1
EXHIBIT 10.1.17
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CREDIT AGREEMENT
among
PASADENA COGENERATION L.P.,
a Delaware limited partnership
(Borrower)
and
ING (U.S.) CAPITAL CORPORATION
(Agent for the Banks)
and
THE BANKS PARTIES HERETO
_________________________________
240 MW Cogeneration Facility
Pasadena, Texas
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TABLE OF CONTENTS
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ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - THE CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Loan Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1.1 Construction Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1.2 Term Loan Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1.3 Interest Provisions Relating to All Loans . . . . . . . . . . . . . . . . . 4
2.1.4 Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.5 Loan Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.6 Conversion of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.7 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Total Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2.1 Loan Commitment Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2.2 Reductions and Cancellations . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3.1 Advisory Fee; Syndication Fee . . . . . . . . . . . . . . . . . . . . . . . 9
2.3.2 Annual Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3.3 Loan Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Other Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.1 Place and Manner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.2 Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.3 Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.4 Net of Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4.5 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4.6 Failure to Pay Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4.7 Withholding Exemption Certificates . . . . . . . . . . . . . . . . . . . . . 12
2.5 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5.1 Borrowings, Commitment Reductions, Etc. . . . . . . . . . . . . . . . . . . 12
2.5.2 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Change of Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6.1 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6.3 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.4 Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.5 Notice; Participating Banks' Rights . . . . . . . . . . . . . . . . . . . . 15
2.7 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 Alternate Office; Minimization of Costs . . . . . . . . . . . . . . . . . . . . . . 15
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ARTICLE 3 - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Conditions Precedent to the Closing Date . . . . . . . . . . . . . . . . . . . . . 16
3.1.1 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.2 Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.3 Formation Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.4 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.5 Satisfactory Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.6 Operative Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.7 Certificate of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.8 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.9 Certificate of Insurance Consultant . . . . . . . . . . . . . . . . . . . . 18
3.1.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1.11 Certificate of the Independent Engineer . . . . . . . . . . . . . . . . . . 18
3.1.12 Reports of the Borrower's Environmental Consultant . . . . . . . . . . . . . 18
3.1.13 Certificate of the Fuel Consultant . . . . . . . . . . . . . . . . . . . . . 18
3.1.14 Certificate of Power Marketing Consultant . . . . . . . . . . . . . . . . . 18
3.1.15 Power Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.16 Schedule of Applicable Permits and Applicable Third Party Permits . . . . . 19
3.1.17 No Change in Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.18 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.19 Payment of Filing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.20 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.21 UCC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.22 Project Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.23 Base Case Project Projections . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.24 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.25 A.L.T.A. Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.26 Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.27 Qualifying Facility Status . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.28 Notice to Proceed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.29 Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.30 Representations and Warranties of Partners and Borrower . . . . . . . . . . 22
3.1.31 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.32 Interest Rate ▇▇▇▇▇▇ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.33 Key Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.34 Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.35 Reports of Borrower's Tax Consultants . . . . . . . . . . . . . . . . . . . 22
3.1.36 Reports of Borrower's HCC Evaluation Consultant . . . . . . . . . . . . . . 22
3.1.37 ▇▇▇▇▇▇▇▇ Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Conditions Precedent to Each Construction Credit Event . . . . . . . . . . . . . . 23
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3.2.1 Credit Event Conditions Satisfied . . . . . . . . . . . . . . . . . . . . . 23
3.2.2 Monthly Drawdown Frequency . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2.3 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2.4 Drawdown Certificate and Engineer's Certificate . . . . . . . . . . . . . . 23
3.2.5 Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2.6 Title Policy Endorsement . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2.7 Lien Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2.8 Applicable Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2.9 Equity Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2.10 Additional Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2.11 Acceptable Work; No Liens . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2.12 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2.13 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2.15 Key Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3 Conditions Precedent to Term-Conversion . . . . . . . . . . . . . . . . . . . . . . 25
3.3.1 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3.2 Final Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3.3 Certificates of Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3.4 Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3.5 Equity Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3.6 Annual Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3.8 Reserve Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.4 Conditions Precedent to Each Credit Event . . . . . . . . . . . . . . . . . . . . . 27
3.4.1 Representations and Warranties True and Correct . . . . . . . . . . . . . . 27
3.4.2 No Event of Default or Inchoate Default . . . . . . . . . . . . . . . . . . 27
3.4.3 Operative Documents, Applicable Permits and Applicable
Third Party Permits in Effect . . . . . . . . . . . . . . . . . . . . . . . 27
3.4.4 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 Conditions Precedent to Initial Distribution . . . . . . . . . . . . . . . . . . . 27
3.5.1 Term-Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5.2 Revised Base Case Projections . . . . . . . . . . . . . . . . . . . . . . . 27
3.5.3 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5.4 Applicable Permits and Applicable Third Party Permits . . . . . . . . . . . 27
3.5.5 A.L.T.A. Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5.6 Term Loan Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5.7 Power Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.6 No Approval of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7 Waiver of Funding; Adjustment of Drawdown Requests . . . . . . . . . . . . . . . . 29
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.2 Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.5 Business, Debt, Contracts, Joint Ventures Etc. . . . . . . . . . . . . . . . . . . 30
4.6 Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.7 Investment Company Act, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.9 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10 Qualifying Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.11 Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13 Labor Disputes and Acts of God . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.14 Project Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.15 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.16 Private Offering by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.18 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.19 Regulation U, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.20 Project Budget; Projections; Commercial Operation Date . . . . . . . . . . . . . . 34
4.21 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.22 Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.23 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.24 Offices, Location of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.25 Title and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.26 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.27 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.28 Sufficiency of Project Documents . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.29 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.30 Roads/Transmission Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.31 Proper Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.32 Flood Zone Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 5 - COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1 Use of Proceeds and Project Revenues . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.1 Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.2 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2.1 Credit Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2.2 Project Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3 Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.6 Books, Records, Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 Compliance with Laws, Instruments, Etc. . . . . . . . . . . . . . . . . . . . . . . 42
5.8 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9 Existence, Conduct of Business, Properties, Etc. . . . . . . . . . . . . . . . . . 43
5.10 Debt Service Coverage Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.12 Qualifying Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.13 Construction of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.14 Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.15 Operation of Project and Annual Operating Budget . . . . . . . . . . . . . . . . . 47
5.16 Adjustments to Project Projections . . . . . . . . . . . . . . . . . . . . . . . . 48
5.17 Preservation of Rights; Further Assurances . . . . . . . . . . . . . . . . . . . . 50
5.18 Project Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.19 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.20 Taxes, Other Government Charges and Utility Charges . . . . . . . . . . . . . . . . 53
5.21 Event of Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.22 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.22.1 Interest Rate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.22.2 Hedge Breaking Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.22.3 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.22.4 Bank Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.23 Alternative Thermal Host Action Plan . . . . . . . . . . . . . . . . . . . . . . . 55
5.24 Performance Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.25 Power Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.25.1 Replacement of Power Marketer . . . . . . . . . . . . . . . . . . . . . . . 55
5.25.2 Requests for Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.25.3 Firm Sales to HL&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.25.4 Arrangements with Power Marketer . . . . . . . . . . . . . . . . . . . . . 56
5.26 Auxiliary Boilers Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.27 Construction Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.28 Operating Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.29 Stand-Alone Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.30 Extension of Lease, Lease of Expansion Property . . . . . . . . . . . . . . . . . . 58
5.31 License from Port Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.32 ▇▇▇▇▇▇▇▇ License from Port Authority . . . . . . . . . . . . . . . . . . . . . . . 58
5.33 Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.34 Option Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 6 - NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.1 Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.2 Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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6.3 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.4 Sale or Lease of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.5 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.8 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.9 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.11 Partnerships, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.12 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.13 Amendments; Change Orders; Completion. . . . . . . . . . . . . . . . . . . . . . . 60
6.14 Compliance with Operative Documents . . . . . . . . . . . . . . . . . . . . . . . . 62
6.15 Name and Location; Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.16 Use of Project Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.17 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.18 Abandonment of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.19 Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.20 Additional Project Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.21 Project Budget Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 7 - APPLICATION OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.1 Construction Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.1.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.1.2 Disbursements from Construction Account . . . . . . . . . . . . . . . . . . 66
7.1.3 Rights of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.1.4 Proceeds of the Final Drawing . . . . . . . . . . . . . . . . . . . . . . . 67
7.1.5 Disbursements Following Term-Conversion . . . . . . . . . . . . . . . . . . 68
7.2 Revenue Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.2.1 Establishment of Account; Priority of Payments . . . . . . . . . . . . . . . 68
7.2.2 O&M Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
7.2.3 Subordinated Fuel Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.2.4 Subordinated O&M Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.2.5 Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.3 Major Maintenance Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.3.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.3.2 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.3.3 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.3.4 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.4 Emissions Offsets Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.4.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.4.2 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.4.3 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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7.4.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.5 Fuel Supply Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.5.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.5.2 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.5.3 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.5.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.6 Debt Service Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.6.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.6.2 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.6.3 Replenishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.6.4 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.6.5 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.6.6 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.7 Operating Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.7.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.7.2 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.7.3 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.8 Loss Proceeds Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.9 Accrual Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.9.1 Establishment of Sub-Account . . . . . . . . . . . . . . . . . . . . . . . . 76
7.9.2 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.9.3 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.10 Distribution Suspense Account; Initial Distribution Suspense Account . . . . . . . 77
7.10.1 Establishment of Account . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.10.2 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.10.3 Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.11 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.11.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
7.11.2 Business Interruption Insurance . . . . . . . . . . . . . . . . . . . . . . 78
7.11.3 Applications; Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 78
7.11.4 Proceeds Less than $1,000,000 . . . . . . . . . . . . . . . . . . . . . . . 79
7.11.5 Proceeds in Excess of $1,000,000, Not in Excess of $5,000,000 . . . . . . . 79
7.11.6 Proceeds in Excess of $5,000,000 . . . . . . . . . . . . . . . . . . . . . . 79
7.11.7 Repair and Restoration Procedures . . . . . . . . . . . . . . . . . . . . . 80
7.11.8 Excess Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.11.9 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.12 Application of Eminent Domain Proceeds . . . . . . . . . . . . . . . . . . . . . . 81
7.13 Application of Certain Damages Payments; Mandatory Prepayments . . . . . . . . . . 81
7.13.1 Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.13.3 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.14 Security Interest in Proceeds and Accounts . . . . . . . . . . . . . . . . . . . . 81
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7.15 Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.16 Earnings on Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.17 Dominion and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.18 Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 8 - EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.1.1 Failure to Make Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.1.2 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.1.3 Misstatements; Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.1.4 Bankruptcy; Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.1.5 Debt Cross Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.1.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.1.7 Breach of Project Documents . . . . . . . . . . . . . . . . . . . . . . . . . 84
(a) Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
(b) Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
(c) Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.1.8 Breach of Terms of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 85
8.1.9 Term-Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.1.10 Conditions to Initial Distributions . . . . . . . . . . . . . . . . . . . . 86
8.1.11 Loss of Qualifying Facility Status . . . . . . . . . . . . . . . . . . . . . 86
8.1.12 Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.1.13 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.1.14 Loss of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
8.1.15 Loss of or Failure to Obtain Applicable Permits or
Applicable Third Party Permits . . . . . . . . . . . . . . . . . . . . . . 87
8.1.16 Loss of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.1.17 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.2.1 No Further Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.2.2 Cure by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.2.3 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.2.4 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.2.5 Possession of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
8.2.6 Remedies Under Credit Documents . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE 9 - SCOPE OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE 10 - THE AGENT; SUBSTITUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . 90
10.2 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
10.3 Non-Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
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10.4 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
10.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
10.6 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
10.7 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
10.8 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
10.9 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
10.10 Withholding Tax . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
10.11 General Provisions as to Payments . . . . . . . . . . . .. . . . . . . . . . . . . 95
10.12 Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.13 Participation . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 95
10.14 Transfer of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.15 Laws . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 96
10.16 Assignability to Federal Reserve Bank . . . . . . . . . . . . . . . . . . . . . . 96
ARTICLE 11 - INDEPENDENT CONSULTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.1 Removal and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.2 Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.3 Independent Consultants' Certificates . . . . . . . . . . . . . . . . . . . . . . . 97
11.4 Certification of Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE 12 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.1 Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
12.2 Additional Security; Right to Set-Off . . . . . . . . . . . . . . . . . . . . . . . 99
12.3 Delay and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.4 Costs, Expenses and Attorneys' Fees; Syndication . . . . . . . . . . . . . . . . . 99
12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.9 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.10 Additional Financing . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 100
12.11 No Partnership, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12.12 Deed of Trust/Collateral Documents . . . . . . . . . . . . .. . . . . . . . . . . . 101
12.13 Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12.14 Waiver of Jury Trial . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 101
12.15 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12.16 Usury . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 102
12.17 Knowledge and Attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
12.18 Successors and Assigns . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 102
12.19 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
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INDEX OF EXHIBITS
Exhibit A Definitions and Rules of Interpretation
NOTES
Exhibit B-1 Form of Construction Note
Exhibit B-2 Form of Term Note
LOAN DISBURSEMENT PROCEDURES
Exhibit C-1 Form of Notice of Borrowing
Exhibit C-2 Form of Notice of Term-Conversion
Exhibit C-3 Form of Confirmation of Interest Period Selection
Exhibit C-4 Form of Notice of Conversion of Loan Type
Exhibit C-5 Form of Drawdown Certificate
Exhibit C-6 Form of Engineer's Certificate
Exhibit C-7 Form of Disbursement Requisition
Exhibit C-8 Form of Reserve Account Disbursement Requisition
EQUITY AND SECURITY-RELATED DOCUMENTS
Exhibit D-1 Form of Depositary Agreement
Exhibit D-2A Form of Equity Commitment Guaranty
Exhibit D-2B Form of Contingent Equity Guaranty
Exhibit D-3 Form of Deed of Trust
Exhibit D-4 Form of Security Agreement
Exhibit D-5 Form of Partnership Interest Pledge and Security Agreement
Exhibit D-6 Form of Shareholder Pledge and Security Agreement
Exhibit D-7 Form of Plant Operator Subordination Agreement
Exhibit D-8 Form of Lien Subordination Agreement
Exhibit D-9 Form of Subordination Agreement (Subordinated Debt)
Exhibit D-10 Schedule of Permitted Encumbrances
Exhibit D-11 Schedule of Security Filings
CONSENTS
Exhibit E-1 Form of Consent for Contracting Party
Exhibit E-2 Schedule of Closing Date Consents
CLOSING CERTIFICATES
Exhibit F-1 Form of Borrower's Closing Certificate
Exhibit F-2 Form of Insurance Consultant's Certificate
Exhibit F-3 Form of Independent Engineer's Certificate
Exhibit F-4 Form of Fuel Consultant's Certificate
Exhibit F-5 Form of Power Marketing Consultant's Certificate
PROJECT DESCRIPTION EXHIBITS
Exhibit G-1 Description of Project
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Exhibit G-2 Power Marketing Plan
Exhibit G-3 Schedule of Applicable Permits
Exhibit G-4 Project Budget
Exhibit G-5 Base Case Project Projections
Exhibit G-6 Project Schedule
Exhibit G-7 Pending Litigation
Exhibit G-8 Hazardous Substances Disclosure
OTHER
Exhibit H Banks/Lending Offices
Exhibit I Amortization Schedule
Exhibit J-1 Form of Withholding Certificate (Treaty)
Exhibit J-2 Form of Withholding Certificate (Effectively Connected)
Exhibit K Insurance Requirements
Exhibit L Annual Insurance Consultant's Certificate
Exhibit M Dispute Resolution
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13
THIS CREDIT AGREEMENT (this "Agreement") dated as of
December 20, 1996, is entered into among PASADENA COGENERATION L.P., a Delaware
limited partnership, as Borrower, the financial institutions listed on Exhibit
H or who later become a party hereto (the "Banks") and ING (U.S.) CAPITAL
CORPORATION, as Agent for the Banks.
In consideration of the agreements herein and in the other
Credit Documents and in reliance upon the representations and warranties set
forth herein and therein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Definitions. Except as otherwise expressly provided,
capitalized terms used in this Agreement and its exhibits shall have the
meanings given in Exhibit A.
1.2 Rules of Interpretation. Except as otherwise
expressly provided, the rules of interpretation set forth in Exhibit A shall
apply to this Agreement and the other Credit Documents.
ARTICLE 2 - THE CREDIT FACILITIES
2.1 Loan Facilities.
2.1.1 Construction Loan Facility.
(a) Availability. Subject to the terms
and conditions set forth in this Agreement, each Bank severally agrees to
advance to Borrower from time to time during the Construction Loan Availability
Period such loans as Borrower may request under this Section 2.1.1
(individually, a "Construction Loan" and collectively the "Construction
Loans"), in an aggregate principal amount not to exceed such Bank's
Construction Loan Commitment.
(b) Notice of Borrowing. Borrower shall
request Construction Loans by delivering to Agent a written notice in the form
of Exhibit C-1, appropriately completed (a "Notice of Borrowing"), which
specifies, among other things:
(i) The principal portion of the
requested Borrowing which will bear interest as provided in (1) Section
2.1.1(c)(i) (individually, a "Base Rate Construction Loan") and/or (2) Section
2.1.1(c)(ii) (individually, a "LIBOR Construction Loan");
(ii) The amount of the requested
Borrowing, which shall be in the minimum amount of $1,000,000 or an integral
multiple of $10,000 in excess thereof;
(iii) The date of the requested
Borrowing, which shall be a Banking Day; and
(iv) If the requested Borrowing is
to consist of LIBOR Construction Loans, the initial Interest Periods selected
by Borrower for such Loans.
14
Borrower shall give each Notice of Borrowing relating to
Construction Loans to Agent so as to provide the Minimum Notice Period
applicable to Construction Loans of the Type requested. Any Notice of
Borrowing may be modified or revoked by Borrower through the Banking Day prior
to the Minimum Notice Period, and shall thereafter be irrevocable.
(c) Construction Loan Interest.
Borrower shall pay interest on the unpaid principal amount of each Construction
Loan from the date of such Construction Loan until the maturity or prepayment
thereof at the following rates per annum:
(i) With respect to the principal
portion of such Construction Loan which is, and during such periods as such
Construction Loan is, a Base Rate Construction Loan, at a rate per annum equal
to the Base Rate plus 0.750%, such rate to change from time to time as the Base
Rate shall change; and
(ii) With respect to the principal
portion of such Construction Loan which is, and during such portion of such
periods as such Construction Loan is, a LIBOR Construction Loan, at a rate per
annum, at all times during each Interest Period for such LIBOR Construction
Loan, equal to the LIBO Rate for such Interest Period plus 1.500%.
(d) Construction Loan Principal
Payments. Borrower shall repay to Agent, for the account of each Bank, in full
on the Construction Loan Maturity Date the unpaid principal amount of all
Construction Loans made by such Bank which will not be Term-Converted to Term
Loans as provided in Section 2.1.2(a). Upon payment or Term-Conversion, in
full, of the aggregate principal amount of the Construction Loans and all
accrued and unpaid interest thereon, the Banks shall promptly ▇▇▇▇ the
Construction Notes cancelled and return such cancelled Construction Notes to
Borrower.
2.1.2 Term Loan Facility.
(a) Availability. Subject to the terms
and conditions set forth in this Agreement, each Bank severally agrees to make
to Borrower on the date of Term-Conversion specified pursuant to Section
2.1.2(b)(iii), at the request of Borrower, a term loan under this Section 2.1.2
(individually a "Term Loan" and collectively the "Term Loans") in an aggregate
principal amount not to exceed such Bank's Term Loan Commitment. Each Bank
shall make its Term Loan by converting the portion of its outstanding
Construction Loans equal to such Bank's Term Loan Commitment to a Term Loan.
(b) Notice of Term-Conversion. Upon
satisfaction of the conditions set forth in Section 3.3, Borrower shall request
the Term-Conversion by delivering to Agent a written notice in the form of
Exhibit C-2, appropriately completed ("Notice of Term-Conversion"), which
specifies:
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(i) The principal portion of the
Term Loans which will bear interest as provided in (1) Section 2.1.2(c)(i)(A)
(individually, a "Base Rate Term Loan") and/or (2) Section 2.1.2(c)(i)(B)
(individually, a "LIBOR Term Loan");
(ii) The aggregate amount of the
Term Loans, which shall not exceed the lesser of the Total Term Loan Commitment
and the aggregate principal amount of all Construction Loans outstanding on the
date of Term-Conversion (immediately prior to Term-Conversion, after giving
effect to the Final Drawing and the application of: (x) all Base Equity
pursuant to Section 5.18, (y) all liquidated damages required to be applied to
the prepayment of Construction Loans pursuant to Section 7.1.4 or 7.13, and (z)
any Base Equity or Additional Borrower Equity required to be applied to the
prepayment of Construction Loans pursuant to Section 5.18);
(iii) The proposed date of the
Term-Conversion, which shall be no later than the Construction Loan Maturity
Date; and
(iv) If the Term Loans are to
consist of LIBOR Loans, the initial Interest Periods selected by Borrower for
such Loans.
Borrower shall so deliver the Notice of Term-Conversion to Agent so as to
provide at least the Minimum Notice Period applicable to Loans of the Type
requested upon Term-Conversion. The Notice of Term-Conversion may be modified
or revoked by Borrower through the Banking Day prior to the Minimum Notice
Period, and thereafter shall be irrevocable.
(c) Term Loan Interest.
(i) Borrower shall pay interest on
the unpaid principal amount of each Term Loan from the date of such Term Loan
until the maturity or prepayment thereof at one of the following rates per
annum:
(A) With respect to the
principal portion of such Term Loan which is, and during such periods as such
Term Loan is, a Base Rate Term Loan, at a rate per annum equal to the Base Rate
plus the percentage listed below, such rate to change from time to time as the
Base Rate shall change:
First Term Period 0.500%
Second Term Period 0.750%
Third Term Period 1.125%
Fourth Term Period 1.750%
(B) With respect to the
principal portion of such Term Loan which is, and during such periods as such
Term Loan is, a LIBOR Term Loan, at a rate per annum during each Interest Period
for such LIBOR Term Loan equal to the LIBO Rate for such Interest Period plus
the percentage listed below:
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First Term Period 1.250%
Second Term Period 1.500%
Third Term Period 1.875%
Fourth Term Period 2.500%
provided, however, that, in the case of clauses (A) and (B) above, (a) in the
event that and for so long as, from time to time, Borrower has met the
Extension Requirements on the last day of the last preceding calendar quarter,
then (i) the percentages set forth above for the Third Term Period and the
Fourth Term Period shall, from and after the day following the date of Term-
Conversion, be reduced by 0.250% and (ii) the percentage set forth above for
the Fourth Term Period shall, from and after the day following the tenth
anniversary of the date of Term-Conversion, be reduced by an additional 0.375%;
provided further, however, notwithstanding anything to the contrary in the
foregoing proviso, in the event that from time to time, the Four-Quarter
Average Debt Service Coverage Ratio calculated on the last day of the last
preceding calendar quarter is less than 1.50 to 1.00, then each of the
percentages set forth above shall not be decreased and instead shall be
increased by .250%, until such time as the Four- Quarter Average Debt Service
Coverage Ratio as of the end of any subsequent calendar quarter is equal to or
greater than 1.50 to 1.00 at which time the percentages set forth above shall
no longer be increased by such 0.250% and shall return to the percentages set
forth above (subject to increase or decrease pursuant to this Section
2.1.2(c)).
