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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1997 Commission File Number 33-59960
SITHE/INDEPENDENCE FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3677475
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 Lexington Avenue, New York, NY 10017
- ---------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 450-9000
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 33-0468704
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 Lexington Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 450-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
7.90% Secured Notes due 2002
8.50% Secured Bonds due 2007
9.00% Secured Bonds due 2013
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| Yes |_| No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
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SITHE/INDEPENDENCE FUNDING CORPORATION
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
Part 1 Page
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Items 1, 2 and 3. Business, Properties and Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
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Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters (Not applicable) --
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 16
Part III
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Item 10. Directors and Executive Officers of the Registrants 16
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management 18
Item 13. Certain Relationships and Related Transactions 19
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 19
Signatures 24
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PART I
ITEMS 1, 2 AND 3. BUSINESS, PROPERTIES AND LEGAL PROCEEDINGS
THE PARTNERSHIP
Sithe/Independence Power Partners, L.P. (the "Partnership") was formed to
develop, construct and own a natural gas-fired cogeneration facility having a
design capacity of approximately 1,000 megawatts ("MW") located in the Town of
Scriba, County of Oswego, New York (the "Project"). Cogeneration is a power
production technology that provides for the sequential generation of two or more
useful forms of energy (in the Project's case, electricity and thermal energy)
from a single primary fuel source (in the Project's case, natural gas). The
Partnership is a Delaware limited partnership formed in November 1990 by
Sithe/Independence, Inc. (the "General Partner"), its sole general partner. The
overall strategy of the Partnership is to operate the Project as one of the most
reliable, economically efficient and environmentally clean fossil-fueled
electrical power plants in the United States. The Project began commercial
operation for financial reporting purposes on December 29, 1994.
The General Partner is an indirect wholly-owned subsidiary of Sithe
Energies, Inc. ("Sithe Energies"). The limited partners of the Partnership are
Sithe Energies and certain of its direct and indirect wholly-owned subsidiaries
(the "Limited Partners"). The General Partner and the Limited Partners are
referred to herein as the "Partners." Sithe Energies, which was founded in 1984,
is an independent power producer engaged in the development, construction,
ownership and operation of electric generating facilities throughout the United
States and in selected international power markets. At December 31, 1997, Sithe
Energies owned or leased, through its subsidiaries, 23 operating power plants,
in addition to the Project, in the United States, Australia and Canada with an
installed capacity of 1,912 MW. Sithe has four projects under advanced
development in Brazil, Australia, Colombia and Tunisia representing an aggregate
capacity of 1,819 MW and is in the process of acquiring the non-nuclear
generating assets of Boston Edison, which when completed in the second quarter
of 1998, will more than double Sithe's MW capacity in operation in North America
to 3,629 MW. At December 31, 1997, Sithe's Asian joint venture with the AIG
Asian Infrastructure Fund and the Government of Singapore Investment Corporation
had two plants in operation in China and Pakistan (158 MW), two projects under
construction in China (133 MW) and 10 projects representing approximately 2,532
MW under advanced development in various countries including China, India,
Pakistan and the Philippines. Also, a Sithe subsidiary which does business in
Thailand and is in the process of being acquired by Sithe China, had the 120 MW
Samutprakarn gas-fired cogeneration project under construction and two projects
(240 MW) under advanced development.
Sithe Energies owns, directly or indirectly, 100% of the partnership
interests in the Partnership. The following chart sets forth the organizational
structure of the Partners in the Partnership and of the other affiliates of
Sithe Energies involved with the Partnership.
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Sithe Energies, Inc.
- ------------------------------- (Limited Partner)
| ----------------------------------------------
| | |
| | |
| 100% 100%
| Sithe Energies U.S.A., Inc. Energy Factors, Inc.
| (Limited Partner)
| ----------------------------------- --------------------
| | | | |
100% | 100% 100%
|Mitex, Inc. | Sithe/Independence, Inc. Sithe Energies Power
|(Limited Partner) | (General Partner) Services, Inc.
| | | | (Operator)
| | | |
| | | |
| | | |
45% 10% 44% 1%
| | | |
- -------------The Partnership---------
|
100%
Sithe/Independence
Funding Corporation
Sithe Energies is privately owned 59.7% by Compagnie Generale des Eaux
("CGE"), 29.5% by Marubeni Corporation ("Marubeni"), and 10.8% by its other two
founders. CGE is one of France's leading municipal services companies and the
world's largest water distribution company. Marubeni is one of Japan's leading
general trading companies.
Sithe/Independence Funding Corporation ("Sithe Funding"), a Delaware
corporation, was established for the sole purpose of issuing the 7.90% Notes due
2002, the 8.50% Bonds due 2007 and the 9.00% Bonds due 2013 (collectively, the
"Securities") for its own account and as agent acting on behalf of the
Partnership. Sithe Funding loaned the proceeds of the sale of the Securities to
the Partnership (the "Loans"), which applied the proceeds of such Loans to the
development and construction of the Project. The terms of the Loans are
identical to the terms of the Securities. The Loans are the only assets of Sithe
Funding.
The Securities are not guaranteed by or otherwise obligations of Sithe
Energies, CGE or Marubeni or any affiliate of Sithe Energies, CGE or Marubeni
other than Sithe Funding and the Partnership.
THE PROJECT
The Project is a natural gas-fired cogeneration facility having a design
capacity of approximately 1,000 MW. The Project is located on an approximately
340-acre site adjacent to the Alcan Aluminum Corporation (doing business as
Alcan Rolled Products Company ("Alcan")) plant in the Town of Scriba, County of
Oswego, New York, approximately two miles northeast of Oswego, New York. The
Project consists of four General Electric Model MS7001FA combustion gas turbine
generators designed to generate approximately 160 MW each at their design point
conditions, four heat recovery steam generators ("HRSG"), two steam turbines
designed to generate 208 MW each and air quality control systems to reduce the
nitrous oxide and other emissions of the Project.
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The majority of the capacity and electric energy generated by the Project
is sold to Consolidated Edison Company of New York, Inc. ("Con Edison") and
Alcan with the remainder of the electric energy being sold to Niagara Mohawk
Power Corporation ("Niagara Mohawk"). The electric energy sold to Con Edison is
transported by Niagara Mohawk through Niagara Mohawk's electric transmission
system. Thermal energy generated by the Project is sold to Alcan. Natural gas
supplies to fuel the Project are provided by Enron Power Services, Inc. ("Enron
Power Services"), an indirect wholly-owned subsidiary of Enron Corp., and are
transported to the Project by seven separate pipeline companies. Each of the
principal contracts entered into by the Partnership has a term of 20 years or
longer from the date the Project was placed into commercial operation.
For the portion of the capacity not already committed, the Project may,
from time to time, enter into short- or long-term capacity sales of electricity
to Con Edison, Niagara Mohawk or others, subject to certain restrictions set
forth in the Trust Indenture dated as of January 1, 1993 entered into by Sithe
Funding, the Partnership and IBJ Schroder Bank & Trust Company (the
"Indenture").
The Partnership has designed the Project as a qualifying facility ("QF" or
"Qualifying Facility") under the Public Utilities Regulatory Policies Act of
1978 ("PURPA") and the regulations promulgated thereunder. Accordingly, the
Project must satisfy certain annual operating and efficiency standards in order
to maintain QF status.
The Project was designed, constructed, equipped and tested pursuant to a
fixed-price (approximately $505 million, including change orders) turnkey design
and construction agreement (the "Independence Construction Contract") among
Raytheon Constructors Inc. and General Electric Company (collectively, the
"Independence Contractors") and the Partnership. The Partnership and the
Independence Contractors have settled all punchlist items under the Independence
Construction Contract and have agreed to arbitration for a determination of any
performance bonuses that may be payable under the Independence Construction
Contract.
Operations and Maintenance
The Project is operated by Sithe Energies Power Services, Inc. (the
"Operator"), a wholly-owned subsidiary of Sithe Energies, pursuant to an
Operations and Maintenance Agreement. The Operations and Maintenance Agreement
terminates on October 31, 2014.
The Operator has agreed to operate the Project, to provide all operations
and maintenance services necessary or advisable in order to efficiently operate
and maintain the Project, and to be liable for all expenses relating to
operating, maintaining and managing the Project. The Partnership pays the
Operator an annual management fee of $551,250, escalating at 5% per annum, and
reimburses the Operator on a monthly basis for all direct and indirect necessary
costs and expenses reasonably incurred by the Operator in fulfilling its
obligations under the Operations and Maintenance Agreement.
Sale of Capacity and Electricity
The majority of the capacity and electric energy generated by the Project
is sold to Con Edison and Alcan, with the remainder of the electric energy being
sold to Niagara Mohawk. Accordingly, the Partnership depends on one purchaser
for a major portion of the Project's capacity, on one purchaser currently for
all energy required to maintain the status of the Project as a Qualifying
Facility and currently on two electric energy purchasers for substantially all
of the electricity to be produced by the Project.
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Con Edison
Pursuant to the terms of the Con Edison Energy Purchase Agreement, Con
Edison is obligated to purchase for a term of 40 years following the Date of
Commercial Operation of the Project 740 MW of the Project's capacity and all of
the electrical energy to be derived therefrom up to a maximum in any hour
produced by the Project at a temperature-adjusted summer dependable maximum net
capacity ("Summer DMNC") level of 740 MW plus two percent. During the first five
years of the operation of the Project (the "First Period"), Con Edison is
obligated to pay for the first 6.6 billion kilowatt-hours ("KWH") of electricity
delivered to Con Edison in any Annual Period at a price equal to the sum of (a)
100% of Actual Con Edison Avoided Energy Costs and (b) $0.026/KWH. For each KWH
in excess of 6.6 billion KWH in any Annual Period, Con Edison is obligated to
pay a price equal to 93.75% of Actual Con Edison Avoided Energy Costs. The
payments for electricity during the remainder of the contract are equal to
93.75% of Actual Con Edison Avoided Energy Costs in years six through 20 of the
contract term (the "Second Period") and 88.75% of Actual Con Edison Avoided
Energy Costs in years 21 through 40 of the contract term (the "Third Period").
In addition to payments for electricity delivered to Con Edison, during the
Second Period, Con Edison will be obligated to make monthly capacity payments in
an amount equal to the product of (a) the Summer DMNC of the Dedicated Plant
applicable to such month, (b) the Equivalent Availability Ratio applicable to
such month and (c) a fixed capacity charge equal to $6.7455/kilowatt ("KW").
During the Third Period, Con Edison will be obligated to make monthly capacity
payments in an amount equal to the product of (a) the Summer DMNC of the
Dedicated Plant applicable to such month, (b) the Equivalent Availability Ratio
applicable to such month and (c) a fixed capacity charge equal to $3.3727/KW.
During the Second Period, Con Edison will also be obligated to make payments for
operation and maintenance at a price equal to $0.01/KWH during calendar year
2000 escalating on the first day of each calendar year thereafter during the
remainder of the Second Period with the index contained in the Con Edison Energy
Purchase Agreement. During the Third Period, Con Edison will also be obligated
to make payments for operation and maintenance at a price equal to one-half of
the per KWH price during the last calendar year of the Second Period escalating
on the first day of each calendar year during the Third Period with the index
contained in the Con Edison Energy Purchase Agreement. Con Edison has the option
to terminate the power sales contract with the Partnership upon satisfaction of
certain conditions including assuming all of the Partnership's financial and
contractual obligations related to the Project and paying an amount to the
Partnership determined by a formula based on estimated future revenues and
expenses under the contract. (Terms not defined in this section have the
respective meanings set forth in the Con Edison Energy Purchase Agreement.)
Niagara Mohawk
Under the Niagara Mohawk Power Purchase Agreement, Niagara Mohawk will
purchase all of the electricity delivered to Niagara Mohawk by the Project, up
to a maximum of three million megawatthours ("MWH") of electricity in any
calendar year (provided the Project does not deliver electricity at a rate in
excess of 300 MW in any hourly period, or such greater amount as may be accepted
by Niagara Mohawk). The Niagara Mohawk Power Purchase Agreement has a term of 20
years from the date on which the Partnership commences deliveries of commercial
quantities of electricity to Niagara Mohawk on a continuous basis. Niagara
Mohawk will purchase electricity at its "energy only" rate, which is Niagara
Mohawk's Public Service Commission of the State of New York ("PSC") filed tariff
for the purchase of electricity from on-site generators, such as the
Partnership, in effect at the time of delivery of electrical energy to Niagara
Mohawk. Niagara Mohawk has no right of first refusal for any additional
electricity or capacity to be sold by the Partnership.
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A petition requesting permission to curtail (i.e., limit or suspend)
purchases of power from independent power producers was filed by Niagara Mohawk,
and the PSC instituted a proceeding to consider the merits of the petition. In
August 1996, the PSC issued a notice inviting comments regarding whether and
when utilities should be permitted to curtail purchases from independent power
producers. In December 1996, the Partnership submitted comments to the PSC with
respect to this matter but the PSC has not yet issued an order. The
Partnership's power sales contract with Niagara Mohawk covers up to
approximately 300MW in any hourly period. A decision by the PSC permitting
Niagara Mohawk to implement curtailment could adversely affect the operating
revenue of the Project.
Alcan
Alcan, a subsidiary of Alcan Aluminum Limited, owns and operates an
aluminum production facility adjacent to the Project site. The Alcan facility
engages in the production and recycling of aluminum alloys and rolled aluminum
which are used principally in the beverage container industry.
Pursuant to the terms of the Alcan Energy Sales Contract, the Partnership
has agreed for a period of 22 years from the commencement of commercial
operation of the Project to sell to Alcan up to 44 MW of the Project's capacity
and associated energy. In addition, the Partnership has agreed to supply and,
subject to the terms and provisions of the Alcan Energy Sales Contract, Alcan
has agreed to purchase thermal energy on a firm, non-interrupted basis in an
amount equal to 1.618 trillion British Thermal Units ("Btus") per year of
operation.
On September 8, 1994, the PSC issued a certificate of public convenience
and necessity ("CPCN") permitting the Partnership to make retail sales of
electricity to Alcan and to a containerboard recycling facility then being
developed by a partnership of paper industry companies, and invited comment on
an appropriate and equitable equalization fee that would be paid by the
Partnership to Niagara Mohawk. On September 29, 1994, the PSC issued an order
establishing an equalization fee with a present value of $19.6 million, which
the Partnership has elected to pay in equal annual amounts of approximately $3
million for ten years, beginning on December 31, 1995. The order establishing
the equalization fee also contains provisions for the amount of such fee to be
reconsidered if the containerboard facility or a facility of comparable economic
development is not developed. Sithe Energies continues to actively pursue
facilities of comparable economic development.
Electrical Interconnection and Transmission
Niagara Mohawk's transmission lines have been interconnected to the
Project through the construction of the facilities necessary to effect the
transfer of electricity produced at the Project into Niagara Mohawk's
transmission system (the "Interconnection Facilities"). Pursuant to the
Interconnection Agreement between the Partnership and Niagara Mohawk, the
Partnership has agreed to reimburse Niagara Mohawk for all reasonable costs
incurred by Niagara Mohawk in connection with operation and maintenance of the
Interconnection Facilities. The Interconnection Agreement will terminate 20
years from the Date of Commercial Operation.
Pursuant to the Transmission Services Agreement, Niagara Mohawk has agreed
to provide transmission services from the Project to the point of
interconnection between Niagara Mohawk's transmission system and Con Edison's
transmission system (the "Con Edison Interconnection") for a period of 20 years
from the Date of Commercial Operation. The agreement specifies that Niagara
Mohawk will be obligated to transmit up to 805 MW of electricity to the Con
Edison Interconnection, subject to interruption if required to meet the demands
of its retail customers, its current wholesale customers and its obligations to
the New York Power Pool. The Partnership has the ability to increase this amount
by up to 2% per annum, up to a maximum of 853 MW of
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electricity. To the extent that Niagara Mohawk has excess capacity on its
transmission system, it has agreed to accommodate the Project's additional
transmission requirements. On March 29, 1995, the Partnership filed a petition
with the Federal Energy Regulatory Commission (the "FERC") alleging that Niagara
Mohawk has been overcharging the Partnership for the transmission of electricity
in violation of FERC policy by calculating transmission losses on an incremental
basis. The Partnership believes that transmission losses should be calculated on
an average basis. The Partnership has been recording its transmission expense at
the disputed, higher rate. As of December 31, 1997, the Partnership estimates it
was owed approximately $7.7 million for transmission overcharges. The
Partnership requested that the FERC order Niagara Mohawk to recalculate the
transmission losses beginning in October 1994, when it began wheeling power from
the Project. In September 1996, the FERC issued an order dismissing the
Partnership's complaint and requiring Niagara Mohawk to provide the Partnership
with information regarding the calculation of transmission losses. In October
1996, the Partnership filed a request for rehearing of the FERC's order, which
was denied by the FERC. In December 1997, the Partnership filed a petition for
review of the FERC orders in the United States Court of Appeals. The Court of
Appeals has not yet set a briefing schedule for this proceeding.
Gas Supply Agreement
Natural gas for the Project is supplied by Enron Power Services pursuant
to the Gas Supply Agreement (the "Gas Supply Agreement") between Enron Power
Services and the Partnership. The Gas Supply Agreement provides that, for a
period of 20 years following the Date of Commercial Operation, Enron Power
Services is obligated to deliver to the Partnership up to a maximum of 192,291
million Btus ("MMBtus") of natural gas per day, which represents the Project's
daily fuel requirement when operating at design conditions. The Partnership is
obligated to purchase a sufficient amount of natural gas each month so that its
daily average for the month is at least 159,600 MMBtus and the Partnership is
obligated to purchase a sufficient amount of natural gas each year so that its
daily average for the year is at least 173,061 MMBtus of natural gas. During the
First Period, the price to be paid by the Partnership for 116,000 MMBtus of
natural gas per day (the "Tier I" gas) is fixed on an increasing-rate basis as
specified in the Gas Supply Agreement. During the remainder of the term of the
Gas Supply Agreement, the price of Tier I gas will fluctuate based on Actual Con
Edison Avoided Energy Costs, as well as the price paid by Con Edison to the
Project. The remaining 76,291 MMBtus of gas per day will be priced in relation
to Niagara Mohawk's "energy only" electric rate.
Enron Power Services will maintain a notional tracking account to account
for differences between the contract price and spot gas prices, except that
there will be no such tracking with respect to the Tier I gas during the first
five years of the Gas Supply Agreement. The tracking account would be increased
if the then current spot gas price is greater than the contract price and would
be decreased if the then current spot gas price is lower than the contract
price. The tracking account bears interest at 1% over prime. Enron Power
Services has been given a security interest in the plant, which is subordinated
to payments for the Securities and certain letter of credit reimbursement
obligations, to secure any tracking account balance. If at any time the tracking
account balance exceeds 50% of the plant's then fair market value, the
Partnership will be required to reduce the tracking account balance by paying to
Enron Power Services the lesser of (a) the amount necessary to reduce the
tracking balance to 50% of the plant's fair market value and (b) (i) during
years 6 through 15 of the Gas Supply Agreement, all incremental revenues as
defined in the Gas Supply Agreement and (ii) thereafter 50% of qualifying cash
flows also as defined in the Gas Supply Agreement plus all incremental revenues.
If a positive balance exists in the tracking account at the end of the contract
term, the Partnership will be required to either pay the balance in the tracking
account or to convey to Enron Power Services an equity ownership in the Project
based on the ratio of the tracking account balance to the plant's fair market
value at such time.
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Gas Transportation Agreements
The Partnership has entered into gas transportation agreements with seven
pipeline companies in order to transport, on a firm basis, the natural gas
purchased pursuant to the Gas Supply Agreement. Each of the gas transportation
agreements entered into by the Partnership has a 20-year term from the Date of
Commercial Operation, and together the agreements will provide for sufficient
transportation capacity to supply the Project with all of its anticipated
natural gas requirements. In addition to Niagara Mohawk, the other parties to
the gas transportation agreements are Union Gas Limited, Panhandle Eastern Pipe
Line Company, ANR Pipeline Company, Empire State Pipeline, Great Lakes Gas
Transmission Limited Partnership and TransCanada Pipelines Limited.
Competition
Many organizations, including equipment manufacturers and subsidiaries of
utilities and contractors, as well as other organizations similar to Sithe
Energies, have entered the cogeneration market. The resultant increased
competition has reduced the price utilities are willing to pay to independent
power producers for electrical capacity and energy. These factors may adversely
affect the price the Partnership may be paid under the Energy Purchase
Agreements (due to potential declines in a utility's long run avoided cost).
BUSINESS
General
The Partnership's sole business is the ownership of the Project. The
Partnership has long-term contracts to sell capacity and electricity produced by
the Project to Con Edison and Alcan, electricity to Niagara Mohawk and thermal
energy to Alcan. The Project is located on an approximately 340-acre site,
located in the Town of Scriba, County of Oswego, New York, approximately two
miles northeast of Oswego, New York. The site is bounded on the north by Lake
Ontario. Alcan owns and operates a facility adjacent to the site for the
production of rolled aluminum stock which is used principally in the production
of beverage containers.
The Project consists of the following equipment, systems and facilities:
o Four General Electric Model MS7001FA combustion gas turbine
generators, each able to produce approximately 160 MW of electricity
under design point conditions;
o Four Henry Vogt Machine Company HRSGs which create thermal energy
using heat from the turbine exhaust;
o Two General Electric steam turbines which are able to produce an
additional 208 MW each of electricity under design point conditions
from the thermal energy generated by the HRSGs;
o Air quality control systems; and
o Various associated equipment and improvements, including a
demineralization system to produce high purity water for use in
creating steam, wastewater collection and treatment facilities and
two 345kV transmission circuits.
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The Project was designed to have an average net electrical output
available to customers of 963 MW and an average steam flow of up to 235,000
lbs./hr. The performance of the Project is dependent on ambient conditions,
which affect the combustion turbine efficiency and capacity. Ambient conditions
also affect the steam turbine cycle efficiency by affecting the operation of the
cooling tower and the circulating water temperature, and therefore the condenser
pressure.
Employees
The Partnership has no employees. The Operator provides operations and
maintenance services and certain management and administrative support for the
Project.
As of December 31, 1997, the Operator employed 44 individuals in
connection with the Project.
Legal Proceedings
Other than the Partnership's petition for review of the FERC order with
the United States Court of Appeals alleging that Niagara Mohawk has been
overcharging the Partnership for the transmission of electricity, neither Sithe
Funding nor the Partnership is a party to any legal proceedings.
REGULATION
Energy Regulation
PURPA. PURPA and the regulations promulgated thereunder provide an
electric generating project with rate and regulatory incentives if the project
is a Qualifying Facility. A cogeneration facility is a Qualifying Facility if it
(i) sequentially produces both electricity and a certain quantity of useful
thermal energy which is used for industrial, commercial, heating or cooling
purposes, (ii) meets certain energy efficiency standards when oil or natural gas
is used as a fuel source and (iii) is not more than 50% owned by an electric
utility, electric utility holding company or an entity or person owned by either
of the above.
Under PURPA and the regulations promulgated thereunder, Qualifying
Facilities receive two primary benefits. First, PURPA and the regulations
promulgated thereunder exempt Qualifying Facilities from the Public Utility
Holding Company Act of 1935 ("PUHCA"), most provisions of the Federal Power Act
(the "FPA") and certain state laws relating to securities, rate and financial
regulation. Second, FERC's regulations promulgated under PURPA require that (i)
electric utilities purchase electricity generated by Qualifying Facilities,
construction of which commenced on or after November 9, 1978, at a price based
on the purchasing utility's full "avoided costs," and (ii) the utilities sell
supplementary, back-up, maintenance and interruptible power to the Qualifying
Facility on a just and reasonable and non-discriminatory basis. PURPA and the
regulations promulgated thereunder define "avoided costs" as the "incremental
costs to an electric utility of electric energy or capacity or both which, but
for the purchase from the qualifying facility or qualifying facilities, such
utility would generate itself or purchase from another source". Utilities may
also purchase power at prices other than "avoided costs" pursuant to
negotiations with potential suppliers as provided by FERC regulations.
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The Project currently meets all of the criteria for a Qualifying Facility
under PURPA and the regulations promulgated thereunder. If at any time the
Project were to fail to meet such criteria, the Partnership may become subject
to regulation as a public utility company under PUHCA, the FPA and state utility
laws.
PUHCA. PUHCA provides that any corporation, partnership or other entity or
organized group which owns, controls or holds power to vote 10% of the
outstanding voting securities of a "public utility company" or a company which
is a "holding company" of a public utility company is subject to registration
with the Securities and Exchange Commission (the "Commission") and PUHCA
regulation, unless eligible for an exemption or unless a Commission order
declaring it not to be a holding company is granted. PUHCA requires registration
for a holding company of a public utility company, and requires a public utility
holding company to limit its utility operations to a single integrated utility
system and to divest any other operations not functionally related to the
operation of the utility system. In addition, a public utility company which is
a subsidiary of a registered holding company under PUHCA is subject to financial
and organizational regulation, including approval by the Commission of its
financing transactions.
The Energy Policy Act of 1992 (the "Policy Act") contains amendments to
PUHCA that may allow the Partnership to operate its business without becoming
subject to PUHCA in the event the Project loses its status as a Qualifying
Facility. Under the Policy Act, a company engaged exclusively in the business of
owning and/or operating a facility used for the generation of electric energy
exclusively for sale at wholesale may be exempted from PUHCA. In order to
qualify for such an exemption, a company must apply to the FERC for a
determination of eligibility, pursuant to implementing rules that the FERC will
promulgate. Although the Policy Act and its implementing rules may exempt the
Partnership from PUHCA in the event that Qualifying Facility status is lost, the
Policy Act may also encourage greater competition in wholesale electricity
markets, which could result in a decline in long-term rates to be paid by
electric utilities such as Con Edison and Niagara Mohawk.
FPA. Under the FPA, the FERC has exclusive rate-making jurisdiction over
wholesale sales of electricity and transmission in interstate commerce. These
rates may be based on a cost of service approach or may be determined through
competitive bidding or negotiation. If the Project were to lose its Qualifying
Facility status, the rates set forth in each of the Energy Purchase Agreements
would have to be filed with the FERC and would be subject to review by the FERC
under the FPA. The Con Edison Energy Purchase Agreement and the Niagara Mohawk
Power Purchase Agreement contain provisions for a reduction in the rates to be
paid for electric energy in such event.
State Regulation. The Project, by virtue of being a Qualifying Facility,
is exempt from New York State rate, financial and organizational regulations
which are applicable to a public utility. The PSC's general supervisory powers
relating to environmental and safety matters apply to Qualifying Facilities.
Wheeling and Interconnection. Under Section 201 of the FPA, FERC regulates
the rates, terms and conditions for the transmission of electric energy in
interstate commerce. This has been interpreted to mean that the FERC has
jurisdiction when the transmission system is interconnected and capable of
transmitting energy across a state boundary, even if the utility has no direct
connection with another utility outside its state but is interconnected with
another utility which in turn has interstate connections with other utilities.
Accordingly, the rates to be paid by the Partnership to Niagara Mohawk under the
Transmission Services Agreement are subject to the jurisdiction of the FERC
under the FPA. Niagara Mohawk has obtained approval by the FERC of the
Transmission Services Agreement under the FPA, but has reserved the right to
apply for future changes in rates under the FPA. The Interconnection Agreement,
which is subject to review under Sections 205 and 206 of the FPA, was accepted
by the FERC in the fall of 1993.
11
<PAGE>
The FERC's authority under the FPA to require electric utilities to
provide transmission service to Qualifying Facilities and other wholesale
electricity producers has been significantly expanded by the Policy Act.
Pursuant to the Policy Act, the Partnership may apply to the FERC for an order
requiring a utility to provide transmission services. The FERC may issue such an
order provided that the reliability of the affected electric systems would not
be unreasonably impaired. The Policy Act may enhance the Partnership's ability
to obtain transmission access necessary to sell electric energy or capacity to
purchasers other than Con Edison or Niagara Mohawk. However, there is no
assurance that the rates for such transmission service would be economical for
the Partnership. The Policy Act may also result in greater competition among
wholesale electric energy producers.
IDA Agreements
The Partnership has leased the Project site to the County of Oswego
Industrial Development Agency (the "IDA") pursuant to a ground lease between the
Partnership and the IDA (the "IDA Lease"). The IDA has leased the site back to
the Partnership pursuant to a sublease agreement between the Partnership and the
IDA (the "IDA Sublease"). The IDA's participation in the Project exempts the
Project from certain mortgage recording taxes, certain state and local real
property taxes and certain sales and use taxes within New York State. The
Partnership has also entered into an agreement whereby the Partnership will be
required to make payments in lieu of property taxes during the term of the IDA
Lease and IDA Sublease.
The IDA is a corporate governmental agency, constituting a public benefit
corporation of the State of New York. It is authorized to promote, attract,
encourage and develop economically sound commerce and industry for the purpose
of preventing unemployment and economic deterioration. The IDA is authorized to
lease real property interests and industrial and commercial facilities and may
exercise appropriate financing powers, including the granting of mortgages and
indentures of mortgage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the
Partnership during the fourth quarter of 1997.
12
<PAGE>
PART II
ITEM 6. SELECTED FINANCIAL DATA
The Partnership was in the development stage from its inception in
November 1990 through December 29, 1994. All construction costs and all project
development costs incurred subsequent to obtaining the Con Edison Energy
Purchase Agreement in 1991 were capitalized.
The selected consolidated financial data presented below for, and at the
end of, each of the years in the five year period ended December 31, 1997 are
derived from the Partnership's audited consolidated financial statements.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (a)
Revenue $ 355,432 $ 379,024 $ 335,844 $ 2,749 $ --
Operating income 94,672 120,211 89,886 1,064 --
Non-operating income and (expense):
Interest expense (62,369) (63,441) (64,261) (13,910) (33,969)
Interest and other income, net 7,026 4,187 4,525 5,704 13,703
Net income (loss) 39,329 60,957 30,150 (7,142) (20,266)
<CAPTION>
December 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Property, plant and equipment $ 713,274 $ 723,188 $ 737,716 $ 752,820 $ 490,272
Total assets 838,047 867,471 845,888 794,063 779,977
Long-term debt 669,345 688,201 698,405 702,333 717,241
Partners' capital (deficiency) 120,564 123,699 62,734 (7,631) (266)
</TABLE>
- ----------
(a) The Partnership commenced commercial operation for financial reporting
purposes on December 29, 1994. The net losses for 1994 and 1993 are
attributable to the net interest expense resulting from the excess of the
8.65% weighted average interest rate on the Securities over the rate
earned on the investment of the unspent construction funds which was
required to be charged against income.
13
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Partnership was formed to develop, construct and own the Project. The
Partnership was in the development stage from its inception, November 1, 1990,
through December 29, 1994, when the Project commenced commercial operation for
financial reporting purposes.
Results of Operations -- 1997, 1996 and 1995
Revenue for 1997 decreased from 1996 by $23.6 million (6%) due to lower
incremental revenue from selling gas instead of electricity as the mild 1997
winter and resultant low gas prices afforded fewer arbitrage opportunities than
in 1996; the fact that 1996 included a 1995 tariff adjustment payment from Con
Edison; one less day of generation than in 1996 which was a leap year; and a
change in the mix of sales due to certain curtailments on transmission of energy
deliveries to Con Edison.
Cost of sales for 1997 increased by $2.0 million (.8%) from 1996 due to
higher fuel costs as a result of a scheduled price increase under the
Partnership's long-term gas supply contract and higher depreciation expense,
partially offset by an $8.2 million credit to maintenance expense that the
Partnership was required to record in connection with the discontinuance of its
major overhaul cost normalization policy for its gas turbines, steam turbines
and generators.
Revenue and cost of sales for 1996 increased by $43.1 million (13%) and
$12.9 million (5%), respectively, over 1995. Revenue increased as a result of
higher avoided-cost based tariff prices on energy deliveries to Con Edison, a
1995 tariff adjustment payment from Con Edison, overall higher plant
availability and incremental revenue from selling gas instead of generating
electricity at certain times during 1996. The increase in cost of sales was
primarily attributable to higher fuel costs reflecting higher quantities and the
scheduled increase in the price of gas associated with energy deliveries to Con
Edison. As a result of these factors, operating income for 1996 increased by
$30.3 million (34%) over 1995 which was the Partnership's first full year of
operations.
Interest expense for 1997 and 1996 decreased by $1.4 million (2%) and $.8
million (1%) from 1996 and 1995 respectively, as a result of lower outstanding
amounts of long-term debt.
Interest and other income, net, for 1997 and 1996 consisted of interest
income. Interest and other income, net for 1995 consisted of $2.6 million of
interest income, $2.1 million of income from a natural gas arbitrage transaction
and $.2 million of realized losses on short-term investments designated for
construction.
Liquidity and Capital Resources
Financing for the Project consisted of a loan to the Partnership by Sithe
Funding of the proceeds of its issuance of $717.2 million of notes and bonds and
$60 million of capital contributions by the Partners. In addition, the Partners
obtained a credit facility under which one or more letters of credit may be
issued in connection with their obligations pursuant to certain Project
contracts, and, as of December 31, 1997, letters of credit aggregating $14.1
million were outstanding in connection with such obligations. Also, the
Partnership secured the Project's debt service obligations with a letter of
credit in the amount of $50 million and as of December 31, 1997, the Project's
cumulative additional debt service and major overhaul reserve requirements of
$33.0 million and $5.4 million, respectively, were fully funded. To secure the
Partnership's obligation to pay any amounts
14
<PAGE>
drawn under the debt service letter of credit, the letter of credit provider has
been assigned a security interest and lien on all of the collateral in which the
holders of the Securities have been assigned a security interest and lien.
