UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[GRAPHIC OMITTED] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[GRAPHIC OMITTED] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: Not Yet Issued
Reg. No. 33-69762
CONSOLIDATED HYDRO, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1138478
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
680 Washington Boulevard, Stamford, Connecticut 06901
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (203) 425-8850
NONE
(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class A Outstanding as of February 10, 1997
---------------------------------- -----------------------------------
Common stock, $.001 par value 1,285,762
Class B Outstanding as of February 10, 1997
---------------------------------- -----------------------------------
Common stock, $.001 par value NONE
<PAGE>
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 2
Consolidated Statement of Operations for the three months and
six months ended December 31, 1996 and 1995 (Unaudited).... 3
Consolidated Balance Sheet at December 31, 1996
and June 30, 1996 (Unaudited)............................ 4
Consolidated Statement of Stockholders' Deficit
for the six months ended December 31, 1996 (Unaudited).... 5
Consolidated Statement of Cash Flows for the six months
ended December 31, 1996 and 1995 (Unaudited).............. 6-7
Notes to Consolidated Financial Statements (Unaudited) ..... 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 11-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 21
Item 2 Changes in Securities....................................... 21
Item 3. Default upon Senior Securities.............................. 21
Item 4. Submission of Matters to a Vote of Security Holders......... 21
Item 5. Other Information........................................... 21
Item 6. Exhibits and Reports on Form 8-K............................ 22
Signature 23
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 JUNE 30, 1992
2
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
<S> <C> <C> <C> <C>
Operating revenues:
Power generation revenue $ 13,271 $ 12,355 $ 22,126 $ 17,718
Management fees and operations & maintenance revenues 1,152 1,061 2,692 2,477
Equity income in partnership interests and other partnership income 279 265 396 135
----------- -------- -------- --------
14,702 13,681 25,214 20,330
----------- -------- -------- --------
Costs and expenses:
Operating 3,912 4,151 8,854 8,796
General and administrative 1,847 1,187 3,120 1,989
Charge for employee and director equity participation programs 25 88 50 175
Depreciation and amortization 2,156 2,615 4,331 5,464
Lease expense to a related party 905 897 1,795 1,708
Lease expense to unrelated parties 563 548 1,070 1,150
(Adjustment)/charge for impairment of long-lived assets (412) 83,359 (412) 83,359
----------- -------- -------- ---------
8,996 92,845 18,808 102,641
----------- -------- -------- ---------
Income/(loss) from operations 5,706 (79,164) 6,406 (82,311)
Interest income 315 323 639 687
Other income 25 62 44 96
Interest expense on indebtedness to related parties (2,588) (2,461) (5,171) (4,918)
Interest expense on indebtedness to unrelated parties (4,666) (3,759) (9,500) (7,532)
Minority interests in loss of consolidated subsidiaries -- 2,063 -- 2,063
----------- ------- -------- --------
Loss before benefit for income taxes and extraordinary item (1,208) (82,936) (7,582) (91,915)
Benefit for income taxes 1,576 7,672 1,460 7,585
----------- ------- -------- --------
Income/(loss) before extraordinary item 368 (75,264) (6,122) (84,330)
Extraordinary gain on early extinguishment of debt (net of income tax of $3,41 5,622 -- 5,622 --
----------- ------- -------- --------
Net income/(loss) 5,990 (75,264) (500) (84,330)
Accumulated deficit at beginning of period (269,675) (169,565) (259,427) (157,182)
Dividends declared on preferred stock (3,664) (3,209) (7,208) (6,312)
Accretion of preferred stock (214) (214) (428) (428)
----------- -------- -------- --------
Accumulated deficit at end of period $ (267,563) $ (248,252) $ (267,563) $ (248,252)
=========== ========== ========= =========
Net loss applicable to common stock:
Net income/(loss) $ 5,990 $ (75,264) $ (500) $ (84,330)
Dividends declared on preferred stock (3,664) (3,209) (7,208) (6,312)
Accretion of preferred stock (214) (214) (428) (428)
Undeclared dividends on cumulative preferred stock (2,455) (2,455) (4,909) (4,909)
----------- --------- -------- ---------
$ (343) $ (81,142) $ (13,045) $ (95,979)
=========== ========= ======== =========
Net loss per common share:
Loss before extraordinary item $ (4.64) $ (63.46) $ (14.52) $ (75.06)
Extraordinary item 4.37 -- 4.37 --
----------- --------- -------- ---------
$ (0.27) $ (63.46) $ (10.15) $ (75.06)
=========== ========= ======== =========
Weighted average number of common shares 1,285,762 1,278,698 1,285,762 1,278,698
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED BALANCE SHEET
(Amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Dec. 31 June 30
1 9 9 6 1 9 9 6
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents unrestricted $ 22,148 $ 10,598
Cash and cash equivalents restricted 9,523 13,236
Accounts receivable, net 8,129 7,854
Prepaid expenses and other current assets 1,169 1,353
----------- -------
Total current assets 40,969 33,041
Property, plant and equipment, net 125,230 126,133
Facilities under development 1,972 1,217
Intangible assets, net 49,279 50,746
Assets to be disposed of 3,808 15,066
Investments and other long-term assets 19,309 18,454
----------- ---------
$ 240,567 $ 244,657
=========== =========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses $ 7,894 $ 10,496
Current portion of long-term debt payable to a related party 1,614 2,305
Current portion of long-term debt and obligations under capital leases payable to unrelated parties 4,320 4,157
----------- --------
Total current liabilities 13,828 16,958
Long-term debt payable to related parties 90,209 87,406
Long-term debt and obligations under capital leases payable to unrelated parties 167,209 172,752
Deferred credit, state income taxes and other long-term liabilities 39,794 37,564
Minority interests in consolidated subsidiaries --- ---
Commitments --- ---
Mandatorily redeemable preferred stock, $.01 par value, at redemption
value of $1,000 per share, junior in liquidation preference to Series F Preferred Stock:
Series H, 136,950 shares authorized, issued and outstanding ($112,220 and $105,012 liquidation
preference at December 31 and June 30, 1996, respectively) 106,240 98,604
----------- ---------
Total liabilities and mandatorily redeemable preferred stock 417,280 413,284
----------- ---------
Stockholders' deficit:
Preferred stock, $.01 par value, at redemption value of $1,000 per share:
Series F, 55,000 shares authorized, issued and outstanding ($55,000 liquidation preference) 49,356 49,356
Series G, 55,000 shares authorized, issued and outstanding ($55,000 liquidation preference) 49,356 49,356
Class A common stock, $.001 par value, 9,000,000 shares authorized, 4,576,925 unissued shares reserved,
1,834,235 shares issued and 1,285,762 shares outstanding at December 31 and June 30, 1996 2 2
Class B common stock, $.001 par value, 1,000,000 shares authorized, 246,510 unissued shares reserved,
no shares issued and outstanding --- ---
Additional paid-in capital, including $5,966 related to warrants 13,497 13,497
Accumulated deficit (267,563) (259,427)
----------- --------
(155,352) (147,216)
Less: Deferred compensation (300) (350)
Treasury stock (common: 548,473 shares), at cost (21,061) (21,061)
----------- --------
Total stockholders' deficit (176,713) (168,627)
----------- --------
$240,567 $244,657
=========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
(Amounts in thousands except shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Number Number Additional Total
of Shares Reported of Shares Par Paid-in Accumulated Deferred Treasury Stockholders'
Outstanding Amount Outstanding Value Capital Deficit Compensation Stock Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 30, 1996 110,000 $ 98,712 1,285,762 $ 2 $ 13,497 $ (259,427) $ (350) $ (21,061) $ (168,627)
Quarterly dividend
of $25.88 per share,
mandatorily redeemable
Series H Preferred -
September 30, 1996 (3,544) (3,544)
Quarterly dividend
of $26.75 per share,
mandatorily redeemable
Series H Preferred -
December 31, 1996 (3,664) (3,664)
Accretion of Series
H Preferred (428) (428)
Recognition of employee
compensation expense
related to the issuance
of common stock 50 500
Net loss (500) (500)
--------- --------- ---------- --- -------- ---------- -------- --------- ----------
Balance December 31, 1996 110,000 $ 98,712 1,285,762 $ 2 $ 13,497 $ (267,563) $ (300) $ (21,061) $ (176,713)
========= ========= ========== ==== ======== ========== ======== ========= ==========
</TABLE>
5
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands except share and per share amounts)
(Unaudited)
Six Months Ended
December 31,
1 9 9 6 1 9 9 5
------- -------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (500) $ (84,330)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash interest and other charges 10,328 8,574
Charge for employee and director equity participation programs 50 175
Non-cash (adjustment)/charge for impairment of long-lived assets (412) 83,359
Benefit relating to deferred tax liabilities (1,677) (7,905)
Extraordinary gain on early extinguishment of debt (5,622) ---
Depreciation and amortization 4,331 5,464
Minority interest in loss of consolidated subsidiaries --- (2,063)
Provision for uncollectible accounts receivable 96 ---
Increase in accounts receivable (1,205) (1,294)
Decrease in prepaid expenses and other current assets 131 128
Decrease in accounts payable and accrued expenses (1,913) (788)
----------- -------
Net cash provided by operating activities 3,607 1,320
----------- -------
Cash flows from investing activities:
Proceeds from disposition of assets 11,740 ---
Cost associated with disposition of assets (61) ---
Cost of development expenditures (755) (1,680)
Decrease in long-term notes receivable --- 53
Increase in long-term notes receivable --- (58)
Capital expenditures (2,353) (1,620)
Increase in investments and other long-term assets (855) (383)
----------- -------
Net cash provided by/(used in) investing activities 7,716 (3,688)
----------- -------
Cash flows from financing activities:
Payment of refinancing costs (310) ---
Long-term borrowings from unrelated parties 37 34
Payments to a related party on long-term borrowings (1,161) (126)
Payments to unrelated parties on long-term borrowings (2,046) (1,717)
Decrease in other long-term liabilities (6) (77)
----------- ---------
Net cash used in financing activities (3,486) (1,886)
----------- ---------
Net increase/(decrease) in cash and cash equivalents 7,837 (4,254)
Cash and cash equivalents, at beginning of period 23,834 16,682
----------- --------
Cash and cash equivalents, at end of period $ 31,671 $ 12,428
=========== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid to related party $ 2,589 $ 1,843
========== ========
Interest paid to unrelated parties $ 2,365 $ 2,530
========== ========
Income taxes, net $ 231 $ 450
========== ========
(continued)
</TABLE>
6
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands except share and per share amounts)
(Unaudited)
(continued)
Schedule of noncash financing activities:
Series H mandatorily redeemable preferred stock increased $428 for the six
months ended December 31, 1996 and 1995, respectively, as a result of the
accretion of the difference between the fair market value at issuance and the
redemption value.
Series H mandatorily redeemable preferred stock increased $7,208 and $6,312 for
the six months ended December 31, 1996 and 1995, respectively, as a result of
declared dividends which increased the liquidation preference of the Series H
preferred stock.
Long-term debt and obligations under capital leases increased by $10,053 and
$9,016 for the six months ended December 31, 1996 and 1995, respectively, as a
result of non-cash interest.
In connection with the disposition of certain assets by the Company, the Company
reduced its long-term debt by approximately $1.2 million.
The accompanying notes are an integral part of the
consolidated financial statements.
7
<PAGE>
CONSOLIDATED HYDRO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except per share amounts or
otherwise noted)
(Unaudited)
NOTE 1 - ORGANIZATION
Consolidated Hydro, Inc., (together with its consolidated subsidiaries, the
"Company"), organized in July 1985, is principally engaged in the development,
operation and management of hydroelectric power plants. As of December 31, 1996,
and 1995, it had ownership interests in, leased and/or operated projects with a
total operating capacity of approximately 343 and 377 megawatts ("MW"),
respectively. In November 1995, the Company established a subsidiary for the
purpose of developing, acquiring, operating and managing industrial energy
facilities and related industrial assets. Currently, all of the Company's
revenue is derived from the ownership and operation of hydroelectric facilities.
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") have been omitted pursuant to such rules
and regulations, although the Company believes that the disclosures herein are
adequate to make the information presented not misleading.
The results of operations for the interim periods shown in this report are
not necessarily indicative of the results to be expected for the fiscal year. In
the opinion of the Company's management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly its financial position as of
December 31, 1996 and June 30, 1996 and the results of its operations and
changes in its financial position for the six months ended December 31, 1996 and
1995. These financial statements should be read in conjunction with the June 30,
1996 Audited Consolidated Financial Statements ("June 1996 Financials") and
Notes thereto.
Certain amounts have been reclassified in fiscal 1996 to conform with
fiscal the 1997 presentation.
NOTE 3 - REFINANCING OF NON-RECOURSE PROJECT LOAN
On October 30, 1996, the Company arranged to have a financial institution
purchase a $13,759 non-recourse project term loan (the "Old Loan") relating to
four of its existing hydroelectric projects for $5,000, including certain
required reserves and closing costs of $500, (the "New Loan"). An additional
$2,000 credit facility is also available under the New Loan for up to one year
to finance certain project enhancements. A subsidiary of the Company was
assigned an interest in the balance of the Old Loan on a basis fully
subordinated to the New Loan. As a result, the Company has recorded a $5,622
Extraordinary gain on early extinguishment of debt, net of certain transaction
costs of approximately $224 and income tax of $3,414, on its Statement of
Operations for the three months and six months ended December 31, 1996.
The New Loan, which matures in the year 2008, accrues interest at a fixed
rate of 10.17% per annum through October 29, 2003. Thereafter, through October
30, 2008, interest accrues on a quarterly basis, at a rate equal to the three
year U.S. Treasury Note Rate plus 390 basis points. Principal and interest
payments are to be made quarterly in arrears and mandatory prepayments, if
required, are to be made annually. Costs associated with obtaining the New Loan
have been capitalized and are included in Intangible assets, net on the
Company's Balance Sheet as of December 31, 1996.
8
<PAGE>
NOTE 4 - SALE OF CONSOLIDATED HYDRO MAINE, INC.
On December 23, 1996, the Company through its wholly owned subsidiary, CHI
Universal, Inc., a Delaware corporation ("CHI Universal"), sold Consolidated
Hydro Maine, Inc., a Delaware corporation ("CHI Maine"), to Ridgewood Maine
Hydro Partners, L.P., a Delaware limited partnership (the "Partnership"). CHI
Maine owned and operated 15 hydroelectric projects located in the State of Maine
with an aggregate capacity of 11.32 megawatts (the "Projects"). The sale was
made pursuant to an Agreement of Merger dated as of July 1, 1996 (the "Merger
Agreement"), by and among CHI Maine, CHI Universal, CHI Ridgewood Maine Hydro
Corporation and the Partnership.
On the Closing Date (as defined in the Merger Agreement), all of the issued
and outstanding capital stock of CHI Maine was sold to the Partnership for cash.
The total sales price aggregated approximately $12.9 million, and the
Partnership assumed a long-term lease obligation of approximately $1.2 million
related to one of the Projects.
Under a separate agreement with the Partnership, the Company will continue
to operate and maintain the Projects and provide certain administrative services
to the Partnership for an initial period of up to 15 years.
The following unaudited pro forma financial information for the six months
ended December 31, 1996 and 1995 has been prepared assuming the disposition of
CHI Maine occurred at the beginning of the periods presented.
(Unaudited)
Six Months Ended December 31,
1996 1995
---- ----
(Pro forma) (Pro forma)
Operating Revenues $ 24,184 $ 19,851
========= =========
Net loss $ (972) $ (64,943)
========= ========
Net loss per common share $ (10.51) $ (59.90)
========= ========
Weighted average number of
common shares 1,285,762 1,278,698
========= =========
NOTE 5 - WORKING CAPITAL FACILITY AMENDMENT
In October 1993, one of the Company's former senior lenders, Den norske
Bank AS ("DnB"), provided the Company with a $20.0 million unsecured working
capital facility (the "DnB Facility"), which originally had an expiration date
of June 30, 1997. On December 3, 1996, the Company amended the DnB Facility (the
"Amendment") which Amendment, among other things, waived previous defaults by
the Company, changed the final expiration date of the DnB Facility to June 30,
1998, reduced (in steps) the total commitment under the DnB Facility from
approximately $6.0 million at September 30, 1996 to zero at June 30, 1998,
limited the use of the DnB Facility solely to letters of credit and modified
certain financial covenants. Since the execution of the Amendment, the Company
has reduced the outstanding letters of credit under the DnB Facility to
approximately $3.1 million in accordance with the terms of the Amendment.
9
<PAGE>
NOTE 6 - ADOPTION OF SFAS 121
The Company implemented Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("SFAS 121") in the second quarter of fiscal 1996. This
statement establishes accounting standards for determining impairment of
long-lived assets and long-lived assets to be disposed of. The Company
periodically assesses the realizability of its long-lived assets and evaluates
such assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets (or group of assets) may not be
recoverable. For assets in use or under development, impairment is determined to
exist if the estimated future cash flow associated with the asset, undiscounted
and without interest charges, is less than the carrying amount of the asset.
When the estimated future cash flow indicates that the carrying amount of the
asset will not be recovered, the asset is written down to its fair value.
In fiscal 1996, in light of the Company's planned sale of certain of its
conventional hydroelectric projects, recent industry trends (including the
continued decline in electricity prices and other factors stemming from the
deregulation of the electric power industry), the timing of the expiration of
the fixed rate period of some of its long-term power sales contracts and other
indications of a decline in the fair value of certain of its conventional
hydroelectric projects, the Company determined, pursuant to SFAS 121, that
certain of these projects (including properties which are not included among
those to be sold) were impaired pursuant to the criteria established under SFAS
121. The Company also determined that due to the factors noted above, as well as
its current financial position, it is highly unlikely that the Company will
successfully develop its pumped storage projects. See Note 4 to the June 1996
Financials.
The carrying value of the CHI Maine assets has been adjusted upward by $0.4
million to reflect adjustments to the sales price of the assets. This adjustment
has been included in (Adjustment)/charge for impairment of long-lived assets on
the Statement of Operations for the three and six months ended December 31,
1996.
In conjunction with the adoption of SFAS 121, during the third quarter of
fiscal 1996, the Company re-evaluated the useful lives of certain property,
plant and equipment and intangible assets. This resulted in a reduction of the
estimated useful lives of these fixed and intangible assets. This change had the
effect of increasing the loss from operations and the net loss, net of tax
benefit, by approximately $0.3 million (.23(cent) per share) for the three
months ended December 31, 1996.
NOTE 7 - FINANCIAL ADVISOR
In December 1996, the Company retained Houlihan Lokey Howard & Zukin, Inc.,
a specialty investment banking firm, to provide financial advisory services to
the Company in connection with the formulation and potential implementation of
financial restructuring options for the Company.
NOTE 8 - SUBSEQUENT EVENT
ISSUANCE OF SERIES F PREFERRED AND SERIES G PREFERRED
On January 31, 1997, the Company issued 1,279 shares each of its 8% senior
convertible voting preferred stock ("Series F Preferred") and its 9.85% junior
convertible voting preferred stock ("Series G Preferred") to Ms. Carol H.
Cunningham in exchange for shares of Summit Energy Storage Inc. common stock (or
vested options therefor) owned by Ms. Cunningham. The financial statement impact
of this exchange is not material.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Consolidated Hydro, Inc. ("CHI", and together with its consolidated
subsidiaries the "Company") is principally engaged in the development, operation
and management of hydroelectric power plants. The Company's operating
hydroelectric projects are located in 15 states and one Canadian province. In
November 1995, the Company established a subsidiary, CHI Power, Inc., for the
purpose of developing, acquiring, operating and managing industrial energy
facilities and related industrial assets.
The Company's existing U.S. projects are clustered in four regions: the
Northeast, Southeast, Northwest and West, with a concentration in the Northeast.
CHI has developed what it believes to be an efficient "hub" system of project
management designed to maximize the efficiency of each facility's operations.
The economies of scale created by this system include reduced costs related to
centralized administration, operations, maintenance, engineering, insurance,
finance and environmental and regulatory compliance. The hub system and the
Company's operating expertise have enabled the Company to successfully integrate
acquisitions within its current portfolio and increase the efficiency and
productivity of its projects.
The Company has expanded primarily by acquiring existing hydroelectric
facilities in the United States. On December 31, 1996, the Company had a 100%
ownership or long-term lease interest in 52 projects (141 megawatts) including 5
projects under contract for sale, a partial ownership interest in 14 projects
(86 megawatts), and operations and maintenance ("O&M") contracts with 25
projects (116 megawatts).
CHI sells substantially all of the electric energy and capacity from its
U.S. projects to public utility companies pursuant to take and pay power
purchase agreements. These contracts vary in their terms but typically provide
scheduled rates throughout the life of the contracts, which are generally for a
term of 15 to 40 years from inception.
The Company has begun to seek opportunities to provide energy-related
products and services to industrial and utility customers in an effort to
respond to changing market conditions. Such opportunities, if available, would
permit the Company to move away from relying exclusively on hydropower ownership
and operation in a business climate driven largely by legislation and regulation
and the structural industry trends described below in which the Company
currently believes that acquisition and development opportunities are
increasingly limited, particularly with regard to hydroelectric facilities.
Currently, all of the Company's revenue is derived from the ownership and
operation of hydroelectric facilities. See "-- Liquidity and Capital Resources."
In fiscal 1996, the Company had significantly written down the carrying
values of its pumped storage development assets, certain investments in
partnerships which own hydroelectric facilities and certain of its conventional
hydroelectric assets to $0.1 million, $0.8 million and $26.0 million,
respectively. See Note 4 to the June 1996 Financials. The Company has determined
that it is highly unlikely that the Company will successfully develop its pumped
storage projects.
11
<PAGE>
Power Generation Revenue
The Company's revenues are derived principally from selling electrical
energy and capacity to utilities under long-term power purchase agreements which
require the contracting utilities to purchase energy generated by the Company.
The Company's present power purchase agreements have remaining terms ranging
from 1 to 30 years. Fluctuations in revenues and related cash flows are
generally attributable to increasing megawatts in operation, coupled with
variations in water flows and the effect of escalating and declining contract
rates in the Company's power purchase agreements.
Management Fees and Operations & Maintenance Revenues
O&M contracts, from which management fees and operations and maintenance
revenues are derived, generally enable the Company to maximize the use of its
available resources and to generate additional income.
Equity Income In Partnership Interests and Other Partnership Income
In accordance with generally accepted accounting principles, certain of the
Company's partnership interests are accounted for under the equity and the cost
methods of accounting. Fluctuations in equity income and other partnership
income are generally attributable to variations in results of operations and
timing of cash distributions of certain partnerships.
Operating Expenses
Operating expenses consist primarily of project-related costs such as
labor, repairs and maintenance, supplies, insurance and real estate taxes.
Operating expenses include direct expenses related to the production of power
generation revenue as well as direct costs associated with O&M contracts which
are rebillable to applicable third party owners directly or not rebillable since
they are covered through an established management fee.
Lease Expense
Lease expense includes operating leases associated with some of the
hydroelectric projects as well as leases for the corporate and regional
administrative offices. Certain leases provide for payments that are based upon
power sales revenue or cash flow for specific projects. Hence, varying project
revenues will impact overall lease expense, year-to-year.
12
<PAGE>
Certain Key Operating Results and Trends
The information provided in the tables below is included to provide an
overview of certain key operating results and trends which, when read in
conjunction with the narrative discussion that follows, is intended to provide
an enhanced understanding of the Company's results of operations. These tables
include information regarding the Company's ownership by region of projects as
well as information on regional precipitation. As presented, the Company's
project portfolio is concentrated in the Northeastern United States, a region
characterized by relatively consistent long-term water flow and power purchase
contract rates which are higher than in most other regions of the country.
This information should be read in conjunction with the June 30, 1996
Audited Consolidated Financial Statements ("June 1996 Financials") and related
Notes thereto.
Power Producing Facilities
<PAGE>
<TABLE>
<CAPTION>
As of As of As of
December 31, 1996 June 30, 1996 December 31, 1995
MWs #Projects MWs #Projects MWs #Projects
<S> <C> <C> <C> <C> <C> <C>
Northeast:
100% Ownership (1) 90.88(4)(5) 29(4)(5) 102.20 44 102.20 44
Partial Ownership (2) 52.37 8 52.37 8 52.37 8
O&M Contracts (3) 92.16(4) 19(4) 80.14 3 80.14 3
--------- ---- --------- ---- --------- ----
Total 235.41 56 234.71 55 234.71 55
====== === ====== === ====== ===
Southeast:
100% Ownership (1) 27.42 13 27.42 13 27.42 13
Partial Ownership (2) -- -- -- -- -- --
O&M Contracts (3) -- -- -- -- -- --
--------- ---- --------- ---- --------- ----
Total 27.42 13 27.42 13 27.42 13
====== === ====== === ====== ===
West:
100% Ownership (1) 1.35 1 1.35 1 1.35 1
Partial Ownership (2) 8.33 4 8.33 4 8.33 4
O&M Contracts (3) 19.48 5 19.48 5 51.98 6
---------- ---- --------- ---- --------- ----
Total 29.16 10 29.16 10 61.66 11
====== === ====== === ====== ===
Northwest:
100% Ownership (1) 21.72 9 21.72 9 21.72 9
Partial Ownership (2) 24.96 2 24.96 2 24.96 2
O&M Contracts (3) 4.34 1 6.09 2 6.09 2
---------- ---- --------- ---- --------- ----
Total 51.02 12 52.77 13 52.77 13
====== === ====== === ====== ===
Total:
100% Ownership (1) 141.37(4)(5) 52(4)(5) 152.69 67 152.69 67
Partial Ownership (2) 85.66 14 85.66 14 85.66 14
O&M Contracts (3) 115.98(4) 25(4) 105.71 10 138.21 11
---------- ---- ----------- ---- ----------- ----
Total 343.01 91 344.06 91 376.56 92
====== === ====== === ====== ===
- ------------
(1) Defined as projects in which the Company has 100% of the economic interest.
(2) Defined as projects in which the Company's economic interest is less than
100%.
(3) Defined as projects in which the Company is an operator pursuant to O&M
contracts with the project's owner or owners. The Company does not have any
ownership interest in such projects.
(4) Reflects the sale of 15 projects (11.32 megawatts) on December 23, 1996,
and the addition of those same projects as O&M Contracts.
(5) Includes 5 projects (5.43 megawatts) with respect to which the Company has
reached an agreement to sell, subject to certain conditions.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Selected Operating Information:
Quarter Ended December 31, Six Months Ended December 31,
1996 1995 1996 1995
----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Power generation revenues (thousands) $ $ 12,355 $ 22,126 $ 17,718
(1) 13,271
Kilowatt hours produced (thousands) 166,323 160,088 291,520 240,684
(1)
Average rate per kilowatt hour (1) 8.0(cent) 7.7(cent) 7.6(cent) 7.4(cent)
</TABLE>
- ---------
(1) Limited to projects included in consolidated revenues.
Precipitation, Water Flow and Seasonality
The amount of hydroelectric energy generated at any particular facility
depends upon the quantity of water flow at the site of the facility. Dry periods
tend to reduce water flow at particular sites below historical averages,
especially if the facility has low storage capacity. Excessive water flow may
result from prolonged periods of higher than normal precipitation, or sudden
melting of snow packs, possibly causing flooding of facilities and/or a
reduction of generation until water flows return to normal.
Water flow is generally consistent with precipitation. However, snow and
other forms of frozen precipitation will not necessarily increase water flow in
the same period of such precipitation if temperatures remain at or below
freezing. "Average", as it relates to water flow, refers to the actual long-term
average of historical water flows at the Company's facilities for any given
year. Typically, these averages are based upon hydrologic studies done by
qualified engineers for periods of 20 to 50 years or more, depending on the flow
data available with respect to a particular site. Over an extended period (e.g.,
10 to 15 years) water flows would be expected to be average, whereas for shorter
periods (e.g., three months to three years) variation from average is likely.
Each of the regions in which the Company operates has distinctive precipitation
and water flow characteristics, including the degree of deviation from average.
Geographic diversity helps to minimize short-term variations.
<TABLE>
<CAPTION>
Water Flow by Region (1)
Quarter Ended December 31, Six Months Ended December 31,
1996 1995 1996 1995
------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Northeast Above Average Above Average Above Average Average
Southeast Average Above Average Average Above Average
West Below Average Below Average Below Average Below Average
Northwest Above Average Below Average Above Average Below Average
</TABLE>
- ---------
(1) These determinations were made by management based upon water flow in areas
where the Company's projects are located and may not be applicable to the
entire region.
Production of energy by the Company is typically greatest in its third and
fourth fiscal quarters (January through June), when water flow is at its highest
at most of the Company's projects, and lowest in the first fiscal quarter (July
through September). The amount of water flow in any given period will have a
direct effect on the Company's production, revenues and cash flow.