(d) Term Loan Principal Payment.
Borrower shall repay to Agent, for the account of each Bank, the aggregate
unpaid principal amount of the Term Loan made by such Bank in installments
payable on each Repayment Date in accordance with the repayment schedule set
forth on Exhibit I, with any remaining unpaid principal, interest, fees and
costs due and payable on the Term Loan Maturity Date.
2.1.3 Interest Provisions Relating to All Loans.
(a) Interest Payment Dates. Borrower
shall pay accrued interest on the unpaid principal amount of each Loan (i) in
the case of each Base Rate Loan, on the last Banking Day of each calendar
quarter, (ii) in the case of each LIBOR Loan, on the last day of each Interest
Period related to such LIBOR Loan and, if such Interest Period is longer than
three months, every three months after the date of such LIBOR Loan and (iii) in
all cases, upon prepayment (to the extent thereof and including any optional
prepayments or Mandatory Prepayments), upon conversion from one Type of Loan to
another Type, and at maturity (whether by acceleration or otherwise).
(b) LIBOR Loan Interest Periods.
(i) The initial and subsequent
Interest Period for LIBOR Loans shall be a maximum of one month during the six
month period immediately following the Closing Date; provided that Agent may
otherwise approve, in its sole discretion, a longer Interest Period which is
requested by Borrower and otherwise complies with the following provisions of
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this Section 2.1.3(b)(i). Thereafter, each subsequent Interest Period
(including any Interest Period referenced in the proviso of the first sentence
of this Section 2.1.3(b) selected by Borrower for all LIBOR Loans shall be one,
two, three or six months or such other period as close to three months as is
practicable to enable Borrower to limit the number of LIBOR Loans as required
by this Section 2.1.3(b) or to comply with clauses (C), (D) or (E) of the next
sentence. Notwithstanding anything to the contrary in either of the two
preceding sentences, (A) any Interest Period which would otherwise end on a day
which is not a Banking Day shall be extended to the next succeeding Banking Day
unless such next Banking Day falls in another calendar month, in which case
such Interest Period shall end on the immediately preceding Banking Day; (B)
any Interest Period which begins on the last Banking 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
Banking Day of a calendar month; (C) Borrower may not select Interest Periods
which would leave a greater principal amount of Loans subject to Interest
Periods ending after a date upon which Loans are or may be required to be
repaid (including the Construction Loan Maturity Date and each Repayment Date)
than principal amount of Loans scheduled to be outstanding after such date; (D)
unless Term-Conversion has occurred, any Interest Period for a Construction
Loan which would otherwise end after the Construction Loan Maturity Date shall
end on the Construction Loan Maturity Date; (E) any Interest Period for a Term
Loan which would otherwise end after the Term Loan Maturity Date shall end on
the Term Loan Maturity Date; (F) LIBOR Loans for each Interest Period shall be
in the amount of at least $100,000; and (G) Borrower may not at any time have
outstanding more than six different Interest Periods relating to LIBOR Loans.
(ii) Borrower may contact Agent
at any time prior to the end of an Interest Period, for a quotation of Interest
Rates in effect at such time for given Interest Periods and Agent shall promptly
provide such quotation. Borrower may select an Interest Period telephonically
within the time periods specified in Section 2.1.6, which selection shall be
irrevocable on and after the applicable Minimum Notice Period. Borrower shall
confirm such telephonic notice to Agent by telecopy on the day such notice is
given (in substantially the form of Exhibit C-3, a "Confirmation of Interest
Period Selection"). Borrower shall promptly deliver to Agent the original of the
Confirmation of Interest Period Selection initially delivered by telecopy. If
Borrower fails to notify Agent of the next Interest Period for any LIBOR Loans
in accordance with this Section 2.1.3(b), such Loans shall automatically convert
to Base Rate Loans on the last day of the current Interest Period therefor.
Agent shall as soon as practicable (and, in any case, within two Banking Days
after delivery of the Confirmation of Interest Period Selection) notify Borrower
of each determination of the Interest Rate applicable to each Loan.
(c) Interest Account and Interest
Computations. Borrower authorizes Agent to record in an account or accounts
maintained by Agent on its books (i) the interest rates applicable to all Loans
and the effective dates of all changes thereto, (ii) the Interest Period for
each LIBOR Loan, (iii) the date and amount of each principal and interest
payment on each Loan and (iv) such other information as Agent may determine is
necessary for the computation of interest payable by Borrower hereunder.
Borrower agrees that all computations by Agent of interest shall be conclusive
in the absence of manifest error. All computations of
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interest on Base Rate Loans shall be based upon a year of 365 or 366 days and
the actual days elapsed, and shall be adjusted in accordance with any changes
in the Base Rate to take effect on the beginning of the day of such change in
the Base Rate. All computations of interest on LIBOR Loans shall be based upon
a year of 360 days and the actual days elapsed.
2.1.4 Promissory Notes. The obligation of Borrower
to repay the Loans made by each Bank and to pay interest thereon at the rates
provided herein shall be evidenced by promissory notes in the form of Exhibit
B-1 (individually, a "Construction Note") and Exhibit B-2 (individually, a
"Term Note"), each payable to the order of such Bank and in the principal
amount of such Bank's Construction Loan Commitment and Term Loan Commitment,
respectively. Borrower authorizes each Bank to record on the schedule annexed
to such Bank's Note or Notes, the date and amount of each Loan made by such
Bank, and each payment or prepayment of principal thereunder and agrees that
all such notations shall constitute prima facie evidence of the matters noted.
Borrower further authorizes each Bank to attach to and make a part of such
Bank's Note or Notes continuations of the schedule attached thereto as
necessary. No failure to make any such notations, nor any errors in making any
such notations, shall affect the validity of Borrower's obligations to repay
the full unpaid principal amount of the Loans or the duties of Borrower
hereunder or thereunder.
2.1.5 Loan Funding.
(a) Notice. Each Notice of Borrowing
shall be delivered to Agent in accordance with Section 12.1. Agent shall
promptly notify each Bank of the contents of each Notice of Borrowing.
(b) Pro Rata Loans. All Loans shall be
made on a pro rata basis by the Banks in accordance with their respective
Proportionate Shares of such Loans, with each Borrowing to consist of a Loan by
each Bank equal to such Bank's Proportionate Share of such Borrowing.
(c) Bank Funding. Each Bank shall,
before 12:00 noon on the date of each Borrowing, make available to Agent at its
office specified in Section 12.1, in same day funds, such Bank's Proportionate
Share of such Borrowing. The failure of any Bank to make the Loan to be made
by it as part of any Borrowing shall not relieve any other Bank of its
obligation hereunder to make its Loan on the date of such Borrowing. No Bank
shall be responsible for the failure of any other Bank to make the Loan to be
made by such other Bank on the date of any Borrowing.
(d) Construction Account. No later than
2:00 p.m. on the date specified in each Notice of Borrowing, if the applicable
conditions precedent listed in Article 3 have been satisfied and to the extent
Agent shall have received the appropriate funds from the Banks, Agent will make
available the Construction Loans requested in such Notice of Borrowing (or so
much thereof as the Banks shall have approved pursuant to this Agreement) in
Dollars and
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in immediately available funds, at Agent's New York Branch, and shall deposit
such Construction Loans into the Construction Account.
2.1.6 Conversion of Loans. Borrower may convert
Loans from one Type of Loans to another Type; provided, however, that (i) any
conversion of LIBOR Loans into Base Rate Loans shall be made on, and only on,
the first day after the last day of an Interest Period for such LIBOR Loans and
(ii) Loans shall be converted only in amounts of $100,000 or more. Borrower
shall request such a conversion by a written notice to Agent in the form of
Exhibit C-4, appropriately completed (a "Notice of Conversion of Loan Type"),
which specifies:
(a) The Loans, or portion thereof, which
are to be converted;
(b) The Type into which such Loans, or
portion thereof, are to be converted;
(c) If such Loans are to be converted
into LIBOR Loans, the initial Interest Period selected by Borrower for such
Loans in accordance with Section 2.1.3(b); and
(d) The date of the requested
conversion, which shall be a Banking Day.
Borrower shall so deliver each Notice of Conversion of Loan Type so as to
provide at least the applicable Minimum Notice Period. Any Notice of
Conversion of Loan Type may be modified or revoked by Borrower through the
Banking Day prior to the Minimum Notice Period, and shall thereafter be
irrevocable. Each Notice of Conversion of Loan Type shall be delivered by
first-class mail or telecopy to Agent at the office or to the telecopy number
and during the hours specified in Section 12.1; provided, however, that
Borrower shall promptly deliver to Agent the original of any Notice of
Conversion of Loan Type initially delivered by telecopy. Agent shall promptly
notify each Bank of the contents of each Notice of Conversion of Loan Type.
2.1.7 Prepayments.
(a) Terms of All Prepayments. Upon the
prepayment of any Loan (whether such prepayment is an optional prepayment under
Section 2.1.7(b) or a Mandatory Prepayment), Borrower shall pay to Agent for
the account of the Bank which made such Loan and/or Hedge Bank, as applicable,
(i) all accrued interest to the date of such prepayment on the amount prepaid,
(ii) all accrued fees to the date of such prepayment of the amount being
prepaid, (iii) to the extent required by the terms of the applicable Interest
Rate Agreement, all Hedge Breaking Fees owed by Borrower to such Bank or Hedge
Bank as a result of such prepayment, and (iv) if such prepayment is the
prepayment of a LIBOR Loan on a day other than the last day of an Interest
Period for such LIBOR Loan, all Liquidation Costs incurred by such Bank as a
result of such prepayment. All Mandatory Prepayments of Term Loans shall be
applied to reduce the remaining payments required under Section 2.1.2(d) in
inverse order of maturity. All optional
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prepayments of the Term Loans shall be applied ratably to the Amortization
Schedule for the Term Loans to reduce the remaining payments required under
Section 2.1.2(d). Borrower may not reborrow the principal amount of any
Construction Loan or Term Loan which is prepaid. Borrower shall terminate or
partially terminate Hedge Transactions such that at no time shall the notional
amount under all of the Hedge Transactions combined exceed the principal amount
of Loans outstanding at such time.
(b) Optional Prepayments. Subject to
Section 2.1.7(a), Borrower may, at its option and without penalty, upon five
Banking Days' notice to Agent, prepay (i) the entire outstanding amount of all
Construction Loans in whole or (ii) any Term Loans in whole or in part in
minimum incremental amounts of $100,000; provided, however, that as a condition
to Borrower's right to make any prepayment of the Construction Loans, Borrower
shall have terminated and repaid all other Commitments hereunder.
(c) Mandatory Prepayments. Borrower
shall prepay (or cause to be prepaid) Loans to the extent required by Section
5.18, 7.1.4, 7.2.5, 7.11, 7.12, or 7.13 of this Agreement, or any other
provision of this Agreement which requires prepayment of Loans (such
prepayment, "Mandatory Prepayment").
2.2 Total Commitments.
2.2.1 Loan Commitment Amounts.
(a) The aggregate principal amount of
all Construction Loans made by the Banks shall not exceed $151,750,000.
Notwithstanding the foregoing, such amount shall be reduced by the amount of
Base Equity and the amount of Subordinated Debt applied to pay Project Costs;
provided, however, such amount shall be reinstated by an amount equal to the
stated amount of any Equity Support Letter of Credit. Such amount shall be
further reduced by the amount elected by Borrower pursuant to Section 2.2.2.
The amount of Construction Loans as determined pursuant to Section 2.2.1(a)
shall be referred to herein as the "Total Construction Loan Commitment").
(b) Notwithstanding anything that may be
construed to the contrary in this Agreement, the aggregate principal amount of
all Term Loans outstanding at any time shall in no event exceed the lesser of
(i) $98,637,500 and (ii) sixty-five percent (65%) of the Final Project Cost,
or, in either case, if such amount is reduced by Borrower to a lower amount
pursuant to Section 2.2.2 (by virtue of a reduction of the Total Construction
Loan Commitment) or by virtue of any optional prepayment or Mandatory
Prepayment, such lower amount (such amount, so reduced from time to time, the
"Total Term Loan Commitment").
2.2.2 Reductions and Cancellations. Borrower may,
from time to time upon five Banking Days written notice to Agent, permanently
reduce, by an amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof or cancel in its entirety the Total Construction Loan
Commitment. Notwithstanding the foregoing, Borrower may not reduce or
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cancel the Total Construction Loan Commitment if, after giving effect to such
reduction or cancellation, (a) the aggregate principal amount of all
Construction Loans then outstanding would exceed the Total Construction Loan
Commitment, (b) the Available Construction Funds would not, in the reasonable
judgment of Agent and the Independent Engineer, be equal to or exceed remaining
Project Costs, or (c) such reduction or cancellation would cause a violation of
any other provision of this Agreement or the other Credit Documents. Borrower
shall pay to Agent any Commitment Fees then due upon any cancellation and, from
the effective date of any reduction, the Commitment Fees shall be computed on
the basis of the Available Construction Loan Commitment as reduced as a result
of such reduction of the Total Construction Loan Commitment. Once reduced or
cancelled, the Total Construction Loan Commitment may not be increased or
reinstated. Any reductions of the Total Construction Loan Commitment shall
cause a corresponding pro rata reduction in the Total Term Loan Commitment.
Any reductions pursuant to this Section 2.2.2 shall be applied ratably to each
Bank's respective Commitments in accordance with Section 2.5.1.
2.3 Fees.
2.3.1 Advisory Fee; Syndication Fee. Borrower
shall pay to Agent solely for Agent's account the advisory fee and the
syndication fee described in that certain letter from Borrower to Agent dated
the Closing Date.
2.3.2 Annual Agency Fee. Borrower shall pay to
Agent solely for Agent's account an annual agency fee (the "Agency Fee")
payable in advance on the Closing Date and on each anniversary thereof on which
any Loans are outstanding, in an amount equal to the product of (a)(i) for
years beginning prior to Term-Conversion, $175,000 per year, and (ii) for years
beginning after Term-Conversion, $100,000 per year, times (b) the Inflation
Factor.
2.3.3 Loan Commitment Fees. On the last Banking
Day in each calendar quarter (where all or any portion of such calendar quarter
occurs on or after the Closing Date and prior to the Construction Loan Maturity
Date) and on the Construction Loan Maturity Date (or, if the Total Construction
Loan Commitment is cancelled prior to such date, on the date of such
cancellation), Borrower shall pay to Agent, for the benefit of the Banks,
accruing from the Closing Date or the first day of such quarter, as the case
may be, a commitment fee (the "Commitment Fee") for such quarter (or portion
thereof) then ending equal to the product of (a) 0.375% times (b) the daily
average Available Construction Loan Commitment for such quarter (or portion
thereof) times (c) a fraction, the numerator of which is the number of days in
such quarter (or portion thereof) and the denominator of which is the number of
days in that calendar year (365 or 366, as the case may be).
2.4 Other Payment Terms.
2.4.1 Place and Manner. Borrower shall make all
payments due to each Bank or Agent hereunder to Agent, for the account of such
Bank, to Chase Manhattan Bank; Swift: ▇▇▇▇▇▇▇▇; Fed. Ref.: ▇▇▇▇▇▇▇▇▇; Account
Name: ING (U.S.) Capital Corporation;
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Account Number: 9301035763, in lawful money of the United States and in
immediately available funds not later than 12:00 noon on the date on which such
payment is due. Any payment made after such time on any day shall be deemed
received on the Banking Day after such payment is received. Agent shall
disburse to each Bank each such payment received by Agent for such Bank, such
disbursement to occur on the day such payment is received if received by 12:00
noon or if otherwise reasonably possible, otherwise on the next Banking Day.
2.4.2 Date. Whenever any payment due hereunder
shall fall due on a day other than a Banking Day, such payment shall be made on
the next succeeding Banking Day, and such extension of time shall be included
in the computation of interest or fees, as the case may be.
2.4.3 Late Payments. If any amounts required to be
paid by Borrower under this Agreement or the other Credit Documents (including
principal or interest payable on any Loan, and any fees or other amounts
otherwise payable to Agent or any Bank) remain unpaid after such amounts are
due, Borrower shall pay interest on the aggregate, unpaid balance of such
amounts from the date due until those amounts are paid in full at a per annum
rate equal to the Default Rate.
2.4.4 Net of Taxes, Etc.
(a) Taxes. Subject to each Bank's
compliance with Section 2.4.7, any and all payments to or for the benefit of
Agent or any Bank by Borrower hereunder or under any other Credit Document
shall be made free and clear of and without deduction, setoff or counterclaim
of any kind whatsoever and in such amounts as may be necessary in order that
all such payments, after deduction for or on account of any present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto (excluding income and franchise taxes, which
include taxes imposed on or measured by the net income or capital of Agent or
such Bank by any jurisdiction or any political subdivision or taxing authority
thereof or therein solely as a result of a connection between such Bank and
such jurisdiction or political subdivision, other than a connection resulting
solely from executing, delivering or performing its obligations or receiving a
payment under, or enforcing, this Agreement or any Note) (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"), shall be equal to the amounts otherwise
specified to be paid under this Agreement and the other Credit Documents. If
Borrower shall be required by law to withhold or deduct any Taxes from or in
respect of any sum payable hereunder or under any other Credit Document to
Agent or any Bank, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable
to additional sums payable under this Section 2.4.4, Agent or such Bank
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions and (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. If Borrower shall make
any payment under this Section 2.4.4 to or for the benefit of Agent or any Bank
with respect to Taxes and if Agent or such Bank shall claim any credit or
deduction for such Taxes against any other taxes payable by Agent or such Bank
to any taxing jurisdiction then Agent
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or such Bank shall pay to Borrower an amount equal to the amount by which such
other taxes are actually reduced; provided that the aggregate amount payable by
Agent or such Bank pursuant to this sentence shall not exceed the aggregate
amount previously paid by Borrower with respect to such Taxes. In addition,
Borrower agrees to pay any present or future stamp, recording or documentary
taxes and any other excise or property taxes, charges or similar levies (not
including income or franchise taxes) that arise under the laws of the United
States of America, the State of New York or the State of Texas from any payment
made hereunder or under any other Credit Document or from the execution or
delivery or otherwise with respect to this Agreement or any other Credit
Document (hereinafter referred to as "Other Taxes").
(b) Indemnity. Borrower shall indemnify
each Bank for the full amount of Taxes and Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.4.4 paid by any Bank, or any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted; provided that Borrower shall
not be obligated to indemnify any Bank for any penalties, interest or expenses
relating to Taxes or Other Taxes arising from the indemnitee's gross negligence
or willful misconduct. Each Bank agrees to give written notice to Borrower of
the assertion of any claim against such Bank relating to such Taxes or Other
Taxes as promptly as is practicable after being notified of such assertion, and
in no event later than one hundred eighty (180) days after the principal
officer of such Bank responsible for administering this Agreement obtains
knowledge thereof; provided that any Bank's failure to notify Borrower of such
assertion within such one hundred eighty (180) days period shall not relieve
Borrower of its obligation under this Section 2.4.4 with respect to Taxes or
Other Taxes arising prior to the end of such period, but shall relieve Borrower
of its obligations under this Section 2.4.4 with respect to Taxes or Other
Taxes between the end of such period and such time as Borrower receives notice
from such Bank as provided herein. Payments by Borrower pursuant to this
indemnification shall be made within 30 days from the date such Bank makes
written demand therefor (submitted through Agent), which demand shall be
accompanied by a certificate describing in reasonable detail the basis thereof.
Each Bank agrees to repay to Borrower any refund (including that portion of any
interest that was included as part of such refund with respect to Taxes or
Other Taxes paid by Borrower pursuant to this Section 2.4.4) received by such
Bank for Taxes or Other Taxes that were paid by Borrower pursuant to this
Section 2.4.4 and to contest, with the approval and participation of and at the
expense of Borrower, any such Taxes or Other Taxes which such Bank or Borrower
reasonably believes not to have been properly assessed.
(c) Notice. Within 30 days after the
date of any payment of Taxes by Borrower, Borrower shall furnish to Agent, at
its address referred to in Section 12.1, the original or a certified copy of a
receipt evidencing payment thereof. Borrower shall compensate each Bank for
all reasonable losses and expenses sustained by such Bank as a result of any
failure by Borrower to so furnish such copy of such receipt.
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(d) Survival of Obligations. The
obligations of Borrower under this Section 2.4.4 shall survive the termination
of this Agreement and the repayment of the Obligations.
2.4.5 Application of Payments. Payments made under
this Agreement or the other Credit Documents and other amounts received by
Agent and the Banks under this Agreement or the other Credit Documents shall
first be applied to any fees, costs, charges or expenses payable to Agent or
the other Banks hereunder or under the other Credit Documents, next to any
accrued but unpaid interest then due and owing, and then to outstanding
principal then due and owing or otherwise to be prepaid.
2.4.6 Failure to Pay Agent. Unless Agent shall
have received notice from Borrower at least two Banking Days prior to the date
on which any payment is due to the Banks hereunder that Borrower will not make
such payment in full, Agent may assume that Borrower has made such payment in
full to Agent on such date and Agent may, in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent Borrower shall not have so
made such payment in full to Agent, such Bank shall repay to Agent forthwith
upon demand such amount distributed to such Bank, together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to Agent, at the Federal Funds Rate
for the first five days after such date, and subsequent thereto at the Base
Rate. A certificate of Agent submitted to any Bank with respect to any amounts
owing by such Bank under this Section 2.4.6 shall be conclusive in the absence
of manifest error.
2.4.7 Withholding Exemption Certificates. Agent on
the Closing Date and each Bank upon becoming a Bank hereunder including any
entity to which any Bank grants a participation, or otherwise transfers its
interest in this Agreement, agree that they will deliver to Borrower and Agent
(and Agent agrees that it will deliver to Borrower) either (a) a statement that
it is incorporated under the laws of the United States of America or a state
thereof or (b) if it is not so incorporated, a letter in the form of Exhibit
J-1 or Exhibit J-2, as appropriate, and two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, certifying in each case that such Bank is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Bank which delivers to Borrower and
Agent a Form 1001 or 4224 pursuant to the preceding sentence further undertakes
to deliver to Borrower and Agent further copies of the said letter and Form
1001 or 4224, or successor applicable forms, or other manner of certification
or procedure, as the case may be, on or before the date that any such letter or
form expires or becomes obsolete or within a reasonable time after gaining
knowledge of the occurrence of any event requiring a change in the most recent
letter and forms previously delivered by it to Borrower, and such extensions or
renewals thereof as may reasonably be requested by Borrower, certifying in the
case of a Form 1001 or 4224 that such Bank is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes, unless in any such cases an event (including 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
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inapplicable or which would prevent a Bank from duly completing and delivering
any such letter or form with respect to it and such Bank advises Borrower that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax, and in the case of Form W-8 or W-9,
establishing an exemption from United States backup withholding tax. The
Borrower shall not be obligated, however, to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 2.4.4 (or make
an indemnification payment pursuant to Section 2.4.4) to any Bank (including
any entity to which any Bank sells, assigns, grants a participation in, or
otherwise transfers its rights under this Agreement) if the obligation to pay
such additional amounts (or such indemnification) would not have arisen but for
a failure of such Bank to comply with its obligations under this Section 2.4.7.
