<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
May 30, 1996
Date of Report (Date of earliest event reported)
Commission File Number: 0-19281
THE AES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
54-1163725
(IRS Employer Identification No.)
1001 North 19th Street
Arlington, Virginia 22209
(Address of principal executive office)
Telephone Number (703) 522-1315
(Registrant's telephone number, including area code)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On May 30, 1996, AES, through certain subsidiaries, acquired for approximately
$393 million, common shares representing an 11.35% interest (the "Light
Interest") in Light Servicos de Eletricidade S.A. ("Light"), a publicly-held
Brazilian corporation that operates as the concessionaire of an approximately
3,800 megawatt electric power generation, transmission and distribution system
which serves 28 municipalities in the state of Rio de Janeiro, Brazil. AES
acquired its interest by bidding in the Brazilian privatization program auction
of 60% of Light's outstanding shares held on May 21, 1996. Subsequent to the
auction, the winning bidders, including a subsidiary of the Company, formed a
consortium (the "Consortium") whose aggregate ownership interest of 50.44%
represents a controlling interest in Light. Prior to the privatization
auction, Light was owned primarily by the Brazilian government utility holding
company, Centrais Eletricas Brasileiras S.A. ("Eletrobras") (81.6%) and public
shareholders (17.9%).
The Consortium, organized pursuant to a shareholders agreement dated as
of May 27, 1996 (the "Shareholder's Agreement"), is comprised of the direct
common share ownership interests held in Light by subsidiaries or affiliates of
AES (11.35%), Electricite de France ("EDF") (11.35%), Houston Industries
Incorporated ("HI") (11.35%), Companhia Siderurgica Nacional ("CSN") (7.25%),
and Banco Nacional de Desenvolvimento Economico E Social (BNDES) (9.14%). In
addition, pursuant to the terms of an Addendum to the Shareholders Agreement
dated May 30, 1996, entered into among the members of the Consortium and
InvestLight--Clube de Investimento dos Empregados da Light ("InvestLight"), an
investment group owned by Light employees, InvestLight may join the Consortium
and become a party to the Shareholder's Agreement if it acquires at least 5% of
the total outstanding registered voting common shares of Light on or prior to
June 28, 1996. Under the provisions of the Shareholder's Agreement, principal
responsibilities for the various aspects of Light's business will be allocated
among AES, EDF, HI and CSN. AES will have the principal responsibility for all
matters relating to generation and purchasing of electricity by Light. In
connection with the privatization process, the Brazilian National Department of
Water and Electric Energy ("DNAEE") has requested an opportunity to review and
to approve the general terms and conditions of the Shareholder's Agreement.
Such review by DNAEE is expected to be completed by the end of June 1996.
There can be no assurance that DNAEE will not request modifications to the
terms and conditions of the Shareholder's Agreement.
<PAGE> 3
Light currently serves approximately 2.8 million customers or approximately 70%
of the population of the state of Rio de Janeiro. Light generates about 17% of
the total electricity it distributes through four hydroelectric complexes
having an aggregate installed generating capacity of approximately 788
megawatts. The remaining electricity distributed by Light (approximately 83%
of the total) is purchased from Furnas Centrais Eletricas S.A., a power
generation and transmission company owned by Eletrobras.
In connection with the purchase of the controlling interest by the Consortium,
the Federal Government of Brazil, through the Ministry of Mines and Energy
(the "Grantor"), granted a 30-year concession to Light pursuant to the
terms of a concession agreement (the "Concession"). The Concession
obligates Light to provide electric services to all customers within its
concession area and to conduct whatever related projects are necessary to serve
such customers. The Concession also grants certain rights and privileges to
Light to enable it to fulfill its service obligations. Additionally, Light is
obligated to provide open access transmission and distribution services to
certain individual customers and to other entities interconnected with the
Light system. As a result, beginning in 1998, customers with capacity needs
greater than three megawatts have the right to purchase electricity from
providers other than Light.
The Concession authorizes Light to charge its customers a tariff for electric
services which consists of two components - an expense pass-through component
and an inflation-adjusted operating cost component. Beginning in 2004, the
Grantor has the authority to review Light's costs to determine the adjustment,
if any, to the operating cost component for subsequent five-year periods.
There can be no assurance that, beginning in 2004, the Grantor will
continue to allow adjustments to the operating cost component of the tariff,
consistent with adjustments allowed historically or that future adjustments
will not be set in a manner that adversely affects Light's revenues.
The Company financed its purchase and other related transaction costs of Light
through (i) drawings of $179 million under a $425 million credit facility
issued pursuant to a credit agreement dated as of May 20, 1996, among AES,
certain banks listed therein, and Morgan Guaranty Trust Company of New York,
as Agent (the "Bank Credit Agreement"), and (ii) a $225 million reimbursement
agreement dated as of May 20, 1996 between AES Light, Inc. ("AES Light"), an
indirect subsidiary of AES with an indirect ownership interest in Light, and
<PAGE> 4
Morgan Guaranty Trust Company of New York (the "Reimbursement Agreement"). The
Bank Credit Agreement has a three-year term, and may be extended for two
one-year terms subject to the prior written consent of the parties thereto.
The Reimbursement Agreement has an 18-month term, is recourse only to AES
Light and is secured by a pledge of approximately 18 million shares of common
stock of AES which had been previously contributed to AES Light.
Light is the subject of certain lawsuits by industrial customers who have
alleged that increases in electricity tariffs introduced by Light and all other
electric utilities in Brazil from March through November 1986 during a price
freeze imposed by the federal government of Brazil (the "Cruzado Period") were
illegal. In these lawsuits, the plaintiffs have demanded reimbursement for
amounts relating to such increases paid during the Cruzado Period. Although
these lawsuits have not specified the maximum amount of possible alleged
damages, Light's internal estimates range up to approximately $75 million. The
Company has been informed by Light that the Superior Tribunal of Justice in
Brazil has affirmed lower court decisions that Light and the other utilities
are required to reimburse their industrial customers for the tariff
increase during the Cruzado Period.
The Company also has been informed by Light that approximately 10 lawsuits have
been filed by industrial customers of Brazilian utilities, including Light,
demanding reimbursement of amounts relating to tariff increases introduced
after the Cruzado Period on the basis that all future tariff increases were
illegal because they took into account the allegedly illegal increase
introduced during the Cruzado Period in computing subsequent incremental
increases. Although these lawsuits have not specified the maximum amount of
possible alleged damages, Light's internal estimates of its possible
reimbursement obligations range up to $700 million. The Company has been
informed by Light that the Superior Tribunal of Justice has, in an appellate
proceeding involving two other utilities, ruled that the plaintiffs in that
proceeding are not entitled to reimbursement for tariff increases introduced
after the Cruzado Period. Although Brazilian counsel has advised the Company
that such counsel does not believe that it is likely that the other lawsuits
involving Light will be decided differently by the Superior Tribunal of
Justice, no assurance can be given that amounts in excess of $75 million will
not be required to be reimbursed by Light.
Furthermore, Light has informed the Company that it may be able to recover all
or a portion of the amounts reimbursed to its customers resulting from the
lawsuits discussed above, although no assurance can be given that Light would
be successful in these efforts to recover such amounts reimbursed.
<PAGE> 5
Item 5. Other Events.
In early June 1996, the Company, through one of its subsidiaries, participated
in the bidding for shares of common stock representing an 80% interest in
Tiszai Eromu Rt. ("Tiszai"), a 1,281 megawatt electric generating and coal
mining company in Hungary, presently owned by the Hungarian government. The
sale of the interest in Tiszai is part of the Hungarian government's
privatization of its electric and gas industries. The evaluation committee of
the Hungarian State Privatization Agency Board (the "APV") is reviewing the
bids received in connection with the auction and will recommend a bid for
approval to the APV.
The APV is expected to formally approve the winning bid by late June 1996. The
successful bidder has 120 days to agree to the terms of the government's sale
of the interest in Tiszai upon notification from the APV. If the Company's bid
is successful, the Company expects to pay in excess of $100 million for its
interest in Tiszai, and expects to initially finance such acquisition through
borrowings under its Bank Credit Agreement, the incurrence of additional
indebtedness, internally generated cash flows or a combination thereof. There
can be no assurance that (i) the Company's bid will be recommended for
approval, (ii) that the Company's bid, if recommended for approval, will be
approved by the APV, or (iii) that if the Company's bid is approved by the APV,
the Company will be able to successfully conclude the terms of the sale.
Item 7. Financial Statements and Exhibits.
a (i). Financial Statements of Business Acquired.
The following audited financial statements of Light as of and for the
years ended December 31, 1995 and 1994, together with the Independent Auditors'
Report are expressed in Brazilian Reais and prepared in accordance with
generally accepted accounting principles in Brazil.
<PAGE> 6
LIGHT - SERVICOS DE ELETRICIDADE S.A.
Financial Statements for the
Years ended December 31, 1995 and 1994
and Independent Auditors' Opinion
1
<PAGE> 7
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of
LIGHT - Servicos de Eletricidade S.A.
Rio de Janeiro - RJ
We have audited the balance sheets of LIGHT - Servicos de Eletricidade S.A.
presented under the heading of "Corporate Law and Price-Level Restatement" as
of December 31, 1995, and the related statements of operations, changes in
stockholders' equity and changes in financial position for the year then ended.
We have also audited the balance sheet and the related statements of
operations, changes in stockholders' equity and changes in financial position
presented under the heading "Price-Level Restatement" as of and for the year
ended December 31, 1994. These financial statements, all of which are
expressed in Brazilian reais, are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of Eletropaulo-
Eletricidade de Sao Paulo S.A. (note 8) as of and for the years ended December
31, 1995 and 1994 were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amounts included for such company, is based solely upon the report of such
other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in Brazil. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
financial statements described in the first paragraph presented under the
heading "Price-Level Restatement" present fairly, in all material respects, the
financial position of LIGHT - Servicos de Eletricidade S.A., as of December 31,
1995 and 1994, the results of its operations, the changes in its stockholders'
equity and the changes in its financial position for the years then ended, in
conformity with accounting principles generally accepted in Brazil.
In our opinion, based upon our audits and the report of other auditors, the
financial statements described in the first paragraph and presented under the
heading "Corporate Law" present fairly, in all material respects, the financial
position of LIGHT - Servicos de Eletricidade S.A. as of December 31, 1995, the
results of its operations, the changes in its stockholders' equity and the
changes in its financial position for the year then ended, in conformity with
accounting principles generally accepted in Brazil, as based on Company Law.
/s/ DELOITTE TOUCHE TOHMATSU /s/ MARCELO C. ALMEIDA
Auditores Independentes Contador
CRC-SP 11.609 S/RJ CRC-RJ 36.206-3
Rio de Janeiro, Brazil
January 24, 1996, except for note 27, for which the date is May 1996.
2
<PAGE> 8
LIGHT - SERVICOS DE ELETRICIDADE S.A.
BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
Corporate Law
and Price-Level Price-Level
ASSETS Restatement Restatement
- ------ --------------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and banks 772 186
Money market investments 37.101 32.139
Consumers and distributors 230.635 204.035
Allowance for doubtful accounts (605) (1.624)
Interest receivable 285.998 271.841
Debentures 35.712 26.448
Current portion of repassed loans and financing 4.350 17.301
Tax and social securities contributions receivable 73.963 107.111
Sundry receivables 37.661 52.611
Inventories - supplies 10.236 9.455
Notes receivable 175.707 185.440
Account receivable - Companhia Sideroergia Nacional - CSN 18.027 16.835
Credits - other 25.796 13.690
Prepaid expenses 4.794 1.591
------------ -----------
Total current assets 940.147 937.109
------------ -----------
NON-CURRENT ASSETS
Accounts receivable 75.260 84.177
Allowance for doubtful accounts (1.263)
Debentures 107.140 105.795
Repassed loans and financing 336.442 424.904
Other 6.431 1.309
------------ -----------
Total non-current assets 525.273 614.922
------------ -----------
PERMANENT ASSETS
Investments 3.178.768 3.333.813
Fixed assets 2.938.782 2.879.139
Deferred charges 354.646 368.484
------------ -----------
Total permanent assets 6.472.196 6.581.436
------------ -----------
TOTAL 7.937.616 8.133.467
============ ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 9
LIGHT - SERVICOS DE ELETRICIDADE S.A.
BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
Corporate Law
and Price-Level Price-Level
LIABILITIES AND STOCKHOLDERS' EQUITY Restatement Restatement
- ------------------------------------ --------------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Suppliers 109.450 110.259
Salaries payable 12.756 2.428
Interest and other financial charges 6.775 21.158
Taxes and social security contributions 69.606 65.943
Dividends 6.879 75.599
Loans and financing 14.535 56.413
Accrued liabilities 86.617 68.446
Loans repaid by consumers payable to Eletrobras 20.176 63.348
Social Security Fund - BRASLIGHT 18.288 385
Other 15.593 11.118
----------- ---------
Total current liabilities 360.675 475.097
----------- ---------
LONG-TERM LIABILITIES
Loans and financing 548.482 593.822
Taxes and social security contributions 22.058 52.227
Special obligations 247.702 238.555
Social Security Fund - BRASLIGHT 12.349 9.637
Other 586 735
----------- ---------
Total long-term liabilities 831.177 894.976
----------- ---------
STOCKHOLDERS' EQUITY
Capital stock - paid-up and restated 1.183.067 1.183.067
Advances for capital increase 1.936 1.936
Capital reserves 4.494.157 4.462.913
Revaluation reserve of associated company 479.451 454.041
Revenue reserves 502.276 524.675
Retained earnings 84.877 136.762
----------- ---------
Total stockholders' equity 6.745.764 6.763.394
----------- ---------
TOTAL 7.937.616 8.133.467
=========== =========
</TABLE>
(Concluded)
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 10
LIGHT - SERVICOS DE ELETRICIDADE S.A.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
------------------------------ ----------
Corporate Price-Level Price-Level
Law Restatement Restatement
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUE
Sale of electric power 1.629.471 1.833.457 1.914.467
Taxes - ICMS (275.090) (300.950) (273.324)
Other revenue 18.721 20.515 17.505
----------- ----------- -----------
Gross operating revenue 1.373.102 1.553.022 1.658.648
Quotas for the use of fuel oil (39.818) (43.313) (39.376)
Quota for global reserve of reversion of concession (42.355) (44.289) (44.356)
----------- ----------- -----------
Net operating revenue 1.290.929 1.465.420 1.574.916
----------- ----------- -----------
OPERATING EXPENSES
Employees (243.386) (271.123) (308.226)
Materials (20.196) (23.269) (17.308)
Third-party services (71.277) (78.323) (73.579)
Electric power purchased for resale (571.903) (621.529) (743.754)
Depreciation and amortization (169.877) (187.954) (180.760)
Payroll taxes (40.850) (46.629) (53.564)
Other (77.851) (90.810) (80.716)
----------- ----------- -----------
Total operating expenses (1.195.340) (1.319.637) (1.457.907)
----------- ----------- -----------
EQUITY ADJUSTMENT OF ASSOCIATED
COMPANY (205.521) (205.521) 48.154
----------- ----------- -----------
FINANCIAL INCOME (EXPENSES)
Interest income 39.402 34.736 21.820
Monetary adjustment and fines - energy sold 69.888 (19.542)
Monetary adjustment and fines - energy purchased (4.581) 44.025
Other monetary adjustments 55.791
Interest charges (20.379) (501) 7.583
Accounts receivable income 41.720 51.869 (53.981)
Other (1.206) (26.341) (29.461)
----------- ----------- -----------
OPERATING PROFIT 70.703 25 135.607
----------- ----------- -----------
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 11
LIGHT - SERVICOS DE ELETRICIDADE S.A.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
------------------------- ----------
Corporate Price-Level Price-Level
Law Restatement Restatement
---------- ----------- -----------
<S> <C> <C> <C>
NON-OPERATING EXPENSES - NET (12.198) (13.241) (18.799)
INFLATION ADJUSTMENTS
Monetary adjustments of investments, fixed assets,
deferred charges and stockholders' equity - net (29.159)
Exchange losses and other monetary correction related
to financing of fixed assets (45.736)
-------- ------------- -------------
Inflation adjustments - net (74.895) (13.241) (18.799)
-------- ------------- -------------
PROFIT (LOSS) BEFORE INCOME TAX AND (16.390) (13.216) 116.808
SOCIAL CONTRIBUTION
SOCIAL CONTRIBUTION (22.971) (22.971) (5.555)
REVERSAL OF INCOME TAX PROVISION 16.775 17.059 79.329
INCOME TAX (88.793) (91.057) (41.132)
-------- ------------- -------------
PROFIT (LOSS) FOR THE YEAR (111.379) (110.185) 149.450
======== ============ =============
PROFIT (LOSS) PER 1000 SHARES - R$ (10,72) (10,60) 14,38
===== ===== =====
</TABLE>
(Concluded)
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 12
LIGHT - SERVICOS DE ELETRICIDADE S.A.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CORPORATE LAW
FOR THE YEAR ENDED DECEMBER 31, 1995
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL STOCK
PAID-UP AND RESTATED
------------------------------------
ADVANCES
PAID-UP MONETARY RESTATED FOR CAPITAL CAPITAL
CAPITAL CORRECTION CAPITAL INCREASE RESERVES
--------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 96.102 869.967 966.069 1.581 3.644.326
CAPITAL INCREASE 869.967 (869.967)
INCOME TAX ADJUSTMENTS - Law 8.981
REALIZATION OF RESERVE
REMUNERATION OF INVESTMENTS IN CONSTRUCTION
WORK IN PROGRESS - OWN FUNDS 27.832
MONETARY ADJUSTMENTS 216.998 216.998 355 821.999
REVERSAL OF RESERVE
LOSS FOR THE YEAR
INCOME TAX ADJUSTMENTS - Law 9.249
PROPOSED DIVIDENDS
--------- --------- --------- -------- -----------
BALANCE, DECEMBER 31, 1995 966.069 216.998 1.183.067 1.936 4.494.157
========= ========= ========= ======= ===========
<CAPTION>
Continued REVALUATION
- --------- RESERVE
-------------
ASSOCIATED REVENUE RETAINED
COMPANY RESERVES EARNINGS TOTAL
--------- -------- -------- -----
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 370.761 428.439 115.291 5.526.467
CAPITAL INCREASE
INCOME TAX ADJUSTMENTS - Law 8.981 (45.605) (45.605)
REALIZATION OF RESERVE (33.464) 33.464
REMUNERATION OF INVESTMENTS IN CONSTRUCTION
WORK IN PROGRESS - OWN FUNDS 27.832
MONETARY ADJUSTMENTS 68.228 96.236 30.703 1.234.519
REVERSAL OF RESERVE (22.399) 22.399
LOSS FOR THE YEAR (111.379) (111.379)
INCOME TAX ADJUSTMENTS - Law 9.249 119.531 119.531
PROPOSED DIVIDENDS (5.601) (5.601)
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1995 479.451 502.276 84.877 6.745.764
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 13
LIGHT - SERVICOS DE ELETRICIDADE S.A.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - PRICE LEVEL RESTATEMENT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REVALUATION
CAPITAL STOCK ADVANCE RESERVE OF
PAID-UP AND FOR CAPITAL CAPITAL ASSOCIATED REVENUE RETAINED
RESTATED INCREASE RESERVES COMPANY RESERVES EARNINGS TOTAL
------------- ------------ -------- ----------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 1.183.067 1.936 4.428.805 501.560 540.047 1 6.655.416
REMUNERATION OF INVESTMENTS IN CONSTRUCTION
WORK IN PROGRESS - OWN FUNDS 34.108 34.108
TRANSFER TO RETAINED EARNINGS (47.519) 47.519
PROFIT FOR THE YEAR 149.450 149.450
REVERSAL OF RESERVE (22.161) 22.161
LEGAL RESERVE 6.789 (6.789)
PROPOSED DIVIDENDS (75.580) (75.580)
---------- -------- ------------ ------------ --------- -------- --------
BALANCE, DECEMBER 31, 1994 1.183.067 1.936 4.462.913 454.041 524.675 136.762 6.763.394
PRIOR YEAR ADJUSTMENTS 3.228 3.228
INCOME TAX ADJUSTMENTS - Law 8.981 (55.847) (55.847)
REMUNERATION OF INVESTMENTS IN CONSTRUCTION
WORK IN PROGRESS - OWN FUNDS 31.244 31.244
TRANSFER TO RETAINED EARNINGS (38.274) 38.274
REVERSAL OF RESERVE (22.399) 22.399
LOSS FOR THE YEAR (110.185) (110.185)
INCOME TAX ADJUSTMENTS - Law N 1/4 9.249 119.531 119.531
PROPOSED DIVIDENDS (5.601) (5.601)
--------- -------- ------------ ------------ -------- --------- --------
BALANCE, DECEMBER 31, 1995 1.183.067 1.936 4.494.157 479.451 502.276 84.877 6.745.764
========= ===== ========= ======= ======= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 14
LIGHT - SERVICOS DE ELETRICIDADE S.A.
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------------------------- -----------
Corporate Price-Level Price-Level
Law Restatement Restatement
----------- ----------- -----------
<S> <C> <C> <C>
FUNDS PROVIDED FROM
OPERATIONS:
Profit (loss) for the year (111.379) (110.185) 149.450
Income (expenses) that do not affect working capital:
Depreciation and amortization 169.877 187.954 180.760
Exchange losses and other monetary adjustments
of non-current accounts - net credit 39.176
Monetary adjustments of investments, fixed
assets, deferred charges and stockholders'
equity - net credit 31.787
Monetary adjustments on long-term loan with
associated company (2.628)
Equity adjustment 205.521 205.521 (48.154)
(Gain) loss on long-term monetary items (25.721) 5.910
Loss on fixed asset disposals 11.712 12.716 14.491
Deferred income tax liability (16.775) (16.775) (90.537)
Adjustments to long-term renegotiated receivables 41.261
Allowance for doubtful accounts (1.031) (1.263) 3.424
Other 983 1.054
---------- --------- ------------
Funds provided from operations 327.243 253.301 256.605
Non-current loans and financing 32.379 37.039 7.283
Transfer from non-current to current assets 88.290 104.394 67.914
Transfer from current liabilities to non-current 506.384
Dividends receivable 16.676 16.676 1.228
Other 8.619 9.529 26.740
---------- --------- ------------
Total 145.964 167.638 609.549
---------- --------- ------------
TOTAL FUNDS PROVIDED 473.207 420.939 866.154
========== ========= ============
FUNDS USED FOR
Increase in non-current assets 18.306 20.818 11.187
Investments 8.253 8.838 4.208
Acquisition of fixed assets 185.877 207.518 132.120
Transfer from non-current to current liabilities 53.377 59.703 78.065
Transfer from current assets to non-current 355.194
Proposed dividends 5.601 5.601 75.580
Other 891 1.001 3.373
---------- --------- ------------
TOTAL FUNDS USED 272.305 303.479 659.579
========== ========= ============
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE> 15
LIGHT - SERVICOS DE ELETRICIDADE S.A.
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
--------------------------- -----------
Corporate Price-Level Price-Level
Law Restatement Restatement
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE IN WORKING CAPITAL
FOR THE YEAR 200.902 117.460 206.575
======= ======= =========
CHANGES IN WORKING CAPITAL
Current assets
At the beginning of the year 767.302 937.109 1.395.329
At the end of the year 940.147 940.147 937.109
------- ------- ----------
Total 172.845 3.038 (458.220)
------- -------- ---------
Current liabilities
At the beginning of the year 388.732 475.097 1.139.892
At the end of the year 360.675 360.675 475.097
------- -------- ----------
Total (28.057) (114.422) (664.795)
------- -------- ----------
INCREASE IN WORKING CAPITAL
FOR THE YEAR 200.902 117.460 206.575
======= ======= ==========
</TABLE>
(Concluded)
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE> 16
LIGHT - SERVICOS DE ELETRICIDADE S.A.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1995 AND 1994
(Expressed in thousands of Brazilian Reais, except dividend per share)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
LIGHT is a Company controlled by Centrais Eletricas Brasileiras S.A. -
ELETROBRAS, and operates in 28 municipalities of the State of Rio de
Janeiro with an electric power distribution network covering 174.243,3 km,
of which 159.969,3 km of the network is aboveground and 14.274,0 km is
underground, supplying 2.654.299 consumers.
Although the Company's main activity is the distribution of electricity, it
also generates about 17% of the total electricity distributed through its
four hydroelectric plants, 2.214,9 km of transmission lines and 72
substations.
The remaining 83% of the total electricity distributed is purchased from
Furnas Centrais Eletricas S.A., 60% in Brazilian reais and 40% in United
States dollars (which is passed on to Itaipoe Binacional).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
I Corporate Law Financial Statements
These financial statements were prepared in accordance with
corporate law and the following accounting practices:
a) Current and non-current assets
Investments in the money market, made through the short-term
fixed income fund of the Banco do Brasil S.A., are stated at
cost plus interest accrued to the balance sheet date.
Warehouse materials and supplies are valued at average cost;
such cost does not exceed the market value.
Assets, indexed for inflation, have been adjusted to the
balance sheet date.
The provision for doubtful accounts is made based on an
estimate of possible losses.
Notes receivable (current and non-current) relate to amounts
arising from the sale of assets of the Light - Sao Paulo
subsystem to ELETROPAULO and are recorded at their original
amounts increased by monetary adjustments based on the
exchange rate.
b) Permanent assets
Permanent assets are adjusted for inflation based on the UFIR
index (Unit of Fiscal Reference), which was R$0,8287 at
December 31, 1995.
The carrying value of the investment in the affiliated
Company, ELETROPAULO, is adjusted by the equity method to show
LIGHT's participation in the affiliate's net equity. Other
investments are stated at cost plus monetary adjustments (see
note 8).
11
<PAGE> 17
Depreciation is calculated by the straight-line method and is
charged either to operations or is capitalized. Depreciation
rates are established by DNAEE - National Department of Water
and Electric Energy (see note 9).
Expenses arising from the remuneration of construction work in
progress, included in deferred charges, are amortized at an
annual rate of 10% from the month the project is completed or
put into service. The amortization of the remuneration is
calculated at an annual rate of 10%, in conformity with
prevailing legislation, on the Company's own and third-party
funds.
c) Current and long-term liabilities
Liabilities include accrued interest and charges and
adjustments for inflation or exchange devaluation.
d) Stockholders' equity
Stockholders equity has been adjusted for inflation using the
same indices as those used to adjust permanent assets.
The reserve for unrealized profits has been set up in
accordance with corporate law to record the credit arising
from the difference between the inflation adjustments of
stockholders' equity and the inflation adjustments of
permanent assets. The amount of this reserve will be
transferred to retained earnings in the same proportion as the
depreciation and amortization of fixed assets and deferred
charges and dividends received on permanent investments. In
1995, because the Company recorded a net loss, no reserve was
created.
e) Result for the year
The result for the year has been accounted for by the accrual
method and includes the effect of accounting for inflation, as
determined by corporate law.
II Price-Level-Restatement Financial Statements
The accompanying price-level-adjusted financial statements are
based on those prepared in accordance with Corporate Law as
defined by CVM Instruction No. 191/92 and the
CVM-circular/CVM/SEP/SNC/(#) 02/95. The financial statements
were drawn up using the UMC - Monetary Unit for Accounts, which is
based on the value of the UFIR (Fiscal Reference Unit), valued at
R$0,8287 on December 31, 1995, as follows:
a) Balance sheets
Permanent assets and shareholders' equity have been
price-level adjusted to December 31, 1995. Other balance
sheet accounts have been maintained at their original
amounts, since such amounts represent their December 31,
1995 purchasing power.
Rights and obligations with pre-fixed values have been
maintained at their actual value at December 31, 1995.
They have not been adjusted to their present value as such
adjustments would be immaterial.
b) Statements of income
Income and expenses are inflation-adjusted from the month
recorded to December 31, 1995 based on the change in the
UMC.
12
<PAGE> 18
Depreciation and amortization expenses are obtained from a
separate ledger maintained in UMC and converted into reais
at the December 31, 1995 UMC value.
Inflation gains and losses on monetary items are
allocated directly to the respective income statement
accounts.
c) Statements of changes in financial position and the movement of the
stockholders' equity.
The values in these statements are price-level adjusted to
December 31, 1995.
III 1994 Financial Statements
The 1994 financial statements were adjusted for comparative
purposes, to reflect the December 31, 1995 purchasing power using
the change in the UMC.
IV Taxes
a) The statutory corporate income tax rate for 1995 was 25% of
taxable profit increased by a surtax of 12% or 18%, if
applicable.
b) The social contribution tax, established by Law 7689 of
12.15.88, was calculated at a rate of 10%. The Company
contested judicially the payment of this tax for the period
1988-1990. For 1988 the case was judged in favor of the
Company on January 1, 1995. For 1989 and 1990 the Company is
paying the tax in 120 monthly installments.
c) The Company has been questioning judicially the
constitutionality of the 5% state income tax. Such case has
reached the Supreme Court since at lower levels the Company
did not obtain a favorable decision. In 1993 the Supreme Court
deemed such tax unconstitutional, and the Company is in the
process of filing for a refund of the amount paid.
d) The Company has been paying COFINS in accordance with the
legal requirements, but as a result of a recent Supreme Court
decision that deemed the increase in FINSOCIAL
unconstitutional, the Company filed a claim in May 1994 to
recover the amount overpaid during the period September 1,
1989 to December 31, 1991.
3. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ELETROBRAS 3.642 36.241
ELETROPAULO 279.604 229.836
Total 2.752 5.764
------- -------
285.998 271.841
======= =======
</TABLE>
13
<PAGE> 19
4. DEBENTURES AND OTHER
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
Current Non-current Current Non-current
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Debentures 35.712 107.136 26.448 105.791
Other 4 4
------ ------- ------ -------
35.712 107.140 26.448 105.795
====== ======= ====== =======
</TABLE>
Non-convertible debentures issued by ELETROPAULO are being redeemed over 20
years from 1991 monetarily adjusted for inflation. The debentures bear
interest paid annually based on their nominal value adjusted by a
percentage equal to that of the dividend attributed to the preferred shares
(see note 8), which is payable annually from the date of issue. During 1992
and 1993 ELETROPAULO did not account for interest on the debentures because
the preliminary results, drawn up by the Company, were not positive. In
order that the intercompany balances agree, the Company opted not to
account for such interest, yet it considers such interest to be due and
intends to begin discussions with ELETROPAULO in respect of the payment of
such interest.
During 1987, in order to state debentures at an uniform number of OTN
(Federal Treasury Obligations) in the records of both companies, LIGHT
reduced its OTN equivalent by 43.278.430,8388 BTN's. However, this
adjustment did not constitute a definitive acceptance of ELETROPAULO's
criteria, and Light in 1988 initiated legal action to properly adjust the
quantity of debentures and, accordingly, the amount of interest and
monetary adjustments on such debentures.
With the enactment of the Economic Stabilization Programs of 1989 and 1990,
and with the enactment of Laws 8177 and 8178, Light again followed the same
criteria as ELETROPAULO to adjust the debentures, although with the
understanding that the adjustment did not properly restate the value of the
outstanding debentures.
5. REPASSED LOANS AND FINANCING
<TABLE>
<CAPTION>
31.12.95 31.12.94
------------------------------ ------------------------------
Current Non-current Current Non-current
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
ELETROBRAS 2.484 336.442 15.327 424.904
ELETROPAULO 1.866 1.974
----- ------- ------- -------
4.350 336.442 17.301 424.904
===== ======= ====== =======
</TABLE>
Repassed loans and financing are restated in the accordance with the same
exchange variance as that of the original loans.
6. ACCOUNTS RECEIVABLE - CSN
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
Current Non-current Current Non-current
------- ----------- ------- -----------
<S> <C> <C> <C>
18.027 75.260 16.325 84.177
====== ====== ====== ======
</TABLE>
This debt, which relates to previous periods, has been renegotiated and is
being repaid in 84 monthly installments. The renegotiated balance is
subject to monetary correction in accordance with the variation of the
IGP-M, plus interest of 12% p.a..
14
<PAGE> 20
7. INVESTMENTS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Permanent investments 3.153.067 3.308.352
Assets for sale 860 860
Studies and projects 23.857 23.619
Other 984 982
--------- ---------
Total 3.178.768 3.333.813
========= =========
</TABLE>
8. PERMANENT INVESTMENTS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ELETROPAULO - Eletricidade de Sao Paulo S.A. (see note 27) 3.148.798 3.304.083
Other 4.269 4.269
--------- ---------
Total 3.153.067 3.308.352
========= =========
</TABLE>
a) Information in respect of ELETROPAULO at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Paid-up capital 634.830 659.181
Number of shares 30.863.686.314 30.863.686.314
Number of shares held by LIGHT (class A - preferred
nominative) 14.666.666.667 14.666.666.667
Loss for the year (adjusted) 550.329 54.416
Stockholders' equity (adjusted) 6.533.776 6.953.037
Percentage of participation 47,52 47,52
b) Intercompany balances with LIGHT:
Receivables 602.982 552.227
Payables 6.276 5.469
Revenue 35.267 (67.480)
Expenses 807 746
c) Changes in the ELETROPAULO investment:
1995 1994
---- ----
Balance at beginning of the year 3.304.083 3.257.157
Prior year adjustments 3.228
Income tax adjustments - Law 8.981/95 (55.847)
Income tax adjustments - Law 9.249/95 119.531
Equity (205.521) 48.154
Dividends receivable (16.676) (1.228)
--------- ---------
Balance at end of the year 3.148.798 3.304.083
========= =========
</TABLE>
15
<PAGE> 21
d) The revaluation reserve in an affiliated company is net of the special
and complementary monetary correction and taxes, as required by the
Brazilian Securities Commission (CVM) Instruction No. 189 of January
25, 1992.
e) In determining the amount of annual dividends, ELETROPAULO takes into
account the annual return on investment obtained by LIGHT calculated in
accordance with DNAEE regulations or a minimum of 25% of net adjusted
income. During 1992 and 1993 ELETROPAULO determined that no dividends
were payable on preferred shares, because LIGHT was operating at a
loss. In order to maintain the accounting records on the same basis,
LIGHT did not record dividends receivable.
f) LIGHT has a court order to receive from ELETROPAULO additional
dividends for 1981-1988 in respect of (1) differences in calculation on
the income from investment and (2) differences in the basis used to
calculate dividends.
g) In an attempt to settle their disagreements in respect of debentures
and dividends, LIGHT and ELETROPAULO are discussing with government
officials methods to settle all differences.
h) LIGHT, in accordance with generally accepted accounting principles, has
used the financial statements of ELETROPAULO as of November 30, 1995 to
value its investment.
9. FIXED ASSETS
The classification by operational activity is as follows:
<TABLE>
<CAPTION>
Annual
Depreciation
1995 1994 Rate - %
---- ---- -------------
<S> <C> <C> <C>
ASSETS IN USE
Generating 677.190 683.034 3
Transmission 1.346.629 1.390.797 3
Distribution 1.792.400 1.727.229 4
Other 741.181 641.322 3
---------- ----------
Total 4.557.400 4.442.382
Accumulated depreciation and amortization (1.927.213) (1.790.340)
--------- ---------
Total 2.630.187 2.652.042
---------- ----------
ASSETS UNDER CONSTRUCTION
Generating 66.021 52.352
Transmission 118.430 86.005
Distribution 53.978 26.839
Other 70.166 61.901
--------- ---------
Total 308.595 227.097
--------- ---------
TOTAL 2.938.782 2.879.139
========= =========
</TABLE>
16
<PAGE> 22
10. DEFERRED CHARGES
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
a) By operational activity:
IN USE
Generation system 69.818 67.469
Transmission system 142.162 137.379
Distribution system 176.551 170.611
Other 65.554 63.349
-------- --------
Total 454.085 438.808
Amortization (203.318) (159.202)
-------- --------
Total 250.767 279.606
-------- --------
UNDER CONSTRUCTION
Generation system 20.323 19.044
Transmission system 43.241 17.375
Distribution system 29.877 30.228
Other 10.438 22.231
-------- --------
Total 103.879 88.878
------- --------
TOTAL 354.646 368.484
======= =======
</TABLE>
<TABLE>
<CAPTION>
Annual
rate of
amortization 1995 1994
------------ ---- ----
<S> <C> <C> <C>
b) By origin:
In phases of amortization:
Cost of remuneration of construction
work in progress 10 429.535 416.119
Financial charges and inflationary effects 10 24.550 22.689
Accumulated amortization (203.318) (159.202)
-------- --------
250.767 279.606
-------- --------
In formation:
Cost of remuneration of construction
work in progress 90.656 70.177
Cost of remuneration of studies and
projects 10.290 13.150
Financial charges and inflationary effects 2.933 5.551
------- -------
103.879 88.878
------- -------
Total 354.646 368.484
======= =======
</TABLE>
17
<PAGE> 23
11. TAXES AND SOCIAL SECURITY CONTRIBUTIONS
<TABLE>
<CAPTION>
1995 1994
----- -----
Current Non-current Current Non-current
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Deferred tax 5.169 3.594 28.059
Social contribution tax (based on 21.720 12.919 21.930 13.679
profits)
ICMS 31.508 5.545 31.948 10.474
INSS 4.065 4.579
COFINS 3.364 3.063
FGTS 1.993 2.273
PASEP 1.093 1.363
Sundry taxes 694 787
------ ------ ------ ------
Total 69.606 22.058 65.943 52.227
====== ====== ====== ======
</TABLE>
12. LOANS AND FINANCING
a) Composition:
<TABLE>
<CAPTION>
1995 1994
------------------------------------ ------------------------------------
Financial Financial
charges Principal charges Principal
--------- ---------------------- --------- ----------------------
Current Current Non-current Current Current Non-current
--------- ------- ----------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
FOREIGN CURRENCY:
ELETROBRAS 1.212 10.630 36.092 14.912 32.738 47.797
Financial institutions 57 51
Federal government - bonus 5.307 3.874 511.958 5.953 2.752 528.082
Banco do Brasil advice 26.507 748.559
Part to be settled with account of
results (26.507) (748.559)
-------- ---------- ---------- ------- -------- ----------
to be compensated - CRC
Total 6.576 14.504 548.050 20.916 35.490 575.879
----- ------ ------- ------- -------- -------
LOCAL CURRENCY:
ELETROBRAS 5 25 432 2 20.804 17.938
Financial institutions 6 1 119 5
Other 194 239
------ ----------- ----------- -------- ------------ ----------
Total 199 31 432 242 20.923 17.943
------ --------- ---------- -------- -------- --------
TOTAL 6.775 14.535 548.482 21.158 56.413 593.822
===== ====== ======= ====== ======== =======
</TABLE>
b) Substantially all indebtedness is guaranteed by the Federal Government
and/or ELETROBRAS.
c) The total due in foreign currency of R$569.130 is equilavent to
US$585,224.
18
<PAGE> 24
d) The long-term principal balance of R$548.050, equivalent to US$563,548,
has maturity dates as follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
US$
---
<S> <C>
1997 23,038
1998 25,561
1999 26,369
2000 25,793
After 2000 462,787
-------
Total 563,548
=======
</TABLE>
e) Loans in local currency are subject to annual fixed rates of 6% to
10,5% (1994 - 7% to 10,5%) and those in foreign currency at annual
floating rates of 4,0% to 8,0% (1994 - 4,0% to 7,25%).
13. GUARANTEE OF OBLIGATIONS
In February 1995 LIGHT signed a contract with the pension fund BRASLIGHT
(Fundacao de Seguridade Social BRASLIGHT), repurchasing for R$28.890 the
buildings that make up the administrative complex of its headquarters. This
repurchase was with 24 promissory notes, the first maturing on March 20,
1995 and the last on February 20, 1997. The liability as of December 31,
1995 was R$15,903 short-term and R$1,704 long-term. As a guarantee of
payment, an equivalent amount of the account receivable from Companhia
Siderurgica Nacional mentioned in note 6 has been pledged.
14. SPECIAL OBLIGATIONS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Reserve for reversion of concession 151.503 151.503
Consumers' contributions 88.965 80.836
Participation of federal government 7.234 6.216
------- -------
247.702 238.555
======= =======
</TABLE>
The reserve for reversion of concession arose from provisions made through
1971 under Federal Decree 41.019/57 and represents 50% of the concession
fee that was withheld and applied in the expansion of public services for
electric power.
Consumers' contributions relate to funds obtained to carry out projects
necessary to attend to requests for the supply of electric power.
Because of the nature of these accounts, they do not represent effective
financial obligations, and should not be considered as liabilities for the
purpose of calculating economic-financial ratios.
19
<PAGE> 25
15. CAPITAL AND RESERVES
Capital at December 31, 1995 and 1994 consists of 10.390.846.695 common
shares with no par value.
Composition of capital and revenue reserves:
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Capital reserves
Subventions for investments 1.769.633 1.769.633
Remuneration of construction work in progress - own funds 261.929 230.685
Special reserve - Law 8200 2.358.664 2.358.664
Other 103.931 103.931
---------- ----------
Total 4.494.157 4.462.913
========== ==========
Revenue reserves:
Legal 83.386 83.386
Unrealized earnings 418.890 441.289
---------- ----------
Total 502.276 524.675
========== ==========
</TABLE>
16. PROPOSED DIVIDENDS
The Company's by-laws require a minimum dividend of 25% of net income,
adjusted in accordance with corporate law. Dividends were calculated as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Profit (loss) for the year (111.379) 135.787
Legal reserve (6.789)
Compensation of loss 111.379
Realization of unrealized income reserve 22.399 22.161
-------- --------
Basis of calculation 22.399 151.159
======== =======
Proposed dividend (25% in 1995 and 50% in 1994) 5.601 75.580
========= ========
Dividend per 1.000 shares 0,539 7,274
===== =====
</TABLE>
a) The Company has proposed that the balance of retained earnings be
retained for capital-expenditure requirements.
b) The Company has proposed that the dividend be paid within 60 days of
the stockholders' meeting.