The following tables, which show revenues (in thousands) from power sales
and kilowatt hour production by fiscal quarter, respectively, highlight the
seasonality of the Company's revenue stream. These tables should be reviewed in
conjunction with the water flow information included above.
Power Generation Revenues (1)
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996
--------------------- -----------------------
<S> <C> <C> <C> <C>
$ % $ %
First Fiscal Quarter $ 8,855 40.0 $ 5,363 10.8
(2)
Second Fiscal Quarter 13,271 60.0 12,355 24.8
(2)
Third Fiscal Quarter 15,744 31.6
Fourth Fiscal Quarter 16,299 32.8
---------- -------- ------------ ---------
Total $ 22,126 100.0 $49,761(2) 100.0
====== ===== ======= =====
</TABLE>
- -----------------
(1) Limited to projects included in consolidated revenues.
(2) Includes business interruption revenue of $175, $234 and $840 representing
claims for lost generation recoverable from an insurance company for the
three months ended September 30, 1996 and December 31, 1996, and the fiscal
year ended June 30, 1996, respectively, $1,129 of which has been recovered.
14
<PAGE>
Kilowatt Hours Produced (1)
Fiscal 1997 Fiscal 1996
----------------- ---------------------
kWh % kWh %
First Fiscal Quarter 125,197(2) 42.9 80,596 12.4
Second Fiscal Quarter 166,323(2) 57.1 160,088 24.7
Third Fiscal Quarter 195,540 30.3
Fourth Fiscal Quarter 211,440 32.6
----------- ----- ------- -----
Total 291,520 100.0 647,664(2) 100.0
======= ===== ======= =====
- -------------
(1) Limited to projects included in consolidated revenues.
(2) Includes the production equivalent of 2,682 kWh, 3,300 kWh and 15,335 kWh
of the business interruption revenue recoverable as a result of insurance
claims for the three months ended September 30, 1996 and December 31, 1996,
and for the fiscal year ended June 30, 1996, respectively.
Three Months Ended December 31, 1996 Compared to Three Months Ended December 31,
1995
Operating Revenues
Power Generation Revenue. The Company's power generation revenue increased
by $0.9 million (7.3%), from $12.4 million to $13.3 million for the three months
ended December 31, 1995 and 1996, respectively.
The Northeast region experienced increased revenues of $0.9 million, due to
well above average water flows and precipitation for the three months ended
December 31, 1996 as compared to slightly above average water flows and
precipitation for the three months ended December 31, 1995.
The Southeast region experienced a decrease in revenues of $0.2 million,
primarily due to average water flows and precipitation for the three months
ended December 31, 1996 as compared to above average water flows and
precipitation for the three months ended December 31, 1995.
The West and Northwest regions (combined) experienced increased revenues of
$0.2 million, primarily as a result of above average water flow and
precipitation in the Northwest region, an area which contributes significantly
to total revenues of the combined regions, for the three months ended December
31, 1996 as compared to below average water flows and precipitation in the
Northwest region for the three months ended December 31, 1995.
The Company as a whole experienced increased revenue per kilowatt hour of
0.3(cent) (3.9%), from 7.7(cent) to 8.0(cent) in the 1996 fiscal period versus
the 1997 fiscal period, respectively, primarily as a result of variations in the
production mix and contract rates among the various projects.
Management Fees and Operations & Maintenance Revenues. Management fees and
O&M contract revenue remained relatively constant, increasing by $0.1 million,
from $1.1 million to $1.2 million for the three months ended December 31, 1995
and 1996, respectively.
Equity Income in Partnership Interests and Other Partnership Income. Equity
income in partnership interests and other partnership income remained relatively
constant at $0.3 million for the three months ended December 31, 1995 and 1996,
respectively.
Costs and Expenses
Operating Expenses. Operating expenses decreased $0.2 million (4.9%), from
$4.1 million to $3.9 million for the three months ended December 31, 1995 and
1996, respectively. The decrease was primarily due to: (i) a decrease in
salaries and benefits resulting from a reduction in staff; and (ii) a decrease
in maintenance and supplies, resulting from a decision to defer certain
maintenance in order to maximize revenue associated with high overall water
flows during the three months ended December 31, 1996 partially offset by an
increase in insurance premiums and other operating costs.
15
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased by $0.6 million (50.0%), from $1.2 million to $1.8 million for the
three months ended December 31, 1995 and 1996, respectively. The increase was
primarily due to (i) an increase in business development costs and general and
administrative salaries related to CHI Power, Inc.; (ii) the effect of expensing
pumped storage business development costs for the three months ended December
31, 1996 that had previously been capitalized during the three months ended
December 31, 1995; and (iii) costs associated with the formulation of financial
restructuring options for the Company, partially offset by a general decrease in
conventional hydroelectric business development costs.
Depreciation and Amortization. Depreciation and amortization decreased by
$0.4 million (15.4%), from $2.6 million to $2.2 million for the three months
ended December 31, 1995 and 1996, respectively. The decrease was primarily due
to a write-down of impaired assets in fiscal 1996 as a result of the
implementation of SFAS 121 and the cessation of depreciation expense taken on
assets disposed of and to be disposed of for the three months ended December 31,
1996 as compared to the three months ended December 31, 1995.
Interest Expense
Interest expense increased by $1.1 million (17.7%), from $6.2 million to
$7.3 million for the three months ended December 31, 1995 and 1996,
respectively. The increase was primarily due to the increasing principal balance
of the Company's 12% Senior Discount Notes due 2003, Series B (the "Senior
Discount Notes") which resulted in a corresponding increase in interest expense
and the effect of expensing interest for the three months ended December 31,
1996, that had previously been capitalized during the three months ended
December 31, 1995.
SFAS 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of
The Company implemented SFAS 121 during the three months ended December 31,
1995 and, as a result, an impairment charge of $83.4 million had been recorded
as a component of the Company's loss from operations. Included in the impairment
charge was an amount related to certain assets to be disposed of. The carrying
value of those assets has been adjusted upward by $0.4 million to reflect
adjustments to the sales price of the assets. This adjustment has been included
in (Adjustment)/charge for impairment of long-lived assets on the Statement of
Operations for the three and six months ended December 31, 1996.
Minority Interests in Loss of Consolidated Subsidiaries
The Company recognized a benefit of approximately $2.1 million for the
three months ended December 31, 1995 resulting from the recognition of minority
shareholders' interest in the loss of certain consolidated subsidiaries related
to the write-down of pumped storage business development assets in accordance
with SFAS 121 which reduced the value of minority interests recorded by the
Company to zero.
Benefit for Income Taxes
The Company recognized deferred benefits for income taxes (excluding
current provisions) of $1.7 million and $7.9 million for the three months ended
December 31, 1996 and 1995, respectively. For the fiscal 1997 period, the
deferred benefit for income tax relates to certain factors, principally due to
an increase in the amount of net operating losses ("NOL") expected to be
utilized during the NOL carryforward period. For the fiscal 1996 period, the
deferred tax benefit related to the write-down of certain long-lived assets in
accordance with SFAS 121.
Extraordinary Gain on Early Extinguishment of Debt
On October 30, 1996, the Company arranged to have a financial institution
purchase a $13,759 non-recourse project term loan (the "Old Loan") relating to
four of its existing hydroelectric projects for $5,000, including certain
required reserves and closing costs of $500, (the "New Loan"). An additional
$2,000 credit facility is also available under the New Loan for up to one year
to finance certain project enhancements. A subsidiary of the Company was
assigned an interest in the balance of the Old Loan on a basis fully
subordinated to the New Loan. As a result, the Company has recorded a $5,622
Extraordinary gain on early extinguishment of debt, net of certain transaction
costs of approximately $224 and income tax of $3,414, on its Statement of
Operations for the three months and six months ended December 31, 1996.
16
<PAGE>
Six Months Ended December 31, 1996 compared to Six Months Ended December 31,
1995
Operating Revenues
Power Generation Revenue. The Company's power generation revenue increased
by $4.4 million (24.9%), from $17.7 million to $22.1 million for the six months
ended December 31, 1995 and 1996, respectively.
The Northeast region experienced increased revenues of $4.0 million due to
above average water flows and precipitation for the six months ended December
31, 1996 as compared to average water flows and precipitation for the six months
ended December 31, 1995.
The Southeast region revenues remained constant for the six months ended
December 31, 1995 as compared to the six months ended December 31, 1996.
The West and Northwest regions (combined) experienced increased revenues of
$0.4 million primarily as a result of above average water flows and
precipitation in the Northwest region, an area which contributes significantly
to total revenues of the combined regions, for the six months ended December 31,
1996 as compared to below average water flows and precipitation in the Northwest
region for the six months ended December 31, 1995.
The Company as a whole experienced increased revenue per kilowatt hour of
0.2(cent) (2.7%), from 7.4(cent) to 7.6(cent) in the 1996 fiscal period versus
the 1997 fiscal period, respectively, primarily as a result of variations in the
production mix and contract rates among the various projects.
Management Fee and Operations & Maintenance Revenues. Management fees and
O&M contract revenue remained relatively constant increasing by $0.2 million,
from $2.5 million to $2.7 million for the six months ended December 31, 1995 and
1996, respectively.
Equity Income in Partnership Interests and Other Partnership Income. Equity
income in partnership interests and other partnership income increased $0.3
million (300.0%), from $0.1 million to $0.4 million for the six months ended
December 31, 1995 and 1996, respectively. The increase is primarily due to above
average water flows and precipitation for the three months September 30, 1996 as
compared to the three months ended September 30, 1995 related to partnership
interests in the Northeast region.
Costs and Expenses
Operating Expenses. Operating expenses increased $0.1 million (1.1%), from
$8.8 million to $8.9 million for the six months ended December 31, 1995 and
1996, respectively. The increase was primarily due to an increase in insurance
premiums and other operating costs; offset by (i) a decrease in salaries and
benefits resulting from a reduction in staff; and (ii) a decrease in maintenance
and supplies, resulting from a decision to defer certain maintenance in order to
maximize revenue associated with high overall water flows during the six months
ended December 31, 1996.
General and Administrative Expenses. General and administrative expenses
increased $1.1 million (55.0%) from $2.0 million to $3.1 million for the six
months ended December 31, 1995 and 1996, respectively, primarily due to (i) an
increase in business development costs and general and administrative salaries
related to CHI Power, Inc.; (ii) a reimbursement received during the three
months ended September 30, 1995 from a partner for current and previous
international hydroelectric business development costs; (iii) costs associated
with the formulation of financial restructuring options for the Company; (iv) a
credit recorded by the Company representing current cash surrender value of one
of its former officer's life insurance policies recorded during the three months
ended September 30, 1995; and (v) the effect of expensing pumped storage
business development costs for the six months ended December 31, 1996, that had
previously been capitalized during the six months ended December 31, 1995,
partially offset by a general decrease in conventional hydroelectric business
development costs.
Interest Expense
Interest expense increased by $2.2 million (17.6%), from $12.5 million to
$14.7 million for the six months ended December 31, 1995 and 1996, respectively.
The increase is primarily due to the increasing principal balance of the Senior
Discount Notes which resulted in a corresponding increase in interest expense
and the effect of expensing interest for the six months ended December 31, 1996,
that had previously been capitalized during the six months ended December 31,
1995.
17
<PAGE>
Liquidity and Capital Resources
As more fully described in the December 31, 1996 Unaudited Consolidated
Financial Statements and related Notes thereto included herein, the cash flow of
the Company was comprised of the following:
Six Months ended
December 31, 1996 December 31, 1995
--------------------- --------------------
(amounts in thousands)
Cash provided by/(used in):
Operating activities $ 3,607 $ 1,320
Investing activities 7,716 (3,688)
Financing activities (3,486) (1,886)
------------- ---------------
Net increase/(decrease) in cash $ 7,837 $ (4,254)
======== =========
The Company has historically financed its capital needs and acquisitions
through long-term debt and limited partner capital contributions and, to a
lesser extent, through cash provided from operating activities. The Company's
principal capital requirements are those associated with acquiring and
developing new projects, as well as upgrading existing projects. The Company is
currently limiting its pumped storage activities to the minimum necessary to
maintain the viability of the Summit project and the monitoring of market
conditions relevant to the project with the intention of pursuing commitments
for the balance of the project's capacity. Consequently, the Company does not
expect its capital requirements in connection with the development of pumped
storage projects to be material in the near term.
For the six months ended December 31, 1996, the cash flow provided by
operating activities was principally the result of the $0.5 million net loss for
such period, coupled with $10.3 million of non-cash interest and other charges,
$4.3 million of depreciation and amortization and a $0.1 million decrease in
prepaid expenses and other current assets, offset by a $5.6 million gain on
early extinguishment of debt, a $1.7 million deferred tax benefit, a $1.9
million decrease in accounts payable and accrued expenses, a $1.2 million
increase in accounts receivable and $0.4 million from an adjustment to a
non-cash charge for impairment of long-lived assets. The cash flow provided by
investing activities was primarily attributable to $11.7 million of net cash
proceeds received from the sale of the CHI Maine assets, offset by $2.4 million
of investments in upgrading existing conventional projects, $0.8 million for the
continued development of a new conventional hydroelectric project and a $0.9
million increase in other long term assets during fiscal 1997. The cash flow
used in financing activities was primarily due to the repayment of $3.2 million
of project debt.
Cash provided by operating activities increased by $2.3 million for the six
months ended December 31, 1996 as compared to the six months ended December 31,
1995. The increase resulted from a $3.3 million increase in income before
depreciation and amortization, non-cash interest and other charges, employee and
director equity programs, non-cash adjustment for impairment of long-lived
assets, gain on early extinguishment of debt and provision for uncollectible
accounts, offset by a $1.0 million decrease in other operating items
(receivables, prepaid expenses, accounts payable and accrued expenses).
For the six months ended December 31, 1995, the cash flow provided by
operating activities was principally the result of the $84.3 million net loss
for such period, adjusted for an $83.4 million non-cash charge for impairment of
long-lived assets, and benefits of $7.9 million and $2.1 million for deferred
tax and minority shareholders' interest in loss of consolidated subsidiaries,
respectively, resulting from such impairment charge, $0.8 million decrease in
accounts payable and accrued expenses, and a $1.3 million increase in accounts
receivable, offset by $5.5 million of depreciation and amortization and $8.6
million for non-cash interest. The cash flow used in investing activities was
primarily attributable to $1.6 million investment in upgrading existing
conventional projects and $1.7 million investments in pumped storage and
conventional development during fiscal 1996. Of the pumped storage and
conventional development expenditures, approximately $1.2 million was
attributable to capitalized interest costs, and $0.5 million was attributable to
the funding of committed development capital for the Summit and River Mountain
pumped storage projects. The cash flow used in financing activities was due
primarily to repayment of $1.8 million of project debt.
18
<PAGE>
Cash provided by operating activities decreased by $2.6 million for the six
months ended December 31, 1995 as compared to the six months ended December 31,
1994. The decrease resulted from a $1.4 increase in income before depreciation
and amortization, non-cash interest, non-cash charge for impairment of
long-lived assets, tax benefit resulting from a charge for impairment of
long-lived assets, minority shareholders' interest in loss of consolidated
subsidiaries and employee and director equity programs, offset by a $4.0 million
decrease in other operating items (receivables, prepaid expenses, accounts
payable and accrued expenses).
Summary of Indebtedness
Principal Amount Outstanding as of
December 31, 1996 June 30, 1996
------------------ -------------
(amounts in thousands)
Company debt, excluding non-recourse debt
of subsidiaries $ 160,200 $ 151,131
Non-recourse debt of subsidiaries 103,152 115,489
Current portion of long-term debt (5,934) (6,462)
------------ ------------
Total long-term debt obligations $ 257,418 $ 260,158
======= =======
In October 1993, one of the Company's former senior lenders, Den norske
Bank AS ("DnB"), provided the Company with a $20 million unsecured working
capital facility (the "DnB Facility"), which originally had an expiration date
of June 30, 1997. The DnB Facility is pari passu with the Senior Discount Notes.
Under certain limited circumstances, pursuant to the terms of the agreement, DnB
has the right, upon notice to the Company, to limit any further borrowings under
the DnB Facility and require the Company to repay any and all outstanding
indebtedness thereunder within one year from the date DnB provides such notice
to the Company.
On December 3, 1996, the Company amended the DnB Facility (the "Amendment")
which Amendment, among other things, waived previous defaults by the Company,
changed the final expiration date of the DnB Facility to June 30, 1998, reduced
(in steps) the total commitment under the DnB Facility from approximately $6.0
million at September 30, 1996 to zero at June 30, 1998, limited the use of the
DnB Facility solely to letters of credit and modified certain financial
covenants. Since the execution of the Amendment, the Company has reduced the
outstanding letters of credit under the DnB Facility to approximately $3.1
million in accordance with the terms of the Amendment. The Company does not
currently expect that it will require a revolving credit facility for additional
working capital during fiscal 1997.
The electric power industry in the United States is undergoing significant
structural changes, evolving from a highly regulated industry dominated by
monopoly utilities to a deregulated, competitive industry providing energy
customers with an increasing degree of choice among sources of electric power
supply. The Company will seek to become a provider of reliable, low-cost energy
and related products and services to industrial and utility customers, by taking
advantage of its existing technical and financial expertise and using its
geographic presence to realize economies of scale in administration, operation,
maintenance and insurance of facilities.
Nevertheless, the performance of the Company in the future will be affected
by a number of factors, in addition to the structural changes to the electric
power industry described above. First, the Company competes for hydroelectric
and industrial energy projects with a broad range of electric power producers
including other independent power producers of various sizes and many
well-capitalized domestic and foreign industry participants such as utilities,
equipment manufacturers and affiliates of industrial companies, many of whom are
aggressively pursuing power development programs and have relatively low
return-on-capital objectives. Opportunities to acquire or develop power
generation assets on favorable economic terms in such an environment are
increasingly limited, particularly with regard to hydroelectric facilities.
Second, the Company is highly leveraged and its debt service obligations, the
cash portion of which commence in January 1999, along with its preferred stock
obligations, the cash portion of which commence in September 1998, make it
difficult to source capital on favorable terms that would allow the Company to
successfully pursue significant acquisition and development opportunities. Such
leverage and debt service obligations also make it difficult to establish the
creditworthiness necessary to develop the project and in several recent
instances have adversely affected the Company's ability to obtain contracts to
develop products and services for its industrial and utility customers.
19
<PAGE>
Federal regulators and a number of states, including some in which the
Company operates, are exploring ways in which to increase competition in
electricity markets, most notably by opening access to the transmission grid.
Although the character and extent of this deregulation are as yet unclear, the
Company expects that these efforts will increase uncertainty with respect to
future power prices and make it more difficult to obtain long-term power
purchase contracts.
The Company expects that, through calendar 1998, it will generate
sufficient cash flow from existing operations to meet its capital expenditure
and working capital requirements. Commencing on September 30, 1998, however,
cash dividends become payable on the Company's 13 1/2% Cumulative Redeemable
Exchangeable Preferred Stock (the "Series H Preferred Stock") and on January 15,
1999, cash interest becomes payable on the Company's Senior Discount Notes. In
order to meet such obligations, the Company currently anticipates that it will
have to rely on proceeds from asset sales, additional debt or equity offerings
or other sources. However, the Company also currently anticipates that it may
not be able to obtain the necessary additional debt or equity financing or
sufficient proceeds from asset sales or other sources in order to satisfy such
dividend and interest payment obligations on a timely basis as well as meet the
Company's other obligations, including accrued and unpaid dividends since
issuance under the 8% Senior Convertible Voting Preferred Stock and its capital
expenditure and working capital requirements at such time. As a result, it may
be necessary to restructure the Company's debt and equity structure either
before or at such time. In addition, the Company anticipates that it would need
to obtain financing for the principal payments on its Senior Discount Notes at
their maturity in 2003 and to redeem the Series H Preferred Stock at its 2003
redemption date. There can be no assurance that any such additional financing
will be available to the Company.
In December 1996, the Company retained Houlihan Lokey Howard & Zukin, Inc.,
a specialty investment banking firm, to provide financial advisory services to
the Company in connection with the formulation and potential implementation of
financial restructuring options for the Company.
Also, the Company may consider from time to time, either prior to 1998 or
thereafter, the use of available cash, if any, to engage in repurchases of the
Senior Discount Notes, subject to applicable contractual restrictions and other
appropriate uses, in negotiated transactions or at market prices. There can be
no assurance that, if the Company decides to engage in repurchases of the Senior
Discount Notes, any Senior Discount Notes will be available for repurchase by
the Company on terms that would be favorable or acceptable to the Company.
Certain statements contained herein that are not related to historical
facts may contain "forward looking" information, as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such statements are based on
the Company's current beliefs as to the outcome and timing of future events, and
actual results may differ materially from those projected or implied in the
forward looking statements. Further, certain forward looking statements are
based upon assumptions of future events which may not prove to be accurate. The
forward looking statements involve risks and uncertainties including, but not
limited to, the uncertainties relating to the Company's existing debt, industry
trends and financing needs and opportunities; risks related to hydroelectric,
industrial energy, pumped storage and other acquisition and development
projects; risks related to the Company's power purchase contracts; risks and
uncertainties related to weather conditions; and other risk factors detailed
herein and in other of the Company's Securities and Exchange Commission filings.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
CHI's management currently believes that none of the pending claims against
the Company will have a material adverse effect on the Company.
Item 2. Changes in Securities
NONE
Item 3. Default upon Senior Securities
As of September 30, 1996 and June 30, 1996, the Company was in
compliance with its covenants under the DnB Facility. However, as of March 31,
1996 based on the Company's financial performance for the twelve month period
then ended, the Company continued to be unable to meet one of the financial
covenants as required under the DnB Facility. In response to an earlier request
from the Company, the bank had waived compliance with respect to the covenant
for the twelve month period ended September 30, 1995 and, pending a further
review of the Company's performance and opportunities, had limited availability
under the DnB Facility to $6.1 million, the amount outstanding to provide
letters of credit at September 27, 1995. Due to the extremely low water flow in
the Northeast region during the fourth quarter of fiscal 1995 and the first
quarter of fiscal 1996, and because the measurement contained in the financial
covenant is applied at the end of each fiscal quarter on the basis of the four
most recently completed quarters, the Company was unable to meet the covenant
for the twelve months ended December 31, 1995.
On December 3, 1996, the Company amended the DnB Facility (the "Amendment")
which Amendment, among other things, waived previous defaults by the Company,
changed the final expiration date of the DnB Facility to June 30, 1998, reduced
(in steps) the total commitment under the DnB Facility from approximately $6.0
million at September 30, 1996 to zero at June 30, 1998, limited the use of the
DnB Facility solely to letters of credit and modified certain financial
covenants. Since the execution of the Amendment, the Company has reduced the
outstanding letters of credit under the DnB Facility to approximately $3.1
million in accordance with the terms of the Amendment.
The Company has acquired a number of projects in the past that included
non-recourse project debt as part of the liabilities assumed. In certain
instances, the Company believed that some of these projects would be incapable
of servicing such non-recourse debt but that by acquiring these projects for
little or no equity investment, it would be able to renegotiate the non-recourse
loans involved and enhance the equity value of the underlying projects.
On October 30, 1996, the Company refinanced non-recourse project loans,
aggregating $13.8 million with another financial institution for $5.0 million,
including certain required reserves and closing costs of $0.5 million. As a
result of this transaction, these loans are no longer in default.
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
21
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Amendment of Restated Certificate of Incorporation
10.1 Amendment dated as of July 1, 1996 to the Revolving Credit
Agreement between Consolidated Hydro, Inc. and Den norske Bank
ASA
10.2 First Amended and Restated Credit Agreement dated as of October
15, 1996 between Lyon Credit Corporation and BP Hydro Finance
Partnership
27.1 Financial Data Schedule
(b) Reports on Form 8-K
NONE
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 13, 1997 CONSOLIDATED HYDRO, INC.
By: /s / Patrick J. Danna
----------------------------------
Patrick J. Danna
Vice President, Controller
signing on behalf of the registrant
and as Chief Accounting Officer
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
CONSOLIDATED HYDRO, INC.
CONSOLIDATED HYDRO, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corpora-
tion, at a meeting duly held, adopted the following
resolutions:
RESOLVED, that pursuant to the authority granted
to and vested in the Board of Directors of the Corpo-
ration in accordance with the provisions of its
Restated Certificate of Incorporation, as amended,
the Board of Directors hereby amends the terms of its
8% Senior Convertible Preferred Stock by deleting the
last sentence of paragraph 1 of Article 4, Part H, of
its Restated Certificate of Incorporation in its
entirety and substituting therefor the following:
The number of shares constituting such series
shall be 56,279.
; and further
RESOLVED, that pursuant to the authority granted
to and vested in the Board of Directors of the Corpo-
ration in accordance with the provisions of its
Restated Certificate of Incorporation, as amended,
the Board of Directors hereby amends the terms of its
9.85% Convertible Preferred Stock by deleting the
last sentence of paragraph 1 of Article 4, Part I, of
its Restated Certificate of Incorporation in its
entirety and substituting therefor the following:
The number of shares constituting such series
shall be 56,279.
-2-
SECOND: That said amendments have been duly adopted
by the stockholders of the Corporation by written consent in
lieu of a meeting in accordance with the applicable provisions
of Sections 228 and 242 of the General Corporation Law of the
State of Delaware.
THIRD: That said amendments were duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
-3-
IN WITNESS WHEREOF, Consolidated Hydro, Inc. has
caused this Certificate of Amendment to be signed by the fol-
lowing authorized officers on this 11th day of December, 1996.
/s/Edward M. Stern
----------------------------
Name: Edward M. Stern
Title: Secretary
Attest:
/s/Patrick J. Danna
- ---------------------------
Name: Patrick J. Danna
Title: Assistant Secretary
AMENDMENT
Amendment ("Amendment") dated as of July 1, 1996 to the Revolving Credit
Agreement referred to below between Consolidated Hydro, Inc., a Delaware
corporation (the "Borrower"), Den norske Bank ASA (the "Agent") and the banks
named therein (the "Bank");
PRELIMINARY STATEMENT
1. The Borrower, the Agent and the Banks are party to a Revolving Credit
Agreement (as amended or restated from time to time, the "Credit Agreement")
dated as of October 14, 1993.
2. The Borrower has requested that the Credit Agreement be amended for the
purpose of, among other things, changing the Expiry Date, reducing the Total
Commitment and modifying certain financial covenants.
3. Subject to and on the terms and conditions set forth herein, the Agent
and the Banks are willing to agree to such request.
NOW THEREFORE, the parties hereto agree as follows:
A. Unless otherwise defined herein, terms used herein and defined in the
Credit Agreement shall be used herein as so defined.
B. The Borrower, the Agent and the Banks agree that the Credit Agreement is
hereby amended as follows:
I. Section 2.1(a) shall be amended by adding the following at the end
thereof
"Notwithstanding the foregoing, no Loan shall be made on or after June
1, 1996, except for Loans made or deemed made as a result of the payment of any
drawing under any Letter of Credit."
1. The first sentence of Section 2.1(c) shall be amended to read in
its entirety as follows:
"The Total Commitment shall be reduced on the following dates to the
related amounts:
<PAGE>
Total
Date Commitment
Prior to November 20, 1996 $5,000,000
January 31, 1997 $4,500,000
July 31, 1997 $3,000,000
January 31, 1998 $2,000,000
July 31, 1998 $0
In addition to the foregoing, the Total Commitment (as set forth opposite each
date above) shall be reduced by (i) $500,000, when the aggregate value of the
net proceeds from Northeast Asset Sales is greater than or equal to $5,000,000
and (ii) without duplication, $1,000,000, when (x) such aggregate value is
greater than or equal to $10,000,000 or (y) all or substantially all of the
Northeast Assets have been disposed of. At the time of any reduction of the
Total Commitment, whether pursuant to this Section 2.1(c) or otherwise, the
Commitment of each Bank shall be reduced to the amount equal to such Bank's Pro
Rata Share of the Total Commitment as so reduced.
2. Section 2.7 shall be deleted.
3. Section 3.1(c) shall be deleted in its entirety.
4. Section 5.2 shall be amended by adding the following at the end
thereof:
"Notwithstanding the foregoing, on and after the Effective Date of the
7/1/96 Amendment, the fee described in the first sentence of this Section 5.2
shall be 2%, instead of 1.5%."
5. Section 6.1 shall be amended to read in its entirety as follows:
"6.1 Repayment of Loans.(a)Any Loan(s) made or deemed made as the
result of the payment of any drawing under any Letter of Credit shall be payable
ON DEMAND.
(b) The Borrower agrees that, if and to the extent that, on any day,
the aggregate L/C Available Amount of all Letters of Credit (other than
Subsidiary Letters of Credit) exceeds the Total Commitment, as reduced pursuant
to this Agreement, the Borrower will reduce such L/C Available Amount in the
amount of such excess through the cancellation or reduction of Letters of
Credit.
