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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
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COMMISSION FILE NUMBER: 33-74254
COGENTRIX ENERGY, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 56-1853081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9405 ARROWPOINT BOULEVARD 28273-8110
CHARLOTTE, NORTH CAROLINA (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (704) 525-3800
Securities registered pursuant to Section 12(b) of Act:
NONE
Securities registered pursuant to Section 12(g) of Act:
NONE
Indicate by checkmark 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 checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. [X]
Number of shares of Common Stock, no par value, outstanding at March 30,
2000: 282,000
DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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COGENTRIX ENERGY, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
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PAGE
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PART I
Item 1: Business.................................................... 3
Item 2: Properties.................................................. 23
Item 3: Legal Proceedings........................................... 23
Item 4: Submission of Matters to a Vote of Security Holders......... 23
PART II
Item 5: Market for the Registrant's Common Stock and Related
Shareholder Matters......................................... 24
Item 6: Selected Consolidated Financial Data........................ 25
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 26
Item 8: Financial Statements and Supplementary Data................. 37
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 68
PART III
Item 10: Directors and Executive Officers of the Registrant.......... 68
Item 11: Executive Compensation...................................... 71
Item 12: Security Ownership of Certain Beneficial Owners and
Management.................................................. 75
Item 13: Certain Relationships and Related Transactions.............. 76
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 77
Signatures............................................................. 86
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Cogentrix Energy, Inc. is an independent power producer that through its
direct and indirect subsidiaries acquires, develops, owns and operates electric
generating plants, principally in the United States. We derive most of our
revenue from the sale of electricity, but we also produce and sell steam. We
sell the electricity we generate, primarily under long-term power purchase
agreements, to regulated electric utilities and power marketers. We sell the
steam we produce to industrial customers with manufacturing or other facilities
located near our electric generating plants. We were one of the early
participants in the market for electric power generated by independent power
producers that developed as a result of energy legislation the United States
Congress enacted in 1978. We believe we are one of the larger independent power
producers in the United States based on our total project megawatts in
operation.
We currently own -- entirely or in part -- a total of 25 electric
generating facilities in the United States. Our 25 plants are designed to
operate at a total production capability of approximately 4,000 megawatts. After
taking into account our part interests in the 16 plants that are not
wholly-owned by us, which range from 1.7% to approximately 74%, our net
ownership interests in the total production capability of our 25 electric
generating facilities is approximately 1,840 megawatts. We currently operate 12
of our facilities, 10 of which we developed and constructed.
We also have an ownership interest in and will operate three facilities
currently under construction in Mississippi, Oklahoma and Idaho. Once these
facilities begin operation, we will have ownership interests in a total of 28
domestic electric generating facilities that are designed with a total
production capability of approximately 5,870 megawatts. Our net equity interest
in the total production capability of those 28 facilities will be approximately
3,190 megawatts.
Unless the context requires otherwise, references in this report to "we,"
"us," "our," or "Cogentrix" refer to Cogentrix Energy, Inc. and its
subsidiaries, including subsidiaries that hold investments in other corporations
or partnerships whose financial results are not consolidated with ours. The term
"Cogentrix Energy" refers only to Cogentrix Energy, Inc., which is a development
and management company that conducts its business primarily through
subsidiaries. Cogentrix Energy's subsidiaries that are engaged in the
development, ownership or operation of cogeneration facilities are sometimes
referred to individually as a "project subsidiary" and collectively as Cogentrix
Energy's "project subsidiaries."
TRENDS AFFECTING THE DOMESTIC ELECTRIC GENERATING INDUSTRY AND OUR BUSINESS
Increasing Competition in the Domestic Electric Generating Industry
In response to increasing customer demand for access to low-cost
electricity and enhanced services, new regulatory initiatives are currently
being adopted or considered at both state and federal levels to increase
competition in the domestic electric generating industry. We believe that these
regulatory initiatives will lead to the transformation of the existing regulated
market, which sells to a captive customer base, to a more competitive market in
which end users may purchase electricity from a variety of suppliers, including
non-utility generators, power marketers, public utilities and others. Our
management believes that these market trends will create significant new
business opportunities for us because we have demonstrated our ability to
construct and operate efficient, low-cost electric generating facilities.
Growing Market for Sale of Electric Generating Assets
Regulatory initiatives to restructure the United States electric industry
have led to the development of a growing market for the sale of electric
generating assets principally by utilities, but also by independent power
producers and industrial companies. In addition to regulatory pressure, some
utilities' managements have decided for strategic reasons to sell some or all of
their generating assets and to concentrate on the transmission and distribution
segments of the power supply market. If this trend continues, it may create
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additional investment opportunities for us. In connection with
acquiring -- entirely or in part -- any additional electric generating assets,
we expect to reduce our exposure to electric market price risk by entering into
contractual arrangements with fuel suppliers, utilities and/or power marketers
under which they would assume some or all of the risks associated with
fluctuations in energy prices.
Expansion of our Options Resulting from Passage of the Energy Policy Act
The passage of the Energy Policy Act in 1992 significantly expanded the
options available to independent power producers, particularly with respect to
siting a generating facility. Among other things, the Energy Policy Act enables
independent power producers to obtain an order from the Federal Energy
Regulatory Commission requiring an intermediary utility to give access to its
transmission lines to transmit or "wheel" electric power from a generating
facility to its utility purchaser. The availability of wholesale transmission
"wheeling" could be an important aspect in the development of new projects. For
example, we may be able to develop a project in one utility's service territory
and "wheel" the electric power produced by the project through the transmission
lines of that utility to a second utility or another wholesale purchaser. The
Energy Policy Act also created a new class of generator -- exempt wholesale
generators -- that, unlike qualifying facilities, are not required to use
alternative or renewable fuels or to have useful thermal energy output. See
"Regulation -- Energy Regulations" herein.
OUR DEVELOPMENT AND ACQUISITION STRATEGY
We intend to remain among the leaders in the independent power industry by
developing and constructing or acquiring -- entirely or in part -- electric
generating facilities in the United States and in foreign countries where the
political climate is conducive to increased foreign investment.
We have targeted three market segments for our future acquisition and
development activities. They are:
- Developing new, electric generating facilities using natural gas as fuel
- Acquiring interests in existing domestic electric generating plants
- Developing, owning, managing and operating on-site cogenerating
facilities for large industrial customers with significant energy needs
Developing New Electric Generating Plants. We intend to pursue domestic
development of new, highly-efficient, low-cost plants, concentrating on
facilities that use natural gas as fuel. We expect these facilities to enter
into long-term contractual arrangements with fuel suppliers, electric utilities
or power marketers. These contractual arrangements will provide us a scheduled
and/or indexed payment for electricity and result in the fuel supplier, electric
utility or power marketer assuming the risks associated with energy price
fluctuations. We also intend to pursue international project development
opportunities on a highly selective basis. We expect to do so only in those
countries where demand for power is growing rapidly, private investment is
encouraged and favorable financing conditions exist.
Acquiring Interests in Existing Domestic Electric Generating Plants. Our
candidates for future acquisitions will generally already have entered into
power sales contracts with electric utilities or other customers whose senior
unsecured debt carries investment-grade credit ratings. We may also seek to
acquire interests in electric generating facilities that do not have contracts
in place but are nonetheless highly efficient, low-cost providers that can take
advantage of opportunities in a rapidly deregulating energy market. If we do, we
intend to protect Cogentrix against the risk of changes in the market price for
electricity by entering into contracts at the time of acquisition with fuel
suppliers, utilities or power marketers which reduce or eliminate our exposure
to this risk by establishing future prices and quantities for the electricity
produced independent of the short-term market.
Developing New or Managing Existing Plants for Industrial Companies. Many
large, industrial companies with significant energy needs own on-site facilities
for generating the electricity and producing the steam they require for their
manufacturing, refining or other operations. We believe that cogenerating
facilities with state-of-the-art technology developed by us could replace or
upgrade existing facilities employing older
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technology that many of these industrial companies currently operate themselves.
We also expect that many industrial companies choosing not to replace their
existing facilities will seek to contract with companies like Cogentrix to
manage and operate their existing facilities.
We are concentrating on opportunities to develop or acquire interests in
mid-sized electric generating facilities which use low-cost, state-of-the-art
proven technology. We target projects that will allow us to capitalize on our
reputation as a low-cost, efficient and reliable provider. We seek to manage the
risks associated with owning and operating electric generating facilities by
emphasizing diversification and balance among our investments in terms of the
following criteria:
- the geographic location of the facilities in which we have an ownership
interest
- the electric utility or power marketing customers for the electricity we
generate and the industrial customers for the steam we produce
- the technology we employ to generate electricity and produce steam
- the coal, gas and other fuel suppliers to our plants
PROJECTS UNDER DEVELOPMENT
Rathdrum, Idaho Project. We are developing jointly with Avista Power, Inc.
a 270-megawatt electric generating facility to be located in Rathdrum, Idaho.
Avista Turbine Power, Inc. will deliver natural gas to the plant and purchase
the electrical output of the facility under a 25 year power purchase agreement.
Cogentrix will have a 51% ownership interest and Avista Power will have a 49%
ownership interest in the facility. We will have the lead role for the
development, construction and operation of the facility.
Subsequent to December 31, 1999, we closed the financing with a bank and a
financial institution on a $126 million construction loan to fund the
construction of the facility in Rathdrum, Idaho. We have begun construction and
expect commercial operations to commence in the third quarter of 2001.
Dominican Republic Project. We are in the advanced stages of developing a
300 megawatt electric generating facility in the Dominican Republic. The project
will utilize fuel oil-fired, combined-cycle technology. We are serving as lead
developer in a partnership with Commonwealth Development Corporation of Great
Britain. The facility will sell electricity under a 20-year power purchase
agreement with the Corporacion Dominicana de Electricidad ("CDE") supported by a
Dominican government guarantee of the payment obligations. The project is
expected to close financing and commence construction in the second quarter of
2000 with a commencement of operations in 2001.
PROJECT AGREEMENTS, FINANCING AND OPERATING ARRANGEMENTS FOR OUR FACILITIES
Project Agreements
Our facilities have long-term power sales agreements to sell electricity to
electric utilities and power marketers. A facility's revenue from a power sales
agreement usually consists of two components: variable payments, which vary in
accordance with the amount of energy the facility produces, and fixed payments,
which are received in the same amounts whether or not the facility is producing
energy. Variable payments, which are generally intended to cover the costs of
actually generating electricity, such as fuel costs, if supplied by the
operating facility, and variable operation and maintenance expense, are based on
a facility's net electrical output measured in kilowatt hours. Variable payment
rates are either scheduled or indexed to the fuel costs of the electricity
purchaser and/or an inflationary index.
Fixed payments, which are intended to compensate us for the costs incurred
by the project subsidiary whether or not it is generating electricity, such as
debt service on the project financing, are more complex and are calculated based
on a declared production capability of a facility. Declared production
capability is the electric generating capability of a plant in megawatts that
the project subsidiary contractually agrees to make available to the electricity
purchaser. It is generally less than 100% of the facility's design production
capability dictated by its equipment and design specifications. Fixed payments
are based either on a facility's
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net electrical output and paid on a kilowatt-hour basis or on the facility's
declared production capability and can be adjusted if actual production
capability varies significantly from declared production capability.
Many power sales agreements permit the electricity purchaser to direct the
facility to deliver a variable amount of electrical output within limited
parameters. This means the purchaser may, within those parameters, direct the
facility to reduce or suspend the delivery of electricity. The power sales
agreements of substantially all our facilities provide the electricity purchaser
with the right to reduce or suspend their purchases of electricity whenever they
determine that they can obtain lower cost power either by generating power at
their own plants or by purchasing electricity in bulk from others. The power
sales agreements for these facilities are structured in a manner such that when
the amount of electrical output is reduced, the facility continues to receive
the fixed payments, which cover fixed operating costs and debt service
requirements and provide substantially all of the project subsidiary's profits.
The variable payments, which cover the operating, maintenance and fuel costs
incurred by the operating subsidiary to generate electricity, are received only
for each kilowatt hour delivered.
With some exceptions, our facilities produce process steam for use by an
industrial customer which has a manufacturing or other facility located nearby.
Our industrial customers, which include textile manufacturing companies,
pharmaceutical manufacturing companies, chemical producers and synthetic fiber
plants, use the process steam in their manufacturing processes. Our steam sales
contracts with these industrial customers generally are long-term contracts that
provide payment on a per thousand pound basis for steam delivered.
With the exception of facilities in which the electricity purchaser is
responsible for providing the fuel, each of our facilities purchases fuel under
long-term supply agreements. Substantially all fuel supply contracts are
structured so that the scheduled increases in the fuel cost are generally
matched by increases in the variable payments received by the project subsidiary
for electricity under its power sales agreement. This matching is typically
affected by having the fuel prices escalate as a function of the solid fuel
index of the purchasing utility. The matching is sometimes affected by
contracting for scheduled increases in the variable payments under our power
sales agreements designed to offset scheduled increases in fuel prices.
Project Financing
Each facility is financed primarily under financing arrangements at the
project subsidiary level which, except as noted below, require the loans to be
repaid solely from the project subsidiary's revenues. They also generally
provide that the repayment of the loans and payment of interest is secured
solely by the physical assets, agreements, cash flow and, in certain cases, the
capital stock of or partnership interests in that project subsidiary. This type
of financing is generally referred to as "project financing."
Project financing transactions are generally structured so that all
revenues of a project are deposited directly with a bank or other financial
institution acting as escrow or security deposit agent. These funds are then
payable in a specified order of priority to assure that, to the extent
available, they are used first to pay operating expenses, senior debt service
and taxes and to fund reserve accounts. Then, subject to satisfying debt service
coverage ratios and other conditions, any available funds may be disbursed to
Cogentrix Energy and its other partners in the case of jointly-owned facilities
in the form of management fees or dividends or for the payment of subordinated
debt service, where there are subordinated lenders.
Our facilities are financed using a high proportion of debt to equity. This
leveraged financing permits us to develop projects with a limited equity base
but also increases the risk that a reduction in revenues could adversely affect
a particular project's ability to meet its debt or lease obligations. The
lenders to each project subsidiary have security interests covering some or all
of the aspects of the project, including the facility, related facility support
agreements, the stock or partnership interest of our project subsidiaries,
licenses and permits necessary to operate the facility and the cash flow derived
from the facility. In the event of a foreclosure after a default, the project
subsidiary would only retain an interest in the property remaining, if any,
after all debts and obligations were paid.
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In addition, the debt of each operating project may reduce the liquidity of
our interest in such project since any sale or transfer of its interest would,
in most cases, be subject both to a lien securing such project debt and to
transfer restrictions in the relevant financing agreements. Also, our ability to
transfer or sell our interest in some of our projects is restricted by purchase
options we have granted to an industrial steam customer and to a utility and
certain rights of first refusal we have granted in favor of our power and steam
purchasers.
Because the project debt is "non-recourse", the lenders under these project
financing structures cannot look to Cogentrix Energy or its other projects for
repayment unless Cogentrix Energy or another project subsidiary expressly agrees
to undertake liability. Cogentrix Energy has agreed to undertake limited
financial support for certain of its project subsidiaries in the form of limited
obligations and contingent liabilities. These obligations and contingent
liabilities take the form of guarantees, indemnities, capital infusions and
agreements to pay debt service deficiencies. To the extent Cogentrix Energy
becomes liable under such guarantees and other agreements with respect to a
particular project, distributions received by Cogentrix Energy from other
projects may be used to satisfy these obligations. To the extent of these
obligations, the lenders to a project may look to Cogentrix Energy and the
distributions it receives from other projects for repayment. The aggregate
contractual liability of Cogentrix Energy to its project lenders is, in each
case, a small portion of the aggregate project debt. Thus, the project financing
structures are generally described throughout this report as being
"non-recourse" to Cogentrix Energy and its other projects. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Our facilities are insured in accordance with covenants in each project's
debt financing agreements. Coverages for each plant include workers'
compensation, commercial general liability, supplemented by primary and excess
umbrella liability, and a master property insurance program including property,
boiler and machinery and business interruption.
Operating Arrangements
Unlike many independent power producers who contract with third-party
operators, we operate many of our facilities. When we do operate a facility, our
project subsidiary employs directly the persons required to operate the
facility. We invest in training our operating personnel and structure our
facility bonus program to reward safe, efficient and cost-effective operation of
the facilities. Our management meets and conducts, several times a year, on-site
facility performance reviews with each facility manager.
We have established a strong record of safety, efficiency and reliability
in operating our electric generating plants, which reliability is measured in
the industry by a generating plant's "availability" to generate and sell
electricity. The table below shows the average "availability" of the plants we
operate for the periods indicated.
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PERIOD AVERAGE AVAILABILITY
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Year ended December 31, 1999................................ 95.6%
Year ended December 31, 1998................................ 96.4%
Year ended December 31, 1997................................ 97.2%
</TABLE>
We provide to all but one of the facilities we operate administrative and
management services for a periodic fee, which in some cases is adjusted annually
by an inflation factor. The ability of a project subsidiary to pay these
management fees is contingent upon the continuing compliance by the project
subsidiary with covenants under its project financing agreements and may be
subordinated to the payment of obligations under those agreements. We have
earned and will continue to earn incentive compensation from our Hopewell
facility, in which Cogentrix Energy holds a 50% general partnership interest and
is, through a subsidiary, the managing general partner, if the facility achieves
the contractually specified net income levels.
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Ash Removal
Project subsidiaries owning nine of our coal-fired plants contract with our
subsidiary, ReUse Technology, to remove coal ash generated by such facilities.
As an alternative to disposing coal ash in landfills, ReUse Technology uses coal
ash in the manufacturing and production of various ash derived products for
resale.
FACILITIES UNDER CONSTRUCTION
In August 1998, we acquired an approximate 52% interest in a 800-megawatt
combined-cycle, natural gas-fired electric generating facility under
construction in Batesville, Mississippi. We will operate this facility, which is
scheduled to begin operation in summer 2000. Electricity generated by the plant
will be sold under long-term power purchase agreements with two utilities. Both
of these utilities have senior, unsecured debt outstanding that
nationally-recognized credit rating agencies have rated investment grade.
In December 1999, Cogentrix closed financing and commenced construction on
an 800 megawatt combined-cycle, natural gas-fired electric generating facility
in Jenks, Oklahoma. PECO Energy's Power Team will deliver natural gas to the
plant and purchase the electricity under a long term power purchase agreement.
This facility, which we will operate and manage, is scheduled to commence
commercial operations in early 2002.
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FACILITIES IN OPERATION
Our facilities described below rely on power sales agreements for the
majority of their revenues. During the fiscal year ended December 31, 1999, two
regulated utility customers accounted for approximately 64% of our consolidated
revenues. The failure of either of these utility customers to fulfill its
contractual obligations for a prolonged period of time would have a material
adverse effect on our primary source of revenues. Both of these utilities have
senior, unsecured debt outstanding that nationally-recognized credit rating
agencies have rated investment grade. As a result of recent growth, our future
operations will be more diverse with regard to both geography and fuel source
and less dependent on any single project or customer.
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OUR
OUR NET EQUITY
PERCENT INTEREST IN
PLANT OWNERSHIP PLANT POWER
FACILITY LOCATION FUEL MEGAWATTS INTEREST MEGAWATTS PURCHASING UTILITY
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Elizabethtown........... Elizabethtown, NC Coal 35 100% 35.0 CP&L*
Lumberton............... Lumberton, NC Coal 35 100 35.0 CP&L*
Kenansville............. Kenansville, NC Coal 35 100 35.0 CP&L*
Roxboro................. Roxboro, NC Coal 60 100 60.0 CP&L*
Southport............... Southport, NC Coal 120 100 120.0 CP&L*
Hopewell................ Hopewell, VA Coal 120 50.0 60.0 Virginia Power
Portsmouth.............. Portsmouth, VA Coal 120 100 120.0 Virginia Power
Rocky Mount............. Rocky Mount, NC Coal 120 100 120.0 Virginia Power
Ringgold................ Ringgold, PA Gas 15.5 100 15.5 Pennsylvania Electric
Company
Richmond................ Richmond, VA Coal 240 100 240.0 Virginia Power
Birchwood............... King George, VA Coal 240 50.0 120.0 Virginia Power
Cottage Grove........... Cottage Grove, MN Gas 245 73.2 179.3 Northern States Power
Company
Whitewater.............. Whitewater, WI Gas 245 74.2 181.8 Wisconsin Electric
Power Corporation
Logan................... Logan Township, NJ Coal 218 50.0 109.0 Atlantic City Electric
Northampton............. Northampton County, PA Waste coal 110 50.0 55.0 Metropolitan Edison
Indiantown.............. Martin County, FL Coal 380 50.0 190.0 Florida Power & Light
Carneys Point........... Carneys Point, NJ Coal 262 10.0 26.2 Atlantic City Electric
Panther Creek........... Carbon County, PA Waste coal 83 12.2 10.1 Metropolitan Edison
Scrubgrass Township,
Scrubgrass.............. PA Waste coal 85 20.0 17.0 Pennsylvania Electric
Selkirk................. Albany, NY Gas 396 5.1 20.2 Con Edison & Niagara
Mohawk
Cedar Bay............... Jacksonville, FL Coal 260 16.0 41.6 Florida Power & Light
Mass Power.............. Springfield, MA Gas 258 1.7 4.4 Boston Edison
Gilberton............... Frackville, PA Waste coal 82 19.6 16.1 Pennsylvania Power &
Light
Pittsfield.............. Pittsfield, MA Gas 173 10.9 18.9 New England Power
Morgantown.............. Morgantown, WV Coal/Waste Coal 62 15.0 9.3 Monongahela Power
Iroquois Gas Long Island, NY to -- -- 0.5 -- --
Transmission System... Waddington, NY
</TABLE>
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* Commonly-used acronym for Carolina Power & Light Company
DESCRIPTION OF FACILITIES IN WHICH WE OWN A SIGNIFICANT ECONOMIC INTEREST
Elizabethtown, Lumberton and Kenansville, North Carolina Facilities
Our subsidiary, Cogentrix Eastern Carolina Corporation, owns and operates
three 35-megawatt stoker coal-fired cogeneration plants in Elizabethtown,
Lumberton and Kenansville, North Carolina.
The Elizabethtown, Lumberton and Kenansville facilities sell electricity to
CP&L under separate power sales agreements, which were amended effective in
September 1996. The power sales agreements for the Elizabethtown and Lumberton
facilities expire in November 2000, and the power sales agreement for the
Kenansville facility has an initial term expiring in September 2001. Each of the
facilities may operate at a
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declared production capability of up to approximately 33 megawatts. Another
subsidiary, Cogentrix, Inc., has guaranteed the performance of CECC under the
power sales agreements. Alamac Knit Fabrics, Inc. purchases steam for its
apparel fabrics division mills from the Lumberton facility and the Elizabethtown
facility under separate steam sales agreements. Guilford Mills, Inc. purchases
steam from the Kenansville facility for use in its textile manufacturing plant.
Each of the power sales agreements provides that in the event of a
termination prior to the expiration of the initial term of the power sales
agreements, our project subsidiary must pay CP&L a termination charge. In the
event of a material breach by the utility, our project subsidiary may terminate
the power sales agreement prior to its expiration without incurring the
termination charge. The termination charge is an amount equal to the excess paid
for capacity and energy over what would have been paid to our project subsidiary
under the state utilities commission's published rates plus interest.
If the average production capability or electricity generated or made
available during any 12-month period falls below 80% of the established contract
level, a special charge will be imposed by CP&L equal to a percentage of the
termination charge described above. In addition, if our project subsidiary
desires to terminate the power sales agreement prior to its expiration and a
substitute operator satisfactory to the utility is not secured, our project
subsidiary must pay to the utility the termination charge described above plus
an amount equal to the depreciated installed cost of the interconnection
facilities relating to the plant.
Roxboro and Southport, North Carolina Facilities
Our subsidiary, Cogentrix of North Carolina, Inc., operates two stoker
coal-fired cogeneration plants in Roxboro and Southport, North Carolina, which
are owned by another wholly-owned project subsidiary of Cogentrix Energy.
The Roxboro and Southport facilities sell electricity under separate power
sales agreements, each having an initial term expiring in December 2002. The
60-megawatt Roxboro facility may operate at a declared production capability of
up to 56 megawatts and the 120-megawatt Southport facility may operate at a
declared production capability of up to 107 megawatts. Cogentrix, Inc., has
guaranteed the performance of our project subsidiary under the power sales
agreements. Collins & Aikman Corporation purchases process steam for its textile
manufacturing facility from the Roxboro facility and Archer-Daniels-Midland
Company purchases steam for its pharmaceutical and chemical manufacturing
company from the Southport facility.
Each of the power sales agreements provides that in the event our project
subsidiary desires to terminate the power sales agreement or abandons the
Roxboro or Southport facility, our project subsidiary must pay the utility a
termination charge. Such termination charge will be equal to the sum of the
following:
- the depreciated installed cost of the interconnection facilities relating
to the plant
- the cost incurred by the utility to replace the production capability
provided by the Roxboro or Southport facility in excess of the fixed
payments which would have been made to our project subsidiary for the
Roxboro or Southport facility
- a carrying charge equal to the overall pretax cost of capital allowed to
the utility by the retail rate order of the state utilities commission in
effect during the time the energy credits were received.
Hopewell, Virginia Facility
Our facility, located in Hopewell, Virginia, is a 120-megawatt stoker
coal-fired cogeneration facility owned and operated by a general partnership, in
which a 50% general partnership interest is owned by one of our subsidiaries.
The remaining 50% partnership interest is owned by Capistrano Cogeneration
Company, a subsidiary of Edison Mission Energy.
The Hopewell facility provides declared production capability of up to 92.5
megawatts to Virginia Power under a power sales agreement which expires in
January 2008. If the power sales agreement is terminated prior to the end of its
initial or any subsequent term other than due to a default by Virginia Power,
the project partnership must pay a penalty to Virginia Power. The amount of the
penalty is the difference between
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payments for production capability already made and those that would have been
allowable under the applicable "avoided cost" schedules of the utility plus
interest. Allied-Signal Corporation purchases steam from the Hopewell facility.
Portsmouth, Virginia Facility
Our facility located in Portsmouth, Virginia is a 120-megawatt stoker
coal-fired cogeneration facility. The Portsmouth facility provides Virginia
Power declared production capability of up to 115 megawatts under a power sales
agreement which expires in June 2008. The Portsmouth facility also sells process
steam to BASF Corporation and Celanese Chemical, Inc.
If the power sales agreement for this facility is terminated prior to the
end of its initial or any subsequent term other than due to a default by
Virginia Power, then our project subsidiary must pay a penalty to Virginia
Power. The amount of the penalty is the difference between payments for
production capability already made and those that would have been allowable
under the applicable "avoided cost" schedules of Virginia Power plus interest.
Rocky Mount, North Carolina Facility
Our facility located near Rocky Mount, North Carolina is a 120-megawatt
stoker coal-fired cogeneration plant. Under a power sales agreement with North
Carolina Power Company, a division of Virginia Power, the Rocky Mount facility
provides declared production capability of 115.5 megawatts of electricity for an
initial term expiring in October 2015. In addition, steam from the Rocky Mount
facility is sold to Abbott Laboratories.
The power sales agreement for this facility provides that in the event the
state utility commission prohibits North Carolina Power from recovering from its
customers payments made by North Carolina Power under the power sales agreement
to our project subsidiary, our project subsidiary would recognize a reduction in
payments received under the power sales agreement after the 18th anniversary of
commencement of commercial operations of the facility to the extent necessary to
repay North Carolina Power the amount disallowed by the utility commission with
interest. In light of this provision in the power sales agreement, the project
lender for the Rocky Mount facility has established a reserve account, which is
required to be funded at any time a disallowance of payments occurs or, from and
after January 1, 2004, any meritorious filing with the utility commission
challenging the pass-through of payments made by the utility under the power
sales agreement is made.
If a disallowance event occurs during the period from 1998 through 2002,
then 25% of cash flow from the facility must be deposited to the regulatory
disallowance reserve account until the balance of such account is equal to the
amount required to be funded. If a disallowance event occurs during the period
from 2003 through 2013, then 100% of the cash flow from the facility must be
deposited to the reserve account until the balance of the reserve account is
equal to the amount required to be funded. The amount required to be funded in
such account is an amount equal to the lesser of:
- Projected reduction in cash flows from 2009 through 2013 as a result of
the disallowance of payments made by the utility and,
- The amount of our project subsidiary's debt outstanding at September 30,
2008.
If the number of days in any year in which the Rocky Mount facility is
unable to generate electricity in an amount equal to its declared production
capability is more than the greater of 25 days or ten percent of the total
number of days the facility was required by North Carolina Power to operate,
then the fixed payments under the contract for that period will be reduced by
four percent for each excess day. In the event testing indicates that the Rocky
Mount facility's dependable production capability is less than 90% of the
declared production capability, our project subsidiary will be obligated to pay
annual liquidated damages to North Carolina Power. A letter of credit has been
posted by our project subsidiary in favor of North Carolina Power to secure its
obligations to perform under the power sales agreement.
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Ringgold, Pennsylvania Facility
Our facility located in Ringgold, Pennsylvania, is a 15.5-megawatt
gas-fired cogeneration facility using an internal combustion engine fueled
primarily by natural gas. Pennsylvania Electric Company purchases energy from
the facility. Under the power sales agreement, the failure of our facility to
generate and sell electricity throughout the term of the agreement at an annual
average level which is at least equal to 85% of the average output achieved
during a rolling three-year period of operation would result in the payment of a
penalty.
In January 1998, we signed an agreement with Pennsylvania Electric Company
to terminate this facility's power purchase agreement. This termination
agreement was the result of a request for proposals from the utility to buy-back
or restructure power sales agreements issued to all major operating independent
power projects in its territory in April 1997. The termination agreement
provides for a payment to our project subsidiary of approximately $20.4 million,
which will be sufficient to retire all of the project subsidiary's outstanding
debt. The buy-back of the power purchase agreement is subject to the issuance of
a satisfactory final order by the Pennsylvania Public Utility Commission
granting Pennsylvania Electric Company the authority to fully recover from its
customers the consideration paid under the buyout agreement. We do not expect
the termination of this facility's power purchase agreement, if it occurs, to
have an adverse impact on our consolidated results of operations or financial
position.
The Ringgold facility provides hot water to a 10-acre greenhouse owned by
our project subsidiary which is leased to and operated by Village Farms, L.P.
The lease has a ten-year term, which may be extended with our consent.
Richmond, Virginia Facility
Our 240-megawatt stoker coal-fired cogeneration plant in Richmond, Virginia
provides 209 megawatts of declared production capability to Virginia Power under
two 25-year power sales agreements expiring in 2017. Our Richmond facility also
provides steam to E. I. DuPont de Nemours & Company.
Each of the power sales agreements provides that in the event the state
utilities commission prohibits Virginia Power from recovering from its customers
payments made by Virginia Power to our project subsidiary, our subsidiary would
recognize a reduction in payments received under such power sales agreements
after the 18th anniversary of commencement of commercial operations of the
facility to the extent necessary to repay the amount of the disallowed payments
to Virginia Power with interest.
If the number of days in any year in which the Richmond facility is unable
to generate electricity in an amount equal to its declared production capability
is more than the greater of 25 days or ten percent of the total number of days
the facility was required by Virginia Power to operate, the fixed payments under
the contract for that period will be reduced by four percent for each excess
day. In the event testing indicates that the facility's dependable production
capability is less than 90% of the declared production capability, our
subsidiary will be obligated to pay annual liquidated damages to Virginia Power.
Our project subsidiary has letters of credit in favor of Virginia Power to
secure its obligations to perform under the power sales agreements.
Our project subsidiary purchased one of the power sales agreements from WV
Hydro, Inc. In connection with the purchase and in consideration of certain
consulting arrangements, our subsidiary has continuing obligations to make
payments to an affiliate of WV Hydro, in an aggregate amount ranging from
$250,000 to $750,000, each year through 2003, from excess facility cash flow. If
excess facility cash flow for any year is insufficient to pay the $250,000
minimum amount, the deficiency will be carried forward and is payable from
excess facility cash flow, if any, in future years. In addition, our subsidiary
is obligated to pay an amount ranging from 3 to 3.5 percent of the net proceeds
payable to our subsidiary upon any sale, disposition or refinancing of the
Richmond facility after payment of senior and subordinated project financing
debt and expenses.
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Birchwood, Virginia Facility
Through an indirect, wholly-owned subsidiary we have a 50% interest in a
partnership that owns a 240-megawatt stoker coal-fired cogeneration facility in
King George, Virginia. The Southern Company, a public utility holding company,
owns the remaining 50% of the facility. The 36-acre greenhouse located adjacent
to the facility, which is jointly owned by us and The Southern Company, uses
steam from the facility. An affiliate of The Southern Company manages and
operates the Birchwood facility.
The Birchwood facility provides up to 202 megawatts of declared production
capability to Virginia Power under a power sales agreement which expires in
2021. The power sales agreement provides that in the event the state utilities
commission prohibits Virginia Power from recovering from its customers payments
made by Virginia Power to our project subsidiary, the partnership that owns the
facility would recognize a reduction in payments received under the power sales
agreement after the 20th anniversary of commencement of commercial operations of
the facility to the extent necessary to repay the amount of the disallowed
payments to Virginia Power with interest.
If this facility is unable to operate within the parameters established by
Virginia Power under the power sales agreement, the fixed payments under the
agreement for the period the facility is not able to do so are subject to
reduction. In the event testing indicates that the facility's dependable
production capability is less than 90% of the declared production capability,
the partnership will be obligated to pay annual liquidated damages to Virginia
Power. The partnership has posted a letter of credit in favor of Virginia Power
to secure its obligations to perform under the power sales agreement.
Cottage Grove, Minnesota Facility
Our Cottage Grove facility is a 245-megawatt combined-cycle, natural
gas-fired cogeneration facility in Cottage Grove, Minnesota. One of our
wholly-owned indirect subsidiaries is the sole general partner of the
partnership that owns the facility with a 1% partnership interest. Another
wholly-owned indirect subsidiary of ours owns an approximate 72.2% limited
partnership interest in Cottage Grove. An affiliate of Tomen Power Corporation
owns the remaining approximate 26.8% limited partnership interest.
The Cottage Grove facility provides 245 megawatts of declared production
capability to Northern States Power Company measured at summer conditions and
262 megawatts of declared production capability measured at winter conditions
under a power sales agreement which expires in 2027. Fixed payments are subject
to adjustment on the basis of performance-based factors which reflect the
Cottage Grove facility's semiannually tested production capability and its
rolling 12-month average and on-peak availability. Fixed payments are also
adjusted for transmission losses or gains relative to a reference plant. The
Cottage Grove facility also sells steam to Minnesota Mining and Manufacturing
Company.
Currently, Northern States Power Company is permitted full recovery from
its customers of payments made under the power sales agreement. The power sales
agreement provides, however, that following the tenth anniversary of the
commercial operation date, if Northern States Power Company fails to obtain or
is denied authorization by any governmental authority having jurisdiction over
its retail rates and charges, granting it the right to recover from its
customers any payments made under the power sales agreement, the disallowed
amounts will be monitored in a tracking account and the unpaid balance in the
tracking account shall accrue interest. Within 30 days after the first mortgage
bonds issued to finance the construction of the facility have been fully
retired, Northern States Power Company may begin reducing payments to the
partnership that owns the facility to ensure the payments are in line with
Minnesota Public Utility Commission rates and begin amortizing the balance in
the tracking account. Should Northern States Power Company exercise its right to
reduce payments, the maximum reduction is 75% of the payment otherwise due for
the period.
We manage and administer the partnership's business with respect to the
Cottage Grove facility, and provide certain management and administrative
services to the general partner of the partnership. Also, one of our
wholly-owned subsidiaries operates the facility pursuant to an O&M Agreement
with the partnership.
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Whitewater, Wisconsin Facility
Our Whitewater facility is a 245-megawatt combined-cycle, natural gas-fired
cogeneration facility in Whitewater, Wisconsin. One of our wholly-owned indirect
subsidiaries is the sole general partner of the general partnership that owns
the facility with a 1% general partnership interest. Another wholly-owned
indirect subsidiary of ours owns an approximate 73.2% limited partnership
interest. An affiliate of Tomen Power Corporation owns the remaining approximate
25.8% limited partnership interest.
The Whitewater facility provides approximately 236.5 megawatts of declared
production capability to Wisconsin Electric Power Company under a power sales
agreement which expires in 2022. The Whitewater facility may also sell to third
parties up to 12 megawatts of electric production capability and any energy
which the utility does not dispatch. Fixed payments from the utility are subject
to adjustment on the basis of performance-based factors which reflect the
Whitewater facility's semiannually tested production capability and average and
on-peak availability for the preceding contract year.
The fixed payments from the utility may be reduced to the extent that the
utility's senior debt is downgraded by any two of Standard & Poor's Corporation,
Moody's Investors Services, Inc. and Duff & Phelps as a result of the utility's
long-term power purchase obligations under the power purchase agreement for the
Whitewater facility. So long as the partnership's first mortgage bonds issued to
finance construction of the facility are outstanding, the reduction may not
exceed the level necessary to cause the partnership's debt service coverage
ratio to be less than 1.4 in any one month, with such ratio calculated on a
rolling average of the four fiscal quarters immediately preceding the proposed
adjustment. After the partnership's first mortgage bonds have been repaid, the
reduction may not exceed 50% of the partnership's revenues minus expenses.
Reductions precluded by application of these limitations are accumulated in a
tracking account with interest accruing at a specified rate. Tracking account
balances are to be repaid when possible, subject to the limitations described
above, or may be applied to the price of the utility's option to purchase the
Whitewater facility at the expiration of the power sales agreement.
Currently, Wisconsin Electric Power Company is permitted full recovery from
its customers of payments made under the power sales agreement. The power sales
agreement provides, however, if at any time the utility is denied rate recovery
from its customers of any payment to be made under the power sales agreement by
an applicable regulatory authority, the utility's payments may be
correspondingly reduced, subject to contractually specified limitations. While
the partnership's first mortgage bonds are outstanding, the fixed payments may
be reduced by the annual regulatory disallowance provided that the reduction may
not cause the partnership's debt service coverage ratio to be less than 1.4 in
any month calculated on a rolling average of the four fiscal quarters preceding
the proposed adjustment. After the outstanding first mortgage bonds are repaid,
reductions may not exceed 50% of the Whitewater facility's revenues minus
expenses. Reductions precluded by these restrictions are accumulated in a
tracking account with repayment subject to the same provisions as for bond
downgrading adjustments discussed above.
The Whitewater facility sells steam to the University of Wisconsin --
Whitewater under a steam supply agreement expiring in 2005. The facility also
sells hot water to a greenhouse located adjacent to the facility. FloriCulture,
Inc., an affiliate of the partnership that owns the Whitewater facility, has
entered into an operational services agreement pursuant to which FloriCulture
provides all services necessary to produce, market and sell horticulture
products and to operate and maintain the greenhouse facility.
We manage and administer the partnership's business with respect to the
Whitewater facility, and provide management and administrative services to the
general partner of the partnership. Also, one of our wholly-owned subsidiaries
operates the facility pursuant to an O&M Agreement with the partnership.
Logan (New Jersey) Facility
A Delaware limited partnership owns the Logan facility, which is a
218-megawatt pulverized coal-fired cogeneration generating plant located on the
Delaware River in Logan Township, New Jersey. The partnership leases the Logan
facility to another Delaware limited partnership. An indirect, wholly-owned
subsidiary of Cogentrix, owns a 50% general partnership interest in each of the
first limited partnership and each of the
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partners of the second limited partnership. An indirect, wholly-owned subsidiary
of PG&E Generating Company ("PG&E") is the sole limited partner in each of the
first partnership and the partners of the second limited partnership, owning a
1% limited partnership interest. The PG&E subsidiary also owns a 49% general
partnership interest in each of the first partnership and each of the partners
of the second limited partnership.
The Logan facility, which began operation in September 1994, provides up to
203 megawatts of declared production capability to Atlantic City Electric
Company under a power sales agreement which expires in 2024. The Logan facility
has the capability to provide up to approximately 15 megawatts of excess
production capability and energy to third parties. The Logan facility sells
steam to Solutia, Inc.
If the net deliverable production capability of the Logan facility falls
below 190,000 kilowatts, then the partnership that owns the facility must pay
liquidated damages to the utility in an amount calculated using a formula that
reflects both the amount of the deficiency and the rate those mid-Atlantic
electric utilities who are members of a mid-Atlantic regional power pool and
fail to satisfy their capacity obligations to the pool must pay to the other
members who make up the deficiency.
An affiliate of PG&E operates the Logan facility pursuant to an operation
and maintenance agreement with an initial term expiring in 2004. PG&E provides
management services pursuant to a management services agreement which expires in
2027.
Northampton (Pennsylvania) Facility
A Delaware limited partnership owns this 110-megawatt anthracite waste
coal-fired electric generating facility in Northampton County, Pennsylvania. An
indirect, wholly-owned subsidiary of Cogentrix owns a 50% general partnership
interest in this partnership. An indirect, wholly-owned subsidiary of PG&E owns
an aggregate 50% equity interest in the partnership that owns this project,
which consists of a 48% general partnership interest and 2% limited partnership
interest.
The Northampton facility, which began operation in September 1995, provides
electric energy to Metropolitan Edison Company pursuant to a power sales
agreement which expires in 2020. Capacity in excess of 89 megawatts may be sold
to third parties, but no energy from the Northampton facility may be sold to any
entity other than Metropolitan Edison.
The Northampton facility is not directly interconnected to Metropolitan
Edison's electric system and accordingly requires an electric utility that is
interconnected with Metropolitan Edison's electric system to transmit the
Northampton facility's output to Metropolitan Edison. Pursuant to a transmission
service agreement (which expires in 2020) with Pennsylvania Power & Light
Company, that utility transmits the Northampton Facility's net electric energy
to Metropolitan Edison's existing electric system.
In the event the Northampton facility's annual average delivery of
electricity for any year following the commercial operation date during on-peak
hours is less than 85% of the Northampton facility's annual average delivery of
electricity during the on-peak hours for the prior three years, the partnership
that owns the facility is obligated to make a penalty payment to Metropolitan
Edison. During the first 11 years of the power sales agreement commencing with
the commercial operation date, the penalty payment will equal the difference
between 85% of the annual average on-peak electricity delivered in the prior
three years and the actual on-peak electricity delivered in the year to which
the penalty relates times 3.4c per kWh. After the eleventh year of the power
sales agreement, the penalty payment will be calculated as above, except that
the rate of 3.4c per kWh shall be adjusted annually according to changes in the
Gross Domestic Product Implicit Price Deflator.
Based on its use of waste coal as its primary fuel source, the Federal
Energy Regulatory Commission has certified the Northampton facility as a
"qualifying small power production facility".
An affiliate of PG&E operates and maintains the Northampton facility
pursuant to an operation and maintenance agreement with an initial term expiring
in 2020. PG&E provides management and administration services for the
Northampton facility pursuant to a management services agreement with an initial
term expiring in 2020.
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In addition to the partners' original equity contributions to the
partnership that owns the Northampton facility, the partners have posted letters
of credit or corporate guarantees in an aggregate amount of $9 million as a
standby equity commitment to be used for certain fuel-related costs. They have
also posted a letter of credit in the amount of $2.2 million as a standby equity
commitment to be used solely to establish the bank debt service reserve fund for
the exclusive benefit of the banks. Cogentrix provides letters of credit or
corporate guarantees for 50% of those standby equity commitments.
Indiantown (Florida) Facility
A Delaware limited partnership owns this 380-megawatt pulverized coal-fired
cogeneration facility located in Martin County, Florida. An entity controlled by
PG&E owns a 50% general partnership interest in the partnership, and we own a
50% general partnership interest. The Indiantown facility began operation in
December 1995 and sells steam to Caulkins Indiantown Citrus Company.
The Indiantown facility provides 330 megawatts of declared production
capability to Florida Power & Light Company under a power sales agreement which
expires in 2025. Fixed payments by Florida Power & Light are subject to
adjustment on the basis of the Indiantown facility's actual production
capability.
Currently, Florida Power & Light is permitted full recovery from its
customers of payments made under the power sales agreement. The power sales
agreement contains a provision, which provides that if Florida Power & Light at
any time is denied authorization to recover from its customers any payments to
be made under the power sales agreement, Florida Power & Light may, in its sole
discretion, adjust payments under the power sales agreement to the amount it is
authorized to recover from its customers. The utility may also require the
partnership that owns the facility to return payments subsequently disallowed by
the regulatory agency. If the obligations of Florida Power & Light and the
partnership that owns the facility are materially altered due to the operation
of this provision in the agreement, the partnership may terminate the power
sales agreement upon 60 days' notice. The partnership and Florida Power & Light
must then in good faith attempt to negotiate a new power sales agreement or any
agreement for transmission of the Indiantown facility's capacity and energy to
another investor-owned, municipal, or cooperative electric utility
interconnected with Florida Power & Light in Florida.
An affiliate of PG&E provides operation and maintenance services for the
Indiantown facility pursuant to an operating agreement which expires in 2025.
PG&E manages and administers the business of the partnership that owns the
facility pursuant to a management service agreement which expires in 2029.
Carneys Point (New Jersey) Facility
A Delaware limited partnership owns this 262-megawatt pulverized coal-fired
cogeneration facility located within the grounds of the DuPont Chamber Works, a
chemical complex in Carneys Point, New Jersey. The partnership leases the
Carneys Point facility to a partnership of wholly-owned subsidiaries of PG&E.
Lease payments are structured to equal project cash flow, and the lessee
partnership derives no net cash flow or benefit from the lease. We own a 10%
general partnership interest in the limited partnership that owns the facility.
The other general partner is an indirect, wholly-owned subsidiary of PG&E, which
owns a 50% general partnership interest. The sole limited partner is an
indirect, wholly-owned subsidiary of General Electric Capital Corporation, which
owns a 40% limited partnership interest.
The Carneys Point facility began operation in March 1994. The facility
provides Atlantic City Electric Company with 187.6 megawatts in the summer
months and 173.2 megawatts in the winter months for an annual average of 180.4
megawatts. If the actual available production capability falls below 95% of the
respective production capability requirement for the winter or summer period,
the partnership that owns the facility must make a deficiency payment to the
utility until actual production capability for such period reaches 95% of the
production capability requirements for the period.
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Under an energy services agreement, the Carneys Point facility sells steam
and up to 40 megawatts of electricity to DuPont. The Carneys Point facility has
the capability to sell an average of approximately 30 megawatts of excess
production capability and energy to third parties.
An affiliate of PG&E operates the Carneys Point facility under an operation
and maintenance agreement with an initial term expiring in 2004. PG&E provides
management services for the facility pursuant to a management services agreement
with a term expiring in 2018.
PRINCIPAL CUSTOMERS
Electric utility customers accounting for more than ten percent of our
consolidated revenue for the fiscal years ended December 31, 1999, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
CP&L.................................................... 17% 19% 22%
Virginia Power.......................................... 47 50 64
</TABLE>
As a result of our recent growth, our future operations will be more
diverse with regard to both geography and fuel source and less dependent on any
single project or customer.
REGULATION
Our plants are subject to federal, state and local energy and environmental
laws and regulations applicable to the development, ownership and operation of
electric generating facilities. Federal laws and regulations govern
transactions, types of fuel utilized, the type of energy produced and power
plant ownership. State regulatory commissions may approve the rates and, in some
instances, other terms under which utilities purchase electricity from
independent producers. These state commissions may have broad jurisdiction over
non-utility owned power plants. Power plants also are subject to laws and
regulations governing environmental emissions and other substances produced by a
plant, along with the geographical location, zoning, land use and operation of a
plant. Applicable federal environmental laws typically have state and local
enforcement and implementation provisions. These environmental laws and
regulations generally require that a wide variety of permits and other approvals
be obtained before construction or operation of a power plant commences and that
the power plant operates in compliance with them. We strive to comply with all
environmental laws, regulations, permits and licenses but, despite such efforts,
at times we have been in non-compliance.
Energy Regulations
QFS UNDER THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978. All of our
current operating facilities are classified as a qualifying facility ("QF")
under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). QFs are
relieved of compliance with extensive federal, state and local regulations that
control the development, financial structure and operation of power plants and
cost-of-service based ratemaking to determine the prices at which electric
generating facilities sell energy. In order to be a QF, a cogeneration facility
must sequentially produce both electricity and useful thermal energy for
non-mechanical or non-electrical uses in specified proportions to the facility's
total useful energy output. A QF utilizing oil or natural gas as fuel also must
meet energy efficiency standards. A small power production facility may be a QF
if it uses alternative fuels as its primary energy input, subject to limitations
on fossil fuel input and size for the facility. Finally, a QF must not be
controlled or more than 50% owned by an electric utility or by an electric
utility holding company, or a subsidiary of either or any combination thereof.
PURPA exempts QFs from the Public Utility Holding Company Act of 1935
("PUHCA"), most provisions of the Federal Power Act (the "FPA") and, except
under limited circumstances, state rate and financial regulations. These
exemptions are important to us and our competitors.
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In the absence of a power sales agreement, regulations adopted by the
Federal Energy Regulatory Commission ("FERC") require utilities to purchase
electricity generated by QFs at a price based on the purchasing utility's full
"avoided cost," and that the utility sell back-up power to the QF on a non-
discriminatory basis. Avoided costs are the incremental costs to a utility of
electric energy or capacity, or both, which, but for the purchase from QFs, the
utility would generate for itself or purchase from another source. Due to
increasing competition for utility contracts, the current practice is for most
power sales agreements to be awarded below avoided cost.
We endeavor to minimize the risk of our facilities losing their QF status.
The occurrence of events outside our control, such as loss of a steam customer,
could jeopardize QF status. While the facilities usually would be able to react
in a manner to avoid the loss of QF status by, for example, replacing the steam
customer or finding another use for the steam which meets PURPA's requirements,
there is no certainty that the alternative implemented would be practicable or
economic.
If one of our facilities were to lose its status as a QF, the subsidiary
could lose its exemptions from PUHCA and the FPA and from state laws and
regulations. This could subject the subsidiary to regulation under the FPA and,
in such event, would result in Cogentrix Energy inadvertently becoming a public
utility holding company. Our other facilities could in turn lose their QF
status. Moreover, loss of QF status could result in utility customers
terminating their power sales agreement with the nonqualifying facility. If loss
of QF status were threatened for a facility, we could avoid holding company
status and thereby protect the QF status of our other facilities by applying to
the FERC to obtain exempt wholesale generator ("EWG") status for the owner of
the nonqualifying facility. See "-EWGs under the Energy Policy Act of 1992"
herein. Alternatively, the FERC may grant a limited waiver to the QF that would
provide continued exemption under PUHCA, provided the facility's rates were
regulated under the FPA.
EWGS UNDER THE ENERGY POLICY ACT OF 1992. The passage of the Energy Policy
Act has significantly expanded the options available to independent power
producers with respect to their regulatory status. In addition to or in lieu of
QF status, an independent power producer selling exclusively at wholesale now
can also apply to the FERC to be granted status as an EWG. Except for existing
cost-of-service based facilities for which state consents are required, any
owner of a facility may apply for status as an EWG. An EWG, like a QF, is exempt
from regulation under PUHCA. However, EWG status does not exempt a facility from
FERC and state public utility commission ("PUC") regulatory reviews, which may
be more expansive than those applicable to QFs. Several of Cogentrix Energy's
facilities, which are QFs, have also been determined to be EWGs. In addition,
several project subsidiaries developing new generating facilities have also been
determined to be EWGs.
FOREIGN INVESTMENTS UNDER THE ENERGY POLICY ACT. The Energy Policy Act has
also expanded the options for companies that wish to invest in foreign
enterprises that own power production facilities outside the United States.
Amendments to PUHCA in the Energy Policy Act provide that a domestic company
making such an investment may avoid "holding company" status or other regulation
under PUHCA, if the foreign enterprise obtains EWG status or files a notice with
the Securities and Exchange Commission that it is a foreign utility company
("FUCO").
PUHCA. Under PUHCA, any entity owning or controlling ten percent or more
of the voting securities of a "public utility company" is a "holding company"
and is subject to registration with the Securities and Exchange Commission and
regulation under PUHCA, unless eligible for an exemption. Under the Energy
Policy Act and PURPA, EWGs, FUCOs, and owners and operators of QFs are deemed
not to be public utility companies under PUHCA. Momentum is growing in Congress
for the repeal of PUHCA, as more legislators adopt the view that this statute
has outlived its purpose. Elimination of PUHCA would enable more companies to
consider owning generating and transmission assets, would permit "single state"
utility systems to expand beyond their state borders, and would permit companies
that are currently in registered holding company systems to diversify their
investments to a greater extent than now permitted. This could attract more
competitors to the power development and power marketing business. We believe
that we are well positioned, however, to meet stronger competition and, indeed,
may be able to pursue more investment opportunities made available by the repeal
of PUHCA.
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FPA. The FPA grants the FERC exclusive rate-making jurisdiction over
wholesale sales of electricity in interstate commerce, including ongoing as well
as initial rate jurisdiction, which enables the FERC to revoke or modify
previously approved rates. While QFs under PURPA typically are exempt from the
traditional rate-making and certain other provisions of the FPA, projects not
qualifying for QF status, for example, most EWGs, are subject to the FPA and to
FERC rate making jurisdiction. Power marketers are also subject to FERC review
of their wholesale rates, and to FERC oversight of various business dealings
such as corporate reorganizations. Pursuant to the FPA, our power marketing
subsidiary has filed its wholesale electric power rates with the FERC and
obtained authorization to sell electric power at rates set by supply and demand
in the marketplace. In addition, the Logan facility and certain other facilities
in which Cogentrix Energy owns a small interest have filed their rates with the
FERC and obtained authorization to sell all of their power pursuant to those
rates. Several of our projects under development have also filed and obtained
from FERC market-based rates for sales of power from these facilities.
STATE REGULATION. PUCs regulate retail rates of electric utilities and, in
many states, power sales agreements from independent power producers. In
addition, states have been delegated the authority to determine utilities'
avoided costs under PURPA. PUCs often will pre-approve agreements with prices
that do not exceed avoided costs, because such contracts often have been
acquired through a competitive or market-based process. Recognizing the
competitive nature of the acquisition process, many PUCs will permit utilities
to "pass through" expenses associated with a power sales agreement with an
independent power producer. In addition, retail sales of electricity or steam by
an independent power producer may be subject to PUC regulation, depending on
state law.
EWGs are subject to broad regulation by PUCs, ranging from the requirement
of certificates of public convenience and necessity to regulation of
organizational, accounting, financial and other corporate matters. In addition,
states may assert jurisdiction over the siting and construction of EWGs as well
as QFs and over the issuance of securities and the sale or other transfer of
assets by these facilities. Many state utility commissions and state
legislatures are actively seeking ways to lower electric power costs at the
retail level, including options that would permit or compel competition at the
retail level. Federal legislation that would require states to permit retail
competition is also being given serious consideration. An opening of the retail
market would create tremendous opportunities for companies that have until now
been limited to the wholesale market. At the same time, state commissions are
pressuring the utilities they regulate to cut purchased power costs through
strict enforcement of existing contracts with QFs and EWGs, many of which are
considered to be overpriced. State commissions are also encouraging efforts by
utilities to buy out or buy down such contracts.
PROPOSED LEGISLATION. In addition to federal legislative initiatives, the
state commissions or state legislatures of many states are considering, or have
considered, whether to open the retail electric power market to competition.
These initiatives are generally called "retail access" or "customer choice".
Such "customer choice" plans typically allow customers to choose their
electricity suppliers by a certain date. Retail competition is possible when a
customer's local utility agrees, or is required, to "unbundle" its distribution
service, that is, the delivery of electric power to retail customers through its
local distribution lines, from its transmission and generating service.
The competitive price environment that will result from retail competition
may cause utilities to experience revenue shortfalls and deteriorating
creditworthiness. However, most, if not all, state plans will insure that
utilities receive sufficient revenues, through a distribution surcharge if
necessary, to pay their obligations under existing long-term power purchase
contracts with QFs and EWGs, including the above-market rates, or "stranded
investment" costs, provided for in such contracts. Many states will also provide
that the stranded investment costs will be "securitized" through new financial
instruments. On the other hand, QFs and EWGs may be subject to pressure to lower
their contract prices or to renegotiate contracts in an effort to reduce the
"stranded investment" costs of their utility customers.
Retail access programs may provide Cogentrix with additional opportunities
to provide power from our projects to industrial users or power marketers.
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<PAGE> 20
TRANSMISSION AND WHEELING. Under the FPA, the FERC regulates the rates,
terms and conditions for electricity transmission in interstate commerce. The
FERC's authority under the FPA to require electric utilities to provide
transmission service to QFs and EWGs was significantly expanded by the Energy
Policy Act. Except when market factors such as an exceptional site or power
sales opportunity warrant it, we generally attempt to site our facilities within
the utility customer's service area, and thus avoid the need to utilize
wheeling. The new provisions of the Energy Policy Act, however, and actions
taken by the FERC under the FPA have improved transmission access and pricing
for independent power producers like us.
In April 1996, the FERC issued a rulemaking order under the FPA, Order 888,
requiring all jurisdictional public utilities to file "open access" transmission
tariffs. Compliance with Order 888 has been virtually universal. However, many
utilities are seeking permission from the FERC to recover for "stranded
investment" through add-ons to their transmission rates. To the extent that the
FERC permits such charges, the cost of transmission may be too high on some
systems to be of practical use to wholesale sellers like Cogentrix. Therefore,
the full value of Order 888 remains to be determined.
The FERC is also encouraging the voluntary restructuring of transmission
operations through the use of independent system operators and regional
transmission groups. Such entities may create efficiencies for traditional
utilities, but are not likely to have a substantial impact on power developers
and power marketers like Cogentrix.
Environmental Regulations -- United States
The construction and operation of power projects are subject to extensive
environmental protection and land use regulation in the United States. Those
regulations applicable to Cogentrix primarily involve the discharge of emissions
into the water and air and the use of water, but can also include wetlands
preservation, endangered species, waste disposal and noise regulation. These
laws and regulations often require a lengthy and complex process of obtaining
and renewing licenses, permits and approvals from federal, state and local
agencies. If such laws and regulations are changed and our facilities are not
grandfathered, extensive modifications to power project technologies and
facilities could be required.