2.5 Pro Rata Treatment.
2.5.1 Borrowings, Commitment Reductions, Etc.
Except as otherwise provided herein, (a) each Borrowing consisting of
Construction Loans and Term Loans and each reduction of the Total Construction
Loan Commitment shall be made or allocated among the Banks pro rata according
to their respective Proportionate Shares of such Loans, (b) each payment of
principal of and interest on Construction Loans and Term Loans shall be made or
shared among the Banks holding such Loans pro rata according to the respective
unpaid principal amounts of such Loans held by such Banks and (c) each payment
of Commitment Fees shall be shared among the Banks pro rata according to (i)
their respective Proportionate Shares of the Loans to which such fees apply and
(ii) in the case of each Bank which becomes a Bank hereunder after the date
hereof, the date upon which such Bank so became a Bank.
2.5.2 Sharing of Payments, Etc. If any Bank shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of Loans owed to it, in excess of its
ratable share of payments on account of such Loans obtained by all Banks
entitled to such payments, such Bank shall forthwith purchase from the other
Banks such participation in the Loans, as the case may be, as shall be
necessary to cause such purchasing Bank to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Bank, such purchase from
such Bank shall be rescinded and each other Bank shall repay to the purchasing
Bank the purchase price to the extent of such recovery together with an amount
equal to such other Bank's ratable share (according to the proportion of (a)
the amount of such other Bank's required repayment to (b) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
Borrower agrees that any Bank so purchasing a participation from another Bank
pursuant to this Section 2.5.2 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff) with respect
to such participation as fully as if such Bank were the direct creditor of
Borrower in the amount of such participation.
2.6 Change of Circumstances.
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2.6.1 Inability to Determine Rates. If, on or
before the first day of any Interest Period for any LIBOR Loans, (a) Agent
determines that the LIBO Rate for such Interest Period cannot be adequately and
reasonably determined due to the unavailability of funds in or other
circumstances affecting the London interbank market, or (b) Banks holding
aggregate Proportionate Shares of 33-1/3% or more shall advise Agent that (i)
the rates of interest for such LIBOR Loans do not adequately and fairly reflect
the cost to such Banks of making or maintaining such Loans or (ii) deposits in
Dollars in the London interbank market are not available to such Banks (as
conclusively certified by each such Bank in good faith in writing to Agent and
to Borrower) in the ordinary course of business in sufficient amounts to make
and/or maintain their LIBOR Loans, Agent shall immediately give notice of such
condition to Borrower. After the giving of any such notice and until Agent
shall otherwise notify Borrower that the circumstances giving rise to such
condition no longer exist, Borrower's right to request the making of or
conversion to, and the Banks' obligations to make or convert to LIBOR Loans
shall be suspended. Any LIBOR Loans outstanding at the commencement of any
such suspension shall be converted at the end of the then current Interest
Period for such Loans into Base Rate Loans unless such suspension has then
ended.
2.6.2 Illegality. If, after the date of this
Agreement, the adoption of any Governmental Rule, any change in any
Governmental Rule or the application or requirements thereof (whether such
change occurs in accordance with the terms of such Governmental Rule as
enacted, as a result of amendment, or otherwise), any change in the
interpretation or administration of any Governmental Rule by any Governmental
Authority, or compliance by any Bank or Borrower with any request or directive
(whether or not having the force of law) of any Governmental Authority (a
"Change of Law") shall make it unlawful or impossible for any Bank to make or
maintain any LIBOR Loan, such Bank shall immediately notify Agent and Borrower
of such Change of Law. Upon receipt of such notice, (a) Borrower's right to
request the making of or conversion to, and the Bank's obligations to make or
convert to, LIBOR Loans shall be suspended for so long as such condition shall
exist, and (b) Borrower shall, at the request of such Bank, either (i) pursuant
to Section 2.1.6, convert any then outstanding LIBOR Loans into Base Rate Loans
at the end of the current Interest Periods for such Loans, or (ii) immediately
repay pursuant to Section 2.1.7 or convert LIBOR Loans of the affected Type
into Base Rate Loans if such Bank shall notify Borrower that such Bank may not
lawfully continue to fund and maintain such Loans. Any conversion or
prepayment of LIBOR Loans made pursuant to the preceding sentence prior to the
last day of an Interest Period for such Loans shall be deemed a prepayment
thereof for purposes of Section 2.7.
2.6.3 Increased Costs. If, after the date of this
Agreement, any Change of Law:
(a) Shall subject any Bank to any tax,
duty or other charge with respect to any LIBOR Loan or Commitment, or shall
change the basis of taxation of payments by Borrower to any Bank on such a Loan
or with respect to any Commitment (except for Taxes, Other Taxes or changes in
the rate of taxation on the overall net income of any Bank); or
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(b) Shall impose, modify or hold
applicable any reserve, special deposit or similar requirement (without
duplication of any reserve requirement included within the applicable Interest
Rate through the definition of "Reserve Requirement") against assets held by,
deposits or other liabilities in or for the account of, advances or loans by,
or any other acquisition of funds by any Bank for any LIBOR Loan; or
(c) Shall impose on any Bank any other
condition directly related to any LIBOR Loan or Commitment;
and the effect of any of the foregoing is to increase the cost to such Bank of
making, issuing, creating, renewing, participating in (subject to the
limitations in Section 10.13) or maintaining any such LIBOR Loan or Commitment
or to reduce any amount receivable by such Bank hereunder; then Borrower shall
from time to time, upon demand by such Bank, pay to such Bank additional
amounts sufficient to reimburse such Bank for such increased costs or to
compensate such Bank for such reduced amounts. A certificate setting forth in
reasonable detail the amount of such increased costs or reduced amounts and the
basis for determination of such amount, submitted by such Bank to Borrower,
shall, in the absence of manifest error, be conclusive and binding on Borrower
for purposes of this Agreement.
2.6.4 Capital Requirements. If any Bank determines
that (a) any Change of Law after the date of this Agreement increases the
amount of capital required or expected to be maintained by such Bank (or the
Lending Office of such Bank) or any Person controlling such Bank (a "Capital
Adequacy Requirement") and (b) the amount of capital maintained by such Bank or
such Person which is attributable to or based upon the Loans, the Commitments
or this Agreement must be increased as a result of such Capital Adequacy
Requirement (taking into account such Bank's or such Person's policies with
respect to capital adequacy), Borrower shall pay to Agent on behalf of such
Bank or such Person, upon demand of Agent on behalf of such Bank or such
Person, such amounts as such Bank or such Person shall reasonably determine are
necessary to compensate such Bank or such Person for the increased costs to
such Bank or such Person of such increased capital. A certificate of such Bank
or such Person, setting forth in reasonable detail the computation of any such
increased costs, delivered to Borrower by Agent on behalf of such Bank or such
Person shall, in the absence of manifest error, be conclusive and binding on
Borrower for purposes of this Agreement.
2.6.5 Notice; Participating Banks' Rights. Each
Bank will notify Borrower of any event occurring after the date of this
Agreement that will entitle such Bank to compensation pursuant to this Section
2.6, as promptly as practicable, and in no event later than 90 days after the
principal officer of such Bank responsible for administering this Agreement
obtains knowledge thereof; provided that any Bank's failure to notify Borrower
within such 90 day period shall not relieve Borrower of its obligation under
this Section 2.6.5 with respect to claims arising prior to the end of such
period, but shall relieve Borrower of its obligations under this Section 2.6.5
with respect to the time between the end of such period and such time as
Borrower receives notice from the indemnitee as provided herein. No Person
purchasing from a Bank a participation in any Commitment (as opposed to an
assignment) shall be entitled to any payment from or on behalf of
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Borrower pursuant to Section 2.6.3 or Section 2.6.4 which would be in excess of
the applicable proportionate amount (based on the portion of the Commitment in
which such Person is participating) which would then be payable to such Bank if
such Bank had not sold a participation in that portion of the Commitment.
2.7 Funding Losses. If Borrower shall (a) repay or
prepay any LIBOR Loans on any day other than the last day of an Interest Period
for such Loans (whether an optional prepayment or a Mandatory Prepayment), (b)
fail to borrow any LIBOR Loans in accordance with a Notice of Borrowing
delivered to Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise), (c) fail to convert any Loans into LIBOR
Loans in accordance with a Notice of Conversion of Loan Type delivered to Agent
(whether as a result of the failure to satisfy any applicable conditions or
otherwise), or (d) fail to make any prepayment in accordance with any notice of
prepayment delivered to Agent; Borrower shall, upon demand by any Bank,
reimburse such Bank for all costs and losses incurred by such Bank as a result
of such repayment, prepayment or failure ("Liquidation Costs"). Borrower
understands that such costs and losses may include losses incurred by a Bank as
a result of funding and other contracts entered into by such Bank to fund LIBOR
Loans. Each Bank demanding payment under this Section 2.7 shall deliver to
Borrower a certificate setting forth in reasonable detail the basis for and the
amount of costs and losses for which demand is made. Such a certificate so
delivered to Borrower shall, in the absence of manifest error, be conclusive
and binding as to the amount of such loss for purposes of this Agreement.
2.8 Alternate Office; Minimization of Costs.
2.8.1 To the extent reasonably possible, each Bank
shall designate an alternative Lending Office with respect to its LIBOR Loans
and otherwise take any reasonable actions to reduce any liability of Borrower
to any Bank under Section 2.4.4, 2.6.3 or 2.6.4, or to avoid the unavailability
of any Type of Loans under Section 2.6.2 so long as such Bank, in its sole
discretion, does not determine that such designation is disadvantageous to such
Bank.
2.8.2 If and with respect to each occasion that a
Bank either makes a demand for compensation pursuant to Section 2.4.4, 2.4.7,
2.6.3 or 2.6.4 or is unable for a period of three consecutive months to fund
LIBOR Loans pursuant to Section 2.6.2 or such Bank wrongfully fails to fund a
Loan, Borrower may, upon at least five Banking Days' prior irrevocable written
notice to each of such Bank and Agent, in whole permanently replace the
Commitment of such Bank; provided that Borrower shall replace such Commitment
with the Commitment of a commercial bank reasonably satisfactory to the Agent.
Such replacement Bank shall upon the effective date of replacement purchase the
Obligations owed to such replaced Bank for the aggregate amount thereof and
shall thereupon for all purposes become a "Bank" hereunder. Such notice from
Borrower shall specify an effective date for the replacement of such Bank's
Commitment, which date shall not be later than the tenth day after the day such
notice is given. On the effective date of any replacement of such Bank's
Commitment pursuant to this Section 2.8.2, Borrower shall pay to Agent for the
account of such Bank (a) any fees due to such Bank to the date of such
replacement; (b) accrued interest on the principal amount of outstanding Loans
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held by such Bank to the date of such replacement, and (c) the amount or
amounts requested by such Bank pursuant to each of Sections 2.4.4, 2.4.7, 2.6.3
and 2.6.4, as applicable. Borrower will remain liable to such replaced Bank
for any Liquidation Costs that such Bank may sustain or incur as a consequence
of repayment of such Bank's Loans (unless such Bank has defaulted on its
obligation to fund a Loan hereunder). Upon the effective date of repayment of
any Bank's Loans and termination of such Bank's Commitment pursuant to this
Section 2.8.2, such Bank shall cease to be a Bank hereunder. No such
termination of any such Bank's Commitment and the purchase of such Bank's Loans
pursuant to this Section 2.8.2 shall affect (i) any liability or obligation of
Borrower or any other Bank to such terminated Bank which accrued on or prior to
the date of such termination or (ii) such terminated Bank's rights hereunder in
respect of any such liability or obligation.
2.8.3 Any Bank may designate a Lending Office other
than that set forth on Exhibit H and may assign all of its interests under the
Credit Documents, and its Notes, to such Lending Office; provided that such
designation and assignment do not at the time of such designation and
assignment increase the reasonably foreseeable liability of Borrower under
Sections 2.4.4, 2.6.3, or 2.6.4 or make an Interest Rate option unavailable
pursuant to Section 2.6.2.
ARTICLE 3 - CONDITIONS PRECEDENT
3.1 Conditions Precedent to the Closing Date. The
obligation of the Banks to make the initial Construction Loans is subject to
the prior satisfaction of each of the following conditions (unless waived in
writing by Agent with the consent of the Banks):
3.1.1 Resolutions. Delivery to Agent of a copy of
one or more resolutions or other authorizations of Borrower and each of the
Partners, Shareholders, Construction Manager, Project Manager, Operator and
each Equity Party, certified by the appropriate officers of each such entity as
being in full force and effect on the Closing Date, authorizing, as applicable,
the Borrowings herein provided for and the execution, delivery and performance
of this Agreement and the other Operative Documents and any instruments or
agreements required hereunder or thereunder to which such entity is a party.
3.1.2 Incumbency. Delivery to Agent of a
certificate satisfactory in form and substance to Agent, from the Managing
Partner of Borrower and from each of the Partners, Shareholders, Construction
Manager, Project Manager, Operator and each Equity Party, signed by the
appropriate authorized officer of each such entity and dated the Closing Date,
as to the incumbency of the natural persons authorized to execute and deliver
this Agreement and the other Operative Documents and any instruments or
agreements required hereunder or thereunder to which such entity is a party.
3.1.3 Formation Documents. Delivery to Agent of
(a) a copy of the Partnership Agreement, certified by the secretary or an
assistant secretary of the Managing Partner as being true, current and complete
on the Closing Date, and any related agreements or certificates
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filed in accordance with applicable state law, and (b) copies of the articles
of incorporation or certificate of incorporation or charter of each Major
Project Participant other than Borrower (or any Equity LC Issuer), certified,
if requested by the Agent, by the secretary of state of the state of
incorporation, and (c) copies of the Bylaws of each of the Partners and
Shareholders, Construction Manager, Project Manager, Operator and each Equity
Party, certified by its secretary or an assistant secretary.
3.1.4 Good Standing Certificates. Delivery to
Agent of certificates issued by the Secretary of State of Texas and, if other
than such state, the state of formation of each Major Project Participant other
than any Equity LC Issuer certifying that such Major Project Participant is in
good standing and is qualified to do business in, and has paid all franchise
taxes or similar taxes due to, Texas (if applicable) and its state of
formation.
3.1.5 Satisfactory Proceedings. All corporate,
partnership and legal proceedings and all instruments in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to Agent, and Agent shall have received all information and copies of
all documents, including records of corporate or partnership proceedings and
copies of any approval by any Governmental Authority required in connection
with any transaction herein contemplated, which Agent may reasonably have
requested in connection herewith, such documents where appropriate to be
certified by proper corporate or partnership officers or Governmental
Authorities.
3.1.6 Operative Documents. Delivery to Agent of
executed originals of each Credit Document (other than any Equity Support
Letter of Credit, Debt Service Reserve Letter of Credit, Fuel Supply Reserve
Letter of Credit or Emissions Offsets Reserve Letter of Credit) and a certified
list of and true and correct copies of, each Project Document then in effect,
any supplements or amendments thereto, all of which shall be in form and
substance satisfactory to Agent, shall have been duly authorized, executed and
delivered by the parties thereto, and all of which Project Documents shall be
certified by a Responsible Officer of Borrower as being true, complete and
correct and in full force and effect on the Closing Date pursuant to the
certificate delivered as provided in the following paragraph, which certificate
shall state that neither Borrower nor, to Borrower's knowledge, any other party
to any Project Document is or, but for the passage of time or giving of notice
or both will be, in breach of any material obligation thereunder, and that all
conditions precedent to the performance of the parties under the Project
Documents then required to have been performed have been satisfied.
3.1.7 Certificate of Borrower. Agent shall have
received a certificate, dated as of the Closing Date, signed by a Responsible
Officer of Borrower, in substantially the form of Exhibit F-1.
3.1.8 Legal Opinions. Delivery to Agent of legal
opinions of counsel to each Major Project Participant (other than any Equity LC
Issuer), in form and substance satisfactory to the Agent.
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3.1.9 Certificate of Insurance Consultant.
Delivery to Agent of the Insurance Consultant's certificate, in substantially
the form of Exhibit F-2, with the Insurance Consultant's report, in form and
substance satisfactory to Agent, attached thereto.
3.1.10 Insurance. Insurance complying with Exhibit
K shall be in full force and effect and Agent shall have received (a) a
certificate from Borrower's insurance broker(s), dated as of the Closing Date
and identifying underwriters, type of insurance, insurance limits and policy
terms, listing the special provisions required as set forth in Exhibit K,
describing the insurance obtained and stating that such insurance is in full
force and effect and that all premiums due thereon through the Construction
Loan Maturity Date have been paid and that, in the opinion of such broker(s),
such insurance complies with Exhibit K, and (b) certified copies of all
policies evidencing such insurance (or a binder, commitment or certificates
signed by the insurer or a broker authorized to bind the insurer), in form and
substance satisfactory to Agent.
3.1.11 Certificate of the Independent Engineer.
Delivery to Agent of the Independent Engineer's certificate, in substantially
the form of Exhibit F-3, with the Independent Engineer's report, in form and
substance satisfactory to Agent, attached thereto.
3.1.12 Reports of the Borrower's Environmental
Consultant. Delivery to Agent of the Borrower's Environmental Consultant's
reports along with the corresponding reliance letters, each in form and
substance satisfactory to Agent.
3.1.13 Certificate of the Fuel Consultant. Delivery
to Agent of the Fuel Consultant's certificate, in substantially the form of
Exhibit F-4, with the Fuel Consultant's report, in form and substance
satisfactory to Agent, attached thereto.
3.1.14 Certificate of Power Marketing Consultant.
Delivery to Agent of the Power Marketing Consultant's certificate, in
substantially the form of Exhibit F-5, with the Power Marketing Consultant's
report, in form and substance satisfactory to Agent, attached thereto.
3.1.15 Power Marketing Plan. Delivery to Agent of a
plan with respect to power marketing setting forth Borrower's good faith
assessment of Borrower's projected sales of power within ERCOT, which plan
shall not in any way be construed to modify or limit Borrower's rights and
obligations set forth herein, substantially in the form of Exhibit G-2 (the
"Power Marketing Plan").
3.1.16 Schedule of Applicable Permits and Applicable
Third Party Permits. Delivery to Agent of Exhibit G-3, the schedule of Permits
required to construct and operate the Project or required to be obtained by any
Person (other than Borrower) that is party to any Project Document in order to
perform its obligations thereunder, satisfactory in form and substance to
Agent, together with copies of each Applicable Permit and Applicable Third
Party Permit listed on Parts I(A) and I(B) of Exhibit G-3, each satisfactory in
form and substance to Agent. Except as disclosed in Exhibit G-3, Borrower
shall have duly obtained or been assigned and there shall
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be in full force and effect in Borrower's name, and not subject to any current
legal proceeding or to any unsatisfied condition that could reasonably be
expected to allow material modification or revocation of, and all applicable
appeal periods shall have expired with respect to, the Applicable Permits for
the Project set forth on Parts I(A) and I(B) of Exhibit G-3, constituting in
Agent's reasonable opinion all of the Applicable Permits as of the Closing
Date. Except as disclosed on Exhibit G-3, each Major Project Participant with
respect to which responsibility for an Applicable Third Party Permit is
indicated in Part I(B) of Exhibit G-3 shall have duly obtained or been assigned
such Applicable Third Party Permit and there shall be in full force and effect
in such Person's name, and not subject to any current legal proceeding or to
any unsatisfied condition that could reasonably be expected to allow material
modification or revocation of, and all applicable appeal periods shall have
expired with respect to, each Applicable Third Party Permit set forth on Part
I(B) of Exhibit G-3, constituting in Agent's reasonable opinion all of the
Applicable Third Party Permits as of the Closing Date. Part II(A) of Exhibit
G-3 shall list all other Permits required by Borrower to construct and operate
the Project as contemplated by the Operative Documents. Part II(B) of Exhibit
G-3 shall list all other material Permits required by any other Major Project
Participant to perform its obligations under the Operative Documents to which
it is a party. The Permits listed in Parts II(A) and II(B) of Exhibit G-3
shall, in Agent's reasonable opinion, be timely obtainable without material
difficulty, expense or delay by Borrower or the applicable other Major Project
Participant, respectively. Except as disclosed in Exhibit G-3 the Permits
listed in Part I(A) and I(B) of Exhibit G-3 shall not be subject to any
restriction, condition, limitation or other provision that could reasonably be
expected to have a Material Adverse Effect.
3.1.17 No Change in Tax Laws. No change shall have
occurred, since the date upon which this Agreement was executed and delivered,
in any law or regulation or interpretation thereof that would subject any Bank
to any material unreimbursed Tax or Other Tax.
3.1.18 Absence of Litigation. (a) No action, suit,
proceeding or investigation shall have been instituted or threatened against
Borrower and (b) no order, judgment or decree shall have been issued or
proposed to be issued by any Governmental Authority that, as a result of the
construction, ownership, leasing or operation of the Project, the sale of
electricity or steam therefrom or the entering into of any Operative Document
or any transaction contemplated hereby or thereby, would cause or deem the
Banks, Borrower or any Affiliate of any of them to be subject to, or not
exempted from, regulation under the FPA or PUHCA or under state laws and
regulations respecting the rates or the financial or organizational regulation
of electric utilities.
3.1.19 Payment of Filing Fees. All amounts required
to be paid to or deposited with Agent, and all taxes, fees and other costs
payable in connection with the execution, delivery, recordation and filing of
the documents and instruments referred to in this Section 3.1, shall have been
paid in full or, as approved by Agent, provided for.
3.1.20 Financial Statements. Agent shall have
received the most recent annual financial statements (audited if available) or
Form 10-K and most recent quarterly financial
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statements or Form 10-Q from Borrower and each other Major Project Participant
(other than the Partners) (or, in the case of the Fuel Supplier and HL&P, their
respective parent corporations) other than any Equity LC Issuer, together (in
the case of Borrower and its Affiliates who are Major Project Participants)
with certificates from the appropriate Responsible Officer thereof, stating
that no material adverse change in the consolidated assets, liabilities,
operations or financial condition of such Person has occurred from those set
forth in the most recent financial statements or the balance sheet, as the case
may be, provided to Agent.
3.1.21 UCC Reports. Agent shall have received a UCC
report of a date reasonably close to the Closing Date for each of the
jurisdictions in which the UCC-1 financing statements, are intended to be filed
in respect of the Collateral, showing that upon due filing (assuming such
filing or recordation occurred on the date of such respective reports), the
security interests created under such Collateral Documents will be prior to all
other financing statements, or other security documents wherein the security
interest is perfected by filing in respect of the Collateral.
3.1.22 Project Budget. Borrower shall have
furnished Agent a budget in substantially the form of Exhibit G-4 (the "Project
Budget") for all anticipated costs to be incurred in connection with the
construction and start-up of the Project, including in such budget all
construction and non-construction costs, and including all interest, taxes and
other carrying costs, and such other information as Agent may require, together
with a balanced statement of sources and uses of proceeds (and any other funds
necessary to complete the Project), broken down as to separate construction
phases and components, which Project Budget shall be satisfactory to Agent.
