereof (i) shall be
absolute, unconditional and irrevocable, (ii) to the extent permitted by
applicable law, shall not be subject to any counterclaims, set-off, deduction,
diminution, abatement, recoupment, suspension, deferment or reduction (other
than full and strict compliance by the Guarantor with its obligations hereunder)
based upon any claim the Guarantor, the Enron Credit Counterparty or any other
Person may have against EICPO or upon any claim the Guarantor may have against
the Enron Credit Counterparty or any other Person and (iii) shall remain in full
force and effect without regard to, and shall not be released, discharged or in
any way affected or impaired by any circumstance or condition whatsoever
(whether or not the Guarantor shall have any knowledge or notice thereof) except
as expressly consented to by EICPO, including, without limitation, (a) any
amendment or modification of or supplement to or other change in the Support
Agreement or any assignment, mortgaging or transfer thereof or of any interest
therein; provided, however, that any amendment or modification of the amount of
the Guaranteed Obligations shall be consented to by the Guarantor in writing;
(b) any failure, omission or delay on the part of any other Person to conform or
comply with any term of the Support Agreement; (c) any waiver, consent,
extension, indulgence, compromise, release or other action or inaction under or
in respect of the Support Agreement or any exercise or non-exercise of any
right, remedy, power or privilege under or in respect of the Support Agreement;
(d) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
liquidation or similar proceeding with respect to the Enron Credit Counterparty,
the Guarantor or any other Person or any of their respective properties, or any
action taken by any trustee or receiver or by any court in any such proceeding;
(e) any illegality, invalidity or unenforceability, in whole or in part of this
Agreement, the Support Agreement or any term or provision thereof or hereof, (f)
any merger or consolidation of the Enron Credit Counterparty or the Guarantor
into or with any other Person or any sale, lease or transfer of all or any of
the assets of the Enron Credit Counterparty or the Guarantor to any other
Person, except in each case, pursuant to the terms and provisions of Section
15(g) hereof; (g) any change in the ownership of any shares of capital stock of
the Guarantor or the Enron Credit Counterparty, except in each case, pursuant to
the terms and provisions of Section 15(g) hereof; (h) to the extent as may be
waived by applicable law, the benefit of all principles or provisions of law,
statutory or otherwise, which may be in conflict with the terms hereof,
including, without limitation, any law which provides that the obligation of a
surety or guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or guarantor's
obligation in proportion to the principal obligation; and (i) to the extent
permitted under applicable law, any other occurrence or circumstance whatsoever,
whether similar or dissimilar to the foregoing which might otherwise constitute
a legal or equitable defense or discharge of the liabilities of a guarantor or
surety or which might otherwise limit recourse against the Guarantor. The
obligation of the Guarantor set forth herein constitutes the
B-2
<PAGE> 33
full recourse obligation of the Guarantor enforceable against it to the full
extent of all its assets and properties. Without limiting the generality of the
foregoing, the Guarantor agrees that in the event that any Guaranteed
Obligations are paid by the Enron Credit Counterparty or the Guarantor
hereunder, and thereafter all or any part of such payment is recovered as a
preferential or fraudulent transfer under any bankruptcy code, any applicable
insolvency law, or any other similar law now or hereafter in effect, the
liability of the Guarantor hereunder with respect to such Guaranteed Obligations
so paid and recovered shall continue and remain in full force and effect as if,
to the extent of such recovery, such payment had not been made.
SECTION 5. WAIVER OF DEMANDS, NOTICES, ETC. The Guarantor hereby
unconditionally and irrevocably waives, to the extent permitted by applicable
law, (a) notice of any of the matters referred to in Section 4; (b) all notices
which may be required by statute, rule or law or otherwise, now or hereafter in
effect, to preserve any rights against the Guarantor hereunder, including,
without limitation, any demand, proof or notice of non-payment of the Guaranteed
Obligations; (c) acceptance of this Agreement, demand, protest, presentment,
notice of default or dishonor and any requirement of diligence; (d) any
requirement to exhaust any remedies under the Support Agreement and (e) any
other circumstance whatsoever which might otherwise constitute a discharge,
release or defense of a guarantor or surety, or which might otherwise limit
recourse against the Guarantor or exonerate the Guarantor from its obligations
under this Agreement (including although not limited to any such defense related
to any requirement for the prior exhaustion of the Enron Credit Counterparty's
property or the extension of the date for payment of any Guaranteed Obligations
under the Assumption Agreement).
SECTION 6. SEPARATE ACTION. EICPO may bring and prosecute a separate
action or actions against the Guarantor whether or not any other guarantor or
any other Person is joined in any such action or a separate action or actions
are brought against any other guarantor, any other Person, or any collateral for
all or any part of the Guaranteed Obligations. The Guaranteed Obligations of the
Guarantor under, and the effectiveness of, this Agreement are not conditioned
upon the existence or continuation of any other guarantee of all or any part of
the Guaranteed Obligations.
SECTION 7. COSTS, EXPENSES. The Guarantor agrees to pay all costs and
expenses, including attorneys' fees, that may be incurred by EICPO to enforce
any of the obligations of the Guarantor under this Agreement.
SECTION 8. PRIORITY OF THE GUARANTY. The obligations of the Guarantor
under this Agreement shall rank pari passu with all other unsecured indebtedness
of Guarantor now or hereafter existing, subject to bankruptcy and other similar
laws applicable to creditors right generally.
SECTION 9. PAYMENTS UNDER THE GUARANTY. The Guarantor agrees to pay all
Guaranteed Obligations hereunder in immediately available Dollars in New York
pursuant to the instruction received from time to time by EICPO.
SECTION 10. STATUTES OF LIMITATIONS. Nothing in this Agreement shall be
construed as a waiver of any applicable statute of limitations period within
which legal proceedings must be initiated.
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<PAGE> 34
SECTION 11. SUBROGATION. Until all Guaranteed Obligations due and
payable in accordance with the Assumption Agreement have been paid in full in
Dollars or cash equivalents, the Guarantor hereby waives, to the fullest extent
permitted by applicable law, all rights of subrogation or contribution, whether
arising by contract or operation of law (including, without limitation, any such
right arising under any bankruptcy code, any applicable bankruptcy or insolvency
law or any other similar law) or otherwise by reason of any payment by it
hereunder and further agrees with the Enron Credit Counterparty for the benefit
of EICPO that any such payment by it shall be paid to EICPO to be credited and
applied against the Guaranteed Obligations.
SECTION 12. SEVERABILITY. The Guarantor hereby further agrees that
EICPO may pursue its rights and remedies under this Agreement and shall be
entitled to payment hereunder notwithstanding any other guarantee of or
security, if any, in favor of EICPO or any lack of validity or enforceability
thereof, or any failure to perfect or to exercise any right, remedy, power or
privilege with respect to such security, if any, or any payment received
thereunder.