We expect that environmental regulations will continue to become more
stringent as environmental legislation previously passed becomes implemented and
new laws are enacted. Accordingly, we plan to continue a strong emphasis on
implementation of environmental standards and procedures at the facilities we
operate and at our other facilities to minimize the environmental impact of
energy generation at these facilities.
CLEAN AIR ACT. In late 1990, Congress passed the Clean Air Act Amendments
of 1990 (the "1990 Amendments") which affect existing facilities as well as new
project development. The original Clean Air Act of 1970 set guidelines for
emissions standards for major pollutants from newly-built sources. All of the
facilities we operate are in compliance with federal performance standards
mandated for such facilities under the Clean Air Act and the 1990 Amendments.
The 1990 Amendments attempt to reduce emissions from existing sources --
particularly large older facilities that were exempted from certain regulations
under the original Clean Air Act.
The 1990 Amendments create a marketable commodity called a sulfur dioxide
("SO(2)") "allowance." All non-exempt facilities over 25 megawatts that emit
SO(2), including independent power plants, must obtain allowances in order to
operate after 1999. Each allowance gives the owner the right to emit one ton of
SO(2). The 1990 Amendments exempt from the SO(2) allowance provisions all
independent power projects which were operating, under construction or with
power sales agreements or letters of intent as of November 15, 1990, as well as
facilities outside the contiguous 48 states. As a result, most of the facilities
we operate are exempt. The non-exempt facilities we operate have determined
their need for allowances and have accounted for these requirements in their
operating budgets and financial forecasts. In the future, the facilities we
expect to develop will continue to rely on "clean low sulfur coal," with flue
gas desulfurization technology or natural gas technology. We believe that the
additional costs of obtaining the number of allowances needed for future
projects should not materially affect our ability to develop such projects.
20
<PAGE> 21
The 1990 Amendments also contain other provisions that could affect our
projects. Provisions dealing with geographical areas the EPA has designated as
in "nonattainment" with national ambient air quality standards require that
existing sources of air pollutants in a nonattainment area be retrofit with
reasonably available control technology ("RACT") for all pollutants for which an
area is designated nonattainment. The technology currently installed at the
plants we operate should uniformly meet or exceed RACT for those pollutants. The
nonattainment provisions also require that each new or expanded source of air
pollutants in designated nonattainment areas must obtain emissions reductions
from existing sources that more than offset the emissions from the new or
expanded source. While the "offset" requirements may hamper new project
development in certain geographical areas, development of new projects has and
will likely continue, particularly as markets for "offsets" develop.
The 1990 Amendments also provide an extensive new operating permit program
for existing sources called the Title V permitting program. Because all of the
facilities we operate were permitted under the Prevention of Significant
Deterioration New Source Review Process, the permitting impact to Cogentrix
under the 1990 Amendments at those facilities is expected to be minimal.
Continuous emission monitoring systems may need to be upgraded at some
facilities while the permit fees will increase operating expenses. The costs of
applying for and obtaining operating air permits are not anticipated to be
significant.
The hazardous air pollutant provisions of the 1990 Amendments presently
exclude electric steam generating facilities, such as our facilities. Studies of
the emissions from such facilities have been submitted to Congress. Until
Congress either amends the Clean Air Act further or the EPA promulgates
regulations, the federal hazardous air pollutants emissions restrictions, which
will be applied to our facilities and other electric steam generating
facilities, will remain uncertain.
In July 1997, the EPA promulgated more restrictive ambient air quality
standards for ozone and for particulate matter: less than 25 microns in diameter
- -- PM-2.5. These new standards will likely increase the number of nonattainment
areas for both ozone and PM-2.5. If our facilities are in these new
nonattainment areas, further emission reduction requirements could result in the
installation of additional control technology. In May 1999, the D.C. Circuit
Court of Appeals remanded these standards. However, we will continue to track
these standards and the potential impact on us.
In addition, the Ozone Transport Assessment Group ("OTAG"), composed of
state and local air regulatory officials from the 37 Eastern states, has
recommended additional NO(x) emission reductions that go beyond current federal
standards. These recommendations include reductions from utility and industrial
boilers. In the fall of 1998, the EPA adopted regulations requiring revisions to
state implementation plans ("SIPs"). These regulations implement some of the
OTAG's recommendations and go beyond some of the OTAG's recommendations for
reductions in NO(x) emissions. As a result of these more stringent NO(x)
emission standards, we may be required to install additional NO(x) emission
control technologies and/or obtain allowances from other emitters. We will
continue to monitor the potential effects this proposed regulation will have on
Cogentrix.
In December 1999, the EPA issued a final rule requiring reductions of NOx
emissions from 392 generating and other facilities in 12 Eastern and Midwestern
states, including North Carolina and Virginia, by May of 2003. This rule
responds to petitions by Northeastern States under CAA Section 126 for controls
on upwind NOx emission sources, which the states demonstrated prevents them from
attaining the ozone ambient standard. The Section 126 rule is an alternative to
the NOx SIP-Call rule and is very similar in structure. We are considering all
options in complying with this rule including installation of control equipment
and/or purchasing of NOx allowances.
The 1990 Amendments expand the enforcement authority of the federal
government by increasing the range of civil and criminal penalties for
violations of the Clean Air Act, enhancing administrative civil penalties, and
adding a citizen suit provision. These enforcement provisions also include
enhanced monitoring, recordkeeping and reporting requirements for existing and
new facilities. On February 13, 1997, the EPA issued a regulation providing for
the use of "any credible evidence or information" in lieu of, or in addition to,
the test methods prescribed by regulation to determine the compliance status of
permitted sources of air
21
<PAGE> 22
pollution. This rule may effectively make emission limits previously established
for many air pollution sources, including ours, more stringent.
The Kyoto Protocol regarding greenhouse gas emissions and global warming
was signed by the U.S., committing to significant reductions in greenhouse gas
emissions. The U.S. Senate must ratify the agreement for the protocol to take
effect. The Clinton Administration has proposed a package of legislative and
administrative policies to curb greenhouse gases, none of which are affected by
the need for Senate ratification. Management believes that none of these
policies will have a material effect on the consolidated results of operations
or financial position of Cogentrix. Future initiatives on this issue and the
effects on Cogentrix are unknown at this time.
CLEAN WATER ACT. Our facilities are subject to a variety of state and
federal regulations governing existing and potential water/wastewater and
stormwater discharges from the facilities. Generally, federal regulations
promulgated through the Clean Water Act govern overall water/wastewater and
stormwater discharges through National Pollutant Discharge Elimination System
permits. Under current provisions of the Clean Water Act, existing permits must
be renewed every five years, at which time permit limits are under extensive
review and can be modified to account for more stringent regulations. In
addition, the permits have re-opener clauses which can be used to modify a
permit at anytime. Several of the facilities we operate have either recently
gone through permit renewal or will be renewed within the next few years. Based
upon recent renewals, we do not anticipate more stringent monitoring
requirements for any of the facilities we operate. We believe that we are in
material compliance with applicable discharge requirements under the Clean Water
Act.
EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT. In April of 1997, the
EPA expanded the list of industry groups required to report the Toxic Release
Inventory under Section 313 of the Emergency Planning and Community
Right-to-Know Act to include electric utilities. Our operating facilities are
required to complete a toxic chemical inventory release form for each listed
toxic chemical manufactured, processed or otherwise used in excess of threshold
levels. The purpose of this requirement is to inform the EPA, states, localities
and the public about releases of toxic chemicals to the air, water and land that
can pose a threat to the community.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT. The
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA" or "Superfund"), requires cleanup of sites from which there
has been a release or threatened release of hazardous substances and authorized
the EPA to take any necessary response action at Superfund sites, including
ordering potentially responsible parties ("PRPs") liable for the release to take
or pay for such actions. PRPs are broadly defined under CERCLA to include past
and present owners and operators of, as well as generators of wastes sent to a
site. At present, we are not subject to liability for any Superfund matters and
take measures to assure that CERCLA will not apply to properties we own or
lease. However, we do generate certain wastes in the operation of our plants,
including small amounts of hazardous wastes, and send certain wastes to third-
party waste disposal sites. As a result, there can be no assurance that we will
not incur liability under CERCLA in the future.
RESOURCE CONSERVATION AND RECOVERY ACT ("RCRA"). RCRA regulates the
generation, treatment, storage, handling, transportation and disposal of
hazardous wastes. We are exempt from the solid waste requirements under RCRA
regarding coal combustion by-products. We are classified as a conditionally
exempt small quantity generator of hazardous wastes at all of our facilities. We
will continue to monitor regulations under this rule and will strive to maintain
the exempt status.
ENVIRONMENTAL REGULATIONS -- INTERNATIONAL
Although the type of environmental laws and regulations applicable to
independent power producers and developers varies widely from country to
country, many foreign countries have laws and regulations relating to the
protection of the environment and land use which are similar to those found in
the United States. Laws applicable to the construction and operation of electric
generating facilities in foreign countries generally regulate discharges and
emissions into water and air and also regulate noise levels.
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<PAGE> 23
Air pollution laws in foreign jurisdictions often limit the emissions of
particulates, dust, smoke, carbon monoxide, sulfur dioxide, nitrogen oxide and
other pollutants. Water pollution laws in foreign countries generally limit
wastewater discharges into municipal sewer systems and require treatment of
wastewater which does not meet established standards. New projects and
modifications to existing projects are also subject, in many cases, to land use
and zoning restrictions imposed in the foreign country. In addition, developers
of foreign independent power projects often conduct environmental impact
assessments of proposed projects pursuant to existing legislative requirements.
Lenders to international development projects may impose their own requirements
relating to the protection of the environment.
We believe that the level of environmental awareness and enforcement is
growing in most countries, including most of the countries in which we intend to
develop and operate new projects. As a result, plants built overseas will likely
include pollution control equipment that is required in the United States.
Therefore, based on current trends, we believe that the nature and level of
environmental regulation that we are subject to will become increasingly
stringent, whether we undertake new projects in foreign countries or in the
United States.
EMPLOYEES
At December 31, 1999, we employed 524 people, none of whom is covered by a
collective bargaining agreement.
ITEM 2. PROPERTIES
In addition to our properties listed and described in the section entitled
"Business -- Facilities in Operation," we lease our principal executive office,
a single 61,024 square foot building, located at 9405 Arrowpoint Boulevard in
Charlotte, North Carolina. We lease the building and related land from a
partnership comprised of four shareholders of Cogentrix Energy. The building
lease has an initial term ending in 2004, with optional renewals through 2047.
The term of the land lease extends through 2047. See "Certain Relationships and
Related Transactions -- Leases and Real Property Transactions."
We also lease office space in Prince George, Virginia and Portland, Oregon.
We believe that our facilities and properties have been satisfactorily
maintained, are in good condition, and are suitable for our operations.
ITEM 3. LEGAL PROCEEDINGS
Claims and Litigation
One of our indirect, wholly-owned subsidiaries is party to certain product
liability claims related to the sale of coal combustion by-products for use in
various construction projects. Management cannot currently estimate the range of
possible loss, if any, we will ultimately bear as a result of these claims.
However, our management believes - based on its knowledge of the facts and legal
theories applicable to these claims and after consultations with various counsel
retained to represent the subsidiary in the defense of such claims - that the
ultimate resolution of these claims should not have a material adverse effect on
our consolidated financial position or results of operations or on Cogentrix
Energy's ability to generate sufficient cash flow to service its outstanding
debt.
In addition to the litigation described above, we experience other routine
litigation in the normal course of business. Our management is of the opinion
that none of this routine litigation will have a material adverse impact on our
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE> 24
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
(a) Market Information -- There is no established market for our common stock,
which is closely held.
(b) Principal Shareholders -- All of the issued and outstanding shares of common
stock of Cogentrix Energy are beneficially owned by the six persons listed
in Item 12 of this report.
(c) Dividends -- For the year ended December 31, 1999, our board of directors
declared a dividend on our outstanding common stock of $8.7 million, which
was paid in March 2000. Our board of directors declared a dividend on our
outstanding common stock of $7.4 million for the fiscal year ended December
31, 1998, which was paid in March 1999. The board of directors has adopted a
policy, which is subject to change at any time, of maintaining a dividend
payout ratio of no more than 20% of our net income for the immediately
preceding fiscal year. In addition, under the terms of the indentures under
which Cogentrix Energy has senior debt outstanding and the corporate credit
facility agreement, our ability to pay dividends and make other
distributions to our shareholders is restricted.
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<PAGE> 25
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data
as of and for the five years ended December 31, 1999, which should be read in
conjunction with our consolidated financial statements and related notes thereto
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected consolidated financial data as of and for
each of the five years in the period ended December 31, 1999 set forth below has
been derived from our consolidated financial statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating revenue:
Electric........................... $294,185 $293,083 $307,104 $340,681 $361,694
Steam.............................. 25,236 25,043 26,123 28,987 23,328
Lease.............................. 44,697 34,715 -- -- --
Service revenue under capital
leases........................... 43,888 34,470 -- -- --
Income from unconsolidated
investments in power projects.... 25,464 6,474 1,412 3,408 --
Other.............................. 14,093 14,908 15,275 15,769 12,655
-------- -------- -------- -------- --------
Total operating revenue....... 447,563 408,693 349,914 388,845 397,677
-------- -------- -------- -------- --------
Operating expenses:
Operating costs.................... 195,142 185,567 190,098 232,199 238,261
General, administrative and
development...................... 39,014 36,490 41,650 31,245 28,853
Depreciation and amortization...... 43,713 42,535 41,844 37,455 38,848
Loss on impairment and cost of
removal of cogeneration
facilities....................... -- -- -- 65,628 --
-------- -------- -------- -------- --------
Total operating expenses...... 277,869 264,592 273,592 366,527 305,962
-------- -------- -------- -------- --------
Operating income........................ 169,694 144,101 76,322 22,318 91,715
Other income (expense):
Interest expense................... (94,956) (74,949) (53,864) (56,950) (59,362)
Investment and other income........ 11,213 9,226 9,789 10,942 8,232
Equity in net income (loss) of
affiliates, net.................. (208) (3,274) (1,538) (2,135) 109
Minority interest in income............. (14,752) (12,458) (4,672) (5,621) (3,558)
-------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary gain (loss)............. 70,991 62,646 26,037 (31,446) 37,136
Benefit (provision) for income taxes.... (27,576) (24,914) (9,754) 11,273 (13,783)
-------- -------- -------- -------- --------
Income (loss) before extraordinary
loss.................................. 43,415 37,732 16,283 (20,173) 23,353
Extraordinary loss on early
extinguishment of debt, net........... -- (743) (1,502) (703) --
-------- -------- -------- -------- --------
Net income (loss)....................... $ 43,415 $ 36,989 $ 14,781 $(20,876) $ 23,353
======== ======== ======== ======== ========
</TABLE>
OTHER FINANCIAL RATIO DATA
Set forth below are other financial data and ratios for the periods
indicated (in thousands, except ratio data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Parent EBITDA............................................... $96,982 $63,884
Parent Fixed Charges........................................ $32,548 $14,217
Parent EBITDA/Parent Fixed Charges.......................... 2.98 4.49
</TABLE>
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<PAGE> 26
Parent EBITDA represents cash flow to Cogentrix Energy prior to debt
service and income taxes of Cogentrix Energy. Parent Fixed Charges include cash
payments made by Cogentrix Energy related to outstanding indebtedness of
Cogentrix Energy and the cost of funds associated with Cogentrix Energy's
guarantees of some of its subsidiaries' indebtedness. Our management believes
Parent EBITDA is a useful measure of Cogentrix Energy's ability to service debt.
Parent EBITDA should not be construed, however, as an alternative to operating
income or to cash flows from operating activities.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets............................. $1,998,386 $1,499,851 $822,974 $865,941 $914,136
========== ========== ======== ======== ========
Project financing debt (1)............... $1,204,983 $ 877,653 $567,705 $620,885 $639,823
========== ========== ======== ======== ========
Parent debt (2).......................... $ 355,000 $ 355,000 $100,000 $100,000 $100,000
========== ========== ======== ======== ========
Total shareholders' equity............... $ 121,451 $ 87,863 $ 58,298 $ 50,631 $ 75,891
========== ========== ======== ======== ========
</TABLE>
- ---------------
(1) Project financing debt with respect to each of our facilities is
"substantially non-recourse" to Cogentrix Energy and its other project
subsidiaries. For a discussion of the term "substantially non-recourse," see
"Business -- Project Agreements, Financing and Operating Arrangements for
Our Facilities -- Project Financing" herein.
(2) Parent debt represents obligations of Cogentrix Energy only and does not
include non-recourse obligations of our project subsidiaries.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to discussing and analyzing our recent historical financial
results and condition, the following "Management's Discussion and Analysis of
Financial Condition and Results of Operations" includes statements concerning
certain trends and other forward-looking information affecting or relating to
Cogentrix which are intended to qualify for the protections afforded
"Forward-Looking Statements" under the Private Securities Litigation Reform Act
of 1995, Public Law 104-67. The forward-looking statements made herein and
elsewhere in this Form 10-K are inherently subject to risks and uncertainties
which could cause the actual results to differ materially from the
forward-looking statements. See cautionary statements appearing under the
Business section above and elsewhere in this Form 10-K for a discussion of the
important factors affecting the realization of those results.
TRENDS AFFECTING OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Effect of Recent Power Purchase Agreement Restructurings on our Revenues,
Expenses and Cash Flow
Each of our electric generating facilities in operation produces
electricity for sale to a utility and thermal energy for sale to an industrial
user. The electricity and thermal energy generated by these facilities are
typically sold under long-term power or steam sales agreements.
A number of the generating facilities we originally developed sold
electricity under long-term contracts that obligated the electric utility to
purchase all electricity generated by the facility. We subsequently negotiated
amendments to the majority of these contracts to provide the electric utility
the ability to suspend or reduce its purchases of electricity from each facility
if the electric utility determines the utility can operate its system for a
designated period of time more economically.
The amended power purchase agreements are structured so that we continue to
receive -- during any period the utility exercises its ability to suspend or
reduce purchases of electricity -- fixed payments that are designed in part to
cover the facility's debt service and its fixed operating costs. These fixed
payments also make up a substantial portion of the profit component of each
power purchase agreement.
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<PAGE> 27
When the electric utility exercises its right to suspend or reduce
purchases of electricity from us, we do not receive, or receive only in reduced
amounts, the variable payments for electricity produced that are intended
primarily to cover our variable operating and maintenance costs, as well as our
coal and rail transportation costs. Because we are not producing electricity, or
are producing electricity in reduced amounts, these variable costs are
correspondingly reduced.
Despite the reduced variable payments we receive when an electric utility
suspends or reduces its purchases of electricity from us, we generally recognize
an increase in cash flows. The increase in cash flows is a result of both the
lower operating and maintenance costs during the period of suspension or
reduction and the amount of the fixed payments the utility must continue to make
during the period.
The restructuring of these power purchase agreements represents a positive
development both for us and for the electric utilities. Even when the fixed
payments the utilities must make to us are combined with their cost of obtaining
electricity from alternative sources, those payments still represent a
significant reduction from the rates the electric utilities would have paid us
for electricity generated by our facilities had the power purchase agreements
not been restructured.
Termination Dates of Seven of our Power Sales Agreements
The power sales agreements at seven of our facilities either terminate in
years 2000 through 2002 or provide for a significant reduction in fixed payments
received under such agreements after 2002. Accordingly, revenues recognized by
us under these power sales agreements will, after 2002, be eliminated or
significantly reduced. Our management believes, however, that our project
subsidiaries and unconsolidated affiliates will generate sufficient cash flow to
allow them to pay management fees and dividends to Cogentrix Energy periodically
in sufficient amounts to allow Cogentrix Energy to pay all required debt service
on our outstanding senior notes and our corporate credit facility, fund a
significant portion of our development activities and permit Cogentrix Energy to
meet its other obligations.
Legislative Proposals to Restructure the Electric Generating Industry
The domestic electric generating industry is currently going through a
period of significant change as many states are implementing or considering
regulatory initiatives designed to increase competition. In addition to
restructuring activities in various states, there have also been several
industry restructuring bills introduced in Congress. We cannot predict the final
form or timing of the proposed restructurings and the impact, if any, that such
restructurings would have on our existing business or consolidated results of
operations. Because these restructuring proposals have generally included a
grandfathering provision for contracts entered into prior to repeal of existing
legislation, we believe that any such restructuring would not have a material
adverse effect on our power sales agreements. Accordingly, we believe that our
existing business and results of consolidated operations would not be materially
adversely affected, although there can be no assurance in this regard.
Recent Acquisitions, Development and Other Changes in our Portfolio of
Generating Plants
Our recent growth has substantially increased our electric production
capability. The acquisition of ownership interests in the Cottage Grove and
Whitewater facilities, whose power sales agreements are accounted for as
"sales-type" capital leases, has resulted in the recognition of lease and
service revenues, as well as cost of services under "sales-type" leases. The
acquisition of ownership interests in twelve electric generating facilities has
significantly impacted the amount of income recognized from unconsolidated power
projects. These acquisitions were financed with debt and as a result, have
impacted the interest expense reported in our results of operations. Our
facilities under construction will not have a significant impact on our results
of operations until they begin commercial operations, at which time, we will
experience an increase in operating revenues, operating expenses and interest
expense.
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<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth the results of operations and percentage of
total operating revenues represented by the components of operating revenues and
expenses for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total operating revenues.................... $447,563 100% $408,693 100% $349,914 100%
Operating costs............................. 195,142 44 185,567 45 190,098 54
General, administrative and development..... 39,014 9 36,490 9 41,650 12
Depreciation and amortization............... 43,713 9 42,535 11 41,844 12
-------- --- -------- --- -------- ---
Operating income............................ $169,694 38% $144,101 35% $ 76,322 22%
======== === ======== === ======== ===
</TABLE>
Fiscal Year Ended December 31, 1999 as compared to Fiscal Year Ended December
31, 1998
Total operating revenues increased 9.5% to $447.6 million for the year
ended December 31, 1999 as compared to $408.7 million for the year ended
December 31, 1998. This increase was primarily attributable to the $19.4 million
increase in lease and service revenue earned under the power sales agreements
for the Cottage Grove and Whitewater facilities in which we acquired our
interests in March, 1998. The increase in operating revenues also relates to a
$19.0 million increase in income from unconsolidated investments in power
projects. This increase was primarily attributable to the purchase of interests
in 12 electric generating facilities in October, 1998. The increase in income
from unconsolidated investments in power projects was also impacted by the
purchase of an additional 40% interest in the Indiantown facility during 1999.
The increase in total operating revenues was partially offset by a decrease in
other operating revenue, due to the recognition of a $4.6 million construction
management fee received in 1998 for the completion of a 248 megawatt, gas-fired
electric generating facility in Clark County, Washington.
Total operating expenses increased 5.1% to $195.1 million for the year
ended December 31, 1999 as compared to $185.6 million for the year ended
December 31, 1998. This increase was primarily attributable to the $9.9 million
in cost of services incurred by the Cottage Grove and Whitewater facilities,
interests in which we acquired in March, 1998. Total operating expenses also
increased as a result of an increase in fuel expense of $3.4 million associated
with an increase in overall megawatt hours sold to the purchasing utilities at
our plants, the amortization of our fuel litigation settlement with a coal
supplier and an increase in fuel sold to third parties at the Cottage Grove and
Whitewater facilities. The increase in total operating expenses was partially
offset by a $4.6 million decrease in operation and maintenance expenses due to
routine maintenance expenses incurred at several of our facilities during the
year ended December 31, 1998.
General, administrative, and development expenses increased 6.8% to $39.0
million for the year ended December 31, 1999 as compared to $36.5 million for
the year ended December 31, 1998. This increase is primarily due to an increase
in compensation expense related to an increase in the number of corporate
employees, an increase in incentive compensation expense related to our
increased profitability, and expense related to the buyout of an executive's
participation in an incentive compensation plan. General and administrative
expense was also impacted, to a lesser extent, by an increase in information
system consulting costs resulting from the implementation of various new core
business systems. The increase in general, administrative, and development
expenses was partially offset by the capitalization of development costs related
to certain project development efforts during the year ended December 31, 1999
and a decrease in travel and other development costs related to international
development activity.
Interest expense increased 26.8% to $95.0 million for the year ended
December 31, 1999 as compared to $74.9 million for the year ended December 31,
1998. Our average long-term debt increased to $1.2 billion, with a weighted
average interest rate of 7.62% for the year ended December 31, 1999 as compared
to average long-term debt of $1.0 billion, with a weighted average interest rate
of 7.25% for the year ended December 31, 1998. The increases in interest expense
and weighted average debt outstanding were related to the inclusion of the
project debt of the Cottage Grove and Whitewater facilities acquired in March,
1998, the issuance of $255
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<PAGE> 29
million of 8.75% senior notes during the fourth quarter of 1998, and borrowings
incurred during the year under revolving credit facilities at some subsidiaries
related to acquisitions made during the year. The increase in average long-term
debt outstanding was also impacted, to a lesser extent, by an outstanding
construction loan of approximately $70 million in December, 1999, for the
project under construction in Jenks, Oklahoma. The increase in interest expense
was partially offset by a decrease in interest expense at several of our project
subsidiaries resulting from the scheduled repayment of outstanding project
finance debt, and the capitalization of interest costs on projects under
construction.
The increase in minority interest in income for the year ended December 31,
1999 as compared to the year ended December 31, 1998 related to the inclusion of
a full twelve months of operations for the Cottage Grove and Whitewater
facilities in the year ended December 31, 1999, as compared to only nine months
in the year ended December 31, 1998, and the settlement of the construction
contract on the Whitewater and Cottage Grove facilities.
Fiscal Year Ended December 31, 1998 as compared to Fiscal Year Ended December
31, 1997
Total operating revenues increased 16.8% to $408.7 million for the year
ended December 31,1998 as compared to $349.9 million for the year ended December
31, 1997. This increase was primarily attributable to the $69.2 million
aggregate amount of lease revenue and service revenue earned under the power
sales agreements for the Cottage Grove and Whitewater facilities in which we
acquired our interests in March 1998. Operating revenues were also impacted by
an increase in income from unconsolidated investments in power projects. The
increase was primarily the result of the acquisition of ownership interests in
twelve electric generating facilities in October, 1998. We recognized
approximately $2.8 million of revenue, net of premium amortization, related to
these ownership interests. These increases in operating revenues were partially
offset by a net decrease in electric revenue for the year ended December 31,
1998 as compared to the year ended December 31, 1997. This decrease is primarily
the result of a restructuring of power sales agreements at two of our facilities
to give the purchasing utility the right to suspend or reduce purchases of
energy. The decrease in electric revenues was partially offset by an increase in
electric revenue at three of our facilities due to an increase in megawatt hours
sold to the purchasing utilities.
Our operating costs decreased approximately 2.4% to $185.6 million for the
year ended December 31, 1998 as compared to $190.1 million for the year ended
December 31, 1997. The decrease in operating expenses was primarily the result
of a $38.3 million reduction in fuel expense at two of our facilities resulting
from the restructuring of their power sales agreements. The decrease was also a
result of a decrease in operating costs incurred by ReUse related to third-party
agreements. This decrease was partially offset by the $39.4 million in cost of
services incurred by the Cottage Grove and Whitewater facilities, interests in
which we acquired in March 1998. Operating expenses were also impacted by the
increases in fuel expense at two of our facilities associated with an increase
in megawatt hours sold.
General, administrative and development expenses for the year ended
December 31, 1998 decreased 12.5% to $36.5 million as compared to $ 41.7 million
for the year ended December 31, 1997. The decrease was primarily the result of
$10.7 million of expense recognized in the year ended December 31, 1997 related
to the restructuring or termination of incentive compensation arrangements for
certain employees, as well as expense incurred related to severance payments to
certain executive officers. The decrease was also due to a general decrease in
salary expense during the year ended December 31, 1998 as a result of a
restructuring we completed in the prior year. This decrease was partially offset
by an increase in incentive compensation expense related to our profit-sharing
plan as a result of the increase in our profitability for the year ended
December 31, 1998, and expenses incurred related to our project development
efforts.
Interest expense increased 39.1% to $74.9 million for the year ended
December 31, 1998 as compared to $53.9 million for the year ended December 31,
1997. Our average long-term debt increased to $1.0 billion, with a weighted
average interest rate of 7.25%, for the year ended December 31, 1998 as compared
to average long-term debt of $697 million, with a weighted average interest rate
of 7.73%, for the year ended December 31, 1997. The increases in interest
expense and weighted average debt outstanding are related to the inclusion of
the project finance debt of the Cottage Grove and Whitewater facilities acquired
in March
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<PAGE> 30
1998, and the increase in project finance debt outstanding at the Portsmouth
Facility, which was refinanced in December 1997, and the Hopewell Facility,
which was refinanced in February 1998. The increases also relate to the issuance
of $255 million of 8.75% senior notes in the fourth quarter of 1998 and periodic
borrowings under the corporate credit facility. The increase in interest expense
discussed above was partially offset by a decrease in interest expense at
several of our project subsidiaries due to the scheduled repayment of
outstanding project finance debt.
The increase in the equity in net loss of affiliates for the year ended
December 31, 1998 relates to an increase in losses recognized by the
partnerships operating tomato greenhouses in the states of New York and Texas.
In December 1998, we entered into an agreement to sell our interests in these
partnerships which resulted in the recognition of a $2.1 million gain included
in investment and other income in the accompanying consolidated statements of
operations.
The increase in minority interests in income for the year ended December
31, 1998 as compared to the prior year relates to the recognition of the
minority partner's share of earnings in the Cottage Grove and Whitewater
facilities, and an increase in earnings at the Hopewell Facility as a result of
that facility's restructured power sales agreement.
The extraordinary loss on early extinguishment of debt for the year ended
December 31, 1998 relates to the refinancing of the Hopewell Facility's project
debt in January 1998. The loss consisted of a write-off of the deferred
financing costs on the Hopewell Facility's original project debt and a swap
termination fee on an interest rate swap agreement hedging the original project
debt.
LIQUIDITY AND CAPITAL RESOURCES
The principal components of operating cash flow for the year ended December
31, 1999 were generated by net income of $43.4 million, increases due to
adjustments for depreciation and amortization of $43.7 million, deferred income
taxes of $23.9 million, minority interest in income, net of dividends of $8.5
million and equity in net income of unconsolidated affiliates, net of dividends,
of $3.6 million which were partially offset by amortization of unearned lease
income, net of minimum lease payments received of $1.6 million and a net $12.5
million use of cash reflecting changes in other working capital assets and
liabilities. Cash flow provided by operating activities of $109.0 million,
proceeds from project finance borrowings of $191.3 million, and $12.2 million of
cash escrows released, were primarily used to purchase property, plant and
equipment additions of $4.3 million, to make investments in affiliates of $76.8
million, to pay deferred financing costs of $9.0 million, to repay project
finance borrowings of $122.2 million, to pay a dividend to common shareholders
of $7.4 million and to fund construction in progress and project development
costs of $60.7 million.
The principal components of operating cash flow for the year ended December
31, 1998 were net income of $37.0 million, increases due to adjustments for
depreciation and amortization of $42.5 million, deferred income taxes of $14.2
million, a write-off of deferred financing costs of $2.2 million and equity in
net income (loss) of unconsolidated affiliates, net of dividends of $10.2
million, which were partially offset by amortization of unearned lease income,
net of minimum lease payments received of $2.0 million, minority interests in
income, net of dividends, of $14.5 million, a gain on sale of investment in
affiliates of $2.1 million and a net $12.8 million use of cash reflecting
changes in other working capital assets and liabilities. Cash flow provided by
operating activities of $74.7 million, proceeds from borrowings of $384.1
million, proceeds from the sale of marketable securities of $42.1 million, $23.0
million of cash escrows released and cash on hand at the beginning of the year
of $23.6 million were primarily used to acquire interests in facilities of
$155.3 million, purchase property plant and equipment of $7.4 million, make
investments in affiliates of $180.3 million, repay project finance borrowings of
$193.8 million, pay deferred financing costs of $8.6 million and pay a common
stock dividend of $2.1 million.
Historically, we have financed each facility primarily under financing
arrangements and related documents which generally require the extensions of
credit to be repaid solely from the project's revenues and provide that the
repayment of the extensions of credit (and interest thereon) is secured solely
by the physical assets, agreements, cash flow and, in certain cases, the capital
stock of or the partnership interest in that
30
<PAGE> 31
project subsidiary. This type of financing is generally referred to as "project
financing." The project financing debt of our subsidiaries and joint ventures
(aggregating $1.2 billion as of December 31, 1999) is non-recourse to Cogentrix
Energy and its other project subsidiaries, except in connection with certain
transactions where Cogentrix Energy has agreed to certain limited guarantees and
other obligations with respect to such projects. These limited guarantees and
other obligations include agreements for the benefit of the project lenders to
two project subsidiaries to fund cash deficits the projects may experience as a
result of incurring certain costs, subject to an aggregate cap of $40.6 million.
In addition, Cogentrix Inc., which is an indirect subsidiary of Cogentrix
Energy, has guaranteed two project subsidiaries' obligations to the purchasing
utility under five power sales agreements. Three of these power sales agreements
provide that in the event of early termination that is not for cause, the
project subsidiary must pay the utility a termination charge equal to the excess
paid for capacity and energy over what would have been paid to the utility under
the utility's published five-year capacity credit and variable energy rates plus
interest. The remaining two power sales agreements provide that in the event of
early termination, the project subsidiary must pay the utility the cost of
replacing the electricity from a third party for the remainder of the
agreement's term. Because these project subsidiaries' obligations do not by
their terms stipulate a maximum dollar amount of liability, the aggregate amount
of potential exposure under these guarantees cannot be quantified. If we or our
subsidiary were required to satisfy all of these guarantees and other
obligations or even one or more of the significant ones, it could impair
Cogentrix Energy's ability to service its outstanding debt.
Any project we develop in the future, and those electric generating
facilities we may seek to acquire, are likely to require substantial capital
investment. Our ability to arrange financing on a non-recourse basis and the
cost of such capital are dependent on numerous factors. In order to access
capital on a non-recourse basis in the future, we may have to make larger equity
investments in, or provide more financial support for, the project entity.
The ability of our subsidiaries to pay dividends and management fees
periodically to Cogentrix Energy is subject to certain limitations in their
respective financing documents. Such limitations generally require that: (a)
debt service payments be current, (b) debt service coverage ratios be met, (c)
all debt service and other reserve accounts be funded at required levels and (d)
there be no default or event of default under the relevant financing documents.
There are also additional limitations that are adapted to the particular
characteristics of each subsidiary. Management does not believe that such
restrictions or limitations will adversely affect Cogentrix Energy's ability to
meet its debt obligations.
As of December 31, 1999, we had long-term debt (including the current
portion thereof) of approximately $1.6 billion. With the exception of the $355
million of senior notes currently outstanding, substantially all of such
indebtedness is project financing debt, a large portion of which is non-recourse
to Cogentrix Energy. Future annual maturities of long-term debt range from $54.8
million to $105.9 million in the five-year period ending December 31, 2004. We
believe that our project subsidiaries and the project entities in which we have
an investment will generate sufficient cash flow to pay all required debt
service on the project financing debt and to allow them to pay management fees
and dividends to Cogentrix Energy periodically in sufficient amounts to allow
Cogentrix Energy to pay all required debt service on outstanding balances under
the corporate credit facility, the 2004 notes and the 2008 notes and to fund a
significant portion of its development activities and meet its other
obligations. If, as a result of unanticipated events, our ability to generate
cash from operating activities is significantly impaired, we could be required
to curtail our development activities to meet our debt service obligations.
In December 1997, we renegotiated the project financing arrangements for
our Portsmouth facility. The amended agreements resulted in an extension of the
final maturity date of the loan by three months and an increase in the amount of
commitment provided by the project lenders in the form of a $43.5 million
revolving credit facility. The revolving credit facility is available to be
drawn by the project subsidiary owning the Portsmouth facility at any time for
general corporate purposes, including paying dividends to Cogentrix Energy.
During 1999, the project subsidiary borrowed $20.4 million under the revolving
credit facility and
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<PAGE> 32
distributed such amount to Cogentrix Energy for purposes of funding a portion of
the purchase price related to the acquisition of a 40% interest in the
Indiantown facility.
In February 1998, we renegotiated the project financing arrangements for
the Hopewell facility, in which we own a 50% interest. The amended agreements
resulted in a $34.6 million increase in outstanding indebtedness of the project
subsidiary owning and operating the facility, and extended the final maturity
date of the loan by six months. The project subsidiary transferred substantially
all of the additional funds borrowed (net of transaction costs) to its partners.
The distribution received by Cogentrix Energy related to the refinancing was
approximately $16.6 million.
In March 1998, we acquired from LS Power Corporation an approximate 74%
ownership interest in the Whitewater facility and the Cottage Grove facility.
Each of the Cottage Grove and Whitewater facilities is a 245-megawatt gas-fired,
combined-cycle cogeneration facility. Commercial operations of the facilities
commenced in the last half of calendar 1997. The aggregate acquisition price for
our ownership interests in the Cottage Grove and Whitewater facilities was
$158.0 million. In addition, we pre-funded a $16.7 million distribution to the
previous owners. This distribution represented unused construction contingency
funds and cash flows that were accumulated by the Cottage Grove and Whitewater
facilities prior to January 1, 1998. Cogentrix Energy received a distribution of
$15.7 million in April 1998, and received a distribution of the remaining $1.0
million in 1999. The purchase price was funded with the proceeds of the
corporate credit facility and corporate cash balances.
In August 1998, we acquired an approximate 52% interest in the Batesville
facility. We have committed to provide an equity contribution to the project
subsidiary of approximately $54 million upon the earliest to occur of (a) the
incurrence of construction costs after all project financing has been expended,
(b) an event of default under the project subsidiary's financing arrangements or
(c) June 30, 2001. This equity commitment is supported by a $54 million letter
of credit, which is provided under the corporate credit facility. We expect the
Batesville facility, which we will operate, to begin operation in summer 2000.
Electricity generated by the Batesville facility will be sold under long-term
power purchase agreements with two investment-grade utilities.
In October 1998, we acquired Bechtel Generating Company, Inc.'s ownership
interests in 12 electric generating facilities, comprising a net equity interest
of approximately 365 megawatts, and one interstate natural gas pipeline. The
aggregate acquisition price for the Bechtel Acquisition including acquisition
costs was approximately $189.7 million. The purchase price was funded with a
portion of the proceeds from the sale of the 2008 notes.
On October 29, 1998, we amended and restated the corporate credit facility
to provide for direct advances to, or the issuance of letters of credit for, our
benefit in an amount up to $125 million. The corporate credit facility is
unsecured and imposes covenants on us substantially the same as the covenants
contained in the indentures as well as certain financial condition covenants. We
have used approximately $117 million of the credit availability under the
corporate credit facility for letters of credit issued in connection with the
Bechtel Acquisition, the Batesville Acquisition and the construction of the
Oklahoma Facility. The balance of the commitment under the corporate credit
facility is available, subject to any limitations imposed by the covenants
contained therein and in the indentures, to be drawn upon by us to repay other
outstanding indebtedness or for general corporate purposes, including equity
investments in new projects or acquisitions of existing electric generating
facilities or those under development. Subsequent to December 31, 1999, the
corporate credit facility was amended to provide for $175 million of revolving
credit and to modify the covenants. The revolving credit facility has been
extended through October 2002.
As a result of a March 1999 arbitration award related to a contract dispute
with a coal supplier, we were obligated to pay the coal supplier approximately
$8 million in 1999. Approximately $3 million of this award relates to the
reduction in purchase quantities for prior periods and approximately $5 million
relates to the reduction in purchase quantities from the date of the award
through the balance of the term of the coal contract, which ends in September
2001. The future reduction in purchase quantities provides a future economic
benefit to our project subsidiary. The amount of damages awarded did not
materially reduce the projected amount of cash flow to Cogentrix Energy for the
current fiscal year and did not, therefore, have a material adverse impact on
Cogentrix Energy's ability to service its outstanding debt.
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<PAGE> 33
In June, 1999, we entered into an agreement to purchase an additional 40%
ownership interest in the Indiantown cogeneration facility in a three-phase
transaction. We paid $39.8 million to acquire a 19.9% interest in the facility
in June, 1999, $36.6 million to acquire a 20% interest in the facility in
September, 1999 and $0.2 million to acquire a 0.1% interest in the facility in
November, 1999. We funded the purchase of these interests with proceeds from the
CEA credit facility and the Portsmouth credit facility.
In September 1999, one of our wholly-owned subsidiaries, Cogentrix Eastern
America, Inc., ("CEA") formed to hold our twelve electric generating facilities
acquired in the Bechtel Acquisition, entered into a $75 million, three-year
revolving credit facility. The commitment under this facility reduces to $67.5
million after one-year and to $60 million after two years. Certain covenants and
financial conditions must be met under this credit facility prior to cash
distributions received by CEA being available for distribution to Cogentrix
Energy. With the closing of this credit facility, our subsidiaries now maintain
revolving credit facilities, which are non-recourse to us, with aggregate
commitments of $143.0 million. As of December 31, 1999, we had $42.6 million
available under these facilities.
In November 1999, Cottage Grove, Whitewater and the contractor, with the
concurrence of the independent engineer, reached a final agreement regarding the
settlement of all outstanding issues and obligations of Cottage Grove,
Whitewater and the contractor pursuant to the Cottage Grove and Whitewater
construction contracts. The final settlement of the construction contracts
provided for a payment to the contractor of approximately $4,030,000 from funds
available in Cottage Grove's and Whitewater's construction retainage accounts.
The contractor has also agreed to extend various warranty periods and perform
various repairs and inspection. Cottage Grove and Whitewater, in turn,
acknowledged that final acceptance shall have been deemed to have occurred. The
value of the existing letters of credit provided in lieu of cash retainage was
reduced from $11,030,000 to $5,000,000. The remaining value of these letters of
credit will be decreased in stages as the contractor successfully completes the
agreed upon inspections and additional work. The settlement provided for the
release of approximately $9,441,000 of remaining restricted cash from the
construction retainage accounts of Cottage Grove and Whitewater. These funds
were distributed to Cogentrix in November, 1999.
In December, 1999, we closed a $350 million construction loan with two
banks and commenced construction on an approximate 800 megawatt, combined-cycle,
natural gas-fired generating facility located in Jenks, Oklahoma. We have
committed to provide an equity contribution to the project subsidiary of
approximately $56.9 million upon the earliest to occur of (a) an event of
default under the project subsidiary's financing agreement, (b) the incurrence
of construction costs after all project financing has been expended, or (c) June
24, 2002. The equity contribution is reduced by approximately $8.2 million upon
our receipt of a waste water discharge permit, and further reduced by
contributions made by us once the construction loan proceeds are exhausted. This
equity contribution commitment is supported by a letter of credit, which is
provided under the corporate credit facility. We expect the Oklahoma facility,
which we will operate, to begin operation in June 2002. Electricity generated by
the Oklahoma facility will be sold under a long-term power purchase agreement to
PECO Energy's Power Team.
In March 2000, we closed a credit facility with a bank and a financial
institution which provides for a $126 million construction loan and a $5 million
debt service reserve letter of credit. Proceeds from the construction loan will
be used to construct an approximate 270 megawatt combined-cycle natural
gas-fired generating facility located in Rathdrum, Idaho. We own a 51% interest
in a partnership that will own this facility and have committed to provide an
equity contribution to the project subsidiary of approximately $16.7 million
upon the earliest to occur of (a) an event of default under the project's
subsidiary's financing agreement, (b) the incurrence of construction costs after
all project financing has been expended, or (c) October 1, 2002. This equity
contribution commitment is supported by a letter of credit, which is provided
under the corporate credit facility. In addition, Cogentrix Energy has agreed to
make additional stand-by equity contributions to cover certain contingent costs
during the construction period capped at $3.6 million. An indirect, wholly-owned
subsidiary of Cogentrix Energy has entered into an engineering, procurement and
construction (EPC) contract with the partnership to construct the Rathdrum
facility. Cogentrix Energy is providing a guarantee supporting the subsidiary's
obligations under the EPC contract. We expect the Rathdrum facility, which we
will operate, to begin operation in the third quarter of 2001. Electricity
generated
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<PAGE> 34
by the Rathdrum facility will be sold under a long-term power purchase agreement
to Avista Turbine Power, Inc.
We are in the advanced stages of developing a 300 megawatt electric
generating plant in the Dominican Republic. This project will utilize fuel
oil-fired, combined-cycle technology. We are serving as lead developer in a
partnership with Commonwealth Development Corporation of Great Britain. This
facility will sell electricity under a long-term power purchase agreement with
the CDE supported by a Dominican government guarantee of the payment
obligations. The project is expected to close financing and commence
construction in the second quarter of 2000 with a commencement of operations in
2001. We currently anticipate requiring funds of approximately $50 million for
the purpose of making our equity investment in the Dominican Republic project.
We expect to fund this equity commitment from corporate cash balances.
We have entered into commitments with a turbine supplier to purchase a
specified number of turbines with specified delivery dates. We have made
approximately $11.2 million in non-refundable deposits related to these
commitments through December 31, 1999. We expect to make additional progress
payments of $82.9 million in 2000, of which approximately $75.8 million would be
repaid or funded from proceeds of financings we anticipate closing.
For the fiscal year ended December 31, 1999, our board of directors
declared a dividend on the outstanding common stock of $8.7 million, which was
paid in March 2000. The board of directors' policy, which is subject to change
at any time, provides for a dividend payout ratio of no more than 20% of our net
income for the immediately preceding fiscal year. In addition, under the terms
of the indentures under which Cogentrix Energy has senior debt outstanding and
corporate credit facility agreement, our ability to pay dividends and make other
distributions to our shareholders is restricted.
IMPACT OF ENERGY PRICE CHANGES, INTEREST RATES AND INFLATION
Energy prices are influenced by changes in supply and demand, as well as
general economic conditions, and therefore tend to fluctuate significantly.
Through various hedging mechanisms, we have attempted to mitigate the impact of
changes on the results of operations of most of its projects. The basic hedging
mechanism against increased fuel and transportation costs is to provide
contractually for matching increases in the energy payments our project
subsidiaries receive from the utility purchasing the electricity generated by
the facility.
Under our power sales agreements, energy payments are indexed, subject to
certain caps, to reflect the purchasing utility's solid fuel cost of producing
electricity or provide periodic, scheduled increases in energy prices that are
designed to match periodic, scheduled increases in fuel and transportation costs
that are included in the fuel supply and transportation contracts for the
facilities.
Changes in interest rates could have a significant impact on us. Interest
rate changes affect the cost of capital needed to construct projects, as well as
interest expense of existing project financing debt. As with fuel price
escalation risk, we attempt to hedge against the risk of fluctuations in
interest rates by arranging either fixed-rate financing or variable-rate
financing with interest rate swaps, collars or caps on a portion of its
indebtedness.
Although hedged to a significant extent, our financial results will likely
be affected to some degree by fluctuations in energy prices, interest rates and
inflation. The effectiveness of the hedging techniques implemented by us is
dependent, in part, on each counterparty's ability to perform in accordance with
the provisions of the relevant contracts. We have sought to reduce this risk by
entering into contracts with creditworthy organizations.
Interest Rate Sensitivity
The following tables provide information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, including interest rate swaps, interest rate caps and debt
obligations.
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<PAGE> 35
The table below contains information on the interest rate sensitivity of
our debt portfolio. This table presents principal cash flows and related
weighted average interest rates by expected maturity dates for all of our debt
obligations as of December 31, 1999. This table does not reflect scheduled
future interest rate adjustments. The weighted average interest rates disclosed
in the table are calculated based on interest rates as of December 31, 1999.
Future interest rates are likely to vary from those disclosed in the table.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
------------------------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER TOTAL
------- ------- ------- ------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term Debt
Fixed Rate............. $ 6,386 $28,662 $30,227 $32,471 $ 54,934 $981,462 $1,134,142
Weighted average
interest rate...... 7.50% 7.49% 7.51% 7.47% 7.47% 8.01%
Variable Rate.......... $83,728 $77,247 $48,321 $22,317 $ 23,272 $151,315 406,200
----------
Weighted average
interest rate...... 7.08% 7.07% 7.20% 7.63% 7.45% 7.48% $1,540,342
==========
</TABLE>
The following tables contain information regarding interest rate swap and
interest rate cap agreements entered into by some of our project subsidiaries to
manage interest rate risk on their variable-rate project financing debt. The
notional amounts of debt covered by these agreements as of December 31, 1999 was
approximately $263,279,000. These agreements effectively changed the interest
rate, including applicable margins, on the portion of debt covered by the
notional amounts from a weighted average variable rate of 7.22% to a weighted
average effective rate of 7.09% at December 31, 1999.
FIXED RATE PAY/VARIABLE RATE RECEIVE INTEREST RATE SWAPS
<TABLE>
<CAPTION>
HEDGED FIXED VARIABLE FAIR
NOTIONAL EFFECTIVE MATURITY RATE RATE MARKET
AMOUNT DATE DATE PAY RECEIVE(1) VALUE
- ----------- --------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$51,000,000.. 2/12/98 12/31/02 5.6875% 6.15% $ 711,875
4,500,000.. 8/30/90 8/30/00 9.503% 6.005% (151,731)
20,000,000.. 7/31/00 7/31/02 6.995% -- (31,272)
58,163,000.. 12/20/95 7/31/06 6.078% 6.022% 1,985,472
23,748,281.. 11/15/98 3/07/01 5.585% 6.15% 111,333
26,304,000.. 1/14/98 6/30/02 5.555% 6.21% 338,715
----------
$2,964,392
==========
</TABLE>
INTEREST RATE CAPS
<TABLE>
<CAPTION>
HEDGED MAXIMUM ACTUAL FAIR
NOTIONAL EFFECTIVE MATURITY INTEREST INTEREST MARKET
AMOUNT DATE DATE RATE RATE(1) VALUE
- ----------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
$6,824,000.. 12/31/96 3/31/01 7.50% 6.2113% $ 1,312
26,304,000.. 2/20/97 6/28/02 6.50% 6.2113% 119,137
80,000,000.. 9/18/99 7/31/02 9.00% 6.022% 41
31,000,000.. 7/31/00 7/31/02 9.00% -- 50,773
---------
$ 171,263
=========
</TABLE>
- ---------------
(1) The "variable rate receive" and "actual interest rate" are based on the
interest rates in effect as of December 31, 1999. Interest rates in the
future are likely to vary from those disclosed in the tables above.
CHANGE OF CORPORATE FISCAL YEAR
Effective January 1, 1998, we changed our fiscal year to commence on
January 1 and conclude on December 31 of each year. Our fiscal year previously
commenced each July 1, concluding on June 30 of the
35
<PAGE> 36
following calendar year. We have restated our consolidated financial statements
for the 1997 fiscal year to a calendar basis.
YEAR 2000 COMPLIANCE
The Year 2000 issue existed because many computer systems and applications,
including those embedded in equipment and facilities, use two digit rather than
four digit fields to designate an applicable year. As a result, those systems
and applications may not have properly recognized the year 2000 or processed
data which included such date.
We performed extensive investigation, analysis contingency planning and
remediation to prepare our systems and applications for the Year 2000 issue. We
also communicated extensively with our critical suppliers, vendors, joint
venture partners, and major customers to assess their compliance, and our
exposure, with the Year 2000 issue.
Our systems were Year 2000 compliant before December 31, 1999, and there
have been no significant transition issues in our computers related to the Year
2000 issue at any of our plants or our corporate headquarters. We have not
encountered any Year 2000 issues with any of our business partners, critical
suppliers, vendors, joint venture partners or major customers.
36
<PAGE> 37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... 38
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1999 and
1998.................................................. 39
Consolidated Statements of Operations For the Years
Ended December 31, 1999, 1998 and 1997................ 40
Consolidated Statements of Changes in Shareholders'
Equity For the Years Ended December 31, 1999, 1998 and
1997.................................................. 41
Consolidated Statements of Cash Flows For the Years
Ended December 31, 1999, 1998 and 1997................ 42
Notes to Consolidated Financial Statements.................. 43
Financial Statement Schedules:
Schedule I -- Condensed Financial Information of the
Registrant................................................ 63
</TABLE>
Schedules other than those listed above have been omitted, since they are not
required, are not applicable or are unnecessary due to the presentation of the
required information in the financial statements or notes thereto.
37
<PAGE> 38
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO COGENTRIX ENERGY, INC.:
We have audited the accompanying consolidated balance sheets of Cogentrix
Energy, Inc. (a North Carolina corporation) and subsidiary companies as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Cogentrix Energy, Inc. and
subsidiary companies as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
March 9, 2000.
38
<PAGE> 39
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 80,344 $ 48,207
Restricted cash........................................... 81,647 40,604
Accounts receivable....................................... 59,360 66,586
Inventories............................................... 20,137 18,697
Other current assets...................................... 2,252 4,061
---------- ----------
Total current assets.............................. 243,740 178,155
NET INVESTMENT IN LEASES.................................... 500,195 498,614
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $262,963 and $225,928, respectively....... 437,483 473,065
LAND AND IMPROVEMENTS....................................... 5,764 3,981
CONSTRUCTION IN PROGRESS.................................... 350,243 161
DEFERRED FINANCING COSTS, net of accumulated amortization of
$23,950 and $15,557, respectively......................... 51,315 37,007
NATURAL GAS RESERVES........................................ 744 1,557
INVESTMENTS IN AFFILIATES................................... 325,504 251,312
PROJECT DEVELOPMENT COSTS................................... 7,124 --
OTHER ASSETS................................................ 76,274 55,999
---------- ----------
$1,998,386 $1,499,851
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 90,114 $ 86,255
Accounts payable.......................................... 37,588 25,511
Accrued compensation...................................... 8,415 8,096
Accrued interest payable.................................. 25,708 7,729
Accrued dividends payable................................. 8,683 7,398
Other accrued liabilities................................. 15,621 13,492
---------- ----------
Total current liabilities......................... 186,129 148,481
LONG-TERM DEBT.............................................. 1,518,773 1,127,184
DEFERRED INCOME TAXES....................................... 72,980 52,306
MINORITY INTEREST........................................... 69,608 61,167
OTHER LONG-TERM LIABILITIES................................. 29,445 22,850
---------- ----------
1,876,935 1,411,988
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 9 AND 10)
SHAREHOLDERS' EQUITY:
Common stock, no par value, 300,000 shares authorized;
282,000 shares issued and outstanding.................. 130 130
Accumulated other comprehensive loss...................... (1,144) --
Accumulated earnings...................................... 122,465 87,733
---------- ----------
121,451 87,863
---------- ----------
$1,998,386 $1,499,851
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
39
<PAGE> 40
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR EARNINGS PER COMMON SHARE)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUE:
Electric.................................................. $294,185 $293,083 $307,104
Steam..................................................... 25,236 25,043 26,123
Lease..................................................... 44,697 34,715 --
Service................................................... 43,888 34,470 --
Income from unconsolidated investment in power projects,
net of premium amortization............................ 25,464 6,474 1,412
Other..................................................... 14,093 14,908 15,275
-------- -------- --------
447,563 408,693 349,914
-------- -------- --------
OPERATING EXPENSES:
Fuel expense.............................................. 81,835 78,420 118,731
Cost of service........................................... 45,933 36,039 --
Operations and maintenance................................ 67,374 71,108 71,367
General, administrative and development expenses.......... 39,014 36,490 41,650
Depreciation and amortization............................. 43,713 42,535 41,844
-------- -------- --------
277,869 264,592 273,592
-------- -------- --------
OPERATING INCOME............................................ 169,694 144,101 76,322
OTHER INCOME (EXPENSE):
Interest expense.......................................... (94,956) (74,949) (53,864)
Investment and other income............................... 11,213 9,226 9,789
Equity in net loss of affiliates, net..................... (208) (3,274) (1,538)
-------- -------- --------
INCOME BEFORE MINORITY INTERESTS IN INCOME,
INCOME TAXES AND EXTRAORDINARY LOSS....................... 85,743 75,104 30,709
MINORITY INTERESTS IN INCOME................................ (14,752) (12,458) (4,672)
-------- -------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS........... 70,991 62,646 26,037
PROVISION FOR INCOME TAXES.................................. (27,576) (24,914) (9,754)
-------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS............................ 43,415 37,732 16,283
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, NET OF
INCOME TAX BENEFIT, AND MINORITY INTEREST................. -- (743) (1,502)
-------- -------- --------
NET INCOME.................................................. $ 43,415 $ 36,989 $ 14,781
======== ======== ========
EARNINGS PER COMMON SHARE:
Income before extraordinary loss.......................... $ 153.95 $ 133.80 $ 57.74
Extraordinary loss........................................ -- (2.63) (5.33)
-------- -------- --------
$ 153.95 $ 131.17 $ 52.41
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................. 282,000 282,000 282,000
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
40
<PAGE> 41
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR DIVIDENDS PER COMMON SHARE)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON COMPREHENSIVE ACCUMULATED COMPREHENSIVE
STOCK INCOME EARNINGS INCOME (LOSS) TOTAL
------ ------------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996............. $130 $ -- $ 50,501 $ -- $ 50,631
Comprehensive income
Net income........................... -- 14,781 14,781 --
Other comprehensive income, net of
tax:
Unrealized holding gain during
year............................ -- 26 -- 26
-------
Comprehensive income:........... $14,807 14,807
=======
Common stock dividends ($25.32 per
common share)........................ -- (7,140) -- (7,140)
---- -------- ------- --------
Balance, December 31, 1997............. 130 58,142 26 58,298
Comprehensive income
Net income........................... -- 36,989 36,989 --
Other comprehensive income, net of
tax:
Realized gains included in net
income.......................... -- (26) -- (26)
-------
Comprehensive income:........... $36,963 36,963
=======
Common stock dividends ($26.23 per
common share)........................ -- (7,398) -- (7,398)
---- -------- ------- --------
Balance, December 31, 1998............. 130 87,733 -- 87,863
Comprehensive income
Net income........................... -- 43,415 43,415 --
Other comprehensive loss, net of tax:
Unrealized holding losses during
year............................ (1,144) (1,144)
-------
Comprehensive income:........... $42,271 42,271
=======
Common stock dividends ($30.79 per
common share)........................ -- (8,683) -- (8,683)
---- -------- ------- --------
Balance, December 31, 1999............. $130 $122,465 $(1,144) $121,451
==== ======== ======= ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
41
<PAGE> 42
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 43,415 $ 36,989 $ 14,781
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 43,713 42,535 41,844
Deferred income taxes................................ 23,933 14,182 4,927
Extraordinary loss on early extinguishment of debt... -- 2,172 2,458
Minority interest in income of joint venture, net of
dividends......................................... 8,461 (14,494) 1,935
Gain on sale of investment in affiliate.............. -- (2,063) --
Equity in net (income) loss of unconsolidated
affiliates........................................ (22,998) (3,200) 126
Dividends received from unconsolidated affiliates.... 26,647 13,362 15,354
Minimum lease payments received...................... 43,116 31,500 --
Amortization of unearned lease income................ (44,697) (33,473) --
Decrease (increase) in accounts receivable........... 7,487 (7,278) 3,437
Decrease (increase) in inventories................... (627) (1,029) 4,385
Decrease in accounts payable......................... (9,791) (4,212) (9,490)
Increase in accrued liabilities...................... 5,074 5,179 499
Decrease (increase) in other, net.................... (14,732) (5,425) 2,320
--------- --------- ---------
Net cash flows provided by operating activities........ 109,001 74,745 82,576
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions.............. (4,305) (7,391) (2,449)
Decrease in marketable securities.................... -- 42,118 21,577
Investments in unconsolidated affiliates............. (76,827) (180,292) (61,063)
Acquisition of facilities, net of cash acquired...... -- (155,324) --
Construction in progress and project development
costs............................................. (60,697) -- --
Decrease in restricted cash.......................... 12,243 22,952 1,532
--------- --------- ---------
Net cash flows used in investing activities............ (129,586) (277,937) (40,403)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt....... 191,340 384,104 65,171
Repayments of notes payable and long-term debt....... (122,255) (193,812) (118,778)
Increase in deferred financing costs................. (8,965) (8,586) (921)
Common stock dividends paid.......................... (7,398) (2,140) (5,000)
--------- --------- ---------
Net cash flows provided by (used in) financing
activities........................................... 52,722 179,566 (59,528)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 32,137 (23,626) (17,355)
CASH AND CASH EQUIVALENTS, beginning of year................ 48,207 71,833 89,188
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year...................... $ 80,344 $ 48,207 $ 71,833
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
42
<PAGE> 43
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Cogentrix Energy, Inc. and subsidiary companies (collectively, the
"Company") is principally engaged in the business of acquiring, developing,
owning and operating independent power generating facilities (individually, a
"Facility," or collectively, the "Facilities"). As of December 31, 1999, the
Company owned or had interests in 25 Facilities in operation in the United
States with an aggregate installed capacity of approximately 4,000 megawatts.