(c) If any reduction or cancellation is required pursuant to Section
6.1(b), the Issuing Bank will, if so requested in writing by the Borrower at
least 30 days prior to the date of such reduction, issue a Letter of Credit
(each a "Subsidiary Letter of Credit") to the beneficiary of the Letter of
Credit being reduced or cancelled and for the account of the Subsidiary (each a
"Borrowing Subsidiary") for whose project or business the
2
<PAGE>
Letter of Credit being reduced or cancelled was originally issued. Each
Subsidiary Letter of Credit shall (i) be in an amount not greater than the
amount of the related reduction of the L/C Available Amount of the Letter of
Credit being cancelled or reduced, as the case may be, (ii) expire no later than
the L/C Expiry Date, (iii) be in form and substance satisfactory to the Issuing
Bank and (iv) be issued pursuant to a Reimbursement Agreement (each a
"Reimbursement Agreement") substantially in the form of Exhibit B annexed hereto
and on the terms and conditions set forth herein and therein. Such documents and
instruments, in any event, shall provide that the obligations of the Borrowing
Subsidiary shall be secured by cash collateral deposited at the New York or
Cayman Islands office of the Issuing Bank in an amount equal to the face amount
of the related Subsidiary Letter of Credit.
It is understood and agreed that, in connection with the issuance of any
Subsidiary Letter of Credit, the related Letter of Credit previously issued may
have to be amended or re-issued to reflect the reduction of the L/C Available
Amount thereof. Each Borrowing Subsidiary shall be deemed to be a Restricted
Subsidiary and a Significant Subsidiary for purposes of this Agreement until the
related Subsidiary Letter of Credit has expired and all obligations of such
Borrowing Subsidiary thereunder and under the related Reimbursement Agreement
have been paid in full."
6. Section 6.2(a) shall be deleted in its entirety, but the
designation of 6.2(b) shall not be changed.
7. Section 6.2(b) shall be amended by adding the following at the end
thereof:
"If pursuant to this Section 6.2(b) the Borrower is required to
make any prepayment in respect of the Loans, then, instead of any such
prepayment, the Total Commitment (as set forth opposite each date in Section
2.1(c) of this Agreement) shall be reduced by the amount otherwise required to
be prepaid in accordance with, and with the effect provided by, Section 2.1(c)
of this Agreement."
9.Sections 6.2(d), 6.4, 9.4 and 11.6(a) shall be deleted in their
entirety.
10. Section 10.2(b) shall be amended to read in its entirety as
follows:
"(b) in the case of the annual Financial Statements delivered
pursuant to Section 10.1, (i) a statement by the independent certified public
accountants reporting on such Financial Statements that, (x) in making the audit
in connection with such Financial Statements, nothing has come to their
attention that caused them to believe that the Borrower was not in compliance
with Sections 4.04, 4.06 and 5.01 of the Indenture and Sections 11.5 or 11.6 of
the Credit Agreement (noting, however, that their audit was not directed
primarily toward obtaining knowledge of such noncompliance), (y) in conducting
their audit, they acquired no actual knowledge that any Event of Default or
Default has occurred and is continuing under the Indenture or the
3
<PAGE>
Credit Agreement (noting, however, with respect to such actual knowledge, they
relied solely on the representations made to them by management of the Borrower
in its management representation letter, but they are not aware of any reason
why such reliance is not justified), or, (z) if any such noncompliance, Event of
Default or Default has come to their attention, such statement shall specify the
nature and period of existence thereof, provided that such independent certified
public accountants shall not be liable in respect of such statement by reason of
any failure to obtain knowledge of any such noncompliance, Event of Default or
Default that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards in effect at
the date of such examination, and (ii) a certificate of an Authorized
Representative of the Borrower certifying which Subsidiaries are Significant
Subsidiaries;"
11.Section 11.6(b) shall be amended by changing the ratio "2.75 to
1.0" set forth therein to "2.0 to 1.0."
12.Section 12. 2 is amended to read in its entirety as follows:
"12.2Representations and Warranties.Any representation,
warranty or statement made or deemed made by the Borrower or any Borrowing
Subsidiary herein, in any other Loan Document or otherwise in connection
herewith or therewith, shall be breached or be untrue in any material respect on
or as of the date made or deemed made; or"
13.Annex I shall be amended by (a) adding the following at the end
of the definition of "Adjusted Consolidated Net Worth":
"plus $77,200,000.
(b)amending the definition of "L/C Expiry Date to read in its
entirety as follows:
"'L/C Expiry Date' shall mean July 31, 1998."
(c)amending the definition of "Asset Sales" to exclude any Northeast
Asset Sales, amending the definition of "Loan Documents" by adding at the end
thereof:
"and shall also include any Borrowing Subsidiary Loan Documents."
and amending the definition of Net Cash Proceeds to exclude any proceeds from
Northeast Asset Sales.
(d) deleting the definition of "Clean-Up Period" andadding the
following new definitions in alphabetical order:
"Borrowing Subsidiary" - Section 6.1(c)."
4
<PAGE>
"Borrowing Subsidiary Loan Documents" shall mean any documents or
instruments executed and delivered by a Borrowing Subsidiary in connection with
a Subsidiary Letter of Credit.
"Northeast Assets" shall mean all or any part of the assets of, or the
capital stock or other equity interests of, the entities listed on Schedule 1
hereto.
"Northeast Asset Sale" shall mean any Asset Sale of the Northeast
Assets.
"7/1/96 Amendment" shall mean the Amendment to this Agreement
dated as of July 1, 1996.
"Subsidiary Letter of Credit" - Section 6.1(c)
C. The amendments set forth above are limited precisely as written and
shall not be deemed to (a) be a consent to any waiver of any other term or
condition of the Credit Agreement or any other Loan Document, (b) prejudice any
right or rights which the Agent, the Issuing Bank or the Banks may now or in the
future have in connection with the Credit Agreement or any other Loan Document.
It is understood, however, that (i) all Events of Default and Defaults cured by
the amendments set forth herein shall be deemed waived by the Agent and the
Banks and (ii) the Agent and the Banks waive all Defaults and Events of Default
which occurred prior to the Effective Date of this Amendment. Except as modified
hereby, the Credit Agreement and the other Loan Documents shall continue in full
force and effect.
D. The Borrower represents and warrants that as of the Effective Date
(as hereinafter defined), after giving effect to this Amendment, (i) all
representations and warranties contained in the Credit Agreement or other Loan
Documents are true and correct; and (ii) no Default exists.
E. For purposes of the representations and warranties made pursuant to
paragraph E above and for purposes of any documents and papers delivered in
connection with the execution and delivery of the Credit Agreement, the
effectiveness of this Amendment or thereafter, the term "Credit Agreement" shall
mean the Credit Agreement as modified hereby and the term "Loan Documents" shall
include the Loan Documents as modified hereby.
F. This Amendment may be executed in counterparts, of which each shall
be an original and all shall constitute a single instrument, and shall become
effective on the date (the "Effective Date") when (x) the Borrower, the Agent,
and each Bank shall have signed a copy hereof (whether the same or different
copies) and the Agent shall have received a copy executed by all such parties
and (y) unless waived by the Agent in writing, the Agent shall have received
each of the following documents:
5
<PAGE>
(i)an amendment fee equal to $29,703, such fee shall not, in any
event, be refundable,
(ii)a copy of the Certificate set forth at the foot of this
Amendment executed and delivered by the Secretary or an Assistant Secretary of
the Borrower, and
(iii)a favorable opinion from counsel for the Borrower covering the
matters set forth in Exhibit A hereto.
All such documents and information shall be in form and substance satisfactory
to the Bank.
H. This Amendment shall be governed by and construed in accordance
with the law of the State of New York, without giving effect to the conflict of
laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
6
<PAGE>
Amendment to be duly executed and delivered by their duly authorized officers as
of the date first above written.
CONSOLIDATED HYDRO, INC.
By _____________________________
Title __________________________
DEN NORSKE BANK ASA, Individually
and as Agent
By _____________________________
Title __________________________
By ____________________________
Title _________________________
7
<PAGE>
SECRETARY'S CERTIFICATE
The undersigned, the Secretary or Assistant Secretary of Consolidated
Hydro, Inc., a Delaware corporation (the "Borrower"), hereby certifies that the
foregoing letter of amendment ("Amendment") dated July 1, 1996 and the
transactions contemplated thereby have been duly authorized and approved by all
necessary corporate and shareholder action and that the officer of the Borrower
who has executed and delivered such Amendment has been duly authorized to take
such action and all such other action as may be necessary or desirable to effect
the intent and purposes of such Amendment and the transactions contemplated
thereby.
IN WITNESS WHEREOF, the undersigned has hereunto set forth his/her
hand and affixed the corporate seal of the Borrower on the ____ day of
_______________, 1996.
___________________________________
Name: _____________________________
Title: ____________________________
[Seal]
8
<PAGE>
Schedule 1
Northeast Assets
MW
UTILITY PROJECT CAPACITY
CMP: Upper Barker 0.95
Lower Barker 1.50
Browns Mill 0.59
Greenville 0.57
Pittsfield 1.05
Damariscotta 0.46
Eustis 0.25
Gardiner 1.00
Mechanics Falls 1.30
Norway 0.32
South Berwick 0.53
York 1.25
----
9.77
PSNH: EHC 1.00
Kellys Falls 0.45
Rollinsford 1.49
Salmon Falls 1.20
Somerwsoth 1.29
----
5.43
Bangor
Hydro: Milo 0.60
Pumpkin Hill 0.95
1.55
----
TOTAL 16.75
=====
9
- --------------------------------------------------------------------------------
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
dated as of October 15, 1996
between
LYON CREDIT CORPORATION,
as Lender,
and
BP HYDRO FINANCE PARTNERSHIP,
as Borrower
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS.............................................2
1.1 Certain Defined Terms ..................................2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations under Agreement...........................24
1.3 Other Definitional Provisions .........................25
SECTION 2 AMOUNTS AND TERMS OF THE LOANS.........................25
2.1 The Loans .............................................25
2.2 Conditions and Terms Specific to the Senior Loan ......25
2.3 Conditions and Terms Specific to the Additional Credit
Facility...............................................27
2.4 Interest.............................................. 29
2.5 Fees ..................................................31
2.6 Payments and Prepayments ..............................31
2.7 Term of this Agreement ................................35
2.8 Borrower's Loan Account and Statements ................36
2.9 Capital Adequacy, Taxes and Other Adjustments .........36
SECTION 3 CONDITIONS TO LOANS....................................38
3.1 Conditions Precedent ..................................38
3.2 Conditions Precedent for the Benefit of Lender ........47
3.3 Location of Closing ...................................47
SECTION 4 REPRESENTATIONS AND WARRANTIES OF
BORROWER...............................................47
4.1 Organization, Business and Qualification ..............47
4.2 Power and Authorization ...............................48
4.3 Financial Condition ...................................49
4.4 Suits, Actions, Proceedings and Adverse Facts .........49
4.5 Title to Borrower Collateral; Liens ...................49
4.6 Governmental Requirements .............................50
-i-
<PAGE>
4.7 Employee Benefit Plans ................................50
4.8 Taxes .................................................51
4.9 Chief Executive Office ................................51
4.10 Environmental Matters .................................51
4.11 Burdensome Restrictions; Other Contracts ..............51
4.12 Labor Matters .........................................52
4.13 Permits ...............................................52
4.14 Disclosure ............................................52
4.15 Material Agreements ...................................52
4.16 No Default ............................................53
4.17 Certain Fees ..........................................53
4.18 Use of Proceeds and Margin Security ...................53
4.19 Compliance with Governmental Requirements .............54
4.20 Insurance .............................................54
4.21 Projects ..............................................55
4.22 Capital Calls .........................................55
4.23 No Maintenance Liabilities ............................55
4.24 Indebtedness ..........................................53
4.25 Accounts Receivable ...................................55
SECTION 5 AFFIRMATIVE COVENANTS AND AGREEMENTS
OF BORROWER............................................55
5.1 Compliance with Governmental Requirements .............56
5.2 Access ................................................56
5.3 Notices by Governmental Authority; Fire and Casualty
Losses, etc............................................56
5.4 Borrower Revenues .....................................56
5.5 No Lender Liability ...................................57
5.6 Payment of Taxes, Fees and Claims .....................57
5.7 Financial Statements and Other Reports ................57
5.8 Insurance .............................................60
5.9 Continuance of Business ...............................60
5.10 Perfection and Preservation of Liens ..................61
5.11 Agent .................................................61
5.12 Employee Benefit Plans ................................61
5.13 Authorized Officers ...................................62
5.14 Self-Certification ....................................59
5.15 Further Assurances ....................................62
5.16 All Necessary Action ..................................62
-ii-
<PAGE>
5.17 Use of Proceeds .......................................62
5.18 Security Documents ....................................63
5.19 Debt Service Reserve Account ..........................63
5.20 Other Financial Covenants .............................63
5.21 Additional Work Actions. ..............................63
5.22 Enforcement of Rights .................................63
5.23 Change of Chief Executive Office ......................64
SECTION 6 NEGATIVE COVENANTS OF BORROWER.........................64
6.1 No Liens ..............................................64
6.2 Restriction on Fundamental Changes ....................64
6.3 Transactions with Affiliates...........................64
6.4 Changes to Material Agreements.........................65
6.5 Contingent Obligations ................................65
6.6 Indebtedness ..........................................65
6.7 Security Documents ....................................65
6.8 Borrower Revenues .....................................65
SECTION 7 RIGHTS AND REMEDIES OF LENDER..........................66
7.1 Acceleration ..........................................66
7.2 Additional Remedies of Lender .........................66
7.3 Application of Proceeds ...............................68
7.4 Notices ...............................................68
7.5 Funds of Lender .......................................68
7.6 No Waiver or Exhaustion................................68
SECTION 8 GENERAL TERMS AND CONDITIONS...........................69
8.1 Expenses and Attorneys' Fees ..........................69
8.2 Indemnity by Borrower .................................70
8.3 Notice and Defense of Claim ...........................72
8.4 Amendments and Waivers ................................73
8.5 Retention of Borrower Documents .......................73
8.6 Notices ...............................................73
8.7 Survival of Representations, Warranties, Covenants and
Certain Agreements.....................................75
8.8 Failure or Indulgence Not Waiver; Remedies Cumulative .75
8.9 Marshaling; Payments Set Aside ........................75
8.10 Independence of Covenants..............................76
-iii-
<PAGE>
8.11 Severability ..........................................76
8.12 Headings ..............................................76
8.13 Applicable Law ........................................76
8.14 Successors and Assigns ................................76
8.15 No Fiduciary Relationship or Partnership ..............76
8.16 CONSENT TO JURISDICTION AND SERVICE OF
PROCESS................................................77
8.17 WAIVER OF JURY TRIAL ..................................78
8.18 Counterparts; Effectiveness ...........................78
8.19 Assignment and Participation ..........................79
8.20 Reproduction of Documents .............................79
8.21 Controlling Agreement .................................79
8.22 Termination of Commitment .............................80
8.23 Entire Agreement ......................................80
8.24 Confidentiality .......................................80
-iv-
<PAGE>
EXHIBIT 1.1 Descriptions of Projects
EXHIBIT 1.2 Form of Disbursement Instructions
EXHIBIT 1.3 Pro Forma Cash Flow Projections
EXHIBIT 1.5 Form of Security Agreement
EXHIBIT 1.6 Form of Note
EXHIBIT 2.1(a) Request for Advance
EXHIBIT 2.1(b) Receipt for Advance
EXHIBIT 3.1 Form of Assignment
EXHIBIT 3.2 Form of Consent to Assignment
EXHIBIT 4.1 Foreign Jurisdictions
EXHIBIT 4.2 Consents and Waivers
EXHIBIT 4.3 Financing Statement Offices and Locations
EXHIBIT 4.15 Material Agreements
EXHIBIT 4.25 Accounts Receivable
EXHIBIT 5.7 Form of Certificate of Authorized Officer
EXHIBIT 5.21 Report of Independent Engineer
EXHIBIT 6.5 Contingent Obligations
EXHIBIT 6.6 Indebtedness
SCHEDULE I Applicable Permits
SCHEDULE II Articles of Incorporation and Partnership
Agreements
SCHEDULE III Initial Disbursement and Closing Costs
SCHEDULE IV Project Documents
SCHEDULE V Schedule of Exceptions
SCHEDULE VI Capital Leases
-v-
<PAGE>
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"),
dated as of October 15, 1996, is between LYON CREDIT CORPORATION, a Delaware
corporation ("Lender"), with offices at 1266 East Main Street, Stamford,
Connecticut 06902, and BP HYDRO FINANCE PARTNERSHIP, a Utah general partnership
("Borrower"), with offices at 111 West North Bend Way, P.O. Box 1029, North
Bend, Washington 98045 and amends and restates the Credit Agreement, dated as of
August 22, 1990, by and between Borrower and The Fuji Bank, Limited, acting
through its Los Angeles agency ("Fuji Bank"), as amended by Amendment No. 1,
dated as of December 23, 1992, between Borrower and Fuji Bank, and as assigned
by Fuji Bank to Lender pursuant to the Assignment, Assumption and Note Purchase
Agreement, dated as of the date hereof (the "Assignment Agreement"), between
Fuji Bank and Lender (such Credit Agreement, as so amended and assigned, the
"Original Credit Agreement").
RECITALS
WHEREAS, pursuant to the Original Credit Agreement, Borrower issued a
promissory note, dated August 22, 1990 and amended and restated December 23,
1992 (the "Fuji Note"), in the initial principal amount of fifteen million seven
hundred fifty thousand Dollars ($15,750,000);
WHEREAS, the indebtedness of Borrower evidenced by the Fuji Note is
secured by, among other things, certain partnership interests and certain
capital stock of the Affiliates (as defined below), all of the ownership
interests of the Project Owners (as defined below) Borrower in the Projects (as
defined below) and certain contract rights relating to the Projects (the
security for Borrower's indebtedness, collectively, the "Fuji Security");
WHEREAS, pursuant to a letter agreement, dated September 16, 1996,
between Fuji Bank and CHI West, Inc. ("CHI West"), an affiliate of Borrower,
Fuji Bank offered to sell or assign the Fuji Note, the Original Credit Agreement
and the Fuji Security to CHI West or to its designee;
<PAGE>
WHEREAS, CHI West designated Lender as its designee to purchase the
Fuji Note and to be the assignee of the Original Credit Agreement and the Fuji
Security;
WHEREAS, pursuant to the Assignment Agreement, Lender has purchased
the Fuji Note and Fuji Bank has assigned to Lender all of its right, title and
interest in, to and under the Original Credit Agreement and the Fuji Security;
WHEREAS, Lender and Borrower wish to amend and restate in its entirety
the Original Credit Agreement to reflect, among other things, the purchase of
the Fuji Note, the assignment of the Fuji Security, the creation of additional
security in favor of Lender, and the restructuring of a portion of the
indebtedness evidenced by the Fuji Note as the Senior Loan (as defined below)
and the Additional Credit Facility (as defined below); and
WHEREAS, simultaneously with the execution of this Agreement, Borrower
will issue (i) an amended and restated promissory note in favor of Lender in the
principal amount of the Senior Loan Commitment (as defined below) and (ii) the
Additional Credit Facility Note (as defined below) and Lender will sell to CHI
Finance, Inc. a Delaware corporation, the balance of the indebtedness of
Borrower under the Fuji Note;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
SECTION 1
DEFINITIONS
1.1 Certain Defined Terms.
When used herein, the following terms have the following respective
meanings:
"Accounts" means, collectively, the Debt Service Account, the Debt
Service Reserve Account and the Project Revenues Account.
2
<PAGE>
"Accumulated Funding Deficiency" means a funding deficiency described
in section 302 of ERISA.
"Additional Credit Facility" means a line of credit reserved by Lender
for the benefit of Borrower from the original indebtedness of Borrower to Fuji
Bank pursuant to the Fuji Note and secured by the Fuji Security (as assigned by
Fuji Bank to Lender) in the maximum available amount of two million Dollars
($2,000,000).
"Additional Credit Facility Note" means, collectively, each Note of
Borrower relating to the Additional Credit Facility and issued pursuant to
Section 2.3, and each other promissory note of Borrower issued in substitution
or exchange for any Additional Credit Facility Note. The Additional Credit
Facility Note shall be payable to the order of Lender, shall be in the amount of
the maximum available amount under the Additional Credit Facility and shall
provide for the repayment of principal and the payment of interest as provided
therein and herein and shall be secured by the Borrower Collateral.
"Advance" means any disbursement of principal under the Additional
Credit Facility.
"Affiliate" means (i) CHI-Idaho, Inc., a Delaware corporation, (ii)
CHI-Magic Valley, Inc., a Delaware corporation, (iii) Consolidated Hydro
Mountain States, Inc., a Delaware corporation, (iv) BP Hydro Associates, an
Idaho general partnership, and (v) Fulcrum, Inc., an Idaho corporation.
"Agency Fee" means the fee payable by Borrower to Lender on each
anniversary of the Closing Date, which fee shall be in the amount of twenty
thousand Dollars ($20,000) on the first through the third anniversary of the
Closing Date and ten thousand Dollars ($10,000) on the fourth anniversary of the
Closing Date and each anniversary of the Closing Date thereafter until all
Obligations of Borrower have been indefeasibly paid in full.
"Applicable Permit" means, with respect to any Project, any Permit,
including any zoning, environmental protection, pollution, sanitation, FERC,
public utilities commission, health, safety, siting or building Permit, (a) that
is necessary at any given time in the operation of such Project to test,
operate, maintain, repair, own or use such Project as contemplated by any
Material Agreement relating to such Project, to sell electricity therefrom, to
enter into any Material Agreement for such Project or to perform the
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obligations contemplated thereby, or (b) that is necessary so that none of
Borrower, any Affiliate, Lender or any affiliate of Lender may be deemed by any
Governmental Authority to be subject to regulation under the FPA, PUHCA or any
state law or regulation respecting the rates or the financial or organizational
regulation of electric utilities solely as a result of the ownership or
operation of any Project by the applicable Project Owner or the sale of
electricity therefrom. A list of all Applicable Permits is set forth in Schedule
I.
"Articles of Incorporation" means the documents relating to certain
Affiliates listed in Schedule II.
"Assignment Agreement" has the meaning set forth in the first
paragraph hereof.
"Assignment Fee" means the fee payable by CHI Finance to Lender on the
Closing Date in the amount of twenty-five thousand Dollars ($25,000) as
consideration for the assignment by Lender to CHI Finance of the portion of the
Fuji Note remaining after Borrower shall have executed and delivered to Lender
the Senior Loan Note and the Additional Credit Facility Note.
"Assignments" means the Collateral Assignments of Agreements, dated as
of the date hereof, by Borrower and each Affiliate, assigning to Lender such
Person's rights under the Material Agreements substantially in the form of
Exhibit 3.1.
"Authorized Officer" means, with respect to Borrower and the
Affiliates, Edward M. Stern, Neil A. Manna or any other officer of Borrower or
an Affiliate designated from time to time by written notice to Lender. Each
Authorized Officer shall be authorized to (i) execute and deliver the Loan
Documents on behalf of Borrower and the Affiliates, (ii) execute and deliver any
other agreement, document or certificate contemplated hereunder or thereunder on
behalf of Borrower and the Affiliates, and (iii) communicate with Lender and its
agents on behalf of Borrower and the Affiliates as contemplated hereunder.
"Availability Period" means the period of time from the Closing Date
until the first anniversary thereof.
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"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time, or any successor statute, and all
rules promulgated thereunder.
"Barber Dam Project" means the approximately 4.1 megawatt
hydroelectric facility located in Boise, Idaho, of Fulcrum, Inc., an Idaho
corporation, as more particularly described in Exhibit 1.1.
"Borrower Collateral" means, collectively, the Fuji Security (as
assigned to Lender pursuant to the Security Assignment Documents), the Accounts,
all assets of Borrower and the Affiliates, the Pledged Interests, certain other
items of personal or intangible property and Lender's rights with respect to any
Borrower Revenues, all as more particularly described in the Security Documents.
"Borrower Revenues" means all cash, property or other value (other
than Insurance Proceeds, Condemnation Proceeds and proceeds from any sale of
assets not required to be utilized as a prepayment pursuant to Section 2.6(c))
paid, payable, distributed or distributable to Borrower or any Affiliate from
any other Affiliate or Idaho Power and any interest therein or proceeds thereof.
"Borrowing Date" means the first Business Day of any month during the
Availability Period.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York, or Hartford, Connecticut,
are required or authorized to be closed.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, a lessee would account for as
a capital lease.
"CHI Finance" means CHI Finance, Inc., a Delaware corporation.
"Closing Costs" means all amounts to be paid by Borrower on the
Closing Date as reflected on Schedule III (or thereafter, including, without
limitation, on the date of any Advance) in connection with the transactions
contemplated hereunder, including, without limitation, the following: (a) to
Lender, on account of the Assignment Fee, the Letter of Credit Fee (if any), the
Success Fee and the Work Fee; (b) to Chadbourne & Parke LLP, on account of
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Lender's attorneys' fees and expenses; and (c) to the Independent Engineer, on
account of the work performed by the Independent Engineer.
"Closing Date" means the date on which the conditions precedent to the
obligations of Lender under this Agreement shall be satisfied or waived by
Lender, which date shall be agreed between Lender and Borrower and shall occur
on or before October 28, 1996; provided, that if Lender and Borrower have not
agreed on a date by October 29, 1996, then such date shall be notified to
Borrower by Lender.
"Condemnation Proceeds" means any proceeds or payments paid or payable
by any Governmental Authority in connection with any condemnation, eminent
domain, requisition for use, compulsory acquisition or like proceeding.
"Consolidated Hydro" means Consolidated Hydro, Inc., a Delaware
corporation.
"Contingent Obligation," as applied to any Person, means any direct or
indirect contingent liability of such Person (a) with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (b) with
respect to any letter of credit issued for the account of such Person or as to
which such Person is otherwise liable for reimbursement of drawings; (c) under
interest rate agreements; or (d) under any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
such Person against fluctuations in currency values; but excluding checks and
other negotiable instruments endorsed in the ordinary course of business.
Contingent Obligations shall include, without limitation (x) the direct or
indirect guaranty, endorsement (other than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (y) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (z) any liability of such Person for
the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation, to provide funds for the payment or
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discharge of such obligation or to maintain the solvency, financial condition or
any balance sheet item or level of income of another. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if a fixed and determined amount, the
maximum amount so guaranteed.
"Debt Service Account" has the meaning ascribed to it in the Security
Agreement.
"Debt Service Reserve Account" has the meaning ascribed to it in the
Security Agreement.
"Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar laws affecting the rights or remedies of creditors
generally, including, without limitation, the Bankruptcy Code, as in affect from
time to time.
"Default" means a condition or event that, after the giving of notice
or lapse of time or both, would constitute an Event of Default if such condition
or event were not cured or removed within any applicable grace or cure period.
"Default Rate" means the Interest Rate, as the same is applicable to
any Loan or other Obligation pursuant to Section 2.4(a), plus two percent (2%)
per annum, but in no event shall such rate exceed the Maximum Rate.
"Dietrich Drop Project" means the approximately 4.7 megawatt
hydroelectric facility located in Dietrich, Idaho, of BP Hydro Associates, an
Idaho general partnership, as more particularly described in Exhibit 1.1.
"Disbursement Instructions" means each of those certain letters,
substantially in the form of Exhibit 1.2, dated as of the Closing Date from
Borrower to each Affiliate and from each Affiliate to certain Persons (including
the other Affiliates and Idaho Power) irrevocably instructing each such Person
to deposit into the Project Revenues Account for the benefit of Lender all
Borrower Revenues.
"Disbursement Agent" means Fleet National Bank or such other Person as
may from time to time be the "Disbursement Agent" under the Security Agreement.
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"Dollar" and the sign "$" mean the lawful currency of the United
States of America.
"Due Inquiry" means every inquiry with any Person, in each case as is
at the time deemed reasonably necessary or desirable to ascertain or confirm the
veracity and accuracy of any matter (including, without limitation, the
inclusion or omission of any fact or circumstance which would, in Lender's
reasonable opinion, be material with respect to such matter or with respect to
Lender's interests hereunder).
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA including any Multiemployer Plan which (a) is
maintained for employees of Borrower or any ERISA Affiliate or (b) has at any
time within the preceding six (6) years been maintained for the employees of
Borrower or any current or former ERISA Affiliate, excluding any such plan
maintained only after the last date a Person was an ERISA Affiliate.
"Environmental Claim" means any claim, liability, investigation,
notice, litigation or administrative proceeding, whether pending or threatened
pursuant to written notification, or any judgment or order relating to any
Hazardous Material asserted or threatened pursuant to written notification
against Borrower or any Affiliate or any event giving rise to liability of
Borrower or any Affiliate under any Environmental Law.