Although the Partnership's net income could decline through the fourth
quarter of 1999 due largely to Tier I gas pricing increasing at a greater rate
than increases in the energy component of billings to Con Edison, the
Partnership believes that funds available from cash on hand, restricted funds,
operations and the debt service letter of credit will be more than sufficient to
liquidate Partnership obligations as they come due and pay scheduled debt
service.
The Partnership utilizes a number of computerized operating and control
systems at the Project, including applications used in plant operations and
various administrative functions. To the extent that the computer applications
can not properly interpret the calendar year 2000 and beyond, some level of
modification or replacement of such applications will be necessary. The
Partnership is working to identify its applications that are not year 2000
compliant and plans to modify or replace such applications, as necessary. Based
upon information currently available about the Partnership's systems that are
non-compliant and the Partnership's ongoing, normal course-of-business efforts
to upgrade or replace critical systems, as necessary, the Partnership does not
expect that year 2000 compliance costs will have a material adverse impact on
its financial statements.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
The index to financial statements appears on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
All management functions of the Partnership are the responsibility of the
General Partner.
The following table sets forth certain information with respect to
directors and executive officers of Sithe Funding and the General Partner:
Name Age Position
---- --- --------
William Kriegel 52 Chairman of the Board, Chief
Executive Officer and President
Bruce J. Wrobel 40 Executive Vice President
Steven D. Burton 50 Secretary, General Counsel and Director
Richard J. Cronin III 51 Chief Financial Officer, Senior
Vice President and Director
Frank J. Donohoue 50 Senior Vice President for Construction
Ralph J. Grutsch 65 Senior Vice President for Operations
Sandra J. Manilla 46 Treasurer and Vice President
W. Harrison Wellford 57 Director
William Kriegel founded Sithe Energies in 1984 and has been Chairman of
the Board, President and Chief Executive Officer of Sithe Energies since that
time. Mr. Kriegel also serves in such capacities for each of the Limited
Partners and the Operator. Prior to coming to the United States in 1984, Mr.
Kriegel co-founded an unaffiliated French energy company that within three years
of its formation in 1980 became France's largest privately-owned company engaged
in the development of small hydroelectric projects. In 1978, he co-founded
S.I.I.F., S.A., an unaffiliated company specializing in the purchase and
rehabilitation of residential buildings and historical properties in France.
Bruce J. Wrobel has served as Executive Vice President in charge of
project development and finance activities for Sithe Energies since January
1986. Mr. Wrobel also serves in such capacity for each of the Limited Partners
and the Operator. From 1980 to 1986, he was Vice President for business
development and project finance at Mitex, an alternative energy development
company which was co-founded by Mr. Wrobel and acquired by Sithe Energies in
1986. Prior to 1980, he was with Temple, Barker & Sloan as a member of its
Energy Strategy and Management Group.
16
<PAGE>
Steven D. Burton has been Secretary and General Counsel of Sithe Energies
since January 1987. Mr. Burton also serves in such capacities for each of the
Limited Partners and the Operator. From 1984 to 1986, he was a consultant to
Sithe Energies while he was a Vice President and General Counsel of
Winner/Wagner & Associates, Inc., a communications and political consulting firm
which specializes in energy related issues. Prior to entering private practice,
he served as Chief Counsel to the California Air Resources Board. Mr. Burton is
Chairman of the Electric Power Supply Association. He has also chaired the
efforts of the California Independent Energy Producers on industry restructuring
and currently serves as President of the Independent Power Producers of New
York.
Richard J. Cronin III has been Senior Vice President since September 1996
and Chief Financial Officer and Vice President of Sithe Energies since September
1990. Mr. Cronin also serves in such capacities for each of the Limited Partners
and the Operator. From September 1986 to September 1990, Mr. Cronin was Vice
President and Director of Financial Reporting at Drexel Burnham Lambert, Inc., a
financial services company. His prior financial experience, in reverse
chronology, includes eight years at Freeport-McMoRan, Inc., three years at
American Electric Power, Inc. and five years at Coopers & Lybrand.
Frank J. Donohue joined Sithe Energies as Senior Vice President for
Construction in March 1992. Mr. Donohue has over 19 years of experience in heavy
industrial construction and construction contract negotiation and management.
From 1977 until 1992, he was with Century Contractors West, Inc. where, as Vice
President of Operations, he had direct responsibility for construction projects,
including nine cogeneration projects representing over 1,500 MW of capacity.
Ralph J. Grutsch is Senior Vice President for Operations and has been with
Sithe Energies since its acquisition in 1988 of Energy Factors, Incorporated,
which was a publicly-held independent energy producer and of which he was a
co-founder. Mr. Grutsch also serves in such capacity for each of the Limited
Partners and the Operator. Mr. Grutsch served as President and Chief Operating
Officer of Energy Factors immediately prior to its acquisition by Sithe
Energies. From 1964 until 1983, Mr. Grutsch was with Solar Turbines,
Incorporated where he held numerous management positions ultimately serving as
Senior Vice-President-Marketing and director of that company.
Sandra J. Manilla joined Sithe Energies in September 1986 and has been
Vice President since September 1996 and Treasurer since May 1990. Ms. Manilla
also serves in such capacities for each of the Limited Partners and the
Operator. From 1979 until 1986, she worked in Deloitte & Touche's consulting
group where she managed several financial consulting engagements with the
Government. From 1976 until 1979, Ms. Manilla was Assistant to the Special
Deputy Comptroller of New York City and, prior to that, spent three years on
Citicorp's internal audit staff.
W. Harrison Wellford is currently a partner in the law firm of Latham &
Watkins and specializes in energy, trade, and environmental law. During the
transition from the Bush to Clinton administration, he served as White House
transition adviser and as a member of the Economic Policy Group. From 1977 to
1981, he served as Executive Director of the Office of Management and Budget in
the White House. Mr. Wellford is also a fellow of the National Academy of Public
Administration.
17
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
No cash compensation or non-cash compensation was paid in 1997 or is
proposed to be paid in the current calendar year to any of the executive
officers listed under Item 10. "DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT" for their services to Sithe Funding, the Partnership or the General
Partner. Operations and maintenance services for the Project are performed on a
cost reimbursement basis by the Operator pursuant to the Operations and
Maintenance Agreement. In addition, the Operator receives a $551,250 annual fee,
which escalates at the rate of 5% per annum, for certain management and
administrative services provided by it. See Item 13. "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following information is given with respect to the Partners of the
Partnership:
Amount and Nature Percentage
Name and Address of Beneficial Ownership
Title of Class of Beneficial Owner Ownership (1)(2) Interest
-------------- ------------------- ---------------- --------
Partnership Interest Sithe/Independence, Inc. General Partner 1%
450 Lexington Avenue
New York, NY 10017
Partnership Interest Sithe Energies, Inc. Limited Partner 45%
450 Lexington Avenue
New York, NY 10017
Partnership Interest Sithe Energies U.S.A., Inc. Limited Partner 44%
450 Lexington Avenue
New York, NY 10017
Partnership Interest Mitex, Inc. Limited Partner 10%
450 Lexington Avenue
New York, NY 10017
- ----------
(1) None of the persons listed has the right to acquire beneficial ownership
of Securities as specified in Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934.
(2) Sithe Energies is the direct or indirect beneficial owner of each of the
other Partners.
Except as specifically provided or required by law, Limited Partners may
not participate in the management or control of the Partnership. Thus, although
the General Partner has the smallest interest in the Partnership, it has sole
responsibility for management of the Partnership. The General Partner is an
indirect wholly-owned subsidiary of Sithe Energies, a Limited Partner. See Item
13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
The Partnership is a limited partnership wholly-owned by its Partners.
Beneficial interests in the Partnership are not available to any persons other
than the Partners.
18
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Operation and maintenance services for the Project are provided on a cost
reimbursement basis by the Operator pursuant to an Operations and Maintenance
Agreement, dated as of August 15, 1992, between the Partnership and the
Operator. The Operator receives a $551,250 annual fee, which escalates at a rate
of 5% per annum, for certain management and administrative services provided by
it. See Items 1, 2 and 3. "BUSINESS, PROPERTIES AND LEGAL PROCEEDINGS -- The
Project -- Operations and Maintenance." Management and administrative services
performed by the Operator, with the prior consent of the Partnership, include
collecting of all sums payable to or due the Partnership under the Project
Documents and accounting for and depositing all such funds in the operating
account; obtaining such insurance as is necessary to protect the interest of the
Partnership and complying with the provisions of the Project Documents;
estimating and advising the Partnership of all federal, state and local taxes
payable by the Partnership that are attributable to the ownership and operation
of the Project; and determining and recommending to the Partnership any
necessary or desirable improvements, modifications or alterations to the
Project. Upon the occurrence of any transfer, assignment or reassignment of the
Partnership's interest in the Project wherein neither the Partnership nor any
affiliate of the Partnership (other than the Operator) retains an interest in
the Project, the continuance of the Operator's duties and obligations under the
Operations and Maintenance Agreement are expressly conditioned upon the
renegotiation of the Operator's compensation.
Mr. Wellford is a partner in the law firm of Latham & Watkins, which firm
from time to time serves as outside legal counsel for Sithe Energies and the
Partnership.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Sithe/Independence Power Partners, L.P.
Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Partners' Capital
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the three months
ended December 31, 1997.
(c) Exhibits
19
<PAGE>
Exhibit No. Description of Exhibit
- ----------- ----------------------
3.1 --Certificate of Incorporation of Sithe/Independence Funding Corporation
("Sithe Funding") *
3.2 --By-laws of Sithe Funding *
3.3 --Certificate of Limited Partnership of Sithe/Independence Power Partners,
L.P. (the "Partnership") *
3.4 --Amendment to Certificate of Limited Partnership of the Partnership *
3.5 --Agreement of Limited Partnership of Sithe/Independence Power Partners,
L.P., among Sithe/Independence, Inc. (the "General Partner"), Sithe
Energies, Inc., Sithe Energies U.S.A., Inc. and Mitex, Inc.*
3.6 --Certificate of Incorporation of the General Partner *
3.7 --Amendment to Certificate of Incorporation of the General Partner *
3.8 --By-laws of the General Partner *
4 --Indenture
4.1 --Indenture dated as of January 1, 1993 among Sithe Funding, the
Partnership and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee")*
4.2 --First Series Supplemental Indenture dated as of January
1, 1993 among Sithe Funding, the Partnership and the Trustee *
10.1 --Credit Facilities
10.1.1--Senior Secured Revolving Credit Agreement among Sithe Energies, Inc.
(as Borrower) and Energy Factors, Incorporated and Sithe Energies,
U.S.A., Inc. and Sithe International, Inc. and Sithe Energies
Development Corporation (together with the Borrower as Loan Parties)
and Bank of Montreal and the additional Financial Institutions from
time to time set forth on Appendix I (the Lenders) and Bank of
Montreal (as Agent) dated as of December 19, 1997. ******
10.1.2--Amended and Restated Letter of Credit and Reimbursement Agreement
among the Partnership, the Banks named therein and the Sumitomo
Bank, Limited, New York Branch, dated September 28, 1994. ***
10.2 --Intentionally Omitted
10.3 --Power Purchase Agreements
10.3.1--Energy Purchase Agreement, dated May 20, 1991, by and between
Consolidated Edison Company of New York, Inc. ("Con Ed") and Lake
View, Inc. *
10.3.2--Supplement No. 1 to Contract No. 403, dated September 27, 1991, by
and between Con Ed and Tamarac Properties (Lake View, Inc.) *
10.3.3--Assignment and Assumption of Energy Purchase Agreement, dated as
of December 9, 1992, entered into by the General Partner (formerly
named Lake View, Inc.), Con Ed and the Partnership *
10.3.4--Amendment to Energy Purchase Agreement, dated as of December 9,
1992, entered into between the Partnership and Con Ed *
10.3.5--Amendment to Energy Purchase Agreement dated as of April 5, 1993
between the Partnership and Con Ed *
10.3.6--Power Purchase Agreement, dated as of July 24, 1992, between the
Partnership and Niagara Mohawk Power Corporation ("Niagara Mohawk")*
10.3.7--First Amendment to the Power Purchase Agreement, dated as of
November 16, 1992, between the Partnership and Niagara Mohawk *
10.3.8--Energy Sales Contract, dated as of November 18, 1992, between the
Partnership and Alcan Aluminum Corporation d/b/a Alcan Rolled
Products Company ("Alcan") *
10.3.9--Letter Agreement dated January 29, 1993 between Alcan and the
Partnership regarding Sections 9.12 and 9.13 of the Alcan Energy
Sales Contract *
10.3.10-Amendment No. 1 to the Energy Sales Contract dated as of February
3, 1993 between Alcan and the Partnership *
20
<PAGE>
10.3.11-Written notice dated March 10, 1993 from Alcan to the Partnership
exercising the Fixed Price Option for Energy Sales Contract *
10.3.12-Fixed Price Option for Energy Sales Contract between Alcan and
the Partnership *
10.3.13-Amendment No. 2 to the Energy Sales Contract dated March 21, 1996
between the Partnership and Alcan *****
10.4 -Amended and Restated Operations and Maintenance Agreement, dated
as of August 25, 1992, between the Partnership and Sithe Energies
Power Services, Inc. *
10.5 -Transmission Agreements
10.5.1 -Transmission Services Agreement, dated as of November 5, 1991,
between Niagara Mohawk and Lake View, Inc. *
10.5.2 -Assignment, Assumption and Amendment of Transmission Services
Agreement, dated as of March 9, 1992, between Niagara Mohawk, the
General Partner and the Partnership *
10.6 -Interconnection Agreements
10.6.1 -Interconnection Agreement, dated as of March 9, 1992, between the
Partnership and Niagara Mohawk *
10.6.2 -Supplement to Interconnection Agreement, dated as of March 10,
1992, between the Partnership and Niagara Mohawk *
10.6.3 -Amendment No. 1 to Interconnection Agreement, dated as of July
24, 1992, between the Partnership and Niagara Mohawk *
10.6.4 -Amendment No. 2 to the Interconnection Agreement, dated as of
November 17, 1992, entered into by Niagara Mohawk and the
Partnership **
10.7 -Gas Supply Agreements
10.7.1 -Amended and Restated Base Gas Sales Agreement, dated as of
October 26, 1992, between the Partnership and Enron Power Services,
Inc. ("Enron") *
10.7.2 -First Amendment to Amended and Restated Base Gas Sales Agreement,
dated as of December 1, 1992, between the Partnership and Enron *
10.7.3 -Second Amendment to Amended and Restated Base Gas Sales Agreement
dated as of August 1, 1992 between the Partnership and Enron **
10.7.4 -Third Amendment to Amended and Restated Base Gas Sales Agreement
dated as of December 31, 1993 between the Partnership and Enron **
10.7.5 -Base Guarantee Agreement, dated as of December 1, 1992, by Enron
Corp. in favor of the Partnership *
10.7.6 -Fourth Amendment to Amended and Restated Base Gas Sales Agreement
dated October 31, 1994 by and between Enron Power Services, Inc. and
the Partnership. ***
10.7.7 -Fifth Amendment to Amended and Restated Base Gas Sales Agreement
dated January 30, 1995 by and between Enron Capital & Trade
Resources Corp. and the Partnership. ***
10.7.8 -Sixth Amendment to Amended and Restated Base Gas Sales Agreement
dated March 1, 1995 by and between Enron Capital & Trade Resources
Corp. and the Partnership. ***
10.7.9 -Seventh Amendment to Amended and Restated Base Gas Sales
Agreement dated March 31, 1995 by and between Enron Capital & Trade
Resources Corp. and the Independence Partnership. ****
10.8 -Gas Transportation Agreements
10.8.1 -Gas Transportation Agreement, dated as of March 11, 1992, by and
between the Partnership and Niagara Mohawk *
10.8.2 -Transportation Service Agreement, dated as of May 5, 1992, by and
between the Partnership and Great Lakes Gas Transmission Limited
Partnership ("Great Lakes") *
10.8.3 -Supplemental Agreement, dated May 6, 1992, between the
Partnership and Great Lakes*
10.8.4 -Amended and Restated FTS Agreement, dated as of November 23,
1992, between the Partnership and ANR Pipeline Company ("ANR") *
10.8.5 -Precedent Agreement for Firm Transportation Service, dated as of
March 20, 1992, between the Partnership and Panhandle Eastern Pipe
Line Company ("Panhandle") *
10.8.6 -Discounted Rate for Firm Transportation Services Agreement, dated
March 20, 1992, between the Partnership and Panhandle *
21
<PAGE>
10.8.7 -Agreement, dated as of October 4, 1993 between the Partnership
and Empire State Pipeline Company, Inc. ("Empire"), St. Clair
Pipeline Company, Inc. and Energy Line Corporation, providing for
firm transportation service (Contract No. 95000) **
10.8.8 -Supplemental Agreement, dated as of February 28, 1992, between
Empire and the Partnership (incorporated by reference into Agreement
dated as of October 4, 1993) **
10.8.9 -Firm Service Contract dated as of March 9, 1994, between
TransCanada Pipelines, Ltd. ("TCPL") and the Partnership re
Panhandle Volumes **
10.8.10-Firm Service Contract dated as of March 9, 1994, between TCPL and
the Partnership re ANR Volumes **
10.8.11-Contract No. M12012, M12 Firm Transportation Contract Dawn to
Kirkwall, dated as of April 6, 1992, between Union Gas Limit
("Union") and the Partnership *
10.8.12-Contract No. M12016, M12 Firm Transportation Contract Dawn to
Kirkwall, Enron Corp., dated as of April 21, 1992, between Union and
the Partnership *
10.8.13-Contract No. M12017, M12 Firm Transportation Contract Dawn to
Kirkwall, dated as of April 10, 1992, between Union and the
Partnership *
10.8.14-Amending Agreement for M12 Firm Transportation Contract (No.
M12017) dated as of February 19, 1993 between Union and the
Partnership *
10.8.15-Contract No. M12022, M12 Firm Transportation Contract Dawn to
Kirkwall, dated as of April 20, 1992, between Union and the
Partnership *
10.8.16-Amending Agreement for M12 Firm Transportation Contract (No.
M12022) dated as of February 19, 1993 between Union and the
Partnership *
10.8.17-Contract No. C10018, C-1 Firm Transportation Contract Ojibway to
Dawn, dated as of April 10, 1992, between Union and the Partnership *
10.8.18-Amending Agreement for C-1 Firm Transportation Contract (No.
C10018) dated as of February 19, 1993 between Union and the
Partnership *
10.8.19-Contract No. C10020, C-1 Firm Transportation Contract Ojibway to
Dawn, dated as of April 20, 1992, between Union and the Partnership *
10.8.20-Amending Agreement for C-1 Firm Transportation Contract (No.
C10020) dated as of February 19, 1993 between Union and the
Partnership *
10.8.21-Union Supplemental Letter, dated May 26, 1992, between Union and
the Partnership *
10.8.22-Union Supplemental Letter, dated November 4, 1992, between Union
and the Partnership*
10.8.23-Assignment Agreement dated as of March 9, 1994 between TCPL,
Union and the Partnership **
10.8.24-Firm Transportation Service Agreement dated July 13, 1994 by and
between Panhandle Eastern Pipeline Company and the Partnership. ***
10.8.25-Service Agreement dated August 8, 1994 by and between Great Lakes
Gas Transmission Limited Partnership and the Partnership (FT089) ***
10.8.26-Service Agreement dated August 19, 1994 by and between Great
Lakes Gas Transmission Limited Partnership and the Partnership
(FT056-02) ***
10.8.27-Gathering Agreement by ANR Pipeline Company and the Partnership
dated May 1, 1994. ***
10.8.28-Second Amended and Restated Agreement dated August 23, 1994 by
and between ANR Pipeline Company and the Partnership. ***
10.8.29-FTS-1 Service Agreement dated August 23, 1994 by and between ANR
Pipeline Company and the Partnership. ***
10.9 -Agreements re Real Property
10.9.1 -Main Transmission Line Licensing Agreement, dated as of November
18, 1992, between the Partnership and Alcan *
10.9.2 -Piping and Wiring Licensing Agreement, dated as of November 18,
1992, between the Partnership and Alcan *
10.9.3 -Mortgage and Security Agreement, dated as of January 1, 1993,
given by County of Oswego Industrial Development Agency (the "IDA")
and the Partnership to Manufacturers and Traders Trust Company (the
"Collateral Agent") *
22
<PAGE>
10.9.4 -Mortgage and Security Agreement, dated as of January 1, 1993,
given by the IDA and the Partnership to the Collateral Agent *
10.9.5 -Mortgage and Security Agreement, dated as of January 1, 1993,
given by the IDA and the Partnership to the Collateral Agent *
10.9.6 -Credit Line Mortgage and Security Agreement, dated as of January
1, 1993, given by the IDA and the Partnership to the Collateral
Agent *
10.9.7 -First Building Loan Mortgage and Security Agreement, dated as of
January 1, 1993, given by the IDA and the Partnership to the
Collateral Agent *
10.9.8 -Second Building Loan Mortgage and Security Agreement, dated as of
January 1, 1993, given by the IDA and the Partnership to the Collateral
Agent *
10.9.9 -First Building Loan Agreement, dated as of January 1,
1993, among the Trustee, Sithe Funding and the Partnership *
10.9.10-Second Building Loan Agreement, dated as of January 1, 1993,
among the Trustee, Sithe Funding and the Partnership *
10.9.11-Bill of Sale and Assignment and Assumption Agreement dated as of
August 25, 1992 between the General Partner, as assignor, and the
Partnership, as assignee *
10.10 -Water Service Agreements
10.10.1-Water Service Agreement, dated as of May 11, 1992, by and between
the Partnership and the City of Oswego *
10.10.2-Water Facilities Agreement, dated as of August 18, 1992, between
the Partnership and the County of Oswego *
10.11 -IDA Agreements
10.11.1-Lease Agreement, dated as of January 22, 1993, between the IDA
and the Partnership*
10.11.2-Ground Lease, dated as of January 22, 1993, between the IDA and
the Partnership *
10.11.3-Payment in Lieu of Taxes Agreement dated as of January 22, 1993
between the IDA and the Partnership *
10.12 -Security Documents
10.12.1-Collateral Agency and Intercreditor Agreement, dated as of
January 1, 1993, among Union Bank, the Trustee, Enron, the
Partnership, Sithe Funding, the IDA and the Collateral Agent*
10.12.2-Security Agreement and Assignment of Contracts, dated as of
January 1, 1993, made by the Partnership in favor of the Collateral
Agent *
10.12.3-Partner Security Agreement, dated as of January 1, 1993, among
the General Partner, Sithe Energies U.S.A., Inc., Sithe Energies,
Inc., Mitex, Inc. and the Collateral Agent*
10.12.4-Equity Contribution Agreement, dated as of January 1, 1993, by
the General Partner, Sithe Energies, Inc., Sithe Energies U.S.A.,
Inc., Mitex, Inc. in favor of the Partnership and for the benefit of
the Collateral Agent *
27 -Article 5 Financial Data Schedule of the Partnership for the year
ended December 31, 1997 ******
- ----------------
* Incorporated herein by reference from the Registration Statement on Form
S-1, file No. 33-59960, filed with the Securities and Exchange Commission
(the "SEC") by Sithe/Independence Power Partners, L.P. on March 23, 1993,
as amended.
** Incorporated herein by reference from the Annual Report on Form 10-K for
the year ended December 31, 1993 for Sithe/Independence Power Partners,
L.P. filed with the SEC.
*** Incorporated herein by reference from the Annual Report on Form 10-K for
the year ended December 31, 1994 for Sithe/Independence Power Partners,
L.P. filed with the SEC.
**** Incorporated herein by reference from the Annual Report on Form 10-K for
the year ended December 31, 1995 for Sithe Independence Power Partners,
L.P. filed with the SEC.
***** Incorporated herein by reference from the Annual Report on Form 10-K for
the year ended December 31, 1996 for Sithe/Independence Power Partners,
L.P. filed with the SEC.
****** Filed herewith.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Sithe/Independence Funding Corporation
--------------------------------------
(Registrant)
March 31, 1998 /s/ Richard J. Cronin III
---------------------------
Richard J. Cronin III
Chief Financial Officer and Senior Vice
President (Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ William Kriegel Chief Executive Officer, President March 31, 1998
------------------------ and Director (Principal Executive
William Kriegel Officer)
/s/ Bruce Wrobel Executive Vice President and March 31, 1998
----------------------- Director
Bruce Wrobel
/s/ Frank Donohue Senior Vice President and Director March 31, 1998
-----------------------
Frank Donohue
/s/ Steven D. Burton Secretary, General Counsel and March 31, 1998
-------------------------- Director
Steven D. Burton
/s/ Richard J. Cronin III Chief Financial Officer, Senior March 31, 1998
-------------------------- Vice President and Director
Richard J. Cronin III (Principal Financial and
Accounting Officer)
/s/ W. Harrison Wellford Director March 31, 1998
---------------------------
W. Harrison Wellford
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the co-registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Sithe/Independence Power Partners, L.P.
---------------------------------------
(Co-Registrant)
By: Sithe/Independence, Inc.
------------------------
General Partner
March 31, 1998 /s/ Richard J. Cronin III
---------------------------
Richard J. Cronin III
Chief Financial Officer and Senior Vice
President (Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ William Kriegel Chief Executive Officer, President March 31, 1998
------------------------ and Director (Principal Executive
William Kriegel Officer)
/s/ Bruce Wrobel Executive Vice President and March 31, 1998
----------------------- Director
Bruce Wrobel
/s/ Frank Donohue Senior Vice President and Director March 31, 1998
-----------------------
Frank Donohue
/s/ Steven D. Burton Secretary, General Counsel and March 31, 1998
-------------------------- Director
Steven D. Burton
/s/ Richard J. Cronin III Chief Financial Officer, Senior March 31, 1998
-------------------------- Vice President and Director
Richard J. Cronin III (Principal Financial and
Accounting Officer)
/s/ W. Harrison Wellford Director March 31, 1998
---------------------------
W. Harrison Wellford
25
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
Page No.
--------
Financial Statements
Independent Auditors' Report ...................................F-2
Consolidated Balance Sheets at December 31, 1997
and 1996 .....................................................F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1997, 1996 and 1995 ......................F-4
Consolidated Statements of Partners' Capital for
the Years Ended December 31, 1997, 1996 and 1995 ............F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 ......................F-6
Notes to Consolidated Financial Statements.......................F-7
All financial statement schedules are omitted because they are not applicable,
or not required, or because the required information is included in the
Financial Statements or Notes thereto.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
We have audited the accompanying consolidated balance sheets of
Sithe/Independence Power Partners, L.P. (a Delaware limited partnership) and its
subsidiary as of December 31, 1997 and 1996, and the related consolidated
statements of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sithe/Independence Power Partners,
L.P. and its subsidiary as of December 31, 1997 and 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Deloitte & Touche, LLP
New York, New York
March 17, 1998
F-2
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
----- -----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3 $ 4
Restricted cash and cash equivalents 40,643 73,412
Restricted investments 34,674 14,610
Accounts receivable - trade 33,384 39,782
Fuel, inventory and other current assets 1,872 2,887
--------- ---------
Total current assets 110,576 130,695
Property, plant and equipment, at cost:
Land 5,010 5,875
Electric and steam generating facilities 765,239 755,020
--------- ---------
770,249 760,895
Accumulated depreciation (56,975) (37,707)
--------- ---------
713,274 723,188
Debt issuance costs 9,212 10,265
Other assets 4,985 3,323
--------- ---------
Total assets $ 838,047 $ 867,471
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Trade payables $ 20,823 $ 24,264
Accrued interest 174 174
Current portion of long-term debt 18,856 10,202
Accrued construction costs and retentions 443 9,249
--------- ---------
Total current liabilities 40,296 43,889
Long-term debt:
7.90% secured notes due 2002 109,897 128,753
8.50% secured bonds due 2007 150,839 150,839
9.00% secured bonds due 2013 408,609 408,609
--------- ---------
669,345 688,201
Other liabilities 7,842 11,682
Commitments and contingencies
Partners' capital 120,564 123,699
--------- ---------
Total liabilities and partners' capital $ 838,047 $ 867,471
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenue $ 355,432 $ 379,024 $ 335,844
--------- --------- ---------
Cost of sales:
Fuel 207,713 198,947 187,847
Operations and maintenance 33,779 41,087 39,333
Depreciation 19,268 18,779 18,778
--------- --------- ---------
260,760 258,813 245,958
--------- --------- ---------
Operating income 94,672 120,211 89,886
Non-operating income (expenses):
Interest expense (62,369) (63,441) (64,261)
Interest and other income, net 7,026 4,187 4,525
--------- --------- ---------
Net income $ 39,329 $ 60,957 $ 30,150
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In thousands)
<TABLE>
<CAPTION>
Unrealized
Loss on Total
General Limited Marketable Partners'
Partner Partners Securities Capital
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ -- $ (7,408) $ (223) $ (7,631)
Capital contribution 400 39,600 -- 40,000
Net income 302 29,848 -- 30,150
Change in unrealized loss
on marketable securities -- -- 215 215
--------- --------- --------- ---------
Balance, December 31, 1995 702 62,040 (8) 62,734
Net income 610 60,347 -- 60,957
Change in unrealized loss
on marketable securities -- -- 8 8
--------- --------- --------- ---------
Balance, December 31, 1996 1,312 122,387 -- 123,699
Net income 393 38,936 -- 39,329
Distribution (425) (42,039) -- (42,464)
--------- --------- --------- ---------
Balance, December 31, 1997 $ 1,280 $ 119,284 $ -- $ 120,564
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 39,329 $ 60,957 $ 30,150
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 19,268 18,779 18,778
Amortization of deferred financing costs 1,053 1,085 1,150
Changes in operating assets and liabilities:
Accounts receivable - trade 6,398 (4,461) (24,816)
Fuel inventory and other current assets 1,015 (25) (2,598)
Other assets (1,662) (1,662) (1,661)
Trade payables and other current liabilities (3,441) 4,074 14,767
Accrued interest payable -- (30,736) 30,738
Other liabilities (3,840) 6,002 5,680
--------- --------- ---------
Net cash provided by operating activities 58,120 54,013 72,188
--------- --------- ---------
Cash flows from investing activities:
Construction costs (18,160) (11,589) (65,945)
Restricted funds 12,705 (31,978) (55,643)
Use of funds designated for construction -- -- 17,792
--------- --------- ---------
Net cash used in investing activities (5,455) (43,567) (103,796)
--------- --------- ---------
Cash flows from financing activities:
Principal payments on secured notes (10,202) (11,384) (7,454)
Distribution to partners (42,464) -- --
Capital contribution -- -- 40,000
--------- --------- ---------
Net cash used in financing activities (52,666) (11,384) 32,546
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (1) (938) 938
Cash and cash equivalents at beginning of year 4 942 4
--------- --------- ---------
Cash and cash equivalents at end of year $ 3 $ 4 $ 942
========= ========= =========
Supplemental cash flow information:
Cash payments for interest $ 62,031 $ 61,179 $ 31,031
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Partnership
Sithe/Independence Power Partners, L.P. (the "Partnership"), in which
Sithe Energies, Inc. ("Sithe Energies") and certain of its direct and indirect
wholly-owned subsidiaries (the "Partners") hold all the partnership interests,
is a Delaware limited partnership that was formed in November 1990 for a term of
50 years to develop, construct and own a gas fired cogeneration facility with a
design capacity of approximately 1,000 megawatts (the "Project") located in the
Town of Scriba, County of Oswego, New York. Sithe/Independence, Inc., an
indirect wholly-owned subsidiary of Sithe Energies, is the General Partner. The
Project commenced commercial operation for financial reporting purposes on
December 29, 1994 and on September 10, 1997, the Partnership notified the
Trustee under the Indenture that final completion of construction had been
achieved.
The Partnership has entered into a 40-year power sales contract with
Consolidated Edison Company of New York ("Con Edison"), a 20-year power sales
contract with Niagara Mohawk Power Corporation ("Niagara Mohawk") and a 22-year
contract for thermal energy and electricity sales with Alcan Aluminum
Corporation ("Alcan").
Sithe Energies is an independent energy producer engaged, through its
subsidiaries, in the development, construction, ownership and operation of
non-utility electric generating facilities. At December 31, 1997, Sithe Energies
owned or leased twenty-four electric generating facilities, including the
Project, representing approximately 1,912 megawatts ("MW") of operating
capacity. Sithe Energies is actively pursuing a number of development projects
in the United States and internationally as discussed in Business, Properties
and Legal Proceedings. Sithe Energies is presently owned 59.7% by Compagnie
Generale des Eaux, 29.5% by Marubeni Corporation and 10.8% by its two other
founders.
2. Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts of
the Partnership and Sithe/Independence Funding Corporation ("Sithe Funding"), a
wholly-owned subsidiary formed by the Partnership for the purpose of issuing
debt securities in connection with financing the Project. All significant
intercompany transactions and balances have been eliminated.
F-7
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents, including restricted cash, consist of bank
deposits, commercial paper and certificates of deposit that mature within three
months of their purchase.
Restricted investments include U.S. treasury notes and other debt
securities with maturities of more than three months from the date of their
purchase.
Depreciation of electric and steam generating facilities is computed using
the straight-line method over the 40-year estimated economic life of the
Project.
Revenue from the sale of electricity and steam is recorded based upon
output delivered and capacity provided at the payment rates as specified under
contract terms.