SECTION 13. RIGHTS OF THIRD PARTIES. This Guaranty is made for the
benefit of, and shall be enforceable by, EICPO. Each and every right and remedy
of EICPO, shall, to the extent permitted by law, be cumulative and shall be in
addition to any right or remedy of EICPO contained in the Support Agreement or
now or hereafter existing at law or in equity or by statute. This Guaranty shall
not be construed to create any right in any Person other than EICPO or to be a
contract in whole or in part for the benefit of any Person other than EICPO.
SECTION 14. REPRESENTATIONS AND WARRANTIES OF ENRON. Enron hereby
represents and warrants to EICPO as follows as of the date hereof:
(a) STATUS. Enron is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, has all
requisite power and authority, and has all material governmental licenses,
authorizations, consents and approvals, necessary to carry on its material
business as now being conducted.
(b) POWERS. Enron has all necessary corporate power and authority to
execute and deliver this Agreement and any other documentation relating to this
Agreement to which it is a party and to perform its obligations under this
Agreement and has taken all necessary corporate action to authorize such
execution, delivery and performance. This Agreement has been duly executed and
delivered by Enron. This Agreement constitutes the legal, valid and binding
obligation of Enron, enforceable against Enron in accordance with its terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or law)).
(c) NO VIOLATION OR CONFLICT. None of the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein and
compliance with the terms and provisions hereof will contravene or result in a
breach of the amended and restated articles of incorporation, as amended, or
by-laws, as amended, of Enron, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any
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<PAGE> 35
material ("material" for the purposes of this representation meaning creating a
liability of $50,000,000 or more) agreement or instrument to which Enron is a
party or by which Enron is bound or to which Enron is subject, or result in the
creation or imposition of any lien upon any property of Enron.
(d) CONSENTS. All governmental and other consents that are required to
have been obtained by Enron with respect to its execution, delivery and
performance of this Agreement have been obtained and are in full force and
effect and all conditions of any such consents have been complied with.
(e) ABSENCE OF LITIGATION. Except as disclosed in Enron's Form 10-K for
the year ended December 31, 1997 or Enron's Form 10-Q for the quarter ended June
30, 1998, there is not pending or, to its knowledge, threatened against Enron or
its consolidated subsidiaries, any action, suit or proceeding at law or in
equity or before any court, governmental body, agency or official or any
arbitrator in which there is a reasonable possibility of an adverse decision
that, if adversely determined, could have a material adverse effect on the
ability of Enron to perform obligations hereunder.
(f) NO REQUIRED REGISTRATION. Enron has not engaged in any transaction
in connection with this Agreement that would result in the violation of, or
require registration of EICPO as an investment company under, the Investment
Company Act of 1940, as amended.
SECTION 15. MISCELLANEOUS.
(a) SECTION HEADINGS, ETC. The headings of the various
sections of this Agreement are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or
provisions hereof.
(b) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.
(c) NOTICES. All notices or requests or consents provided for
or permitted to be given to Enron pursuant to this Agreement must be in
writing and must be given by depositing the same in the United States
mail, addressed to Enron to be notified, postpaid, and registered or
certified with return receipt requested or by delivering such notice in
person or by facsimile to Enron. Notice given by personal delivery or
mail shall be effective upon actual receipt. Notice given by telecopier
shall be effective upon actual receipt if received during the
recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
recipient's normal business hours. All notices to be sent to Enron
pursuant to this Agreement shall be sent to or made at the address set
forth below Enron's signature to this Agreement, or at such other
address as Enron may stipulate to EICPO in the manner provided in this
Section 15(c).
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<PAGE> 36
(d) ENTIRE AGREEMENT; SUPERSEDURE. This Agreement, constitutes
the entire agreement of the parties relating to the matters contained
herein, superseding all prior contracts or agreements, whether oral or
written, relating to the matters contained herein.
(e) EFFECT OF WAIVER OR CONSENT. No waiver or consent, express
or implied, by any party to or of any breach or default by any Person
in the performance by such Person of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach
or default in the performance by such Person of the same or any other
obligations of such Person hereunder. Failure on the part of a party to
complain of any act of any Person or to declare any Person in default,
irrespective of how long such failure continues, shall not constitute a
waiver by such party of its rights hereunder until the applicable
statute of limitations period has run.
(f) AMENDMENT OR MODIFICATION. This Agreement may be amended
or modified from time to time only by a written instrument signed by
both parties hereto. Each such instrument shall be reduced to writing
and shall be designated on its face an "Amendment" or an "Addendum" to
this Agreement.
(g) ASSIGNMENT. Except as otherwise provided in this
Agreement, no party shall have the right to assign its rights or
obligations under this Agreement except as otherwise set forth below:
(i) either of the parties hereto shall be entitled to
assign all of its rights and delegate all of its duties and
obligations under this Agreement to any successor of such
party by merger or consolidation; provided, however, that any
such successor to Enron hereunder has obtained a rating from
S&P or Moody's and in the event that any such successor to
Enron hereunder has a rating from either S&P or Moody's that
is below Investment Grade at the time of the assignment, the
financial obligations of such successor under this Agreement
shall be guaranteed by an Acceptable Credit Provider;
(ii) in the case of a sale by Enron, an offering to
third parties or a distribution to the shareholders of Enron
(as a dividend or otherwise) of 10% or more of the securities
of a Person owning a majority interest in Enron International,
including (a) all of the interests attributable to the
Designated Enron Ownership Interests held by Enron or any
Enron Affiliates in all of the Project Borrowers and (b)
control and authority over substantially all of the financing
activities, development activities and operations of Enron
International, Enron shall be entitled to assign all of its
rights and delegate all of its duties and obligations under
this Agreement to such Person; provided that, (A) if the
Program Manager assigned all of its duties and obligations
under the Management Agreement to such Person or an Affiliate
of such Person, in the reasonable opinion of Enron such Person
or its Affiliate, as the case may be, has the capability or
has committed to provide the capability to perform the
services of the Program Manager under the Management Agreement
in accordance with the Standard of Care, as such term is
defined in the Management Agreement,
B-6
<PAGE> 37
(B) the Rating Condition shall have been satisfied after
giving effect to such assignment, (C) such Person succeeding
Enron under this Agreement shall be rated by S&P and Moody's
and shall not have a credit rating that is less than
Investment Grade by either of S&P or Moody's at the time of
assignment, (D) no Default has occurred and is continuing
prior to and immediately after giving effect to such offering,
distribution or sale, (E) the Holders of the Class A Notes and
Class B Notes have been notified of such offering,
distribution or sale and related assignment, and (F) Enron
shall have obtained an Opinion of Counsel from external
counsel of the entity that has acquired the interest in Enron
International that the Support Agreement is the valid and
binding obligation of such acquiring entity enforceable
against such entity in accordance with its terms, subject to
customary exceptions;
(iii) in the case of a transfer or sale by Enron to a
Person of a majority interest of Enron International,
including (a) all of the interests attributable to Designated
Enron Ownership Interests held by Enron and any Enron
Affiliates in all of the Project Borrowers and (b) control and
authority over substantially all of the financing activities,
development activities and operations of Enron International,
Enron shall be entitled to assign all of its rights and
delegate all of its duties and obligations under this
Agreement to the purchaser thereof; provided that, (A) if the
Program Manager assigns all of its duties and obligations
under the Management Agreement to such Person or an Affiliate
of such Person, in the reasonable opinion of Enron such Person
or its Affiliate, as the case may be, has the capability or
has committed to provide the capability to perform the
services of the Program Manager under the Management Agreement
in accordance with the Standard of Care, as such term is
defined in the Management Agreement, (B) the Rating Condition
shall have been satisfied after giving effect to such
assignment, (C) such Person shall be rated by Moody's or S&P
and shall not have a credit rating that is less than
Investment Grade by either Moody's or S&P; (D) no Default has
occurred and is continuing prior to and immediately after
giving effect to such transfer or sale, (E) the Holders of the
Class A Notes and Class B Notes have been notified of such
transfer or sale and related assignment, and (F) Enron shall
have obtained an Opinion of Counsel from external counsel of
the entity that has acquired the interest in Enron
International that this Agreement is the valid and binding
obligation of such acquiring entity enforceable against such
entity in accordance with its terms, subject to customary
exceptions; and
(iv) EICPO shall be entitled to assign all of its
rights under this Agreement to the Collateral Agent if and to
the extent that such assignment is required under the Security
Agreement.