"Environmental Laws" means any and all laws, statutes, ordinances,
rules, regulations, orders, guidance or determinations of any Governmental
Authority pertaining to public health, pollution or the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials including, without
limitation, common law, the Clean Air Act, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control
Act, the Occupational Safety and Health Act of 1970, the Resource Conservation
and Recovery Act of 1976, the Safe Drinking Water Act, the Toxic Substances
Control Act, the Emergency Planning and Community Right to Know Act, the
Endangered Species Act, the
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National Environmental Policy Act, the Oil Pollution Act, the Pollution
Prevention Act, the Solid Waste Disposal Act and any other environmental
conservation or protection law of any applicable jurisdiction, all as may be
hereafter amended, modified or supplemented from time to time; provided, that in
the event any of the foregoing laws is amended, modified or supplemented so as
to broaden the scope or basis of liability of Borrower or any Affiliate under
any or all Environmental Laws, such amended, modified or supplemented meaning
shall apply subsequent to the effective date of such amendment or modification
with respect to all provisions of this Agreement; and provided, further, that,
to the extent the laws of the state in which any property of Borrower or any
Affiliate is located establish a meaning for "hazardous substance", "release",
"solid waste", "disposal" or any other term which is broader than that specified
in any of the foregoing federal laws, such broader meaning shall apply to
Borrower and each Affiliate for purposes of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate," as applied to Borrower, means any Person who is a
member of a group which is under common control with Borrower, which together
with Borrower is treated as a single employer within the meaning of Section
414(b) or (c) of the IRC, determined without regard to any equity or other
economic interest or benefit or any right to exercise voting power of such
interest or benefit held in the parent.
"Event of Default" means the occurrence or existence of any one or
more of the following:
(a) Borrower or an Affiliate fails (i) to pay any interest, fee or
expense set forth in this Agreement or any other Loan Document (other than
the Intercompany Notes) within three (3) Business Days of when due or
declared due, (ii) to make any payment of principal on any Loan when due or
at maturity, whether by acceleration or otherwise, or (iii) to make any
payment when due under any Letter of Credit;
(b) Borrower, an Affiliate or CHI Finance fails to perform, keep or
observe any term, provision, condition or covenant contained in this
Agreement or any other Loan Document (other than the
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Intercompany Notes) (except as provided in paragraph (c) of this
definition) which is required to be performed, kept or observed by
Borrower, such Affiliate or CHI Finance and such failure shall not have
been cured within thirty (30) days (or any shorter period as may be
expressly set forth in this Agreement or such other Loan Document) after
the date of such failure; provided, that if it is reasonably possible to
cure in all respects such failure, and if Borrower, such Affiliate or CHI
Finance is diligently attempting to cure such failure, then Borrower, such
Affiliate or CHI Finance shall have an additional thirty (30) days to
effect such cure;
(c) Borrower fails, or fails to cause any Affiliate to perform, keep
or observe any term, provision, condition or covenant contained in Section
5.2, 5.3, 5.4, 5.5, 5.6, 5.8, 5.9, 5.10, 5.11, 5.15, 5.16, 5.17, 5.18,
5.19, 5.20, 5.22 or 5.23 Section 6 of this Agreement which is required;
provided, that if Borrower shall have given notice of any such failure in
accordance with Section 5.7(f), such failure shall not become an Event of
Default until five (5) days after Lender shall have notified Borrower in
writing that such failure shall become an Event of Default after the
passage of such five (5) day period;
(d) A default or event of default shall have occurred and be
continuing with respect to any Indebtedness or Contingent Obligation of
Borrower or any Affiliate in excess of fifty thousand Dollars ($50,000);
(e) Any statement, representation, warranty, report, financial
statement or certificate set forth in this Agreement or in any other Loan
Document or made or delivered by any Authorized Officer to Lender (i) is
false or misleading in any material respect on the date made or (ii) is
intentionally misrepresented in any respect, whether material or otherwise;
(f) Any event, occurrence or condition that has a Material Adverse
Effect;
(g) The (i) institution by Borrower, an Affiliate or CHI Finance of
any judicial proceeding intended to effect a suspension of any right or
power of Lender under any Loan Document, or causing Borrower, any Project
or any other Borrower Collateral to become subject to the control or
custody of any court, or (ii) rendering of a
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judgment (other than a judgment covered under paragraph (i) below) not
stayed or appealed (with respect to any judicial proceeding not instituted
by Borrower, an Affiliate or CHI Finance) which shall not be discharged or
stayed within ten (10) days after entry thereof, and such judgment shall
have the effect of suspending any material right or power of Lender under
any Loan Document, or causing Borrower, any Project or any other Borrower
Collateral to become subject to the control or custody of any court;
(h) (i) Borrower or any Affiliate does not have good title to its
interests in the Borrower Collateral; (ii) any Project, Pledged Interest or
other Borrower Collateral is attached, seized, levied upon or subjected to
a writ or distress warrant and any such action shall remain unbonded,
undischarged or unstayed for a period in excess of the earlier of ten (10)
days or five (5) days prior to the date of any proposed sale thereof; (iii)
any Project, other Borrower Collateral or any other material asset of
Borrower or any Affiliate comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors for a period in
excess of ten (10) days; or (iv) Lender does not have or ceases to have a
valid and perfected first priority Lien in any of the Borrower Collateral
(subject to Permitted Liens); provided, that if the provisions of both this
paragraph (h) and paragraph (i) below apply, then the forty-five (45) day
period in paragraph (i) shall apply instead of the period provided for
herein;
(i) An application is made by any Person other than Borrower or any
Affiliate for the appointment of a receiver, trustee or custodian for any
asset of Borrower or any Affiliate and the same is not dismissed within
forty-five (45) days after the application therefor; any order, judgment,
decree or petition under any section or chapter of the Debtor Relief Laws
is filed against Borrower or any Affiliate or any case or proceeding is
filed against Borrower or any Affiliate for its dissolution or liquidation
(as the case may be), and such order, judgment, decree or petition is not
dismissed within forty-five (45) days after the entry or filing thereof;
(j) An application is made by Borrower or any Affiliate for the
appointment of a receiver, trustee or custodian for any assets of Borrower
or any Affiliate; a petition under any section or chapter of the Debtor
Relief Laws is filed by Borrower or any Affiliate; Borrower or
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any Affiliate makes an assignment for the benefit of creditors; any
case, certificate or proceeding is filed by Borrower or any Affiliate for
the dissolution or liquidation (as the case may be) of Borrower or any
Affiliate or Borrower or any Affiliate becomes insolvent or admits in
writing its inability to pay its debts as they mature;
(k) Any Project Owner is enjoined, restrained or in any way prevented
by court order or order of any other Governmental Authority from owning any
Project and such order shall not be stayed or otherwise lifted within
thirty (30) days after entry thereof;
(l) (i) Any Material Agreement becomes unenforceable or is terminated
by operation of law or by any party thereto (other than as a result of its
full performance or discharge) or the enforceability of any such agreement
is challenged by any Person (other than by Lender or any affiliate of
Lender) and such challenge, in Lender's reasonable determination, is likely
to prevail, the result of any of which is likely to have a Material Adverse
Effect (in such event, Lender shall provide Borrower a written explanation
of the basis for any action Lender is taking or intends to take with
respect to such Event of Default; provided, that neither the form nor the
substance of such explanation, nor Borrower's failure to receive the same,
shall in any way affect the right of Lender to exercise any of its remedies
under this Agreement or the other Loan Documents with respect to such Event
of Default or grant Borrower or any Affiliate any right to contest the
same); or (ii) a default or an event of default occurs and remains
unremedied beyond any applicable cure period under any Material Agreement
and the effect of such default or event of default gives another party to
such agreement the right to terminate the same either immediately or after
any applicable notice or lapse of time, the result of which, in Lender's
reasonable opinion, is likely to have a Material Adverse Effect;
(m) Any money judgment, writ or warrant of attachment in excess of
fifty thousand Dollars ($50,000) in the aggregate, which is or are not
adequately covered by insurance of Borrower, is entered against Borrower or
any Affiliate and is not paid, discharged or stayed within the earlier of
ten (10) days after entry thereof or five (5) days prior to the date of any
proposed sale thereunder;
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(n) The loss, suspension or revocation of, or failure to renew, any
Applicable Permit now held or hereafter acquired by or in connection with
any Project, if such loss, suspension, revocation or failure to renew
(together with all other such losses, suspensions, revocations and
failures) is likely, in Lender's reasonable opinion, to have a Material
Adverse Effect;
(o) Any Material Agreement is amended without the prior written
consent of Lender and the result of such amendment, in Lender's reasonable
opinion, is likely to have a Material Adverse Effect; and
(p) (1) if Borrower or any ERISA Affiliate has in effect any Employee
Benefit Plan, other than a Multiemployer Plan, notice of intent to
terminate such Employee Benefit Plan shall be filed under Section 4041(c)
of ERISA or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer such Employee
Benefit Plan under circumstances that would result in Borrower or an
Affiliate becoming liable to pay under Title IV of ERISA to the PBGC or
with respect to such Employee Benefit Plan an amount or amounts aggregating
in excess of $50,000, (2) Borrower or any ERISA Affiliate incurs a
liability to a Multiemployer Plan as a result of a withdrawal or partial
withdrawal therefrom in an amount in excess of $50,000, (3) a condition
shall exist by reason of which the PBGC would be entitled to institute
proceedings to terminate any such Employee Benefit Plan pursuant to the
provisions of Section 4042(a)(1), 4042(a)(2) or 4042(a)(3) of ERISA, as
reasonably determined in good faith by Lender, (4) any such Employee
Benefit Plan shall incur an Accumulated Funding Deficiency, whether or not
waived within the meaning of Section 412 of the IRC, in excess of $50,000,
or (5) any Reportable Event or Prohibited Transaction shall occur with
respect to any such Employee Benefit Plan that could reasonably be expected
to result in Borrower or an Affiliate becoming liable to the PBGC or any
other Person in an amount or amounts aggregating in excess of $50,000, and
any such event specified in any of clauses (1), (2), (3), (4) and (5) above
shall continue for ten (10) days.
"Excess Interest" has the meaning ascribed thereto in Section 2.4(c).
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"FERC" means the Federal Energy Regulatory Commission and any
successor thereto.
"Final Maturity Date" means the date that is the twelfth (12th)
anniversary of the Closing Date.
"Financial Statements" means the financial statements required to be
delivered to Lender pursuant to Section 5.7.
"Financing Statements" means the Form UCC-1 and Form UCC- 3 financing
statements to be filed with the appropriate offices for the purpose of
perfecting Lender's Liens in the Borrower Collateral.
"Fiscal Quarter" means any of the three (3) month periods ending on
the last day of March, June, September and December, respectively, of each
calendar year.
"Fiscal Year" means the twelve (12) month period beginning on the
first day of July and ending on June 30 of the next calendar year.
"Floating U.S. Treasury Note Rate" means the yield, as reported in the
Wall Street Journal on the date of determination, for U.S. Treasury Notes
maturing as near as possible to the third (3d) anniversary of such date of
determination.
"FPA" means the Federal Power Act, as amended, and all rules and
regulations promulgated thereunder.
"Fuji Bank" has the meaning set forth in the first paragraph hereof.
"Fuji Note" has the meaning set forth in the first recital hereto.
"Fuji Security" has the meaning set forth in the second recital
hereto.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or any
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successor authority) that are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means the United States, any state, any
county, any city or any other political subdivision in which Borrower or any
Affiliate operates, any Project or other Borrower Collateral is located, and any
other political subdivision, agency, authority, board, bureau, commission,
court, department, district or other instrumentality of any of the foregoing,
including, without limitation, FERC and the Environmental Protection Agency.
"Governmental Requirements" means, as of the date of determination
thereof, all applicable laws, ordinances, rules, regulations, judgments,
interpretations, policy orders, decrees or similar forms of decision of any
Governmental Authority.
"Hazardous Material" means, without limitation, any of the following
in any solid, liquid or gas form, from whatever source: (a) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable laws
or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (b) oil, petroleum or petroleum-derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per million.
"Indebtedness," as applied to any Person, means (a) any indebtedness
for borrowed money; (b) that portion of any obligation with respect to a Capital
Lease that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) any note payable and draft accepted representing an
extension of credit whether or not representing an obligation for borrowed
money; (d) any obligation owed for all or any part of the deferred purchase
price of property or services if the purchase price is due more than six (6)
months from the date the obligation is incurred or is evidenced by a note or
similar written instrument; and (e) any indebtedness secured by any Lien on any
property or asset owned or held by such Person regardless of whether the
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indebtedness secured thereby shall have been assumed by such Person or is
nonrecourse to the credit of such Person. Obligations under interest rate
agreements constitute Contingent Obligations and not Indebtedness.
"Idaho Power" means Idaho Power Company, a Maine corporation.
"Independent Engineer" means Acres International or such other
qualified and experienced engineer and/or any replacement or successor engineer
as reasonably selected by Lender.
"Initial Disbursement" means an amount equal to or greater than the
sum of the following amounts (all as detailed more fully in Schedule III): (a)
the amount required to purchase the Fuji Note from Fuji Bank; (b) the aggregate
amount of all Closing Costs; (c) the amount required to fund the Debt Service
Reserve Account to the level required by the Security Agreement and (d) the
amount necessary to secure fully the payment of any Letter of Credit then
outstanding.
"Initial U.S. Treasury Note Rate" means the yield, as reported in the
Wall Street Journal, on the Closing Date for U.S. Treasury Notes maturing as
near as possible to the average life of the Senior Loan as determined by the Pro
Formas taking into account the scheduled amortization of the Senior Loan and
anticipated mandatory prepayments.
"Insurance Policy" means any policy evidencing insurance coverage
required to be maintained pursuant to any Material Agreement.
"Insurance Proceeds" means, collectively, proceeds or payments paid or
payable by or through the issuer of any Insurance Policy as a result of the
occurrence of any event covered under such Insurance Policy. Insurance Proceeds
shall not include (a) any payment made by the insured as a result of the
occurrence of such an event, whether such payment is as a deductible, co-payment
or otherwise, or (b) any refund of any premium.
"Intercreditor Agreement" means the Intercreditor and Collateral
Sharing Agreement, dated as of the date hereof, between Lender and CHI Finance.
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"Intercompany Notes" means, collectively, the BP Hydro Note (as
defined in the Security Agreement) and the Fulcrum Note (as defined in the
Security Agreement).
"Interest Rate" means (i) with respect to the Senior Loan (a) from the
Closing Date through the day before the seventh (7th) anniversary of the Closing
Date, the Initial U.S. Treasury Note Rate plus three hundred ninety (390) basis
points per annum and (b) from the seventh (7th) anniversary of the Closing Date
through the Final Maturity Date, the Floating U.S. Treasury Note Rate plus three
hundred ninety (390) basis points per annum, as recalculated on the date that is
ten (10) days prior to the date of each Scheduled Installment, and (ii) with
respect to each Advance under the Additional Credit Facility, (a) from the
Borrowing Date for such Advance through the day before the seventh (7th)
anniversary of such Borrowing Date, the U.S. Treasury Note Rate for the
Additional Credit Facility plus three hundred ninety (390) basis points per
annum, and (b) from the seventh (7th) anniversary of such Borrowing Date through
the Final Maturity Date, the Floating U.S. Treasury Note Rate plus three hundred
ninety (390) basis points per annum, as recalculated on the date that is ten
(10) days prior to the date of each Scheduled Installment.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Letter of Credit" means any letter of credit issued by Lender or its
designee for the benefit of Borrower or an Affiliate.
"Letter of Credit Fee" means a fee on the aggregate amount of Senior
Loan funds utilized as contingent collateral for a Letter of Credit pursuant to
Section 2.2(c)(Y), which fee shall equal two percent (2%) of the amount of such
undrawn funds and shall be payable on the date of issuance of such Letter of
Credit and on each anniversary thereof on which such Letter of Credit is
outstanding.
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
other), charge, encumbrance, hypothecation, assignment, preference, priority,
levy, assessment, judgment, lease, easement, security interest or claim of
whatever nature or description (including any agreement to give any of the
foregoing), including any security interest arising under conditional sale or
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other title retention agreements, or any other defect, irregularity, interest in
property or cloud on title.
"Loan" or "Loans" means any loan to Borrower by Lender evidenced by a
Note.
"Loan Account" has the meaning ascribed thereto in Section 2.8(a).
"Loan Documents" means this Agreement, the Security Documents, the
Intercreditor Agreement, any Note and such other agreements, instruments and
documents (and all annexes, schedules and exhibits thereto) evidencing,
securing, pertaining to or executed in connection with any Loan as shall, from
time to time, be executed and delivered by Borrower or any other Person to
Lender pursuant to this Agreement or any other Loan Document.
"Lowline Rapids Project" means the approximately 2.8 megawatt
hydroelectric facility located in Kimberly, Idaho, of BP Hydro Associates, an
Idaho general partnership, as more particularly described in Exhibit 1.1.
"Material Adverse Effect" means (a) with respect to Borrower or any
Affiliate, the occurrence of any event or condition that individually or in the
aggregate with any other event or condition is materially adverse to Borrower's
or such Affiliate's ability to perform its obligations under any Loan Document
to which it is a party or (b) the occurrence of any event or condition that
impairs in any material respect Lender's right or ability to enforce or collect
the Obligations or any other obligation owing to Lender pursuant to any Loan
Document. Lender may find a Material Adverse Effect only after (a) full
consideration of any reasonably anticipated insurance or other proceeds and the
application thereof in accordance with the requirements of this Agreement, (b)
notice to Borrower of such finding, and (c) if such Material Adverse Effect is
one that is reasonably susceptible to remedy, it is not remedied within thirty
(30) days of receipt of such notice; provided, that if cure in all respects is
reasonably possible and Borrower or such Affiliate is diligently attempting to
cure such event or condition, then Borrower or such Affiliate shall have an
additional thirty (30) days to effect such cure.
"Material Agreements" means, individually or collectively, the
Partnership Agreements, the Articles of Incorporation and the Project Documents.
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"Maximum Rate" has the meaning ascribed thereto in Section 2.4(c).
"Minimum Coverage Ratio" means 1.15 to 1 for the preceding twenty-four
(24) month period ending on the last day of the calendar month preceding the
date of determination and for the projected subsequent two (2) twelve (12) month
periods as forecasted in the budget submitted by Borrower and approved by
Lender, calculated by dividing (x) the preceding twenty-four (24) months' Net
Operating Cash from all Projects (assuming each of such Projects has been a
Project for at least twenty-four (24) months) by (y) debt service on the Senior
Loan for the same twenty-four (24) month period.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which Borrower or any ERISA Affiliate is making,
or is accruing an obligation to make, contributions or has made, or been
obligated to make, contributions within the preceding six (6) years.
"Net Operating Cash" means, with respect to any Project, the Borrower
Revenues earned by such Project less the aggregate amount of all sums other than
Variable Fees (as defined in each of the O&M Agreements) and the O&M Incentive
Fee then due and owing by the Project Owners less Qualified Project Expenses (as
defined in and permitted by the Security Agreement).
"Note" means the Senior Loan Note or any Additional Credit Facility
Note, substantially in the form of Exhibit 1.6, or, upon the occurrence of the
event specified in Section 2.2(c)(Y)(B), a Letter of Credit, and "Notes" means
all such Notes.
"O&M Agreements" shall have the meaning ascribed thereto in the
Security Agreement.
"O&M Incentive Fee" means a fee payable to the O&M Operator by the
Projects equal to an aggregate amount of one hundred thousand Dollars
($100,000), as adjusted annually at the end of each Fiscal Year by the Consumer
Price Index, less the aggregate of the Variable Fees (as defined in the O&M
Agreements).
"O&M Operator" means CHI Mountain States Operations, Inc., a Delaware
corporation.
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"Obligations" means all of Borrower's and the Affiliates'
Indebtedness, liabilities and other obligations of any and every kind and nature
(including, without limitation, the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest, charges, expenses, fees, costs,
attorneys' fees and other sums chargeable to Borrower or any Affiliate by Lender
and future advances made to or for the benefit of Borrower) arising under this
Agreement and the other Loan Documents.
"Partnership Agreements" means the agreements relating to Borrower and
certain of the Affiliates listed on Schedule II.
"PBGC" means the Pension Benefit Guarantee Corporation established
pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to all or
part of its functions under ERISA.
"Permit" means any action, approval, consent, waiver, exemption,
variance, franchise, order, permit, authorization, right or license of or from a
Governmental Authority, including any modification or renewal of the foregoing.
"Permitted Liens" means, with respect to Borrower, any Affiliate or
any Borrower Collateral, (i) Liens for taxes not yet subject to penalties for
non-payment and Liens for taxes the payment of which is being contested as
permitted by Section 5.6; (ii) Liens resulting from any money judgment, writ or
warrant of attachment in an amount less than fifty thousand Dollars ($50,000) in
the aggregate; (iii) Lender's and Disbursement Agent's Liens; (iv) pledges or
deposits by Borrower or such Affiliate under workers' compensation laws,
unemployment insurance laws, social security laws or similar legislation, or
good faith deposits in connection with bids, tenders, contracts (other than for
the payment of Indebtedness), or leases or deposits to secure public or
statutory obligations of such Person or deposits of cash to secure surety,
appeal, performance or other similar bonds, or deposits as security for
contested taxes or import duties or for the payment of rent; (v) Liens imposed
by law, such as carriers', warehousemen's, materialmen's and mechanics' Liens
which are incurred in the ordinary course of business for sums not more than
thirty (30) days delinquent or which are being contested in good faith
(provided, that a reserve or other appropriate provision shall have been made
therefor); (vi) purchase money Liens of a vendor of equipment whether or not to
be included in any Project (which Liens will be extinguished upon payment in
full in accordance with the delivery terms of such equipment) and Liens arising
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from capital leases of vehicles and office and testing equipment existing on the
Closing Date as set forth on Schedule VI and with respect to any of such items
which are newly acquired, which Liens shall not exceed twenty-five thousand
Dollars ($25,000) individually and two hundred fifty thousand Dollars ($250,000)
in the aggregate; and (vii) all exceptions and encroachments set forth in any
policy of title insurance with respect to any Project delivered to Lender.
"Person" means and includes an individual, a partnership, a joint
stock company, an association, a bank, a trust company, a land trust, a business
trust, a joint venture, a corporation, a trust, an unincorporated organization,
a Governmental Authority and any other entity whether or not such entity is a
legal entity.
"Pledge Agreements" means collectively each of the First Amended and
Restated Stock Pledge Agreements, the General Partner Pledge Agreements, the
Security Agreement and the First Amended and Restated General Partner Pledge
Agreements, each dated of even date herewith, between certain Affiliates, as
pledgor, and Lender, as pledgee.
"Pledged Interests" means the Intercompany Notes and the shares of
corporate stock of and partnership interests in Borrower and certain Affiliates
pledged pursuant to the Pledge Agreements and in which Lender has a security
interest pursuant to the Security Documents.
"Prior Liens" means the Liens of all lenders other than Lender to the
Projects, Borrower and any Affiliate.
"Pro Forma" means the pro forma cash flow projections set forth in
Exhibit 1.3.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA and any
transaction described in Section 4975(c) of the IRC that is not exempt by reason
of Section 4975(c)(2) or Section 4975(d) of the IRC.
"Project" means each of the Barber Dam Project, the Dietrich Drop
Project, the Lowline Rapids Project and the Rock Creek Project and "Projects"
means all such Projects.
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"Project Documents" means the agreements, documents and instruments
listed in Schedule IV.
"Project Owner" means each of BP Hydro Associates, an Idaho general
partnership, and Fulcrum, Inc., an Idaho corporation.
"Project Revenues Account" has the meaning ascribed to it in the
Security Agreement.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended, and all rules and regulations promulgated thereunder.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended, and all rules and regulations promulgated thereunder.
"Qualifying Facility" shall have the same meaning as the term
"qualifying facility" in Part 292 of FERC's regulations under PURPA.
"Reinvestment Loss Amount" means the difference between (i) the
interest which Lender would have earned on the principal amount of a prepaid
Note from the date of Borrower's prepayment of such Note through the seventh
(7th) anniversary of the Closing Date and (ii) the interest which Lender would
have earned on the principal amount of a prepaid Note from the date of
Borrower's prepayment of such Note through the seventh (7th) anniversary of the
Closing Date if the interest rate on such prepaid Note had been the Interest
Rate as recalculated on the date of prepayment.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, a withdrawal from an Employee
Benefit Plan described in Section 4063 of ERISA, or a cessation of operations
described in Section 4062(e) of ERISA.
"Rock Creek Project" means the approximately 1.9 megawatt
hydroelectric facility located in Twin Falls, Idaho, of BP Hydro Associates, an
Idaho general partnership, as more particularly described in Exhibit 1.1.
"Scheduled Installment" has the meaning attributed thereto in Sections
2.2(d) and 2.3(d).
"Security Agreement" means that certain First Amended and Restated
Disbursement and Pledge Agreement, dated the date hereof, among
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Lender, Borrower and Disbursement Agent, securing the payment and performance of
the Obligations and evidencing a valid and enforceable security interest in and
to the collateral described therein, substantially in the form of Exhibit 1.5.
"Security Assignment Documents" means (i) the Assignment, Assumption
and Note Purchase Agreement, dated the Closing Date, between Fuji Bank and
Lender, (ii) the Assignment and Assumption Agreement, dated the Closing Date,
among Fuji Bank, Lender and Borrower and (iii) the Assignments of Deeds of
Trust, dated the Closing Date, between Fuji Bank and Lender.
"Security Documents" means, individually and collectively, any
instrument, document or agreement executed by or on behalf of Borrower or any
Affiliate to guarantee or provide collateral with respect to the Obligations and
the other transactions contemplated by the Loan Documents, including, without
limitation, the Security Assignment Documents, the Security Agreement, the
Disbursement Instructions, the Pledge Agreements, the Financing Statements and
each instrument, document and agreement executed pursuant to any Security
Document.
"Security Interest" has the meaning ascribed thereto in the Security
Agreement.
"Senior Loan" means the loan made on the Closing Date by Lender to
Borrower in the initial principal amount of the Initial Disbursement, as such
principal amount may be increased in connection with the collateralization of
any Letter of Credit.
"Senior Loan Commitment" means five million two hundred thousand
Dollars ($5,200,000).
"Senior Loan Note" means the Note of Borrower relating to the Senior
Loan issued pursuant to Section 2.2(a) and each other promissory note of
Borrower issued in substitution or exchange for the Senior Loan Note. The Senior
Loan Note shall be payable to the order of Lender, shall be in the amount of the
Senior Loan Commitment and shall provide for the repayment of principal and the
payment of interest as provided therein and herein and shall be secured by the
Borrower Collateral.
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"Success Fee" means the fee payable by Borrower to Lender on the
Closing Date, which fee shall be in the amount of fifty percent (50%) of the
difference between one hundred twenty thousand Dollars ($120,000) and the
closing fee payable to Fuji Bank in respect of the acquisition of the Fuji Note.
"Tax Liabilities" has the meaning ascribed thereto in Section 2.9(a).
"Termination Date" has the meaning ascribed thereto in Section 2.7.
"UCC" means the Uniform Commercial Code (or any successor statute) as
in force in New York, as it may be amended from time to time, or, pursuant to
the provisions of Section 9.103 of the Uniform Commercial Code, the laws of a
different jurisdiction that govern perfection and the effect of perfection or
non-perfection of Liens in certain Borrower Collateral.
"U.S. Treasury Note Rate for the Additional Credit Facility" means the
yield, as reported in the Wall Street Journal, on the date of determination for
U.S. Treasury Notes maturing as near as possible to the average life of the
Additional Credit Facility as determined by the Pro Formas, taking into account
the scheduled amortization of the Additional Credit Facility.
"Work Fee" means the fee payable by Borrower to Lender on the date of
each Advance, which fee shall be in the amount of five thousand Dollars
($5,000). Work Fees shall compensate Lender for its internal costs incurred in
connection with the making of each such Advance. Lender's internal costs shall
include, without limitation: internal costs to undertake the credit analysis and
due diligence for each Project submitted for inclusion in the Borrower
Collateral, the cost of providing temporary paralegal and secretarial services
to support any closing, the use of Lender's facilities to conduct any closing,
wire transfer fees, duplicating costs, telephone costs, direct costs associated
with the use of Lender's personnel to review, document and close any Loan, and
any other direct or indirect cost which may be incurred by Lender which is not
payable by Borrower pursuant to Section 8.1.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
under Agreement. For purposes of this Agreement, all accounting terms not
otherwise defined herein have the meanings assigned to such terms in
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conformity with GAAP. All financial statements and other information furnished
to Lender pursuant to Section 5.7 shall be prepared in accordance with GAAP as
in effect at the time of such preparation.