Revenue for 1997 consisted of $353.5 million from sales of electricity and
steam and $1.9 million from gas sale transactions with Con Edison, Niagara
Mohawk and Alcan accounting for 92%, 5% and 3%, respectively, of the sales of
electricity and steam. Revenue for 1996 consisted of $343.3 million from sales
of electricity and steam and $35.7 million from gas sale transactions with Con
Edison, Niagara Mohawk and Alcan accounting for 92%, 5% and 3%, respectively, of
the sales of electricity and steam. During 1995, Con Edison, Niagara Mohawk and
Alcan accounted for 91%, 6% and 3%, respectively, of revenue.
The Partnership evaluates the operating and financial performance of its
long-lived assets for potential impairments in accordance with Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which prescribes
the method for measuring impairment. If an asset is determined to be impaired,
the capitalized costs are written down to fair value.
Routine maintenance and repairs are charged to expense as incurred.
Effective January 1, 1997, the Partnership entered into a twelve-year service
agreement with General Electric Company ("GE") under which the Partnership will
pay GE specified amounts per megawatt-hour of net generation to perform all
scheduled major equipment overhauls for the Project's gas turbines, steam
turbines and generators (the "covered units") during such period. As a result of
such agreement, which, among other things, was entered into to lock in the cost
of future major overhauls for the covered units, the Partnership discontinued
the application of its major overhaul cost normalization policy for the covered
units as of the beginning of the first quarter of 1997. In that connection, in
the first quarter of 1997, the Partnership was required to reverse to income as
a credit to maintenance expense the $8.2 million of major overhaul reserves for
the covered units that had been established in prior years under that policy.
F-8
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Legal fees and other direct costs incurred in connection with the issuance
of long-term debt are being deferred and amortized to interest expense using the
interest method over the term of the long-term debt.
Since the Partnership is not an income tax paying entity, the accompanying
consolidated financial statements do not reflect any income tax effects. Sithe
Funding is a taxable entity, but has no taxable income since its interest income
is equal to its interest expense.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting comprehensive income. The
Partnership is required to adopt SFAS No. 130 beginning in the first quarter of
1998 and, based on current circumstances, does not believe that adoption of this
pronouncement will have a material impact on its financial statements.
3. Financing
Financing for the project consisted of a loan to the Partnership by Sithe
Funding of the proceeds of its issuance of $717.2 million of notes and bonds
(the "Securities") and $60 million of capital contributions by the Partners.
Aggregate maturities of the Securities over the next five years are as follows:
$18.9 million in 1998, $27.4 million in 1999, $19.3 million in 2000, $32.4
million in 2001 and $30.8 in 2002. The Securities are guaranteed by the
Partnership and secured by substantially all of the assets of the Partnership.
In addition, the Partners obtained a credit facility under which one or
more letters of credit may be issued in connection with their obligations
pursuant to certain Project contracts, and, as of December 31, 1997, letters of
credit aggregating $14.1 million were outstanding in connection with such
obligations. The Partnership has funded the Project's debt service reserve fund
with a letter of credit in the amount of $50 million and as of December 31, 1997
its cumulative additional debt service reserve and major overhaul reserve
funding requirements of $33.0 million and $5.4 million, respectively, were fully
funded. The Partnership is also required to fund additional reserves for debt
service and major overhauls from available cash flow after debt service of
approximately $6 million annually. To secure the Partnership's obligation to pay
any amounts drawn under the debt service letter of credit, the letter of credit
provider has been assigned a security interest and lien on all of the collateral
in which the holders of the Securities have been assigned a security interest
and lien.
The Partnership is precluded from making distributions to the Partners
unless project reserve accounts are funded to specified levels, as discussed
above, and unless the required debt service coverage ratio is met, which was the
case in 1997 and 1996. A distribution to the Partners of $42.4 million was made
in November 1997.
F-9
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Although the Partnership's net income could decline through the fourth
quarter of 1999 due largely to Tier I gas pricing increasing at a greater rate
than increases in the energy component of billings to Con Edison, the
Partnership believes that funds available from cash on hand, restricted funds,
operations and the debt service letter of credit will be more than sufficient to
liquidate Partnership obligations as they come due and pay scheduled debt
service.
4. Financial Instruments
Financial instruments which potentially subject the Partnership to
concentrations of risk consist principally of temporary cash investments,
restricted funds and trade receivables. The Partnership invests its temporary
cash investments and restricted investments in U.S. government obligations and
financial instruments of highly-rated financial institutions. Trade receivables
are from major regulated electric utilities and the associated credit risks are
limited.
The carrying values reflected in the balance sheet at December 31, 1997
and 1996 reasonably approximate the fair values for cash and cash equivalents,
restricted investments, trade receivables and construction payables and
retentions. In making such assessment, the Partnership utilized credit reviews.
The Partnership estimates that the fair value of the Securities at December 31,
1997 and 1996 were $762.7 million and $710.3 million, respectively, based on
quoted market prices, which were $74.5 million and $11.9 million higher,
respectively, than the historical carrying values of $688.2 million and $698.4
million, respectively.
At December 31, 1997 and 1996, the aggregate fair value of the
Partnership's available-for-sale debt securities closely approximated the
amortized cost of such securities.
5. Commitments and Contingencies
Litigation and Claims
On March 29, 1996, the Partnership filed a petition with the Federal
Energy Regulatory Commission ("FERC") alleging Niagara Mohawk has been
overcharging for the transmission of electricity in violation of the FERC policy
by calculating transmission losses on an incremental basis. The Partnership
believes that transmission losses should be calculated on an average basis. The
Partnership has been recording its transmission expense at the disputed, higher
rate. As of December 31, 1997, the Partnership estimates it was owed
approximately $7.7 million for transmission overcharges. The Partnership
requested that the FERC order Niagara Mohawk to recalculate the transmission
losses beginning in October 1994, when it began wheeling power from the Project.
In September 1996, the FERC issued an order dismissing the Partnership's
complaint and requiring Niagara Mohawk to provide the Partnership with
information regarding the calculation of transmission losses. In October 1996,
the Partnership filed a request for rehearing of the FERC's order which was
denied by
F-10
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the FERC. In December 1997, the Partnership filed a petition for review of the
FERC orders in the United States Court of Appeals. The Court of Appeals has not
yet set a briefing schedule for this proceeding. The Partnership intends to
continue to vigorously pursue this matter.
Gas Supply
The Partnership has entered into a 20-year gas supply agreement with Enron
Power Services, Inc. ("Enron"), and 20-year transmission services and
interconnection agreements for gas transportation with several pipeline
companies, each with a term or expected term of at least twenty years. Aggregate
minimum commitments under these contracts over the next five years are as
follows: $234.6 million in 1998, $245.0 million in 1999, $200.6 million in 2000,
$200.8 million in 2001 and $201.0 in 2002.
The Partnership recognizes fuel expense for gas consumed at its plant
based on pricing provided for in the Project's 20-year gas supply agreement with
Enron. Pursuant to such agreement, the price for the first 116,000 MMBtu's of
natural gas per day ("Tier I" gas) is fixed for the first five years of the
agreement and thereafter fluctuates with pricing based on a pre-determined
multiple of Con Edison's actual avoided energy price as well as certain other
payments made by Con Edison to the Project. Up to an additional 76,291 MMBtu's
of gas consumed per day by the Project ("Tier II" gas) is priced based on the
pre-determined multiple applied to Niagara Mohawk's "energy only" rate.
Enron will maintain a notional tracking account to account for differences
between the contract price and spot gas prices, except that there will be no
such tracking with respect to the Tier I gas during the first five years of the
contract. The tracking account would be increased if the then current spot gas
price is greater than the contract price and would be decreased if the then
current spot gas price is lower than the contract price. The tracking account
bears interest at 1% over prime. Enron has been given a security interest in the
plant, which is subordinated to payments for secured debt service and certain
letter of credit reimbursement obligations, to secure any tracking account
balance. As of December 31, 1997, the Partnership estimates that the balance in
the tracking account amounted to approximately $103.0 million. If at any time
the tracking account balance exceeds 50% of the plant's then fair market value,
the Partnership will be required to reduce the tracking balance by paying to
Enron the lesser of (a) the amount necessary to reduce the tracking balance to
50% of the plant's fair market value or (b) (i) during years 6 through 15 of the
contract, all incremental revenues as defined in the contract and (ii)
thereafter 50% of qualifying cash flows also as defined in the contract plus all
incremental revenues. If a positive balance exists in the tracking account at
the end of the contract term, the Partnership will be required either to pay the
balance in the tracking account or to convey to Enron an equity ownership in the
plant based on the ratio of the tracking account balance to the facility's fair
market value at such time.
At present, the Partnership's expectation based on its projection of
energy and gas prices is that there will not be a positive balance in the
tracking account at the end of the contract term and that during the term of the
contract it will not be required to make any tracking account balance reduction
payments.
F-11
<PAGE>
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other
The Partnership's power sales contract with Con Edison includes an option
that would allow Con Edison to terminate the power sales contract with the
Partnership upon satisfaction of certain conditions including assuming all of
the Partnership's financial and contractual obligations related to the Project
and paying an amount to the Partnership determined by a formula based on
estimated future revenues and expenses under the contract.
Under the terms of the power sales contract with Con Edison, electricity
will generally be sold to Con Edison at prices based on Con Edison's actual
avoided energy costs plus a fixed price per KWH. Changes in the
avoided-cost-based energy component of billings by the Partnership to Con Edison
will impact the Partnership's profitability, particularly during the first five
years of operation when the price for gas associated with energy deliveries to
Con Edison is fixed.
A petition requesting permission to curtail (i.e., limit or suspend)
purchases of power from independent power producers was filed by Niagara Mohawk,
and the Public Service Commission of the State of New York (the "PSC")
instituted a proceeding to consider the merits of the petition. In August 1996,
the PSC issued a notice inviting comments regarding whether and when utilities
should be permitted to curtail purchases from independent power producers. In
December 1997, the Partnership submitted comments to the PSC with respect to
this matter but the PSC has not yet issued an order. The Partnership intends to
vigorously oppose any efforts by the PSC and/or individual utilities to curtail
purchases of power from independent power producers. The Partnership's power
sales contract with Niagara Mohawk covers up to approximately 300MW in any
hourly period. A decision by the PSC permitting Niagara Mohawk to implement
curtailment could adversely affect the Partnership's operating revenue.
6. Related Party Transactions
The Partnership has entered into an operations and maintenance agreement
with Sithe Energies Power Services, Inc. ("Sithe Power Services"), an indirect
wholly-owned subsidiary of Sithe Energies, under which Sithe Power Services will
provide all operations and maintenance services for the Project for twenty years
following the Date of Commercial Operation on a cost reimbursement basis. In
addition, the agreement calls for the Partnership to pay Sithe Power Services a
$551,250 annual fee, which escalates at 5% per annum, for management and
administrative services, provided by Sithe Power Services to the Partnership.
During the second quarter of 1997, the Partnership obtained from the
Trustee a release of the lien and transferred ownership of approximately 160
acres of land to a wholly-owned subsidiary of Sithe Energies. The land, which is
not required for operation of the Project or for any potential future Project
expansion, was transferred at book value (approximately $.9 million) and no gain
or loss was recorded by the Partnership.
F-12
<PAGE>
Exhibit 10.1.1
SENIOR SECURED REVOLVING CREDIT AGREEMENT
among
SITHE ENERGIES, INC.
(As Borrower)
and
ENERGY FACTORS, INCORPORATED
and
SITHE ENERGIES U.S.A., INC.
and
SITHE INTERNATIONAL, INC.
and
SITHE ENERGIES DEVELOPMENT CORPORATION
(Together with the Borrower as Loan Parties)
and
BANK OF MONTREAL
and
THE ADDITIONAL FINANCIAL INSTITUTIONS
FROM TIME TO TIME SET FORTH ON APPENDIX I
(The Lenders)
and
BANK OF MONTREAL
(As Agent)
Dated as of December 19, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages(s)
<S> <C>
PRELIMINARY STATEMENT........................................... 1
ARTICLE I DEFINITIONS........................................... 1
Section 1.1 Certain Defined Terms......................... 1
Section 1.2 Other Definitional Provisions................. 19
ARTICLE II THE CREDITS......................................... 20
Section 2.1. Commitments to Lend........................... 20
Section 2.2. Notice of Borrowings.......................... 20
Section 2.3. Letters of Credit............................. 22
Section 2.4. Notice to Lenders; Funding of Loans........... 29
Section 2.5. Notes......................................... 30
Section 2.6. Use of Loan Proceeds.......................... 31
Section 2.7. Interest Rates................................ 31
Section 2.8. Fees.......................................... 32
Section 2.9. Fee Payments.................................. 32
Section 2.10. Mandatory Termination of Commitment........... 33
Section 2.11. Prepayments................................... 33
Section 2.12. General Provisions as to Payments............. 34
Section 2.13. Funding Costs................................. 34
Section 2.14. Computation of Interest and Fees.............. 35
Section 2.15. Withholding Tax Exemption..................... 35
Section 2.16. Security for the Obligations.................. 36
Section 2.17 Application of Payments....................... 37
Section 2.18 Interest...................................... 37
Section 2.19 Funding and Yield Protection.................. 38
ARTICLE III REPRESENTATIONS AND WARRANTIES...................... 42
Section 3.1 Existence and Business........................ 42
Section 3.2 Subsidiaries.................................. 42
Section 3.3 Power and Authorization; Enforceable
Obligations................................ 43
Section 3.4 Collateral Security Documents................. 43
Section 3.5 No Legal Bar.................................. 44
Section 3.6 Governmental Approvals and Other
Consents and Approvals..................... 44
Section 3.7 Financial Statement........................... 45
Section 3.8 Taxes......................................... 46
</TABLE>
i
<PAGE>
Section 3.9 No Proceedings or Litigation..................... 46
Section 3.10 No Default....................................... 47
Section 3.11 Title to Property................................ 47
Section 3.12 Agreements....................................... 47
Section 3.13 Compliance with Law.............................. 48
Section 3.14 Environmental Matters............................ 48
Section 3.15 Federal Reserve Regulations...................... 48
Section 3.16 ERISA............................................ 48
Section 3.17 Investment Company: Investment Adviser........... 49
Section 3.18 Public Utility Status............................ 49
Section 3.19 Principal Place of Business, etc................. 49
Section 3.20 Offer of Notes or Securities..................... 50
Section 3.21 Labor Matters.................................... 50
Section 3.22 Solvency......................................... 50
Section 3.23 Full Disclosure.................................. 50
ARTICLE IV CONDITIONS PRECEDENT..................................... 50
Section 4.1 The Initial Extension of Credit.................. 50
Section 4.2 All Loans; Letters of Credit..................... 53
ARTICLE V AFFIRMATIVE COVENANTS
Section 5.1 Conduct of Business, Maintenance of
Existence, etc................................... 55
Section 5.2 Quarterly Distributions.......................... 55
Section 5.3 Performance of Obligations....................... 55
Section 5.4 Cooperation in Syndication....................... 56
Section 5.5 Inspection of Property, Books and
Records; Discussions............................. 56
Section 5.6 Compliance with Laws, Contractual
Obligations, etc................................. 56
Section 5.7 Information...................................... 56
Section 5.8 Certificates; Other Information.................. 59
Section 5.9 Payment of Taxes and Claims...................... 59
Section 5.10 Maintenance of Properties; Insurance............. 60
Section 5.11 Assignments of Additional Contracts;
Maintenance of Liens of the Collateral
Security Documents; Future Liens................. 60
Section 5.12 Defend Title..................................... 61
Section 5.13 Management Letters............................... 61
Section 5.14 Accounts......................................... 61
Section 5.15 Intentionally Omitted............................ 61
Section 5.16 Fiscal Year Forecast............................. 61
Section 5.17 Environmental Matters............................ 61
Section 5.18 Bank Accounts.................................... 63
ii
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<TABLE>
<S> <C> <C>
Section 5.19 Supplemental Collateral Security
Documents................................................. 65
</TABLE>
<TABLE>
<S> <C>
ARTICLE VI NEGATIVE COVENANTS............................................... 65
</TABLE>
<TABLE>
<S> <C> <C>
Section 6.1 Organization, Sale of Assets,
Purchases, etc............................................ 65
Section 6.2 Indebtedness.............................................. 66
Section 6.3 Liens..................................................... 67
Section 6.4 Project Refinancings...................................... 67
Section 6.5 Amendment of Contracts, etc............................... 67
Section 6.6 Investments............................................... 68
Section 6.7 Net Worth, etc............................................ 68
Section 6.8 Change of Office.......................................... 68
Section 6.9 Change of Name............................................ 68
Section 6.10 Limitation on Transactions with
Affiliates................................................ 68
Section 6.11 Distributions............................................. 69
Section 6.12 Assignment................................................ 70
Section 6.13 Employee Plans............................................ 70
Section 6.15 Leverage Ratio............................................ 70
Section 6.16 Adjusted EBITDA/Interest Ratio............................ 70
Section 6.18 Fiscal Year............................................... 71
Section 6.19 Exceed Commitment......................................... 71
Section 6.20 Wholly Owned Subsidiaries................................. 71
Section 6.21 Asian Investments......................................... 71
</TABLE>
<TABLE>
<S> <C>
ARTICLE VII EVENTS OF DEFAULT............................................... 72
</TABLE>
<TABLE>
<S> <C> <C>
Section 7.1 Events of Default......................................... 72
Section 7.2 Other Remedies............................................ 76
</TABLE>
<TABLE>
<S> <C>
ARTICLE VIII THE AGENT...................................................... 77
</TABLE>
<TABLE>
<S> <C> <C>
Section 8.1 Appointment............................................... 77
Section 8.2 Delegation of Duties...................................... 77
Section 8.3 Exculpatory Provisions.................................... 77
Section 8.4 Reliance by Agents........................................ 78
Section 8.5 Notice of Default......................................... 78
Section 8.6 Non-Reliance on Agent and Other Lenders................... 79
Section 8.7 Indemnification........................................... 79
Section 8.8 Agent in Individual Capacities............................ 80
Section 8.9 Successor Agent........................................... 80
</TABLE>
<TABLE>
<S> <C>
ARTICLE IX MISCELLANEOUS.................................................... 81
</TABLE>
<TABLE>
<S> <C> <C>
Section 9.1 Expenses; Indemnification, etc........................... 81
</TABLE>
iii
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 9.2 Amendments; Consent to Amendments.............. 82
Section 9.3 Investment Purpose............................. 83
Section 9.4 Notices to Subsequent Holder................... 83
Section 9.5 Persons Deemed Owners.......................... 83
Section 9.6 Survival of Representations and
Warranties..................................... 84
Section 9.7 Successors and Assigns......................... 84
Section 9.8 Notices........................................ 86
Section 9.9 Descriptive Headings........................... 87
Section 9.10 Governing Law.................................. 87
Section 9.11 No Waiver...................................... 87
Section 9.12 Severability................................... 87
Section 9.13 Counterparts................................... 87
Section 9.14 Waiver of Jury Trial; Limitation of
Remedies....................................... 87
Section 9.15 Independence of Covenants...................... 88
Section 9.16 Sharing of Payments............................ 88
Section 9.17 Right of Set-off............................... 88
Section 9.18 Satisfaction Requirement....................... 89
Section 9.19 Marshalling; Payments Set Aside................ 89
Section 9.20 Prior Understandings........................... 89
Section 9.21 Joint and Several Liability.................... 89
Section 9.22 Confidentiality................................ 89
Section 9.23 Defaulting Lender.............................. 90
</TABLE>
APPENDIX I LENDER SCHEDULE
---------------
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT I (a) PRICING GRID
EXHIBIT I (b) PRICING GRID
EXHIBIT I (c) PRICING GRID
</TABLE>
-iv-
<PAGE>
SENIOR SECURED REVOLVING CREDIT AGREEMENT, dated as of December 19, 1997,
among SITHE ENERGIES, INC., a Delaware corporation (the "Borrower"), its
wholly owned subsidiaries, ENERGY FACTORS, INCORPORATED, a Delaware
corporation ("EFI"), SITHE ENERGIES U.S.A., INC. a Delaware corporation
("Sithe U.S.A."), SITHE INTERNATIONAL, INC., a Delaware corporation ("SII")
and SITHE ENERGIES DEVELOPMENT CORPORATION, a Delaware Corporation ("SED")
(the Borrower, EFI, Sithe U.S.A., SII and SED, together, the "Loan Parties"),
BANK OF MONTREAL, a Canadian banking corporation ("BMO"), each other Lender
hereafter listed from time to time as a Lender on the Lender Schedule (BMO
and each such Lender, collectively, the "Lenders") and BMO, in its capacity
as Agent for the Lenders (in such capacity, the "Agent"). Capitalized terms
not otherwise defined in this Agreement shall have the meanings ascribed to
them in Article I hereof.
PRELIMINARY STATEMENT
This Agreement provides for the Lenders to extend a credit facility to
the Borrower in an aggregate amount of up to $300,000,000 in order to provide
for the issuance of standby letters of credit for the benefit of the Loan
Parties and their Consolidated Subsidiaries, and to provide revolving credit
loans to the Borrower, in each case for the purposes permitted herein, and
all subject to the conditions herein set forth.
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings (such definitions to be equally
applicable to both singular and plural forms of the terms defined):
"ACCOUNTS": the accounts at the Depositary Bank established by the
Borrower pursuant to the Deposit, Disbursement and Security Agreement.
"ADDITIONAL CONTRACT": each contract or other arrangement required to be
set forth after the Closing Date on an amended Schedule 3.12 pursuant to
Section 5.7(b).
"ADJUSTED EBITDA/INTEREST RATIO": for the Borrower and its Consolidated
Subsidiaries, the ratio of EBITDA to Interest Expense, provided that for
purposes of this ratio, there shall be excluded from EBITDA all interests of
Subsidiaries in which Borrower (directly or indirectly) has a less than 50%
interest (except to the extent of cash distributions received by a Loan Party
from any such Subsidiary) and there shall be excluded from all of the
foregoing calculations items related to the NIMO Projects
<PAGE>
"ADJUSTED LIBOR RATE": for any Interest Period, the rate PER ANNUM equal
to the quotient obtained (rounded upwards, if necessary to the next higher
1/16 of 1%) by dividing (i) the applicable LIBOR Rate by (ii) 1.00 minus the
Eurodollar Reserve Percentage.
"AFFILIATE": of any designated Person, any Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing,
shall include (a) any Person which beneficially owns or holds 5% or more of
any class of voting securities of such designated Person or 5% or more of the
equity interest in such designated Person and (b) any Person of which such
designated Person beneficially owns or holds 5% or more of any class of voting
securities or in which such designated Person beneficially owns or holds 5% of
more of the equity interest. For the purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"AGREEMENT": this Senior Secured Revolving Credit Agreement.
"APPLICABLE MARGIN": as defined in the applicable pricing grid attached
hereto as Exhibit I.
"APPROVALS": as defined in Section 3.6.
"ASSIGNED CONTRACT": each of the contracts and other arrangements set
forth on Schedule 3.12 as of the Closing Date, together with Additional
Contracts, in each case as collaterally assigned to the Agent for the
ratable benefit of the Lenders pursuant to the Collateral Security Documents,
excluding (a) the contracts and other arrangements referred to in clause
(a)(ii) of Section 5.11, and (b) the existing contracts and other
arrangements which, as disclosed on Schedule 3.12, cannot be so collaterally
assigned.
"ASSIGNMENTS OF PARTNERSHIP INTERESTS": as defined in Section 2.16(c).
"BANKRUPTCY LAW": as defined in Section 7.1(i).
"BASIC DOCUMENTS": the collective reference to the Loan Instruments and
the Assigned Contracts.
"BORROWING": shall mean the incurrence of a Loan on a given date (or
resulting from conversions or continuations on a given date).
2
<PAGE>
"BORROWING DATE": as defined in Section 2.2(a).
"BUSINESS DAY": any day excluding Saturday, Sunday and any day on which
commercial banks in New York, New York or Chicago, Illinois are required or
authorized to be closed; or in the case of LIBOR Rate Loans, a LIBOR
Business Day.
"CASH COLLATERAL": the irrevocable deposit by the Borrower in a specially
designated cash collateral account pursuant to the Deposit, Disbursement and
Security Agreement, in which the Agent shall have a first priority perfected
security interest for the ratable benefit of the Secured Parties, of an
amount equal to the maximum Letter of Credit Exposure with respect to any or
all (as the context requires) of the Letters of Credit and which, in the case
of Foreign Currency Letters of Credit, is in a specially designated cash
collateral account (in either Dollars or such Foreign Currency) maintained
with the Depositary Bank.
"CGE": Compagnie Generale des Eaux, a French corporation, which is as of
the Closing Date, the majority (indirect) shareholder of the Borrower.
"CLOSING DATE": December 19, 1997.
"CODE" The Internal Revenue Code of 1986, as amended from time to time.
"COLLATERAL": the collective reference to all property, tangible and
intangible, and the proceeds and products thereof, subjected from time to
time to the Liens intended to be created by the Collateral Security Documents.
"COLLATERAL ASSIGNMENT": with respect to any Assigned Contract, a
collateral assignment of such contract to the Agent for the ratable benefit
of the Secured Parties, in substantially the form of Exhibit 1.1(a).
"COLLATERAL SECURITY DOCUMENTS": the collective reference to the
Assignments of Partnership Interest, the Security Agreements, the Stock
Pledge Agreements, the Collateral Assignments, Uniform Commercial Code
financing statements and any other agreement or instrument hereafter
entered into by any Loan Party or any other Person which secured any of the
Obligations, including, without limitation, any Supplemental Collateral
Security Documents.
"COMMITMENT": the commitment of all of the Lenders to provide financing
hereunder in the form or Loans and Letters of Credit, in an aggregate amount
not exceeding the lesser of $300,000,000 and the aggregate amount of all
Lenders' commitments
3
<PAGE>
as set forth in the Lender Schedule (and further limited to $200,000,000 in
the case of Loans).
"COMMITMENT TRANSFER SUPPLEMENT": an instrument of transfer
substantially in the form of Exhibit 9.7(c).
"COMMONLY CONTROLLED ENTITY": a Person which is under common control with
the Borrower within the meaning of Section 4001 of ERISA.
"CONSOLIDATED SUBSIDIARY": any Subsidiary or other entity the accounts of
which would be consolidated with those of the Borrower in its consolidated
financial statements if such statements were prepared as of such date.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any indenture, mortgage, deed of trust,
contract, document, agreement, lease, instrument, preferential payment
arrangement or undertaking to which such Person is a party or by which it or
any of its property is bound or subject, and including the entire agreement
containing all such provisions.
"DEBT SERVICE": for any period, the aggregate (without duplication) of
(i) Interest Expense for the Borrower and its Consolidated Subsidiaries PLUS
(ii) all amounts of principal on the Loans and on other Indebtedness of the
Borrower or any of its Consolidated Subsidiaries which are required to be paid
during such period (whether by maturity, acceleration or otherwise), excluding
any optional or mandatory prepayments of principal during such period, PLUS
(iii) all periodic fees, costs, charges and expenses which are due and payable
to the Agent or any Lender or the holder of any other Indebtedness of the
Borrower or any of its Consolidated Subsidiaries during such period, plus (iv)
payments under capitalized and operating leases of the Borrower or any of its
Consolidated Subsidiaries during such period.
"DEBT SERVICE COVERAGE RATIO": for the Borrower and its Consolidated
Subsidiaries, the ratio of (X) the sum of (EBITDA plus operating lease
expense) minus (capital expenditures unrelated to Project development) to (Y)
Debt Service; PROVIDED, HOWEVER that, for purposes of this ratio, there shall
be excluded from EBITDA all interests of Subsidiaries in which Borrower
(directly or indirectly) has a less than 50% interest (except to the extent
of cash distributions received by a Loan Party from any such Subsidiary) and
there shall be excluded from all of the foregoing calculations items
related to the NIMO Projects.
"DEFAULT": any of the events specified in Section 7.1, whether or not any
requirement for the giving of notice, the lapse of time, or both, or for the
happening of any other condition, has been satisfied.
4
<PAGE>
"DEFAULT RATE": a rate per annum equal to the sum of 2% plus the Reference
Rate plus the Applicable Margin at the time of determination.
"DEPOSIT, DISBURSEMENT AND SECURITY AGREEMENT": as defined in Section
2.16(b).
"DEPOSITARY BANK": Harris Trust and Savings Bank or any successor
depositary bank under the Deposit, Disbursement and Security Agreement.
"DISTRIBUTION": (a) any distribution, direct or indirect, in cash or in
kind, on account of any partnership interest or stock interest or (b) any
redemption, retirement, purchase or other acquisition by any Person, direct
or indirect, of any partnership interest or stock interest, as the case may
be.
"DOLLARS" or "$": dollars in lawful currency of the United States of
America.
"DRAWING": any payment by the Fronting Bank to a beneficiary under a
Letter of Credit.
"EBITDA" means, for any period, (without duplication) the consolidated net
income (or net loss) of the Borrower and its Consolidated Subsidiaries for
such period as determined in accordance with GAAP, plus (a) the sum of (i)
depreciation expense, (ii) amortization expense, (iii) Interest Expense
(without taking into account the proviso in the definition thereof), (iv)
total income tax expense, and (v) extraordinary or unusual losses (and other
after tax losses on sales of assets outside of the ordinary course of
business and not otherwise included in GAAP extraordinary or unusual losses),
in each case of the Borrower and all of its Consolidated Subsidiaries for
such period, less (b) the sum of (i) extraordinary or unusual gains (and
other after-tax gains on sales of assets outside of the ordinary course of
business and not otherwise included in GAAP extraordinary or unusual gains)
of the Borrower and all of its Consolidated Subsidiaries for such period,
(ii) the net income (or loss) of any Person that is accounted for by the
equity method of accounting, except to the extent of the amount of dividends
or distributions paid to the Borrower, and (iii) the net income (or loss) of
any other Person acquired by the Borrower or any Consolidated Subsidiary of
the Borrower in a transaction accounted for as a pooling of interests for any
period prior to the date of such acquisition.
"ENVIRONMENTAL LAWS": all federal, state, local and foreign laws and
regulations including, without limitation, the Comprehensive Environmental
Response Compensation and Liability
5
<PAGE>
Act (42 U.S.C. Section 9601 ET SEQ.), the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 ET SEQ.), the National Environmental Policy Act
(42 U.S.C. Section 4321 ET SEQ.), the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.),
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the
Safe Drinking Water Act (42 U.S.C. Section 300f ET SEQ.), and any common law
theory of liability, in any case relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), all as
currently in effect or as shall be promulgated, issued and amended or ordered
in the future, including, without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
refining, distribution, use, treatment, storage, disposal, transport,
recycling, reporting or handling of Materials of Environmental Concern, and
all federal, state and local zoning and land use laws or regulations, as
currently in effect or as shall be promulgated, issued and amended or ordered
in the future.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all regulations promulgated thereunder.
"EURODOLLAR RESERVE PERCENTAGE": means for any date 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 LIBOR Rate Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
any Lender to United States residents). The Adjusted LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": any of the events specified in Section 7.1; PROVIDED
that any requirement set forth therein for the giving of notice, the lapse of
time, or both, or for the happening of any other condition, has been
satisfied.
"EVENT OF LOSS": (a) the actual or constructive total loss of any Project,
(b) loss, theft, destruction or damage of any portion of any Project, or (c)
the Taking for six months or more of the use of any portion of any Project,
which in any such case would be reasonably be likely to result in a Material
Adverse Effect.
6
<PAGE>
"EXISTING LETTERS OF CREDIT": the letters of credit set forth on
Schedule 1.1(b) issued by BMO for the account of the Loan Parties pursuant to
agreements existing prior to the Closing Date, which letters of credit will
as of the Closing Date be deemed Letters of Credit as though issued under
this Agreement.
"EXISTING LOAN AGREEMENT": the Loan Agreement, dated as of August 3, 1993
and restated and amended as of December 28, 1994, and as further amended
through the date hereof, among the Loan Parties, BMO, Banque Nationale de
Paris (Los Angeles Agency) ("BNP") and each other lender listed on the Lender
Schedule attached thereto as Appendix I, BMO, as Administrative Agent and BNP
as Co-Agent.
"FEDERAL FUNDS RATE": 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 Business Day next succeeding such
day, PROVIDED that (i) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to
the Agent on such day on such transactions as determined by the Agent.
"FISCAL QUARTER": a period of three consecutive
months commencing immediately after 12:00 a.m. on
January 1, April 1, July 1 or October 1, and ending
immediately prior to midnight on March 31, June 30,
September 30 or December 31, respectively.
"FISCAL YEAR": a period of 12 consecutive months commencing immediately
after 12:00 a.m. on January 1, and ending on December 31 immediately prior to
midnight.
"FORECAST": the annual update of the pro Forma Financial Statements
incorporating revisions to the forecasted material therein contained and
including a schedule setting forth the amounts of Loans the Borrower
anticipates requesting on the Borrowing Dates projected (and any anticipated
request for issuance of Letters of Credit and Drawings thereunder) for the
ensuing Fiscal Year.
"FOREIGN CURRENCY": any currency other than Dollars.
"FOREIGN CURRENCY LETTER OF CREDIT": any Letter of Credit denominated and
available for Drawings in a Foreign Currency.
7
<PAGE>
"FORM 1001": Form 1001 (Ownership, Exemption, or Reduced Rate Certificate)
of the Department of Treasury of the United States of America (or such
successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a
claim to which such form relates).
"FORM 4224": Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States) of the Department of Treasury of the United States of America (or
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a
claim to which such form relates).