3.1.23 Base Case Project Projections. Borrower
shall have furnished to Agent the Base Case Project Projections of operating
expenses and cash flow for the Project showing a minimum projected annual Debt
Service Coverage Ratio of 2.11 and an average projected annual Debt Service
Coverage Ratio of 2.41 over the term of the Term Loans and otherwise in
substantially the form of Exhibit G-5 and in form and substance satisfactory to
Agent.
3.1.24 No Material Adverse Change. Since April 22,
1996, in the reasonable judgment of Agent, there shall not have occurred any
material adverse change in the Project Budget, Project Schedule or Base Case
Project Projections, in the economics or feasibility of constructing and/or
operating the Project, or in the financial condition, business, prospects or
property of any Major Project Participant, which could reasonably be expected
to have a Material Adverse Effect.
3.1.25 A.L.T.A. Surveys. Agent shall have received
A.L.T.A. surveys of the Site and the Easements, satisfactory in form and
substance to Agent and the Title Insurer, reasonably current and certified to
Agent by ▇▇▇▇▇▇▇ Engineering Co. or another licensed surveyor satisfactory to
Agent, showing (a) as to the Site, the exact location and dimensions thereof,
including the location of all means of access thereto and all easements
relating thereto and showing the perimeter within which all foundations are or
are to be located; (b) as to the Easements, the exact location and dimensions
thereof, including the location of all means of access thereto, and
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all improvements or other encroachments in or on the Easements; (c) the
existing utility facilities servicing the Project (including water,
electricity, gas, telephone, sanitary sewer and storm water distribution and
detention facilities); (d) that such existing improvements do not encroach or
interfere with adjacent property or existing easements or other rights (whether
on, above or below ground), and that there are no gaps, gores, projections,
protrusions or other survey defects; (e) whether the Site or any portion
thereof is located in a special earthquake or flood hazard zone; and (f) that
there are no other matters that could reasonably be expected to be disclosed by
a survey constituting a defect in title other than Permitted Encumbrances.
3.1.26 Title Policy. Borrower shall have delivered
to Agent a lender's A.L.T.A. policy of title insurance, together with such
endorsements as are required by Agent, or a commitment to issue such a policy
(such policy and endorsements or commitment being hereinafter referred to as
the "Title Policy"), in the amount of $151,750,000 with such reinsurance as is
satisfactory to Agent, issued by the Title Insurer in form and substance
satisfactory to Agent, insuring (or agreeing to insure) that:
(a) Borrower has a good, marketable and
insurable title to or right to control, occupy and use the Site and the
Easements, free and clear of liens, encumbrances or other exceptions to title
except those exceptions specified on Exhibit D-10 ("Permitted Encumbrances");
and
(b) the Deed of Trust is (or will be
when recorded) a valid first lien on the Mortgaged Property, free and clear of
all liens, encumbrances and exceptions to title whatsoever, other than
Permitted Encumbrances.
3.1.27 Qualifying Facility Status. The Project
shall have complied with the requirements of 18 C.F.R. Section 209.207
required to be complied with as of the Closing Date and delivered to Agent a
certificate of FERC certifying the Project as a Qualifying Facility.
3.1.28 Notice to Proceed. Each Contractor shall
have been given an unconditional notice to proceed or otherwise been
unconditionally directed to begin performance under the Construction Contract
to which it is a party, and shall have acknowledged receipt thereof, on or
prior to the Closing Date.
3.1.29 Establishment of Accounts. The Accounts
required under Article 7 shall have been established to the satisfaction of the
Agent.
3.1.30 Representations and Warranties of Partners
and Borrower. Each representation and warranty of the Partners under the
Credit Documents and each representation and warranty of Borrower under the
Credit Documents shall be true and correct.
3.1.31 Utilities. Agent has received evidence
acceptable to Agent in its sole discretion that all necessary utility services
are either contracted for, or readily available on reasonable economic terms,
at the Project.
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3.1.32 Interest Rate ▇▇▇▇▇▇. Borrower shall have
entered into the Interest Rate Agreement and that certain letter agreement
described in Section 5.22.
3.1.33 Key Personnel. Construction Manager shall
have retained and is engaging, for the performance of its obligations under the
Construction Management Agreement, key management personnel which includes the
key personnel that were engaged in connection with the development of the Sumas
project or which are otherwise acceptable to Agent and Independent Engineer.
Such personnel shall include without limitation, ▇▇▇▇▇▇ ▇▇▇▇▇▇, as the home
office construction manager, and ▇▇▇▇ ▇▇▇▇▇, as the project site manager or
such other personnel as are reasonably acceptable to Agent.
3.1.34 Project Schedule. Borrower shall have
furnished the Project Schedule in substantially the form of Exhibit G-6.
3.1.35 Reports of Borrower's Tax Consultants.
Delivery to Agent of sales tax and real property tax reports along with
corresponding reliance letters from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, each in form and
substance satisfactory to Agent.
3.1.36 Reports of Borrower's HCC Evaluation
Consultant. Delivery to Agent of an HCC evaluation and assessment report along
with a corresponding reliance letter from Pace Consultants, each in form and
substance satisfactory to Agent.
3.1.37 ▇▇▇▇▇▇▇▇ Documents. ▇▇▇▇▇▇▇▇ shall have
provided to Agent (a) a letter confirming the environmental condition of the
properties subject to the Easements granted to Borrower pursuant to the Lease
and (b) a letter confirming that ▇▇▇▇▇▇▇▇ has not entered into any agreement
nor has otherwise subjected HCC to any noise ordinance or regulation or other
noise restrictions, each in form and substance satisfactory to Agent.
3.1.38 Mechanics' Lien Indemnity. Calpine shall
have executed and delivered an indemnity in favor of the Banks with respect to
mechanics' liens which could gain priority over the Deed of Trust.
3.1.39 Port Authority License. The Port Authority
shall have delivered a letter to Agent, stating (i) the Port Authority has
authorized the execution and delivery of a license in favor of Borrower
relating to certain transmission lines for the Project, (ii) the Authority will
execute and deliver such license promptly after preparation thereof, and (iii)
the Port Authority will, concurrently with such execution, execute and deliver
consent to assignment of such license to Agent, in the form attached to such
letter as an exhibit.
3.1.40 ▇▇▇▇▇▇▇▇ License. ▇▇▇▇▇▇▇▇ shall have
delivered a letter to Agent stating that ▇▇▇▇▇▇▇▇ has applied or will promptly
apply for an amendment to the Oil, Gas, etc. Pipeline License (Railroad
Right-of-Way) dated April 1, 1990 between the Port and ▇▇▇▇▇▇▇▇ 66 Company, as
predecessor in interest to ▇▇▇▇▇▇▇▇ so as to permit Borrower to construct
within the
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area described in Exhibit A to the license the improvements contemplated in the
Development and Construction Agreement.
3.2 Conditions Precedent to Each Construction Credit
Event. The obligation of the Banks to make each Construction Loan (including
the first Construction Loan and the final Construction Loan) and to disburse
non-Loan proceeds from the Construction Account (each of the foregoing, a
"Construction Credit Event"), is subject to the prior satisfaction of each of
the following conditions:
3.2.1 Credit Event Conditions Satisfied. The
conditions set forth in Section 3.4 shall have been satisfied and Agent shall
have received a certificate from Borrower dated the date such Construction
Credit Event is proposed to occur, certifying to the matters set forth in
Section 3.4.
3.2.2 Monthly Drawdown Frequency. Construction
Loans shall be made no more frequently than one time per month.
3.2.3 Notice of Borrowing. Borrower shall have
delivered a Notice of Borrowing to Agent in accordance with the procedures
specified in Section 2.1.
3.2.4 Drawdown Certificate and Engineer's
Certificate. (i) At least ten (10) Banking Days prior to each Construction
Credit Event, Borrower shall have provided Agent with a certificate, dated the
date of the proposed occurrence of such Construction Credit Event and signed by
Borrower, substantially in the form of Exhibit C-5, and (ii) at least four (4)
Banking Days prior to each Construction Credit Event, the Independent Engineer
shall have provided Agent with a certificate of the Independent Engineer,
substantially in the form of Exhibit C-6.
3.2.5 Amount. Construction Loans shall be in such
amounts as shall ensure that uncommitted funds remaining in the Construction
Account shall be disbursed to the greatest extent possible, given the
requirements of Section 2.1.1(b)(ii).
3.2.6 Title Policy Endorsement. Borrower shall
provide, or Agent shall be adequately assured that the Title Insurer is
committed at the time of each Construction Credit Event to issue, to Agent a
date-down endorsement of the Title Policy to the date of such Construction
Credit Event, insuring the continuing first priority of the Deed of Trust
(subject only to Permitted Encumbrances) and otherwise in form and substance
reasonably satisfactory to Agent.
3.2.7 Lien Releases. If requested by Agent and
subject to Borrower's right to contest liens as described in the definition of
"Permitted Liens," Borrower shall have delivered to Agent duly executed
acknowledgments of payments and releases of mechanics' and materialmen's liens,
in form satisfactory to Agent, from each Contractor for all work, services and
materials, including equipment and fixtures of all kinds, done, previously
performed or furnished for the construction of the Project, and in respect of
which Borrower has requested payment; provided, however, that such releases may
be conditioned upon receipt of payment with
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respect to work, services and materials to be paid for with the proceeds of the
requested Construction Loan or other Borrowing.
3.2.8 Applicable Permits. Except as disclosed in
Exhibit G-3, all Applicable Permits and Applicable Third Party Permits with
respect to the construction and operation of the Project required to have been
obtained by Borrower or any Major Project Participant by the date of such
Construction Credit Event from any Governmental Authority shall have been
issued and be in full force and effect and not subject to current legal
proceedings or to any unsatisfied conditions that could reasonably be expect to
allow material modification or revocation, and all applicable appeal periods
with respect thereto shall have expired. With respect to any of the Permits
not yet obtained and listed in Part II(A) or II(B) of Exhibit G-3, no facts or
circumstances exist which indicate that any such Permit will not be timely
obtainable without material difficulty, expense or delay by Borrower or the
applicable Major Project Participant, respectively, prior to the time that it
becomes an Applicable Permit or Applicable Third Party Permit, as applicable.
Except as disclosed in Exhibit G-3, the Permits which have been obtained by the
Borrower or any Major Project Participant shall not be subject to any
restriction, condition, limitation or other provision that could reasonably be
expected to have a Material Adverse Effect.
3.2.9 Equity Contributions. Borrower shall be in
compliance with Section 5.18.
3.2.10 Additional Documentation. With respect to
Additional Project Documents and Applicable Permits entered into or obtained,
transferred or required (whether because of the status of the construction or
operation of the Project or otherwise) since the date of the most recent
Construction Credit Event, there shall be redelivery of such matters as are
described in Sections 3.1.1 through 3.1.4 and 3.1.6 to the extent applicable to
such Additional Project Documents or Applicable Permits and, if reasonably
requested by Agent, Sections 3.1.8 and 3.1.20 from the counterparty to such
Additional Project Document.
3.2.11 Acceptable Work; No Liens. All work that has
been done on the Project shall have been done in a good and workmanlike manner
and in accordance with the Construction Contracts and Prudent Utility Practices
and there shall not have been filed with or served upon Borrower with respect
to the Project or any part thereof notice of any Lien, claim of Lien or
attachment upon or claim affecting the right to receive payment of any of the
moneys payable to any of the Persons named on such request which has not been
released by payment or bonding or otherwise or which will not be released with
the payment of such obligation out of such Construction Loan or other
Borrowing, other than Permitted Liens.
3.2.12 Casualty. If at the time of any Construction
Credit Event, the Project shall have been materially injured or damaged by
flood, fire or other casualty, Agent shall have received insurance proceeds or
money or other assurances sufficient in the reasonable judgment of Agent and
the Independent Engineer to assure restoration and Completion prior to the
Construction Loan Maturity Date and each of the conditions set forth in Section
7.11.3 has been satisfied.
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3.2.13 Absence of Litigation. No action, suit,
proceeding or investigation shall have been instituted against Borrower, any
Partner or the Project which could reasonably be expected to have a Material
Adverse Effect, except as approved by Agent with the consent of the Majority
Banks.
3.2.14 Insurance. Insurance complying with the
requirements of Section 5.19 shall be in effect, and upon the request of Agent
evidence thereof shall be provided to Agent.
3.2.15 Key Personnel. The condition set forth in
Section 3.1.33 continues to be satisfied as of the date of the Construction
Credit Event.
3.2.16 Available Construction Funds. Available
Construction Funds shall not be less than the aggregate unpaid amount required
to cause the Completion Date to occur in accordance with all Legal
Requirements, the Construction Contracts and the ▇▇▇▇▇▇▇▇ Documents, prior to
the Date Certain and to pay or provide for all anticipated non-construction
costs, all as set forth in the Project Budget.
3.3 Conditions Precedent to Term-Conversion. No
Construction Loans shall Term-Convert unless the following conditions shall
have been satisfied:
3.3.1 Payment of Obligations. Borrower shall have
paid to Agent the principal amount of the Construction Loans outstanding which
will not be Term-Converted to Term Loans as provided in Section 2.1.2(a) plus
all interest due and owing on the Construction Loans and all other Obligations
of Borrower due and owing to Agent and the Banks hereunder or under the other
Credit Documents.
3.3.2 Final Drawing. Immediately prior to
Term-Conversion, Borrower shall have requested (in accordance with the terms of
this Article 3) a Construction Loan (the "Final Drawing") to be applied in
accordance with Section 7.1.4, in the amount, if any, of the remaining Total
Construction Loan Commitment up to the sum of (a) an amount sufficient for
completion of the Punch List and payment of other Project Costs through Final
Completion, determined by Borrower and approved by Agent in consultation with
Independent Engineer, (b) the amount required to be funded into the Emissions
Offsets Reserve Account at Term-Conversion, (c) the amounts required to be
funded into the Fuel Supply Reserve Account at Term-Conversion and (d) the
amount required to be funded into the Debt Service Reserve Account at
Term-Conversion.
3.3.3 Certificates of Occupancy. Delivery to
Agent, in form and substance satisfactory to Agent, of:
(a) Evidence that all work requiring
inspection by municipal and other Governmental Authorities having jurisdiction
has been duly inspected and approved by such authorities, that a final
certificate of occupancy or a certificate of final completion has been issued
for the Project, that Borrower has duly recorded a notice of completion for the
Project, that all
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parties performing such work have been or will be paid for such work, and that
no mechanics' and/or materialmen's liens or application therefor have been
filed and all applicable filing periods for any such mechanics' and/or
materialmen's liens have expired; provided, however, that in the event Borrower
delivers to agent either (i) a policy of title insurance or endorsement
thereto, in form and substance satisfactory to Agent, insuring against loss
arising by reason of any mechanics' or materialmen's lien gaining priority over
the Deed of Trust or (ii) a bond, in form and substance satisfactory to Agent,
in the amount of all payments owed to any contractor, subcontractor or any
other person as to whom the filing periods for mechanics' and materialmen's
liens have not expired, and covering Borrower's liability to such contractors,
subcontractors or other persons, Agent shall waive the applicable filing
periods referred to herein; and
(b) A certification by Construction
Manager and by Borrower and the Independent Engineer that Completion has been
achieved and that an appropriate "Permit to Operate" and "Certificate of
Occupancy" for the Project have been issued to Borrower or that Borrower and
Agent know of no reason why such certificates will not be issued when and as
needed.
3.3.4 Completion. Completion shall have occurred.
3.3.5 Equity Contributions. Borrower shall be in
compliance with Section 5.18.
3.3.6 Annual Budget. Agent shall have received the
initial Annual Operating Budget as required under Section 5.15.2.
3.3.7 Insurance. Insurance complying with the
requirements of Section 5.19 shall be in effect, and upon the request of Agent
evidence thereof shall be provided to Agent.
3.3.8 Reserve Accounts. Borrower shall have
deposited into (a) the Emissions Offsets Reserve Account, all funds required
under Section 7.4, (b) the Fuel Supply Reserve Account, all funds required
under Section 7.5 and (c) the Debt Service Reserve Account, all funds required
under Section 7.6.
3.3.9 Power Marketing Security Agreement. Borrower
shall have entered a security agreement with Power Marketer substantially in
the form of Exhibit D-4, with such changes to the description of collateral
therein as is necessary to provide Borrower with a first priority lien in the
Power Marketing Depository Account and such other changes as may be approved by
Agent (the "Power Marketing Security Agreement").
3.4 Conditions Precedent to Each Credit Event. The
obligation of the Banks to effect or permit each Credit Event is subject to the
further conditions that, on the date such Credit Event is to occur, the
following shall be true and correct:
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3.4.1 Representations and Warranties True and
Correct. Each representation and warranty set forth in Article 4 is true and
correct as if made on such date, unless such representation or warranty
expressly relates solely to another time.
3.4.2 No Event of Default or Inchoate Default. No
Event of Default or Inchoate Default has occurred and is continuing or will
result from such Credit Event.
3.4.3 Operative Documents, Applicable Permits and
Applicable Third Party Permits in Effect. Each Credit Document, Project
Document, Additional Project Document, Applicable Permit and Applicable Third
Party Permit remains in full force and effect and no material defaults have
occurred thereunder.
3.4.4 No Material Adverse Effect. No event or
circumstance having a Material Adverse Effect has occurred since the Closing
Date (except as is no longer continuing).
3.5 Conditions Precedent to Initial Distribution.
Borrower's right to effect the initial distribution as provided in Waterfall
Level 11 is subject to the prior satisfaction of each of the following
conditions (unless waived in writing by Agent with the consent of the Required
Banks):
3.5.1 Term-Conversion. Term-Conversion shall have
occurred.
3.5.2 Revised Base Case Projections. Borrower
shall have delivered to Agent a current set of Adjusted Base Case Projections
if so requested under Section 5.16.
3.5.3 Delivery of Documents. Delivery to Agent on
or after the date of Term-Conversion, in form and substance satisfactory to
Agent, of such date-down opinions, resolutions, certificates and other evidence
as Agent may reasonably request to insure Agent's satisfaction on such date
with the matters covered in Sections 3.1.8 (with respect solely to Borrower),
3.1.6, 3.1.10, 3.1.17 and 3.1.19.
3.5.4 Applicable Permits and Applicable Third Party
Permits. Borrower shall have obtained or caused to be obtained and delivered
to Agent all Applicable Permits, satisfactory in form and substance to Agent,
together with copies of each such Applicable Permit and a certificate of an
authorized officer of Borrower certifying that all such Permits have been
obtained. Each Major Project Participant shall have obtained or caused to be
obtained all Applicable Third Party Permits applicable to such Person,
satisfactory in form and substance to Borrower and Agent, and Borrower shall
deliver or cause to be delivered to Agent copies or other evidence of each such
Applicable Third Party Permit and a certificate of an authorized officer of
Borrower certifying that all such Applicable Third Party Permits have been
obtained. Except as disclosed in Exhibit G-3, all Applicable Permits and
Applicable Third Party Permits shall be in full force and effect, not subject
to any then current legal proceeding or to any unsatisfied condition that could
reasonably be expected to allow material modification or revocation, and all
applicable appeal periods with respect thereto shall have expired.
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3.5.5 A.L.T.A. Surveys. Agent shall have received
as-built A.L.T.A. surveys of the Site and the Easements, reasonably
satisfactory in form and substance to Agent and the Title Insurer, certified to
Agent as to completeness and accuracy as of not more than four weeks prior to
Term-Conversion by ▇▇▇▇▇▇▇ Engineering Co. or another licensed surveyor
reasonably satisfactory to Agent, showing (a) as to the Site, the exact
location and dimensions thereof, including the location of all means of access
thereto and all easements relating thereto and showing the perimeter within
which all foundations are located; (b) as to the Easements, the exact location
and dimensions thereof, including the location of all means of access thereto,
and all improvements or other encroachments in or on the Easements; (c) the
location and dimensions of all improvements, fences or encroachments located in
or on the Site or the Easements; (d) that the location of the Project does not
encroach on or interfere with adjacent property or existing easements or other
rights (whether on, above or below ground), and that there are no gaps, gores,
projections, protrusions or other survey defects; (e) whether the Site or any
portion thereof is located in a special earthquake or flood hazard zone; and
(f) that there are no other matters that could reasonably be expected to be
disclosed by a survey constituting a defect in title other than Permitted
Encumbrances.
3.5.6 Term Loan Title Policy. Agent shall have
received (a) a lender's A.L.T.A. policy of title insurance, together with such
endorsements as are reasonably required by Agent and are obtainable in the
State of Texas at reasonable costs, in the amount of the aggregate principal
amount of the Total Term Loan Commitment at the Conversion Date, issued by the
Title Insurer, in form and substance and with such reinsurance as is reasonably
satisfactory to Agent, and insuring Agent as to all matters described in
Section 3.1.26, the continued first priority of the Lien on the Mortgaged
Property evidenced by the Deed of Trust and as to such other matters as Agent
may reasonably request, and containing only Permitted Encumbrances, such
Permitted Liens as are junior and subordinate to the Deed of Trust and any
other exceptions relating to the boundaries of the Site, encroachments and
matters disclosed or discoverable by a survey or inspection as are acceptable
to Agent in its sole discretion or (b) an endorsement to the A.L.T.A. Policy
delivered to Agent pursuant to Section 3.1.26 hereof reasonably satisfactory to
Agent reflecting the items referred to above (such policy and endorsements, or
endorsement, being referred to as the "Term Loan Title Policy").
3.5.7 Power Marketing. Either of the following has
occurred: (i) Borrower has entered into one or more Distribution Threshold
Power Sales Agreements, covering, in the aggregate, at least 75 MW of firm
energy and capacity or (ii) the Project's Four-Quarter Average Debt Service
Coverage Ratio has equaled or exceeded, for five (5) consecutive calendar
quarters, 90% of the annual Debt Service Coverage Ratios for the year of
calculation set forth in the Base Case Project Projections in effect as of the
Closing Date for such five (5) consecutive calendar quarters.
3.6 No Approval of Work. The making of any Loan
hereunder shall not be deemed an approval or acceptance by Agent or the Banks
of any work, labor, supplies, materials or equipment furnished or supplied with
respect to the Project.
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3.7 Waiver of Funding; Adjustment of Drawdown Requests.