1.3 Other Definitional Provisions. References to "Sections",
"Exhibits" and "Schedules" are to Sections, Exhibits and Schedules,
respectively, of this Agreement unless otherwise specifically provided. Any term
defined herein may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference. In this Agreement, "hereof,"
"herein," "hereto," "hereunder" and the like mean and refer to this Agreement as
a whole and not merely to the specific section, paragraph or clause in which the
respective word appears; words importing any gender include the other gender;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes",
and "include" shall be deemed to be followed by the words "without limitation";
references to agreements and other contractual instruments shall be deemed to
include subsequent amendments, assignments, and other modifications thereto, but
only to the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan Document; references
to Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; and all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
SECTION 2
AMOUNTS AND TERMS OF THE LOANS
2.1 The Loans. Subject to and upon the terms and conditions herein set
forth, Lender agrees to make the Senior Loan to Borrower in an aggregate
principal amount not to exceed the Senior Loan Commitment and to make available
to Borrower the Additional Credit Facility. Each Loan shall mature and be due
and payable on the Final Maturity Date without further action on the part of
Lender. Once repaid, a Loan may not be reborrowed.
2.2 Conditions and Terms Specific to the Senior Loan.
(a) The Senior Loan Note. On the Closing Date, Borrower shall execute
and deliver to Lender the Senior Loan Note, which shall evidence
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Borrower's obligation to pay the principal and interest noted therein.
Borrower authorizes Lender to record on Schedule II of the Senior Loan Note the
payments made on the Senior Loan. Such notations shall be prima facie evidence
of the information set forth therein; provided, that the failure by Lender to
make any such notation or an error in making any such notation shall not affect
the obligations of Borrower hereunder or under any other Loan Document. In the
event of an assignment by Lender pursuant to Section 8.19, Borrower shall, upon
surrender of the Senior Loan Note, issue a new Senior Loan Note to reflect such
assignment.
(b) Disbursements. Subject to the satisfaction of the terms and
conditions set forth herein, on the Closing Date, Lender shall make available to
Borrower, and Borrower shall borrow, the Initial Disbursement and Borrower shall
deliver to Lender a receipt substantially in the form of Exhibit 2.1(b). In
addition, Lender shall make available to Borrower during the Availability Period
the amount, if any, remaining under the Senior Loan Commitment to be used as
contingent collateral for a Letter of Credit in accordance with Section
2.2(c)(Y).
(c) Permitted Use of Senior Loan.
(X) Note Funds. Except as provided in Section 2.02(c)(Y), funds
from the Senior Loan may be used only (i) to purchase the Fuji Note from
Fuji Bank, (ii) to pay Closing Costs, (iii) to fund the Debt Service
Reserve Account and (iv) to provide working capital to the Projects.
Borrower shall not use any portion of the Senior Loan for providing working
capital to Borrower or any Affiliate or for distributions to the officers
or shareholders of Borrower or any other Person.
(Y) Letter of Credit.
(A) In addition to the purposes listed in Section
2.02(c)(X), during the Availability Period, Borrower may use up to three
hundred thousand Dollars ($300,000) of the Senior Loan Commitment to
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provide contingent collateral for any Letter of Credit issued to secure
obligations of Borrower incurred in the normal course of business. Borrower will
not be required to draw on such contingent collateral until the earliest of any
of the following to occur during the Availability Period: (1) any Letter of
Credit is drawn upon, (2) the occurrence of any Event of Default and (3) the
point in time when Borrower has elected to prepay, mandatory or otherwise, the
then-outstanding principal balance of the Senior Loan.
(B) In the event a Letter of Credit is drawn upon after the
expiration of the Availability Period or without a portion of the Senior Loan
having been utilized as contingent collateral for such Letter of Credit pursuant
to Section 2.2 (c)(Y)(A), the Letter of Credit shall become a demand note to be
paid prior to any distribution to Borrower or any Affiliate from Borrower
Revenues. The demand note will carry interest at the Interest Rate as in effect
for the Senior Loan; provided, that the disbursed amount of the Senior Loan and
the amount of the demand note total an amount which is less than the Senior Loan
Commitment. To the extent such sum exceeds the Senior Loan Commitment, such
excess portion of the demand note shall earn interest at the Interest Rate
then-applicable to the Senior Loan plus two percent (2%) per annum.
(d) Repayment. Borrower shall make principal payments (each, a
"Scheduled Installment") on the dates listed in Schedule I attached to the
Senior Loan Note and in the amounts determined by multiplying the principal
amount of the Senior Loan Note by the percentage opposite such date. Borrower
hereby agrees that Schedule I to the Senior Loan Note may, at Lender's sole
option, be revised at the time any contingent collateral provided for any Letter
of Credit in accordance with Section 2.2(c)(Y)(A) is drawn (but only if Lender
has opted not to demand payment in full of such draw), analyzed using the
methodology employed in connection with the creation of the original
amortization schedule for the Senior Loan Note and taking into account
anticipated mandatory prepayments of the Senior Loan, the original debt service
coverage ratios and projected Borrower Revenues contained in the Pro Formas.
2.3 Conditions and Terms Specific to the Additional Credit Facility.
(a) The Additional Credit Facility Note. On the Closing Date, Borrower
shall execute and deliver to Lender the Additional Credit Facility Note, which
shall evidence Borrower's obligation to pay the principal and interest noted
therein. Borrower authorizes Lender to record on Schedule II attached to the
Additional Credit Facility Note each Advance, the date thereof and the
repayments thereof. Such notations shall be prima facie evidence of the
information set forth therein; provided, that the failure by Lender to make
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any such notation or an error in making any such notation shall not affect the
obligations of Borrower hereunder or under any other Loan Document. In the event
of an assignment pursuant to Section 8.19, Borrower shall, upon surrender of the
Additional Credit Facility Note, issue a new Additional Credit Facility Note to
reflect such assignment.
(b) Disbursements. Subject to the satisfaction of the terms and
conditions set forth herein, on the Closing Date or on any Borrowing Date after
the Closing Date, Lender shall make available to Borrower the amount, if any,
remaining under the Additional Credit Facility. Each Advance shall be in an
amount not less than five hundred thousand Dollars ($500,000) and shall be for
credit to the account of Borrower at such bank in such place as Lender and
Borrower shall agree in immediately available funds. Advances shall be made upon
Borrower's request in writing, substantially in the form of Exhibit 2.1(a),
delivered to Lender at least ten (10) Business Days prior to the proposed date
of disbursement, and against each Advance Borrower shall deliver to Lender a
receipt substantially in the form of Exhibit 2.1(b).
(c) Permitted Use of Additional Credit Facility. Borrower may use the
funds available through the Additional Credit Facility for any purpose. Borrower
may apply to Lender for an Advance after Borrower or any Affiliate has taken any
action which increases the operating cash available to Borrower over and above
the levels projected in the Pro Forma. Such actions include renegotiating any
contract or agreement in a manner which increases revenue or reduces Project
operating expenses or negotiating any contract or agreement in a manner which
increases the operating cash available to Borrower. Lender shall have the right,
in its sole discretion, to approve or reject any request for an Advance. If
approved, Lender will calculate the amount of the Advance using the same credit
criteria, pricing spreads, terms and conditions as were used in connection with
the making of the Senior Loan. Borrower may borrow up to seventy-one and
forty-three one-hundredths percent (71.43%) of the discounted additional
operating cash flow (discounted at the then-applicable Interest Rate for the
Senior Loan); provided, that such cash flow, for purposes of this Section
2.3(c), shall be calculated for the shorter of the period remaining until (i)
the Final Maturity Date or (ii) the expiration of the contract negotiated or
re-negotiated in connection with such Advance; and provided, further, that such
borrowing may not exceed the maximum amount of the Additional Credit Facility.
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(d) Repayment. Borrower shall make principal payments (each, a
"Scheduled Installment") on the dates listed in Schedule I attached to the
Additional Credit Facility Note and in the amounts determined by multiplying the
sum of all Advances on the Additional Credit Facility Note by the percentage
opposite such date. Borrower hereby agrees that Schedule I to the Additional
Credit Facility Note may, at Lender's sole option, be revised at the time of
each Advance and at the expiration of the Availability Period, using the
methodology employed in connection with the creation of the original
amortization schedule for the Additional Credit Facility Note, taking into
account anticipated mandatory prepayments of the Additional Credit Facility, the
original debt coverage ratios and projected Borrower Revenues contained in the
Pro Formas.
2.4 Interest.
(a) Rate of Interest. So long as no Event of Default has occurred and
is continuing, the Loans and all other Obligations shall bear interest from the
date any such Loan was made or such other Obligation becomes due to the date
paid at a rate per annum equal to the Interest Rate applicable to such Loan or,
in the case of an Obligation for which the Interest Rate is not otherwise
specified, to the Interest Rate then-applicable to the Senior Loan. Upon the
occurrence of an Event of Default and for so long as such Event of Default
continues, the Loans and all other Obligations shall bear interest at their
respective Default Rate.
(b) Computation and Payment of Interest. Interest on the Loans shall
be computed on the daily principal balance outstanding on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed in the period
during which it accrues. In computing interest on the Loans, the date on which
the Initial Disbursement, any draw on contingent collateral for a Letter of
Credit or any Advance is made shall be included and the date of payment shall be
excluded. Interest shall be payable quarterly in arrears on each March 31, June
30, September 30 and December 31, commencing December 31, 1996.
(c) Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Borrower shall not be
required to pay, and Lender shall not be permitted to collect, any amount in
excess of the maximum amount of interest permitted by law ("Excess Interest").
In determining whether or not the interest paid or payable
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with respect to any Obligation of Borrower to Lender, under any specific
contingency, exceeds the highest lawful rate allowed from time under applicable
law (the "Maximum Rate"), Borrower and Lender shall, to the maximum extent
permitted by applicable law, (i) characterize any non- principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, (iii) amortize, prorate, allocate and
spread the total amount of interest throughout the full term of such Obligation
so that the actual rate of interest on account of such Obligation does not
exceed the Maximum Rate, and/or (iv) allocate interest between portions of such
Obligation such that no such portion shall bear interest at a rate greater than
the Maximum Rate. Notwithstanding the foregoing, if any Excess Interest is
provided for or determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any other Loan Document, then in such event
(1) the provisions of this Section 2.4(c) shall govern and control; (2) Borrower
shall not be obligated to pay any Excess Interest; (3) any Excess Interest that
Lender may have received hereunder shall be, at Lender's option, (A) applied as
a credit against the outstanding principal balance of the Obligations or accrued
and unpaid interest (not to exceed the Maximum Rate), (B) refunded to the payer
thereof or (C) any combination of the foregoing; (4) the Interest Rate provided
for herein shall be automatically reduced to the Maximum Rate, and this
Agreement and the other Loan Documents shall be deemed to have been and shall be
reformed and modified to reflect such reduction; and (5) when Lender shall have
complied with clauses (1) through (4) above, Borrower shall not have any action
against Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Loan is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such Loan
shall remain at the Maximum Rate until Lender shall have received the amount of
interest which Lender would have received during such period on such Loan had
the rate of interest not been limited to the Maximum Rate during such period.
(d) Waiver. Interest shall be due and payable to Lender at the
Interest Rate or the Default Rate (as the case may be) as provided herein, after
as well as before demand, default and judgment, notwithstanding any judgment
rate of interest provided for in any statute and, to the extent permitted by
law, Borrower expressly waives the applicability of any such statutory interest
rate.
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2.5 Fees.
(a) Agency Fee. Borrower shall pay to Lender the Agency Fee on or
before each date on which such fee is due.
(b) Success Fee. Borrower shall pay to Lender the Success Fee, if any,
on the Closing Date.
(c) Work Fee. Borrower shall pay to Lender the Work Fee on the date of
each Advance. Borrower agrees that Lender shall have earned the Work Fee with
respect to any Advance upon the issuance by Lender of its approval for such
Advance and that such Work Fee shall be payable regardless of whether such
Advance is disbursed by Lender; provided, that such Work Fee shall not be
payable if Lender shall have breached its obligation to disburse an Advance
following the satisfaction of all conditions precedent to the disbursement of
such Advance.
(d) Letter of Credit Fee. Borrower shall pay to Lender the Letter of
Credit Fee on or before each date on which such fee is due.
(e) Assignment Fee. CHI Finance shall pay to Lender the Assignment Fee
on the Closing Date.
2.6 Payments and Prepayments.
(a) Manner and Time of Payment.
(i) All payments by Borrower of the Obligations shall be made
without defense, setoff or counterclaim and in immediately available funds and
delivered to Lender by wire transfer to Lender's account, ABA No. 011900571,
Account No. 7030-0226 at Fleet National Bank, Hartford, Connecticut, for the
benefit of Borrower, or at such other place as Lender may direct from time to
time by notice to Borrower. Borrower shall receive credit for payments on the
date received by Lender if Borrower has given Lender telephonic notice by 12:00
noon (New York, New York time) of the transfer of such funds and such funds are
received by Lender by 2:00 p.m. (New York, New York time) on such day. In the
absence of timely notice and receipt, such payments shall be deemed to have been
made by Borrower on the next succeeding Business Day.
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(ii) Notwithstanding the provisions of Section 2.6(a)(i) above to
the contrary, so long as the Security Agreement remains in full force and effect
and provided sufficient funds are available for application in accordance with
the terms and conditions hereof and thereof, Borrower authorizes and consents to
make, and Lender agrees automatically to receive, any and all payments required
to be made hereunder through operation of the relevant provisions of the
Security Agreement.
(iii) All payments made by Borrower hereunder shall be applied in
the following order of priority: (1) payment of all current fees due to Lender,
(2) payment of all current interest due to Lender, (3) payment of all principal
of the Senior Loan then due to Lender (including any mandatory prepayment
thereof), (4) payment of all principal of the Additional Credit Facility then
due to Lender (including any mandatory prepayment thereof), and (5) payment of
any amount drawn under any Letter of Credit.
(b) Payments on Business Days. Except with respect to payments made
through operation of the relevant provisions of the Security Agreement, whenever
any payment to be made hereunder shall be stated to be due on a day that is not
a Business Day, the payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of the payment
of interest hereunder.
(c) Mandatory Prepayments.
(X) Immediately upon receipt by Borrower or any Affiliate of any
distribution of Condemnation Proceeds (with respect to all or substantially
all assets of a Project) or Insurance Proceeds with respect to any Project
or, subject to Section 6.2, the proceeds of any sale, transfer or
disposition of any Project or any Project asset for which the greater of
the net proceeds of the sale of the asset or the present market value of
the asset is at least twenty-five thousand Dollars ($25,000), Borrower
shall prepay the Loans in an amount equal to the greater of (i) one hundred
percent (100%) of such proceeds and (ii) the percentage of the outstanding
principal amounts of the Loans attributable to such Project as indicated on
Schedule III to each Note (which Schedule III Borrower agrees may, at
Lender's sole option, be revised at the time of the issuance of each Letter
of Credit and the making of each Advance); provided, that Borrower shall
not be required to prepay the Loans in the event such Insurance Proceeds
with
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respect to any event (which event, for purposes of this Agreement, shall
include any series of events arising from a related causal factor or
occurring within a period of five (5) Business Days) do not in the
aggregate exceed two hundred thousand Dollars ($200,000) and Borrower or
such Affiliate is utilizing such Insurance Proceeds to repair the damage
caused to such Project by such event; provided, further, that Borrower
shall be required to prepay the Loans only in an amount equal to one
hundred percent (100%) of such Insurance Proceeds if (i) the first proviso
of this sentence shall not be true and (ii) there has not been a total loss
or constructive total loss of such Project and such Project can be returned
to production of revenue within a reasonable period of time thereafter. All
prepayments in excess of the amounts payable pursuant to clause (ii) of the
first sentence of this Section 2.6(c) shall be applied in the manner
provided in Section 2.6(a)(iii). In the case of Condemnation Proceeds from
less than substantially all of the assets of a Project, so long as such
Project continues to produce revenue without material impairment (or can be
returned to production of revenue without material impairment within a
reasonable period thereafter), the Project Owner may use such proceeds to
purchase assets of substantially the same or greater utility.
(Y) In addition, if any Project Document is amended or terminated
in such a manner that such amendment or termination results in a cash
payment to Borrower or any Affiliate, or if any material Project asset is
sold without replacement within a reasonable period of time by property of
substantially the same or greater utility and equal or greater value, in
either case resulting in a cash payment to Borrower or any Affiliate, then
Borrower shall prepay the Loans in the amount of such proceeds and such
prepayment shall be applied in the manner provided in Section 2.6(a)(iii).
(Z) In addition, if the Net Operating Cash available to Borrower
exceeds one hundred twenty percent (120%) of the annual debt service on the
Senior Loan and if the Debt Service Reserve Account is funded at the level
required by the Security Agreement, then Borrower shall prepay the Senior
Loan in the reverse order of maturities in an amount equal to eighty
percent (80%) of such excess amount.
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(d) Voluntary Prepayments. Borrower may, at any time, upon at least
thirty (30) days' written notice to Lender, prepay to Lender (in the manner
provided in Section 2.6(a)(iii)) all or any portion of any outstanding Loan. Any
such prepayment shall cause Borrower to owe Lender the prepayment fee described
in Section 2.6(e).
(e) Prepayment Fee. In connection with (1) any voluntary prepayment,
(2) any mandatory prepayment in connection with the sale, transfer or
disposition of any Project or any Project asset, (3) any mandatory prepayment
resulting from any casualty to any Project which has not caused the total loss
or constructive total loss of the Project or (4) any mandatory prepayment
resulting from the amendment or termination of any Project Document, Borrower
shall pay to Lender a prepayment fee equal to the greater of the Reinvestment
Loss Amount and the amount determined pursuant to the following table as
liquidated damages and compensation for the costs of Lender:
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Penalty as a % of Loan
Date of Prepayment Balance
From the Closing Date until the first 6%
anniversary thereof
From the first to the second 5%
anniversary of the Closing Date
From the second to the third 4%
anniversary of the Closing Date
From the third to the fourth 3%
anniversary of the Closing Date
From the fourth to the fifth 2%
anniversary of the Closing Date
From the fifth to the sixth 1%
anniversary of the Closing Date
After the sixth anniversary of the No penalty
Closing Date
Notwithstanding the foregoing, in the event the Reinvestment Loss Amount is
negative, then such negative amount shall be subtracted from the amount
calculated pursuant to the above table.
2.7 Term of this Agreement. Unless Lender agrees to extend the term of
this Agreement, the "Termination Date" hereunder shall be the earlier of the
Final Maturity Date or the date upon which all of the Obligations (other than
Contingent Obligations which by their terms survive the termination of the Loan
Documents) shall have been indefeasibly paid in full. However, this Agreement
may be terminated prior to the Termination Date as set forth in Section 7. Upon
termination in accordance with Section 7 or on the Termination Date, all
Obligations (other than Contingent Obligations which by their terms survive the
termination of the Loan Documents) shall become immediately due and payable
without notice or demand. Notwithstanding any termination of this Agreement,
until all Obligations (other than Contingent Obligations which by their terms
survive the termination of the Loan Documents) have been indefeasibly paid in
full and satisfied, Lender shall be
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entitled to retain its Liens upon all of the Borrower Collateral and shall
retain all of its rights and remedies hereunder and in the other Loan Documents,
and even after payment of all Obligations Borrower's duty to indemnify Lender in
accordance with the terms hereof shall continue.
2.8 Borrower's Loan Account and Statements.
(a) Lender shall maintain a loan account (the "Loan Account") for
Borrower on its books to record (i) all Loans to Borrower hereunder; (ii) all
payments made by Borrower; and (iii) all other appropriate debits and credits as
provided in this Agreement with respect to the Obligations. All entries in the
Loan Account shall be made in accordance with Lender's customary accounting
practices as in effect from time to time. Borrower shall pay the amount
reflected as owing by it in the Loan Account and all other Obligations as such
amounts become due or are declared due pursuant to the terms of this Agreement.
(b) The balance in the Loan Account, as set forth on Lender's most
recent printout or other written statement, shall be presumptive evidence of the
amounts due and owing to Lender by Borrower. Not more than ten (10) days after
the last day of each Fiscal Quarter, Lender shall render to Borrower a statement
setting forth the principal balance of the Loan Account and the calculation of
interest due thereon. Each statement shall be subject to subsequent adjustment
by Lender but shall, absent manifest errors or omissions, be presumed correct
and binding upon Borrower with respect to the amount of the Obligations, and
shall constitute an account stated unless, within twenty (20) Business Days
after receipt of such statement, Borrower shall deliver to Lender Borrower's
written objection thereto specifying any error contained in such statement.
2.9 Capital Adequacy, Taxes and Other Adjustments.
(a) If Lender determines that the adoption after the date hereof of
any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements, or compliance by Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Lender and thereby reducing the rate of return on
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Lender's capital as a consequence of the Loans hereunder, then Borrower shall
from time to time within fifteen (15) days after notice and demand from Lender
(together with the certificate referred to in the next sentence) pay to Lender,
for the account of Lender, additional amounts sufficient to compensate Lender
for such reduction in the rate of return. A certificate as to the amount of such
actual cost and showing the basis of the computation of such cost in reasonable
detail submitted by Lender to Borrower shall, absent manifest error, be final,
conclusive and binding on Borrower. Any and all payments or reimbursements
hereunder shall be made free and clear of and without deduction for any and all
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto (collectively, "Tax Liabilities"), excluding taxes imposed
on the net income of Lender by the jurisdiction under the laws of which Lender
is organized or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If Borrower shall be required by law to deduct
any such amount from or in respect of any sum payable hereunder to Lender, then
the sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made. Borrower hereby
indemnifies and agrees to hold Lender harmless from and against all Tax
Liabilities.
(b) Except as otherwise provided in Section 2.9(a) above, in the event
that, subsequent to the Closing Date, (i) any change in any existing law,
regulation, treaty or directive or in the interpretation or application thereof,
or (ii) any new law, regulation, treaty or directive enacted or any
interpretation or application thereof, or (iii) compliance by Lender with any
request or directive (whether or not having the force of law) from any
Governmental Authority:
(A) does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any
Loan made hereunder, or change the basis of taxation of payments to Lender
of principal, fees, interest or any other amount payable hereunder (except
for taxes which are based upon or measured by Lender's net income or which
are expressly in substitution for, or relieve Lender from, any actual taxes
based upon or measured by Lender's net income); or
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(B) does or shall impose on Lender any other condition or
increased cost (other than those determined in accordance with Section
2.9(a) above) in connection with the transactions contemplated hereby;
and the result of any of the foregoing is to increase the actual cost to Lender
of making or continuing any Loan hereunder or to reduce any amount receivable
thereunder then, in any such case, to the extent such increased cost is not
reflected in the Floating U.S. Treasury Note Rate, Borrower shall promptly pay
to Lender, upon its demand, any additional amount necessary to compensate Lender
for such additional cost or reduced amount receivable which Lender deems to be
material as reasonably determined by Lender with respect to this Agreement, the
other Loan Documents or any Loan made hereunder. If Lender becomes entitled to
claim any additional amount pursuant to this subsection, it shall promptly
notify Borrower of the event by reason of which Lender has become so entitled. A
certificate as to any additional amount payable pursuant to the foregoing
sentence submitted by Lender to Borrower shall be conclusive in the absence of
manifest error. For the avoidance of doubt, Lender confirms that the provisions
of this Section 2.9 refer to Lender only and not to any other Person.
SECTION 3
CONDITIONS TO LOANS
3.1 Conditions Precedent.
(a) Conditions to Closing. No obligation of Lender contained in this
Agreement and the other Loan Documents to lend or disburse money or to indemnify
Borrower or any other Person or otherwise to take any action or assume any
existing obligation of another Person shall be deemed binding on Lender until
each of the conditions set forth in this Section 3.1(a) is performed to the
satisfaction of Lender and Lender has received the following documents, all in
form and substance satisfactory to Lender:
(i) Lender and its counsel shall have received copies of each
Material Agreement (including without limitation the O&M
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contract between the O&M Operator and each Project Owner), and
shall have reviewed and approved (in their sole discretion) the form,
terms, conditions, substance and structure thereof;
(ii) Lender shall have received a review and analysis
satisfactory to Lender (in its sole discretion) by the Independent Engineer
with respect to relevant technical aspects of the Projects including,
without limitation, existing environmental damage and liabilities, if any,
operation and maintenance costs, historical and projected availability and
useful life of each Project, capabilities of the O&M Operator, Borrower's
ability to perform under the Project Documents, projected operation and
maintenance costs, maintenance plans and schedules, terms of Project
Documents, Permits, net capacity degradation (if any), the Project's
ability to comply with Permit conditions and any other technical issues
Lender may request;
(iii) Lender shall have received delivery of reference Pro Formas
on each Project and in aggregate for all Projects for a period extending
out twenty (20) years from the Closing Date or one hundred thirty-three
percent (133%) of the term of the Senior Loan as determined by the Pro
Forma, which shall incorporate the results of due diligence and the reports
of Lender's counsel and the Independent Engineer and the terms and
conditions imposed by the Project Documents, showing annual Net Operating
Cash available for debt service sufficient (in Lender's sole discretion) to
support the maximum amount of the Senior Loan (assuming a 1.4 to 1 annual
loan coverage ratio);
(iv) Lender and its advisors shall have completed their review of
all Permits relating to the Projects, Borrower shall have accomplished all
items on the regulatory compliance action plan prepared by the Independent
Engineer that were required to have been accomplished on or before the
Closing Date, and all such Permits and accomplished items shall be
satisfactory to Lender (in its sole discretion) and, where applicable, in
full force and effect;
(v) Lender shall be satisfied in its sole discretion that (A)
Borrower's and the Projects' operations comply, in all respects deemed
material by Lender, with all applicable Environmental Laws, (B) Borrower's
and the Projects' operations are not subject to any federal or state
investigation evaluating whether remedial action involving any
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expenditure deemed material by Lender is needed to respond to any release
of any Hazardous Material and (C) none of Borrower or any Project have any
contingent liabilities deemed material by Lender in connection with the
release of any Hazardous Material. Lender shall be satisfied (in its sole
discretion) with the results of the environmental audit of each Project;
(vi) Lender shall have received evidence satisfactory to Lender,
in its sole discretion, that Lender has a valid and perfected first
priority Lien in the Borrower Collateral, including, without limitation,
Form UCC-3 assignment or termination statements relating to the Prior Liens
executed and in due form for filing. Borrower shall have made arrangements
satisfactory to Lender that all Prior Liens will be discharged with the
proceeds of the Initial Disbursement or assigned to Lender and all notes
and letters of credit related thereto will be paid in full and canceled or
purchased by Lender. Lender shall have received UCC, federal and state tax
lien, judgment lien, bankruptcy, court and title search reports listing all
effective financing statements and other documents that name Borrower or
the Affiliates as debtors and that are filed in the jurisdictions in which
the Borrower Collateral is located, the jurisdictions of incorporation of
Borrower and the Affiliates and in each jurisdiction where Borrower or any
Affiliate maintains an office;
(vii) Borrower shall have paid the Closing Costs in immediately
available funds;
(viii) Borrower shall deliver or cause to be delivered to Lender
the documents listed below, duly executed (except the Disbursement
Instructions), in form and substance satisfactory to Lender and in
quantities designated by Lender:
(A) This Agreement;
(B) The Notes and the Intercreditor Agreement;
(C) The Security Agreement, the Security Assignment Documents
and the other Security Documents not listed below;
(D) Drafts of the Disbursement Instructions (Borrower having
thirty (30) days after the Closing Date to
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deliver to Lender fully executed originals of the
Disbursement Instructions);
(E) The Pledged Interests, including without limitation stock
certificates representing all issued and outstanding shares
of capital stock of Fulcrum, Inc., together with undated
stock powers relating to such certificates executed in
blank;
(F) The Pledge Agreements;
(G) The Assignments, if any;
(H) (1) A certificate duly executed as of the Closing Date by an
Authorized Officer of Borrower certifying that (x) all
representations and warranties made by Borrower under the
Loan Documents are true as though made on and as of such
date, (y) all conditions to the obligations of Lender to
make the Loan pursuant to this Section 3.1(a) have been
fully satisfied or expressly waived in writing, and (z) no
Default or Event of Default exists or will result from such
closing or making of the Loans and (2) certificates duly
executed as of the Closing Date by an Authorized Officer of
each Affiliate certifying that all representations and
warranties made by such Affiliate under the Loan Documents
to which it is a party are true as though made on and as of
such date;
(I) Copies of (1) the Partnership Agreement of Borrower,
certified as of the Closing Date by the Secretary or other
appropriate officer of a general partner of Borrower, (2)
resolutions and any other documents evidencing all action
taken by each general partner of Borrower to authorize the
execution and delivery of this Agreement and each other Loan
Document to which Borrower is a party, such documents to be
certified as of the Closing Date by the Secretary or other
appropriate officer of
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a general partner of Borrower, and (3) certificates,
certified as of the Closing Date by the Secretary or other
appropriate officer of a general partner of Borrower,
setting forth the name and signature of each Authorized
Officer of Borrower (Lender may rely conclusively on such
certification until it receives notice in writing to the
contrary from the applicable Person);
(J) Copies of (1) the Certificate or Articles of Incorporation
and By-Laws or Partnership Agreement of each Affiliate
certified as of the Closing Date by the Secretary or other
appropriate officer of such Affiliate, and certificates
dated within five (5) days prior to the Closing Date that
each corporate Affiliate is validly existing and in good
standing on such date, certified by the Secretary of State
of the state in which such Affiliate is organized, (2)
resolutions and any other documents evidencing all action
taken by such Affiliate to authorize the execution and
delivery of each Loan Document to which such Affiliate is a
party, such documents to be certified as of the Closing Date
by the Secretary or other appropriate officer of such
Affiliate, and (3) certificates, certified as of the Closing
Date by the Secretary or other appropriate officer of such
Affiliate setting forth the name and signature of each
Authorized Officer of such Affiliate (Lender may rely
conclusively on such certification until it receives notice
in writing to the contrary from such Affiliate);
(K) Evidence that Messrs. Cahill, Gordon & Reindel or another
Person acceptable to Lender has agreed to serve as the agent
of Borrower and each Affiliate for receipt of service of
process in the State of New York;
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(L) Copies of all financial statements, tax returns, reports and
notices described in Section 5.7 as are then available or
which would be required to be provided to Lender as of the
Closing Date if the Closing Date had already occurred;
(M) Copies of all Applicable Permits;
(N) Copies of all orders issued as of the Closing Date by FERC
certifying the Projects as Qualifying Facilities and copies
of all Notices of Self- Certification filed as of the
Closing Date with FERC with respect to the Projects;
(O) Executed originals of one or more written opinions of Curtis
Thaxter Stevens Broder & Micoleau LLC and Davis Wright
Tremaine LLP, special counsel to Borrower and each Affiliate
and of Chadbourne & Parke LLP, special counsel to Lender,
each dated the Closing Date and addressed to Lender;
(P) The executed originals of the consents of Idaho Power
substantially in the form set forth in Exhibit 3.2;
(Q) Evidence satisfactory to Lender that all existing debt of
Borrower and each Affiliate to a lender other than Lender
(other than the Indebtedness listed in Exhibit 6.6.) will be
paid in full with the proceeds of the Initial Disbursement,
including without limitation canceled notes relating to any
such Indebtedness;
(R) Copies of letters from the general partner of each of
Borrower and BP Hydro Associates to Borrower and BP Hydro
Associates instructing each such partnership to record on
its records the pledge of the respective Pledged Interests
pursuant to the Pledge Agreements; and
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(S) An endorsement from the applicable title company confirming
the assignment of the deeds of trust relating to the
Projects in favor of Lender and confirming that such deeds
of trust remain a valid and subsisting Lien on the Projects
described therein subject only to those exceptions set forth
in the title policies originally issued in favor of Fuji
Bank.