20
<PAGE> 26
17. ENERGY SOLD
<TABLE>
<CAPTION>
1995 1994
--------------------------------- ---------------------------------
Mwh R$ Mwh R$
--- -- --- --
<S> <C> <C> <C> <C>
Invoiced:
Residential 6.199.759 698.824 5.472.573 642.738
Commercial 4.163.290 465.134 3.905.163 492.856
Industrial 8.238.430 465.848 8.101.613 507.671
Rural 31.500 2.685 27.542 2.795
Public authorities 862.234 89.657 807.042 88.027
Public illumination 556.665 31.957 562.370 44.947
Own consumption 70.236 7.444 47.553 6.326
Public services 1.023.021 64.901 1.044.103 63.332
---------- ----------- ---------- ---------
Total 21.145.135 1.826.450 19.967.959 1.848.692
Accrued 7.007 65.775
---------- ------------ ---------- ---------
Total direct sales 21.145.135 1.833.457 19.967.959 1.914.467
========== ========= ========== =========
Sold for resale 16.612 350 12.611 206
========== ============= ========== =========
</TABLE>
18. PENSION PLAN
The Company is a sponsor and is responsible for covering any insufficiency
in technical reserves in respect of the employees' supplementary pension
benefits, which are administered by the pension fund - BRASLIGHT. The
benefit plan's reserves are calculated by actuaries based on the method of
capitalization on aggregated values; the last actuarial valuation was at
December 31, 1994. LIGHT contributed with 1,59 times that contributed by
the participants, increased by an administrative charge of 2,37% of the
payroll of those who participate in BRASLIGHT.
Based on calculations made by independent actuaries, in addition to the
employees' monthly contributions, LIGHT contributed R$19.123 during 1995
(1994 - R$ 21.068).
The rates of contribution periods for plans (A) before 1994 and (B) after
1984 are as follows:
<TABLE>
<CAPTION>
A B
- -
<S> <C> <C>
Coverage after 60 Months 120 Months
Up to 50% of the social security limit 2,50% 1,75%
From 51% to 100% of the social security limit 5,00% 3,50%
From the social security limit to three times such limit 9,00% 7,00%
Between three to four times the benefit limit 9,60% 7,30%
Above four times the limit and up to 80 minimum salaries 15,00% 15,00%
</TABLE>
At December 31, 1995, the Company had an obligation with BRASLIGHT in
respect of differences on contributions and supplementary employees'
benefits resulting from the implementation of new limits on employees'
monthly contributions effective January 1, 1991, to be amortized over 30
years in monthly installments, with monetary correction and annual interest
of 7%.
The amount provided at December 31, 1995 was R$11.087, of which R$442 is
due within one year and R$10.645 after one year (1994 provision - R$10.021;
R$385 current and R$9.636 non-current).
21
<PAGE> 27
19. INSURANCE
The Company's principal assets, including fixed assets in service and under
construction and materials and supplies, are insured against fire for a
total of R$465.448 (1994 - R$449.889).
In conformity with specific legislation, a substantial part of the
Company's fixed assets, is not coverable by insurance.
20. REMUNERATION OF ADMINISTRATORS AND EMPLOYEES
The remuneration paid to administrators and employees in December 1995,
expressed in reais, was as follows:
<TABLE>
<CAPTION>
Administrators Employees
-------------- ---------
R$ R$
-- --
<S> <C> <C>
Lowest 7.274,18 463,27
Highest 7.274,18 7.274,18
</TABLE>
21. SPECIAL MONETARY CORRECTION
The Company's special monetary correction of permanent assets in 1991, made
in accordance with Law 8200, is being amortized or depreciated in
accordance with the estimated useful lives of these assets. During 1995
this amortization and depreciation aggregated R$66.150. This exppense is
not deductible for income tax purposes, nor is it considered in the cost
structure used to calculate electricity tariffs.
The balance of this special monetary correction as of December 31, 1995 was
as follows:
<TABLE>
<CAPTION>
R$
--
<S> <C>
Investments 3.220
Fixed assets 757.022
Deferred charges 35.987
--------
Total 796.229
=======
</TABLE>
22. CONTINGENCIES
a) The Rio de Janeiro Urban Industrial Trade Unions took court action
against LIGHT, demanding the payment of wage adjustments resulting from
the Bresser Plan and the Collor Plan. Recent pronouncements of the
Labor Superior Tribunal consider that no rights have been obtained in
relation to the Collor Plan and have restricted the rights obtained in
relation to the Bresser Plan up to the date of the union's collective
agreement. The amount of these restricted rights is not material, and
no provision has been made because in the opinion of the Company's
attorneys, the amount is not due.
Regarding the Bresser Plan court action, the Company was successful at
the first hearing and as to the Collor Plan, similar court hearings
have had favorable results. Consequently, no provisions have been made
for these labor contingencies, and the Company is confident that it
will win both actions.
b) There exist other labor actions against the Company, the amounts of
which have not yet been defined but will not be material; for this
reason no provision has been made.
c) Some industrial customers have questioned in the judiciary the
readjustment of electric energy tariffs approved by the order of the
DNAEE, order 38/86, 45/86, 155/86 - Cruzado Plan. The Company believes
22
<PAGE> 28
that there will not be significant net losses incurred from actions
already judged. In the opinion of the Companys' attorneys, there is a
possibility of the recovery of amounts deemed payable through the
tariff insufficiency account. Based on these arguments, LIGHT has not
made a provision for the contigencies.
23. RECONCILIATION BETWEEN LOSSES AND STOCKHOLDERS' EQUITY
EXPRESSED BY CORPORATE LAW AND PRICE-LEVEL RESTATEMENT
<TABLE>
<CAPTION>
December 31, 1995
---------------------------
Stockholders'
Profit Equity
------ -------------
<S> <C> <C>
By Corporate law 111.379 6.745.764
Reversal of 1994 adjustments to present value and tax provision (1.194)
------- ----------
Price - level restatement 110.185 6.745.764
======= =========
</TABLE>
24. RELATED PARTY TRANSACTIONS
Relevant operations with affiliated companies that are not otherwise
disclosed in the financial statements relate to the purchase of electricity
from Furnas Centrais Eletricas S.A., as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current liabilities 100.343 94.111
Expenses 621.529 700.394
</TABLE>
25. FINANCIAL INSTRUMENTS
On March 23, 1995 the Brazilian Securities and Commission (CVM), through
Instruction 235, established the requirement to disclose the market value
of financial instruments, whether recognized or not in the financial
statements.
LIGHT's only relevant financial asset that requires disclosure of market
value is the particpating interest in ELETROPAULO. As of November 30, 1995,
the adjusted equity value of the investment was the equivalent of R$211,70
per thousand shares, whereas the preferred share price was R$50,70 per
thousand shares.
26. INCOME TAX CHANGES
In December 1995, the Government introduced changes to the income tax law
(effective January 1, 1996), the significant provisions of which are
summarized below:
Monetary adjustment of the financial statements was discontinued;
The basic corporate income tax rate was decreased from 25% to 15%, with the
rate of surtax being decreased from 12% and 18% to a single rate of 10%,
calculated on taxable income exceeding R$240,000 (US$247,000);
The social contribution tax rate was decreased from 10% to 8%.
On January 24, 1996 the Company exercised the option under article 7 of Law
9.249/95 to make the tax payment on accumulated inflationary profit as of
December 31, 1995 at a rate of 10%. As a result, the provision for income
tax was adjusted, resulting in a reduction of such provision for the period
of R$15.508.
23
<PAGE> 29
27. SUBSEQUENT EVENTS
A. In accordance with the terms of Law 9163 and the objectives of the
National Privitization Program, LIGHT is conducting a corporate
reorganization through the spin-off to a newly formed company, Light
Participacoes S.A. - LIGHTPAR, of its assets and liabilities linked to
its investment in ELETROPAULO - Eletricidade de Sao Paulo S.A. (note
8). Under the plan of distribution, stockholders receive one share of
LIGHTPAR for each share of LIGHT held on December 31, 1995.
The principal aim of the spin-off is the separation of the assets that
are used for running LIGHT's services of generation, transmission and
distribution of electric energy from those that represent its indirect
participation in electricity services through its investment in
ELETROPAULO.
The transaction, which was approved by the stockholders on January 29,
1996 with a base date of December 31, 1995, was effected through the
transfer of the following assets and liabilities:
<TABLE>
<CAPTION>
Assets: R$
------------
<S> <C>
Investment in ELETROPAULO 3.148.798
Debentures issued by ELETROPAULO 142.852
Notes receivable from ELETROPAULO 175.707
Interest receivable from these instruments 279.604
Other 4.820
---------
Total 3.751.781
=========
Liabilities 6.277
=========
</TABLE>
B. On May 21, 1996, LIGHT's controlling stockholder, Centrais Eletricas
Brasileiras S.A. - ELETROBRAS, sold common shares of the Company
representing 54,67% of the total common shares and capital, of which a
consortium of five companies purchased 50,44% of total capital, as
follows:
<TABLE>
<CAPTION>
% E
--------
<S> <C>
Electricite de France 11,35
AES Corporation (USA) 11,35
Houston Industries (USA) 11,35
BNDES Participacoes (Brazil) 9,14
Companhia Siderurgica Nacional (Brazil) 7,25
------
Total 50,44
=====
</TABLE>
C. As discussed in Note 22(c) there are lawsuits brought by approximately
100 industrial companies against Light, alleging that price increases
from March to November 1986 were illegal. The Company's internal
estimates of such losses range up to US $75 million. The decisions of
the Superior Tribunal (STJ) have been favorable to the consumers, and
the Company does not foresee a reduction in the liability. The Company
may be able to recover from DNAEE, amounts reimbursed to its customers
through future rate increases. Based on the opinion of its internal
legal counsel concerning the legal process and the potential recovery
of such costs, the Company, in principle, does not believe that the
ultimate resolution of such lawsuits will have a material effect on its
financial position.
Certain consumers, arguing that such rate differences have affected the
rates from November 1986 to the present, have brought suits claiming
refunds for such differences, which the Company estimates to be in the
range of U.S. $700 million; however, the STJ has ruled initially in
favor of certain electric distribution companies. The Company's internal
legal counsel believes the Company's possibility of winning these
cases to be good.
- --------------------------------------------------------------------------------
24
<PAGE> 30
a (ii). The following condensed unaudited quarterly financial information of
Light as of March 31, 1996 and for the quarters ended March 31, 1996 and 1995
have been derived from the financial report prepared by Light to meet their
statutory reporting requirements stipulated by the Comissao de Valores
Mobiliarios ("CVM"), the governmental body which regulates securities in
Brazil.
<PAGE> 31
LIGHT - SERVICOS DE ELETRICIDADE S.A.
CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
(Expressed in thousands of Brazilian Reais, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net Sales 425,374 402,728
Operating Costs and Expenses:
Cost of Sales 292,346 294,074
General and Administrative 40,392 49,925
--------- ---------
Total Operating Costs and Expenses 332,738 343,999
--------- ---------
Operating Income 92,636 58,729
Interest Expense (3,927) (16,142)
Interest Income 8,883 22,094
Other Income (Expense) 743 (2,446)
--------- ---------
Income Before Taxes 98,335 62,235
Income Taxes 34,069 25,545
--------- ---------
NET INCOME $ 64,266 $ 36,690
========= =========
Income Per 1,000 Shares $6.18 $3.53
====== ======
</TABLE>
See Notes to Condensed Unaudited Financial Information.
- --------------------------------------------------------------------------------
<PAGE> 32
LIGHT - SERVICOS DE ELETRICIDADE S.A.
CONDENSED UNAUDITED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,312 772
Investments 59,673 37,101
Accounts receivable 287,679 248,057
Interest receivable -- 285,998
Note receivable -- 175,707
Income taxes receivable 75,364 73,963
Inventories 10,656 10,236
Prepaid and other 56,243 108,313
----------- -----------
Total current assets 490,927 940,147
----------- -----------
Fixed Assets 3,293,034 2,938,782
Investments 42,944 3,178,768
Accounts Receivable 73,225 75,260
Other Receivables and Deferred Charges 349,289 804,659
----------- -----------
TOTAL ASSETS $4,249,419 $7,937,616
=========== ===========
</TABLE>
See Notes to Condensed Unaudited Financial Information.
- --------------------------------------------------------------------------------
<PAGE> 33
LIGHT - SERVICOS DE ELETRICIDADE S.A.
CONDENSED UNAUDITED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Expressed in thousands of Brazilian Reais)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables $ 116,335 $ 109,450
Accrued payroll 9,656 12,756
Accrued taxes 106,115 69,606
Other accrued liabilities 115,932 168,863
----------- -----------
Total current liabilities 348,038 360,675
----------- -----------
LONG-TERM LIABILITIES
Debt 552,350 548,482
Reserves 250,136 247,702
Other 33,133 34,993
----------- -----------
Total long-term liabilities 835,619 831,177
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 526,228 1,183,067
Capital reserves 2,219,596 4,494,157
Revenue reserves 183,059 502,276
Revaluation reserves -- 479,451
Retained earnings 134,943 84,877
Other 1,936 1,936
----------- -----------
Total stockholders' equity 3,065,762 6,745,764
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,249,419 $7,937,616
=========== ===========
</TABLE>
See Notes to Condensed Unaudited Financial Information.
- --------------------------------------------------------------------------------
<PAGE> 34
LIGHT-SERVICOS DE ELETRICIDADE S.A.
NOTES TO THE CONDENSED UNAUDITED QUARTERLY FINANCIAL INFORMATION
1. Basis of Presentation
The condensed unaudited quarterly financial information is derived
from the Company's March 31, 1996 statutory report filed with the CVM. All
amounts are in Brazilian reais and have been prepared in conformity with
accounting principles generally accepted in Brazil.
2. Subsequent Events
(a) The stockholders confirmed during the first quarter of 1996, that
the payment of the dividend of R$5.6 million which was accrued and
proposed at December 31, 1995 should be increased to R$22.4
million.
(b) Eletrobras will assume US$346 million of Light's external debt in
settlement of a receivable of a similar amount owed by Eletrobras
to Light.
(c) In the first quarter of 1996 Light conducted a corporate
reorganization and spun-off its interest in ELETROPAULO.
<PAGE> 35
b. Pro Forma Financial Information
On May 30, 1996, AES, through certain subsidiaries, acquired for
approximately $393 million, common shares representing an 11.35% interest in
Light. The following unaudited pro forma consolidated balance sheet
represents AES's financial position at March 31, 1996 as if the acquisition by
the Company of the Light Interest had occurred on that date. The unaudited
pro forma statements of operations information combine the results of AES's
investment in Light for the year ended December 31, 1995 and the three months
ended March 31, 1996 on the equity method as if the acquisition by the Company
of the Light Interest had occurred on January 1, 1995. The acquisition of
Light will be accounted for using the purchase method.
The unaudited pro forma adjustments are based upon available
information and certain assumptions and estimates which the Company believes
are reasonable under the circumstances. The unaudited pro forma results do
not purport to be indicative of the results that would have been obtained had
the Light acquisition occurred at the beginning of the periods presented,
<PAGE> 36
nor are they intended to be a projection of future results. The unaudited pro
forma financial information should be read in conjunction with the notes
thereto.
<PAGE> 37
THE AES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Pro Forma Pro Forma
The Adjustments As Adjusted
AES for Light for Light
Corporation Acquisition Acquisition
- ----------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 207 $ -- $ 207
Short-term investments 50 -- 50
Accounts receivable 50 -- 50
Inventory 42 -- 42
Receivable from affiliates 11 -- 11
Prepaid expenses and other current assets 34 -- 34
---------- --------- ---------
TOTAL CURRENT ASSETS 394 -- 394
PROPERTY, PLANT AND EQUIPMENT:
Land 10 -- 10
Electric and steam generating facilities 1,619 -- 1,619
Furniture and office equipment 11 -- 11
Accumulated depreciation, depletion, and amort. (235) -- (235)
Construction in progress 198 -- 198
---------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 1,603 -- 1,603
OTHER ASSETS:
Deferred costs, net 31 11 (a) 42
Project development costs 43 -- 43
Investments in and advances to affiliates 52 393 (a) 445
Debt service reserves and other deposits 178 -- 178
Goodwill and other intangible assets, net 37 -- 37
Other assets 15 -- 15
---------- --------- ---------
TOTAL OTHER ASSETS 356 404 760
---------- --------- ---------
TOTAL $ 2,353 $ 404 $ 2,757
========== ========= =========
</TABLE>
See Notes to Pro Forma Financial Information
<PAGE> 38
THE AES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Pro Forma Pro Forma
The Adjustments As Adjusted
AES for Light for Light
Corporation Acquisition Acquisition
- --------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 43 $ -- $ 43
Income taxes payable 4 -- 4
Accrued interest 17 -- 17
Accrued and other liabilities 33 -- 33
Revolving bank loan - current portion 31 54(b) 85
Project financing debt - current portion 84 -- 84
------- ------- -------
TOTAL CURRENT LIABILITIES 212 54 266
LONG-TERM LIABILITIES:
Project financing debt 1,108 -- 1,108
Reimbursement agreement -- 225(b) 225
Revolving bank loan -- 125(b) 125
Other notes payable 125 -- 125
Deferred income taxes 159 -- 159
Other long-term liabilities 9 -- 9
------- ------- -------
TOTAL LONG-TERM LIABILITIES 1,401 350 1,751
MINORITY INTEREST 158 -- 158
STOCKHOLDERS' EQUITY:
Common stock 1 -- 1
Additional paid-in capital 294 -- 294
Retained earnings 300 -- 300
Cumulative foreign currency
translation adjustment (10) -- (10)
Less treasury stock at cost (3) -- (3)
------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 582 -- 582
------- ------- -------
TOTAL $ 2,353 $ 404 $ 2,757
======= ======= =======
</TABLE>
See Notes to Pro Forma Financial Information
<PAGE> 39
THE AES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Pro Forma Pro Forma
The Adjustments As Adjusted
AES for Light for Light
Corporation Acquisition Acquisition
- ------------------------------------------------------------------------------------
($ in millions, except per share amounts)
<S> <C> <C> <C>
REVENUES:
Sales and services $ 685 $ -- $ 685
OPERATING COSTS AND EXPENSES:
Cost of sales and services 405 -- 405
Selling, general and administrative expenses 32 -- 32
------ ------ ------
TOTAL OPERATING COSTS AND EXPENSES 437 -- 437
------ ------ ------
OPERATING INCOME 248 -- 248
OTHER INCOME AND (EXPENSE):
Interest expense (122) (27)(d) (149)
Interest income 27 -- 27
Equity in earnings of affiliates (net of
of income tax) 14 11 (c) 25
------ ------ ------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 167 (16) 151
Income taxes 57 (11)(e) 46
Minority Interest 3 -- 3
------ ------ ------
NET INCOME $ 107 $ (5) $ 102
====== ====== ======
NET INCOME PER SHARE $ 1.41 $(0.07) $ 1.34
====== ====== ======
</TABLE>
See Notes to Pro Forma Financial Information
<PAGE> 40
THE AES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Pro Forma Pro Forma
The Adjustments As Adjusted
AES for Light for Light
Corporation Acquisition Acquisition
- ---------------------------------------------------------------------------------------
($ in millions, except per share amounts)
<S> <C> <C> <C>
REVENUES:
Sales and services $ 172 $ -- $ 172
OPERATING COSTS AND EXPENSES:
Cost of sales and services 100 -- 100
Selling, general and administrative expenses 9 -- 9
------- ------- ------
TOTAL OPERATING COSTS AND EXPENSES 109 -- 109
------- ------- ------
OPERATING INCOME 63 -- 63
OTHER INCOME AND (EXPENSE):
Interest expense (28) (7)(d) (35)
Interest income 5 -- 5
Equity in earnings of affiliates (net of
income tax) 5 6 (c) 11
------- ------- ------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 45 (1) 44
Income taxes 15 (3)(e) 12
Minority Interest 1 -- 1
------- ------- ------
NET INCOME $ 29 $ 2 $ 31
======= ======= ======
NET INCOME PER SHARE $ 0.38 $ 0.03 $ 0.41
======= ======= ======
</TABLE>
See Notes to Pro Forma Financial Information
<PAGE> 41
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Basis of Presentation
The AES subsidiary which owns an 11.35% interest in Light is
participating in a consortium that owns a 50.44% controlling interest.
As a result, the Company has the ability to exert significant influence over
the operations of Light, and will record its investment using the equity
method.
The unaudited pro forma financial information presented is based on
Light's financial position and results of operations as of March 31, 1996 and
for the periods ended December 31, 1995 and March 31, 1996 during which time it
was controlled by Eletrobras, the Brazilian government utility holding company
(which owned approximately 81.6%). The unaudited pro forma financial
information has been prepared based on the Company's estimate of Light's
financial position and results of operation in conformity with U.S. generally
accepted accounting principles.
Pro forma equity in earnings of Light for the year ended December 31,
1995 has been translated into U.S. dollars at the average rate during the
year of R$0.92 to U.S.$1.00, and for the quarter ended March 31, 1996 at the
average rate of R$0.99 to U.S.$1.00.
2. Goodwill
The estimated excess of the purchase price over the Company's
proportionate share of the net assets acquired is being amortized over the 30
year life of the concession.
3. Financing
For purposes of the unaudited pro forma balance sheet, the
acquisition of the Light Interest was funded initially through drawings of $179
million under the Company's $425 million Credit Agreement and borrowings of
$225 million under the Reimbursement Agreement.
<PAGE> 42
4. Description of Unaudited Pro Forma Entries
(a) represents the investment in Light of $393 million and costs of
$11 million financed by borrowings of $225 million under the
Reimbursement Agreement and drawings of $179 million under the
Credit Agreement.
(b) represents the financing of the transaction described in (a).
(c) represents equity in earnings of Light, net of goodwill
amortization.
(d) represents interest expense associated with average borrowings
under the Reimbursement Agreement and the Credit Agreement during
the period, and amortization of deferred financing costs.
(e) represents the income tax benefit related to the interest costs.
<PAGE> 43
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 thereunto duly authorized.
The AES Corporation
(Registrant)
BY: WILLIAM R. LURASCHI
WILLIAM R. LURASCHI
GENERAL COUNSEL AND SECRETARY
Dated: June 10, 1996
<PAGE> 44
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10.61 $425,000,000 Credit Agreement, dated as of May 20, 1996,
among The AES Corporation, the Banks listed therein,
Barclays Bank PLC, Morgan Guaranty Trust Company of
New York, and Union Bank of California, N.A., as Fronting
Banks, and Morgan Guaranty Trust Company of New York, as Agent.
10.65 Reimbursement Agreement between AES Light, Inc. and Morgan
Guaranty Trust Company of New York, dated as of May 20, 1996.
10.66 Pledge Agreement, dated as of May 20, 1996, between AES
Light, Inc., and Morgan Guaranty Trust Company of New York.
10.67 Shareholders' Agreement, dated as of May 27, 1996, among AES
Coral Reef, Inc., Companhia Siderurgica Nacional, EDF
International S.A., Houston Industries Energy - Cayman, Inc.
(the "Shareholders") and BNDES Participacoes S.A.
10.68 Addendum to Shareholders Agreement, dated as of May 30, 1996,
among the Shareholders and InvestLight - Clube de Investimento
dos Empregados da Light.
<PAGE> 1
EXHIBIT 10.61
$425,000,000
CREDIT AGREEMENT
dated as of
May 20, 1996
among
The AES Corporation,
The Banks Listed Herein,
Barclays Bank PLC,
Morgan Guaranty Trust Company of New York
and
Union Bank of California, N.A.,,
as Fronting Banks,
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<S> <C>
Page
</TABLE>
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . 18
</TABLE>
ARTICLE II
THE CREDITS
<TABLE>
<S> <C>
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.02. Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.03. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.04. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.05. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.06. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.07. Fees. (a) Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.08. Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . 32
SECTION 2.09. Mandatory Repayments of the Loans and Cash
Collateralization of Letters of Credit . . . . . . . . . . . . . . . . 33
SECTION 2.10. Optional Prepayment of the Loans . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.11. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.12. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.13. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.14. Cash Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
ARTICLE III
CONDITIONS
<TABLE>
<S> <C>
SECTION 3.01. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.02. AES Finance Addition Date . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.03. Extension of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
- --------------------
*The Table of Contents is not a part of this Agreement.
i
<PAGE> 3
<TABLE>
<S> <C>
Page
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.02. Corporate and Governmental Authorization; No Contravention . . . . . . . 40
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.09. Material AES Entities . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.11. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . 43
SECTION 4.12. Representations in Subsidiary Guaranty True and Correct . . . . . . . . . 44
SECTION 4.13. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.14. Existing Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<S> <C>
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . 48
SECTION 5.04. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . 48
SECTION 5.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . 49
SECTION 5.07. Limitations on Project Exposure . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.08. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.09. Minimum Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . 51
SECTION 5.10. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.11. Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.12. Limitations on Investments, Guarantees and Commitments to Invest . . . . 52
SECTION 5.13. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.14. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . 55
SECTION 5.15. Use of Proceeds; Clean-Up Periods . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.16. Cash Flow Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Page
</TABLE>
<TABLE>
<S> <C>
SECTION 5.17. Cash Flow to Total Debt Ratio . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.18. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
ARTICLE VI
DEFAULTS
<TABLE>
<S> <C>
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.03. Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
ARTICLE VII
THE AGENT
<TABLE>
<S> <C>
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.09. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
<TABLE>
<S> <C>
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . 63
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans . . . . . . . . 68
</TABLE>
ARTICLE IX
GUARANTY
<TABLE>
<S> <C>
SECTION 9.01. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.02. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Page
</TABLE>
<TABLE>
<S> <C>
SECTION 9.03. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances . . . . . . . . . . . . . . . . 70
SECTION 9.04. Waiver by AES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.05. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.06. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.07. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
ARTICLE X
MISCELLANEOUS
<TABLE>
<S> <C>
SECTION 10.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.08. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . 76
SECTION 10.09. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . . . 76
SECTION 10.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.11. Fronting Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
Appendix
Pricing Schedule
Schedule I - Existing Debt
Schedule II - Existing Liens
Schedule III - Existing Agreements with Affiliates
Schedule IV - Existing Letters of Credit
Schedule V - Non-Conforming Letter of Credit
Exhibit A - Note
Exhibit B - Subsidiary Guaranty
Exhibit C - Closing Date Opinion of the General
iv
<PAGE> 6
Counsel of AES Borrowers
Exhibit D - Opinion of Davis Polk & Wardwell,
Special Counsel for the Agent
Exhibit E - AES Finance Addition Date Opinion of
the General Counsel of AES
Exhibit F - Opinion of Counsel to AES Finance in
AES Finance's Jurisdiction of
Incorporation
Exhibit G - Assignment and Assumption Agreement
Exhibit H - Form of Extension Agreement
v
<PAGE> 7
CREDIT AGREEMENT
AGREEMENT dated as of May 20, 1996 among THE AES CORPORATION, the
BANKS listed on the signature pages hereof, BARCLAYS BANK PLC, MORGAN GUARANTY
TRUST COMPANY OF NEW YORK and UNION BANK OF CALIFORNIA, N.A., as Fronting
Banks, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Additional Permitted Subordinated Debt Indenture" means the
indenture or other agreement pursuant to which any Additional Permitted
Subordinated Debt is issued, as the same may, subject to Section 5.11, be
amended, modified or supplemented and in effect from time to time.
"Additional Permitted Subordinated Debt" means Debt of AES (other
than Debt evidenced by the Existing Subordinated Notes) (i) in an aggregate
principal amount of not more than $225,000,000 and (ii) which does not require
any payment of principal prior to December 31, 2002 and which has subordination
provisions no less favorable to the Banks than those applicable to the Existing
Subordinated Notes and other terms and provisions applicable to AES and its
Subsidiaries that are no more restrictive in any material respect (including,
without limitation, covenants and events of default) than those applicable to
the Existing Subordinated Notes or otherwise acceptable to the Required Banks.
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.06(b).
"Adjusted Parent Operating Cash Flow" means, for any period, (i)
Parent Operating Cash Flow for such period less (ii) the sum of the following
expenses (determined without duplication), in each case to the extent paid by a
<PAGE> 8
Borrower during such period and regardless of whether any such amount was
accrued during such period:
(A) development expenses;
(B) income tax expenses of AES and its Subsidiaries; and
(C) corporate overhead expenses.
"Administrative Questionnaire" means, with respect to each Bank,
an administrative questionnaire in the form prepared by the Agent and submitted
to the Agent (with a copy to AES) duly completed by such Bank.
"AES" means The AES Corporation, a Delaware corporation, and its
successors.
"AES Coral Reef" means AES Coral Reef, Inc., a limited liability
company organized and existing under the laws of The Cayman Islands, and its
successors.
"AES Deepwater" means AES Deepwater, Inc., a Delaware corporation
and a Subsidiary of AES, and its successors.
"AES Electric" means Applied Energy Services Electric Limited, an
English corporation, and its successors.
"AES Finance" means a single Wholly-Owned Consolidated Subsidiary
of AES organized under the laws of The British Virgin Islands, The Netherlands
or The Cayman Islands and designated by AES in writing as AES Finance, and the
successors of such Subsidiary.
"AES Finance Addition Date" means the date on or after the Closing
Date on which the Agent shall have received the documents specified in or
pursuant to Section 3.02.
"AES Hawaii" means AES Hawaii Management Company, Inc., a Delaware
corporation and a Subsidiary of AES, and its successors.
"AES Light" means AES Light, Inc., a Delaware corporation and a
Subsidiary of AES, and its successors.
"AES Light Non-Recourse Facility" means the Reimbursement
Agreement dated as of May 20, 1996 between AES
2
<PAGE> 9
Light and Morgan Guaranty Trust Company of New York, as LC Issuer, as amended.
"AES March 1996 Form 10-Q" means AES's quarterly report on Form
10-Q for the fiscal quarter ended March 31, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"AES Management Group" means (i) individuals who are members of
the board of directors or officers of AES or the president of any Material AES
Entity, (ii) their respective spouses, children, grandchildren, siblings and
parents, (iii) trusts established for the sole or principal benefit of Persons
described in clauses (i) and (ii) above, (iv) heirs, executors, administrators
and personal or legal representatives of Persons described in clauses (i) and
(ii) above, and (v) any corporation or other Person that is controlled by, and
the majority equity interests in which is directly owned by, Persons described
in clauses (i) and (ii) above.
"AES 1995 Form 10-K" means AES's annual report on Form 10-K for
the year ended December 31, 1995, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
"AES Oklahoma" means AES Oklahoma Management Co., Inc., a Delaware
corporation and a Subsidiary of AES, and its successors.
"AES Placerita" means AES Placerita, Inc., a Delaware corporation
and an indirect Subsidiary of AES, and its successors.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls AES (a "Controlling Person") or
(ii) any Person (other than AES or a Subsidiary) which is controlled by or is
under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i)
in the case of its Domestic Loans, its Domes-
3
<PAGE> 10
tic Lending Office and (ii) in the case of its Euro-Dollar Loans, its
Euro-Dollar Lending Office.
"Asset Disposition" has the meaning set forth in the Existing
Subordinated Note Indenture.
"Assignee" has the meaning set forth in Section 10.06(c).
"Automatic Acceleration Event" means the occurrence, with respect
to either Borrower, of any of the Events of Default listed in clauses (g) and
(h) of Section 6.01.
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.06(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means (i) prior to the AES Finance Addition Date, AES
and (ii) from and after the AES Finance Addition Date, AES or AES Finance, as
the context may require; prior to the AES Finance Addition Date, "Borrowers"
means AES and from and after the AES Finance Addition Date, "Borrowers" means
AES and AES Finance.
"Borrowing" means a borrowing hereunder consisting of Loans made
to a single Borrower at the same time by the Banks pursuant to Article II. A
Borrowing is a "Domestic Borrowing" if such Loans are Domestic Loans or a
"Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans.
"Cash Collateral Account" has the meaning set forth in Section
2.14.
"Cash Flow Coverage Ratio" means, for any period, the ratio of (i)
Adjusted Parent Operating Cash Flow for such period to (ii) Corporate Charges
for such period.
"Cash Flow to Total Debt Ratio" means, on any date, the ratio of
(i) Adjusted Parent Operating Cash Flow for the period of four consecutive
fiscal quarters ended on,
4
<PAGE> 11
or most recently prior to, such date to (ii) Debt of the Borrowers at such
date.
"Closing Date" means the date on or after the Effective Date on
which the Agent shall have received the fees and documents specified in or
pursuant to Section 3.01.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank in the Appendix hereto, as such amount may
be reduced from time to time pursuant to Section 2.08.
"Consolidated Debt" means at any date the Debt of AES and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Net Income" means for any period the consolidated
net income (or loss) of AES and its Consolidated Subsidiaries for such period.
"Consolidated Subsidiary" means at any date with respect to any
Person, any Subsidiary of such Person or other entity the accounts of which
would be consolidated with those of such Person in its consolidated financial
statements if such statements were prepared as of such date.
"Consolidated Tangible Net Worth" means at any date the
consolidated stockholders' equity of AES and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. For
purposes of this definition "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated stockholders' equity) of (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to June 30, 1995 in the book
value of any asset owned by AES or a Consolidated Subsidiary, (ii) all
Investments made after June 30, 1995 in unconsolidated Subsidiaries and all
equity investments made after such date in Persons which are not Subsidiaries
and (iii) all unamortized debt discount and expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, anticipated
future benefit of tax loss carry-forwards, copyrights, organization costs,
capitalized project development costs and other intangible assets.
"Corporate Charges" means, for any period, the sum of the
following amounts (determined without duplication), in each case to the extent
paid by a Borrower during such
5
<PAGE> 12
period and regardless of whether any such amount was accrued during such
period:
(A) interest expense of any Borrower for such period;
(B) rental expense of any Borrower for such period; and
(C) dividends paid on AES's capital stock during such period.
"Debt" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all obligations (whether contingent or non-contingent) of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit or similar instrument, (vi) all Debt secured by a Lien on any asset of
such Person, whether or not such Debt is otherwise an obligation of such
Person, and (vii) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Designated Transaction" means the transaction between AES and AES
Deepwater described in the memorandum dated August 24, 1995 from AES to the
Banks.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to AES and the Agent.
6
<PAGE> 13
"Domestic Loan" means a Loan to be made by a Bank as a Domestic
Loan in accordance with the applicable Notice of Borrowing or pursuant to
Article VIII.
"Effective Date" means the date this Agreement becomes effective
in accordance with Section 10.09.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means AES, its Subsidiaries and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with AES or any of its
Subsidiaries, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to AES and the Agent.
"Euro-Dollar Loan" means a Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.06(b).
7
<PAGE> 14
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.06(b).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Convertible Subordinated Debentures" means AES's 6 1/2%
Convertible Subordinated Debentures due 2002 issued pursuant to the Existing
Convertible Subordinated Debenture Indenture.
"Existing Convertible Subordinated Debenture Indenture" means the
Indenture dated as of March 1, 1992 between AES and Morgan Guaranty Trust
Company of New York, as Trustee, relating to the Existing Convertible
Subordinated Debentures, as such Indenture may, subject to Section 5.11, be
amended, modified or supplemented and in effect from time to time.
"Existing Credit Facility" means the Credit Agreement dated as of
September 8, 1995 among AES, the banks listed therein, Barclays Bank PLC and
Union Bank as fronting banks and as managing-agents, Banque Nationale de Paris,
Credit Lyonnais, New York Branch, The First National Bank of Chicago, The
Industrial Bank of Japan Trust Company, NationsBank, N.A. (Carolinas), The
Sanwa Bank Limited, New York Branch, Standard Chartered Bank and Toronto
Dominion (New York), Inc., as Co-Agents, and Morgan Guaranty Trust Company of
New York, as agent, as amended.
"Existing Letter of Credit" means a Letter of Credit (as defined
in the Existing Credit Facility) issued by Barclays Bank PLC or Union Bank
under the Existing Credit Facility that is outstanding on the Effective Date.
"Existing Subordinated Notes" means AES's 9 3/4% Senior
Subordinated Notes due 2000 issued pursuant to the Existing Subordinated Note
Indenture.
"Existing Subordinated Note Indenture" means the Indenture dated
as of June 15, 1993 between AES and The Bank of New York, as Trustee, relating
to the Existing Subordinated Notes, as such Indenture may, subject to Section
5.11, be amended, modified or supplemented and in effect from time to time.
"Extension of Credit" means (i) a Borrowing pursuant to Section
2.01 or (ii) the issuance of a Letter of Credit pursuant to Section 2.03.
8
<PAGE> 15
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day; provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day on such transactions as determined by the
Agent.
"Fee Letter" has the meaning specified in Section 3.01.
"Financing Documents" means this Agreement, the Notes and the
Subsidiary Guaranty.
"Fronting Bank" means (i) with respect to the initial Letters of
Credit deemed to have been issued pursuant to the second sentence of Section
2.03(a), Barclays Bank PLC or Union Bank of California, as the case may be, and
(ii) with respect to all other Letters of Credit, Morgan Guaranty Trust Company
of New York.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means, with respect to either Borrower, the other
Borrower.
9
<PAGE> 16
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 10.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date; and
(2) with respect to each Domestic Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
10
<PAGE> 17
"Investment" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
"Investment and Guarantee Commitments" means, without duplication,
(i) all commitments (contingent or otherwise) by a Borrower to make Investments
and (ii) all obligations (contingent or otherwise but excluding obligations
hereunder, whether under Article IX or otherwise) of a Borrower to make
payments under Guarantees.
"Letter of Credit" means a letter of credit issued by a Fronting
Bank pursuant to Section 2.03(a).
"Letter of Credit Commission Rate" means a rate per annum
determined in accordance with the annexed Pricing Schedule.
"Letter of Credit Liabilities" means, at any time and in respect
of any Letter of Credit, the sum, without duplication, of (i) the amount
available for drawing under such Letter of Credit (without regard to whether
any conditions to drawing thereunder can then be met) plus (ii) the aggregate
unpaid amount of all Reimbursement Obligations in respect of previous drawings
made under such Letter of Credit.
"Level I Status" has the meaning set forth in the annexed Pricing
Schedule.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a
security interest, in respect of such asset. For the purposes of this
Agreement, AES or any of its Subsidiaries shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LIGHT" means Light-Servicos de Electricidades, S.A., an
integrated utility servicing Rio de Janeiro which is being privatized by the
government of Brazil.
"LIGHT Acquisition" means the acquisition by AES Coral Reef
pursuant to the auction of such shares through Sistema Electronico de Negociaco
Nacional of shares representing at least a 10% ownership interest in the common
equity of LIGHT and at least 10% of the voting power of all
11
<PAGE> 18
shares entitled to vote at a general shareholder's meeting of LIGHT.
"LIGHT Acquisition Letter of Credit" means a Letter of Credit
issued for the account of AES for the benefit of Camara de Liquidacion e
Custodia S/A - CLC to secure AES Coral Reef's obligation to pay the purchase
price in respect of the LIGHT Acquisition.
"Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans"
means Domestic Loans or Euro-Dollar Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.06(b).
"Material AES Entity" means (i) any Subsidiary Guarantor, (ii) any
of AES Connecticut Management Co., Inc., AES Thames, Inc., AES Barbers Point,
Inc. and AES Shady Point, Inc. and (iii) any other Person in which AES has a
direct or indirect equity Investment if such Person's contribution to Parent
Operating Cash Flow for the four most recently completed fiscal quarters of AES
constitutes 15% or more of Parent Operating Cash Flow for such period.
"Material Debt" means Debt (other than the Loans and the
Reimbursement Obligations) of either Borrower arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $5,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Net Cash Proceeds" has the meaning set forth in the Existing
Subordinated Note Indenture.
"Notes" means promissory notes of each Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of such Borrower to
repay the Loans made to it, and "Note" means any one of such promissory notes
issued hereunder.
12
<PAGE> 19
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Issuance" has the meaning set forth in Section 2.03(d).
"Obligors" means the Borrowers and the Subsidiary Guarantors.
"Other LIGHT Non-Recourse Collateral" means letters of credit,
guarantees, bid bonds and similar instruments, cash proceeds of Debt and/or
securities purchased with cash proceeds of Debt, in each case which are
recourse only to AES Light, AES Coral Reef or any other Subsidiary of AES
having a direct or indirect interest in LIGHT.
"Parent" means, with respect to any Bank or Fronting Bank, any
Person controlling such Bank or Fronting Bank, as the case may be.
"Parent Operating Cash Flow" means, for any period, the sum of the
following amounts (determined without duplication), but only to the extent
received in cash by a Borrower from a Person other than a Borrower during such
period:
(A) dividends paid to a Borrower by its Subsidiaries during such
period;
(B) consulting and management fees paid to a Borrower for such
period;
(C) tax sharing payments made to a Borrower during such period;
(D) interest and other distributions paid during such period with
respect to cash and other Temporary Cash Investments of a Borrower (other
than with respect to amounts on deposit in the Cash Collateral Account);
and
(E) other cash payments made to a Borrower by its Subsidiaries
other than (i) returns of invested capital, (ii) payments of the principal
of Debt of any such Subsidiary to such Borrower, (iii) payments in an
amount equal to the aggregate amount released from debt service reserve
accounts upon the issuance of Letters of Credit for the benefit of the
beneficiaries of such accounts.