Notwithstanding the foregoing, the Required Banks, without waiving any of the
Banks' rights hereunder, shall have the right to effect a Credit Event
hereunder without full compliance by Borrower with the conditions described in
this Article 3. In the event Agent determines that an item or items listed in
a Drawdown Certificate as a Project Cost is not properly included in such
Drawdown Certificate, Agent may in its reasonable discretion cause to be made a
Loan or Loans in the amount requested in such Drawdown Certificate less the
amount of such item or items or may reduce the amount of Loans made pursuant to
any subsequent Drawdown Certificate. In the event that Borrower prevails in
any dispute as to whether such Project Costs were properly included in such
Drawdown Certificate, Loans in the amount requested but not initially made
shall forthwith be made.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties
to and in favor of Agent and the Banks as of the Closing Date and as of the
date of each Credit Event. All of these representations and warranties shall
survive the Closing Date and the making of the Loans:
4.1 Organization.
4.1.1 Borrower (a) is a limited partnership duly
constituted, validly existing and in good standing under the laws of the State
of Delaware and (b) is duly qualified, authorized to do business and in good
standing in the States of California and Texas and in each other jurisdiction
where the character of its properties or the nature of its activities makes
such qualification necessary. Borrower has all requisite partnership power and
authority to own or hold under lease and operate the property it purports to
own or hold under lease and to carry on its business as now being conducted and
as now proposed to be conducted in respect of the Project. On the Closing
Date, (i) CPC is the sole general partner of Borrower and CTC is the sole
limited partner of Borrower and (ii) the sole direct owners of the Partners are
the specific Persons identified by name under the definition of "Shareholders".
4.1.2 CPC (a) is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with all requisite corporate power and authority under the laws of the State of
Delaware to enter into the Partnership Agreement and as the general partner of
Borrower to perform its obligations thereunder and to consummate the
transactions contemplated thereby, (b) is duly qualified, authorized to do
business and in good standing in the State of Texas and each other jurisdiction
where the character of its properties or the nature of its activities makes
such qualification necessary, (c) has the corporate power (i) to carry on its
business as now being conducted and as proposed to be conducted by it, (ii) to
execute, deliver and perform each Operative Document to which it is a party, in
its individual capacity, (iii) to take all action as may be necessary to
consummate the transactions contemplated thereunder and (iv) to grant the liens
and security interest provided for in the Pledge and Security Agreement to
which it is a party and (d) has the power and authority under the Partnership
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Agreement to execute and deliver, on behalf of Borrower, each Operative
document to which Borrower is a party.
4.2 Authorization; No Conflict. Borrower has duly
authorized, executed and delivered each Operative Document to which Borrower is
a party and neither Borrower's execution and delivery thereof nor its
consummation of the transactions contemplated thereby nor its compliance with
the terms thereof (a) does or will contravene the Partnership Agreement, the
Articles or Certificate of Incorporation or bylaws of any Partner or any other
Legal Requirement applicable to or binding on Borrower or any of its
properties, (b) does or will contravene or result in any breach of or
constitute any default under, or result in or require the creation of any Lien
(other than Permitted Liens) upon any of its property under, any agreement or
instrument to which it is a party or by which it or any of its properties may
be bound or affected or (c) does or will require the consent or approval of any
Person which has not already been obtained.
4.3 Enforceability. Each of the Operative Documents to
which Borrower is a party is a legal, valid and binding obligation of Borrower
enforceable against Borrower, in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of
creditors' rights or by the effect of general equitable principles. None of
the Operative Documents to which Borrower is a party has been amended or
modified except in accordance with this Agreement.
4.4 Compliance with Law. There are no violations by
Borrower, any Partner or, to Borrower's knowledge, any Shareholder of any Legal
Requirement which could reasonably be expected to have a Material Adverse
Effect. Except as otherwise have been delivered to Agent, no notices of
violation of any Legal Requirement relating to the Project or the Site have
been issued, entered or received by Borrower, any Partner or, to Borrower's
knowledge, any Shareholder.
4.5 Business, Debt, Contracts, Joint Ventures Etc.
4.5.1 Neither any Partner nor Borrower has
conducted any business other than the business contemplated by the Operative
Documents, has any outstanding Debt or other material liabilities other than
pursuant to or allowed by the Operative Documents, and is not a party to or
bound by any material contract other than the Operative Documents to which it
is a party.
4.5.2 Borrower is not a general partner or a
limited partner in any general or limited partnership or a joint venturer in
any joint venture.
4.5.3 Neither Borrower nor any Partner thereof has
any subsidiaries.
4.6 Adverse Change. To the best of Borrower's knowledge,
there has occurred no material adverse change in the Project Budget, Project
Schedule or Base Case Project
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Projections, in the economics or feasibility of constructing and/or operating
the Project, or in the financial condition, business or property of any Major
Project Participant, or any other event or circumstance which is reasonably
likely to have a Material Adverse Effect (a) as of the Closing Date, since
April 22, 1996 and (b) after the Closing Date, except as disclosed to Agent in
writing at the time the representation in this Section 4.6 is being made, since
the Closing Date.
4.7 Investment Company Act, Etc. Neither Borrower nor
any Partner is an investment company or a company controlled by an investment
company, within the meaning of the Investment Company Act of 1940, and neither
Borrower nor any Partner is or has been determined by the Securities and
Exchange Commission or any other Governmental Authority to be subject to, or
not exempt from, regulation under PUHCA or the FPA (other than as provided by
PURPA).
4.8 ERISA. Either (a) there are no ERISA Plans for
Borrower or any member of the Controlled Group or (b) Borrower and each member
of the Controlled Group have fulfilled their obligations (if any) under the
minimum funding standards of ERISA and the Code for each ERISA Plan in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code and have not incurred any liability to the PBGC or an ERISA
Plan under Title IV of ERISA (other than liability for premiums due in the
ordinary course). Assuming that the credit extended hereunder does not involve
the assets of any employee benefit plan subject to ERISA, neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will involve a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which is not exempt under
Section 408 of ERISA or under Section 4975(d) of the Code.
4.9 Permits.
4.9.1 There are no Permits under existing law as
the Project is currently designed that are or will become Applicable Permits
other than the Applicable Permits described in Exhibit G-3 hereto. Each
Applicable Permit listed in Part I(A) of Exhibit G-3 is in full force and
effect, and except as disclosed therein, is not subject to any current legal
proceeding or to any unsatisfied condition that could reasonably be expected to
have a Material Adverse Effect, and all applicable appeal periods with respect
thereto have expired. Each Permit listed in Part II(A) of Exhibit G-3 is of a
type that is routinely granted upon application and that would not normally be
obtained before contemplated by Borrower. No fact or circumstance exists, to
Borrower's knowledge, which indicates that any Permit identified in Part II(A)
of Exhibit G-3 shall not be timely obtainable without material difficulty,
expense or delay by Borrower before it becomes an Applicable Permit. Borrower
is in compliance in all material respects with all Applicable Permits.
4.9.2 There are no Permits under existing law as
the Project is currently designed that are or will become an Applicable Third
Party Permits other than the Applicable Third Party Permits described in
Exhibit G-3 hereto (other than those, the failure of which to obtain could not
reasonably be expected to have a Material Adverse Effect). Each Applicable
Third Party Permit listed in Part I(B) of Exhibit G-3 is in full force and
effect, and except as
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disclosed therein, is not subject to current legal proceeding or to any
unsatisfied condition that could reasonably be expected to have a Material
Adverse Effect, and all applicable appeal periods with respect thereto have
expired. No fact or circumstance exists, to Borrower's knowledge, which
indicates that any Permit identified in Part II(B) of Exhibit G-3 shall not be
timely obtainable without material difficulty, expense or delay by the
applicable Major Project Participant before it becomes an Applicable Third
Party Permit. To the best knowledge of Borrower, each Major Project
Participant is in compliance in all material respects with its respective
Applicable Third Party Permits, each other Major Project Participant possesses
all licenses, franchises, patents, copyrights, trademarks and trade names, or
rights thereto necessary to perform its duties under the Operative Documents to
which it is a party, and such Person is not in violation of any valid rights of
others with respect to any of the foregoing which could reasonably be expected
to have a Material Adverse Effect.
4.10 Qualifying Facility. The Project qualifies as, and,
upon and following the Completion Date, is a Qualifying Facility.
4.11 Hazardous Substance.
4.11.1 Borrower has previously delivered to Agent
the Environmental Reports and Agent acknowledges receipt thereof. Except as
set forth in Exhibit G-8: (a) neither Borrower nor any Partner nor any
Shareholder (the "Subject Companies"), with respect to the Site, Improvements
or other Mortgaged Property, is or has in the past been in violation of any
Hazardous Substance Law which violation could reasonably be expected to result
in a material liability to any of the Subject Companies or their respective
properties and assets or in an inability of Borrower to perform its obligations
under the Operative Documents; (b) none of the Subject Companies nor, to the
best knowledge of the Partners and Borrower, any third party has used,
released, discharged, generated, manufactured, produced, stored, or disposed of
in, on, under, or about the Site, Improvements or other Mortgaged Property, or
transported thereto or therefrom, any Hazardous Substances that could
reasonably be expected to subject the Banks to liability or the Subject
Companies to liability, under any Hazardous Substance Law; (c) there are no
underground tanks, whether operative or temporarily or permanently closed,
located on the Site, Improvements or other Mortgaged Property; (d) there are no
Hazardous Substances used, stored or present at, on or, to the best knowledge
of Borrower and the Partners after due inquiry, near the Site, Improvements or
other Mortgaged Property, except in compliance with Hazardous Substance Laws
and other Legal Requirements or as disclosed in the Environmental Reports; and
(e) to the best knowledge of Borrower and the Partners after due inquiry, there
neither is nor has been any condition, circumstance, action, activity or event
that could reasonably be expected to be a material violation by the Subject
Companies of any Hazardous Substance Law, or to result in liability to the
Banks or material liability to the Subject Companies under any Hazardous
Substance Law.
4.11.2 Except as set forth on Exhibit G-7 or Exhibit
G-8, there is no pending or, to the best knowledge of Borrower, threatened,
action or proceeding by any Governmental Authority (including, without
limitation, the Texas Natural Resource Conservation
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Commission and the U.S. Environmental Protection Agency) or any
non-governmental third party with respect to the presence or Release of
Hazardous Substances in, on, from or to the Site, Improvements or other
Mortgaged Property.
4.11.3 Neither Borrower nor any Partner nor
Shareholder has knowledge of any past or existing violations of any Hazardous
Substances Laws by any Person relating in any way to the Site, Improvements or
other Mortgaged Property.
4.12 Litigation. Except as set forth on Exhibit G-7,
there are no pending or, to the best knowledge of Borrower, threatened actions
or proceedings of any kind, including actions or proceedings of or before any
Governmental Authority, to which Borrower, any Partner, any Shareholder, or, to
the best knowledge of Borrower, any other Major Project Participant or the
Project is a party or is subject, or by which any of them or any of their
properties or the Project are bound, which if adversely determined to or
against Borrower, any other Major Project Participant or the Project could
reasonably be expected to have a Material Adverse Effect.
4.13 Labor Disputes and Acts of God. Neither the business
nor the properties of Borrower, any Partner, any Shareholder, or, to the best
knowledge of Borrower, any other Major Project Participant are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or other
casualty (whether or not covered by insurance), which could reasonably be
expected to have a Material Adverse Effect.
4.14 Project Documents.
4.14.1 Copies of all of the Project Documents in
effect as of such date have been delivered to Agent by Borrower. Except as has
been previously disclosed in writing to Agent, as of the Closing Date none of
the Project Documents has been amended, modified or terminated.
4.14.2 To Borrower's knowledge, the representations
and warranties of the Major Project Participants contained in the Operative
Documents other than this Agreement are true and correct.
4.15 Disclosure. Neither this Agreement nor any
certificate or other documentation furnished to Agent, or to any consultant
submitting a report to Agent, by or, to the knowledge of Borrower, on behalf of
Borrower in connection with the transactions contemplated by this Agreement,
the other Project Documents or the design, description, testing or operation of
the Project, contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein not misleading under the circumstances in which they were made at the
time such statements are made. As of the Closing Date, there is no fact known
to Borrower which has had or could reasonably be expected to have a Material
Adverse Effect which has not been set forth in this Agreement or in the other
documents, certificates and written statements furnished to Agent and/or the
Independent
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Engineer, by or on behalf of Borrower prior to the Closing Date in connection
with the transactions contemplated hereby. The documentation furnished to
Agent and to the Independent Engineer on or prior to the Closing Date, as the
case may be, taken as a whole, including without limitation written updated or
supplemented information, is true and correct in all material respects and all
such documentation does not omit to state any fact which would have a Material
Adverse Effect.
4.16 Private Offering by Borrower. Assuming that the
Banks are acquiring the Notes for investment purposes only, and not for
purposes of resale or distribution thereof except for assignments or
participations as provided in Sections 10.13 and 10.14, no registration of the
Notes under the Securities Act of 1933, as amended, or under the securities
laws of the State of Texas or New York is required in connection with the
offering, issuance and sale of the Notes hereunder. Neither Borrower nor
anyone acting on its behalf has taken, or will take, any action which would
subject the issuance or sale of the Notes to Section 5 of the Securities Act of
1933, as amended.
4.17 Taxes. Borrower and each Partner has filed all
federal, state and local tax returns that it is required to file, has paid all
taxes it is required to pay to the extent due (other than those taxes that it
is contesting in good faith and by appropriate proceedings, with adequate,
segregated reserves or other security reasonably acceptable to Agent
established for such taxes) and, to the extent such taxes are not due, has
established reserves that are adequate for the payment thereof and are required
by GAAP. For federal income tax purposes, Borrower is a partnership and not an
association taxed as a corporation.
4.18 Governmental Regulation. None of Borrower, any
Partner, Agent, or the Banks, nor any Affiliate of any of them will, solely as
a result of the construction, ownership, leasing or operation of the Project,
the sale of electricity therefrom or the entering into any Operative Document
or any transaction contemplated hereby or thereby, be subject to, or not exempt
from, regulation under the FPA or PUHCA or under state laws and regulations
respecting the rates or the financial or organizational regulation of electric
utilities. Borrower is not subject to regulation under any Governmental Rule
as to securities, rates or financial or organizational matters that would
preclude any Loans, or the incurrence by Borrower of any of the Obligations or
the execution, delivery and performance by Borrower of the Operative Documents.
Borrower will not be deemed by any Governmental Authority having jurisdiction
to be subject to financial, organizational or rate regulation as an "electric
utility," "electric corporation," "electrical company," "public utility,"
"public utility holding company" or any similar entity under any existing law,
rule or regulation of any Governmental Authority.
4.19 Regulation U, Etc. Borrower is not engaged
principally, or as one of its principal activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulations G, T, U or X of the Federal Reserve Board), and no part
of the proceeds of the Loans or the Project Revenues will be used by Borrower
to purchase or carry any such margin stock or to extend credit to others for
the purpose of purchasing or carrying any such margin stock.
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4.20 Project Budget; Projections; Commercial Operation
Date. Borrower has prepared the Project Budget and the Base Case Project
Projections and is responsible for developing the assumptions on which the
Project Budget and the Base Case Project Projections are based; and the Project
Budget and the Base Case Project Projections (a) are based on reasonable
assumptions as to all legal and factual matters material to the estimates set
forth therein, (b) as of the Closing Date are consistent with the provisions of
the Project Documents and (c) indicate that the estimated Project Costs will
not exceed funds available to pay Project Costs. In the reasonable opinion of
Borrower, as of the Closing Date the textual material accompanying the Base
Case Project Projections discloses all information reasonably necessary for an
understanding of the Base Case Project Projections, and does not contain any
material misstatements or omit any information which, in conjunction with other
information given, would be necessary to make such information not materially
misleading.
4.21 Financial Statements. The financial statements of
Borrower, the Partners, Calpine, and Power Marketer delivered pursuant to
Section 3.1.20 and Section 5.5 are true, complete and correct and fairly
present the financial condition of each such Person as of the date thereof.
Such financial statements have been prepared in accordance with GAAP. Neither
Borrower, the Partners, Calpine, or Power Marketer has any material
liabilities, direct or contingent, except as has been disclosed in such
financial statements.
4.22 Existing Defaults. Borrower is not in default under
any material term of any Operative Document or any agreement relating to any
obligation of Borrower for or with respect to borrowed money, and to the best
of Borrower's knowledge, no other party to any Project Document is in default
thereunder.
4.23 No Default. No Event of Default or Inchoate Default
has occurred or is existing.
4.24 Offices, Location of Collateral.
4.24.1 The chief executive office or chief place of
business (as such term is used in Article 9 of the Uniform Commercial Code as
in effect in the State of Texas from time to time) of Borrower is located at
San Jose, California. Borrower's federal employer identification number is
▇▇-▇▇▇▇▇▇▇.
4.24.2 All of the Collateral (other than the Accounts
and general intangibles), including the Mortgaged Property is, or when
installed pursuant to the Project Documents will be, located on the Site or the
Easements or at the address set forth in Section 4.24.1.
4.24.3 Borrower's books of accounts and records are
located at ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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4.25 Title and Liens. Borrower has good, marketable and
insurable title to the Project, and all of the Collateral relating to the
Project, and good, marketable and insurable title to, or as applicable, a
leasehold estate in, the Site and the Easements (except that title to certain
of the Easements which are licenses may not be insurable), in each case free
and clear of all Liens, encumbrances or other exceptions to title other than
Permitted Liens. The Lien of the Collateral Documents constitutes a valid and
subsisting first priority lien of record on all the Mortgaged Property
described in the Deed of Trust and a first priority perfected security interest
in all the personal property described in the Collateral Documents, subject to
no Liens except Permitted Encumbrances.
4.26 Trademarks. Borrower owns or has the right to use
all patents, trademarks, service marks, trade names, copyrights, licenses and
other rights, which are necessary for the operation of its business. Nothing
has come to the attention of Borrower to the effect that (a) any material
product, process, method, substance, part or other material presently
contemplated to be sold by or employed by Borrower in connection with its
business will infringe any patent, trademark, service ▇▇▇▇, trade name,
copyright, license or other right owned by any other Person, (b) there is
pending or threatened any claim or litigation against or affecting Borrower
contesting its right to sell or use any such product, process, method,
substance, part or other material or (c) there is, or there is pending or
proposed, any patent, invention, device, application or principle or any
statute, law, rule, regulation, standard or code relating to the use of
technology or intellectual property by Borrower which could reasonably have a
Material Adverse Effect.
4.27 Collateral. The security interests granted to Agent
pursuant to the Collateral Documents in the Collateral (a) constitute as to
personal property included in the Collateral and, with respect to subsequently
acquired personal property included in the Collateral, will constitute, a
perfected security interest under the UCC to the extent a security interest can
be perfected by filing or, in the case of the Accounts, by possession by or on
behalf of the secured party and (b) are, and, with respect to such subsequently
acquired property, will be, as to Collateral perfected under the UCC as
aforesaid, superior and prior to the rights of all third Persons now existing
or hereafter arising whether by way of mortgage, lien, security interests,
encumbrance, assignment or otherwise except for ▇▇▇▇▇▇▇▇' rights under the
Ground Lease with respect to the Development and Construction Easements upon
the Commercial Operation Date or earlier termination of the Ground Lease and
with respect to the Project upon ▇▇▇▇▇▇▇▇' exercise of the Project Purchase
Option or upon surrender or termination of the Ground Lease. Except to the
extent possession of portions of the Collateral is required for perfection, all
such action as is necessary has been taken to establish and perfect Agent's
rights in and to the Collateral to the extent Agent's security interest can be
perfected by filing, including any recording, filing, registration, giving of
notice or other similar action. As of the Closing Date, no filing,
recordation, re- filing or re-recording other than those listed on Exhibit D-11
hereto is necessary to perfect and maintain the perfection of the interest,
title or Liens of the Collateral Documents, and on the Closing Date all such
filings or recordings will have been made to the extent Agent's security
interest can be perfected by filing. Borrower has properly delivered or caused
to be delivered to Agent all Collateral that requires perfection of the Lien
and security interest described above by possession.
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4.28 Sufficiency of Project Documents.
4.28.1 Other than those that can be reasonably
expected to be commercially available when and as required, the services to be
performed, the materials to be supplied and the real property interests, the
Easements and other rights granted pursuant to the Project Documents:
(a) comprise all of the property
interests necessary to secure any right material to the acquisition, leasing,
development, construction, installation, completion, operation and maintenance
of the Project in accordance with all Legal Requirements and in accordance with
the Project Schedule, all without reference to any proprietary information not
owned by Borrower;
(b) are sufficient to enable the Project
to be located, constructed and operated on the Site and the Easements; and
(c) provide adequate ingress and egress
from the Site for any reasonable purpose in connection with the construction
and operation of the Project.
4.28.2 There are no services, materials or rights
required for the construction or operation of the Project in accordance with
the Construction Contracts and the Base Case Project Projections other than
those that can reasonably be expected to be commercially available at the Site
on commercially reasonable terms consistent with the Project Budget and the
Base Case Project Projections.
4.29 Utilities. All utility services necessary for the
construction and the operation of the Project for its intended purposes are
available at the Project or will be so available as and when required upon
commercially reasonable terms consistent with the Project Budget, Project
Schedule and the Base Case Project Projections.
4.30 Roads/Transmission Line.
4.30.1 All roads necessary for the construction and
full utilization of the Project for its intended purposes have either been
completed or the necessary rights of way therefor have been acquired.
4.30.2 All necessary easements, rights of way,
licenses, agreements and other rights for the construction, interconnection and
utilization of (a) the interconnection facilities (including the
interconnection to the HL&P grid) and (b) the Steam Line have been acquired.
4.31 Proper Subdivision. The Site has been properly
subdivided or entitled to exception therefrom, and for all purposes the Site
may be mortgaged, conveyed and otherwise dealt with as separate legal lots or
parcels.
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4.32 Flood Zone Disclosure. None of the Collateral
includes improved real property that is or will be located in an area that has
been identified by the Director of the Federal Emergency Management Agency as
an area having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968, as amended.
ARTICLE 5 - COVENANTS OF THE BORROWER
Borrower covenants and agrees that so long as this Agreement
is in effect, it will:
5.1 Use of Proceeds and Project Revenues.
5.1.1 Proceeds. Unless otherwise applied by Agent
pursuant to this Agreement, deposit the proceeds of the Construction Loans in
the Construction Account, hold such proceeds as a trust fund for the payment of
Project Costs, and use them solely to pay Project Costs.
5.1.2 Revenues. Unless otherwise applied by Agent
pursuant to Articles 7 and 8, deposit all Project Revenues other than Insurance
Proceeds, Eminent Domain Proceeds and damage payments described in Section 7.13
received prior to Term-Conversion in the Construction Account for application
toward Project Costs and otherwise for application as set forth in Section 7.1,
deposit all Project Revenues other than Insurance Proceeds, Eminent Domain
Proceeds and damage payments described in Section 7.13 received after
Term-Conversion in the Revenue Account for application solely for the purposes
and in the order and manner provided in Section 7.2, and deposit all Insurance
Proceeds, Eminent Domain, proceeds and damage payments described in Section
7.13 received at any time in the Loss Proceeds Account for application solely
for the purposes, and in the order and manner, provided in Section 7.7.
5.2 Payment.
5.2.1 Credit Documents. Pay all sums due under
this Agreement and the other Credit Documents according to the terms hereof and
thereof.
5.2.2 Project Documents. Pay all obligations due
under the Project Documents, howsoever arising, as and when due and payable,
except (a) such as may be contested in good faith or as to which a bona fide
dispute may exist, provided that Agent is satisfied in its reasonable
discretion that non-payment of such obligation pending the resolution of such
contest or dispute will not in any way endanger or materially adversely affect
the Project, the Banks' Liens in the Collateral or Borrower or that provision
is made to the satisfaction of Agent in its reasonable discretion for the
posting of security (other than the Collateral) for or the bonding of such
obligations or the prompt payment thereof in the event that such obligation is
payable and (b) Borrower's trade payables which shall be paid in the ordinary
course of business.