After taking into account the part interests in the 16 plants that are not
wholly-owned by the Company, which range from 1.7% to approximately 74%, the
Company's net equity interest in the total production capability of the 25
Facilities, in operation, is approximately 1,840 megawatts. Electricity
generated by each Facility is sold to an electric utility (the "Utility") and
steam is sold to an industrial company (the "Steam Purchaser"), all under
long-term contractual agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation -- The accompanying
consolidated financial statements include the accounts of Cogentrix Energy, Inc.
and its subsidiary companies. Wholly-owned and majority owned subsidiaries,
including a 50% owned joint venture in which the Company has effective control
through majority representation on the board of directors of the managing
general partner, are consolidated. Less-than-majority-owned subsidiaries, and
subsidiaries for which control is deemed to be temporary, are accounted for
using the equity method. Investments in unconsolidated affiliates in which the
Company has less than a 20% interest and does not exercise significant influence
over operating and financial policies are accounted for under the cost method.
All material intercompany transactions and balances among Cogentrix Energy,
Inc., its subsidiary companies and its consolidated joint ventures have been
eliminated in the accompanying consolidated financial statements.
Cash and Cash Equivalents -- Cash and cash equivalents include bank
deposits, commercial paper, government securities and certificates of deposit
that mature within three months of their purchase. Amounts in debt service
accounts which might otherwise be considered cash equivalents are treated as
current restricted cash.
Inventories -- Coal inventories consist of the contract purchase price of
coal and all transportation costs incurred to deliver the coal to each Facility.
Gas inventories represent the cost of natural gas purchased as fuel reserves
that are forecasted to be consumed during the next fiscal year. Spare parts
inventories consist of major equipment and recurring maintenance supplies
required to be maintained in order to facilitate routine maintenance activities
and minimize unscheduled maintenance outages. As of December 31, 1999 and 1998,
fuel and spare parts inventories are comprised of the following (dollars in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
------- -------
<S> <C> <C>
Coal........................................................ $ 8,469 $ 8,028
Natural gas................................................. 2,875 2,773
Spare parts................................................. 8,138 7,377
Fuel oil.................................................... 655 519
------- -------
$20,137 $18,697
======= =======
</TABLE>
Coal inventories at certain Facilities are recorded at last-in, first-out
("LIFO") cost, with the remaining Facilities' coal inventories recorded at
first-in, first-out ("FIFO") cost. The cost of coal inventories recorded on a
LIFO basis was approximately $374,000 and $305,000 less than the cost of these
inventories on a FIFO basis as of December 31, 1999 and 1998, respectively.
Spare parts inventories are recorded at average cost.
Property, Plant and Equipment -- Property, plant and equipment is recorded
at actual cost. Substantially all property, plant and equipment consists of
cogeneration facilities which are depreciated on a straight-line
43
<PAGE> 44
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
basis over their estimated useful lives (ranging from 9 to 30 years). Other
property and equipment is depreciated on a straight-line basis over the
estimated economic or service lives of the respective assets (ranging from 3 to
10 years). Maintenance and repairs are charged to expense as incurred. Emergency
and rotatable spare parts inventories are included in plant and are depreciated
over the useful life of the related components.
Construction in Progress -- Construction progress payments, engineering
costs, insurance costs, wages, interest and other costs relating to construction
in progress are capitalized. Construction in progress balances are transferred
to property, plant and equipment when the assets are ready for their intended
use. Interest is capitalized on projects during the development and construction
period. For the year ended December 31, 1999, the Company capitalized $1,812,000
of interest in connection with the development and construction of power plants.
There was no interest capitalized in 1998 or 1997.
Deferred Financing Costs -- Financing costs, consisting primarily of legal
and other direct costs incurred to obtain financing, are deferred and amortized
over the financing term.
Natural Gas Reserves -- Natural gas reserves consist of the cost of natural
gas purchased as long-term fuel reserves for a Facility. These reserves are
recorded at cost.
Investments in Affiliates -- Investments in affiliates include investments
in unconsolidated entities which own or derive revenues from power projects
currently in operation and investments in unconsolidated development joint
venture entities. The Company's share of income or loss from investments in
operating power projects is included in operating revenues in the accompanying
consolidated statements of operations. The Company's share of income or loss
from investments in development joint venture entities and investments
previously held in entities which own and operate greenhouses, is included in
other income (expense) in the accompanying consolidated statements of
operations.
Project Development Costs -- The Company capitalizes project development
costs once it is determined that it is probable that such costs will be realized
through the ultimate construction of a power plant. These costs include
professional services, salaries, permits and other costs directly related to the
development of a new project. These costs are generally transferred to
construction in progress when financing is obtained, or expensed when the
Company determines that a particular project will no longer be developed.
Capitalized costs are amortized over the estimated useful life of the project.
Revenue Recognition -- Revenues from the sale of electricity and steam are
recorded based upon output delivered and capacity provided at rates specified
under contract terms. Significant portions of the Company's revenues have been
derived from certain electric utility customers. Two customers accounted for 47%
and 17% of revenues in the year ended December 31, 1999, 50% and 19% of revenues
in the year ended December 31, 1998 and 64% and 22% of revenues in the year
ended December 31, 1997.
Interest Rate Protection Agreements -- The Company enters into interest
rate protection agreements with major financial institutions to fix or limit the
volatility of interest rates on its long-term debt. The differential paid or
received is recognized as an adjustment to interest expense. Any premiums
associated with interest rate protection agreements are capitalized and
amortized to interest expense over the effective term of the agreement.
Unamortized premiums are included in other assets in the accompanying
consolidated balance sheets.
Income Taxes -- Deferred income tax assets and liabilities are recognized
for the estimated future income tax effects of temporary differences between the
tax bases of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets are also established for the estimated future
effect of net operating loss and tax credit carryforwards when it is more likely
than not that such assets will be realized. Deferred taxes are calculated based
on provisions of the enacted tax law.
44
<PAGE> 45
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates -- 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.
Comprehensive Income -- The Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," ("SFAS No.
130"), which requires companies to report all changes in equity during a period,
except those resulting from investment by owners and distribution to owners, in
a financial statement for the period in which they are recognized. The Company
has chosen to disclose Comprehensive Income, which encompasses net income and
unrealized holding losses during the year in the Consolidated Statement of
Shareholders' Equity. Prior years have been restated to conform to the SFAS No.
130 requirements.
New Accounting Pronouncements -- In April 1998, the American Institute of
Certified Public Accounts ("AICPA") issued Statement of Position ("SOP") No.
98-5, "Reporting on the Costs of Start-Up Activities" which is effective for
financial statements for fiscal years beginning after December 15, 1998. SOP No.
98-5 requires costs incurred for start-up activities to be expensed as incurred.
For purposes of this SOP, start-up activities are defined broadly as those
one-time activities related to opening a new facility, conducting business in a
new territory, conducting business with a new class of customer or beneficiary,
initiating a new process in an existing facility, or commencing a new operation.
Start-up activities include activities related to organizing a new entity
(commonly referred to as organization costs). The Company adopted SOP No. 98-5
as of January 1, 1999. The adoption of SOP No. 98-5 did not have a material
impact on the consolidated financial statements.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheets as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized in current earnings unless specified hedge
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement, and requires that a company formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Investments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 requires the adoption of SFAS No. 133 to be
effective for fiscal years beginning after June 15, 2000. Early adoption is
allowed.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on
the consolidated financial statements and has not determined the timing or
method of adoption of SFAS No. 133. However, SFAS No. 133 could increase
volatility in earnings.
Change of Fiscal Year -- Effective January 1, 1998, the Company changed its
fiscal year to commence on January 1 and conclude on December 31 of each year.
The Company's fiscal year previously commenced each July 1, concluding on June
30 of the following calendar year. The Company has restated its consolidated
financial statements for the 1997 fiscal year to a calendar year basis.
Reclassifications -- Certain amounts included in the accompanying
consolidated financial statements for the fiscal year ended December 31, 1998
have been reclassified from their original presentation to conform with the
presentation for the year ended December 31, 1999.
45
<PAGE> 46
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACQUISITIONS
LS Power Acquisition -- In March 1998, the Company acquired from LS Power
Corporation (the "LS Power Acquisition") an approximate 74% ownership interest
in two partnerships which own and operate electric generating facilities located
in Whitewater, Wisconsin (the "Whitewater Facility") and Cottage Grove,
Minnesota (the "Cottage Grove Facility"). Each of the Cottage Grove and
Whitewater Facilities is a 245-megawatt gas-fired, combined-cycle cogeneration
facility. Commercial operations of both of these facilities commenced in the
last half of calendar 1997. The Cottage Grove Facility sells capacity and energy
to Northern States Power Company under a 30-year power sales contract
terminating in 2027. The Whitewater Facility sells capacity and energy to
Wisconsin Electric Power Company under a 25-year power sales contract
terminating in 2022. Each of the power sales contracts has characteristics
similar to a lease in that the agreement gives the purchasing utility the right
to use specific property, plant and equipment. As such, each of the power sales
contracts is accounted for as a "sales-type" capital lease in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting for
Leases." (see Note 7).
The aggregate acquisition price for the equity interests in the Cottage
Grove and Whitewater Facilities acquired by the Company was approximately $158.0
million. In addition, the Company pre-funded a $16.7 million distribution to the
previous owners, which represented unused construction contingency funds and
cash flows that were accumulated by the Cottage Grove and Whitewater Facilities
prior to January 1, 1998. Cogentrix Energy, Inc. received $15.7 million of this
distribution in April 1998 and received the remaining $1 million in 1999. The
purchase price was ultimately funded with a portion of the net proceeds of the
Company's 2008 senior notes (see Note 6) and corporate cash balances.
The Company accounted for the LS Power Acquisition using the purchase
method of accounting. The purchase price has been allocated to the assets and
liabilities acquired based on their fair market values at the date of
consummation. An adjustment in the amount of $22.2 million was recorded to
reflect the Company's portion of the excess of the fair value of the
Partnerships' fixed rate debt over its historical carrying value. This fair
value adjustment, or debt premium, will be amortized to income over the life of
the debt acquired using the effective interest method. The historical book
values of the remaining assets and liabilities approximated their fair values at
the date of consummation. The excess of the purchase price over the fair value
of the net assets acquired was approximately $27.7 million. This excess is
included in other assets on the accompanying balance sheets as of December 31,
1999 and 1998, and is being amortized on a straight line basis over the lives of
the power purchase agreements for the two facilities. The minority owner's share
of each partnership's net assets is included in minority interests on the
accompanying consolidated balance sheets as of December 31, 1999 and 1998. The
accompanying consolidated statement of operations for the year ended December
31, 1998 includes the results of operations of the acquired facilities for the
period beginning March 20, 1998 (closing date of LS Power Acquisition) to
December 31, 1998.
During 1999, the Company and the contractor, with the concurrence of the
independent engineer, reached a final agreement regarding the settlement of all
outstanding issues and obligations of the Cottage Grove and Whitewater
facilities and the contractor pursuant to the construction contracts. The final
settlement of the construction contract provided for a payment to the contractor
of approximately $4,030,000 from funds available in Cottage Grove's and
Whitewater's construction retainage accounts. The contractor has also agreed to
extend various warranty periods and perform various repairs and inspections.
Cottage Grove and Whitewater, in turn, acknowledged that final acceptance shall
have been deemed to have occurred. Upon the release of the remaining
construction retainage accounts and settlement of outstanding warranty claims,
the Company recorded a gain of approximately $6,257,000 before minority
interests in income. The gain is included in other income in the accompanying
consolidated statements of operations for the year ended December 31, 1999.
Batesville Acquisition -- In August 1998, the Company acquired an
approximate 52% interest in an 800-megawatt, gas-fired electric generating
facility (the "Batesville Facility") under construction in Batesville,
46
<PAGE> 47
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mississippi (the "Batesville Acquisition"). The Company has committed to provide
an equity contribution to the project subsidiary of approximately $54 million
upon the earliest to occur of (i) the incurrence of construction costs after all
project financing has been expended, (ii) an event of default under the project
subsidiary's financing arrangements or (iii) June 30, 2001. This equity
commitment is supported by a $54 million letter of credit provided under the
Company's corporate credit facility. The Company expects the Batesville
Facility, which will be operated by the Company, to commence commercial
operation in summer 2000. Electricity generated by the Batesville Facility will
be sold under long-term power purchase agreements with two investment-grade
utilities.
The Batesville acquisition was originally accounted for under the equity
method of accounting, as the Company originally deemed its approximate 52%
interest to be temporary. As of December 31, 1999, the Company has reassessed
its ownership, and has determined that it will maintain an approximate 51%
interest in the project. As such, the Company has consolidated the net assets of
the Batesville Facility in the accompanying consolidated balance sheets at
December 31, 1999. The accompanying consolidated statements of operations at
December 31, 1999 and 1998 recognized earnings from the Batesville facility
under the equity method of accounting.
Bechtel Asset Acquisition -- In October 1998, the Company acquired from
Bechtel Generating Company, Inc. ("BGCI") ownership interests in 12 electric
generating facilities, comprising a net equity interest of approximately 365
megawatts, and one interstate natural gas pipeline in the United States (the
"BGCI Acquisition"). The aggregate acquisition price, including acquisition
costs, for the interests in the BGCI assets was approximately $189.7 million.
The Company utilized a portion of the net proceeds from the issuance of $255
million of senior notes due 2008 to fund the BGCI Acquisition.
The BGCI Acquisition has been accounted for using the purchase method of
accounting, which resulted in the recognition of a net purchase premium of
approximately $66.5 million. The purchase premiums or discounts related to the
BGCI Acquisition are being amortized over the remaining lives of the facilities
or over the remaining terms of the power purchase agreements. The Company uses
the equity method of accounting to account for its ownership interests in eight
of these facilities and uses the cost method of accounting for its ownership
interests in the other four facilities (see Note 4).
Subsequent to December 31, 1999, the Company purchased an additional 1%
interest in the Logan and Northampton facilities, two of the twelve electric
generating facilities included in the BGCI Acquisition. The Company paid
approximately $1,650,000 for these additional interests. The Company will
continue to account for its 50% interest in the Logan and Northampton facilities
using the equity method.
Indiantown Acquisition -- In June, 1999, the Company entered into an
agreement to purchase an additional 40% ownership interest in the Indiantown
cogeneration facility (the "Indiantown Acquisition"), one of the twelve electric
generating facilities included in the BGCI Acquisition, in a three-phase
transaction. The Company paid $39.8 million to acquire a 19.9% interest in the
facility in June, 1999, $36.6 million to acquire a 20% interest in the facility
in September, 1999 and $0.2 million to acquire a 0.1% interest in the facility
in November, 1999. The Company funded the purchase of these interests with
proceeds from credit facilities. These purchases resulted in a premium of
approximately $38,000,000. This premium will be amortized over the remaining
term of the power purchase agreement. The Company currently has a 50% interest
in the Indiantown facility. This investment is accounted for using the equity
method of accounting.
47
<PAGE> 48
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma consolidated results for the Company for
the years ended December 31, 1999 and 1998 give effect to the LS Power
Acquisition, the BGCI Acquisition and the Indiantown Acquisition as if these
transactions had occurred on January 1, 1999 and January 1, 1998, respectively
(dollars in thousands, except per share amount).
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues.................................................... $452,891 $453,566
Net Income.................................................. $ 43,942 $ 37,336
Earnings per Share.......................................... $ 155.82 $ 132.41
</TABLE>
4. INVESTMENTS IN UNCONSOLIDATED POWER PROJECTS
Birchwood Power Partners, L.P.
The Company owns a 50% interest in Birchwood Power Partners, L.P.
("Birchwood Power"), a partnership which owns a 220-megawatt, coal fired
cogeneration facility (the "Birchwood Facility") which sells electricity to a
utility and provides thermal energy to a 36-acre greenhouse under long-term
contracts. The Birchwood Facility is operated by an affiliate of The Southern
Company under a long-term operations and maintenance agreement. The Company has
50% representation on Birchwood Power's management committee, which must approve
all material transactions of Birchwood Power. The Company is accounting for its
investment in Birchwood Power under the equity method. The Company's share of
net income of Birchwood Power is recorded net of the amortization of the $36.4
million premium paid to purchase the Company's 50% share interest in Birchwood
Power. This premium is being amortized on a straight-line basis over the
estimated useful life of the Birchwood Facility. The Company recognized
approximately $3,509,000, $3,714,000 and $1,412,000 in income from
unconsolidated investments in power projects, net of premium amortization, in
the accompanying consolidated statements of operations for the years ended
December 31, 1999, 1998 and 1997, respectively, related to its investment in
Birchwood Power. The following table presents summarized financial information
for Birchwood Power as of December 31, 1999 and 1998 and for the years ended
December 31, 1999, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets....................................... $ 48,805 $ 48,416
Noncurrent assets.................................... 333,318 344,374
-------- --------
Total assets................................. $382,123 $392,790
======== ========
Current liabilities.................................. $ 9,882 $ 7,952
Noncurrent liabilities............................... 323,598 329,428
Partners' capital.................................... 48,643 55,410
-------- --------
$382,123 $392,790
======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues................................... $ 75,582 $ 71,908 $ 69,275
Operating income..................................... 36,399 36,863 35,087
Net income........................................... 9,740 9,747 6,451
</TABLE>
48
<PAGE> 49
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BGCI Assets
The Company acquired interests in 12 electric generating facilities from
BGCI on October 20, 1998 (the "BGCI assets") (see Note 3). The following table
presents the Company's ownership interests at December 31, 1999 in the BGCI
assets that are accounted for under the equity method:
<TABLE>
<CAPTION>
PERCENT NET
OWNERSHIP EQUITY INTEREST
PLANT INTEREST IN PLANT
PROJECT MEGAWATTS ACQUIRED MEGAWATTS
------- --------- --------- ---------------
<S> <C> <C> <C>
Logan................................................ 218 49.0% 106.8
Northampton.......................................... 110 49.0 53.9
Indiantown........................................... 380 50.0 190.0
Carney's Point....................................... 262 10.0 26.2
Panther Creek........................................ 83 12.2 10.1
Scrubgrass........................................... 85 20.0 17.0
Gilberton............................................ 82 19.6 16.1
Morgantown........................................... 62 15.0 9.3
</TABLE>
The Company recognized approximately $21,954,000 and $2,760,000 in income
from unconsolidated investments in power projects in the accompanying
consolidated statement of operations for the year ended December 31, 1999 and
for the period from October 20, 1998 to December 31, 1998 related to its
investment in the projects acquired from BGCI. The following table presents
summarized combined financial data of the unconsolidated power projects acquired
from BGCI being accounted for under the equity method as of December 31, 1999
and 1998 and for the year ended December 31, 1999 and for the period from
October 20, 1998 to December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets............................................ $ 157,396 $ 131,178
Noncurrent assets......................................... 2,988,277 2,827,875
---------- ----------
Total assets...................................... $3,145,673 $2,959,053
========== ==========
Current liabilities....................................... $ 205,667 $ 137,205
Noncurrent liabilities.................................... 2,523,826 2,398,944
Partners capital.......................................... 416,180 422,904
---------- ----------
$3,145,673 $2,959,053
========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 20, 1998 TO
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ -------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Operating revenues................................ $624,010 $96,622
Operating income.................................. 365,429 51,948
Net income........................................ 56,818 15,071
</TABLE>
5. INVESTMENT IN OTHER UNCONSOLIDATED AFFILIATES
The Company makes investments in other joint venture partnerships whose
purpose is to develop power projects. The Company utilizes the equity method of
accounting for those partnerships in which it holds an ownership interest
between 20% and 50%. The Company recognized approximately $208,000, $307,000,
and $471,000 in equity losses for the years ended December 31, 1999, 1998 and
1997, respectively, related to its
49
<PAGE> 50
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
investments in these partnerships. These losses are reflected in equity in loss
of affiliates in the accompanying consolidated statements of operations.
The Company entered into an agreement with Agro Power Development, Inc. a
developer and operator of greenhouse facilities, ("Agro") to make investments in
partnerships which develop, construct and operate greenhouses which produce
tomatoes. The Company obtained a 50% interest in four limited partnerships which
had a combined 107 acres of production capacity in operation. In December 1998,
the Company entered into an agreement to sell its 50% interest in the
partnerships to EcoScience Corporation ("EcoScience"), the parent of Agro. In
return for its 50% interest, the Company received 1,000,000 shares of common
stock of EcoScience and a note receivable from EcoScience (the "EcoScience
Note") in the amount of approximately $20.6 million. The original note
receivable from EcoScience accrued interest at 11.25% per annum with principal
and interest due on March 15, 1999, (see below), and was secured by a pledge of
all of the outstanding stock of Agro. The Company recognized a gain of $2.1
million related to the fair market value of common stock received from the sale
of the greenhouse partnerships. This gain is included in investment and other
income in the accompanying consolidated statement of operations for the year
ended December 31, 1998. As of December 31, 1999, the Company has recorded an
unrealized holding loss on the EcoScience common stock, which has been included
in accompanying consolidated financial statements.
On March 15, 1999, the Company agreed to extend the due date for principal
and interest on the EcoScience Note to June 30, 1999. In exchange for this
extension, the Company received an extension fee of $1 million in the form of a
promissory note from EcoScience, which bears the same terms as the original
note. As of December 31, 1999 and 1998, the Company had a recorded investment in
the EcoScience Note of $21,600,000 and $20,600,000, respectively. The Company
has an allowance for credit losses related to the entire balance of its recorded
investment in the EcoScience Note of approximately $14,400,000 and $11,800,000
at December 31, 1999 and 1998, respectively. Currently, the Company is recording
interest income only as cash is received. The Company recognized and received no
interest on this note for the year ended December 31, 1999. The Company would
have recognized gross interest income of approximately $2,400,000 for the year
ended December 31, 1999 if EcoScience would have been current in their interest
payments.
Subsequent to December 31, 1999, the Company entered into an agreement to
exchange the EcoScience Note and all outstanding interest due for a promissory
note in the amount of $15,900,000. The promissory note bears interest at 5% per
year, and is due in five annual installments of $3,180,000, beginning on
December 1, 2003 until December 1, 2007. In consideration for this exchange,
EcoScience authorized and issued 333,333 shares of Series A Preferred Stock of
EcoScience to the Company.
Prior to the sale of the greenhouse partnerships, the Company accounted for
its investment in these partnerships under the equity method, and recognized
approximately $2,967,000, and $1,066,000 in equity losses in the accompanying
consolidated statements of operations for the years ended December 31, 1998 and
1997, respectively.
50
<PAGE> 51
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
The following long-term debt was outstanding as of December 31, 1999 and
1998, respectively (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
PROJECT FINANCING DEBT:
HOPEWELL FACILITY:
Note payable to banks.................................. $ 51,000 $ 67,000
PORTSMOUTH FACILITY:
Note payable to banks.................................. 41,649 43,129
ROCKY MOUNT FACILITY:
Note payable to financial institution.................. 120,182 123,422
RINGGOLD FACILITY:
Note payable to banks.................................. 10,995 13,440
RICHMOND FACILITY:
Commercial paper notes payable, net of unamortized
issue discount of $745 and $350, respectively, and
tax-exempt bonds..................................... 171,848 185,814
ELIZABETHTOWN, LUMBERTON AND KENANSVILLE FACILITIES:
Notes payable to banks................................. 6,824 16,964
ROXBORO AND SOUTHPORT FACILITIES:
Note payable to banks.................................. 52,608 73,400
COTTAGE GROVE AND WHITEWATER FACILITIES:
Bonds payable, due 2010 and 2016, including unamortized
fair market value adjustment related to purchase of
facilities of $20,386 and $21,345.................... 352,386 353,345
BATESVILLE FACILITY:
Bonds payable, due 2014 and 2025....................... 326,000 --
OKLAHOMA FACILITY:
Construction note payable to banks..................... 70,531 --
CEA CREDIT FACILITY......................................... 66,400 --
OTHER....................................................... 960 1,139
---------- ----------
Total Project Financing Debt...................... 1,271,383 877,653
SENIOR NOTES (including net unamortized gain (loss) on hedge
transactions of $(18,246) and $(20,048), respectively and
net bond issuance premium of $750 and $835,
respectively)............................................. 337,504 335,786
---------- ----------
Total Long-Term Debt........................................ 1,608,887 1,213,439
Less: Current portion....................................... (90,114) (86,255)
---------- ----------
Long-term portion........................................... $1,518,773 $1,127,184
========== ==========
</TABLE>
Information related to each of these borrowings is as follows:
HOPEWELL FACILITY:
The Hopewell Facility's project debt agreement was amended in February 1998
resulting in an extension of the final maturity of the note payable by six
months to December 31, 2002. The amended terms of the loan agreement increased
outstanding borrowings by $34.6 million, the proceeds of which (net of
transaction costs) were paid as a distribution to the partners in that project.
The amended note payable accrues interest at an annual rate equal to the
applicable LIBOR rate, as chosen by the Company, plus an additional margin of
51
<PAGE> 52
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1.00% (7.15% at December 31, 1999). The amended note payable also provides for a
$5 million letter of credit to secure the project's obligation to pay debt
service. Cogentrix Energy, Inc. has indemnified the lenders of the note payable
for any cash deficits the Hopewell Facility could experience as a result of
incurring certain costs, subject to a cap of $10.6 million.
An extraordinary loss of $2.4 million was recorded in the first quarter of
1998 related to the write-off of unamortized deferred financing costs from the
original project debt and a swap termination fee on an interest rate swap
agreement hedging the original project debt. The Company's share of this
extraordinary loss of approximately $700,000, net of a tax benefit of
approximately $500,000 and $1.2 million of minority interest, is shown in the
accompanying consolidated statements of operations.
PORTSMOUTH FACILITY:
The Portsmouth Facility's project debt agreement was amended in December
1997, resulting in the extension of the final maturity of the loan by three
months to December 31, 2002. The amended terms of the loan agreement also
increased the outstanding credit commitment from the project lenders to $43.5
million in the form of a revolving credit facility. As of December 31, 1999, the
balance outstanding under the credit facility is approximately $41,600,000 of
which $20,400,000 was outstanding under the revolving credit facility. The
amended terms of the loan agreement provide for interest to accrue at an annual
rate equal to the applicable LIBOR rate, as chosen by the Company, plus an
additional margin of 1.0% (7.15% at December 31, 1999). The banks' outstanding
credit commitment under the loan agreement is reduced quarterly, with interest
payable the earlier of the maturity of the applicable LIBOR term or quarterly
through December 2002. The loan agreement also provides for a $6 million letter
of credit to secure the project's obligations to pay debt service. Cogentrix
Energy, Inc. has indemnified the lenders of the senior credit facility for any
cash deficits the Portsmouth Facility could experience as a result of incurring
certain costs, subject to a cap of $30 million.
An extraordinary loss of $2,458,000 was recorded in the year ended December
31, 1997 related to the write-off of unamortized deferred financing costs from
the original senior loan of $1,395,000 and net swap termination fees of
$1,063,000 related to interest rate swap agreements hedging the original project
debt. This extraordinary loss is shown net of a tax benefit of $956,000 in the
accompanying consolidated statement of operations.
ROCKY MOUNT FACILITY:
The note payable to financial institution consists of a $120,182,000 senior
loan which accrues interest at a fixed annual rate of 7.58%. Payment of
principal and interest is due quarterly through December 2013.
RINGGOLD FACILITY:
The note payable to banks consists of a senior loan which accrues interest
at an annual rate equal to the applicable LIBOR rate, as chosen by the Company,
plus 1.35% per annum (7.36% at December 31, 1999). Interest is payable at the
earlier of the maturity of the applicable LIBOR term or quarterly in arrears.
Payments of principal under the senior loan are due semiannually through April
2004.
In January 1998, the Company signed an agreement with Pennsylvania Electric
Company ("Penelec") to terminate the project subsidiary's power purchase
agreement. This termination agreement was the result of a request for proposals
from the utility to buy-back or restructure power sales agreements issued to all
major operating independent power producers in Penelec's territory in April
1997. The termination agreement with Penelec provides for a payment to the
project subsidiary of approximately $20.4 million, which will be sufficient to
retire all of the project subsidiary's outstanding debt. The buy-back of the
power purchase agreement is subject to the issuance of a satisfactory final
order by the Pennsylvania Public Utility
52
<PAGE> 53
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Commission, which is not subject to appeal, granting Penelec the authority to
fully recover from its customers the consideration paid under the buyout
agreement. Management does not expect the termination of this project
subsidiary's power purchase agreement, if it occurs, to have an adverse impact
on the Company's consolidated results of operations or financial position.
RICHMOND FACILITY:
Commercial paper notes outstanding are supported by an irrevocable,
direct-pay letter of credit provided by a syndicate of banks (the "Banks"). The
maximum amount of commercial paper notes supported by the letter of credit is
$124,600,000 as of December 31, 1999. The annual interest rate incurred is the
yield on the commercial paper notes plus a 1.25% to 1.50% per annum fee
(weighted average rate of 7.27% at December 31, 1999) paid to the Banks for
providing the letter of credit.
Tax-exempt industrial development bonds (the "Bonds") have been issued to
support the purchase of certain pollution control and solid waste disposal
equipment for the Facility ($48 million outstanding at December 31, 1999 and
1998). Principal and interest payments on the Bonds are supported by an
irrevocable, direct-pay letter of credit provided by the Banks. The annual
interest rate is the yield on the Bonds plus a 1.25% to 1.50% per annum fee
(5.6% at December 31, 1999). The letters of credit described above are part of
one credit facility (the "Credit Facility"). The Credit Facility provides for
commitment reductions through September 2007.
ELIZABETHTOWN, LUMBERTON AND KENANSVILLE FACILITIES:
The project debt on the Elizabethtown, Lumberton and Kenansville Facilities
consists of a senior note payable that accrues interest at an annual rate equal
to the applicable LIBOR rate, as chosen by the Company, plus 1% (7.21% at
December 31, 1999). Principal is payable quarterly with interest payable at the
earlier of the maturity of the applicable LIBOR term or quarterly through
September 2000. The senior credit facility also provides for a $3.3 million
letter of credit to secure the project's obligations to pay debt service.
ROXBORO AND SOUTHPORT FACILITIES:
The project debt agreement for the Roxboro and Southport Facilities
consists of a senior note payable that accrues interest at an annual rate equal
to the applicable LIBOR rate, as chosen by the Company, plus 1% through
September 2001 and 1.125% thereafter (7.21% at December 31, 1999). Principal is
payable quarterly with interest payable at the earlier of the maturity of the
applicable LIBOR term or quarterly through June 2002. The senior credit facility
also provides for a $6.5 million letter of credit to secure the project's
obligations to pay debt service.
COTTAGE GROVE AND WHITEWATER FACILITIES:
The project debt of the Cottage Grove and Whitewater Facilities consist of
the following senior secured bonds (dollars in thousands):
<TABLE>
<S> <C>
7.19% Senior Secured Bonds due June 30, 2010................ $105,551
8.08% Senior Secured Bonds due December 30, 2016............ 226,449
--------
$332,000
========
</TABLE>
Interest and principal is payable on these bonds semi-annually on June 30
and December 30 of each year. Principal payments commence on June 30, 2000 for
the 2010 Bonds and December 30, 2010 for the 2016 Bonds.
53
<PAGE> 54
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1998, Cogentrix Mid-America, Inc., a wholly-owned subsidiary,
which holds the Company's interest in the Cottage Grove and Whitewater
Facilities, entered into a credit agreement with a bank to provide for a $25
million revolving credit facility available in a form of the issuance of letters
of credit to support the debt reserve requirements for the 2010 and 2016 Bonds
which vary from $12.9 million to $28.1 million over the term of the Bonds. The
credit agreement also provides for direct advances up to the amount of any
excess of the $25 million commitment over the then debt service reserve
requirement. As of December 31, 1999, letters of credit totalling $14.1 million
were issued and outstanding under the credit agreement.
JENKS FACILITY:
The construction loan agreement for the Jenks facility consists of a
construction note payable up to $350 million to construct an 800-megawatt
combined cycle natural gas-fired generating facility. The construction loan will
convert to a term loan, due December 2006, upon commencement of commercial
operations. The loan agreement provides for interest to accrue at an annual rate
equal to the applicable LIBOR rate, as chosen by the Company plus 1.25% to 1.50%
per annum. The loan facility also provides for an $8 million letter of credit to
secure the project's obligation to pay debt service.
In accordance with the terms of the project financing agreements, the
Company is committed to provide an equity contribution to the project subsidiary
of approximately $56.9 million upon the earliest to occur of (a) an event of
default under the project subsidiary's financing agreement, (b) the incurrence
of construction costs after all project financing has been expended or (c) June
24, 2002. The equity contribution commitment will be reduced by approximately
$8.2 million upon the project subsidiary's receipt of a waste water discharge
permit. This equity contribution commitment is supported by a letter of credit,
which is provided under the corporate credit facility.
BATESVILLE FACILITY:
The project debt of the Batesville Facility consists of the following
senior secured bonds (dollars in thousands):
<TABLE>
<S> <C>
7.16% Senior Secured Bonds due January 15, 2014............. $150,000
8.16% Senior Secured Bonds due June 15, 2025................ 176,000
--------
$326,000
========
</TABLE>
Interest and principal is due on these bonds semi-annually on January 15
and July 15 each year. Principal payments commence on July 15, 2001 for the 2014
Bonds, and July 15, 2014 for the 2025 Bonds.
CEA CREDIT FACILITY:
In September 1999, one of the Company's wholly-owned subsidiaries,
Cogentrix Eastern America, Inc., formed to hold the Company's ownership interest
in twelve electric generating facilities acquired in the BGCI Acquisition,
entered into a $75 million, three-year credit facility. The commitment under
this facility reduces to $67.5 million after one year and to $60 million after
two years. As of December 31, 1999, advances totalling $66.4 million were
outstanding under this facility
INTEREST RATE PROTECTION AGREEMENTS:
The Company has entered into interest rate cap and interest rate swap
agreements (Note 12) to manage its interest rate risk on its variable-rate
project financing debt. The notional amounts of debt covered by these agreements
as of December 31, 1999 and 1998 were approximately $263,279,000 and
$343,112,000, respectively. The agreements effectively change the interest rate
on the portion of debt covered by the notional
54
<PAGE> 55
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amounts from a weighted average variable rate of 7.2% at December 31, 1999 to a
weighted average effective rate of 7.1% at December 31, 1999. These agreements
expire at various dates through July 2006.
SENIOR NOTES:
On March 15, 1994, Cogentrix Energy, Inc. issued $100 million of
registered, unsecured senior notes due 2004 (the "2004 Notes") in a public debt
offering. The 2004 Notes were priced at par to yield 8.10%. In February 1994,
Cogentrix Energy, Inc. entered into a forward sale of ten-year U.S. Treasury
Notes in order to protect against a possible increase in the general level of
interest rates prior to the completion of the 2004 Notes offering. This hedge
transaction resulted in the recognition of a gain which has been deferred and
included as part of the 2004 Notes on the accompanying consolidated balance
sheets. This deferred gain will be recognized over the term of the 2004 Notes,
reducing the effective rate of interest on the 2004 Notes to 7.5%. The 2004
Notes require annual sinking fund payments beginning in March 2001. The impact
of the sinking fund requirements has been reflected in the schedule of future
maturities of long-term debt contained herein.
On October 20, 1998, Cogentrix Energy, Inc. issued $220 million of
registered, unsecured 8.75% senior notes due 2008 (the "2008 Notes"). These
notes were issued at a discount resulting in an effective rate of approximately
8.82%. On November 25, 1998, the Company issued an additional $35 million of the
2008 Notes at a premium.
In March 1998, in anticipation of the offering of the 2008 Notes, the
Company entered into an interest rate hedge agreement to protect against a
possible increase in the general level of interest rates. The settlement costs
of approximately $22.1 million related to this hedge agreement were deferred and
are recognized over the term of the 2008 Notes, resulting in an overall
effective rate of approximately 9.59%.
CORPORATE CREDIT FACILITY:
In May 1997, the Company entered into a credit agreement with Australia and
New Zealand Banking Group Limited, as agent for a group of lending banks. In
October 1998, the Company amended and restated the corporate credit facility to
provide for $125 million of revolving credit available through October 2001 in
the form of direct advances or the issuance of letters of credit (the "Corporate
Credit Facility"). Borrowings bear interest at LIBOR plus an applicable margin
based on the credit rating on Cogentrix Energy's 2004 and 2008 Notes. Commitment
fees related to the Corporate Credit Facility are currently 50 basis points per
annum, payable each quarter on the outstanding unused portion of the Corporate
Credit Facility. As of December 31, 1999, the Company has used this credit
facility to issue approximately $117 million of letters of credit in connection
with investments made in electric-generating plants, and two plants under
construction. Subsequent to December 31, 1999, the Corporate Credit Facility was
amended to provide for $175 million of revolving credit and to modify the
covenants. The revolving credit facility has been extended through October,
2002.
The project financing debt is substantially non-recourse to the Company (as
parent). The project financing agreements of the Company's subsidiaries, the
indentures for the 2004 and 2008 Senior Notes and the Corporate Credit Facility
agreement contain certain covenants which, among other things, place limitations
on the payment of dividends, limit additional indebtedness, and restrict the
sale of assets. The project financing agreements also require certain cash to be
held with a trustee as security for future debt service payments. In addition,
the Facilities, as well as the long-term contracts which support them, are
pledged as collateral for the Company's obligations under the project financing
agreements.
The ability of the Company's subsidiaries to pay dividends and management
fees periodically to the Company (as parent) is subject to certain limitations
in their respective financing documents. Such limitations generally require
that: (i) debt service payments be current, (ii) debt service coverage ratios be
55
<PAGE> 56
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
met, (iii) all debt service and other reserve accounts be funded at required
levels, and (iv) there be no default or event of default under the relevant
credit documents. Dividends, when permitted, are declared and paid immediately
to the Company at the end of such period.
The Company's ability to pay dividends to its shareholders is restricted by
certain covenants of the Indentures for the 2004 and 2008 Senior Notes and the
Corporate Credit Facility agreement. These covenants did not restrict the
Company's ability to declare dividends of $8.7 million and $7.4 million to the
Company's shareholders for the years ended December 31, 1999 and 1998.
Future maturities of long-term debt at December 31, 1999, excluding the
unamortized issue discounts on commercial paper notes, the net unamortized
premium on senior notes, the unamortized balance of the deferred gains and
losses on hedge transactions and the unamortized fair market value adjustments
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ------------
<S> <C>
2000.................................................... $ 90,114
2001.................................................... 105,911
2002.................................................... 144,949
2003.................................................... 54,789
2004.................................................... 78,206
Thereafter.............................................. 1,132,773
----------
$1,606,742
==========
</TABLE>
Cash paid for interest on the Company's long-term debt amounted to
$92,228,000, $76,358,000, and $55,339,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
7. SALES TYPE CAPITAL LEASE
The power purchase agreements acquired by the Company as a result of the LS
Power Acquisition have characteristics similar to leases in that the agreements
confer to the purchasing utility the right to use specific property, plant and
equipment. At the commercial operations date, the partnerships accounted for the
power purchase agreements as "sales-type" capital leases in accordance with
Statement of Financial Accounting Standards (SFAS) No. 13, "Accounting for
Leases".
The components of the net investment in the leases at December 31, 1999 and
1998 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Gross Investment in Leases.................................. $1,097,787 $1,140,909
Unearned Income on Leases................................... (597,592) (642,295)
---------- ----------
Net Investment in Leases.................................... $ 500,195 $ 498,614
========== ==========
</TABLE>
Gross investment in leases represents total capacity payments receivable
over the terms of the power purchase agreements, net of executory costs, which
are considered minimum lease payments in accordance with SFAS No. 13.
56
<PAGE> 57
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Estimated minimum lease payments over the remaining term of the power
purchase agreements as of December 31, 1999 are as follows (dollars in
thousands):
<TABLE>
<S> <C>
2000.................................................... $ 45,180
2001.................................................... 45,187
2002.................................................... 47,253
2003.................................................... 49,052
2004.................................................... 50,957
Thereafter.............................................. 860,158
----------
Total......................................... $1,097,787
==========
</TABLE>
8. INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31,
1999, 1998 and 1997, consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Current
Federal.............................................. $ 980 $ 6,561 $3,619
State................................................ 2,663 3,698 252
------- ------- ------
3,643 10,259 3,871
------- ------- ------
Deferred
Federal.............................................. 22,402 13,565 3,942
State................................................ 1,531 617 985
------- ------- ------
23,933 14,182 4,927
------- ------- ------
$27,576 $24,441 $8,798
======= ======= ======
Statements of Operations Captions
Tax effect of extraordinary loss..................... $ -- $ (473) $ (956)
Provision for income taxes........................... 27,576 24,914 9,754
------- ------- ------
$27,576 $24,441 $8,798
======= ======= ======
</TABLE>
Reconciliations between the federal statutory income tax rate and the
Company's effective income tax rate are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
State income taxes, net of loss carryforwards and federal
tax impact................................................ 4.7 3.4 3.4
Other....................................................... (0.9) 1.4 (1.1)
---- ---- ----
Effective tax rate.......................................... 38.8% 39.8% 37.3%
==== ==== ====
</TABLE>
The net current and noncurrent components of deferred income taxes
reflected in the accompanying consolidated balance sheets as of December 31,
1999 and 1998 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Net current deferred tax liability (asset).................. $ 227 $(2,269)
Net noncurrent deferred tax liability....................... 72,980 52,306
------- -------
Net deferred tax liability.................................. $73,207 $50,037
======= =======
</TABLE>
57
<PAGE> 58
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss and tax credit carryforwards. Significant components of the
Company's net deferred tax liability as of December 31, 1999 and 1998 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Depreciation/amortization and book/tax basis
differences............................................ $ 56,436 $ 59,435
Book/tax timing differences on joint venture interest..... 74,968 34,043
Other..................................................... 21,663 10,124
-------- --------
153,067 103,602
-------- --------
Deferred tax assets:
Depreciation/amortization and book/tax basis
differences............................................ 14,687 13,463
Operating loss carryforwards.............................. 20,202 3,852
Accrued expenses not currently deductible................. 7,220 7,211
Alternative minimum tax credit carryforwards.............. 24,002 22,867
Other..................................................... 13,749 6,172
-------- --------
79,860 53,565
-------- --------
Net deferred tax liability................................ $ 73,207 $ 50,037
======== ========
</TABLE>
As of December 31, 1999, the Company has net federal operating loss
carryforwards available to offset future federal taxable income of approximately
$25,082,000 which expire in 2019. The Company also has state net operating loss
carryforwards available to offset future state taxable income of approximately
$140,431,000 which expire from 2005 to 2019. In addition, the Company has
alternative minimum tax credit carryforwards of approximately $24,002,000 which
are available to reduce future federal regular income taxes, if any, over an
indefinite period.
Cash paid for income taxes amounted to approximately $2,142,000,
$11,367,000, and $12,127,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
9. LEASE COMMITMENTS
The Company leases an office building and land from Equipment Leasing
Partners ("ELP"), a partnership formed by several of the Company's shareholders,
with remaining initial lease terms of 3 years and 47 years, respectively. The
Company also leases certain equipment from ELP used to transport and handle coal
and ash at certain Facilities. Future minimum lease payments under the
agreements with ELP and agreements with other equipment providers at December
31, 1999 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
OTHER
YEAR ENDED EQUIPMENT
DECEMBER 31, ELP PROVIDERS TOTAL
- ------------ ------ --------- ------
<S> <C> <C> <C>
2000....................................... $1,575 $182 $1,757
2001....................................... 1,375 96 1,471
2002....................................... 1,348 -- 1,348
2003....................................... 1,118 -- 1,118
2004....................................... 1,056 -- 1,056
Thereafter................................. 5,076 -- 5,076
</TABLE>
58
<PAGE> 59
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
Long-Term Contracts -- The Company has several long-term contractual
commitments that comprise a significant portion of its financial obligations.
These contractual commitments with original terms varying in length from 10 to
30 years are the basis for a major portion of the revenue and operating expenses
recognized by the Company and provide for specific services to be provided at
fixed or indexed prices. The major long-term contractual commitments are as
follows:
(i) The Company is required to sell electricity generated by each
Facility to a Utility and the Utility is required to purchase this
electricity or make capacity payments at pre-established or annually
escalating prices.
(ii) The Company is required to sell and the Steam Purchaser is
required to purchase a minimum amount of process steam from each Facility
for each contract year. The Steam Purchaser is generally required to
purchase its entire steam requirements from the Company. The purchase price
of steam under these contracts escalates annually or is fixed and
determinable during the term of the contracts.
(iii) The Company is obligated to purchase and fuel suppliers are
required to supply all of the fuel requirements of each Facility. Fuel
requirements include the quality and estimated quantity of fuel required to
operate each Facility. The price of fuel escalates annually for the term of
each contract. In addition, the Company has transportation contracts with
various entities to deliver the fuel to each Facility. These contracts also
provide for annual escalations throughout the term of the contracts.
Effective September 1996, the Company amended the power sales agreements on
its Lumberton, Elizabethtown, Kenansville, Roxboro and Southport Facilities.
These amendments provide the purchasing utility additional rights related to the
dispatch of the Facilities and eliminated the purchase options which the utility
held related to the Roxboro and Southport Facilities.
The Company has also amended the power sales agreement on its Portsmouth
Facility and Hopewell Facility, effective December 1997 and February 1998,
respectively. These amendments provide the purchasing utility additional rights
related to the dispatch of these Facilities. The terms of Portsmouth's amended
power sales agreement also eliminated Portsmouth's accrued obligation to return
previously disallowed capacity payments to the purchasing utility.
Under the terms of certain contracts with electricity purchasers, the
Company is obligated to pay up to $37,350,000 in aggregate liquidated damages to
the respective electricity purchasers if the respective facility does not
demonstrate certain operating and reliability standards. Banks have issued
letters of credit, non recourse to Cogentrix Energy, Inc., in favor of the
electricity purchaser which secure the Company's obligations to the electricity
purchaser under this provision of the contracts.
Under certain power sales agreements, the Utility is permitted to reduce
future payments or recover certain payments previously made upon the occurrence
of certain events, which include a state utility commission prohibiting the
Utility from recovering such payments made under such power sales agreement.
However, in most cases, the Utility is prohibited from reducing or recovering
such payments prior to the maturity date of the original project financing debt.
Management Incentive Compensation Plans -- The Company has entered into
various incentive compensation plans with certain employees which provide for
compensation to the employees (during the period of employment) equal to a
percentage, as determined by the board of directors, of the Company's income
before income taxes or certain subsidiaries' cash flow. The Company incurred
expense under these plans of approximately $8,236,000, $5,758,000, and
$9,123,000 for the fiscal years ended December 31, 1999, 1998 and 1997,
respectively. During the fiscal year ended December 31, 1997, the Company
incurred $10.7 million of expenses in connection with the restructuring or
termination of these incentive compensation plans.
59
<PAGE> 60
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Benefit Plans -- The Company sponsors a defined contribution
401(k) savings plan for its full-time employees. The Company matches employees'
contributions to the plan up to specified limitations. Company contributions to
the plan were approximately $1,664,000, $1,435,000, and $1,483,000 for the
fiscal years ended December 31, 1999, 1998 and 1997, respectively.
The Company has a non-qualified Supplemental Retirement Plan agreement with
certain directors and officers. Under the plan, the participants may elect to
have up to 35% of their compensation deferred. In addition, the Company will
credit the participant's deferral account, up to specified limitations, with an
amount equal to the participant deferral. The participants' account balances are
distributable upon termination of employment or death. The Company purchases
insurance on the participants' lives (cash surrender value of approximately
$10,350,000 and $4,853,000 at December 31, 1999 and 1998, respectively) which is
used to fully fund the liability under the plan on an annual basis. The Company
is owner and beneficiary of the policies.
Guarantees -- In connection with its non-recourse project financings and
certain other subsidiary contracts, the Company and its subsidiary, Cogentrix,
Inc. have expressly undertaken certain limited obligations and commitments, most
of which will only be effective or will be terminated upon the occurrence of
future events. These obligations and commitments include guarantees by
Cogentrix, Inc. of a certain subsidiary's obligation capped at $1.5 million and
certain subsidiaries' performance under their contracts with one Utility. In
addition, Cogentrix Energy, Inc. has indemnified the project lenders of certain
subsidiaries for any cash deficits such subsidiaries could experience as a
result of incurring certain costs, subject to an aggregate cap of $40.6 million.
Cogentrix Delaware Holdings, Inc., a wholly-owned subsidiary of Cogentrix
Energy, Inc., has guaranteed all of the existing and future senior, unsecured
outstanding indebtedness for borrowed money of Cogentrix Energy, Inc. This
guarantee, provided for in the credit agreement for the Corporate Credit
Facility, expires by its terms in 2002, unless the term of the credit agreement
is extended. The agreement under which the guarantee was given provides that the
terms or provisions of the guarantee may be waived, amended, supplemented or
otherwise modified at any time and from time to time by Cogentrix Delaware
Holdings, Inc. and the agent bank for the lenders under the credit agreement.
Turbine Deposits -- The Company has entered into commitments with a turbine
supplier to purchase a specified number of turbines with specified delivery
dates. The Company has made approximately $11,205,000 million in non-refundable
deposits related to these commitments through December 31, 1999. The Company
expects to make additional deposits of approximately $82.9 million, of which
approximately $75.8 million would be repaid or funded from proceeds of financing
the Company anticipates closing.
Claims and Litigation -- One of the Company's indirect, wholly-owned
subsidiaries is party to certain product liability claims related to the sale of
coal combustion by-products for use in various construction projects. Management
cannot currently estimate the range of possible loss, if any, the Company will
ultimately bear as a result of these claims. However, management
believes -- based on its knowledge of the facts and legal theories applicable to
these claims and after consultations with various counsel retained to represent
the subsidiary in the defense of such claims -- that the ultimate resolution of
these claims should not have a material adverse effect on our consolidated
financial position or results of operations or on Cogentrix Energy's ability to
generate sufficient cash flow to service its outstanding debt.
In addition to the litigation described above, the Company experiences
other routine litigation in the normal course of business. The Company's
management is of the opinion that none of this routine litigation will have a
material adverse impact on its consolidated financial position or results of
operations.
60
<PAGE> 61
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. FUNDS HELD BY TRUSTEES
The majority of revenue received by the Company is required by the terms of
various credit agreements to be deposited in accounts administered by certain
banks (the "Trustees"). The Trustees invest funds held in these accounts at the
direction of the Company. These accounts are established for the purpose of
depositing all receipts and monitoring all disbursements of each Facility. In
addition, special accounts are established to provide debt service payments and
income taxes. The funds in these accounts are pledged as security under the
project financing agreements of each subsidiary.
Funds held by the Trustees were approximately $118,494,000 and $56,637,000
at December 31, 1999 and 1998, respectively. Debt service account balances are
reflected as restricted cash, whereas all other accounts are classified as cash
and cash equivalents in the accompanying consolidated balance sheets.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISKS
The Company invests its temporary cash balances in U.S. government
obligations, corporate obligations and financial instruments of highly-rated
financial institutions. A substantial portion of the Company's accounts
receivable are from two major regulated electric utilities and the associated
credit risks are limited.
The carrying values reflected in the accompanying consolidated balance
sheets at December 31, 1999 and 1998, approximate the fair values for cash and
cash equivalents and variable-rate long-term debt. Investments in certificates
of deposit and restricted investments are included in restricted cash and are
reported at fair market value, which approximates cost, at December 31, 1999,
and 1998. The fair value of the Company's fixed-rate borrowings at December 31,
1999 and 1998 is $30,480,000 lower and $84,194,000 greater than the historical
carrying value of $1,133,181,000 and $810,422,000, respectively. In making such
calculations, the Company utilized credit reviews, quoted market prices and
discounted cash flow analyses, as appropriate.
The Company is exposed to credit-related losses in the event of
non-performance by counterparties to the Company's interest rate protection
agreements (Note 6). The Company does not obtain collateral or other security to
support such agreements but continually monitors its positions with, and the
credit quality of, the counterparties to such agreements. As of December 31,
1999 and 1998, the net unrealized gain (loss) on the interest rate protection
agreements was $2,325,000 and $(6,086,000), respectively.
13. RELATED PARTY TRANSACTIONS
The Company has notes receivable and advances due from shareholders and an
affiliated entity of approximately $1,105,000 and $405,000 as of December 31,
1999 and 1998, respectively. The notes receivable bear interest at various
rates, all of which are in excess of the prime rate in effect from time to time,
and have specified repayment terms. These notes have been classified as other
assets in the accompanying consolidated balance sheets.
The Company leases certain equipment, its principal executive office
building and land from an affiliated entity. Payments by the Company under these
lease agreements were approximately $1,887,000, $1,694,000, and $1,851,000, for
the years ended December 31, 1999, 1998 and 1997, respectively.
A shareholder, director and former executive officer was a participant in
management incentive compensation plans (Note 10) while employed as an executive
officer of the Company and continues to receive incentive compensation annually
pursuant to such plans equal to a percentage of net cash flow, as defined, of
certain subsidiaries. Total compensation to the shareholder under the consulting
agreement and incentive compensation plans was approximately $290,000, $278,000,
and $324,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Subsequent to December 31, 1999, the Company entered into a consulting
agreement with a shareholder, director and former executive officer to provide
consulting services related to general business matters. The
61
<PAGE> 62
COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement provides for monthly payments of $29,202 through December 31, 2000,
monthly payments of $18,251 for January 2001 through December 2001, monthly
payments of $15,644 for January 2002 through December 2003 and monthly payments
of $10,429 for January 2004 through December 2004.
Three shareholders, who were also employees of the Company, terminated
their participation in certain management incentive compensation plans during
the fiscal year ended December 31, 1997 (Note 10). The Company recognized $3.5
million of expense in the year ended December 31, 1997 related to the
termination of the shareholders' participation in these plans.
14. SUBSEQUENT EVENT
The Company has been developing jointly with Avista Power, Inc. a 270
megawatt, combined cycle, natural gas-fired electric generating facility to be
located in Rathdrum, Idaho. The Company and Avista Power own a 51% and 49%
interest, respectively, in a partnership that will own the Rathdrum facility. On
March 9, 2000, the partnership closed a credit facility with a bank and a
financial institution which provide for a $126 million construction loan and a
$5 million debt service reserve letter of credit. In accordance with the terms
of the financing agreements, the Company has committed to provide an equity
contribution to the partnership of approximately $16.7 million upon the earliest
to occur of (a) an event of default under the project's financing agreements,
(b) the incurrence of construction costs after all project financing has been
expended, or (c) October 1, 2002. This equity contribution agreement is
supported by a letter of credit, which is provided under the corporate credit
facility. In addition, Cogentrix Energy has agreed to make additional stand-by
equity contributions to cover certain contingent costs during the construction
period capped at $3.6 million.
An indirect, wholly-owned subsidiary of Cogentrix Energy has entered into
an engineering, procurement and construction (EPC) contract with the partnership
to construct the Rathdrum facility. Cogentrix Energy is providing a guarantee
supporting the subsidiary's obligations under the EPC contract. The Rathdrum
facility, which the Company will operate, is anticipated to begin operation in
the third quarter of 2001. Avista Turbine Power, Inc. will deliver natural gas
to the plant and purchase the electrical output of the facility under a 25 year
power purchase agreement.