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For purposes of determining Parent Operating Cash Flow:
(1) net cash payments received by AES Electric during any period
which could have been, but were not, paid as a dividend to AES during such
period due to cash management considerations may be included in Parent
Operating Cash Flow for such period; provided that (x) AES Electric shall have
satisfied all of the provisions of clauses (x), (y) and (z) of subsection
5.12(c)(i) (without giving effect to the proviso to clause (y) thereof); (y)
AES Electric shall engage in no business or other activity, shall enter into no
binding agreements and shall incur no obligations other than (A) the holding of
the capital stock and Debt obligations permitted under clause 5.12(c)(i)(x),
(B) the holding of cash received from its Subsidiaries and the investment
thereof in Temporary Cash Investments, (C) the payment of dividends to AES, (D)
ordinary business development activities and (E) the making of the Investments
the obligations to make which are permitted under Section 5.12(c)(ii) and (z)
any amounts so included will not be included in Parent Operating Cash Flow if
and when paid to a Borrower in any subsequent period;
(2) if at any time there shall exist an event or condition which
permits any holder to accelerate the maturity date of any Debt of, or terminate
its commitment to extend credit to, any Subsidiary, then the contributions of
such Subsidiary to Parent Operating Cash Flow for any period ending at or prior
to such time shall be eliminated and Parent Operating Cash Flow shall be
calculated after giving effect to such elimination; and
(3) if any Subsidiary of a Borrower is sold or otherwise disposed
of (by way of merger, sale of capital stock, sale of assets or otherwise), (x)
the net cash proceeds from such sale or other disposition shall not be included
in Parent Operating Cash Flow for any period and (y) the contributions of such
Subsidiary to Parent Operating Cash Flow for any period shall be eliminated and
Parent Operating Cash Flow shall be calculated after giving effect to such
elimination.
"Participant" has the meaning set forth in Section 10.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or
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organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code
and either (i) is maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii) has at any time
within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.
"Power Project" means an electric power or thermal energy
generation or cogeneration facility or related facilities, and its or their
related electric power transmission, distribution, fuel supply and fuel
transportation facilities, together with its or their related power supply,
thermal energy and fuel contracts as well as other contractual arrangements
with customers, suppliers and contractors.
"Power Project Debt" means Debt of a Subsidiary of AES permitted
by Section 5.08(a)(ii).
"Power Project Default" means any event or condition which results
in the acceleration of the maturity of any Power Project Debt or enables the
holder of such Power Project Debt or any Person acting on such holder's behalf
to then accelerate the maturity thereof, or failure to pay any Power Project
Debt at the final maturity thereof.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"Reference Banks" means the principal London offices of
NationsBank, N.A. (Carolinas), Barclays Bank PLC and Morgan Guaranty Trust
Company of New York, and "Reference Bank" means any one of such Reference
Banks.
"Refunding Borrowing" means a Borrowing which, after application
of the proceeds thereof, results in no net increase in the Total Outstandings
of any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
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"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Obligations" means at any date the obligations then
outstanding of the Borrowers under Section 2.03(f) to reimburse the Fronting
Banks for amounts drawn under Letters of Credit.
"Required Banks" means at any time Banks having at least 66 2/3%
in amount of the aggregate Total Exposures at such time.
"Restricted Payment" means (i) any dividend or other distribution
on any shares of AES's capital stock (except dividends payable solely in shares
of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of AES's capital stock
or (b) any option, warrant or other right to acquire shares of AES's capital
stock.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.
"Significant AES Entity" means (i) any Material AES Entity and
(ii) any other Person in which AES has a direct or indirect equity Investment
if (A) such Person's contribution to Parent Cash Flow for the four most
recently completed fiscal quarters of AES constitutes 10% or more of Parent
Cash Flow for such period, or (B) AES's direct or indirect interest in the
total assets of such Person if such Person is a Consolidated Subsidiary or in
the net assets of such Person in all other cases is at least equal to 10% of
the consolidated assets of AES and its Consolidated Subsidiaries, taken as a
whole, or AES's direct or indirect interest in the total net income of such
Person (for the preceding fiscal quarter) is at least equal to 10% of the net
income of AES and its Consolidated Subsidiaries (for the preceding fiscal
quarter) taken as a whole.
"Subordinated Debt" means Debt in respect of the Existing
Subordinated Notes and the Existing Convertible Subordinated Debentures and
Additional Permitted Subordinated Debt.
"Subordinated Note Indenture" means the Existing Subordinated Note
Indenture, the Existing Convertible Subordinated Debenture Indenture and the
Additional Permitted Subordinated Debt Indenture.
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"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Subsidiary Guarantors" means (i) prior to the first day, if any,
on which both (x) Level I Status shall exist and (y) there is no Debt and no
letters of credit outstanding under the AES Light Non-Recourse Facility and all
commitments to extend credit thereunder have been terminated, AES Oklahoma and
AES Hawaii and (ii) on and after such first day, if any, AES Hawaii.
"Subsidiary Guaranty" means the Subsidiary Guaranty, substantially
in the form of Exhibit B hereto, given by the Subsidiary Guarantors for the
benefit of the Banks, the Fronting Banks and the Agent, as the same may be
amended from time to time.
"Temporary Cash Investment" means any Investment in (A)(i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Corporation and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or trust
company which is organized or licensed under the laws of the United States or
any state thereof and has capital, surplus and undivided profits aggregating at
least $500,000,000, (iv) medium term notes, asset backed securities, bonds,
notes and letter of credit supported instruments, issued by any entity
organized under the laws of the United States, or any state or municipality of
the United States and rated in any of the three highest rated categories by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc., (v)
repurchase agreements with respect to securities described in clause (i) above
entered into with an office of a bank or trust company meeting the criteria
specified in clause (iii) above, (vi) Euro-Dollar certificates of deposit
issued by any bank or trust company which has capital and unimpaired surplus of
not less than $500,000,000 or (vii) with respect to a Subsidiary, any category
of investment designated as permissible investments under such Subsidiary's
project loan documentation, provided in each case (except clause (vii)) that
such Investment matures within fifteen months from the date of acquisition
thereof by AES or a Subsidiary and (B) registered investment companies that are
"money market
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funds" within the meaning of Rule 2a-7 under the Investment Company Act of
1940.
"Termination Date" means May 20, 1999, or such later date to which
the Termination Date shall have been extended pursuant to Section 2.01(b), or,
if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case the Termination Date shall be the next preceding
Euro-Dollar Business Day.
"Total Exposure" means at any time with respect to each Bank, its
Commitment or, if the Commitments shall have terminated, its Total
Outstandings.
"Total Outstandings" means at any time, as to any Bank, the sum of
the aggregate outstanding principal amount of such Bank's Loans and its
participation in the aggregate outstanding Letter of Credit Liabilities.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by AES.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by
AES's
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independent public accountants) with the most recent audited consolidated
financial statements of AES and its Consolidated Subsidiaries delivered to the
Banks; provided that, if AES notifies the Agent that AES wishes to amend any
covenant in Article V to eliminate the effect of any change in generally
accepted accounting principles on the operation of such covenant (or if the
Agent notifies AES that the Required Banks wish to amend Article V for such
purpose), then AES's compliance with such covenant shall be determined on the
basis of generally accepted accounting principles in effect immediately before
the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to AES and the Required Banks.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend.
(a) Each Bank severally agrees, on the terms and conditions
set forth in this Agreement, to make loans to the Borrowers pursuant to this
Section 2.01(a) from time to time during the Revolving Credit Period in amounts
such that the Total Outstandings of such Bank at any time shall not exceed the
amount of its Commitment at such time. Each Borrowing under this subsection
(a) shall be in an aggregate principal amount of $3,000,000 or any larger
multiple of $1,000,000 (except that any such Borrowing may be in the aggregate
amount available in accordance with Section 3.03(c)) and shall be made from the
several Banks ratably in proportion to their respective Commitments. Within
the foregoing limits, a Borrower may borrow under this Section 2.01(a), repay,
or, to the extent permitted by Section 2.10, prepay Loans and reborrow at any
time during the Revolving Credit Period. Prior to the earlier of (i) July 31,
1996 and (ii) the date on which AES receives the proceeds of at least
$225,000,000 of Additional Permitted Subordinated Debt, Loans may not be used,
directly or indirectly, to provide cash collateral to secure AES Coral Reef's
bid in connection with the LIGHT Acquisition or to purchase securities used as
collateral to secure such bid unless the outstanding amount of Other LIGHT
Non-Recourse Collateral posted to secure AES Coral Reef's bid in connection
with the LIGHT Acquisition is greater than or equal to $225,000,000.
(b) Extension of Termination Date. The Termination Date may
be extended, in the manner set forth in this subsection (b), on May 20, 1998
and on May 20, 1999
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(each, an "Extension Date"), in each case for a period of one year after the
Termination Date theretofore in effect. If AES wishes to request an extension
of the Termination Date on any Extension Date, it shall give written notice to
that effect to the Agent not less than 45 nor more than 90 days prior to such
Extension Date, whereupon the Agent shall notify each of the Banks of such
notice. Each Bank will use its best efforts to respond to such request,
whether affirmatively or negatively, within 30 days. If all Banks respond
affirmatively (any Bank which does not respond being deemed to have responded
negatively), then, subject to receipt by the Agent prior to such Extension Date
of counterparts of an Extension Agreement in substantially the form of Exhibit
H duly completed and signed by all of the parties hereto, the Termination Date
shall be extended, effective on such Extension Date, for a period of one year
to the date stated in such Extension Agreement.
SECTION 2.02. Notice of Borrowing. (a) The relevant Borrower
shall give the Agent notice (a "Notice of Borrowing") not later than 11:00 A.M.
(New York City time) on (x) the date of each Domestic Borrowing and (y) the
third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are Domestic
Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's ratable
share of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by any Borrower.
(c) Not later than 2:00 P.M. (New York City time) on the date of
each Borrowing, each Bank shall (except as provided in subsection (d) of this
Section) make available its ratable share of such Borrowing, in Federal or
other funds immediately available in New York City, to the Agent
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at its address referred to in Section 10.01. Unless the Agent determines that
any applicable condition specified in Article III has not been satisfied, the
Agent will make the funds so received from the Banks available to the Borrower
requesting such Borrowing at the Agent's aforesaid address.
(d) If any Bank makes a new Loan hereunder to either Borrower on
a day on which such Borrower is to repay all or any part of an outstanding Loan
from such Bank, such Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference (if any) between the
amount being borrowed and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (c), or remitted by such
Borrower to the Agent as provided in Section 2.11, as the case may be.
(e) Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such Bank
has made such share available to the Agent on the date of such Borrowing in
accordance with subsections (c) and (d) of this Section 2.02 and the Agent may,
in reliance upon such assumption, make available to the Borrower requesting
such Borrowing on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Agent, such Bank
and such Borrower severally agree to repay to the Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to such Borrower until the date such amount
is repaid to the Agent, at (i) in the case of such Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate applicable
thereto pursuant to Section 2.06 and (ii) in the case of such Bank, the Federal
Funds Rate. If such Bank shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
SECTION 2.03. Letters of Credit.
(a) Issuance of Letters of Credit. Subject to the terms and
conditions hereof, Morgan Guaranty Trust Company of New York, as Fronting Bank,
agrees to issue letters of credit under this Section 2.03(a), upon either
Borrower's request and for such requesting Borrower's account, from time to
time during the Revolving Credit Period. In addition, and notwithstanding any
reference in any Existing Letter of Credit to the Existing Credit Facility, on
and as of the Effective Date, each Existing
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Letter of Credit shall be deemed to be a Letter of Credit and to have been
issued on the Effective Date (by the Fronting Bank that issued such Existing
Letter of Credit under the Existing Credit Facility) pursuant to this Section
2.03(a); provided however, that nothing in this Section 2.03(a) shall extend,
modify or otherwise affect the existing expiry date under any such Existing
Letter of Credit.
(b) Participations in Letters of Credit. Upon the issuance (or
deemed issuance) of each Letter of Credit by a Fronting Bank under Section
2.03(a), such Fronting Bank shall be deemed, without further action by any
party hereto, to have sold to each Bank (other than such Fronting Bank) and
each such Bank shall be deemed, without further action by any party hereto, to
have purchased from such Fronting Bank, a participation in such Letter of
Credit and the related Letter of Credit Liabilities, in the amount required so
that the participations of the Banks (including such Fronting Bank's retained
participation, if any) therein shall be in proportion to their respective
Commitments.
(c) Required Terms. Each Letter of Credit (other than the Letter
of Credit identified on Schedule V) issued hereunder shall:
(i) In the case of any Letter of Credit other than a LIGHT
Acquisition Letter of Credit, by its terms expire (x) no earlier than 30
days after its date of issue and (y) no later than the earlier of (1) five
Domestic Business Days prior to the Termination Date and (2) eighteen
months after its date of issue (except that the term of Letters of Credit
used to support debt service reserves shall not exceed 180 days);
(ii) be in a face amount of (x) not less than $300,000 and (y)
not more than the amount that would, after giving effect to the issuance
thereof (and the related purchase and sale of participations therein
pursuant to Section 2.03(b)) cause the Total Outstandings of any Bank to
equal its Commitment;
(iii) be in a form acceptable to the Fronting Bank; and
(iv) in the case of a LIGHT Acquisition Letter of Credit, expire
no later than July 15, 1996.
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(d) Notice of Issuance. Except in the case of Letters of Credit
deemed, pursuant to the second sentence of subsection (a)(ii) above, to be
issued on the Effective Date, a Borrower may request that a Letter of Credit be
issued by giving the Agent and the Fronting Bank for such Letter of Credit a
notice (a "Notice of Issuance") at least two Domestic Business Days before such
Letter of Credit is to be issued, specifying:
(i) the date of issuance of such Letter of Credit;
(ii) the expiry date of such Letter of Credit (which shall comply
with the requirements of Section 2.03(c)(i));
(iii) the proposed terms of such Letter of Credit, including the
face amount thereof (which shall comply with the requirements of Section
2.03(c)(ii));
(iv) the transaction that is to be supported or financed with
such Letter of Credit, including identification of the Power Project, if
any, to which such transaction relates and specifying whether or not such
Letter of Credit is a LIGHT Acquisition Letter of Credit; and
(v) the identity of the Fronting Bank for such Letter of
Credit, which shall comply with the definition of Fronting Bank.
Upon the receipt of a Notice of Issuance, the Agent shall promptly notify each
Bank of the contents thereof and of the amount of such Bank's participation in
such Letter of Credit and such Notice of Issuance shall not thereafter be
revocable by the Borrower giving such Notice.
(e) Drawings under Letters of Credit.
(i) Upon receipt from the beneficiary of any Letter of Credit of
demand for payment under such Letter of Credit, the Fronting Bank shall
determine in accordance with the terms of such Letter of Credit whether
such request for payment should be honored.
(ii) If the Fronting Bank determines that a demand for payment by
the beneficiary of a Letter of Credit should be honored, the Fronting Bank
shall make available to the beneficiary in accor-
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dance with the terms of such Letter of Credit the amount of the drawing
under such Letter of Credit. The Fronting Bank shall thereupon promptly
notify the relevant Borrower and each Bank of the amount of such drawing
paid by it and the amount of each Bank's participation therein.
(f) Reimbursement and Other Payments by the Borrower.
(i) If any amount is drawn under any Letter of Credit issued for
the account of a Borrower, such Borrower irrevocably and unconditionally
agrees to reimburse the applicable Fronting Bank for all amounts paid by
such Fronting Bank upon such drawing, together with any and all reasonable
charges and expenses which any Bank or Fronting Bank may pay or incur
relative to such drawing, and all such amounts due from such Borrower shall
bear interest, payable on the date upon which such amounts shall be due and
payable, on the amount drawn for each day from and including the date such
amount is drawn to but excluding the date such reimbursement payment is due
and payable at a rate per annum equal to the rate applicable to Domestic
Loans for such day. Such reimbursement payment shall be due and payable
not later than 10:00 A.M. (New York City time) on the second Domestic
Business Day succeeding the date the applicable Fronting Bank notifies the
relevant Borrower of such drawing, together with interest thereon for each
day until the date of payment at a rate per annum equal to the rate
applicable to Domestic Loans for each such day. Any overdue reimbursement
payment, or overdue interest thereon, shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of the
rate applicable to Domestic Loans for such day plus 2%.
(ii) Each payment to be made by a Borrower pursuant to this
Section shall be made, in Federal or other funds immediately available, to
the applicable Fronting Bank at its address referred to in Section 10.01.
(iii) The obligations of each Borrower to reimburse the Fronting
Banks under this Section 2.03(f) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms
of this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
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(1) any lack of validity or enforceability of any
Financing Document;
(2) any amendment or waiver of or any consent to
departure from any Financing Document (except, in the case of an
effective amendment to, waiver of or consent to a departure from
any provision of this Agreement, to the extent specified herein);
(3) the existence of any claim, set-off, defense or other
right which either Borrower may have at any time against the
beneficiary of any Letter of Credit (or any Person or entity for
whom such beneficiary may be acting), the Agent, either Fronting
Bank or any Bank or any other Person or entity, whether in
connection with this Agreement, any other Financing Document or
any unrelated transaction;
(4) any statement or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect whatsoever;
(5) payment by a Fronting Bank under any Letter of Credit
against presentation of a draft or document which does not comply
with the terms of such Letter of Credit; or
(6) to the extent permitted under applicable law, any
other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
(g) Payments by Banks with Respect to Letters of Credit.
(i) Each Bank shall make available an amount equal to its ratable
share of any drawing under a Letter of Credit, in Federal or other funds
immediately available in New York City, to the applicable Fronting Bank by
3:00 P.M. (New York City time) on the second Domestic Business Day
following such drawing, together with interest on such amount for the
period from and including the date of such drawing to but excluding the
date upon which such amount is to be made available at the Federal Funds
Rate on the date of such drawing, at such Fronting Bank's address referred
to in Section 10.01; provided that each Bank's obligation shall be
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<PAGE> 32
reduced by its pro rata share of any reimbursement theretofore paid by the
relevant Borrower in respect of such drawing pursuant to Section
2.03(f)(i). The applicable Fronting Bank shall notify each Bank of the
amount of such Bank's obligation in respect of any drawing under a Letter
of Credit not later than 1:30 P.M. (New York City time) on the day such
payment by such Bank is due. Each Bank shall be subrogated to the rights
of the applicable Fronting Bank against the Borrower to the extent such
payment due from such Bank to such Fronting Bank is paid, plus interest
thereon, from and including the day such amount is due from such Bank to
such Fronting Bank to but excluding the day the Borrower makes payment to
such Fronting Bank pursuant to Section 2.03(f)(i), whether before or after
judgment, at a rate per annum equal to the sum of 2% plus the rate
applicable to Domestic Loans for such day.
(ii) If any Bank fails to pay any amount required pursuant to
subsection (i) of this Section 2.03(g) on the date on which such payment is
due, interest, payable on demand, shall accrue on such Bank's obligation to
make such payment, for each day from and including the date such payment
becomes due to but excluding the date such Bank makes such payment at a
rate per annum equal to the Federal Funds Rate. Any payment made by any
Bank after 3:00 P.M. (New York City time) on any Domestic Business Day
shall be deemed for purposes of the preceding sentence to have been made on
the next succeeding Domestic Business Day.
(iii) If the relevant Borrower shall reimburse a Fronting Bank for any
drawing under a Letter of Credit after the Banks shall have made funds
available to such Fronting Bank with respect to such drawing in accordance
with subsection (i) of this Section 2.03(g), such Fronting Bank shall
promptly upon receipt of such reimbursement distribute to each Bank its pro
rata share thereof, including interest, to the extent received by such
Fronting Bank.
(iv) The several obligations of the Banks to the Fronting Banks
hereunder shall be absolute, irrevocable and unconditional under any and
all circumstances whatsoever and shall not be affected by any circumstance,
including, without limitation, (1) any set-off, counterclaim, recoupment,
defense or other right which any such Bank or any other Person may have
against the Agent, either Fronting Bank or any other Person for any reason
whatsoever; (2) the occurrence or continuance of
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<PAGE> 33
a Default or an Event of Default or the termination of the Commitments or
any Letter of Credit; (3) any adverse change in the condition (financial or
otherwise) of any Obligor or any other Person; (4) any breach of any
Financing Document by any party thereto; (5) the fact that any condition
precedent to the issuance of, or the making of any payment under, any
Letter of Credit was not in fact met; (6) any violation or asserted
violation of law by any Bank or any affiliate thereof; or (7) to the extent
permitted under applicable law, any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. Each payment
by each Bank to a Fronting Bank for its own account shall be made without
any offset, abatement, withholding or reduction whatsoever. If a Fronting
Bank is required at any time (whether before or after the Termination Date)
to return to a Borrower or to a trustee, receiver, liquidator, custodian or
other similar official any portion of the payments made by such Borrower to
such Fronting Bank in payment of any Reimbursement Obligation or interest
thereon upon the insolvency of such Borrower, or the commencement of any
case or proceeding under any bankruptcy, insolvency or other similar law
with respect to such Borrower, each Bank shall, on demand of such Fronting
Bank, forthwith return to such Fronting Bank any amounts transferred to
such Bank by such Fronting Bank in respect thereof pursuant to this
subsection plus such Bank's pro rata share of any interest on such payments
required to be paid to the Person recovering such payments plus interest on
the amount so demanded from the day such demand is made, if such demand is
made by 2:00 p.m. (New York City time), or from the next following Domestic
Business Day, if such demand is made after 2:00 p.m., to but not including
the day such amounts are returned by such Bank to such Fronting Bank at a
rate per annum for each day equal to (A) the Federal Funds Rate for the day
of such demand and (B) the Base Rate plus 1% for each day thereafter.
(h) Letter of Credit Commission; Issuance Fee
(i) Letter of Credit Commission. Each Borrower agrees to pay to
the Agent a letter of credit commission with respect to each Letter of
Credit issued for its account, computed for each day from and including the
date of issuance of such Letter of Credit to but excluding the last day a
drawing is available under such Letter of Credit (the "Letter of Credit
Termination Date"), at the Letter of Credit Commission
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Rate on the aggregate amount available for drawing under such Letter of
Credit from time to time (whether or not any conditions to drawing can then
be met), such fee to be for the account of the Banks ratably in proportion
to their Total Exposures. Such fee shall be payable quarterly in arrears
on the last Domestic Business Day of each March, June, September and
December and upon the Termination Date.
(ii) Issuance Fee. Each Borrower shall pay to each Fronting
Bank for its own account such fees with respect to each Letter of Credit
issued by such Fronting Bank for the account of such Borrower as shall have
been agreed between such Borrower and such Fronting Bank.
(iii) Limited Liability of the Fronting Bank. As between a
Fronting Bank on the one hand, and a Borrower on the other, the Borrower
assumes all risks of any acts or omissions of the beneficiary and any
transferee of any Letter of Credit with respect to its use of such Letter
of Credit. Neither Fronting Bank nor any of their respective employees,
officers or directors shall be liable or responsible for: (a) the use
which may be made of any Letter of Credit or for any acts or omissions of
any beneficiary or transferee in connection therewith, (b) the validity,
sufficiency or genuineness of documents, or of any endorsement(s) thereon,
even if such documents should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged, (c) payment by the Fronting
Bank against presentation of documents which do not comply with the terms
of any Letter of Credit, including failure of any documents to bear any
reference or adequate reference to such Letter of Credit, or (d) any other
circumstance whatsoever in making or failing to make payment under any
Letter of Credit; provided that the Borrower shall have a claim against the
applicable Fronting Bank, and such Fronting Bank shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed
to consequential or special, damages suffered by the Borrower which are
found in a final, unappealable judgment of a court of competent
jurisdiction to have been caused by (i) such Fronting Bank's willful
misconduct or gross negligence in determining whether documents presented
under any Letter of Credit comply with the terms thereof or (ii) such
Fronting Bank's willful failure to pay, or gross negligence resulting in a
failure to pay, any drawing after the presentation to it by the beneficiary
(or any transferee of the Letter of Credit) of a draft and
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other required documentation strictly complying with the terms and
conditions of the Letter of Credit. In furtherance and not in limitation
of the foregoing, a Fronting Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation.
(i) Fronting Banks and Affiliates. Barclays Bank PLC, Morgan
Guaranty Trust Company of New York and Union Bank of California shall have the
same rights and powers under the Financing Documents as any other Bank and may
exercise or refrain from exercising the same as though they were not Fronting
Banks (in each case to the extent such Fronting Bank is also a Bank), and
Barclays Bank PLC, Morgan Guaranty Trust Company of New York, Union Bank of
California and their respective affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with AES or any Subsidiary or
affiliate of AES as if they were not Fronting Banks hereunder.
SECTION 2.04. Notes. (a) The Loans of each Bank to each
Borrower shall be evidenced by a single Note payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request
that its Loans to such Borrower of a particular type be evidenced by a separate
Note of such Borrower in an amount equal to the aggregate unpaid principal
amount of such Loans. Each such Note shall be in substantially the form of
Exhibit A hereto with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference in this Agreement
to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include
any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Notes pursuant to Section 3.01(a)
and 3.02(a), the Agent shall forward such Notes to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it to each
Borrower and the date and amount of each payment of principal made with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note of either Borrower, endorse on the schedule forming a
part thereof appropriate notations to evidence the foregoing information with
respect to each such Loan to such Borrower then outstanding; provided that the
failure of any Bank to make any such recordation or endorsement shall not
affect the obligations of any Obligor under the Financing
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Documents. Each Bank is hereby irrevocably authorized by the Borrowers so to
endorse its Notes and to attach to and make a part of any Note a continuation
of any such schedule as and when required.
SECTION 2.05. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.06. Interest Rates. (a) Each Domestic Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or interest on any
Domestic Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Domestic Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to such
Interest Period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than three months,
at intervals of three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the annexed Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher
1/16th of 1%) of the respective rates per annum at which deposits in dollars
are offered to each of the Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Business Days before the first day
of such Interest Period in an amount approximately equal to the principal
amount of the Euro-Dollar Loan of such Reference Bank to
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which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(c) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar
Margin for such day plus the Adjusted London Interbank Offered Rate applicable
to the Interest Period for such Loan and (ii) the sum of 2% plus the
Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if
necessary, to the next higher 1/100th of 1%) by dividing (x) the average
(rounded upward, if necessary, to the next higher 1/16th of 1%) of the
respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Agent may select) deposits in dollars
in an amount approximately equal to such overdue payment due to each of the
Reference Banks are offered to such Reference Bank in the London interbank
market for the applicable period determined as provided above by (y) 1.00 minus
the Euro-Dollar Reserve Percentage (or, if the circumstances described in
clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the
sum of 2% plus the rate applicable to Domestic Loans for such day).
(d) The Agent shall determine each interest rate applicable to
the Loans hereunder. The Agent shall give prompt notice to the Borrowers and
the participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
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(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available
on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.07. Fees. (a) Commitment Fee. AES shall pay to the
Agent for the account of the Banks ratably in proportion to their Commitments
of each Class a commitment fee at the Commitment Fee Rate on the daily amount
by which the aggregate amount of the Commitments of such Class exceeds the
aggregate Total Outstandings of such Class. Such commitment fee shall accrue
from and including the Effective Date with respect to such Class to but
excluding the Termination Date with respect to such Class (or earlier date of
termination of the Commitments of such Class in their entirety). Accrued
commitment fees under this Section 2.07 shall be payable quarterly on each
March 31, June 30, September 30 and December 31 and upon the date of
termination of the Commitments of such Class in their entirety. For this
purpose, "Commitment Fee Rate" means a rate per annum determined in accordance
with the annexed Pricing Schedule.
(b) Other Fees. AES shall pay to Morgan Guaranty Trust Company
of New York the fees specified in the Fee Letter at the times and in the
amounts specified therein.
SECTION 2.08. Termination or Reduction of Commitments.
(a) Optional. AES may, upon at least three Domestic Business
Days' notice to the Agent, (i) terminate the Commitments in their entirety at
any time, if no Loans or Letters of Credit are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $5,000,000 or any
larger multiple thereof, the aggregate amount of the Commitments in excess of
the aggregate Total Outstandings.
(b) Mandatory. (i) Scheduled Termination. The Commitments
shall terminate on the Termination Date, and any Loans and Reimbursement
Obligations then outstanding (together with accrued interest thereon) shall be
due and payable on such date.
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(ii) Net Cash Proceeds of Asset Dispositions. In the event that
AES or any of its Subsidiaries shall at any time, or from time to time, receive
any Net Cash Proceeds of any Asset Disposition, the Commitments of the Banks
shall, unless the Required Banks otherwise agree, be ratably reduced by such
amounts and at such times as may be required to avoid any requirement that all
or any portion of such Net Cash Proceeds be applied to repay, prepay,
repurchase or defease any Subordinated Debt.
(c) Reductions Permanent. All reductions of the Commitments
pursuant to this Section 2.08 shall be permanent.
SECTION 2.09. Mandatory Repayments of the Loans and Cash
Collateralization of Letters of Credit. If on any date, after giving effect to
the reductions in the Commitments pursuant to Section 2.08, the aggregate Total
Outstandings exceed the aggregate Commitments, the Borrowers shall be jointly
and severally obligated to apply an amount equal to such excess to prepay the
Loans or cash collateralize Letters of Credit, or both. Amounts to be applied
pursuant to the preceding sentence shall be applied first to repay the
principal amount of the Borrowings then outstanding until all such Borrowings
shall have been repaid in full, and if any excess then remains such excess
shall be deposited with the Agent in the Cash Collateral Account to be held,
applied or released for application as provided in Section 2.14. The
particular Borrowings to be repaid shall be as designated by AES (or, failing
such designation, as the Agent may determine). Each repayment shall be applied
to repay ratably the Loans of the several Banks included in such Borrowings.
Each payment of principal shall be made together with interest accrued on the
amount repaid to the date of payment.
SECTION 2.10. Optional Prepayment of the Loans. (a) Subject in
the case of any Euro-Dollar Borrowing to Section 2.12, the Borrowers may, upon
at least one Domestic Business Days' notice to the Agent, prepay any Domestic
Borrowing or upon at least three Euro-Dollar Business Days' notice to the
Agent, prepay any Euro-Dollar Borrowing, in each case in whole at any time, or
from time to time in part in amounts aggregating $1,000,000 or any larger
multiple of $500,000 by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment, provided, however, that no
partial prepayment of a Euro-Dollar Borrowing may be made if the principal
balance of such a Euro-Dollar Borrowing outstanding after such prepayment is
less than $3,000,000. Each such optional
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prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower giving such notice.
SECTION 2.11. General Provisions as to Payments. (a) The
Borrowers shall make each payment of principal of, and interest on, the Loans
and Reimbursement Obligations and of fees hereunder, not later than 12:00 Noon
(New York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Agent at its address referred to
in Section 10.01. The Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Agent for the account of the Banks.
Whenever any payment of principal of, or interest on, the Domestic Loans or
Reimbursement Obligations or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of,
or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from a Borrower
prior to the date on which any payment is due from such Borrower to the Banks
hereunder that such Borrower will not make such payment in full, the Agent may
assume that such Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then
due such Bank. If and to the extent that such Borrower shall not have so made
such payment, each Bank shall repay to the Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.12. Funding Losses. If a Borrower makes any payment of
principal with respect to any Euro-
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Dollar Loan (pursuant to Article VI or VIII or otherwise) on any day other than
the last day of the Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.06(c), or if a Borrower fails to
borrow or prepay any Euro-Dollar Loans after notice has been given to any Bank
in accordance with Section 2.02(b) or 2.10(b), such Borrower shall reimburse
each Bank within 15 days after demand for any resulting loss or expense
incurred by it (or by an existing or prospective Participant in the related
Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or failure to borrow or prepay,
provided that such Bank shall have delivered to such Borrower a certificate as
to the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.13. Computation of Interest and Fees. Interest based
on the Prime Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
SECTION 2.14. Cash Collateral Account. (a) All amounts required
to be deposited as cash collateral with the Agent pursuant to Section 2.09 or
Section 6.03 shall be deposited in a cash collateral account (the "Cash
Collateral Account") established by the Borrowers with the Agent, to be held,
applied or released for application as provided in this Section 2.14.
(b) If and when any portion of the Letter of Credit Liabilities
on which any deposit of cash collateral was based (the "Relevant Contingent
Exposure") shall become fixed (a "Direct Exposure") as a result of the payment
by a Fronting Bank of a draft presented under any relevant Letter of Credit,
the amount of such Direct Exposure (but not more than the amount in the Cash
Collateral Account at the time) shall be withdrawn by the Agent from the Cash
Collateral Account and shall be paid to the relevant Fronting Bank to be
applied against such Direct Exposure and the Relevant Contingent Exposure shall
thereupon be reduced by such amount. If at any time the amount in the Cash
Collateral Account exceeds the Relevant Contingent Exposure, the excess amount
shall, so long as no Default shall have occurred and be continuing, be
withdrawn by the Agent and paid to such
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Borrower as AES may direct. If a Default shall have occurred and be
continuing, such excess amount shall be retained in the Cash Collateral Account
and, if and when requested by the Required Banks, shall be withdrawn by the
Agent and applied first to repay the Loans, Reimbursement Obligations and other
due and unpaid amounts required to be paid by the Borrowers hereunder and
second any remaining excess shall be paid to such Borrower as AES may direct.
If at any time the amount in the Cash Collateral Account is less than the
Relevant Contingent Exposure, AES shall promptly deposit in the Cash Collateral
Account additional cash collateral in the amount of such shortfall.
(c) Interest and other payments and distributions made on or with
respect to the cash collateral held by the Agent shall be for the account of
the Borrowers and shall constitute cash collateral to be held by the Agent or
returned to the Borrowers in accordance with subsection (b) of this Section
2.14; provided that the Agent shall have no obligation to invest any cash
collateral on behalf of the Borrowers or any other Person. Beyond the exercise
of reasonable care in the custody thereof, the Agent shall have no duty as to
any cash collateral in its possession or control or in the possession or
control of any agent or bailee or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto. The
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the cash collateral in its possession if the cash collateral is
accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to any
of the cash collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by the Agent in good
faith. All expenses and liabilities incurred by the Agent in connection with
taking, holding and disposing of any cash collateral (including customary
custody and similar fees with respect to any cash collateral held directly by
the Agent) shall be paid by AES from time to time upon demand. Upon a Default,
the Agent shall be entitled to apply (and, at the request of the Required Banks
but subject to applicable law, shall apply) cash collateral or the proceeds
thereof to payment of any such expenses, liabilities and fees.
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ARTICLE III
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur upon
receipt by the Agent of (i) the fees for the account of each Bank in the
amounts previously agreed by AES and as set forth in the letter agreement (the
"Fee Letter") between AES, J.P. Morgan Securities, Inc. and Morgan Guaranty
Trust Company of New York dated May 18, 1996 and (ii) the following documents,
each dated the Closing Date unless otherwise indicated:
(a) duly executed Notes of AES for the account of each Bank dated
on or before the Closing Date complying with the provisions of Section
2.04;
(b) the Subsidiary Guaranty, duly executed by the Subsidiary
Guarantors;
(c) an opinion of the General Counsel of AES, substantially in
the form of Exhibit C hereto and covering such additional matters relating
to the transactions contemplated hereby as the Required Banks may
reasonably request;
(d) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit D hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(e) evidence satisfactory to the Agent that (i) all amounts
outstanding under the Existing Credit Facility have been paid in full, (ii)
all commitments thereunder have been terminated and (iii) all principal,
interest, fees, reimbursement obligations and other amounts owing
thereunder shall have been paid in full;
(f) evidence, satisfactory to the Agent, in the form of pro forma
calculations, that (i) the LIGHT Acquisition, (ii) the issuance of, and
drawings under the letters of credit under the AES Light Non-Recourse
Facility and (iii) the making of Borrowings and the issuance of, and
drawings under, Letters of Credit under this Agreement are permitted under
the terms of the Existing Subordinated Debt Indenture;
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(g) copies of the resolutions of the Board of Directors of each
Obligor authorizing the execution, delivery and performance by such Obligor
of the Financing Documents to which it is a party, certified by a duly
authorized officer of such Obligor (which certificate shall state that such
resolutions are in full force and effect on the Closing Date);
(h) certified copies of all approvals, authorizations or consents
of, or notices to or registrations with, any governmental body or agency
required for each Obligor, if necessary, to enter into the Financing
Documents to which it is a party;
(i) a certificate of a duly authorized officer of each Obligor
certifying the names and true signatures of the officers of such Obligor
authorized to sign the Financing Documents to which it is a party and the
other documents to be delivered by such Obligor hereunder;
(j) payment of all reasonable fees and other amounts then payable
(including, without limitation, all fees and expenses of counsel to the
Agent payable pursuant to Section 10.03); and
(k) a certificate signed by a duly authorized officer of AES
dated the Closing Date, to the effect that: (i) the representations and
warranties contained in Article IV hereof are true and correct on and as of
the Closing Date as though made on and as of such date; and (ii) no Default
has occurred and is continuing or would result from the issuance of the
Letters of Credit requested by AES to be issued on such date and the
Borrowings requested by AES to be made on such date; and
(l) all documents the Agent may reasonably request relating to
the existence of the Obligors, the corporate authority for and the validity
of this Agreement and the other Financing Documents, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent.
The Agent shall promptly notify the Borrowers and the Banks of the Closing
Date, and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. AES Finance Addition Date. The AES Finance
Addition Date shall occur on the date upon which the Agent shall have received:
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(a) duly executed Notes of AES Finance for the account of each
Bank dated on or before the AES Finance Addition Date complying with the
provisions of Section 2.04;
(b) a counterpart hereof signed by AES Finance;
(c) an opinion of the General Counsel of AES substantially in the
form of Exhibit E hereto and covering such additional matters relating to
the transactions contemplated hereby as the Required Banks may reasonably
request;
(d) an opinion of counsel to AES Finance from the jurisdiction of
incorporation of AES Finance, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(e) all documents that the Agent may reasonably request relating
to the existence of AES Finance, the corporate authority for and the
validity of this Agreement and its Notes as agreements and obligations of
AES Finance, and any other matters relevant hereto, all in form and
substance reasonably satisfactory to the Agent.
The Agent shall promptly notify the Borrowers and the Banks of the AES Finance
Addition Date, and such notice shall be conclusive and binding on all parties
hereto.
SECTION 3.03. Extension of Credit. The obligation of each Bank
to make a Loan on the occasion of each Borrowing and the obligation of a
Fronting Bank to issue a Letter of Credit (including the deemed issuance of the
initial Letters of Credit pursuant to the second sentence of Section 2.03(a))
on the occasion of each request therefor by a Borrower shall in each case be
subject to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or
prior to May 21, 1996;
(b) receipt by the Agent of a Notice of Borrowing or (except in
the case of the deemed issuance of the initial Letters of Credit pursuant
to the second sentence of Section 2.03(a)) a Notice of Issuance as required
by Section 2.02 or 2.03, as the case may be;
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(c) the fact that, immediately after such Extension of Credit,
after giving effect to all direct and indirect applications of the proceeds
of such Extension of Credit made substantially simultaneously with the
extension thereof, (i) the aggregate Total Outstandings of any Bank will
not exceed its Commitment and (ii) if such Extension of Credit is the
issuance of a LIGHT Acquisition Letter of Credit, prior to the earlier of
(x) July 31, 1996 and (y) the date on which AES receives the proceeds of at
least $225,000,000 of Additional Permitted Subordinated Debt, the
outstanding amount of Other LIGHT Non-Recourse Collateral posted to secure
AES Coral Reef's bid in connection with the LIGHT Acquisition equals or
exceeds $225,000,000;
(d) the fact that, immediately before and after such Extension of
Credit, no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the
Obligors contained in the Financing Documents (except, in the case of a
Refunding Borrowing, the representations and warranties set forth in
Sections 4.04(c) and 4.05 as to any matter which has theretofore been
disclosed in writing by AES to the Banks) shall be true on and as of the
date of such Borrowing.
Each Extension of Credit hereunder shall be deemed to be a representation and
warranty by the Borrowers on the date of such Extension of Credit as to the
facts specified in clauses (c), (d) and (e) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
AES represents and warrants that:
SECTION 4.01. Corporate Existence and Power. Each Obligor is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Obligor of the
Financing Documents to which
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it is a party are within such Obligor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of such Obligor
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon AES or any of its Subsidiaries or result in the creation or
imposition of any Lien on any asset of AES or of any Material AES Entity;
provided that AES makes no representation or warranty hereunder with respect to
whether compliance by AES with Section 5.07 would contravene existing
agreements pursuant to which Applied Energy Services Electric Limited may make
Investments after the date hereof in Power Projects owned by NIGEN Limited and
Medway Power Limited.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid
and binding agreement of each Borrower and each other Financing Document, when
executed and delivered in accordance with this Agreement, will constitute a
valid and binding obligation of each Obligor that is a party thereto, in each
case enforceable in accordance with its terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of AES and its Consolidated
Subsidiaries as of December 31, 1995 and the related consolidated statements of
operations and cash flows for the fiscal year then ended, reported on by
Deloitte & Touche and set forth in AES's 1995 Form 10-K, a copy of which has
been delivered to each of the Banks, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial position
of AES and its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of AES and its
Consolidated Subsidiaries as of March 31, 1996 and the related unaudited
consolidated statements of operations and cash flows for the fiscal quarter and
the portion of AES's fiscal year then ended, set forth in AES's March 1996 Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
in conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of AES and its Consolidated
Subsidiaries as of such
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date and their consolidated results of operations and cash flows for such
fiscal quarter and portion of such fiscal year (subject to normal year-end
adjustments).