5.3 Warranty of Title. Maintain (a) good, marketable and
insurable leasehold title to the Site and related Easements, subject only to
Permitted Liens, and (b) good, marketable
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and insurable title to all of its other respective properties and assets (other
than properties and assets disposed of in the ordinary course of business).
5.4 Notices. Promptly, upon acquiring notice or giving
notice, as the case may be, or obtaining knowledge thereof, give written notice
(with copies of any such underlying notices) to Agent of:
5.4.1 Any litigation pending or, to the knowledge
of Borrower, threatened against Borrower involving claims against Borrower or
the Project in excess of $100,000 in the aggregate per calendar year or
involving any injunctive, declaratory or other equitable relief, such notice to
include, if requested by Agent, copies of all papers filed in such litigation
and to be given monthly if any such papers have been filed since the last
notice given;
5.4.2 Any dispute or disputes which may exist
between Borrower and any Governmental Authority and which involve (a) claims
against Borrower which exceed $100,000 individually or $250,000 in the
aggregate per calendar year, (b) injunctive or declaratory relief, (c)
revocation, modification, failure to renew or the like of any Applicable Permit
or Applicable Third Party Permit or imposition of additional material
conditions with respect thereto, or (d) any Liens for taxes due but not paid;
5.4.3 Any Event of Default or Inchoate Default;
5.4.4 Any casualty, damage or loss, whether or not
insured, through fire, theft, other hazard or casualty, or any act or omission
of Borrower, its employees, agents, contractors, consultants or
representatives, or of any other Person if such casualty, damage or loss
affects Borrower or the Project, in excess of $100,000 for any one casualty or
loss or in the aggregate in any policy period;
5.4.5 Any cancellation or material change in the
terms, coverage or amounts of any insurance described in Exhibit K;
5.4.6 Any matter which has had, or, in Borrower's
reasonable judgment, could reasonably be expected to have, a Material Adverse
Effect, including any PUC or FERC proceedings affecting the Project which if
adversely determined, reasonably could be expected to have a Material Adverse
Effect;
5.4.7 Any contractual obligations incurred by
Borrower exceeding $100,000 per year in the aggregate for the Project, not
including any obligations incurred pursuant to the Credit Documents or the
Project Documents (excluding Additional Project Documents and the Partnership
Agreement) or any obligation contemplated in the approved Annual Operating
Budget;
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5.4.8 Any act by Borrower to become a surety,
guarantor, endorser or accommodation endorser for a third party other than
endorsement of negotiable instruments for collection purposes;
5.4.9 Any intentional withholding of compensation
to any Contractor, any engineer or Operator or any other Person under any
Construction Contract, or the O&M Agreement, or any other construction or
operating contract relating to the Project, other than retention provided by
the express terms of any such contracts;
5.4.10 Any termination or material default or notice
thereof (including any notice of default) under any Project Document;
5.4.11 Any events of force majeure or change orders
under any Construction Contract or other Project Documents and, to the extent
requested by Agent, copies of invoices or statements which are reasonably
available to Borrower under such Construction Contract, certified by an
authorized representative of Borrower, together with a copy of any supporting
documentation, schedule, data or affidavit delivered under the Construction
Contract or such other Project Document;
5.4.12 No later than the date upon which the
Independent Engineer is entitled to receive notice pursuant to any Construction
Contract of the proposed conduct of the initial Performance Tests under such
Construction Contract, promptly prior to the proposed conduct of any subsequent
Performance Tests pursuant to each such Construction Contract and promptly
prior to the conduct of any performance tests required under any other Project
Document, written notice of such proposed test;
5.4.13 Any (a) fact, circumstance, condition or
occurrence at, on, or arising from, the Site, Improvements, or other Mortgaged
Property that results in material noncompliance with any Hazardous Substance
Law or any Release of Hazardous Substances on or from the Site, Improvements or
other Mortgaged Property that has resulted or could reasonably be expected to
result in personal injury or material property damage or to have a Material
Adverse Effect, and (b) pending or, to Borrower's knowledge, threatened,
Environmental Claim against Borrower or to Borrower's knowledge any of its
Affiliates, contractors, lessees or any other Persons, arising in connection
with their occupying or conducting operations on or at the Project, the Site,
the Improvements or the other Mortgaged Property;
5.4.14 Promptly, but in no event later than 30 days
if consent of Agent or the Bank is required, and 15 days otherwise, prior to
the time any Person will become a partner of Borrower or the occurrence of any
other change in or transfer of ownership interests in Borrower or the Project,
notice thereof, which notice shall identify such partner and such partner's
interest in Borrower or shall describe, in reasonable detail, such other change
or transfer;
5.4.15 Any material notices delivered to or received
from, the parties to the Project Documents, including any Pricing Notices;
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5.4.16 Initiation of any condemnation proceedings
involving the Project or the Site or any portion thereof; and
5.4.17 Promptly, but in no event later than 15 days
after Borrower has knowledge of the execution and delivery thereof, a copy of
each Additional Project Document.
5.4.18 Promptly, but in no event later than 30 days
after the receipt thereof by Borrower, copies of (a) all Applicable Permits
obtained by Borrower or any Partner after the Closing Date, (b) any amendment,
supplement or other modification to any Applicable Permits received by Borrower
after the closing Date and (c) all material notices relating to the Project
received by Borrower from any Governmental Authority.
5.5 Financial Statements.
5.5.1 Unless Agent otherwise consents, deliver or
cause to be delivered to Agent, in form and detail reasonably satisfactory to
Agent:
(a) As soon as practicable and in any
event within 45 days after the end of the first, second and third quarterly
accounting periods of its fiscal year (commencing with the quarter ending March
31, 1997), an unaudited balance sheet of Borrower, the Partners, the
Shareholders, Calpine, Power Marketer, Fuel Supplier (or its parent
corporation) and HL&P (or its parent corporation) and ▇▇▇▇▇▇▇▇ as of the last
day of such quarterly period and the related statements of income, cash flows,
and partners' capital (where applicable) for such quarterly period and (in the
case of second and third quarterly periods) for the portion of the fiscal year
ending with the last day of such quarterly period, setting forth in each case
in comparative form corresponding unaudited figures from the preceding fiscal
year (such requirement may be satisfied with respect to ▇▇▇▇▇▇▇▇, Shareholder,
Calpine, Fuel Supplier and HL&P (or Fuel Supplier's and HL&P's respective
parent corporations) by delivery of the appropriate Form 10-Q filed with the
Securities and Exchange Commission); and
(b) As soon as available but no later
than 120 days after the close of each applicable fiscal year, audited financial
statements of Borrower, the Partners, the Shareholders, Calpine, Power
Marketer, ▇▇▇▇▇▇▇▇, and, to the extent reasonably available, the Fuel Supplier
and HL&P (or their respective parent corporations), including a statement of
equity, a balance sheet as of the close of such year, an income and expense
statement, reconciliation of capital accounts and a statement of sources and
uses of funds, all prepared in accordance with GAAP and in the case of audited
financial statements, certified by an independent certified public accountant
selected by the Person whose financial statements are being prepared and
satisfactory to Agent. Such certificate for Borrower, each Partner, each
Shareholder, Calpine, Power Marketer, ▇▇▇▇▇▇▇▇, the Fuel Supplier and HL&P (or
their respective parent corporations) shall not be qualified or limited because
of restricted or limited examination by such accountant of any material portion
of the records of the applicable Person. Such requirement may be satisfied
with respect to ▇▇▇▇▇▇▇▇, Shareholder, Calpine, Fuel Supplier and HL&P, (or
Fuel Supplier's and
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HL&P's respective parent corporations) by delivery of the appropriate Form 10-K
filed with the Securities and Exchange Commission.
5.5.2 Each time the financial statements are
delivered under Section 5.5.1(a) above for Borrower, the Partners, the
Shareholders, Calpine, Power Marketer (if an Affiliate of Borrower), cause to
be delivered, along with such financial statements, a certificate signed by a
Responsible Officer of such Person, certifying that such officer has made or
caused to be made a review of the transactions and financial condition of such
Person during the relevant fiscal period and that such review has not, to the
best of such Responsible Officer's knowledge, disclosed the existence of any
event or condition which constitutes an Event of Default or Inchoate Default,
or if any such event or condition existed or exists, the nature thereof and the
corrective actions that such Person has taken or proposes to take with respect
thereto, and also certifying that such Person is in compliance with all
applicable material provisions of each Credit Document to which such Person is
a party or, if such is not the case, stating the nature of such non-compliance
and the corrective actions which such Person has taken or proposes to take with
respect thereto.
5.6 Books, Records, Access. Maintain adequate books,
accounts and records with respect to Borrower and the Project and prepare all
financial statements required hereunder in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction thereof, and, subject to requirements of Governmental Rules and
safety requirements, after pre-scheduling with the Operator, permit employees
or agents of Agent and Independent Engineer at any reasonable times and upon
reasonable prior notice to inspect all of Borrower's properties, including the
Site, to examine or audit all of Borrower's books, accounts and records and
make copies and memoranda thereof and to witness the Performance Tests.
5.7 Compliance with Laws, Instruments, Etc. Promptly
comply, or cause compliance, in all material respects, with all Legal
Requirements, including Legal Requirements relating to pollution control,
environmental protection, equal employment opportunity or employee benefit
plans, ERISA Plans and employee safety, with respect to Borrower or the
Project, and make such alterations to the Project and the Site as may be
required for such compliance.
5.8 Reports.
5.8.1 Deliver to Agent on the last Banking Day of
each month prior to Final Completion in which no Loan is made (if any) a
certificate of an authorized officer of Borrower as to the matters required by
Section 3.2.4, substantially in the form of the Drawdown Certificate.
5.8.2 Deliver to Agent at such times as Agent may
reasonably request (but not more frequently than monthly) a report describing
in reasonable detail the progress of the construction of the Project since the
last prior report hereunder.
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5.8.3 Within 30 days following the completion of
the major foundations for the Project, provide to Agent a foundation survey
showing (a) the exact location and dimensions of such foundations, (b) that
such foundations comply with all applicable building and zoning codes and
set-back lines, and (c) that such foundations do not encroach or interfere with
existing property rights.
5.8.4 Deliver to Agent within 30 days of the end of
each month after Term-Conversion, a summary operating report which shall
include, with respect to the month most recently ended, (a) a monthly and
year-to-date numerical and narrative assessment of (i) the Project's compliance
with each material category in the Annual Operating Budget, (ii) electrical and
steam production and delivery, (iii) fuel deliveries and use, including heat
rate, (iv) plant and unit availability, including trips and scheduled and
unscheduled outages, (v) cash receipts and disbursements and cash balances,
including distributions to the Partners, debt service payments and balances in
the Accounts, (vi) maintenance activity, (vii) staffing changes with respect to
project or construction managers, (viii) casualty losses of value in excess of
$100,000, (ix) replacement of equipment of value in excess of $100,000 and (x)
material disputes with contractors, materialmen, suppliers or others and any
related claims against Borrower; (b) statistical data and reasonably detailed
commentary thereon; and (c) a comparison of year-to-date figures to
corresponding figures provided in the prior year.
5.8.5 Deliver to Agent within 60 days of the end of
each year a report setting forth a narrative summary describing and assessing
the Project's compliance with all Applicable Permits and Legal Requirements.
5.8.6 Provide to Agent promptly upon request such
reports, statements, lists of property, accounts, budgets, forecasts and other
information concerning the Project and, to the extent reasonably available, the
Major Project Participants and at such times as Agent shall reasonably require,
including such reports and information as are reasonably required by the
Independent Consultants.
5.8.7 Provide to Agent promptly upon receipt by
Borrower any material notices, information or reports provided by (a) ▇▇▇▇▇▇▇▇
under the Energy Sales Agreement, (b) HL&P under the HL&P Agreements, (c) Power
Marketer under any Power Marketing Project Document or (d) any other purchaser
under a Power Purchase Document.
5.8.8 Within 30 days of the end of each fiscal
year, deliver to Agent a certificate, substantially in the Form of Exhibit L
hereto, and otherwise in form and substance satisfactory to Agent in
consultation with the Insurance Consultant, certifying that the insurance
requirements of Exhibit K have been implemented and are being complied with in
all material respects.
5.9 Existence, Conduct of Business, Properties, Etc.
Except as otherwise expressly permitted under this Agreement, (a) maintain and
preserve its existence as a Delaware limited partnership and all material
rights, privileges and franchises necessary or desirable in the
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normal conduct of its business, (b) perform (to the extent not excused by force
majeure events or the nonperformance of the other party and not subject to a
good faith dispute) all of its contractual obligations under the Operative
Documents to which it is party or by which it is bound, (c) maintain all
necessary Permits and licenses, including all Applicable Permits, with respect
to its business and the Project and cause all Major Project Participants to
maintain all Applicable Third-Party Permits, (d) at or before the time that any
Permit becomes an Applicable Permit, obtain such Permit, (e) at or before the
time that any Permit required to be obtained by a Major Project Participant
becomes an Applicable Third-Party Permit, cause the relevant third party to
obtain such Permit and (f) engage only in the business contemplated by the
Operative Documents.
5.10 Debt Service Coverage Ratios. As promptly as
practicable, but in no event later than ten Banking Days after each Repayment
Date, calculate and deliver to Agent the Four-Quarter Average Debt Service
Coverage Ratio and the Projected Four-Quarter Average Debt Service Coverage
Ratio. Agent shall notify Borrower in writing of any suggested corrections,
changes or adjustments which should be made to such Debt Service Coverage Ratio
calculations within 20 days after receipt. Borrower shall incorporate all such
corrections, changes or adjustment as Agent reasonably deems appropriate. The
calculations of Debt Service Coverage Ratios hereunder shall be used in
determining the application and distribution of funds from the Accounts
pursuant to Section 7.2.1 and Section 7.2.5, the distribution of funds to
Borrower pursuant to Section 6.6 and the applicable interest rate for Term
Loans under Section 2.1.2(c).
5.11 Indemnification.
5.11.1 Indemnify, defend and hold harmless Agent and
each Bank, and in their capacities as such, their respective officers,
directors, shareholders, controlling persons, employees, agents and servants
(collectively, the "Indemnitees") from and against and reimburse the
Indemnitees for:
(a) any and all claims, obligations,
liabilities, losses, damages, injuries (to person, property, or natural
resources), penalties, stamp or other similar taxes, actions, suits, judgments,
costs and expenses (including reasonable attorney's fees) of whatever kind or
nature, whether or not well founded, meritorious or unmeritorious, demanded,
asserted or claimed against any such Indemnitee (collectively, "Subject
Claims") in any way relating to, or arising out of or in connection with this
Agreement, the other Operative Documents, or the Project, except for claims by
Borrower against an Indemnitee;
(b) any and all Subject Claims arising
in connection with the release or presence of any Hazardous Substances at the
Project, whether foreseeable or unforeseeable, including all costs of removal
and disposal of such Hazardous Substances, all reasonable costs required to be
incurred in (i) determining whether the Project is in compliance and (ii)
causing the Project to be in compliance, with all applicable Legal
Requirements, all reasonable costs associated with claims for damages to
persons or property, and reasonable attorneys' and consultants' fees and court
costs; and
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(c) any and all Subject Claims in any
way relating to, or arising out of or in connection with any claims, suits,
liabilities against Borrower, any Partner or any of their Affiliates.
5.11.2 The foregoing indemnities shall not apply
with respect to an Indemnitee, to the extent arising as a result of the gross
negligence or willful misconduct of such Indemnitee, but shall continue to
apply to other Indemnitees.
5.11.3 The provisions of this Section 5.11 shall
survive foreclosure of the Collateral Documents and satisfaction or discharge
of Borrower's obligations hereunder, and shall be in addition to any other
rights and remedies of the Banks.
5.11.4 In case any action, suit or proceeding shall
be brought against any Indemnitee, such Indemnitee shall notify Borrower of the
commencement thereof, and Borrower shall be entitled, at its expense, acting
through counsel reasonably acceptable to such Indemnitee, to participate in,
and, to the extent that Borrower desires, to assume and control the defense
thereof. Such Indemnitee shall be entitled, at its expense, to participate in
any action, suit or proceeding the defense of which has been assumed by
Borrower. Notwithstanding the foregoing, Borrower shall not be entitled to
assume and control the defenses of any such action, suit or proceedings if and
to the extent that, in the reasonable opinion of such Indemnitee and its
counsel, such action, suit or proceeding involves the potential imposition of
criminal liability upon such Indemnitee or a conflict of interest between such
Indemnitee and Borrower or between such Indemnitee and another Indemnitee
(unless such conflict of interest is waived in writing by the affected
Indemnitees), and in such event (other than with respect to disputes between
such Indemnitee and another Indemnitee) Borrower shall pay the reasonable
expenses of such Indemnitee in such defense.
5.11.5 Borrower shall report to such Indemnitee on
the status of such action, suit or proceeding as material developments shall
occur and from time to time as requested by such Indemnitee (but not more
frequently than every sixty (60) days). Borrower shall deliver to such
Indemnitee a copy of each document filed or served on any party in such action,
suit or proceeding, and each material document which Borrower possesses
relating to such action, suit or proceeding.
5.11.6 (a) Notwithstanding Borrower's rights
hereunder to control certain actions, suits or proceedings, if any Indemnitee
reasonably determines that failure to compromise or settle any Subject Claim
made against such Indemnitee is reasonably likely to have an imminent and
Material Adverse Effect on such Indemnitee, such Indemnitee shall be entitled
to compromise or settle such Subject Claim.
(b) Notwithstanding Borrower's rights
hereunder to control certain actions, suits or proceedings, if the Required
Banks reasonably determine that failure to compromise or settle any Subject
Claim made against such Indemnitee is reasonably likely to have an imminent and
Material Adverse Effect on Borrower or the Project, such Indemnitee or the
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Required Banks, as the case may be, shall provide Borrower with written notice
of a proposed compromise or settlement of such claim specifying in detail the
nature and amount of such proposed settlement or compromise. Borrower shall be
deemed to have approved such proposed compromise or settlement unless, within
thirty (30) days after the date Borrower receives such notice of intended
compromise or settlement, Borrower provides such Indemnitee or the Required
Banks, as the case may be, with (i) a written legal analysis from counsel
reasonably acceptable to such Indemnitee or Required Banks, as the case may be,
reasonably concluding that, based on the magnitude of the Subject Claim, the
legal basis for such Subject Claim, and/or the cost of defending such Subject
Claim, the amount of such proposed settlement or compromise is not within a
reasonable range of settlements or compromises for such Subject Claim, and
indicating, based on such factors, such counsel's view as to the appropriate
amount of a reasonable settlement or compromise for such Subject Claim (the
"Settlement Amount"). If the Indemnitee or the Required Banks, as the case may
be, receives such legal analysis required by this Section within such thirty
(30)-day period, the Indemnitee or the Required Banks, as the case may be, may
elect to settle or compromise such Subject Claim and Borrower shall be
responsible for the payment of all amounts of such compromise or settlement up
to one hundred twenty-five percent (125%) of the Settlement Amount, such
Indemnitee shall be responsible for payment of all amounts of such compromise
or settlement in excess of such one hundred twenty-five percent (125%) limit
and such compromise or settlement shall be binding upon Borrower. If Borrower
does not provide such legal analysis within such period, or if such legal
analysis is not reasonable, in the reasonable determination of such Indemnitee
or the Required Banks, as the case may be, such Indemnitee may settle or
compromise such Subject Claim and shall be fully indemnified by Borrower
therefor. Such Indemnitee or the Required Banks, as the case may be, shall not
otherwise settle or compromise any such Subject Claim other than at its own
expense.
5.11.7 Upon payment of any Subject Claim by Borrower
pursuant to this Section 5.11 or other similar indemnity provisions contained
herein to or on behalf of an Indemnitee, Borrower, without any further action,
shall be subrogated to any and all claims that such Indemnitee may have
relating thereto, and such Indemnitee shall cooperate with Borrower and give
such further assurances as are necessary or advisable to enable Borrower
vigorously to pursue such claims.
5.11.8 Any amounts payable by Borrower pursuant to
this Section 5.11 shall be regularly payable within 30 days after Borrower
receives an invoice for such amounts from any applicable Indemnitee, and if not
paid within such 30-day period shall bear interest at the Default Rate.
5.11.9 Notwithstanding anything to the contrary set
forth herein, the Borrower shall not, in connection with any one legal
proceeding or claim, or separate but related proceedings or claims arising out
of the same general allegations or circumstances, in which the interests of the
Indemnitees do not materially differ, be liable to the Indemnitees (or any of
them) under any of the provisions set forth in this Section 5.11 for the fees
and expenses of more than one separate firm of attorneys (which firm shall be
selected by the affected Indemnitees, or upon failure to so select, by the
Agent).
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5.12 Qualifying Facility. Take or cause to be taken all
necessary or appropriate actions (a) so that the Project will be a Qualifying
Facility upon the Completion Date and at all times thereafter until all
Obligations due the Banks under the Credit Documents have been paid in full
unless the Project's failure to be a Qualifying Facility could not reasonably
be expected to have a Material Adverse Effect, and (b) to maintain Borrower's
and the Project's exemptions from regulation under the FPA (unless failure to
so maintain such exemptions could not reasonably be expected to have a Material
Adverse Effect) and PUHCA (except regulations specifically applicable to a
Qualifying Facility) or, if Calpine or its successor becomes a registered
holding company under PUHCA, as a subsidiary of such registered holding
company.
5.13 Construction of Project. Cause the Project to be
constructed and equipped substantially in accordance with the Plans and
Specifications, the Construction Contracts, the other Project Documents, the
Project Budget and the Project Schedule as the same may be amended from time to
time pursuant to Section 6.13.
5.14 Completion. Achieve Completion and Final Completion
in a timely and diligent manner in accordance with the Project Schedule, the
Project Budget, the Construction Contracts and the Plans and Specifications as
the same may be extended and, in the case of Completion, in no event later than
the Construction Loan Maturity Date.
5.15 Operation of Project and Annual Operating Budget.
5.15.1 (a) Keep the Project, or cause the same to be
kept, in good operating condition consistent with Prudent Utility Practices,
all Applicable Permits (and, if applicable, Applicable Third Party Permits),
Legal Requirements and the Operative Documents, and make or cause to be made
all repairs (structural and non-structural, extraordinary or ordinary)
necessary to keep the Project in such condition; and (b) operate the Project,
or cause the same to be operated, in a manner consistent with Prudent Utility
Practices and in compliance with the terms of the Power Purchase Documents so
as to assure, to the extent reasonably possible, the maximum generation of net
revenue for the Project consistent with the Power Purchase Documents.