(h) SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be held invalid
or unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
B-7
<PAGE> 38
(i) FURTHER ASSURANCES. In connection with this Agreement and
all transactions contemplated by this Agreement, each signatory party
hereto agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms,
provisions and conditions of this Agreement and all such transactions.
(j) U.S. CURRENCY. All sums and amounts payable or to be
payable pursuant to the provisions of this Agreement shall be payable
in coin or currency of the United States of America that, at the time
of payment, is legal tender for the payment of public and private debts
in the United States of America.
(k) LAWS AND REGULATIONS. Notwithstanding any provision of
this Agreement to the contrary, no party hereto shall be required to
take any act, or fail to take any act, under this Agreement if the
effect thereof would be to cause such party to be in violation of any
applicable law, statute, rule or regulation.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed by its officer thereunto duly authorized as of the date set
forth above.
ENRON CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address for Notice:
1400 Smith Street
Houston, Texas 77002
Attention:
--------------------
Facsimile No.:
----------------
B-8
<PAGE> 39
EXHIBIT C
FORM OF SUPPORT NOTE
ENRON INTERNATIONAL CPO, L.P.
ENRON INTERNATIONAL CPO, INC.
12% SUBORDINATED SUPPORT NOTES
DUE 2018
THIS ISSUANCE OF THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR QUALIFICATION UNDER
SAID ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION THEREFROM.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE
PRIOR PAYMENT IN FULL OF THE SENIOR INDEBTEDNESS (AS DEFINED HEREIN) PURSUANT
TO, AND TO THE EXTENT PROVIDED IN, THIS NOTE, THE INDENTURE DESCRIBED HEREIN AND
THE PARTNERSHIP AGREEMENT DESCRIBED HEREIN.
$__________________________, 199__
Enron International CPO, L.P., a Delaware limited partnership (the
"Issuer"), and Enron International CPO, Inc., a Delaware corporation (the
"Co-Issuer" and, together with the Issuer, the "Issuers"), for value received,
promise to pay to ______________ or its registered assigns ("Payee"), at
___________________, or at such other address as to which Payee (or any
subsequent holder of this Note) shall notify Issuer in writing, in lawful money
of the United States of America, the principal sum of ____________ DOLLARS
($_________), on _____________, payable together with interest on the unpaid
balance thereof except as provided below and in the Financing Documents.
Capitalized terms used herein but not defined shall have the meanings given to
them in the Common Agreement dated as of the date hereof among the Issuer, the
Co-Issuer, Chase Texas, as Trustee, ________ as Liquidity Facility Agent,
________, as Backup Facility Agent and ________ , as Collateral Agent (as
amended, modified or supplemented from time to time, the "Common Agreement").
1. Interest Payments. Interest shall accrue from and after the date
hereof on the principal balance hereof from time to time remaining unpaid at an
annual rate of 12%, calculated on the basis of a year of 360 days consisting of
twelve 30-day months. Interest shall be payable on this Note (a) in accordance
with the terms of Article 4 of the Security Agreement and the Partnership
Agreement and (b) commencing on the date on which the Class I Interests have
been terminated, retired or liquidated pursuant to the Partnership Agreement.
Notwithstanding the foregoing, during the period that interest accrues on this
Note and prior to the date on which interest shall be payable, accrued interest
shall be added to the outstanding principal of this Note on the last day of each
calendar quarter after the date of this Note and shall bear interest in
accordance with the terms of this Note.
2. Principal Payments. Principal on this Note shall be payable (a) in
accordance with the terms of Article 4 of the Security Agreement and the
Partnership Agreement and (b) commencing
<PAGE> 40
on the date on which the Class I Interests have been terminated, retired or
liquidated pursuant to the Partnership Agreement.
3. Waivers. Issuers, and all persons liable or who become liable for
all or any part of this Note, expressly waive demand and presentment for
payment, notice of nonpayment, protest, demand, notice of protest, notice of
dishonor, dishonor, bringing of suit, notice of extension and diligence in
taking any action to collect amounts called for hereunder and in the handling of
securities at any time existing in connection herewith; and are liable for the
payment of all sums owing and to be owing hereon, regardless of and without any
notice, diligence, act or omission as or with respect to the collection of any
amount called for hereunder or in connection with any right, lien, interest or
property at any and all times had or existing as security for any amount called
for hereunder.
4. No Release. The granting to Issuers of an extension or extensions or
time for the payment of any sum or sums due under this Note or any other
agreement by Issuers with the Payee or any subsequent holder of this Note in
respect of such Note, or the exercising or failure to exercise any right or
power under this Note, or any agreement by Issuers with the Payee or any
subsequent holder of this Note, shall not in any way release or affect the
liability of Issuers hereunder.
5. Subordination. (a) Issuers agree, and each holder or by its
acceptance of this Note agrees, that payments of principal and interest on this
Note, together with any and all fees and expenses and all other amounts payable
hereunder, including, without limitation, postpetition interest (the "Debt") are
subordinated, to the extent and in the manner provided in this Section 5, to the
prior payment of all Senior Indebtedness, whether outstanding on the date of
execution of this Note or thereafter created, incurred or assumed, and that the
subordination is for the benefit of the holders of Senior Indebtedness. In
addition to the subordination provisions set forth in this Section 5, payments
of principal and interest on this Note are subordinated to the payment of
certain other amounts in accordance with the Priority of Payments and the
Priority of Acceleration Payments under Section 4 of the Security Agreement,
Section 3.1 of the Intercreditor Agreement and the Partnership Agreement. This
Note shall rank senior to all existing and future Indebtedness of Issuers that
is not Senior Indebtedness, and only Indebtedness of Issuers that is Senior
Indebtedness shall rank senior to this Note in accordance with the provisions
set forth herein.