"FORM W-8": Form W-8 (Certificate of Foreign Status) of the Department of
Treasury of the United States of America (or such successor and related forms
as may from time to time be adopted by the relevant taxing authorities of the
United States of America to document a claim to which such form relates).
"FRONTING BANK": BMO or any successor Lender issuing the Letters of Credit
(or another Lender, as applicable, to the extent it elects to issue one or
more Letters of Credit pursuant to the last sentence of Section 2.3(a)).
"GAAP": generally accepted accounting principles in effect from time to
time in the United States of America, consistently applied; PROVIDED that if
any changes in accounting principles from those used by the Borrower in the
preparation of its financial statements are hereafter required by the rules,
regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by the
Borrower with the agreement of its independent certified public accountants
and such changes materially affect (or result in a material change in the
method of calculation of) any of the covenants, standards or terms found in
this Agreement, the parties hereto agree to enter into negotiations in order
to amend such provisions so as to reflect equitably such changes with the
desired result that the criteria for evaluating compliance with such
covenants, standards and terms by the Borrower shall be the same after such
changes as if such changes had not been made; PROVIDED, HOWEVER, that no
change in generally accepted accounting principles that would affect any of
such covenants, standards or terms or the method of calculation of any such
covenants, standards or terms) shall be given effect in such calculations
until such provisions are amended, in a manner satisfactory to the Agent, the
Majority Lenders and the Borrower, to reflect such change in accounting
principles.
8
<PAGE>
"GOVERNMENTAL APPROVALS": authorizations, consents, approvals, waivers,
exemptions, variances, franchises, permissions, permits and licenses of, and
filings and declarations with, and ruling by any Governmental Authority.
"GOVERNMENTAL AUTHORITY": any government, or any nation, state, or
political subdivision of any nation or state, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any central bank or
other fiscal, monetary or other authority.
"INDEBTEDNESS": as applied to any Person, (a) all obligations of such
Person for borrowed money and for the deferred purchase price of property,
including, without limitation, pursuant to any capital lease, or services
(other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days
past due), and obligations evidenced by bonds, debentures, notes or similar
instruments (excluding "deposit only" endorsements on checks payable to the
order of such Person); (b) all indebtedness secured by any Lien on any
property owned or held by such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed; and (c) obligations of
such Person under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others.
"INDEPENDENCE CREDIT AGREEMENT": the Revolving Credit Agreement dated as
of January 1, 1993, among Sithe/Independence Power Partners, L.P., the banks
named therein and The Sumitomo Bank, Limited (New York Branch), as agent.
"INDEPENDENCE FINANCING DOCUMENTS": all of the material documentation
entered into by Sithe/Independence Power Partner, L.P. and its
Affiliates in connection with the financing of the Independence Project as
made available to, and, to the extent requested by the Agent, as certified by
Responsible Officer of the Borrower and delivered to, the Agent, including,
without limitation, the Independence Credit Agreement, and the Independence
Indenture.
"INDEPENDENCE INDENTURE": the Trust Indenture dated as of January 1,
1993, among Sithe/Independence Funding Corporation, Sithe/Independence Power
Partners, L.P. and IBJ Schroder Bank & Trust Company, as trustee.
"INDEPENDENCE PROJECT": the cogeneration project owned by
Sithe/Independence Power Partners, L.P. in Scriba, New York.
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"INTEREST EXPENSE": means, as of any Quarterly Date, gross interest
expense determined in accordance with GAAP (excluding the non-cash component
of interest payable with respect to Indebtedness incurred after the Closing
Date) minus gross interest income, in each case determined for the
consecutive four Fiscal Quarter periods then ending; provided, however, that
such gross interest income shall be capped, for purposes of this definition,
at $12,000,000, for each such four quarter period.
"INTEREST PERIOD": shall mean with respect to any LIBOR Rate Loan, the
period beginning on and including the date on which such LIBOR Rate Loan is
made or, if such LIBOR Rate Loan already is outstanding, the Interest Period
End Date for the existing Interest Period for such LIBOR Rate Loan, and
ending on but excluding the date numerically corresponding to such beginning
date in the first, second, third or sixth next succeeding month as the
Borrower may specify or be deemed to specify; provided, however, that if such
beginning day or ending day is not a LIBOR Business Day, then such beginning
and/or ending day shall be the next succeeding LIBOR Business Day unless such
next succeeding LIBOR Business Day falls in the next succeeding calendar
month, in which the event such beginning day or ending day shall be the next
preceding LIBOR Business Day.
"INTEREST PERIOD END DATE": the ending date of each Interest Period or,
if earlier, the Termination Date, and any date on which all of the Notes
become due under Article VII.
"INVESTMENT GRADE RATING": a rating on the Borrower's senior unsecured
indebtedness of BBB- or better from Standard and Poor's Corporation and/or
Baa3 or better from Moody's Investors Service, Inc.
"LENDER SCHEDULE": the Lender Schedule attached hereto as Appendix I, as
amended from time to time.
"LETTER OF CREDIT": as defined in Section 2.3(a).
"LETTER OF CREDIT COMMITMENT": the commitment of the Fronting Bank to
issue and of the Lenders to participate in, Letters of Credit issued pursuant
to Section 2.3 in an aggregate maximum available amount not to exceed
$300,000,000 minus (x) the principal amount of outstanding Loans and (y) the
amount of all outstanding Reimbursement Obligations.
"LETTER OF CREDIT EXPOSURE": the sum of (i) the undrawn amount which is
then, or may thereafter become, available for Drawings under all outstanding
Letters of Credit and (ii) the amount of all outstanding Reimbursement
Obligations.
"LETTER OF CREDIT TERMINATION DATE": as defined in Section 2.3(h)(i).
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"LEVERAGE RATION": for the Borrower and its Consolidated Subsidiaries,
the ratio of (X) Total Debt to (Y) Total Debt plus Net Worth.
"LIBOR BUSINESS DAY": a day of the year on which dealings are carried on
in the London Interbank Market and banks are open for business in London,
England, and are not required or authorized to close in New York, New York.
"LIBOR RATE": for any Interest Period the rate PER ANNUM determined by
the Agent to be the arithmetic average of the rates PER ANNUM as quoted to
the Agent by the Reference Banks as being offered by such Reference Banks to
prime banks two LIBOR Business Days prior to the first day of such Interest
Period for U.S. dollar deposits in the London Interbank Market in the
approximate amount of the portion of the applicable Loan to be made on the
first day of such Interest Period and for such term equal to such Interest
Period in immediately available funds for delivery on the first day of such
Interest Period.
"LIBOR RATE LOAN": any Loan that bears interest at the Adjusted LIBOR
Rate for the applicable Interest Period plus the Applicable Margin as
provided in Section 2.7(b).
"LIEN": any mortgage, deed of trust, security, interest, pledge,
hypothecation, deposit arrangement, assignment, charge, encumbrance, lien
(statutory or other) or other preferential arrangement in the nature of a
security interest, including, without limitation, any agreement to give any
of the foregoing, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any
such agreement, and the filing of any statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"LOAN COMMITMENT": the commitment of the Lenders to make Loans hereunder
in an aggregate maximum amount for all Lenders of $200,000,000.
"LOAN INSTRUMENTS": this Agreement, the Collateral Security Documents,
the Notes, the Letters of Credit, and such other instruments evidencing,
securing or pertaining to the Commitment as shall from time to time be
executed and delivered to the Lenders by any Loan Party or any other party,
pursuant to, in anticipation of, or as contemplated by this Agreement.
"LOANS": as defined in Section 2.1.
"MAJORITY LENDERS": at any time Lenders having at least 51% of the
Commitment, or, if the Commitment shall have been terminated, holding 51% of
the outstanding Loans and Letter of Credit Exposure.
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"MARUBENI": shall mean Marubeni Corporation, a Japanese corporation which
is as of the Closing Date a shareholder of the Borrower.
"MATERIAL ADVERSE EFFECT": shall mean a material adverse effect on (a) any
material part of the security or Collateral provided for the benefit of the
Secured Parties under the Collateral Security Documents, (b) the condition
(financial or otherwise), business, operations or prospects of the Loan
Parties, taken as a whole, (c) the ability of any Loan Party to observe and
perform its obligations under the Basic Documents to which it is a party, or
(d) the ability of the Agent or any Lender to enforce any of the Obligations.
"MATERIAL OBLIGOR": any purchaser of electric power or thermal power from
any of the Projects in amounts that are projected in the Pro Forma Financial
Statements to constitute more than 15% of all projected revenues to the
Borrower and its Consolidated Subsidiaries as projected in the Pro Forma
Financial Statements.
"MATERIAL PROJECT FINANCING" shall mean Indebtedness of one Project or
more than one Project which itself or together constitute more than 15% of
the aggregate Indebtedness of the Borrower and its Consolidated Subsidiaries,
determined as of the most recent Quarterly Date.
"MATERIALS OF ENVIRONMENTAL CONCERN": those chemicals, pollutants,
contaminants, wastes, degradation by-products, toxic substances, petroleum
and petroleum products, including, without limitation, "hazardous
substances," "hazardous wastes," "toxic substances" and "toxic pollutants,"
as defined in or identified pursuant to any applicable Environmental Law.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NET WORTH": as to a Person, such Person's shareholders' equity, as
determined in accordance with GAAP.
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"NIMO": Niagara Mohawk Power Corporation, a New York corporation.
"NIMO PROJECTS": Projects other than the Independence Project in which
NIMO is a power purchaser under a Power Purchase Agreement.
"NOTE": as defined in Section 2.5.
"NOTICE OF AMENDMENT": as defined in Section 2.3(d)
"NOTICE OF BORROWING": as defined in Section 2.2(a).
"NOTICE OF ISSUANCE": as defined in Section 2.3(d).
"OBLIGATIONS": all obligations. fees, charges, liabilities and
indebtedness of every nature of the Loan Parties from time to time owing to
the Agent or any Lender under or in connection with the transaction
contemplated by the Loan Instruments, including, without limitation, the
obligation to provide Cash Collateral, wherever mandatory.
"PARTICIPANT": as defined in Section 9.7(b).
"PARTNERSHIP INTEREST": any interest held directly or indirectly by any
of the Loan Parties in a partnership which directly or indirectly owns all or
part of a Project or Permitted Investment.
"PERMITTED INVESTMENTS": (i) securities received as part of
(ii) investments in securities maturing within one year that are: (a)
direct obligation of the United States of America, or any agency thereof; (b)
obligations fully guaranteed by the United States of America or any agency
thereof; (c) certificates of deposit issued by commercial banks under the
laws of the United States of America or of any political subdivision thereof
or under the laws of Canada, Japan or any country that is a member of the
European Economic Community having a combined capital and surplus of at least
$500,000,000 and having long-term unsecured debt securities then rated at a
rating equal to or higher than A by Standard & Poor's Corporation and A2 by
Moody's Investors Service, Inc. (or an equivalent rating by another
nationally recognized credit rating agency of similar standing if such
corporations are not in the business of rating indebtedness) or at a higher
rating (but not more than $10,000,000 in principal amount at any given time
from any one bank (other than overnight investments of up to $40,000,000 with
any one such bank, provided that the Borrower shall have used reasonable
efforts not to exceed $10,000,000 with any one such bank)); (d) open market
commercial paper of any corporation incorporated or doing business under the
laws of the United States of America or of any political subdivision thereof
then rated equal to or higher than Al by Standard & Poor's
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Corporation or P1 by Moody's Investors Service, Inc. (or an equivalent rating
by another nationally recognized credit rating agency of similar standing if
such corporations are not in the business of rating commercial paper) equal
to the highest rating assigned by such organization to commercial paper (but
not more than $10,000,000 in principal amount at any given time from any one
company); (e) guaranteed investment contracts of any financial institution
organized under the laws of the United States of America or any state thereof
or under the laws of Canada, Japan or any country that is a member of the
European Economic Union, which financial institution has assets of at least
$15,000,000,000 in the aggregate and has a long term debt rating which is (on
the date of acquisition thereof) A or better by at least two of Standard &
Poor's Corporation, Moody's Investors Service, Inc. and Fitch Investors
Service, Inc. (or an equivalent rating by another nationally recognized
credit rating agency of similar standing if such corporations are not in the
business of rating such obligations) (but not more than $10,000,000 in
principal amount at any given time from any one institution) (the investments
in the foregoing clauses (a) through (e), inclusive, being herein called
"Cash Investments"); (iii) Permitted Project Investments; (iv) nonrecourse
investments not in Projects subject to a maximum investment in any single
transaction (including any combination or series of related transactions as a
single transaction) of 10% of the Net Worth of the Borrower and its
Consolidated Subsidiaries (as determined at the time of such investment by
reference to the most recently prepared consolidated financial statements of
the Borrower); and (v) investments set forth in Schedule 1.1(c). Mutual funds
investing exclusively in Cash Investments shall be included as Permitted
Investments hereunder.
"PERMITTED LIENS": (a) Liens created by the Collateral Security Documents;
(b) Liens for Taxes the payment of which is not at the, time required by
Section 5.10; (c) carrier's, warehousemen's, mechanics, materialmen's,
repairmen's or other like Liens arising in the ordinary course of business or
incidental to the construction or improvement of any property of a Loan
Party, not filed of record which secure payment of sums which are not
delinquent, and mechanics', materialmen's, repairmen's and other like Liens
which have been filed of record but which are being contested in good faith
and have not proceeded to judgment (unless such contest involves a material
risk that a material part of the Property of such Loan Party, title thereto
or any significant interest therein may be sold, lost or forfeited or use
thereof interfered with), PROVIDED, that such Loan Party shall have posted a
bond for the full amount of such Liens; (d) Liens (other than any Lien
imposed by ERISA) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other types of social security; (e) minor defects, irregularities,
encumbrances and clouds on title and statutory Liens which do not
individually or in the aggregate materially
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impair the value of the property affected thereby; (f) rights reserved to
or vested in any Governmental Authority under applicable law to control or
regulate any property of a Loan Party which do not in the aggregate interfere
with or impair the operation or use thereof for the purposes for which it is
or may reasonably be expected to be held by a Loan Party;
(g) restrictions on the transfer of partnership interests or stock existing
on the date hereof under any partnership agreement or shareholders agreement
disclosed to the Agent and the Lenders on such date or pursuant to the
Securities Act of 1933, as amended, or the securities or "blue sky" laws of
any State.
"PERMITTED PROJECT INVESTMENTS": direct or indirect nonrecourse investments
in Projects subject to (i) a maximum investment in any single Project
(including any combination or series of related transactions with respect to
a Project or series of Projects as a "single Project" for this purpose) of
20% of the Net Worth of Borrower and its Consolidated Subsidiaries (as
determined at the time of such investment by reference to the most recently
prepared consolidated financial statements of the Borrower) and (ii) a
maximum investment in any single Project (including any combination or series
of related transactions with respect to a Project or series of Projects as a
"single Project" for this purpose) in its development phase, i.e., before
the receipt of construction or long-term financing of 10% of the Net Worth of
Borrower and its Consolidated Subsidiaries (as determined at the time of such
investment by reference to the most recently prepared consolidated financial
statements of the Borrower).
"PERSON" an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": any employee benefit plan covered by Title IV of ERISA, the
funding requirements of which:
(a) were the responsibility of the Borrower or any Commonly Controlled
Entity at any time within the five years immediately preceding the date
hereof,
(b) are currently the responsibility of the Borrower or any Commonly
Controlled Entity, or
(c) hereafter become the responsibility of the Borrower or any Commonly
Controlled Entity,
including any such plans as may have been, or may hereafter be, terminated
for whatever reason.
"POWER PURCHASE AGREEMENT": any agreement for the purchase of electric
power produced by any Project.
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"PRO FORMA FINANCIAL STATEMENTS": the pro forma financial statements
attached hereto as Exhibit 1.1(b).
"PROJECT": an independent power project or cogeneration project (including
any thermal host business) owned or developed by any of the Loan Parties or
in which any of them has a beneficial interest.
"QUARTERLY DATE": the last day in December 1997 and the last day in each
succeeding March, June and September through the Termination Date.
"RECEIPT ACCOUNT": the account established with the Depositary Bank
pursuant to the Deposit, Disbursement and Security Agreement in which certain
of the respective revenues of the Loan Parties will be deposited.
"RECOURSE INDEBTEDNESS": Indebtedness of a Person to the extent that it is
recourse generally to the assets of such Person.
"REFERENCE BANK": Each of BMO and/or any other bank designated by the
Agent and reasonably acceptable to the Borrower, from among commercial banks
organized under the laws of the United States of America, Japan, Switzerland
or any country that is a member of the European Community and having as of
the date of designation a long term debt rating of at least "A" from each of
Standard & Poor's Corporation and Moody's Investors Service, Inc.
"REFERENCE RATE": as of any date, a rate per ANNUM EQUAL to the greater of
(a) the prime commercial lending rate announced by BMO as in effect on such
day at its principal office and (b) the Federal Funds Rate plus 1/2%. The
Reference Rate is not necessarily the lowest rate of interest charged by BMO
or any Lender in connection with extensions of credit.
"REFERENCE RATE LOAN": any Loan that bears interest at the Reference Rate
plus the Applicable Margin as provided in Section 2.7(a).
"REIMBURSEMENT OBLIGATIONS": the obligations then outstanding of the
Borrower to reimburse the Fronting Bank in respect of Drawings.
"REQUIREMENT OF LAW": as to any Person, the certificate of incorporation
and by-laws or partnership agreement or other organizational or governing
documents of such Person, and any law (including, without limitation, any
Environmental Law), treaty, rule, directive or regulation, or determination,
interpretation or order of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding
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upon such Person or any of its properties or to which such Person or any of
its properties is subject.
"RESPONSIBLE OFFICER": as to any Person (except as otherwise provided),
the president, the treasurer, any vice president or the secretary of such
Person, or if such Person is a partnership, the president, the treasurer, any
vice president or the secretary of a general partner of such Person, or, if
such Person is a limited liability company, any management committee member,
or, with respect to financial matters, the chief financial officer or
treasurer of such Person, or if such Person is a partnership, the chief
financial officer or treasurer of a general partner of such Person or, if
such Person is a limited liability company, any management committee member
having primary responsibility for financial and accounting matters for such
limited liability company.
"REVOLVING CREDIT PERIOD": the period commencing on the Closing Date and
ending on the Termination Date.
"SECURED PARTIES": the Agent and the Lenders.
"SECURITY ACCOUNT": the account established with the Depositary Bank
pursuant to the Deposit, Disbursement and Security Agreement in which certain
of the respective revenues of the Loan Parties will be deposited.
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"SECURITY AGREEMENT": as defined in Section 2.16(a).
"SITHE ASIA": Sithe Asia, Inc., a British Virgin Islands corporation,
formerly known as Sithe China Holdings, Ltd, a corporate joint venture among
SII, Asia Pacific Electric Ptc Ltd. and AIG Asia Infrastructure Fund, L.P.
"SOLVENT": means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of
such Person is (y) greater than the total amount of liabilities (including
contingent obligations) of such Person and (z) greater than the amount that
will be required to pay the probable liabilities on such Person's then
existing debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
and (ii) such Person does not intend to incur, or believe (nor should it
reasonably believe) that it will incur, debts beyond its ability to pay such
debts as they become due; and (B) such Person is "solvent" within the meaning
given that term and similar terms under applicable laws relating to
fraudulent transfers and conveyances.
"STOCK INTERESTS": any shares of stock or rights to shares of stock which
shares or rights are held directly or indirectly by any of the Loan Parties
in a corporation which directly or indirectly owns all or part of a Project
or Permitted Investment.
"STOCK PLEDGE AGREEMENTS": as defined in Section 2.16(d).
"SUBORDINATED CGE DEBT": Indebtedness that is unsecured and subordinated
to the Obligations on the terms set forth in Exhibit 6.2.
"SUBORDINATED FINANCING": subordinated financing with terms and conditions
at then prevailing market standards for companies similarly situated and
otherwise reasonably satisfactory to the Majority Lenders.
"SUBSEQUENT LETTERS OF CREDIT": as defined in Section 4.2.
"SUBSEQUENT LOANS": as defined in Section 4.2.
"SUBSIDIARY" means, as of any date of determination and with respect to
any Person, any corporation, partnership, joint venture or business trust,
whether now existing or hereafter organized or acquired: (a) in the case of a
corporation, of which a majority of the securities having ordinary voting
power for the election of directors or other governing body (other than
securities having such power only by reason of the happening of a
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contingency) are at the time beneficially owned by such Person and/or one or
more Subsidiaries of such Person, or (b) in the case of a partnership, joint
venture or business trust, of which such Person or a Subsidiary of such
Person is a general partner of joint venturer or of which a majority of the
partnership or other ownership interests are at the time beneficially owned
by such Person and/or one or more of its Subsidiaries.
"SUPPLEMENTAL COLLATERAL SECURITY DOCUMENTS": as defined in Section 5.19.
"TAKING": a temporary or permanent taking, condemnation, seizure,
requisition or confiscation or requisition of title by a Governmental
Authority or political subdivision thereof during the term hereof of all or
any part of a Project; or any interest therein or right accruing thereto, as
the result of or in lieu of or in anticipation of the exercise of the right
of condemnation or eminent domain, materially affecting such Project or any
part thereof.
"TAXES": any and all United States of America federal, state, local and
other income, franchise, property, excise, sales or other taxes, fees or
charges, or payments in lieu of any of the foregoing, together with all
related assessments, interest and penalties.
"TERMINATION DATE": the date that is thirty-six months after the Closing
Date, but if the Termination Date would otherwise fall on a date that is not
a Business, the Termination Date shall be the next succeeding Business Day,
unless such Business Day falls in another calendar month, in which case the
Termination Date shall be the next preceding Business Day.
"TOTAL DEBT": means (without duplication), as of any Quarterly Date, the
sum of (i) all Indebtedness of the Borrower and its Consolidated
Subsidiaries PLUS (ii) the outstanding Letter of Credit Exposure PLUS (iii)
8 times the amount of operating lease expense of the Borrower and its
Consolidated Subsidiaries determined as of any Quarterly Date for the
consecutive four Fiscal Quarterly periods then ending, each of the foregoing
items determined on a consolidated basis in accordance with GAAP.
"TRANFEREE BENEFICIARY": as defined in Section 2.3(i).
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the same meanings when
used in the Notes or in any certificate or other document made or delivered
pursuant to the Agreement, unless otherwise stated therein.
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(b) All references to a contract, agreement or lease herein shall mean
such contract, agreement or lease and all exhibits, schedules and other
attachments thereto, as any such contract, agreement or lease may be
assigned, amended supplemented or otherwise modified in accordance with the
provisions of this Agreement. All references to any Person shall include such
Person's successors and permitted assigns.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant to it, accounting terms, to the extent not defined
in Section 1.1, shall have the respective meanings given to them under GAAP.
ARTICLE II
THE CREDITS
Section 2.1. COMMITMENTS TO LEND. During the Revolving Credit Period,
each Lender severally agrees, on the terms and conditions set forth in this
Agreement, to make revolving credit loans ("Loans") to the Borrower pursuant
to this Section from time to time in amounts such that the aggregate principal
amount of Loans by such Lender at any one time outstanding shall not (i)
exceed the amount of such Lender's share of the Loan Commitment nor (ii) when
added to such Lender's share of the Letter of Credit Exposure (after giving
effect to the use of proceeds of such Loans), exceed such Lender's share of
the Commitment. Each Loan shall be in a minimum principal amount of
$1,000,000 in the case of Reference Rate Loans, and $5,000,000 or any larger
multiple of $1,000,000 in the case of LIBOR Rate Loans, and shall be made
from the several Lenders ratably in proportion to their respective shares of
the Commitment. Within the foregoing limits, the Borrower may borrow under
this Section, or to the extent permitted by Section 2.11, prepay Loans and
reborrow at any time during the Revolving Credit Period under this Section.
Section 2.2. NOTICE OF BORROWINGS.
(a) NEW LOANS. The Borrower shall give the Agent notice (a "Notice of
Borrowing") substantially in the form of Exhibit 2.2(a), not later than 1:00
p.m. (Chicago time) on (x) the Business Day immediately preceding each
Reference Rate Loan and (y) the third LIBOR Business Day before each LIBOR
Rate Loan, specifying:
(i) the date such Loan is requested to be borrowed (the "Borrowing Date"),
which shall be a Business Day,in the case of a Reference Rate Loan, and a
LIBOR Business Day, in the case of a LIBOR Rate Loan,
(ii) the aggregate principal amount of such Loan,
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(iii) whether the Loan is to be a Reference Rate Loan or a LIBOR Rate
Loan or a LIBOR Rate Loan; and
(iv) in the case of a LIBOR Rate Loan, the duration of the Interest
Period applicable thereto, subject to the provisions of the definition of
Interest Period.
(b) CONTINUATION OR CONVERSION OF LOANS.
(i) Subject to the other provisions hereof (including without
limitation as to minimum amounts and integral multiples), the Borrower
shall have the option (A) to convert all or any part of the outstanding
Loans which are Reference Rate Loans to LIBOR Rate Loans, (B) to convert
on the applicable Interest Period End Date all or any part of the
outstanding LIBOR Rate Loans to Reference Rate Loans, and (C) to continue
on the applicable Interest Period End Date all or part of the outstanding
LIBOR Rate Loans as LIBOR Rate Loans for an additional Interest Period of
such duration as the Borrower shall elect.
(ii) To elect to convert, from or to, or continue as, a LIBOR Rate Loan
under this subsection, the Borrower shall notify the Agent of such
conversion or continuation by an irrevocable written notice specifying the
proposed commencement date thereof, which notice must be received by the
Agent no later than (A) the third Business Day prior to the proposed
commencement date of the Interest Period for such LIBOR Rate Loan
(in the case of a continuation of an existing LIBOR Rate Loan) for
an additional Interest Period or of the conversion of a Reference Rate
Loan to a LIBOR Rate Loan or (B) the conversion date (in the case of
a conversion of an existing LIBOR Rate Loan to a Reference Rate Loan).
(c) INTEREST RATE ELECTION DURING DEFAULT. Notwithstanding any of the
foregoing , (x) an outstanding LIBOR Rate Loan may not be continued as a
LIBOR Rate Loan and shall be converted to a Reference Rate Loan after the end
of the Interest Period with respect thereto if a Default or Event of Default
has occurred and is continuing as of the Interest Period End Date for such
LIBOR Rate Loan and (y) an outstanding Reference Rate Loan may not be
converted to a LIBOR Rate Loan if a Default or Event of Default has occurred
and is continuing as of the date such Reference Rate Loan is to be converted
to a LIBOR Rate Loan.
(d) LIMITATION ON LIBOR RATE LOANS. No more than five different LIBOR
Rate Loans may be outstanding at any one time.
Section 2.3. LETTERS OF CREDIT.
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(a) COMMITMENT TO ISSUE.
During the Revolving Credit Period, any Loan Party may from time to time
request that the Fronting Bank issue to its account letters of credit
("Letters of Credit") in an aggregate available amount not to exceed the
aggregate amount of the Letter of Credit Commitment, pursuant to which
Letters of Credit the Fronting Bank shall be obligated to the beneficiary to
pay any Drawings made thereunder and the Lenders shall be obligated to the
Fronting Bank to participate ratably in such Drawings in proportion to their
respective shares of the Letter of Credit Commitment as hereinafter provided.
If on one or more occasions a proposed beneficiary of a Letter of Credit
shall not accept a Letter of Credit from BMO, after the Loan Parties shall
have used reasonable efforts to cause such beneficiary to accept such Letter
of Credit, another Lender may, in its sole discretion (without hereby
committing to do so), issue its letter of credit to such beneficiary, in
which case any such letter of credit shall be a "Letter of Credit" hereunder
and such other Lender shall be the "Fronting Bank" hereunder with respect to
each such Letter of Credit.
(b) PARTICIPATION BY LENDERS. Subject to subsection (c) below, and in
accordance with its customary procedures (to the extent such procedures are
not inconsistent with the terms of this Agreement), the Fronting Bank agrees,
on the terms and conditions set forth in this Agreement and at the request of
the Borrower, to issue Letters of Credit for the account of the Borrower.
Each Lender agrees to participate ratably in proportion to its share in any
Drawings made under each Letter of Credit.
(c) CONDITIONS. In addition to the conditions precedent set forth in
Article IV, the obligation of the Fronting Bank to issue Letters of Credit
pursuant to subsection (b) above is subject to the following additional
conditions:
(i) all Letters of Credit issued hereunder shall be standby letters of
credit either (A) backing certain equity contribution and performance
obligations of the requesting Loan Party or any of its Consolidated
Subsidiaries in connection with the development or financing of existing
and future Projects or (B) backing the obligations of another bank or banks
under such other bank's or banks' letter(s) of credit (any such other
banks' letters of credit to be limited to the same purposes as under (A) of
this subparagraph (i)).
(ii) no Letter of Credit shall be issued if after giving effect to the
issuance thereof the aggregate outstanding principal amount of the Loans
and the aggregate
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Letter of Credit Exposure would together exceed the amount of the
Commitment; and
(iii) each Letter of Credit shall have an expiration date no later than
one Business Day prior to the Termination Date;
(iv) no Letter of Credit shall be issued in respect of any single Project
(including any combination or series of related transactions with respect to
a Project or series of Projects as a "single Project" for this purpose) if
after giving effect to the issuance thereof the portion of the Letter of
Credit Exposure in respect of such Project exceeds 20% of Borrower's Net
Worth (as determined at the time of such issuance by reference to the most
recently prepared consolidated financial statements of the Borrower);
(v) no Letter of Credit shall be issued in respect of any single Project
(including any combination or series of related transactions with respect to
a Project or series of Projects as a "single Project" for this purpose)
during the development phase of such Project (before receipt of construction
or long term financing) if after giving effect to the issuance thereof the
portion of the Letter of Credit Exposure in respect of such Project exceeds
10% of Borrower's Net Worth (as determined at the time of such issuance by
reference to the most recently prepared consolidated financial statements of
the Borrower);
(vi) no Foreign Currency Letter of Credit shall be available unless the
Agent determines that there is no Requirement of Law or internal bank policy
or limitation on capability restricting or limiting the issuance of such
Foreign Currency Letter of Credit; and
(vii) no Letter of Credit shall be issued in respect of any investments or
obligations of or relating to Sithe Asia in excess of an amount equal to
SII's ownership percentage of Sithe Asia multiplied by the amount of such
investment or obligation of Sithe Asia (any such excess, the "Excess
Amount"), unless sufficient capacity would exist under Section 6.2(g) to
incur the Excess Amount of such Letter of Credit as Indebtedness thereunder;
any such Letters of Credit issued as permitted by this clause (vii) shall
reduce the available capacity under such Section 6.2(g) by such Excess
Amount.
(d) NOTICE OF ISSUANCE. The requesting Loan Party shall give the Agent
notice (a "Notice of Issuance") substantially in the form of Exhibit 2.3(d)A,
at least two Business Days before each Letter of Credit is to be issued,
specifying: (a) the date of issuance and expiration date (subject to clause
(c)(iii) above) of such Letter of Credit,
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(b) the proposed terms of such Letter of Credit, including the face amount
(subject to clauses (c)(ii), (iv), (v) and (vii) above) thereof and, (c) the
transaction (including, in the case of Projects, the identity of the Project
that is to be supported or financed by such Letter of Credit, which must be a
Project participated in by such Loan Party or one of its Consolidated
Subsidiaries). The requesting Loan Party shall give the Agent notice in the
form of Exhibit 2.3(d)B (a "Notice of Amendment") at least two Business Days
prior to a requested amendment of an outstanding Letter of Credit. Upon
receipt of a Notice of Issuance or Notice of Amendment, the Fronting Bank
shall promptly notify the Agent which shall promptly notify each Lender of
the contents thereof and of the amount of such Lender's participation in such
Letter of Credit and such Notice of Issuance or Notice of Amendment shall not
thereafter be revocable by the requesting Loan Party.
(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 accordance 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 Borrower (and
the Agent if the Agent is not the Fronting Bank), and the Agent shall
promptly notify each Lender of the amount of such Drawing paid by the
Fronting Bank and the amount of each Lender's participation therein,
subject to paragraph (k) of this Section 2.3.
(f) REIMBURSEMENT AND OTHER PAYMENTS BY THE LOAN PARTIES.
(i) If there is a Drawing under any Letter of Credit, the Loan Parties
irrevocably and unconditionally agree to reimburse the Fronting Bank for
all amounts paid by the Fronting Bank upon such Drawing, together with any
and all reasonable charges and expenses which any Lender or the Fronting
Bank may pay or incur relative to such Drawing and all such amounts due
from the Loan Parties shall bear interest on the amounts drawn at the
Reference Rate plus the Applicable Margin for each day from and including
the date such amount is drawn to but excluding the date such reimbursement
payment is received, but if such reimbursement payment is not received in
full by the Agent on the third Business Day after the Borrower receives
notice of such
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Drawing, such amounts shall thereafter bear interest at the Default Rate,
in each case subject to paragraph (k) of this Section 2.3. Such reimbursement
payment shall be due and payable (x) not later than 2:00 p.m. (Chicago time)
on the date the Fronting Bank notifies the Borrower of such Drawing, if such
notice is given at or before 1:00 p.m. (Chicago time) on such date, or (y)
not later than 11:00 a.m. (Chicago time) on the first Business Day succeeding
the date such notice is given, if such notice is given after 1:00 p.m.
(Chicago time). Deferral of the application of the Default Rate to the third
Business Day after a Drawing pursuant to the first sentence of this
subparagraph (i) shall not extend the due date of the reimbursement payment
set forth in the preceding sentence.