(ix) The representations and warranties of Borrower and each
Affiliate contained herein and in the other Loan Documents shall be true,
correct and complete in all material respects on and as of the Closing
Date;
(x) No event shall have occurred and be continuing, or would
result from the closing or the making of any Loan, that would constitute a
Default or Event of Default;
(xi) Borrower and each Affiliate shall have performed in all
material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed or satisfied by it on or before
the Closing Date;
(xii) No order, judgment or decree of any court or Governmental
Authority shall enjoin or restrain Lender from making the Loans;
(xiii) Except as disclosed in Schedule V, there shall not be
pending or, to the knowledge of Borrower or any Affiliate threatened
pursuant to written notification, any action, suit, proceeding,
governmental investigation or arbitration against or affecting Borrower or
any Affiliate, any Project or any of the other Borrower Collateral and
there shall have occurred no development in any action, suit, proceeding,
governmental investigation or arbitration disclosed to Lender that, in
Lender's reasonable determination, is likely to have a Material Adverse
Effect. No injunction or other restraining order shall have been issued and
no hearing to cause an injunction or other restraining order to be issued
shall be pending or noticed with respect to any action, suit or proceeding
seeking to enjoin or otherwise prevent the
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consummation of, or to recover any damages or obtain relief as a
result of, this Agreement or the making of the Loans hereunder;
(xiv) There shall not be any amendment, or any proposed
amendment, to permitting, licensing or other regulatory requirements that,
in Lender's reasonable determination, is likely to have a Material Adverse
Effect;
(xv) There shall not be any amendment, or any proposed amendment,
to any Material Agreement which is likely, in Lender's reasonable
determination, to have a Material Adverse Effect, without Lender's prior
written consent;
(xvi) Borrower shall have taken all actions necessary or
desirable to implement the transactions contemplated in the Security
Documents, including, without limitation, establishing all required
Accounts, procuring all third-party consents, agreements and approvals
necessary or desirable to fund the Accounts in the manner required by the
Security Agreement and the Disbursement Instructions, and all such other
actions necessary or desirable to ensure that Borrower and each Affiliate
complies with the terms and conditions of the Security Documents;
(xvii) Lender shall have received binders for or other evidence
satisfactory to Lender (including, if requested by Lender, certificates of
insurers, independent brokers and Borrower or any Affiliate) indicating (i)
that Lender will immediately following the Closing Date be named as loss
payee with respect to the property insurance and business interruption
insurance policies relating to the Projects and (ii) that Lender will
immediately following the Closing Date be named as an additional insured on
the general and umbrella liability insurance policies maintained by
Borrower and the Affiliates;
(xviii) Since September 19, 1996, no change shall have occurred
in the condition or operation, financial or otherwise, of Borrower, any
Affiliate or any Project that, in Lender's sole discretion, is likely to
have a Material Adverse Effect;
(xix) The Closing Date shall occur on or before December 31,
1996; and
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(xx) the Certificates or Articles of Incorporation and By- Laws
of CHI-Idaho, Inc., CHI-Magic Valley, Inc. and Fulcrum, Inc. and the
Partnership Agreements of BP Hydro Associates and Borrower shall contain
bankruptcy-remote provisions satisfactory to Lender.
(b) Conditions to Advances. Lender shall have no obligation to make
any Advance pursuant to this Agreement until each condition set forth in this
Section 3.1(b) is performed or otherwise satisfied to the satisfaction of
Lender:
(i) Lender shall have issued to Borrower a formal commitment to
make the Advance;
(ii) Since September 19, 1996, no change shall have occurred in
the condition or operation, financial or otherwise, of Borrower, any
Affiliate or any Project that, in Lender's sole discretion, is likely to
have a Material Adverse Effect;
(iii) Borrower shall deliver to Lender the documents listed
below, duly executed, in form and substance satisfactory to Lender:
(A) a certificate of an Authorized Officer of Borrower, duly
executed as of the date of such Advance, representing and warranting
that (1) all representations and warranties made by Borrower and each
Affiliate under all Loan Documents are true as though made on and as
of such date, unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and
correct in all material respects as of such earlier date, (2) all
obligations of Borrower and each Affiliate under the Loan Documents
required to be performed on or before such date have been properly
performed or expressly waived in writing, and (3) no Default or Event
of Default exists or will result from the making of the Advance;
(B) the new or renegotiated contract which gives rise to the
Advance;
(C) a new closing Pro Forma on the operating cash flow of
the Projects for a period extending out twenty (20) years from the
date of the Advance or one hundred thirty-three percent
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(133%) of the term of such Advance as determined by the new
closing Pro Forma (which shall incorporate the results of a report
from the Independent Engineer and the terms and conditions imposed by
the Project Documents) demonstrating that the annual operating cash
flow which is available to service the Loans supports the amount of
the Advance such that the ratio of Net Operating Cash to debt service
on the Loans is at least 1.4 to 1; and
(D) such other assurances, instruments or undertakings as
Lender may reasonably request; and
(iv) Borrower shall pay the Closing Costs (to the extent not
previously paid).
3.2 Conditions Precedent for the Benefit of Lender. All conditions
precedent to the obligation of Lender to make any Loan are imposed hereby solely
for the benefit of Lender and no other Person may require satisfaction of any
such condition precedent or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with such conditions
precedent. All requirements of this Agreement may be waived by Lender in whole
or in part at any time at Lender's sole option and discretion.
3.3 Location of Closing. The closing of the loan transaction
contemplated hereunder shall take place on the Closing Date at the offices of
Lender in Stamford, Connecticut, or the offices of counsel to Lender in New
York, New York, at the election of Lender.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Lender to enter into this Agreement and to make the
Loans, Borrower (as evidenced by the signature of its Authorized Officer to this
Agreement) hereby represents and warrants on the date hereof and on the Closing
Date, except with respect to any representation and warranty which specifically
states that it is made on only one of such dates
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(each of which representations and warranties shall survive the Closing Date and
the making of the Loans as provided in Section 8.7) to Lender as follows:
4.1 Organization, Business and Qualification. Borrower is a duly
formed and validly existing general partnership under the laws of the State of
Utah and is qualified to do business in each other jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification. Each jurisdiction in which Borrower is required to be qualified
and in good standing is set forth in Exhibit 4.1.
4.2 Power and Authorization.
(a) Borrower has the power and authority to own its properties and
assets and to conduct its business as now conducted and to incur the
Indebtedness evidenced by the Notes. The execution, delivery and performance by
Borrower of this Agreement and the other Loan Documents to which it is a party
(i) have been duly authorized and constitute valid obligations of Borrower
legally binding upon it and enforceable in accordance with their respective
terms, except as enforcement may be limited by Debtor Relief Laws or by
equitable principles relating to or limiting creditors' rights generally, and
(ii) do not require any approval of Borrower or any Affiliate which has not been
obtained or the approval of any trustee or holder of any obligation or
Indebtedness of Borrower or any Affiliate and do not, and will not, contravene
any Governmental Requirement, Borrower's Partnership Agreement or any
partnership document or constitute a default under any indenture or agreement to
which Borrower or any Affiliate is a party or by which Borrower or any Affiliate
or any of their properties may be bound or affected, or result in the creation
of any Lien (other than Permitted Liens) upon any property of Borrower or any
Affiliate. Except as contemplated under the Security Documents, no consent of
any other Person and no consent, license, approval or authorization of, or
registration or declaration with, any Governmental Authority is required in
connection with Borrower's execution, delivery or performance of, or the
validity or enforceability of, this Agreement or the other Loan Documents to
which it is a party except those consents which have been obtained or are not
yet required.
(b) The list of consents and waivers set forth in Exhibit 4.2 is a
true, complete and accurate list of all consents and waivers required for the
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consummation of the transactions contemplated under the Loan Documents
(including, without limitation, consents and waivers necessary or desirable in
connection with the assignment or grant and perfection of the Security Interests
to Lender and Lender's ability to exercise and enforce its rights and remedies
under the Loan Documents and waivers of rights of first refusal necessary or
desirable in connection with the possible foreclosure on and sale of the
Borrower Collateral by Lender), and such list contains no material misstatement
or inaccuracy or misleading information and does not omit any information the
omission of which would be materially misleading.
(c) All consents and waivers set forth in Exhibit 4.2 have been
obtained as of the Closing Date.
4.3 Financial Condition. All financial statements, reports, records
and other information concerning Borrower or any Affiliate which have been
furnished by Borrower to Lender pursuant to this Agreement have been prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as disclosed therein) and present fairly the financial condition of the
Persons covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
4.4 Suits, Actions, Proceedings and Adverse Facts. Except as disclosed
in Schedule V, there is no judgment, action, investigation, claim, complaint,
notice of violation, injunction, order, decree, directive, suit, arbitration or
proceeding pending or threatened pursuant to written notification in any court
or before or by any Governmental Authority (a) against or affecting Borrower,
any Affiliate or any of the Borrower Collateral involving any claim in any
amount or (b) involving the validity, enforceability or priority of any Loan
Document at law or in equity.
4.5 Title to Borrower Collateral; Liens.
(a) Borrower or an Affiliate is the sole owner of each item of the
Borrower Collateral, having good and marketable title thereto free and clear of
any and all Liens other than Permitted Liens.
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(b) On the Closing Date, the Security Documents (including the filing
of the Financing Statements in the offices and locations listed in Exhibit 4.5
and the taking by Lender of possession of the Borrower Collateral and the filing
of Liens on certificates of title and the giving of written notice to Borrower
and the Affiliates pursuant to the Security Documents) create or preserve and
constitute a valid and continuing perfected and first priority Lien on and first
priority security interest in the Borrower Collateral in favor of Lender, prior
to all other Liens (other than Permitted Liens) in favor of others and rights of
others, and are enforceable (except as enforcement may be limited by Debtor
Relief Laws or by equitable principles relating to or limiting creditors' rights
generally) as such as against Borrower and the Affiliates and all third parties
(except as otherwise provided by statute) and secure the payment of the
Obligations. On the Closing Date, all action necessary to protect and perfect
such Liens and security interests in each item of the Borrower Collateral has
been duly taken. Such Liens and security interests are entitled to all of the
rights, priorities and benefits afforded by the UCC or other relevant law as
enacted in any relevant jurisdiction to perfected security interests. On the
Closing Date, no mortgage or financing statement or other instrument or
recordation covering all or any part of the Borrower Collateral is on file in
any recording office, except such as may have been filed in favor of Lender or
with respect to Permitted Liens. No further action will be required to maintain
and preserve, or effectively to put other Persons on notice of, such Liens and
security interests other than the filing of continuation statements required by
the UCC.
4.6 Governmental Requirements. All representations and warranties made
by Borrower and the Affiliates in the Material Agreements with respect to
Governmental Requirements are, to Borrower's best knowledge upon Due Inquiry,
true and correct as of each date this representation and warranty is made.
4.7 Employee Benefit Plans.
(a) (i) No Prohibited Transaction or Accumulated Funding Deficiency
with respect to an Employee Benefit Plan or withdrawals from Multiemployer Plans
have occurred or exist that, in the aggregate, could reasonably be expected to
subject Borrower or any Affiliate to any material tax, penalty, or other
liability where such tax, penalty or other liability in the aggregate is not
covered in full, for the benefit of Borrower or such Affiliate,
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by insurance, (ii) no notice of intent to terminate an Employee
Benefit Plan under a distress termination has been filed, and no Employee
Benefit Plan has been terminated, under Section 4041(c) of ERISA, the PBGC has
not instituted proceedings to terminate, or appoint a trustee to administer, an
Employee Benefit Plan, and no event has occurred or condition exists that could
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Employee
Benefit Plan, and (iii) the present value of all benefit vested under all
Employee Benefit Plans (based on the actuarial assumptions used to fund the
Employee Benefit Plans) does not exceed the assets of the Employee Benefit Plans
allocable to such vested benefits.
(b) All representations and warranties made by Borrower or any
Affiliate in the Material Agreements with respect to Employee Benefit Plans are,
to Borrower's best knowledge upon Due Inquiry, true and correct as of each date
this representation and warranty is made.
4.8 Taxes. Borrower and the Affiliates have filed all United States
federal and state tax returns and reports and all other tax returns and reports
with each appropriate Governmental Authority in all jurisdictions in which such
returns and reports are required to be filed, and such returns and reports
properly reflect the taxes, assessments and charges of Borrower and the
Affiliates for the periods covered thereby. Borrower and the Affiliates have
paid all taxes, assessments and other charges which have become due to any
Governmental Authority having jurisdiction over Borrower, the Affiliates or any
of their properties and no tax Liens (other than tax Liens constituting
Permitted Liens) have been filed and no claims are being asserted against
Borrower, the Affiliates or any of their properties. None of the federal or
state income tax returns of Borrower or the Affiliates are under audit. Borrower
has no knowledge of any unpaid taxes, assessments or charges which may be due
and payable against it or the Affiliates or any of their properties which are
likely to have a Material Adverse Effect.
4.9 Chief Executive Office. The address of the chief executive office
(as such term is used in Article 9 of the UCC) of Borrower is set forth on page
1 of this Agreement.
4.10 Environmental Matters. All representations and warranties made by
Borrower or any of the Affiliates in the Material Agreements with respect to
Environmental Claims, compliance with Environmental Laws and any other matter
generally relating to any actual or potential liability of, or the production,
handling and disposal by, any Person with respect to Hazardous Materials, are,
to Borrower's best knowledge upon Due Inquiry, true and correct as of each date
this representation and warranty is made.
4.11 Burdensome Restrictions; Other Contracts. Except with respect to
the Material Agreements and the Applicable Permits, no contract, lease,
agreement or other instrument to which Borrower or any of the Affiliates is a
party or is bound or to which any of such Person's properties is subject, and no
provision of any applicable Governmental Requirement, restricts such Person's
ability to own, operate and maintain any Project in a manner which is likely to
have a Material Adverse Effect with respect to such Project, Borrower or such
Affiliate.
4.12 Labor Matters. All representations and warranties made by
Borrower or any of the Affiliates in the Material Agreements with respect to
labor matters are, to Borrower's best knowledge upon Due Inquiry, true and
correct as of each date this representation and warranty is made.
4.13 Permits. Schedule I includes a list of all Applicable Permits.
Each of such Applicable Permits is in full force and effect, is final, and,
based on current regulations, is not subject to appeal or judicial, governmental
or other review.
4.14 Disclosure. No representation or warranty of Borrower or any of
the Affiliates contained in this Agreement, the Financial Statements, the Pro
Formas, the other Loan Documents or any other material document, certificate or
written statement furnished to Lender for use in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. There is no material fact known to
Borrower that has had or is likely to have a Material Adverse Effect that has
not been disclosed herein or in such other documents, certificates and
statements furnished to Lender for use in connection with the transactions
contemplated hereby.
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4.15 Material Agreements.
(a) Each Material Agreement constitutes the entire agreement of the
respective parties thereto with respect to the subject matter thereof and no
party thereto shall be bound except in accordance therewith.
(b) To the best knowledge of Borrower after Due Inquiry, each Material
Agreement constitutes the valid contract of the parties thereto, enforceable
against the parties thereto in accordance with its terms, except as enforcement
may be limited by Debtor Relief Laws or by equitable principles relating to or
limiting creditors' rights generally; each of the parties thereto has executed
such Material Agreement with full power, authority and capacity to contract; and
such Material Agreement is in full force and effect.
(c) Borrower and, to the best knowledge of Borrower after Due Inquiry,
each other party to a Material Agreement, has performed in a timely manner, in
all material respects, its duties and obligations under each Material Agreement
applicable to it.
(d) To the best knowledge of Borrower after Due Inquiry, the
obligations of each party to a Material Agreement, as stated therein are
absolute and unconditional and are not, nor are claimed to be, subject to any
claim, defense, counterclaim or setoff against Borrower.
(e) The list of Material Agreements set forth in Exhibit 4.15 is true,
complete and accurate in every respect. Copies of the Material Agreements as of
the date hereof have been furnished to Lender by Borrower and are true and
complete copies.
(f) With respect to the Material Agreements, there are no existing
conditions that would give rise to any defense to payment or to any claim, right
of setoff, counterclaim, recoupment or rescission except to the extent any such
right is already reflected in the relevant figures in the Pro Forma.
4.16 No Default. None of Borrower or any of the Affiliates is in
default under any agreement (including, without limitation, any Material
Agreement), ordinance, resolution, decree, bond, note, indenture, order or
judgment to which it is a party or by which it is bound, or any other agreement
or other instrument by which it or any of the properties or assets owned by it
or used in the conduct of its business is affected.
4.17 Certain Fees. Other than as disclosed in writing to Lender prior
to the date of this Agreement, no broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby and Borrower
shall be solely responsible for and shall pay all such broker's or finder's fees
or commissions. Borrower shall indemnify, pay and hold Lender harmless from and
against any claim, demand or liability for broker's or finder's fees alleged to
have been incurred in connection with any of the transactions contemplated
hereby and any expenses, including, without limitation, attorneys' fees, arising
in connection with any such claim, demand or liability. No other similar fees or
commissions will be payable by Borrower for any other services rendered to
Borrower or ancillary to the transactions contemplated hereby.
4.18 Use of Proceeds and Margin Security. Borrower shall use the
proceeds of the Loans for the purposes expressly set forth herein. No portion of
the proceeds of the Loans shall be used by Borrower in any manner that might
cause the borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934 or any applicable usury law.
4.19 Compliance with Governmental Requirements.
(a) None of Borrower or any Affiliate has (i) violated any
Governmental Requirement with respect to the operation of any Project as a
hydroelectric generating facility and no such violation has been alleged
pursuant to written notification; (ii) failed to file in a timely manner all
reports, documents and other materials required to be filed by it with any
Governmental Authority with respect to the operation of any Project as a
hydroelectric generating facility (and the information contained in each of such
filings is true, correct and complete in all material respects); or (iii) failed
to retain all records and documents required to be retained by it pursuant to
any Governmental Requirement with respect to the operation of any Project as a
hydroelectric generating facility.
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(b) No Project (i) is in violation of any Governmental Requirement
with respect to the operation of any Project as a hydroelectric generating
facility and, to the best knowledge of Borrower upon Due Inquiry, no such
violation has been alleged pursuant to written notification; (ii) has failed, to
the best knowledge of Borrower upon Due Inquiry, to file in a timely manner all
reports, documents and other materials required to be filed by it with any
Governmental Authority, the failure to file which is likely to have a Material
Adverse Effect (and the information contained in each of such filings is true,
correct and complete in all material respects); or (iii) has failed, to the best
knowledge of Borrower upon Due Inquiry, to retain all records and documents
required to be retained by it pursuant to any Governmental Requirement, the
failure to retain which is likely to have a Material Adverse Effect.
4.20 Insurance
(a) Each of Borrower and the Affiliates is in compliance, to the
extent applicable to it, with all requirements set forth in the Material
Agreements to maintain insurance.
(b) All representations and warranties made by Borrower and each
Affiliate in the Material Agreements with respect to insurance are, to
Borrower's best knowledge upon Due Inquiry, true and correct as of each date
this representation and warranty is made.
4.21 Projects. The descriptions of the Projects set forth in Exhibit
1.1 and all information regarding the Projects furnished by Borrower (or on its
behalf) to Lender do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances in which the same were
made.
4.22 Capital Calls. There are no outstanding calls for contributions
of capital in respect of Borrower or any Affiliate and, to the best knowledge of
Borrower upon Due Inquiry, no such calls for contributions of capital are
currently contemplated or under discussion.
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4.23 No Maintenance Liabilities. There are no accrued maintenance
liabilities with respect to the Projects.
4.24 Indebtedness. Exhibit 6.5 lists all Contingent Obligations of
Borrower and the Affiliates as of the Closing Date. Exhibit 6.6 lists all
Indebtedness of Borrower and the Affiliates as of the Closing Date.
4.25 Accounts Receivable. Exhibit 4.25 lists all accounts receivable
of Borrower and the Affiliates as of the Closing Date.
SECTION 5
AFFIRMATIVE COVENANTS AND AGREEMENTS OF BORROWER
Borrower hereby covenants and agrees that, from the date of this
Agreement until the indefeasible payment in full of all Obligations (other than
Contingent Obligations which by their terms survive the termination of the Loan
Documents) and full and complete performance of all of its and the Affiliates'
other obligations hereunder and under the other Loan Documents, Borrower shall
perform, or cause to be performed, all covenants and agreements in this Section
5. Any request for Lender's consent to Borrower's or any other Person's failure
to comply with such covenants must be made by Borrower in writing and any
consent given by Lender shall also be in writing.
5.1 Compliance with Governmental Requirements. Borrower and the
Affiliates shall comply in all material respects with all Governmental
Requirements relating to Borrower, the Borrower Collateral and each Project.
5.2 Access. Upon (a) ten (10) Business Days' notice to Borrower
(except as set forth in clause (b) below) or (b) two (2) Business Days' notice
to Borrower following the occurrence and during the continuance of an Event of
Default, any of Lender's officers, employees or agents shall have the right, in
Lender's name or in the name of Borrower and the Affiliates, during normal
business hours, to (i) verify the validity, amount or any other matter relating
to the Borrower Collateral by mail, telephone or otherwise; (ii) inspect the
Borrower Collateral, all books and records related thereto (and to make extracts
from and copies of such books and records) and the premises upon which any of
the Borrower Collateral is located; and (iii) discuss Borrower's and the
Affiliates' affairs and finances and the Borrower Collateral with Borrower's and
the Affiliates' Authorized Officers and independent public accountants. Borrower
and the Affiliates shall fully cooperate with Lender in connection with the
foregoing. So long as no Event of Default has occurred and is continuing, Lender
may exercise its rights provided above once in each calendar quarter. Borrower
and each Affiliate shall also participate in a meeting with Lender, at the
request of Lender, once during each Fiscal Year to be held at Borrower's or such
Affiliate's offices at such time as may be agreed by Borrower or such Affiliate
and Lender.
5.3 Notices by Governmental Authority; Fire and Casualty Losses, etc.
Borrower shall timely comply with and promptly furnish to Lender true and
complete copies of any material notice or material claim by any Governmental
Authority pertaining to Borrower, any Project or the other Borrower Collateral
and any notice or order from FERC pertaining to any Project or any written
notice from any Person that legal action may be or has been initiated
challenging the eligibility of any of the Projects as a Qualifying Facility.
Borrower shall promptly notify Lender of any eminent domain action or similar
proceeding affecting any Project or any fire or other casualty affecting any
Project resulting in more than fifty thousand Dollars ($50,000) in damage.
5.4 Borrower Revenues. Borrower shall use all necessary or desirable
efforts to cause all Borrower Revenues to be deposited in, and disbursed from,
the Project Revenues Account in accordance with this Agreement and the Security
Documents.
5.5 No Lender Liability. Lender shall have no liability, obligation or
responsibility whatsoever with respect to the operation of any Project by any
Project Owner. Lender shall not be obligated to inspect any Project, nor shall
Lender be liable for the performance or default of Borrower or any of the
Affiliates, any Project, any contractor or any other Person, or for any failure
to protect or insure any Project, or for the payment of costs of labor,
materials or services supplied for the operation of any Project, or for the
performance of any obligation of Borrower or any the Affiliates whatsoever.
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5.6 Payment of Taxes, Fees and Claims. Except as set forth below in
this Section 5.6, Borrower shall pay or cause to be paid in a timely manner when
due all taxes, assessments, fees, claims and other charges incurred and payable
by it or any of the Affiliates in connection with the Projects. Notwithstanding
the preceding sentence, Borrower may contest (a) any tax or assessment levied by
any Governmental Authority and (b) all fees and commissions claimed by brokers,
salesmen and agents in connection with the Loans, and, so long as such contest
is being diligently pursued by appropriate proceedings and does not threaten a
Material Adverse Effect, such contest on the part of Borrower shall not be an
Event of Default; provided, that during the pendency of any such contest
involving a disputed amount in excess of fifty thousand Dollars ($50,000) with
respect to Borrower, any Project or the other Borrower Collateral, Borrower
shall furnish to Lender an indemnity bond satisfactory to Lender or other
security acceptable to Lender in an amount equal to any unpaid amount being
contested plus a reasonable additional sum to cover possible costs, interest and
penalties, or should such contest not involve a liquidated amount, in an amount
acceptable to Lender; provided, further, that Borrower shall pay any amount
adjudged by a court of competent jurisdiction to be due, with all costs,
interest and penalties thereon, before such judgment becomes a Lien (other than
a Permitted Lien) on any Project or the other Borrower Collateral. Borrower
shall pay when due all costs and expenses required to be paid by this Agreement,
including, without limitation, all taxes and fees in connection with the
execution, delivery, filing, or recordation of any Lien, the Financing
Statements, any other Loan Document and the Loans.
5.7 Financial Statements and Other Reports.
(a) Borrower shall cause to be furnished to Lender as soon as
available, and in any event no later than one hundred twenty (120) days after
the end of each Fiscal Year (i) certified annual consolidated financial
statements of Consolidated Hydro and (as available) audited annual financial
statements for the Borrower and the Projects, such financial statements to be
prepared in accordance with GAAP consistently applied (if annual audited
financial statements for the Borrower and any Project are not available, then
Borrower must provide Lender with the unaudited balance sheet and income
statement for the Borrower and each Project that are used as a basis for
Consolidated Hydro's audited consolidated financial statements); (ii) a report
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and opinion relating to Consolidated Hydro's annual financial statements of
independent certified public accountants of recognized standing selected by
Borrower and reasonably acceptable to Lender (which shall include any of the
"Big Six" accounting firms), which report the opinion shall each be based upon
an audit made in accordance with GAAP throughout the period involved and (iii) a
statement by such independent certified public accountants that (A) in making
the audit for such report and opinion such accountants (without making any
special examination for the purpose of such statement) have obtained no
knowledge of any Event of Default under Sections 5.6, 5.7, 6.1, 6.3, 6.4, 6.5,
6.6, and 6.7; provided, that such independent certified public accountants shall
not be liable in respect of such statement by reason of any failure to obtain
knowledge of any such default that would not be disclosed in the course of an
audit examination conducted in accordance with generally accepted auditing
standards in effect at the date of such examination, (B) if, in the opinion of
such accountants, any such Event of Default referred to in the foregoing clause
(A) shall exist, a statement as to the nature and status thereof shall be
included. In addition, concurrently with the delivery of such statements,
Borrower and each Affiliate shall furnish to Lender statements of cash
distributions receivable or received by Borrower and each such Affiliate, which
statements shall be in a form consistent with the Pro Forma.