(b) Certain Definitions.
"Indebtedness" means, with respect to any Person, and without
duplication, (i) indebtedness of such Person for money borrowed, incurred or
assumed, and any fees, charges, collection expenses (including, without
limitation, attorney's fees), and additional or contingent interest obligations,
(ii) express written guaranties by such Person of indebtedness for money
borrowed by any direct or indirect subsidiary of such Person, (iii) indebtedness
evidenced by notes, debentures, bonds or other instruments of indebtedness for
the payment of which such Person is responsible or liable, by guaranties or
otherwise, (iv) obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction, (v)
obligations of such Person under any agreement to lease or any lease of, any
real or personal property that, in accordance with generally accepted accounting
principles, is classified upon such Person's consolidated balance sheet
C-2
<PAGE> 41
as a liability and (vi) obligations of such Person under interest rate swaps,
caps, collars, options and similar arrangements and foreign currency hedges
entered into in respect of any such indebtedness or obligation.
"Senior Indebtedness," when used with respect to Issuers, means the
principal of, and prepayment or redemption premium, if any, and accrued and
unpaid interest (including interest that accrues subsequent to the commencement
of any bankruptcy, insolvency or similar proceedings with respect to Issuers,
whether or not a claim for post-filing interest is allowed in such proceeding),
and any other amounts in respect of all Indebtedness of Issuers under the
Liquidity Facility, the Backup Facility, the Liquidity Notes, if any, and the
Funding Availability Notes, if any, each issued under the Support Agreement and
the Class A Notes, the Class B Notes and the Class C Notes issued under that
certain Indenture dated as of ________, 1998 among Issuers and Chase Texas, as
Trustee, whether outstanding on the date of execution of this Note or thereafter
created, incurred or assumed.
(c) Liquidation, Dissolution, Bankruptcy. The Payee will not be
permitted to commence or join with any other creditor or creditors of the Issuer
or Co-Issuer in commencing any bankruptcy, reorganization or insolvency
proceedings against the Issuer or Co-Issuer. At any general meeting of creditors
of the Issuer or Co-Issuer or in the event of any proceeding, voluntary or
involuntary, for the distribution, division or application of all or part of the
assets of the Issuer or Co-Issuer or the proceeds thereof, whether such
proceeding be for the liquidation, dissolution or winding up of the Issuer or
Co-Issuer or its business, receivership, insolvency or bankruptcy proceeding, an
assignment for the benefit of creditors or proceeding by or against the Issuer
or Co-Issuer for extension or otherwise, if the Senior Indebtedness has not been
paid in full at the time, the holders of the Senior Indebtedness (acting through
the Collateral Agent) will be irrevocably authorized at any such meeting or in
any such proceeding:
(i) To enforce claims comprising the Debt in the name
of the Payee by proof of debt, proof of claim, suit or
otherwise;
(ii) To collect any assets of the Issuer or Co-Issuer
distributed, divided or applied by way of dividend or payment,
or such securities issued, on account of the Debt and apply
the same, or the proceeds of any realization upon the same
that the holders of the Senior Indebtedness in their
discretion elect to effect, to the Senior Indebtedness until
the Senior Indebtedness shall have been paid in full (the
holders of the Senior Indebtedness will agree to render any
surplus to the Payee);
(iii) To vote claims comprising the Debt to accept or
reject any plan or partial or complete liquidation,
reorganization, arrangement, composition or extension; and
(iv) To take generally any action in connection with
any such meeting or proceeding which the Payee might otherwise
take.
Until the Senior Indebtedness is paid in full, any distribution to
which the holder of this Note would be entitled but for this Section 5 shall be
made to the Collateral Agent on behalf of holders
C-3
<PAGE> 42
of Senior Indebtedness as their interests may appear, except that the holder of
this Note may, (A) at any time other than upon a voluntary or involuntary
bankruptcy, insolvency or receivership proceeding relating to Issuers or their
properties or upon an assignment for the benefit of creditors receive securities
issued under a note or similar instrument with terms and other provisions that
are substantially identical to those contained in this Note and (B) at any other
time receive securities that are subordinated to Senior Indebtedness to at least
the same extent as this Note.
(d) Default on Senior Indebtedness. Issuers may not pay principal of or
interest on this Note and may not repurchase, redeem or otherwise acquire this
Note (other than as aforesaid) if at such time there exists (i) a default with
respect to payment of any principal, interest or other amount due with respect
to any Senior Indebtedness or (ii) any other default on Senior Indebtedness,
unless, in either case, the default has been cured or waived or such Senior
Indebtedness has been paid in full.
(e) When Distribution Must be Paid Over. If a payment or other
distribution is made to the holder of this Note in violation of the provisions
of this Section 5 should not have been made to it, the holder of this Note who
received the payment or other distribution shall hold it in trust for holders of
Senior Indebtedness and shall be required to pay it over to the Collateral Agent
on behalf of them as their interests may appear.
(f) Subrogation. After all Senior Indebtedness is paid in full and
until this Note is paid in full, the holder of this Note shall be subrogated to
the rights of holders of Senior Indebtedness. A distribution made under this
Section 5 to holders of Senior Indebtedness that otherwise would have been made
to the holder of this Note is not, as between Issuers and the holder of this
Note, a payment by Issuers on Senior Indebtedness.
(g) Relative Rights. This Section 5 defines the relative rights of the
holder of this Note and holders of Senior Indebtedness. Nothing in this Note
shall:
(i) impair, as between Issuers and the holder of this Note,
the obligation of Issuers, which is absolute and unconditional, to pay
principal of and interest on this Note in accordance with its terms; or
(ii) prevent the Payee or any subsequent holder of this Note
from exercising its available remedies upon an Event of Default,
subject to the rights of holders of Senior Indebtedness to receive
payments or other distributions otherwise payable to holder of this
Note.
(h) Subordination May Not be Impaired. Any holder of Senior
Indebtedness will be authorized to demand specific performance of the provisions
of this Section 5, whether or not the Issuer or Co-Issuer shall have complied
with the provisions of this Note applicable to it, at any time when the Payee
shall have failed to comply with any provision of this Section 5. The holders of
Senior Indebtedness may, at any time and from time to time, without impairing or
releasing the subordination provided in this Section 5 or the obligations of the
holders of this Note hereunder to the holders of the Senior Indebtedness, do any
one or more of the following:
C-4
<PAGE> 43
(i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Indebtedness or otherwise
amend or supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding;
(ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness
or fail to perfect or delay in the perfection of any security interests
in such property;
(iii) release, amend, waive or consent to departure from any
guarantee for all or any Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against
Issuers and any other Person.