5.15.2 On or before ninety (90) days prior to the
earlier of the anticipated date of Term-Conversion and the Construction Loan
Maturity Date, adopt an operating plan and a budget, detailed by month, of
anticipated revenues, anticipated expenditures under all Waterfall Levels set
forth in Section 7.2.1, and anticipated expenditures from the Major Maintenance
Reserve Account, such budget to include debt service, proposed partnership
distributions, maintenance, repair and operation expenses (including reasonable
allowance for contingencies), Major Maintenance, reserves and all other
anticipated O&M Costs for the Project for the period from the anticipated
Commercial Operation Date to the conclusion of the first full fiscal year
thereafter and, in the case of Major Maintenance in accordance with Section
5.15.3, to the conclusion of the second full fiscal year thereafter ("Annual
Operating Budget"). Such Annual Operating Budget shall be subject to the
reasonable approval of Agent and the Independent Engineer. No less than ninety
(90) days in advance of the beginning of each fiscal year thereafter, Borrower
will similarly adopt a draft Annual Operating Budget for the ensuing fiscal
year. Copies
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of the draft Annual Operating Budget shall be promptly furnished to Agent for
its review and reasonable approval. Failure by Agent to approve or disapprove
such draft Annual Operating Budget within ninety (90) days after receipt
thereof shall be deemed to be an approval by Agent of such draft. Borrower
shall incorporate Agent's suggestions into a final Annual Operating Budget,
which, subject to the provisions of the last sentence of this Section 5.15.2,
shall be prepared no less than forty-five (45) days in advance of each fiscal
year. The O&M Costs in each such Annual Operating Budget which are subject to
escalation limitations in the Project Documents shall not, absent extraordinary
circumstances, be increased by more than the amounts provided in such Project
Documents. Borrower shall continue to operate and maintain the Project, or
cause the Project to be operated and maintained, within amounts not to exceed
(a) with respect to any Major Budget Category, 105% (on a year-to-date basis)
of the amounts budgeted therefor and (b) with respect to any Budget Category,
110% (on a year-to-date basis) of the amounts budgeted therefor, each as set
forth in the then current Annual Operating Budget as approved by Agent and the
Independent Engineer; provided, however, that so long as Borrower is in
compliance with Section 6.25.1(b), the costs for fuel shall not be limited by
the Annual Operating Budget (but shall be paid in accordance with Section 7.2).
Pending approval of any Annual Operating Budget in accordance with the terms of
this Section 5.15.2, Borrower shall continue to operate and maintain the
Project, or cause the Project to be operated and maintained, within the Annual
Operating Budget then in effect; provided that the amounts specified therein
shall be increased by the amounts specified in the Project Documents.
5.15.3 Borrower shall include in each Annual
Operating Budget a re-assessment of (a) the anticipated scheduling and probable
cost of each item of Major Maintenance and (b) the anticipated amounts which
will be on deposit in the Major Maintenance Reserve Account during the
applicable fiscal year and the following fiscal year in accordance with the
then-applicable Major Maintenance Reserve Requirement. From time to time, to
the extent that Agent, in consultation with Borrower and the Independent
Engineer, reasonably determines that the anticipated cost of Major Maintenance
during the ensuing two fiscal years of Borrower is higher than that reflected
in the approved Annual Operating Budget, the amounts specified in the Annual
Operating Budget with respect to Major Maintenance may be modified by Agent.
The Major Maintenance Reserve Requirement shall be modified accordingly.
5.15.4 Replace the Operator if such Operator is not
operating the Project in accordance with the provisions hereof or the O&M
Agreement, the Power Purchase Documents, the Lease or any other agreement or
instrument under which Borrower holds title, an easement or a leasehold to the
Site, the Easements or the Collateral, and such failure could reasonably be
expected to have a Material Adverse Effect, upon receipt of notice from Agent
(after consultation with the Borrower) to the effect that, in the opinion of
the Required Banks and the Independent Engineer, said Operator has failed to
perform any material obligations set forth above; provided, however, that the
Operator may have 30 days from Borrower's receipt of notice to cure said
failure (or to establish to the satisfaction of the Required Banks that a
failure does not exist); provided, further, that if such failure cannot be
corrected within such 30 days, the Required Banks will not unreasonably
withhold their consent to an extension of such time if corrective
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action is promptly instituted by such Operator within the 30-day period and
thereafter diligently pursued until the failure is corrected and such extension
shall not have a Material Adverse Effect.
5.16 Adjustments to Project Projections. Each year at the
time Borrower prepares the Annual Operating Budget, at any time that the Annual
Operating Budget is amended, not earlier than ninety (90) days but not later
than forty-five (45) days prior to the Extension Determination Date, and also
from time to time following an event or circumstance which will materially
affect the Base Case Project Projections or the Adjusted Base Case Project
Projections, at the reasonable request of Agent, revise the Base Case Project
Projections or Adjusted Base Case Project Projections, as the case may be,
including the assumptions thereto, if appropriate, to show Borrower's
reasonable good faith estimates as of the date of preparation, for each year
through the full remaining term of the initial Base Case Project Projections,
of anticipated Project Revenues, Project Operating Revenues, O&M Costs
(including projected dates of performance of Major Maintenance), Debt Service
Coverage Ratios (on an annual basis) payments of principal, interest, fees and
other amounts payable under the Credit Documents, payments to fund required
reserves, subordinated payments and other appropriate sources and uses of
funds, as well as other data and assumptions which Borrower reasonably
considers appropriate ("Adjusted Base Case Project Projections"). The Adjusted
Base Case Project Projections shall be subject to the same approval procedures
as the Annual Operating Budget, as described in Section 5.15.2; provided,
however, that notwithstanding the foregoing, in connection with determining
whether the Extension Requirements have been satisfied, if:
(a) Borrower's proposed Adjusted Base Case
Project Projections satisfy clause (c) of the Extension Requirements;
and
(b) Agent's proposed Adjusted Base Case Project
Projections do not satisfy clause (c) of the Extension Requirements;
and
(c) Borrower's proposed Adjusted Base Case
Project Projections project an average of the annual (based on a
calendar year) Debt Service Coverage Ratios for each calendar year
through the fifteenth (15th) anniversary of Term- Conversion that
exceeds Agent's proposed Adjusted Base Case Project Projections'
forecast of such average of such annual Debt Service Coverage Ratios
by more than .25 for each calendar year through the fifteenth (15th)
anniversary of Term- Conversion; and
(d) either (i) Borrower's annual Debt Service
Coverage Ratio for each calendar year that ended since the immediately
preceding Extension Determination Date (or, in the case of the first
Extension Determination Date, since the date of Term-Conversion) has
equaled or exceeded ninety percent (90%) of the corresponding annual
(based on a calendar year) Debt Service Coverage Ratios set forth in
the Base Case Project Projections as in effect on the Closing Date or
(ii)(A) Borrower's annual Debt Service Coverage Ratio for each
calendar year but one that ended since the immediately preceding
Extension Determination Date (or, in the case of the first Extension
Determination Date, since the date of Term- Conversion) has equaled or
exceeded ninety percent (90%) of the
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corresponding annual (based on a calendar year) Debt Service Coverage
Ratios set forth in the Base Case Project Projections as in effect on
the Closing Date and (B) the average of Borrower's Debt Service
Coverage Ratios for each of the calendar years that ended since the
immediately preceding Extension Determination Date (or, in the case of
the first Extension Determination Date, since the date of
Term-Conversion) equal or exceeds the average of the Debt Service
Coverage Ratios for such calendar years set forth in the Base Case
Project Projections as in effect on the Closing Date;
then, the Base Case Project Projections or Adjusted Base Case Project
Projections shall be determined using the following procedure:
(A) Negotiation. The parties will attempt in good faith
to mutually agree on the Adjusted Base Case Project Projections by
negotiations. In order to implement such negotiations, each party shall be
entitled to give the other party written notice of such dispute (a "Dispute
Notice"). Within twenty (20) days after receipt of the Dispute Notice, the
receiving party shall submit to the other a written response. Each of the
Dispute Notice and response shall include (i) a statement of the position of
the party providing such notice or response and a summary of the evidence and
arguments supporting its position, and (ii) the name and title of the
representative of such party. The representatives shall meet at a mutually
acceptable time and place within fifteen (15) days after the date of the
response of the receiving party to the Dispute Notice and thereafter as often
as they reasonably deem necessary to exchange relevant information and to
attempt to agree upon the Adjusted Base Case Project Projections.
(B) Arbitration. In the event that the parties are
unable to agree upon the Adjusted Base Case Project Projections using the
negotiation procedures set forth in clause (A) above within thirty (30) days
after delivery of a Dispute Notice, then each of the parties shall be entitled
to have the dispute settled by arbitration using the procedures set forth in
Exhibit M.
5.17 Preservation of Rights; Further Assurances.
5.17.1 Preserve, protect and defend the rights of
Borrower under each and every Project Document, including prosecution of suits
to enforce any right of Borrower thereunder and enforcement of any claims with
respect thereto; provided, however, that upon the occurrence and during the
continuance of an Event of Default if Agent requests that certain actions be
taken and Borrower fails to take the requested actions within five Banking Days
and such failure reasonably could be expected to have a Material Adverse
Effect, Agent may enforce in its own name or in Borrower's name, such rights of
Borrower.
5.17.2 From time to time, execute, acknowledge,
record, register, deliver and/or file all such notices, statements, instruments
and other documents (including any memorandum of lease or other agreement,
financing statement, continuation statement, certificate of title or estoppel
certificate), relating to the Loans stating the interest and charges then due
and any known defaults, and take such other steps as may be necessary or
advisable to render fully valid and enforceable under all applicable laws the
rights, liens and priorities of the Banks with
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respect to all Collateral and other security from time to time furnished under
this Agreement and the other Credit Documents or intended to be so furnished,
in each case in such form and at such times as shall be satisfactory to Agent,
and pay all fees and expenses (including reasonable attorneys' fees) incident
to compliance with this Section 5.17.2.
5.17.3 If Borrower shall at any time acquire any
real property or leasehold or other interest in real property not covered by
the Deed of Trust, promptly upon such acquisition (or on the Closing Date if
such acquisition occurred prior thereto) execute, deliver and record a
supplement to the Deed of Trust, satisfactory in form and substance to Agent,
subjecting the real property or leasehold or other interests to the lien and
security interest created by the Deed of Trust. If requested by Agent,
Borrower shall obtain an appropriate endorsement or supplement to the Title
Policy insuring the Lien of the Banks in such additional property, subject only
to Permitted Liens and other exceptions to title approved by the Agent.
5.17.4 Perform, upon the request of Agent, such
reasonable acts as may be necessary to carry out the intent of this Agreement
and the other Credit Documents.
5.18 Project Equity.
5.18.1 On the Closing Date, deliver or cause to be
delivered to the Depositary Agent cash equal to $53,112,500 (the "Base
Equity"). The Depositary Agent shall deposit the Base Equity into the Equity
Account at the Depositary Agent's New York office pursuant to the Depositary
Agreement. From time to time following the Closing Date, Borrower shall have
the right to request that Agent cause the Depositary Agent to transfer amounts
from the Equity Account to the Construction Account to pay Project Costs then
due as described in a Drawdown Certificate, dated the date of the proposed
transfer and signed by Borrower. Upon the satisfaction of the conditions set
forth in Sections 3.2 (other than Section 3.2.6) and 3.4, Agent shall cause the
Depositary Agent to so transfer such amounts and such amounts shall be applied
in accordance with Section 7.1.
5.18.2 At such time, if ever, as there remain no
Available Construction Funds other than Additional Borrower Equity and there
remain Project Costs to be incurred or paid to achieve Final Completion, then
Borrower shall deposit or cause to be deposited with Agent, in cash, equity
funds in an amount equal to all such further Project Costs, such deposit to be
made on or before the date such Project Costs are due to be paid ("Additional
Borrower Equity"). All such Additional Borrower Equity proceeds shall be
deposited in the Construction Account established pursuant to Section 7.1
hereof and applied, after satisfaction of the conditions set forth in Section
3.2, to pay Project Costs.
5.18.3 Unless an Event of Default has occurred and is
continuing, have the right at any time prior to Term-Conversion to replace cash
in the Equity Account with Subordinated Debt in amount up to fifty percent
(50%) of the total Base Equity, or, provided Borrower delivers an Equity
Commitment Guaranty, with an Equity Support Letter of Credit in an amount up to
one hundred percent (100%) of the Base Equity.
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5.18.4 If Borrower elects to replace such cash with
Subordinated Debt, such Subordinated Debt shall be applied as follows: (a)
first, to Borrower in an amount equal to the lesser of the amount of such
Subordinated Debt and the amount of Base Equity previously applied to pay
Project Costs and (b) second, for deposit into the Equity Account, any
remaining Subordinated Debt to replace cash therein, in which case an amount in
the Equity Account equal to the principal amount of Subordinated Debt deposited
into the Equity Account shall promptly be delivered by the Depositary Agent to
Borrower.
5.18.5 If Borrower elects to replace such cash with
an Equity Support Letter of Credit, upon Agent's receipt of the Equity Support
Letter of Credit, receipt of the Equity Commitment Guaranty and receipt of an
executed Notice of Construction Loan Borrowing delivered in accordance with
Section 2.1.1, the Banks shall make a Construction Loan in accordance with
Section 2.1.5 in an amount equal to the lesser of (x) the Project Costs
previously paid with cash representing Base Equity, and (y) the stated amount
of the Equity Support Letter of Credit. The proceeds of such Construction Loan
shall be paid to Borrower. If the stated amount of the Equity Support Letter
of Credit is greater than the amount of the Project Costs previously paid with
such cash, on such date of receipt, Agent also shall instruct the Depositary
Agent to promptly withdraw an amount from the Equity Account equal to the
excess of such stated amount over such amount of Project Costs previously paid
and deliver such excess to Borrower.
5.18.6 In the event Borrower replaces Base Equity
with an Equity Support Letter of Credit, pay Agent when due any interest
accruing on Construction Loans that is not reflected in the Project Budget
delivered to Agent on the Closing Date and that has accrued as a result of such
replacement.
5.18.7 If an Event of Default shall have occurred
prior to Term-Conversion, transfer all remaining amounts in the Equity Account
to the Construction Account and promptly pay to Agent an amount equal to the
undrawn stated amount of any Equity Support Letter of Credit. If Borrower
fails to so pay or cause to be paid such amount, Agent shall have the right to
make a draw upon the Equity Support Letter of Credit in an amount equal to such
undrawn amount. Agent shall deposit the funds so received from or on behalf of
Borrower into the Construction Account for application in accordance with
Section 7.1.
5.18.8 Immediately prior to Term-Conversion, Borrower
and Agent will take the following actions. First, Agent shall calculate,
applying the respective formulas set forth in the Construction Contracts, the
total amount of "performance" liquidated damages that would be payable under
such Construction Contracts if such contracts had no individual limitations on
liability for such performance liquidated damages obligations (the "Maximum
TheoreticalDamages"). Next, Agent shall calculate the difference between (x)
the lesser of (A) the Maximum Theoretical Damages and (B) $20,000,000 and (y)
the aggregate amount of "performance" liquidated damages and "excess delay"
liquidated damages under the Construction Contracts applied pursuant to
Section 7.13.1 and 7.1.4, respectively, to prepay Construction Loans (the
"Actual Paid Performance Damages").
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5.18.9 If the Actual Paid Performance Damages equals
or exceeds the lesser of (A) the Maximum Theoretical Damages and (B)
$20,000,000, then Borrower shall have no further obligation regarding the
payment of Project Costs and Agent shall perform the calculation set forth in
Section 5.18.11.
5.18.10 If the Actual Paid Performance Damages is
less than the lesser of (A) the Maximum Theoretical Damages and (B)
$20,000,000, then, if the Final Project Cost is less than the Budgeted Project
Cost, Agent shall adjust the Final Project Cost by increasing the Final Project
Cost by the difference between (i) the lesser of (A) the Maximum Theoretical
Damages and (B) $20,000,000 and (ii) the Actual Paid Performance Damages.
Agent shall then use the lesser of (x) such adjusted Final Project Cost and (y)
the Budgeted Project Cost in making the calculations set forth in Section
5.18.11. If the Actual Paid Performance Damages are less than the lesser of
(A) the Maximum Theoretical Damages and (B) $20,000,000 and if the Final
Project Cost, as adjusted pursuant to this Section 5.18.10 is equal to or
greater than the Budgeted Project Cost, then Borrower shall pay or cause to be
paid to Agent an amount equal to the difference between (i) the lesser of (A)
the Maximum Theoretical Damages and (B) $20,000,000 and (ii) the Actual Paid
Performance Damages and such amount shall be applied by Agent to the prepayment
of Construction Loans.
5.18.11 Next, Agent shall compare (i) the sum of cash
as Base Equity, Subordinated Debt and draws under any Equity Support Letter of
Credit previously applied to pay Project Costs to (ii) thirty-five percent
(35%) of the Final Project Cost, as adjusted if necessary pursuant to Section
5.18.10. In the event that such sum exceeds thirty-five percent (35%) of the
adjusted Final Project Cost (the difference between such amounts, the "Excess
Equity Amount"), Borrower shall have the right to request a Construction Loan
in accordance with Section 2.1.1, and the Banks shall make a Construction Loan
to Borrower in accordance with Section 2.1.5, in an amount equal to the Excess
Equity Amount. In the event such sum is less than thirty-five percent (35%) of
the adjusted Final Project Cost (the difference between such amounts, the
"Shortfall Amount"), Borrower shall pay or cause to be paid to Agent, in
immediately available funds, an amount equal to the Shortfall Amount. If
Borrower fails to so pay or cause to be paid the Shortfall Amount, Agent shall
have the right to withdraw from the Equity Account and/or make a draw upon the
Equity Support Letter of Credit in an aggregate amount equal to the Shortfall
Amount. Agent shall deposit the funds so received from or on behalf of
Borrower into the Construction Account for application in accordance with
Section 7.1.
5.18.12 Upon Term-Conversion, pay or cause to be paid
to any holders of any Subordinated Debt, in immediately available funds, such
amounts as are necessary so that the amount of Subordinated Debt outstanding
immediately after Term-Conversion does not exceed seventeen and one-half
percent (17 1/2%) of the Final Project Cost.
5.18.13 Notwithstanding anything to the contrary in
this Agreement, in no event shall the outstanding Term Loans at Term-Conversion
exceed sixty-five (65%) of the lesser of the Final Project Cost and the
Budgeted Project Cost.
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5.19 Maintenance of Insurance. Borrower shall, without
cost to the Banks, maintain or cause to be maintained on its behalf in effect
at all times the types of insurance required pursuant to Exhibit K, in the
amounts and on the terms and conditions specified therein, with insurance
companies rated "A-" or better, with a minimum size rating of "VIII," by Best's
Insurance Guide and Key Ratings, (or an equivalent rating by another nationally
recognized insurance rating agency of similar standing if Best's Insurance
Guide and Key Ratings shall no longer be published) or other insurance
companies of recognized responsibility satisfactory to Agent.
5.20 Taxes, Other Government Charges and Utility Charges.
Pay, or cause to be paid, as and when due and prior to delinquency, all taxes,
assessments and governmental charges of any kind that may at any time be
lawfully assessed or levied against or with respect to Borrower or the Project,
including sales and use taxes and real estate taxes, all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of
the Project, and all assessments and charges lawfully made by any Governmental
Authority for public improvements that may be secured by a lien on the Project.
In furtherance of the foregoing, Borrower shall engage a qualified Person or
Persons to confirm Borrower's compliance with all tax laws and regulations and
to implement any required programs and procedures to ensure continued
compliance with the same. Borrower may contest in good faith any such taxes,
assessments and other charges and, in such event, may permit the taxes,
assessments or other charges so contested to remain unpaid during any period,
including appeals, when Borrower is in good faith contesting the same, so long
as (a) reserves reasonably satisfactory to Agent have been established in an
amount sufficient to pay any such taxes, assessments or other charges, accrued
interest thereon and potential penalties or other costs relating thereto, or
other adequate provision for the payment thereof shall have been made, (b)
enforcement of the contested tax, assessment or other charge is effectively
stayed for the entire duration of such contest, and (c) any tax, assessment or
other charge determined to be due, together with any interest or penalties
thereon, is immediately paid after resolution of such contest.
5.21 Event of Eminent Domain. If an Event of Eminent
Domain shall occur with respect to any Collateral, (a) promptly upon discovery
or receipt of notice of any such occurrence, provide written notice of either
to Agent, (b) diligently pursue all its rights to compensation against the
relevant Governmental Authority in respect of such Event of Eminent Domain, (c)
not, without the written consent of Agent and the Majority Banks, which consent
shall not be unreasonably withheld, compromise or settle any claim against such
Governmental Authority, (d) pay or apply all Eminent Domain Proceeds in
accordance with Section 7.10. Borrower consents to the participation of Agent
in any eminent domain proceedings, and Borrower shall from time to time deliver
to Agent all documents and instruments requested by it to permit such
participation.
5.22 Interest Rate Protection.
5.22.1 Interest Rate Agreements. On or prior to the
sixtieth (60th) day following the Closing Date, enter into with Agent (or an
Affiliate thereof) one or more Hedge
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Transactions, with an aggregate notional amount equal to Seventy-Five Million
Dollars ($75,000,000) as more particularly described in and in accordance with
the methodology set forth in that certain letter agreement, dated of even date
herewith, between Agent and Borrower.
5.22.2 Hedge Breaking Fees. To the extent required
pursuant to the terms of the Hedge Transactions, pay all reasonable costs, fees
and expenses incurred by the Borrower in connection with any unwinding, breach
or termination of such Hedge Transactions ("Hedge Breaking Fees"), all as
calculated pursuant to the applicable Interest Rate Agreements.
5.22.3 Security. Each Interest Rate Agreement
provided by Agent (or an Affiliate thereof) hereunder, including all Hedge
Transactions thereunder entered into in accordance with the terms of this
Agreement and all Hedge Breaking Fees shall be and are hereby secured by the
Collateral Documents, pari passu with the Loans. No Interest Rate Agreement
(and Hedge Transactions thereunder) not provided by Agent (or an Affiliate
thereof) hereunder may be secured by the Collateral Documents. The parties
hereto agree that, for purposes of any sharing of Collateral under the
Collateral Documents, Agent or any Affiliate thereof, in its capacity as a
counterparty or intermediary to the Interest Rate Agreements shall be deemed to
have made a Loan to Borrower in an amount equal to the unpaid amount of any
Hedge Breaking Fees owed by Borrower to Agent or such Affiliate, under any such
Hedge Transaction on the date that a "Early Termination Date" (as defined in
the applicable Interest Rate Agreement) occurs. For purposes of any such
Collateral sharing, and for purposes of voting on matters under this Agreement
to the extent specified in the definition of "Proportionate Share," Agent or
any of such Affiliates shall be deemed a Bank under the Collateral Documents to
the extent of such Loan.
5.22.4 Bank Participation. At the election of
Agent, the Banks may participate in the Interest Rate Agreements and Hedge
Transactions thereunder in proportion to their respective Proportionate Shares
by means of a risk sharing agreement in form and substance satisfactory to such
Banks, provided, that if any such Bank's Lending office is in the State of New
York, such Bank may designate another branch to enter into such risk sharing
agreement.