(c) Since December 31, 1995 there has been no material adverse
change in the business, financial position, results of operations or prospects
of AES and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. Except as disclosed in AES's March
1996 Form 10-Q, there is no action, suit or proceeding pending against, or to
the knowledge of AES threatened against or affecting, AES or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of AES and its Consolidated
Subsidiaries or which in any manner draws into question the validity of any
Financing Document.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the currently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability in excess of $100,000 under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of
its business, each of AES and its Subsidiaries conducts an ongoing review of
the effect of Environmental Laws on the business, operations and properties of
AES or such Subsidiary, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a
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condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances by AES or its Subsidiaries, and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, AES has reasonably
concluded that such associated liabilities and costs, including the costs of
compliance with Environmental Laws, are unlikely to have a material adverse
effect on the business, financial condition, results of operations or prospects
of AES and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns of
AES and its Subsidiaries have been examined and closed through the fiscal year
ended December 31, 1986. AES and its Subsidiaries have filed all United States
Federal income tax returns and AES and all Material AES Entities have filed all
other material tax returns which are required to be filed by them and have paid
all taxes due as indicated on such returns or pursuant to any assessment
received by AES or any Subsidiary or any Material AES Entity other than any
such taxes that are being diligently contested in good faith through
appropriate proceedings and for which adequate reserves have been established
in accordance with generally accepted accounting principals. The charges,
accruals and reserves on the books of AES, its Subsidiaries and all Material
AES Entities in respect of taxes or other governmental charges are, in the
opinion of AES, adequate.
SECTION 4.09. Material AES Entities. Each Material AES Entity is
a corporation duly incorporated, validly existing and (other than any Material
AES Entity that is not incorporated under the laws of the United States or any
political subdivision thereof) in good standing under the laws of its
jurisdiction of incorporation. Each Material AES Entity has all corporate
powers and all material governmental licenses, authorization, consents and
approvals required to carry on its business as proposed to be conducted and has
all governmental licenses, authorizations, consents and approvals required to
have been obtained prior to the date hereof and which are material to the
operation of its business as proposed to be conducted, except to the extent
that the failure to obtain any such license, authorization, consent or
approval, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect upon the business, financial condition,
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operations, property and prospects of AES and its Consolidated Subsidiaries,
taken as a whole.
SECTION 4.10. Not an Investment Company. None of the Obligors is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.11. Public Utility Holding Company Act. Neither AES
nor any of its Subsidiaries is subject to regulation as a "holding company" or
a "subsidiary company" of a holding company or an "affiliate" of a subsidiary
or holding company or a "public utility company" under Section 2(a) of the
Public Utility Holding Company Act of 1935, as amended ("PUHCA"), except that
AES and its subsidiary in the United Kingdom, Applied Energy Services Electric
Limited, are exempt holding companies under Section 3(a)(5) of PUHCA by order
of the Securities and Exchange Commission.
SECTION 4.12. Representations in Subsidiary Guaranty True and
Correct. Unless the Subsidiary Guaranty shall have ceased to be a Financing
Document, each of the representations and warranties of any Obligor contained
in the Subsidiary Guaranty is true and correct.
SECTION 4.13. Full Disclosure. All information heretofore
furnished by either Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by either Borrower to the Agent or any
Bank will be, true and accurate in all material respects on the date as of
which such information is stated or certified. AES has disclosed to the Banks
in writing any and all facts which materially and adversely affect or may
affect (to the extent either Borrower can now reasonably foresee), the
business, operations or financial condition of AES and its Consolidated
Subsidiaries, taken as a whole, or the ability of any Obligor to perform its
obligations under the Financing Documents.
SECTION 4.14. Existing Letters of Credit. Schedule IV hereto
identifies each Existing Letter of Credit outstanding as of the date hereof and
as of the Effective Date.
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ARTICLE V
COVENANTS
AES agrees that, so long as any Bank has any Commitment hereunder
or any amount payable under any Note remains unpaid or any Letter of Credit or
Reimbursement Obligation remains outstanding:
SECTION 5.01. Information. AES will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of AES, a consolidated (and in the case of AES
only, consolidating) balance sheet of each Obligor and its Consolidated
Subsidiaries as of the end of such fiscal year and an unconsolidated
balance sheet of AES as of the end of such fiscal year and the related
consolidated, consolidating and unconsolidated (as applicable) statements
of operations and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, said
consolidated financial statements to be reported on, in a manner acceptable
to the Securities and Exchange Commission, by Deloitte & Touche or other
independent public accountants of nationally recognized standing and such
consolidating and unconsolidated financial statements to be certified as to
fairness of presentation, generally accepted accounting principles (other
than failure to consolidate) and consistency by the chief executive
officer, president or chief financial officer of AES;
(b) as soon as available and in any event within 50 days after
the end of each of the first three quarters of each fiscal year of AES, a
consolidated (and in the case of AES only, consolidating) balance sheet of
each Obligor and its Consolidated Subsidiaries as of the end of such
quarter and an unconsolidated balance sheet of AES as of the end of such
fiscal quarter and the related consolidated, consolidating and
unconsolidated (as applicable) statements of operations and cash flows for
such quarter and for the portion of such Obligor's fiscal year ended at the
end of such quarter, setting forth in the case of such statements of
operations and cash flows in comparative form the figures for the
corresponding quarter and the corresponding portion of such Obligor's
previous fiscal year, all certified (subject to normal year-end
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adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief executive officer, president or
chief financial officer of AES;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief executive officer, president or chief financial officer of AES (i)
setting forth in reasonable detail the calculations required to establish
whether AES was in compliance with the requirements of Sections 5.08, 5.09,
5.10, 5.12, 5.14, 5.16 and 5.17 on the date of such financial statements,
(ii) stating to the knowledge of AES whether any Default exists on the date
such certificate and, if any Default then exists, setting forth the details
thereof and the action which AES is taking or proposes to take with respect
thereto and (iii) accompanied by a schedule setting forth in reasonable
detail a description, including, where applicable, the expected and maximum
dollar amounts thereof, of all material contingent liabilities not
disclosed in such financial statements;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention as a result of their audit
(which was not directed primarily toward obtaining knowledge of
noncompliance) to cause them to believe that AES has failed to comply with
the terms, covenants, provisions or conditions as they relate to accounting
of financial matters addressed in Sections 5.07 to 5.18, inclusive, and
(ii) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of AES obtains knowledge
of any Default, if such Default is then continuing, a certificate of the
chief executive officer, president, executive vice-president or chief
financial officer of AES setting forth the details thereof and the action
which AES is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of AES
generally, copies of all financial statements, reports and proxy statements
so mailed;
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(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which AES shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief executive officer, president or chief
financial officer of AES setting forth details as to such occurrence and
the action, if any, which AES or the applicable member of the ERISA Group
is required or proposes to take;
(i) not less than 10 days prior to the anticipated receipt by AES
or any Subsidiary of AES of Net Cash Proceeds from any Asset Disposition, a
certificate of the chief executive officer, president, executive
vice-president or chief financial officer of AES setting forth a
description of the transaction giving rise to such Net Cash Proceeds, the
date or dates upon which such Net Cash Proceeds are anticipated to be
received
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by AES or such Subsidiary and the amount of Net Cash Proceeds anticipated
to be received on such date or each of such dates;
(j) promptly after receipt by AES or any Subsidiary of AES or any
Material AES Entity, a copy of each complaint, order, citation, notice or
other written communication from any Person with respect to the existence
or alleged existence of a material violation of any applicable
Environmental Law or the incurrence of any liability, obligation, loss,
damage, cost, expense, fine, penalty or sanction or the requirement to
commence any remedial action resulting from or in connection with any air
emission, water discharge, noise emission, Hazardous Substance or any other
environmental, health or safety matter at, upon, under or within any of the
properties now or previously owned, leased or operated by AES, any of its
Subsidiaries or any Material AES Entity, or due to the operations or
activities of AES, any Subsidiary, any Material AES Entity or any other
Person on or in connection with any such property or any part thereof; and
(k) from time to time such additional information regarding the
financial position or business of AES and its Subsidiaries as the Agent, at
the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. Each Borrower will pay and
discharge all its material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) AES will
keep, and will cause each Subsidiary to keep, all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted.
(b) AES will, and will cause each of its Subsidiaries to,
maintain (either in the name of AES or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance of such types,
in at least such amounts and against at least such risks (and with such risk
retention) as are usually insured against in similar circumstances in the same
general area by companies
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of established repute engaged in the same or a similar business; and will
furnish to each Bank upon request information presented in reasonable detail as
to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
AES (a) will continue, and will cause each Material AES Entity and each other
Borrower, if any, to continue, to engage in business of the same general type
as now conducted by AES and its Subsidiaries, (b) will continue, and will cause
each Material AES Entity and each other Borrower, if any, to continue, to
operate their respective businesses on a basis substantially consistent with
the policies and standards of AES, such Material AES Entity or such Borrower,
if any, as in effect on the date hereof and (c) will preserve, renew and keep
in full force and effect, and will cause each Material AES Entity and each
other Borrower, if any, to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges
and franchises necessary or desirable in the normal conduct of business;
provided that nothing in this Section 5.04 shall prohibit (i) the merger of a
Subsidiary into AES or the merger or consolidation of a Subsidiary (other than
a Borrower) with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, (x) no Default shall have occurred and be continuing and (y) no
Borrower or Subsidiary Guarantor shall be liable for any Debt of such
Subsidiary except to the extent that it was liable for such Debt prior to
giving effect to such merger or (ii) the termination of the corporate existence
of any Subsidiary (other than a Borrower or a Subsidiary Guarantor) if AES in
good faith determines that such termination is in the best interest of AES and
is not materially disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. AES will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) (a) except for such non-compliance as would result
solely in the payment of monetary compensation by AES or such Subsidiary in an
amount not to exceed $200,000 for each such non-compliance and (b) except where
the necessity of compliance therewith is contested in good faith by appropriate
proceedings.
SECTION 5.06. Inspection of Property, Books and Records. AES
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true
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and correct entries shall be made of all dealings and transactions in relation
to its business and activities; and will permit, and will cause and each
Significant AES Entity and each other Borrower, if any, to permit,
representatives of any Bank at such Bank's expense to visit and inspect any of
their respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and independent public
accountants, all at such reasonable times and as often as may reasonably be
desired.
SECTION 5.07. Limitations on Project Exposure. If and for so
long as any Power Project Default shall have occurred and shall not have been
cured (regardless of whether such Power Project Default shall have been
waived), AES shall not, and shall not permit any Subsidiary or Affiliate
controlled, directly or indirectly, by AES to, make any Investment in, or enter
into any Guarantee of any Debt or other obligation of, any Subsidiary of AES
having a direct or indirect interest in the Power Project to which such Power
Project Default relates in an amount in excess of $2,000,000 in the aggregate
for AES and its Subsidiaries. The foregoing restriction shall not prohibit or
limit AES or any Subsidiary from making Investments in AES Light for the
purpose of allowing AES Light to pay principal, interest and other amounts due
and owing under the AES Light Non-Recourse Facility.
SECTION 5.08. Debt. (a) AES shall not, and shall not permit any
Subsidiary to, incur, assume, create or suffer to exist any Debt (including any
Guarantees of Debt and obligations in respect of letters of credit), except
for:
(i) Debt under the Financing Documents (subject to Section 5.15);
(ii) Debt incurred by a Subsidiary (A) to finance the
development, acquisition, construction, maintenance or working capital
requirements of a Power Project operated or managed (including on a joint
basis with others), directly or indirectly, by AES and in which such
Subsidiary has an interest and (B) that is not also the Debt of, or
Guaranteed by, any other Subsidiary with an interest in any other Power
Project;
(iii) Debt existing on the date hereof and identified on Schedule
I;
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(iv) Debt owing to AES or a Consolidated Subsidiary of AES;
(v) Debt of AES or its Subsidiaries representing a refinancing,
replacement or refunding of Debt permitted by clauses (ii) and (iii) above;
provided that (A) the aggregate principal amount of such Debt outstanding
or available will not be increased at the time of such refinancing,
replacement or refunding, (B) no Obligor shall be liable for any such Debt
except to the extent that it was liable for the Debt so refinanced,
replaced or refunded and (C) if any Debt being refinanced, replaced or
refunded is subordinated to the Debt of either Borrower hereunder or of any
Subsidiary under any Guarantee thereof, such Debt shall be subordinated at
least to the same extent;
(vi) Guarantees by AES of Debt permitted by clauses (ii) and (to
the extent that the same constitutes a refinancing of Debt permitted under
such clause (ii)) (v) above;
(vii) Additional Permitted Subordinated Debt; and
(viii) Other Debt not described in clauses (i) through (vii)
above in an aggregate principal amount at any time outstanding not to
exceed $2,000,000.
(b) AES shall not issue any Additional Permitted Subordinated
Debt unless (i) both before and after giving effect to such issuance no Default
shall have occurred and be continuing and (ii) on a pro forma basis after
giving effect to such issuance and the application of the proceeds thereof, AES
would have been in compliance with Sections 5.16 and 5.17 as of the last day of
the fiscal quarter ended on, or most recently ended prior to, the date of such
issuance (assuming for this purpose that such Additional Permitted Subordinated
Debt was issued and the proceeds applied on the first day of the period of four
consecutive fiscal quarters ended on such last day).
SECTION 5.09. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than the sum of (i)
$300,000,000 plus (ii) for each fiscal quarter of AES ended after June 30, 1995
and at or prior to such time for which Consolidated Net Income is a positive
number, an amount equal to 50% of Consolidated Net Income for such fiscal
quarter plus (iii) an amount equal to 75% of the cumulative net proceeds to AES
from issuances of equity securities made by AES from and after the Closing
Date.
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SECTION 5.10. Restricted Payments. Neither AES nor any
Subsidiary will declare or make any Restricted Payment unless, after giving
effect thereto, the aggregate of all Restricted Payments declared or made
subsequent to June 30, 1995 does not exceed the sum of (a) $5 million plus (b)
5% of Consolidated Net Income of AES and its Consolidated Subsidiaries for the
period from June 30, 1995 through the last day of the fiscal quarter of AES
then most recently ended (treated for this purpose as a single accounting
period). Nothing in this Section shall prohibit the payment of any dividend or
distribution within 45 days after the declaration thereof if such declaration
was not prohibited by this Section.
SECTION 5.11. Subordinated Debt. AES will not, and will not
permit any of its Subsidiaries to, consent to or solicit any amendment,
supplement, waiver or other modification of any Subordinated Note Indenture or
any other agreement or instrument evidencing or governing any Subordinated
Debt, without the express prior written consent of the Required Banks.
SECTION 5.12. Limitations on Investments, Guarantees and
Commitments to Invest. (a)(i) The aggregate amount of Investment and
Guarantee Commitments shall not at any time exceed an amount equal to the sum
of:
(x) the product of (A) Parent Operating Cash Flow for the period
of four consecutive fiscal quarters then most recently ended multiplied by (B)
four (4) (or, at any time prior to April 1, 1996, five (5)), plus
(y) the excess, if any, of (A) the aggregate amount of net cash
proceeds received by AES from the issuance of equity securities or Additional
Permitted Subordinated Debt and from the disposition of Material AES Entities
during the period from the Closing Date to such time (to the extent not used to
prepay Subordinated Debt or to permanently retire any other Debt) over (B) the
aggregate amount of cash Investments (other than Temporary Cash Investments)
and cash payments made by AES under Guarantees during such period;
provided, that for purposes of determining compliance with this clause (a)(i),
the aggregate amount of Investment and Guarantee Commitments at any time shall
be reduced to the extent collateralized with cash and cash equivalents and any
deposit or other posting by AES of cash or cash equivalents as collateral for
any Investment and Guarantee Commitment shall be treated as a cash Investment
for purposes of subclause (y)(B) of this clause (i).
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(ii) AES shall not make or enter into any Investment and Guarantee
Commitments at any time that AES's senior unsecured Debt is rated less than BB-
by Standard & Poor's Ratings Group or less than Ba3 by Moody's Investors
Service, Inc.
(b) Except as permitted by Section 5.12(c), AES will not permit
any of its Subsidiaries with any direct or indirect interest in (i) a Power
Project to make any Investment in, or to consolidate or merge with, any other
Person with a direct or indirect interest in any other Power Project or any
unrelated business or (ii) any unrelated business to make any Investment in, or
to consolidate or merge with, any other Person with a direct or indirect
interest in any Power Project.
(c) (i) One or more Subsidiaries of AES (each, an "Intermediate
Holding Company") may serve as holding companies for any or all of AES's direct
and indirect interests in Power Projects and unrelated businesses; provided
that:
(x) each such Intermediate Holding Company's direct and indirect
interest in any Power Project or unrelated business shall be limited to the
ownership of capital stock or Debt obligations of a Person with a direct or
indirect interest in such Power Project or unrelated business;
(y) no consensual encumbrance or restriction of any kind shall
exist on the ability of any Intermediate Holding Company to make payments,
distributions, loans, advances or transfers to AES or any other
Intermediate Holding Company, provided that this clause (y) shall not apply
to any such restrictions in effect on the date of this Agreement contained
in agreements governing Debt of such Intermediate Holding Company
outstanding on the date of this Agreement and, if such Debt is renewed,
extended or refinanced in compliance with this Agreement, restrictions on
such Intermediate Holding Company contained in the agreements governing the
renewed, extended or refinancing Debt (and successive renewals, extensions
and refinancings thereof) if such restrictions are no more restrictive than
those contained in the agreements governing the Debt so renewed, extended
or refinanced; and
(z) no Intermediate Holding Company shall incur, assume, create or
suffer to exist any Debt (including any Guarantee of Debt) other than Debt
of the Borrowers hereunder).
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(ii) AES Electric may make Investments in Power Projects owned by
NIGEN Limited and Medway Power Limited as of the date of this Agreement under
any agreement by which it is bound as of the date of this Agreement.
(iii) AES, AES Hawaii, AES Barbers Point, Inc. and AES Deepwater
may enter into and consummate the Designated Transaction.
SECTION 5.13. Negative Pledge. Neither AES nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement as set forth on Schedule II;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary of AES and not created in contemplation
of such event;
(c) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into AES or a Subsidiary of
AES and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition
thereof by AES or a Subsidiary of AES and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal
or refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens arising in the ordinary course of its business which
(i) do not secure Debt, (ii) do not secure any obligation in any amount
exceeding $25,000,000 and (iii) do not in the aggregate materially detract from
the value of its assets or materially impair the use thereof in the operation
of its business;
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(h) Liens in connection with worker's compensation, social
security obligations, taxes, assessments, statutory obligations or other
similar charges, good faith deposits in connection with tenders, contracts or
leases to which AES or any of its Subsidiaries is a party or other deposits
required to be made in the ordinary course of business and not in connection
with borrowing money or obtaining advances or credit, provided in each case
that the obligation or liability arises in the ordinary course of business and
if overdue is being contested in good faith by appropriate proceedings;
(i) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees', carriers', warehousemen's, or other like Liens arising in the
ordinary course of business of AES or its Subsidiaries;
(j) with respect to real property, easements, rights of way,
reservations and other minor defects or irregularities in title which do not
materially impair the use thereof for the purposes for which it is held by AES
or its Subsidiaries;
(k) Liens on cash collateral securing Investment and Guarantee
Commitments; and
(l) Liens securing Power Project Debt or utility obligations or
other customer, supplier or contractor obligations associated with a Power
Project that are limited to the assets and revenues of the related Power
Project and the capital stock or other assets (including contract rights) of
Subsidiaries of AES having a direct or indirect interest in such Power Project.
SECTION 5.14. Consolidations, Mergers and Sales of Assets. (a)
Neither Borrower will consolidate or merge with or into any other Person;
provided that a Borrower may merge with another Person if (i) such Borrower is
the corporation surviving such merger and (ii) immediately after giving effect
to such merger, no Default shall have occurred and be continuing.
(b) AES will not sell, lease or otherwise transfer, directly or
indirectly, all or any substantial part of the assets of AES and its
Subsidiaries, taken as a whole, to any other Person.
(c) AES will not sell or otherwise transfer, or permit to be sold
or otherwise transferred, directly or indirectly, any shares of capital stock
of AES Finance or any Material AES Entity which are owned, directly or
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indirectly, by AES; provided that AES may transfer, or permit the transfer of,
shares of capital stock of a Material AES Entity owned, directly or indirectly,
by AES if:
(i) after giving effect to such transfer, AES will continue to
own, directly or indirectly, at least 80% of the outstanding capital stock
of each Material AES Entity;
(ii) the consideration received by AES or a Subsidiary of AES for
such transfer (A) has a value, as determined by AES, at least equal to the
fair market value of the shares of capital stock transferred and (B) is in
the form of cash or capital stock or partnership or other similar equity
interests of a Person the principal assets of which consist of direct or
indirect interests in one or more Power Projects, or a combination of the
foregoing;
(iii) after giving effect to such transfer, no Default shall have
occurred and be continuing;
(iv) on a pro forma basis after giving effect to such transfer,
the Cash Flow Coverage Ratio for the four consecutive fiscal quarters than
most recently ended is at least 1.80 to 1.00 (assuming for this purpose
that such transfer occurred on the first day of such period of four
consecutive fiscal quarters); and
(v) AES Barbers Point, Inc. shall at all times remain a direct
Subsidiary of AES Hawaii and AES Shady Point, Inc. shall at all times
remain a direct Subsidiary of AES Oklahoma.
SECTION 5.15. Use of Proceeds; Clean-Up Periods. (a) The
proceeds of the Loans made and Letters of Credit issued under this Agreement
will be used by the Borrowers for working capital and other general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U or Regulation G.
(b) For at least one period of 30 consecutive days in each twelve
month period, (i) the aggregate outstanding principal amount of Loans for each
day during such period shall not exceed $125,000,000, and (ii) no Letter of
Credit shall be used, directly or indirectly, to fund, in whole or in part, any
debt service reserve at any time during such period.
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(c) No debt service reserve may be funded, directly or
indirectly, in whole or in part for more than 180 consecutive days with one or
more Letters of Credit or the proceeds of Loans.
(d) For at least one period of 90 consecutive days during each
fiscal year of AES, there shall be no outstanding Loan or Letter of Credit
used, directly or indirectly, to fund, in whole or in part, any debt service
reserve.
SECTION 5.16. Cash Flow Coverage. The Cash Flow Coverage Ratio
for any period of four consecutive fiscal quarters of AES shall not be less
than 1.80 to 1.00.
SECTION 5.17. Cash Flow to Total Debt Ratio. The Cash Flow to
Total Debt Ratio shall not be less than 0.17 to 1.00 at any date.
SECTION 5.18. Transactions with Affiliates. Except pursuant to
agreements existing on the date hereof and listed on Schedule III attached
hereto, AES will not, and will not permit any Subsidiary of AES to, directly or
indirectly, in any transaction involving aggregate consideration in excess of
one million dollars, pay any funds to or for the account of, make any
investment (whether by acquisition of stock or indebtedness, by loan, advance,
transfer of property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other
joint arrangement with, any Affiliate; provided, however, that the foregoing
provisions of this Section shall not prohibit (a) AES from declaring or paying
any lawful dividend so long as, after giving effect thereto, no Default shall
have occurred and be continuing, (b) AES or any Subsidiary of AES from making
sales to or purchases from any Affiliate and, in connection therewith,
extending credit or making payments, or from making payments for services
rendered by any Affiliate, if such sales or purchases are made or such services
are rendered in the ordinary course of business and on terms and conditions at
least as favorable to AES or such Subsidiary as the terms and conditions which
would apply in a similar transaction with a Person not an Affiliate, (c) AES or
any Subsidiary of AES from making payments of principal, interest and premium
on any Debt of AES or such Subsidiary held by an Affiliate if the terms of such
Debt are substantially as favorable to AES or such Subsidiary as the terms
which could have been obtained at the time of the creation of such Debt from a
lender which
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was not an Affiliate and (d) AES or any Subsidiary of AES from participating
in, or effecting any transaction in connection with, any joint enterprise or
other joint arrangement with any Affiliate if AES or such Subsidiary
participates in the ordinary course of its business and on a basis no less
advantageous than the basis on which such Affiliate participates. The
provisions of this Section 5.18 shall not apply to (i) transactions between AES
or any of its Subsidiaries, on the one hand, and any employee of AES or any of
its Subsidiaries, on the other hand, that are approved by the Board of
Directors of AES or any committee of the Board of Directors consisting of AES's
independent directors and (ii) the payment of reasonable and customary regular
fees to directors of AES or a Subsidiary of AES.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) any Obligor shall fail to pay when due any principal of any
Loan or any Reimbursement Obligation, or shall fail to pay within three
days of the date when due any interest, fees or other amounts payable under
any Financing Document;
(b) AES shall fail to observe or perform any covenant contained
in Sections 5.07 to 5.18, inclusive, or except in accordance with the terms
hereof and thereof, the Subsidiary Guaranty or the guarantees in Article IX
shall cease to be in full force and effect;
(c) any Obligor shall fail to observe or perform any covenant or
agreement contained in any Financing Document (other than those covered by
clause (a) or (b) above) for 20 days after written notice thereof has been
given to AES by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made
by any Obligor in any Financing Document or in any certificate, financial
statement or other document delivered pursuant to any Financing Document
shall prove to have been incorrect in any material respect when made (or
deemed made);
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(e) either Borrower shall fail to make any payment in respect of
any Material Debt when due or within any applicable grace period;
(f) any event or condition shall occur which (i) results in the
acceleration of the maturity of any Debt of AES or any Subsidiary of AES
(except AES Placerita and Central Termica San Nicolas S.A.) or the
termination of any commitment to provide financing to AES or any Material
AES Entity or (ii) in the case of either Borrower, enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of any
Material Debt or any Person acting on such holder's behalf to accelerate
the maturity thereof or (iii) enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of any Debt outstanding
under the AES Light Non-Recourse Facility or any person acting on such
holder's behalf to accelerate the maturity thereof or (iv) prior to the
earlier of (x) July 31, 1996 and (y) the date on which AES receives the
proceeds of at least $225,000,000 of Additional Permitted Subordinated
Debt, at any time that a LIGHT Acquisition Letter of Credit is outstanding,
the outstanding amount of Other LIGHT Non-Recourse Collateral posted to
secure AES Coral Reef's bid in connection with the LIGHT Acquisition is
less than $225,000,000;
(g) a Borrower or any Significant AES Entity shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against a Borrower or any Significant AES Entity seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a
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trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days;
or an order for relief shall be entered against a Borrower or any
Significant AES Entity under the federal bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $1,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $1,000,000;
(j) a judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against AES or any Subsidiary of AES, and such
judgment or order shall continue unsatisfied and unstayed for a period of
10 days; or
(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) other than a
member of the AES Management Group shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 20% or more of the outstanding
shares of common stock of AES; during any period of twelve consecutive
calendar months, individuals who were directors of AES on the first day of
such period (or who were appointed or nominated for election as directors
of AES by at least a majority of the individuals who were directors on the
first day of such period) shall cease to constitute a majority of the board
of directors of AES;
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or AES Finance shall fail, at any time, to be a Wholly-Owned Consolidated
Subsidiary;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Total Exposures, by notice to the
Borrowers terminate the Commitments and they shall thereupon terminate, and
(ii) if requested by Banks having more than 50% of the Total Exposures, by
notice to the Borrowers declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrowers; provided that in the case of any
Automatic Acceleration Event, without any notice to the Borrowers or any other
act by the Agent or the Banks, the Commitments shall thereupon terminate and
the Notes (together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers.
SECTION 6.02. Notice of Default. The Agent shall give notice to
AES under Section 6.01(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Collateral. If any Automatic Acceleration
Event shall occur or the Loans of the Banks shall have otherwise been
accelerated or the Commitments terminated pursuant to Section 6.01, then
without any request or the taking of any other action by the Agent or any of
the Banks, the Borrowers shall be jointly and severally obligated forthwith to
pay to the Agent an amount in immediately available funds equal to the then
aggregate amount available for drawings (regardless of whether any conditions
to any such drawing can then be met) under all Letters of Credit at the time
outstanding, to be held by the Agent as cash collateral as provided in Section
2.14.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Financing Documents as are
delegated to the Agent by the terms thereof, together with all such powers as
are reasonably incidental thereto.
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SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under the Financing
Documents as any other Bank and may exercise or refrain from exercising the
same as though it were not the Agent, and Morgan Guaranty Trust Company of New
York and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with AES or any Subsidiary or affiliate of AES
as if it were not the Agent under the Financing Documents.
SECTION 7.03. Action by Agent. The obligations of the Agent
under the Financing Documents are only those expressly set forth therein.
Without limiting the generality of the foregoing, the Agent shall not be
required to take any action with respect to any Default, except as expressly
provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for either Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii)
in the absence of its own gross negligence or willful misconduct. Neither the
Agent nor any of its affiliates nor any of their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with the Financing Documents or any Extension of Credit
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any Obligor; (iii) the satisfaction of any condition specified in
Article III, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of the Financing Documents or
any other instrument or writing furnished in connection therewith. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
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SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, and each Fronting Bank,
each of their respective affiliates and the respective directors, officers,
agents and employees of any of them (to the extent not reimbursed by the
Obligors) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with the Financing Documents or any action taken
or omitted by such indemnitees thereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Agent, any Fronting Bank or
any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Agent, any Fronting Bank or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time
by giving notice thereof to the Banks and the Borrowers. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
SECTION 7.09. Agent's Fee. AES shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon between
AES and the Agent.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
Commitments advise the Agent that the Adjusted London Interbank Offered
Rate as determined by the Agent will not adequately and fairly reflect the
cost to such Banks of funding their Euro-Dollar Loans for such Interest
Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans shall be suspended. Unless a Borrower notifies the Agent at
least two Domestic Business Days before the date of any Euro-Dollar Borrowing
for which a Notice of Borrowing has previously been given that it elects not to
borrow on such date such Borrowing shall instead be made as a Domestic
Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans to either Borrower and such Bank shall so notify
the Agent, the Agent shall forthwith give notice thereof to the other Banks and
AES, whereupon until such Bank notifies AES and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans to such Borrower shall be suspended.
Before giving any notice to
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the Agent pursuant to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
to such Borrower to maturity and shall so specify in such notice, such Borrower
shall immediately prepay in full the then outstanding principal amount of each
such Euro-Dollar Loan, together with accrued interest thereon. Concurrently
with prepaying each such Euro-Dollar Loan, such Borrower shall borrow a
Domestic Loan in an equal principal amount from such Bank (on which interest
and principal shall be payable contemporaneously with the related Euro-Dollar
Loans of the other Banks), and such Bank shall make such a Domestic Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or
after the date hereof, the adoption of any applicable law, rule or regulation,
or any change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) or any
Fronting Bank (any Bank (or its Applicable Lending Office) and any Fronting
Bank being referred to in this Section 8.03 as a "Credit Party") with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
with respect to any Euro-Dollar Loan any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Credit Party or shall impose on any
Credit Party or on the London interbank market any other condition affecting
its Euro-Dollar Loans, its Note, the Letters of Credit or its participation
therein or its obligation to make Euro-Dollar Loans or to issue Letters of
Credit or to participate therein and the result of any of the foregoing is to
increase the cost to such Credit Party of making or maintaining any Euro-Dollar
Loan or issuing any Letter of Credit or participating therein, or to reduce the
amount of any sum received or receivable by such Credit Party under this
Agreement or under its Note with respect thereto, by an amount deemed by such
Credit Party to be material, then, within 15 days after demand by such Credit
Party (with a copy to the Agent), AES shall pay to such Credit Party such
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additional amount or amounts as will compensate such Credit Party for such
increased cost or reduction.
(b) If any Credit Party shall have determined that, after the
date hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Credit Party (or its Parent) as a consequence of such Credit
Party's obligations hereunder to a level below that which such Credit Party (or
its Parent) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Credit Party to be material, then from
time to time, within 15 days after demand by such Credit Party (with a copy to
the Agent), AES shall pay to such Bank such additional amount or amounts as
will compensate such Credit Party (or its Parent) for such reduction.
(c) Each Credit Party will promptly notify AES and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Credit Party to compensation pursuant to this Section and
will designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the judgment of such Credit Party, be otherwise disadvantageous to such Credit
Party. A certificate of any Credit Party claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, such Credit Party may use any reasonable averaging and attribution
methods.
SECTION 8.04. Taxes. (a) Any and all payments by either
Borrower to or for the account of any Bank, any Fronting Bank or the Agent
hereunder or under any other Financing Document shall be made free and clear of
and without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank, each Fronting Bank and the Agent,
taxes imposed on its income (including branch profit taxes), franchise and
similar taxes and other taxes imposed on it
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that, in any such case, would not have been imposed but for a material
connection between such Bank, such Fronting Bank or the Agent (as the case may
be) and the jurisdiction imposing such taxes (other than a material connection
arising by reason of this Agreement or any other Financing Document or the
receipt of payments made hereunder or thereunder) (all such non-excluded taxes,
duties, levies, imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Taxes"). If either Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any other Financing Document to any Bank, any Fronting Bank
or the Agent, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 8.04) such Bank, such Fronting Bank or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Borrower shall make such
deductions, (iii) such Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) such Borrower shall furnish to the Agent, at its address referred
to in Section 9.01, the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes and any other excise or property taxes, or
charges or similar levies which arise from any payment made by it hereunder or
under any Note or from the execution or delivery of, or otherwise with respect
to, this Agreement or any other Financing Document (hereinafter referred to as
"Other Taxes").
(c) Each Borrower agrees to indemnify each Bank, each Fronting
Bank and the Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 8.04) paid by such Bank,
such Fronting Bank or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 15 days from the date such
Bank, such Fronting Bank or the Agent (as the case may be) makes demand
therefor.
(d) Each Bank organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Bank listed on the signature pages hereof
and on or prior to the date on which it becomes a Bank in the
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case of each other Bank, and from time to time thereafter if requested in
writing by AES (but only so long as such Bank remains lawfully able to do so),
shall provide AES with two duly completed and accurate copies of Internal
Revenue Service form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that such Bank is
entitled to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States. If the
form provided by a Bank at the time such Bank first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from "Taxes" as
defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to
provide AES with the appropriate form pursuant to Section 8.04(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.04(a) with respect to
Taxes imposed by the United States; provided, however, that should a Bank,
which is otherwise exempt from or subject to a reduced rate of withholding tax,
become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrowers shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(f) If either Borrower is required to pay additional amounts to
or for the account of any Bank pursuant to this Section 8.04, then such Bank
will change the jurisdiction of its Applicable Lending Office so as to
eliminate or reduce any such additional payment which may thereafter accrue if
such change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
(g) Each Bank, each Fronting Bank and the Agent agrees that it
will promptly (within 30 days) after receiving notice thereof from any taxing
authority, notify AES of the assertion of any liability by such taxing
authority with respect to Taxes or Other Taxes; provided, that the failure to
give such notice shall not relieve AES of its obligations under this Section
8.04 except to the extent that AES has been prejudiced by such failure and
except that AES shall not be liable for penalties, interest or expenses
accruing after such 30 day period until such time as it receives the notice
contemplated above, after
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which time it shall be liable for interest, penalties and expenses accruing
after such receipt.
(h) If any Bank, a Fronting Bank or the Agent shall receive a
credit or refund from a taxing authority (as a result of any error in the
imposition of Tax or Other Tax by such taxing authority) with respect to and
actually resulting from an amount of such Taxes or Other Taxes paid by a
Borrower pursuant to subsection (a) or (c) above, such Bank, such Fronting Bank
or the Agent shall promptly pay to AES the amount so received (without interest
thereon, whether or not received).
SECTION 8.05. Domestic Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to any
Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03 or 8.04 with respect to its
Euro-Dollar Loans to any Borrower and such Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies AES that the circumstances giving rise to
such suspension or demand for compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by
such Bank as Euro-Dollar Loans shall be made instead as Domestic Loans (on
which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans to such Borrower has been
repaid, all payments of principal which would otherwise be applied to repay
such Euro-Dollar Loans shall be applied to repay its Domestic Loans to such
Borrower instead.
ARTICLE IX
GUARANTY
SECTION 9.01. The Guaranty. Subject, in the case of AES Finance,
to the provisions of Section 9.07, each Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the applicable Borrower pursuant to this Agreement, and the full and
punctual payment of all other amounts payable by such Borrower under this
Agreement.
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<PAGE> 76
Upon failure by a Borrower to pay punctually any such amount, the applicable
Guarantor shall, subject, in the case of AES Finance, to the provisions of
Section 9.07, forthwith on demand pay the amount not so paid at the place and
in the manner specified in this Agreement. Without limiting the generality of
the foregoing, each Guarantor's liability hereunder shall extend to all amounts
which constitute part of the obligations guaranteed by it hereunder and would
be owed by a Borrower hereunder but for the fact that they are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such Borrower.
SECTION 9.02. Guaranty Unconditional. The obligations of each
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any other Obligor under any
Financing Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
Financing Document;
(iii) any release, impairment, non-perfection or invalidity of
any direct or indirect security for any obligation of any other Obligor
under any Financing Document;
(iv) any change in the corporate existence, structure or
ownership of any Obligor, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting any other Obligor or its assets or any
resulting release or discharge of any obligation of any other Obligor
contained in any Financing Document;
(v) the existence of any claim, set-off or other rights which
such Guarantor may have at any time against any other Obligor, the Agent,
any Fronting Bank, any Bank or any other Person, whether in connection
herewith or with any unrelated transactions, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
any other Obligor for any reason of any Financing Document, or any
provision of applicable law
70
<PAGE> 77
or regulation purporting to prohibit the payment by any other Obligor of
the principal of or interest on any Note or any other amount payable by it
under any Financing Document; or
(vii) any other act or omission to act or delay of any kind by
any Obligor, the Agent, any Fronting Bank, any Bank or any other Person or
any other circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of or defense to
AES's obligations hereunder.
SECTION 9.03. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. Each Guarantor's obligations hereunder shall remain
in full force and effect until the Commitments shall have terminated, the
principal of and interest on the Notes and all other amounts payable by any
Obligor under any Financing Document shall have been paid in full and all
Letters of Credit shall have expired or been terminated. If at any time any
payment of principal of or interest on any Note or any other amount payable by
either Borrower under any Financing Document is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of such
Borrower or otherwise, the applicable Guarantor's obligations hereunder with
respect to such payment shall be reinstated at such time as though such payment
had been due but not made at such time.
SECTION 9.04. Waiver by AES. Each Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against the applicable Borrower or any other Person.
SECTION 9.05. Subrogation. Upon making any payment with respect
to a Borrower under this Article IX, the applicable Guarantor shall be
subrogated to the rights of the payee against such Borrower with respect to
such payment; provided that neither Guarantor shall enforce any payment by way
of subrogation until all amounts of principal of and interest on the Notes and
all other amounts payable by either Borrower under any Financing Document shall
have been paid in full.
SECTION 9.06. Stay of Acceleration. In the event that
acceleration of the time for payment of any amount payable by a Borrower under
any Financing Document is stayed upon insolvency, bankruptcy or reorganization
of such Borrower, all such amounts otherwise subject to acceleration under the
terms of this Agreement shall nonetheless be
71
<PAGE> 78
payable by the applicable Guarantor hereunder forthwith on demand by the Agent
made at the request of the requisite proportion of the Banks specified in
Article VI of this Agreement.
SECTION 9.07. Limitation of Liability. The obligations of AES
Finance under this Article IX shall be limited to an aggregate amount equal to
the largest amount that would not render its obligations under this Article IX
subject to avoidance under Section 548 of the Bankruptcy Code or any comparable
provisions of any applicable state law.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (w) in the case of AES, either Fronting Bank or the Agent, at its
address or telex or facsimile transmission number set forth on the signature
pages hereof, (x) in the case of AES Finance, in care of AES at the address or
telex or facsimile transmission number of AES set forth on the signature pages
hereof, (y) in the case of any Bank, at its address or telex or facsimile
transmission number set forth in its Administrative Questionnaire or (z) in the
case of any party, at such other address or telex or facsimile transmission
number as such party may hereafter specify for the purpose by notice to the
Agent, the Fronting Banks and AES. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in or pursuant to this Section and
the appropriate answerback is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in or pursuant to this Section; provided that notices to
the Agent or a Fronting Bank under Article II or Article VIII shall not be
effective until received.
SECTION 10.02. No Waivers. No failure or delay by the Agent,
either Fronting Bank or any Bank in exercising any right, power or privilege
hereunder or under any other Financing Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any
72
<PAGE> 79
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.03. Expenses; Indemnification. (a) AES shall pay (i)
all out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement and the other Financing
Documents, any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (ii) if an Event of Default occurs,
all out-of-pocket expenses incurred by the Agent, each Fronting Bank and each
Bank, including (without duplication) the fees and disbursements of outside
counsel and the allocated cost of inside counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) AES agrees to indemnify the Agent, each Fronting Bank and
each Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans or Letters of Credit hereunder or the
issuance or deemed issuance of any Letter of Credit hereunder; provided that no
Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by a
court of competent jurisdiction.
SECTION 10.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount due with respect to the Total
Outstandings of such Bank which is greater than the proportion received by any
other Bank in respect of the aggregate amount due with respect to the Total
Outstandings of such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Total Outstandings of
the other Banks, and such other adjustments shall be made, as may be required
so that all such payments with respect to the Total Outstandings of the Banks
shall be shared by the Banks pro rata; provided that
73
<PAGE> 80
nothing in this Section shall impair the right of any Bank to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of a Borrower other than its
indebtedness in respect of the Total Outstandings of any Bank. Each Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note or in any Letter of Credit
Liability, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a direct
creditor of such Borrower in the amount of such participation.