(i) Each holder of this Note by purchasing or accepting this Note:
(i) waives any and all notice of the creation, modification,
renewal, extension, amendment, restatement or accrual of any Senior
Indebtedness, notice of or proof of reliance by any holder or owner of
Senior Indebtedness upon this Section 5;
(ii) irrevocably waives any defense based on the adequacy of a
remedy at law which might be asserted as a bar to the remedy of
specific performance in any action brought therefor by the holders of
the Senior Indebtedness to enforce the provisions of this Section 5;
(iii) waives presentment, notice and protest in connection
with all negotiable instruments evidencing the Senior Indebtedness,
notice of acceptance of the instrument creating the Indebtedness
incurred, extension granted or other action taken in reliance on the
provisions of this Section 5, and all demands and notices of every kind
in connection with the Senior Indebtedness or time of payment of the
Senior Indebtedness;
(iv) assents to any renewal, extension or postponement of the
time of payment of the Senior Indebtedness or any other indulgence with
respect thereto, to any increase in the amount of the Senior
Indebtedness, to any substitution, exchange or release of collateral
therefor and to the addition or release of any Person primarily or
secondarily liable thereon; and
(v) assents to the provisions of any instrument, security or
other writing evidencing the Senior Indebtedness.
The Senior Indebtedness shall conclusively be deemed to have been
created, contracted or incurred in reliance on this Section 5, and all dealings
between Issuers and the holders and owners of the Senior Indebtedness shall be
deemed to have been consummated in reliance upon this Section 5. The provisions
of this Section 5 are intended to be for the benefit of, and shall be
enforceable directly by, the holders of the Senior Indebtedness.
C-5
<PAGE> 44
(j) Subordination Not Impaired In The Event of Default. If an Event of
Default shall have occurred and be continuing:
(i) The Issuer or Co-Issuer is not permitted to, directly or
indirectly, make any payment on account of, or transfer any collateral
for any part of, the Debt except as set forth in the Security
Agreement;
(ii) The Payee shall not be permitted to demand, sue for, or
accept from the Issuer or Co-Issuer or any other Person any such
payment or collateral, to take any other action to enforce or collect
upon any such payment or to enforce its rights in respect of or
accelerate the Debt, nor cancel, set off or otherwise discharge any
part of the Debt; and
(iii) Neither the Issuer or Co-Issuer nor the Payee shall be
permitted to otherwise take any action prejudicial to or inconsistent
with the holders of the Senior Indebtedness' priority position over the
Payee created by the subordination provisions of this Section 5.
(k) Conflict with other Financing Documents. If there is a conflict or
inconsistency between the subordination provisions of this Note and those
contained in the other Financing Documents, then the subordination provisions
contained in such other Financing Documents shall control.
6. Redemptions. The Issuers may redeem all of this Note at any time
after (i) the repayment in full of the Liquidity Facility, the Backup Facility,
the Liquidity Notes, if any, the Funding Availability Notes, if any, Class A
Notes, Class B Notes and Class C Notes, including accrued interest and Premium,
if any and (ii) a termination, retirement or liquidation of the Class I
Interests, at a redemption price equal to the face value of this Note plus all
accrued and unpaid interest thereon. Any redemption hereunder shall be subject
to any applicable terms and conditions of the Financing Documents.
7. Assignment and Transfer. The Issuers shall maintain a register in
which shall be entered the name of the registered holder of this Note. No
assignment or transfer of this Note shall be effective until it has been
recorded in such register, and the Issuers shall treat the registered holder of
this Note as the Person entitled to all payments hereunder notwithstanding any
notice to the contrary. The Issuers shall not record or otherwise recognize any
assignment or transfer of this Note unless (a) the assignee or transferee shall
have delivered to the Issuer certification in the form of Exhibit F to the
Support Agreement, with relevant tax forms duly completed and attached, that (i)
either (A) such assignee or transferee is a United States person as defined by
the United States Internal Revenue Code as then effective or (B) all income to
be received by such assignee or transferee with respect to this Note (whether it
is treated as a partnership interest in or debt of the Issuer) will be entitled
to a complete exemption from the withholding of United States federal income tax
and (ii) either (A) such assignee or transferee is not for United States federal
income tax purposes a partnership, grantor trust, S corporation or other
pass-through entity or (B) such assignee or transferee was not formed for the
purpose of acquiring Class C Notes, Support Notes or Interests in the Issuer and
not more than 50% of the value of a beneficial owner's interest in such assignee
or transferee will be attributable to Class C Notes, Support Notes or Interests
in the Issuer held by the
C-6
<PAGE> 45
transferee or assignee, (b) the assignee or transferee represents that it will
take no action that would cause the Issuer to become a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes and (c) the Program Manager shall have determined (on the basis of the
Issuer's registers of the holders of the Support Notes, Class C Notes and Class
II Interests and treating any unfunded obligations as having been funded for
purposes of this determination) that, after giving effect to the transfer or
assignment, there would be no more than forty-six (46) holders of the aggregate
of the Support Notes, the Class II Interests and the Class C Notes for purposes
of Code Section 7704 of the United States Internal Revenue Code.
8. No Petition. The Payee hereby covenants and agrees that, prior to
the date which is one year and one day after the payment in full of all
outstanding Notes, it will not institute against, or join with any other person
in instituting against, the Issuer or Co-Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar proceeding
under the laws of any jurisdiction.
9. Severability. If any provision of this Note or the application
thereof to any party or circumstance is held invalid or unenforceable, the
remainder of this Note and the application of such provision to other parties or
circumstances shall not be affected thereby, the provisions of this Note being
severable in any such instance.
10. Successors. This Note shall be binding upon and shall inure to the
benefit of Issuers and Payee and their respective successors and assigns.
11. Governing Law. THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW.
ENRON INTERNATIONAL CPO, L.P.
By: ENRON CPO HOLDINGS, INC.,
its general partner
By:
--------------------------
Name:
------------------------
Title:
-----------------------
C-7
<PAGE> 46
EXHIBIT D
TERMS OF PURCHASE BY ENRON OR ITS DESIGNEE
OF CLASS C NOTES
On the Business Day specified in the Election Notice under Section 2.3
as the date on which Enron or its designee intends to purchase Class C Notes or
on the Quarterly Payment Date on which Enron or its permitted assignee is
required to purchase Class C Notes under Section 4.1(a), Enron or such designee
or assignee shall wire transfer to an account designated by EICPO same day funds
in an amount equal to 100% of the principal amount of the Class C Notes as
specified in the Election Notice or the Final Credit Support Notice, as the case
may be (provided that, if no Final Credit Support Notice is delivered, the
amount required by Section 4.1(a) shall be the amount required to be
transferred), in exchange for a Class C Note with a principal amount as
specified in the Election Notice or the Final Credit Support Notice, as the case
may be (provided that, if no Final Credit Support Notice is delivered, the
amount required by Section 4.1(a) shall be the principal amount of such Class C
Note). EICPO shall provide each purchaser of Class C Notes with customary legal
opinions in connection with the issuance of the Class C Notes as reasonably
requested by the purchaser of Class C Notes. In the event of a purchase of a
Class C Note by a designee or assignee of Enron, such designee shall provide to
EICPO the documentation required under Section 2.5(a) and (b), and the Program
Manager shall have made the determination under Section 2.5(c), of the Support
Agreement at the time of purchase of such Class C Note.