62
<PAGE> 63
SCHEDULE I
COGENTRIX ENERGY, INC.
CONDENSED BALANCE SHEETS OF REGISTRANT
DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 35,243 $ 14,884
Restricted cash........................................... 7,549 7,351
Accounts receivable....................................... 436 1,313
Accounts receivable from affiliates, net.................. 37,678 20,997
Other current assets...................................... 279 200
-------- --------
Total current assets.............................. 81,185 44,745
-------- --------
INVESTMENT IN SUBSIDIARIES (ON THE EQUITY METHOD)........... 428,423 408,780
-------- --------
EQUIPMENT, net of accumulated depreciation.................. 2,257 2,661
-------- --------
OTHER ASSETS:
Income tax benefit........................................ 77,981 59,020
Deferred financing costs, net of accumulated
amortization........................................... 7,991 8,547
Notes receivable from affiliates.......................... 4,891 5,801
Other..................................................... 30,619 5,934
-------- --------
Total other assets................................ 121,482 79,302
-------- --------
Total Assets...................................... $633,347 $535,488
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 167 $ 7,452
Accrued liabilities....................................... 65,417 25,346
Accrued dividends......................................... 8,683 7,398
-------- --------
Total current liabilities......................... 74,267 40,196
-------- --------
LONG-TERM LIABILITIES:
Notes payable to affiliates............................... 76,410 54,528
Long-term debt............................................ 337,504 335,787
Other..................................................... 22,571 17,114
-------- --------
Total long-term liabilities....................... 436,485 407,429
-------- --------
Total liabilities................................. 510,752 447,625
-------- --------
SHAREHOLDERS' EQUITY:
Common Stock.............................................. 130 130
Accumulated earnings...................................... 122,465 87,733
-------- --------
Total shareholders' equity........................ 122,595 87,863
-------- --------
Total Liabilities and Shareholders' Equity........ $633,347 $535,488
======== ========
</TABLE>
The accompanying condensed notes to condensed financial
statements are an integral part of this schedule.
63
<PAGE> 64
SCHEDULE I
COGENTRIX ENERGY, INC.
CONDENSED STATEMENTS OF INCOME OF REGISTRANT
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
INCOME:
Development and construction management fees.............. $ 618 $ 4,471 $ 5,329
Operating management fees................................. 23,618 22,836 20,002
-------- -------- --------
Total income...................................... 24,236 27,307 25,331
-------- -------- --------
OPERATING EXPENSES:
General, administrative and development expenses.......... 37,981 34,310 40,765
Depreciation and amortization............................. 2,115 1,467 1,304
-------- -------- --------
Total operating expenses.......................... 40,096 35,777 42,069
-------- -------- --------
OPERATING LOSS.............................................. (15,860) (8,470) (16,738)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (34,466) (15,018) (10,635)
Investment and other income............................... 1,456 236 2,137
-------- -------- --------
Total other expense............................... (33,010) (14,782) (8,498)
-------- -------- --------
LOSS BEFORE INCOME TAXES.................................... (48,870) (23,252) (25,236)
INCOME TAX BENEFIT.......................................... 18,962 9,255 9,413
EQUITY IN EARNINGS OF SUBSIDIARIES.......................... 73,323 50,986 30,604
-------- -------- --------
NET INCOME.................................................. $ 43,415 $ 36,989 $ 14,781
======== ======== ========
</TABLE>
The accompanying condensed notes to condensed financial
statements are an integral part of this schedule.
64
<PAGE> 65
SCHEDULE I
COGENTRIX ENERGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS OF REGISTRANT
FOR THE YEAR ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES............. $ 94,508 $ 78,803 $ 36,860
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in restricted investments............. -- 250 19,750
Property, plant and equipment additions................... (389) (2,485) (201)
Investments in subsidiaries............................... (88,193) (301,077) (46,239)
-------- --------- --------
Net cash flows used in investing activities............... (88,582) (303,312) (26,690)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (repayment) from notes payable to affiliate,
net.................................................... 21,882 10,123 (10,878)
Increase in restricted cash............................... (198) (4,940) (22)
Proceeds from issuance of long term debt.................. -- 233,705 --
Decrease (increase) in notes receivable from affiliates... 910 1,325 (3,612)
Increase in deferred financing costs...................... (763) (6,944) (661)
Dividends paid............................................ (7,398) (2,140) (5,000)
-------- --------- --------
Net cash flows provided by (used in) financing
activities............................................. 14,433 231,129 (20,173)
-------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 20,359 6,620 (10,003)
CASH AND CASH EQUIVALENTS, beginning of year................ 14,884 8,264 18,267
-------- --------- --------
CASH AND CASH EQUIVALENTS, end of year...................... $ 35,243 $ 14,884 $ 8,264
======== ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH DIVIDENDS RECEIVED................................... $141,873 $ 97,605 $ 59,291
======== ========= ========
</TABLE>
The accompanying condensed notes to condensed financial
statements are an integral part of this schedule.
65
<PAGE> 66
SCHEDULE I
COGENTRIX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT
1. SIGNIFICANT ACCOUNTING POLICIES
These condensed notes should be read in conjunction with the consolidated
financial statements and accompanying notes.
Accounting for Subsidiaries -- Cogentrix Energy, Inc. has accounted for its
investment in and earnings of its subsidiaries on the equity method in the
condensed financial information.
Income Taxes -- The benefit for income taxes has been computed based on the
Company's consolidated effective income tax rate.
Change of Fiscal Year -- Effective January 1, 1998, Cogentrix Energy, Inc.
changed its fiscal year to commence on January 1 and conclude on December 31 of
each year. Cogentrix Energy, Inc.'s fiscal year previously commenced each July
1, concluding on June 30 of the following calendar year. Cogentrix Energy has
restated its financial statements for the years ending December 31, 1997 fiscal
year to a calendar year basis.
2. LONG-TERM DEBT
Senior Notes
On March 15, 1994, Cogentrix Energy, Inc. issued $100 million of
registered, unsecured senior notes due 2004 (the "2004 Notes") in a public debt
offering. The 2004 Notes were priced at par to yield 8.10%. In February 1994,
Cogentrix Energy, Inc. entered into a forward sale of ten-year U.S. Treasury
Notes in order to protect against a possible increase in the general level of
interest rates prior to the completion of the 2004 Notes offering. This hedge
transaction resulted in the recognition of a gain which has been deferred and
included as part of the 2004 Notes on the accompanying consolidated balance
sheets. This deferred gain will be recognized over the term of the 2004 Notes,
reducing the effective rate of interest on the 2004 Notes to 7.5%. The 2004
Notes require annual sinking fund payments beginning in March 2001. The impact
of the sinking fund requirements has been reflected in the schedule of future
maturities of long-term debt contained herein.
On October 20, 1998, Cogentrix Energy, Inc. issued $220 million of
registered, unsecured 8.75% senior notes due 2008 (the "2008 Notes"). These
notes were issued at a discount resulting in an effective rate of approximately
8.824%. On November 25, 1998, the Company issued an additional $35 million of
the 2008 Notes at a premium.
In March 1998, in anticipation of the offering of the 2008 Notes, the
Company entered into an interest rate hedge agreement to protect against a
possible increase in the general level of interest rates. The settlement costs
of approximately $22.1 million related to this hedge agreement were deferred and
will be recognized over the term of the 2008 Notes resulting in an overall
effective rate of approximately 9.59%.
66
<PAGE> 67
COGENTRIX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT -- (CONTINUED)
Future maturities of long-term debt at December 31, 1999, excluding the
unamortized balance of the net deferred hedge loss and excluding the net
unamortized premium, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ------------
<S> <C>
2000.................................................... $ 0
2001.................................................... 20,000
2002.................................................... 20,000
2003.................................................... 20,000
2004.................................................... 20,000
Thereafter.............................................. 275,000
--------
$355,000
========
</TABLE>
Corporate Credit Facility
In May 1997, the Company entered into a credit agreement with Australia and
New Zealand Banking Group Limited, as agent for a group of lending banks. In
October 1998, the Company amended and restated the corporate credit facility to
provide for $125 million of revolving credit available through October 2002 in
the form of direct advances or the issuance of letters of credit (the "Corporate
Credit Facility"). Borrowings bear interest at LIBOR plus an applicable margin
based on the credit rating on Cogentrix Energy's 2004 and 2008 Notes. Commitment
fees related to the Corporate Credit Facility are currently 50 basis points per
annum, payable each quarter on the outstanding unused portion of the Corporate
Credit Facility. As of December 31, 1999, the Company has used this credit
facility to issue approximately $117 million of letters of credit in connection
with investments made in electric-generating plants, and two plants under
construction. Subsequent to December 31, 1999, the Corporate Credit Facility was
amended to provide for $175 million of revolving credit available through
October, 2002.
Cogentrix Delaware Holdings, Inc., a wholly-owned subsidiary of Cogentrix
Energy, has guaranteed all of the existing and future senior, unsecured
outstanding indebtedness for borrowed money of Cogentrix Energy. This guarantee,
provided for in the credit agreement for the Corporate Credit Facility, expires
by its terms in 2002, unless the term of the credit agreement is extended. The
agreement under which the guarantee was given provides that the terms or
provisions of the guarantee may be waived, amended, supplemented or otherwise
modified at any time and from time to time by Cogentrix Delaware Holdings, Inc.
and the agent bank for the lenders under the credit agreement.
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<PAGE> 68
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
The directors and executive officers of Cogentrix Energy are as set forth
below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George T. Lewis, Jr. ..................... 72 Chairman Emeritus and Director
David J. Lewis............................ 43 Chairman of the Board, Chief Executive Officer and
Director
Mark F. Miller............................ 45 President, Chief Operating Officer and Director
James E. Lewis............................ 36 Vice Chairman and Director
Dennis W. Alexander....................... 53 Group Senior Vice President, General Counsel,
Secretary and Director
James R. Pagano........................... 40 Group Senior Vice President -- Development, Mergers
& Acquisitions
Bruno R. Dunn............................. 49 Group Senior Vice President -- Operations
Thomas F. Schwartz........................ 38 Group Senior Vice President -- Chief Financial
Officer
Betty G. Lewis............................ 70 Director
Robert W. Lewis........................... 46 Director
W. E. "Bill" Garrett...................... 69 Director
John A. Tillinghast....................... 72 Director
</TABLE>
GEORGE T. LEWIS, JR., our founder, has been a Director of Cogentrix Energy
since its formation in 1993 and was appointed Chairman Emeritus in March 1999.
Prior to March 1999, Mr. Lewis was Chairman of the Board since December 1993,
Chief Executive Officer and a Director of Cogentrix, Inc. from 1983 to 1993,
Chairman of the Board of Cogentrix, Inc. since 1990 and President of Cogentrix,
Inc. from 1983 to 1989. Mr. Lewis previously served for over 18 years with Chas
T. Main, Inc., an engineering firm headquartered in Boston. In 1971, he became a
Senior Vice President responsible for that firm's work with the utility
industry. From 1978 through 1980, he headed that firm's Southern District office
located in Charlotte, North Carolina and directed its involvement in the area of
coal-fired industrial power plants. In 1980, Mr. Lewis was promoted to Group
Vice President and director and returned to Boston to assume responsibility for
all corporate marketing and sales. George Lewis is the father of David J. Lewis,
James E. Lewis and Robert W. Lewis and the spouse of Betty G. Lewis.
DAVID J. LEWIS has been a Director of Cogentrix Energy since its formation
and was appointed Chairman of the Board and Chief Executive Officer in March
1999. Prior to March 1999, Mr. Lewis was Vice Chairman of the Board and Chief
Executive Officer since August 1995, Executive Vice President -- Marketing and
Development, Chief Executive Officer -- Elect since June 1994, Group Senior Vice
President -- Marketing and Development with Cogentrix, Inc. since September 1993
and a Director of Cogentrix, Inc. since 1988. From 1989 until September 1993, he
was Senior Vice President -- CGX Environmental Systems and President and Chief
Operating Officer -- CGX Environmental Systems Division of Cogentrix, Inc. From
1987 to 1989, he was Vice President -- Administration of Cogentrix, Inc. from
1986 to 1987, he was Resident Construction Manager and from 1985 to 1986, he was
Assistant Construction Manager. Prior to joining Cogentrix, Inc. in 1985, he was
Operations Manager with Bartex Corporation, an export management company
headquartered in Portland, Oregon. David Lewis is a son of George T. Lewis, Jr.
and Betty G. Lewis.
68
<PAGE> 69
MARK F. MILLER was appointed President, Chief Operating Officer and a
Director of Cogentrix Energy in May 1997. Prior to joining Cogentrix Energy, Mr.
Miller was Vice President for Northrop Grumman in Bethpage, New York. He joined
Northrop Grumman in 1982 and held successive positions in the material, law and
contracts departments before being named Vice President, Contracts and Pricing
at Northrop's B-2 Division in 1991. In 1993, he became Vice President-Business
Management at the B-2 Division. In 1994, Northrop acquired the Grumman
Corporation and Mr. Miller was named Vice President-Business Management for the
newly formed Electronics and Systems Integration Division, a position he held
until his move to Cogentrix Energy. From 1980 to 1982, he was an Associate with
the law firm of Dolack, Hansler.
JAMES E. LEWIS has been a Director of Cogentrix Energy since its formation,
and was appointed Vice Chairman in March 1999. Prior to March 1999, Mr. Lewis
was Executive Vice President since December 1993, Executive Vice President of
Cogentrix, Inc. since November 1992 and a Director of Cogentrix, Inc. since
1988. From 1991 to 1992, he was Senior Vice President of Operations responsible
for the daily operations of Cogentrix, Inc.'s facilities. From 1989 to 1991, Mr.
Lewis was Vice President -- Utility Operations. Mr. Lewis joined Cogentrix in
1986 and in 1987, he was selected as Assistant Project Manager responsible for
the construction of the Portsmouth facility. James Lewis is a son of George T.
Lewis, Jr. and Betty G. Lewis.
DENNIS W. ALEXANDER has been Group Senior Vice President, General Counsel,
Secretary and a Director since joining Cogentrix Energy in February 1994.
Immediately prior to joining Cogentrix Energy, Mr. Alexander was Vice
President/General Counsel of Wheelabrator Environmental Systems Inc., the waste-
to-energy and cogeneration subsidiary of Wheelabrator Technologies Inc., an
independent power and environmental services and products company, as well as
Director, Environmental, Health and Safety Audit Program for Wheelabrator
Technologies Inc. From 1988 to 1990, Mr. Alexander was Vice President/General
Counsel -- Operations of Wheelabrator Environmental Systems Inc. and from 1986
to 1988 was Vice President/General Counsel of Wheelabrator Energy Systems, a
cogeneration project development subsidiary. From 1984 to 1986, he served as
Group General Counsel for The Signal Company and from 1980 to 1984 as Division
General Counsel of Wheelabrator-Frye Inc., each a diversified public company.
JAMES R. PAGANO has been Group Senior Vice President -- Development,
Mergers & Acquisitions since February 1999. From May 1997 until then he was
Group Senior Vice President -- Chief Financial Officer of Cogentrix Energy,
prior to which he was Senior Vice President -- Project Finance since February
1995 and Vice President -- Project Finance since Cogentrix Energy's formation.
Previously, Mr. Pagano was Vice President -- Project Finance of Cogentrix, Inc.
since July 1993, Vice President -- Legal and Finance from July 1992 to July
1993, and from January 1992 to July 1992, Mr. Pagano was Vice President and
Assistant General Counsel of Cogentrix, Inc. Prior to joining Cogentrix, Inc. he
was Vice President of The Deerpath Group, Inc., a financial advisory firm. From
1987 to 1990, Mr. Pagano was an Associate with the law firm of Simpson Thacher &
Bartlett.
BRUNO R. DUNN has been Group Senior Vice President Operations since joining
Cogentrix Energy in January 1999. Immediately prior to joining Cogentrix Energy,
Mr. Dunn was Vice President Operations of Wheelabrator Technologies, Inc., an
independent power and environmental services and product company as well as Vice
President Operations of Wheelabrator Environmental Systems, Inc., the waste to
energy and cogeneration subsidiary of Wheelabrator Technologies. From 1988 to
1995 Mr. Dunn was Vice President Construction for Wheelabrator Technologies,
Inc. From 1980 to 1988 Mr. Dunn was a project manager and/or operations manager
for various Wheelabrator trash-to-energy facilities.
THOMAS F. SCHWARTZ has been Group Senior Vice President -- Finance and
Chief Financial Officer since December 1999. From March 1997 until then he was
Senior Vice President -- Finance and Treasurer of Cogentrix Energy, prior to
which he was Vice President -- Finance and Treasurer since Cogentrix Energy's
formation. Previously, Mr. Schwartz was Controller of Cogentrix, Inc. since
April 1991. Prior to joining Cogentrix, he was an audit manager with Arthur
Andersen, LLP's Small Business Advisory Division.
BETTY G. LEWIS has been a Director of Cogentrix Energy since September
1994. Betty Lewis is the spouse of George T. Lewis, Jr.
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<PAGE> 70
ROBERT W. LEWIS has been a Director of Cogentrix Energy since its
formation, prior to which he was a Director of Cogentrix, Inc. since 1988. In
April 1991, Mr. Lewis resigned from his positions of Vice Chairman and Secretary
of Cogentrix, Inc. which he had held since March 1991. Since his resignation as
an officer, Mr. Lewis has served as a consultant to us. From October 1990 to
March 1991, Mr. Lewis was Executive Vice President and Secretary. From March
1988 to October 1990, Mr. Lewis was Senior Vice President -- Corporate
Development and Secretary, in which position Mr. Lewis was in charge of
Cogentrix, Inc.'s development efforts. From March 1987 to March 1988, Mr. Lewis
was Senior Vice President -- Administration and Secretary. From September 1983
to March 1987, Mr. Lewis was Vice President -- Administration and Secretary. Mr.
Lewis joined Cogentrix, Inc. in April 1983 and served as Secretary through
September 1983. Robert Lewis is a son of George T. Lewis, Jr. and Betty G.
Lewis.
W. E. "BILL" GARRETT has been a Director of Cogentrix Energy since its
formation and became a Director of Cogentrix, Inc. in September 1993. Mr.
Garrett served on the staff of the National Geographic Society for 36
years -- the last 10 as Editor-in-Chief of the magazine. As a member of the
Board of Trustees of the National Geographic Society and its Research and
Exploration Committee, he was instrumental in the Society's emergence as the
world's largest educational and scientific institution. He resigned in 1990 and
became the President of the La Ruta Maya Conservation Foundation, which is
involved in cultural and conservation work with the Maya Indians. Mexico,
Guatemala and Italy have honored him with prestigious awards for his work in the
region. Mr. Garrett currently serves on the boards of the National Capital
Bicentennial Celebration, the American Land Conservancy, Partners for Livable
Communities and the Editorial Board of Nature's Best Magazine.
JOHN A. TILLINGHAST was elected a Director of Cogentrix Energy on March 19,
1998. Mr. Tillinghast served from 1994 through May 1998 as President, Chairman
and CEO of Great Bay Power Corporation, a public utility in Portsmouth, New
Hampshire. He also has served from 1997 through May 1998 as the President,
Chairman and CEO of BayCorp Holdings, Ltd., the holding company for Great Bay
Power Corporation. Since May 1998 Mr. Tillinghast has served as Chairman of
BayCorp Holdings and Great Bay Power. After graduating from Columbia University
in 1949 with BS and MS degrees in mechanical engineering, Mr. Tillinghast began
a 30-year career with American Electric Power Company, rising through the
engineering ranks to become Vice Chairman of the Board in charge of engineering
and construction. Prior to his current position at Bay Corp Holdings, LTD., he
served as Chairman of the Energy Engineering Board of the National Academy of
Sciences, Director of the Edison Electric Institute and is a Fellow of the
American Society of Mechanical Engineers. Mr. Tillinghast is registered as a
professional engineer in nine states and holds two U.S. and seven foreign
patents.
70
<PAGE> 71
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information for the calendar years ended
December 31, 1999, 1998 and 1997 concerning the annual compensation paid or
accrued by Cogentrix to or for the account of each of the following: (1) the
only person who served as the chief executive officer of Cogentrix during the
fiscal year ended December 31, 1999 and (2) the four most highly compensated
executive officers of Cogentrix incumbent at December 31, 1999, other than the
chief executive officer, for the year then ended (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER COMPENSATION
-----------------------------
RETIREMENT TERMINATION
ANNUAL COMPENSATION CONTRIBUTIONS OF
NAME AND TWELVE-MONTH ----------------------------------- AND INCENTIVE
PRINCIPAL POSITION PERIOD ENDING SALARY(1) BONUS(2) TOTAL OTHER(3) AGREEMENTS(4)
- ------------------ ----------------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Lewis............ December 31, 1999 $641,392 $1,254,585 $1,895,977 $120,678 $ 0
Chairman and December 31, 1998 633,428 1,117,302 1,750,730 62,010 0
Chief Executive Officer December 31, 1997 613,960 841,239 1,455,199 58,157 862,329
Mark F. Miller............ December 31, 1999 $387,452 $1,082,227 $1,469,679 $195,580 $ 0
President and Chief December 31, 1998 386,412 779,057 1,165,469 127,989 0
Operating Officer December 31, 1997 249,164 173,046 422,210 193,243 0
James E. Lewis............ December 31, 1999 $378,664 $ 902,530 $1,281,194 $ 66,498 $956,366
Vice Chairman December 31, 1998 378,788 679,642 1,058,430 32,570 0
December 31, 1997 364,524 415,163 779,687 25,831 884,692
James R. Pagano........... December 31, 1999 $307,240 $1,052,530 $1,359,770 $ 67,048 $ 0
Group Senior Vice December 31, 1998 291,118 660,227 951,345 29,169 0
President -- Development, December 31, 1997 223,532 345,033 568,565 28,412 0
Mergers & Acquisitions
Dennis W. Alexander....... December 31, 1999 $295,524 $ 878,833 $1,174,357 $ 60,705 $ 0
Group Senior Vice December 31, 1998 295,328 635,227 930,555 27,922 0
President and December 31, 1997 284,086 175,033 459,119 21,845 0
General Counsel
</TABLE>
- ---------------
(1) Amounts listed in this column include all fees for service on Cogentrix's
board of directors.
(2) Amounts listed in this column reflect annual performance bonuses and annual
distributions under our profit-sharing plan, executive incentive bonus plan
and facility cash flow incentive compensation agreements discussed below.
The amounts listed do not include the distributions made under such plan and
agreements to the Named Executive Officers during any fiscal year in which
such distribution was earned in the previous fiscal year.
(3) The amounts shown in this column include Cogentrix's matching contributions
on behalf of the Named Executive Officers to Cogentrix's 401(k) savings plan
in which all Cogentrix employees are eligible to participate and to a
non-qualified Supplemental Retirement Savings Plan in which approximately 39
employees, including all of the Named Executive Officers, participate. The
amounts shown for Mark F. Miller also include compensation related to
relocation and a company-provided life insurance policy.
(4) The amounts shown in this column for the year ended December 31, 1997
include the payments made to David J. Lewis and James E. Lewis related to
the termination of the facility cash flow incentive compensation agreements,
net of the awards each of these Named Executive Officers would have
otherwise received under these plans for the fiscal year ended June 30,
1997, which amounts are included under the column heading "Bonuses." The
amount for James E. Lewis for the year ended December 31, 1999 represents
severance benefits earned under our profit sharing plan related to his
resignation effective January 1, 2000 from Cogentrix as an employee and
officer.
71
<PAGE> 72
COMPENSATION PURSUANT TO INCENTIVE COMPENSATION PLANS
Profit-Sharing Plan
We have a profit-sharing plan which is a non-qualified incentive
compensation plan for the benefit of approximately 42 employees of Cogentrix.
Under our profit-sharing plan, we have entered into arrangements with each of
our executive officers, which provide for annual cash compensation distribution
awards to each participant equal to a designated percentage of our adjusted net
income before taxes each fiscal year plus the amount of any accrual for payments
to be made under our profit-sharing plan, with the designated percentage
determined annually at the discretion of our Chief Executive Officer or Chief
Operating Officer based on criteria they deem appropriate. For the fiscal year
ended December 31, 1999, David J. Lewis earned $796,971, Mark F. Miller earned
$557,880, James E. Lewis and James R. Pagano each earned $478,183, and Dennis W.
Alexander earned $398,486 under our profit sharing plan. In addition, James E.
Lewis earned $956,366 in severance benefits under our profit sharing plan
related to his resignation from Cogentrix as an executive officer.
In the event a participant in our profit-sharing plan terminates his or her
employment with Cogentrix (for a reason other than death, total disability,
retirement or termination by Cogentrix for willful misconduct), the participant
is entitled to receive a severance benefit equal to a percentage (ranging from
100% after six years of full-time employment to a maximum of 200% after ten
years or more of full-time employment) of the most recent annual distribution to
which the employee is then entitled. In the event of a participant's death or
total disability, the participant (or his or her beneficiary) is entitled to
receive from zero to five years of annual distribution awards thereafter,
depending upon the participant's length of service with Cogentrix.
Executive Incentive Bonus Plan
In addition to the annual cash compensation distribution awards payable
under our profit-sharing plan, each of the Named Executive Officers, with the
exception of David J. Lewis, may receive additional incentive cash compensation
awards, determined on a sliding scale, if we achieve contractually specified
levels of net income before income tax targets for a given fiscal year. For the
fiscal year ended December 31, 1999, each of the Named Executive Officers, with
the exception of David J. Lewis, earned $324,347 under the executive incentive
bonus plan.
Facility Cash Flow Incentive Compensation Agreements
We previously had in effect non-qualified incentive compensation agreements
with two of the Named Executive Officers, David J. Lewis and James E. Lewis,
each of whom is a director and a shareholder of Cogentrix Energy. These
agreements provided for each of these Named Executive Officers to receive,
through June 30, 2007, annual distributions equal to a designated percentage of
the net cash flow for the fiscal year of two of our facilities. In the fiscal
year ended June 30, 1997, we terminated the facility cash flow incentive
compensation agreements with these Named Executive Officers. In connection with
the termination of these plans, David J. Lewis and James E. Lewis were paid
$1,157,996 and $1,119,816 in the fiscal year ended June 30, 1997, respectively.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
David J. Lewis
In March 1999, the board of directors elected David J. Lewis Chairman of
the Board of Cogentrix. He was previously elected Chief Executive Officer of
Cogentrix in August 1995. George T. Lewis, Jr., the former Chief Executive
Officer and Chairman of the Board, will serve as Chairman Emeritus. We have an
employment agreement with David J. Lewis through August 2000 which provides for
a base annual salary for each fiscal year at least equal to the base salary for
the immediately preceding fiscal year. In addition to the base salary, Mr. Lewis
is entitled to receive annual incentive compensation in an amount determined by
the board of directors, which amount, when combined with the base salary payable
to him, shall be at least sufficient to provide him with total annual
compensation that is competitive with total annual compensation offered by other
similarly situated companies to their employees in comparable positions.
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<PAGE> 73
Upon our giving notice, the employment agreement is terminable in the event
a majority of the board of directors terminates Mr. Lewis' employment for cause.
In addition, we may terminate the agreement at any time at our option in the
event that the board determines in its reasonable, good faith judgment, and by a
vote of at least two-thirds of the directors then in office, that the continued
service of Mr. Lewis as Chief Executive Officer of Cogentrix would not be in our
best interest because there has occurred a continued failure by him, whether or
not such failure resulted from his physical or mental incapacity, substantially
to perform his duties, responsibilities or obligations as Chief Executive
Officer after having been given written notice of such failure to perform and
after having failed to improve such performance within the time period specified
in such notice. Mr. Lewis may terminate his employment agreement at any time at
his option in the event of a change of control of Cogentrix.
Mark F. Miller
When he joined Cogentrix in May 1997, we entered into an employment
agreement with Mark F. Miller to serve as President and Chief Operating Officer.
Under the employment agreement, Mr. Miller is entitled to a minimum base annual
salary of $350,000, which may be increased in future years. He is also entitled
to participate in our profit sharing plan, at a level of no less than 0.7% of
net income before taxes, and to receive a performance bonus each fiscal year,
the level of which is determined in the sole discretion of the Chief Executive
Officer. Such performance bonus can not be less than $80,000 for fiscal 1998 and
$100,000 for fiscal 1999. The employment agreement is for a five year term that
renews automatically for an additional five year term, unless we previously
exercise our right to terminate Mr. Miller's employment. We have the right to
terminate Mr. Miller's employment upon sixty days written notice. In the event
we terminate his employment, other than for cause, Mr. Miller is entitled to
continue to receive base salary, bonus (based upon historical levels) and
distributions under the profit sharing plan through the remainder of the initial
term and renewal term of the employment agreement.
Mr. Miller can terminate his employment for good reason as a result of
- a change in control of Cogentrix
- a change in title, authority or duties
- our failure to make any other payment to Mr. Miller or our breach of the
employment agreement
If Mr. Miller elects to terminate his employment for good reason, he is
entitled to continue to receive, through the remainder of the initial term and
renewal term of the employment agreement, an amount equal to the average annual
salary, bonus and profit sharing distribution received prior to his termination.
Dennis W. Alexander
When he joined Cogentrix in January 1994, we entered into an employment
agreement with Dennis W. Alexander to serve as Senior Vice President, General
Counsel and Secretary and as a member of the Board of Directors. Under the
employment agreement, Mr. Alexander is entitled to a minimum base annual salary
of $180,000, subject to adjustment in future years. He is also entitled to
participate in our profit sharing plan, at a level of no less than 0.3% of net
income before taxes, and our executive incentive bonus plan. The employment
agreement is for a one-year term that renews automatically at the end of each
calendar year unless we previously exercise our right to terminate Mr.
Alexander's employment. We have the right to terminate Mr. Alexander's
employment upon 30 days' written notice. A material change in his title,
authority, duties or current compensation following a change in control of
Cogentrix constitutes a de facto termination by us. In the event we terminate
his employment, Mr. Alexander is entitled to receive, within 30 days of his
termination, a severance payment in an amount equal to his total compensation
received in the prior calendar year, including any fees he received for serving
as a member of the Board of Directors.
James R. Pagano
In January 1999, we entered into an employment agreement with James R.
Pagano, Group Senior Vice President -- Development, Mergers & Acquisitions.
Under the employment agreement, Mr. Pagano is entitled to an annual base salary
of $306,000, which may be increased in 1999 or in future years. He is also
entitled to participate in our profit sharing plan, at a level of no less than
0.5% of net income before taxes, and
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<PAGE> 74
our executive incentive bonus plan. The employment agreement is for a one-year
term that renews automatically at the end of each calendar year unless we
previously exercise our right to terminate Mr. Pagano's employment. We have the
right to terminate Mr. Pagano's employment upon 30 days' written notice.
Following a change in control of Cogentrix, we will be deemed to have terminated
Mr. Pagano as the result of
- a change in his title, authority, duties or location of workplace and
responsibilities,
- a reduction in his annual base salary or profit sharing participation or
- our failure to make any other payment to Mr. Pagano.
In the event we terminate his employment, Mr. Pagano is entitled to
receive, within 30 days of his termination, a severance payment in an amount
equal to 250% of his total compensation received in the prior calendar year,
including salary, bonuses and profit sharing.
DIRECTORS' COMPENSATION AND CONSULTING AGREEMENTS
Directors, including employee directors, receive an annual retainer of
$25,000 for service on the board of directors. In addition, for each meeting
attended, each director receives a fee of $1,000. During the year ended December
31, 1999, there were five meetings of Cogentrix Energy's board of directors.
We have entered into consulting agreements with Messrs. Garrett and
Tillinghast each of which provides for payment of $15,000 annually for
consulting services to be rendered to us.
George T. Lewis, Jr.
We previously had in effect a non-qualified incentive compensation
agreement with George T. Lewis, Jr., the Chairman of the Board and a shareholder
of Cogentrix Energy. This agreement provided for Mr. Lewis to receive, through
June 30, 2007, annual distributions equal to a designated percentage of the net
cash flow for the fiscal year of one of our facilities. In the fiscal year ended
June 30, 1997, we terminated the facility cash flow incentive compensation
agreement with Mr. Lewis. In connection with the termination of this plan, Mr.
Lewis was paid $1,247,259 in the fiscal year ended June 30, 1997.
In August 1995, we entered into a five-year employment and noncompetition
agreement with George T. Lewis, Jr., a shareholder and then Chairman of the
Board. Under the terms of the agreement, Mr. Lewis is required to be fully
available to us during customary business hours for consultations, either in
person or by telephone, with respect to our business and affairs as we may
reasonably call on him to furnish. In addition, the restrictive covenants of the
agreement substantially limit Mr. Lewis' ability to engage in consulting
arrangements for other companies and prohibit his support of any company in the
energy industry. Pursuant to the agreement, Mr. Lewis will receive base
compensation of $618,000, adjusted annually based on an inflationary index, as
well as performance bonuses, the amount of which will be determined in
accordance with our policy by the Chief Executive Officer in consultation with
the Chief Operating Officer. Mr. Lewis received base compensation of $676,672
for the year ended December 31, 1999.
In the event of Mr. Lewis' death or inability to provide services due to
disability, the agreement shall terminate and we are obligated to continue
making payments to him or to his estate for a period of six months after such
termination. We may terminate this agreement for cause at any time, and Mr.
Lewis may voluntarily terminate this agreement at any time. In either case, Mr.
Lewis shall not be entitled to any further payments or benefits under the
consulting agreement. In the event we terminate this agreement without cause,
Mr. Lewis is entitled to receive all payments and benefits which would have been
earned throughout the term of this consulting agreement.
Robert W. Lewis
While Robert W. Lewis was employed as an executive officer, Cogentrix
entered into a non-qualified incentive compensation agreement with him similar
to the agreements described above under "-- Facility Cash Flow Incentive
Compensation Agreements" providing for him to receive incentive compensation
74
<PAGE> 75
annually equal to a designated percentage of the net cash flow for the fiscal
year of two of our facilities. Our obligation to make such annual payments to
him continues through June 30, 2007. We have agreed to pay him an annual minimum
payment of $200,000 regardless of whether his actual annual distribution would
yield such amount. Robert W. Lewis must repay to Cogentrix, on or before January
31, 2008, an amount equal to the aggregate amount of minimum payments made in
excess of the actual annual distributions which he was entitled to receive. The
actual amount of the distribution Mr. Lewis received pursuant to his facility
cash flow compensation agreement for the year ended December 31, 1999 was
$293,265.
If at any time through June 1, 2007 Mr. Lewis sells or transfers any of the
shares of common stock of Cogentrix Energy held by him to anyone other than
other designated members of the Lewis family without granting Cogentrix Energy a
right of first refusal with respect to the shares sold or transferred, he will
forfeit his right to the annual distributions under his facility cash flow
incentive compensation agreement and the right to the annual minimum payment of
$200,000.
James E. Lewis
On January 1, 2000, we entered into a consulting agreement with James E.
Lewis, a shareholder, director, employee and officer of Cogentrix. Under the
terms of the consulting agreement, Mr. Lewis is required, subject to certain
limits, to be available during customary business hours for consultations,
either in person or by telephone, with respect to such of our business and
affairs as we may reasonably call on him to furnish.
Pursuant to the consulting agreement, base compensation is payable to Mr.
Lewis in the following amounts for the following periods:
<TABLE>
<CAPTION>
PERIOD BASE COMPENSATION
------ -----------------
<S> <C>
01-01-00 to 12-31-00........................................ $350,424
01-01-01 to 12-31-01........................................ 219,015
01-01-02 to 12-31-03........................................ 187,727
01-01-04 to 12-31-04........................................ 125,151
</TABLE>
In the event of Mr. Lewis' death or inability to provide services due to
disability, we are obligated to continue making payments, when due, to him or
his estate.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding shares of common stock of Cogentrix
Energy are beneficially owned as follows:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
NAME SHARES OWNERSHIP
---- --------- ----------
<S> <C> <C>
George T. Lewis, Jr. (1).................................... 73,320 26%
John C. Fennebresque (2).................................... 73,320 26
Betty G. Lewis.............................................. 73,320 26
David J. Lewis.............................................. 45,120 16
James E. Lewis.............................................. 45,120 16
Robert W. Lewis............................................. 45,120 16
</TABLE>
- ---------------
(1) George T. Lewis, Jr.'s shares are held of record by a revocable grantor
trust (the "Trust") that may be revoked by Mr. Lewis at any time prior to
his death, in which event the shares held by the Trust would be transferred
to him. Accordingly, he is deemed to be the beneficial owner of the shares
held by the Trust.
(2) The 73,320 shares shown as beneficially owned by Mr. Fennebresque are all
held of record by the Trust described in Note 1 above. Mr. Fennebresque is
deemed to be the beneficial owner of these shares, because he is the sole
trustee of the Trust and, as such, has the power to vote and invest the
shares held by the Trust. Since George T. Lewis, Jr. is also deemed to be
the beneficial owner of these shares, they are also included in the amount
shown for the number of shares beneficially owned by George T. Lewis, Jr.
75
<PAGE> 76
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The transactions described or referred to below were entered into between
related parties. In connection with the public offering of our Senior Notes
conducted in March 1994, our board of directors adopted a policy that all
subsequent material transactions with related parties must be on terms no less
favorable than could be obtained from third parties and that any variance from
this policy is subject to approval by a majority of our disinterested directors.
The indentures and the covenants of the Corporate Credit Facility place certain
limitations on our ability to enter into material transactions with related
parties as well.
LEASES AND REAL PROPERTY TRANSACTIONS
Equipment Leasing Partners ("ELP"), a North Carolina general partnership
consisting of four of our shareholders, George T. Lewis, Jr., David J. Lewis,
James E. Lewis and Robert W. Lewis, owns and leases certain equipment to our
project subsidiaries related to the operations of the plants. Each of the
partners in ELP is a member of our board of directors. David J. Lewis is
Chairman and Chief Executive Officer of Cogentrix. Total rent paid by us to ELP
under such equipment leases was $901,000, $726,000, and $896,000 for the fiscal
years ended December 31, 1999, 1998 and 1997, respectively.
ELP also owns and leases to us our executive offices under a long term
lease with an initial term expiring in 2004. Total rent paid by us to ELP under
such lease was $868,000, $856,000 and $843,000 for the fiscal years ended
December 31, 1999, 1998 and 1997, respectively.
ELP leases the land on which our executive offices are located under a
long-term ground lease from an unrelated third party with an initial term
expiring in 2047, all payments under which are guaranteed by Cogentrix. Total
amounts paid by ELP under such lease were $118,000, $112,000 and $112,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
FACILITY CASH FLOW INCENTIVE COMPENSATION AGREEMENTS
We have entered into agreements with four of the beneficial owners of our
outstanding shares of common stock, each of whom is also a director, that
provide for them to receive annual distributions equal to a designated
percentage of the net cash flow for each fiscal year of one or both of two of
our facilities. During the fiscal year ended June 30, 1997, we terminated these
agreements for the three executive officers. See "Executive
Compensation -- Compensation Pursuant to Incentive Compensation Plans --
Facility Cash Flow Incentive Compensation Agreements" and "Executive
Compensation -- Directors' Compensation and Consulting Agreements" herein.
SHAREHOLDER STOCK TRANSFER AGREEMENT
In August 1994, George T. Lewis, Jr. entered into an agreement with Betty
G. Lewis ("Ms. Lewis") providing for, among other things, the transfer by George
T. Lewis, Jr. of a portion of his shares of our common stock to Ms. Lewis.
In accordance with the agreement, if Ms. Lewis desires to transfer or
otherwise dispose of any of her shares of common stock of Cogentrix, she must
first offer to sell them to us at a price equal to a bona fide offer from an
unrelated party. Any shares, the offer of sale of which is not accepted by us
after receipt of the written offer, must be offered by Ms. Lewis at the same
price to the other shareholders, who have the right to purchase such shares on a
pro rata basis determined in accordance with the then current stock ownership of
those shareholders. In the event neither we nor the other shareholders notify
Ms. Lewis of its or their intention to purchase her shares within 15 days after
receipt of the written offer, Ms. Lewis shall have the right for 90 days
thereafter to consummate the sale of her shares with the unrelated party who
provided the bona fide offer.
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<PAGE> 77
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and
Exhibits -- The following documents are filed as part of this Form
10-K.
(1) Consolidated Financial Statements -- See index on page 37.
(2) Financial Statement Schedules -- See index on page 37.
(3) Index to Exhibits.
<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
2.1 Purchase Agreement, dated as of March 6, 1998, between
Cogentrix Energy, Inc. and Bechtel Generating Company, Inc.
(10.2). (*)(13)
2.1(a) Amendment No. 1, dated October 14, 1998, to Purchase
Agreement, dated March 6, 1998, between Cogentrix Energy,
Inc., a North Carolina corporation ("Buyer"), and Bechtel
Generating Company, Inc., a Delaware corporation ("Seller").
(21)
2.2 Securities Purchase Agreement, dated March 6, 1998, by and
among LS Power Corporation, a Delaware corporation, Granite
Power Partners, L.P., a Delaware Limited partnership
(collectively, the "Sellers"), Cogentrix Mid-America, Inc.,
a Delaware corporation, Cogentrix Cottage Grove, LLC, a
Delaware limited liability Company, and Cogentrix
Whitewater, LLC, a Delaware limited liability company
(collectively, the "Purchasers") and Cogentrix Energy, Inc.
(2). (12)
3.1 Articles of Incorporation of Cogentrix Energy, Inc. (3.1).
(1)
3.2 Amended and Restated Bylaws of Cogentrix Energy, Inc., as
amended (3.2). (11)
4.1 Indenture, dated as of March 15, 1994, between Cogentrix
Energy, Inc. and First Union National Bank of North
Carolina, as Trustee, including form of 8.10% 2004 Senior
Note (4.1). (3)
4.2 Indenture, dated as of October 20, 1998, between Cogentrix
Energy, Inc. and First Union National Bank, as Trustee,
including form of 8.75% Senior Note. (4.2) (14)
4.3 First Supplemental Indenture, dated as of October 20, 1998,
between Cogentrix Energy, Inc. and First Union National
Bank, as Trustee. (4.3) (14)
4.4 Registration Agreement, dated as of October 20, 1998, by and
among Cogentrix Energy, Inc., Salomon Smith Barney Inc.,
Goldman, Sachs & Co. and CIBC Oppenheimer Corp. (4.4) (14)
4.5 Registration Agreement, dated as of November 25, 1998,
between Cogentrix Energy, Inc. and Salomon Smith Barney,
Inc. (4.5) (15)
4.6 Amendment No. 1 to the First Supplemental Indenture, dated
as of November 25, 1998, between Cogentrix Energy, Inc. and
First Union National Bank, as Trustee. (4.6) (15)
10.1 Power Purchase and Operating Agreement, dated as of July 21,
1986, between Cogentrix of Virginia, Inc. and Virginia
Electric and Power Company, as amended (assigned to and
assumed by Cogentrix Virginia Leasing Corporation)
(Portsmouth Facility) (10.7). (1)
10.1(a) Third Amendment and Restatement of the Power Purchase and
Operating Agreement, dated December 5, 1997, between
Cogentrix Virginia Leasing Corporation and Virginia Electric
and Power Company (Portsmouth Facility) (10.7(a)). (11)
10.2 Power Purchase and Operating Agreement, dated as of January
24, 1989, between Cogentrix of Rocky Mount, Inc. and
Virginia Electric and Power Company, doing business in North
Carolina as North Carolina Power, as amended (Rocky Mount
Facility) (10.8). (1)
</TABLE>
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<PAGE> 78
<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
10.3 Power Purchase and Operating Agreement, dated as of January
24, 1989, between Cogentrix of Richmond, Inc. (formerly
named Cogentrix of Petersburg, Inc.) and Virginia Electric
and Power Company, as amended. (Richmond Facility, Unit I)
(10.10). (1)
10.4 Power Purchase and Operating Agreement, dated as of January
24, 1989, between WV Hydro, Inc. and Virginia Electric and
Power Company, as amended (assigned to and assumed by
Cogentrix of Richmond, Inc.) (Richmond Facility, Unit II)
(10.11). (1)
10.5 Steam Purchase Agreement, dated as of December 31, 1985,
between Cogentrix Virginia Leasing Corporation and
Hoechst-Celanese Corporation (successor to Virginia
Chemicals Inc.) (Portsmouth Facility) (10.19). (*)(2)
10.6 Steam Purchase Agreement, dated as of November 15, 1988,
between Cogentrix of Rocky Mount, Inc. and Abbott
Laboratories, as amended (Rocky Mount Facility) (10.20).
(*)(2)
10.7 Steam Purchase Agreement, dated as of May 18, 1990, between
Cogentrix of Richmond, Inc. and E.I. du Pont de Nemours and
Company, as amended (Richmond Facility) (10.22). (*)(2)
10.8 Coal Sales Agreement, dated as of December 15, 1986, among
AgipCoal Sales USA, Inc. (formerly named Enoxy Coal Sales,
Inc.), AgipCoal USA, Inc. (formerly named Enoxy Coal, Inc.)
and Cogentrix Virginia Leasing Corporation (Portsmouth
Facility) (10.27). (*)(2)
10.8(a) First Amendment to Coal Sales Agreement, dated September 29,
1995, by and between Arch Coal Sales Company, Inc., and
Cogentrix Virginia Leasing Corporation (Portsmouth Facility)
(10.1). (6)
10.8(b) Second Amendment, dated as of April 20, 1999, to Coal Sales
Agreement, dated as of December 15, 1986, by and between
Cogentrix Virginia Leasing Corporation and Arch Coal Sales
Company. (10.1) (*) (25)
10.9 Coal Sales Agreement, dated as of October 1, 1989, among
Agip Coal Sales USA, Inc., Laurel Creek Co., Inc. and
Cogentrix of Rocky Mount, Inc., as amended (Rocky Mount
Facility) (10.28). (*)(2)
10.10 Coal Sales Agreement, dated as of February 15, 1990, among
Electric Fuels Corporation, Kentucky May Coal Company, Inc.
and Cogentrix of Richmond, Inc., as amended (Richmond
Facility, Unit I) (10.31). (*)(2)
10.10(a) Fourth Amendment to Coal Sales Agreement, dated as of July
1, 1998, among Electric Fuels Corporation, Kentucky May Coal
Company, Inc. and Cogentrix of Richmond, Inc. (10.10(a)) (*)
(22)
10.11 Coal Sales Agreement, dated as of January 1, 1990, between
Coastal Coal Sales, Inc., and Cogentrix of Richmond, Inc.,
as amended (Richmond Facility, Unit II) (10.32). (*)(2)
10.12 Railroad Transportation Contract, dated as of December 22,
1986, between Cogentrix Virginia Leasing Corporation, and
Norfolk Southern Railway Company, as amended (Portsmouth
Facility) (10.39). (*)(2)
10.13 Barge Transportation Contract, dated as of December 23,
1986, between Cogentrix Virginia Leasing Corporation and
McAllister Brothers, Inc., as amended (Portsmouth Facility)
(10.40). (1)
10.14 Railroad Transportation Contract, dated as of September 26,
1989, between Cogentrix of Rocky Mount, Inc. and CSX
Transportation, Inc., as amended (Rocky Mount Facility)
(10.41). (*)(2)
10.14(a) Fourth Amendment, dated as of August 23, 1995, to the
Railroad Transportation Contract, dated as of September 26,
1989, between Cogentrix of Rocky Mount, Inc. and CSX
Transportation, Inc. (Rocky Mount Facility) (10.41(a)). (5)
</TABLE>
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<PAGE> 79
<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
10.14(b) Fifth Amendment, dated as of January 1, 1996, to the
Railroad Transportation Contract, dated as of September 26,
1989, between Cogentrix of Rocky Mount, Inc. and CSX
Transportation, Inc. (Rocky Mount Facility) (10.41(b)). (8)
10.14(c) Amendment No. 6 to Contract CSXT-C-03951, dated as of
January 1, 1997, between Cogentrix of Rocky Mount, Inc. and
CSX Transportation, Inc. (Rocky Mount Facility) (10.9). (9)
10.14(d) Amendment No. 7 to Contract CSXT-C-03951, dated as of July
1, 1997, between Cogentrix of Rocky Mount, Inc. and CSX
Transportation, Inc. (Rocky Mount Facility) (10.47(d)). (10)
10.14(e) Amendment No. 8 to Contract CSXT-C-03951, dated as of
January 1, 1999, between Cogentrix of Rocky Mount, Inc. and
CSX Transportation, Inc. (Rocky Mount Facility). (10.14(e))
(22)
10.15 Railroad Transportation Contract, dated as of March 1, 1990,
between Cogentrix of Richmond, Inc. and CSX Transportation,
Inc., as amended (Richmond Facility, Unit I) (10.42). (*)(2)
10.15(a) Third Amendment to Railroad Transportation Contract, filed
with the ICC on December 13, 1994, between Cogentrix of
Richmond, Inc. and CSX Transportation, Inc. (Richmond
Facility, Unit I) (10.4). (4)
10.16 Railroad Transportation Contract, dated as of March 1, 1990,
between Cogentrix of Richmond, Inc. and CSX Transportation,
Inc., as amended (Richmond Facility, Unit II) (10.43).
(*)(2)
10.16(a) Fourth Amendment to Railroad Transportation Contract, filed
with the ICC on December 13, 1994, between Cogentrix of
Richmond, Inc. and CSX Transportation, Inc. (Richmond
Facility, Unit II) (10.5). (4)
10.16(b) Fifth Amendment to Railroad Transportation Contract,
effective as of November 16, 1995, between Cogentrix of
Richmond, Inc. and CSX Transportation, Inc. (Richmond
Facility, Unit II) (10.43(b)). (*)(8)
10.16(c) Amendment No. 6 to Railroad Transportation Contract,
effective on June 9, 1998, between Cogentrix of Richmond,
Inc. and CSX Transportation, Inc. (Richmond Facility).
(*)(14)
10.17 Third Amended and Restated Loan Agreement, dated as of
December 22, 1997, among Cogentrix Virginia Leasing
Corporation, the lenders party thereto and Credit Lyonnais,
as the Agent, Issuing Bank and a Lender (Portsmouth
Facility) (10.54). (11)
10.17(a) Amendment No 1 to the Third Amended and Restated Loan
Agreement dated December 22, 1997 between Cogentrix Virginia
Leasing Company and several banks and other financial
institutions. (10.2) (25)
10.18 Amended and Restated Construction and Term Loan Agreement,
dated as of December 1, 1993, among Cogentrix of Rocky
Mount, Inc., the Tranche B Lenders party thereto, and The
Prudential Insurance Company of America, as Credit Facility
Agent (Rocky Mount Facility) (10.52). (1)
10.18(a) First Amendment, dated as of March 31, 1996, to the Amended
and Restated Construction and Term Loan Agreement, dated as
of December 1, 1993, among Cogentrix of Rocky Mount, Inc.,
the Tranche B Lenders party thereto, and The Prudential
Insurance Company of America, as Credit Facility Agent
(Rocky Mount Facility) (10.4). (7)
10.18(b) Second Amendment, dated as of May 31, 1996, to the Amended
and Restated Construction and Term Loan Agreement, dated as
of December 1, 1993, among Cogentrix of Rocky Mount, Inc.,
the Tranche B Lenders party thereto, and The Prudential
Insurance Company of America, as Credit Facility Agent
(Rocky Mount Facility) (10.48(b)). (8)
</TABLE>
79
<PAGE> 80
<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
10.18(c) Third Amendment, dated as of December 1, 1997, to the
Amended and Restated Construction and Term Loan Agreement,
dated as of December 1, 1993, among Cogentrix of Rocky
Mount, Inc, the Tranche B Lenders party thereto, and The
Prudential Insurance Company of America, as Credit Facility
Agent (Rocky Mount Facility) (10.55(c)). (11)
10.19 Amended and Restated Subordinated Note dated April 22, 1994
of Cogentrix of Pennsylvania, Inc. payable to Cogentrix
Delaware Holdings, Inc. (10.57). (11)
10.20 Reimbursement and Loan Agreement, dated as of December 1,
1990, among Cogentrix of Richmond, Inc., Banque Paribas, New
York Branch as Issuing Bank, the lenders party thereto and
Banque Paribas, New York Branch, as Agent, as amended
(Richmond Facility) (10.55). (1)
10.20(a) Fourth Amendment, dated as of February 15, 1995, to the
Reimbursement and Loan Agreement, dated as of December 1,
1990, among Cogentrix of Richmond, Inc., Banque Paribas, New
York Branch, as Issuing Bank, the lenders party thereto and
Banque Paribas, New York Branch, as Agent (Richmond
Facility) (10.55(a)). (5)
10.20(b) Fifth Amendment, dated as of June 1, 1995, to the
Reimbursement and Loan Agreement, dated as of December 1,
1990, among Cogentrix of Richmond, Inc., Banque Paribas, New
York Branch, as Issuing Bank, the lenders party thereto and
Banque Paribas, New York Branch, as Agent (Richmond
Facility) (10.55(b)). (5)
10.20(c) Sixth Amendment, dated as of March 31, 1996, to the
Reimbursement and Loan Agreement, dated as of December 1,
1990, among Cogentrix of Richmond, Inc., Banque Paribas, New
York Branch, as Issuing Bank, the lenders party thereto and
Banque Paribas, New York Branch, as Agent (Richmond
Facility) (10.5). (7)
10.20(d) Seventh Amendment, dated as of December 1, 1997, to the
Reimbursement and Loan Agreement, dated as of December 1,
1990, among Cogentrix of Richmond, Inc., Banque Paribas, New
York Branch, as Issuing Bank, the lenders party thereto and
Banque Paribas, New York Branch, as Agent (Richmond
Facility) (10.58(d)). (11)
10.21 Indenture of Trust, dated as of December 1, 1990, between
the Industrial Development Authority of the City of
Richmond, Virginia and Sovran Bank, N.A., as Trustee,
including First and Second Supplemental Indentures of Trust
(Richmond Facility) (10.56). (1)
10.22 Sale Agreement, dated as of December 1, 1990, between the
Industrial Development Authority of the City of Richmond,
Virginia and Cogentrix of Richmond, Inc., including First
and Second Supplemental Sale Agreements (Richmond Facility)
(10.57). (1)
10.23 Third Amended and Restated Security Deposit Agreement, dated
as of December 22, 1997, among Cogentrix Virginia Leasing
Corporation, Credit Lyonnais, as Agent and Issuing Bank, and
First Union National Bank, as Security Agent (Portsmouth
Facility) (10.68). (11)
10.24 Amended and Restated Security Deposit Agreement, dated as of
December 1, 1993, among Cogentrix of Rocky Mount, Inc., The
Prudential Insurance Company of America, as Credit Facility
Agent and First Union National Bank of North Carolina, as
Security Agent (Rocky Mount Facility) (10.65). (1)
10.25 Security Deposit Agreement, dated as of December 1, 1990,
among Cogentrix of Richmond, Inc., Banque Paribas, New York
Branch, as Agent and First Union National Bank of North
Carolina, as Security Agent (Richmond Facility) (10.67). (1)
10.25(a) First Amendment to Security Deposit Agreement, dated
December 15, 1993, among Cogentrix of Richmond, Inc., Banque
Paribas, New York Branch, as Agent and First Union National
Bank of North Carolina, as Security Agent (Richmond
Facility) (10.67(a)). (2)
</TABLE>
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<PAGE> 81
<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
10.26 Third Amended and Restated Pledge Agreement, dated as of
December 22, 1997, made by Cogentrix, Inc., as Pledgor, and
Credit Lyonnais, as Agent (Portsmouth Facility) (10.79).
(11)
10.27 Ground Lease and Easement, dated as of December 15, 1986,
between Virginia Chemicals, Inc., as Lessor and Cogentrix
Virginia Leasing Corporation, as Lessee (Portsmouth
Facility) (10.94). (1)
10.28 Ground Lease, dated as of December 13, 1990, between
Cogentrix of Richmond, Inc., as Lessee, and E.I. du Pont de
Nemours and Company, as Lessor (Richmond Facility) (10.95).
(1)
10.29 Amended and Restated Land Lease Agreement, dated as of
February 18, 1988, among Arrowpoint Associates Limited
Partnership, as Landlord, and Cogentrix, Inc., CI
Properties, Inc. and Equipment Leasing Partners, as Tenant,
as amended (assigned to and assumed by Equipment Leasing
Partners, with Cogentrix, Inc., as guarantor) (Corporate
Headquarters) (10.96). (1)
10.30 Amended and Restated Lease Agreement, dated as of April 30,
1993, among Equipment Leasing Partners, as Landlord,
Cogentrix, Inc., as Tenant, and CI Properties, Inc., as
amended (Corporate Headquarters) (10.97). (1)
10.31 Letter Agreement, dated May 25, 1989, among Cogentrix, Inc.,
Cogentrix of Richmond, Inc. (formerly named Cogentrix of
Petersburg, Inc.), and WV Hydro, Inc., as amended (Richmond
Facility) (10.98). (1)
10.32 Consulting Agreement, dated as of September 27, 1991,
between Robert W. Lewis and Cogentrix, Inc., as amended
(assigned to and assumed by Cogentrix Energy, Inc.) (10.99).
(1)
10.33 Consulting Agreement, dated as of September 30, 1993,
between Cogentrix, Inc. and W.E. Garrett (assigned to and
assumed by Cogentrix Energy, Inc.) (10.100). (1)
10.34 Consulting Agreement, dated as of March 19, 1998, between
Cogentrix Energy and John A. Tillinghast.
10.35 Form of Profit-Sharing Plan (I) (10.102). (1)
10.36 Form of Profit-Sharing Plan (II) (10.103). (1)
10.37 Executive Incentive Bonus Plan (10.104). (2)
10.38 Facility Cash Flow Incentive Compensation Agreement with
Robert W. Lewis (10.105). (1)
10.39 Adoption of Stock Transfer Agreement dated as of December
30, 1993 among Cogentrix Energy, Inc., Cogentrix Inc., David
J. Lewis, Robert W. Lewis and James E. Lewis (10.111). (1)
10.40 Employment Agreement, dated as of June 24, 1994, between
David J. Lewis and Cogentrix Energy, Inc. (10.115). (3)
10.41 Employment Agreement, dated as of May 1, 1997, between Mark
F. Miller and Cogentrix Energy, Inc. (10.109). (10)
10.42 Employment Agreement, dated as of January 1, 1994, between
Dennis W. Alexander and Cogentrix Energy, Inc. (10.110).