(b) Borrower shall (i) submit a preliminary draft of the annual
operating budget for each Project to Lender prior to June 1 and shall submit a
final budget prior to June 30 for each subsequent calendar year that contains a
forecast of the operating profit for the next three (3) years and (ii) provide
or cause to be provided quarterly unaudited balance sheet and income statements
on each Project, Borrower and each Affiliate within forty-five (45) days of the
close of each quarterly period. If any budget submitted by Borrower pursuant to
the preceding sentence reflects an expense for operations and maintenance of any
Project that is greater by seven percent (7%) or more than the same expense as
detailed in the Pro Forma, then such budget must be approved by Lender in its
sole discretion.
(c) Promptly upon their becoming available, Borrower shall deliver or
cause to be delivered copies of (i) all financial statements, operating reports,
reports of any other nature and notices which Lender may from time to time
request and (ii) all regular and periodic reports pertaining to any Project
filed by Borrower or any Affiliate with any Governmental Authority or which
Lender may from time to time request. Borrower shall use its best efforts to
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deliver to Lender, in a reasonable time frame, all material press releases and
other written statements made available by Borrower or any Affiliate to the
public concerning developments in the business of Borrower or such Affiliate.
(d) Borrower shall cause to be furnished to Lender as soon as
available all such other reports, schedules or information, or excerpts
therefrom, relating to the Projects as Lender may request from time to time.
(e) Concurrently with the delivery of the reports and statements
referred to in Sections 5.7(a) and (b) above, Borrower shall deliver a
certificate of an Authorized Officer substantially in the form of Exhibit 5.7
(or such other form which is reasonably acceptable to Lender in its sole
discretion), which shall include calculations by Borrower of the Minimum
Coverage Ratio, together with supporting information to allow Lender to verify
such calculations.
(f) Promptly upon Borrower obtaining knowledge of any of the following
events or conditions, Borrower shall deliver a certificate executed by an
Authorized Officer specifying the nature and period of existence of such
condition or event and what action Borrower has taken, is taking and proposes to
take with respect thereto: (i) any condition or event that constitutes a Default
or an Event of Default; (ii) any action, suit, proceeding, investigation or
arbitration affecting Borrower, any Project or the other Borrower Collateral; or
(iii) any event or condition that has a Material Adverse Effect on Borrower, any
Project or the other Borrower Collateral.
(g) Borrower shall furnish to Lender (i) promptly and in any event
within ten (10) days after Borrower knows or has reason to know of the
occurrence of a Reportable Event with respect to the Employee Benefit Plan with
regard to which a 30-day notice must be provided to PBGC, a copy of such
materials required to be filed with the PBGC with respect to such Reportable
Event, and in each such case, a certificate of an Authorized Officer setting
forth details as to such Reportable Event; (ii) at least ten (10) days prior to
the filing by any plan administrator of an Employee Benefit Plan in a distress
termination a copy of such notice; (iii) promptly after requested, and in no
event more than ten (10) days after requested by the Lender, copies of each
annual report that is filed on Form 5500 (together with all schedules filed
therewith) with respect to any Employee Benefit Plan; (iv) promptly and in any
event within ten (10) days after it knows or has reason to know of any event or
condition that could reasonably be expected to constitute grounds under
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Section 4042 of ERISA for the termination of, or appointment of a trustee to
administer, any Employee Benefit Plan, a certificate of Authorized Officer of
Borrower describing such event or condition; (v) promptly and in no event more
than ten (10) days after receipt thereof by Borrower or any of its ERISA
Affiliates, each notice received by Borrower or an ERISA Affiliate of Borrower
concerning the imposition of any material withdrawal liability for a complete
withdrawal, or any withdrawal liability for a partial withdrawal, under Section
4202 of ERISA; and (vi) promptly after receipt thereof, a copy of any material
notice Borrower or any of its ERISA Affiliates may receive from the PBGC or the
Internal Revenue Service with respect to any Employee Benefit Plan or
Multiemployer Plan; provided, that this clause (vi) shall not apply to notices
of general application promulgated by the PBGC or the Internal Revenue Service.
5.8 Insurance. Borrower shall take all necessary action within its
power to ensure that all Insurance Policies are maintained as required under the
Material Agreements.
5.9 Continuance of Business. Each of Borrower and its Affiliates shall
preserve and maintain its existence as a corporation or general partnership
(under state law and for federal income tax purposes) and maintain its rights,
permits, franchises and privileges under the laws of its jurisdiction of
organization or formation. Except for de minimis amounts of cash required to
maintain their existence and as required in connection with the performance of
their obligations under the Loan Documents, each Project Owner shall have no
assets other than, and shall engage in no business other than the holding of,
the corresponding Projects and the proceeds thereof. No Project Owner shall
employ any staff, pay salaries or enter into any agreements for services of any
nature other than administrative costs relating specifically to the existence of
such Project Owner and accounting and legal services relating specifically to
such Project Owner, or incur any Indebtedness (except as provided in Section
6.6) without the prior written approval of Lender.
5.10 Perfection and Preservation of Liens. Borrower shall take any and
all actions necessary (including causing the Financing Statements and other
documents at all times to be recorded, registered and filed, paying or causing
to be paid all recording, filing or other fees, complying with all Governmental
Requirements) in order fully to create, preserve, perfect, maintain and protect
Lender's Lien in the Borrower Collateral as a first and superior Lien and first
priority security interest, subject only to Permitted Liens. Borrower shall, and
shall cause each Affiliate to, protect and defend its interest in the Borrower
Collateral against Liens asserted by any third Person, other than Permitted
Liens, and promptly discharge any such Lien so asserted. Borrower shall promptly
notify Lender of any such assertion and, in the event of any such assertion
which is contested by Borrower or an Affiliate, Borrower shall promptly notify
Lender of the action which Borrower or such Affiliate intends to take to
discharge or otherwise deal therewith. Borrower will deliver to Lender
statements and schedules further identifying and describing the Borrower
Collateral and such other reports, evidence and information in connection with
the Borrower Collateral, all in reasonable detail, as from time to time may be
reasonably requested by Lender. Borrower shall keep full and accurate books and
records relating to the Borrower Collateral and shall stamp or otherwise mark
such books and records in such manner as Lender may reasonably request
indicating that the Borrower Collateral is subject to the Security Documents.
5.11 Agent. Borrower and each Affiliate shall appoint and continuously
retain Messrs. Cahill, Gordon & Reindel or another Person acceptable to Lender
as its agent in the State of New York for receipt of service of process and
shall pay all costs, fees and expenses in connection therewith.
5.12 Employee Benefit Plans. Neither Borrower nor any ERISA Affiliate
shall (i) terminate or withdraw from any Employee Benefit Plan or Multiemployer
Plan so as to result in any material liability to the PBGC or any Person; (ii)
engage in or permit, to the extent within the reasonable control of Borrower or
its ERISA Affiliates, any event or condition to occur that could reasonably be
expected to constitute grounds for the PBGC to institute proceedings to
terminate or appoint a trustee to administer any Employee Benefit Plan; (iii)
engage in or permit any Prohibited Transaction involving any Employee Benefit
Plan that would subject Borrower to any material tax, penalty or other
liability; (iv) incur or suffer to exist by any ERISA Affiliate of Borrower any
material Accumulated Funding Deficiency, whether or not waived, involving any
Employee Benefit Plan; or (v) allow or suffer to exist any event or condition
within Borrower's material liability to the PBGC or any Person, if any of the
foregoing could reasonably be expected to have the effect of subjecting Borrower
to any material tax, penalty or other liability that is not covered in full for
the benefit of Borrower by insurance.
5.13 Authorized Officers. Borrower shall deliver, or cause to be
delivered, within ten (10) Business Days of any change in Borrower's or any of
the Affiliate's Authorized Officers, an updated certificate of an Authorized
Officer reflecting such change.
5.14 Self-Certification. For each Project that has not been self-
certified as a Qualifying Facility, Borrower shall deliver, not later than
thirty (30) days after the date of this Agreement, a copy of a notice of self-
certification filed with FERC.
5.15 Further Assurances. Borrower shall, and shall cause the
Affiliates to from time to time, execute such financing statements, documents,
security agreements, reports and, subject to the next sentence, guaranties, and
take all further action as Lender at any time may reasonably request to
evidence, perfect or otherwise implement the guaranties and security for
repayment of the Obligations provided for in the Loan Documents. The foregoing
shall not, without the written consent of Borrower or the relevant Affiliate,
permit Lender to require any guaranty which (a) materially increases the scope
of any guaranty which is a Loan Document or part thereof, or (b) makes any
additional party a guarantor.
5.16 All Necessary Action. Borrower shall take all action necessary or
reasonably requested by Lender to ensure that each of the Affiliates will comply
with all covenants and requirements applicable to such Affiliate under any
Material Agreement; provided that no violation of this Section 5.16 shall become
an Event of Default during the relevant periods for notice and cure under the
terms of the applicable Material Agreement.
5.17 Use of Proceeds. Borrower shall use the proceeds of the Loans
only for the purposes expressly set forth in Sections 2.2 and 2.3 unless
otherwise approved in writing by Lender no fewer than fifteen (15) days prior to
such other use of proceeds. No portion of the proceeds of any Loan shall be used
by Borrower in any manner that might violate the terms and conditions of this
Agreement, any other Loan Document or any Material Agreement.
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5.18 Security Documents. Borrower shall take all action necessary or
reasonably requested by Lender for the ongoing implementation of the
transactions contemplated in the Security Documents, including, without
limitation, procuring all third-party consents, agreements and approvals as may
become necessary or reasonably requested by Lender to fund the Project Revenues
Account, the Debt Service Account and the Debt Service Reserve Account in the
manner required by the Security Documents. Borrower shall take all action
necessary or reasonably requested by Lender to ensure that Borrower and all
relevant third parties comply with the terms and conditions of the Security
Documents.
5.19 Debt Service Reserve Account. Borrower shall fund and maintain
the Debt Service Reserve Account in accordance with the terms and conditions of
the Security Agreement.
5.20 Other Financial Covenants. Borrower shall, starting on September
30, 1998, and thereafter on each anniversary of such date, maintain the Minimum
Coverage Ratio. Borrower agrees on its behalf and on behalf of the Affiliates
that, in the event the Minimum Coverage Ratio is not so maintained, then no
distributions will be made and all cash available, after payments due Lender are
made, shall be placed in the Debt Service Reserve Account in accordance with the
provisions of the Security Documents until the Debt Service Reserve Account has
reached the balance then required by the Security Agreement.
5.21 Additional Work Actions. Borrower shall carry out or shall cause
to be carried out such additional work actions as are requested by Lender on or
before the Closing Date in order for the generation of electrical energy at each
of the Projects to be at the levels estimated in the report of the Independent
Engineer attached hereto as Exhibit 5.21 and used in compiling the Pro Forma.
Each such work action shall, if requested by Lender, be completed to the
reasonable satisfaction of the Independent Engineer.
5.22 Enforcement of Rights. Borrower shall use its best efforts to
enforce, or to cause the Affiliates to enforce, any right it has against any
third party if the failure to enforce such right could have a Material Adverse
Effect. To the extent that any other Person has a right to enforce any right
against any third party as to which the failure to enforce such right could have
a Material Adverse Effect, Borrower shall use all commercially reasonable
efforts to cause such Person to enforce such rights.
5.23 Change of Chief Executive Office. Borrower and any Affiliate of
Borrower shall give Lender at least thirty (30) days' prior written notice of
any change in the location of its chief executive office from that existing on
the Closing Date.
SECTION 6
NEGATIVE COVENANTS OF BORROWER
Borrower hereby covenants and agrees that, from the date of this
Agreement until the indefeasible payment in full of all Obligations (other than
Contingent Obligations which by their terms survive the termination of the Loan
Documents) and full and complete performance of all of its and the Affiliates'
other obligations hereunder and under the other Loan Documents, Borrower shall
comply with all covenants in this Section 6. Any request for Lender's consent to
Borrower's or any other Person's failure to comply with such covenants must be
made by Borrower in writing and any consent given by Lender shall also be in
writing.
6.1 No Liens. Borrower shall not directly or indirectly create, incur,
assume or permit to exist any Lien on or with respect to the Borrower Collateral
whether now owned or hereafter acquired by Borrower or any of the Affiliates, or
any income or profits therefrom, except for Permitted Liens.
6.2 Restriction on Fundamental Changes. None of Borrower or any
Affiliate shall (a) enter into any transaction of merger or consolidation; (b)
liquidate, wind-up or dissolve itself; or (c) convey, sell, lease, sublease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business or assets (including,
without limitation, the Borrower Collateral) whether now owned or hereafter
acquired (unless the proceeds payable to Borrower from any such disposition of
assets shall be sufficient to pay in full all then-outstanding Obligations, in
which case such proceeds shall be paid to Lender and Lender shall apply the same
in accordance with Section 2.6(c)).
6.3 Transactions with Affiliates. None of Borrower or any Affiliate
shall enter into any transaction, including, without limitation, the purchase,
sale, transfer, lease or exchange of property or the rendering or purchase of
any service to or from any Affiliate, except in the ordinary course of, and
pursuant to the reasonable requirements of, Borrower's or such Affiliate's
business and on reasonable terms no different than are available in a comparable
arm's-length transaction with an unaffiliated Person. This Section 6.3 shall not
be construed to prohibit any contract in effect on the Closing Date, including
without limitation the O&M contracts referenced in Section 3.2(a)(i).
6.4 Changes to Material Agreements. Without the prior written consent
of Lender (which shall not be unreasonably withheld), no Material Agreement
shall be amended, and no obligation under the Material Agreements shall be
modified (whether by waiver or otherwise), if such amendment or modification
would, in the reasonable opinion of Lender, have a Material Adverse Effect on
Borrower or any Affiliate or the ability of any of them to perform its
obligations under the Loan Documents.
6.5 Contingent Obligations. None of Borrower or any Affiliate shall
directly or indirectly create, incur, assume, guarantee or otherwise become or
remain directly or indirectly liable with respect to any Contingent Obligation,
except (a) any existing Indebtedness described in Exhibit 6.6, (b) other
existing Contingent Obligations described in Exhibit 6.5, or (c) pursuant to
Letters of Credit issued hereunder.
6.6 Indebtedness. None of Borrower or any Affiliate shall directly or
indirectly create, incur, assume, guarantee or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except existing
Indebtedness described in Exhibit 6.6 and as otherwise permitted by any Loan
Document.
6.7 Security Documents. None of Borrower or any Affiliate shall take
or, to the extent of such Person's power, permit any other Person to take, any
action (or omit to take any action) which would be in violation of the
arrangements provided in the Security Documents (taking into account any periods
for notice and cure provided in the Security Documents).
6.8 Borrower Revenues. None of Borrower or any Affiliate shall receive
any Borrower Revenues (other than amounts due Lender or payments made pursuant
to any Loan Document) upon the occurrence and during the continuation of an
Event of Default.
SECTION 7
RIGHTS AND REMEDIES OF LENDER
7.1 Acceleration. In addition to all other rights and remedies Lender
has under this Agreement and the other Loan Documents, upon the occurrence of an
Event of Default, Lender shall have the right, upon five (5) Business Days'
prior written notice to Borrower (provided, that no such notice shall be
required as a result of any Event of Default described in clause g, h, i, j or k
of the definition of Event of Default, upon the occurrence of which the
Obligations shall become immediately due and payable), at its option and sole
discretion, to declare all or any portion of the Obligations immediately due and
payable without presentment, demand, set off, protest or notice of any kind,
except as provided in this Section 7.1, including, without limitation, notice of
intent to accelerate, all of which are hereby expressly waived by Borrower;
provided, that if Borrower shall, before the expiration of such five (5)
Business Day period, cure such Event of Default, the Lender's rights under this
Section 7.1 with respect to such cured Event of Default shall cease.
7.2 Additional Remedies of Lender. In addition to all other rights and
remedies Lender has under this Agreement and the other Loan Documents, if an
Event of Default shall have occurred and be continuing, Lender shall have the
following rights and remedies:
(a) The right to collect and apply to the Obligations, pursuant to the
Security Agreement, the Disbursement Instructions and Section 7.3 hereof,
all Borrower Revenues and cash held in the Accounts;
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(b) All of the rights and remedies of a secured party under the UCC
(whether or not the UCC applies to the affected Borrower Collateral) and
other applicable laws, all of which rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law;
(c) The right to notify postal authorities to change the address for
delivery of Borrower's mail to an address designated by Lender and to
receive, open and dispose of, in a reasonable manner, all mail addressed to
Borrower (provided, that Lender shall return to Borrower in a timely manner
all such mail that does not involve the Projects or the Borrower
Collateral);
(d) The right to take possession of Borrower's original books and
records, obtain access to Borrower's data processing equipment, computer
hardware and software relating to the Borrower Collateral and to use all of
the foregoing and the information contained therein in any manner Lender
deems appropriate for purposes of realizing on the Borrower Collateral;
(e) (i) Prepare, file and sign Borrower's name on any proof of claim
in bankruptcy or similar document against any account debtor of Borrower,
(ii) prepare, file and sign Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with
the Accounts or any note, chattel paper or instrument, (iii) do all acts
and things necessary, in Lender's discretion, to fulfill Borrower's
Obligations, including, without limitation, withdrawing all cash from the
Accounts and applying such monies in payment of the Obligations, (iv) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to account debtors, and (v) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts;
(f) The right to (i) sell or otherwise dispose of all or any portion
of the Borrower Collateral successively and/or in any sequence and/or in
any order at any judicial and/or public and/or private sale or sales, or
any part thereof, for cash, credit or any combination thereof, and Lender
may purchase all or any part of the Borrower Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such
purchase price, may set off the amount of such price against the
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Obligations and (ii) adjourn such sales from time to time with or without
notice. To the extent permitted by law, Borrower hereby expressly waives
all rights of redemption, stay or appraisal which it has or may have under
any law now existing or hereafter enacted; and
(g) Borrower hereby appoints Lender as its attorney-in-fact, with full
power of substitution, and in the name of Borrower, if Lender elects to do
so following the occurrence and during the continuance of an Event of
Default, to (i) endorse the name of Borrower on any check or draft
representing proceeds of the Insurance Policies, or other checks or
instruments payable to Borrower with respect to any Project, and (ii)
prosecute or defend any action or proceeding incident to any of the
Borrower Collateral. The power-of-attorney granted hereby is a power
coupled with an interest and is irrevocable but shall terminate at such
time as the Obligations have been indefeasibly paid in full. Lender shall
have no obligation to undertake any of the foregoing actions and if Lender
should do so, it shall have no liability to Borrower for the sufficiency or
adequacy of any such actions taken by Lender.
7.3 Application of Proceeds. The proceeds of any sale of, or other
realization upon, all or any part of the Borrower Collateral and of Borrower's
cash held by Lender shall be applied in accordance with the provisions of the
Security Agreement.
7.4 Notices. To the extent there is any notice required to be given by
Lender of a sale, lease, other disposition of the Borrower Collateral or any
other intended action by Lender hereunder, Borrower expressly agrees that notice
given ten (10) days prior to such proposed action shall constitute commercially
reasonable and fair notice thereof.
7.5 Funds of Lender. Any funds of Lender used for any purpose referred
to in this Section 7 shall constitute part of the Obligations secured by the
Borrower Collateral and the Loan Documents and shall bear interest at the
Default Rate from the date of occurrence, and through the continuance, of any
Event of Default.
7.6 No Waiver or Exhaustion. No waiver by Lender of any of its rights
or remedies hereunder, in the other Loan Documents or otherwise, shall be
considered a waiver of any other or subsequent right or remedy of Lender, and no
waiver shall be valid unless in writing signed by Lender. Any amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No delay or
omission in the exercise or enforcement by Lender of any right or remedy shall
ever be construed as a waiver of any right or remedy of Lender and any single or
partial exercise of any such right or remedy shall not preclude any other or
further exercise thereof or the exercise of any other right; and no exercise or
enforcement of any such right or remedy shall ever be held to exhaust any right
or remedy of Lender. Borrower hereby expressly waives presentment, demand,
notice of non-payment, protest, notice of protest and dishonor, notice of Event
of Default, notice of intent to accelerate, notice of acceleration or any other
notice whatsoever on any and all forms of the Obligations, except for those
notices provided for in any Loan Document, including, without limitation, those
notices which are a prerequisite for certain Defaults ripening into Events of
Default. No notice to or demand on Borrower in any case shall entitle Borrower
to any other or further notice or demand in similar or other circumstances. Any
of the undertakings, agreements, warranties, covenants and representations of
Borrower or any Affiliate contained in the Loan Documents and any Event of
Default may be waived or modified in writing at Lender's discretion but none of
the undertakings, agreements, warranties, covenants and representations of
Borrower or any Affiliate contained in the Loan Documents and no Event of
Default shall be deemed to have been suspended or waived by Lender unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrower.
SECTION 8
GENERAL TERMS AND CONDITIONS
8.1 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to pay promptly all
reasonable fees, costs and expenses incurred by Lender in connection with any
matter contemplated by or arising out of this Agreement or the other Loan
Documents, including, without limitation, the following (but excluding any fee
deemed to have been paid by Borrower's payment of a Work Fee), and all such
fees, costs and expenses shall be part of the Obligations, payable on demand and
secured by the Borrower Collateral: (a) reasonable fees, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses, and
reasonable fees and expenses of any Independent Engineer, consultant, industry
consultant, accountant and other professional retained by Lender) incurred in
connection with the examination, review, due diligence investigation,
documentation, syndication and closing of the financing arrangements evidenced
by the Loan Documents; (b) reasonable fees, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, and reasonable fees
and expenses of any Independent Engineer, industry consultant, accountant and
other professional retained by Lender) incurred in connection with the
negotiation, preparation, execution and administration of the Loan Documents,
the Loans and any amendment, modification and waiver relating thereto,
(including, without limitation, out-of-pocket expenses for travel, lodging and
meals for inspections); (c) reasonable fees, costs and expenses of the
Independent Engineer in connection with the examination and review of all work
actions performed pursuant to Section 5.21; (d) reasonable fees, costs and
expenses incurred in creating, perfecting and maintaining perfection of Liens in
favor of Lender, pursuant to any Loan Document, including lien search fees,
filing and recording fees, taxes and expenses, title insurance policy fees,
reasonable fees and expenses of attorneys for providing such opinions as Lender
may reasonably request and reasonable fees and expenses of attorneys to Lender;
(e) reasonable fees, costs, expenses and bank charges, including bank charges
for returned checks, incurred by Lender in establishing, maintaining and
handling lock box accounts, blocked accounts or other accounts for collection of
the Borrower Collateral; (f) reasonable fees, costs, expenses (including,
without limitation, reasonable attorneys' fees and expenses) and costs of
settlement incurred in collecting upon or enforcing rights against the Borrower
Collateral; and (g) fees, costs and expenses (including, without limitation,
attorneys' fees and expenses and fees and expenses of other professionals
retained by Lender) incurred in any action to enforce this Agreement or the
other Loan Documents or to collect any payment due from Borrower under this
Agreement, the Notes or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceeding or otherwise. For purposes of this Section
8.1, expenses of third-party consultants incurred after the Closing Date shall
be due and payable in full no later than thirty (30) days after the same are
invoiced or billed to Borrower.
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8.2 Indemnity by Borrower.
(a) In addition to the payment of expenses pursuant to Section 8.1,
whether or not the transactions contemplated hereby shall be consummated,
Borrower shall, subject to the provisions of this Section 8.2, indemnify, pay
and hold Lender, and any holder of any Note, and the officers, directors,
employees, agents, affiliates and attorneys of Lender and such holder
(collectively, the "Indemnitees") harmless from and against any and all
out-of-pocket liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, reasonable attorneys' fees and
costs of the Indemnitees in connection with any investigative, arbitral,
administrative or judicial proceeding commenced or threatened, whether or not
the Indemnitees shall be designated a party thereto) that are imposed on,
incurred by or asserted against any Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents, Lender's agreement to
make the Loans hereunder, the use or intended use of the proceeds of any Loan or
the exercise of any right or remedy hereunder or under any other Loan Document
(collectively, the "Indemnified Liabilities"); provided, that (i) no Indemnitee
shall be held harmless or indemnified hereunder for its own gross negligence,
willful misconduct or bad faith or breach of this Agreement or any other Loan
Document, and (ii) nothing herein shall affect the obligations and liabilities
of Lender to Borrower contained herein or in any other Loan Document. Borrower
shall be obligated to pay or reimburse each Indemnitee for all reasonable
out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by such Indemnitee in the defense of any
claim arising out of any Indemnified Liability at the time such costs and
expenses are incurred and Lender has given Borrower written notice thereof. The
foregoing indemnity shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated by this Agreement or any of the Loan Documents, the
repayment of the Loans and the Obligations, the invalidity or unenforceability
of any term or provision of this Agreement or any other Loan Document, or any
investigation made on behalf of Lender or the content or accuracy of any
representation or warranty made by Borrower or any Affiliate under this
Agreement or any other Loan Document. Lender may (but shall not be obligated to)
appear in, or defend, or in good faith commence any action or proceeding
purporting to affect the Loans, any property or the respective rights
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and obligations of Lender and Borrower or any Affiliate pursuant to any Loan
Document. Lender may (but shall not be obligated to) pay all necessary expenses,
including reasonable attorneys' fees and expenses incurred in connection with
such proceedings or actions, which Borrower agrees to repay to Lender upon
demand together with interest thereon at the Interest Rate then applicable to
the Senior Loan (or the Default Rate, if applicable) from the date of payment by
Lender to the date of repayment by Borrower. To the extent that the undertaking
to indemnify, pay and hold harmless set forth in this Section 8.2 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable laws to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
(b) In addition to any other indemnity hereunder, Borrower shall
indemnify and hold the Indemnitees harmless against, and promptly pay on demand
or reimburse each of them with respect to, any and all claims, demands, causes
of action, losses, damages, liabilities, costs and expenses of any and every
kind or nature whatsoever, including, without limitation, those based upon
negligence, sole negligence, contractual comparative negligence, concurrent
negligence or strict liability, asserted against or incurred by any of them by
reason of or arising out of or in any way related to (i) the breach by Borrower
or any Affiliate of any representation or warranty set forth herein regarding
Environmental Laws, (ii) the failure of Borrower or any Affiliate to perform any
obligation required herein or in any Loan Document or any Material Agreement to
be performed pursuant to Environmental Laws, and (iii) any violation or alleged
violation by Borrower or any Affiliate of any obligation or liability arising
under any Environmental Law (collectively, the "Environmental Indemnity
Matters"). Borrower shall be obligated to pay or reimburse each Indemnitee for
all reasonable out-of-pocket costs and expenses (including, without limitation,
consultants', engineers' and attorneys' fees and expenses) incurred by such
Indemnitee in response to and/or in the defense of any claim arising out of any
Environmental Indemnity Matter at the time such costs and expenses are incurred
and such Indemnitee has given Borrower written notice thereof. The provisions of
this Section 8.2(b) shall be payable upon written demand therefor, shall survive
the final payment of all of the Obligations and the termination of this
Agreement and shall continue thereafter in full force and effect.
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8.3 Notice and Defense of Claim.
(a) Each Indemnitee shall give prompt notice to Borrower, in
accordance with the terms of this Section 8.3, of the assertion of any claim, or
the commencement of any suit, action or proceeding by any party in respect of
which such Indemnitee may seek indemnification hereunder, specifying with
reasonable particularity the basis therefor and shall give Borrower such
information with respect thereto as Borrower may reasonably request. Borrower
may, at its own expense, (i) participate in and (ii) upon notice to such
Indemnitee and Borrower's written agreement that such Indemnitee is entitled to
indemnification pursuant to Section 8.1 or 8.2 for any liability or loss arising
out of such claim, suit, action or proceeding, at any time during the course of
any such claim, suit, action or proceeding, assume the defense thereof with
counsel reasonably acceptable to Lender. If Borrower assumes such defense, such
Indemnitee shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by Borrower. Whether or not Borrower chooses to defend or prosecute any
such claim, suit, action or proceeding, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
(b) In the event that Borrower does not elect to assume the defense of
any claim, suit, action or proceeding, then any failure of any Indemnitee to
defend or to participate in the defense of any such claim, suit, action or
proceeding or to cause the same to be done shall not relieve Borrower of its
obligations hereunder; provided, that such Indemnitee gives Borrower at least
thirty (30) days' notice of its proposed failure to defend or participate and
affords Borrower the opportunity to assume the defense thereof.