<PAGE> 47
EXHIBIT E
FORM OF ELECTION NOTICE UNDER SECTION 2.3 OR 5.2
[Enron Corp.][Name of Enron Credit Counterparty or Acceptable Credit Provider]
hereby elects to [exercise the Class C Option under Section 2.3][make a
commitment to EICPO under Section 5.2] of the Support Agreement dated
________________, 1998 between Enron International CPO, L.P. and Enron Corp.
[with respect to the Project Loan to be made in connection with the [insert name
of Project]][with respect to failure of EICPO to satisfy [insert name of test,
i.e., the Funding Availability Test/the Liquidity Test/the Credit Support
Tests] as follows:
<TABLE>
<S> <C>
Total Principal Amount of Class C Notes: ___________
Principal Amount of Class C Notes to be
Purchased by Enron Corp.: ___________
Principal Amount of Class C Notes to be Purchased
by Persons other than Enron: ___________
Names of any Third Party Purchasers: ___________
Principal Amount of Class C Notes for which
Enron Corp. Commits to Purchase: ___________
Principal Amount of Class C Notes for which each
Enron Credit Counterparty and Acceptable Credit
Provider Commits to Purchase: ____________
Enron Credit Counterparties: ____________
Acceptable Credit Providers: ____________
Amount for which Enron (or any applicable designee)
commits to pay to EICPO under Section 5.2 in
order to satisfy [insert name of test]: _____________
Amount for which Enron Credit Counterparty or Acceptable
Credit Provider commits to pay to EICPO under Section 5.2
in order to satisfy [insert name of test]: _____________
Name and Address for Notices, if other than Enron: _____________
Termination date or conditions ______________
</TABLE>
<PAGE> 48
In connection with any [commitment to purchase Class C
Notes][commitment to make a payment under Section 5.2] under this Election
Notice [Enron][Name of Enron Credit Counterparty/Acceptable Credit Provider]
hereby agrees to [purchase Class C Notes][make the payment to EICPO] in the
amount indicated in this Election Notice and in accordance with the terms and
provisions of [Exhibit E to the Support Agreement][Article IV of the Support
Agreement]. [Name of Enron Credit Counterparty/Acceptable Credit Provider] has
executed an Assumption Agreement in the form set forth in Exhibit A to the
Support Agreement]. This election Notice shall be effective upon execution
hereof.
Date of Exercise:
Date:
----------------
ENRON CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
E-2
<PAGE> 49
EXHIBIT F
FORM OF CERTIFICATE OF TRANSFEREE,
ASSIGNEE OR DESIGNEE OF ENRON CORP., PURSUANT
TO SUPPORT AGREEMENT
I, _______________________, as an officer of ____________________, the
transferee, designee, or assignee of Enron ("Transferee"), do hereby certify,
represent and warrant, pursuant to Section ___ of the Support Agreement among
Enron Corp. and Enron International CPO, L.P. ("EICPO") and Enron International
CPO, Inc., dated __________________, as follows:
1. [Transferee is a United States person as defined in the U.S.
Internal Revenue Code] or [all income to be received by Transferee with respect
to the [Class C Notes (whether they are treated as partnership interests in or
debts of EICPO)] [Class II Interests] [Support Notes] will be entitled to a
complete exemption from the withholding of United States federal income tax];
and
2. [Transferee is not, for United States federal income tax purposes, a
partnership, grantor trust, S corporation or other pass-through entity], or
[Transferee was not formed for the purpose of acquiring Class C Notes or
Interests and not more than 50% of the value of the beneficial owner's interest
in Transferee will be attributable to Class C Notes, Support Notes or Interests
held by the Transferee]; and
3. Transferee will take no action that would cause EICPO to become a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes.
The relevant tax forms evidencing the above representations have been
completed and are attached thereto.
Date: _________________
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 50
EXHIBIT G
TERMS OF PURCHASE OF CLASS II INTERESTS
On the Quarterly Payment Date on which Enron is required to purchase
Class II Interests under Section 4.1(b), Enron shall wire transfer to an account
designated by EICPO same day funds in an amount equal to the amount of the Class
II Interests specified in the Final Credit Support Notice (provided that if no
such Final Credit Support Notice is provided, the amount required by Section
4.1(b) shall be the amount transferred) in exchange for the amount of Class II
Interests specified in the Final Credit Support Notice (provided that if no such
Final Credit Support Notice is provided, the amount required by Section 4.1(b)
shall be the amount of Class II Interests purchased). EICPO shall provide each
purchaser of Class II Interests with customary legal opinions in connection with
the issuance of the Class II Interests as reasonably requested by the purchaser
of Class II Interests. In the event of a purchase of Class II Interests by an
Enron Affiliate, an Acceptable Credit Provider or any other Person, such Enron
Affiliate, Acceptable Credit Provider or Person shall provide to EICPO the
documentation required under clauses (a) and (b) of the proviso in Section 3.2
of the Support Agreement and the Program Manager shall have made the
determination under clause (c) of the proviso in Section 3.2 of the Support
Agreement, at the time of purchase of Class II Interests.
<PAGE> 51
EXHIBIT H
FORM OF LIQUIDITY NOTE
ENRON INTERNATIONAL CPO, L.P.
ENRON INTERNATIONAL CPO, INC.
LIQUIDITY NOTE
DUE 2018
THIS ISSUANCE OF THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR QUALIFICATION UNDER
SAID ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION THEREFROM.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE
PRIOR PAYMENT IN FULL OF THE SENIOR INDEBTEDNESS (AS DEFINED HEREIN) PURSUANT
TO, AND TO THE EXTENT PROVIDED IN, THE INDENTURE DESCRIBED HEREIN.
$__________________________, 199__
ENRON INTERNATIONAL CPO, L.P., a Delaware limited partnership (the
"Issuer"), and ENRON INTERNATIONAL CPO, INC., a Delaware corporation (the
"Co-Issuer" and, together with the Issuer, the "Issuers"), for value received,
promise to pay to _____________ or its registered assigns ("Payee"), at
___________________, or at such other address as to which Payee (or any
subsequent holder of this Note) shall notify Issuer in writing, in lawful money
of the United States of America, the principal sum of ____________DOLLARS
($_________), on or before _____________, payable together with interest on the
unpaid balance thereof except as provided below and in the Financing Documents.
Capitalized terms used herein but not defined shall have the meanings given to
them in the Common Agreement dated as of the date hereof among the Issuer, the
Co-Issuer, __________, as Trustee, ________ as Liquidity Facility Agent,
________, as Backup Agent and ________ , as Collateral Agent (as amended,
modified or supplemented from time to time, the "Common Agreement").