(11)
10.43 Executive Employment Agreement, dated as of January 1, 1999,
Cogentrix Energy, Inc. and James R. Pagano. (10.42). (22)
10.44 Supplemental Retirement Savings Plan (10.132). (5)
10.44(a) Amendments to Cogentrix Energy, Inc. Supplemental Retirement
Savings Plan. (10.3) (26)
</TABLE>
81
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<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
10.45 Trust Under Supplemental Retirement Savings Plan, dated
April 17, 1995, by and between Cogentrix Energy, Inc. and
Wachovia Bank of North Carolina, N.A. of Winston Salem,
North Carolina, as Trustee (10.133). (5)
10.46 Consulting and Noncompetition Employment Agreement, dated as
of August 11, 1995, between Cogentrix Energy, Inc. and
George T. Lewis, Jr. (10.135). (5)
10.47 Support Agreement, dated as of July 14, 1995, from Cogentrix
Energy, Inc. to Malconna Company Limited (10.137). (5)
10.48 Amended and Restated Credit Agreement, dated as of October
29, 1998, among Cogentrix Energy, Inc., the several Lenders
from time to time parties thereto, Australia and New Zealand
Banking Group Limited, CIBC Oppenheimer Corporation and The
Bank of Nova Scotia, as Lead Arrangers, and Australia and
New Zealand Banking Group Limited, as Agent and as the
Issuing Bank. (10.129) (14)
10.48(a) Second Amended and Restated Credit Agreement, dated as of
March 3, 2000, among Cogentrix Energy, Inc., the several
Lenders from time to time parties thereto, Australia and New
Zealand Banking Group Limited, CIBC Oppenheimer Corporation
and The Bank of Nova Scotia, as Lead Arrangers, and
Australia and New Zealand Banking Group Limited, as Agent
and as the Issuing Bank.
10.49 Amended and Restated Guarantee, dated as of October 29,
1998, made by Cogentrix Delaware Holdings, Inc., the
Guarantor, in favor of the Borrower Creditors. (10.130) (14)
10.49(a) Second Amended and Restated Guarantee, dated as of March 3,
2000, made by Cogentrix Delaware Holdings, Inc., the
Guarantor, in favor of the Borrower Creditors.
10.50 Amended and Restated Limited Partnership Agreement, dated as
of June 30, 1995, among LSP-Cottage Grove, Inc., Granite
Power Partners, L.P., and TPC Cottage Grove, Inc. (17)
10.50(a) Amendment #1 to the Cottage Grove Partnership Agreement.
(18)
10.50(b) Consent, Waiver and Amendment No. 2, dated March 20, 1998,
to the Amended and Restated Limited Partnership Agreement of
LSP-Cottage Grove, L.P. (20)
10.50(c) Third Amendment, dated December 11, 1998, to the Amended and
Restated Limited Partnership Agreement of LSP-Cottage Grove,
L.P. (23)
10.51 Amended and Restated Partnership Agreement, dated as of June
30, 1995, among LSP-Whitewater I, Inc., Granite Power
Partners, L.P. and TPC Whitewater, Inc. (17)
10.51(a) Consent, Waiver and Amendment No. 1, dated March 20, 1998,
to the Amended and Restated Limited Partnership Agreement of
LSP-Whitewater Limited Partnership. (20)
10.51(b) Second Amendment, dated December 11, 1998, to the Amended
and Restated Limited Partnership Agreement of LSP-Whitewater
Limited Partnership. (23)
10.52 Power Purchase Agreement, dated as of May 9, 1994, between
Northern States Power Company and LSP-Cottage Grove, L.P.
(17)
10.53 Power Purchase Agreement, dated as of December 21, 1993,
between Wisconsin Electric Power Company and LSP-Whitewater
Limited Partnership. (17)
10.53(a) Amendment to Power Purchase Agreement, dated as of February
10, 1994, between Wisconsin Electric Power Company and
LSP-Whitewater Limited Partnership. (17)
10.53(b) Second Amendment to Power Purchase Agreement, dated as of
October 5, 1994, between Wisconsin Electric Power Company
and LSP-Whitewater Limited Partnership. (17)
10.53(c) Third Amendment to Power Purchase Agreement, dated as of May
5, 1995, between Wisconsin Electric Power Company and
LSP-Whitewater Limited Partnership. (17)
10.53(d) Fourth Amendment to Power Purchase Agreement, dated March
18, 1997, between Wisconsin Electric Power Company and
LSP-Whitewater Limited Partnership. (19)
</TABLE>
82
<PAGE> 83
<TABLE>
<CAPTION>
DESIGNATION OF
EXHIBIT DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<C> <S>
10.53(e) Fifth Amendment to Power Purchase Agreement, dated February
26, 1998, between Wisconsin Electric Power Company and
LSP-Whitewater Limited Partnership. (20)
10.54 Operations and Maintenance Agreement by and between
LSP-Whitewater Limited Partnership as Owner and
LSP-Whitewater I, Inc. as Operator dated as of April 15,
1999. (10.1) (*) (24)
10.55 Operations and Maintenance Agreement by and between
LSP-Cottage Grove, L.P. as Owner and LSP-Cottage Grove, Inc.
as Operator dated as of April 15, 1999. (10.2) (*) (24)
10.56 Steam Purchase Contract, effective as of January 1, 1999, by
and between Celanese Chemical, Inc. and Cogentrix Virginia
Leasing Corporation. (10.3) (*) (25)
10.57 Steam Purchase Contract, effective as of January 1, 1999, by
and between BASF Corporation and Cogentrix Virginia Leasing
Corporation. (10.4) (*) (25)
10.58 Credit Agreement, dated as of September 8, 1999, between
Cogentrix Eastern America, Inc. and Dresdner Bank, AG, as
administrative agent. (10.1) (26)
10.58(a) First Amendment, dated as of December 17, 1999, to the
Credit Agreement, dated as of September 8, 1999, between
Cogentrix Eastern America, Inc. and Dresdner Bank, AG, as
administrative agent.
10.59 Pledge Agreement, dated as of September 8, 1999, between
Cogentrix Delaware Holdings, Inc. and Dresdner Bank, AG, as
administrative agent. (10.2) (26)
10.60 Consulting Agreement, dated as of January 1, 2000, between
James E. Lewis and Cogentrix Energy, Inc.
21.1 Direct and Indirect Subsidiaries of Cogentrix Energy, Inc.
27.1 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only, and is not filed.
</TABLE>
- ---------------
(*) Certain portions of this exhibit have been omitted pursuant to previously
approved requests for confidential treatment.
(1) Incorporated by reference to Registration Statement on Form S-1 (File No.
33-74254) filed January 19, 1994. The number designating the exhibit on the
exhibit index to such previously-filed report is enclosed in parentheses at
the end of the description of the exhibit above.
(2) Incorporated by reference to Amendment No. 2 to Registration Statement on
Form S-1 (File No. 33-74254) filed March 7, 1994. The number designating
the exhibit on the exhibit index to such previously-filed report is
enclosed in parentheses at the end of the description of the exhibit above.
(3) Incorporated by reference to the Form 10-K (File No. 33-74254) filed
September 28, 1994. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(4) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed
February 14, 1995. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(5) Incorporated by reference to the Form 10-K (File No. 33-74254) filed
September 28, 1995. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(6) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed
November 14, 1995. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(7) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed May 3,
1996. The number designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at the end of the
description of the exhibit above.
83
<PAGE> 84
(8) Incorporated by reference to the Form 10-K (File No. 33-74254) filed
October 10, 1996. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(9) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed
February 14, 1997. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(10) Incorporated by reference to the Form 10-K (File No. 33-74254) filed
September 29, 1997. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(11) Incorporated by reference to the Form 10-K (File No. 33-74254) filed March
30, 1998. The number designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at the end of the
description of the exhibit above.
(12) Incorporated by reference to the Form 8-K (File No. 33-74254) filed April
6, 1998. The number designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at the end of the
description of the exhibit above.
(13) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed May
15, 1998. The number designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at the end of the
description of the exhibit above.
(14) Incorporated by reference to the Registration Statement on Form S-4 (File
No. 33-67171) filed November 12, 1998. The number designating the exhibit
on the exhibit index to such previously file report is enclosed in
parentheses at the end of the description of the exhibit above.
(15) Incorporated by reference to Amendment No. 1 to the Registration Statement
on Form S-4 (File No. 33-67171) filed January 27, 1999. The number
designating the exhibit on the exhibit index to such previously file report
is enclosed in parentheses at the end of the description of the exhibit
above.
(16) Incorporated by reference to Amendment No. 3 to the Registration Statement
on Form S-4 (File No. 33-67171) filed March 15, 1999 by Cogentrix Energy,
Inc. and Cogentrix Delaware Holdings, Inc. The number designating the
exhibit on the exhibit index to such previously file report is enclosed in
parentheses at the end of the description of the exhibit above.
(17) Incorporated by reference to the Registration Statement on Form S-4 (File
No. 33-95928) filed on August 16, 1995, as amended, or to the Form 10-K
filed for the fiscal year ended December 31, 1995 by LS Power Funding
Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater Limited
Partnership.
(18) Incorporated by reference to the Form 10-Q (File No. 33-95928) filed August
12, 1996 by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
LSP-Whitewater Limited Partnership.
(19) Incorporated by reference to the Form 10-Q (File No. 33-95928) filed May
14, 1997 by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
LSP-Whitewater Limited Partnership.
(20) Incorporated by reference to the Form 10-K (File No. 33-95928) filed April
15, 1998 by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
LSP-Whitewater Limited Partnership.
(21) Incorporated by reference to the Form 8-K (File No. 33-74254) filed
November 4, 1998. The number designating the exhibit on the exhibit index
to such previously-filed report is enclosed in parentheses at the end of
the description of the exhibit above.
(22) Incorporated by reference to the Form 10-K (File No. 33-74254) filed March
31, 1999. The number designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at the end of the
description of the exhibit above.
(23) Incorporated by reference to the Form 10-K (File No. 33-95928) filed March
31, 1999 by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
LSP-Whitewater Limited Partnership.
(24) Incorporated by reference to the Form 10-Q (File No. 33-95928) filed May
17, 1999 by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
LSP-Whitewater Limited Partnership. The number designating the exhibit on
the exhibit index to such previously filed report is enclosed in
parentheses at the end of the description of the exhibit above.
(25) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed August
16, 1999. The number designating the exhibit on the exhibit index to such
previously filed report is enclosed in parentheses at the end of the
description of the exhibit above.
84
<PAGE> 85
(26) Incorporated by reference to the Form 10-Q (File No. 33-74254) filed
November 15, 1999. The number designating the exhibit on the exhibit index
to such previously filed report is enclosed in parentheses at the end of
the description of the exhibit above.
85
<PAGE> 86
SIGNATURES.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COGENTRIX ENERGY, INC.
(Registrant)
Date: March 30, 2000 By: /s/ DAVID J. LEWIS
------------------------------------
David J. Lewis
Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive 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
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE T. LEWIS, JR. Chairman Emeritus and Director March 30, 2000
- -----------------------------------------------------
George T. Lewis, Jr.
/s/ DAVID J. LEWIS Chairman of the Board, Chief March 30, 2000
- ----------------------------------------------------- Executive Officer and
David J. Lewis Director
/s/ MARK F. MILLER President, Chief Operating March 30, 2000
- ----------------------------------------------------- Officer and Director
Mark F. Miller
/s/ BETTY G. LEWIS Director March 30, 2000
- -----------------------------------------------------
Betty G. Lewis
/s/ JAMES E. LEWIS Vice Chairman and Director March 30, 2000
- -----------------------------------------------------
James E. Lewis
Director March 30, 2000
- -----------------------------------------------------
Robert W. Lewis
/s/ DENNIS W. ALEXANDER Group Senior Vice President, March 30, 2000
- ----------------------------------------------------- General Counsel, Secretary
Dennis W. Alexander and Director
/s/ W. E. GARRETT Director March 30, 2000
- -----------------------------------------------------
W. E. Garrett
/s/ JOHN A. TILLINGHAST Director March 30, 2000
- -----------------------------------------------------
John A. Tillinghast
/s/ THOMAS F. SCHWARTZ Group Senior Vice President, March 30, 2000
- ----------------------------------------------------- Chief Financial Officer
Thomas F. Schwartz (Principal Accounting
Officer)
</TABLE>
86
<PAGE> 1
EXHIBIT 10.34
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (the "AGREEMENT") is dated as of March 19,
1998 by and among Cogentrix Energy, Inc., a North Carolina corporation
("COGENTRIX") and John A. Tillinghast, an individual residing in North Hampton,
New Hampshire.
WITNESSETH:
WHEREAS, Cogentrix is in the business of developing and operating
cogeneration and independent power production facilities;
WHEREAS, Cogentrix has offered to Consultant a position on its Board of
Directors and Consultant has agreed to serve as a Director of Cogentrix;
WHEREAS, Cogentrix and the Consultant desire to set forth in writing
their agreement with respect to certain additional services offered by the
Consultant and compensation therefor;
NOW, THEREFORE, for good and valuable consideration including the
mutual agreements contained herein, Cogentrix and the Consultant do hereby agree
as follows:
1. Services Rendered by the Consultant. The Consultant in addition to
his participation in Board of Director meetings, shall also be available on
reasonable notice to provide advice and counsel on matters relating to domestic
and international project development, government and public relations, and
general corporate affairs of Cogentrix and its affiliates. Cogentrix agrees to
schedule such requests for services with reasonable advance telephonic or
written notice, and to limit its requests to not more than fifteen hours per
month. Consultant shall be compensated as set forth in Section 2 below (in
addition to such compensation payable to Consultant as a member of the Board of
Directors).
2. Compensation. In consideration for the services referred to herein
and subject to the terms and conditions of this Agreement, Cogentrix shall be
obligated to pay the Consultant a consulting fee in the amount of $15,000.00
annually. Such fee shall be payable in quarterly installments of $3,750.00
beginning March 19, 1998 and payable thereafter on the first day of each
January, April, July and October. Consultant shall be responsible for all
Federal, State, FICA and Medicare taxes on such compensation. In addition, all
reasonable expenses in connection with such services shall be reimbursed at cost
if submitted in a manner acceptable to the Internal Revenue Service and
Cogentrix accounting practices.
3. Termination. Cogentrix and the Consultant acknowledge and agree that
either Cogentrix or Consultant, by delivery of written notice to the other
party, may
<PAGE> 2
terminate this Agreement at any time upon thirty (30) days prior written notice.
Upon such termination, Cogentrix's obligation to pay Consultant under Section 2
shall cease and any final amount owed shall be prorated.
4. Confidentiality. Consultant acknowledges that, in and as a result of
his services for Cogentrix, he will be acquiring confidential information of a
special and unique nature and value. As consideration for the renumeration for
such services and as an inducement for entering in this Agreement, Consultant
covenants and agrees that he shall not, except with the prior written consent of
Cogentrix, at any time during or following term of this Agreement, directly or
indirectly, divulge, reveal, or disclose, for any purpose whatsoever, any of
such confidential information which has been obtained by or disclosed to him as
a result of performing services for Cogentrix.
5. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions hereof shall not affect the validity or enforceability of the other
provisions hereof.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
7. Notices. Any notice required hereunder to be given to any party
hereto shall be considered as given if mailed by certified or registered mail,
postage prepaid and addressed to the parties as follows:
Mr. Mark F. Miller
President and Chief Operating Officer
Cogentrix Energy, Inc.
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8110
Telephone: (704) 525-3800
Telecopy: (704) 529-1006
Mr. John A. Tillinghast
77 Exeter Road
North Hampton, NH 03862
Telephone: (603) 964-9888
Either party may change the address to which notice to it must be given by
advising the other party in writing of the new address.
2
<PAGE> 3
IN WITNESS WHEREOF, Cogentrix and Consultant have each caused this
Agreement to be executed under seal by their respective duly authorized
representatives as of the day and year first above written.
COGENTRIX ENERGY, INC.
By: /s/ David J. Lewis
--------------------------
Title: C.E.O. - Vice Chairman
-----------------------
CONSULTANT
By: /s/ John A. Tillinghast
--------------------------
John A. Tillinghast
3
<PAGE> 1
EXHIBIT 10.48(a)
EXECUTION COPY
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
COGENTRIX ENERGY, INC.,
The Several Lenders
from Time to Time Parties Hereto
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
AND THE BANK OF NOVA SCOTIA
as Lead Arrangers
and
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED,
as Agent and as the Issuing Bank
DATED AS OF MARCH 3, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS...................................................................................1
1.1 Defined Terms.............................................................................1
1.2 Other Definitional Provisions............................................................26
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS..............................................................27
2.1 Revolving Credit Commitments.............................................................27
2.2 Procedure for Revolving Credit Borrowing.................................................27
2.3 Fees.....................................................................................28
2.4 Termination or Reduction of Commitments..................................................28
2.5 Repayment of Revolving Credit Loans; Evidence of Debt....................................29
2.6 Prepayments..............................................................................29
2.7 Conversion and Continuation Options......................................................30
2.8 Minimum Amounts and Maximum Number of Tranches...........................................31
2.9 Interest Rates and Payment Dates.........................................................31
2.10 Computation of Interest and Fees.........................................................32
2.11 Inability to Determine Interest Rate.....................................................32
2.12 Pro Rata Treatment and Payments..........................................................32
2.13 Illegality...............................................................................33
2.14 Requirements of Law......................................................................34
2.15 Taxes....................................................................................35
2.16 Indemnity................................................................................36
2.17 Change of Lending Office.................................................................37
2.18 Use of Proceeds..........................................................................37
SECTION 3. LETTERS OF CREDIT............................................................................37
3.1 L/C Commitment...........................................................................37
3.2 Procedure for Issuance of Letters of Credit..............................................38
3.3 Fees, Commissions and Other Charges......................................................39
3.4 L/C Participations.......................................................................39
3.5 Reimbursement Obligation of the Borrower.................................................40
3.6 Obligations Absolute.....................................................................41
3.7 Letter of Credit Payments................................................................41
3.8 Issuance Request.........................................................................41
3.9 Collateralization........................................................................41
3.10 Substitution/Replacement of Issuing Bank.................................................42
SECTION 4. REPRESENTATIONS AND WARRANTIES...............................................................43
4.1 Financial Information....................................................................43
4.2 No Change................................................................................45
4.3 Corporate Existence; Compliance with Law.................................................45
4.4 Corporate Power; Authorization; Enforceable Obligations..................................46
</TABLE>
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<PAGE> 3
<TABLE>
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4.5 No Legal Bar.............................................................................46
4.6 No Material Litigation...................................................................46
4.7 No Default...............................................................................46
4.8 Ownership of Property; Liens.............................................................46
4.9 Taxes....................................................................................47
4.10 Federal Regulations......................................................................47
4.11 ERISA....................................................................................47
4.12 Investment Company Act; Public Utility Holding Company Act;
Other Regulations........................................................................48
4.13 Subsidiaries.............................................................................48
4.14 Purpose of the Revolving Credit Loans....................................................48
4.15 Environmental Matters....................................................................48
4.16 Accuracy of Information; Full Disclosure.................................................49
4.17 Security Documents.......................................................................50
4.18 Year 2000 Matters........................................................................50
SECTION 5. CONDITIONS PRECEDENT.........................................................................50
5.1 Conditions to Effectiveness of Agreement. ...............................................50
5.2 Conditions to Each Revolving Credit Loan and Each Letter of Credit.......................52
SECTION 6. AFFIRMATIVE COVENANTS........................................................................53
6.1 Financial Statements.....................................................................53
6.2 Certificates; Other Information..........................................................54
6.3 Payment of Obligations...................................................................56
6.4 Conduct of Business and Maintenance of Existence.........................................56
6.5 Maintenance of Property; Insurance.......................................................56
6.6 Inspection of Property; Books and Records; Discussions...................................56
6.7 Notices..................................................................................57
6.8 Environmental Laws.......................................................................57
6.9 Indemnification..........................................................................58
SECTION 7. NEGATIVE COVENANTS...........................................................................59
7.1 Financial Condition. ...................................................................59
7.2 Limitation on Debt.......................................................................59
7.3 Limitation on Subsidiary Debt............................................................61
7.4 Limitation on Restricted Payments........................................................64
7.5 Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries...................................................................65
7.6 Restrictions on Dispositions.............................................................66
7.7 Limitations on Transactions with Affiliates..............................................66
7.8 Limitations on Liens.....................................................................67
7.9 Limitations on Mergers, Consolidations, Sales or Transfers
of Assets by or Involving Borrower.......................................................68
7.10 Limitations on Certain Mergers, Consolidations and Investments
by Subsidiaries..........................................................................68
7.11 CDH Permitted Investments................................................................69
</TABLE>
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<PAGE> 4
<TABLE>
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SECTION 8. EVENTS OF DEFAULT............................................................................70
SECTION 9. THE AGENT....................................................................................74
9.1 Appointment..............................................................................74
9.2 Delegation of Duties.....................................................................74
9.3 Exculpatory Provisions...................................................................75
9.4 Reliance by Agent........................................................................75
9.5 Notice of Default........................................................................75
9.6 Non-Reliance on Agent and Other Lenders..................................................76
9.7 Indemnification..........................................................................76
9.8 Agent in Its Individual Capacity.........................................................77
9.9 Successor Agent..........................................................................77
9.10 Lead Arrangers...........................................................................77
SECTION 10. MISCELLANEOUS...............................................................................77
10.1 Amendments and Waivers...................................................................77
10.2 Notices..................................................................................78
10.3 No Waiver; Cumulative Remedies...........................................................79
10.4 Survival of Representations and Warranties; Survival of Certain
Agreements and Covenants.................................................................79
10.5 Payment of Expenses and Taxes............................................................79
10.6 Successors and Assigns; Participations and Assignments...................................80
10.7 Adjustments; Set-off.....................................................................82
10.8 Counterparts.............................................................................83
10.9 Severability.............................................................................83
10.10 Integration..............................................................................83
10.11 GOVERNING LAW............................................................................83
10.12 Submission To Jurisdiction; Waivers......................................................83
10.13 Acknowledgments..........................................................................84
10.14 WAIVERS OF JURY TRIAL....................................................................84
10.15 Confidentiality..........................................................................84
10.16 Rank.....................................................................................85
10.17 Amendment and Restatement................................................................85
</TABLE>
SCHEDULES
Schedule I - Lenders' Commitment Percentages and Addresses for Notices
Schedule II - Applicable Margin
Schedule III - Financial Disclosure
Schedule IV - Material Litigation
Schedule V - Subsidiaries of the Borrower
Schedule VI - Environmental Matters
Schedule VII - Existing Letters of Credit
-iii-
<PAGE> 5
EXHIBITS
Exhibit A - Form of Note
Exhibit B - [intentionally omitted]
Exhibit C - Form of CDH Guarantee
Exhibit D - Form of Extension Agreement
Exhibit E-1 - Form of Borrowing Request
Exhibit E-2 - Form of Issuance Request
Exhibit F - Form of Opinion of McGuire Woods Battle & Boothe LLP
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Account Pledge Agreement
Exhibit I - Form of Securities Account Control Agreement
-iv-
<PAGE> 6
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
March 3, 2000 among (i) COGENTRIX ENERGY, INC., a North Carolina corporation
(the "Borrower"), (ii) the several banks and other financial institutions from
time to time parties to this Agreement (the "Lenders"), (iii) AUSTRALIA AND NEW
ZEALAND BANKING GROUP LIMITED ("ANZ") AND THE BANK OF NOVA SCOTIA, as the lead
arrangers and (iv) AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, as the
issuer hereunder of the Letters of Credit (as hereinafter defined) and as agent
for the Lenders hereunder.
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and ANZ, as Agent and
Issuing Bank, are parties to the Amended and Restated Credit Agreement, dated as
of October 29, 1998, among the Borrower, the Lenders, the lead arrangers named
therein, and ANZ as Agent and Issuing Bank, as supplemented by the Supplements
thereto dated December 18, 1998 and January 22, 1999 and as amended by the
Extension Agreement and Amendment dated October 22, 1999 (as so supplemented and
amended, the "Existing Credit Agreement");
WHEREAS, the Borrower has requested that the Existing Credit
Agreement be amended and restated (a) to increase the aggregate of the
Commitments to $175,000,000 and (b) otherwise to amend the Existing Credit
Agreement and restate it as more fully set forth herein;
WHEREAS, the Lenders, the Agent and the Issuing Bank are
willing so to amend and restate the Existing Credit Agreement, but only on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, each of the parties
hereto hereby agrees that, from and after the Closing Date, the Existing Credit
Agreement (including all Exhibits and Schedules thereto) shall be, and the same
hereby is, amended and restated in its entirety to read as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the higher of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum established from time to time
by the Agent as its prime rate in effect at its principal office in New
York City (the Prime Rate not being intended to be the lowest rate of
interest charged by the Agent in connection with extensions of credit
to debtors); and "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds
<PAGE> 7
2
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal
funds brokers of recognized standing selected by it. Any change in the
ABR due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"ABR Loans": Revolving Credit Loans the rate of interest
applicable to which is based upon the ABR.
"Acceptable Acquisition Premium": any Acquisition Premium with
respect to any Capital Stock acquired after the Closing Date by the
Borrower (or any of its Subsidiaries) in any Person owning one or more
Power Generation Facilities; provided, that such Acquisition Premium
may not exceed the excess (if any) of the Maximum Value with respect to
such Capital Stock over the book value of the net tangible assets
underlying such Capital Stock, all as determined in accordance with
GAAP; and "Maximum Value" shall mean an amount (as certified to the
Lenders by a Responsible Officer of the Borrower within thirty days of
the acquisition of such Capital Stock by the Borrower or such
Subsidiary) equal to the net present value of all dividends,
distributions and other payments reasonably projected (using
assumptions reasonably acceptable to the Agent) to be received by the
Borrower or such Subsidiary in respect of such Capital Stock after its
acquisition, calculated by discounting to the date of such acquisition
the amount of all such dividends, distributions and other payments
using an assumed discount rate proposed by the Borrower and reasonably
acceptable to the Agent; provided, that for purposes of projecting the
amount of such dividends, distributions and payments in respect of such
Capital Stock, revenue shall be assumed to be received by such Person
from the sale of power from such Power Generation Facilities only to
the extent that such revenue would be received pursuant to a written
power sales agreement and (even if pursuant to a written power sales
agreement) no revenue shall be assumed to be received by such Person
from the sale of electricity into any power exchange or to the extent
the price for such electricity is based on any power exchange price.
"Account Pledge Agreement": as defined in subsection 3.9(a).
"Acquisition Debt": Debt of any Person existing at the time
such Person became a Subsidiary of the Borrower (or such Person is
merged into the Borrower or one of its Subsidiaries) or assumed in
connection with the acquisition of assets from any such Person (other
than assets acquired in the ordinary course of business), including
Debt Incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary of the Borrower (but excluding Debt of such
Person which is extinguished, retired or repaid in connection with such
Person becoming a Subsidiary of the Borrower).
<PAGE> 8
3
"Acquisition Premium": with respect to any Capital Stock owned
by the Borrower (or any of its Subsidiaries) in any Person (including,
without limitation, any Subsidiary or Affiliate of the Borrower or any
Joint Venture in which the Borrower or any of its Subsidiaries has an
interest), the cost of acquiring such Capital Stock in excess of the
net tangible assets underlying such Capital Stock, as determined in
accordance with GAAP.
"Adjusted Consolidated Net Income": for any period, for any
Person the aggregate Net Income (or loss) of such Person and its
consolidated Subsidiaries for such period determined in conformity with
GAAP plus the Net Income of any Subsidiary of such Person for prior
periods to the extent such Net Income is actually paid in cash to such
Person during such period plus the Net Income of such Person (other
than a Subsidiary thereof) in which any third Person has a joint
interest for prior periods to the extent such Net Income is actually
paid in cash to such Person during such period; provided that the
following items shall be excluded in computing Adjusted Consolidated
Net Income (without duplication): (i) the Net Income (or loss) of such
Person (other than a Subsidiary thereof) in which any third Person has
a joint interest, except to the extent of the amount of dividends or
other distributions actually paid in cash to such Person during such
period by such Person in which the joint interest is held, which
dividends and distributions shall be included in such computation; (ii)
solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (c)(i) or (c)(ii) of
subsection 7.4 (and in such case, except to the extent includable
pursuant to clause (i) above), the Net Income (if positive) of such
Person accrued prior to the date it becomes a Subsidiary of any other
Person or is merged into or consolidated with such other Person or any
of its Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by such other Person or any of its
Subsidiaries; (iii) the Net Income of any Subsidiary of such Person,
except to the extent that (A) such Net Income (if positive) is actually
paid in cash to such Person during such period and (B) such Net Income
(if negative) is actually paid in cash to such Subsidiary during such
period; (iv) any gains or losses (on an after-tax basis) attributable
to Asset Sales; (v) the cumulative effect of a change in accounting
principle; and (vi) any amounts paid or accrued as dividends on
Preferred Stock of such Person or Preferred Stock of any Subsidiary of
such Person.
"Adjusted Parent Operating Cash Flow": for any period, (i)
Parent Operating Cash Flow for such period less (ii) the sum of the
following expenses (determined without duplication), in each case to
the extent paid by the Borrower during such period and regardless of
whether any such amount was accrued during such period:
(a) development expenses for such period of the
Borrower and its Subsidiaries paid directly by the Borrower or
paid indirectly by the transferring of funds or other assets
(whether through a loan, capital contribution or otherwise) to
any Subsidiary of the Borrower (whether by the Borrower or by
any of its
<PAGE> 9
4
Subsidiaries) for the purpose of enabling such Subsidiary or
another Subsidiary to pay any such expense;
(b) income tax expenses of the Borrower and its
Subsidiaries (computed on a consolidated basis) for such
period; and
(c) corporate overhead expenses of the Borrower and
its Subsidiaries for such period.
"Adjusted Tangible Net Worth": with respect to the Borrower,
as of the date of determination, the Tangible Net Worth of the Borrower
at such date plus the sum of all Acquisition Premiums included in the
Net Worth of the Borrower as reflected in the Pro Forma Balance Sheet
plus the sum of all Acceptable Acquisition Premiums (if any) at such
date.
"Administration Fee": as defined in subsection 2.3(c).
"Affiliate": as to any Person, any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") when
used with respect to any Person means the possession, directly or
indirectly, of the power either (a) to vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
"Agent": ANZ in its capacity as the agent for the Lenders
under this Agreement and the other Loan Documents and its successors in
such capacity.
"Aggregate Outstanding Extensions of Credit": as to any Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then
outstanding and (b) such Lender's Commitment Percentage of the L/C
Obligations then outstanding.
"Agreement": this Second Amended and Restated Credit
Agreement, as amended, supplemented or otherwise modified from time to
time.
"Applicable Margin": for the Commitment Fee, for each Type of
Revolving Credit Loan and for each Type of Letter of Credit, the rate
per annum as set forth under the relevant column heading on Schedule
II.
"Asset Acquisition": (i) an investment by the Borrower or any
of its Subsidiaries in any other Person pursuant to which such Person
shall become a Subsidiary of the
<PAGE> 10
5
Borrower or any of its Subsidiaries or shall be merged into or
consolidated with the Borrower or any of its Subsidiaries or (ii) an
acquisition by the Borrower or any of its Subsidiaries of the Property
of any Person other than the Borrower or any of its Subsidiaries that
constitutes substantially all of an operating unit or business of such
Person.
"Asset Disposition": with respect to any Person, any sale,
transfer, conveyance, lease or other disposition (including by way of
merger, consolidation or sale-leaseback) by such Person or any of its
Subsidiaries to any Person (other than to such Person or a Subsidiary
of such Person and other than in the ordinary course of business) of
(i) any Property of such Person or any of its Subsidiaries or (ii) any
shares of Capital Stock of such Person's Subsidiaries. For purposes of
this definition, any disposition in connection with directors'
qualifying shares or investments by foreign nationals mandated by
applicable law shall not constitute an Asset Disposition. In addition,
the term "Asset Disposition" shall not include (i) any sale, transfer,
conveyance, lease or other disposition of the Capital Stock or assets
of Subsidiaries pursuant to the terms of any power sales agreements or
steam sales agreements to which such Subsidiaries are parties as of the
date of this Agreement or pursuant to the terms of any power sales
agreements or steam sales agreements to which such Subsidiaries become
a party after such date if the Board of Directors determines in good
faith (evidenced by a Board resolution) that such provisions are
necessary in order to effect such agreements and are reasonable, (ii)
any sale, transfer, conveyance, lease or other disposition of assets
governed by subsection 7.9, (iii) the sale, transfer, conveyance, lease
or other disposition of the Capital Stock or assets of the following:
(A) Cogentrix of Pennsylvania, Inc. and (B) ReUse Technology, Inc. and
(iv) any transaction or series of related transactions consisting of
the sale, transfer, conveyance, lease or other disposition of Capital
Stock or assets with a Fair Market Value aggregating less than $5
million. The term "Asset Disposition" also shall not include (i) the
grant of a Lien by any Person in any assets or shares of Capital Stock
securing a borrowing by, or contractual performance obligation of, such
Person or any Subsidiary of such Person or any Joint Venture in which
such Person has an interest, which Lien is not prohibited under
subsection 7.8 or 7.12 or under Section 10(a) of the CDH Guarantee or
the exercise of remedies thereunder or (ii) a sale-leaseback
transaction involving substantially all of the assets of a Power
Generation Facility where a Subsidiary of the Borrower sells the Power
Generation Facility to a Person in exchange for the assumption by that
Person of the Debt financing the Power Generation Facility and the
Subsidiary leases the Power Generation Facility from such Person.
"Asset Sale": the sale or other disposition by the Borrower or
any of its Subsidiaries (other than to the Borrower or another
Subsidiary of the Borrower) of (i) all or substantially all of the
Capital Stock of any Subsidiary of the Borrower or (ii) all or
substantially all of the Property of the Borrower or any of its
Subsidiaries.
"Assignee": as defined in subsection 10.6(c).
<PAGE> 11
6
"Assignment and Acceptance": an Assignment and Acceptance
substantially in the form of Exhibit G.
"Attributable Value": as to a Capitalized Lease Obligation
under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount
thereof that would appear on the face of a balance sheet of such Person
in accordance with GAAP.
"Available Commitment": as to any Lender, at any time, an
amount equal to the excess, if any, of (a) such Lender's Commitment
over (b) such Lender's Aggregate Outstanding Extensions of Credit.
"Average Life": at any date of determination with respect to
any Debt security or Preferred Stock the quotient obtained by dividing
(i) the sum of the product of (A) the number of years from such date of
determination to the dates of each successive scheduled principal or
involuntary liquidation value payment of such Debt security or
Preferred Stock, respectively, multiplied by (B) the amount of such
principal or involuntary liquidation value payment by (ii) the sum of
all such principal or involuntary liquidation value payments.
"Board of Directors": either the Board of Directors of the
Borrower or any committee of such Board duly authorized to act on
behalf of such Board.
"Borrower Indenture Securities": the collective reference to
the 2004 Senior Notes and the 2008 Senior Notes.
"Borrower Indentures": the collective reference to the 2004
Senior Note Indenture and the 2008 Senior Note Indenture.
"Borrowing Date": any Business Day specified in a Borrowing
Request pursuant to subsection 2.2 as a date on which the Borrower
requests the Lenders to make Revolving Credit Loans hereunder.
"Borrowing Request": a request and certificate of the Borrower
substantially in the form of Exhibit E-1 (with such changes thereto as
agreed upon from time to time by the Agent and the Borrower).
"Business": as defined in subsection 4.15(b).
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
"Capital Stock": with respect to any Person, any and all
shares, interests, participations or other equivalents (however
designated, whether voting or non-voting)
<PAGE> 12
7
of, or interests in (however designated), the equity of such Person
which is outstanding or issued on or after the date of this Agreement,
including, without limitation, all Common Stock and Preferred Stock and
partnership and joint venture interests of such Person.
"Capitalized Lease": as applied to any Person, any lease of
any Property of which the discounted present value of the rental
obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person;
"Capitalized Lease Obligation" means the rental obligations, as
aforesaid, under such lease.
"Collateral Account": as defined in subsection 3.9(a).
"CDH": Cogentrix Delaware Holdings, Inc., a Delaware
corporation and a Wholly-Owned Subsidiary of the Borrower.
"CDH Guarantee": the Second Amended and Restated Guarantee to
be executed and delivered by CDH, substantially in the form of Exhibit
C, as amended, supplemented or otherwise modified from time to time.
"CDH Permitted Investments": as defined in the CDH Guarantee.
"CEA": Cogentrix Eastern America, Inc., a Delaware corporation
and a Wholly-Owned Subsidiary of the Borrower.
"CEA Credit Agreement": the Credit Agreement, dated as of
September 8, 1999, among CEA, the several lenders from time to time
parties thereto, and Dresdner Bank AG, New York Branch, as
administrative agent thereunder, as amended, supplemented or otherwise
modified from time to time.
"Closing Date": the date on which the conditions precedent set
forth in subsection 5.1 shall be satisfied.
"CMA": Cogentrix Mid-America, Inc., a Delaware corporation and
a Wholly-Owned Subsidiary of the Borrower.
"CMA Credit Agreement": the Credit Agreement, dated as of
December 11, 1998, among CMA, the several lenders from time to time
parties thereto, and Dresdner Bank AG, New York Branch, as issuing bank
and administrative agent thereunder, as amended, supplemented or
otherwise modified from time to time.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": the collective reference to the "Collateral" and
the "Collateral Account" as defined in the Account Pledge Agreement.
<PAGE> 13
8
"Commitment": as to any Lender, the obligation of such Lender
to make Revolving Credit Loans to and/or issue or participate in
Letters of Credit issued hereunder in an aggregate principal and/or
face amount at any one time outstanding not to exceed the amount set
forth next to such Lender's name under the caption "Commitment" on
Schedule I or set forth in the Assignment and Acceptance executed by
such Lender by which such Lender became a Lender hereunder, in either
such case as such amount may be reduced from time to time pursuant to
subsection 2.4 and as such amount may be adjusted from time to time in
accordance with subsection 10.6 pursuant to any Assignment and
Acceptance executed by such Lender or otherwise in accordance with this
Agreement.
"Commitment Fee": as defined in subsection 2.3(a).
"Commitment Percentage": as to any Lender at any time, the
percentage set forth next to such Lender's name under the caption
"Commitment Percentage" on Schedule I or set forth in the Assignment
and Acceptance executed by such Lender by which such Lender became a
Lender hereunder, in either such case as such percentage may be
adjusted from time to time in accordance with subsection 10.6 pursuant
to any Assignment and Acceptance executed by such Lender or otherwise
in accordance with this Agreement.
"Commitment Period": the period from and including the Closing
Date to but not including the Final Maturity Date or such earlier date
on which the Commitments shall terminate as provided herein.
"Common Stock": with respect to any Person, Capital Stock of
such Person that does not rank prior, as to the payment of dividends or
as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.
"Consolidated EBITDA": of any Person for any period, the
Adjusted Consolidated Net Income of such Person, plus (i) income taxes,
excluding income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or Asset Sales, all
determined on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP, (ii) Consolidated Fixed Charges,
(iii) depreciation and amortization expense, all determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP, (iv) all other non-cash items reducing Adjusted
Consolidated Net Income for such period, all determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
<PAGE> 14
9
accordance with GAAP and (v) the aggregate amount actually received in
cash by such Person during such period relating to non-cash items
increasing Adjusted Consolidated Net Income for prior periods, and less
(i) all non-cash items increasing Adjusted Consolidated Net Income
during such period and (ii) the aggregate amount actually paid in cash
by such Person during such period relating to non-cash items reducing
Adjusted Consolidated Net Income for prior periods; provided that
depreciation and amortization expense of any Subsidiary of such Person
and any other non-cash item of any Subsidiary of such Person that
reduces Adjusted Consolidated Net Income shall be excluded (without
duplication) in computing Consolidated EBITDA, except to the extent
that the positive cash flow associated with such depreciation and
amortization expense and other non-cash items is actually distributed
in cash to such Person during such period.
"Consolidated Fixed Charges": of any Person, for any period,
the aggregate of (i) Consolidated Interest Expense, (ii) the interest
component of Capitalized Leases, determined on a consolidated basis for
such Person and its consolidated Subsidiaries in accordance with GAAP
excluding any interest component of Capitalized Leases in respect of
that portion of a Capitalized Lease Obligation of a Subsidiary that is
Non-Recourse to such Person and (iii) cash and non-cash dividends due
(whether or not declared) on the Preferred Stock of any Subsidiary of
such Person and any Redeemable Stock of such Person.
"Consolidated Interest Expense": of any Person, for any
period, the aggregate interest expense in respect of Debt (including
amortization or original issue discount and non-cash interest payments
or accruals) of such Person and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, including
all commissions, discounts, other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs
associated with Interest Rate Protection Agreements and any amounts
paid during such period in respect of such interest expense,
commissions, discounts, other fees and charges that have been
capitalized; provided that Consolidated Interest Expense of the
Borrower shall not include any interest expense (including all
commissions, discounts, other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs
associated with Interest Rate Protection Agreements) in respect of that
portion of Debt of a Subsidiary of the Borrower that is Non-Recourse to
the Borrower; and provided further that Consolidated Interest Expense
of the Borrower in respect of a Guarantee by the Borrower of Debt of a
Subsidiary shall be equal to the commissions, discounts, other fees and
charges that would be due with respect to a hypothetical letter of
credit issued under a bank credit agreement that can be drawn by the
beneficiary thereof in the amount of the Debt so guaranteed if (i) the
Borrower is not actually making directly or indirectly interest
payments on such Debt and (ii) GAAP does not require the Borrower on an
unconsolidated basis to record such Debt as a liability of the
Borrower.
<PAGE> 15
10
"Consolidated Total Assets": with respect to any Person at any
time, the total assets of such Person and its consolidated Subsidiaries
at such time determined in conformity with GAAP.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"Currency Protection Agreement": with respect to any Person
any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in currency values to or under which
such Person or any of its Subsidiaries is a party or a beneficiary on
the date of this Agreement or becomes a party or a beneficiary
thereafter.
"Debt": with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or
bankers' acceptance or other similar instruments (or reimbursement
obligations with respect thereto), (iv) all obligations of such Person
to pay the deferred purchase price of property or services, except
Trade Payables, (v) the Attributable Value of all obligations of such
Person as lessee under Capitalized Leases, (vi) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person; provided that, for purposes of determining
the amount of any Debt of the type described in this clause, if
recourse with respect to such Debt is limited to such asset, the amount
of such Debt shall be limited to the lesser of the Fair Market Value of
such asset or the amount of such Debt, (vii) all Debt of others
Guaranteed by such Person to the extent such Debt is Guaranteed by such
Person, (viii) all Redeemable Stock valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends and (ix) to the extent not otherwise included in this
definition, all obligations of such Person under Currency Protection
Agreement and Interest Rate Protection Agreements.
"Default": any of the events specified in Section 8, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as now or may at any
time hereafter be in effect.
<PAGE> 16
11
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which the Agent is offered Dollar deposits at or
about 10:00 A.M., New York City time, two Eurodollar Business Days
prior to the beginning of such Interest Period in the London interbank
eurodollar market for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to
the amount of its Eurodollar Loan to be outstanding during such
Interest Period.
"Eurodollar Business Day": any Business Day on which dealings
in foreign currency and exchange between banks may be carried on in
London, England.
"Eurodollar Loans": Revolving Credit Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow": of any Person for any period, Consolidated
EBITDA less Consolidated Fixed Charges less any income taxes actually
paid during such period.
"Existing Credit Agreement:": as defined in the recitals
hereto.
"Existing Letters of Credit:": the collective reference to the
letters of credit listed in Schedule VII.
<PAGE> 17
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"Extension Date": as defined in subsection 2.1(c).
"Extension of Credit": any making of any Revolving Credit Loan
by a Lender and any issuance or extension by the Issuing Bank of any
Letter of Credit.
"Fair Market Value": with respect to any Capital Stock, asset
or other Property, the price obtainable for such Capital Stock, asset
or other Property in an arm's-length sale between an informed and
willing purchaser under no compulsion to purchase and an informed and
willing seller under no compulsion to sell.
"Fee Letter": the reference to any and all agreements between
the Borrower and ANZ relating to the fees payable hereunder to ANZ as
Agent and as Issuing Bank.
"Final Maturity Date": October 29, 2002 or such later date to
which the Final Maturity Date shall have been extended pursuant to
subsection 2.1(c); provided, that, if such later date is not a
Eurodollar Business Day, the Final Maturity Date shall be the next
succeeding Eurodollar Business Day.
"Financial Letter of Credit": as defined in clause (i)(1) of
subsection 3.1(b).
"Fixed Charge Ratio": the ratio, on a pro forma basis, of (i)
the aggregate amount of Consolidated EBITDA of any Person for the
Reference Period immediately prior to the date of the transaction
giving rise to the need to calculate the Fixed Charge Ratio (the
"Transaction Date") to (ii) the aggregate Consolidated Fixed Charges of
such Person during such Reference Period; provided that for purposes of
such computation in calculating Consolidated EBITDA and Consolidated
Fixed Charges, (1) the Incurrence of the Debt giving rise to the need
to calculate the Fixed Charge Ratio and the application of the proceeds
therefrom shall be assumed to have occurred on the first day of the
Reference Period, (2) Asset Sales and Asset Acquisitions which occur
during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date (but including any Asset Acquisition to
be made with the Debt Incurred pursuant to (1) above) shall be assumed
to have occurred on the first day of the Reference Period, (3) the
Incurrence of any Debt during the Reference Period or subsequent to the
Reference Period and prior to the Transaction Date and the application
of the proceeds therefrom shall be assumed to have occurred on the
first day of such Reference Period, (4) Consolidated Interest Expense
attributable to any Debt (whether existing or being Incurred) computed
on a pro forma basis and bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been
the applicable rate for the entire period unless such Person or any of
its Subsidiaries is a party to an Interest Rate Protection Agreement
(which shall remain in effect for the twelve month period after the
Transaction Date) which has the effect of fixing the interest rate on
the date of computation, in which case such rate (whether higher or
lower) shall be used and (5) there shall be excluded from Consolidated
Fixed Charges any Consolidated Fixed Charges related to any amount of
Debt which was outstanding during and subsequent to
<PAGE> 18
13
the Reference Period but is not outstanding on the Transaction Date,
except for Consolidated Fixed Charges actually incurred with respect to
Debt borrowed (as adjusted pursuant to clause (4)) under a revolving
credit or similar arrangement to the extent the commitment thereunder
remains in effect on the Transaction Date. For the purpose of making
this computation, Asset Sales and Asset Acquisitions which have been
made by any Person which has become a Subsidiary of the Borrower or
been merged with or into the Borrower or any Subsidiary of the Borrower
during the Reference Period, or subsequent to the Reference Period and
prior to the Transaction Date shall be calculated on a pro forma basis
(including all of the calculations referred to in clauses (1) through
(5) above assuming such Asset Sales or Asset Acquisitions occurred on
the first day of the Reference Period).
"Fronting Fee": as defined in subsection 3.3(a).
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as approved by a significant segment of the accounting
profession.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee" or "Guarantee Obligation": any obligation,
contingent or otherwise, of any Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation of such other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, or to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee
of such Debt or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Incur": with respect to any Debt, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Debt; provided that neither the accrual of interest (whether such
interest is payable in cash or kind) nor the accretion of original
issue discount shall be considered an Incurrence of Debt.
<PAGE> 19
14
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each March, June, September and December, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of
such Interest Period, and (c) as to any Eurodollar Loan having an
Interest Period longer than three months or 90 days, respectively, each
day which is three months or 90 days, respectively, or a whole multiple
thereof, after the first day of such Interest Period and the last day
of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the Borrowing
Date or conversion date, as the case may be, with respect to
such Eurodollar Loan and ending one, two, three, six, nine or
twelve months thereafter, as selected by the Borrower in its
Borrowing Request or notice of conversion, as the case may be,
given with respect thereto; and
(ii) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three, six, nine or
twelve months thereafter, as selected by the Borrower by
irrevocable notice to the Agent not less than three Eurodollar
Business Days prior to the last day of the then current
Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar
Loan would otherwise end on a day that is not a Eurodollar
Business Day, such Interest Period shall be extended to the
next succeeding Eurodollar Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period
shall end on the immediately preceding Eurodollar Business
Day;
(2) any Interest Period that would otherwise extend
beyond the Final Maturity Date shall end on the Final Maturity
Date;
(3) any Interest Period pertaining to a Eurodollar
Loan that begins on the last Eurodollar Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day
of a calendar month; and
<PAGE> 20
15
(4) the Borrower shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar Loan
during an Interest Period for such Revolving Credit Loan.
"Interest Rate Protection Agreement": with respect to any
Person, any interest rate protection agreement, interest rate future
agreement, interest rate option agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement
designed to protect such Person or any of its Subsidiaries against
fluctuations in interest rates to or under which such Person or any of
its Subsidiaries is a party or a beneficiary on the date of this
Agreement or becomes a party or a beneficiary thereafter.
"Intermediate Holding Company": any Subsidiary of the Borrower
that serves as a holding company (directly or indirectly) for any of
the Borrower=s interests in any one or more Power Generation Facilities
or other businesses.
"Investment": in a Person, any investment in, loan or advance
to, Guarantee on behalf of, directly or indirectly, or other transfer
of assets to, such Person.
"Investment Grade": with respect to the Borrower Indenture
Securities, a rating of "Baa3" or better by Moody's Investors Service,
Inc. and a rating of "BBB-" or better by Standard and Poor's Rating
Group.
"Issuance Request": a request and certificate of the Borrower
substantially in the form of Exhibit E-2 (with such changes thereto as
agreed upon from time to time by the Agent and the Borrower), together
with a properly completed application for a Letter of Credit in such
form as the Issuing Bank may specify from time to time.
"Issuing Bank": ANZ, in its capacity as issuer of any Letter
of Credit, and any L/C Participant issuing any Letter of Credit
pursuant to subsection 3.10(a) or succeeding ANZ as Issuing Bank
pursuant to subsection 3.10(b), in its capacity as the issuer of each
Letter of Credit issued by it.
"Joint Venture": a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form;
provided that, as to any such arrangement in corporate form, such
corporation shall not, as to any Person to which such corporation is a
Subsidiary, be considered to be a Joint Venture to which such Person is
a party.
"L/C Fee Payment Date": the last day of each March, June,
September and December.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the
<PAGE> 21
16
aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to subsection 3.5(a).
"L/C Participants": the collective reference to all the
Lenders.
"Lead Arrangers": the collective reference to ANZ and The Bank
of Nova Scotia, in their capacities as the lead arrangers of the
Commitments.
"Letter of Credit Availability": at any time, an amount equal
to the excess of (i) the aggregate Commitments of all the Lenders at
such time over (ii) the then Aggregate Outstanding Extensions of
Credits of all the Lenders.
"Letter of Credit Fee": as defined in subsection 3.3(b).
"Letters of Credit": as defined in subsection 3.1(a).
"Leverage Ratio": as of any date, the ratio of (i) the
aggregate amount of all Debt of the Borrower at such date to (ii) the
sum of (a) the Adjusted Parent Operating Cash Flow for the six-month
period ending on such date plus (b) the projected Adjusted Parent
Operating Cash Flow for the immediately succeeding six-month period.
The projected Adjusted Parent Operating Cash Flow referred to in
subclause (b) of the preceding sentence shall be determined by using
the same amount for Adjusted Parent Operating Cash Flow for the
immediately preceding six months and then adjusting such amount for the
effect thereon (if any) of any planned or anticipated changes in the
Adjusted Parent Operating Cash Flow during such succeeding six months
(as determined in good faith by the Borrower and by using assumptions
reasonably acceptable to the Majority Lenders); provided that in no
event shall the projected Adjusted Parent Operating Cash Flow include
cash flows to be received by the Borrower in respect of any Power
Generating Facility or other asset which was not owned by a Subsidiary
of the Borrower or by an unconsolidated Affiliate of the Borrower at
any time during such preceding six-month period.
"Lien": with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such Property. For purposes of this Agreement, the Borrower shall be
deemed to own subject to a Lien any Property which it has acquired or
holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention
agreement relating to such Property.
"Loan Documents": this Agreement, the Notes, all Borrowing
Requests, all Issuance Requests, the CDH Guarantee and the Security
Documents.
"Loan Parties": the Borrower and CDH.
<PAGE> 22
17
"Majority Lenders": at any time, Lenders the Commitment
Percentages of which aggregate more than 50%.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole, (b)
the validity or enforceability of this or any of the other Loan
Documents or the rights or remedies of the Agent, the Issuing Bank or
the Lenders hereunder or thereunder or (c) any Loan Party's ability to
perform any Obligation.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": from an Asset Disposition or Recovery
Event, cash payments received (including, without limitation, any cash
payment received by way of (a) a payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when
received (including any cash received upon sale or disposition of such
note or receivable) or (b) any dividend or other distribution on any
shares of any Person's Capital Stock representing directly or
indirectly all or part of the consideration in respect of any Asset
Disposition or Recovery Event, but only as and when received, but
excluding any other consideration received in the form of assumption by
the acquiring Person of Debt or other obligations relating to the
Property disposed of in such Asset Disposition or Recovery Event or
received in any other noncash form) therefrom, in each case, net of all
legal, title and recording tax expenses, commissions and other fees and
expenses incurred or payable and all federal, state, provincial,
foreign and local taxes required to be accrued as a liability under
GAAP (i) as a consequence of such Asset Disposition or Recovery Event,
(ii) as a result of the repayment of any Debt in any jurisdiction other
than the jurisdiction where the Property disposed of was located or
(iii) as a result of any repatriation to the United States of America
of any proceeds of such Asset Disposition or Recovery Event, and in
each case net of a reasonable reserve for the after tax cost of any
indemnification payments (fixed and contingent) attributable to
seller's indemnities to the purchaser undertaken by the Borrower or any
of its Subsidiaries in connection with such Asset Disposition or
Recovery Event (but excluding any payments, which by the terms of the
indemnities will not, under any circumstances, be made prior to the
then Final Maturity Date), and net of all payments made on any Debt
which is secured by such Property, in accordance with the terms of any
Lien upon or with respect to such Property or which must by its terms
or by applicable law be repaid out of the proceeds from such Asset
Disposition, and net of all distributions and other payments
<PAGE> 23
18
made to holders of minority interests in Subsidiaries or Joint Ventures
as a result of such Asset Disposition.
"Net Income": of any Person for any period, the net income
(loss) of such Person for such period, determined in accordance with
GAAP, except that for any purpose hereunder (other than for computing
Net Income of the Borrower and its consolidated Subsidiaries for
purposes of subsection 7.1(c)(iii)) extraordinary and non-recurring
gains and losses as determined in accordance with GAAP shall be
excluded.
"Net Worth": of any Person, as of any date the aggregate of
capital, surplus and retained earnings (including any cumulative
translation adjustment) of such Person and its consolidated
Subsidiaries as would be shown on a consolidated balance sheet of such
Person and its consolidated Subsidiaries prepared as of such date in
accordance with GAAP.
"Non-Excluded Taxes": as defined in subsection 2.15.
"Non-Recourse": to a Person as applied to any Debt (or portion
thereof), that such Person is not, directly or indirectly, liable to
make any payments with respect to such Debt (or portion thereof), that
no Guarantee of such Debt (or portion thereof) has been made by such
Person other than a Guarantee limited in recourse to the Capital Stock
of the Person incurring such Debt (or any shareholder, partner, member
or participant of such Person) and that such Debt (or portion thereof)
is not secured by a Lien on any asset of such Person other than the
Capital Stock of the Person incurring such Debt or any shareholder,
partner, member or participant of such Person or of the Person whose
obligations were Guaranteed, provided that for purposes of this
definition the status of a Subsidiary as a general partner of a
partnership or Joint Venture shall not, without more, cause such Person
to be, directly or indirectly, liable to make payments with respect to
such Debt or constitute a Guarantee of such Debt for purposes of
determining whether Debt is Non-Recourse, and provided further that
none of the following shall cause any Debt to fail to be Non-Recourse:
the incurrence of Debt, Guarantees or Liens jointly by (i) Cogentrix
Eastern Carolina Corporation and Cogentrix of North Carolina, Inc. (or
successor to the merger or other combination of such entities) with
respect to the Power Generation Facilities located at Elizabethtown,
Kenansville, Lumberton, Southport and Roxboro, North Carolina; (ii)
Cogentrix Virginia Leasing Corporation and James River Cogeneration
Company (or successor to the merger or other combination of such
entities) with respect to the Power Generation Facilities located at
Portsmouth and Hopewell, Virginia; and (iii) Subsidiaries of the
Borrower or Joint Ventures in which the Borrower or one of its
Subsidiaries is a partner, shareholder, member or other participant,
which become such after the date of this Agreement, incurred thereafter
with respect to the development or acquisition by such Subsidiaries or
Joint Ventures of multiple Power Generation Facilities, so long as no
such Subsidiary or Joint Venture has any direct or indirect interest in
any Power Generation Facility other than the Power Generation
Facilities to be developed or acquired or in any other business.
<PAGE> 24
19
"Notes": as defined in Section 2.5(e).
"Obligations": all of the Debt, obligations and liabilities of
the Loan Parties to the Agent, the Lead Arrangers, the Issuing Bank,
the Lenders, or to any of them now or in the future existing under or
in connection with this Agreement, the Notes, the CDH Guarantee or any
other Loan Document (as any of the foregoing may from time to time be
amended, modified, substituted, extended, or renewed), direct or
indirect, absolute or contingent, due or to become due, now or
hereafter existing.
"Other Borrower Indebtedness": any Debt of the Borrower of the
types described in clause (i) and (ii) of the definition of Debt which
has a term of not less than 5 years (other than the Obligations but
including the Borrower Indenture Securities) and which the Borrower is
not prohibited from incurring hereunder or under the Borrower
Indentures.