(ii) Each payment to be made by the Loan Parties pursuant to this Section
shall be made, in Federal or other funds immediately available in Chicago to
the Fronting Bank at its address referred to in Section 9.8.
(g) PAYMENTS BY LENDERS WITH RESPECT TO LETTERS OF CREDIT.
(i) Each Lender shall make available an amount equal to its share of any
Drawing under a Letter of Credit, subject to paragraph (k) of this Section
2.3, in Federal or other funds immediately available in Chicago, to the Agent
by 2:00 p.m. (Chicago time) on the Business Day following such Drawing,
together with interest on such amount at the Federal Funds Rate, at the
Agent's address specified herein (and, if it is not the Fronting Bank, the
Agent shall promptly make such amounts received from the Lenders available
to the Fronting Bank at the Fronting Bank's address specified herein, or if
the Agent is also the Fronting Bank, the Agent shall retain the funds in its
capacity as Fronting Bank); PROVIDED that each such Lender's obligation shall
be reduced by its share of any reimbursement theretofore paid by the Loan
Parties in respect of such Drawing pursuant to Section 2.3(f)(i). The
Fronting Bank (if it is not also the Agent) shall notify the Agent (and in
any case the Agent shall in turn promptly thereafter notify each such Lender)
of whether or not the Loan Parties have reimbursed the Fronting Bank within
the deadlines set in Section 2.3(f)(i) as soon as practicable after the
Fronting Bank knows of such reimbursement or failure to reimburse, and of the
amount (if any) of such Lender's obligation in respect of any Drawing under a
Letter of Credit in which a Lender is participating. Each Lender shall be
subrogated to the rights of the Fronting Bank against the Loan Parties to the
extent of all amounts due from such Lender to the Fronting Bank, plus
interest thereon, from and including the day such amount is due from such
Lender to the Fronting Bank to but excluding the day
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the Borrower makes payment to the Fronting Bank pursuant to Section
2.3(f)(i), whether before or after judgment at an applicable rate per annum
specified in Section 2.3(f)(i).
(ii) If any Lender fails to pay any amount required pursuant to subsection
(i) of this Section on the date on which such payment is due, interest shall
accrue on such Lender's obligation to make such payment, for each day from
and including the date such payment becomes due to but excluding the date
such Lender makes such payment at a rate per annum equal to the Federal
Funds Rate during such interest accrual period. Any payment made by any
Lender after 2:00 p.m. (Chicago time) on any Business Day shall be deemed
for purposes of the preceding sentence to have been made on the next
succeeding Business Day.
(iii) If the Loan Parties shall reimburse the Fronting Bank for any
Drawing under a Letter of Credit after the participating Lenders shall have
made funds available to the Agent with respect to such Drawing in accordance
with subsection (i) of this Section, the Agent shall promptly upon receipt
of such reimbursement distribute to each participating Lender its ratable
share thereof, including interest, to the extent received by the Agent. If
in the foregoing case the Agent (if it is not the Fronting Bank) shall have
paid over to the Fronting Bank such amount received from such Lenders, the
Fronting Bank shall pay such amount back to the Agent for distribution to
such Lenders as aforesaid.
(h) LETTER OF CREDIT FEES.
(i) The Loan Parties agree to pay to the Agent a letter of credit fee with
respect to each Letter of Credit, 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 rate set forth in the applicable pricing grid
attached hereto as Exhibit I (subject to subparagraph (ii) below), in each
case per annum on the aggregate amount available for Drawing under such
Letter of Credit from time to time (subject to paragraph (k)(i) of this
Section 2.3 in the case of Foreign Currency Letters of Credit), such fee to
be for the account of the participating Lenders ratably in proportion to
their respective shares of the Letter of Credit Commitment or, if the entire
such Letter of Credit Commitment shall have been terminated, in proportion
to their respective shares immediately before such termination. Such fee
shall be payable quarterly in arrears on each Quarterly Date for so long as
such Letter of Credit is outstanding and, also in arrears, upon the Letter of
Credit Termination Date. The calculation of such fee shall be made by the
Fronting Bank
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and the allocation thereof among the participating Lenders shall be
calculated by the Agent which shall so notify the participating Lenders.
(ii) Notwithstanding the foregoing subparagraph (i), during the
continuance of an Event of Default the rate for the Letter of Credit Fee
shall be 2% per annum with respect to such Letter of Credit plus the amount
of Letter of Credit Fee otherwise applicable pursuant to subparagraph (i)
above.
(i) LIMITED LIABILITY OF THE FRONTING BANK. The Loan Parties assume all
risks of the acts or omissions of any beneficiary of any letter of Credit and
any successor beneficiary to whom such Letter of Credit has been transferred
in accordance with its terms (a "Transferee Beneficiary") with respect to its
use of such Letter of Credit. The Agent, the Lenders, the Fronting Bank and
their respective officers, directors, employees and agents shall not be
liable or responsible for, and the obligations of each Lender to make
payments (other than obligations of such Lender to the extent resulting from
the gross negligence or willful misconduct of the Fronting Bank) and of the
Loan Parties to reimburse the Fronting Bank for payments (other than
obligations of such Lender to the extent resulting from the gross negligence
or willful misconduct of the Fronting Bank), pursuant to this Section shall
not be excused by, any action or inaction of any Agent, any Lender or the
Fronting Bank related to (a) the use which may be made of any Letter of
Credit or any acts or omissions of any beneficiary or Transferee Beneficiary
in connection therewith; (b) the validity, sufficiency or genuineness of
documents presented under any Letter of Credit, or of any endorsements
thereon,even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged (other than, in
connection therewith, any action or inaction of the Fronting Bank which is
determined by a court of competent jurisdiction to constitute gross
negligence of willful misconduct); or (c) payment by the Fronting Bank
against presentation of documents to the Fronting Bank 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 the Letter of Credit.
Notwithstanding the foregoing, Borrower shall have a claim against the
Fronting Bank, and the Fronting Bank 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 were caused by (a) the Fronting Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms thereof or (b) the
Fronting Bank's willful failure to pay any Letter of Credit after the
presentation to the Fronting Bank by any beneficiary (or Transferee
Beneficiary) of documents strictly complying with the terms and conditions of
such Letter of Credit. Subject to the two preceding sentences, the Fronting
Bank may accept documents that appear on their face to comply with the terms
of the Letter of Credit without
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responsibility for further investigation, regardless of any notice or
information to the contrary unless any beneficiary (or Transferee
Beneficiary) and the Loan Parties shall have notified the Fronting Bank that
such documents do not comply with the terms and conditions of such Letter of
Credit. Each Lender shall, ratably in accordance with its share of the Letter
of Credit Commitment, indemnify the Fronting Bank (to the extent not
reimbursed by the Loan Parties) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except
such as result from the Fronting Bank's gross negligence or willful
misconduct) that the Fronting Bank may suffer or incur in connection with
this Agreement or any action taken or omitted by the Fronting Bank hereunder.
(j) Pursuant to letter agreements dated on or near the Closing Date,
Banque Nationale de Paris (Los Angeles Agency) ("BNP), Bank of Montreal, the
other lenders party to the Existing Loan Agreement and the Loan Parties have
entered into satisfactory arrangements with respect to keeping the existing
BNP letters of credit in place, supported by back-to-back Letters of Credit
from the Fronting Bank and a separate reimbursement obligation from the Loan
Parties.
Each of the Agent, the Lenders and the Loan Parties acknowledges and
agrees that the Existing Letters of Credit constitute Letters of Credit
outstanding under this Agreement on and as of the Closing Date. The Lenders
hereby severally and unconditionally agree to participate in the Existing
Letters of Credit under the terms of this Agreement as though originally
issued hereunder as Letters of Credit. BMO and the Loan Parties agree that
the documentation between BMO and the Borrower in existence prior to the
Closing Date with respect to the Existing Letters of Credit (other than the
Existing Letters of Credit themselves) is hereby terminated as of the Closing
Date and superseded by this Agreement.
(k) (i) With respect to outstanding Foreign Currency Letters of Credit,
the Foreign Currency Letters of Credit, the Fronting Bank shall, in
accordance with its customary procedures, convert that portion of the Letter
of Credit Exposure attributable to such Foreign Currency Letters of Credit
to an equivalent amount of Dollars on (A) the date any Foreign Currency
Letter of Credit is issued, (B) the first Business Day of each calendar
month thereafter, (C) the date of any Drawing under any Foreign Currency
Letter of Credit and (D) every Letter of Credit Termination Date. The
obligations of the Loan Parties with respect to any amounts owing by the
Loan Parties with respect to any amounts owing by the Loan Parties with
respect to such Foreign Currency Letters of Credit shall be payable in such
Dollar equivalent as most recently determined by the Fronting Bank in
accordance with the preceding sentence, except in the case of certain
specified fees related to such Foreign Currency Letters of Credit, the
calculation for which fees (therein specified) is described in subparagraph
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(k)(ii) below. Payments owing by or owing to the Lenders with respect to
Foreign Currency Letters of Credit shall similarly be payable in the Dollar
equivalent of any applicable Foreign Currency amount on the date paid or
received by such Lender, as most recently determined by the Fronting Bank in
accordance with the first sentence of this paragraph (k). The Commitment and
the Letter of Credit Commitment shall each be reduced by an amount equal to
100% of the Dollar equivalent (determined as aforesaid) of that portion of
the Letter of Credit Exposure attributable to outstanding Foreign Currency
Letters of Credit.
(ii) Those portions of (x) the letter of credit fees
described in subsection (h) of Section 2.3 and (y) the
fronting fee described in Section 2.8(c), which in each case
are attributable to outstanding Foreign Currency Letters of
Credit, shall be calculated as follows: the applicable fee
percentage shall be multiplied by the amount available in
such Foreign Currency during the period for which each such
fee is payable, and such Foreign Currency amount shall be
converted by the Fronting Bank (in accordance with its
customary procedures) to the Dollar equivalent thereof on
the date such fee is due and payable, and such Dollar
equivalent shall be payable by the Loan Parties on such date
if the Borrower receives a request for payment therefor on
or prior to 4:00 p.m., Chicago time (and, if not, it shall
be payable on or before 2:00 p.m. (Chicago time) of the
Business Day next succeeding such date).
Section 2.4 NOTICE TO LENDERS; FUNDING OF LOANS.
-----------------------------------
(a) Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Lender of the contents thereof and of
such Lender's share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 1:00 p.m. (Chicago time) on the
Borrowing Date, each Lender participating therein shall (except
as provided in subsection (c) of this Section) make available its
ratable share of such Borrowing, in Federal or other funds
immediately available in New York, to the Agent at its address
specified in or pursuant to Section 9.8. 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 Lenders available to the Borrower at the Agent's
aforesaid address before 5:00 p.m. (Chicago time) on the date
received.
(c) If any Lender makes a new Loan hereunder on a day
on which the Borrower is to repay all or any part of an
outstanding Loan from such Lender, such Lender 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
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such Lender to the Agent as provided in subsection (b), or remitted by the
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received written notice from a Lender
prior to the date of any Borrowing that such Lender will not make available
to the Agent such Lender's share of such Borrowing, the Agent may assume that
such Lender has made such share available to the Agent on the Borrowing Date
in accordance with subsections (b) and (c) of this Section 2.4 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such share available to the Agent, such Lender and the 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 the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, a rate per annum equal to the
higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.7 and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Agent such corresponding
principal amount, such principal amount so repaid shall constitute such
Lender's Loan for purposes of this Agreement.
Section 2.5 NOTES.
(a) The Loans of each Lender shall be evidenced by a single promissory
note ("Note"), substantially in the form of Exhibit 2.5(a), payable to the
order of such Lender in an amount equal to the aggregate unpaid principal
amount of such Lender's Loans.
(b) Upon receipt of each Lender's Note pursuant to Section 2.5(a), the
Agent shall mail or otherwise deliver such Note to such Lender. Each Lender
shall record the date, amount, type and maturity of each Loan made by it and
the date and amount of each payment of principal made by the Borrower with
respect thereto, and prior to any transfer of its Note shall endorse on the
schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding;
PROVIDED that the failure of any Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Lender is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
Section 2.6. USE OF LOAN PROCEEDS. The Borrower shall use the proceeds of
the Loans solely for its general corporate purposes in the ordinary course of
business, and shall not, in any event, use the proceeds of the Loans to
finance any
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acquisition that the Majority Lenders reasonably conclude is "hostile."
Section 2.7. INTEREST RATES.
(a) Each Reference Rate 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 sum of the Reference Rate for
such day plus the Applicable Margin. Such interest shall be payable in
arrears on each Quarterly Date. Any overdue principal of or interest on any
Reference Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate.
(b) Each LIBOR Rate Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at the rate per
annum equal to the sum of the Adjusted LIBOR Rate plus the Applicable Margin.
Such interest shall be payable for each Interest Period on the Interest Period
End Date with respect thereto and, if sooner, on the date that is three months
after the date on which such LIBOR Rate Loan is made.
(c) Any overdue principal of or interest on any LIBOR Rate 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 Default Rate.
(d) During the continuance of an Event of Default, all Loans shall bear
interest at 2% above the rate otherwise applicable thereto.
(e) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the Lenders
by telephone, telecopier, telex or cable of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence
of manifest error.
Section 2.8. FEES.
(a) COMMITMENT FEE. The Borrower shall pay to the Agent for the account
of the Lenders in proportion to their ratable share of the aggregate
Commitment a commitment fee at the rate per annum set forth on the applicable
pricing grid attached hereto as Exhibit I, on the daily average amount by
which the Commitment exceeds the sum of the aggregate outstanding principal
amount of the Loans and the Letter of Credit Exposure. Such commitment fee
shall accrue from and including the Closing Date to but excluding the
Termination Date, subject to Section 2.9.
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(b) AGENT'S FEES. The Borrower shall pay to the Agent for its own account
an annual administrative fee as set forth in the letter dated the Closing
Date from BMO to the Borrower.
(c) FRONTING FEE. The Borrower shall pay to the Fronting Bank for its own
account an annual fronting fee of 0.08% per annum, or, if the Fronting Bank
is not BMO, a percentage per annum as agreed between the Borrower and such
Fronting Bank, on the aggregate amount available for Drawings under
outstanding Letters of Credit (subject to Section 2.3(k)(ii)), together with
applicable documentary and processing charges, such charges to be as
described in Exhibit 2.8(c) (or, in the case of any other Lender acting as
Fronting Bank with respect to a Letter of Credit, as such charges are
otherwise disclosed to the Borrower).
(d) UNDERWRITING FEE. The Borrower shall on the Closing Date pay to BMO
an underwriting fee as set forth in the letter agreement dated November 20,
1997 between BMO and the Borrower.
Section 2.9 FEE PAYMENTS. Accrued fees under Section 2.8(a) and 2.8(c)
shall be payable quarterly in arrears on each Quarterly Date and upon the
Termination Date, PROVIDED that fees under 2.8(c) shall continue to accrue
after the Termination Date and be payable quarterly in arrears on each
Quarterly Date thereafter so long as there remains any Letter of Credit
Exposure. The Agent's fee described in Section 2.8 (b) shall be payable
annually in advance on the Closing Date and on each one year anniversary
thereof and such fee shall continue to be payable annually beyond the
Termination Date so long as the Obligations have not been repaid in full. Any
such Agent's fees accruing after the Termination Date shall be payable
annually in advance. Any past due fees and any other past due amounts owing
under this Agreement shall bear interest at the Default Rate. To the extent
that, prior to the Termination Date, the Obligations are paid in full and the
Commitment is terminated so that the Lenders no longer have any obligations
to extend credit under the Loan Instruments, any Agent's fees described in
Section 2.8(b) theretofore paid in advance for the final 12 month period
under this Agreement shall be rebated to the Borrower in proportion to that
portion of such final 12 month period which includes complete calendar months
after the Lenders' obligations have so ended.
Section 2.10. MANDATORY TERMINATION OF COMMITMENT. The Commitment shall
terminate on the Termination Date, and any Loans and any Reimbursement
Obligations with respect to Letters of Credit then outstanding (together with
accrued interest thereon) shall be due and payable on such date. Without
making any commitment to extend the Termination Date or otherwise incurring
any legal obligation to the Loan Parties with respect thereto, the Agent and
Lenders agree to consider requests from the Borrower for an extension of the
Termination Date effective
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on each of the first and second anniversaries of the Closing Date, on terms
satisfactory to the Agent and all of the Lenders in their sole discretion,
such requests from the Borrower to be made no later than 3 months prior to
each such anniversary, respectively. It is the current intention of the Agent
and the Loan Parties that this Agreement will be syndicated among an
additional group of Lenders after the Closing Date, and that, upon completion
of a successful syndication, this Agreement will be amended and restated to,
among other things, extend the Termination Date, provided that the Agent
undertake no commitment or legal obligation to complete such a syndication.
Section 2.11. PREPAYMENTS.
(a) The Borrower may, (i) upon at least one Business Day's written notice
to the Agent, prepay any Reference Rate Loan or (ii) on at least three
Business Days' written notice and subject to the provisions of Section
2.11(b), prepay any LIBOR Rate Loan, in either case in whole at any time or
from time to time in part in amounts aggregating $1,000,000 or any larger
multiple thereof, 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 LIBOR Rate Loan may be made if the principal
balance of such LIBOR Rate. Loan outstanding after such prepayment is less
than $5,000,000. Each such optional prepayment shall be applied to prepay
the Loans of the several Lenders in accordance with their respective shares
thereof.
(b) The Borrower may not prepay all or any portion of the principal
amount of any LIBOR Rate Loan prior to the Interest Period End Date
applicable thereto except upon payment of breakage costs as contemplated by
Section 2.13.
(c) Upon receipt of a notice of prepayment pursuant to this Section 2.11,
the Agent shall promptly notify such Lender of the contents thereof and of such
Lender's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
(d) The Borrower shall from time to time prepay Loans immediately in an
amount equal to the amount by which the sum of the Letter of Credit Exposure
plus the outstanding amount of Loans exceeds the aggregate Commitment,
whenever that occurs.
Section 2.12. GENERAL PROVISIONS AS TO PAYMENTS.
(a) The Borrower shall make each payment of principal of , and interest
on, the Loans and of fees hereunder, no later than 1:00 p.m. (Chicago time)
on the date when due, in Federal or other funds immediately available in
Chicago, to the Agent at its address referred to in Section 9.8. The Agent
will promptly distribute to each Lender its ratable share of each such payment
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received by the Agent for the account of the Lenders. Whenever any payment of
principal of, or interest on, the Reference Rate Loans or of fees shall be
due on a day which is not a Business Day, the date for payment thereof shall
be extended to the next succeeding Business Day. Whenever any payment of
principal of, or interest on, the LIBOR Rate Loans shall be due on a day
which is not a LIBOR Business Day, the date for payment thereof shall be
extended to the next succeeding LIBOR Business Day unless such LIBOR Business
Day falls in another calendar month, in which case the date for payment
thereof shall be the next preceding LIBOR 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 written notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that
the Borrower will not make such payment in full, the Agent may assume that
the 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
Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent that the Borrower shall not have so made such payment,
each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from
the date such amount is distributed to such Lender until the date such Lender
repays such amount to the Agent, at the Federal Funds Rate.
Section 2.13. FUNDING COSTS. The Borrower agrees to pay each Lender an
amount equal to any actual loss (excluding loss of anticipated profits), cost
or out-of-pocket expense which such Lender determines is attributable to (i)
default by the Borrower in payment when due of the principal amount of or
interest on any LIBOR Rate Loan (or portion thereof) of such Lender, (ii)
failure of the Borrower to borrow any LIBOR Rate Loan after the Borrower has
selected a LIBOR Rate Loan pursuant to Section 2.2(a) (except to the extent
such failure is caused by such Lender's own default), (iii) failure of the
Borrower to convert any Reference Rate Loan to a LIBOR Rate Loan after the
Borrower has given any notice pursuant to Section 2.2(b) regarding such
conversion, (iv) failure by the Borrower to make any prepayment of any LIBOR
Rate Loan after the Borrower has given any notice regarding such prepayment
or (v) the making of a prepayment (including, without limitation, on
acceleration) or the conversion of any LIBOR Rate Loan on a day which is
other than the end of the Interest Period with respect thereto, including,
without limitation, in each case, any such loss, cost or expense arising from
the reemployment of funds obtained by such Lender to maintain its LIBOR Rate
Loan, as the case may be, or from fees payable to terminate the deposits from
which such funds were obtained.
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Section 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the
Reference 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.
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.
Section 2.15. WITHHOLDING TAX EXEMPTION. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America or a state thereof agrees that it will deliver
to each of the Borrower and the Agent two duly completed copies of (a) Form 1001
or Form 4224, or (b) if the Lender is not a "bank" within the meaning of
"Section 881(c)(3)(A) of the Code and cannot deliver either Form 1001 or
Form 4224, it will deliver (i) Form W-8 and (ii) a certification that such
Lender is not a bank for purposes of such section, is not a 10 percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of any
Loan Party, is not a controlled foreign corporation related to any Loan Party
(within the meaning of Section 864(d)(4) of the Code) and is entitled to
receive payments hereunder payable to it without deduction or withholding of
any United States Federal income taxes, or subject to a reduced rate thereof,
all such documents certifying in either case that such Lender is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or Form 4224 further undertakes to deliver to each of the
Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
so delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Agent, in each
case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the
Borrower and the Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax. By becoming
a party to this Agreement, each Lender represents and warrants to the
Borrower that, as of the date such Lender becomes a party hereto, such Lender
is entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes.
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Section 2.16 SECURITY FOR THE OBLIGATIONS. (i) The Loan Parties covenant
and agree that the Notes and all other Obligations will be secured by:
(a) security agreements in the form of Exhibit 2.16(a) (the "Security
Agreement");
(b) a deposit, disbursement and security agreement in the form of
Exhibit 2.16(b) (the "Deposit, Disbursement and Security Agreement") and, if
the Agent so requests, separate collateral assignments of the Accounts in
form and substance reasonably satisfactory to the Agent;
(c) collateral assignments of Partnership Interests in the form of Exhibit
2.16(c)(i) and (ii), as applicable (the "Assignments of Partnership
Interest"), together with any necessary consents to such assignments;
(d) stock pledges in the forms of Exhibit 2.16(d)(i), (ii) and (iii) (the
"Stock Pledge Agreements"), together with stock powers; and
(e) such other collateral documents as the Agent may from time to time
reasonably require to further evidence the Collateral described in the
foregoing clauses (a) through (d), and/or to grant to the Agent for the
ratable benefit of the Secured Parties a security interest in all right,
title and interest of the Secured Parties in the Collateral;
PROVIDED that (i) upon the closing of construction or long term limited
recourse financing with respect to a Project not in existence on the Closing
Date or (ii) upon the sale for not less than book value to a third party,
who is not an Affiliate of a Loan Party, of a Project development entity, or
(iii) upon the closing of long-term limited recourse financing with respect
to non-Project energy related investments, or (iv) in each case in which a
Loan Party (or wholly owned Subsidiary thereof) holds Stock Interests or
Partnership Interests that are subject to pledge pursuant to the Collateral
Security Documents, the Agent shall release such pledge (excluding the pledge
of stock or partnership interests of a Loan Party) upon the request of the
Borrower if required by a lender or group of lenders to such Project or the
buyer of such Project development entity or such non-Project investment (as
the case may be), but without warranty by or recourse to any Secured Party;
PROVIDED, also that should the Borrower obtain an Investment Grade Rating,
the Agent shall, upon written request of the Borrower, release the security
interests of the Secured Parties in that portion of the Collateral pledged
pursuant to Assignments of Partnership Interests and Stock Pledge Agreements,
but without warranty by or recourse to any Secured Party, and subject to a
surviving negative pledge (VIZ., Section 6.3 hereof)
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of such released Collateral; PROVIDED FURTHER that in no event shall the Agent
be required to release Collateral consisting of the Accounts or the pledged
stock or partnership interests of a Loan Party.
(ii) Upon written request from the Borrower to the Agent, the percentage
of stock or other ownership interest otherwise required to be pledged as
Collateral under the Loan Instruments with respect to an entity organized
outside the United States may be limited, or other collateral within the
United States or of a United States organized entity substituted for such
pledged interests, so as to avoid a material adverse tax effect on the
Borrower, but only if the Agent, exercising its discretion, reasonably
concludes that such limitation or substitution will not materially diminish
the value and the quality of the overall Collateral hereunder.
Section 2.17. APPLICATION OF PAYMENTS. Except as otherwise specifically
provided herein, each payment received by the Agent or any Lender shall be
applied as follows: (i) first against costs, expenses and indemnities due to
the Agent and/or the Lenders under the Loan Documents (proportionately); (ii)
then to the payment of accrued and unpaid interest; (iii) then to the payment
of any other fees or costs owing to the Agent and the Lenders
(proportionately) hereunder or under any Basic Document (other than any
amounts described in clause (v) below); (iv) then against principal and
Reimbursement Obligations; (v) then to the payment of any amounts payable
under Section 2.13; and (vi) then to any remaining Obligations.
Section 2.18 INTEREST. Anything in this Agreement notwithstanding, in the
event that the interest rate chargeable on any of the Obligations pursuant to
the terms of this Agreement shall exceed the highest lawful rate that may be
charged under applicable law, the interest rate shall be deemed to be equal
to the highest lawful rate.
Section 2.19 FUNDING AND YIELD PROTECTION.
(a) TAXES.
(i) NO DEDUCTIONS, ETC. All payments made by the Loan Parties to the
Agent and the Lenders hereunder or under the Notes will be made free and
clear of, and without deduction or withholding for, any present or future
Taxes and all interest, penalties or similar liabilities with respect
thereto, excluding net income and franchise taxes imposed on the Agent or
any Lender by (A) the jurisdiction under the laws of which the Agent or such
Lender is organized or any political subdivision or taxing authority thereof
or therein or, where such jurisdiction is a political subdivision of a
superior jurisdiction, such superior jurisdiction and any taxing authority
thereof, or (B) the United States or any
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state, and any taxing authority or political subdivision thereof, or (C)
any jurisdiction in which the office used to make any such Lender's LIBOR
Rate Loans hereunder is located or any political subdivision or taxing
authority thereof or therein. If any Taxes are so levied or imposed, the Loan
Parties agree to pay the full amount of such Taxes and such additional
amounts as may be necessary so that every payment of all amounts due to the
Agent or the Lenders hereunder or under the Notes, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in the Notes. The Loan Parties will furnish to the
Agent and each Lender within 30 days after the date the payment of any Taxes
is due pursuant to any Requirement of Law certified copies of tax receipts
evidencing such payment by the Loan Parties. The Loan Parties will indemnify
and hold harmless the Agent and each Lender, and reimburse the Agent or such
Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by the Agent or such Lender.
(ii) INCREASED PAYMENTS, ETC. If the Loan Parties are prohibited or
prevented by any Requirement of Law or otherwise from making any such payment
net, free and clean of any Taxes or from reimbursing such Agent or any
Lender for the cost of any such Taxes (as provided above), then the amount
of such payment to be made by the Loan Parties shall be increased by such
additional amount or amounts as may be necessary to ensure that the Agent
and each Lender shall receive a new amount which after payment of any Taxes
imposed shall be equal to the amount the Agent and such Lender, as
applicable, would have received had no such imposition been made.
(iii) The obligations of the Loan Parties under this Section 2.19(a)
shall survive the Termination Date, termination of the Commitment, payment
or prepayment of the Notes and any transfer of the Notes.
(b) INCREASED COSTS. If, with respect to any Loan or any of the Loan
Instruments (including the making or the maintenance by any Lender of any
Loan):
(i) The compliance by the Agent or any Lender with any direction,
requirement or request from any Governmental Authority, whether or not
having the force of law, with which such Person must reasonably comply; or
(ii) the application or interpretation of any law or regulation or the
enactment of any law or regulation after the date hereof imposing, modifying
or deeming applicable any reserve requirement (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve
System (but excluding any reflected in the applicable
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Eurodollar Reserve Percentage) on nonpersonal Dollar time deposits in the
continental United Stated in an amount of $100,000 or more), deposit
requirement (including, without limitation, any requirement relating
to the rate at which deposit insurance premiums are assessed),
capital adequacy requirement or similar requirement with respect
to any class of assets or liabilities of, deposits with or for the account
of, or loans by any Lender (or with respect to any change therein or in the
amount thereof); or
(iii) the occurrence after the date hereof of any other condition or
circumstances relating only to the affected Agent or Lender and arising
solely as a result of any exercise of discretion of the affected Agent or
Lender) with respect to this Agreement and/or the maintenance by any Lender
of its ratable share of any Loan,
shall (A) result in any increase in cost to the Agent or any Lender in
connection with or arising out of any Loan, any Note or any other Loan
Instrument, (B) result in any reduction in the amount of any payment
receivable by the Agent or Lender hereunder or thereunder or (C) result in
any reduction of the rate of the return on the Agent's or any Lender's
capital as a consequence of its obligations hereunder below that which such
Agent or Lender could have achieved but for such circumstances, then in each
such case the Loan Parties shall fully reimburse the Agent or Lender the
amount of such increase in cost, reduction in payment receivable or reduction
in rate of return promptly after written notification thereof to the Borrower
and the Agent by the Agent or Lender, which notification shall include the
Agent's or Lender's relevant calculations and all relevant additional facts,
assumptions and information that the Agent or Lender customarily provides in
like circumstances. Each of the Agent and Lenders shall (consistent with its
internal policies and legal and regulatory restrictions) use its reasonable
efforts to avoid such Borrower prompt notice thereof and granting the
Borrower the opportunity to convert to an alternative arrangement, PROVIDED
that the Loan Parties promptly pay when due all reasonable fees and expenses
of the Agent and the Lenders incurred or to be incurred in connection with
such alternative arrangement.
If the Borrower so requests within ten days of notice to the Borrower of
any such increased costs of a type not generally imposed on United States or
foreign lenders making loans of the types contemplated hereunder, the Agent
shall use reasonable efforts to arrange an assignment of such Lender's
proportionate share of the Commitment, to an assignee selected by the Agent
or the Borrower (and reasonably acceptable to each of them) subject to the
provisions of Section 2.19(e) hereof, and such assigning Lender hereby
consents to any such assignment.
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(c) CHANGE OF LAW. After the date hereof if any change in any Requirement
of Law or the interpretation thereof by any Governmental Authority makes it
unlawful for any Lender to make or continue its proportionate interest in any
Loan, then such Lender shall promptly give notice along with evidence thereof
to the Borrower and the Agent, and the Loan Parties shall pay forthwith all
amounts outstanding, accrued or payable under this Agreement and the Note(s)
to such Lender; PROVIDED that if the Borrower so requests of a Lender within
ten days of receipt of the notice referred to above, such Lender shall
(consistent with its internal policies and legal and regulatory restrictions)
negotiate with the Borrower an assignment of its proportionate share of the
Commitment to an assignee selected by the Agent or the Borrower (and
reasonably acceptable to each of them) subject to the provisions of Section
2.19(e) hereof, and such assigning Lender hereby consents to such assignment.
If a transfer or assignment is not agreed to by the Agent, the Borrower and
the affected Lender, then the Loan Parties shall pay forthwith all amounts
outstanding, accrued or payable under this Agreement and the Note to or with
respect to such Lender.
(d) NON-AVAILABILITY.
(i) If at any time Dollar deposits in the principal amount of any
Lender's proportionate interest in, or obligation under, any LIBOR Rate
Loan are not available to such Lender in the London interbank market for
the next Interest Period, such Lender shall so notify the Agent, who shall
so notify the Borrower, and the LIBOR Rate basis for such Loan shall be
suspended, and such Lender's proportionate share of the LIBOR Rate Loans
shall thereafter be Reference Rate Loans. If the Borrower so requests
within ten days of notice to the Borrower of any such non-availability, the
Agent shall use reasonable efforts to arrange an assignment of such
Lender's proportionate share of the Commitment to an assignee selected by
the Agent or the Borrower (and reasonably acceptable to each of them)
subject to the provisions of Section 2.19(e) hereof, and such assigning
Lender hereby consents to any such assignment.
(ii) If at any time the interest rate then in effect based on the LIBOR
Rate does not serve as an accurate reference, in the reasonable judgment of
any Lender, for such Lender to determine the cost of advancing or
maintaining its respective proportionate share in any LIBOR Rate Loan
during any Interest Period, then such Lender shall notify the Agent, who
shall so notify the Borrower, and interest on such Lender's proportionate
share of the LIBOR Rate Loans shall thereafter accrue at an interest rate
determined by reference to an alternate basis; PROVIDED, that if no other
interest rate serves as an accurate reference for such Lender, then such
Lender shall so notify
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the Agent, who shall so notify the Borrower, and such Lender's
proportionate share of the LIBOR Rate Loans shall thereafter be Reference
Rated Loans. If the Borrower so requests within ten days of notice to the
Borrower pursuant to this Section 2.19(d)(ii), the Agent shall use
reasonable efforts to arrange an assignment of such Lender's proportionate
share of the Commitment, to an assignee selected by the Agent or the
Borrower (and reasonably acceptable to each of them) subject to the
provisions of Section 2.19(e) hereof, and such assigning Lender hereby
consents to any such assignment.
(iii) If any conversion pursuant to this Section 2.19(d) is made on a
day that is not the Interest Period End Date for a complete Interest
Period with respect to such LIBOR Rate Loans, the Loan Parties shall pay
to the Lender such amount or amounts as may be necessary to compensate
such Lender for any loss or expense sustained or incurred by such Lender
in respect of its LIBOR Rate Loans as a result of such conversion,
including but not limited to any interest or fees payable by the Lender
to lenders of funds obtained by it in order to make or maintain the LIBOR
Rate Loans hereunder. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by the Lender to the
Borrower shall be conclusive and binding for all purposes, absent manifest
error.