SECTION 10.05. Amendments and Waivers. Any provision of this
Agreement or any other Financing Document may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by each Borrower, each
Fronting Bank and the Required Banks (and, if the rights or duties of the Agent
are affected thereby, by the Agent); provided that no such amendment or waiver
shall, unless signed by all the Banks, (i) increase or decrease the Commitment
of any Bank (except for a ratable decrease in Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan or Reimbursement Obligation or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on
any Loan or Reimbursement Obligation or any fees hereunder or for any reduction
or termination of any Commitment, (iv) change the percentage of the Commitments
or of the Total Exposures, or the number of Banks, which shall be required for
the Banks or any of them to take any action under this Section or any other
provision of this Agreement or any other Financing Document, or (v) release
either Subsidiary Guarantor from its obligations under Section 2 of the
Subsidiary Guaranty or AES from its obligations under Article IX hereof.
SECTION 10.06. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that neither
Borrower may assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
(and a corresponding interest in its Loan Commitment) or any or all of its
Loans or participating interests in Letter of Credit Liabilities. In the event
of any such grant by a Bank of a participating
74
<PAGE> 81
interest to a Participant, whether or not upon notice to the Borrowers, the
Fronting Banks and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrowers, the Fronting Bank
and the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrowers hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement or any other Financing Document; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii) or (v) of Section 10.05 without the consent of the Participant.
The Borrowers agree that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which
is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to
an initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the other Financing Documents, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit G hereto executed
by such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of AES (which shall not be unreasonably withheld), the Fronting Banks
and the Agent; provided that if an Assignee is an affiliate of such transferor
Bank, no such consent shall be required. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the
Borrowers shall make appropriate arrangements so that, if
75
<PAGE> 82
required, new Notes are issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to AES and the Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in
accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and the other Financing Documents to a Federal
Reserve Bank. No such assignment shall release the transferor Bank from its
obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with AES's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 10.07. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U or Regulation G) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
SECTION 10.08. Governing Law; Submission to Jurisdiction. This
Agreement and the other Financing Documents shall be governed by and construed
in accordance with the laws of the State of New York. Each Borrower hereby
submits to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York and of any New York State court sitting
in New York City for purposes of all legal proceedings arising out of or
relating to this Agreement and the other Financing Documents or the
transactions contemplated hereby. Each Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
76
<PAGE> 83
SECTION 10.09. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement and the other Financing Documents
constitute the entire agreement and understanding among the parties hereto and
supersedes any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof. This Agreement shall become effective
upon receipt by the Agent of counterparts hereof signed by each of the parties
hereto, other than AES Finance (or, in the case of any such party as to which
an executed counterpart shall not have been received, receipt by the Agent in
form satisfactory to it of telegraphic, telex, facsimile transmission or other
written confirmation from such party of execution of a counterpart hereof by
such party).
SECTION 10.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
FRONTING BANKS, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 10.11. Fronting Bank Obligations. Barclays Bank PLC
("Barclays") and Union Bank of California ("Union") are Fronting Banks only
with respect to the Letters of Credit that were Existing Letters of Credit
issued by them under the Existing Credit Agreement and they have no Commitments
hereunder to make Loans or to purchase participations in Letters of Credit or
any obligation to issue any additional Letters of Credit. If following good
faith discussions, the terms on which either Barclays or Union, as the case may
be, are to become a "Bank" hereunder are not agreed within 30 days following
the Effective Date, AES and Morgan Guaranty Trust Company of New York, as
Fronting Bank ("Morgan"), agree to use their best efforts to replace the
Letters of Credit issued by Barclays or Union, as the case may be, with new
Letters of Credit issued by Morgan as soon as is reasonably practicable.
77
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
THE AES CORPORATION
By
-------------------------------
Title: Vice President, Chief
Financial Officer and
Secretary and Treasurer
1001 North 19th Street
Arlington, VA 22209
Telecopy no.: (703) 528-4510
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
--------------------------------
Title: Vice President
78
<PAGE> 85
BARCLAYS BANK PLC, as Fronting
Bank
By
--------------------------------
Title: Director
222 Broadway
New York, New York 10038
Attention: Letter of Credit
Department
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Fronting Bank
By
--------------------------------
Title:
60 Wall Street
New York, New York 10260-0060
Attention: James Finch
Telex number: 177615
UNION BANK OF CALIFORNIA, N.A.,
as Fronting Bank
By
--------------------------------
Title:
445 South Figueroa Street
Los Angeles, California 90071
Attention:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
--------------------------------
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: James Finch
Telex number: 177615
79
<PAGE> 86
APPENDIX
COMMITMENTS
<TABLE>
<CAPTION>
Name of Bank Commitment
------------ ----------
<S> <C>
Morgan Guaranty Trust Company of New York . . . . . . $425,000,000
</TABLE>
<PAGE> 87
PRICING SCHEDULE
The "Euro-Dollar Margin", "Commitment Fee Rate" and "Letter of
Credit Commission Rate" for any day are the respective percentages set forth
below in the applicable row under the column corresponding to the Status that
exists on such day:
<TABLE>
<CAPTION>
==================================================================================================
Level Level Level Level Level
Status I II III IV V
==================================================================================================
<S> <C> <C> <C> <C> <C>
Euro-Dollar
Margin 1.00% 1.50% 1.75% 2.00% 2.50%
- --------------------------------------------------------------------------------------------------
Commitment Fee Rate 0.25% 0.375% 0.375% 0.50% 0.50%
- --------------------------------------------------------------------------------------------------
Letter of Credit
Commission Rate 1.00% 1.50% 1.75% 2.00% 2.50%
==================================================================================================
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Level I Status" exists at any date if, at such date, AES's
long-term debt is rated BBB- or higher by S&P and Baa3 or higher by Moody's.
"Level II Status" exists at any date if, at such date, (i) AES's
long-term debt is rated BB+ or higher by S&P and Ba1 or higher by Moody's and
(ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) AES's
long-term debt is rated BB or higher by S&P and Ba2 or higher by Moody's and
(ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) AES's
long-term debt is rated BB- or higher by S&P and Ba3 or higher by Moody's and
(ii) none of Level I Status, Level II Status and Level III Status exists.
2
<PAGE> 88
"Level V Status" exists at any date if, at such date, no other
Status exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Rating Group.
"Status" refers to the determination which of Level I Status,
Level II Status, Level III Status, Level IV Status or Level V Status exists at
any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of AES (including,
if no senior unsecured long-term debt securities of AES are outstanding, any
such ratings that Moody's or S&P has explicitly stated may be implied from the
ratings it has assigned to AES's outstanding subordinated unsecured long-term
debt securities) without third-party credit enhancement, and any rating
assigned to any other debt security of AES shall be disregarded. The rating in
effect at any date is that in effect at the close of business on such date.
3
<PAGE> 89
Schedule I
EXISTING DEBT
[TO COME]
<PAGE> 90
Schedule II
EXISTING LIENS
[TO COME]
<PAGE> 91
Schedule III
EXISTING AGREEMENTS WITH AFFILIATES
[TO COME]
<PAGE> 92
Schedule IV
EXISTING LETTERS OF CREDIT
[TO COME]
2
<PAGE> 93
Schedule V
NON-CONFORMING LETTER OF CREDIT
Letter of Credit Number 836978 issued by Barclays Bank PLC, dated June 23,
1994, in favor of Amwest Surety Insurance Company
3
<PAGE> 94
EXHIBIT A
NOTE
New York, New York
, 19
For value received, [The AES Corporation] [Name of AES Finance], a
Delaware corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of May 20, 1996 among The AES
<PAGE> 95
Corporation, the banks listed on the signature pages thereof, Barclays Bank
PLC, Morgan Guaranty Trust Company of New York and Union Bank, as Fronting
Banks, and Morgan Guaranty Trust Company of New York, as Agent (as the same may
be amended from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings. Reference is made to
the Credit Agreement for provisions for the guarantee hereof in certain
circumstances, the prepayment hereof and the acceleration of the maturity
hereof.
[BORROWER]
By
-------------------------
2
<PAGE> 96
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
3
<PAGE> 97
EXHIBIT B
SUBSIDIARY GUARANTY
GUARANTY, dated as of May 20, 1996, made by AES HAWAII MANAGEMENT
CO., INC. ("AES Hawaii") and AES OKLAHOMA MANAGEMENT CO., INC. ("AES
Oklahoma"), corporations organized and existing under the laws of Delaware
(each individually a "Guarantor" and, collectively, the "Guarantors"), in favor
of the banks (the "Banks") party to the Credit Agreement (as defined below) and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as agent (the "Agent") for the
Banks.
PRELIMINARY STATEMENTS:
(1) The Banks, Barclays Bank PLC, Morgan Guaranty Trust Company
of New York and Union Bank, as Fronting Banks, and the Agent have entered into
a Credit Agreement, dated as of even date herewith (the "Credit Agreement")
with The AES Corporation, a corporation organized and existing under the laws
of Delaware ("AES"), which owns 100% of the outstanding shares of stock of each
Guarantor.
(2) Each Guarantor and its respective wholly-owned subsidiary,
AES Barbers Point, Inc. ("AES Barbers Point") and AES Shady Point, Inc. ("AES
Shady Point"), may receive a portion of the proceeds of the Loans made, and the
benefit of Letters of Credit issued, under the Credit Agreement and otherwise
derive substantial direct and indirect benefit from the Credit Agreement.
(3) It is a condition under the Credit Agreement that each
Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
satisfy the condition on which the Banks and the Agent were willing to enter
into the Amendment, the Guarantors hereby jointly and severally agree as
follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement
and not otherwise defined herein are used herein as therein defined.
SECTION 2. Guaranty. Subject to Section 10, each Guarantor,
jointly and severally, hereby unconditionally guarantees, as primary obligor
and not merely as surety, the
<PAGE> 98
full and punctual payment as and when the same shall become due and payable
(whether at stated maturity, upon acceleration or otherwise) of the principal
of and interest on each Note issued by any Borrower pursuant to the Credit
Agreement, the full and punctual payment of each Reimbursement Obligation under
the Credit Agreement and the full and punctual payment of all other amounts
payable by any Borrower under the Credit Agreement. Upon failure by any
Borrower to pay punctually any such amount, the Guarantors shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement. The obligations of the Borrowers guaranteed by the
Guarantors are referred to herein as the "Guaranteed Obligations". Without
limiting the generality of the foregoing, each Guarantor's liability shall
extend to all amounts which constitute part of the Guaranteed Obligations and
would be owed by any Borrower under the Credit Agreement but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Borrower.
SECTION 3. Guaranty Absolute. Each Guarantor, jointly and
severally, guarantees that, subject to Section 10 hereof, the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Banks and the Agent with respect thereto. The obligations of the Guarantors
under this Guaranty are independent of the Guaranteed Obligations, and a
separate action or actions may be brought and prosecuted against the Guarantors
to enforce this Guaranty, irrespective of whether any action is brought against
any Borrower or whether any Borrower is joined in any such action or actions.
The liability of each Guarantor under this Guaranty shall, subject to Section
10 hereof, be absolute and unconditional and, without limiting the generality
of the foregoing, irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement or any other agreement or instrument relating thereto, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Borrower of any of the Guaranteed Obligations or any other
amount payable by any Borrower under the Credit Agreement;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any other
amendment, waiver,
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extension, renewal, settlement, compromise or release in respect of or any
consent to departure from the Credit Agreement including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to AES or any of its Subsidiaries or
otherwise;
(iii) any taking, exchange, release, impairment, invalidity or
nonperfection of any collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Guaranteed Obligations;
(iv) any manner of application of collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of sale
or other disposition of any collateral for all or any of the Guaranteed
Obligations or any other assets of AES or any of its Subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of AES or any of its Subsidiaries;
(vi) any insolvency, bankruptcy, reorganization or other similar
proceeding affecting any Borrower or its assets or any resulting release or
discharge of any of the Guaranteed Obligations or any other obligation of
any Borrower contained in the Credit Agreement (other than as a result of
the payment or performance in full thereof);
(vii) the existence of any claim, set-off or other rights which
the Guarantors may have at any time against any Borrower, the Agent, any
Bank or any other corporation or person, whether in connection herewith or
with any unrelated transactions, provided that nothing herein shall prevent
the assertion of any such claim by separate suit or compulsory
counterclaim; or
(viii) any other circumstances which might, but for this Section
otherwise constitute a defense available to, or a discharge of, any
Borrower or Guarantor.
This Guaranty shall continue to be effective or shall be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Agent or any Bank upon the
insolvency, bankruptcy or reorganization of any Borrower or
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otherwise, all as though such payment had been due but not been made at such
time.
SECTION 4. Cash Collateral Account. (a) Each Guarantor further
agrees that if any Borrower shall fail to deposit in the Cash Collateral
Account any amount required to be deposited therein pursuant to the Credit
Agreement, the Guarantors shall deposit such amount in a subaccount of the Cash
Collateral Account as collateral security for each Guarantor's potential
obligations hereunder. If the Guarantors fail to furnish such funds, the Agent
shall be authorized to debit any accounts the Guarantors maintain with the
Agent in such amount. Cash deposited in such subaccount of the Cash Collateral
Account pursuant to this Section shall be returned to the Guarantors depositing
the same to the extent that funds deposited by any Borrower in the Cash
Collateral Account would have been required to be returned to such Borrower
under the Credit Agreement.
(b) Each Guarantor hereby pledges and grants to the Agent, for
the benefit of the Banks and the Agent, a continuing lien on and security
interest in all right, title and interest of such Guarantor with respect to any
funds held in the Cash Collateral Account from time to time, and all proceeds
thereof, as security for the payment of the Guaranteed Obligations.
(c) The Agent may, at any time or from time to time after funds
are deposited in the Cash Collateral Account, apply funds then held in the Cash
Collateral Account to the payment of any of the Guaranteed Obligations, in such
order as the Agent may elect, as shall have become or shall become due and
payable by any Borrower to the Banks or the Agent under the Credit Agreement.
(d) Neither the Guarantors nor any person or entity claiming on
behalf of or through the Guarantors shall have any right to withdraw any of the
funds held in the Cash Collateral Account.
(e) Each Guarantor agrees that it will not (i) sell or otherwise
dispose of any interest in the Cash Collateral Account or any funds held
therein, or (ii) create or permit to exist any lien, security interest or other
charge or encumbrance upon or with respect to the Cash Collateral Account or
any funds held therein, except as contemplated by the terms hereof.
SECTION 5. Representations and Warranties of the Guarantors.
Each Guarantor respectively represents and warrants as follows:
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(a) Such Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation,
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
(b) The execution, delivery and performance by such Guarantor of
this Guaranty are within such Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation applicable to such Guarantor or the certificate of incorporation
or by-laws of such Guarantor or any judgment, injunction, order, decree,
material agreement or other material instrument binding upon such Guarantor or
result in the creation or imposition of any Lien on any asset of AES or any of
its Subsidiaries, except as contemplated by the terms hereof.
(c) This Guaranty constitutes a valid and binding obligation of
such Guarantor enforceable against such Guarantor in accordance with its terms,
except as the enforceability hereof may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights generally or by general principles of equity limiting the
availability of equitable remedies.
SECTION 6. Covenants. So long as any Note or Letter of Credit
shall remain outstanding or Loan or Reimbursement Obligation shall remain
unpaid or any Commitment shall remain outstanding under the Credit Agreement,
no Guarantor will, without the written consent of the Required Banks, if, and
for so long as, an Actionable Default shall have occurred and be continuing
under the Credit Agreement, (i) declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of capital stock of the Guarantor (other
than stock splits and dividends payable solely in equity securities of the
Guarantor), or purchase, redeem or otherwise acquire for value (or permit any
of its Subsidiaries to do so) any shares of any class of capital stock of the
Guarantor or any warrants, rights or options to acquire any such shares, now or
hereafter outstanding or (ii) make any Investment in or otherwise advance any
funds to the Borrower, or, except as may be required by the Shady Point
Financing Documents (as defined in Schedule I hereto), any Subsidiary of the
Borrower. "Actionable Default" means an Event of Default
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described in clauses (a), (e), (f), (g) and (h) of Section 6.01 of the Credit
Agreement.
SECTION 7. Waiver. Each Guarantor hereby waives promptness,
diligence, notice of acceptance presentment, protest and any other notice with
respect to any of the Guaranteed Obligations and this Guaranty and waives any
requirement that the Agent or any Bank protect, secure, perfect or insure any
security interest or lien on any property subject thereto or exhaust any right
or take any action against any Borrower or any other person or entity or any
collateral.
SECTION 8. Subrogation. Upon making any payment with respect to
a Borrower under this Guaranty, the Guarantor making such payment shall be
subrogated to the rights of the payee against such Borrower with respect to
such payment; provided that neither Guarantor shall enforce any payment by way
of subrogation until all amounts of principal of and interest on the Notes and
all other amounts payable by either Borrower under any Financing Document shall
have been paid in full.
SECTION 9. Stay of Acceleration. If acceleration of the time for
payment of any Guaranteed Obligation is stayed upon the insolvency, bankruptcy
or reorganization of any Borrower, all such Guaranteed Obligations otherwise
subject to acceleration under the terms of the Credit Agreement shall
nonetheless be payable by the Guarantors hereunder forthwith on demand by the
Agent made at the request of the requisite proportion of the Banks specified in
Article VI of the Credit Agreement.
SECTION 10. Limit of Liability. The obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the
largest amount that would not render its obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state law (including, without
limitation, the provisions of the Uniform Fraudulent Transfer Act and the
Uniform Fraudulent Conveyance Act, to the extent incorporated in applicable
state law).
SECTION 11. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty, and no consent to any departure by either Guarantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Banks and each Guarantor, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided that neither Guarantor shall be released
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from its obligations under Section 2 hereof without the consent of all of the
Banks.
SECTION 12. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telecopier, telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered to it, if to a Guarantor, to it in
care of The AES Corporation at its address at 1001 North 19th Street,
Arlington, Virginia 22209, Attention: Vice President, Chief Financial Officer
and Secretary, and if to the Agent, at its address specified in the Credit
Agreement, or, as to either party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and
other communications shall be effective in the manner and at the time set forth
in Section 10.01 of the Credit Agreement.
SECTION 13. No Waiver; Remedies. No failure on the part of the
Agent or any Bank to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 14. Continuing Guaranty; Assignment under Credit
Agreement. This Guaranty is a continuing guaranty and shall (i) subject, in
the case of AES Oklahoma, to the provisions of Section 15, remain in full force
and effect until the later of (x) the payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty, (y) the
termination of all Commitments under the Credit Agreement and (z) the surrender
to the Fronting Bank or the expiration of all Letters of Credit issued under
the Credit Agreement, (ii) be binding upon the Guarantors and their respective
successors and assigns, and (iii) inure to the benefit of, and be enforceable
by, the Banks, the Agent and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), the
Agent and any Bank may assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement and the Notes to any other
person or entity (to the extent therein provided), and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to such assigning party herein or otherwise, subject, however, to the
provisions of Article VII (concerning the Agent) and Section 10.06 of the
Credit Agreement.
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SECTION 15. Termination of Obligations of AES Oklahoma Upon
Attainment of Level I Status. If, at any time, Level I Status exists and no
Debt or Letters of Credit are outstanding under the AES Light Non-Recourse
Facility and all commitments to extend credit thereunder shall have terminated,
the obligations of AES Oklahoma hereunder shall be immediately and irrevocably
terminated.
SECTION 16. Governing Law. This Guaranty shall be governed by,
and construed in accordance with, the laws of the State of New York.
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
AES HAWAII MANAGEMENT COMPANY, INC.
By:
--------------------------
Title: Vice President
AES OKLAHOMA MANAGEMENT CO., INC.
By:
---------------------------
Title: Vice President
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SCHEDULE 1
TO GUARANTY
(1) The Application for Letter of Credit and Reimbursement
Agreement, dated as of June 23, 1987, among AES Shady Point, certain banks
named therein and Security Pacific National Bank, as issuing bank and as agent
for such banks, (2) the Subordinated Debt Agreement, dated as of June 23, 1987,
among AES Shady Point, the subordinated lenders named therein and Nichimen
America, Inc. as agent for such lenders, (3) the Subordinated Debt Agreement,
dated as of December 6, 1991, between AES Shady Point and The AES Corporation
as subordinated lender (it being understood that this debt may be refinanced by
Additional Subordinated Debt (as defined therein) and secured on a pari passu
basis with the Nichimen subordinated debt referred to above), and (4) the other
"Project Documents" referred to therein, as each of the above may be amended
from time to time, and any successor credit facility providing for the
refinancing of the Debt under such documents (collectively, the "Shady Point
Financing Documents").
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EXHIBIT C
CLOSING DATE OPINION OF
THE GENERAL COUNSEL OF AES
To the Banks, the Fronting Banks and
the Agent Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am the General Counsel of The AES Corporation ("AES") and have
acted as counsel for AES and each of the Subsidiary Guarantors (as defined in
the Credit Agreement referred to below) in connection with the Credit Agreement
(the "Credit Agreement") dated as of May 20, 1996 among AES, the banks listed
on the signature pages thereof, Barclays Bank PLC, Morgan Guaranty Trust
Company of New York and Union Bank, as Fronting Banks (the "Fronting Banks"),
and Morgan Guaranty Trust Company of New York, as Agent. Terms defined in the
Credit Agreement are used herein as therein defined. This opinion is being
rendered to you at the request of the Obligors pursuant to Section 3.01(c) of
the Credit Agreement. AES and the Subsidiary Guarantors are sometimes
hereinafter referred to as the "Obligors" and each as an "Obligor".
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable
for purposes of this opinion.
I am a member of the bar of the State of New York and I do not
purport to be expert on or to express any opinion herein concerning any matter
governed by any laws other than the State of New York, the general corporation
laws of the State of Delaware and the federal laws of the United States of
America.
<PAGE> 108
Upon the basis of the foregoing, I am of the opinion that:
1. Each of the Obligors is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware, and has all
corporate powers and, to the best of my knowledge after due inquiry, all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
2. The execution, delivery and performance by each Obligor of the
Financing Documents to which it is a party are within such Obligor's corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
the certificate of incorporation or by-laws of such Obligor or, to the best of
my knowledge after due inquiry, of applicable law or regulation or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
AES or any Material AES Entity or result in the creation or imposition of any
Lien on any asset of AES or any of its Subsidiaries, except for Liens on
amounts deposited in the cash collateral accounts contemplated by the Financing
Documents and except as set forth in the proviso to Section 4.02 of the Credit
Agreement.
3. The Credit Agreement constitutes a valid and binding agreement
of AES and each Note of AES constitutes a valid and binding obligation of AES,
in each case enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, fraudulent conveyance, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
4. The Subsidiary Guaranty constitutes a valid and binding
agreement of each of the Subsidiary Guarantors, in each case enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
fraudulent conveyance, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity.
5. Except as disclosed in AES's March 1996 Form 10-Q, there is no
action, suit or proceeding pending against, or to the best of my knowledge
threatened against or affecting, AES or any of its Subsidiaries before any
court or arbitrator or any governmental body, agency or official, in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the
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<PAGE> 109
business, consolidated financial position or consolidated results of operations
of AES and its Consolidated Subsidiaries, considered as a whole, or which in
any manner draws into question the validity of the Credit Agreement, the Note
or the Subsidiary Guaranty.
6. Each of the Material AES Entities is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
7. None of the Obligors is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
8. Neither AES nor any of its Subsidiaries is subject to
regulation as a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a subsidiary or holding company or a "public
utility company" under Section 2(a) of the Public Utility Holding Company Act
of 1935, as amended ("PUHCA") except that AES and Applied Energy Services
Electric Limited are exempt holding companies under Section 3(a)(5) of PUHCA by
order of the Securities and Exchange Commission.
Very truly yours,
3
<PAGE> 110
EXHIBIT D
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
May 20, 1996
To the Banks, the Fronting Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement
(the "Credit Agreement") dated as of May 20, 1996 among The AES Corporation, a
Delaware corporation ("AES"), the banks listed on the signature pages thereof
(the "Banks"), Barclays Bank PLC, Morgan Guaranty Trust Company of New York and
Union Bank, as Fronting Banks (the "Fronting Banks"), and Morgan Guaranty Trust
Company of New York, as Agent (the "Agent"), and have acted as special counsel
for the Agent for the purpose of rendering this opinion pursuant to Section
3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are
used herein as therein defined. The Credit Agreement, the Note and the
Subsidiary Guaranty are referred to herein collectively as the "Documents".
AES and the Subsidiary Guarantors are referred to herein collectively as the
"Obligors".
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
<PAGE> 111
The Credit Agreement constitutes a valid and binding agreement of
AES, the Note constitutes a valid and binding obligation of AES, and the
Subsidiary Guaranty constitutes a valid and binding agreement of each
Subsidiary Guarantor, in each case enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and equitable principles of general applicability.
The foregoing opinion is subject to the effect, if any, of Section 548 of the
United States Bankruptcy Code or any comparable provision of State law.
For purposes of the foregoing opinions, we have assumed with your
permission and without independent investigation, that (i) each of the Obligors
is duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation, (ii) the execution, delivery and performance
by each Obligor of each Document to which it is a party are within its
corporate powers and have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of such Obligor or of any agreement, judgment,
injunction, order, decree or other instrument binding on such Obligor or any of
its Subsidiaries or Affiliates and (iii) the Documents have been duly executed
and delivered by each Obligor party thereto.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. In giving the foregoing opinion,
we express no opinion as to the effect (if any) of any law of any jurisdiction
(except the State of New York) in which any Bank is located which limits the
rate of interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 112
EXHIBIT E
AES FINANCE ADDITION DATE OPINION
OF THE GENERAL COUNSEL OF AES
To the Banks, the Fronting Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am the General Counsel of The AES Corporation ("AES") and have
acted as counsel for [Name of AES Finance] ("AES Finance") in connection with
the Credit Agreement (the "Credit Agreement") dated as of May 20, 1996 among
AES, the banks listed on the signature pages thereof, Barclays Bank PLC, Morgan
Guaranty Trust Company of New York and Union Bank, as Fronting Banks, and
Morgan Guaranty Trust Company of New York, as Agent. Terms defined in the
Credit Agreement are used herein as therein defined. This opinion is being
rendered to you at the request of AES Finance pursuant to Section 3.02(c) of
the Credit Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable
for purposes of this opinion.
I am a member of the bar of the State of New York and I do not
purport to be expert on or to express any opinion herein concerning any matter
governed by any laws other than the State of New York, the general corporation
laws of the State of Delaware and the federal laws of the United States of
America.
<PAGE> 113
Upon the basis of the foregoing, I am of the opinion that:
1. The execution, delivery and performance by AES Finance of the
Financing Documents to which it is a party require no action by or in respect
of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, to the best of my knowledge after
due inquiry, any provision of applicable law or regulation or of any agreement,
judgment, injunction, order, decree or other instrument binding upon AES or any
of its Subsidiaries or result in the creation or imposition of any Lien on any
asset of AES or any of its Subsidiaries, except for Liens on amounts deposited
in the cash collateral accounts contemplated by the Financing Documents and
except as set forth in the proviso to Section 4.02 of the Credit Agreement.
2. The Credit Agreement constitutes a valid and binding agreement
of AES Finance and each Note of AES Finance constitutes a valid and binding
obligation of AES Finance, in each case enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, fraudulent conveyance,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
3. AES Finance is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
4. AES Finance is not subject to regulation as a "holding
company" or a "subsidiary company" of a holding company or an "affiliate" of a
subsidiary or holding company or a "public utility company" under Section 2(a)
of the Public Utility Holding Company Act of 1935, as amended.
Very truly yours,
2
<PAGE> 114
EXHIBIT F
AES FINANCE ADDITION DATE OPINION
OF THE LOCAL COUNSEL OF AES
To the Banks, the Fronting Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel to [Name of AES Finance] ("AES Finance")
in [jurisdiction of organization of AES Finance] in connection with the Credit
Agreement (the "Credit Agreement") dated as of May 20, 1996 among The AES
Corporation ("AES"), the banks listed on the signature pages thereof, Barclays
Bank PLC, Morgan Guaranty Trust Company of New York and Union Bank, as Fronting
Banks, and Morgan Guaranty Trust Company of New York, as Agent. Terms defined
in the Credit Agreement are used herein as therein defined. This opinion is
being rendered to you at the request of AES Finance pursuant to Section 3.02(d)
of the Credit Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable
for purposes of this opinion.
I am a member of the bar of [jurisdiction of organization of AES
Finance] and I do not purport to be expert on or to express any opinion herein
concerning any matter governed by any laws other than [jurisdiction of
organization of AES Finance].
<PAGE> 115
Upon the basis of the foregoing, I am of the opinion that:
1. AES Finance is a corporation duly incorporated and validly
existing under the laws of its jurisdiction of incorporation.
2. The execution, delivery and performance by AES Finance of the
Financing Documents to which it is a party are within AES Finance's corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
the certificate of incorporation or by-laws of AES Finance or, to the best of
my knowledge after due inquiry, of applicable law or regulation or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
AES or any of its Subsidiaries or result in the creation or imposition of any
Lien on any asset of AES or any of its Subsidiaries, except for Liens on
amounts deposited in the cash collateral accounts contemplated by the Financing
Documents and except as set forth in the proviso to Section 4.02 of the Credit
Agreement.
3. The choice of New York law to govern the Credit Agreement and
the Notes of AES Finance is a valid and effective choice of law under the laws
of [jurisdiction of incorporation of AES Finance] and adherence to existing
judicial precedents would require a court sitting in [jurisdiction of AES
Finance] to abide by such choice of law.
4. There is no income, stamp or other tax of [jurisdiction of
incorporation of AES Finance and, if different, of AES Finance's principal
place of business] or any taxing authority thereof or therein, imposed by or in
the nature of withholding or otherwise, which is imposed on any payment to be
made by AES Finance pursuant to the Credit Agreement or any other Financing
Document, or is imposed by virtue of the execution, delivery or enforcement of
the Credit Agreement or any other Financing Document.
Very truly yours,
2
<PAGE> 116
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), THE AES CORPORATION ("AES"), BARCLAYS
BANK PLC and UNION BANK OF CALIFORNIA, N.A., as Fronting Banks (each a
"Fronting Bank"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of May 20, 1996 among
AES, the Assignor and the other Banks party thereto, as Banks, Barclays Bank
PLC, Morgan Guaranty Trust Company of New York and Union Bank as Fronting
Banks, and the Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans to the Borrowers and participate in Letters of
Credit issued for the account of the Borrowers in an aggregate principal amount
at any time outstanding not to exceed $__________;
WHEREAS, Loans made to the Borrowers by the Assignor under the
Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof and participations purchased by the Assignor in
Letter of Credit Liabilities in the aggregate principal amount of $__________
are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Loans and
participating interests in outstanding Letter of Credit Liabilities, and the
Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
<PAGE> 117
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Loans made by the Assignor outstanding at the date hereof and the
corresponding portion of participating interests purchased by the Assignor in
Letter of Credit Liabilities outstanding on the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, AES, each Fronting
Bank and the Agent and the payment of the amounts specified in Section 3
required to be paid on the date hereof, (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between them.*
It is understood that commitment fees and/or letter of credit commissions
accrued to the date hereof are for the account of the Assignor and such fees
and commissions accruing from and including the date hereof are for the account
of the Assignee. Each of the Assignor and the Assignee hereby
- ----------------------------------
*Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion
of any upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
2
<PAGE> 118
agrees that if it receives any amount under the Credit Agreement which is for
the account of the other party hereto, it shall receive the same for the
account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
SECTION 4. Consent of AES, the Fronting Banks and the Agent.
This Agreement is conditioned upon the consent of AES, the Fronting Banks and
the Agent pursuant to Section 10.06(c) of the Credit Agreement. The execution
of this Agreement by AES, the Fronting Banks and the Agent is evidence of this
consent. Pursuant to Section 10.06(c) AES agrees, and agrees to cause each
other Borrower, if any, to execute and deliver a Note payable to the order of
the Assignee to evidence the assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of any
Obligor, or the validity and enforceability of the obligations of any Obligor
in respect of the Credit Agreement or any other Financing Document. The
Assignee acknowledges that it has, independently and without reliance on the
Assignor, any other Bank, the Agent or any Fronting Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Obligors.
SECTION 6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
3
<PAGE> 119
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
--------------------------
Title:
[ASSIGNEE]
By
--------------------------
Title:
THE AES CORPORATION
By
--------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
--------------------------
Title:
BARCLAYS BANK PLC, as Fronting
Bank
By
--------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Fronting
Bank
By
--------------------------
Title:
4
<PAGE> 120
UNION BANK OF CALIFORNIA,
N.A., as Fronting Bank
By
--------------------------
Title:
5
<PAGE> 121
EXHIBIT H
EXTENSION AGREEMENT
The AES Corporation
1001 North 19th Street
Arlington, VA 22209
Morgan Guaranty Trust Company
of New York, as Agent
under the Credit Agreement
referred to below
60 Wall Street
New York, New York 10260
Gentlemen:
The undersigned hereby agree to extend, effective [Extension
Date], the Termination Date under the Credit Agreement dated as of May 20, 1996
among The AES Corporation, the Banks listed therein, Barclays Bank PLC, Morgan
Guaranty Trust Company of New York and Union Bank of Cliafornia, N.A., as
Fronting Banks, and Morgan Guaranty Trust Company of New York, as Agent (the
"Credit Agreement"), for one year to [date to which the Termination Date is
extended]. Terms defined in the Credit Agreement are used herein as therein
defined.
This Extension Agreement shall be construed in accordance with and
governed by the law of the State of New York.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
---------------------------
Title:
[NAME OF BANK]
By
---------------------------
Title:
1
<PAGE> 122
Agreed and accepted:
THE AES CORPORATION
By
-----------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
-----------------------
Title:
2
<PAGE> 1
EXHIBIT 10.65
REIMBURSEMENT AGREEMENT
between
AES Light, Inc.
and
Morgan Guaranty Trust Company of New York
dated as of
May 20, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
LETTER OF CREDIT;
TERM LOAN COMMITMENT
SECTION 2.01. Issuance of the Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.02. Exchange of the Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.03. Term Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.04 Required Terms of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.05 Notice of Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.06 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
CONDITIONS
SECTION 3.01. Conditions Precedent to Issuance of Initial LC . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.02 Conditions Precedent to Issuance of Each Exchange LC . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.03 Conditions Precedent to Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
THE LOAN
SECTION 4.01. Reimbursement Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.02. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.03. Maturity of the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.04. Interest on the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.05. Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.06. Mandatory Prepayment of the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.07. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.08. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.09. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.10. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.11. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.13. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.14. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.15. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.16. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.17. Base Rate Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.04. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.09. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
COVENANTS
SECTION 6.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.04. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.07. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.08. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.09. Investments; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.10. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.11. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.12. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.14. Permanent Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.04. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.06. Limited Liability of the LC Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.07. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.08. Jurisdiction And Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.12. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
Exhibit A - Form of Letter of Credit
Exhibit B - Form of Note
Exhibit C - Form of Pledge Agreement
Exhibit D - Form of Opinion of Counsel to Borrower
Exhibit E - Form of Opinion of Counsel to LC Issuer
Exhibit F - Form of Registration Rights Agreement
iii
<PAGE> 5
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of May 20, 1996 between AES
Light, Inc., a Delaware corporation (together with its successors, the
"Borrower"), and Morgan Guaranty Trust Company of New York (together with its
successors and assigns, the "LC Issuer").
The LC Issuer and the Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, shall have the following meanings.
"Adjusted Base Rate" means for any day a rate per annum equal
to the sum of (i) the Base Rate for such day plus (ii) 1.50%.
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 4.04(a).
"AES" means The AES Corporation, a Delaware corporation, and
its successors.
"AES Coral Reef" means AES Coral Reef, Inc., a limited
liability company organized and existing under the laws of The Cayman Islands,
and its successors.
"AES Senior Credit Agreement" means the Credit Agreement dated
as of the date hereof among AES, the banks listed on the signature pages
thereof, Barclays Bank PLC, Union Bank and Morgan Guaranty Trust Company of New
York, as Fronting Banks, and Morgan Guaranty Trust Company of New York, as
Agent, as the same may be amended, modified or supplemented from time to time.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary of the
Borrower) which is controlled by or is under common control with a Controlling
Person. As used herein, the term "control"
<PAGE> 6
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Reimbursement Agreement.
"Asset Sale and Insurance Proceeds" has the meaning set forth
in Section 4.06.
"Assignee" has the meaning set forth in Section 8.05.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Beneficiary" means Camara de Liquidacion E Custodia S/A CLC.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrowing Date" means the date the Term Loan is made.
"Collateral Value Ratio" has the meaning set forth in the
Pledge Agreement.
"Date of Issuance" means May 20, 1996, the date on which the
Initial LC is to be issued pursuant to Section 2.01 hereof.
"Debt" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all Debt of others secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person, (vi) all Debt of others Guaranteed by
such Person and (vii) all obligations of such Person (whether contingent or
non-contingent) to reimburse any bank or other Person in
2
<PAGE> 7
respect of amounts paid under a letter of credit or similar instrument.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Dollars" and the sign "$" means lawful money of the United
States.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
by law to close.
"Drawing" means a drawing under the Letter of Credit.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary of the
Borrower and all members of a controlled group of corporations and all trades
or businesses (whether or not incorporated) under common control which,
together with the Borrower or any Subsidiary of the Borrower, are treated as a
single employer under Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
3
<PAGE> 8
"Euro-Dollar Rate" means a rate of interest determined
pursuant to Section 4.04(a) on the basis of an Adjusted London Interbank
Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 4.04(a).
"Event of Default" has the meaning set forth in Section 7.01.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day on such transactions as determined by the
LC Issuer.
"Financing Documents" means this Agreement, the Letter of
Credit, the Note and the Pledge Agreement, in each case as the same may be
amended, modified or supplemented from time to time.
"Financing Proceeds" has the meaning set forth in Section
4.06.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person or in any manner providing for the payment of
any Debt of any other Person or otherwise protecting the holder of such Debt
against loss (whether arising by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise); provided, that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic
or otherwise hazardous substance, including
4
<PAGE> 9
petroleum, its derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of the foregoing
characteristics.
"Interest Period" means (i) in the case of the first Interest
Period, the period commencing on the date the Loan is made and ending one month
thereafter and (ii) in the case of each subsequent Interest Period, the period
commencing on the last day of the immediately preceding Interest Period and
ending one month thereafter; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Maturity Date shall end on the Maturity Date.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise.
"Letter of Credit" means the letter of credit (the "Initial
LC") issued on the Date of Issuance pursuant to Section 2.01 and any letter of
credit (an "Exchange LC") issued pursuant to Section 2.02 in exchange for the
Initial LC or any previously issued Exchange LC.
"LC Issuer" has the meaning set forth in the introductory
paragraph to this Agreement.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a
security interest, in respect of such asset. For the
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purposes of this Agreement, the Borrower shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LIGHT" means Light-Servicos de Electricidades S.A., an
integrated utility servicing Rio de Janeiro which is being privatized by the
government of Brazil.
"LIGHT Acquisition" means the acquisition by AES Coral Reef
pursuant to the auction of such shares through Sistema Electronico de
Negociacao Nacional of shares representing at least a 10% ownership interest in
the common equity of LIGHT and at least 10% of the voting power of all shares
entitled to vote at a general shareholder's meeting of LIGHT.
"Loan" means either (i) the Reimbursement Obligation, if a
Drawing is made under the Letter of Credit or (ii) the Term Loan made to the
Borrower at its request pursuant to Section 2.03 simultaneously with the return
of the undrawn Letter of Credit.
"London Interbank Offered Rate" has the meaning set forth in
Section 4.04(a).
"Maturity Date" means November 20, 1997, or if such day is not
a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $1,000,000.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"Note" means a promissory note of the Borrower, substantially
in the form of Exhibit B hereto, evidencing the obligation of the Borrower to
repay the Loan.
"Notice of Borrowing" has the meaning set forth in Section
4.01.
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"Other Letters of Credit" means letters of credit in an
aggregate amount of not less than $225,000,000 issued under the AES Senior
Credit Agreement in support of the obligation of AES Coral Reef to pay the
purchase price payable by it in connection with the LIGHT Acquisition.
"Other LIGHT Non-Recourse Collateral" means letters of credit,
guarantees, bid bonds and similar instruments, cash proceeds of Debt and/or
securities purchased with cash proceeds of Debt, in each case which are
recourse only to AES Light, AES Coral Reef or any other Subsidiary of AES
having a direct or indirect interest in LIGHT and which are posted to secure
AES Coral Reef's bid in connection with the LIGHT Acquisition or are actually
paid as part of the purchase price in respect of the LIGHT Acquisition;
provided that Letters of Credit and Loans shall not constitute Other LIGHT
Non-Recourse Collateral.
"Participant" has the meaning set forth in Section 8.05.
"Permanent Financing" means the debt or equity securities to
be issued by AES or a subsidiary of AES as soon as practicable following the
Date of Issuance for the purpose of refinancing the Loan as provided in Section
6.14.
"Person" means an individual, corporation, partnership, joint
venture, association, business trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"Pledge Agreement" means the Pledge Agreement dated as of the
date hereof between the LC Issuer and the Borrower, substantially in the form
of Exhibit C hereto.
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"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"Registration Rights Agreement" means a Registration Rights
Agreement made by AES for the benefit of the LC Issuer substantially in the
form of Exhibit F hereto.