8.4 Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by Borrower therefrom, shall in any event be effective without
the written concurrence of Lender and Borrower. No amendment, modification,
termination or waiver of the principal amount, maturity, amortization rate or
seniority level of any Loan or commitment or the rate of interest applicable to
and fees payable with respect to any Loan (other than fees payable solely to
Lender) shall be effective without the written concurrence of the holder of such
Loan or commitment. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No notice
to or demand on Borrower in any case shall entitle Borrower to any other or
further notice or demand in similar or other circumstances.
8.5 Retention of Borrower Documents. Lender may, in accordance with
Lender's customary practices, destroy or otherwise dispose of all documents,
schedules, invoices or other papers delivered by Borrower or an affiliate of
Borrower to Lender unless Borrower or any Affiliate requests in writing that
same be returned. Upon Borrower's request and at Borrower's expense, Lender
shall return such papers when Lender's actual or anticipated need for the same
has terminated.
8.6 Notices. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing
addressed to the respective party as set forth below and may be personally
served, telecopied or sent by overnight courier service or United States mail
(return receipt requested) and shall be deemed to have been given (a) if
delivered in person, when delivered; (b) if delivered by telecopy, on the date
of transmission if transmitted on a Business Day before 4:00 p.m. (New York, New
York time) or, if not, on the next succeeding Business Day; (c) if delivered by
reputable overnight courier, two (2) days after delivery to such courier
properly addressed; or (d) if by U.S. Mail, four (4) Business Days after deposit
in the United States mail, with postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to Borrower:
BP HYDRO FINANCE PARTNERSHIP
111 West North Bend Way
P.O. Box 1029
North Bend, Washington 98045
Attention: Mr. Donald P. Jarrett
Telecopy: (206) 888-2780
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With a copy to:
CONSOLIDATED HYDRO, INC.
680 Washington Boulevard
Suite 500
Stamford, Connecticut 06901
Attention: Mr. Patrick J. Danna
Telecopy: (203) 425-8880
If to Lender:
LYON CREDIT CORPORATION
1266 East Main Street
Stamford, Connecticut 06902
Attention: Mr. Jerome P. Peters, Jr.
Telecopy: (203) 328-9339
With a copy to:
CHADBOURNE & PARKE LLP
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
Attention: Cornelius J. Golden, Jr., Esq.
Telecopy: (202) 289-3002
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 8.6. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
8.7 Survival of Representations, Warranties, Covenants and Certain
Agreements.
(a) All representations, warranties, covenants and agreements made
herein shall survive the execution and delivery of this Agreement and the making
of the Loans hereunder.
(b) Notwithstanding the foregoing or anything in this Agreement or
implied by law to the contrary, the obligations of Borrower set
63
<PAGE>
forth in Sections 5.1, 5.5, 5.6, 8.1, 8.2, 8.3, 8.8, 8.16, 8.17 and 8.21 hereof
(and, in each case, the defined terms used therein) shall survive the payment of
the Loans and the termination of this Agreement and any other Loan Document;
provided, that the obligations of Borrower to Lender contained in Sections 5.1
and 5.6 shall terminate thirteen (13) months after the indefeasible payment in
full of all Obligations.
8.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of Lender or any holder of any Loan in the exercise of any
power, right or privilege hereunder or under the other Loan Documents shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under this
Agreement and any other Loan Document are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
8.9 Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lender, Lender enforces its Liens and
security interests or exercises its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
Debtor Relief Law, state or federal law, common law or equitable cause, then to
the extent of such recovery, the Obligations or part thereof originally intended
to be satisfied, and all Liens, rights and remedies therefor, shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
8.10 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default if such action is taken or such condition
exists.
64
<PAGE>
8.11 Severability. The invalidity, illegality or unenforceability of
any provision in or obligation under this Agreement or the other Loan Documents
shall not affect or impair the validity, legality or enforceability of the
remaining provisions or obligations under this Agreement or the other Loan
Documents or of such provision or obligation in any other jurisdiction.
8.12 Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
8.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
8.14 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; provided, the rights and duties of Borrower under the Loan
Documents may not be assigned or delegated, whether by operation of law or
otherwise, and any such purported assignment or delegation shall be void.
8.15 No Fiduciary Relationship or Partnership. No provision in this
Agreement or in any of the other Loan Documents and no course of dealing among
Borrower and Lender shall be deemed to create any fiduciary duty or any
partnership, joint venture or other business relationship other than that of
borrower and lender.
8.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. BORROWER HEREBY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OF NEW YORK COURT OR
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREES
THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
BORROWER ACCEPTS FOR AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES
ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR THE OBLIGATIONS. BORROWER HEREBY DESIGNATES AND APPOINTS MESSRS.
CAHILL, GORDON & REINDEL AND OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY
BORROWER WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE
ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED
BY REGISTERED MAIL TO BORROWER AT ITS ADDRESS PROVIDED IN SECTION 8.6 EXCEPT
THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
BORROWER REFUSES TO ACCEPT SERVICE, BORROWER AGREES THAT SERVICE UPON IT BY MAIL
SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER JURISDICTION PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION IF NECESSARY TO ENFORCE THE JUDGMENT RENDERED BY ANY COURT IN THE
STATE OF NEW YORK.
8.17 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. BORROWER AND LENDER ALSO
WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF LENDER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED, EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
8.18 Counterparts; Effectiveness. This Agreement and any amendment,
waiver, consent or supplement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
65
<PAGE>
8.19 Assignment and Participation. Lender may, without notice to or
the consent of Borrower, assign its rights and delegate its obligations
hereunder and under the other Loan Documents and Lender may assign, or sell
participations in, all or any part of the Loans, Lender's commitments, Lender's
fees or any of Lender's other interests herein or in the other Loan Documents to
no more than two (2) other parties; provided, that such participants are banks
or institutional investors with knowledge and experience in project finance and
who do not have an existing relationship with any Project, including any equity
investor, senior or subordinated debt investor and other contract party (such
Person, a "Permitted Investor"). Borrower shall have the right to consent, which
consent shall not be unreasonably withheld, to the participation in the Loans by
any Person who is not a Permitted Investor. Following any such assignment, the
term "Lender" as used herein shall include such assignee or assignees.
8.20 Reproduction of Documents. This Agreement and all documents
related hereto, including, without limitation (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by Lender
or Borrower at the closing of this Agreement, and (c) financial statements,
certificates and other information and documentation heretofore or hereafter
furnished to Lender or Borrower, may be reproduced by Lender by any
photographic, photostatic, microfilm, microcard, microfiche, miniature
photographic or other similar process, and Lender or Borrower may destroy any
original document so reproduced. Lender and Borrower agree and stipulate that
any such reproduction shall be admissible in evidence as the original itself in
any judicial, arbitration or administrative proceeding (whether or not the
original is in existence and whether or not any such reproduction was made by
Lender or Borrower in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
8.21 Controlling Agreement. Except as otherwise provided in this
Agreement and except as otherwise provided in the other Loan Documents by
specific reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in the other Loan Documents, the provision contained in this
Agreement shall govern and control; provided, to the extent that the terms and
provisions of the Security Documents impose greater duties, obligations,
liabilities or standards of care upon Borrower, including, without limitation,
covenants concerning the maintenance or use of the Borrower Collateral, the
terms and provisions of the Security Documents shall control.
8.22 Termination of Commitment. Borrower and Lender hereby agree that,
by their execution and delivery of this Agreement, all obligations, duties and
liabilities of Lender under that certain commitment letter delivered by Lender
to Borrower and dated September 19, 1996, relating to the Loans, shall terminate
and such letter, as amended, shall be of no further force and effect. Each party
hereto acknowledges and agrees that Lender has made no agreement or commitment
to provide any financing to Borrower except as expressly set forth herein.
8.23 Entire Agreement. This Agreement, the other Loan Documents and
any other document executed contemporaneously herewith, memorialize and
constitute the final expression and the complete and exclusive statement among
the parties with respect to the subject matter hereof and thereof. There are no
writings, conversations, representations, warranties or agreements that the
parties intend to be a part hereof except as expressly set forth in this
Agreement, the other Loan Documents and any other document executed
contemporaneously herewith, or to be set forth in the instruments and other
documents delivered or to be delivered hereunder and thereunder. This Agreement,
the other Loan Documents and any other document executed contemporaneously
herewith represent the entire agreement among the parties and supersede all
previous written or oral agreements or discussions among the parties and any
other Person concerning the transactions contemplated herein and therein.
8.24 Confidentiality. Lender and Borrower hereby agree to exercise
their best efforts to keep any information delivered or made available pursuant
to this Agreement confidential from anyone other than persons employed or
retained by Lender or assisting Borrower who are or are expected to become
engaged in evaluating, approving, structuring or administering the Loans;
provided, that nothing herein shall prevent Lender from advertising and/or
publicizing the transactions contemplated hereunder in a "tombstone" or
otherwise, or from disclosing such information to any bona fide potential
assignee, transferee or participant that has agreed to comply with this Section
8.24 in connection with the contemplated assignment or transfer of any Loans or
participation therein or as required or requested by any Governmental Authority
or pursuant to legal process or as required in connection with the exercise of
any remedy under the Loan Documents.
8.25 Release of Lender with Respect to Original Credit Agreement.
Borrower, acting on behalf of itself, the Affiliates and its successors and
assigns, and their officers, directors, employees, managers, attorneys,
accountants, agents, servants, shareholders and partners, hereby releases and
forever discharges Lender and its successors and assigns, subsidiaries and
affiliates, officers, directors, employees, managers, attorneys, accountants,
agents and servants, and each of them, in all capacities, including
individually, from any and all actions, liabilities, liens, debts, damages,
claims, suits, judgments, executions and demands of every kind, nature and
description, including but not limited to tort claims, that any of them may have
against Lender as assignee of Fuji Bank in connection with the Original Credit
Agreement, the Fuji Note and the related contracts and accounts assigned by Fuji
Bank to Lender on the Closing Date (such contracts and accounts, the "Fuji
Agreements") to the same extent as Borrower has released Fuji Bank from all
similar liabilities pursuant to the Release Agreement, dated the Closing Date,
by and among Borrower, the Project Owners, CHI-West, Inc., a Delaware
corporation, CHI-Magic Valley, Inc., a Delaware corporation, CHI- Idaho, Inc., a
Delaware corporation, Consolidated Hydro, Inc., a Delaware corporation, and Fuji
Bank.
66
<PAGE>
IN WITNESS WHEREOF, this First Amended and Restated Credit Agreement
has been duly executed as of the day and year first above written.
LYON CREDIT CORPORATION
By_____________________
Name:
Title:
BP HYDRO FINANCE PARTNERSHIP, a
Utah general partnership
By: BP HYDRO ASSOCIATES, an
Idaho general partnership,
its general partner
By: CHI-IDAHO, INC., a
Delaware corporation, its
general partner
By___________________
Name:
Title:
68
<PAGE>
By: CHI-MAGIC VALLEY,
INC., a Delaware
corporation, its general
partner
By___________________
Name:
Title:
By: FULCRUM, INC., an Idaho
corporation, its general
partner
By________________________
Name:
Title:
69
<PAGE>
Exhibit 1.1
Credit Agreement
Description of Projects
[to be provided by Borrower]
<PAGE>
Form of
Disbursement Instructions
[Letterhead of Borrower or Affiliate]
October __, 1996
[Payor] ("Payor")
[Address]
[Address]
Re: Payments to [Borrower/Affiliate]
Ladies and Gentlemen:
Reference is hereby made to that certain First Amended and Restated
Credit Agreement, dated October __, 1996, between Lyon Credit Corporation, a
Delaware corporation ("Lender"), and BP Hydro Finance Partnership, a Utah
general partnership (as amended, modified and supplemented, the "Credit
Agreement").
We hereby irrevocably instruct you, for the benefit of Lender, to
distribute all amounts which are payable to us pursuant to [contract] to the
following account at Fleet National Bank:
Account No. _____________
ABA No. 011900571
Attention: Mr. Donald P. Jarrett
Reference: BP Hydro
Except as otherwise specifically provided for herein, these
instructions may not be amended or revoked without the prior written consent of
Lender, which consent may be withheld in Lender's sole and absolute discretion
until such time as all amounts payable under the Credit Agreement have been
paid, at which time Lender shall deliver to you a written revocation of these
instructions. Please execute your acknowledgment of receipt of these
instructions in the space provided below.
<PAGE>
[Payor]
October _, 1996
Page 2
Very truly yours,
[Borrower/Affiliate]
By____________________________
Name:
Title:
RECEIVED AND ACKNOWLEDGED:
Payor hereby agrees, for the benefit of Lender, to distribute all
amounts which are payable to [Borrower/Affiliate] pursuant to [contract]
pursuant to the terms and provisions of this letter agreement until such time as
a written notice from Lender has been received revoking these instructions.
[Payor]
By____________________________
Name:
Title:
2
<PAGE>
Exhibit 1.3
to First Amended and Restated
Credit Agreement
Pro Forma Cash Flow Projections
[to be provided by Lender]
<PAGE>
Exhibit 1.5
to First Amended and Restated
Credit Agreement
Form of Security Agreement
[draft distributed]
<PAGE>
Exhibit 1.6
to First Amended and Restated
Credit Agreement
FORM OF
[SENIOR LOAN/ADDITIONAL CREDIT FACILITY]
NOTE
[New York, New York]
$[maximum principal amount] October __, 1996
FOR VALUE RECEIVED, the undersigned Borrower, with its principal place
of business at 111 West North Bend Way, P.O. Box 1029, North Bend, Washington
98045, (hereinafter referred to as "Maker"), hereby promises to pay to the order
of LYON CREDIT CORPORATION, a Delaware corporation, with a place of business at
1266 East Main Street, Stamford, Connecticut 06902 (hereinafter referred to as
"Holder"), by wire transfer to Holder's account at Fleet National Bank, ABA No.
011900571, Account No. 7030-0226, Reference: Lyon Credit Corporation for the
benefit of BP Hydro Loans, or at such other place or places and to such account
or accounts as Holder may direct from time to time by notice to Maker in
accordance with the Credit Agreement (as hereinafter defined), the principal sum
of [maximum principal amount] ($________________) or the aggregate unpaid
principal amount of the [Senior Loan/Additional Credit Facility] made to Maker
by Holder pursuant to the Credit Agreement in lawful money of the United States
of America in immediately available funds, payable, subject to the fourth
paragraph hereof, in forty-nine (49) Scheduled Installments on March 31, June
30, September 30 and December 31 of each year, such Scheduled Installments
commencing on December 31, 1996, the amount of each such Scheduled Installment
being computed by multiplying the sum of [the Initial Disbursement and any other
portion of the Senior Loan Commitment drawn as collateral for a Letter of
Credit/all Advances on this Note] by the percentage opposite the date of such
Scheduled Installment on Schedule I attached hereto (provided, the final such
Scheduled Installment shall be in an amount sufficient to repay in full unpaid
principal amount of this Note and the amount of any outstanding Letters of
Credit, whether or not drawn upon), or on such earlier date as the same may
become due and payable hereunder or under the Credit Agreement. Capitalized
terms used herein and not defined herein shall have the same meanings as set
forth in the Credit Agreement.
Maker further promises to pay interest on the outstanding principal
amount hereof in accordance with the Credit Agreement on such dates and in such
amounts as determined in accordance with the Credit Agreement. In no contingency
or event whatsoever shall the interest rate charged pursuant to the terms of
this Note exceed the maximum amount of interest permitted by applicable law. In
the event that a court of competent jurisdiction
<PAGE>
determines that the Credit Agreement provides for interest in excess of the
maximum amount of interest permitted by applicable law, the provisions of
Section 2.4(c) of the Credit Agreement shall apply.
Maker hereby irrevocably authorizes Holder to record on Schedule II
attached hereto the repayments of the principal amount hereof. The principal
amount of this Note outstanding from time to time shall be the principal amount
of the [Senior Loan/Additional Credit Facility] made to Maker by Lender less the
aggregate amount of all principal payments made thereon.
This Note is issued to evidence a Loan made pursuant to the provisions
of that certain First Amended and Restated Credit Agreement, dated as of October
__, 1996, by and between Holder and Maker (as from time to time in effect, the
"Credit Agreement"), as to which reference is hereby made for a statement of the
terms, conditions and covenants under which the indebtedness evidenced hereby
was made and is to be repaid, including those related to the acceleration of the
indebtedness represented hereby upon the occurrence of an Event of Default or
upon the termination of the financing of which this Note is a part pursuant to
the Credit Agreement. Payment of this Note is secured by the Borrower
Collateral. No voluntary prepayment of the indebtedness evidenced by this Note
is permitted except as provided in the Credit Agreement. This Note is subject to
mandatory prepayment as provided in the Credit Agreement; Schedule III attached
hereto indicates the percentage of the outstanding principal amount hereof
attributable to each Project.
Holder shall not be required to look to the Borrower Collateral for
the payment of this Note but may proceed against Maker in such manner as it
deems desirable. None of the rights or remedies of Holder hereunder are to be
deemed waived or affected by failure or delay on the part of Holder to exercise
the same. All remedies conferred upon Holder by this Note or any other
instrument or agreement shall be cumulative and none is exclusive, and such
remedies may be exercised concurrently or consecutively at Holder's option.
Maker hereby waives diligence, presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note.
This Note has been executed and delivered in [New York, New York] and
shall be governed by the laws of the State of New York without giving effect to
principles of conflicts of law. Maker hereby expressly and irrevocably agrees
and consents that any suit, action or proceeding arising out of or relating to
this Note may be instituted in either state or federal court (at Holder's
option) and, by the execution and delivery of this Note, Maker expressly waives
any objection which it may have now or hereafter to the venue or jurisdiction of
any such suit, action or proceeding, and irrevocably submits generally and
2
<PAGE>
unconditionally to the jurisdiction of any such court in any such suit, action
or proceeding. By the execution and delivery of this Note, Holder and Maker
expressly waive their respective rights to a jury trial of any claim or cause of
action based upon or arising out of this Note.
WITNESS the hand and seal of Maker.
BP HYDRO FINANCE PARTNERSHIP
By............................
Name:
Title:
3
<PAGE>
SCHEDULE I
AMORTIZATION SCHEDULE
Percentage of Aggregate Amount of
Payment Date [Advances] to be Paid
<PAGE>
SCHEDULE II
Advances and Payments of Principal
<PAGE>
Amount of
Principal Paid Unpaid
Amount or Principal Notation Made
Date of Loan Prepaid Balance By
<PAGE>
SCHEDULE III
Allocation of Principal to Projects
Project Percentage of Principal Amount
(as defined in the
Credit Agreement)
Barber Dam
Dietrich Drop
Lowline Rapids
Rock Creek
------------------------------
TOTAL: 100%
<PAGE>
Form of
Request For Advance
__________________ __, 199_
Lyon Credit Corporation
Soundview Plaza
1266 East Main Street
Stamford, Connecticut 06902
Attn: Mr. Jerome P. Peters, Jr.
Ladies and Gentlemen:
BP Hydro Finance Partnership ("Borrower") hereby requests in
accordance with Section 2.3(b) of that certain First Amended and Restated Credit
Agreement, dated as of October 15, 1996 (the "Credit Agreement"), between Lyon
Credit Corporation ("Lender") and Borrower, that Lender disburse to Account No.
_____________ at [name and address of bank], ABA No. _____________,
______________ Dollars ($________) on __________ __, 199_. Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Credit Agreement.
The undersigned Authorized Officer of Borrower hereby certifies to
Lender that, on and as of the date of this notice (i) all representations made
by Borrower and each Affiliate under all Loan Documents are true as though made
on and as of this date, (ii) all obligations of Borrower and each Affiliate
under the Loan Documents required to be performed on or before the date hereof
have been properly performed or expressly waived in writing, (iii) all
conditions to the obligation of Lender to make the Advance pursuant to Section
3.1(b) of the Credit Agreement have been fully satisfied or expressly
<PAGE>
waived in writing, and (iv) no Default or Event of Default exists or will result
from the making of the Advance.
Very truly yours,
BP HYDRO FINANCE PARTNERSHIP, a Utah
general partnership
By: BP HYDRO ASSOCIATES, an Idaho
general partnership, its general
partner
By: CHI-IDAHO, INC., a Delaware
corporation, its general partner
By___________________
Name:
Title:
By: CHI-MAGIC VALLEY, INC., a
Delaware corporation, its general
partner
By___________________
Name:
Title:
By: FULCRUM, INC., an Idaho
corporation, its general partner
By________________________
Name:
Title:
<PAGE>
Form of
Receipt
BP Hydro Finance Partnership, a Utah general partnership, hereby
acknowledges receipt from Lyon Credit Corporation, a Delaware corporation, of
the amount of ________________ Dollars ($______) by wire transfer in Federal
funds to Account No. __________ of [name and address of bank].
IN WITNESS WHEREOF, BP Hydro Finance Partnership has executed and
delivered this receipt by its duly authorized officer in [city], [state], this
____ day of _____________, 199_.
BP HYDRO FINANCE PARTNERSHIP, a Utah
general partnership
By: BP HYDRO ASSOCIATES, an Idaho
general partnership, its
general partner
By: CHI-IDAHO, INC., a Delaware
corporation, its general
partner
By___________________
Name:
Title:
<PAGE>
By: CHI-MAGIC VALLEY, INC., a
Delaware corporation, its general
partner
By___________________
Name:
Title:
By: FULCRUM, INC., an Idaho
corporation, its general partner
By________________________
Name:
Title:
<PAGE>
Form of
Assignment
KNOW ALL MEN BY THESE PRESENTS, that [ASSIGNOR] ("Assignor") for
valuable consideration, receipt of which is hereby acknowledged, has, this ___
day of October, 1996, sold, assigned, transferred, conveyed and set over and
does hereby sell, assign, transfer, convey and set over unto LYON CREDIT
CORPORATION ("Lender"), in connection with the transactions contemplated by that
certain First Amended and Restated Credit Agreement, dated the date hereof
between Lender and [Borrower] (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), all right, title and interest of
Assignor in, to and under (including all moneys due and to become due to
Assignor under), and does hereby grant to Lender a first priority security
interest in, each of the Agreements listed on Schedule I hereto (as any of the
same may from time to time be amended, supplemented or otherwise modified, the
"Assigned Agreements"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Credit Agreement.
This Assignment is made as collateral security for all obligations of
Borrower to Lender under the Credit Agreement and the other Loan Documents and
is subject to all of the terms and conditions of the Loan Documents. All right,
title and interest of Assignor in, to and under the Assigned Agreements shall
from the date hereof constitute part of the Borrower Collateral for all purposes
of the Loan Documents.
Assignor hereby irrevocably authorizes and directs each Contract Party
listed in Schedule I hereto to pay all moneys, if any, due and to become due
under or by reason of any Assigned Agreement directly to the following account
of Fleet National Bank, as Disbursement Agent ("Disbursement Agent") under the
Security Agreement:
Account No. ____________
ABA No. 011900571
Attention: Susan Keller, Center 4125
Reference: BP Hydro
or to such other person or in such other manner as Disbursement Agent or Lender
may hereafter from time to time specify to such Contract Party in writing, until
such time as Lender shall notify such Contract Party that this Assignment has
been terminated and released.
<PAGE>
This Assignment shall not cause Disbursement Agent or Lender to be
under any obligation to Assignor or any Contract Party for the performance or
observance of any of the representations, warranties, terms or conditions of any
Assigned Agreement.
Notwithstanding this Assignment, Assignor shall be and remain
obligated to each Contract Party to perform all of Assignor's obligations and
agreements under the Assigned Agreements, and each Contract Party shall be and
remain obligated to Assignor to perform such Contract Party's obligations and
agreements under the Assigned Agreements.
Assignor hereby irrevocably constitutes and appoints Lender as its
true and lawful attorney-in-fact with full and irrevocable power and authority
in the place and stead of Assignor and in the name of Assignor or in the name of
Lender, for the purpose of carrying out the terms of this Assignment and the
Loan Documents, to take any and all action and to execute any and all
instruments which may be necessary to accomplish the purposes of this
Assignment. This power-of-attorney is a power coupled with an interest and shall
be irrevocable.
Assignor hereby represents and warrants that it has not heretofore
assigned or otherwise disposed of or encumbered any right, title or interest of
Assignor in, to or under any Assigned Agreement or any moneys due or to become
due to Assignor under or by reason thereof, and that Assignor has the right and
power to transfer to Lender, absolute title to Assignor's right, title and
interest in, to and under each Assigned Agreement to which Assignor is a party
and in and to all the moneys due and to become due to Assignor under each
Assigned Agreement to which Assignor is a party.
This Assignment shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, Assignor has caused this Collateral Assignment of
Agreements to be duly executed and delivered on the date first above written.
[ASSIGNOR]
By________________________________
Name:
Title:
<PAGE>
Schedule I
Assigned Agreement Contract Party
<PAGE>
Form of Consent to Assignment
[to come; based on contract party's preferences]
<PAGE>
Foreign Jurisdictions
[Borrower to provide]
<PAGE>
Consents and Waivers
[Borrower to provide]
<PAGE>
Financing Statement Offices and Locations
[Borrower to provide]
<PAGE>
Material Agreements
[Borrower to provide]
<PAGE>
Accounts Receivable
[Borrower to provide]
<PAGE>
Form of
Certificate of Authorized Officer
I, ____________________________, an Authorized Officer of BP Hydro
Finance Associates, a Utah general partnership ("Borrower"), hereby certify to
Lyon Credit Corporation ("Lender") pursuant to the requirements of Section 5.7
of the First Amended and Restated Credit Agreement, dated as of October 15, 1996
(the "Credit Agreement"), between Lender and Borrower and in connection with the
delivery to Lender of the information attached hereto as Schedule II required to
be delivered to Lender by Borrower pursuant to Sections 5.7(a) and (b) of the
Credit Agreement (the "Information"), that during the period covered by the
Information, the Minimum Coverage Ratio was ____ to ____, as calculated in
accordance with the provisions of the Credit Agreement.
Attached hereto as Schedule I is supporting information to allow
Lender to verify the foregoing calculations. All such calculations and
supporting information are, as of the date of this Certificate, true, complete
and accurate in every respect, and such calculations and supporting information
do not contain misleading information or omit to include information the
omission of which would be misleading. All such calculations and supporting
information, and the Information, comply in all material respects with the
requirements of the Credit Agreement and the other Loan Documents.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Credit Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
_______________, 199_.
By_________________________
Name:
Title:
<PAGE>
Report of Independent Engineer
[to be provided by Lender]
<PAGE>
Contingent Obligations
[Borrower to provide]
<PAGE>
Indebtedness
[Borrower to provide]
<PAGE>
Applicable Permits
[Borrower to provide]
<PAGE>
Articles of Incorporation and Partnership Agreements
[Borrower to provide]
<PAGE>
Initial Disbursement and Closing Costs
[Lender to draft based on information provided by Borrower]
<PAGE>
Project Documents
[Borrower to provide]
<PAGE>
Schedule of Exceptions
[Borrower to provide]
<PAGE>
Capital Leases
[Borrower to provide]
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
CONSOLIDATED HYDRO INC.
SEC - 10Q ADDITIONAL FINANCIAL INFORMATION
(Amounts in thousands)
<CAPTION>
Quarter Year to Date
June 30, 1997 June 30, 1997
December 31, 1996 December 31, 1996
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> Jun-30-1997 Jun-30-1997
<PERIOD-END> Dec-31-1996 Dec-31-1996
<CASH> 31,671 31,671
<SECURITIES> 0 0
<RECEIVABLES> 8,129 8,129
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 40,969 40,969
<PP&E> 149,170 149,170
<DEPRECIATION> (23,941) (23,941)
<TOTAL-ASSETS> 240,567 240,567
<CURRENT-LIABILITIES> 13,828 13,828
<BONDS> 263,352 263,352
106,240 106,240
98,712 98,712
<COMMON> 2 2
<OTHER-SE> (275,427) (275,527)
<TOTAL-LIABILITY-AND-EQUITY> 240,567 240,567
<SALES> 0 0
<TOTAL-REVENUES> 14,702 25,214
<CGS> 0 0
<TOTAL-COSTS> 7,124 15,638
<OTHER-EXPENSES> 1,872 3,170
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,254 14,671
<INCOME-PRETAX> (1,208) (7,582)
<INCOME-TAX> (1,576) (1,460)
<INCOME-CONTINUING> 368 (6,122)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 5,622 5,622
<CHANGES> 0 0
<NET-INCOME> 5,990 (500)
<EPS-PRIMARY> (0.27) (10.15)
<EPS-DILUTED> 0 0
</TABLE>