The obligations of the Issuers under this Note and the other Financing
Documents are limited recourse obligations of the Issuers payable solely from
the Collateral, and following realization of the Collateral, all claims of the
holder of this Note shall be extinguished. Except as otherwise provided in the
Indenture and the other Financing Documents, the principal of this Note shall be
payable no later than the Stated Maturity unless the unpaid principal of this
Note becomes due and payable at an earlier date by declaration of acceleration,
call for redemption or otherwise.
1. Interest Payments. Interest shall accrue from and after the date
hereof on the principal balance hereof from time to time remaining unpaid at an
annual rate equal to _________________, calculated on the basis of a year of 360
days consisting of twelve 30-day months. Interest shall be payable on January
10, April 10, July 10 and October 10, commencing on _________________, ____
(each, a "Quarterly Payment Date") in accordance with Article 4 of the Security
Agreement. Notwithstanding the foregoing, during any period that the Issuers
shall have failed to make all scheduled interest payments due and owing under
this Note (including without limitation any failure to make a payment that is
required by the subordination provisions hereof), then the amount of such
<PAGE> 52
scheduled payments shall be added to outstanding principal hereunder and shall
bear interest in accordance with the terms of this Note.
2. Principal Payments. [Principal on this Note shall be payable in
accordance with Article 4 of the Security Agreement.] [ADDRESS PRINCIPAL
REPAYMENT PROVISIONS OF LIQUIDITY FACILITY TERM SHEET]
3. Waivers. Issuers, and all persons liable or who become liable for
all or any part of this Note, expressly waive demand and presentment for
payment, notice of nonpayment, protest, demand, notice of protest, notice of
dishonor, dishonor, bringing of suit, notice of extension and diligence in
taking any action to collect amounts called for hereunder and in the handling of
securities at any time existing in connection herewith; and are liable for the
payment of all sums owing and to be owing hereon, regardless of and without any
notice, diligence, act or omission as or with respect to the collection of any
amount called for hereunder or in connection with any right, lien, interest or
property at any and all times had or existing as security for any amount called
for hereunder.
4. No Release. The granting to Issuers of an extension or extensions or
time for the payment of any sum or sums due under this Note or any other
agreement by Issuers with the Payee or any subsequent holder of this Note in
respect of such Note, or the exercising or failure to exercise any right or
power under this Note, or any agreement by Issuers with the Payee or any
subsequent holder of this Note, shall not in any way release or affect the
liability of Issuers hereunder.
5. Subordination. Payments of principal of and interest on this Note
are subordinated to the payment of certain other amounts in accordance with the
Priority of Payments, the Priority of Acceleration Payments and Section 3.1 of
the Intercreditor Agreement.
6. Redemptions. This Note shall be subject to redemption by the Issuers
under Article 10 of the Common Agreement.
7. Assignment and Transfer. The Issuers shall maintain a register in
which shall be entered the name of the registered holder of this Note. No
assignment or transfer of this Note shall be effective until it has been
recorded in such register, and the Issuers shall treat the registered holder of
this Note as the person entitled to all payments hereunder notwithstanding any
notice to the contrary.
8. Severability. If any provision of this Note or the application
thereof to any party or circumstance is held invalid or unenforceable, the
remainder of this Note and the application of such provision to other parties or
circumstances shall not be affected thereby, the provisions of this Note being
severable in any such instance.
9. Successors. This Note shall be binding upon and shall inure to the
benefit of Issuers and Payee and their respective successors and assigns.
H-2
<PAGE> 53
10. No Petition. The Payee hereby covenants and agrees that, prior to
the date which is one year and one day after the payment in full of all
outstanding Notes, it will not institute against, or join with any other person
in instituting against, the Issuer or Co-Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar proceeding
under the laws of any jurisdiction.
11. Governing Law. THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW.
ENRON INTERNATIONAL CPO, L.P.
By: ENRON CPO HOLDINGS, INC.,
its general partner
By:
--------------------------
Name:
------------------------
Title:
-----------------------
H-3
<PAGE> 54
EXHIBIT I
FORM OF FUNDING AVAILABILITY NOTE
ENRON INTERNATIONAL CPO, L.P.
ENRON INTERNATIONAL CPO, INC.
BACK UP FACILITY NOTES
DUE 2018
THIS ISSUANCE OF THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR QUALIFICATION UNDER
SAID ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION THEREFROM.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE
PRIOR PAYMENT IN FULL OF THE SENIOR INDEBTEDNESS (AS DEFINED HEREIN) PURSUANT
TO, AND TO THE EXTENT PROVIDED IN, THE INDENTURE DESCRIBED HEREIN.
$__________________________, 199__
ENRON INTERNATIONAL CPO, L.P., a Delaware limited partnership (the
"Issuer"), and ENRON INTERNATIONAL CPO, INC., a Delaware corporation (the
"Co-Issuer" and, together with the Issuer, the "Issuers"), for value received,
promise to pay to _____________ or its registered assigns ("Payee"), at
___________________, or at such other address as to which Payee (or any
subsequent holder of this Note) shall notify Issuer in writing, in lawful money
of the United States of America, the principal sum of ____________DOLLARS
($_________), on or before _____________, payable together with interest on the
unpaid balance thereof, except as provided below and in the Financing Documents.
Capitalized terms used herein but not defined shall have the meanings given to
them in the Common Agreement dated as of the date hereof among the Issuer, the
Co-Issuer, __________, as Trustee, ___________ as Liquidity Facility Agent,
__________, as Backup Agent and ___________, as Collateral Agent (as amended,
modified or supplemented from time to time, the "Common Agreement").
The obligations of the Issuers under this Note and the other Financing
Documents are limited recourse obligations of the Issuers payable solely from
the Collateral, and following realization of the Collateral, all claims of the
holder of this Note shall be extinguished. Except as otherwise provided in the
Indenture and the other Financing Documents, the principal of this Note shall be
payable no later than the Stated Maturity unless the unpaid principal of this
Note becomes due and payable at an earlier date by declaration of acceleration,
call for redemption or otherwise.
1. Interest Payments. Interest shall accrue from and after the date
hereof on the principal balance hereof from time to time remaining unpaid at an
annual rate equal to _________________, calculated on the basis of a year of 360
days consisting of twelve 30-day months. Interest shall be payable on January
10, April 10, July 10 and October 10, commencing on _________________, 1998
(each, a "Quarterly Payment Date") in accordance with Article 4 of the Security
Agreement. Notwithstanding the foregoing, during any period that the Issuers
shall have failed to make all scheduled interest payments due and owing under
this Note (including without limitation any failure
<PAGE> 55
to make a payment that is required by the subordination provisions hereof), then
the amount of such scheduled payments shall be added to outstanding principal
hereunder and shall bear interest in accordance with the terms of this Note.