(e) ASSIGNMENTS BY LENDERS. Any assignment or transfer made by a Lender
pursuant to Section 2.19 hereof shall satisfy the following conditions: (i)
the Loan Parties shall promptly pay when due all reasonable fees and expenses
of such Lender incurred or to be incurred in connection with such transfer or
assignment and (ii) any assignment of all or part of the Commitment shall be
made without recourse, representation or warranty (other than the
representation or warranty that the assignor is the legal and beneficial
owner of the interest being assigned, free and clear of any adverse claim),
and the Assignee shall pay to the Agent for the account of the assigning
Lender in immediately available funds all amounts outstanding or payable
under this Agreement and any other Loan Instrument to each Lender assigning
its interest in the Commitment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the Loan Parties represents and warrants that:
Section 3.1 EXISTENCE AND BUSINESS. It is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business as a foreign corporation under the laws of
every other
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jurisdiction where the ownership or lease of its assets requires it to so
qualify, except where the failure to so qualify would not reasonably be
expected to have a Material Adverse Effect. It has full corporate power,
authority and legal right to conduct its business as conducted as of the
Closing Date.
Section 3.2 SUBSIDIARIES. As of the Closing Date, it has no Subsidiaries
except as set forth on Schedule 3.2. As of any other date on which this
representation and warranty is made or deemed made, it has no Subsidiaries
except as disclosed to the Lenders pursuant to an amended Schedule 3.2
delivered to the Agent simultaneously with the financial statements required
to be delivered to the Agent pursuant to Section 5.7(b) (other than
Subsidiaries created or acquired since the most recent such date), and the
creation, acquisition or investment in any such new Subsidiary complies with
the terms of this Agreement. The capital stock of each of the Subsidiaries
identified in Schedule 3.2 as amended from time to time is duly authorized,
validly issued, fully paid and nonassessable and none of such capital stock
constitutes "margin stock" within the meaning of Regulation G or U of the
Board of Governors of the Federal Reserve System. Each of the Subsidiaries
identified on Schedule 3.2 as amended from time to time is validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation set forth therein, has full corporate power and authority to
own its assets and properties and to operate its business as presently owned
and conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry
out its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 3.2 annexed
hereto and as amended from time to time when and as required by this
Agreement correctly sets forth the ownership interest of each of the Loan
Parties in each of its Subsidiaries identified therein.
Section 3.3 POWER AND AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
(a) It has full corporate power and authority and the legal right to
execute, deliver and perform this Agreement, the Notes (in the case of the
Borrower) and the other Basic Documents to which it is a party, to take all
actions necessary to complete the transactions contemplated by this
Agreement, the Notes (in the case of the Borrower) and such other Basic
Documents and to grant the liens and security interests provided for in the
Collateral Security Documents to which it is a party and, in the case of the
Borrower, to borrow hereunder. It has taken all necessary corporate action to
authorize the transactions contemplated hereby on the terms and conditions of
this Agreement and the other Basic Documents to which it is a party, to grant
the liens and security interests provided for in the Collateral
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Security Documents to which it is a party and to authorize the execution,
delivery and performance of this Agreement, the Notes (in the case of the
Borrower) and the other Basic Documents to which it is a party.
(b) Each of this Agreement, the Notes (in the case of the Borrower) that
have been delivered to the Lenders and the other Basic Documents to which it
is a party has been duly executed and delivered by it and constitutes its
legal, valid and binding obligation enforceable against it in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or by limitation upon the
availability of equitable remedies.
Section 3.4 COLLATERAL SECURITY DOCUMENTS. The Collateral Security
Documents are or when executed will be effective to create, in favor of the
Secured Parties, legal, valid, enforceable and perfected and first priority
Liens (subject to Permitted Liens) on and security interests in all of the
Collateral. The descriptions of the Collateral set forth in the Collateral
Security Documents are true, complete and correct in all material respects
and are adequate for the purpose of establishing, preserving, protecting and
perfecting the interests, rights and first priorities intended to be created
by the Collateral Security Documents. All necessary and appropriate
recordings, filings and registrations have been or will be duly effected in
all appropriate public offices and stock and partnership registers so that on
or immediately following the Closing Date each of the Collateral Security
Documents constitutes or will constitute a perfected first Lien on and prior
perfected first security interest in all right, title, estate and interest of
the owner thereof in and to the Collateral (subject only to Permitted Liens).
The recordings, filings and other actions shown on Schedule 3.4 are all the
recordings, filings and other actions necessary and appropriate in order to
establish, protect and perfect the Agent's lien on and security interest in
the right, title, estate and interest of the owner thereof in and to the
Collateral for the ratable benefit of the Secured Parties.
Section 3.5 NO LEGAL BAR. The execution, delivery and performance of
this Agreement, the Notes (in the case of the Borrower) and the other Basic
Documents to which it is a party will not (a) violate any Requirement of Law
applicable to it, or any of its material Contractual Obligations or (b)
result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any Requirement of Law or Contractual
Obligation, except for the Liens created or permitted by the Collateral
Security Documents. No approvals or consents of any trustee or any holder of
any of its Indebtedness are required in connection with its execution,
delivery and performance of any Basic Documents to which it is a party,
except
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such approvals or consents as are set forth on Schedule 3.5, which consents
and approvals have been duly obtained and are in full force and effect.
Section 3.6 GOVERNMENTAL APPROVALS AND OTHER CONSENTS
AND APPROVALS. Except as set forth on Schedule 3.6, no Governmental Approvals
or other consents or approvals except routine filings, registrations and
permits which are ministerial in nature (collectively, the "Approvals") are
required to be obtained by it or any of its Affiliates in connection with its
participation or its Affiliates' participation, in the transactions
contemplated by this Agreement and the other Basic Documents, or the
execution, delivery or performance by it or any of its Affiliates, of any
Basic Document to which it is a party, in accordance with the applicable
provisions of the Basic Documents and in compliance in all respects with all
applicable Requirements of Law, in each case as of the Closing Date and on
any other date this representation and warranty is made or deemed made,
subject to the next succeeding sentence. To the extent the foregoing
representation or warranty is made or deemed made on a date other than the
Closing Date it shall be subject to the exclusion of additional Approvals the
absence of which would not reasonably be expected to have a Material Adverse
Effect. The Approvals set forth on Schedule 3.6 are (i) in full force and
effect, (ii) have been validly issued in the name of the Person required to
receive it and in compliance with all Requirements of Law and (iii) not
subject to appeal or any restriction, condition, limitation or other
provision that in the sole judgment of the Majority Lenders has, or would be
reasonably expected to have, a Material Adverse Effect.
Section 3.7 FINANCIAL STATEMENTS.
(a) The consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 1995 and 1996 and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal
years then ended, reported on by Deloitte & Touche, a copy of each of which
has been delivered to each of the Lenders, fairly present in all material
respects, in conformity with GAAP, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such dates and their
consolidated results of operations and cash flows for each such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of September 30, 1997 and the related unaudited
consolidated statements of operations and cash flows for the nine months then
ended, a copy of which has been delivered to each of the Lenders, fairly
present in all material respects, in conformity with GAAP applied on a basis
consistent with the financial statements referred to in subsection (a) of
this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of
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such date and their consolidated results of operations and cash flows for
such nine month period (subject to normal year-end adjustments).
(c) Since December 31, 1996, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
(d) The Pro Forma Financial Statements for the Borrower and the
Consolidated Subsidiaries (copies of which have been furnished to the Agent
and have been certified by a Responsible Officer of the Borrower), together
with any notes or schedules related thereto, are complete and correct in all
material respects and fairly present the information contained therein as at
the Closing Date and the Borrower's estimate of the information contained
therein as of the end of Fiscal Years 1997 through 2002, as applicable. As of
the date of the Pro Forma Financial Statements, neither the Borrower nor any
Consolidated Subsidiary has any material liability, contingent or otherwise,
including any liability for Taxes, or any material forward or long-term
commitments which are not disclosed by, or reserved against in, the Pro Forma
Financial Statements or in the notes thereto which under GAAP are of a nature
and an amount required to be so disclosed or reserved. There are no
unrealized or anticipated losses from any unfavorable commitments of the
Borrower or any of its Subsidiaries which would reasonably be expected to
have a Material Adverse Effect.
(f) Each of the Forecast and all other projections or budgets furnished or
to be furnished to the Agent, by or on behalf of the Borrower and the
assumptions related thereto, have been prepared with due care and, on the
Closing Date, (i) are complete in all material respects and fairly present
the Borrower's expectations as to the matters covered thereby, (ii) are based
on reasonable assumptions as to the factual and legal matters material to the
estimates therein and (iii) are consistent with the provisions of this
Agreement and the other Basic Documents, it being understood that nothing
contained in this Section 3.7 shall constitute a representation or warranty
that any financial performance forecast or projection will in fact be
achieved.
Section 3.8 TAXES. It has been filed or caused to be filed all Tax
returns required to be filed by it, has paid all Taxes shown to be due and
payable on such returns and has paid all
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assessments made against it or any of its property and all other Taxes
imposed on it or any of its property by any Governmental Authority other than
Taxes and assessments which are not yet delinquent and remain payable without
penalty or are being contested in accordance with the provisions of Section
5.9; no additional assessments for any of its taxable years are anticipated
and all charges, accruals and reserves for Taxes applicable to any Loan
Party, as the case may be, are adequate; no Tax Liens (other than Tax Liens
which are Permitted Liens) have been filed and no claims have been asserted
with respect to any such Taxes; except in each case to the extent deviation
from the foregoing would not reasonably be expected to have a Material
Adverse Effect.
Section 3.9 NO PROCEEDING OR LITIGATION. No litigation, proceeding of or
before any arbitrator or Governmental Authority is pending or, to its
knowledge, threatened, and, to its knowledge, no investigation or inquiry by
any Governmental Authority is pending or threatened against or affecting it
or any of its Affiliates, or against or affecting any of its or their
respective properties, rights, revenues or assets, in each case that would
reasonably be expected to result in a Material Adverse Effect. To its
knowledge, except as set forth on Schedule 3.9 hereto, no litigation or
proceeding of or before any arbitrator or Governmental Authority is pending
or threatened, and, to its knowledge, no investigation or inquiry by any
arbitrator or Governmental Authority is pending or threatened against or
affecting any other Material Obligor, or against or affecting any of their
respective properties, rights, revenues or assets, in each case that would
reasonably be expected to result in a Material Adverse Effect.
Section 3.10 NO DEFAULT. It is not in default under or with respect to
any material contract or Contractual Obligation and has complied with all
requirements of the Approvals. No Default or Event of Default has occurred
and is continuing.
Section 3.11 TITLE TO PROPERTY. All of its contracts, Governmental
Approvals, entitlements and other property of it is owned by it and reflected
in the financial statements referred to in Section 3.7 or in the most
recently delivered financial statement delivered pursuant to Section 5.7, and
it has full contractual rights to the benefits thereof free and clear of any
Lien, other than Permitted Liens. It has good title to all other Collateral
now owned by it, free and clear of all Liens, except Permitted Liens. No deed
of trust, mortgage or financing statement or other instrument of recordation
covering all or any part of the Collateral is on file in any recording
office, other than with respect to Permitted Liens.
Section 3.12 AGREEMENTS. As of the Closing Date, Schedule 3.12 sets
forth, with respect to each Project located in
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the United States, (i) all partnership agreements, subscription agreements
and other investment agreements and arrangements (including without
limitation with respect to each Loan Party's investments in Projects and with
respect to each Loan Party's creation or acquisition of Subsidiaries of such
Loan Party to which any of the Loan Parties is a party and pursuant to which
it receives or may receive distributions, dividends or other payments, and
(ii) every contract and other arrangement to which a Loan Party is a party
which, in the case of (ii), provides for payment to such Loan Party of an
amount constituting more than 5% of the gross revenues of the Borrower and
its Consolidated Subsidiaries, and further sets forth, accurately and
completely, the restrictions or prohibitions, if any, that exist on the
pledging of such contracts and arrangements as Collateral to the Agent for
the ratable benefit of the Secured Parties. The information set forth on
Schedule 3.12 delivered to the Agent and (if subsequent amendments thereto
become necessary) simultaneously with the financial statements required to be
delivered to the Agent pursuant to Section 5.7(b) is and shall be true and
complete as of the Closing Date and as of each such subsequent date.
Section 3.13 COMPLIANCE WITH LAW. It is in compliance with all
Requirements of Law, including, without limitation, Environmental Laws
except to the extent the non-compliance would not reasonably be expected to
have a Material Adverse Effect.
Section 3.14 ENVIRONMENTAL MATTERS. Except as described in Schedule 3.14,
no Materials of Environmental Concern are currently or, to its knowledge
after due inquiry, have been located at, in, on, under or about any other
property with respect to which it has or may have retained or assumed
liability either contractually or by operation of law in a manner which
violates any Environmental Law currently in effect, or for which cleanup or
corrective action of any kind is required or for which Borrower may have
liability under any Environmental Law; no substantial risk to human health or
the environment exists as a result of any condition on such property; no
release of any Materials of Environmental Concern from such property onto or
into any other property or from any other property onto or into such property
has occurred or is occurring in violation of any Environmental Law currently
in effect, or which could pose a substantial risk to human health or the
environment; and no notice of violation, Lien, complaint, suit, order or
other notice with respect to the environmental condition of any property with
respect to which it has or may have retained or assumed liability either
contractually or by operation of law is outstanding or, to its knowledge,
anticipated. No Loan party has provided any other Person with an indemnity
with respect to, or otherwise obligated itself on a recourse basis with
respect to, any Environmental Law or any Materials of Environmental Concern.
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Section 3.15. FEDERAL RESERVED REGULATIONS. It is not, directly or
indirectly, using and will not, directly or indirectly, use any of the
proceeds of the Loans or Letters of Credit for the purpose, whether
immediate, incidental or ultimate, of buying a "margin stock" or of
maintaining, reducing or retiring any indebtedness originally incurred to
purchase a stock that is currently a "margin stock", or for any other purpose
which might constitute this transaction a "purpose credit", in each case
within the meaning of Regulations G or U of the Board of Governors of the
Federal Reserve System, or otherwise take or permit to be taken any action
which would involve a violation of such Regulations G or U or of Regulation T
or Regulation X or any other regulation of such Board.
Section 3.16 ERISA. Neither the Borrower nor any Commonly Controlled
Entity sponsors, maintains, administers, participates in, has an obligation
to contribute to, or has any liability to a Plan.
Section 3.17 INVESTMENT COMPANY; INVESTMENT ADVISER. It is not an
"investment company" or a company controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. It is
not an "investment adviser" within the meaning of the Investment Advisers Act
of 1940, as amended.
Section 3.18 PUBLIC UTILITY STATUS.
(a) It is not, and will not by reason of any transaction contemplated by
this Agreement or any of the other Basic Documents, be deemed (i) by any
Governmental Authority to be subject to financial, organizational or rate
regulation as an "electric utility", "electric utility company", "electric
corporation", "electrical company", "public utility", "public service
corporation", "gas utility", "natural gas company" (transporting gas in
interstate commerce), "gas corporation", "public service company" or a
"public utility holding company" under any existing law, rule or regulation
of any Governmental Authority, or (ii) an entity whose electric rates, terms
of service or facilities or whose rates or terms of gas sales or
transportation service provided to third parties or gas facilities, are
subject to regulation by a state public service or utility commission.
(b) No Secured Party will, solely by reason of (i) the making of the Loans
or the issuance or participation in the issuance of any Letter of Credit,
(ii) the securing of the Notes and other Obligations by the Collateral, or
(iii) any other transaction (including without limitation the exercise of
remedies and assumption of ownership and control of the Collateral by the
Secured Parties of the Agent on their behalf) contemplated by this Agreement or
any of the other Basic Documents, be deemed (A) by any Governmental Authority
to be, or
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to be subject to regulation as, an "electric utility", "electric utility
company", "electric corporation", "electrical company", "public utility",
"natural gas company" (transporting gas in interstate commerce), "gas
utility", "gas corporation", "public service company", or a "public utility
holding company" under any existing law, rule or regulation of any
Governmental Authority, or (B) an entity whose electric rates, terms of
service or facilities or whose rates or terms of gas sales or transportation
service provided to third parties or gas facilities, are subject to
regulation by a state public service or utility commission.
Section 3.19 PRINCIPAL PLACE OF BUSINESS, ETC. It's principal place of
business and chief executive office (including for federal tax purposes) and
the office where it keeps its records is located at 450 Lexington Avenue, New
York, New York 10017.
Section 3.20 OFFER OF NOTES OR SECURITIES. Neither it nor any Person
acting on its behalf has taken or will take any action which would subject
the issuance and sale of the Notes, or any part thereof, or any of the
partnership interests or shares of stock pledged to the Agent to the
provisions of Section 5 of the Securities Act of 1933, as amended, or to the
registration or qualification provisions of any securities or Blue Sky law
of any applicable jurisdiction.
Section 3.21 LABOR MATTERS. There are no collective bargaining agreements
or Multiemployer Plans covering its employees. Neither it nor any of its
Subsidiaries has suffered any strikes, walkouts, work stoppages, or other
labor difficulty within five years from Persons who are not its employees
which could reasonably be expected to have a Material Adverse Effect. Neither
it nor any of its Subsidiaries has suffered any strikes, walkouts, work
stoppages, or other material labor difficulty within five years from its or
such Subsidiary's employees.
Section 3.22 SOLVENCY. It is and, upon the incurrence of any obligations
by it on any date on which the representation is made, will be, solvent.
Section 3.23 FULL DISCLOSURE. As of the Closing Date, no representation
or warranty made by it or any of its Affiliates herein or in any Basic
Document, or in any certificate, written statement or other document
furnished to the Agent or the Lenders with regard to this transaction by it
or any of its Affiliates, or by any of its authorized agents, in each case
when taken together with all such other information, and none of the
Borrower's filings with the Securities and Exchange Commission, contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained in such documents,
written statements, certificates or filings not misleading. There is no fact
known to it which has not disclosed to the Agent which materially adversely
affects
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its properties, business, prospects, operations or financial or other
condition or its ability to perform its obligations hereunder and under the
other Basic Documents to which it is or is to be a party.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 THE INITIAL EXTENSION OF CREDIT. The obligations of the
Lenders to make the initial Loan hereunder and of the Fronting Bank to issue
the initial Letter of Credit shall each be subject to the condition precedent
that the Agent shall have received the documents, opinions, certificates and
information referred to in this Section 4.1, each of which shall be in form
and substance satisfactory to the Agent, and that the other conditions set
forth in this Section 4.1 shall have been satisfied. The initial Loans and
initial Letter of Credit shall also be subject to the additional conditions
set forth in Section 4.2.
(a) NOTES. Each of the Lenders shall have received its Note, each duly
authorized, executed and delivered by the Borrower.
(b) OPINION OF COUNSEL. The Agent and the Lenders shall have received the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the
Loan Parties, dated the Closing Date, substantially in the form of Exhibit
4.1(b) and covering such additional matters relating to the transactions
contemplated hereby as the Agent or Lenders may reasonably request.
(c) CORPORATE AND GOVERNMENTAL PROCEEDINGS. All corporate, partnership and
legal proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Basic Documents
shall be satisfactory in form and substance to the Lenders, and the Agent
shall have received all information and copies of all documents and papers,
including records of corporate and governmental proceedings and the
financial information required to be delivered under this Agreement, which
the Agent may reasonably have requested in connection therewith, such
documents and papers, when appropriate, to be certified by proper corporate
or governmental authorities. The documentation to be delivered to the Agent
on or before the Closing Date shall include, without limitation, the
following:
(i) evidence as to the authority of and certified signatures of the
representatives of each Loan Party, as applicable, authorized to execute
Basic Documents to which
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each of them is a party and all related documents and certificates required
hereunder or thereunder;
(ii) evidence of corporate authorization of each Loan Party, with respect
to the execution, delivery and performance of the Basic Documents to which
each of them is a party; and
(iii) duly authorized and executed articles of incorporation, by-laws,
any amendments to any of the foregoing, incumbency certificates and good
standing certificates, as appropriate, with respect to each Loan Party.
(d) COLLATERAL SECURITY DOCUMENTS. Each of the Collateral Security
Documents shall have been duly authorized and executed by the Loan Party or
Loan Parties party thereto and each other party thereto and each of the
Collateral Security Documents shall have been delivered to the Agent.
(e) CONTRACTS. The Agent shall have received copies of all of the
contracts and other arrangements for United States Projects set forth on
Schedule 3.12.
(f) FILINGS AND RECORDINGS. Each of the Collateral Security Documents
shall have been duly filed, recorded and/or registered in all places as may
be required, necessary or desirable so as, together with such other actions
as may have been taken by the Agent to establish, perfect, protect and
preserve the rights, titles, interests, remedies, privileges, Liens and
security interests of the Secured Parties thereunder or in respect thereof,
and to create valid first Liens and first priority security interests in the
Collateral superior to all other Liens other than Permitted Liens, and all
recording and filing taxes and fees shall have been paid, and any giving of
notice or taking of any other action to such end (whether similar or
dissimilar) required or desirable shall have been given or taken and the
Agent shall have received evidence satisfactory to it as to any such filing,
recording, registration, search, giving of notice and/or other action.
(g) UCC SEARCHES. The Agent shall have received Uniform Commercial Code
Lien searches with respect to the Loan Parties in each jurisdiction in which
its principal executive offices are located or any Collateral is located or
as the Agent shall deem advisable to obtain such searches, which shall reveal
no filings or recordings with respect to any of the Collateral in favor of
any Person other than the Agent other than with respect to any of the
Collateral in favor of any Person other than the Agent other than with
respect to Permitted Liens.
(h) FINANCIAL STATEMENTS. The Borrower shall have furnished to the Agent
the financial statements referred to in Section 3.7 and other information
required by Section 3.7. The
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Borrower shall certify that (i) such financial statements referred to in
Sections 3.7(a) and (b) are true, correct and complete in all material
respects, (ii) the balance sheets fairly present its financial position as at
the dates thereof and have been prepared in accordance with GAAP except as
otherwise specifically noted therein, (iii) there has been no material
adverse change in its financial position from that set forth in the balance
sheet prepared as at the dates thereof, and (iv) all respective liabilities,
contingent or otherwise, are disclosed by, or reserved against in, such
financial statements or the footnotes thereto to the extent required by GAAP.
(i) CANCELLATION OF INDEBTEDNESS: RELEASE OF LIENS.
The Agent shall have received evidence satisfactory to the Lenders that,
(A) upon payment of the amounts (if any) requested pursuant to the initial
Notice of Borrowing to be paid on the Closing Date to existing creditors as
set forth on Schedule 4.1(i) by the Lenders, the notes representing such
indebtedness shall be canceled, all obligations of the Loan Parties and any
of their respective Affiliates under such notes and any loan or other
agreement relating thereto shall be fully satisfied (except as set forth on
Schedule 4.1(i)), and any and all Liens of such existing creditors shall be
completely and irrevocably released, or (B) if no amounts are outstanding
under such other loan or other agreements, such agreements will be terminated
on the Closing Date.
(j) PAYMENTS OF FEES. The Borrower shall have paid or shall on the Closing
Date pay to the Persons entitled thereto, in Dollars, all fees, costs and
expenses payable as of the time specified in Section 2.8 hereof or otherwise
payable to any party hereto in connection with the transactions contemplated
by this Agreement or any other Basic Document or in connection with the
transactions contemplated hereby or thereby or relating hereto or thereto.
(k) OTHER CONDITIONS. All acts, conditions and things required by the
provisions of this Agreement or the other Basic Documents to be done and
performed and to have happened prior to the execution and delivery of this
Agreement shall have been done and performed and have happened.
Section 4.2 ALL LOANS; LETTERS OF CREDIT. The obligation of the Lenders to
make the initial Loans, any Loans subsequent to the initial Loans
("Subsequent Loans") and the right of the Loan Parties to have the initial
Letters of Credit and any Letters of Credit subsequent to the initial Letters
of Credit ("Subsequent Letters of Credit") issued by the Fronting Bank shall
be subject to the condition, precedent that the Agent shall have received the
documents, opinions, certificates and information referred to in this Section
4.2, each of which, in the case of the initial Loans and initial Letters of
Credit shall
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be in form and substance satisfactory to the Agent, and in the case of
Subsequent Loans and Subsequent Letters of Credit, shall be in form and
substance satisfactory to the Agent and the Majority Lenders, and that the
other conditions set forth in this Section 4.2 shall have been satisfied.
(a) NOTICE OF BORROWING/NOTICE OF ISSUANCE. The Agent shall have received,
before the expiration of the applicable advance notice period required by
this Agreement, a Notice of Borrowing (in the case of a Loan) or Notice of
Issuance (in the case of a Letter of Credit) signed by a Responsible Officer
of the Borrower (or, in the case of a Letter of credit, of the requesting
Loan Party) together with each of the attachments thereto, duly executed and
delivered by the appropriate parties thereto.
(b) NO DEFAULT. At the time of the making of each Loan and each issuance
of a Letter of Credit and after giving effect thereto, there shall exist no
Default or Event of Default hereunder, and all deficiencies, if any, with
respect to conditions precedent to any prior Loan shall have been corrected
or expressly waived.
(c) ACCURACY OF REPRESENTATIONS. At the time of the making of each Loan
and issuance of each Letter of Credit, and in each case after giving effect
thereto, all representations and warranties make to either the Agent or to
the Lenders contained in this Agreement or any other Loan Instrument or in
any writing delivered to either of the Agents by the Borrower or any party to
the Loan Instrument pursuant hereto or thereto, shall be true and correct in
all material respects with the same force and effect as though such
representations and warranties had been made on and as of the date of such
Loan or Letter of Credit, as the case may be, except to the extent that such
representations and warranties made in any such Loan Instrument or writing
executed prior to the date hereof related only to a specific date.
(d) APPROVALS. The Agent shall have received copies of all Approvals (and
all correspondence referred to therein), certified by a Responsible Officer of
the Borrower to be true, correct and complete.
(e) NO REQUIREMENT OF LAW. No Requirement of Law shall be effect or shall
have occurred (or shall have been proposed, if such proposed Requirement of
Law has a reasonable likelihood of being enacted) the effect of which is to
prevent the Agent, the Lenders, any Loan Party or any party to any Assigned
contract from fulfilling its obligations hereunder or thereunder, or which
would subject the Agent or any Lender (or any Affiliate of the Agent or a
Lender) to any penalty or sanction.
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(f) ADVERSE CHANGE. In the reasonable opinion of the Agent (in the case of
the initial Loans or initial Letter of Credit) or the Agent and Majority
Lenders (in the case of Subsequent Loans, or Subsequent Letters of Credit),
no change in the Collateral, or in the financial condition, business
operations or prospects of any Loan Party shall have occurred on or after
September 30, 1997 (in the case of the initial Loans or initial Letters of
Credit) or the Closing Date (in the case of Subsequent Loans or Subsequent
Letters of Credit) which could reasonably be expected to have a Material
Adverse Effect. Each of the Basic Documents then required to be in full force
and effect shall be in full force and effect and no default, or event which
with the passage of time, the giving of notice, or both, would constitute a
default by or any Loan Party shall have occurred thereunder.
(g) OTHER CONDITIONS. All acts, conditions and things required by the
provisions of this Agreement or the other Loan Instruments, including
creating perfected first Liens on and prior perfected first security
interests pursuant to the provisions of Section 3.4 hereof, to be done and
performed and to have happened prior to the date of the proposed Loan or
issuance of Letter of Credit, as applicable, shall have been done and
performed and have happened.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any of the Obligations shall remain outstanding or any Lender
shall have any obligation to extend credit hereunder, each of the Loan
Parties agrees that:
Section 5.1 CONDUCT OF BUSINESS, MAINTENANCE OF EXISTENCE, ETC.
It will and will cause each Affiliate within its control and each
Subsidiary to continue to engage in business of the same general type as
conducted by each of them as of the Closing Date and activities necessarily
related thereto, all in a sound and prudent manner and preserve and maintain
in full force and effect (A) its existence as a corporation under the laws of
the jurisdiction of its incorporation (including without limitation by
maintaining adequate corporate records and otherwise observing corporate
formalities) and its qualification to do business in each jurisdiction in
which the failure to so qualify would reasonably be expected to have a
Material Adverse Effect, (B) (except when the failure to do so would not
reasonably be expected to have a Material Adverse Effect) all of its rights,
privileges and franchises necessary or desirable for the normal conduct of
its business.
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Section 5.2 QUARTERLY DISTRIBUTIONS. Except as permitted by Section
5.18(b), it will cause all Distributions that are at any time available to it
for distribution to be made (by deposit into the Receipt Account) no later
than the immediately succeeding Quarterly Date.
Section 5.3 PERFORMANCE OF OBLIGATIONS. It will duly perform and observe
and cause each Affiliate within its control and each Subsidiary to duly
perform and observe all covenants, agreements and conditions on its or such
Affiliate's or Subsidiary's part to be performed and observed under this
Agreement, the Notes, the Collateral Security Documents and the other Basic
Documents subject in each case to any applicable grace periods therein
contained.
Section 5.4 COOPERATION IN SYNDICATION. It will cooperate with the Agent
in the syndication of the Commitment and will provide and cause its advisers
and other representatives to provide all reasonable information and other
assistance deemed necessary or desirable to complete a successful syndication.
Section 5.5 INSPECTION OF PROPERTY, BOOKS AND RECORDS; DISCUSSIONS. It
will keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities
throughout the periods involved. It shall permit representatives of the
Agent, and any Lender, to visit and inspect its properties, to examine its
books of record and accounts and to make copies thereof and to discuss its
affairs, finances and accounts with its principal officers, engineers and
independent accountants, all at such times during business hours and at such
intervals as the Agent or any such Lender may reasonably request upon
reasonable advance notice.
Section 5.6 COMPLIANCE WITH LAWS, CONTRACTUAL OBLIGATIONS, ETC. Except to
the extent the failure to do so would not reasonably be expected to have a
Material Adverse Effect, it will, and will cause each Affiliate within its
control and each Subsidiary to, comply with all Requirements of Law,
Governmental Approvals and, all Contractual Obligations, and obtain or cause
such Affiliate or Subsidiary to obtain, prior to the dates required therefor
under any applicable Governmental Approval or Requirement of Law, all
Governmental Approvals and other consents and approvals, as shall now or
hereafter be necessary or reasonably desirable in connection with the
entering into and performance by it of any of the Basic Documents to which it
is a party.
Section 5.7 INFORMATION. The Borrower will deliver to the Agent with
sufficient copies for each of the Lenders:
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(a) as soon as available and in any event within 120 days after the end
of each Fiscal Year of the Borrower and Sithe Asia, respectively,
consolidated and consolidating balance sheets of each of the Borrower and
Sithe Asia, respectively, and its Consolidated Subsidiaries as of the end of
such Fiscal Year and the related consolidated 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, and reported on by Deloitte &
Touche or other independent public accountants of nationally recognized
standing
(b) as soon as available and in any event within 60 days after each of
the first three Quarterly Dates in each Fiscal Year of the Borrower and Sithe
Asia, respectively, consolidated and consolidating balance sheets of the
Borrower and Sithe Asia, respectively, and its Consolidated Subsidiaries as of
the end of such Fiscal Quarter and the related consolidated statements of
operations and cash flows for such quarter and for the portion of the Fiscal
Year of the Borrower and Sithe Asia, respectively, ended at the end of such
quarter, setting forth in each case such comparative information with respect
to such Person's previous Fiscal Year as is customarily set forth in such
statements by such Person, all certified (subject to normal year-end
adjustments) as to fairness of presentation, GAAP and consistency by a
Responsible Officer of such Person, and simultaneously therewith, the
information required by Section 3.2 as to Subsidiaries and by Section 3.12 as
to agreements (copies of which agreements shall accompany such amended
Section 3.12);
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 6.2,
6.7, 6.11(c)(ii), 6.14, 6.15 and 6.16 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 all business or
credit transactions with Affiliates entered into during such fiscal year;
(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 whether anything has
come to their attention as a result of their audit to cause them to believe
that any Loan Party has failed to comply with the terms, covenants, provisions
or conditions as they relate to accounting or financial matters addressed in
Sections 6.2, 6.7, 6.11(c)(ii), 6.14, 6.15, and 6.16.
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(e) no later than 60 days after the start of each Fiscal Year a Forecast
for such Fiscal Year, as further described in Section 5.16.