"Parent Cash Flow Coverage Ratio": for any period, the ratio
of (i) Adjusted Parent Operating Cash Flow for such period to (ii)
Parent Corporate Charges for such period.
"Parent Corporate Charges": for any period, the sum of the
following amounts (determined without duplication), in each case to the
extent paid by the Borrower during such period and regardless of
whether any such amount was accrued during such period:
(a) interest expenses of the Borrower for such
period, including without limitation all commissions,
discounts, other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and net costs
associated with Interest Rate Protection Agreements; and
(b) rental payments and other expenses of the
Borrower for such period under any Capitalized Lease.
"Parent Operating Cash Flow": for any period, the sum of the
following amounts (determined without duplication), but only to the
extent received in cash by the Borrower during such period and
regardless of whether any such amount was accrued during such period:
(a) dividends and distributions paid to the Borrower
by its Subsidiaries during such period;
(b) development, consulting, management or other fees
paid to the Borrower during such period;
(c) tax-sharing payments made to the Borrower during
such period;
<PAGE> 25
20
(d) interest, dividends and other distributions paid
during such period with respect to cash and cash investments
of the Borrower (other than with respect to amounts on deposit
in the Collateral Account except to the extent of any interest
earnings on cash deposited in the Collateral Account actually
paid to the Borrower pursuant to Section 3.9(c)); and
(e) other cash payments made to the Borrower by its
Subsidiaries other than (i) returns of invested capital upon
liquidation or sale, (ii) payments of the principal of Debt of
any such Subsidiary to the Borrower and (iii) payments in an
amount equal to the aggregate amount released from debt
service reserve accounts upon the issuance of Letters of
Credit for the benefit of the beneficiaries of such accounts.
"Participant": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Performance Letter of Credit": as defined in clause (i)(2) of
subsection 3.1(b).
"Permitted Holders": (a) George T. Lewis, Jr., Betty G. Lewis,
Robert W. Lewis, David J. Lewis and James E. Lewis (collectively, the
"Current Holders"), (b) members of the immediate families of the
Current Holders, (c) trusts for the benefit of Current Holders and
members of the immediate families of the Current Holders, and (d) a
non-profit corporation or foundation controlled by any of the Persons
described in (a), (b) or (c) of this definition. Members of a Person's
"immediate family" shall mean such Person's parents, brothers, sisters,
spouse and lineal descendants.
"Permitted Investment": any Investment of the type specified
in clause (iv) of the definition of Restricted Payment which is made
directly or indirectly by the Borrower and its Subsidiaries; provided
that the Person in which the Investment is made is (a) a Subsidiary
which, directly or indirectly, is or will be engaged in the
development, construction, marketing, management, acquisition,
ownership or operation of a Power Generation Facility or (b) a Joint
Venture; provided further, that, in the case of an Investment in a
Joint Venture, (i) at the time such Investment is made, the Borrower
could Incur at least $1 of Debt under subsection 7.2; (ii) at the time
such Investment is made, no Event of Default or event that, after the
giving of notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing; and (iii) such
Investment is in a Joint Venture which, directly or indirectly, is or
will be engaged in the development, construction, marketing,
management, acquisition, ownership or operation of a Power Generation
Facility.
"Permitted Payments": with respect to the Borrower or any of
its Subsidiaries (i) any dividend on shares of Capital Stock payable
(or to the extent paid) solely in shares
<PAGE> 26
21
of Capital Stock (other than Redeemable Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Redeemable
Stock); (ii) any dividend or other distribution payable to the Borrower
by any of its Subsidiaries or by a Subsidiary to a Wholly-Owned
Subsidiary; (iii) the repurchase or other acquisition or retirement for
value of any shares of the Borrower's Capital Stock, or any option,
warrant or other right to purchase shares of the Borrower's Capital
Stock with additional shares of, or out of the proceeds of a
substantially contemporaneous issuance of, Capital Stock other than
Redeemable Stock (unless the redemption provisions of such Redeemable
Stock prohibit the redemption thereof prior to the date on which the
Capital Stock to be acquired or retired was by its terms required to be
redeemed); (iv) any defeasance, redemption, repurchase or other
acquisition for value of any Debt which by its terms ranks subordinate
in right of payment to the Obligations with the proceeds from the
issuance of (x) Debt which is also subordinate to the Obligations at
least to the extent and in the manner as the Debt to be defeased,
redeemed, repurchased or otherwise acquired is subordinate in right of
payment to the Obligations; provided that such subordinated Debt
provides for no payments of principal by way of sinking fund, mandatory
redemption or otherwise (including defeasance) by the Borrower
(including, without limitation, at the option of the holder thereof
other than an option given to a holder pursuant to an asset disposition
or change of control covenant which is no more favorable to the holders
of such Debt than the provisions contained in subsections 2.6(b), 7.6,
7.9, 7.10 and 8(j) are to the Lenders and such Debt provides that the
Borrower will not repurchase such Debt pursuant to such provisions
prior to the date that all Obligations have been paid and performed in
full) prior to, or in an amount greater than, any Stated Maturity of
the Debt being replaced and the proceeds of such subordinated Debt are
utilized for such purpose within 45 days of issuance or (y) Capital
Stock (other than Redeemable Stock); (v) in respect of any actual
payment on account of an Investment (other than a Permitted Investment)
which is not fixed in amount at the time when made, the amount
determined by the Board of Directors to be a Restricted Payment on the
date such Investment was originally deemed to have been made (the
"Original Restricted Payment Charge") plus an amount equal to the
interest on a hypothetical investment in a principal amount equal to
the Original Restricted Payment Charge assuming interest at a rate of
7% per annum compounded annually for a period beginning on the date the
Investment was originally deemed to have been made and ending with
respect to any portion of the Original Restricted Payment Charge
actually paid on the date of actual payment less any actual payments
previously made on account of such Investment; provided that the
Permitted Payment under this clause (v) shall in no event exceed the
payment actually made; (vi) any amount required to be paid with respect
to an obligation outstanding on the date of this Agreement; or (vii) a
Permitted Investment.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
<PAGE> 27
22
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Power Generation Facility": an electric power or thermal
energy generation or cogeneration facility or related facilities
(including residual waste management and, to the extent such facilities
are in existence on the date of this Agreement or are required by
contract or applicable law, rule or regulation, facilities that use
thermal energy from a cogeneration facility), and its or their related
electric power transmission, fuel supply and fuel transportation
facilities, together with its or their related power supply, thermal
energy and fuel contracts and other facilities, services or goods that
are ancillary, incidental, necessary or reasonably related to the
marketing, development, construction, management or operation of the
foregoing, as well as other contractual arrangements with customers,
suppliers and contractors.
"Preferred Stock": with respect to any Person, any and all
shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of preferred or preference
stock of such Person which is outstanding or issued on or after the
date of this Agreement.
"Pro Forma Balance Sheet": as defined in subsection 4.1(e).
"Project Properties": as defined in subsection 4.15.
"Property": as to any Person, all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or
not included in the most recent consolidated balance sheet of such
Person under GAAP.
"Recovery Event": any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding
relating to any Property of the Borrower or any of its Subsidiaries.
"Redeemable Stock": any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be
redeemed prior to the later of the Final Maturity Date, the Stated
Maturity of the 2004 Senior Notes or the Stated Maturity of the 2008
Senior Notes, (ii) redeemable at the option of the holder of such class
or series of Capital Stock at any time prior to the later of the Final
Maturity Date or the Stated Maturity of the 2004 Senior Notes or the
Stated Maturity of the 2008 Senior Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above
or Debt having a scheduled maturity prior to the later of the Final
Maturity Date, the Stated Maturity of the 2004 Senior Notes or the
Stated Maturity of the 2008 Senior Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require the Borrower to
repurchase
<PAGE> 28
23
or redeem such Capital Stock upon the occurrence of an "asset sale" or
a "change of control" occurring prior to the later of the Final
Maturity Date or the Stated Maturity of the 2004 Senior Notes or the
Stated Maturity of the 2008 Senior Notes shall not constitute
Redeemable Stock if the asset disposition or change of control
provision applicable to such Capital Stock is no more favorable to the
holders of such Capital Stock than the provisions contained in
subsections 2.6(b), 7.6, 7.9, 7.10 and 8(j) are to the Lenders and such
Capital Stock specifically provides that the Borrower will not
repurchase or redeem any such Capital Stock pursuant to such provisions
prior to the date that all Obligations have been paid and performed in
full.
"Reference Period": the four complete fiscal quarters for
which financial information is available preceding the date of a
transaction giving rise to the need to make a financial calculation;
provided, that for purposes of this definition financial information
shall not be considered unavailable for any fiscal quarter on any day
that is 30 or more days after the last day of such fiscal quarter.
"Refinance": to issue Debt in order to substantially
concurrently repay, redeem, defease, refund, refinance, discharge or
otherwise retire for value, in whole or in part, other Debt or
securities.
"Register": as defined in subsection 10.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 3.5(a) for amounts
drawn under Letters of Credit.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. sec. 2615.
"Required Lenders": at any time, Lenders the Commitment
Percentages of which aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
<PAGE> 29
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"Responsible Officer": the chief executive officer or the
president of the Borrower or, with respect to financial matters, the
chief financial officer, the vice president-finance or the treasurer of
the Borrower.
"Restricted Payment": with respect to any Person, (i) any
dividend or other distribution on any shares of such Person's Capital
Stock; (ii) any payment on account of the purchase, redemption,
retirement or acquisition for value of such Person's Capital Stock;
(iii) any defeasance, redemption, repurchase or other acquisition or
retirement for value prior to the Stated Maturity of any Debt ranked
subordinate in right of payment to the Obligations; and (iv) any
Investment made in an Affiliate (other than the Borrower or CDH).
Notwithstanding the foregoing, "Restricted Payment" shall not include
any Permitted Payment.
"Revolving Credit Loans": as defined in subsection 2.1.
"Security Documents": the Account Pledge Agreement and the
Securities Account Control Agreement.
"Secured Parties": the collective reference to the Agent, the
Issuing Bank, the Lenders and the L/C Participants.
"Securities Account Control Agreement": as defined in
subsection 3.9(a).
"Significant Subsidiary": of a Person, as of any date, any
Subsidiary, or two or more Subsidiaries taken together in the event of
a cross-collateralization of such multiple Subsidiaries' Debt, which
has two or more of the following attributes: (i) it contributes 20% or
more of such Person's Excess Cash Flow for its most recently completed
fiscal quarter or (ii) it contributed 15% or more of Net Income before
tax of such Person and its consolidated Subsidiaries for such Person's
most recently completed fiscal quarter or (iii) it constituted 20% or
more of Consolidated Total Assets of such Person at the end of such
Person's most recently completed fiscal quarter.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Stated Maturity": with respect to any debt security or any
installment of interest thereon, the date specified in such debt
security as the fixed date on which any principal of such debt security
or any such installment of interest is due and payable.
"Subsidiary": with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other
ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by such
<PAGE> 30
25
Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Tangible Net Worth": with respect to any Person, as of the
date of determination, the Net Worth of such Person at such date, after
deducting therefrom all intangible assets, including without limitation
the following:
(a) any surplus resulting from the write-up of assets
subsequent to June 30, 1998;
(b) goodwill, including any amounts (however designated on the
balance sheet) representing Acquisition Premiums;
(c) patents, trademarks, copyrights, franchises, licenses,
service marks and brand names;
(d) leasehold improvements not recoverable at the expiration
of a lease; and
(e) deferred charges (including, but not limited to,
unamortized debt discount and expense, organization expenses and
experimental expenses and project and other development expenses, but
excluding prepaid expenses).
"Trade Payables": with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection
with the acquisition of goods or services.
"Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Revolving
Credit Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 10.6(f).
"2004 Senior Note Indenture": the Indenture, dated as of March
15, 1994, between the Borrower and the First Union National Bank of
North Carolina, a National Banking Association, as trustee, as amended,
supplemented or otherwise modified from time to time.
"2004 Senior Notes": the 8.10% Senior Notes Due 2004 issued by
the Borrower pursuant to the 2004 Senior Note Indenture.
"2008 Senior Note Indenture": the Indenture, dated as of
October 20, 1998, between the Borrower and First Union National Bank of
North Carolina, as trustee, as
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26
supplemented by the first Supplemental Indenture thereto dated as of
October 20, 1998, as amended, supplemented or otherwise modified from
time to time.
"2008 Senior Notes": the 8.75% Senior Notes Due 2008 issued by
the Borrower pursuant to the 2008 Senior Note Indenture.
"Type": (a) as to any Revolving Credit Loan, its nature as an
ABR Loan or a Eurodollar Loan and (b) as to any Letter of Credit, its
nature as a Financial Letter of Credit or a Performance Letter of
Credit.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Voting Stock": with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election
of directors (or persons fulfilling similar responsibilities) of such
Person.
"Wholly-Owned Subsidiary": with respect to any Person, any
Subsidiary of such Person if all of the Capital Stock or other
ownership interests in such Subsidiary having ordinary voting power
(other than stock or such other ownership interests having such power
only by reason of the happening of a contingency) to elect the entire
board of directors or entire group of other persons performing similar
functions (other than any director's qualifying shares or Investments
by foreign nationals mandated by applicable law) is owned directly or
indirectly, by one or more Wholly-Owned Subsidiaries of such Person's
Wholly-Owned Subsidiaries, by such Person.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
<PAGE> 32
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SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("Revolving Credit Loans") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Commitment Percentage of the then outstanding
L/C Obligations, does not exceed the amount of such Lender's Commitment at such
time. During the Commitment Period the Borrower may use the Commitments by
borrowing, prepaying and reborrowing the Revolving Credit Loans in whole or in
part, all in accordance with the terms and conditions hereof. At no time may the
aggregate outstanding principal amount of all Lenders= Revolving Credit Loans,
when added to then outstanding L/C Obligations, exceed the aggregate of all
Lenders= Commitments at such time.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Agent in accordance with subsections 2.2 and
2.7, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan
after the day that is one month prior to the Final Maturity Date.
(c) The Final Maturity Date may be extended, in the manner set
forth in this subsection 2.1(c), on October 29, 2000 (the "Extension Date"), for
a period of one year after the Final Maturity Date. If the Borrower wishes to
request an extension of the Final Maturity Date on the Extension Date, it shall
give written notice to that effect to the Agent not less than 45 nor more than
90 days prior to the Extension Date, whereupon the Agent shall notify each of
the Lenders of such notice. Each Lender will use reasonable efforts to respond
to such request, whether affirmatively or negatively, no later than 15 days
prior to the Extension Date. If all Lenders respond affirmatively (any Lender
which does not respond being deemed to have responded negatively), then, subject
to receipt by the Agent prior to the Extension Date of counterparts of an
Extension Agreement in substantially the form of Exhibit D duly completed and
signed by all of the parties hereto, the Final Maturity Date shall be extended,
effective on the Extension Date, for a period of one year to the date stated in
such Extension Agreement.
2.2 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Commitments during the Commitment Period on any Business Day in
the case of ABR Loans and on any Eurodollar Business Day in the case of
Eurodollar Loans, provided that the Borrower shall have delivered to the Agent a
properly completed Borrowing Request, duly executed by a Responsible Officer of
the Borrower, which notice shall be irrevocable and must be received by the
Agent prior to 10:00 A.M., New York City time, (a) three Eurodollar Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans or (b) one Business
Day prior to the requested Borrowing Date, otherwise. In each such Borrowing
Request, the Borrower shall, in addition to any other information required to be
therein, specify (i) the amount to be borrowed, (ii) the requested Borrowing
Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a
combination thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the
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respective amounts of each such Type of Revolving Credit Loan and the respective
lengths of the initial Interest Periods therefor. Each borrowing under the
Commitments of ABR Loans and each borrowing under the Commitments of Eurodollar
Loans shall be in an amount equal to $1,000,000 or a whole multiple of $500,000
in excess thereof. Upon receipt of any such notice from the Borrower, the Agent
shall promptly notify each Lender thereof. Each Lender will make the amount of
its pro rata share of each borrowing available to the Agent, by wire transfer
using Fedwire or such other method as reasonably specified by the Agent, for the
account of the Borrower at the office of the Agent specified in subsection 10.2
prior to 11:00 A.M., New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Agent. Such borrowing will then
be made available to the Borrower by the Agent by wire transfer to the account
specified in the Borrowing Request, in the amount of the aggregate of the
amounts made available to the Agent by the Lenders and in like funds as received
by the Agent.
2.3 Fees. (a) Commitment Fee. The Borrower agrees to pay to
the Agent for the account of each Lender a commitment fee (a "Commitment Fee")
for the Commitment Period computed at a rate per annum equal to the Applicable
Margin in effect from time to time for the Commitment Fee, such fee to be paid
on the average daily amount of the Available Commitment of such Lender during
the period for which payment is made. The Commitment Fee shall be payable
quarterly in arrears on the last day of each March, June, September and December
and on the Final Maturity Date or such earlier date as the Commitments shall
terminate as provided herein, commencing on the first of such dates to occur
after the date hereof.
(b) [intentionally omitted]
(c) Administration Fee. The Borrower agrees to pay to the
Agent, for its own account, a non-refundable fee (the "Administration Fee") for
its administration of this Agreement in the amount and at the times as agreed
between the Agent and the Borrower.
2.4 Termination or Reduction of Commitments.
(a) Optional. The Borrower shall have the right, upon not less
than thirty days' notice to the Agent, to terminate the Commitments or, from
time to time, to reduce the amount of the Commitments. Any such reduction shall
be in an amount equal to $1,000,000 or a whole multiple of $500,000 in excess
thereof and shall reduce permanently the Commitments then in effect.
(b) Mandatory. In the event that (i) the Borrower or any of
its Subsidiaries shall at any time before the day that is 366 days before the
Final Maturity Date receive any payment representing all or any part of the Net
Cash Proceeds of an Asset Disposition made by the Borrower or any of its
Subsidiaries or any Recovery Event and (ii) such payment shall not have been
invested in its entirety by the Borrower or its Subsidiaries in the business or
businesses of the Borrower or any of its Subsidiaries within 364 days of the
receipt of such payment, the amount of the Commitments shall be mandatorily
reduced on the day that is 365 days after the receipt of such payment in an
amount equal to the product of (x) the amount of the payment of
<PAGE> 34
29
Net Cash Proceeds not so invested times (y) the fraction obtained by dividing
(A) the amount of the Commitments then in effect by (B) the sum of the amount of
the Commitments then in effect plus the aggregate principal amount of the Other
Borrower Indebtedness then outstanding.
2.5 Repayment of Revolving Credit Loans; Evidence of Debt. (a)
The Borrower hereby unconditionally promises to pay to the Agent for the account
of each Lender the then unpaid principal amount of each Revolving Credit Loan of
such Lender on the Final Maturity Date (or such earlier date on which the
Revolving Credit Loans become due and payable pursuant to Section 8). The
Borrower hereby further agrees to pay interest on the unpaid principal amount of
the Revolving Credit Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 2.9.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Revolving Credit Loan of such Lender from time to
time, including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(c) The Agent shall maintain the Register pursuant to
subsection 10.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan made hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.5(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Agent to maintain the Register or any such account,
or any error therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Revolving Credit Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that it will execute and deliver to
each Lender upon the Closing Date, a promissory note of the Borrower evidencing
the Revolving Credit Loans of such Lender, substantially in the form of Exhibit
A with appropriate insertions as to date and principal amount (a " Note").
2.6 Prepayments.
(a) Optional. The Borrower may on the last day of any Interest
Period with respect thereto, in the case of Eurodollar Loans, or at any time and
from time to time, in the case of ABR Loans, prepay the Revolving Credit Loans,
in whole or in part, without premium or penalty, upon irrevocable notice to the
Agent, specifying the date and amount of prepayment and
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30
whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each, which
notice must be received by the Agent at least (i) three Eurodollar Business Days
prior to the date of prepayment if any of the Revolving Credit Loans to be
prepaid are Eurodollar Loans and (ii) one Business Day prior to the date of
prepayment, otherwise. Upon receipt of any such notice the Agent shall promptly
notify each Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein, together
with any amounts payable pursuant to subsection 2.16 and accrued interest to
such date on the amount prepaid. Partial prepayments shall be in an aggregate
principal amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof.
(b) Mandatory.
(i) In the event that the Commitments shall have been
reduced pursuant to subsection 2.4 and the aggregate principal amount
of the Revolving Credit Loans then outstanding, when added to the then
outstanding L/C Obligations, exceed the Commitments in effect after
such reduction less the aggregate amount then on deposit in the
Collateral Account (excluding any amounts then on deposit representing
interest or other earnings thereon), the Borrower shall apply an amount
equal to the amount of such excess to prepay the Revolving Credit Loans
or to collateralize the Letters of Credit or both.
(ii) Amounts to be applied pursuant to clause (i) of this
subsection 2.6(b) shall be applied first to prepay the principal amount
of the Revolving Credit Loans then outstanding until all such Revolving
Credit Loans shall have been prepaid in full, and if any excess then
remains such excess shall be deposited in the Collateral Account to be
held, applied or released for application as provided in subsection
3.9. The particular Revolving Credit Loans to be prepaid shall be
designated by the Borrower (or, failing such designation, as the Agent
may determine). Each prepayment shall be applied to prepay ratably the
Revolving Credit Loans of the Lenders. Each payment of principal shall
be made together with interest accrued on the amount prepaid to the
date of payment.
2.7 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Agent at least two Eurodollar Business Days' prior irrevocable notice of such
election, provided that any such conversion of Eurodollar Loans may only be made
on the last day of an Interest Period with respect thereto. The Borrower may
elect from time to time to convert ABR Loans to Eurodollar Loans by giving the
Agent at least three Eurodollar Business Days' prior irrevocable notice of such
election. Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon receipt
of any such notice the Agent shall promptly notify each Lender thereof. All or
any part of outstanding Eurodollar Loans or ABR Loans may be converted as
provided herein, provided that (i) no Revolving Credit Loan may be converted
into a Eurodollar Loan when any Event of Default has occurred and is
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continuing and (ii) no Revolving Credit Loan may be converted into a Eurodollar
Loan after the date that is one month prior to the Final Maturity Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Agent, in accordance with the applicable
provisions of the term "Interest Period" set forth in subsection 1.1, of the
length of the next Interest Period to be applicable to such Revolving Credit
Loans, provided that no Eurodollar Loan may be continued as such (i) when any
Event of Default has occurred and is continuing or (ii) after the date that is
one month prior to the Final Maturity Date and provided, further, that if the
Borrower shall fail to give such notice or if such continuation is not permitted
such Revolving Credit Loans shall be automatically converted to ABR Loans on the
last day of such then expiring Interest Period.
2.8 Minimum Amounts and Maximum Number of Tranches. All
borrowings, conversions and continuations of Revolving Credit Loans hereunder
and all selections of Interest Periods hereunder shall be in such amounts and be
made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of the Revolving Credit Loans comprising each Tranche
shall be equal to $1,000,000 or a whole multiple of $500,000 in excess thereof.
2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin for such Type of Revolving Credit Loan.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin for such Type of Revolving Credit
Loan.
(c) If all or a portion of (i) any principal of any Revolving
Credit Loan, (ii) any interest payable thereon, (iii) the Commitment Fee, the
Administration Fee, any Fronting Fee or any Letter of Credit Fee or (iv) any
other amount payable hereunder or under any other Loan Document shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
the principal of the Revolving Credit Loans and any such overdue interest,
Commitment Fee, Administration Fee, Fronting Fee, Letter of Credit Fee or other
amount shall bear interest at a rate per annum which is (x) in the case of
principal, the rate that would otherwise be applicable thereto pursuant to the
foregoing provisions of this subsection plus 2% or (y) in the case of any such
overdue interest, Commitment Fee, Administration Fee, Fronting Fee, Letter of
Credit Fee or other amount, the rate described in paragraph (b) of this
subsection plus 2%, in each case from the date of such non-payment until such
overdue principal, interest, Commitment Fee, Administration Fee, Fronting Fee,
Letter of Credit Fee or other amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
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2.10 Computation of Interest and Fees. (a) The Commitment Fee
and, whenever it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Revolving Credit Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such
change becomes effective. The Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Borrower, deliver to the Borrower a statement showing the
quotations used by the Agent in determining any interest rate pursuant to
subsection 2.9(a) or (c).
2.11 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Agent shall have determined (which determination shall
be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Agent shall have received notice from the Majority
Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to
such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Revolving Credit Loans during such Interest
Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as ABR Loans, (y) any Revolving Credit Loans that were to have
been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans that
were to have been continued as such on such first day shall be converted on such
day to ABR Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert ABR Loans to Eurodollar Loans.
2.12 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower of the
Commitment Fee or any Letter of Credit Fee and any reduction of the Commitments
of the Lenders shall be made pro rata
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according to the respective Commitment Percentages of the Lenders. Each payment
(including each prepayment) by the Borrower on account of principal of and
interest on the Revolving Credit Loans shall be made pro rata according to the
respective outstanding principal amounts of the Revolving Credit Loans then held
by the Lenders. All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim and shall be made prior to 11:00 a.m.,
New York City time, on the due date thereof to the Agent, for the account of the
Lenders, at the Agent's office specified in subsection 10.2, in Dollars and in
immediately available funds. The Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than a payment on any Eurodollar Loan) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Eurodollar Business Day, the maturity thereof shall be extended to the next
succeeding Eurodollar Business Day (unless the result of such extension would be
to extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Eurodollar Business Day) and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during any such extension.
(b) Unless the Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its Commitment Percentage of such borrowing available to the
Agent, the Agent may assume that such Lender is making such amount available to
the Agent, and the Agent may, in reliance upon such assumption, make available
to the Borrower a corresponding amount. If such amount is not made available to
the Agent by the required time on the Borrowing Date therefor, such Lender shall
pay to the Agent, on demand, such amount with interest thereon at a rate equal
to the daily average Federal Funds Effective Rate for the period until such
Lender makes such amount immediately available to the Agent. A certificate of
the Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender's Commitment Percentage of such borrowing is not made available to the
Agent by such Lender within three Business Days of such Borrowing Date, the
Agent shall also be entitled to recover such amount with interest thereon at the
rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower.
2.13 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled and (b) such Lender's Revolving Credit Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR
Loans on the respective last days of the then current Interest Periods with
respect to such Revolving Credit Loans or within such earlier period as required
by law. If any such conversion of a Eurodollar Loan occurs on a day which is not
the
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34
last day of the then current Interest Period with respect thereto, the Borrower
shall pay to such Lender such amounts, if any, as may be required pursuant to
subsection 2.16.
2.14 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender or the Issuing Bank with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender or the Issuing Bank to
any tax of any kind whatsoever with respect to this Agreement or any
other Loan Document or any Eurodollar Loan made by it, or change the
basis of taxation of payments to such Lender or the Issuing Bank in
respect thereof (except for Non-Excluded Taxes covered by subsection
2.15 and changes in the rate of tax on the overall net income of such
Lender or the Issuing Bank);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender or the Issuing
Bank which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on such Lender or the Issuing Bank
any other condition;
and the result of any of the foregoing is to increase the cost to such Lender or
the Issuing Bank, by an amount which such Lender or the Issuing Bank, as the
case may be, deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans or issuing or participating in Letters of Credit or
to reduce any amount receivable hereunder in respect thereof, then, in any such
case, the Borrower shall promptly pay such Lender or the Issuing Bank such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such increased cost or reduced amount receivable.
(b) If any Lender or the Issuing Bank shall have determined
that the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by such
Lender or the Issuing Bank or any corporation controlling such Lender or the
Issuing Bank with any request or directive regarding capital adequacy (whether
or not having the force of law) from any Governmental Authority made subsequent
to the date hereof shall have the effect of reducing the rate of return on such
Lender's or the Issuing Bank's or such corporation's capital as a consequence of
its obligations hereunder or under any Letter of Credit to a level below that
which such Lender or the Issuing Bank or such corporation could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or the Issuing Bank's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender or the Issuing Bank to be
material, then from time to time, the Borrower shall promptly pay to such Lender
or the Issuing Bank such
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35
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such reduction.
(c) If any Lender or the Issuing Bank becomes entitled to
claim any additional amounts pursuant to this subsection, it shall promptly
notify the Borrower (with a copy to the Agent) of the event by reason of which
it has become so entitled. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender or the Issuing Bank to the
Borrower (with a copy to the Agent) shall be conclusive in the absence of
manifest error. The agreements in this subsection shall survive the termination
of this Agreement and the payment of the Notes, the Revolving Credit Loans and
all other Obligations.
2.15 Taxes. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or the Issuing Bank or any
Lender as a result of a present or former connection between the Agent or the
Issuing Bank or such Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority thereof or
therein (other than any such connection arising solely from the Agent or the
Issuing Bank or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Agent or the Issuing Bank or any Lender
hereunder or under any Note, the amounts so payable to the Agent or the Issuing
Bank or such Lender shall be increased to the extent necessary to yield to the
Agent or the Issuing Bank or such Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement, provided, however, that the Borrower
shall not be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States of America or a state thereof
if such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Agent for its own
account or for the account of the Issuing Bank or such Lender, as the case may
be, a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Agent, the Issuing Bank and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Agent or the Issuing Bank
or any Lender as a result of any such failure. The agreements in this subsection
2.15(a) shall survive the termination of this Agreement and the payment of the
Notes, the Revolving Credit Loans and all other Obligations.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
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36
(i) deliver to the Borrower and the Agent (A) two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be;
(ii) deliver to the Borrower and the Agent two further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Agent;
unless in any such case 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 so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 10.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
2.16 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Revolving
Credit Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Bank on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank eurodollar market. This
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37
covenant shall survive the termination of this Agreement and the payment of the
Notes, the Revolving Credit Loans and all other Obligations.
2.17 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under subsection 2.14 or 2.15(a), or if any
adoption or change of the type described in subsection 2.13 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, as determined in its sole discretion) to designate
a different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 2.14 or
2.15(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 2.13.
2.18 Use of Proceeds The Borrower shall use the proceeds of
the Revolving Credit Loans solely for working capital and general corporate
purposes in the ordinary course of business.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Bank agrees to issue standby letters of credit ("Letters of
Credit") for the account of the Borrower or, at the Borrower's request, any
Subsidiary of the Borrower on any Business Day during the Commitment Period in
such form as may be approved from time to time by the Issuing Bank; provided,
that the Issuing Bank shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, the Available Commitment for any Lender,
or the Letter of Credit Availability, would be less than zero.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (1) a
standby letter of credit issued to support financial obligations
(incurred in the ordinary course of business) of the Borrower or any
Subsidiary of the Borrower, contingent or otherwise, to pay money (a
"Financial Letter of Credit") or (2) a standby letter of credit issued
to support non-financial obligations of the Borrower or any Subsidiary
of the Borrower, contingent or otherwise, to provide goods or services
in the ordinary course of business (a "Performance Letter of Credit");
(ii) have a face amount of (1) not less than $300,000 and
(2) not more than the amount that would, after giving effect to the
issuance thereof, cause the Available Commitment of any Lender or the
Letter of Credit Availability to be less than zero; and
(iii) expire (1) no earlier than 30 days after its date of
issue and (2) no later than five Business Days prior to the then Final
Maturity Date.
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38
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuing Bank shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
(e) Each party hereto acknowledges and agrees that each of the
Existing Letters of Credit is a Letter of Credit issued by the Issuing Bank
pursuant hereto for all purposes hereunder and under the other Loan Documents.
No amendment, modification or waiver of any provision of this Section 3 (or any
other provision in any manner that would affect any right or duty of the Issuing
Bank) may be made without the written consent of the Issuing Bank.
3.2 Procedure for Issuance of Letters of Credit. (a) The
Borrower may from time to time request that the Issuing Bank issue a Letter of
Credit by delivering to the Agent and the Issuing Bank a duly executed and
completed Issuance Request therefor, completed to the satisfaction of the Agent
and the Issuing Bank, and such other certificates, documents and other papers
and information relating to such Letter of Credit as the Issuing Bank may
reasonably request consistent with its current practices and procedures with
respect to letters of credit of the same type. In addition to such other
information as is required to be therein, the Borrower shall specify in any
Issuance Request:
(i) the proposed party for whose account the requested Letter
of Credit would be issued (which shall be either the Borrower or a
Subsidiary of the Borrower);
(ii) the proposed beneficiary of the requested Letter of
Credit;
(iii) the proposed date of issuance of the requested Letter of
Credit;
(iv) the proposed expiry date of the requested Letter of
Credit;
(v) the proposed terms of the requested Letter of Credit,
including the proposed face amount thereof and whether it would
constitute a Financial Letter of Credit or a Performance Letter of
Credit; and
(vi) the transaction that is to be supported or financed with
the requested Letter of Credit, including identification of the Power
Generation Facility, if any, to which such Letter of Credit would
relate.
(b) Upon receipt of any Issuance Request, the Issuing Bank
will process such Issuance Request and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Bank be required to issue
any Letter of Credit earlier than three Business Days after its receipt of the
Issuance Request therefor
<PAGE> 44
39
and all such other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by the Issuing Bank and the
Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to the
Borrower promptly following the issuance thereof.
3.3 Fees, Commissions and Other Charges. (a) The Borrower
shall pay to the Agent, for the account of the Issuing Bank, a fronting fee
("Fronting Fee") with respect to each Letter of Credit in the amount and at the
times as agreed between the Issuing Bank and the Borrower.
(b) The Borrower shall pay to the Agent, for the account of
the Issuing Bank and the L/C Participants, a letter of credit fee ("Letter of
Credit Fee") with respect to each Letter of Credit, computed for the period from
and including the date of the issuance of such Letter of Credit and to but
excluding the date such Letter of Credit expires, at a rate per annum,
calculated on the basis of a 365- (or 366-, as the case may be) day year, equal
to the Applicable Margin in effect from time-to-time for the Type of such Letter
of Credit and calculated on the aggregate amount available for drawing under
such Letter of Credit for each day during the period for which such fee is then
being calculated. Each Letter of Credit Fee shall be payable to the L/C
Participants to be shared ratably among them in accordance with their respective
Commitment Percentages. Each Letter of Credit Fee shall be payable in arrears on
each L/C Fee Payment Date to occur after the date of issuance of each Letter of
Credit and shall be nonrefundable.
(c) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse the Issuing Bank for such normal and customary
costs and expenses as are incurred or charged by the Issuing Bank in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(d) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this subsection.
3.4 L/C Participations. (a) The Issuing Bank irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Bank to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Commitment Percentage in the Issuing Bank's obligations and rights
under each Letter of Credit issued hereunder and the amount of each draft paid
by the Issuing Bank thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Bank that, if a draft is paid under any
Letter of Credit for which the Issuing Bank is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant
shall pay to the Issuing Bank upon first demand at the Issuing Bank's address
for notices specified herein an amount equal to such L/C Participant's
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
<PAGE> 45
40
(b) If any amount required to be paid by any L/C Participant
to the Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
funds rate, as quoted by the Issuing Bank, during the period from and including
the date such payment is required to the date on which such payment is
immediately available to the Issuing Bank, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.4(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate per annum applicable to ABR Loans hereunder. A certificate
of the Issuing Bank submitted to any L/C Participant with respect to any amounts
owing under this subsection shall be conclusive in the absence of manifest
error.
(c) Whenever, at any time after the Issuing Bank has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection 3.4(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the Issuing
Bank will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Bank shall be required to be returned by the Issuing Bank, such L/C
Participant shall return to the Issuing Bank the portion thereof previously
distributed by the Issuing Bank to it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower
agrees to reimburse the Issuing Bank on each date on which the Issuing Bank
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Bank for the amount of such draft so
paid. Each such payment shall be made to the Issuing Bank at its address for
notices specified herein in lawful money of the United States of America and in
immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrower under this subsection from the date such amounts become
payable (whether at stated maturity, by acceleration or otherwise) until payment
in full at the rate which would be payable on any outstanding ABR Loans which
were then overdue.
(c) Each drawing under any Letter of Credit during the
Commitment Period shall be deemed a request by the Borrower to the Agent for a
borrowing pursuant to subsection 2.2 (Procedure for Revolving Credit Borrowing)
of ABR Loans in the amount of such drawing. The Borrowing Date with respect to
such borrowing shall be the date of such drawing.
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41
3.6 Obligations Absolute. (a) The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Bank or any
beneficiary of a Letter of Credit.
(b) The Borrower also agrees with the Issuing Bank that the
Issuing Bank shall not be responsible for, and the Borrower's Reimbursement
Obligations under subsection 3.5(a) shall not be affected by, among other
things, (i) the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or (ii) any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or (iii) any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of Credit,
except for errors or omissions caused by the Issuing Bank's gross negligence or
willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
the Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence of willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Bank to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Bank shall promptly notify
the Borrower of the date and amount thereof. The responsibility of the Issuing
Bank to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
3.8 Issuance Request. To the extent that any provision of any
Issuance Request related to any Letter of Credit is inconsistent with the
provisions of this Section 3, the provisions of this Section 3 shall apply.
3.9 Collateralization. (a) All amounts required to be
deposited as Collateral with the Agent pursuant to subsection 2.6(b) or Section
8 shall be deposited in a collateral account established by CDH with the Agent
(the "Collateral Account"), to be held, applied or released for application as
provided in this subsection 3.9. Promptly after being requested by the Agent,
the Borrower shall cause CDH to execute and deliver to the Agent, (i) an Account
Pledge Agreement substantially in the form of Exhibit H (the "Account Pledge
Agreement") pursuant to which, as provided therein, CDH shall grant to the
Agent, for the benefit of the Secured Parties, a security
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42
interest in, among other things, all cash, securities and other financial
instruments in the Collateral Account to secure the Obligations, (ii) a
securities account control agreement substantially in the form of Exhibit I (the
"Securities Account Control Agreement") and (iii) such further documents and
instruments as the Agent may reasonably request to evidence the creation and
perfection of such security interest in the Collateral Account.
(b) In the event of a payment by the Issuing Bank of a draft
presented under any Letter of Credit, the amount of such drawing (but not more
than the amount in the Collateral Account at the time) shall be withdrawn by the
Agent from the Collateral Account and shall be paid to the Issuing Bank to be
applied against such drawing. If on any L/C Fee Payment Date the amount in the
Collateral Account exceeds the then outstanding L/C Obligations, the excess
amount shall, so long as no Default shall have occurred and be continuing, be
withdrawn by the Agent and paid to the Borrower on such L/C Fee Payment Date. If
an Event of Default shall have occurred and be continuing, such excess amount
shall, if and when requested by the Required Lenders, be withdrawn by the Agent
and applied first to repay the Reimbursement Obligations, second to repay the
Revolving Credit Loans and other due and unpaid amounts required to be paid by
the Borrower hereunder and third any remaining excess shall be paid to the
Borrower.
(c) Interest and other payments and distributions made on or
with respect to the Collateral held in the Collateral Account shall be for the
account of CDH and shall constitute Collateral to be held by the Agent or
returned to the Borrower in accordance with subsection 3.9(b). Funds held in the
Collateral Account shall be invested in time deposits with the Agent which pay a
market rate of interest for a like deposit with a comparable financial
institution. Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights the
preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any agent or bailee selected by the Agent in good faith. All
expenses and liabilities incurred by the Agent in connection with taking,
holding and disposing of any Collateral (including customary custody and similar
fees with respect to any Collateral held directly by the Agent) shall be paid by
the Borrower or CDH from time to time upon demand. Upon a Default, the Agent
shall be entitled to apply (and, at the request of the Required Lenders but
subject to applicable law, shall apply) Collateral or the proceeds thereof to
payment of any such expenses, liabilities and fees.
3.10 Substitution/Replacement of Issuing Bank. (a) In the
event that the Issuing Bank shall refuse pursuant to subsection 3.1(d) to issue
any Letter of Credit requested by the Borrower, the Borrower may request any L/C
Participant to issue such Letter of Credit hereunder in substitution for the
Issuing Bank by delivering to such L/C Participant and to the Agent a duly
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executed and completed Issuance Request in accordance with subsection 3.2, and
such L/C Participant may agree to issue such Letter of Credit (but no L/C
Participant shall be under any obligation to do so); provided, that the issuance
by such L/C Participant of such Letter of Credit would not conflict with any
Requirement of Law applicable to any other L/C Participant or cause any other
L/C Participant to exceed any limits imposed by any applicable Requirement of
Law. Any L/C Participant issuing a Letter of Credit pursuant to this subsection
3.10(a) shall be deemed hereunder and under the other Loan Documents to be, and
to have all rights, powers, duties and obligations of, the Issuing Bank for the
purposes of such Letter of Credit without any further act or deed on the part of
any of the L/C Participants or any other party to this Agreement.
(b) If at any time the senior unsecured long-term debt
securities of ANZ shall be rated less than "A1" by Moody's Investors Service,
Inc. or less than "A+" by Standard & Poor's Rating Group, the Borrower may
request any L/C Participant, and such L/C Participant may agree, to succeed ANZ
as Issuing Bank hereunder (but no L/C Participant shall be under any obligation
to do so). In such event, upon 10 days' prior written notice to the Agent, ANZ
and each L/C Participant but without any further act or deed on the part of any
of the L/C Participants or any other party to this Agreement, such L/C
Participant shall succeed ANZ as Issuing Bank hereunder and be deemed hereunder
and under the other Loan Documents to be, and to have all rights, powers, duties
and obligations of, the Issuing Bank for the purposes of each Letter of Credit
issued thereafter by such L/C Participant; provided, that ANZ shall remain, and
have all rights, powers, duties and obligations of, the Issuing Bank with
respect to (i) any actions taken or omitted to be taken by it while it was
Issuing Bank and (ii) each Letter of Credit issued by ANZ as Issuing Bank that
shall not have been surrendered and returned to ANZ by the beneficiary thereof
in a manner acceptable to ANZ in its sole discretion.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agent, the Issuing Bank and the Lenders to enter
into this Agreement and to make the Revolving Credit Loans and issue or
participate in the Letters of Credit, the Borrower hereby represents and
warrants to the Agent, the Issuing Bank and each Lender that:
4.1 Financial Information. (a)(i) The audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at December
31, 1998 and the related audited consolidated statements of income, of retained
earnings and of cash flows for the fiscal period ended on such date, reported on
by Arthur Anderson, LLP, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the fiscal period then ended.
(ii) The unaudited unconsolidated balance sheets of the
Borrower and of CDH as at December 31, 1998 and the related unaudited
unconsolidated statement of income for the fiscal period ended on such date,
certified by a Responsible Officer, copies of which have
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44
heretofore been furnished to each Lender, are complete and correct and present
fairly the unconsolidated financial condition of the Borrower and CDH as at such
date, and the unconsolidated results of their operations for the fiscal period
then ended.
(iii) The unaudited consolidating balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31,1998 and the
related unaudited consolidating statement of income for the fiscal period ended
on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidating financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidating results of
their operations for the fiscal period then ended.
(iv) The unaudited statements of cash flow to the Borrower
from each of its consolidated Subsidiaries for the fiscal period ended on
December 31, 1998, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the cash flow to the Borrower from each of its consolidated Subsidiaries
for the fiscal period then ended.
(b)(i) The unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31, 1999 and the
related unaudited consolidated statements of income, of retained earnings and of
cash flows for the fiscal period ended on such date, certified by a Responsible
Officer, copies of which have heretofore been furnished to each Lender, are
complete and correct and present fairly the consolidated financial condition of
the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations for the fiscal period then ended
(subject to normal year-end audit adjustments).
(ii) The unaudited unconsolidated balance sheets of the
Borrower and CDH as at December 31, 1999 and the related unaudited
unconsolidated statements of income for the fiscal period then ended, certified
by a Responsible Officer, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the unconsolidated financial
condition of the Borrower and CDH as at such dates, and the unconsolidated
results of their operations for the fiscal period then ended (subject to normal
year-end audit adjustments).
(iii) The unaudited consolidating balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31, 1999 and the
related unaudited consolidating statement of income for the fiscal period then
ended, certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly the
consolidating financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidating results of their operations
for the fiscal period then ended (subject to normal year-end audit adjustments).
(iv) The unaudited statements of cash flow to the Borrower
from each of its consolidated Subsidiaries for the fiscal period ended on
December 31, 1999, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are
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45
complete and correct and present fairly the cash flow to the Borrower from each
of its consolidated Subsidiaries for the fiscal period then ended (subject to
normal year-end audit adjustments).
(c) All of the financial statements referred to in clause (a)
and (b) above, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein).
(d) Neither the Borrower nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material Guarantee Obligation, contingent liability or liability for
taxes, or any long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or in
the notes thereto. Except as disclosed on Schedule III, during the period from
December 31, 1999 to and including the date of this Agreement there has been no
sale, transfer or other disposition by the Borrower or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial condition
of the Borrower and its consolidated Subsidiaries at December 31, 1999.
4.2 No Change. (a) Except as disclosed on Schedule III, since
December 31, 1998 there has been no development or event which has had or could
reasonably be expected to have a Material Adverse Effect, and (b) during the
period from December 31, 1999 to and including the date of this Agreement no
dividends or other distributions have been declared, paid or made upon the
Capital Stock of the Borrower nor has any of the Capital Stock of the Borrower
been redeemed, retired, purchased or otherwise acquired for value by the
Borrower or any of its Subsidiaries.
4.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization (except, in
the case of the Borrower's Subsidiaries, to the extent that the failure to be so
organized, validly existing or in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect), (b) has the corporate
or partnership power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged (except, in the case of the Borrower's
Subsidiaries, to the extent that the failure to have such power and authority or
legal right could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect), (c) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
(except, in the case of the Borrower's Subsidiaries, to the extent that the
failure to be so duly qualified or in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect) and, (d) is in
compliance with all
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46
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations.
The Borrower has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the Notes and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person (other
than those that have been given or made) is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which the Borrower is a party. This
Agreement has been, and each other Loan Document to which it is a party will be,
duly executed and delivered on behalf of the Borrower. This Agreement
constitutes, and each other Loan Document to which it is a party when executed
and delivered will constitute, a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
4.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents to which the Borrower is a party, the borrowings hereunder
and the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the Borrower or of any of its Subsidiaries and will
not result in, or require, the creation or imposition of any Lien (other than
any Lien created by the Loan Documents) on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation.
4.6 No Material Litigation. Except as disclosed on Schedule
IV, no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby or (b)
which could reasonably be expected to have a Material Adverse Effect.
4.7 No Default. The Borrower is not in default under or in
respect of any of its obligations under either Borrower Indenture, and no "Event
of Default" (as defined in either Borrower Indenture) has occurred and is
continuing under such Borrower Indenture. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real
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47
property, and good title to, or a valid leasehold interest in, all its other
property, and none of the Borrower's property is subject to any Lien except as
permitted by subsection 7.8.
4.9 Taxes. Each of the Borrower and its Subsidiaries has filed
or caused to be filed all tax returns which, to the knowledge of the Borrower,
are required to be filed and has paid all taxes shown to be due and payable on
said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.
4.10 Federal Regulations. No part of the proceeds of any
Revolving Credit Loans will be used for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation G or Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. If requested by any
Lender or the Agent, the Borrower will furnish to the Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case
may be.
4.11 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits. Neither the Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. The
present value (determined using actuarial and other assumptions which are
reasonable in respect of the benefits provided and the employees participating)
of the liability of the Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits.
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48
4.12 Investment Company Act; Public Utility Holding Company
Act; Other Regulations. The Borrower is not (a) an "investment company," or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, or (b) a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended. The Borrower is not subject to regulation under any Federal or State
statute or regulation (other than Regulation X of the Board of Governors of the
Federal Reserve System) which limits its ability to incur Debt.
4.13 Subsidiaries. All the Subsidiaries of the Borrower at the
date of this Agreement are listed on Schedule V.
4.14 Purpose of the Revolving Credit Loans. The proceeds of
the Revolving Credit Loans shall be used by the Borrower for working capital and
general corporate purposes in the ordinary course of business.
4.15 Environmental Matters. Except as set forth on Schedule
VI:
(a) To the best knowledge of the Borrower, the facilities and
properties owned, leased or operated by the Borrower or any of its
Subsidiaries (the "Project Properties") do not contain, and have not
previously contained, any Materials of Environmental Concern in amounts
or concentrations which (i) constitute or constituted a violation of,
or (ii) could reasonably be expected to give rise to liability under,
any Environmental Law, except in either case insofar as such violation
or liability, or any aggregation thereof, is not reasonably likely to
have a Material Adverse Effect.
(b) To the best knowledge of the Borrower, the Project
Properties and all operations at the Project Properties are in
compliance, and have been in compliance while owned, leased or operated
by the Borrower or any of its Subsidiaries, in all material respects
with all applicable Environmental Laws, and there is no contamination
at, under or about the Project Properties or violation of any
Environmental Law with respect to the Project Properties or the
business operated by the Borrower or any of its Subsidiaries (the
"Business") which could materially interfere with the continued
operation of the Project Properties or materially impair the fair
saleable value thereof.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Project
Properties or the Business, nor does the Borrower have knowledge or
reason to believe that any such notice will be received or is being
threatened, except insofar as such notice or threatened notice, or any
aggregation thereof, does not involve a matter or matters that is or
are reasonably likely to have a Material Adverse Effect.
<PAGE> 54
49
(d) To the best knowledge of the Borrower, Materials of
Environmental Concern have not been transported or disposed of from the
Project Properties in violation of, or in a manner or to a location
which could reasonably be expected to give rise to liability under, any
Environmental Law, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of the
Project Properties (i) in violation of any applicable Environmental Law
which violation, or any aggregation thereof, could reasonably be
expected to give rise to material liability to the Borrower or any of
its Subsidiaries under any applicable Environmental Law or (ii) in a
manner that could reasonably be expected to give rise to material
liability to the Borrower or any of its Subsidiaries under any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened,
under any Environmental Law to which the Borrower or any Subsidiary is
or will be named as a party with respect to the Project Properties or
the Business, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Project Properties or the
Business that could reasonably be expected to give rise to material
liability to the Borrower or any of its Subsidiaries under any
applicable Environmental Law.
(f) To the best knowledge of the Borrower, there has been no
release or threat of release of Materials of Environmental Concern at
or from the Project Properties, or arising from or related to the
operations of the Borrower or any Subsidiary in connection with the
Project Properties or otherwise in connection with the Business, (i) in
violation of any applicable Environmental Law which violation, or any
aggregation thereof, could reasonably be expected to give rise to
material liability to the Borrower or any of its Subsidiaries under any
applicable Environmental Law or (ii) in amounts or in a manner that
could reasonably give rise to material liability to the Borrower or any
of its Subsidiaries under any applicable Environmental Law.
4.16 Accuracy of Information; Full Disclosure. No
representation, warranty or other statement made by any Loan Party in this
Agreement, the CDH Guarantee or any other Loan Document or in any certificate,
written statement or other document furnished to the Agent or any Lender by or
on behalf of any Loan Party pursuant to or in connection with this Agreement,
the CDH Guarantee or any other Loan Document or the transactions contemplated
hereby or thereby, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Borrower as of the date of this
Agreement which the Borrower has not disclosed to the Agent and the Lenders in
writing prior to the date of this Agreement which has had, or could reasonably
be expected to have, a Material Adverse Effect.
<PAGE> 55
50
4.17 Security Documents. The provisions of the Security
Documents, when executed and delivered, will be sufficient to create in favor of
the Agent for the benefit of the Secured Parties a legal, valid and enforceable
security interest in the Collateral and all proceeds thereof to the extent a
security interest can be created therein under the Uniform Commercial Code of
the State of New York.
4.18 Year 2000 Matters. Any reprogramming required to permit
the proper functioning (but only to the extent that such proper functioning
would otherwise be impaired by the occurrence of the year 2000) in and following
the year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Borrower or any of its
Subsidiaries or used or relied upon in the conduct of their business (including
any such systems and other equipment supplied by others to the Borrower or any
of its Subsidiaries), and the testing of all such systems and other equipment as
so reprogrammed, have been completed. The costs to the Borrower and its
Subsidiaries for such reprogramming and testing and for the other reasonably
foreseeable consequences to them of any improper functioning of their computer
systems and other equipment containing embedded microchips due to the occurrence
of the year 2000 could not reasonably be expected to result in a Default or
Event of Default or to have a Material Adverse Effect. The computer systems of
the Borrower and its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be, sufficient for
the conduct of their business as currently conducted.
4.19 Intermediate Holding Company Debt and Liens. As of the
date of this Agreement, no Intermediate Holding Company has any Debt or Liens
outstanding on any of its Property, other than (i) Debt Incurred and Liens
created under this Agreement and the other Loan Documents, (ii) in the case of
CMA, Debt Incurred under the CMA Credit Agreement in the amount of $14,516,000
and Liens created in connection therewith, (iii) in the case of CEA, Debt
Incurred under the CEA Credit Agreement in the amount of $66,400,000 and Liens
created in connection therewith and (iv) Liens described in clause (iii) of the
parenthetical contained in subsection 7.12(A).
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Effectiveness of Agreement. This Agreement
shall become effective on the date on which each of the following conditions
shall have been fulfilled, as such date is specified in a notice given by the
Agent to the other parties hereto:
(a) Loan Documents. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of each
of the Borrower, the Issuing Bank and Lenders constituting the Required
Lenders, with a counterpart for each Lender, (ii) for the account of
each Lender, a Note, dated the Closing Date, conforming to the
requirements hereof and executed and delivered by a duly authorized
officer of the Borrower, and (iii) the CDH Guarantee, executed and
delivered by a duly authorized officer of CDH, with a counterpart for
each Lender.
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51
(b) Related Agreements. The Agent shall have received, with a
copy for each Lender, a true and correct copy, certified as to
authenticity by the Borrower, of each of the Borrower Indentures.
(c) Corporate Proceedings of the Borrower. The Agent shall
have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of the Borrower authorizing (i) the execution,
delivery and performance of this Agreement, the Notes and the other
Loan Documents to which it is a party and (ii) the borrowings
contemplated hereunder, certified by the Secretary or an Assistant
Secretary of the Borrower as of the Closing Date, which certificate
shall be in form and substance satisfactory to the Agent and shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(d) Borrower Incumbency Certificate. The Agent shall have
received, with a counterpart for each Lender, a Certificate of the
Borrower, dated the Closing Date, as to the incumbency and signature of
the officers of the Borrower executing any Loan Document satisfactory
in form and substance to the Agent, executed by the Secretary or any
Assistant Secretary of the Borrower and countersigned by one such
officer of the Borrower.
(e) Corporate Proceedings of CDH. The Agent shall have
received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Agent, of the
Board of Directors of CDH authorizing the execution, delivery and
performance of the CDH Guarantee, certified by the Secretary or an
Assistant Secretary of CDH as of the Closing Date, which certificate
shall be in form and substance satisfactory to the Agent and shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(f) Incumbency Certificate of CDH. The Agent shall have
received, with a counterpart for each Lender, a certificate of CDH,
dated the Closing Date, as to the incumbency and signature of the
officer of CDH executing the CDH Guarantee, satisfactory in form and
substance to the Agent, executed by the Secretary or any Assistant
Secretary of CDH and countersigned by such officer of CDH.
(g) Corporate Documents. The Agent shall have received, with a
counterpart for each Lender, true and complete copies of the
certificate or articles of incorporation and by-laws of each Loan
Party, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of such Loan Party.
(h) Fees and Expenses. The Agent shall have received, for its
own account and the accounts of the Lenders entitled thereto, all fees
payable by the Borrower on the Closing Date as previously agreed by the
Borrower. The Agent shall have received
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52
payment for all of its costs and expenses then payable to it as the
Agent pursuant to subsection 10.5.
(i) Legal Opinion. The Agent shall have received, with a
counterpart for each Lender the executed legal opinion of McGuire,
Woods Battle & Boothe LLP, counsel to the Borrower and CDH,
substantially in the form of Exhibit F. Such legal opinion shall cover
such other matters incident to the transactions contemplated by this
Agreement as the Agent may reasonably require.
(j) Lien Searches. The Agent shall have received the results
of a recent search by a Person satisfactory to the Agent of the Uniform
Commercial Code, judgement and tax lien filings which may have been
filed with respect to personal property of the Borrower and CDH, and
the results of such search shall be reasonably satisfactory to the
Agent.
(k) [intentionally omitted]
(l) Existing Credit Agreement. All accrued and unpaid fees
under the Existing Credit Agreement shall have been paid in full.
(m) Financial Statements and Financial Projections. The
Lenders shall have received all of the financial statements described
in subsection 4.1 and financial projections of the Borrower and its
Subsidiaries in form and substance and for a period of time reasonably
satisfactory to the Lenders.
(n) [intentionally omitted]
(o) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be satisfactory in form and substance to the Agent, and
the Agent shall have received such other documents and legal opinions
in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
5.2 Conditions to Each Revolving Credit Loan and Each Letter
of Credit. The agreement of each Lender to make any Revolving Credit Loan, and
of the Issuing Bank to issue any Letter of Credit, requested to be made or
issued by it on any date (including, without limitation, its initial Revolving
Credit Loan or Letter of Credit) is subject to the satisfaction of the following
conditions precedent:
(a) Borrowing or Issuance Request. Except in the case of a
request for a borrowing deemed to be made pursuant to subsection
3.5(c), the Agent and, in the case of a request for a Letter of Credit,
the Issuing Bank shall have received a Borrowing Request or Issuance
Request, as the case may be, for such Revolving Credit Loan or Letter
of Credit, duly executed by a Responsible Officer of the Borrower and
completed, with the
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53
appropriate insertions and attachments, to the satisfaction of the
Agent and, in the case of an Issuance Request, the Issuing Bank.
(b) Representations and Warranties. Each of the
representations and warranties made by the Borrower or CDH in or
pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such
date (or, if such representation or warranty is expressly stated to
have been made as of a specific date, such specific date).
(c) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to all
Extensions of Credit requested to be made on such date.
(d) Financial Covenants. The Agent shall have received a
certificate of a Responsible Officer of the Borrower (i) setting forth
in reasonable detail the calculations and financial information
necessary to determine the Parent Cash Flow Coverage Ratio, for the
four most recent consecutive fiscal quarters of the Borrower and the
Leverage Ratio and the Adjusted Tangible Net Worth of the Borrower as
at the last day of the most recently ended fiscal quarter and (ii)
certifying that the Borrower is then in compliance with subsection 7.1.