2. Principal Payments. [Principal on this Note shall be payable in
accordance with Article 4 of the Security Agreement.] [ADDRESS PRINCIPAL
REPAYMENT PROVISIONS OF BACKUP FACILITY TERM SHEET]
3. Waivers. Issuers, and all persons liable or who become liable for
all or any part of this Note, expressly waive demand and presentment for
payment, notice of nonpayment, protest, demand, notice of protest, notice of
dishonor, dishonor, bringing of suit, notice of extension and diligence in
taking any action to collect amounts called for hereunder and in the handling of
securities at any time existing in connection herewith; and are liable for the
payment of all sums owing and to be owing hereon, regardless of and without any
notice, diligence, act or omission as or with respect to the collection of any
amount called for hereunder or in connection with any right, lien, interest or
property at any and all times had or existing as security for any amount called
for hereunder.
4. No Release. The granting to Issuers of an extension or extensions or
time for the payment of any sum or sums due under this Note or any other
agreement by Issuers with the Payee or any subsequent holder of this Note in
respect of such Note, or the exercising or failure to exercise any right or
power under this Note, or any agreement by Issuers with the Payee or any
subsequent holder of this Note, shall not in any way release or affect the
liability of Issuers hereunder.
5. Subordination. Payments of principal of and interest on this Note
are subordinated to the payment of certain other amounts in accordance with the
Priority of Payments, the Priority of Acceleration Payments and Section 3.1 of
the Intercreditor Agreement.
6. Redemptions. This Note shall be subject to redemption by the Issuers
under Article 10 of the Common Agreement.
7. Assignment and Transfer. The Issuers shall maintain a register in
which shall be entered the name of the registered holder of this Note. No
assignment or transfer of this Note shall be effective until it has been
recorded in such register, and the Issuers shall treat the registered holder of
this Note as the person entitled to all payments hereunder notwithstanding any
notice to the contrary.
8. Severability. If any provision of this Note or the application
thereof to any party or circumstance is held invalid or unenforceable, the
remainder of this Note and the application of such provision to other parties or
circumstances shall not be affected thereby, the provisions of this Note being
severable in any such instance.
9. Successors. This Note shall be binding upon and shall inure to the
benefit of Issuers and Payee and their respective successors and assigns.
I-2
<PAGE> 56
10. No Petition. The Payee hereby covenants and agrees that, prior to
the date which is one year and one day after the payment in full of all
outstanding Notes, it will not institute against, or join with any other person
in instituting against, the Issuer or Co-Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar proceeding
under the laws of any jurisdiction.
11. Governing Law. THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW.
ENRON INTERNATIONAL CPO, L.P.
By: ENRON CPO HOLDINGS, INC.,
its general partner
By:
--------------------------
Name:
------------------------
Title:
-----------------------
I-3
<PAGE> 57
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I.
Definitions..............................................................................................1
1.1 Reference to Common Agreement..........................................................1
1.2 Other Definitions......................................................................1
ARTICLE II.
Option to Purchase Class C Notes.........................................................................5
2.1 Option.................................................................................5
2.2 Term of Option.........................................................................5
2.3 Notice of Exercise.....................................................................6
2.4 Right to Reduce Class C Note Purchase Commitment.......................................6
2.5 Assignment and Transfer................................................................6
ARTICLE III.
Class II Interests.......................................................................................7
3.1 Commitment to Purchase Class II Interests..............................................7
3.2 Assignment and Transfer................................................................7
ARTICLE IV.
Support for Payment Obligations..........................................................................8
4.1 Insufficient Collateral Proceeds on a Quarterly Payment Date...........................8
4.2 Insufficient Collateral Proceeds Upon an Acceleration..................................9
4.3 Liquidity Shortfalls..................................................................10
4.4 Notice of Credit Support Obligation...................................................10
4.5 Record Keeping and Audit Right........................................................10
ARTICLE V.
Support Upon the Occurrence of Certain Events...........................................................11
5.1 Support upon the Occurrence of a Tax Event............................................11
5.2 Support upon a Failure by EICPO to satisfy Certain Tests under the Common
Agreement.............................................................................11
5.3 Support for Redemptions...............................................................11
5.4 Support for Shortfalls in Funding of Project Loans....................................11
</TABLE>
C-i
<PAGE> 58
<TABLE>
<S> <C>
5.5 Additional Security for Quarter Project Distributions and Project
Distributions Reserved................................................................12
5.6 Assignments and Transfers.............................................................12
ARTICLE VI.
Support Notes...........................................................................................13
6.1 Issuance of Support Notes.............................................................13
6.2 Restrictions on Designees.............................................................13
ARTICLE VII.
Notification of Investment Opportunities; Limitation on Competition;
Maintenance of Enron Credit Counterparties..............................................................14
7.1 Notification of Investment Opportunities..............................................14
7.2 Limitation on Competition.............................................................14
7.3 Limitation on Amendment of JEDI Partnership Agreement.................................14
7.4 Maintenance of Enron Credit Counterparties............................................14
ARTICLE VIII.
Equity Disposition......................................................................................15
ARTICLE IX.
Guaranty of Certain Obligations of Program Manager
under Management Agreement..............................................................................15
9.1 Guaranty..............................................................................15
9.2 Obligation Absolute and Unconditional, Continuing, etc................................16
9.3 Waiver of Demands, Notices, etc.......................................................17
ARTICLE X.
Termination of Support Agreement and Obligations Hereunder..............................................17
ARTICLE XI.
Representations and Warranties of EICPO.................................................................18
11.1 Status................................................................................18
11.2 Powers................................................................................18
11.3 No Violation or Conflict..............................................................18
11.4 Consents..............................................................................19
11.5 Absence of Litigation.................................................................19
11.6 No Required Registration..............................................................19
</TABLE>
C-ii
<PAGE> 59
<TABLE>
<S> <C>
ARTICLE XII.
Representations and Warranties of Enron.................................................................19
12.1 Status................................................................................19
12.2 Powers................................................................................19
12.3 No Violation or Conflict..............................................................19
12.4 Consents..............................................................................20
12.5 Absence of Litigation.................................................................20
12.6 No Required Registration..............................................................20
ARTICLE XIII.
Indemnification.........................................................................................20
13.1 Indemnification of EICPO..............................................................20
13.2 Indemnification of Enron..............................................................20
13.3 Limitation on Recovery of Certain Types of Damages....................................20
13.4 Indemnification Procedures............................................................21
ARTICLE XIV.
Miscellaneous...........................................................................................21
14.1 Unconditional Obligation; Waiver of Defenses..........................................21
14.2 No Petition...........................................................................22
14.3 Governing Law.........................................................................22
14.4 Notices...............................................................................22
14.5 Entire Agreement; Supersedure.........................................................22
14.6 Effect of Waiver or Consent...........................................................22
14.7 Amendment or Modification.............................................................22
14.8 Assignment............................................................................22
14.9 Counterparts..........................................................................24
14.10 Severability..........................................................................24
14.11 Further Assurances....................................................................24
14.12 U.S. Currency.........................................................................24
14.13 Laws and Regulations..................................................................24
14.14 Negation of Rights of Limited Partners, Assignees, and Third Parties..................24
14.15 Binding Effect........................................................................24
</TABLE>
C-iii
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
this Registration Statement of our report dated August 6, 1998 and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
August 7, 1998