(f) [intentionally omitted]
(g) within three days after any Responsible Officer of any Loan Party
obtains knowledge of any Default, if such Default is then continuing, a
certificate of a Responsible Officer of such Loan Party setting forth the
details thereof and the action which the such Loan Party is taking or
proposes to take with respect thereto;
(h) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statement,
so mailed;
(i) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statement 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;
(j) of any litigation, investigation, inquiry or proceeding which may
exist at any time between any Loan Party or an Affiliate thereof and any
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect on the properties, business, prospects, operations or other
condition of the Borrower;
(k) within three days after an officer of any Loan Party obtains
knowledge of any litigation or proceeding affecting any Loan Party or an
Affiliate thereof in which the amount involved is $250,000 or more or in
which injunctive or similar relief is sought;
(l) as soon as possible and in any event within 10 days after the
Borrower or any Commonly Controlled Entity knows, or has reason to know, that
the Borrower or any Commonly Controlled Entity is intending to adopt or
participate in a Plan;
(m) of any material adverse change in the properties, business,
operations, or financial condition of the Loan Parties, taken as a whole,
from the condition reflected in the most recent financial information
delivered to the Agent with respect to such Loan Party, and of any change of
law, rule or regulation which has caused or could reasonably be expected to
cause such a material adverse change;
(n) of any loss (excluding permitted withdrawals) to the Collateral in
excess of $250,000, or an Event of Loss;
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(o) immediately after receipt thereof, any notices of default received
with respect to any Project;
(p) concurrently with the delivery of each notice pursuant to the
foregoing clauses (j) through (o) inclusive, an accompanying statement of a
Responsible Officer of the Loan Party setting forth details of the occurrence
referred to and stating what action the Loan Party proposes to take with
respect to such occurrence;
(q) such supporting documentation and other information as the Agent
shall reasonably request for the Loan Parties to demonstrate compliance with
the requirements of Section 5.18; and
(r) from time to time such additional information regarding the financial
position or business of the Loan Parties and their Affiliates as either Agent
or any Lender may reasonably request.
Section 5.8 CERTIFICATES; OTHER INFORMATION. The Borrower will furnish
or cause to be furnished to the Agent:
(a) promptly after delivery or receipt thereof, a copy of each material
notice, demand, request, report, certificate or other communication delivered
by or received by a Loan Party pursuant to any Assigned Contract to the
extent any of the foregoing materially affects, or relates to a material
effect upon, the value of the Collateral or the Agent's and Lenders' ability
to enforce any of the Obligations; and
(b) promptly after receipt thereof, copies of each Governmental Approval
(and copies of any correspondence referred to in any such Governmental
Approval) or any other material consent or approval obtained or made by a
Loan Party.
Section 5.9 PAYMENT OF TAXES AND CLAIMS. It will pay and discharge, or
cause to be paid and discharged, all Taxes imposed on it or on its income or
profits or on any of its property prior to the date on which interest or
penalties attach thereto and all claims, levies or liabilities (including,
without limitation, claims for labor, services, materials and supplies) for
sums which have become due and payable and which have or, if unpaid, are
reasonably likely to become a Lien (other than a Permitted Lien) upon any of
the Collateral. Each of the Loan Parties shall have the right, however, to
contest in good faith the validity or amount of any such Tax or claim by
proper proceedings timely instituted, and may permit the Taxes or claims so
contested to remain unpaid during the period of such contest if (a) such Loan
Party diligently prosecutes such contest, (b) such Loan Party sets aside on
its books adequate reserves as required by GAAP with respect to the contested
items, (c) during
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the period of such contest the enforcement of any contested item is
effectively stayed and (d) such contest does not involve material risk of the
sale, forfeiture or loss of any of the Collateral. Each Loan Party will
promptly pay or cause to be paid any valid, final and non-appealable
judgment enforcing any such Tax or claim and cause the same to be satisfied
of record.
Section 5.10 MAINTENANCE OF PROPERTIES; INSURANCE. It will, and will
cause each Affiliate within its control and each Subsidiary to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used or useful in its and
their business and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. It will and will
cause each Affiliate within its control and each Subsidiary to, maintain or
cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the properties and
businesses of such Affiliates and Subsidiaries against loss or damage of the
kinds customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses.
Section 5.11 ASSIGNMENTS OF ADDITIONAL CONTRACTS; MAINTENANCE OF LIENS
OF THE COLLATERAL SECURITY DOCUMENTS; FUTURE LIENS. Each of the Loan Parties
will:
(a) (during the period prior to the Borrower's obtaining an Investment
Grade Rating) at its expense, promptly after the Quarterly Date immediately
succeeding the execution of any Additional Contract and upon the request of
the Agent, either (i) execute and deliver to the Agent a Collateral
Assignment with respect to such Additional Contract (including without
limitation a pledge of the stock or other ownership interest in conjunction
with the creation or acquisition of any new Subsidiary of a Loan Party) and,
upon the Agent's request, cause the other party or parties to such Additional
Contract to execute and deliver, or cause to be delivered, to the Agent a
consent substantially in the form of Exhibit 5.11 or otherwise in form and
substance reasonably satisfactory to the Agent with respect to such
Collateral Assignment or (ii) certify to the Lenders in writing that a
Collateral Assignment of such Additional Contract is restricted or prohibited
by such Additional Contract or the terms of the financing documents for the
related Permitted Investment applicable thereto, and provide such other
evidence of such restriction or prohibition as the Lenders shall reasonably
request; PROVIDED that it shall not itself intentionally impose such a
restriction so as to avoid the application of this Section; and
(b) at the Borrower's expense, execute and deliver, or cause the
execution and delivery of, and thereafter register, file or record in each
appropriate governmental office, any document or instrument supplemental to or
confirmatory of the
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Collateral Security Documents or otherwise deemed by the Agent to be
necessary or desirable for the creation or perfection of the Liens and
security interests and the maintenance, protection and continuation thereof
purported to be created by the Collateral Security Documents.
Section 5.12 DEFEND TITLE. It will at all times at its own cost and
expense warrant, defend and maintain good title to the Collateral against the
claims and demands of all Persons whomsoever, except with respect to
Permitted Liens.
Section 5.13 MANAGEMENT LETTERS. The Borrower will promptly deliver to
the Agent a copy of each final report delivered to the Borrower by its
independent public accountants in connection with any annual or interim audit
of its books.
Section 5.14 ACCOUNTS. Each of the Loan Parties shall cause to be
deposited, by the respective payors thereof, directly into the Receipt
Account or the Security Account (as required by the Deposit, Disbursement and
Security Agreement), all amounts which such Loan Parties would be entitled to
receive pursuant to Assigned Contracts or otherwise (excluding amounts
permitted by Section 5.18 to be disbursed by the Borrower on behalf of its
Subsidiaries and thereafter reimbursed to the Borrower), including, without
limitation, distributions, dividends or other payments in respect of Projects
and other Permitted Investments.
Section 5.15 INTENTIONALLY OMITTED.
Section 5.16 FISCAL YEAR FORECAST. No later than 60 days after the
beginning of each Fiscal Year, the Borrower will adopt and deliver to the
Agent a Forecast for such Fiscal Year of the Borrower.
Section 5.17 ENVIRONMENTAL MATTERS.
(a) It will comply with, and ensure compliance by each of its Affiliates
within its control and each of its Subsidiaries with applicable Environmental
Laws, except, where any such non-compliance could not result in any direct or
indirect liability or clean-up obligation on its part under any Environmental
Laws that would reasonably be expected to have a Material Adverse Effect; it
will not and will not allow any such Affiliate or Subsidiary to treat, store,
transport or release any Materials of Environmental Concern except as
authorized, permitted or otherwise allowed under Environmental Laws, or in
any manner or quantity which may result in any clean-up obligation or
liability under any Environmental Law; will keep its assets free of any Lien
imposed pursuant to Environmental Laws; and will pay or cause to be paid when
due any and all costs of complying with Environmental Laws and responding to
the presence, release or threatened release of Materials of Environmental
Concern (including without limitation, all damages, liabilities, expenses
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and costs of all third party claims). If a Loan Party fails to do any of the
foregoing, then (i) after the occurrence of an Event of Default which is
continuing under this Agreement or (ii) in the event the Agent or any Lender
sustains any liability, loss, cost, damage or expense (including attorneys'
and consultant's fees and expenses) arising out of the presence, release or
threatened release of Materials of Environmental Concern or otherwise
affecting the Collateral not caused solely by the gross negligence or
willfull misconduct of the Agent or any Lender, the Agent may, if so directed
by the Majority Lenders, upon such prior written notice to the Borrower as is
reasonable under the circumstances, take any action necessary in its judgment
to respond to such presence, release or threatened release affecting the
Collateral, and the cost of such response action shall be added to the
Obligations secured by this Agreement and the Collateral Security Documents.
Each Loan Party will give to the Agent and its agents and employees access to
the Collateral, and each Loan Party hereby specifically grants to the Agent a
license effective only upon the occurrence of an event described in clause
(i) or (ii) above to respond to such presence, release or threatened release
of such Materials of Environmental Concern. Nothing herein shall require, or
be deemed to require, the Agent or any Lender or any of their respective
agents or employees to inspect any property of any Loan Party or its
Affiliates or Subsidiaries or to respond to any presence, release or
threatened release of Materials of Environmental Concern, wherever occurring.
(b) It agrees to indemnify and hold the Agent and each Lender and their
respective directors, officers, agents and employees free and harmless from
and against all liability, loss, cost, damage and expense (including, without
limitation, attorneys' and consultant's fees and expenses incurred in
connection with environmental compliance, clean-up and other response
obligations (including all third party claims) imposed under any
Environmental Laws) that any such indemnitee may sustain by reason of the
assertion against such indemnities by any party of any claim in connection
with any violation of any applicable Environmental Law or Materials of
Environmental Concern used, generated, treated, stored or otherwise located
on, or released or threatened to be released in, on, under, from or affecting
the property of any Loan Party or any of its Affiliates or Subsidiaries,
except to the extent resulting from such indemnities' gross negligence or
willful misconduct.
(c) It will notify the Agent promptly after receipt or after it otherwise
becomes aware of any written notice or communication from any Governmental
Authority or any other source with respect to Materials of Environmental
Concern which may be in, on, under or released from or affecting its property
or the property of any of its Affiliates within its control or for which it
may be responsible, or otherwise liable under any Environmental Laws or
Subsidiaries or of any other such notice or
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communication respecting a pending or threatened investigation, proceeding or
claim related to any such Materials of Environmental Concern. It will also
notify the Agent of any event or circumstance known to it the occurrence of
which renders any of the representations in Section 3.14 untrue. It will also
maintain at its principal office or at its Project offices and keep available
for inspection during ordinary business hours and following reasonable notice
by the Agent and any Lender, accurate and complete records of all
investigations, studies, sampling and testing conducted, and any and all
records obtained by it or any of its Affiliates within its control or for
which it may be responsible, or otherwise liable under any Environmental Laws
or Subsidiaries or response actions taken by any of its Affiliates or
Subsidiaries or, to its knowledge, by any Governmental Authority or other
Person in respect of Materials of Environmental Concern which may be in, on,
under, migrating from or affecting its property.
Section 5.18 BANK ACCOUNTS.
At any time prior to the date of a Satisfactory MRA Settlement:
(a) On and after the Closing Date, except as set forth in Sections 5.18(b),
(c) and (d) below, it shall maintain its bank accounts relating to its
operations in the United States with the Depositary Bank, and shall cause
each of its Subsidiaries (other than the Loan Parties, Allegheny Hydro No. 8,
Inc., Allegheny Hydro No. 9, Inc., those Subsidiaries whose revenues are less
than $100,000 per annum, those Subsidiaries consisting of entities owning
only Projects still in their development phase to maintain, in the United
States (without limiting the ability of any such Subsidiary to maintain bank
accounts outside the United States to the extent reasonably necessary in
connection with its operations outside the United States), bank accounts
separate from those of the Borrower, the Loan Parties and other Subsidiaries
of the Loan Parties, such that each such Subsidiary receives revenues into
such a separate bank account and such that payment of its operating expenses
is only made either with moneys on deposit in such separate bank account or
by moneys drawn on the Borrower's Transaction Account and reimbursed by such
Subsidiary as soon as practicable thereafter (but in any event within twenty
Business Days after an aggregate of $1,500,000 (or, with respect to the
Independence Project, $5,000,000) shall have been disbursed by the Borrower
on such Subsidiary's behalf), and, in any event, specifically for application
to such payment (or as otherwise expressly permitted by the Deposit,
Disbursement and Security Agreement), and moreover, such that moneys in such
separate bank account of such Subsidiary are not applied to any purpose other
than payment of such Subsidiary's own obligations.
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(b) The Borrower shall cause Sithe Canadian Holdings, Inc. and any
Canadian Subsidiaries thereof to maintain no more than one checking and one
investment Canadian bank account per entity (which account shall be
maintained with the Toronto-Dominion Bank or a Lender if such Lender is
willing and able to accept such deposits in Canada, and, if not, then with a
bank acceptable to the Agent), and shall not allow such Canadian bank
accounts maintained by Sithe Canadian Holdings, Inc. and those Canadian
Subsidiaries of Sithe Canadian Holdings, Inc. which do not directly own
Projects to accumulate deposits which in the aggregate exceed $3,000,000 (in
Dollar equivalent of Canadian dollars) or such greater amount as may be
consented to by the Majority Lenders (such consent not to be unreasonably
withheld) without distributing, to the extent permitted by applicable law,
the excess to the Borrower by deposit into the Receipt Account. A Foreign
Currency Letter of Credit to be issued with respect to any Project owned
directly or indirectly by Sithe Canadian Holdings, Inc., shall not be
available for issuance of funds on deposit in the aforementioned Canadian
bank accounts can be applied to the purpose for which such Foreign Currency
Letter of Credit would be required. The Borrower shall, upon the direction of
the Majority Lenders after an Event of Default, cause, to the extent
permitted by applicable law, all amounts on deposit in such Canadian accounts
maintained by Sithe Canadian Holdings, Inc. and those Canadian Subsidiaries
which do not directly own Projects to be distributed to the Borrower by
deposit into the Receipt Account.
(c) The Borrower may maintain one checking and one investment account (with
The Toronto-Dominion Bank or a Lender if such Lender is willing and able to
accept Canadian dollar deposits, and, if not, then with a bank acceptable to
the Agent) for the purpose of receiving payments from Canadian Affiliates,
and paying Canadian dollar obligations of its United States Affiliates. The
maximum aggregate balance to be maintained in such accounts shall be limited
to $5,000,000 (in Dollar equivalent of Canadian dollars) or such greater
amount as may be consented to by the Agent (such consent not to be
unreasonably withheld).
(d) The Borrower may maintain in New York one checking and one investment
account in a New York money center bank for the purpose of processing the
Borrower's executive payroll and for petty cash disbursements necessary to
the operations of the New York office. The maximum balance to be maintained in
such accounts shall not exceed the sum of payroll payments due within three
Business Days plus $100,000.
Section 5.19 SUPPLEMENTAL COLLATERAL SECURITY DOCUMENTS. Promptly upon
request from the Agent, the Loan Parties shall duly authorize, execute and
deliver and record, file and/or register, or cause to be recorded, file
and/or registered, such supplements to the Collateral Security
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Documents, financing statements, continuation statements and other similar
documents (the "Supplemental Collateral Security Documents") in all places as
may be required, necessary or desirable to establish, perfect, protect and
preserve the rights, titles, interests, remedies, privileges, liens and
security interests of the Collateral Security Documents as a Lien on the
respective Collateral intended to be covered thereby prior and superior to
all other Liens and security interests in such Collateral, existing or
future, subject to Permitted Liens, and all recording and filing taxes and
fees shall have been paid, subject only to Permitted Liens, and deliver to
the Agent evidence satisfactory to it of such authorization, execution,
delivery and recordation, filing, registration, giving of notice and/or other
action. Not later than thirty (30) days after the Closing Date, each Loan
Party shall deliver to the Agent stock certificates and stock powers
(endorsed in blank) for each Subsidiary formed in the Cayman Islands or the
British Virgin Islands for which such documents were not delivered on the
Closing Date and for which the stock represented by such certificates has
been pledged pursuant to the Collateral Security Documents.
ARTICLE VI
NEGATIVE COVENANTS
------------------
So long as any of the Obligations shall remain outstanding or any Lender
shall have any obligation to extend credit hereunder, each of the Loan
Parties agrees that:
Section 6.1 ORGANIZATION, SALE OF ASSETS, PURCHASES, ETC.
(a) It will not merge into or consolidate with any other Person (except
another Loan Party and except for mergers by the Borrower with another entity
where the Borrower is the surviving entity, no Event of Default is triggered
thereby and the entity merged into the Borrower is directly involved in the
production of energy), change its form of organization or the scope or nature
of its business or business objectives, or liquidate or dissolve itself (or
suffer any such liquidation or dissolution), or sell, lease, transfer or
otherwise dispose of all or any material portion of its assets, or any of its
assets which constitute part of the Collateral, except to the extent
withdrawals from the Accounts are permitted by the Loan Instruments.
Notwithstanding the foregoing, this Section 6.1 shall not prevent a Loan
Party from transferring all or any portion of its assets and liabilities to
another Loan Party and subsequently transferring all or any portion of such
assets and liabilities to a newly formed Subsidiary which becomes a Loan
Party pursuant to Section 6.21, provided that, prior to or simultaneously
with such transfer, such newly formed Subsidiary
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takes all actions required pursuant to Section 5.19 such that the Agent and
the Lenders are not adversely affected as a result of such transfers.
(b) Except as set forth on Schedule 6.1(b), it will not sell any assets
valued at more than $5,000,000 in net book value in any Fiscal Year, without
notifying the Lenders in writing at least twenty (20) days prior to such
sale, and will not proceed with any such sale if the Majority Lenders, within
ten (10) days after receipt of such notice from the Borrower of any such
sale, have objected in writing to such sale based upon their reasonable
belief that such sale is reasonably likely to result in a Material Adverse
Effect.
Section 6.2 INDEBTEDNESS. It will not create, incur, assume or suffer to
exist any Indebtedness, except (a) Indebtedness in respect of the Loans and
other Obligations pursuant to this Agreement (including Indebtedness to other
banks under their letters of credit backed by Letters of Credit hereunder as
contemplated by, and subject to the restrictions of, Section 2.3(c)(i)),
(b) Indebtedness completely and irrevocably discharged on the Closing Date
with the proceeds of Loans as contemplated by Section 4.1(i), (c) other
Indebtedness set forth on Schedule 6.2 which Indebtedness shall be subject to
the further restrictions set forth on such schedule, (d) Subordinated
Financing, (e) $1,000,000 in Indebtedness outstanding at any one time to any
one creditor or group of creditors in connection with any single financing
transaction; PROVIDED that all indebtedness under this clause (e) shall not
exceed $3,000,000 in the aggregate at any one time outstanding, (f) unsecured
contingent obligations of the Borrower owing to any other party in a maximum
amount for all such contingent obligations not exceeding 10% of the Net Worth
of Borrower and its Consolidated Subsidiaries, (g) unsecured contingent
obligations not exceeding $116,000,000 (as such amount may be reduced
pursuant to Section 2.3(c) (vii)), of Borrower in connection with investments
made by Sithe Asia, PROVIDED the form and substance of all such contingent
obligations described in clause (g) above shall have been reviewed and
approved by the Agent, (h) an unsecured overdraft line of credit of the
Borrower for not more than $5,000,000, and (i) Indebtedness (other than
Indebtedness described in clauses (a) and (c) of the definition thereof)
secured by Liens permitted by Section 6.3. Without the prior approval of the
Agent and the Majority Lenders, no Loan Party shall agree to amend or
otherwise change the terms of any Indebtedness permitted by this Section 6.2
if the effect of such amendment or change is to increase the interest rate on
such Indebtedness, change (to earlier dates) any dates upon which payments of
principal or interest are due thereon, change any event of default or
condition to an event of default with respect thereto (other than to
eliminate any such event of default), change the redemption, prepayment or
defeasance provisions thereof, change the subordination provisions thereof
(or of any guaranty thereof), or change any
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collateral therefor (other than to release such collateral), or if the effect
of such amendment or change, together with all other amendments or changes
made, is to increase materially the obligations of the obligor thereunder or
to confer any additional rights on the holders of such Indebtedness (or a
trustee or other representative on their behalf) which would reasonably be
expected to have a Material Adverse Effect.
Section 6.3 LIENS. Except as set forth on Schedule 6.3, it will not
create, incur, assume or suffer to exist any Lien against all or any portion
of the Collateral securing any Indebtedness or other Obligation of the
Borrower or any other Person, except Permitted Liens and Liens on Collateral
released by the Agent in accordance with Section 2.16(ii) as contemplated by
and in accordance with Section 2.16(ii)).
Section 6.4 PROJECT REFINANCINGS. It shall not permit refinancing of or
increase in Indebtedness with respect to any Project without the prior
written consent of the Majority Lenders if any such refinancing or increase
in Indebtedness is, in the Agent's reasonable determination, likely to have a
Material Adverse Effect.
Section 6.5 AMENDMENT OF CONTRACTS, ETC. It will not and will not permit
any Affiliate within its control or Subsidiary to, without the prior approval
of the Majority Lenders, which approval shall not be unreasonably withheld,
(i) agree to or permit the cancellation or termination of any Assigned
Contract or other Contractual Obligation on its part or for its benefit,
except upon the expiration of the stated term thereof, (ii) agree to the
assignment of the rights or obligations of any party to any such Assigned
Contract or other Contractual Obligation, except as contemplated by this
Agreement or the Collateral Security Documents, (iii) agree to any amendment,
supplement or modification of, or waiver with respect to any of the
provisions of, any Basic Document to which it is a party or with respect to
which its consent is required, (iv) permit any amendment, supplement or
modification of, or waiver with respect to any of the provisions of, any
Basic Document to which it is a party or with respect to which its consent is
required, (v) exercise any option under any Assigned Contract or other
Contractual Obligation or (vi) petition, request or take any other legal or
administrative action that seeks, or may reasonably be expected, to rescind,
terminate or suspend any Contractual Obligation to which it is a party or
amend or modify any portion thereof which in each case is either prohibited
by the Collateral Security Documents or could reasonably be expected to have
a Material Adverse Effect.
Section 6.6 INVESTMENTS. It will not make any investments (whether by
transfer of property, contributions to capital, acquisitions of stock, bonds,
promissory notes or other securities, loans, advances or otherwise) other
than Permitted
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Investments, provided that no investments of any part of the Cash Collateral
shall be made in obligations maturing after the expiration of the applicable
Letter of Credit, and PROVIDED, FURTHER, that Sithe Energies U.S.A., Inc.
shall not in any case invest in any Projects or non-Project energy ventures
which come into existence after the Closing Date. Notwithstanding the
foregoing, nothing in this Section 6.6 shall prohibit Borrower from making
any investments that would be permitted under Section 6.11(d).
Section 6.7 NET WORTH, ETC. Borrower shall not allow the Net Worth of
Borrower and its Consolidated Subsidiaries to fall below the sum of (x)
$360,000,000 plus (y) 75% of the net (positive) income of Borrower and its
Consolidated Subsidiaries accruing subsequent to September 30, 1997, measured
as of each most recently ended Quarterly Date occurring after September 30,
1997.
Section 6.8 CHANGE OF OFFICE. It will not change the location of its
chief executive office or principal place of business or the office where it
keeps its records from that existing on Closing Date and specified in Section
3.19, except upon 30 days' prior written notice to the Agent.
Section 6.9 CHANGE OF NAME. It will not change its name, except upon 30
days' prior written notice to the Agent.
Section 6.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. It will not,
directly or indirectly, conduct any business or enter into any transaction
with any Affiliate except on terms and conditions which are no less favorable
to it than would be obtained in an arms-length transaction with a Person
other than an Affiliate. Notwithstanding the foregoing, nothing in this
Section 6.10 shall prohibit Borrower from engaging in any conduct or entering
into any transaction that would be permitted under Section 6.11(d).
Section 6.11 DISTRIBUTIONS.
(a) It will not at any time request, cause or make any Distribution to any
Person (including without limitation any Distribution to CGE) (other than to
a Loan Party or direct or indirect Subsidiary of a Loan Party) and will not
make any payments of principal or interest on the Subordinated CGE Debt if:
(i) any Default or Event of Default hereunder shall have occurred and be
continuing (including without limitation as a result of any such
Distribution);
(ii) any required deposit to the Accounts has not been made and maintained
in accordance with the requirements of
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this Agreement and the Deposit, Disbursement and Security Agreement; or
(iii) the Borrower shall not have delivered the certificates required by
Section 5.7(c) in form and substance satisfactory to the Agent.
(b) Before the occurrence of a
it will not request, cause or make any Distribution to any Person
(including without limitation any Distribution to CGE) (other than to a Loan
Party or direct or indirect Subsidiary of a Loan Party) except for
Distributions after the Closing Date to shareholders of the common stock of
the Borrower in an amount not to exceed $15,000,000, if such Distribution is
not otherwise prohibited by Section 6.11(a).
(c) After the occurrence of a
it will not request, cause or make any Distribution to any Person
(including without limitation any Distribution to CGE) (other than to a Loan
Party or direct or indirect Subsidiary of a Loan Party) except, with respect
to each of (i) and (ii) below, if such Distribution is not otherwise
prohibited by Section 6.11(a).
(i) for the repayment of the Subordinated CGE Debt; and
(ii) Distributions after the Closing Date equal to the sum of $25,000,000
less the amount of any Distributions made pursuant to Section 6.11(b) plus
25% of the consolidated net income of the Borrower and its Consolidated
Subsidiaries determined on a cumulative basis for the period after the
Closing Date based on the most recently prepared financial statements
delivered by the Borrower to the Agent hereunder.
(d) Notwithstanding the foregoing, nothing in this Section 6.11 shall
prohibit Borrower from purchasing any option (to purchase shares of the
common stock of Borrower) granted under Borrower's 1993 Stock Award and
Incentive Plan that was outstanding as of April 3, 1996, or any shares of the
common stock of Borrower issued upon the exercise of any such option,
PROVIDED the cash consideration paid pursuant to this paragraph (d) after the
Closing Date shall not exceed $1,000,000 in the aggregate.
Section 6.12 ASSIGNMENT. It shall not assign any of its rights or
obligations under any of the Loan Instruments to any Person without the prior
written consent of all of the Lenders. Any such purported assignment without
such prior written consent shall be void.
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Section 6.13 EMPLOYEE PLANS. Neither it nor any Commonly Controlled Entity
shall adopt, maintain, sponsor, participate in or incur any liability under
or obligation to contribute to a Plan without the prior written consent of
the Majority Lenders.
Section 6.14 DEBT SERVICE COVERAGE RATIO.
(a) The Borrower will not permit the Debt Service Coverage Ratio to fall
below 1.05 to 1 as of any Quarterly Date, determined for the consecutive four
Fiscal Quarter periods then ending.
Section 6.15 LEVERAGE RATIO. The Borrower will not permit the Leverage
Ratio to exceed the following levels for the periods indicated:
<TABLE>
<CAPTION>
Leverage
Ratio
--------
<S> <C>
Prior to .85 to 1.
Subsequent to .75 to 1.
</TABLE>
Section 6.16 ADJUSTED EBITDA/INTEREST RATIO.
(a) The Borrower will not permit the Adjusted EBITDA/Interest Ratio to
fall below 1.5 to 1 as of any Quarterly Date, determined for the consecutive
four Fiscal Quarter periods then ending.
Section 6.17 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Except as set
forth on Schedule 6.17, it shall not, and shall not permit any Affiliate
within its control or any Subsidiary (except in connection with investments
which constitute Permitted Investments under clause (f) and (g) of the
definition thereof and which otherwise comply with the Loan Instruments) to,
create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind (except by a provision of a
Loan Instrument) on the ability of any such Person to (i) pay dividends or
make any other distributions on any of such Person's capital stock owned by
any Loan Party or any other Affiliate within its control or Subsidiary, (ii)
repay or prepay any Indebtedness owed by such Affiliate or Subsidiary to any
Loan Party or any other Subsidiary, (iii) make loans or advances to any Loan
Party or any other Affiliate within its control or Subsidiary, (iv) transfer
any of its property or assets to any Loan Party or any other Affiliate within
its control or Subsidiary, or (v) amend or otherwise modify any Loan
Instrument.
Section 6.18 FISCAL YEAR. It shall not change its Fiscal Year-end from
December 31.
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Section 6.19 EXCEED COMMITMENT. It shall not deliver a Notice of Borrowing
or Notice of Issuance or Notice of Amendment when the effect of such
Borrowing or issuance or amendment of Letter of Credit would be to exceed the
Commitment.
Section 6.20 WHOLLY OWNED SUBSIDIARIES. Except in the case of Sithe
Canadian Holdings, Inc. and Sithe Energies Australia Pty Ltd., the Borrower
will not create or acquire a direct wholly owned Subsidiary of the Borrower
without concurrently causing such wholly owned Subsidiary to become a party
hereto as a "Loan Party" hereunder, jointly and severally liable with the
other Loan Parties for the Obligations, to the same extent as if it were
originally a party hereto as a "Loan Party" hereunder.