"Regulations G and U" means Regulations G and U of the Board
of Governors of the Federal Reserve System, as in effect from time to time.
"Reimbursement Obligation" has the meaning specified in Section
4.01.
"Restricted Payment" means (i) any dividend or other
distribution on any shares of the Borrower's capital stock (except dividends
payable solely in shares of its capital stock) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to acquire
shares of the Borrower's capital stock.
"Subsidiary" means, at any date, with respect to any Person,
any corporation or other entity of which more than 50% of the capital stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions is at the
time directly or indirectly owned by such Person.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto imposed by any governmental authority, excluding, in the case of the LC
Issuer, taxes imposed on or calculated with reference to its net income or net
worth, and franchise taxes imposed on it, by the jurisdiction of the office of
the LC Issuer that issues the Letter of Credit.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Ratings Group and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office of any bank or trust company that has capital,
surplus and undivided profits aggregating at least $500,000,000, (iv)
repurchase agreements with respect to securities described in clause
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(i) above entered into with an office of a bank or trust company meeting the
criteria specified in clause (iii) above or (v) Euro-Dollar certificates of
deposit issued by any bank or trust company which has capital and unimpaired
surplus of not less than $500,000,000, provided in each case that such
Investment matures within one year from the date of acquisition thereof by the
Borrower or a Subsidiary of the Borrower.
"Transferee" means an Assignee or a Participant.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time ("GAAP"), applied on a basis consistent (except for changes concurred
in by the Borrower's independent public accountants) with the most recent
financial statements of the Borrower delivered to the LC Issuer; provided that,
if the Borrower notifies the LC Issuer that the Borrower wishes to amend any
covenant in Article VI or any related definition to eliminate the effect of any
change in GAAP on the operation of such covenant (or if the LC Issuer notifies
the Borrower that it wishes to amend Article VI or any related definition for
such purpose), then the Borrower's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Borrower and the LC Issuer.
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ARTICLE II
LETTER OF CREDIT;
TERM LOAN COMMITMENT
SECTION 2.01. Issuance of the Letter of Credit. The LC
Issuer agrees that it will issue the Initial LC on the Date of Issuance,
provided that the obligation of the LC Issuer to issue the Initial LC shall be
subject to satisfaction or waiver of the conditions precedent set forth in
Section 3.01. The face amount of the Letter of Credit shall be $225,000,000.
SECTION 2.02. Exchange of the Letter of Credit. The LC
Issuer agrees, upon two Business Days' prior written notice from the Borrower,
to issue, on any date prior to July 15, 1996, an Exchange LC dated the date of
its issuance, expiring on the date (which shall not be later than July 15,
1996) and in a face amount (which face amount shall not exceed the face amount
of the Letter of Credit in exchange for which such Exchange LC is to be issued)
requested by the Borrower in such notice; provided that the obligation of the
LC Issuer to issue any Exchange LC shall be subject to the satisfaction or
waiver of the conditions precedent set forth in Section 3.02. There shall at
no time be more than one Letter of Credit outstanding hereunder at any time.
SECTION 2.03. Term Loan Commitment. The LC Issuer agrees, on
the terms and conditions set forth in this Agreement and subject to the
satisfaction of the conditions set forth in Section 3.03, to make a loan (the
"Term Loan") to the Borrower pursuant to this Section on or prior to July 15,
1996 in a principal amount not to exceed the amount available for drawing under
the Letter of Credit outstanding on such date.
SECTION 2.04 Required Terms of Letters of Credit. Each
Letter of Credit issued hereunder shall:
(a) by its terms expire not later than July 15, 1996; and
(b) be in a face amount (x) in the case of the Initial
LC, of $225,000,000 and (y) in the case of any Exchange LC, not in
excess of the face amount of the Letter of Credit for which such
Exchange LC is to be exchanged.
SECTION 2.05 Notice of Issuance. The Borrower may request
that a Letter of Credit be issued by giving the
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LC Bank a notice (a "Notice of Issuance") at least two Domestic Business Days
before such Letter of Credit is to be issued, specifying:
(a) the date of issuance of such Letter of Credit (which
(i) shall be the Date of Issuance, in the case of the Initial LC, and
(ii) shall not be later than July 14, 1996);
(b) the expiry date of such Letter of Credit (which shall
comply with the requirements of Section 2.04(a)); and
(c) the face amount of such Letter of Credit (which shall
comply with the requirements of Section 2.04(b)).
SECTION 2.06 Notice of Borrowing. (a) The Borrower shall
give the LC Issuer notice (a "Notice of Borrowing") not later than 11:00 A.M.
(New York City time) on the third Euro-Dollar Business Day before the making of
the Term Loan specifying:
(i) the date of borrowing of such Term Loan, which shall be a
Euro-Dollar Business Day; and
(ii) the principal amount of such Term Loan, which shall
not exceed the face amount of the Letter of Credit outstanding on the
date of borrowing of the Term Loan.
(b) Not later than 2:00 P.M. (New York City time) on the
date of the borrowing of the Term Loan, the LC Issuer shall make available to
the Borrower the amount of such Term Loan in Federal or other funds immediately
available in New York City.
ARTICLE III
CONDITIONS
SECTION 3.01. Conditions Precedent to Issuance of Initial LC.
As a condition precedent to the issuance of the Initial LC,
(a) the LC Issuer shall have received on or before the Date of
Issuance the following, each dated the Date of Issuance, in form and substance
satisfactory to the LC Issuer:
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(i) counterparts hereof, of the Pledge Agreement and of the
Registration Rights Agreement, each signed by each of the parties
hereto and thereto;
(ii) a duly executed Note dated the Date of Issuance complying
with the provisions of Section 4.05;
(iii) the Pledged Stock (as defined in the Pledge Agreement),
together with undated stock powers executed in blank;
(iv) a duly executed Federal Reserve Form U-1 in connection
with the extension of credit under this Agreement;
(v) evidence that the AES Senior Credit Agreement shall have
become effective and all conditions to the issuance of the Other
Letters of Credit shall have been satisfied and all Other Letters of
Credit shall have been issued;
(vi) an opinion of the General Counsel ofAES, and an opinion of
Davis Polk & Wardwell, counsel to the LC Issuer, substantially in the
respective forms of Exhibits D and E hereto;
(viii) copies of the resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance by the
Borrower of the Financing Documents, certified by a duly authorized
officer of the Borrower (which certificate shall state that such
resolutions are in full force and effect on the Date of Issuance);
(ix) certified copies of all approvals, authorizations, or
consents of, or notices to or registrations with, any governmental
body or agency required for the Borrower, if necessary, to enter into
the Financing Documents;
(x) a certificate of a duly authorized officer of the Borrower
certifying the names and true signatures of the officers of the
Borrower authorized to sign the Financing Documents and the other
documents to be delivered by the Borrower hereunder;
(xi) payment of all fees and other amounts then payable
(including, without limitation, all fees and expenses of counsel to
the LC Issuer payable pursuant to Section 8.07) with respect to the
Initial LC on the Date of Issuance;
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(xii) a certificate signed by a duly authorized officer of the
Borrower dated the Date of Issuance, to the effect that: (a) the
representations and warranties contained in Article V hereof are true
and correct on and as of the Date of Issuance as though made on and as
of such date; and (b) no Default has occurred and is continuing or
would result from the issuance of the Letter of Credit;
(xiii) a Notice of Issuance inrespect of the Initial LC as
required by Section 2.04; and
(xiv) such other documents, instruments or approvals (and, if
requested by the LC Issuer, certified duplicates of executed copies
thereof) as the LC Issuer may reasonably request;
(b) each of the representations and warranties of the
Borrower contained in any Financing Document shall be true and correct on and
as of the Date of Issuance; and
(c) no Default will have occurred and be continuing
either immediately before or after giving effect to the issuance of the Initial
LC.
SECTION 3.02 Conditions Precedent to Issuance of Each
Exchange LC. The LC Issuer's obligation to issue any Exchange LC shall be
subject to the satisfaction of each of the following conditions:
(i) receipt by the LC Issuer of a Notice of Issuance in
respect of such Exchange LC, as required by Section 2.04;
(ii) arrangements satisfactory to the LC Issuer shall
have been made for the simultaneous return, undrawn, to the LC Issuer,
for cancellation of the Letter of Credit to be exchanged for such
Exchange LC;
(iii) each of the representations and warranties of the
borrower set forth in any Financing Document shall be true and correct
on and as of the date of issuance of such Exchange LC;
(iv) no Default will have occurred and be continuing
either immediately before or after the issuance of such Exchange LC;
and
(v) the sum of (x) the face amount of such Exchange LC
and (y) the aggregate amount of Other LIGHT Non-Recourse Collateral
outstanding immediately after
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the issuance of such Exchange LC and the cancellation of the Letter of
Credit for which such Exchange LC is exchanged will not be less than
$225,000,000.
SECTION 3.03 Conditions Precedent to Term Loan. The LC
Issuer's obligation to make the Term Loan is subject to the satisfaction of the
following conditions:
(i) all of the conditions set forth in Section 3.01 shall
have been satisfied, the Initial LC shall have been issued and no
Drawing shall have been made under any Letter of Credit;
(ii) receipt by the LC Issuer of a Notice of Borrowing as
required by Section 2.06;
(iii) arrangements satisfactory to the LC Issuer shall have been
made for (x) the simultaneous return to the LC Issuer of the Letter of
Credit undrawn for cancellation and (y) the use of the proceeds of the
Term Loan solely to pay the purchase price payable by AES Coral Reef
in connection with the LIGHT Acquisition;
(iv) each of the representations and warranties of the Borrower
contained in any Financing Document shall be true and correct on and
as of the date of borrowing of the Term Loan, and
(v) no Default will have occurred and be continuing either
immediately before or after giving effect to the making of the Term
Loan.
ARTICLE IV
THE LOAN
SECTION 4.01. Reimbursement Obligation. If at any time the
LC Issuer shall make a payment to the Beneficiary in respect of the Drawing,
the Borrower shall be irrevocably and unconditionally obligated to reimburse
the LC Issuer for the amount of such payment, together with interest thereon as
hereinafter provided. The obligation of the Borrower to so reimburse the LC
Issuer with respect to payments made in respect of the Drawing is referred to
herein as the "Reimbursement Obligation". The amount of any payments made in
respect of the Drawing giving rise to the Reimbursement Obligation is referred
to herein as the "principal" amount of the Reimbursement Obligation.
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SECTION 4.02. Obligations Absolute. The obligations of the
Borrower in respect of Reimbursement Obligation, the Loan and the other
obligations hereunder shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement
under all circumstances whatsoever, including without limitation the following
circumstances:
(a) any lack of validity or enforceability of the Letter of
Credit or any of the other Financing Documents;
(b) any amendment or waiver of or any consent to departure
from this Agreement or any of the other Financing Documents;
(c) the existence of any claim, setoff, counterclaim, defense
or other rights which the Borrower may have at any time against any
beneficiary of the Letter of Credit, the LC Issuer or any other
Person, whether in connection with this Agreement, the other Financing
Documents or any unrelated transactions;
(d) any statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by the LC Issuer under the Letter of Credit
against presentation of a draft or certificate which does not comply
with the terms of the Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing; provided that such other
circumstance or happening shall not have been the result of the gross
negligence or wilful misconduct of the LC Issuer.
SECTION 4.03. Maturity of the Loan. The Loan shall mature,
and the outstanding principal amount thereof, together with accrued and unpaid
interest thereon to the date of payment, shall become due and payable on the
Maturity Date.
SECTION 4.04. Interest on the Loan. (a) Except as provided
in Sections 4.15, 4.16 and 4.17, the Loan shall bear interest on the
outstanding principal amount thereof, for each day during each Interest Period
related thereto, at
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a rate per annum equal to the sum of 2.5% plus the Adjusted London Interbank
Offered Rate applicable to such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which one-month deposits in dollars
are offered to Morgan Guaranty Trust Company of New York in the London
interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Loan.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on the Loan is determined or any category of extensions of credit
or other assets which includes loans by a non-United States office of the LC
Issuer to United States residents). The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change
in the Euro-Dollar Reserve Percentage.
(b) Interest based on the Adjusted Base Rate pursuant to
Section 4.15, 4.16 or 4.17 shall be payable monthly in arrears on the last
Domestic Business Day of each month.
(c) Any overdue principal of or interest on the Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the Adjusted Base Rate for such day.
SECTION 4.05. Note. The Loan shall be evidenced by a single
Note payable to the order of the LC Issuer in an
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amount equal to the aggregate unpaid principal amount of the Loan.
SECTION 4.06. Mandatory Prepayment of the Loan.
(a) Promptly upon receipt, directly or indirectly, by AES or
any Subsidiary of AES having a direct or indirect interest in LIGHT, of the
cash proceeds (net of commissions, fees and expenses incurred by AES or such
Subsidiary in connection therewith) from the issuance of (i) Debt for borrowed
money (other than Debt incurred by AES under the AES Senior Credit Agreement)
or (ii) common stock or other equity securities (other than common stock of AES
issued in connection with employee stock options, director stock options or
other employee benefit plans) (collectively, "Financing Proceeds"), such
Financing Proceeds shall be applied (x) to prepay the aggregate principal
amount of the Loan then outstanding, if any, until paid in full or (y) if the
Letter of Credit is outstanding and no Drawing shall have been made under the
Letter of Credit, to cash collateralize the Letter of Credit up to the full
amount available for drawing thereunder (without regard to whether any
conditions to drawing can then be met).
(b) Promptly upon receipt, directly or indirectly, by AES or
any Subsidiary of AES of the cash proceeds (net of reasonable costs of sale and
amounts required to be retained as collateral) of sales of assets (other than
sales made in the ordinary course of business) or any proceeds of any casualty
insurance, condemnation awards or other recoveries ("Asset Sale and Insurance
Proceeds"), such Asset Sale and Insurance Proceeds shall (to the extent not
required to be applied to the prepayment of other Debt by the terms of any
agreements as in effect on the date hereof) be applied (x) to prepay the
aggregate principal amount of the Loan then outstanding, if any, until paid in
full or (y) if the Letter of Credit is outstanding and no Drawing shall have
been made under the Letter of Credit, to cash collateralize the Letter of
Credit up to the full amount available for drawing thereunder (without regard
to whether any conditions to drawing can then be met).
(c) Each payment of principal with respect to the Loan under
this Section 4.06 shall be made together with accrued and unpaid interest on
the principal amount being prepaid to the date of prepayment.
SECTION 4.07. Optional Prepayments. Subject to Section 4.14,
the Borrower may prepay the Loan, in whole or in part (in principal amounts of
at least $500,000) upon at least one day's prior irrevocable written notice to
the LC
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Issuer (and such amount specified in such notice shall become due and payable
on the date so specified) by paying an amount equal to the aggregate principal
amount being prepaid, together, in each case, with accrued and unpaid interest
on the principal amount being prepaid to the date of prepayment.
SECTION 4.08. Computation of Interest. Interest on the Loan,
and all fees hereunder, shall be computed on the basis of a year of 360 days
and paid for the actual number of days elapsed (including the first day but
excluding the last day).
SECTION 4.09. Fees. (a) The Borrower agrees to pay to the
LC Issuer a letter of credit fee on the amount available to be drawn under the
Letter of Credit (without regard to whether any conditions to drawing can then
be met), for each day from the Date of Issuance to the earlier of the date of
the Drawing, if any, and the Termination Date, at a rate (the "LC Fee Rate")
per annum equal to 2.5%; provided that the LC Fee Rate for any day shall be 1%
per annum with respect to the portion (if any) of such amount which has been
cash collateralized pursuant to Section 4.06. Such fee shall be payable in
arrears on the earlier of the date of the Drawing, if any, and the Termination
Date.
(b) The Borrower shall pay to the LC Issuer at the times and
in the amounts set forth therein the fees specified in the letter agreement
dated May 18, 1996 between AES, the LC Issuer and J.P. Morgan Securities Inc.
(c) Any overdue fees shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to 2% plus the Adjusted Base
Rate for such day.
SECTION 4.10. General Provisions as to Payments. The
Borrower shall make each payment of principal of, and interest on, the Loan and
of fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in lawful currency of the United States of America and in immediately
available funds to the LC Issuer at its address referred to in Section 8.02.
Whenever any payment of principal of, or interest on, the Loan in respect of a
period during which interest on the Loan is determined on the basis of the
Adjusted London Interbank Offered Rate shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any other
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payment hereunder shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next succeeding Domestic
Business Day. If the date for the payment of principal is extended by
operation of law or otherwise, interest shall be payable for such extended
time.
SECTION 4.11. Increased Cost and Reduced Return.
(a) If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit, insurance assessment or similar
requirement against letters of credit issued, or loans made, by the LC Issuer
or any Transferee or (ii) impose on the LC Issuer or any Transferee any other
condition regarding the Financing Documents and the result of any event
referred to in clause (i) or (ii) of this subsection shall be to increase the
cost to the LC Issuer or any Transferee of issuing or maintaining the Letter of
Credit or the Loan then, within 10 days of demand by the LC Issuer or any
Transferee (which demand shall set forth in reasonable detail the events giving
rise to such increased cost and the basis of the LC Issuer's or such
Transferee's computation thereof), the Borrower shall pay to the LC Issuer or
such Transferee all additional amounts as shall be demanded by the LC Issuer or
such Transferee as sufficient to compensate the LC Issuer or such Transferee
for such increased cost incurred by the LC Issuer or such Transferee. A
certificate as to such increased cost incurred by the LC Issuer or any
Transferee as a result of any event mentioned in clause (i) or (ii) of this
subsection shall be submitted by the LC Issuer or such Transferee to the
Borrower and shall be conclusive (absent manifest error) as to the amount
thereof.
(b) If after the date hereof the LC Issuer or any Transferee
shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the LC Issuer or any Transferee with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such governmental authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the LC
Issuer's or such Transferee's capital as a consequence of the LC Issuer's
obligations under (or such Transferee's
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participation in) the Letter of Credit or the Loan to a level below that which
the LC Issuer or such Transferee could have achieved but for such adoption,
change or compliance (taking into consideration the LC Issuer's or such
Transferee's policies with respect to capital adequacy) then, within ten days
after demand by the LC Issuer or such Transferee, the Borrower shall pay to the
LC Issuer or such Transferee such additional amount or amounts as will
compensate the LC Issuer or such Transferee for such reduction. A certificate
of the LC Issuer or any Transferee claiming compensation under this subsection
(b) and setting forth the additional amount or amounts to be paid to it
hereunder and setting forth in reasonable detail the basis therefor and the
manner of calculation thereof shall be prepared and submitted by the LC Issuer
or such Transferee to the Borrower and shall be conclusive in the absence of
manifest error. In determining such amount, the LC Issuer or such Transferee
may use any reasonable averaging and attribution method.
SECTION 4.12. Taxes. All payments due from the Borrower
hereunder shall be free of all withholding with respect to Taxes and in the
event that any such withholding shall be required by law with respect to any
such payments, the amount payable shall be increased so that after making all
required withholdings the LC Issuer and any Transferee receives an amount equal
to the amount it would have received had such withholdings not been made.
SECTION 4.13. [Intentionally Omitted]
SECTION 4.14. Funding Losses. If the Borrower makes any
payment of principal of the Loan on any day other than the last day of the
Interest Period applicable thereto, or if the Loan bears interest at a rate
based on the Adjusted Base Rate pursuant to Section 4.16 or 4.17 commencing on
a day other than the last day of the Interest Period applicable thereto, or if
the Borrower fails to prepay any portion of the Loan after notice has been
given to the LC Issuer in respect of such portion in accordance with Section
4.07, the Borrower shall reimburse the LC Issuer within 15 days after demand
for any resulting loss or expense incurred by it (or by any Participant or
prospective Participant), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or change of interest rate
or prepay, provided that the LC Issuer shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate shall
be conclusive in the absence of manifest error.
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SECTION 4.15. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period:
(a) deposits in dollars (in the applicable amounts) are
not being offered to the LC Issuer in the London interbank market for
such Interest Period, or
(b) the LC Issuer determines that the rate determined in
accordance with Section 4.04(a) will not adequately and fairly reflect
the cost to it of funding the Loan for such Interest Period,
the LC Issuer shall forthwith give notice thereof to the Borrower, whereupon
until the LC Issuer notifies the Borrower that the circumstances giving rise to
such suspension no longer exist, the Loan shall bear interest at the Adjusted
Base Rate beginning on the last day of the then current Interest Period (or if
the notice is given prior to a Drawing under a Letter of Credit, beginning on
the first day of the first Interest Period).
SECTION 4.16. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the LC Issuer with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for the LC Issuer to
make, maintain or fund the Loan bearing interest in accordance with Section
4.04(a) and the LC Issuer shall so notify the Borrower, then until the LC
Issuer notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the Loan shall bear interest at the Adjusted Base
Rate from (a) the last day of the then current Interest Period if the LC Issuer
may lawfully continue to maintain and fund the Loan bearing interest in
accordance with Section 4.04(a) to such day, (b) immediately if the LC Issuer
determines that it may not lawfully continue to maintain and fund the Loan or
(c) the first day of the first Interest Period if such notice is given prior to
such first day. Before giving any notice pursuant to this Section, the LC
Issuer shall designate a different office through which it shall fund or
maintain the Loan if such designation will avoid the need for giving such
notice and will not, in the judgment of the LC Issuer, be otherwise
disadvantageous to it.
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SECTION 4.17. Base Rate Election. If the LC Issuer has
demanded compensation under Section 4.11 with respect to the Loan and the
Borrower shall, by at least five Euro-Dollar Business Days' prior notice to the
LC Issuer, have elected that the provisions of this Section shall apply, then,
unless and until the LC Issuer notifies the Borrower that the circumstances
giving rise to such demand for compensation no longer exist, the Loan shall
bear interest at the Adjusted Base Rate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the LC Issuer
that:
SECTION 5.01. Corporate Existence and Power. The Borrower
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 5.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of the
Financing Documents are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries (except for the Liens created by the Financing Documents).
SECTION 5.03. Binding Effect. Each Financing Document
(other than the Note) constitutes a valid and binding agreement of the Borrower
and the Note, when executed and delivered in accordance with this Agreement,
will constitute a valid and binding obligation of the Borrower.
SECTION 5.04. Full Disclosure. All information heretofore
furnished by the Borrower to the LC Issuer for
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purposes of or in connection with any Financing Document or any transaction
contemplated hereby or thereby was true and accurate in all material respects
on the date as of which such information was stated or certified. The Borrower
has disclosed to the LC Issuer in writing any and all facts known to the
Borrower which materially and adversely affect or could reasonably be expected
to materially and adversely affect (to the extent it can now reasonably
foresee), its business, operations or financial condition, or its ability to
perform its obligations under any Financing Document.
SECTION 5.05. Litigation. There is no action, suit or
proceeding pending against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Borrower or any of its Subsidiaries or which in any manner
draws into question the validity of any Financing Document.
SECTION 5.06. Compliance with ERISA. Each member of the
ERISA Group has fulfilled its obligations under the minimum funding standards
of ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 5.07. Environmental Matters. In the ordinary
course of its business, the Borrower conducts, or AES on behalf of the Borrower
conducts, ongoing reviews of the effect of Environmental Laws on the business,
operations and properties of the Borrower and its Subsidiaries, in the course
of which it identifies and evaluates associated liabilities and costs
(including, without limitation, any capital or operating expenditures required
for clean-up or closure of properties presently or previously owned, any
capital or operating expenditures required to achieve or
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maintain compliance with environmental protection standards imposed by law or
as a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of this
review, to the best of the Borrower's knowledge, there are no violations of
Environmental Laws that would reasonably be expected to have a material adverse
effect on its business, financial condition, results of operations or
prospects.
SECTION 5.08. Taxes. All Federal, state and local tax
returns, reports and statements required to be filed by or with respect to the
Borrower have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to be
filed, and all taxes (including real property) and other charges shown thereon
to be due and payable have been timely paid prior to the date on which any
fine, penalty, interest, late charge or loss may be added thereto for
nonpayment thereof. All state and local sales and use taxes required to be
paid by the Borrower have been paid. All Federal and state returns have been
filed by the Borrower for all periods for which returns were due with respect
to employee income tax withholding, social security and unemployment taxes, and
the amounts shown thereon to be due and payable have been paid in full or
adequate provisions therefor have been made.
SECTION 5.09. Not an Investment Company. The Borrower is not
required to register as an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
ARTICLE VI
COVENANTS
The Borrower covenants and agrees that so long as the Letter
of Credit has not expired or been terminated or any amount payable under the
Note remains unpaid:
SECTION 6.01. Information. The Borrower will deliver to
the LC Issuer:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, a balance sheet of the Borrower,
as of the end of such fiscal
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year and the related statements of operations and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all certified as to fairness of presentation, generally
accepted accounting principles and consistency by the chairman of the board,
president or chief financial officer of the Borrower;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, a balance sheet of the Borrower, as of the end of such quarter and
the related statements of operations and cash flows for such quarter and for
the portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in each case such comparative information with respect to the
Borrower's previous fiscal year as is customarily set forth in such statements
by the Borrower, all certified (subject to normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles and
consistency by the chairman of the board, president or chief financial officer
of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chairman of the board, president or chief financial officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Section 3(b) of
the Pledge Agreement and Section 6.10 on the date of such financial statements,
(ii) stating to the knowledge of the Borrower whether any Default exists on the
date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto and (iii) with respect to the financial statements
referred to in clause (a) above, accompanied by a schedule setting forth in
reasonable detail a description of material contingent liabilities not
disclosed in such financial statements;
(d) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate of
the chairman of the board, president or chief financial officer of the Borrower
setting forth the details thereof and the action which the Borrower is taking
or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports and proxy
statement so mailed;
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(f) as soon as practicable prior to the anticipated receipt by
AES or any of its Subsidiaries of Financing Proceeds or Asset Sale and
Insurance Proceeds, a certificate of the chairman of the board, president or
chief financial officer of the Borrower setting forth a description of the
transaction giving rise to such Financing Proceeds or Asset Sale and Insurance
Proceeds, the date or dates upon which such Financing Proceeds or Asset Sale
and Insurance Proceeds are anticipated to be received by AES or any of its
Subsidiaries and the amount of Financing Proceeds or Asset Sale and Insurance
Proceeds anticipated to be received on such date or each of such dates;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) which the Borrower shall have filed with the
Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of such application; (v)
gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information filed with the PBGC; (vi) gives
notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
reasonably be expected to result in the imposition of a Lien or the posting of
a bond or other security, a certificate of the chairman of the board, president
or chief financial officer of the Borrower setting forth details as to such
occurrence and the action, if any,
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which the Borrower or the applicable member of the ERISA Group is required or
proposes to take;
(i) promptly after receipt by the Borrower, a copy of each
complaint, order, citation, notice or other written communication from any
Person with respect to the existence or alleged existence of a violation of any
applicable Environmental Law or the incurrence of any liability, obligation,
loss, damage, cost, expense, fine, penalty or sanction or the requirement to
commence any remedial action resulting from or in connection with any air
emission, water discharge, noise emission, Hazardous Substance or any other
environmental, health or safety matter at, upon, under or within any of the
properties now or previously owned, leased or operated by the Borrower, or due
to the operations or activities of the Borrower or any other Person on or in
connection with any such property or any part thereof; and
(j) from time to time such additional information regarding
the financial position or business of the Borrower as the LC Issuer may
reasonably request.
All information furnished by the Borrower to the LC Issuer pursuant to the
Financing Documents will be true and accurate in all material respects on the
date as of which such information is stated or certified.
SECTION 6.02. Payment of Obligations. The Borrower will
pay and discharge, at or before maturity, all its obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings or where the failure to so
pay and discharge would not reasonably be expected to have a material adverse
effect on the business, financial condition, results of operations or prospects
of the Borrower taken as a whole, and will maintain, in accordance with
generally accepted accounting principles, appropriate reserves for the accrual
of any of the same.
SECTION 6.03. Maintenance of Property; Insurance.
(a) The Borrower will keep all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Borrower will maintain, with financially sound and
responsible insurance companies, insurance on all its properties in at least
such amounts and against at least such risks (and with such risk retention) as
are usually insured against in the same general area by companies of
established repute engaged in the same or a similar
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business; and will furnish to the LC Issuer upon request information presented
in reasonable detail as to the insurance so carried.
SECTION 6.04. Conduct of Business and Maintenance of
Existence. The Borrower (a) will not engage in any business other than (i)
entering into and performing its obligations under the Financing Documents and
(ii) acquiring and holding direct or indirect interests in LIGHT pursuant to
the LIGHT Acquisition and (b) will preserve, renew and keep in full force and
effect its corporate existence and its rights, privileges and franchises
necessary or desirable in the normal conduct of its business.
SECTION 6.05. Compliance with Laws. The Borrower will
comply in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings.
SECTION 6.06. Inspection of Property, Books and Records.
The Borrower will keep proper books of record and account in accordance with
customary accounting and bookkeeping practices reflecting all financial
transactions in relation to the conduct of its business; and will permit
representatives of the LC Issuer, upon reasonable notice during normal business
hours and at the LC Issuer's expense, to visit and inspect any of its
properties, to examine and make abstracts from any of its books and records and
to discuss its affairs, finances and accounts with its officers, employees and
independent public accountants, all during normal business hours and as often
as may reasonably be desired.
SECTION 6.07. Debt. The Borrower shall not assume, incur,
create or suffer to exist any Debt of the Borrower except for Debt under the
Financing Documents and Debt in respect of Other LIGHT Non-Recourse Collateral
that constitutes Debt of the Borrower solely by virtue of a Lien on the capital
stock of AES Coral Reef permitted under Section 6.10.
SECTION 6.08. Restricted Payments. The Borrower shall not
declare or make any Restricted Payment.
SECTION 6.09. Investments; Contingent Liabilities. (a) The
Borrower shall not make, acquire or hold any Investment in any Person other
than (i) Temporary
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Cash Investments, (ii) Investments consisting of common stock of AES and (iii)
Investments in LIGHT acquired pursuant to the LIGHT Acquisition.
(b) The Borrower will not guarantee, endorse or otherwise be
or become contingently liable, directly or indirectly, with respect to any
obligations, stock or dividends of any Person (including, without limitation,
pursuant to any letter of credit, performance bond, performance guarantee,
surety bond, indemnification agreement or agreement to post cash collateral
(collectively, for purposes of this subsection, "guarantees")), except for the
guarantees given by it pursuant to the Financing Documents.
SECTION 6.10. Negative Pledge. The Borrower will not create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by the Borrower (including, without limitation, shares of capital stock of
LIGHT or any intermediate entity through which the Borrower holds its interest
in LIGHT), except:
(a) Liens created under the Financing Documents and
(b) Liens on capital stock of AES Coral Reef securing Debt
the proceeds from which are applied as required by Section 4.06, but
only if the Collateral Value Ratio equals or exceeds 4.00 to 1.00 at
the time that any such Lien attaches and after giving effect to the
application of the proceeds of such Debt in accordance with Section
4.06.
SECTION 6.11. Consolidations, Mergers and Sales of Assets.
The Borrower shall not consolidate or merge with or into any other Person. The
Borrower shall not sell, lease, transfer or otherwise dispose of, directly or
indirectly, any of its assets to any other Person.
SECTION 6.12. Use of Proceeds. (a) Neither the Letter of
Credit nor any of the proceeds thereof will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying any "margin stock" within the meaning of Regulations G or U.
(b) The proceeds of the Loan shall be used solely to pay the
purchase price for the LIGHT Acquisition.
SECTION 6.13. Transactions with Affiliates. The Borrower
will not, directly or indirectly, pay any funds to or for the account of, make
any investment (whether by
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acquisition of stock or indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or participate in, or effect
any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate except that the Borrower may hold the AES
common stock pledged to the LC Issuer pursuant to the Pledge Agreement.
SECTION 6.14. Permanent Financing. The Borrower will use
its best efforts to take all actions necessary or desirable to cooperate in
obtaining Permanent Financing through the issuance of its debt and/or equity
securities, or the debt and/or equity securities of AES or any other Subsidiary
of AES, in amounts sufficient to produce net proceeds available to the Borrower
of not less than $225,000,000. The Borrower will enter into, and will
cooperate with AES and its other Subsidiaries in entering into, such agreements
as are customary in connection with financings of such type on terms and
conditions reasonably satisfactory to the Borrower in light of then prevailing
market conditions and shall make, and cooperate in the making of, such filings
and public disclosures as shall be required to permit the Permanent Financing
and take such steps as are necessary to cause such filings to become effective
or as are otherwise required to permit the securities to be issued in such
Permanent Financing to be sold; provided that the Borrower will not be
obligated to qualify to do business as a foreign corporation in any
jurisdiction in which it is not then so qualified to facilitate the Permanent
Financing. The Borrower hereby covenants and agrees that the proceeds
available to it from the Permanent Financing shall be used, to the extent
required, as set forth in Section 4.06.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal
payable by it under any Financing Document or shall fail to pay within
3 days of the date when due any interest, fees or other amounts
payable under any Financing Document; or
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(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 6.01(f) or 6.06 through 6.14,
inclusive, or Section 3(b) of the Pledge Agreement; or
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in any Financing Document (other than
those covered by clauses (a) or (b) above) for 10 days after written
notice thereof has been given to the Borrower by the LC Issuer; or
(d) any representation, warranty, certification or statement
made by the Borrower in any Financing Document or in any certificate,
financial statement or other document delivered pursuant to any
Financing Document shall prove to have been incorrect in any material
respect when made (or deemed made); or
(e) the Borrower shall fail to make any payment in respect of
any Debt when due or within any applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of the Borrower or enables
(or, with the giving of notice or lapse of time or both, would enable)
the holder of such Debt or any Person acting on such holder's behalf
to accelerate the maturity thereof;
(g) an Event of Default (as defined in the AES Senior Credit
Agreement) shall have occurred and be continuing; or
(h) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action to authorize
any of the foregoing; or
(i) an involuntary case or other proceeding shall be
commenced against the Borrower seeking liquidation,
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reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower under the bankruptcy
laws as now or hereafter in effect; or
(j) a judgment or order for the payment of money shall be
rendered against the Borrower, and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days; or
(k) AES shall cease to be the owner, directly or indirectly,
of 100% of the outstanding shares of common stock of the Borrower; or
(l) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $250,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal; or
(m) any provision of any Financing Document shall at any time
for any reason cease to be valid and binding on the Borrower or shall
be declared by any court having jurisdiction over the Borrower to be
null and void in any manner that would materially adversely affect the
rights of the LC Issuer, or the Lien created by the Pledge Agreement
at any time shall fail to constitute a valid and perfected Lien on all
of the collateral purported to be covered thereby, subject to no prior
or equal Lien, or the Borrower shall deny that it has any or further
liability or obligation on any Financing Document;
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then, and in every such event, the LC Issuer may, by notice to the Borrower,
declare the Note (together with accrued interest thereon) to be, and the Note
shall thereupon become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; provided that in the case of any of the Events of Default
specified in clause (h) or (i) above, without any notice to the Borrower or any
other act by the LC Issuer, the Note (together with accrued interest thereon)
shall become immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower.
In addition, if an Event of Default shall have occurred and is continuing, the
Borrower shall be obligated forthwith to pay to the LC Issuer, at its request
(or, in the case of an Event of Default specified in clause (h) or (i) above,
without any request of the LC Issuer or any other act of the LC Issuer), an
amount in immediately available funds equal to 102% of the then aggregate
amount available for drawing under the Letter of Credit (without regard to
whether any condition to drawing can then be met), to be held by the LC Issuer
as cash collateral until all Events of Default shall have been cured or waived.
If and to the extent that cash collateral subject to a valid and perfected
first priority Lien in favor of the LC Issuer is posted with the LC Issuer
pursuant to the immediately preceding sentence, then the LC Issuer shall
release from the Lien created by the Pledge Agreement shares of Pledged Stock
subject thereto to the extent, if any, that the value of the Pledged Stock
subject to such Lien exceeds two and one-half times (or, if any capital stock
of AES Coral Reef is subject to a Lien securing Debt of AES Coral Reef, four
times) (A) the sum of the amount available for drawing under the Letter of
Credit, if any (without regard to whether any condition to drawing can then be
met), or the aggregate principal amount of Loan then outstanding, if any, less
(B) the amount of such cash collateral divided by 1.02.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments and Waivers. No amendment or waiver
of any provision of this Agreement nor consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the LC Issuer. Any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
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SECTION 8.02. Notices. All notices, requests and other
communications to either party hereunder shall be in writing (including bank
wire, telex, telecopy or similar writing) and shall be given to such party at
its address, telex or telecopy number set forth below or such other address,
telex or telecopy number as such party may hereafter specify for the purpose by
notice to the other party. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the appropriate answerback is
received, or (ii) if given by any other means, when received at the address or
at the telecopier number specified in this Section.
The Borrower AES Light, Inc.
c/o The AES Corporation
1001 N. 19th Street
Arlington, VA 22209
Telecopier No.: (703) 528-4510
Attention: Chief Financial Officer
LC Issuer Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, NY 10260
Telex Number: 177615
Attention: James Finch
SECTION 8.03. No Waiver; Remedies. No failure on the part of
the LC Issuer to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof nor shall any single or partial exercise of
any right hereunder preclude any other further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Indemnification. The Borrower hereby agrees to
indemnify and hold harmless the LC Issuer and each Participant from and against
any and all claims, damages, losses, liabilities, costs or expenses whatsoever
which the LC Issuer or such Participant may incur (or which may be claimed
against the LC Issuer or such Participant by any person or entity whatsoever)
by reason of or in connection with the execution and delivery of, transfer of,
or payment or failure to pay under, the Letter of Credit or arising out of or
in connection with any other Financing Document or any agreement entered into
by the LC Issuer and any of the parties to the Financing Documents; provided
that the Borrower shall not be required to indemnify the LC
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<PAGE> 39
Issuer or any Participant for any claims, damages, losses, liabilities, costs
or expenses to the extent, but only to the extent, caused by the willful
misconduct or gross negligence of the LC Issuer or such Participant, as the
case may be. Nothing in this Section is intended to limit the obligations of
the Borrower under the Financing Documents.
SECTION 8.05. Successors and Assigns. The obligations of the
Borrower under the Financing Documents shall continue until the later of (a)
the Termination Date and (b) the date upon which all amounts due and owing to
the LC Issuer thereunder shall have been paid in full, and shall (i) be binding
upon the Borrower and its successors and assigns and (ii) inure to the benefit
of and be enforceable by the LC Issuer, each Participant and their respective
successors, transferees and assigns; provided, however, that (x) the Borrower
may not assign all or any part of the Financing Documents without the prior
written consent of the LC Issuer and (y) the obligations of the Borrower
pursuant to Sections 8.04 and 8.07 shall survive the termination of this
Agreement. The LC Issuer may at any time, without the consent of the Borrower,
grant to one or more banks or other institutions (each a "Participant")
participating interests in the Letter of Credit or the Reimbursement Obligation
or the Term Loan. In the event of any such grant by the LC Issuer of a
participating interest to a Participant, whether or not upon notice to the
Borrower, the LC Issuer shall remain responsible for the performance of its
obligations hereunder and under the Letter of Credit, and the Borrower shall
continue to deal solely and directly with the LC Issuer in connection with the
LC Issuer's rights and obligations hereunder and thereunder. The LC Issuer may
at any time, without the consent of the Borrower, assign to one or more banks
or other institutions (each an "Assignee") all or any portion of its rights
hereunder and under the Note. No Transferee shall be entitled to receive any
greater payment under Section 4.11 or 4.12 than the LC Issuer would have been
entitled to receive with respect to the rights transferred, unless such
transfer is made with the Borrower's prior written consent or by reason of the
provisions of Section 4.16 requiring the LC Issuer to designate a different
office for holding or maintaining the Loan under certain circumstances or at a
time when the circumstances giving rise to such greater payment did not exist.
SECTION 8.06. Limited Liability of the LC Issuer. The
Borrower assumes all risks of the acts or omissions of the beneficiary of the
Letter of Credit with respect to such Person's use of the Letter of Credit.
Neither the LC Issuer nor any of its officers or directors shall be liable or
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<PAGE> 40
responsible for: (a) the use which may be made of the Letter of Credit or for
any acts or omissions of any beneficiary in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement(s)
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the LC
Issuer against presentation of documents which do not comply with the terms of
the Letter of Credit, including failure of any documents to bear any reference
or adequate reference to the Letter of Credit; (d) any actual or alleged
misrepresentation or omission (except an intentional or grossly negligent
misrepresentation or omission) by the LC Issuer; or (e) any other circumstances
whatsoever in making or failing to make payment under the Letter of Credit,
except only that the Borrower shall have a claim against the LC Issuer, and the
LC Issuer shall be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by (i) the LC Issuer's willful
misconduct or gross negligence in determining whether documents presented under
the Letter of Credit comply with the terms thereof or (ii) the LC Issuer's
willful failure to pay under the Letter of Credit after the presentation to it
of a draft and certificate strictly complying with the terms and conditions of
the Letter of Credit. In furtherance and not in limitation of the foregoing,
the LC Issuer may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.07. Costs, Expenses and Taxes. The Borrower agrees
to pay on demand all reasonable costs and expenses in connection with the
preparation, execution, delivery, filing and administration of the Financing
Documents and any other documents which may be delivered in connection
therewith, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the LC Issuer with respect thereto and with respect to
advising the LC Issuer as to its rights and responsibilities under the
Financing Documents or any waiver or amendment of, or the enforcement of, the
Financing Documents and such other documents which may be delivered in
connection therewith. In addition, the Borrower agrees to pay any and all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of the Financing
Documents and such other documents and agrees to save the LC Issuer harmless
from and against any and all liabilities with respect to or
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<PAGE> 41
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 8.08. Jurisdiction And Venue. The Borrower
irrevocably submits to the non-exclusive jurisdiction of any New York State or
federal court sitting in The City of New York over any suit, action or
proceeding arising out of or relating to the Financing Documents or the
transactions contemplated thereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now have or
hereafter acquire to the laying of venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. The foregoing shall not
limit the rights of the LC Issuer to bring proceedings against the Borrower in
the competent courts of any jurisdiction or jurisdictions.