Each borrowing of a Revolving Credit Loan by and Letter of Credit issued at the
request of the Borrower hereunder shall constitute a representation and warranty
by the Borrower as of the date thereof that the conditions contained in this
subsection have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, until the Commitments are
terminated, all Obligations have been paid and performed in full, no L/C
Obligations are outstanding and all Letters of Credit have expired and are no
longer outstanding, the Borrower shall:
6.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, (i) a copy of the
audited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash
flows for such fiscal year, setting forth in each case in comparative
form the figures for the fiscal year immediately preceding such fiscal
year, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
Arthur Anderson, LLP or other independent certified public accountants
of nationally recognized standing, (ii) a copy of the unaudited
unconsolidated balance sheet of the Borrower as at the end of such
fiscal year and the related unconsolidated statements of income for
such
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54
fiscal year, setting forth in each case in comparative form the figures
for the fiscal year immediately preceding such fiscal year, certified
by a Responsible Officer as being fairly stated in all material
respects, (iii) a copy of the unaudited consolidating balance sheet of
the Borrower and its consolidated Subsidiaries as at the end of such
fiscal year and the related consolidating statement of income for such
fiscal year, setting forth in each case in comparative form the figures
for the fiscal year immediately preceding such fiscal year, certified
by a Responsible Officer as being fairly stated in all material
respects, (iv) a statement of cash flows for such fiscal year to the
Borrower from each of its Subsidiaries, setting forth in each case in
comparative form the figures for the fiscal year immediately preceding
such fiscal year, certified by a Responsible Officer as being fairly
stated in all material respects and (v) a copy of the unaudited
unconsolidated balance sheet of CDH as at the end of such fiscal year
and the related unconsolidated statements of income for such fiscal
year, setting forth in comparative figures for the fiscal year
immediately preceding such fiscal year, certified by a Responsible
Officer as being fairly stated in all material respects; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Borrower, (i) the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
income and retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, (ii) the unaudited
unconsolidated balance sheet of the Borrower as at the end of such
quarter and the related unconsolidated statements of income for such
quarter and the portion of the fiscal year through the end of such
quarter, (iii) the unaudited consolidating balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such
quarter and the related consolidating statement of income for such
quarter and the portion of the fiscal year through the end of such
quarter, (iv) a statement of cash flows to the Borrower from each of
its Subsidiaries for such quarter and the portion of the fiscal year
through the end of such quarter and (v) the unaudited balance sheet of
CDH as at the end of such quarter and the related statements of income
of CDH for such quarter and the portion of the fiscal year through the
end of such quarter, setting forth in the case of each of subclause
(i), (ii), (iii), (iv) and (v) in comparative form the figures for the
corresponding quarter in the fiscal year immediately preceding such
fiscal year, certified by a Responsible Officer as being fairly stated
in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Lender:
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(a) concurrently with the delivery of the financial statements
referred to in clause (i) of subsection 6.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and 6.1(b), a certificate of a
Responsible Officer (i) stating that, to the best of such Officer's
knowledge, during such period the Borrower has observed or performed
all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
be observed, performed or satisfied by it, and that such Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate, (ii) setting forth in reasonable detail
the calculations and financial information required to establish
whether the Borrower is in compliance with subsection 7.1 and (iii)
certifying the amount, as of the end of such period, of the sum of
clauses (i) through (v) of subsection 7.4(c) and setting forth in
reasonable detail the calculations and financial information required
to determine such sum;
(c) not later than thirty days prior to the end of each fiscal
year of the Borrower, a copy of the projections by the Borrower of the
consolidated operating budget and cash flow budget of the Borrower and
its consolidated Subsidiaries for the succeeding fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer
to the effect that such projections have been prepared on the basis of
sound financial planning practice and that such Officer has no reason
to believe they are based on unreasonable assumptions or misleading in
any material respect;
(d) within five days after the same are filed, copies of all
financial statements and reports which the Borrower may make to, or
file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(e) concurrently with the delivery thereof, copies of all
certificates, notices and other written communications which the
Borrower delivers pursuant to either Borrower Indenture to any party
thereto;
(f) not less than 10 days prior to the anticipated date of any
Asset Disposition by the Borrower or any of its Subsidiaries, or
promptly after the occurrence of any Recovery Event which will result
in Net Cash Proceeds, a certificate of a Responsible Officer of the
Borrower setting forth (i) in the case of any Asset Disposition, a
description of the transaction resulting in such Asset Disposition
(including, without limitation, an identification of the securities,
assets or other Property to be sold or otherwise disposed of) and a
description and valuation of the consideration to be received by the
Borrower or such Subsidiary for such Asset Disposition, (ii) in the
case of any Recovery Event, a description of such Recovery Event
(including, without limitation, an identification of
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the Property which is the subject of such Recovery Event) and (iii) in
the case of any Asset Disposition or any Recovery Event, the date or
dates upon which any Net Cash Proceeds therefrom are anticipated to be
received by the Borrower or such Subsidiary and the amount of the Net
Cash Proceeds anticipated to be received on such date or each of such
dates; and
(g) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, (a) all of the Obligations and (b) all of its other obligations of whatever
nature, except in the case of this clause (b) where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower; provided, that no Default or Event of Default shall
exist under this subsection 6.3(b) at any time unless the aggregate amount of
such unpaid, undischarged or unsatisfied obligations outstanding at such time
shall be equal to at least $5 million.
6.4 Conduct of Business and Maintenance of Existence.
Preserve, renew and keep in full force and effect its corporate existence and
take all action necessary to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business; comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, have a Material Adverse
Effect.
6.5 Maintenance of Property; Insurance. Keep or cause its
Subsidiaries to keep all property useful and necessary in its and its
Subsidiaries' businesses in good working order and condition and maintain and
operate such property in accordance with prudent engineering and business
practices no less rigorous than, in the case of Power Generation Facilities,
those customary in the independent power industry and, in the case of any other
property, those customary in the industry in which such property is used,
except, in either such case, to the extent that the failure to comply herewith
with respect to its Subsidiaries' businesses could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect; maintain or cause its
Subsidiaries to maintain with financially sound and reputable insurance
companies insurance on all its and its Subsidiaries' properties in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to each Lender, upon written request, full information as
to the insurance carried.
6.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records 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; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and
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financial and other condition of the Borrower and its Subsidiaries with officers
and employees of the Borrower and its Subsidiaries and with its independent
certified public accountants.
6.7 Notices. Promptly give notice to the Agent and each Lender
of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries (including,
without limitation, either Borrower Indenture) or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority,
which in either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries in which the amount involved is $3 million or more
or in which injunctive or similar relief is sought or that could
reasonably be expected to have a Material Adverse Effect; and
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of,
any Plan.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply with, and ensure compliance
by all tenants and subtenants, if any, with, all applicable Environmental Laws
and obtain and comply in all material respects with and maintain, and ensure
that all tenants and subtenants obtain and comply in all material respects with
and maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested
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58
in good faith by appropriate proceedings and the pendency of such proceedings
could not be reasonably expected to have a Material Adverse Effect.
6.9 Indemnification. The Borrower shall pay, and protect,
indemnify and save harmless the Agent, the Lead Arrangers, the Issuing Bank and
the Lenders and, in their capacity as such, their officers, directors,
shareholders, controlling persons, employees, agents and servants (individually
an "Indemnified Party," collectively the "Indemnified Parties") from and
against, all liabilities, losses, claims, damages, penalties, causes of action,
suits, costs, expenses and disbursements of any kind whatsoever (including,
without limitation, reasonable attorneys' fees and expenses, but excluding
special, exemplary, punitive or consequential damages suffered by such
Indemnified Party) incurred by or asserted against any Indemnified Party arising
out of, in any way in connection with, or as a result of (a) the execution,
delivery, enforcement, performance or administration of this Agreement, the CDH
Guarantee, any other Loan Document or any document contemplated hereby or
thereby or any of the transactions contemplated by any Loan Document, (b) the
use of the proceeds of the Revolving Credit Loans, (c) the issuance or use of
the proceeds of, or any drawing under, any Letter of Credit or (d) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnified Party is a party thereto (including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower, any of its Subsidiaries or any of the Project Properties);
provided that the Borrower will not be liable to any Indemnified Party for such
liabilities, losses, claims, damages, penalties, causes of action, suits, costs
and expenses (including, without limitation, attorneys' fees) or judgments
arising from such Indemnified Party's gross negligence or wilful misconduct.
With respect to any action, suit or proceeding against it, or any of its
officers, directors, shareholders, controlling persons, employees, agents and
servants, in respect of which indemnity may be sought hereunder, the Agent, the
Issuing Bank, each Lead Arranger and each Lender agrees that it will give
written notice of the commencement of such action, suit or proceeding to the
Borrower within a reasonable time after it is made a party to such action, suit
or proceeding; but the omission to so notify the Borrower will not relieve the
Borrower from any liability which it might have to any Indemnified Party, except
to the extent that the failure to give notice of the commencement of such
action, suit or proceeding shall preclude the Borrower from effectively
defending such action, suit or proceeding. Upon receipt of any such notice by
the Borrower, the Borrower shall be entitled to assume the defense of such
action, suit or proceeding, including the employment of counsel and the payment
of all expenses in connection with such defense, and shall have the right to
negotiate and consent to settlement. Any Indemnified Party shall have the right
to employ separate counsel in any such action, suit or proceeding against it and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the Borrower
or (ii) the Borrower shall have elected not to assume the defense of such
action, suit or proceeding or (iii) such Indemnified Party has been advised by
its own counsel that there are legal defenses available to such Indemnified
Party which are different from, additional to or in conflict with the defenses
available to the Borrower. The Borrower shall not be liable for any settlement
of any such action, suit or proceeding effected without its consent, which
consent shall not be unreasonably withheld; but if any such
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59
action, suit or proceeding is settled with the consent of the Borrower or if
there is a final judgment for the plaintiff in any such action, suit or
proceeding (of which the Borrower shall have been notified), the Borrower shall
indemnify and hold harmless each Indemnified Party from and against any losses,
claims, damages, liabilities or expenses incurred or suffered by reason of such
settlement or judgment. This covenant shall survive the termination of this
Agreement and the payment of the Notes, the Revolving Credit Loans and all other
Obligations.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, until the Commitments are
terminated, all Obligations have been paid and performed in full, no L/C
Obligations are outstanding and all Letters of Credit have expired or are no
longer outstanding, the Borrower shall not do any of the following:
7.1 Financial Condition. (a) Parent Cash Flow Coverage
Ratio(a) Parent Cash Flow Coverage Ratio. The Borrower shall not permit the
Parent Cash Flow Coverage Ratio to be less than 2.0 to 1 for any period of four
consecutive fiscal quarters of the Borrower.
(b) Leverage Ratio. The Borrower shall not permit the Leverage
Ratio as at the last day of any fiscal quarter of the Borrower ending within any
calendar year set forth below to exceed the ratio set forth below opposite such
calendar year:
Calendar year Ratio
------------- -----
2000 6.6 to 1.0
2001 6.1 to 1.0
2002 5.5 to 1.0
(c) Adjusted Tangible Net Worth. The Borrower shall not permit
its Adjusted Tangible Net Worth at any time to be less than the sum of (i)
$69,942,000 less (ii) the aggregate amount of all deferred financing costs
reasonably incurred by the Borrower in connection with this Agreement, plus
(iii) 65% of cumulative Net Income of the Borrower and its consolidated
Subsidiaries for each fiscal quarter (beginning with the fiscal quarter ending
December 31, 1999) for which Net Income is positive plus (iv) 100% of the Net
Cash Proceeds of any offering by the Borrower of Capital Stock consummated after
the Closing Date plus (v) 100% of any capital contribution made to the Borrower
or any of its Subsidiaries after the Closing Date by any holder of the
Borrower's Capital Stock.
7.2 Limitation on Debt. (a) The Borrower shall not Incur any
Debt, including Acquisition Debt, unless after giving effect to the Incurrence
of such Debt and the receipt and
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60
application of the proceeds therefrom, the Fixed Charge Ratio of the Borrower
would be equal to or greater than 2.0 to 1.
(b) Notwithstanding the foregoing, the Borrower may Incur each
and all of the following:
(i) Debt issued in exchange for, or the proceeds of
which are used to Refinance, Debt of the Borrower in an amount (or, if
such new Debt provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, with an original issue price) not to exceed the amount so
exchanged or Refinanced (plus accrued interest and fees and expenses
related to such exchange or Refinancing), the amount so exchanged or
Refinanced being equal to the lesser of (x) the principal amount or
involuntary liquidation preference of the Debt so exchanged or
Refinanced and (y) if the Debt being exchanged or Refinanced was issued
with an original issue discount, the accreted value thereof (as
determined in accordance with GAAP) at the time of such Refinancing;
provided that such Debt of the Borrower will rank pari passu with or
expressly subordinated in right of payment to the Obligations and the
Average Life of the new Debt shall be equal to or greater than the
Average Life of the Debt to be exchanged or Refinanced;
(ii) Debt of the Borrower to any of its Subsidiaries and
to any Joint Ventures in which the Borrower is a direct or indirect
partner, shareholder, member or other participant if such Debt of the
Borrower is expressly subordinated in right of payment to the
Obligations; provided that any transfer of such Debt by a Subsidiary or
a Joint Venture (other than to another Subsidiary or Joint Venture)
will be deemed to be an Incurrence of Debt unless (x) such Debt has an
Average Life which is greater than that of the Borrower Indenture
Securities and which extends to a date later than the then Final
Maturity Date or (y) the aggregate amount of such Debt which has an
Average Life which is equal to or less than that of the Borrower
Indenture Securities or which extends to, or to a date earlier than,
the then Final Maturity Date does not exceed $3 million;
(iii) Debt in an aggregate principal amount not to
exceed $10 million at any one time outstanding;
(iv) Debt in respect of Currency Protection
Agreements or Interest Rate Protection Agreements; and
(v) Debt outstanding as of the date of this Agreement.
For purposes of determining any particular amount of Debt
under this subsection 7.2, Guarantees of, or obligations with respect to letters
of credit supporting, Debt otherwise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with the provisions of this subsection 7.2, in the event that an item of Debt
meets the criteria of more than one of the types of Debt described in the above
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61
clauses, the Borrower, in its sole discretion, shall classify such item of Debt
and only be required to include the amount and type of such Debt in one of such
clauses.
(c) Notwithstanding any other provision hereof, including
without limitation any other provision of this subsection 7.2, the Borrower
shall not Incur any Debt at any time unless (i) no payment or prepayment in
respect of principal of such Debt (including, without limitation, any payments
in respect of any sinking fund) shall be due or can become due (other than as a
result of the acceleration thereof) on or prior to the then Final Maturity Date
and (ii) the aggregate outstanding principal amount of Debt Incurred by the
Borrower at such time (after giving effect to the Incurrence of such Debt) shall
not exceed $540,000,000.
7.3 Limitation on Subsidiary Debt. (a) The Borrower shall not
permit any Subsidiary to Incur, assume or otherwise cause or suffer to exist,
directly or indirectly, any Debt.
(b) Notwithstanding the foregoing (but subject to the
provisions of subsections 7.10, 7.12 and 7.13 and the other provisions of this
Agreement), each and all of the following Debt may be Incurred, assumed or
otherwise caused or suffered to exist by a Subsidiary:
(i) Debt outstanding as of the date of this Agreement;
(ii) Debt owed by a Subsidiary to the Borrower;
(iii) Debt Incurred to finance the development,
acquisition, construction or operation of a Power Generation Facility
in which such Subsidiary has a direct or indirect interest; provided
that such Debt shall be permitted under this clause (iii) only to the
extent of the amount thereof which is Non-Recourse to the Borrower and
is Non-Recourse to any other Subsidiary with a direct or indirect
interest in any other Power Generation Facility;
(iv) Debt issued in exchange for, or the proceeds of
which are used to Refinance, outstanding Debt of such Subsidiary
otherwise permitted under this Agreement in an amount (or, if such new
Debt provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or
Refinanced (plus accrued interest and fees and expenses related to such
exchange or Refinancing), the amount so exchanged or Refinanced being
equal to the lesser of (x) the principal amount or involuntary
liquidation preference of the Debt so exchanged or Refinanced and (y)
if the Debt being exchanged or Refinanced was issued with an original
issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing; provided that (A) the new
Debt shall be Non-Recourse to the Borrower to no lesser extent than the
Debt to be exchanged or Refinanced, (B) the new Debt shall be
Non-Recourse to any other Subsidiary with a direct or indirect interest
in any other Power Generation Facility to no lesser extent than the
Debt to be exchanged or Refinanced, and
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62
(C) the Average Life of the new Debt shall be equal to or greater than
the Average Life of the Debt to be exchanged or Refinanced;
(v) Debt issued in exchange for, or the proceeds of
which are used to Refinance, outstanding Debt of such Subsidiary
otherwise permitted under this Agreement in an amount (or, if such new
Debt provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, with an
original issue price) in excess of the amount so exchanged or
Refinanced (plus accrued interest and fees and expenses related to such
exchange or Refinancing); provided that (A) the new Debt shall be
Non-Recourse to the Borrower to no lesser extent than the Debt to be
exchanged or Refinanced, (B) the new Debt shall be Non-Recourse to any
other Subsidiary with a direct or indirect interest in any other Power
Generation Facility to no lesser extent than the Debt to be exchanged
or Refinanced, and (C) the Average Life of the new Debt shall be equal
to or greater than the Average Life of the Debt to be exchanged or
Refinanced; provided further that (x) after giving effect to the
Incurrence of such new Debt and the retirement of the Debt to be
exchanged or Refinanced, the Fixed Charge Ratio of the Borrower would
be equal to or greater than 2.0 to 1 and (y) all of the following are
satisfied: (i) such Subsidiary directly owns an interest in a Power
Generation Facility; (ii) the Borrower shall have provided evidence
reasonably satisfactory to the Required Lenders (including pro forma
projections) demonstrating average and minimum debt service coverage
ratios reasonably acceptable to the Required Lenders for such
Subsidiary with respect to such new Debt; (iii) the proceeds of such
new Debt are used solely by one or more Subsidiaries of the Borrower to
finance the acquisition of an interest or interests in, or to make an
initial equity investment in, one or more constructed and operating
Power Generation Facilities; and (iv) the Borrowers shall have provided
evidence reasonably satisfactory to the Required Lenders (including pro
forma projections) that such acquisitions or investment, after taking
into account the effect of such new Debt (but excluding the proceeds
therefrom), are reasonably projected to increase the Parent Operating
Cash Flow to an amount greater than otherwise reasonably projected for
the fiscal year of the Borrower in which such acquisitions occurred or
investments were made and for each of the four fiscal years of the
Borrower next succeeding such fiscal year.
(vi) Debt issued in exchange for, or the proceeds of
which are used to Refinance, outstanding Debt which is not Non-Recourse
to the Borrower or to any other Subsidiary in an amount (or if such new
Debt provides for an amount less than the principal amount thereof to
be due and payable upon a declaration or acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or
Refinanced (plus accrued interest and fees and expenses related to such
exchange or Refinancing), the amount so exchanged or Refinanced being
equal to the lesser of (x) the principal amount of the Debt so
exchanged or Refinanced and (y) if the Debt being so exchanged or
Refinanced was issued with an original issue discount, the accreted
value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided that the
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63
Average Life of the new Debt shall be equal to or greater than the
Average Life of the Debt to be exchanged or Refinanced;
(vii) Debt Incurred to support the performance obligations
of a Subsidiary engaged in providing construction management or
operating services to a Power Generation Facility; provided that such
Debt shall be permitted under this clause (vii) only to the extent of
the amount thereof which is Non-Recourse to the Borrower and is
Non-Recourse to any other Subsidiary with a direct or indirect interest
in any other Power Generation Facility;
(viii) [intentionally omitted]
(ix) Debt Incurred by a Person prior to the time: (A) such
Person became a Subsidiary of the Borrower; (B) such Person merges with
or into a Subsidiary of the Borrower; or (C) another Subsidiary of the
Borrower merges with or into such Person (in a transaction in which
such Person becomes a Subsidiary of the Borrower); provided that,
giving effect to such transaction, such Debt could have been Incurred
at the time of such merger or acquisition by the Borrower pursuant to
subsection 7.2 or by the Subsidiary pursuant to either of clauses (iii)
or (iv) of this paragraph (b) of this subsection 7.3;
(x) Debt Incurred by a Subsidiary of which at least 80% of
each class of Common Stock is owned, directly or indirectly, by the
Borrower, to another Subsidiary of which at least 80% of each class of
Common Stock is owned, directly or indirectly, by the Borrower; and
(xi) Debt Incurred by CMA under the CMA Credit Agreement
and Debt Incurred by CEA under the CEA Credit Agreement, provided that
(A) the aggregate of the Debt Incurred under the CMA Credit Agreement
and the CEA Credit Agreement shall not be greater than $100,000,000
outstanding at any time during calendar year 2000, shall not be greater
than $92,500,000 outstanding at any time during calendar year 2001, and
shall not be greater than $85,000,000 outstanding at any time during
calendar year 2002 and (B) CMA shall not Incur any Debt under the CMA
Credit Agreement (other than any increase provided to occur thereunder
in the stated amount of either of the debt service reserve letters of
credit issued thereunder with respect to the financing of the Cottage
Grove power project and Whitewater power project) and CEA shall not
Incur any Debt under the CEA Credit Agreement, unless, in either case,
all of the following are satisfied: (1) the proceeds of such Debt are
used solely by one or more Subsidiaries of the Borrower (but which is
not CEA, CMA or a Subsidiary of CEA or CMA) to finance the acquisition
of an interest or interests in, or to make an initial equity investment
in, one or more constructed and operating Power Generation Facilities;
and (2) the Borrower shall have provided evidence reasonably
satisfactory to the Required Lenders (including pro forma projections)
that such acquisitions or investment, after taking into account the
effect of such borrowing (but excluding the proceeds therefrom), are
reasonably projected to increase the Parent Operating Cash Flow to an
amount greater than otherwise reasonably
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64
projected for the fiscal year of the Borrower in which such
acquisitions occurred or investments were made and for each of the four
fiscal years of the Borrower next succeeding such fiscal year.
For purposes of determining any particular amount of Debt
under this subsection 7.3, Guarantees of, or obligations with respect to letters
of credit supporting, Debt otherwise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with the provisions of this subsection 7.3, in the event that an item of Debt
meets the criteria of more than one of the types of Debt described in the above
clauses, the Borrower, in its sole discretion, shall classify such item of Debt
and only be required to include the amount and type of such Debt in one of such
clauses.
7.4 Limitation on Restricted Payments. The Borrower will not,
and will not permit any Subsidiary to, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment and after giving
effect thereto:
(a) an Event of Default or an event that, after the giving of
notice or lapse of time or both would become an Event of Default, shall
have occurred and be continuing;
(b) the Borrower could not Incur at least $1 of Debt under
subsection 7.2(a);
(c) the aggregate amount of all Restricted Payments made by
the Borrower and its Subsidiaries after March 15, 1994 (the amount so
made, if other than in cash, to be determined in good faith by the
Board of Directors, as evidenced by a Board resolution) shall exceed
the sum (without duplication) of: (i) $5 million plus 50% of the Net
Income of the Borrower and its consolidated Subsidiaries for the period
(taken as one accounting period) beginning on March 15, 1994 and ending
on the last day of the fiscal quarter immediately prior to the date of
such calculation; provided that if Net Income for such period is less
than zero, then minus 100% of the amount of such net loss; plus (ii) if
the Borrower Indenture Securities are Investment Grade at the time of
and after giving effect to the Restricted Payment (or in the case of a
dividend, its declaration) in connection with which the calculation is
made, an additional 25% of Net Income of the Borrower and its
consolidated Subsidiaries for any period of one or more completed
fiscal quarters ending with the last fiscal quarter completed prior to
the date of such Restricted Payment during which the Borrower Indenture
Securities were Investment Grade for the entire period; plus (iii) the
aggregate net proceeds (including the Fair Market Value of proceeds
other than cash) received by the Borrower from and after March 15, 1994
from the issuance and sale (other than to a Subsidiary) of its Capital
Stock (excluding Redeemable Stock, but including Capital Stock other
than Redeemable Stock issued upon conversion of, or in exchange for,
Redeemable Stock or securities other than its Capital Stock), and
warrants, options and rights to purchase its Capital Stock (other than
Redeemable Stock), but excluding the net proceeds from the issuance,
sale, exchange, conversion or other disposition of its Capital Stock
convertible (whether at the option of the Borrower or the holder
thereof or upon the happening of any event) into (x) any security other
than its
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Capital Stock or (y) its Redeemable Stock; plus (iv) the net reduction
in Investments of the type specified in clause (iv) of the definition
of "Restricted Payment" resulting from payments of interest on Debt,
dividends, repayments of loans or advances, or other transfers of
assets to the Borrower or other Person that made the original
Investment from the Person in which such Investment was made; provided
that such payment shall not exceed the amount of the original
Investment; plus (v) any amount previously included as a Restricted
Payment on account of an obligation by the Borrower or any Subsidiary
to make a Restricted Payment which has not actually been made by the
Borrower or any Subsidiary; provided that this clause (c) shall not
prevent the payment of any dividend within 60 days after the date of
its declaration if such dividend could have been made on the date of
its declaration without violation of the provisions of this subsection
7.4.
7.5 Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries. The Borrower will not, and will not permit any
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to (a) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Subsidiary owned by the Borrower or
any other Subsidiary, (b) make payments in respect of any Debt owed to the
Borrower or any other Subsidiary of the Borrower, (c) make loans or advances to
the Borrower or any other Subsidiary of the Borrower or (d) transfer any of its
Property to the Borrower or any other Subsidiary, other than those encumbrances
and restrictions created or existing (i) on the date of this Agreement, (ii)
pursuant to this Agreement, the CDH Guarantee or either Borrower Indenture,
(iii) in connection with the Incurrence of any Debt permitted under clauses
(iii) and (vii) of subsection 7.3(b) hereof; provided that such encumbrances or
restrictions are required in order to effect such financing and are not
materially more restrictive, taken as a whole, on the ability of the applicable
Subsidiary to make the payments, distributions, loans, advances or transfers
referred to in clauses (a) through (d) above than encumbrances and restrictions,
taken as a whole, customarily accepted (or, in the absence of any industry
custom, reasonably acceptable) in substantially Non-Recourse financing, (iv) in
connection with the execution and delivery of an electric power or thermal
energy purchase contract to which such Subsidiary is the supplying party or
other contracts with customers, suppliers and contractors to which such
Subsidiary is a party and where such Subsidiary is engaged, directly or
indirectly, in the development, construction, acquisition or operation of a
Power Generation Facility; provided that such encumbrances or restrictions are
required in order to effect such contracts and are not materially more
restrictive, taken as a whole, on the ability of the applicable Subsidiary to
make the payments, distributions, loans, advances or transfers referred to in
clauses (a) through (d) above than encumbrances and restrictions, taken as a
whole, customarily accepted (or, in the absence of any industry custom,
reasonably acceptable) in comparable transactions, (v) in connection with any
Debt of a Person outstanding when such Person becomes a Subsidiary permitted
under clause (ix) of subsection 7.3(b); provided that such encumbrance or
restriction was not Incurred in contemplation of such Subsidiary becoming a
Subsidiary, (vi) in connection with the Incurrence of any Debt permitted under
clause (iv), (v), (vi) or (to the extent not covered by (iii) above) (iii) of
subsection 7.3(b) hereof; provided that such encumbrances or restrictions taken
as a whole are not materially more restrictive on the ability of the applicable
Subsidiary to make the
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payments, distributions, loans, advances or transfers referred to in clauses (a)
through (d) above than those, taken as a whole, customarily accepted (or, in the
absence of any industry custom, reasonably acceptable) in comparable financing
transactions of the same nature as the Debt being Incurred, (vii) customary
non-assignment provisions in leases or other contracts entered into in the
ordinary course of business of the Borrower or any Subsidiary and (viii) any
restrictions imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of any
Subsidiary or Joint Venture that apply pending the closing of such sale or
disposition.
7.6 Restrictions on Dispositions. Subject to the provisions of
subsections 7.9 and 7.10, the Borrower will not make and will not permit any of
its Subsidiaries to make, any Asset Disposition unless the Borrower (or the
Subsidiary, as the case may be) receives, at the time of such Asset Disposition,
consideration with a Fair Market Value at least equal to the Fair Market Value
of the securities, assets or other Property sold or otherwise disposed of. In
determining the Fair Market Value of the consideration received for any Asset
Disposition, in addition to any other adjustment necessary to determine such
consideration's Fair Market Value, any payment or other amount that is to be
received after the date of such Asset Disposition (whether paid pursuant to a
note or installment receivable or otherwise or in the form of a dividend or
distribution on any shares of any Person's Capital Stock) shall be valued at the
net present value of such payment or other amount calculated by discounting such
payment or other amount to the date of such Asset Disposition using an assumed
discount rate proposed by the Borrower and reasonably acceptable to the Agent.
7.7 Limitations on Transactions with Affiliates. The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into any transaction after the date of this Agreement
(including, without limitation, the sale, purchase or lease of any assets or
properties or the rendering of any services) involving aggregate consideration
with respect to such transaction in excess of $1 million with any Affiliate or
holder of 5% or more of any class of Capital Stock of the Borrower except for
transactions (including, subject to subsection 7.4, any loans or advances by or
to, or guarantee on behalf of, any Affiliate or holder) made in good faith the
terms of which are fair and reasonable to the Borrower or such Subsidiary, as
the case may be, and are at least as favorable as the terms which could be
obtained by the Borrower or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's-length basis with Persons who are not such a holder
or Affiliate; provided that the fairness, reasonableness and arm's-length nature
of the terms of any transaction which is part of a series of related
transactions may be determined on the basis of the terms of the series of
related transactions taken as a whole. This covenant shall not apply to (a) the
payment of reasonable and customary regular fees to directors of the Borrower or
a Subsidiary of the Borrower (including directors who are employees), (b) any
transaction between the Borrower and any of its Subsidiaries the terms of which
are not unfair or unreasonable to the Borrower, (c) any Permitted Payment, and
any Restricted Payment not otherwise prohibited by subsection 7.4 or (d)
equipment and real property lease transactions with and loans to Equipment
Leasing Partners, a North Carolina general partnership, outstanding on the date
of this Agreement, indebtedness of the shareholders of the Borrower outstanding
on the date of this Agreement and the agreements between the Borrower
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and George T. Lewis, Jr., David J. Lewis and Robert W. Lewis, in each case as in
effect on the date of this Agreement.
7.8 Limitations on Liens. The Borrower may not Incur any Debt
which is secured, directly or indirectly, with, nor will the Borrower grant or
cause or suffer to exist, a Lien on the Property of the Borrower now owned or
hereafter acquired unless contemporaneous therewith or prior thereto the
Obligations are equally and ratably secured thereof except for (a) any such Debt
secured by Liens existing on the assets of any entity at the time such assets
are acquired by the Borrower, whether by merger, consolidation, purchase of
assets or otherwise; provided that such Liens (x) are not created, incurred or
assumed in contemplation of such assets being acquired by the Borrower and (y)
do not extend to any other Property of the Borrower; (b) Liens granted to secure
any other Debt required by its terms to be equally and ratably secured as a
result of the Incurrence of such Debt; (c) any pledge to lenders by the Borrower
of the Capital Stock of any of its Subsidiaries granted in good faith as part of
such lenders= providing to such Subsidiary project financing for the
construction of a Power Generation Facility in which such Subsidiary has a
direct interest, provided that such pledge is required in order to effect such
project financing and is not materially more restrictive than pledges
customarily accepted in substantially Non-Recourse project financing and all of
the Debt Incurred as part of such project financing is Non-Recourse to the
Borrower; (d) [intentionally omitted]; (e) Liens in existence on the date of
this Agreement or established pursuant to this Agreement; (f) purchase money
Liens incurred to secure Debt incurred by the Borrower as permitted by
subsection 7.2, which Debt finances the purchase price of Property acquired in
the ordinary course of business, and which Liens will not cover any Property
other than that being purchased, improved or constructed; (g) [intentionally
omitted]; (h) Liens incurred in connection with Capitalized Lease Obligations
incurred by the Borrower as permitted by subsection 7.2; (i) Liens in respect of
extensions, renewals, refunding or Refinancing of any Debt secured by the Liens
referred to in clauses (a), (b), (c), (d), (e), (f) or (h) above, provided that
the Liens in connection with such renewal, extension, refunding or Refinancing
shall be limited to all or part of the specific Property which was subject to
the original Lien; (j) any Lien arising by reason of (A) any judgment, decree or
order or any court, so long as such Lien is being contested in good faith and is
adequately bonded, and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment, decree or order shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired, (B) taxes not yet delinquent or which are
being contested in good faith, (C) security for payment of worker's compensation
or other insurance, (D) security for the performance of tenders, contracts
(other than contracts for the payment of money) or leases, (E) deposits to
secure public or statutory obligations, or to secure permitted contracts for the
purchase or sale of any currency entered into in the ordinary course of
business, (F) operation of law in favor of carriers, warehousemen, landlords,
mechanics, materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business for sums which are not yet delinquent or which are
being contested in good faith by negotiations or by appropriate proceedings
which suspend the collection thereof, (G) easements, rights-of-way, zoning and
similar covenants and restrictions and other similar encumbrances or title
defects which, in the aggregate, are not material, and which do not in any case
materially detract from the value of the Property subject thereto or materially
interfere with the ordinary
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conduct of the business of the Borrower or (H) leases and subleases of property
which do not interfere with the ordinary conduct of the business of the
Borrower, and which are made on customary and usual terms applicable to similar
properties; or (I) Liens in addition to the foregoing, provided that the amount
of the obligations secured by such Liens does not exceed in the aggregate $1
million.
7.9 Limitations on Mergers, Consolidations, Sales or Transfers
of Assets by or Involving Borrower. The Borrower shall not consolidate with,
merge with or into, or transfer all or substantially all of its assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions), to any Person unless:
(a) the Borrower shall be the continuing Person, or the Person
(if other than the Borrower) formed by such consolidation or into which
the Borrower is merged or to which properties and assets of the
Borrower are transferred shall be a corporation organized and existing
under the laws of the United States or any state thereof or the
District of Columbia and shall expressly assume in a writing acceptable
to the Lenders all of the Obligations of the Borrower;
(b) immediately after giving effect to such transaction no
Event of Default or event or condition which through the giving of
notice or lapse of time or both would become an Event of Default shall
have occurred and be continuing;
(c) the Net Worth of the Borrower or the surviving entity, as
the case may be, on a pro forma basis after giving effect to such
transaction is not less than the Net Worth of the Borrower immediately
prior to such transaction; and
(d) immediately after giving effect to such transaction on a
pro forma basis, the Borrower or the surviving entity would be able to
incur at least $1 of Debt under subsection 7.2(a).
7.10 Limitations on Certain Mergers, Consolidations and
Investments by Subsidiaries. Notwithstanding any other provision hereof
(including, without limitation, any provision of subsection 7.3(b)), without the
prior written consent of the Required Lenders (which shall not be unreasonably
withheld), the Borrower shall not permit any Subsidiary with any direct or
indirect interest in (a) a Power Generation Facility to make any Investment in,
or to consolidate or merge with, any other Person with a direct or indirect
interest in any other Power Generation Facility or any unrelated business or (b)
any unrelated business to make any Investment in, or to consolidate or merge
with, any other Person with a direct or indirect interest in any Power
Generation Facility; provided, that to the extent otherwise permitted under this
Agreement and the other Loan Documents (i) Cogentrix Virginia Leasing
Corporation and James River Cogeneration Company may each make Investments in
and consolidate or merge with each other and (ii) CDH, Cogentrix International
Holdings, Inc., Cogentrix International Ltd., and Cogentrix International
Holdings, B.V. may each make any Investment in any Person.
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7.11 CDH Permitted Investments. Notwithstanding any other
provision of this Agreement, the Borrower shall not make any advance, loan,
extension of credit or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of or any assets constituting a business
unit of, or make any other Investment in, any Person, other than (i) Investments
in any Subsidiary of the Borrower (or any Person that will become a Subsidiary
of the Borrower as a result of such Investment) otherwise permitted hereunder
(including, without limitation, subsection 7.4) and under the other Loan
Documents and (ii) CDH Permitted Investments; provided, that so long as the
total of the aggregate amount of CDH Permitted Investments owned by the Borrower
plus the aggregate amount of CDH Permitted Investments owned by CDH (exclusive
of, in the case of both the Borrower and CDH, any CDH Permitted Investments
subject to or otherwise covered by any Lien other than the Lien created under
this Agreement in the Collateral Account) shall have a value of $50 million or
more, the Borrower may make any Investment that the Borrower is otherwise
permitted to make hereunder (including, without limitation, subsection 7.4) and
under the other Loan Documents.
7.12 Limitations on Intermediate Holding Companies.
Notwithstanding any other provision hereof (including, without limitation, any
provision of subsections 7.3(b) or 7.5), the Borrower shall not permit any
Intermediate Holding Company: (A) to Incur any Debt or assume, create or suffer
to exist any Liens on any of its Property (other than (i) Debt or Liens
outstanding as of the date of this Agreement with respect to the Subsidiaries of
the Borrower that are Intermediate Holding Companies as of the date of this
Agreement; (ii) Debt Incurred and Liens created under this Agreement or any of
the other Loan Documents; (iii) in the case of CMA and CEA, Debt permitted to be
Incurred by such Intermediate Holding Companies under subsection 7.3(b)(xi); and
(iv) any pledge to lenders by an Intermediate Holding Company of the Capital
Stock of any of its Subsidiaries granted in good faith as part of such lenders'
providing to such Subsidiary project financing for the construction of a Power
Generation Facility in which such Subsidiary has a direct or indirect interest,
provided that such Subsidiary does not own, directly or indirectly, any interest
in any other Power Generation Facility or other business and such pledge is
required in order to effect such project financing and is not materially more
restrictive than pledges customarily accepted in substantially Non-Recourse
project financing and all of the Debt Incurred as part of such project financing
is Non-Recourse to such Intermediate Holding Company); (B) to create or allow to
exist any restriction or encumbrance of any kind on its ability to pay dividends
or make distributions on its Capital Stock or to make any of the other payments
described in clauses (a) through (d) of subsection 7.5 (other than such
restrictions and encumbrances created or existing (i) on the date of this
Agreement or (ii) pursuant to this Agreement or any of the other Loan
Documents); (C) to provide any Guarantee, other than (x) Guarantees of Debt
otherwise permitted hereunder (including, without limitation, this subsection
7.12) and (y) Guarantees of performance obligations of any Subsidiary of such
Intermediate Holding Company with respect to a Power Generation Facility in
which such Subsidiary has a direct or indirect interest, provided that such
Intermediate Holding Company does not own, directly or indirectly, any interest
in any other Power Generation Facility or other business; or (D) to engage in
any business or activity other than the holding of such interests.
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7.13 Limitations on Investments in CMA or CEA. Notwithstanding
any other provisions hereof, the Borrower, for so long as either of the CMA
Credit Agreement or the CEA Credit Agreement (or any agreement succeeding either
such agreement, whether as a Refinancing or otherwise) is in effect, shall not
make or permit (i) any of its Subsidiaries to make any Investment in CMA, CEA or
any Subsidiary of either thereof or any other Person in which either CEA or CMA
shall, directly or indirectly, have an interest (other than (a) Investments made
prior to the date of this Agreement; (b) Investments not to exceed $1,800,000 in
the aggregate to effect the acquisition of an additional 1% partnership interest
from Bechtel Generating Company, Inc. in respect of each of the Logan power
project and the Northhampton power project (such interests, the "Holdback
Interests") and (c) any Investment solely for the purpose of funding the repair
or replacement of major equipment at a Power Generation Facility) or (ii) CMA or
CEA, directly or indirectly, to acquire any new interest in any Power Generation
Facility or any other business or to increase its interest in any Power
Generation Facility or other business in which it already has a direct or
indirect interest (except for the acquisition of the Holdback Interests).
7.14 Limitations on Accumulation of Funds by Subsidiaries. The
Borrower shall not permit the accumulation of funds at any of its Subsidiaries
(excluding CDH), other than (i) cash balances as may be reasonably required to
be maintained by such Subsidiary for the payment of ordinary operating expenses
incurred in the ordinary course of business, (ii) in the case of any such
Subsidiary directly owning an interest in a Power Generation Facility, funds
required to be accumulated pursuant to reasonable and customary restrictions
imposed under the documentation for the financing or operation of such Power
Generation Facility and required for such financing or operation, (iii) in the
case of CMA, funds required to be accumulated pursuant to the CMA Credit
Agreement and the security deposit agreement entered into in connection
therewith as in effect on the date of this Agreement and (iv) in the case of
CEA, funds required to be accumulated pursuant to the CEA Credit Agreement and
the security deposit agreement entered into in connection therewith as in effect
on the date of this Agreement.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay when due any principal of
any Revolving Credit Loan or any Reimbursement Obligation in accordance
with the terms hereof; or the Borrower shall fail to make in full any
deposit required to be made hereunder into the Collateral Account on
the day such deposit is due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Revolving Credit Loan,
or any fee or other amount payable hereunder or under any other Loan
Document (including, without limitation, any Commitment Fee,
Administration Fee, Fronting Fee or Letter of Credit Fee), when due in
accordance with the terms hereof, and such interest or fee or other
amount shall remain unpaid for a period of five or more Business Days
after notice to the Borrower by the party to whom such payment was due
(or by the Agent on behalf of such party); or
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(b) Any representation or warranty made or deemed made by any
Loan Party herein, the CDH Guarantee or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement, the CDH Guarantee or any other Loan Document shall prove to
have been false or misleading as of the time made or furnished in any
material respect and either such false or misleading representation or
warranty (i) has resulted in a Material Adverse Effect or (ii) could
reasonably be expected to result in a Material Adverse Effect; or
(c) The Borrower shall default in the observance or
performance of any covenant contained in subsection 7.1, 7.9, 7.10 or
7.13; or the Borrower shall default in the observance or performance of
any other covenant contained in Section 7 or CDH shall default in the
observance or performance of any covenant in Section 10 of the CDH
Guarantee, and in either case such default shall continue unremedied
for a period of 10 days after the earlier to occur of (i) the date the
Agent shall have provided notice to the Borrower of such default and
(ii) the date a Responsible Officer of the Borrower shall have learned
or reasonably should have learned of such default; or
(d) The Borrower shall default in the observance or
performance of any other covenant contained in this Agreement (other
than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 Business Days
after notice to the Borrower by the Agent of such default; or
(e) The Borrower or CDH shall (i) default in any payment of
principal of or interest on any Debt (other than the Revolving Credit
Loans) or in the payment of any Guarantee Obligation, beyond the period
of grace (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Debt or Guarantee Obligation was created and
such default permits the holder or holders of such Debt or beneficiary
or beneficiaries of such Guarantee Obligation (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Debt to become due
prior to its stated maturity or such Guarantee Obligation to become
payable; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Debt or Guarantee
Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause such Debt to become due prior to its stated
maturity or such Guarantee Obligation to become payable; provided,
however, that no Default or Event of Default shall exist under this
paragraph unless the aggregate amount of Debt and/or Guarantee
Obligations in respect of which any default or other event or condition
referred to in this paragraph shall have occurred shall be equal to at
least $5 million; or
(f) (i) The Borrower or CDH shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
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relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the Borrower or
CDH shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Borrower or CDH any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Borrower or CDH any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) the Borrower or CDH
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) the Borrower or CDH shall generally
not, or shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Borrower or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any Significant Subsidiary involving in the aggregate a
liability (not paid or fully covered by insurance) of $3 million or
more, and all such judgments or decrees shall not have been vacated,
satisfied, discharged, stayed or bonded pending appeal within 60 days
from the entry thereof; provided, that no Default or Event of Default
shall exist under this paragraph (h) as a result of any such judgment
or decree if such judgment or decree is not
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against the Borrower and the Borrower is not liable, by contract or
otherwise, to make any payment in respect of such judgment or decree;
or
(i) (i) The CDH Guarantee shall cease, for any reason, to be
in full force and effect or CDH shall so assert or (ii) CDH shall fail,
at any time, to be a direct Wholly-Owned Subsidiary of the Borrower; or
(j) (i) Any Person not a Permitted Holder, or any "group"
(within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) not composed entirely of Permitted
Holders, (A) shall have acquired beneficial ownership of more than 50%
of any outstanding class of Capital Stock having ordinary voting power
in the election of directors of the Borrower or (B) shall obtain the
power (whether or not exercised) to elect a majority of the Borrower's
directors or (ii) during any period of twelve consecutive calendar
months, individuals who were either (x) directors of the Borrower on
the first day of such period (or who were appointed or nominated for
election as directors of the Borrower by at least a majority of the
individuals who were directors of the Borrower on the first day of such
period) or (y) appointed directors to replace directors removed solely
as a result of death or mental or physical disability, shall cease to
constitute a majority of the Board of Directors;
(k) an event of default, as defined in any indenture or
instrument evidencing or under which any Significant Subsidiary has at
the date of this Agreement or shall hereafter have outstanding any
Debt, shall happen and be continuing and either (i) such default
results from the failure to pay principal of such Debt in excess of $10
million at final maturity of such Debt or (ii) as a result of such
default, the maturity of such Debt shall have been accelerated so that
the same shall be or become due and payable prior to the date on which
the same would otherwise have become due and payable, and such
acceleration shall not be rescinded or annulled within 30 days and the
principal amount of such Debt of any Significant Subsidiary in default,
or the maturity of which has been accelerated aggregates $10 million or
more; provided that such default shall not be an Event of Default if
such Debt is Non-Recourse to the Borrower in respect of the amounts not
paid or due upon acceleration and the Borrower could, at the time of
default, Incur at least $1 of Debt under subsection 7.2(a); or
(l) any of the Security Documents shall cease, for any reason
after the execution and delivery thereof, to be in full force and
effect (other than as a result of the expiration or termination of such
Security Document in accordance with its terms), or any Loan Party
shall so assert, or any Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority
purported to be created thereby (other than as a result of the
expiration or termination of such Security Document in accordance with
its terms);
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Borrower, automatically the Commitments
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shall immediately terminate and the Revolving Credit Loans hereunder (with
accrued interest thereon), the Notes and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the consent of the Required
Lenders, the Agent may, or upon the request of the Required Lenders, the Agent
shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Agent may, or upon the request of the
Required Lenders, the Agent shall, by notice to the Borrower, declare the
Revolving Credit Loans hereunder (with accrued interest thereon), the Notes and
all other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
the Collateral Account an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit, to be held, applied or released for
application as Collateral as provided in subsection 3.9.
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
SECTION 9. THE AGENT
9.1 Appointment. Each Lender and the Issuing Bank hereby
irrevocably designates and appoints the Agent as the agent of such Lender and
the Issuing Bank under this Agreement and the other Loan Documents, and each
such Lender and the Issuing Bank irrevocably authorizes the Agent, in such
capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, 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, or any fiduciary
relationship with any Lender or the Issuing Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent.
9.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement and the other Loan Documents 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
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not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan 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 or the Issuing Bank for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender or the
Issuing Bank 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 Loan Document, or to inspect the properties, books or records of the
Borrower.
9.4 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, 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 (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense 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 Loan Documents
in accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders, the Issuing Bank and all future holders of the Revolving Credit Loans.
9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender, the Issuing Bank
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 give notice thereof to the
Lenders and the Issuing Bank. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided that unless
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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 it shall deem advisable in
the best interests of the Lenders and the Issuing Bank.
9.6 Non-Reliance on Agent and Other Lenders. Each Lender and
the Issuing Bank 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 hereinafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender or the
Issuing Bank. Each Lender and the Issuing Bank represents to the Agent that it
has, independently and without reliance upon the Agent or any other Lender or
the Issuing Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Revolving Credit Loans hereunder
and enter into this Agreement. Each Lender and the Issuing Bank also represents
that it will, independently and without reliance upon the Agent or any other
Lender or the Issuing Bank, 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
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders and the
Issuing Bank by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender or the Issuing Bank with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower which
may come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Revolving Credit Loans) be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of, the Commitments, this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the termination of this Agreement and payment of the
Notes, the Revolving Credit Loans and all other Obligations.
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9.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower as though the Agent were not the Agent
hereunder and under the other Loan Documents. With respect to the Revolving
Credit Loans made by it and any Note issued to it and with respect to any Letter
of Credit issued or participated in by it, the Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not the Agent, and the terms "Lender"
and "Lenders" shall include the Agent in its individual capacity.
9.9 Successor Agent. The Agent may resign as Agent upon 10
days' notice to the Lenders and the Issuing Bank. If the Agent shall resign as
Agent under this Agreement and the other Loan Documents, then the Required
Lenders shall appoint from among the Lenders a successor agent for the Lenders
and the Issuing Bank, which successor agent (provided that it shall have been
approved by the Borrower), shall succeed to the rights, powers and duties of the
Agent hereunder. Effective upon such appointment and approval, the term "Agent"
shall mean such successor agent, and the former Agent's rights, powers and
duties as 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
holders of the Revolving Credit Loans. After any retiring Agent's resignation as
Agent, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.
9.10 Lead Arrangers. None of the Lead Arrangers shall have any
duties or responsibilities hereunder or under any other Loan Document in its
capacity as such.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Required Lenders may, or, with the written consent of the
Required Lenders, the Agent may, from time to time, (a) enter into with the
Borrower written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the Borrower hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) reduce the amount or extend the scheduled date of maturity of any
Revolving Credit Loan or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Commitment of any Lender, in each
case without the consent of each Lender affected thereby, or (ii) amend, modify
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or waive any provision of this subsection or reduce the percentage specified in
the definition of Required Lenders or Majority Lenders, or consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, in each case without the
written consent of all the Lenders, or (iii) amend, modify or waive any
provision of Section 9 without the written consent of the Agent. Any such waiver
and any such amendment, supplement or modification shall apply equally to each
of the Lenders and shall be binding upon the Borrower, the Lenders, the Lead
Arrangers, the Issuing Bank, the Agent and all future holders of the Revolving
Credit Loans. In the case of any waiver, the Borrower, the Lenders, the Lead
Arrangers, and the Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon. Notwithstanding any provision of this Agreement
(including, without limitation, any provision of this subsection 10.1), the
provisions of this subsection 10.1 shall not apply to any amendment, supplement,
modification, or waiver with respect to the Fee Letter, and the Fee Letter and
any term thereof may be amended, supplemented or modified, and any requirement
or other provision thereof may be waived, as permitted under the Fee Letter
without meeting any requirement (including, without limitation, any requirement
to obtain the agreement or consent of any Person) other than as may be imposed
by the Fee Letter.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and delivered by hand or courier or sent by certified
mail or facsimile transmission and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made (a) in the case of delivery by
hand or courier, when delivered, (b) in the case of delivery by certified mail,
three Business Days after being deposited in the mails, postage prepaid, or (c)
in the case of delivery by facsimile transmission, when sent and receipt has
been confirmed, addressed as follows in the case of the Borrower, the Issuing
Bank and the Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Cogentrix Energy, Inc.
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8110
Attention: Chief Financial Officer
with copy to General Counsel
Fax: 704-529-1006
The Agent and the
Issuing Bank: Australia and New Zealand Banking Group Limited
1177 Avenue of the Americas
New York, New York 10036-2798
Attention: Geoffrey Pack/Elizabeth M. Waters
w/ copy to (if to Issuing Bank): Medhat Osmond,
Letter of Credit Department
Fax: 212-801-9131
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provided that any notice, request or demand to or upon the Agent, the Issuing
Bank or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12, 2.19 or 3.2
shall not be effective until received. The Borrower agrees that the Agent and
the Issuing Bank may act upon telex or facsimile instructions which are received
by either of them from persons purported to be, or which instructions appear to
be, authorized by the Borrower. The Borrower further agrees to indemnify and
hold the Agent and the Issuing Bank harmless from any claims by virtue of such
party's acting upon such telex or facsimile instructions as such instructions
were understood by the such party, except for claims relating solely from such
party's gross negligence or willful misconduct. Neither the Agent nor the
Issuing Bank shall be liable for any errors in transmission or the illegibility
of any telecopied or telexed documents. In the event the Borrower sends the
Agent or the Issuing Bank a manually signed confirmation of previously sent
telex or facsimile instructions, the Agent or the Issuing Bank, as the case may
be, shall have no duty to compare it against the previous instructions received
by such party nor shall such party have any responsibility should the contents
or the written confirmation differ from the telex or facsimile instructions
acted upon by such party.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties; Survival of
Certain Agreements and Covenants. All representations and warranties made
hereunder, in the other Loan Documents and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the making of the Revolving Credit
Loans hereunder. To the extent provided in such subsections, the agreements and
covenants in subsections 2.14, 2.15(a), 2.16, 6.9, 9.7 and 10.5 shall survive
the termination of this Agreement and the payment of the Notes, the Revolving
Credit Loans and all other Obligations.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Agent and the Lead Arrangers for all their reasonable
out-of-pocket costs and expenses incurred in connection with the syndication of
the Commitments and the Revolving Credit Loans, including, without limitation,
all such expenses relating to the preparation and distribution of information
memoranda relating thereto, the hosting of meetings of prospective Lenders and
the promotion and advertising of the syndication, (b) to pay or reimburse the
Agent for all its out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of, and, in the case of the Agent,
any amendment, supplement or
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modification to, or waiver or consent under or in respect of, this Agreement and
the other Loan Documents and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent, (c) to pay or reimburse each
Lender, the Issuing Bank and the Agent for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel (including without
limitation the allocated fees and expenses of in-house counsel, if applicable)
to each Lender and of counsel to the Agent and (d) to pay, indemnify, and hold
each Lender, the Issuing Bank and the Agent harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents. The agreements in this subsection 10.5 shall survive the termination
of this Agreement and the payment of the Notes, the Revolving Credit Loans and
all other Obligations.
10.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Issuing Bank, the Agent and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender and the Issuing Bank (except as otherwise may be
permitted by subsection 7.9).
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Revolving Credit Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Revolving Credit Loan for all purposes under this Agreement and the
other Loan Documents, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clauses (i) and (ii) of the proviso to subsection 10.1. The Borrower agrees
that if amounts outstanding under this Agreement are due or unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect
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of its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully
as if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with
respect to its participation in the Commitments and the Revolving Credit Loans
outstanding from time to time as if it was a Lender; provided that, in the case
of subsection 2.15, such Participant shall have complied with the requirements
of said subsection and provided, further, that no Participant shall be entitled
to receive any greater amount pursuant to any such subsection than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time and from
time to time assign, with the consent of the Issuing Bank, to any Lender or any
affiliate thereof or, with the consent of the Borrower, the Agent, and the
Issuing Bank (which in the case of the Borrower and the Agent shall not be
unreasonably withheld), to an additional bank or financial institution (an
"Assignee") all or any part of its rights and obligations under this Agreement
and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit G, executed by such Assignee, such
assigning Lender (and the Issuing Bank and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Borrower and the Agent) and
delivered to the Agent for its acceptance and recording in the Register,
provided that, in the case of any such assignment to an additional bank or
financial institution, the sum of the aggregate principal amount of the
Revolving Credit Loans, the aggregate amount of the L/C Obligations and the
aggregate amount of the unused Available Commitment being assigned is not less
than $10 million (or such lesser amount as may be agreed to by the Borrower and
the Agent). Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment and Commitment Percentage as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto).
(d) The Agent, on behalf of the Borrower, shall maintain at
the address of the Agent referred to in subsection 10.2 a copy of each
Assignment and Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amounts of the Revolving Credit Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Lenders may (and, in the
case of any Revolving Credit Loan or other obligation hereunder not evidenced by
a Note, shall) treat each Person whose name is recorded in the Register as the
owner of a Revolving Credit Loan or other obligation hereunder
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as the owner thereof for all purposes of this Agreement and the other Loan
Documents, notwithstanding any notice to the contrary. Any assignment of any
Revolving Credit Loan or other obligation hereunder not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being made
in the Register.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and the Issuing Bank and, in the case of
an Assignee that is not then a Lender or an affiliate thereof, by the Borrower
and the Agent) together with payment to the Agent of a registration and
processing fee of $2,500, the Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of subsection 10.15, any and all financial information
in such Lender's possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Revolving Credit Loans and Notes relate only to absolute assignments and that
such provisions do not prohibit assignments creating security interests,
including, without limitation, any pledge or assignment by a Lender of any
Revolving Credit Loan or Note to any Federal Reserve Bank in accordance with
applicable law.
10.7 Adjustments; Set-off. (a) If any Lender (a "benefitted
Lender") shall at any time receive any payment of all or part of its Revolving
Credit Loans or the Reimbursement Obligations owing to it, or interest thereon,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8, or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if any, in respect of
such other Lender's Revolving Credit Loans or the Reimbursement Obligations
owing to it, or interest thereon, such benefitted Lender shall purchase for cash
from the other Lenders a participating interest in such portion of each such
other Lender's Revolving Credit Loan or the Reimbursement Obligations owing to
it, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest.
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(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Agent after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application.
10.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Agent.
10.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Agent and the Lenders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
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(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 10.2 or
at such other address of which the Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
10.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
10.15 Confidentiality. Each Lender agrees to keep confidential
all non-public information provided to it by the Borrower pursuant to this
Agreement that is designated by the Borrower in writing as confidential;
provided that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Agent or any other Lender, (ii) to any Transferee which
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receives such information having been made aware of the confidential nature
thereof, (iii) to its employees, directors, agents, attorneys, accountants and
other professional advisors, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender, (v) in response to any order of
any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (vi) which has been publicly disclosed other
than in breach of this Agreement, or (vii) in connection with the exercise of
any remedy hereunder.
10.16 Rank. The parties hereto, for their own benefit and not
for the benefit of or for the purpose of creating any duty, obligation or
liability to any other Person (including, without limitation, any party to the
Borrower Indenture or any holder of any Borrower Indenture Security),
specifically designate that the Extensions of Credit made by the Lenders and the
Issuing Bank to the Borrower under this Agreement are neither senior nor
subordinate to the Borrower Indenture Securities in right of payment, except to
the extent that the Extensions of Credit are senior to the Borrower Indenture
Securities as a result of the Liens granted by CDH to the Agent pursuant to the
Security Documents.