Section 6.21 ASIAN INVESTMENTS. For all purposes of this Agreement and the
other Loan Instruments, neither Sithe Asia nor any Subsidiary, joint venture
or other direct or indirect investment thereof shall constitute a Subsidiary
or Affiliate of any Loan Party so long as such Subsidiary, joint venture or
other investment would not reasonably be expected to have a Material Adverse
Effect.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 EVENTS OF DEFAULT. If any of the Events of Default listed
below in this Section 7.1 shall occur and be continuing:
(a) the Borrower shall default in the payment of any principal of any of
the Notes or any of the Reimbursement Obligations when the same shall become
due either by the terms thereof or hereof or otherwise as herein provided; or
(b) the Borrower shall default in the payment of any interest on the Notes
or any fee or any other amount payable in connection with the transactions
contemplated hereby under any of the Loan Instruments for more than five days
after the date due; or
(c) any representation or warranty made by any Loan Party to the Agent or
any of the Lenders herein or in any other Loan Instrument, or in any
certificate, financial statement or other document furnished to the Agent or
any of the Lenders at any time hereunder or thereunder, shall prove to have
been false or misleading in any material respect as of the time made or deemed
made; or
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(d) any Loan Party shall fail to perform or observe, or cause to be
performed or observed (subject to any grace periods therein contained), (i)
any covenant contained in any of Sections 5.2, 5.11, 5.18(a) and (d) or
5.19 or Article VI; or (ii) any covenant (for a period of three consecutive
Business Days following notice or discovery of such failure) contained in any
of Sections 5.14, 5.15, 5.16, 5.18(b) and (c); or
(e) any Loan Party shall fail to perform or observe, or cause to be
performed or observed, any other covenant, term or agreement (other than
those referred to in paragraphs (a) through (d) above) contained in this
Agreement or any of the other Basic Documents and such failure shall continue
unremedied on the date which is the 30th day after (i) the first day of such
failure, in the case of any material failure or any failure under any of the
Collateral Security Documents, or (ii) the first day on which such Loan Party
knows of the occurrence of such failure, in the case of any other failure,
and, in the case of either (i) or (ii) immediately above, such period shall
be extended to a total of up to 120 days if (x) such Loan Party has promptly
commenced and diligently takes all such actions as may be required to effect
such remedy, and (y) such extension would not reasonably be expected to have
a Material Adverse Effect; or
(f) (i) any Loan Party shall default in any payment of principal of or
interest on any Indebtedness (other than the Obligations) with an outstanding
principal amount of at least $10,000,000, on the date when due, or shall fail
to observe or perform any other condition or obligation under the terms of
such Indebtedness, or (ii) an "event of default" shall have occurred and be
continuing under any Material Project Financing, and in any of the foregoing
cases, the effect of which is to cause, or to permit the holder thereof to
cause, such Indebtedness to become due prior to its stated maturity and to
permit the holder, trustee or agent thereunder to exercise any remedy against
the obligor or obligors thereunder or to realize upon any collateral given as
security therefor; or
(g) any party (other than a Loan Party) to any Assigned Contract shall
not be in compliance with, breach or default in any of its covenants or
obligations contained in such Assigned Contract, which default would
reasonably be expected to have a Material Adverse Effect, and such
non-compliance, breach or default shall not be remediable or, if remediable,
shall continue unremedied for a period terminating on the earlier to occur of
the day 60 days after the occurrence of such default and last day of the
applicable cure period, if any, specified in the relevant Assigned Contract;
or
(h) any Loan Party or Material Obligor shall make an assignment for the
benefit of creditors or shall generally not be paying its debts as such debts
become due; or
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(i) (i) any decree or order for relief in respect of any Loan party or
Material Obligor shall be entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (herein called
the "Bankruptcy Law") of any jurisdiction, (ii) any petition or application
of the types described in clause (j) below shall be filed, or any such
proceeding shall be commenced, against any loan Party or Material Obligor and
such Loan Party or Material Obligor, by an act, shall indicate its approval,
consent thereto or acquiescence therein, or an order, judgment or decree
shall be entered appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such proceedings, and
such order, judgment or decree shall remain unstayed and in effect for more
than 60 days, or (iii) any order, judgment or decree shall be entered in any
proceedings against any Loan Party or Material Obligor decreeing the
dissolution of such Loan Party or Material Obligor and such order, judgment or
decree shall remain unstayed and in effect for more than 60 days; or
(j) any Loan Party or Material Obligor shall petition or apply to any
tribunal for, or shall consent to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of such
Loan Party or Material Obligor or of any substantial part of the assets of
such Loan Party or Material Obligor, or shall commence a voluntary case under
the Bankruptcy Law of the United States or any proceedings relating to any
such Loan Party or Material Obligor under the Bankruptcy Law of any other
jurisdiction; or
(k) (i) a judgment or judgments in an amount in excess of $4,000,000
shall be rendered against any Loan Party, and, within 30 days after entry
thereof, such judgment shall not be discharged or execution thereof stayed
pending appeal, or within 30 days after the expiration of any such stay, such
judgment shall not be discharged, (ii) any order or decree is entered by any
court of competent jurisdiction directly or indirectly enjoining or
prohibiting any Loan Party from performing any of its material obligations
under this Agreement or any other Basic Document and such order or decree is
not vacated or stayed, and the proceedings out of which such order or decree
arose are not dismissed or stayed, within 30 days after the entry thereof; or
(l) any Collateral Security Document shall fail to provide, or cease to
be effective to grant, to the Agent for the ratable benefit of the Secured
Parties, a perfected Lien on the Collateral intended to be created thereby
(except as contemplated by Section 2.16 hereof) superior to all other Liens,
other than Permitted Liens, or cease to be in full force and effect, or the
validity thereof or the applicability thereof to the Loans, the Letters of
Credit, any Note, or any of the other Obligations purported to be secured or
guaranteed thereby or any part thereof
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shall be questioned or disaffirmed by or on behalf of any Loan Party or any
other party thereto; or
(m) any Assigned Contract or any material provision of any Assigned
Contract shall at any time for any reason cease to be valid and binding or in
full force and effect (except upon expiration of its stated term) or any
Assigned Contract (or any material provision of any Assigned Contract) shall
be declared by a court or other Governmental Authority of competent
jurisdiction to be null and void or be terminated (except upon expiration of
its stated term) in either case in such a way as would reasonably be expected
to have a Material Adverse Effect; or
(n) any of the Governmental Approvals or any other acts contemplated by
Sections 4.2(d) and 5.6 required in connection with the Loans, the Letters of
Credit, this Agreement or any of the other Basic Documents shall be rejected
or otherwise denied or shall expire (without being timely renewed) or be
revoked, rescinded, suspended, held invalid or otherwise limited in effect,
and such rejection, denial, expiration, revocation, rescission, suspension,
holding or other limiting action would reasonably be expected to have a
Material Adverse Effect; or
(o) the passage or promulgation of, or any change in, any statute,
ordinance or regulation or in the interpretation thereof, affecting Borrower
or any of its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect on the Borrower; or
(p) either Agent or any Lender shall, solely as a result of any
transaction contemplated hereby, become subject to regulation as an "electric
utility," "electric corporation," "electric company," "public utility," "gas
utility," "natural gas company," "gas corporation," "public service company,"
"electric utility company" or "holding company" under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, as amended,
the Natural Gas Act, as amended, PURPA, or any comparable state law or
regulation; or
(q) any Contractural Obligation of, or for the benefit of, any Loan Party
or Subsidiary of a Loan Party shall be modified, waived, breached, nullified,
terminated or otherwise changed in such a way as would reasonably be expected
to have a Material Adverse Effect on the Borrower; or
(r) there shall have occurred an Event of Loss; or
(s) either (i) CGE or a wholly-owned Subsidiary thereof or Marubeni or a
wholly-owned Subsidiary thereof, shall sell, transfer, convey or otherwise
dispose of, grant any option with respect to, or pledge any interest in any
of its shares of capital stock in the Borrower such that (in the case of CGE)
it
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holds (directly or indirectly through wholly-owned Subsidiaries) less than
35% of the issued and outstanding shares of capital stock of the Borrower
free and clear of Liens, or (in the case of Marubeni) it holds less than 16%
of the issued and outstanding shares of capital stock of the Borrower free
and clear of Liens; or
(t) the Letter of Credit Exposure (calculated, in the case of the Foreign
Currency portion of the Letter of Credit Exposure, in Dollars in accordance
with the first sentence of Section 2.3(k)(i)), plus the amount of
outstanding Loans, shall exceed the Letter of Credit Commitment for a period
of three consecutive Business Days after written notice is received from the
Agent; or
(u) as a separate and distinct Event of Default, the Agent shall have
received actual knowledge of the occurrence of any other Event of Default
hereunder (such Event of Default shall be deemed to have occurred as of the
date the Agent received actual knowledge of an Event of Default that has not
otherwise been cured or waived);
then (a) if such event is an Event of Default specified in clause (i) or
(j) of this Section 7.1 (to the extent such clauses relate to a Loan Party
and not a Material Obligor), the Notes (with accrued interest thereon) and all
other amounts owing under this Agreement or any Collateral Security Document
under this Agreement or any Collateral Security Document (together with
interest accrued thereon) and an amount equal to the Letter of Credit
Exposure shall automatically become immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties, and the Commitment shall thereupon
terminate, and (b) if such event is an Event of Default specified in any
other clause of this Section 7.1 (including without limitation clause (i) or
(j) to the extent such changes relate to a Material Obligor), the Agent
shall, at the request of the Majority Lenders, in addition to any right,
power or remedy permitted by law or equity, by notice in writing to the
Borrower, declare the Notes (with accrued interest thereon) and an amount
equal to the Letter of Credit Exposure and all other amounts owing under this
Agreement or any Collateral Security Document to be, and the Notes and such
amounts shall thereupon be and become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties, and the commitment shall thereupon
terminate. So long as any Letter of Credit shall remain outstanding, any of
the foregoing amounts payable in respect of the Letter of Credit Exposure,
when received by the Agent, shall be held by the Agent, pursuant to such
documentation as the Agent shall request, as Cash Collateral divided ratably
among the Letters of Credit in proportion to the percentage of the aggregate
Letter of Credit Exposure represented by each Letter of Credit; PROVIDED that
in the event of cancellation or expiration of any Letter of Credit
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or any reduction in the Letter of Credit Exposure, the Agent shall apply the
difference between the Cash Collateral held by it immediately prior to such
cancellation, expiration or reduction and the Letter of Credit Exposure
immediately after such cancellation, expiration or reduction, FIRST to the
payment of any outstanding Obligations (including without limitation to Cash
Collateral for the remaining Letter of Credit Exposure to the extent
theretofore less than fully secured by Cash Collateral), and SECOND to the
payment to whosoever shall be lawfully entitled to receive such funds.
Section 7.2 OTHER REMEDIES. If any Event of Default shall occur and be
continuing, the Agent shall, at the request of or the Majority Lenders, by
notice to the Borrower, (a) terminate the Commitment and (b) proceed to
protect and enforce the rights of the Secured Parties under this Agreement,
the Notes, any Collateral Security Document, or any other Basic Document by
exercising such remedies as are available to the Secured Parties in respect
thereof under applicable law, either by suit in equity or by action of law,
or both, whether for specific performance of any covenant or other agreement
contained in any such document or in aid of the exercise of any power granted
in any such document, and (c) either Agent or any Lender may set off amounts
in any accounts maintained with any of them and apply such amounts to the
Obligations as further described in Section 9.17. No remedy conferred in this
Agreement upon either of the Agents and/or the Lenders is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
ARTICLE VIII
THE AGENT
Section 8.1 APPOINTMENT. (a) Each Lender hereby irrevocably designates
and appoints Bank of Montreal as the Agent of such Lender under this
Agreement and each other Loan Instrument, and each such Lender irrevocably
authorizes such Agent to execute each of the Loan Instruments contemplated
hereby to be executed by either of them, to take such action on its behalf
under the provisions of this Agreement and each other Loan Instrument and to
exercise such powers and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement and each other Loan Instrument,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement,
the Agent shall not have any duties or responsibilities, except those
expressly set forth herein and those necessarily incidental thereto, or any
fiduciary relationship with any Lender, and no implied covenants,
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functions, responsibilities, duties, obligations or liabilities on the part
of the Agent shall be read into this Agreement or otherwise exist against the
Agent. This Article VIII is intended solely to govern the relationship
between the Agent, on the one hand, and the Lenders, on the other. In
performing its functions and duties hereunder and under the other Loan
Instruments, the Agent shall act solely as agent of the Lenders and does not
assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for any Loan Party or any of its respective
successors and assigns.
Section 8.2 DELEGATION OF DUTIES. The Agent may execute any of its
respective duties under this Agreement or the other Loan Instruments by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not
be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
Section 8.3 EXCULPATORY PROVISIONS. The Agent shall not be (i) liable for
any action lawfully taken or omitted to be taken by it or any Person
described in Section 8.2 under or in connection with this Agreement or any
other Basic Document (except for its or such Person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Lenders
for any recitals, statements, representations or warranties made by any other
Person contained in this Agreement or under any other Basic Document or in
any certificate, report, statement or other document referred to or provided
for in, or received under or in connection with, this Agreement or any other
Basic Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any other Basic Document
or for any failure of any other Person to perform its obligations hereunder
or thereunder. The Agent shall be under no obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Basic
Document, or to inspect the properties, books or records of any Person.
Section 8.4 RELIANCE BY AGENTS. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel, independent accountants and other experts
selected by such Agent, as the case may be. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless the Agent
shall have received an executed Commitment Transfer Supplement in respect
thereof. All payments made by the Agent to the Lenders prior to
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the receipt of such Commitment Transfer Supplement shall be valid and binding
for all purposes of this Agreement and the Notes. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or
any other Basic Document unless it shall first receive such advice or
concurrence of the Lenders, as it deems appropriate or it shall first be
indemnified to its satisfaction (subject to the provisions of Section 8.7) by
all of the Lenders, against liabilities and expenses which may be incurred by
it by reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting, or in refraining from acting,
under this Agreement and the other Basic Documents in accordance with a
request of the Majority Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
Section 8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
unless the Agent has received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be directed by the Majority Lenders; PROVIDED that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as the Agent shall
deem advisable and in the best interests of the Lenders.
Section 8.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly
acknowledges that neither the Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any
Person, shall be deemed to constitute any representation or warranty by the
Agent. Each Lender represents and warrants to the Agent that it has,
independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made
its own appraisal of an investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of
each Person deemed relevant by such Lender and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform
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itself as to the business, operations, property, prospects, financial and
other condition and creditworthiness of each Person deemed relevant by such
Lender. Except for notices, reports and other documents expressly required
under the Loan Instruments to be furnished to the Lenders by the Agent, the
Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, operations, property,
prospects, financial and other condition or creditworthiness of any Person
which may come into the possession of the Agent or any of its officers
directors, employees, agents, attorneys-in-fact or affiliates.
Section 8.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent
and its Affiliates and its officers, directors, employees, representatives
and agents (to the extent not reimbursed by the Loan Parties and without
limiting the obligation of the Loan Parties to do so) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgements, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of
counsel for the Agent or such Person in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
the Agent, as the case may be, or such Person shall be designated a party
thereto) that may at any time (including, without limitation, at any time
following the payment in full of the Obligations) be imposed on, incurred by
or asserted against the Agent, or such Person as a result of, or arising out
of, or in any way related to or by reason of, any of the transactions
contemplated hereby or the execution, delivery or performance of any Basic
Document or related document (but excluding any such liabilities,
obligations, losses, damages, penalties, actions, judgements, suits, costs,
expense or disbursements resulting solely from the gross negligence or
willful misconduct of Agent or such Person as finally determined by a court
of competent jurisdiction).
Section 8.8 AGENT IN INDIVIDUAL CAPACITIES. The Agent and its Affiliates
may engage in any kind of business with the Loan Parties and their
Affiliates as though the Agent were not the Agent hereunder. With respect
to Loans made or renewed by it any Note issued to it, and any Letter of
Credit issued or participated in by it, and every other Loan Instrument, the
Agent shall have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent hereunder,
and the terms "Lender," "Lenders," "Secured Party" and "Secured Parties"
shall include the Agent in its individual capacity.
Section 8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days'
notice to the Borrower and the Lenders. If Agent shall resign or be removed
as an Agent under this Agreement, then the Majority Lenders, with the prior
approval of the Agent, during such 30 day period shall appoint from among the
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Lenders a successor Agent reasonably acceptable to the Borrower, whereupon
such successor agent shall succeed to the rights, powers and duties of the
retiring or removed Agent. If no successor Agent from among the Lenders shall
have been appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring or removed Agent's notice of
resignation or removal, then the Majority Lenders shall, with the prior
approval of the Agent, appoint another financial institution as such Agent,
reasonably acceptable to the Borrower. If no successor Agent shall have been
appointed and shall have accepted such appointment within such additional 30
day period, then the retiring or removed Agent may, with the prior approval
of the other Agent, appoint as Agent a financial institution from the Lenders
or otherwise. Any successor Agent shall have a combined capital and surplus
of not less than $1 billion. Effective upon the appointment and acceptance of
such successor agent, the term "Agent" shall mean such successor agent,
effective upon it appointment, and the former Agent's rights, powers and
duties as the Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to this Agreement
or any Lenders. After the Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII and Section 9.1 shall inure to its
benefit as to any actions taken or omitted to be taken by it on or prior to
the effective date of its resignation as Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 EXPENSES; INDEMNIFICATION, ETC.
(a) Each of the Loan Parties agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save the Agent harmless
against liability for the payment of, (i) reasonable syndication related
expenses (including legal costs) of the Agent incurred, and all other
out-of-pocket expenses of the Agent arising in connection with such
transactions, (ii) all filing and recordation fees which may at any time be
payable in respect of the Collateral Security Documents or the Supplemental
Collateral Security Documents, (iii) all reasonable stenographic and
duplication costs and the reasonable fees and expenses of counsel to the
Agent in connection with this Agreement, the Notes, the Letters of Credit the
Collateral Security Documents or any other loan Instrument, the transactions
contemplated hereby or thereby, (iv) the reasonable cost and expenses,
including attorneys' fees, incurred by the Agent and the Lenders in enforcing
any of their rights under this Agreement, the Notes, the Letters of Credit,
the Collateral Security Documents or any other Basic Document or in complying
with any subpoena or other legal process served upon the Agent or any of the
Lenders in connection with this Agreement, the Notes, the Letters of Credit,
the Collateral
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Security Documents or any other Basic Document, or the transactions
contemplated hereby or thereby including without limitation, costs and
expenses incurred in any bankruptcy case and (v) the reasonable costs and
expenses, including attorneys' fees, and all stenographic and duplication
costs, incurred by the Agent in connection with or relating to the
negotiation, preparation, execution or delivery of any amendment,
modification, supplement, consent or waiver requested by any party relating
to this Agreement, the Notes, the Letters of Credit, the Collateral Security
Documents, or any other Basic Document or the transaction contemplated hereby
or thereby.
(b) Each of the Loan Parties agrees to pay, and hold the Agent and the
Lenders harmless from and against, any and all present and future stamp and
other similar taxes with respect to the transactions contemplated by this
Agreement, and save the Agent and the Lenders harmless from and against any
and all liabilities with respect to or resulting from any delay or omission to
pay such taxes. A certificate in reasonable detail as to any amounts payable
to the Agent or any of the Lenders under this section 9.1(b) submitted to the
Borrower by the Agent or any of the Lenders in good faith shall be presumed
to be correct absent manifest error and shall be binding upon all of the
parties to this Agreement and any assignees or transferees.
(c) Each of the Loan Parties agrees, to the extent permitted by law, to
indemnify, pay and hold harmless each of the Agent and the lenders (except
from its or their gross negligence or willful misconduct) from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind whatsoever
which may be imposed on, incurred by or asserted against the Agent or such
Lender in any way relating to or arising out of this Agreement, the Notes,
the Letters of Credit, any of the Collateral Security Documents, Basic
Documents, or other documents or transactions in connection with or relating
thereto. Each of the Loan Parties agrees to indemnify the Agent and the
Lenders against any claims for brokerage fees or commissions payable to any
broker or finder in connection with the Loans or the financing contemplated
by this Agreement (other than any such broker or finder acting solely on
behalf of the Agent or Lenders) and to pay all expenses incurred by any such
parties in connection with the defense of any action brought to collect any
brokerage fees or commissions by any such Person.
(d) The obligations of the Loan Parties under this Section 9.1 shall
survive resignation or removal of the Agent, transfer by the Lenders and
payment in full of the Notes and other Obligations.
Section 9.2 AMENDMENTS; CONSENT TO AMENDMENTS.
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(a) None of the Loan Instruments may be changed orally, but only by an
agreement in writing signed by the party against who enforcement of any
waiver, change, modification or discharge is sought. Without limiting the
generality of the foregoing, the acceptance or approval by the Agent or the
Lenders of any Budget or other projection or forecast shall not be deemed a
waiver of any covenant, condition or other term of this Agreement absent an
express written waiver with respect to the matter purported to be waived, as
required by this Section 9.2.
(b) Each of the Loan Instruments may be amended or any provision thereof
waived, and a Loan Party may take any action herein or therein prohibited, or
omit to perform any act herein or therein required to be performed by it, if
such Loan Party shall obtain the written consent to such amendment, action or
omission to act, of the Majority Lenders, except that no such action shall be
taken if the effect thereof is to (i) extend the maturity of any Note, Letter
of Creditor Reimbursement Obligation or any installment of any thereof,
change the Termination Date, or reduce the rate or extend the time of payment
of interest thereon, or reduce the principal amount thereof, or reduce any
fees payable to the Lenders hereunder or thereunder, without the prior
written consent of each Lender, (ii) change the amount of any Lender's
Commitment without the prior consent of such Lender, (iii) release any
material collateral (including without limitation any Cash Collateral)
purported to be covered by any of the Collateral Security Documents (except
as permitted by Section 2.16 or the Collateral Security Documents) without
the prior written consent of each Lender, (iv) amend the provisions of
Section 9.2(a) or 9.2(b) or the definition of "Majority Lenders", without the
prior written consent of each Lender, (v) amend or modify the provisions of
Section 8.9 without the prior consent of each Lender, (vi) create or permit
additional Indebtedness secured by the Collateral with out the prior consent
of each Lender or (vii) affect the rights or obligations of the Agent without
the consent of the party entitled to such rights or liable for such
obligations. Any such amendment, modification, supplement, cancellation or
termination and any such waiver, properly consented to in accordance with the
foregoing shall apply equally to each of the Lenders and the Agent (to the
extent applicable to such party) and shall be binding upon the Loan Parties
and each of the Secured Parties and all future holders of the Notes and
assignees of any part of the Commitment.
Section 9.3 INVESTMENT PURPOSE. Each of the Lenders represents that in
making the Loans to the Borrower such Lender will be acquiring the Notes for
the purpose of investment and not with the view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act of
1933, as amended, provided that the disposition of property of such Lender
shall at all times be and remain within its control, it being
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understood and agreed that the Agent shall have the right in accordance with
the terms of this Agreement to syndicate the Commitment to additional
financial institutions chosen by the Agent.
Section 9.4 NOTICES TO SUBSEQUENT HOLDER. If any of the Notes shall have
been transferred to another holder pursuant to Sections 9.3 and 9.7 and such
holder shall have designated in writing the address to which communications
with respect to such Note shall be mailed, all notices, certificates,
requests, statements and other documents required or permitted to be
delivered to any Lender or holder of a Note by any provision hereof shall
also be delivered to each such holder.
Section 9.5 PERSONS DEEMED OWNERS. Prior to due presentment of a
Commitment Transfer Supplement, the Borrower may treat the Person in whose
name any of the Notes is registered as the owner and holder of such Note for
the purpose of receiving payment of principal of and premium, if any, and
interest on such Note and for all other purposes whatsoever, whether or not
such Note shall be overdue, and the Borrower shall not be affected by notice
to the contrary.
Section 9.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any
Loan Party in connection herewith shall survive the execution and delivery of
and transfer by the Lenders and payment of the Obligations, regardless of any
investigation made by the Agent or any Lender or on its behalf.
Section 9.7 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Loan Parties, the Secured Parties, and their respective successors and assigns.
(b) Any Lender may from time to time grant participations in all or any
part of the Obligations and the Commitment to any Person (a "Participant") on
such terms and conditions as may be determined by such Lender in its sole and
absolute discretion, PROVIDED that the grant of such participation shall not
relieve any Lender of its obligations hereunder nor create any additional
obligations of any Loan Party, PROVIDED, FURTHER, that the Loan Parties
agree that if any Obligations are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence and during the
continuance of an Event of Default, each Participant shall be deemed to have
the right of setoff under Section 9.17 in respect of its participating
interest in amounts owing under the Loan Instruments to the same extent as if
the amount of its participating interest were owing directly to it as a
Lender under the Loan Instruments, PROVIDED FURTHER, that such right of
setoff shall be subject to the obligations of such Participant to
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share with the Lenders, and the Lenders agree to share with such Participant,
as provided in Section 9.16. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.13 and 2.19, PROVIDED that no
Participant shall be entitled to receive any greater amount pursuant to such
sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participating interest transferred by such
transferor Lender to such Participant had no such transfer occurred. Each
Lender agrees that any agreement between such Lender and any such Participant
in respect of such participating interest shall not restrict such Lender's
right to agree to any amendment, supplement, waiver or modification to this
Agreement or any other Loan Instrument, except where the result of any of the
foregoing would be to effect one of the changes set forth in Section
9.2(b)(i) or 9.2(b)(ii) (except as otherwise expressly provided in the Loan
Instruments).
(c) BMO may, with the prior written consent of the Borrower, not to be
unreasonably withheld, at any time sell to one or more financial institutions
(a "Purchasing Lender") any part of its rights and obligations under the Loan
Instruments pursuant to a Commitment Transfer Supplement, executed by such
Purchasing Lender, such transferor Lender and the Agency. Each Lender other
than BMO may sell to a Purchasing Lender all or any part of its rights and
obligations under the Loan Instruments pursuant to a Commitment Transfer
Supplement, executed by such Purchasing Lender, such transferor Lender and
the Agent; PROVIDED that such transferor Lender shall have received the prior
written consent thereto of Borrower and the Agent (each such consent not to
be unreasonably withheld). Transfers under this Section 9.7(c) shall be in a
minimum amount of $5,000,000, if the Purchasing Lender is already a Lender,
and otherwise in a minimum amount of $10,000,000, unless, in either case, a
lesser amount is then held by such transferor, in which case the minimum
transfer amount shall be the amount then held. Upon (x) such execution of any
such Commitment Transfer Supplement, and (y) delivery of an executed copy
thereof to the Borrower and payment of the amount of its participation
(together with a processing fee payable by the transferor Lender to the Agent
in the amount of $3,500), the Purchasing Lender shall for all purposes be a
Lender party to this Agreement and shall have all the rights and obligations
of a Lender under this Agreement, to the same extent as if it were an
original party hereto with the share of the Commitment as set forth in such
Commitment Transfer Supplement, which shall be deemed to amend this Agreement
(including, without limitation, the Lender Schedule) to the extent, and only
to the extent, necessary to reflect the addition of such Lender and the
resulting adjustment of the Commitment arising from the purchase by such
Lender of all or a portion of the rights and obligations of such transferor
Lender under the Loan Instruments. Upon the consummation of any transfer
pursuant to this Section 9.7(c), the transferor Lender, the Agent and the
Borrower shall make appropriate arrangements so that, if required,
replacement Notes
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are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchasing Lender, in each case in
principal amounts reflecting their respective shares of the Commitment or, as
appropriate, their outstanding Loans, as adjusted pursuant to the applicable
Commitment Transfer Supplement. Prior to selling or otherwise transferring
any Note, the Lender shall endorse on such Note all Loans and all payments of
principal and interest that have been made in respect of such Note.
(d) Each of the Loan Parties acknowledges that any Lender may deliver
copies of any financial statements and other documents delivered to such
Lender, and disclose any other information disclosed to such Lender, by or on
behalf of any Loan Party in connection with or pursuant to the Loan
Instruments (including without limitation information with respect to
deposits of such Loan Party on account with such Lender) to (i) such Lender's
directors, officers, employees, agents and professional consultants, (ii) any
other Lender, (iii) any Person to which such Lender offers to sell all or
part of its rights and obligations under the Loan Instruments, (iv) any
Person to which such Lender sells or offers to sell a participation in all or
any part of its rights and obligations under the Loan Instruments, (v) any
federal or state regulatory authority having jurisdiction over such Lender or
(vi) any other Person to which such delivery or disclosure may be necessary
or appropriate (a) in compliance with any law, rule, regulation or order
applicable to such holder, (b) in response to any subpoena or other legal
process, (c) in connection with any litigation to which such Lender is a
party or (d) in order to protect such Lender's investment (PROVIDED, that, in
the case of clauses (i) through (iv) hereof, such Person shall agree to be
bound by Section 9.22 of this Agreement).
Section 9.8 NOTICES. Except as otherwise expressly provided in this
Agreement, all notices, demands, requests and other communications provided
for hereunder shall be in writing and shall be deemed to have been given (a)
when presented personally, (b) when transmitted by telex to the number, if
any, specified below and the proper answer back is received, (c) if sent by
overnight courier service, on the Business Day following the date of delivery
to such courier service, or such later day as demonstrated by a bona fide
receipt therefor, or (d) if sent by the United States Postal Service, postage
prepaid, registered or certified, return receipt requested, on the date
received, addressed to the respective party, as the case may be, at the
following address, or such other address as any party may from time to time
designate by written notice to the others as herein required. Transmission by
telecopy at the numbers provided below shall constitute provision of notice
under this Agreement only if receipt thereof is acknowledged by the recipient.
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For the Agent/Fronting Bank, and each of the Lenders: as set forth on the
Lender Schedule.
For the Loan Parties:
Sithe Energies, Inc.
450 Lexington Avenue
New York, New York 10017
Attn: Treasurer
Telecopy: (212) 450-9065
Section 9.9 DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
Section 9.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW (OTHER THAN THE PROVISIONS OF
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF SUCH STATE).
Section 9.11 NO WAIVER. Failure by either the Agent or any of the Lenders
to exercise, or any delay in exercising, any right, remedy, power or
privilege it has under this Agreement, or any course of dealing between any
Loan Party and the Agent or the Lenders, shall not operate as a waiver of any
such right, remedy, power or privilege. Neither shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided under this
Agreement are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
Section 9.12 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement and without affecting the validity or enforceability of such or any
other provision in any other jurisdiction.
Section 9.13 COUNTERPARTS. This Agreement may be executed simultaneously
in counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart for each party hereto.
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Section 9.14 WAIVER OF JURY TRIAL; LIMITATION OF REMEDIES.
(a) THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION OF CLAIM
WHICH IS BASED HEREON, OR ARISES OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, THE NOTES, THE LETTERS OF CREDIT, ANY OF THE COLLATERAL SECURITY
DOCUMENTS, BASIC DOCUMENTS, OR OTHER DOCUMENTS OR TRANSACTIONS IN CONNECTION
WITH OR RELATING HERETO OR THERETO, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, THE
LENDERS OR THE LOAN PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS TO ENTER INTO THIS AGREEMENT.
(b) Each of the Loan Parties agrees, regardless of cause, not to assert
any claim whatsoever, against any Secured Party for loss of anticipatory
profits or consequential damages.
Section 9.15 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or would otherwise be within the limitations of another
covenant shall not avoid the occurrence of an Event of Default or Default if
such action is taken or condition exists.
Section 9.16 SHARING OF PAYMENTS. Each of the Lenders agrees that if it
should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under
the Basic Documents, or otherwise) which is applicable to the payment of any
Obligations, of a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total of such
Obligations then owed and due to such Lender bears to the total of such
Obligations then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall purchase for
cash without recourse or warranty from the other Lenders an interest in such
Obligations owing to such Lenders in such amount as shall result in a
proportional participation by all of the Lenders in such amount; provided
that is all or any portion of such excess amount is thereafter recovered from
such Lender, such purchase shall be rescinded and the purchase price restored
to the extent of such recovery, but without interest.
Section 9.17 RIGHT OF SET-OFF. In addition to any rights now or hereafter
granted under any applicable law or otherwise, and not by way of limitation
of any such rights, upon the occurrence and during the continuance of any
Event of Default, each of the Agent and the Lenders is hereby authorized at
any time or from time to time, without presentment, demand,
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<PAGE>
protest or other notice of any kind to any Loan Party or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate
and apply any and all deposits (general or special, time or demand,
provisional or final) and any other indebtedness at any time held or owing
the Agent or such Lender (including, without limitation, by branches and
agencies of such Lender wherever located) to or for the credit or the account
of such Loan Party against and on account of the Obligations of such Loan
Party to the Agent or such Lender under the Loan Instruments, including,
without limitation, all interests in Obligations purchased by such Lender
pursuant to Section 9.16, and all other claims of any nature or description
arising out of or in connection with the Loan Instruments, irrespective of
whether or not the Agent or such Lender shall have made any demand hereunder
and although such Obligations, liabilities or claims, or any of them, shall
be continuing or unmatured.
Section 9.18 SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Person, then the determination
of such satisfaction shall be made by such Person in its sole and exclusive
judgment exercised in good faith.
Section 9.19 MARSHALLING; PAYMENTS SET ASIDE. The Agent and Lenders shall
not be under any obligation to marshal any assets in favor of any Loan Party
or any other party or against or in payment of any or all of the Obligations.
To the extent that any Loan Party makes a payment or payments to the Agent or
any Lender, or the Agent or any Lender enforces any security interests or
exercises its rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
Bankruptcy Law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be reviewed and continued in full force
and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
Section 9.20 PRIOR UNDERSTANDINGS. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein.
Section 9.21 JOINT AND SEVERAL LIABILITY. The Loan Parties are jointly
and severally liable with each other for their respective obligations under
the Loan Instruments.
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Section 9.22 CONFIDENTIALITY. Each of the Loan Parties and Secured
Parties agrees to exercise its reasonable efforts to keep each of the Loan
Instruments and the contents thereof and all other documents marked
"confidential" delivered by or on behalf of any such Person, confidential
from any Person other than Persons employed or retained by such Loan Party or
any such Secured Party who are or are expected to become engaged in
evaluating, approving, structuring or administering the Loan Instruments or
the transactions contemplated thereby; PROVIDED, HOWEVER, that nothing herein
shall prevent any Secured Party from making any disclosure of information
contemplated under Section 9.7(e) or shall prevent a Loan Party or any
Secured Party or any such Person so employed or retained from disclosing such
Loan Instruments (i) to any other Lender, (ii) to its officers, directors,
employees and agents who have a need to review such Loan Instruments in
accordance with customary borrowing or lending practices, as applicable,
(iii) upon the order of any court or administrative agency, (iv) upon the
request or demand of any regulatory agency or authority having jurisdiction
over such Person, (v) which has been publicly disclosed by a Person other
than the person subject hereto, (vi) to the extent reasonably required in
connection with any litigation to which any Loan Party or any Secured Party
or its Affiliates may be a party, (vii) to the extent reasonably required in
connection with the exercise of any right or remedy hereunder, (viii) to any
such Person's attorneys, accountants and independent auditors, (ix) to any
actual or proposed assignee, participant or transferee of any of the
Obligations (subject to the non-disclosure standard set forth herein) or (x)
to any Person to which disclosure may be necessary or appropriate in
compliance with any law, rule, regulation or order applicable to such Person.
Section 9.23 DEFAULTING LENDER. Anything in this Agreement to the
contrary notwithstanding, if:
(i) at a time when the conditions precedent set forth in Article IV
hereof to any Loan hereunder are, in the opinion of the Majority Lenders,
satisfied, any Lender shall fail to fulfill its obligations to make such Loan
or
(ii) any Lender shall fail in its obligation to make available to the
Fronting Bank such Lender's participation in any unreimbursed amount of any
Drawing under any Letter of Credit pursuant to Section 2.3 hereof.
then, for so long as such failure shall continue, such Lender (a
"Defaulting Lender") shall (unless the Majority Lenders, determined as if
such Defaulting Lender were not a "Lender" hereunder, shall otherwise consent
in writing) be deemed for all purposes relating to amendments, modifications,
waivers or consents under this Agreement or any of the other Loan Instruments
(including, without limitation, under this Section 9.23) to have no Loans,
participations in Letters of
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<PAGE>
Credit or Commitments, shall not be treated as a "Lender" hereunder when
performing the computation of Majority Lenders, and shall have no rights
under Section 9.2 hereof; PROVIDED that any action taken by the other Lenders
with respect to those matters referred to in clauses (i), (ii) and (vi) of
Section 9.2(b) which require unanimous Lender consent shall not be effective
as against such Lender without its consent. If the Borrower so requests
within ten days after a Lender becomes a Defaulting Lender, the Agent shall
use reasonable efforts to arrange an assignment of such Lender's
proportionate share of the Commitment, to an assignee selected by the Agent
or the Borrower (and reasonably acceptable to each of them) subject to the
provisions of Section 2.19(e) hereof, and such assigning Lender hereby
consents to any such assignment.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
SITHE ENERGIES, INC.
By: /s/ Sandra Manilla
-------------------------------
Name: Sandra Manilla
Title:
SITHE ENERGIES U.S.A., INC.
By: /s/ Sandra Manilla
-------------------------------
Name: Sandra Manilla
Title:
ENERGY FACTORS, INCORPORATED
By: /s/ Sandra Manilla
-------------------------------
Name: Sandra Manilla
Title:
SITHE INTERNATIONAL, INC.
By: /s/ Sandra Manilla
-------------------------------
Name: Sandra Manilla
Title:
SITHE ENERGIES DEVELOPMENT CORPORATION
By: /s/ Sandra Manilla
-------------------------------
Name: Sandra Manilla
Title:
BANK OF MONTREAL
By: /s/ John Smith
---------------------
Name:
Title:
BANK OF MONTREAL as Agent
By: /s/ John Smith
----------------------
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES F-3 AND F-4 OF THE PARTNERSHIP'S FORM 10K FOR THE YEAR-TO-DATE, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000899281
<NAME> SITHE/INDEPENDENCE FUNDING CORP.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 33,384
<ALLOWANCES> 0
<INVENTORY> 1,872
<CURRENT-ASSETS> 110,576
<PP&E> 770,249
<DEPRECIATION> (56,975)
<TOTAL-ASSETS> 838,047
<CURRENT-LIABILITIES> 40,296
<BONDS> 669,345
0
0
<COMMON> 0
<OTHER-SE> 120,564
<TOTAL-LIABILITY-AND-EQUITY> 838,047
<SALES> 355,432
<TOTAL-REVENUES> 355,432
<CGS> 260,760
<TOTAL-COSTS> 260,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,369
<INCOME-PRETAX> 39,329
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,329
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