SECTION 8.09. Severability. Any provision of this Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 8.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
SECTION 8.11. Headings. Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purpose.
SECTION 8.12. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the LC Issuer of
counterparts hereof signed by each of the parties hereto.
SECTION 8.13. WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR
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<PAGE> 42
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
38
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
AES LIGHT, INC.
By
-------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
-------------------------
Title:
39
<PAGE> 1
EXHIBIT 10.66
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement") dated as of May 20, 1996 by
and between AES LIGHT, INC., a Delaware corporation (with its successors, the
"Pledgor") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a trust company
organized and existing under the laws of the State of New York (with its
successors, the "Lender").
WHEREAS, the Pledgor is an indirect wholly-owned subsidiary of The
AES Corporation, a Delaware corporation ("AES"), and is obligated to reimburse
the Lender for amounts that may become due under that certain Reimbursement
Agreement dated as of May 20, 1996 between the Pledgor and the Lender (the
"Reimbursement Agreement");
WHEREAS, pursuant to the Reimbursement Agreement, the Lender has
agreed to make available a letter of credit (the "Letter of Credit") in favor
of Camara de Liquidacion E Custodia S/A CLC and to provide a term loan if
certain conditions are satisfied;
WHEREAS, the Lender's willingness to enter into the Reimbursement
Agreement is conditioned upon the pledge by the Pledgor of AES Common Stock (as
defined below) to the Lender;
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
Terms defined in the Reimbursement Agreement and not otherwise
defined herein have, as used herein, the respective meanings provided for
therein. The following additional terms, as used herein, have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended.
"AES Common Stock" means shares of the common stock, $.01 par
value, of AES.
<PAGE> 2
"Collateral" has the meaning assigned to such term in Section
3(a).
"Collateral Value" of the Pledged Stock means at any time the
product of (x) the number of shares of AES Common Stock then held by the Lender
as Collateral, multiplied by (y) the closing price for a share of AES Common
Stock on the most recent day during which AES Common Stock was traded through
the National Association of Securities Dealers' Automated Quotations National
Market System.
"Collateral Value Ratio" means at any time the ratio of the
Collateral Value of the Pledged Stock to an amount equal to the sum of (i) the
amount then available for drawing under the Letter of Credit plus (ii) the
aggregate principal amount of the Loan then outstanding.
"Initial Shares" means 18,181,819 shares of AES Common Stock.
"Pledged Stock" means (i) the Initial Shares and (ii) any other
AES Common Stock required to be pledged to the Lender pursuant to Section 3(b).
"Secured Obligations" means the obligations of the Pledgor
hereunder and under the Reimbursement Agreement and the Note (including,
without limitation, any obligation to pay interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Pledgor or which would have
accrued but for such case, proceeding or other action) and any renewals or
extensions of any of the foregoing.
"Security Interest" means the security interest in the Collateral
granted hereunder securing the Secured Obligations.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein that are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties
The Pledgor represents and warrants as follows:
(a) Title to Pledged Stock. The Pledgor owns all of the
Pledged Stock, free and clear of any Liens other than the Security Interest.
All of the Pledged Stock has been
2
<PAGE> 3
duly authorized and validly issued, and is fully paid and non-assessable, and
is subject to no rights or options to purchase of any Person. The Pledgor is
not and will not become a party to or otherwise bound by any agreement, other
than this Agreement, which restricts in any manner the rights of any present or
future holder of any of the Pledged Stock with respect thereto.
(b) Validity, Perfection and Priority of Security Interest.
Upon the delivery of a certificate or certificates representing the Pledged
Stock to the Lender in accordance with Section 4, the Lender will have a valid
and perfected first priority security interest in the Collateral. No
registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of this
Agreement or necessary for the validity or enforceability hereof or for the
perfection or enforcement of the Security Interest. The Pledgor has not
performed and will not perform any acts which might prevent the Lender from
enforcing any of the terms and conditions of this Agreement or which would
limit the Lender in any such enforcement.
SECTION 3. The Security Interest
In order to secure the full payment of the Secured Obligations in
accordance with the terms thereof and to secure the performance of all of the
obligations of the Pledgor hereunder:
(a) The Pledgor hereby assigns, pledges and grants to the
Lender a security interest in the Pledged Stock, and all of its rights and
privileges with respect to the Pledged Stock, and all proceeds, income and
profits thereon, and all interest, dividends and other payments and
distributions with respect thereto (the "Collateral"). On or before the date
hereof, the Pledgor shall deliver to the Lender certificates representing the
Initial Shares, and the Lender shall deliver a receipt therefor to the Pledgor.
(b) If AES at any time issues any additional shares of AES
Common Stock as a dividend or other distribution on or with respect to any or
all of the Pledged Stock, the Pledgor shall immediately pledge to the Lender
such additional shares of AES Common Stock, and shall deliver to the Lender
certificates representing such additional shares of AES Common Stock. If the
Collateral Value Ratio is less than 1.50 to 1.00 (or 3.50 to 1.00 if AES Coral
Reef stock or the stock of any other Subsidiary of Pledgor having a direct or
indirect interest in LIGHT is
3
<PAGE> 4
pledged (a "Subsidiary Pledge") to secure Debt of AES Coral Reef or any such
Subsidiary) for any three consecutive Domestic Business Days, the Pledgor
shall, on the next succeeding Domestic Business Day, pledge to the Lender
sufficient additional shares of AES Common Stock such that the Collateral Value
Ratio is increased to at least 2.00 to 1.00 (or 4.00 to 1.00 if there is a
Subsidiary Pledge) and deliver to the Lender certificates representing such
additional shares of AES Common Stock. All such additional shares delivered
pursuant to this subsection constitute Pledged Stock and shall be subject to
all provisions of this Agreement.
(c) The Lender agrees that if the number of shares of AES Common
Stock represented by the certificate delivered by the Pledgor pursuant to
Section 3(a) exceeds the number of the Initial Shares, the Pledgor will, at any
time within 7 days after the date hereof, accept a substitute certificate
representing the number of Initial Shares.
(d) The Security Interest is granted as security only and
shall not subject the Lender to, or transfer or in any way affect or modify,
any obligation or liability of the Pledgor with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock
(a) All certificates representing Pledged Stock delivered to
the Lender by the Pledgor pursuant hereto shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, with signatures appropriately guaranteed, all
in form and substance satisfactory to the Lender.
(b) The Lender acknowledges that, as of the date hereof, the
Pledged Stock has not been registered under the Act, or under any state
securities law.
(c) The Lender understands that, except during such times that
the Pledged Stock is subject to a currently effective registration statement
under the Act, the Pledged Stock constitutes "restricted securities" under the
Act and that the rules of the Securities and Exchange Commission provide in
substance that holders thereof may dispose of the Pledged Stock only pursuant
to an effective registration statement under the Act or an exemption from such
registration, if available.
4
<PAGE> 5
(d) The Lender hereby acknowledges that, except during such
times that the Pledged Stock is subject to a currently effective registration
statement under the Act, the certificates for the Pledged Stock may bear a
legend stating: "The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be offered, sold or
transferred in the absence of a favorable opinion of recognized counsel or
other evidence reasonably satisfactory to the issuer to the effect that
registration thereof under such Act is not required or the effective
registration thereof under such Act."
SECTION 5. Filing; Further Assurances
The Pledgor agrees that it will, at its expense and in such manner
and form as the Lender may reasonably require, execute, deliver, file and
record any financing statement, specific assignment or other paper and take any
other action that may be necessary or that the Lender may reasonably request,
in order to create, preserve, perfect or validate the Security Interest or to
enable the Lender to exercise and enforce its rights hereunder with respect to
any of the Collateral. To the extent permitted by applicable law, the Pledgor
hereby authorizes the Lender to execute and file, in the name of the Pledgor or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Lender in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interest.
The Lender may at any time or from time to time, in its sole
discretion, cause any or all of the Pledged Stock to be transferred of record
into the name of the Lender or its nominee. The Pledgor will promptly give to
the Lender copies of any notices or other communications received by it with
respect to Pledged Stock registered in the name of the Pledgor and the Lender
will promptly give the Pledgor copies of any notices and communications
received by the Lender with respect to Pledged Stock registered in the name of
the Lender or its nominee.
SECTION 6. Right to Receive Distributions on Collateral
Unless and until a Default has occurred and is continuing, and
except as provided in Section 3(b) with respect to stock dividends, the Pledgor
shall be entitled to receive and retain all dividends, interest and other
5
<PAGE> 6
payments made on or with respect to the Collateral ("Dividends"). During the
continuance of a Default, the Lender shall have the right to receive and to
retain as Collateral hereunder all Dividends and the Pledgor shall take all
such action as the Lender may deem necessary or appropriate to give effect to
such right. If the Lender receives any cash Dividend at time when a Default is
not continuing, the Lender shall pay to the Pledgor such Dividend.
Any Dividends that are received by the Pledgor during the
continuance of a Default shall be received in trust for the benefit of the
Lender and, if the Lender so directs, shall be segregated from other funds of
the Pledgor and shall, forthwith upon demand by the Lender, be paid to the
Lender as Collateral in the same form as received (with any necessary
endorsement). After all Defaults have been cured, the Lender's right to retain
Dividends under this Section 6 shall cease and the Lender shall pay over to the
Pledgor any such Collateral retained by it during the continuance of a Default.
SECTION 7. Right to Vote Pledged Stock
If an Event of Default shall have occurred and be continuing, the
Lender shall have the right, to the extent permitted by law, and the Pledgor
shall take all such action as may be necessary or appropriate to give effect to
such right, to vote and to give consents, ratifications and waivers, and take
any other action with respect to any or all of the Pledged Stock, with the same
force and effect as if the Lender was the absolute and sole owner thereof.
Unless and until an Event of Default has occurred and is continuing, the
Pledgor shall have the sole right to vote and to give consents, ratifications
and waivers, and take any other actions with respect to any or all of the
Pledged Stock as it deems necessary or appropriate and the Lender shall, upon
receiving a written request from the Pledgor accompanied by a certificate
signed by its principal financial officer stating that no Event of Default has
occurred and is continuing, deliver to the Pledgor such proxies, powers of
attorney, consents, ratifications and waivers in respect of any of the Pledged
Stock which is registered in the name of the Lender or its nominee as shall be
specified in such request and be in form and substance reasonably satisfactory
to the Lender.
SECTION 8. General Authority
6
<PAGE> 7
The Pledgor hereby irrevocably appoints the Lender its true and
lawful attorney, with full power of substitution, in the name of the Pledgor,
the Lender or otherwise, for the sole use and benefit of the Lender, but at the
expense of the Pledgor, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default has occurred and is continuing,
all or any of the following powers with respect to all or any of the
Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the
Lender were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Lender shall give the Pledgor not less than ten days' prior
notice of the time and place of any sale or other intended disposition of any
of the Collateral except any Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The Lender and the Pledgor agree that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the Uniform
Commercial Code.
SECTION 9. Remedies
(a) If an Event of Default shall have occurred and be
continuing then, in addition to the remedies described in Sections 6 and 7
above, the Lender may exercise all the rights of a secured party under the
Uniform Commercial Code (whether or not in effect in the jurisdiction where
such rights are exercised) and, in addition, the Lender may, without being
required to give any notice except as herein provided or as may be required by
mandatory provisions of law, (A) apply the cash, if any, then held by it as
Collateral as specified in Section 12 and (B) if there shall be no such cash or
to the extent such cash shall be insufficient to pay all the Secured
7
<PAGE> 8
Obligations in full, sell, subject to Section 9(b), the Collateral or any part
thereof at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price or
prices as the Lender may deem satisfactory and hold the proceeds as Collateral
hereunder or apply such proceeds as specified in Section 12. The Lender may be
the purchaser of any or all of the Collateral sold pursuant to this subsection
at any public sale (or, if the Collateral so sold is Pledged Stock or other
Collateral of a type customarily sold in a recognized market or of a type which
is the subject of widely distributed standard price quotations, at any private
sale). The Lender, instead of exercising the power of sale conferred upon it
in this subsection, may proceed by a suit or suits at law or in equity to
foreclose the Security Interest and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) The Lender is authorized, in connection with any sale
pursuant to this Agreement, if it deems it advisable to do so, (i) if the
Pledged Stock is not then subject to a currently effective registration
statement under the Act or if otherwise necessary to comply with the Act or any
other law, to restrict the prospective bidders on or purchasers of any of the
Pledged Stock to a limited number of sophisticated investors who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or sale of any of such Pledged Stock, (ii) if
the Pledged Stock is not then subject to a currently effective registration
statement under the Act, to cause to be placed on certificates for any or all
of the Pledged Stock or on any other securities pledged hereunder a legend to
the effect that such security has not been registered under the Act and may not
be disposed of in violation of the provisions of the Act, and (iii) to impose
such other limitations or conditions in connection with any such sale as the
Lender deems necessary or advisable in order to comply with the Act or any
other law.
(c) The Pledgor covenants and agrees that it will execute and
deliver such documents and take such other action as the Lender deems necessary
or advisable in order that any sale of Collateral permitted hereunder may be
made in compliance with law. Upon any such sale the Lender shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral
so sold. Each purchaser at any such sale shall hold the Collateral so sold
absolutely free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Pledgor which may
8
<PAGE> 9
be waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal that it has or may have
under any law now existing or hereafter adopted. Any notice of a sale required
by law shall (1) in the case of a public sale, state the time and place fixed
for such sale, (2) in the case of sale at a broker's board or on a securities
exchange, state the board or exchange at which such sale is to be made and the
day on which the Collateral, or the portion thereof so being sold, will first
be offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Lender may fix in the notice of such sale. At any
such sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Lender may determine. The Lender shall not be obligated to
make any such sale pursuant to any such notice. The Lender may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
so adjourned. In case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Lender until the selling price is paid by the purchaser thereof, but the Lender
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.
SECTION 10. Expenses
The Pledgor agrees that it will forthwith upon demand pay to the
Lender:
(i) the amount of any taxes that the Lender may have been
required to pay by reason of the Security Interest or to free any
of the Collateral from any Lien thereon, and
(ii) the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of legal
counsel and of any other experts, which the Lender may incur in
connection with (A) the administration or enforcement of this
Agreement, including such expenses as are incurred to preserve the
value of the Collateral and the validity, perfection, rank
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<PAGE> 10
and value of any Security Interest, (B) the collection, sale or
other disposition of any of the Collateral permitted hereunder, or
(C) the exercise by the Lender of any of the rights conferred upon
it hereunder.
Any such amount not paid on demand shall bear interest at a per annum rate of
2% plus the Adjusted Base Rate.
SECTION 11. Limitation on Duty of the Lender in
Respect of Collateral
Beyond the exercise of reasonable care in the custody thereof, the
Lender shall have no duty as to any Collateral in its possession or control.
The Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of any act or
omission of any agent or bailee selected by the Lender in good faith, other
than any act or omission caused by the gross negligence or willful misconduct
of such bailee or any act or omission made in breach of this Agreement.
SECTION 12. Application of Proceeds
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any
part of the Collateral and any cash held shall be applied by the Lender in the
following order of priority:
first, to payment of the reasonable expenses for which the
Lender is to be reimbursed pursuant to Section 8.07 of the
Reimbursement Agreement or Section 10 hereof and unpaid fees owing
to the Lender under the Reimbursement Agreement;
second, to the ratable payment of accrued but unpaid
interest on the Secured Obligations in accordance with the
provisions of the Reimbursement Agreement;
third, to the ratable payment of unpaid principal of the
Secured Obligations;
10
<PAGE> 11
fourth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid in
full; and
finally, to payment to the Pledgor or its successors or
assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining from such proceeds.
SECTION 13. Termination of Security Interest:
Release of Collateral
When no amount is due and payable by the Pledgor hereunder or
under the Reimbursement Agreement and the Letter of Credit has been terminated
without a drawing being outstanding thereunder, the Security Interest shall
terminate and all rights to the Collateral shall revert to the Pledgor. Upon
such termination of the Security Interest, the Lender will, at the expense of
the Pledgor, execute and deliver to the Pledgor such documents as the Pledgor
shall reasonably request to evidence the termination of the Security Interest
or the release of such Collateral, as the case may be.
SECTION 14. Notices
All notices, communications and distributions hereunder shall be
given in accordance with Section 8.02 of the Reimbursement Agreement.
SECTION 15. Waivers. Non-Exclusive Remedies
No failure on the part of the Lender to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Lender of any right under the Reimbursement Agreement or this
Agreement preclude any other or further exercise thereof or the exercise of any
other right. The rights in this Agreement and the Reimbursement Agreement are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 16. Successors and Assigns
This Agreement is for the benefit of the Lender and its successors
and assigns, and in the event of an
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<PAGE> 12
assignment of all or any of the Secured Obligations, the rights hereunder, to
the extent applicable to the indebtedness so assigned, may be transferred with
such indebtedness. This Agreement shall be binding on the Pledgor and its
successors and assigns.
SECTION 17. Changes in Writing
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated except in a writing signed by the Pledgor and
the Lender.
SECTION 18. New York Law
This Agreement shall be construed in accordance with and governed
by the laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws
of any jurisdiction other than New York are governed by the laws of such
jurisdiction.
SECTION 19. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (b) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
AES LIGHT, INC.
By:
-----------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
------------------------------
Name:
Title: Vice President
13
<PAGE> 1
EXHIBIT 10.67
SHAREHOLDERS AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as
of this 27th day of May, 1996, in the City of Rio de Janeiro, State of Rio de
Janeiro, Brazil, by and among:
AES Coral Reef, Inc. ("AES")
1001 North 19th Street
Arlington, Virginia 22209
Attention: Tom Tribone
Facsimile: 001-703-528-4510;
Companhia Siderugica Nacional ("CSN")
Rua Lauro Muller, 116 - 36 degrees
Rio de Janeiro - RJ
Attention: Sylvio Coutinho
Facsimile: 55-21-545-1318 or 55-21-545-1529;
EDF International S.A. ("EDF")
16 Place des Etats-Unis
75016 Paris, France
Attention: Jack Cizain
Facsimile: 33-1-40-42-5441; and
Houston Industries Energy - Cayman, Inc. ("HIE")
1111 Louisiana, 39th Floor
Houston, Texas 77002
Attention: Edward Monto
Facsimile: 001-713-207-5563;
hereinafter sometimes collectively referred to as the "Operators' Group"; and
BNDES Participacoes S.A. ("BNDESPAR")
Av. Republica do Chile, 100 - 10 degrees andar
Rio de Janeiro - RJ
Attention: Gabriel Stoliar
Facsimile: 55-021-533-1538
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hereinafter sometimes referred to as the "Brazilian Partner"; the Operators'
Group and the Brazilian Partner hereinafter sometimes collectively referred to
as the "Parties" or the "Controlling Group" or severally the "Party.
WITNESSETH THAT:
(A) WHEREAS, the Parties have purchased in the auction (the
"Auction") promoted by Banco Nacional de Desenvolvimento Economico e Social
("BNDES"), in its capacity as the Brazilian Federal Government's agent for the
National Privatization Program, 5,240,700,000 registered voting common shares
of the capital stock of Light Servicos de Eletricidade S.A. ("Light"), a
publicly-held corporation headquartered in the City of Rio de Janeiro, State of
Rio de Janeiro, Brazil, which shares represent not less than fifty percent
(50%) plus one share of the aggregate outstanding registered voting common
shares of Light, the Parties becoming, therefore, controlling shareholders of
Light;
(B) WHEREAS, Light is engaged in the generation, transmission
and distribution of electricity and to that end has applied for and obtained
various concessions granted by the regulator of the Brazilian power sector,
Departamento Nacional de Aguas e Energia Eletrica ("DNAEE");
(C) WHEREAS, each of the Parties desires to enter into a
shareholders' agreement in the form hereof in order to establish the rules
governing their relationships with respect to the decisions to be taken as
shareholders of Light and their relationship with respect to the conduct of the
business and operations of Light after the sale of the controlling interest by
BNDES in the Auction; and
(D) WHEREAS, the Parties are willing to record herein in
writing their agreements and covenants intending to be legally bound;
NOW, THEREFORE, the Parties hereby agree as follows:
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SECTION 1. MEASURES TO BE TAKEN PROMPTLY AFTER
TAKE OVER
MEASURES TO BE TAKEN UPON THE TAKE OVER
1.1 For any and all purposes of this Agreement, the take over
shall be deemed to be the consummation of the transfer to the Parties of the
shares of Light purchased at the Auction and the assumption by the Parties of
the management and operations of Light (the "Take Over").
1.2 Within six (6) months after the Take Over, the Parties
shall agree on a detailed business plan for Light (the "Business Plan"). In
this regard, EDF has prepared a preliminary draft of a financial forecast and
will provide copies thereof to each of the other Parties not later than ten
(10) days after the date of this Agreement. The Business Plan shall be based
upon certain basic assumptions regarding the business of Light to be mutually
agreed upon by the Parties and shall reflect a macroeconomic approach to the
business and operations of Light to be built on the basis of the knowledge of
the Parties of the local environment, the outcome of their audit and due
diligence of Light and taking into account the expertise of the Parties in the
power sector and the results of the Parties' past experience in similar cases.
The Parties hereby agree that the Business Plan will be a valuable instrument
to assist them in strategic planning for Light and to enable them to evaluate
the results of Light after the Take Over.
1.3 Simultaneously with or forthwith upon the Take Over, the
Parties shall ensure that a call for the holding of the Extraordinary General
Meeting of Shareholders of Light is issued and such General Meeting of
Shareholders shall deliberate, inter alia, upon (i) the adoption of the new
by-laws of Light and (ii) the election of the members of the Board of Directors
of Light, in each case in accordance with the more particular requirements of
this Agreement.
1.4 In order to deliberate upon the matters to
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be submitted to the shareholders of Light, the Parties shall, prior to the date
of such General Meeting of Shareholders, hold a Partners' Meeting, as provided
in Section 5 of this Agreement.
SECTION 2. GENERAL AND OPERATING PRINCIPLES
2.1 The Parties hereby expressly and unconditionally
acknowledge that as a result of their purchase in the Auction of the requisite
number of nominative shares of Light, such Parties are the controlling group of
shareholders of Light. Conscious of the responsibilities imposed by law on the
controlling shareholders of a publicly-held corporation, the Parties understand
that they must prioritize the benefits of any nature that may accrue to Light
and its related companies as well as to all Light's shareholders, including the
Parties, and to the customers of Light. In order to implement the foregoing
principles which shall at all times govern the relationship among the Parties,
and between the Parties and Light and its related companies, simultaneously
with the Take Over, the Parties have entered into this Agreement. It is the
intention of the Parties that this Agreement be binding on them for its entire
term and, to that end, each of the Parties shall cause the taking of any action
deemed required by law to ensure the enforceability of the obligations to be
assumed by them hereunder.
2.2 In order to preserve intact the concessions granted by
the Federal Government to Light, in making any decisions with respect to the
business and operations of Light, the Parties shall, and shall cause the
individuals appointed by them to, abide at all times by the provisions of
Light's concession agreements and the obligations assumed by the Parties
thereunder. Furthermore, the Parties hereby agree that Light shall be managed
in accordance with the following general managerial principles implemented in
the manner determined by the Board of Directors and Executive Committee of
Light:
(a) Light shall provide services in accordance with operating,
cost, quality and reliability standards
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<PAGE> 5
compatible with the requirements of the market and the economic and
financial terms of the concession agreements;
(b) Light shall identify areas and business opportunities
that may complement its existing activities with a view to contribute
to the enhancement of its results and profits and to increase the
economic return to its shareholders;
(c) Light and its related companies shall, at all times, be
committed to seek high standards of efficiency, productivity,
competitiveness and profitability;
(d) strategic decisions adopted by Light and its related
companies shall always take into consideration the interest of the
Parties in maximizing the return on their investments;
(e) Light and its related companies shall use their best
endeavors to maximize the benefits accruing from the expertise of the
Parties in Light's field of activity and to that end shall foster the
establishment and increase of their relationship with the Parties,
provided, however, that the relationship between Light and its related
companies and the Parties shall be based on technical, merit-based,
criteria and shall be established and maintained at all times on an
arm's-length basis;
(f) Light and its related companies shall seek a continuous
and constant relationship with its customers, the communities within
which they operate and the governmental authorities with whom they
must interact;
(g) the corporate bodies of Light shall ensure the adoption
of human resources policies compatible with the conditions prevailing
in the market and the other principles set forth in this Section 2.2
and consistent with the performance of its employees;
(h) the participation of the employees and the commitment of
the same to the mission of Light shall be fostered by the management
of Light with a view to promote the development of Light's human
resources;
(i) to the extent required by applicable law, Light shall
ensure the participation of its employees in its
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<PAGE> 6
future profits in proportion to the performance of Light;
(j) the management of Light shall establish, upon defining
any adjustments to be made to the permanent staff of Light, the
criteria applicable to the enhancement of the performance of the human
resources of Light and to the creation of incentive dismissal
programs, the operating needs of Light being strictly observed;
(k) the management of Light shall ensure the strict
observance of the provisions of article 50 of Presidential Decree No.
1,204, of July 25, 1994, in order to preserve the six-month training
program for dismissed employees and their outplacement in the market;
(l) the management of Light shall foster the technological
enhancement of Light's operations and the improvement of the quality
of services to be rendered to its customers, taking into account the
conditions then prevailing for the commercialization of energy in the
Brazilian market and the rationalization and reduction of operating
costs;
(m) the generation capacity of Light shall be managed with a
view to serving adequately its own customers and to incorporate
customers in other regions;
(n) the management of Light shall seek operating alternatives
to increase its revenues by the implementation of new businesses,
provided that Light's primary activities are not adversely affected
thereby;
(o) the management of Light shall keep itself informed about
projects aimed at developing the economic and social conditions of the
State of Rio de Janeiro, and, to the extent Light's strategic planning
is affected by such projects, shall implement such strategic planning
with a view to maximizing the return on investments made by Light and
its shareholders; and
(p) the development of the activities of Light shall at all
times abide by the basic principles of the programs established by the
applicable governmental authorities having jurisdiction over the
properties and operations of Light for the preservation of
environmental conditions.
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<PAGE> 7
2.3 With a view to implementing the operating principles
spelled out hereinabove, the Parties shall cause the management of Light and
its related companies to take such actions as they may deem fit to discharge
the duties associated with such principles.
2.4 It is the intention of the Parties that certain policies
be established by Light respecting the relationship of Light with its employees
both as a general matter and in connection with the implementation by Light of
the Business Plan which the parties expect will contemplate detailed operating
plans for Light, measures to improve the organizational structure and
efficiency of Light, and the development of Light as a profitable, privatized
company. The management of Light shall periodically provide to a duly
designated representative of the employees of Light (the "Employees'
Representative") information pertaining to significant human resources,
economic, financial and technical matters affecting or relating to the
management and operations of Light. The Chief Executive Officer shall meet
every three months with the Employees' Representative in order to discuss
matters of concern to the employees of Light. Commencing on the date two years
after the Take Over, the Employees' Representative may propose to the
management of Light such modifications to the provisions of this Section 2.4 as
shall, in its view, improve relations and communications between the employees
of Light and the management of Light and the management of Light shall meet
with the Employees' Representative at a mutually convenient time to discuss and
consider such proposal.
2.5 The principles set forth in this Section 2 are intended
to provide general guidance for the Board of Directors and Executive Committee
of Light in conducting the business of Light.
SECTION 3. CAPITAL DISTRIBUTION AND BY-LAWS OF
LIGHT
3.1 The Parties are the holders of 5,240,700,000 registered
voting common shares of the capital stock of Light representing 50.436% of the
total capital stock of Light (the "Shares"). The Shares are
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<PAGE> 8
distributed among the Parties as follows:
AES is the holder of 1,179,000,000 Shares;
CSN is the holder of 753,700,000 Shares;
EDF is the holder of 1,179,000,000 Shares;
HIE is the holder of 1,179,000,000 Shares; and
BNDESPAR is the holder of 950,000,000 Shares.
It is irrevocably and unconditionally understood and agreed that any and all
Shares purchased by any of the Parties in the Auction, and all other common
voting shares of Light which, pursuant to the terms of this Agreement become
Shares, and, to the extent provided in Section 6.12, all common voting shares
purchased by any Party in any open-market purchase, are subject to the
provisions of this Agreement.
3.2 The new by-laws of Light to be adopted by the General
Meeting of Shareholders, which are subject to approval by DNAEE, to be held in
pursuance of Section 1.3(i) hereof shall be in the form attached hereto as
Exhibit I and the same may be amended and modified from time to time by
decision of the shareholders of Light as more particularly provided in this
Agreement and in accordance with the applicable provisions of the Brazilian
Corporations Law.
SECTION 4. ADMINISTRATIVE MEASURES AND MANAGEMENT
OF LIGHT
MANAGEMENT OF LIGHT AND EXERCISE OF VOTING RIGHTS
4.1 In its capacity as a publicly-held corporation and in
pursuance of the provisions of the Brazilian Corporations Law, Light is managed
and administered by a Board of Directors ("Conselho de Administrgao") and by
officers ("Diretoria"), as more fully described in Light's by-laws.
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<PAGE> 9
4.2 The Parties hereby agree that the Board of Directors of
Light shall consist of at least nine (9) members and at most fifteen (15)
members. In order to implement such provision, the Parties agree to exercise,
in the General Meeting of Shareholders of Light to be held as contemplated in
Section 1.3, their voting rights so as to cause the amendment of Light's
by-laws as aforesaid.
4.3 The Parties hereby agree to vote their Shares at the
General Meeting of Shareholders of Light held pursuant to Section 1.3(i) and at
subsequent General Meetings of Shareholders so as to elect a Board of Directors
composed of members selected by the Parties (and the Employees' Representative)
in the numbers set forth below:
<TABLE>
<CAPTION>
Party (or other group) Number of Members
---------------------- -----------------
<S> <C>
AES 2
CSN 1
EDF 2
HIE 2
BNDESPAR* 1
BNDESPAR/CSN** 1
Employees' Representative 1
</TABLE>
* Subject to the provisions of Section 5.8.
** To be designated on a rotating basis by BNDESPAR and CSN with
CSN designating the first such member.
In order to enable the election of the members of the Board of Directors and to
comply with the law, each of the Parties hereby agrees to transfer, on a
fiduciary basis, to the individual(s) appointed by it to be a member of the
Board of Directors of Light one (1) share of Light out of those held by it. In
the event that any shareholder of Light shall require the adoption by Light at
a General Meeting of Shareholders of a cumulative or multiple voting system for
the election of members of the Board of Directors, each of the Parties shall
vote their respective Shares so as to cause the election of a majority of the
members of the Board of Directors by the Parties with all of the Parties being
represented thereon by at least one (1) member.
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4.4 The Chairman of the Board of Directors of Light, who
shall not have executive authority, shall be appointed by AES, HIE, EDF and CSN
on a rotating basis. CSN shall select the first Chairman of the Board who
shall serve for a three-year period commencing on the Take Over and, subject to
the unanimous vote of AES, HIE, EDF and CSN in a Partners' Meeting, shall serve
for an additional three-year period. At the end of such three-year period or
such additional three-year period, if applicable, the Chairman of the Board of
Light shall be elected by unanimous vote of AES, HIE, EDF and CSN from persons
nominated by such Parties, provided that any such Party which has theretofore
selected the Chairman of the Board, shall not have the right to nominate a
candidate for such position until each such other Party has selected the
Chairman of the Board, with such rotation process to continue throughout the
term of this Agreement. The Chairman of the Board shall have the following
duties and responsibilities: (a) to call Board of Directors meetings and
General Meetings of Shareholders at the request of any member of the Board of
Directors appointed by any Party, (b) to designate the secretary of the Board
of Directors meetings and General Meetings of Shareholders who shall maintain
the records of the same, and (c) to prepare the agenda for Board of Directors
meetings and General Meetings of Shareholders including therein any matters
requested by the other members of the Board of Directors. The Chairman of the
Board of Directors shall not be entitled to any tie-breaking vote. In the
event three of the four members of the Operators' Group in a Partners' Meeting
request that the Chairman of the Board resign at any time during his term
(which request shall not be arbitrary or capricious), the Parties shall cause
the Chairman of the Board to promptly tender his resignation to the Board of
Directors. The Party that appointed the Chairman of the Board who resigned
shall thereafter be entitled to appoint a successor to serve for the balance of
the term of the individual he is replacing. The Chairman of the Board shall be
a person selected by a Party other than the Party which nominated the
then-serving Chief Executive Officer.
4.5 The Parties hereby expressly agree to exercise their
voting rights in the General Meetings of Shareholders of Light to ensure the
compulsory election of the members appointed by each of them as members of the
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Board of Directors.
4.6 The Parties hereby expressly acknowledge that, pursuant
to the Brazilian Corporations Law, the officers of Light are to be elected by
the Board of Directors. It is the intention of the Parties that the officers
of Light are, at all times, professionals of recognized capacity and reputation
in the market who are able to dedicate themselves full time to the discharge of
their duties.
4.6.1 The Parties hereby expressly acknowledge that Light
shall have a Chief Executive Officer who shall be one of the Executive
Officers comprising the Executive Committee of Light. The principal
functions of the Chief Executive Officer shall be (a) to foster and
achieve consensus among the Executive Officers comprising the
Executive Committee and, if no such consensus is achieved with respect
to a particular matter, to decide the matter in question; provided
that if any such decision is objected to by any other Executive
Officer on the Executive Committee, such matter will be referred to
the Board of Directors (and a Partners' Meeting) for resolution, (b)
to coordinate the activities of Light in strategic negotiations
respecting matters of critical importance to the activities and
business of Light, and (c) to conduct and settle any litigation or
other dispute involving Light and third parties (except for any suit
between any of the Parties and Light arising out of or relating to
this Agreement). In addition, the public relations department, the
internal auditors and the legal department of Light shall report
directly to the Chief Executive Officer, provided that, the internal
auditors shall prepare such reports as may be requested from time to
time by the Board of Directors or any member of the Executive
Committee and a copy of any reports so prepared shall be provided to
all members of the Board of Directors. The Parties agree to review
the role, function and responsibilities of the Chief Executive Officer
at the end of twelve (12) months following the Take Over date with a
view towards assessing whether the arrangement set forth hereinabove
for the Chief Executive Officer is the optimal arrangement for the
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operation of Light.
4.6.2 The Chief Executive Officer shall be selected by AES,
HIE, EDF and CSN on a rotating basis. EDF shall select the first
Chief Executive Officer whom the Parties shall cause the Board of
Directors to elect to serve for a three-year term commencing on the
Take Over and, subject to the unanimous vote of AES, HIE, EDF and CSN
in a Partners' Meeting, to be re-elected to serve an additional
three-year term. The second Chief Executive Officer shall be selected
by HIE and the Parties shall cause such person to be elected as Chief
Executive Officer by the Board of Directors to serve for a three-year
term. Thereafter, the Chief Executive Officer shall be selected in a
Partners' Meeting by the unanimous vote of AES, HIE, EDF, and CSN from
persons nominated by such Parties and the Parties shall cause such
person to be elected as Chief Executive Officer in General Meetings of
Shareholders to serve for a three-year term, provided that any such
Party which has theretofore selected the Chief Executive Officer,
shall not have the right to nominate a candidate for such position
until each such other Party has selected the Chief Executive Officer,
with such rotation process to continue throughout the term of this
Agreement.
4.6.3 In the event three of the four members of the
Operators' Group in a Partners' Meeting request that the Chief
Executive Officer or any of the Executive Officers comprising the
Executive Committee resign at any time during his term (which request
shall not be arbitrary or capricious), the Parties shall cause the
Chief Executive Officer or such Executive Officer promptly to tender
his resignation to the Board of Directors. The Party that appointed
the Chief Executive Officer or such Executive Officer who resigned
shall thereafter be entitled to appoint a successor to serve for the
balance of the term of the individual he is replacing.
4.6.4 In addition to the Chief Executive Officer, the Board
of Directors shall elect a President of Light to serve at the
discretion of the
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Board of Directors. The President shall not have an executive
function and will act only as a special advisor and consultant to the
members of the Board of Directors and to the Executive Officers
comprising the Executive Committee. The President shall be chosen
from among Brazilian citizens of high esteem and shall be an
individual of irreproachable moral character. The President shall be
invited to attend meetings of the Board of Directors and shall be
available for other national or international duties as may be
assigned to him by the Board of Directors. The Parties agree to
review the role, function and responsibilities of the President at the
end of twelve (12) months following the Take Over date with a view
towards assessing whether the arrangement set forth hereinabove for
the President is the optimal arrangement for the operation of Light.
4.7 The Parties agree that the business of Light will be
controlled by an Executive Committee consisting of the following four (4)
members each of whom shall be an officer of Light:
(a) The Executive Officer for Distribution, who will be
appointed by EDF, will have responsibility for all matters relating to
customers and distribution, including (i) establishing and
implementing a commercial policy and quality of service, (ii)
collection of bills and implementing measures to combat fraud in all
aspects, (iii) supporting activities including workforce adjustments,
reorganization of distribution districts, and procurement, (iv)
managing investments in distribution and subtransmission, including
related strategic planning, (v) establishing tariffs and conducting
general economic and institutional studies, and (vi) dealings with
customers in the bulk power market within Light's concession area;
(b) The Executive Officer for Bulk Power Supply, who will be
appointed by AES, will have responsibility for all matters relating to
the generation and purchasing of electricity, including (i)
operations, maintenance, generating additions,
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and dispatching of generating units, (ii) energy purchases (contract
and spot), (iii) new generation project development, (iv) development
of and participation in the bulk power market, and (v) sales of bulk
power outside of the concession area;
(c) The Executive Officer for Finance, who will be appointed
by HIE, will have responsibility for finance and all matters relating
to finance, including (i) management of Light's bank accounts and
relationships with financial institutions; (ii) financial resource
allocation; (iii) long- and short-term financial planning, including
analysis, evaluation, and making recommendations to the Executive
Committee regarding new investments by and capital expenditures of
Light and the financing of these investments, (iv) investor relations,
including interfacing and coordinating matters with stock exchange
representatives, (v) cash management, (vi) purchasing (provided that
the Executive Officer for Administration will have certain
responsibilities during the six-month period following the Take Over
date as provided in Section 4.7(d)(x) below), and (vii) budgeting and
cost management;
(d) The Executive Officer for Administration, who will be
appointed by CSN, will have responsibility for all matters relating to
administration, including (i) human resources and Light's pension
fund, (ii) information systems, methods and data processing, (iii) tax
planning and optimization, (iv) accounting and controllership, (v)
communications and advertising, including relations with governmental
entities and environmental regulatory entities, (vi) real estate
management and control and maintenance of properties, (vii) business
development in areas other than the energy sector, (ix) insurance
management, and (x) coordination of the working group of Light in
renegotiating contracts (except banking and related contracts) and
coordination of the working group of Light in charge of purchasing and
inventory control, in each case during the six-month period following
the Take Over date.
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In no event shall any Executive Officer be involved in or have any
responsibility over any matter that involves or may involve a conflict of
interest with the Party which designated such Executive Officer (or such
Party's affiliates).
4.8 The Executive Officers will have responsibility for
administering their respective Divisions of Light as they deem appropriate,
but, before being appointed, they must agree to work together as a team with
the other Executive Officers to effectively administer the overall business of
Light. They will agree to co-ordinate with each other so that the best overall
results are obtained for Light, including, without limitation, by using their
best efforts to meet as regularly as they deem appropriate. Each Executive
Officer will prepare a Division Plan (including Strategy, Budgets and
Objectives for its area of responsibility) and the Executive Committee as a
team will combine the individual Division Plans into an overall plan for Light.
The Executive Committee will present the overall plan to the Board of Directors
for approval or modification. The Executive Officers will then be responsible
for executing the Division Plan for their respective Divisions as approved by
the Board.
In addition to the foregoing:
(i) the Parties agree to disclose the existence of this
Agreement to the individuals appointed by them to be elected Board members and
with a view for the same to abide by the agreements of the Parties entered into
hereunder;
(ii) the Parties hereby agree to cause the individuals
appointed by them to fulfill any positions in the Board of Directors of Light
to abide by the decisions of the Parties at the level of the Partners'
Meetings; and
(iii) any of the Parties may, at any time, with or without
cause, decide to replace the individuals appointed by it to fulfill any
positions in the Board of Directors of Light. The Parties hereby expressly
agree to use their voting rights to cause the call of a General Meeting of
Shareholders of Light to elect the replacement member and, further, to cause
the election of the
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individual appointed by the Party replacing a Board of Directors member.