10.17 Amendment and Restatement. Each of the parties hereto
agree that, at the request of ANZ to facilitate the syndication of the increase
in the aggregate amount of the Commitments effected by this Agreement, such
party shall promptly upon request execute and deliver an amendment and
restatement of this Agreement, solely for the purpose of adding as signatories
hereto the Lenders added by such syndication, and such other consents, documents
and other instruments reasonably required in connection therewith.
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86
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
COGENTRIX ENERGY, INC.
By:
---------------------------------------
Name:
Title:
<PAGE> 92
87
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED,
as Agent, as a Lead Arranger, as
the Issuing Bank and as a Lender
By:
-----------------------------------------
Name:
Title:
<PAGE> 93
88
THE BANK OF NOVA SCOTIA,
as a Lead Arranger and a Lender
By:
-----------------------------------------
Name:
Title:
<PAGE> 94
89
CIBC INC.,
as a Lender
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE> 95
90
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
as a Lender
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE> 96
91
DRESDNER BANK AG, NEW YORK BRANCH,
as a Lender
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE> 97
92
PARIBAS,
as a Lender
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE> 98
93
THE ROYAL BANK OF SCOTLAND PLC,
as a Lender
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE> 99
Schedule II to
Credit Agreement
REVOLVING CREDIT FACILITY
APPLICABLE MARGIN
<TABLE>
<CAPTION>
STATUS: LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
<S> <C> <C> <C> <C> <C>
Commitment Fee: 0.45% 0.50% 0.60% 0.70% 0.80%
Eurodollar Loans: 1.25% 1.50% 1.875% 2.25% 2.625%
ABR Loans: 0.60% 0.85% 1.225% 1.60% 1.975%
Financial Letters of Credit: 1.25% 1.50% 1.875% 2.25% 2.625%
Performance Letters of Credit: 1.05% 1.30% 1.675% 2.05% 2.425%
</TABLE>
For purposes of this Schedule, capitalized terms shall have the meanings
assigned to them in the Credit Agreement (as amended from time to time) to which
this Schedule is appended, provided that the following terms shall have the
following meanings:
"Level 1 Status" exists at any date if, at such date, the Borrower Indenture
Securities are rated BBB- or higher by S&P and Baa3 or higher by Moody's.
"Level 2 Status" exists at any date if, at such date, (i) the Borrower Indenture
Securities are rated BB+ or higher by S&P and Ba1 or higher by Moody's and (ii)
Level 1 Status does not exist.
"Level 3 Status" exists at any date if, at such date, (i) the Borrower Indenture
Securities are rated BB or higher by S&P and Ba2 or higher by Moody's and (ii)
neither Level 1 Status nor Level 2 Status exists.
"Level 4 Status" exists at any date if, at such date, (i) the Borrower Indenture
Securities are rated BB- or higher by S&P and Ba3 or higher by Moody's and (ii)
none of Level 1 Status, Level 2 Status nor Level 3 Status exists.
"Level 5 Status" exists at any date if, at such date, no other Status exists or
the Borrower Indenture Securities are not rated by both S&P and Moody's or no
Borrower Indenture Securities are outstanding.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Rating Group.
"Status" refers to the determination which of Level 1 Status, Level 2 Status,
Level 3 Status, Level 4 Status or Level 5 Status exists at any date. For
purposes of this determination, the credit rating in effect at any date is that
in effect at the close of business on such date.
<PAGE> 1
EXHIBIT 10.49(a)
EXECUTION COPY
SECOND AMENDED AND RESTATED GUARANTEE
SECOND AMENDED AND RESTATED GUARANTEE, dated as of March 3,
2000, made by COGENTRIX DELAWARE HOLDINGS, INC., a Delaware corporation (the
"Guarantor"), in favor of the Borrower Creditors (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to the Amended and Restated Credit
Agreement, dated as of October 29, 1998, as supplemented by the Supplements
thereto dated December 18, 1998 and January 22, 1999, and as amended by the
Extension Agreement and Amendment dated October 29, 1999 (as so amended and
supplemented, the "Existing Credit Agreement"), among (i) Cogentrix Energy, Inc.
(the "Borrower"), (ii) the several banks and financial institutions parties
thereto (the "Existing Lenders"), (iii) Australia and New Zealand Banking Group
Limited ("ANZ") and certain other banks and financial institutions, as the lead
arrangers (the "Lead Arrangers") and (iv) ANZ as the issuing bank thereunder (in
such capacity, the "Issuing Bank") and as agent for the Existing Lenders, the
Existing Lenders severally agreed to make certain loans to the Borrower (the
"Loans") and the Issuing Bank agreed to issue certain letters of credit for the
account of the Borrower (the "Letters of Credit"; the Loans and the Letters of
Credit, collectively, the "Extensions of Credit") upon the terms and subject to
the conditions set forth therein, the Loans to be evidenced by certain notes
issued by the Borrower under the Credit Agreement;
WHEREAS, the Borrower owns directly all of the issued and
outstanding stock of the Guarantor;
WHEREAS, the proceeds of the Loans have and will be used in
part to enable the Borrower to make valuable transfers (as determined as
provided herein) to the Guarantor in connection with the operation of its
business;
WHEREAS, the Guarantor has and will derive substantial direct
and indirect benefit from the making of the Extensions of Credit;
WHEREAS, it was a condition precedent to the effectiveness of,
and the obligation of the Existing Lenders and the Issuing Bank to make their
respective Extensions of Credit under, the Existing Credit Agreement that the
Guarantor shall have executed and delivered the Amended and Restated Guarantee
dated as of October 29, 1998 (the "Existing Guarantee") in favor of the Borrower
Creditors (as hereinafter defined);
WHEREAS, the Borrower has requested that the Existing Credit
Agreement be amended and restated pursuant to the Second Amended and Restated
Credit Agreement, dated as
<PAGE> 2
2
of March 3, 2000 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among (i) the Borrower, (ii) the several banks
and financial institutions from time to time parties thereto (the "Lenders"),
(iii) ANZ and The Bank of Nova Scotia as lead arrangers and (iv) ANZ as the
Issuing Bank and as agent for the Lenders (in such capacity, the "Agent"); and
WHEREAS, it is a condition precedent to the effectiveness of,
and the obligation of the Lenders and the Issuing Bank to make their respective
Extensions of Credit under, the Credit Agreement that the Guarantor amend and
restate the Existing Guarantee by executing and delivering this Second Amended
and Restated Guarantee.
NOW, THEREFORE, in consideration of the premises and to induce
the Agent, the Issuing Bank, the Lead Arrangers and the Lenders to enter into
the Credit Agreement and to induce the Lenders and the Issuing Bank to make
their respective Extensions of Credit to the Borrower under the Credit
Agreement, the Guarantor hereby agrees to amend and restate the Existing
Guarantee to read as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
(b) As used herein, the following terms shall have the
following meanings:
"Borrower Creditors": the collective reference to the Credit
Agreement Creditors, the Trustees, the Holders, the holders of Other
Indebtedness and their respective successors, indorsees, transferees
and assigns.
"CDH Permitted Investments":
(i)(A) commercial paper of issuers organized under the laws of
any state of the United States of America rated at least "A-1" by
Standard and Poor's Rating Group ("S&P") and "Prime-1" by Moody's
Investors Service, Inc. ("Moody's");
(B) marketable direct obligations of the United States of
America with maturities of three years or less from the date of
acquisition;
(C) marketable obligations directly and fully guaranteed as
to interest and principal by the United States of America with
maturities of three years or less from the date of acquisition;
(D) demand deposits with the Agent, and time deposits,
certificates of deposit and banker's acceptances issued by (1) the
Agent or (2) any member bank of the Federal Reserve System which is
organized under the laws of the United States of America or any state
thereof or any United States branch of a foreign bank, in each case
whose long-term debt securities are rated "A" or better by S&P and "A2"
or better by Moody's;
<PAGE> 3
3
(E) obligations of the Agent, any bank described in clause
(D) above or any financial institution, in respect of the repurchase of
obligations of the type as described in clauses (B) and (C) above,
provided that such repurchase obligations shall be fully secured by
obligations of the type described in said clauses (B) and (C) and the
possession of such obligations shall be transferred to, and segregated
from other obligations owned by, the Agent, any such bank or such
financial institution;
(F) eurodollar certificates of deposit issued by the Agent
or any bank described in clause (D) above;
(G) marketable asset-backed securities rated at least "AA"
by S&P and "Aa2" by Moody's;
(H) marketable debt obligations of the Federal National
Mortgage Association, the Government National Mortgage Association or
the Federal Home Loan Mortgage Association secured by a pool of
mortgage loans with an average life of three years or less from the
date of acquisition and rated at least "AA" by S&P and at least "Aa2"
by Moody's; and
(I) corporate debt securities of issuers organized under
the laws of any state of the United States of America with maturities
of three years or less from the date of acquisition rated not less than
"A" by S&P and "A2" by Moody's;
provided, that for any of the securities of the types described in
subclauses (A), (B), (C), (D), (E), (F), (G), (H) or (I) above to be
CDH Permitted Investments in the hands of any Person (x) the weighted
average maturity from any date of the securities of such types owned on
such date by such Person shall not be more than one year; and (y) the
value of the securities of any single issuer rated less than "AAA" by
S&P and "Aaa" by Moody's (other than the United States of America or
any agency thereof) owned by such Person at any time shall not
constitute more than 5% of the value of all of the securities of such
types owned by such Person at such time; and
(ii) shares of money market mutual funds which invest
exclusively in assets satisfying the requirements of subclauses (A),
(B), (C), (D) or (F) of clause (i) of this definition; provided, that
for any such shares of such a fund to be CDH Permitted Investments in
the hands of any Person, the weighted average maturity from any date of
the securities owned on such date by such fund shall not be more than
one year.
"Credit Agreement Creditors": the collective reference to the
Agent, the Issuing Bank, the Lead Arrangers, and the Lenders.
"Credit Agreement Obligations": the collective reference to
the unpaid principal of and interest on the Notes issued by the
Borrower under the Credit Agreement and all other obligations and
liabilities of the Borrower in respect of the payment of any amount by
the Borrower to, or deposit of any amount by the Borrower with, the
Credit Agreement Creditors or any of them (including, without
limitation, (i) interest accruing at
<PAGE> 4
4
the then applicable rate provided in the Credit Agreement after the
maturity of the Loans and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding and
(ii) the obligations of the Borrower to make deposits into the Cash
Collateral Account), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit
Agreement, the notes issued by the Borrower thereunder, the Letters of
Credit, or any other document made, delivered or given in connection
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Agent, the Issuing Bank or to the Lenders that are required to
be paid by the Borrower or the Guarantor pursuant to the terms of the
Credit Agreement or this Guarantee).
"Guaranteed Obligations": the collective reference to (a) the
Credit Agreement Obligations, (b) the Indenture Obligations and (c) all
Other Indebtedness.
"Holders": the collective reference to the holders of the
Borrower Indenture Securities.
"Indenture Obligations": the collective reference to the
unpaid principal of and interest on the Borrower Indenture Securities
and all other obligations and liabilities of the Borrower in respect of
the payment of any amount by the Borrower to, or deposit of any amount
by the Borrower with either Trustee, or any of the Holders (including,
without limitation, (i) interest accruing at the then applicable rate
provided in the applicable Borrower Indenture after the maturity of any
of the Borrower Indenture Securities and interest accruing at the then
applicable rate provided in the applicable Borrower Indenture after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding and (ii) any obligations of the
Borrower to make deposits pursuant to either Borrower Indenture into a
"Sinking Fund" for the retirement of the any of the Borrower Indenture
Securities) whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter incurred, which may arise
under, out of, or in connection with, either of the Borrower
Indentures, any of the Borrower Indenture Securities or any other
document made, delivered or given in connection therewith, whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to either Trustee or
to any of the Holders that are required to be paid by the Borrower or
the Guarantor pursuant to the terms of the either Borrower Indenture or
this Guarantee).
"Other Indebtedness": any unsecured indebtedness of the
Borrower for borrowed money, other than indebtedness constituting a
Credit Agreement Obligation or Indenture Obligation, existing on the
date hereof or hereafter incurred by the Borrower, but only to
<PAGE> 5
5
the extent the Borrower is permitted to Incur such indebtedness under
the Borrower Indentures and the Credit Agreement.
"Trustees": the collective reference to the 2004 Trustee and
the 2008 Trustee.
"2004 Trustee": the trustee under the 2004 Senior Note
Indenture.
"2008 Trustee": the trustee under the 2008 Senior Note
Indenture.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) Subject to the provisions of paragraph 2(b),
the Guarantor hereby, unconditionally and irrevocably, guarantees to (i) the
Agent, for the ratable benefit of the Credit Agreement Creditors and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment (and performance, in the case of deposits) by the Borrower when
due (whether at the stated maturity, by acceleration or otherwise) of the Credit
Agreement Obligations, (ii) the 2004 Trustee, for the ratable benefit of the
Holders of the 2004 Senior Notes and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment (and performance, in
the case of deposits) by the Borrower when due (whether at the stated maturity,
by acceleration or otherwise) of the Indenture Obligations in respect of the
2004 Senior Notes, (iii) the 2008 Trustee, for the ratable benefit of the
Holders of the 2008 Senior Notes and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment (and performance, in
the case of deposits) by the Borrower when due (whether at the stated maturity,
by acceleration or otherwise) of the Indenture Obligations in respect of the
2008 Senior Notes and (iv) each holder of Other Indebtedness and such holder's
successors, indorsees, transferees and assigns, the prompt and complete payment
by the Borrower when due (whether at the stated maturity, by acceleration or
otherwise) of the Other Indebtedness owed to such holder.
(b) Anything herein or in the Credit Agreement, either of the
Borrower Indentures, any agreement in respect of Other Indebtedness or any other
document to the contrary notwithstanding, (i) the maximum liability of the
Guarantor hereunder and under the Credit Agreement, the Borrower Indentures or
any agreement in respect of Other Indebtedness shall in no event exceed the
amount which can be guaranteed by the Guarantor under applicable federal and
state laws relating to the insolvency of debtors and (ii) the Guarantor shall
not be liable, on account of the Borrower's failure to pay or perform any
Guaranteed Obligation owed to any Borrower Creditor when due, to pay to such
Borrower Creditor any amount hereunder or under the Credit Agreement, the
Borrower Indentures or any agreement in respect of Other Indebtedness unless the
Guarantor shall have more than $150,000 in assets (other than assets
<PAGE> 6
6
constituting Investments in Subsidiaries but including, without limitation, CDH
Permitted Investments) on the day that such failure occurred or thereafter.
(c) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by any Borrower Creditor in enforcing, or obtaining advice
of counsel in respect of, any rights with respect to, or collecting, any or all
of the Guaranteed Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.
(d) No payment or payments made by the Borrower, the
Guarantor, any other guarantor or any other Person or received or collected by
any Borrower Creditor from the Borrower, the Guarantor, any other guarantor or
any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of any of the Guaranteed Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of the Guarantor hereunder
which shall, notwithstanding any such payment or payments other than payments
made by the Guarantor in respect of the Guaranteed Obligations or payments
received or collected from such Guarantor in respect of the Guaranteed
Obligations, remain liable for the Guaranteed Obligations up to the maximum
liability of the Guarantor hereunder.
3. Right of Set-off. The Guarantor hereby irrevocably
authorizes each Borrower Creditor at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived by the
Guarantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Borrower Creditor to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as such Borrower Creditor may
elect, against and on account of the obligations and liabilities of the
Guarantor to the Borrower Creditor hereunder, in any currency, whether arising
hereunder, under the Credit Agreement, either of the Borrower Indentures, any
note issued by the Borrower under the Credit Agreement or either of the Borrower
Indentures, any agreement in respect of Other Indebtedness or otherwise, as such
Borrower Creditor may elect, whether or not any Borrower Creditor has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Borrower Creditor shall notify the Guarantor
promptly of any such set-off and the application made by such Borrower Creditor,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Borrower Creditor under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Borrower Creditor may have.
4. No Subrogation. Notwithstanding any payment or payments
made by the Guarantor hereunder or any set-off or application of funds of any of
the Guarantor by any Borrower Creditor, the Guarantor shall not be entitled to
be subrogated to any of the rights of any Borrower Creditor against the Borrower
or any collateral security or guarantee or right of offset held by any Borrower
Creditor for the payment of any of the Guaranteed Obligations, nor shall the
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Borrower in respect of payments made by the Guarantor hereunder.
<PAGE> 7
7
5. Amendments, etc. with respect to the Guaranteed
Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for payment
of any of the Guaranteed Obligations made by any Borrower Creditor may be
rescinded by such party and any of the Guaranteed Obligations continued, and the
Guaranteed Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by any Borrower Creditor, and the Credit Agreement, either of the
Borrower Indentures, any note issued by the Borrower under the Credit Agreement
or either of the Borrower Indentures, any agreement in respect of Other
Indebtedness and any other documents executed and delivered in connection with
the Credit Agreement, either of the Borrower Indentures, or any agreement in
respect of Other Indebtedness, may be amended, modified, supplemented or
terminated, in whole or in part, as the parties thereto may deem advisable from
time to time, and any collateral security, guarantee or right of offset at any
time held by any Borrower Creditor for the payment of any of the Guaranteed
Obligations may be sold, exchanged, waived, surrendered or released. When making
any demand hereunder against the Guarantor, a Borrower Creditor may, but shall
be under no obligation to, make a similar demand on the Borrower or any other
guarantor, and any failure by any Borrower Creditor to make any such demand or
to collect any payments from the Borrower or any such guarantor or any release
of the Borrower or such other guarantor shall not relieve the Guarantor of its
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of any Borrower
Creditor against the Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by any Borrower
Creditor upon this Guarantee or acceptance of this Guarantee, the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee (subject in each case to the right of the Guarantor and the
Agent to waive, amend, supplement and modify this Guarantee as provided in
paragraph 14(a) hereof and the termination of this Guarantee and the discharge
of the Guarantor's obligations hereunder as provided in Section 15); and all
dealings between the Borrower and the Guarantor, on the one hand, and any of the
Borrower Creditors, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon this Guarantee (subject in each
case to the right of the Guarantor and the Agent to waive, amend, supplement and
modify this Guarantee as provided in paragraph 14(a) hereof and the termination
of this Guarantee and the discharge of the Guarantor's obligations hereunder as
provided in Section 15). The Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Borrower
or the Guarantor with respect to any of the Guaranteed Obligations. The
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, either
of the Borrower Indentures, any note issued by the Borrower under the Credit
Agreement either of the Borrower Indentures, any agreement in respect of any
Other
<PAGE> 8
8
Indebtedness, any of the Guaranteed Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by any Borrower Creditor, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower against any Borrower
Creditor, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for any
of the Guaranteed Obligations, or of the Guarantor under this Guarantee, in
bankruptcy or in any other instance. When pursuing its rights and remedies
hereunder against the Guarantor, any Borrower Creditor may, but shall be under
no obligation to, pursue such rights and remedies as it may have against the
Borrower or any other Person or against any collateral security or guarantee for
any of the Guaranteed Obligations or any right of offset with respect thereto,
and any failure by any Borrower Creditor to pursue such other rights or remedies
or to collect any payments from the Borrower or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of the Borrower or any such other Person or any
such collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of any
Borrower Creditor against the Guarantor.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by any Borrower Creditor upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
8. Payments. The Guarantor hereby guarantees to each of the
Credit Agreement Creditors that payments hereunder in respect of the Credit
Agreement Obligations will be paid to the Agent without set-off or counterclaim
in U.S. Dollars at the office of the Agent located at 1177 Avenue of the
Americas, New York, New York 10036-9715.
9. Representations and Warranties. The Guarantor hereby
represents and warrants to each of the Credit Agreement Creditors (and not to
any other Borrower Creditor):
(a) The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal right to
own and operate its property, to lease the property it operates and to conduct
the business in which it is currently engaged.
(b) The Guarantor has the corporate power and authority and
the legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Guarantee.
(c) This Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms, except as
affected by bankruptcy,
<PAGE> 9
9
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting the enforcement of creditors' rights generally,
general equitable principles and an implied covenant of good faith and fair
dealing.
(d) The execution, delivery and performance of this Guarantee
will not violate any provision of any Requirement of Law or Contractual
Obligation of the Guarantor and will not result in or require the creation or
imposition of any Lien on any of the properties or revenues of such Guarantor
pursuant to any Requirement of Law or Contractual Obligation of the Guarantor.
(e) No consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
the Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this Guarantee.
(f) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or any of the
transactions contemplated hereby or (ii) which could have a material adverse
effect on the business, operations, property or financial or other condition of
the Guarantor.
(g) The Guarantor has good title in all its property, and none
of its property is subject to any Lien of any nature whatsoever except as
permitted under paragraph 10(a) hereof.
(h) The Guarantor has filed or caused to be filed all tax
returns which, to its knowledge, are required to be filed and has paid all taxes
shown to be due and payable on said returns or on any assessments made against
it or any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority (other than any the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of such Guarantor). No tax Lien has been
filed, and, to the knowledge of the Guarantor, no claim is being asserted, with
respect to any such tax, fee or other charge.
(i) The unaudited balance sheet of the Guarantor as at
December 31, 1999 and the related unaudited statement of income for the fiscal
period ended on such date, certified by a Responsible Officer, copies of which
have heretofore been furnished to each Lender, are complete and correct and
present fairly the financial condition of the Guarantor as at such date, and the
results of its operations for the fiscal year then ended. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved. At the date of the balance sheet referred to above, the Guarantor had
no material Guarantee Obligation, contingent liability or liability for taxes,
or any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction or other financial derivative, which is not reflected in the
foregoing statements or in the notes thereto. During the period from December
31, 1999, to and including the date of this Guarantee there has been no
<PAGE> 10
10
sale, transfer or other disposition by the Guarantor of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any Capital Stock of any other Person) material in relation
to the financial condition of the Guarantor at December 31, 1999.
(j) The Borrower directly owns 100% of the outstanding shares
of Capital Stock of the Guarantor.
10. Covenants. The Guarantor hereby covenants and agrees with
each of the Credit Agreement Creditors (and not with any other Borrower
Creditor) as follows:
(a) The Guarantor shall not Incur, assume, create or otherwise
cause or suffer to exist, directly or indirectly, any Debt (other than Debt
under this Guarantee) and shall not grant or cause or suffer to exist any Lien
on any property of the Guarantor now owned or hereafter acquired by the
Guarantor other than (i) the Liens granted under the Cash Collateral Agreement
and (ii) Debt that the Borrower is permitted to allow the Guarantor to Incur,
assume, create or otherwise cause or suffer to exist, and Liens that the
Borrower is permitted to allow the Guarantor to grant or cause or suffer to
exist, in either case under the Credit Agreement (including, without limitation,
subsection 7.12 thereof) and the Borrower Indentures.
(b) The Guarantor shall not create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on its ability to (i) pay dividends or make other distributions
permitted by applicable law on any of its Capital Stock, (ii) make payments in
respect of any Debt owed to the Borrower, (iii) make loans or other advances to
the Borrower or (iv) transfer any of its property to the Borrower, other than
those encumbrances and restrictions that the Borrower is permitted to allow the
Guarantor to create or otherwise cause or suffer to exist under the Credit
Agreement (including, without limitation, subsection 7.12 thereof) and the
Borrower Indentures.
(c) The Guarantor shall not make any advance, loan, extension
of credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit of,
or make any other Investment in, any Person, other than (i) Investments in any
Subsidiary of the Guarantor (or any Person that will become a Subsidiary of the
Guarantor as a result of such Investment) that the Borrower is permitted to
allow the Guarantor to make under the Credit Agreement (including, without
limitation, subsection 7.4 thereof), and the Borrower Indentures and (ii) CDH
Permitted Investments; provided, that (1) so long as the total of the aggregate
amount of CDH Permitted Investments owned by the Borrower plus the aggregate
amount of CDH Permitted Investments owned by the Guarantor (exclusive of, in the
case of both the Borrower and the Guarantor, any CDH Permitted Investments
subject to or otherwise covered by any Lien other than the Lien created under
the Credit Agreement in the Cash Collateral Account) shall have a value of $50
million or more, the Guarantor may make any Investment that the Borrower is
permitted to allow the Guarantor to make under the Credit Agreement (including,
without limitation, subsection 7.4 thereof), and the Borrower Indentures and (2)
the Guarantor may make loans to AGRO Power Development, Inc. and its Affiliates,
for purposes of financing its or their acquisition, construction, operation or
development of greenhouses in which the Borrower or one of its Subsidiaries has
or will have an interest, in an
<PAGE> 11
11
aggregate principal amount not to exceed $10 million at any time, but only to
the extent that the Borrower is permitted to allow the Guarantor to make such
loans under the Credit Agreement (including, without limitation, subsection 7.4
thereof) and the Borrower Indentures.
11. Authority of Agent. The Guarantor acknowledges that the
rights and responsibilities of the Agent under this Guarantee with respect to
any action taken by the Agent or the exercise or non-exercise by the Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Guarantee shall, as between the Agent
and the other Credit Agreement Creditors, be governed by the Credit Agreement
and by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Agent and such Guarantor, the Agent shall be
conclusively presumed to be acting as agent for the other Credit Agreement
Creditors with full and valid authority so to act or refrain from acting, and
the Guarantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
12. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Integration. This Guarantee represents the agreement of
the Guarantor with respect to the subject matter hereof and there are no
promises or representations by any Borrower Creditor relative to the subject
matter hereof not reflected herein.
14. Amendments in Writing; No Waiver; Cumulative Remedies. (a)
The terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified at any time and from time to time by a written instrument
executed by the Guarantor and the Agent but not by any other means. Any waiver,
amendment, supplement or modification pursuant to this paragraph 14(a) shall be
effective as against all of the Borrower Creditors notwithstanding any reliance
by the Borrower Creditors or any of them on this Guarantee prior thereto.
(b) Neither the Agent nor any other Credit Agreement Creditor
nor the Trustee nor any Holder nor any other Borrower Creditor shall by any act,
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of the Agent, any other Credit Agreement Creditor, either Trustee, any
Holder or any other Borrower Creditor, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent, any other Credit Agreement Creditor, either Trustee, any Holder or any
other Borrower Creditor of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Agent, such
other Credit Agreement Creditor, either Trustee, such Holder or such other
Borrower Creditor would otherwise have on any future occasion.
<PAGE> 12
12
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
15. Discharge. This Guarantee and the Guarantor's obligations
hereunder shall remain in full force and effect until all Credit Agreement
Obligations shall have been paid and performed in full and all Letters of Credit
shall have expired or been terminated (notwithstanding that from time to time
the Borrower may be free from any Credit Agreement Obligations) and, except as
otherwise provided in Section 7 hereof, thereafter this Guarantee shall
terminate and all of the Guarantor's obligations hereunder shall be discharged
in full.
16. Section Headings. The section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of each Borrower Creditor and each Borrower Creditor's successors, indorsees,
transferees and assigns.
18. Governing Law. This Guarantee shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE> 13
13
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to
be duly executed and delivered by its duly authorized officer as of the day and
year first above written.
COGENTRIX DELAWARE HOLDINGS, INC.
By: /s/ Thomas F. Schwartz
-----------------------------
Title: Thomas F. Schwartz
President
ACCEPTED AS OF THE DATE HEREOF:
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED, as Agent
By: /s/ Eliz M. Waters
--------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.58(a)
[EXECUTION COPY]
FIRST AMENDMENT
FIRST AMENDMENT, dated as of December 17, 1999 (this
"Amendment"), to the Credit Agreement, dated as of September 8, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Cogentrix Eastern America, Inc., a Delaware corporation (the
"Borrower"), the several banks and other financial institutions or entities from
time to time parties to the Credit Agreement (the "Lenders"), and Dresdner Bank,
AG, New York Branch, as administrative agent for the Lenders (in such capacity,
the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Administrative
Agent are parties to the Credit Agreement; and
WHEREAS, the Borrower has requested that the Lenders agree to
amend certain provisions of the Credit Agreement, and the Lenders are agreeable
to such request but only upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, and for other valuable consideration the receipt of
which is hereby acknowledged, the Borrower, the Lenders and the Administrative
Agent hereby agree as follows:
1. Definitions. All terms defined in the Credit Agreement
shall have such defined meanings when used herein unless otherwise defined
herein.
2. Amendment of Section 1.1. Section 1.1 of the Credit
Agreement is hereby amended by adding the following definition between
"Insolvent" and "Interest Payment Date":
"`Intercompany Notes': the collective reference to (i) the
Promissory Note, payable by Thaleia, LLC to the order of the
Borrower in the amount of $36,646,000.00, dated as of
September 20, 1999; (ii) the Promissory Note, payable by
Thaleia, LLC to the order of the Borrower in the amount of
$39,800,000.00, dated as of June 2, 1999; (iii) the Promissory
Note, payable by Cogentrix/Scrubgrass, Inc. to the order of
the Borrower in the amount of $13,389,143.00, dated as of
October 20, 1998; (iv) the Promissory Note, payable by the
Northampton Holdco to the order of the Borrower in the amount
of $13,967,792.00, dated as of October 20, 1998; (v) the
Promissory Note, payable by the Logan Holdco to the order of
the Borrower in the amount of $79,194,864.00, dated as of
October 20, 1998; and (vi) the Promissory Note, payable by the
Carneys Point Holdco to the order of the Borrower in the
amount of $21,998,000.00, dated as of October 20, 1998."
3. Amendment of Section 3.16. Section 3.16 of the Credit
Agreement is hereby amended by inserting the following language after the phrase
"when stock certificates
<PAGE> 2
2
representing such Pledged Stock are delivered to the Administrative Agent," in
the second sentence of such section:
"in the case of the Intercompany Notes, when such notes are
delivered to the Administrative Agent,"
4. Amendment of Subsection 6.1(a). Subsection 6.1(a) of the
Credit Agreement is hereby amended by deleting the language after the word
"except," and substituting in the place of such language the following language:
"(i) in the case of the Borrower, Indebtedness incurred under
any Credit Document and (ii) in the case of the Significant
Subsidiary Holding Companies, Indebtedness incurred under the
Intercompany Notes."
5. Amendment of Subsection 9.1(b). Subsection 9.1(b) of the
Credit Agreement is hereby amended by deleting clause (i) of the proviso to the
second sentence of such subsection, and replacing such clause with the following
new clause (i):
" (i) forgive any portion of the principal amount or extend
the final scheduled date of maturity of any Revolving Loan, or
increase the amount or extend the expiration date of any
Lender's Revolving Commitment, or reduce any interest or fees
with respect to any Revolving Loan, in each case without the
consent of each Lender directly affected thereby;"
6. Representations and Warranties. To induce the
Administrative Agent and the Lenders to enter into this Amendment, the Borrower
hereby represents and warrants to the Administrative Agent and all of the
Lenders as of the Amendment Effective Date (as defined below) that:
(a) The representations and warranties of each Credit Party
set forth in each of the Credit Documents (as amended hereby)
are true and correct in all material respects on and as of the
Amendment Effective Date with the same effect as if made on
and as of such date, except for representations and warranties
expressly stated to relate to a specific earlier date, in
which case such representations and warranties were true and
correct in all material respects as of such earlier date (it
being understood that the references to the Credit Documents
in such representations and warranties shall be deemed to be
references to the Credit Documents as amended by the Amendment
Documents (as defined below));
(b) No Default or Event of Default shall have occurred and be
continuing after giving effect to the Amendment Documents;
(c) The Borrower has the corporate power and authority, and
the legal right, to make, deliver the Amendment Documents and
to perform the Credit Documents, as amended by the Amendment
Documents, and has taken all necessary corporate
<PAGE> 3
3
action to authorize the execution, delivery and performance of
such Amendment Documents and the performance of such Credit
Documents, as so amended;
(d) No consent or authorization of, approval by, notice to,
filing with or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with
the execution and delivery of the Amendment Documents or with
the performance, validity or enforceability of the Credit
Documents, as amended by the Amendment Documents;
(e) Each Amendment Document has been duly executed and
delivered on behalf of the Borrower;
(f) Each Amendment Document and each Credit Document to which
it is a party, as amended by the Amendment Documents,
constitutes a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with
its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of
creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at
law); and
(g) The execution, delivery and performance of the Amendment
Documents and the performance of the Credit Documents, as
amended by the Amendment Documents, will not violate any
Requirement of Law or Contractual Obligation of the Borrower
or of any of its Subsidiaries and will not result in, or
require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any
such Requirement of Law or Contractual Obligation.
For purposes of this Amendment, the "Amendment Documents" means the collective
reference to this Amendment and each of the amendments referred to in clauses
(ii), (iii) and (iv) of Section 7(a) of this Amendment.
7. Conditions to Effectiveness. This Amendment shall not
become effective until the date (such date, the "Amendment Effective Date") as
of which all of the following conditions precedent shall have been satisfied:
(a) the Administrative Agent shall have received each of the following: (i)
counterparts of this Amendment, duly executed and delivered by the Borrower and
each of the Lenders; (ii) Amendment No. 1 to the Security Deposit Agreement in
the form attached hereto as Exhibit A, duly executed and delivered by the
Borrower and each of the Significant Subsidiary Holding Companies; (iii)
Amendment No. 1 to the Northampton Holdco Stock Pledge Agreement in the form
attached hereto as Exhibit B, duly executed and delivered by the Borrower; (iv)
Amendment No. 1 to the Logan Holdco Stock Pledge Agreement in the form attached
hereto as Exhibit C, duly executed and delivered by the Borrower; and (b) the
Administrative Agent shall have received each of the Intercompany Notes pursuant
to such Amendment No. 1 to the Security Deposit Agreement, together with an
undated note power or endorsement for each Intercompany Note executed in blank
by a duly authorized officer of the Borrower.
<PAGE> 4
4
8. Limited Effect. Except as expressly amended herein, the
Credit Agreement shall continue to be, and shall remain, in full force and
effect. This Amendment shall not be deemed to be a waiver of, or consent to, or
a modification or amendment of, any other term or condition of any of the Credit
Documents or to prejudice any other right or rights which the Lenders may now
have or may have in the future under or in connection with any of the Credit
Documents or any of the instruments or agreements referred to therein, as the
same may be amended from time to time.
9. Costs and Expenses. The Borrower agrees to pay or reimburse
the Administrative Agent for all its reasonable and customary outofpocket costs
and expenses incurred in connection with this Amendment, including, without
limitation, the reasonable fees and disbursements of Simpson Thacher & Bartlett,
counsel for the Administrative Agent.
10. Counterparts. This Amendment may be executed by one or
more of the parties hereto in any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly authorized
officers as of the date first above written.
<PAGE> 5
5
COGENTRIX EASTERN AMERICA, INC.
By: /s/ Thomas F. Schwartz
-------------------------------
Title: Senior Vice President-
Finance and Treasurer
DRESDNER BANK AG, NEW YORK BRANCH,
as Administrative Agent and Lender
By: /s/ Andrew Schroeder
-------------------------------
Title: Vice President
By: /s/ Robert F. Moyle
-------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.60
CHANGE IN EMPLOYMENT STATUS AND
CONSULTING AGREEMENT
THIS CHANGE IN EMPLOYMENT STATUS AND CONSULTING AGREEMENT ("Agreement")
is entered into as of January 1, 2000, between JAMES E. LEWIS, an individual
residing in the State of Florida ("Mr. Lewis"); and COGENTRIX ENERGY, INC., a
North Carolina corporation (the "Company").
STATEMENT OF PURPOSE
A. Mr. Lewis currently holds the office of Vice Chairman and has been
employed as an officer of the Company and of its subsidiaries through December
31, 1999.
B. Mr. Lewis and the Company have agreed upon terms to conclude Mr.
Lewis' participation in the day-to-day operations and management of the Company
and its subsidiaries, other than his duties as a consultant pursuant to the
terms hereof.
C. The Company has offered, and Mr. Lewis has accepted, the position of
Consultant, providing the Company the benefit of Mr. Lewis' experience and
abilities in the business of developing, owning and operating cogeneration
facilities upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the compensation the Company agrees to pay Mr. Lewis, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Resignation as Employee. Effective as of December 31, 1999, Mr.
Lewis hereby resigns as an employee and officer of the Company (and each of its
subsidiaries and affiliates), with the sole exception of the office of Vice
Chairman of the Company from which he does not resign.
2. Consulting Services. During the period commencing on January 1,
2000, and ending on December 31, 2004, subject to matters beyond his reasonable
control, Mr. Lewis agrees to be available for consultation with to the
Management Committee (consisting of the CEO, COO, and division managers of the
Company), which meets in Charlotte, North Carolina, with respect to such of the
Company's business and affairs as the Company may reasonably call on him to
furnish. It is the understanding of the parties that Mr. Lewis will be available
on reasonable notice and at reasonable times during customary normal business
hours for consultations, either in person or by telephone; provided, however,
that Mr. Lewis shall not be required to be active in the day-to-day operations
of the Company and its subsidiaries and Mr. Lewis shall not be required to
perform services for more than (i) from the period from March 1, 2000 through
December 31, 2002, five (5) hours per week (Monday through Friday) for forty
<PAGE> 2
(40) weeks in each year, and (ii) from the period from January 1, 2003, through
December 31, 2004, three (3) hours per week (Monday through Friday) for twenty
(20) weeks in each year. Mr. Lewis shall be provided with written notice of any
meetings in person no less than five (5) and no more than fifteen (15) business
days prior to the meeting if the meeting is to be held in Mecklenburg County,
North Carolina and no less than fifteen (15) and no more than thirty (30)
business days prior to the meeting if the meeting is to be held outside
Mecklenburg County, North Carolina. Mr. Lewis shall be provided with written
notice of any telephone meetings no less than two (2) business days prior to the
meeting. Mr. Lewis shall have the right, no more than three (3) times a year, to
request that the Company reschedule a meeting and, if the Company does not elect
to reschedule such meeting, Mr. Lewis shall be excused from attending the
meeting. Request for specific consulting services shall be made by the Board of
Directors or the Chief Executive Officer of the Company.
3. Compensation for Services as Consultant. In consideration of the
services to be rendered by Mr. Lewis hereunder and for Mr. Lewis' agreement to
be available on reasonable notice to render services (if such services are
required), the Company shall pay Mr. Lewis compensation as follows:
(a) The Company shall pay Mr. Lewis the base annual
compensation set forth below payable in equal monthly installments in
arrears on or about the fourth Thursday of each month beginning as of
January 1, 2000 and continuing through December 31, 2004. The base
annual compensation to be paid hereunder shall be:
Year Base Compensation
---- -----------------
1/1/2000 to 12/31/2000 $350,424 per annum
1/1/2001 to 12/31/2001 $219,015 per annum
1/1/2002 to 12/31/2002 $187,727 per annum
1/1/2003 to 12/31/2003 $187,727 per annum
1/1/2004 to 12/31/2004 $125,151 per annum
In addition, upon providing documentation customarily
required of employees of the Company for such purposes, Mr. Lewis shall
be reimbursed for all actual reasonable out-of-pocket expenses incurred
by him in rendering Company requested services on behalf of the Company
in accordance with the Company's policy relating to expense
reimbursement.
(b) During the period from January 1, 2000 through December
31, 2004, the Company shall provide, at its expense, the corporate
medical, dental, prescription drug card, disability and group term life
insurance coverage, for Mr. Lewis and his spouse and children as in
effect from time to time for senior executives of the Company;
provided, however, that the amount of such group term life insurance
coverage shall be computed based upon a salary rate of $350,424 per
annum. The Company shall continue to maintain its portion of the
premiums on that certain split-dollar life insurance policy
-2-
<PAGE> 3
#4884290 issued on the life of Mr. Lewis by Massachusetts Mutual Life
Insurance Company.
(c) The payments provided for above shall continue in all
events notwithstanding Mr. Lewis' temporary or permanent, total or
partial disability or other inability to perform any services hereunder
or the Company's failure or refusal to timely call upon Mr. Lewis to
perform any services required of Mr. Lewis hereunder. If Mr. Lewis
shall die at any time prior to the payment of all amounts payable
above, the Company shall continue to pay when due hereunder to Mr.
Lewis' beneficiary or estate, as hereinafter provided, the remaining
payments which would have been made to Mr. Lewis had he not died. Such
payments shall be made by the Company to such person or entity as Mr.
Lewis may direct in writing, but if the person or entity does not
survive Mr. Lewis, or if Mr. Lewis shall fail to designate such a
person or entity, then such payments shall be made to Mr. Lewis'
estate. If Mr. Lewis shall be survived by a person designated to
receive such payments and such person shall die prior to receiving all
amounts payable hereunder, then any remaining amounts that would have
been paid to such deceased person if living shall be paid as they
otherwise become due and payable to such deceased person's estate.
4. Entitlements as Former Employee.
(a) Mr. Lewis, as an employee of the Company from April 14,
1986 through December 31, 1999, is entitled to receive the following
payments pursuant to that certain Profit Sharing Plan Agreement between
the Company and Mr. Lewis, dated as of July 1, 1996 as amended ("Profit
Sharing Plan Agreement"), to be paid on March 23, 2000:
(1) the Annual Distribution under the Profit Sharing
Plan Agreement for Plan Year 1999 at the Applicable Percentage of 0.60%
of NIBT for Plan Year 1999 ("1999 Distribution"); and
(2) the Severance Benefit pursuant to Section III,2
of the Profit Sharing Plan Agreement equal to two hundred percent
(200%) of the 1999 Distribution.
(b) Mr. Lewis, as an employee of the Company through December
31, 1999, is entitled to receive a payment pursuant to the terms of
that certain Amended and Restated Incentive Bonus Plan Agreement
between the Company and Mr. Lewis, dated as of December 31, 1997
("Incentive Bonus Plan Agreement") based upon the NIBT for Plan Year
1999, to be paid by Company on or before March 31, 2000.
(c) Mr. Lewis, as an employee of the Company through December
31, 1999, is entitled to receive payment of a performance bonus of
$17,521, to be paid by Company on or before March 31, 2000.
(d) Mr. Lewis, as an employee of the Company through December
31, 1999, participated in the Supplemental Retirement Savings Plan and
deferred receipt of
-3-
<PAGE> 4
substantial income earned prior to January 1, 2000. The Company agrees
to pay and Mr. Lewis agrees to accept, in full satisfaction of Mr.
Lewis' rights under the Supplemental Retirement Savings Plan, the sum
of $574,000.00 with payment by the Company on or before March 31, 2000.
The said payment shall be subject to all applicable tax withholding
requirements and Mr. Lewis shall be provided a statement of all such
deductions from said $574,000.00 on the date of payment.
5. No Control over Employees. Mr. Lewis acknowledges that in performing
his consulting duties under this Agreement, he shall have no authority or
control over the employees of the Company. Nothing herein shall be construed as
giving the Company control over, or the right to control, the personal judgment
or actions of Mr. Lewis with respect to the professional services rendered
hereunder.
6. Trade Secrets. For a period of six (6) years from the date hereof,
Mr. Lewis shall not at any time or in any manner, either directly or indirectly,
divulge, disclose or communicate to any person, firm or corporation in any
manner whatsoever any information (except to the extent it may be necessary or
appropriate to communicate such information on a confidential basis to any
financial institution or Mr. Lewis' professional advisors in connection with Mr.
Lewis' own financial or personal affairs) concerning any matter affecting or
relating to the Company or any of its subsidiaries, including, without
limitation, the identity of any of its customers, the prices it obtains or has
obtained from the sale of its services or the prices at which it offers to sell
its products or services or any other information concerning the Company and its
subsidiaries or affiliated companies, their manner of operation, their plans,
processes or other data relating to the Company and its subsidiaries. The
parties hereto stipulate that the information described above is important and
confidential and affects the effective and successful conduct of the business of
the Company and its subsidiaries and their goodwill and that any breach of the
terms of this section shall be a material breach of this Agreement.
Nothing herein shall in any way limit the disclosure by Mr.
Lewis of any information which is obtained from published information or other
information which is in or comes into the public domain other than as a result
of his breach of this Agreement or which may be required in connection with any
litigation which may arise as a result of a breach by the Company of its
obligations under this Agreement or the Profit-Sharing Plan.
7. Enforcement; Remedies. Mr. Lewis covenants and agrees that in the
event of an anticipated breach or actual breach by him of the provisions of
Section 6 of this Agreement, then the Company shall be entitled to inform all
potential or new shareholders, officers, directors, borrowers, suppliers or
customers, or any of them, of this Agreement. Because the breach or threatened
breach of the covenants contained in Section 6 will result in immediate and
irreparable injury to the Company, Mr. Lewis agrees that the Company shall be
entitled to an injunction restraining him from any violation of Section 6 to the
fullest extent the law allows enforcement of such restrictions and prohibitions.
Mr. Lewis covenants and agrees that if he shall violate the covenants and
agreements contained in Section 6 hereof, the Company shall be entitled to an
accounting of all profits, compensation, commissions, remunerations or benefits
which Mr. Lewis directly or indirectly has realized or may realize as a result
of, growing out of
-4-
<PAGE> 5
or in connection with any such violation and shall be entitled to receive
therefrom all amounts thereof to which the Company would be entitled as damages
under law or at equity. In addition, the Company shall be entitled to suspend
payments due to Mr. Lewis hereunder until (i) Mr. Lewis is no longer in breach
of this Agreement and (ii) Mr. Lewis has compensated the Company for any damages
which it has incurred as a result of Mr. Lewis' breach of this Agreement.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other legal or equitable remedies that may be available to it for any such
breach or threatened breach, including the recovery of damages from Mr. Lewis.
8. Construction. Mr. Lewis hereby expressly acknowledges and agrees
that the covenants set forth in Section 6 above are reasonable when considered
in connection with the payments to be made by the Company to Mr. Lewis;
provided, however, if any court of law shall determine that any provisions of
Section 6 is overly broad or otherwise unenforceable, then such provision shall
be deemed to be applicable and binding only with respect to the period of time
or the prohibited activity or activities which is deemed by such court to grant
the broadest possible enforceable interpretation to the terms of this Agreement.
9. Waiver of Breach. The waiver by the Company of a breach of this
Agreement by Mr. Lewis must be in writing and signed by the Chief Executive
Officer and shall not operate or be construed as a waiver of any subsequent
breach by Mr. Lewis.
10. Release of Company; Acceleration. Upon payment in full by the
Company of all consideration owing to Mr. Lewis pursuant to Sections 4(a), (b),
(c) and (d) of this Agreement, Mr. Lewis hereby releases and forever discharges
the Company and each of its subsidiaries and affiliates and their respective
officers, directors, attorneys, shareholders, employees and agents from and
against any and all actions, causes of action, suits, debts, accounts,
controversies, agreements, promises, damages, claims and demands whatsoever in
law or in equity which he or his successors or assigns hereafter can, shall or
may have against any of them arising out of any matter (including any claim or
benefit from his service as an employee), cause or thing occurring prior to the
execution of this Agreement, except for any future breach regarding salary or
benefits due to be paid as a Consultant under Sections 3(a) through (c);
provided, however, that nothing contained in this Agreement shall affect Mr.
Lewis' right to indemnification as an employee, officer or director of the
Company in accordance with the terms of the Company's Bylaws and the North
Carolina Business Corporation Act. In the event the Company defaults in its
payment and/or performance of any of its obligations hereunder and fails to cure
the same within thirty (30) days of receipt of written notice thereof from Mr.
Lewis to the Company (an "Acceleration Event"), Mr. Lewis shall have the right
to (i) declare all obligations hereunder to be forthwith due and payable,
whereupon the same shall forthwith become due and payable without any further
presentment, demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind, all of which the Company
hereby expressly waives and (ii) all reasonable attorneys' fees, costs and
disbursements incurred after the occurrence of the Acceleration Event in
connection with the enforcement of his rights hereunder.
11. Release of Mr. Lewis. The Company hereby releases and forever
discharges Mr. Lewis from and against any and all actions, causes of action,
suits, debts, accounts, controversies,
-5-
<PAGE> 6
agreements, promises, damages, claims and demands whatsoever in law or in equity
which the Company and its successors or assigns hereafter can, shall or may have
against him arising out of any matter, cause or thing occurring prior to the
execution of this Agreement, including, without limitation, all past services
rendered by Mr. Lewis as an employee in connection with the development and
operation of the projects and facilities developed or under development by the
Company and its subsidiaries and affiliates, other than the obligations of Mr.
Lewis under this Agreement.
12. Totality of Compensation. Mr. Lewis understands, recognizes and
agrees that except for the compensation and benefits provided for in Sections
3(a) through (c) of this Agreement as a consultant, he has no claim, right or
entitlement to any form or amount of compensation for services to the Company
after December 31, 1999; and, further, except for the compensation and benefits
provided for in Sections 4(a) through (d) of this Agreement, subsequent to
December 31, 1999, he has no claim, right or entitlement to benefit from the
Profit Sharing Plan Agreement, Incentive Bonus Plan Agreement, or any other
special executive compensation program, and further, he has no right to make
contributions to any Section 401(k) plan, Supplemental Retirement Savings Plan,
or other defined benefit plan of the Company.
13. Arbitration. All disputes arising out of or in connection with this
Agreement, upon demand by a party hereto in writing to all other parties, shall
be resolved by binding arbitration in accordance with the rules of the American
Arbitration Association, as modified herein. The arbitrator shall be an
independent third party agreed upon by the parties to the arbitration. If such
parties are unable to agree on an arbitrator within thirty (30) days of written
demand for arbitration, each party (a group having a common interest being
considered one party) shall select, within thirty (30) days thereafter, one
arbitrator each and the two selected arbitrators shall choose a third
arbitrator. If three arbitrators are selected, the decision by the three
arbitrators shall be by a two-thirds (2/3) majority vote.
Unless otherwise agreed to in writing by the parties to the arbitration, all
arbitration hearings shall be conducted in Charlotte, North Carolina. Unless
extended by the mutual consent of the parties, the hearing on the dispute shall
be held within forty-five (45) days after selection of the arbitrator or panel
of arbitrators as set forth above. Thirty (30) days prior to the hearing, each
party shall furnish to the other party a list of anticipated witnesses and a
list of anticipated exhibits, together with a copy of each exhibit. Each party
shall have a maximum of the equivalent of five (5) hearing days to complete
their case (including any redirect examination of witnesses or rebuttal of
evidence) and cross-examine the witnesses of the other parties. The
arbitrator(s) shall render a decision resolving the dispute within sixty (60)
days of the conclusion of the arbitration hearing and such decision shall be
binding on the parties to the arbitration. Notwithstanding the foregoing, the
Company shall have the right to seek specific enforcement of the provisions of
Section 6 hereof.
14. Burden and Benefit. This Agreement shall be binding upon, and shall
inure to the benefit of, the Company and Mr. Lewis, and their respective heirs,
successors and assigns.
15. Choice of Law. This Agreement shall be governed by the internal
laws of the State of North Carolina.
-6-
<PAGE> 7
16. Notice. Notice hereunder shall be deemed duly given if in writing
and delivered by hand or mailed, certified or registered, with postage prepaid,
to the following address of each party, or to such other address as may be
hereafter designated in writing by such party to the other party hereto:
MR. LEWIS: Mr. James E. Lewis
424 Mariner Drive
Jupiter, FL 33477
with a copy to: David B. Whelpley, Jr.
Kilpatrick Stockton LLP
3500 One First Union Center
301 South College Street
Charlotte, NC 28202-6001
COMPANY: Cogentrix Energy, Inc.
9405 Arrowpoint Blvd.
Charlotte, North Carolina 28273
Attn: Chief Executive Officer
with a copy to: Cogentrix Energy, Inc.
9405 Arrowpoint Blvd.
Charlotte, North Carolina 28273
Attn: General Counsel
17. Severability. In the event any portion of this Agreement shall be
determined to be invalid under any applicable law, such provision shall be
deemed void and the remainder of this Agreement shall continue in full force and
effect.
18. Section Headings. All section headings contained herein are for
convenience of reference only and are not intended to be defined or limit the
scope of any provision of this Agreement.
19. Entire Agreement. This Agreement constitutes the entire indivisible
agreement between the parties relating to the subject matter hereof and shall
not be modified, amended, altered or changed except by written agreement signed
by the parties.
20. Review and Consultation with Legal Counsel. Mr. Lewis acknowledges
he has had the opportunity to review this Agreement and to otherwise consult
with his legal counsel and he fully understands the terms and conditions of this
Agreement.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
under seal, in duplicate originals as of the date first set forth above.
THE COMPANY:
COGENTRIX ENERGY, INC.
By:
--------------------------------------
David L. Lewis
Chairman and Chief Executive Officer
ATTEST:
- ------------------------------
Asst. Secretary
[CORPORATE SEAL]
MR. LEWIS:
_____________________________(SEAL)
James E. Lewis
-8-
<PAGE> 1
Exhibit 21.1
COGENTRIX ENERGY, INC.
SUBSIDIARIES
<TABLE>
<S> <C> <C>
Cogentrix Energy, Inc. (NC)
Cogentrix Delaware Holdings, Inc. (DE)
Cogentrix Holdings Corporation (NC)
Cogentrix of Richmond, Inc. (NC)
Cogentrix of Rocky Mount, Inc. (NC)
Cogentrix, Inc. (NC)
Cogentrix Eastern Carolina Corporation (NC)
Cogentrix of North Carolina Holdings, Inc. (NC)
Cogentrix of North Carolina, Inc. (NC)
Roxboro/Southport I, Inc. (NC)
Roxboro/Southport II, Inc. (NC)
Roxboro/Southport General Partnership (NC)*
Cogentrix of Virginia, Inc. (VA)
Cogentrix Virginia Leasing Corporation (NC)
Cogentrix of Pennsylvania, Inc. (DE)
ReUse Technology, Inc. (NC) (doing business as RT Soil Sciences)
Cogentrix - Mexico, Inc. (NC)
Cogeneracion Mexicana, S.A. de C.V. (Mexico)
CI Properties, Inc. (NC)
Moapa Valley Holdings, Inc. (NV)
Cogentrix of Asia Pte Ltd. (Singapore)
Cogentrix of Lawrence County, Inc. (DE)
Cogentrix Lawrence County, LLC (DE)
Cogentrix of Oklahoma, Inc. (DE)
Green Country Energy, LLC (DE)
Green Country Operating Services, LLC (DE)
Cogentrix Southaven Holdings, Inc. (DE)
Southaven Power LLC, (DE)
Cogentrix/Batesville Holdings, Inc. (DE)
Cogentrix/Batesville, Inc. (DE)
Cogentrix Batesville Operations, LLC (DE)*
Cogentrix/Batesville, LLC (DE)*
LSP-Batesville Holdings, LLC (DE)*
LSP Batesville Funding Corporation (DE)
LSP Energy, Inc. (DE)
LSP Energy Limited Partnership (DE)*
Cogentrix Eastern America, Inc. (DE)
Cogentrix/Logan, Inc. (DE)
Cogentrix/Northampton, Inc. (DE)
Cogentrix/Carney's Point, Inc. (DE)
Cogentrix/Scrubgrass, Inc. (DE)
Palm Power Corporation (DE)
Thaleia, LLC (DE)
Cedar Power Corporation (DE)
Cedar I Power Corporation (DE)
Cedar II Power Corporation (DE)
Hickory Power Corporation (DE)
Birch Power Corporation (PA)
Panther Creek Leasing, Inc. (DE)
</TABLE>
<PAGE> 2
Exhibit 21.1
<TABLE>
<S> <C> <C>
Arcanum, Inc. (DE)
Cogentrix Energy Power Marketing, Inc. (NC)
Cogentrix of Latin America, Inc. (NC)
Cogentrix of Vancouver, Inc. (NC)
Cogentrix Mid-America, Inc. (DE)
Floriculture, Inc. (DE)
Cogentrix Cottage Grove, LLC (DE)
LSP-Cottage Grove, Inc. (DE)
LSP-Cottage Grove, LP (DE)*
LS Power Funding Corporation (DE)
Cogentrix Whitewater, LLC (DE)
LSP-Whitewater I, Inc. (DE)
LSP-Whitewater Limited Partnership (DE)*
LS Power Funding Corporation (DE)
Cogentrix of Rathdrum, Inc. (NC)
Rathdrum Construction Company, Inc. (DE)
Rathdrum Operating Services Company, Inc. (DE)
Rathdrum Power, LLC (DE)
Cogentrix of Birchwood I, Inc. (DE)
Cogentrix of Birchwood II, Inc. (DE)
Cogentrix/Birchwood One Partners (DE)*
Cogentrix/Birchwood Two, L.P. (DE)*
Cogentrix International Holdings, Inc. (DE)
Cogentrix International, Ltd. (Grand Cayman)
La Compania de Electricidad de San Pedro de Macoris (Grand Cayman)
Cogera Cogeracao e Comercializacao de Energia Ltda. (Brazil)
Cogentrix de la Republica Dominicana (Grand Cayman)
Cogentrix of Brazil, Inc. (DE)
Cogentrix do Brasil Ltda. (Brazil)
Liberty Power/Cogentrix Bolivia, Inc. (DE)
Cogentrix International Holdings, BV (Netherlands)
Yellow Sea Cogeneration Company (Mauritius)
Cogentrix Mauritius Company (Mauritius)
</TABLE>
(PARTNERSHIPS DENOTED BY ASTERISK)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COGENTRIX
ENERGY, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 161,991
<SECURITIES> 0
<RECEIVABLES> 59,360
<ALLOWANCES> 0
<INVENTORY> 20,137
<CURRENT-ASSETS> 243,740
<PP&E> 700,446
<DEPRECIATION> 262,963
<TOTAL-ASSETS> 1,998,386
<CURRENT-LIABILITIES> 186,129
<BONDS> 1,518,773
0
0
<COMMON> 130
<OTHER-SE> 121,321
<TOTAL-LIABILITY-AND-EQUITY> 1,998,386
<SALES> 319,421
<TOTAL-REVENUES> 458,568
<CGS> 277,869
<TOTAL-COSTS> 277,869
<OTHER-EXPENSES> 14,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,956
<INCOME-PRETAX> 70,991
<INCOME-TAX> 27,576
<INCOME-CONTINUING> 43,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,415
<EPS-BASIC> 153.95
<EPS-DILUTED> 153.95
</TABLE>