4.9 The Parties shall cause each of the members of the Board
of Directors of Light appointed by them to establish (at the first meeting of
the Board of Directors of Light held promptly after the General Meeting of
Shareholders of Light wherein such members of the Board of Directors are
elected), implement and maintain a distribution policy (the "Distribution
Policy") for Light. The Distribution Policy shall at all times comply with
applicable provisions and limitations of the Brazilian Corporations Law and
shall be consistent with the following priorities set forth in order of
importance: first, the short- and long-term maintenance, in full force and
effect, of Light's concession agreements and the performance of Light's
obligations under all applicable laws; second, the maintenance of the financial
soundness of Light (including, without limitation, by funding to the extent
required by the Brazilian Corporations Law any reserve fund of Light which must
be funded prior to any distribution of profits to the shareholders of Light);
and third, distribution of all remaining net profits and all other cash amounts
available for distribution to all of the shareholders of Light.
4.10 Unless otherwise agreed by each of the members of the
Operators' Group or as may be necessary to maintain Light's concession
agreements in full force and effect, the Parties shall cause each of the
members of the Board of Directors appointed by them, and shall in any General
Meeting of the Shareholders of Light vote their Shares, to cause Light not to
incur any additional Indebtedness (as defined below) which, taken together with
other outstanding Indebtedness of Light, would exceed 25% of Light's total
assets as ascertained in the most recent audited annual financial statements
for Light. For purposes of this Section 4.10, "Indebtedness" means any
obligations for borrowed money, including under any guaranties in respect of
the obligations of others for borrowed money.
4.11 Notwithstanding the foregoing, the Parties hereby agree
to seek a common position on any matters to be submitted to the shareholders of
Light in the context of a Partners' Meeting, as regulated by
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Section 5 below, including, but not limited to, the appointment of Board of
Directors' members and the officers of Light.
4.12 The Parties acknowledge the importance to the business
and operations of Light of the maintenance of professional and harmonious
relationships with its employees. In this regard, the Parties acknowledge the
positive contributions input from the employees of Light can have in ensuring
the future success of Light and to this end the Parties agree that the
Employees' Representative shall have the right to participate in the working
groups to be formed following the Take Over for the purpose of: (i) developing
and recommending to the Executive Officers of Light a new organizational
structure for Light, (ii) developing and recommending to the Executive Officers
proposals for the reorganization and reformulation of the policies of
BrasLight, and (iii) identifying and assisting in the implementation of means
for mitigating the social impact of any organizational restructuring of the
activities of Light.
4.13 The Parties also acknowledge the importance to the
business and operations of Light of the maintenance of professional and
harmonious relationships with its customers. The Parties agree to cause Light
to develop, promptly following the execution of this Agreement, a new
communications policy for Light which shall be consistent with the goal of
maintaining such professional and harmonious relationships, with development of
new market relations in the Brazilian power sector and with Light's status as a
private company. Should the members of the Operators' Group deem appropriate,
Light may hire consultants to assist Light in developing such communications
policy.
SECTION 5. PARTNERS' MEETINGS
5.1 The Parties understand and accept that it is appropriate
for the Parties to discuss in meetings to be attended by the Parties
("Partners' Meetings") prior to the holding of any Board of Directors' Meeting
or General Meeting of Shareholders of Light any matters submitted to the
deliberation of the Board of Directors or
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shareholders, as the case may be, of Light in order to agree on a common
position with respect to such matters.
5.2 The Partners' Meetings shall be held with reasonable
anticipation of (but not less than two days prior to) the date scheduled for
the holding of any Board of Directors meeting or General Meeting of
Shareholders, as the case may be, and shall be called by any member of the
Operators' Group in a notice specifying the date, time and location of such
meeting and delivered to and received by each Party not less than five (5) days
prior to such meeting. Notwithstanding the Partners' Meetings to be held
pursuant hereto, the Parties agree that it is beneficial for them to exchange
their views on the items included in the respective agenda. To that end, the
Parties agree to exchange their views in a telephone conference call of which
all Parties receive reasonable prior notice of by telecopy sent to all Parties
in advance of the holding of the relevant Partners' Meeting so as to ensure
that all matters included in the agenda for the Board of Directors meeting or
General Meeting of Shareholders are considered in advance of the relevant
Partners' Meeting by the Parties.
5.3 In the absence of a common position of all of the
Parties, any proposal shall only be deemed validly approved by the Partners'
Meetings if such proposal was approved by the Parties holding not less than
sixty-one percent (61%) of the Shares. All decisions approved in a Partners'
Meeting as provided herein shall be reflected in writing in minutes to be
prepared at the end of each meeting and such minutes shall be signed by each of
the representatives of the Parties attending such meeting.
5.4 Without limiting the generality of the foregoing, the
following matters pertaining to Light shall always be submitted by the Parties
for deliberation in the course of Partners' Meetings and shall require the
approval by Parties holding not less than sixty-six and two thirds percent of
the Shares, which sixty-six and two thirds percent vote must include the
affirmative vote of each member of the Operators' Group:
(a) any amendments to the by-laws which may affect the rights
and obligations of the Parties under this Agreement or any changes in
the corporate purpose of Light
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as provided in Light's by-laws;
(b) capital increases or reductions, the issuance of
convertible debentures, subscription bonuses or any options for the
acquisition of shares aggregating in any one-year period in excess of
10% of the total capital of Light, as such total capital is
ascertained in the most recent audited annual financial statement for
Light;
(c) the incurrence of Indebtedness aggregating in any
one-year period in excess of 10% of the total capital of Light, as
such total capital is ascertained in the most recent audited annual
financial statement for Light;
(d) the merger (other than mergers with existing or future
affiliates or subsidiaries of Light in which Light is the surviving
company), consolidation, spin-off of Light and/or any of its related
companies as well as the conversion into another corporate type;
(e) the liquidation, dissolution and any other voluntary act
that may imply a financial restructuring;
(f) cancellation of the listing of the shares of Light on any
stock exchange;
(g) the pledge or assignment of any revenues or credit rights
of Light and/or its related companies as collateral for any financial
operations to be entered into by Light and/or its related companies or
the creation of any liens or encumbrances affecting the assets of
Light, in each case whenever the total aggregate amount of all of
Light's assets affected by such pledge, assignment, liens or
encumbrances exceeds 10% of the total net worth of Light, as such
total net worth is ascertained in the most recent audited annual
financial statements of Light;
(h) the acquisition or disposal of any fixed assets whose
amount exceeds 10% of the total capital of Light, as such total
capital is ascertained in the most recent audited annual financial
statements of Light;
(i) the disposition or acquisition of, or subscription for,
equity holdings in other companies now or hereafter existing,
including, without limitation, through participation by Light in the
privatizations of
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CERJ and CEG;
(j) the participation in any public bidding for the granting
of any concessions for the provision of public utilities;
(k) any change in the functions of the Executive Officers
comprising the Executive Committee; and
(l) the entering into of any contract or agreement, or any
transaction with any Party or any affiliate of any Party.
All decisions approved in a Partners' Meeting as provided
herein shall be reflected in writing in minutes to be prepared at the
end of each meeting and such minutes shall be signed by the
representatives of each one of the Parties attending such meeting.
5.5 The decisions made in accordance with the
provisions of this Section 5, shall be binding upon all Parties,
including any dissenting Party or any Party choosing not to be
represented therein, and the Parties agree to cause the member or
members of the Board of Directors appointed by them, or to exercise
their voting rights in the relevant General Meeting of Shareholders
of Light, as the case may be, to cause the approval of such decision
on the identical terms and conditions as were so approved by the
non-dissenting Parties.
5.6 The failure by a Party to cause the member or
members of the Board of Directors appointed by it or to exercise its
voting rights, or to vote its Shares at a General Meeting of
Shareholders, as deliberated and agreed to by the Parties in a
Partners' Meeting shall give rise to the right of any of the other
Parties to obtain specific performance of the obligations of the
defaulting Party to cause the member or members of the Board of
Directors appointed by it or to exercise such voting rights, or to
vote such Party's Shares in a General Meeting of Shareholders, in
strict accordance with the agreement of the Parties reached in such
Partners' Meeting.
5.7 Notwithstanding any decisions made by the Parties
in a Partners' Meeting, each of the Parties shall
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be entitled, at any time, either directly or through its appointees,
to conduct an audit of the books, records, files, business and
operations of Light, provided, however, that any such audit is
conducted during normal business hours and does not interfere with the
normal course of conduct of the business of Light and provided,
further, that any and all costs associated with the conduct of such
audit shall be exclusively borne by the Party requesting or conducting
such audit.
5.8 As provided in Section 4.2, BNDESPAR has the right
individually to elect one member of the Board of Directors and, as a
Party to this Agreement, to participate in Partners' Meetings as
provided in Section 5.1. BNDESPAR may elect not to exercise its
rights to elect such member of the Board of Directors and not to
participate in Partners' Meetings, but must be timely notified of,
and may attend, all such meetings and all documents delivered to the
other Parties in connection with any such meeting shall be
concurrently delivered to BNDESPAR, in each event as if BNDESPAR were
actually represented on the Board of Directors and in the Partners'
Meetings.
5.8.1 If BNDESPAR shall elect to be represented at any
Partners' Meeting, BNDESPAR shall be granted the right to participate
and vote at such Partners' Meetings, and shall vote jointly with the
other Parties to cause the approval of the matters decided at the
Partners' Meeting by the Board of Directors or in a General Meeting of
Shareholders, as the case may be.
5.8.2 Notwithstanding the provisions of Section 5.4, the
Parties agree that the following actions pertaining to Light shall
require the affirmative vote of BNDESPAR acting in any Partners'
Meeting as a requirement for such action to be submitted to the Board
of Directors or a General Meeting of Shareholders:
(a) any amendments to the by-laws which may affect
the rights and obligations of BNDESPAR under this
Agreement or any changes in the corporate purpose of
Light as provided in Light's by-laws;
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(b) in any one year, capital increases or
reductions, the issuance of convertible debentures,
subscription bonuses or any options for the
acquisition of shares aggregating in excess of twenty
percent (20%) of the total capital of Light, as such
total capital is ascertained in the most recent
audited annual financial statement for Light;
(c) in any one year, the issuance of debentures or
the establishment of any other form of indebtedness
of Light aggregating in excess of fifty percent (50%)
of the total assets of Light, as such total assets
are ascertained in the most recent audited annual
financial statement for Light;
(d) the merger (other than mergers with existing or
future affiliates or subsidiaries of Light in which
Light is the surviving company) or consolidation,
spin-off of Light and/or any of its related companies
as well as the conversion of Light into another
corporate type;
(e) the liquidation or dissolution of Light and any
other voluntary act that may imply a financial
restructuring of Light; and
(f) cancellation of the listing of the shares of
Light on any stock exchange.
5.8.3 The provisions of Section 6 of this Agreement
shall not apply to BNDESPAR. BNDESPAR may freely sell its Shares in
accordance with BNDESPAR rules, provided, however, that in order to
permit the other Parties to take appropriate measures to maintain
management stability at Light, BNDESPAR shall not sell its Shares for
a period of two years following the Take Over date, unless each of the
Parties and BNDESPAR collectively decide that such sale should be
effected sooner. BNDESPAR shall only
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be entitled to sell its Shares in a single block to a single purchaser
or a group of purchasers jointly purchasing and holding such Shares.
Notwithstanding the foregoing, in the event that the other Parties
shall purchase additional shares of Light which have been deemed, by
the unanimous consent of the Parties, to be Shares under this
Agreement such that the total number of Shares held by such other
Parties is at least equal to fifty percent (50%) plus one share of all
outstanding registered voting common shares of Light, then BNDESPAR
shall not be required to sell its Shares in a single block.
5.8.4 In case of the sale by BNDESPAR of all of its
Shares to a third party or a group of purchasers jointly purchasing
and holding such Shares (the "New Shareholder"), the New Shareholder
shall, at its election, be entitled to the following rights:
(a) to participate and vote in the Partners'
Meetings (including, without limitation, to exercise
the rights provided for in Section 5.8.2);
(b) to elect one (1) member of the Board of
Directors and with CSN (on a rotating basis) to elect
a second member of the Board of Directors as
contemplated in Section 4.3; and
(c) to appoint one Executive Officer who shall be an
additional member of the Executive Committee and who
shall have such specific functions and duties as are
jointly determined by all of the Parties in a
Partners' Meeting.
The New Shareholder shall be bound, in all respects, by the provisions
of this Agreement (including, without limitation, Section 6 hereof)
and shall execute an instrument affirmatively evidencing that the New
Shareholder is so bound by the terms of this Agreement. If BNDESPAR
shall, pursuant to Section 5.8.3, sell its Shares other than in a
block, then the purchasers thereof shall not be parties to this
Agreement and the Shares so sold shall no longer be
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deemed to be Shares under this Agreement.
5.8.5 Unless otherwise agreed by all of the
Parties, at least seventy-five (75) days prior to the proposed date of
any auction or other sale by BNDESPAR of its Shares, BNDESPAR shall
announce the auction and allow thirty (30) days for third parties to
apply for pre-qualification to participate at such auction or sale.
In order to prevent a third party unacceptable to the other Parties
from participating in the management of Light, and to prevent any
party from becoming aware of internal information which might be used
against the interests of Light, BNDESPAR shall, immediately following
the thirty (30) day period allowed for the pre-qualification of third
parties, disclose to the other Parties the identities of all third
parties applying for pre-qualification to participate at such auction
or sale, each of which third parties shall be subject to the prior
approval of each of the other Parties (which approval shall not be
unreasonably withheld). Any such refusal must be given within thirty
(30) days of receipt of the notice of the pre-qualified third parties
and shall clearly identify the reasons on which it is based. If
BNDESPAR is of the view that approval of any such third party was not
reasonably withheld, it shall so inform the other Parties in a writing
stating the reasons for its disagreement. Thereafter, BNDESPAR and
the other Parties shall negotiate in good faith in an effort to
resolve such dispute.
SECTION 6. TRANSFER OF SHARES
RIGHT OF FIRST REFUSAL
6.1 Except as provided in Section 5.8, the transfer of any of
the Shares, including any transfer of subscription rights to additional
shares granted to holders of the Shares ("Subscription Rights"), shall
only be validly made after a two-year period commencing on the Take Over
date and shall thereafter be made in accordance with the following rules.
6.2 If any of the Parties wishes to assign and
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transfer all or part of its Shares or Subscription Rights (the "Selling
Shareholder"), the other Parties (the "Other Parties") shall have a right of
first refusal to acquire the Shares or Subscription Rights on offer.
6.3 The Selling Shareholder shall evidence its intention, in
writing, to the Other Parties setting forth the price and payment terms for
such sale. Should there exist a bona fide third-party offer, the right
granted hereby shall be exercised under the same terms and conditions
contained in such bona fide third-party offer. In the absence of a bona
fide third-party offer, the price and payment terms and conditions shall
be those contained in the proposal submitted by the Selling Shareholder
(collectively, with a bona fide offer, an "Offer").
6.4 Each of the Other Parties shall have a period of
forty-five (45) days from the date of receipt of said notice to elect
to acquire the Shares or Subscription Rights being offered on the same
terms and conditions contained in the Offer, in proportion to the number of
remaining Shares of Light held by such Party to the number of remaining
Shares held by all of the Other Parties, it being understood that such
Parties may either purchase the Shares or Subscription Rights on offer or
appoint a third party of their own choosing to acquire such Shares or
Subscription Rights; provided, however, that the appointee (and not the
appointee's nominee) is made known to the other Parties. Upon expressing
their intention to acquire the Shares or Subscription Rights on offer, the
purchasing Parties may also express their intention to acquire the Shares
or Subscription Rights which the Other Parties are entitled to purchase but
have declined to acquire the Shares. In such case, should there be any
Shares or Subscription Rights unpurchased, such Shares or Subscription
Rights shall be allocated, pro rata in accordance with their respective
holdings of Shares, among the purchasing Parties that expressed their
intention to acquire the same. Such allocation shall be completed within
the period of ten (10) days following the expiration of the original 45-day
period.
6.5 In the event that the Other Parties, within the aforesaid
45-day period and the 10-day allocation period, do not exercise, either
directly or through an appointee, the right to purchase all of the
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Shares or Subscription Rights on offer, then none of such Shares or
Subscription Rights may be purchased by the Other Parties and all of such
Shares may be freely offered to the bona fide third party which made the
original Offer or to another third party, as the case may be, by the
Selling Shareholder, within an additional period of forty-five (45) days,
for a price never lower and/or under conditions never more favorable than
those originally stated in the Offer notice and provided, however, that,
for any transfer of Shares proposed to be made within the 6-year period
following the Take Over date, the transferee is not a competitor of the
Other Parties or any affiliate of a Party (as reasonably determined by such
Parties). In the event of any sale of Shares, it shall be a condition to
the effectiveness of such sale that the purchasing shareholder become, by
execution of an adopting instrument reasonably acceptable to the other
Parties, a party to this Agreement.
6.6 If, at the end of the aggregate period of ninety (90)
days, the Selling Shareholder has not sold the offered Shares or
Subscription Rights and is still willing to dispose of them, or if the
terms and conditions of the Offer have changed, the Selling Shareholder
shall re-offer its Shares or Subscription Rights to the Other Parties, in
accordance with the procedures contained in this Section 6.
6.7 The acquisition of part of the Shares or Subscription
Rights then offered is forbidden, unless otherwise agreed by the
Selling Shareholder and, in such case disclosed to the other Parties in
advance of such sale.
6.8 In the event that any member of the Operators' Group
shall sell or transfer in excess of 50% of the Shares owned by it on
the date of the Take Over, such Party shall no longer be included in the
Operators' Group. If any member of the Operators' Group shall sell or
transfer in excess of 50% of the Shares owned by it on the date of the Take
Over to a single purchaser, such purchaser shall become a member of the
Operators' Group.
6.9 Notwithstanding anything herein to the contrary, each of
the Parties acknowledges that the Shares of AES, EDF, CSN and HIE may
from time to time be pledged
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as collateral security to any bank, financial institution or other
person providing financing or refinancing for such Party's investment in
Light (any such bank, financial institution or other person a "Lender" and
any of them together, the "Lenders"), and any restrictions on transfers
herein imposed on the Parties shall not apply to any transfer of the Shares
or pledge to the Lenders or any transfer made in connection with the
exercise of the Lenders' rights and remedies with respect to such pledged
Shares (or any Subscription Rights related thereto), unless otherwise
required by applicable law or Light's concession agreements, and each of
the Parties hereby waives, to the maximum extent permitted by applicable
law, the applicability of any such restrictions or obligations to the
extent necessary to give effect to the foregoing.
VIOLATION OF RULES
6.10 Any transfer of the Shares and/or Subscription Rights
made in violation of the rules provided herein and any attempted
voluntary encumbrance or pledge of rights in respect of the Shares and/or
Subscription Rights made in violation of the rules provided herein shall be
deemed null and of no effect and Light is hereby expressly directed by the
Parties to not register in its corporate books any assignment and transfer
or encumbrance or pledge of the Shares and/or Subscription Rights made in
violation of said rules.
PERMITTED TRANSFERS AND ENCUMBRANCES
6.11 In addition to the transfer, on a fiduciary basis, of
one share to each one of the individuals appointed by the Parties to be
a member of the Board of Directors of Light, any Party may transfer all or
part of its Shares (and any Subscription Rights related thereto) without
the prior written consent of the other Parties (which intended transfer
shall nevertheless be communicated to the other Parties) in the following
circumstances:
(a) subject to the requirement that upon any such transfer the
transferee company or person become, by execution of an adopting
instrument, a Party to this
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Agreement, the transfer to any subsidiary or to the transferor's parent
company or to its ultimate individual shareholders or, further, to any
company which is controlled, directly or indirectly, by the ultimate
individual shareholders of the transferor or which is under common control
with the transferor;
(b) subject to the requirement that upon any such transfer the
transferee company or person become, by execution of an adopting
instrument, a Party to this Agreement, the transfer to any person with
which it merges or which acquires substantially all of its assets, provided
that the transferring Party shall provide documentation of any such merger
or acquisition to the other Parties;
(c) any pledge by any member of the Operators' Group of its Shares to
any Lender as security for its obligations in respect of any financing
or refinancing of any such member's investment in Light; or
(d) the transfer to any Lender (or its designee) upon the foreclosure
by such Lender on any pledge of Shares by any Party.
6.12 Except as provided in Section 6.13, in the event that
any Party shall acquire additional shares of Light through open-market
purchases of such shares, such shares shall not for purposes of any vote in
a Partners' Meeting be deemed to be Shares, except that the Party
purchasing such shares shall be obligated hereunder to vote such shares in
any General Meeting of Shareholders of Light in the same manner as such
Party's Shares.
6.13 The Parties agree that CSN may acquire such additional
number of shares of Light as shall, taken together with the Shares held
by CSN on the date of this Agreement, equals 1,179,000,000 shares (or such
other number of Shares as shall be held by AES, EDF or HIE to the extent
that each such Party's original holdings of Shares has, as a result of any
capital increase or reduction, increased or decreased), which shares shall,
for all purposes of this Agreement be deemed to be Shares, provided that
the price of such additional shares is at least equal to the price per
share paid at
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the Auction. In the event BNDESPAR shall sell its Shares at a price
lower than the price paid in the Auction, each of the members of the
Operators' Group (other than BNDESPAR) may acquire an amount of such Shares
on the same proportionate basis as such member of the Operators, Group's
Shares bears to the aggregate number of Shares held by the Operators'
Group, and any Shares so purchased shall continue to be deemed Shares for
all purposes of this Agreement. In any such sale of the Shares of
BNDESPAR, the members of the Operators' Group which desire to purchase such
Shares agree that they shall agree upon, and at all times bid, common bid
prices for such Shares.
SECTION 7. NEGATIVE COVENANTS
7.1 None of the Parties or their respective Affiliates (as
defined below) shall engage in power generation, transmission or
distribution projects in the State of Rio de Janeiro (other than any such
project publicly-announced or disclosed in writing to the other Parties and
in development on the date of this Agreement) without first offering such
opportunity to Light. Should Light decide not to participate in such
project, the right to participate in it shall be automatically transferred
to the Parties and if any of the Parties shall elect not to participate in
such project, the right to participate therein shall continue to be held by
the remaining Parties.
7.2 Nothing contained herein shall, however, prevent any of
the Parties or their Affiliates from implementing any power generating
project for captive use by such Party or its Affiliates ("Self
Generation"); provided that any excess energy generated and not utilized by
such Party or its Affiliates shall be offered for sale to Light; in its
capacity as the local utility company, as provided by the relevant
provisions of the Brazilian laws in force, mainly the Waters Code.
7.3 For purposes of this Section 7, "Affiliate" means, with
respect to any person, any other person that (a) owns the first person,
(b) is owned by the first person, (c) is under common ownership with the
first person, where "owns" for purposes of this definition,
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means ownership of (i) more than fifty percent (50%) of the equity
interests or rights to distributions on account of equity of the person, or
(ii) the power to direct the management or policies of the person.
Notwithstanding the foregoing, none of the shareholders of CSN shall be
deemed an Affiliate of CSN.
SECTION 8. ADHERENCE TO THE TERMS OF THIS
AGREEMENT
8.1 The Parties hereby agree that any shareholders of Light
may, at any time during the term of this Agreement, become a party to this
Agreement subject to the prior consent of all of the Parties.
SECTION 9. REGISTRATION OF THE AGREEMENT
WITH THE COMPANY
9.1 In order to secure the performance of the obligations set
forth herein, and in accordance with the provisions of Article 118 of
the Brazilian Corporations Law, this Agreement shall be registered in the
Book of Registered Shares and in the Book of Transfer of Registered Shares
of Light and the respective share certificates, whenever issued, shall also
reflect the existence of this Agreement.
SECTION 10. TERM OF THE AGREEMENT
10.1 This Agreement shall come into force on the date of the
execution hereof and shall remain in full force and effect for a term of
thirty (30) years from the date hereof.
10.2 In the ninth year of the term of this Agreement and from
time to time thereafter (but not more than once in any three-year
period), the Parties shall review the terms of this Agreement and, to the
extent they deem appropriate, negotiate in good faith such modifications to
the terms of this Agreement as they
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believe, based upon the experiences of the Parties with the operation
of the terms of this Agreement, will optimize the relations of the Parties
and promote the efficient and profitable operation of Light; provided, that
none of the Parties shall be under any obligation to agree to any such
modification if such Party believes that such modification would be
prejudicial to the optimal relations of the Parties, the efficient and
profitable operation of Light, or its own interests as a Party to this
Agreement.
SECTION 11. SPECIFIC PERFORMANCE
11.1 Any Party shall be entitled to claim in Court the
specific performance of the obligations assumed by the other Parties
hereunder, or of any portion hereof, in pursuance of the relevant Sections
of the Brazilian Code of Civil Procedure, including, but not limited to,
Sections 461, 632, 639 inter alia, as well as Article 118 of the Brazilian
Corporations Law.
11.2 Without limiting the rights or remedies of the Parties,
the Parties hereby acknowledge that the payment of damages by the defaulting
Party to the nondefaulting Parties shall not be deemed adequate
indemnification for the failure by a Party to comply with its obligations
hereunder.
11.3 Any of the Parties shall be entitled to apply for a
declaration by the Chairman of the General Meeting of Shareholders of Light
that any vote by the other Parties in violation of the provisions of this
Agreement shall not be computed and shall be of no effect.
SECTION 12. MISCELLANEOUS
12.1 This Agreement shall be governed by and construed in
accordance with the laws of the Federal Republic of Brazil. If any
dispute or claim between two or more of the Parties (each a "disputing
party") arising out of or derived from the construction, interpretation or
performance of any obligations under this Agreement (a
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"claim") has not been resolved by mutual agreement on or before the 30th day
following the first notice of the subject matter of the claim to or from the
disputing parties, then any disputing party may (a) bring an action in the
Central Court of the City of Rio de Janeiro, which the Parties agree shall
be competent to resolve any such claim, or (b) refer the claim to
arbitration under Sections 12.2 through 12.4 below.
12.2 Any arbitration proceeding conducted hereunder shall be
settled under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce, of Paris, France by three (3) arbitrators. The
nondefaulting Parties, on the one hand, and the defaulting Party, on the
other, shall be entitled to appoint one (1) arbitrator and the arbitrators
appointed by the parties shall, within the period of fifteen (15) calendar
days following the acceptance of their appointment, nominate the third
arbitrator who shall be the Chairman of the arbitral tribunal. If such
arbitrators may not reach a consensus as to the name of the third
arbitrator within the period provided hereinabove, such third arbitrator
shall then be appointed by the International Court of Arbitration of ICC
in pursuance of the Rules.
12.3 The arbitration proceedings shall be held in the City of
London, England (for any arbitration in which no award is being sought
therein against a Brazilian Party) or Rio de Janeiro, Brazil (for any
arbitration in which an award is being sought against a Brazilian Party),
and such proceedings shall be conducted in the English language.
12.4 To the maximum extent permitted under applicable law,
(a) the arbitral award shall be final and binding upon the parties and shall
not be subject to any appeal, and (b) such award shall be enforceable in the
courts of any jurisdiction where any assets of the Party against whom
enforcement is sought are found.
12.5 This Agreement may be modified only by a written
instrument duly executed by all Parties.
12.6 Any notices or other communications required or
permitted hereunder shall be given in writing to the Parties to the
addressees indicated herein or to
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<PAGE> 33
any other address as the Parties may, from time to time, indicate to the
others.
12.7 This Agreement shall be binding upon and inure to the
benefit of the Parties, their successors and assigns, to the extent
permitted hereunder.
12.8 Except as expressly contemplated in Section 5.8 and 6
and except for such rights as do not arise expressly or by direct
implication under the terms of this Agreement and the assignment of which
could not materially affect the obligations of the assigning Party or the
rights of the other Parties, none of the Parties may assign its rights and
obligations hereunder, unless the prior written approval of the other
Parties is first secured.
12.9 In the event that any provision of this Agreement is
declared unenforceable, illegal or invalid by virtue of violation of norms
of public policy or otherwise or is required to be modified by DNAEE as a
condition to its approval of this Agreement, the remaining provisions
shall not be affected and shall remain in full force and effect, and in
such a case the Parties shall be obliged to replace the unenforceable,
illegal or invalid provision with such other provision or provisions, or
to modify such provision, in each case so as to achieve the purposes
envisaged by that provision.
12.10 This Agreement is executed in both the Portuguese and
English language versions, but in case of conflict the English language
version shall prevail over any and all translations hereof.
12.11 Each Party represents and warrants to the other Parties
as follows:
(a) such Party is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which
it is organized and has all requisite power and authority to own,
lease and operate its properties and to carry out its business as
it is now being conducted;
(b) the execution, delivery and performance by such
Party of this Agreement has
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<PAGE> 34
been authorized by all necessary corporate actions and does not and
will not: (i) require any consent or approval not already obtained,
(ii) violate any law, rule, regulation, order, or decree
presently in effect and having applicability to it, (iii) violate
the charter, by-laws or other applicable organizational documents
thereof, or (iv) violate any permit, concession, grant,
franchise, license or other governmental authorization, approval,
judgment, order or decree or any mortgage agreement, deed of
trust, indenture or any other instrument to which such Party is a
party or by which such Party or any of its properties or assets
are bound or which is otherwise applicable to such Party; and
(c) this Agreement is the legal and binding
obligation of such Party, enforceable against it in accordance
with its terms; and any other document in connection with this
Agreement to be delivered by such Party, when duly executed and
delivered by such Party, will be the legal and binding obligation
of such Party, enforceable against it in accordance with its
terms, in each case except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity (regardless of
whether enforcement thereof is sought in a proceeding at law or
in equity).
12.12 The Parties shall comply with all applicable laws, including
the United States Foreign Corrupt Practices Act, in connection with all
matters arising out of or relating in any way to the subject matter of
this Agreement. Without limiting the generality of the foregoing, each
Party agrees not to give anything of value, either directly or indirectly,
to an official of the Brazilian or any other government for the purpose
of influencing an act or decision of any such government or its officials
in connection with this Agreement or the operation of Light.
12.13 Each of the Parties represents that it
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<PAGE> 35
has not entered into any other agreements with any other Party or third
party (excluding any Lender) affecting the manner in which it exercises
its rights or performs its obligations under this Agreement.
12.14 This Agreement is solely for the benefit of the Parties and
their respective successors and permitted assigns, and this Agreement shall
not otherwise be deemed to confer upon or give any third party any remedy,
claim, liability, cause of action or other right.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed in five (5) counterparts of equal tenor in the presence of two
(2) witnesses on the day and year first above written.
AES CORAL REEF, INC.
By: /s/ HENRY PASZELARTR
------------------------------
Name: Henry Paszelartr
Title: Vice Presidet
BNDES PARTICIPACOES S.A.
By: [sig]
------------------------------
Name:
Title:
COMPANHIA SIDERURGICA NACIONAL
By: /s/ SYLVIO COUTINHO
------------------------------
Name:
Title:
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<PAGE> 36
EDF INTERNATIONAL S.A.
By: [sig]
------------------------------
Name:
Title: General Counsel
EDF, International Division
HOUSTON INDUSTRIES ENERGY -
CAYMAN, INC.
By: /s/ EDWARD A. MONTO
------------------------------
Name: Edward A. Monte
Title: Director
Witnesses:
[sig]
- -----------------------------------
[sig] #131823502
[sig]
- -----------------------------------
[sig] R.N. 8.857.240
- 36 -
<PAGE> 1
EXHIBIT 10.68
ADDENDUM TO
SHAREHOLDERS AGREEMENT
THIS ADDENDUM TO SHAREHOLDERS AGREEMENT (the "Addendum") is
made and entered into as of this 30th day of May, 1996 in the City of Rio de
Janeiro, State of Rio de Janeiro, Brazil, by and among:
AES Coral Reef, Inc. ("AES")
1001 North 19th Street
Arlington, Virginia 22209
Attention: Tom Tribone
Facsimile: 001-703-528-4510;
Companhia Siderugica Nacional ("CSN")
Rua Lauro Muller, 116-36 degrees
Rio de Janeiro - RJ
Attention: Sylvio Coutinho
Facsimile: 55-21-545-1318 or 55-21-545-1529;
EDF International S.A. ("EDF")
16 Place des Etats-Unis
75016 Paris, France
Attention: Jack Cizain
Facsimile: 33-1-40-42-5441;
Houston Industries Energy - Cayman, Inc. ("HIE")
1111 Louisiana, 39th Floor
Houston, Texas 77002
Attention: Edward Monto
Facsimile: 001-713-207-5563; and
BNDES Participacoes S.A.
Av. Republica do Chile, 100 - 10 degrees andar
Rio de Janeiro - RJ
Attention: Gabriel Stolier
Facsimile: 55-21-533-1538;
hereinafter sometimes referred to as the "Original Parties" or, severally, an
"Original Party"; and
<PAGE> 2
InvestLight-Clube de Investimento dos Empregados
da Light ("InvestLight")
Av. Presidente Vargas, 642
Rio de Janeiro - RJ
Attention: Paulo Roberto Monteiro de Barros
Facsimile: 55-21-211-2697;
InvestLight and the Original Parties sometimes collectively
referred to as the "Amending Parties" or, severally, an "Amending Party."
WITNESSETH THAT:
(A) WHEREAS, the Original Parties are the parties to that
certain Shareholders Agreement, dated as of May 27, 1996 (the "Shareholders
Agreement"), pursuant to which the Original Parties have constituted themselves
as the controlling group of Light Servicos de Eletricidade S.A. ("Light"), a
publicly-held corporation headquartered in the City of Rio de Janeiro, State of
Rio de Janeiro, Brazil, and have established the rules governing their
relationships with respect to the decisions to be taken as shareholders of
Light;
(B) WHEREAS, InvestLight is in the process of acquiring up to
5.9% of the registered voting common shares of the capital stock of Light (the
"InvestLight Shares") and is the representative of the employees of Light;
(C) WHEREAS, the Original Parties and InvestLight have
executed that certain Statement of Principles of Participation of InvestLight -
Clube de Investimento dos Empregados da Light in the Controlling Group of Light
Servicos de Electricidade S.A., dated May 28, 1996, wherein the Original
Parties and InvestLight have stated their mutual desire that, upon InvestLight
acquiring within a certain period of time a specified percentage of the total
outstanding registered voting common shares of Light, InvestLight shall become
a member of the controlling group of Light and a party to the Shareholders
Agreement on the basis of the principles set forth therein;
(D) WHEREAS, the Original Parties and InvestLight desire to
enter into this Addendum so as to cause InvestLight to became a member of the
controlling
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<PAGE> 3
group and a party to the Shareholders Agreement on the terms and conditions
hereinbelow set forth; and
(E) WHEREAS, the Amending Parties are willing to record
herein in writing their agreements and covenants intending to be legally bound;
NOW THEREFORE, the Amending Parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without
definition shall have the meanings ascribed thereto in the Shareholders
Agreement.
2. InvestLight as Party to Shareholders Agreement. In the
event that InvestLight shall, on or prior to June 28, 1996, own at least five
percent (5%) of the total outstanding registered voting common shares of Light
(the "Initial InvestLight Percentage"), then InvestLight shall automatically
and without any further action by any of the Amending Parties, become a Party
to the Shareholders Agreement with the rights and obligations of a Party
thereunder and all of the InvestLight Shares (but not in excess of shares
representing five percent (5%) of the total outstanding registered common
voting shares of Light) shall be included in and deemed to be a part of the
Shares under the Shareholders Agreement, in each case subject to the more
particular provisions hereof. In the event that InvestLight shall not have
acquired, on or prior to June 28, 1996, sufficient registered voting common
shares of Light such that it owns the Initial InvestLight Percentage, then
InvestLight shall not become a Party to the Shareholders Agreement and this
Addendum shall automatically terminate on such date and be of no further force
or effect. Such rights include, without limitation, the right provided for in
Section 4.3 thereof to select the one member of the Board of Directors of Light
designated therein as the "Employees' Representative" and to designate an
individual to attend and vote in Partners' Meetings convened under Section 5 of
the Shareholders Agreement. Such obligations include, without limitation, the
obligation to cause the member of the Board of Directors appointed by it, or to
exercise its voting rights in a General Meeting of Shareholders of Light, as
the case may be, to cause the approval of any decision made by the Parties in a
Partners' Meeting pursuant to the provisions
3
<PAGE> 4
of Section 5.3 or 5.4 on the identical terms and conditions as were approved by
the Parties in such Partners' Meeting.
3. Concession Agreement. It is the intention of the Amending
Parties that, on or about June 4, 1996, the Original Parties and Investlight
shall execute the concession agreement for Light. In the event that
InvestLight shall not own the Initial InvestLight Percentage on or prior to
June 28, 1996, InvestLight shall promptly take any and all actions necessary to
cause InvestLight to not be a party to such concession agreement.
4. Employee's Representative. For so long as InvestLight
shall remain a Party to Shareholders Agreement, the Employees' Representative
shall be InvestLight. InvestLight may designate different persons to fulfill
the various responsibilities of the Employees' Representative under Sections
2.4, 4.3 and 4.12 of the Shareholders Agreement, respectively. In addition,
the representative of InvestLight at any Partners' Meeting may be a person
other than the person appointed by InvestLight as the Employees' Representative
on the Board of Directors of Light.
5. Minimum Ownership. InvestLight shall remain a Party to
the Shareholders Agreement and a member of the Controlling Group only for so
long as it owns three percent (3%) or more of the total outstanding registered
common stock of Light (the "Minimum Percentage") and, if it shall no longer own
the Minimum Percentage, it shall be released from all further obligations, and
shall have no further rights, under the Shareholders Agreement. In addition,
to the provisions of Section 6 of the Shareholders Agreement, InvestLight
agrees that, for the three-year period commencing on the date of the Take-Over,
it shall not transfer any of its Shares if as a result of such transfer it
would not thereafter own the Initial InvestLight Percentage. The rights of
InvestLight set forth in this Addendum to appoint the Employees' Representative
member of the Board of Directors, and to act as Employee Representative under
Sections 2.4, 4.3 and 4.12 of the Shareholders Agreement are personal to
InvestLight, for so long as it shall remain a Party to the Shareholders
Agreement, and shall not inure to the benefit of any of its transferees,
successors or assigns. In the event that InvestLight shall no longer be a
Party to the Shareholders Agreement, it shall not disclose to any third-party
any and
4
<PAGE> 5
all information obtained by it in connection with any Partners' Meeting.
6. Additional Principles. Section 2.2 of the Shareholders
Agreement is hereby amending by adding thereto the following provisions:
"(q) in selecting the managers of Light, Light will give full
consideration to the existing managers of Light with the intention in
each case of selecting from such existing managers or hiring from
other sources the most qualified person for each such position; and
"(r) in the event that the former employees of Light shall
form cooperatives or companies for the purposes of providing services
which are within Light's areas of business, Light will give full
consideration to using the services of any such cooperative or
company, provided that in each case it shall contract for such
services only on competitive market prices and terms."
7. Approval Percentage. For so long as InvestLight is a Party
to the Shareholders Agreement, the percentage of the Shares set forth in
Section 5.3 of the Shareholders Agreement shall be deemed, for all purposes of
such agreement, to be fifty-one percent (51%), which fifty-one percent vote
must include the affirmative vote of at least three (3) members of the
Operators' Group.
8. Representations and Warranties; Termination. InvestLight
makes to each of the Original Parties, as to itself, each of the
representations and warranties contained in Section 12.11 of the Shareholders
Agreement. InvestLight hereby further represents and warrants to each of the
Original Parties that it is the duly designated and proper representative of
the employees of Light for all purposes contemplated hereunder and is entitled
to appoint a member of the Board of Directors of Light, as contemplated in
Light's concession agreements. In the event that another person shall
successfully claim that it is the duly designated and proper representative of
the employees of Light and is entitled to appoint a member of the Board of
Directors of Light, as contemplated in Light's concession agreements, then
InvestLight shall no longer be a Party to the Shareholders Agreement and all of
its
5
<PAGE> 6
further rights and obligations hereunder and thereunder shall terminate.
9. Miscellaneous. (a) Except as expressly amended by this
Addendum, the Shareholders Agreement shall remain unmodified and in full force
and effect.
(b) This Addendum shall be governed by and construed in
accordance with the laws of the Federal Republic of Brazil and any dispute or
claim arising hereunder shall be resolved as provided in the Shareholders
Agreement.
(c) Any notices or other communications to InvestLight under
the Shareholders Agreement shall be given as provided therein to the address
indicated herein or to any other address as InvestLight may, from time to time,
indicate to the other Parties.
(d) This Addendum is executed in both the Portuguese and
English language versions, but in case of conflict the English language version
shall prevail over any and all translations hereof.
(e) This Addendum is solely for the benefit of the Amending
Parties and their respective successors and permitted assigns, and this
Addendum shall not otherwise be deemed to confer upon or give any third party
any remedy, claim, liability, cause of action or other right.
6
<PAGE> 7
IN WITNESS WHEREOF, the Amending Parties have caused this
Addendum to be executed in six (6) counterparts of equal tenor in the presence
of two (2) witnesses on the day and year first above written.
AES CORAL REEF, INC.
By: [sig]
----------------------------
Name:
Title:
BNDES PARTICIPACGES S.A.
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
COMPANHIA SIDERCRGICA NACIONAL
By: [sig]
----------------------------
Name:
Title:
7
<PAGE> 8
EDF INTERNATIONAL S.A.
By: [sig]
----------------------------
Name:
Title: General Counsel, EDF
International Division
HOUSTON INDUSTRIES ENERGY - CAYMAN,
INC.
By: /s/ STEVEN H. SCHULER
----------------------------
Name: Steven H. Schuler
Title: Director
INVESTLIGHT - CLUBE DE INVESTIMENTO
DOS EMPREGADOS DA LIGHT
By: [sig]
----------------------------
Name:
Title:
Witnesses:
[sig] IFP3466285
- ------------------------------------
[sig] IFP2142611
- ------------------------------------
8