5.23 Alternative Thermal Host Action Plan. Upon receipt
by Borrower of an HCC Shutdown Notice, promptly deliver to Agent, for Agent's
review and approval, a proposed plan of action (as approved pursuant to this
Section 5.23, the "Alternative Thermal Host Action Plan") to procure a new
steam host. The Alternative Thermal Host Action Plan shall set forth in
reasonable detail the various alternatives considered by Borrower, the
anticipated cost to implement each such alternative and the time frame within
which each such alternative reasonably can be completed. Agent shall have
thirty (30) days following receipt of such proposed plan to approve or
disapprove the proposed plan. Failure to disapprove such plan within such
thirty (30)-day period shall be deemed as Agent's approval of such plan. If
Agent disapproves such plan, Borrower and Agent shall promptly meet and
negotiate in good faith to achieve a mutually acceptable plan. Upon such
agreement, Borrower shall promptly implement the Alternative Thermal Host
Action Plan.
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5.24 Performance Bonds. Cause Westinghouse and Prime
Contractor to deliver the bonds required under the respective Construction
Contracts within forty-five (45) days after the Closing Date.
5.25 Power Marketing.
5.25.1 Replacement of Power Marketer. If any of the
following events shall occur:
(a) an Event of Default under Section
8.1.7(b) of this Agreement as a result of a breach or default by Power
Marketer under a Project Document or Consent,
(b) a breach, default or failure to
perform by Power Marketer under any provision in any contract or
agreement between Power Marketer and any other Person (other than
Borrower) if such breach, default or failure to perform (i) materially
interferes with or impairs Borrower's ability to sell energy and/or
capacity generated by the Project and collect its revenues from such
sales and (ii) is not cured within the time periods provided in such
contracts or agreements (not to exceed ninety (90) days), or
(c) the Project's Four-Quarter Average
Debt Service Coverage Ratio calculated at the end of any four (4)
consecutive calendar quarters is less than 2.00 to 1.00,
then, if requested by Agent after consultation with Borrower and consideration
of the facts and circumstances affecting the Project's performance and results,
terminate all contracts and agreements with the then Power Marketer, including
all Power Marketing Services Agreements, Power Marketing Brokering Agreements
and ERCOT Power Purchase Agreements with the Power Marketer, and replace the
Power Marketer with another Power Marketer that is satisfactory to Agent;
provided, however, that any such termination shall be prospective only and
shall not affect Borrower's obligations to supply energy and/or capacity with
respect to transactions entered into or obligations incurred prior to the
effective date of such termination.
5.25.2 Requests for Proposals. From and after the
Closing and until the earlier to occur of (a) the fourth anniversary of
Term-Conversion and (b) Borrower having entered into Bidding Threshold Power
Sales Agreements covering, in the aggregate, at least 75 MW of "firm" energy
and/or capacity, unless Agent otherwise consents, which consent shall not be
unreasonably withheld, submit or cause Power Marketer to submit on its behalf,
bona fide, good faith bids on all requests for proposal or similar offers which
can then be supplied in whole or in part from the Project to enter into Bidding
Threshold Power Sales Agreements and/or Pasadena Unit Power Sales Agreements
meeting the requirements of a Bidding Threshold Power Sales Agreement.
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5.25.3 Firm Sales to HL&P. In the event that, by
April 15 (or such later date as Agent may agree) next preceding the anticipated
Commercial Operation Date, there exists a shortfall between the aggregate
amount of firm energy and/or capacity covered by all Distribution Threshold
Power Sales Agreements entered into by Borrower and 75 MW at such time, then
Borrower shall, on or before the May 1 next preceding the anticipated
Commercial Operation Date, elect the "Firm Energy Option" under the HL&P Power
Purchase Agreement and schedule at least the amount of such shortfall for the
periods beginning on the June 1 next preceding the anticipated Commercial
Operation Date and each June 1 thereafter, unless Agent otherwise consents
(until such time as such shortfall has been eliminated or the fourth
anniversary of Term-Conversion has occurred, whichever occurs earlier) and
ending on the following May 1; provided, however, that such election may
schedule zero firm energy for the period from the June 1 immediately preceding
the anticipated Commercial Operation Date through the end of the month
following the anticipated Commercial Operation Date.
5.25.4 Arrangements with Power Marketer.
(a) Promptly after the Closing Date
enter into (i) a power marketing brokering agreement with Power Marketer in
form and substance reasonably acceptable to Agent (the "Power Marketing
Brokering Agreement"), (ii) a power marketing services agreement with Power
Marketer in form and substance reasonably acceptable to Agent (the "Power
Marketing Services Agreement", and (iii) the Power Marketing Security
Agreement.
(b) Prior to entering into any ERCOT
Power Purchase Agreements or selling any energy or capacity to or through Power
Marketer, cause Power Marketer to (i) establish a depository account (the
"Power Marketing Depository Account") with a depository agent satisfactory to
Agent and (ii) grant to Borrower a first priority perfected security interest
in such account and all funds and instruments deposited therein.
(c) In connection with the establishment
of the Power Marketing Depository Account as provided in Section 5.25.4(b)
above and at all times thereafter, cause Power Marketer to maintain a minimum
balance in the Power Marketing Depository Account equal to the Power Marketing
Minimum Balance; provided, however, that:
(A) During the ninety (90) days
immediately following the first day on which Power Marketer sells,
pursuant to a System Power Sales Agreement, energy and/or capacity
generated and/or made available by the Project, Power Marketer may, in
lieu of maintaining the Power Marketing Minimum Balance in the Power
Marketing Depository Account, cause Calpine to guarantee to Borrower
payment by Power Marketer of the shortfall, existing from time to time
during such ninety (90) day period, between the amount of funds on
deposit in the Power Marketing Depositary Account and the Power
Marketing Minimum Balance. Such guarantee shall be in substantially
the form of Exhibit D-2B.
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(B) At any time, Power Marketer
may, in lieu of maintaining the Power Marketing Minimum Balance in the
Power Marketing Depositary Account, cause a Person that satisfies the
Power Marketing Guaranty Requirements to guarantee to Borrower payment
by Power Marketer of the amounts owed to Borrower under all
Pasadena/CPSC System Supported Contracts, existing from time to time;
provided, however, that such Person's liability under such guaranty
shall be limited to an amount equal to the Power Marketing Minimum
Balance in effect while such guaranty is in effect. Such guaranty
shall be in substantially the form of Exhibit D-2B. If Agent shall,
at any time, but not more frequently than once a year, reasonably
believe that such guarantor is no longer rated at least BBB+ or the
equivalent thereof by S&P or at least Baa1 or the equivalent thereof
by ▇▇▇▇▇'▇, then Agent may request that such guarantor receive an
indicative rating from such rating agencies. If in connection with
such requested rating, or for any other reason, such guarantor shall
at any time cease to satisfy any of the requirements set forth in the
definition of "Power Marketing Guaranty Requirements," then Power
Marketer shall promptly, but in no event more than fifteen (15) days
after the failure of any of such requirements to be satisfied, restore
the balance in the Power Marketing Depository Account to the Power
Marketing Minimum Balance then in effect.
(d) Cause Power Marketer to instruct all
purchasers under Pasadena Unit Power Sales Agreements to make all payments due
thereunder to Power Marketer directly into the Revenue Account.
(e) Cause Power Marketer to (i) promptly
upon execution thereof, collaterally assign to Borrower all of Power Marketer's
rights and interests to all Pasadena Unit Power Sales Agreements and (ii)
obtain consents to such collateral assignments from the purchasers thereunder
as described in Section 6.25.
5.26 Auxiliary Boilers Contractor. In the event that
ABCO, as the Contractor under the Auxiliary Boilers Purchase Contract, fails to
achieve any of the milestones set forth on the "Contract Schedule" (as defined
in the Auxiliary Boilers Purchase Contract) on or prior to seventy-five (75)
days after the scheduled date for achieving such milestone, then upon request
of Agent, as promptly as practicable terminate the Auxiliary Boilers Purchase
Contract and engage a replacement contractor to supply to the Project auxiliary
boilers conforming to the Project's plan and specification.
5.27 Construction Management Plan. On or before sixty
(60) days after the Closing, adopt a draft construction plan (the "Construction
Plan") setting forth a schedule, detailed by month, of the anticipated
milestones to be accomplished in connection with the construction of the
Project and describing the interfacing procedures among the various
Contractors. The Construction Plan shall be subject to the reasonable approval
of Agent. Failure by Agent to approve or disapprove the draft Construction
Plan within thirty (30) days after receipt thereof shall be deemed to be an
approval by Agent of such draft. Borrower shall incorporate Agent's reasonable
suggestions into a final Construction Plan.
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5.28 Operating Agreements. On or before January 31, 1998,
(a) enter into with HL&P, or another entity providing "control area" services
reasonably acceptable to Agent, an agreement whereby HL&P or such other entity
will provide standby station electric service to the Project and (b) enter
into, or cause Power Marketer to enter into on behalf of Borrower, an agreement
with HL&P, or another entity providing "control area" services reasonably
acceptable to Agent, whereby HL&P or such other entity will provide ancillary
services, wheeling and transmission services to the Project, each in form and
substance satisfactory to Agent.
5.29 Stand-Alone Easements. On or before thirty (30) days
after the earliest to occur of the events specified in clauses (a), (b) and (c)
of Section 3.3.6 of the Lease, make an election under Section 3.3.6 of the
Lease to use the "Stand-Alone Easements" (as defined in the Lease) and thereby
convert them into "Operating Easements" (as defined in the Lease).
5.30 Extension of Lease, Lease of Expansion Property. In
the event that the "Initial Term" (as defined in the Lease) of the Lease is not
extended pursuant to Section 4.2 or 4.3 of the Lease, and unless ▇▇▇▇▇▇▇▇
exercises the "Project Purchase Option" (as defined in the Lease), exercise its
option as provided in Section 4.4 of the Lease to extend the Initial Term for
the "Partnership Extension Term" (as defined in the Lease). If directed by
Agent, Borrower shall exercise its option to lease the Expansion Property.
5.31 License from Port Authority. As promptly as
practicable after the Closing Date, and in any event within ninety (90) days
thereafter, deliver to Agent a license executed by the Port Authority in favor
of Borrower relating to certain transmission lines for Project, and \a consent
to assignment thereto executed by the Port Authority in favor of Agent, each in
form and substance reasonably satisfactory to Agent.
5.32 ▇▇▇▇▇▇▇▇ License from Port Authority. As promptly as
practicable after the Closing Date, and in any event within one hundred twenty
(120) days thereafter, cause ▇▇▇▇▇▇▇▇ to amend that certain Oil, Gas, Etc.
Pipeline License (Railroad Right-of-Way), dated April 1, 1990, between the Port
and ▇▇▇▇▇▇▇▇ 66 Company, predecessor in interest to ▇▇▇▇▇▇▇▇, to enable
Borrower and its Contractors to construct such improvements in the area
described in such License as are necessary for Borrower to comply with the
Lease.
5.33 Conversion. Cause the conditions set forth in
Section 3.3 (other than Section 3.3.4) to occur as promptly as practicable
after Completion has occurred.
5.34 Option Title Insurance. To the extent permitted
under Texas law, within sixty (60) days following the Closing Date, cause the
Title Insurer to reissue the Title Policy or issue an endorsement to the Title
Policy insuring the "Expansion Property" and the "QF Property" (as such terms
are defined in the Lease) (or the validity of the options with respect thereto)
to the same extent as the remainder of the Site.
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ARTICLE 6 - NEGATIVE COVENANTS
Borrower covenants and agrees that so long as this Agreement
is in effect, it will not:
6.1 Contingent Liabilities. Except as provided in this
Agreement, become liable as a surety, guarantor, accommodation endorser or
otherwise, for or upon the obligation of any other Person; provided, however,
that this Section 6.1 shall not be deemed to prohibit (a) the acquisition of
goods, supplies or merchandise in the normal course of business or normal trade
credit; (b) the endorsement of negotiable instruments received in the normal
course of its business; or (c) contingent liabilities required under any
Applicable Permit or Operative Document.
6.2 Limitations on Liens. Create, assume or suffer to
exist any Lien, securing a charge or obligation on the Project or on any of the
Collateral, real or personal, whether now owned or hereafter acquired, except
Permitted Liens.
6.3 Indebtedness. Incur, create, assume or permit to
exist any Debt except Permitted Debt.
6.4 Sale or Lease of Assets. Sell, lease, assign,
transfer or otherwise dispose of assets, whether now owned or hereafter
acquired (a) except in the ordinary course of its business as contemplated by
the Operative Documents or (b) except to the extent that such property is worn
out or no longer useful or usable in connection with the operation of the
Project, and in each case at fair market value.
6.5 Changes. Change the nature of its business or expand
its business beyond the business contemplated in the Operative Documents,
including without limitation purchasing gas with the intention of reselling
such gas.
6.6 Distributions. Directly or indirectly, make or
declare any distribution (in cash, property or obligation) on, or other payment
on account of, any interest in Borrower (including any transfers of any tax
benefits):
(a) until each of the conditions to the initial
distribution set forth in Section 3.5 has been satisfied; and
(b) unless (i) on a Calculation Date; (ii)
Term-Conversion has occurred; (iii) no Event of Default or Inchoate Default has
occurred and is continuing; (iv) the Four-Quarter Average Debt Service Coverage
Ratio calculated as of the Repayment Date to which such Calculation Date
relates is equal to or greater than 1.50 to 1.00; (v) the Projected
Four-Quarter Average Debt Service Coverage Ratio calculated as of the Repayment
Date to which such Calculation Date relates is equal to or greater than 1.50 to
1.00; (vi) such payment would not trigger an Inchoate Default or Event of
Default and (vii) such distribution is made at Waterfall Level 11 or from the
Distribution Suspense Account.
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6.7 Investments. Make any investments (whether by
purchase of stocks, bonds, notes or other securities, loan, extension of
credit, advance or otherwise) other than Permitted Investments.
6.8 Transactions With Affiliates. Except for (a) the
Equity Documents, the Project Documents and the transactions permitted thereby,
(b) arms-length transactions in the ordinary course of business not to exceed
in the aggregate $100,000 per calendar year, and (c) as otherwise expressly
permitted by this Agreement and the other Credit Documents, directly or
indirectly enter into any transaction or series of transactions with or for the
benefit of an Affiliate without the prior written approval of Agent.
6.9 Regulations. Directly or indirectly apply any part
of the proceeds of any Loan or other revenues to the purchasing or carrying of
any margin stock within the meaning of Regulations G, T, U or X of the Federal
Reserve Board, or any regulations, interpretations or rulings thereunder.
6.10 ERISA. Establish, maintain, contribute to or become
obligated to contribute to any ERISA Plan or suffer or permit any member of the
Controlled Group to do so.
6.11 Partnerships, etc. Become a general or limited
partner in any partnership or a joint venturer in any joint venture or create
and hold stock in any subsidiary.
6.12 Dissolution. Liquidate or dissolve, or sell or lease
or otherwise transfer or dispose of all or any substantial part of its
property, assets or business or combine, merge or consolidate with or into any
other entity, or change its legal form, or purchase or otherwise acquire all or
substantially all of the assets of any Person.
6.13 Amendments; Change Orders; Completion.
6.13.1 Directly or indirectly, amend, modify,
supplement or waive, or permit or consent to the amendment, modification,
supplement or waiver (including, without limitation, any waiver (or refund) of
liquidated damages payable by any Contractor under any Construction Contract)
of, any of the provisions of, or give any consent under, (a) any of the Project
Documents without first submitting to Agent a copy of such proposed amendment,
modification, supplement or waiver and if, in the reasonable judgment of the
Agent, the amendment, modification, supplement or waiver could reasonably be
expected to have a Material Adverse Effect, obtaining the prior written consent
of the Majority Banks thereto, which consent shall not be unreasonably withheld
or delayed or (b) the Energy Sales Agreement, the HL&P Power Purchase
Agreement, the Lease or the Facility Services Agreement without obtaining the
prior written consent of the Required Banks thereto or (c) the Power Marketing
Services Agreement or the Power Marketing Brokering Agreement without obtaining
the prior written consent of the Majority Banks thereto.
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6.13.2 Without the prior written consent of Agent
direct or consent to any change order under any of the Construction Contracts
if such change order:
(a) will, individually or together with
all previous change orders, increase or decrease the Project Costs by more than
$750,000 in the aggregate for the Project (exclusive of increases reimbursed by
insurance awards, condemnation awards or contractual damage awards);
(b) will materially delay Completion, or
in any event is reasonably likely to delay Completion beyond the Construction
Loan Maturity Date;
(c) is reasonably likely to permit or
result in any adverse modification or impair the enforceability of any warranty
under any Construction Contract or the O&M Agreement;
(d) is reasonably likely, in the opinion
of the Independent Engineer, to impair or reduce the maximum capacity, value,
efficiency, utility, output, performance, reliability, durability or
availability of the Project, or increase O&M Costs, or decrease Project
Revenues, in each case after accounting for other favorable or unfavorable
circumstances which may have affected the Project;
(e) is not permitted by any Project
Document or would (i) diminish any obligation of any Major Project Participant
or (ii) increase any obligation of Borrower thereunder;
(f) is likely, in the reasonable opinion
of Agent, to present a significant risk of the revocation or material
modification of any Applicable Permit or Third Party Permit or jeopardize the
Project's status as a Qualifying Facility;
(g) may cause the Project not to comply
or lessen the Project's ability to comply with Legal Requirements; or
(h) relates to a Construction Contract
between Borrower and an Affiliate of Borrower.
6.13.3 Declare "Completion," "Final Construction
Completion", "Final Project Completion" "Mechanical Completion", (as such terms
are defined in the Construction Contracts) of the Project under the
Construction Contracts or declare that the "Acceptance Date" has occurred or
approve the successful completion of the "Acceptance Tests" (as such terms are
defined in the Construction Contracts) without the written approval of Agent,
which approval, if given, shall not be unreasonably delayed, acting in
consultation with the Independent Engineer.
6.13.4 Conduct any Performance Tests under and as
defined in the Power Island Purchase Contract without the provision by ▇▇▇▇▇▇▇▇
of Off-Gas (as defined in the Facility
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Services Agreement) in the quantities and qualities provided for in the
Facility Services Agreement.
6.13.5 Agree on the Punch List without the written
approval of Agent acting in consultation with the Independent Engineer.
6.13.6 Approve of the hiring by any Contractor of
any Major Subcontractor not previously approved by Agent acting in consultation
with the Independent Engineer.
6.13.7 Unless compliance hereof is waived in writing
by Agent and the Majority Banks, direct or consent to any change order under
the O&M Agreement if such aggregate.
6.13.8 Consent, without Agent's prior approval, to
(a) any action taken by any Contractor to conform the equipment or services
provided by such Contractor to the intellectual property rights of others if
such action could reasonably be expected to materially and adversely affect
Borrower's continued use of the Project or (b) to the settlement by any
Contractor of any claim or proceeding which could reasonably be expected to
adversely affect Borrower's rights.
6.13.9 Direct any Contractor to suspend the work
being performed under any Construction Contract without Agent's prior consent.
6.13.10 Agent shall use good faith efforts to
respond to each change order request as soon as possible and in all events
within 30 days. No change order shall be deemed approved by Agent until
expressly approved.
6.14 Compliance with Operative Documents. Do or permit
(to the extent within its control) to be done in, upon or about the Project or
any part thereof, or do or permit (to the extent within its control) to be done
any act under the Operative Documents, or omit or refrain from any act under
the Operative Documents, where such act done or permitted to be done, or such
omission of or refraining from action, could reasonably be expected to have a
Material Adverse Effect.
6.15 Name and Location; Fiscal Year. Unless waived in
writing by Agent, change its name, the location of its principal place of
business or its federal employer identification number without notice to Agent
at least 45 days prior to such change, or change its fiscal year without
Agent's consent.
6.16 Use of Project Site. Use, or permit to be used, the
Site for any purpose other than for the construction, operation and maintenance
of the Project as contemplated by the Operative Documents, without the prior
written approval of Agent.
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6.17 Assignment. Assign its rights hereunder or under any
of the Operative Documents to any Person except as permitted under this
Agreement and the other Credit Documents.
6.18 Abandonment of Project. Voluntarily cease or abandon
the development, construction or operation of the Project.
6.19 Hazardous Substance. Release, emit or discharge into
the environment any Hazardous Substances in violation of any Hazardous
Substance Laws, Legal Requirements or Applicable Permits.
6.20 Additional Project Documents. Enter into or become a
party to any Additional Project Document, except (a) with the prior written
consent of Agent acting at the direction of the Majority Banks, and (b) if
required by the Agent, upon delivery to the Agent of a Consent from such third
party in substantially the form of Exhibit E-1; provided that the consent of
the Agent and the Majority Banks shall not be required for Borrower to enter
into Additional Project Documents (i) with Persons other than Affiliates of
Borrower and (ii) pursuant to which Borrower will incur obligations or
liabilities with a value of not more than $100,000 individually, or $200,000 in
the aggregate, per year.
6.21 Project Budget Amendments. Directly or indirectly,
amend, modify, allocate, re-allocate or supplement or permit or consent to the
amendment, modification, allocation, re-allocation or supplement or, any of the
provisions of the Project Budget, except that Borrower may:
6.21.1 allocate up to $1,000,000 in the aggregate of
Unrestricted Owner's Contingency to any Budget Categories (other than any line
items pertaining to a transaction with an Affiliate);
6.21.2 after obtaining the prior written consent of
the Agent, allocate all or any portion of Unrestricted Owner's Contingency to
any Budget Categories (other than any line items pertaining to a transaction
with an Affiliate);
6.21.3 upon completion in full of the work or other
activity to which any particular Budget Category relates, reallocate any amount
remaining in such Budget Category to one or more other Budget Categories (other
than any line items pertaining to a transaction with an Affiliate);
6.21.4 after obtaining the prior written consent of
Agent, re-allocate to the Unrestricted Owner's Contingency amounts previously
allocated to any Budget Category pursuant to Section 6.21.1 above, to the
extent that Borrower reasonably determines that such amounts are no longer
required to be allocated to such Budget Category;
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6.21.5 after obtaining the prior written consent of
Agent and the Majority Banks, allocate all or any portion of the Restricted
Owner's Contingency to such Budget Categories as Borrower considers
appropriate; and
6.21.6 make such other allocations and
re-allocations with respect to the Project Budget which are approved in writing
by Agent and the Majority Banks prior thereto.
All allocations and re-allocations made in accordance with the terms hereof
shall be prepared and computed using the same methodology and, upon each such
allocation, re-allocation and restoration, (a) the Project Budget shall be
deemed amended to reflect such allocation, re-allocation or restoration upon
notice by Borrower to Agent of such allocation, re-allocation or restoration,
and (b) Borrower shall promptly prepare and distribute to the Agent an
appropriately revised Project Budget. Any increases to the Budget Category
entitled Interest During Construction shall be made first from Unrestricted
Owner's Contingency and, to the extent that the Unrestricted Owner's
Contingency has been utilized in full, from Restricted Owner's Contingency,
subject in all cases to the approval rights contained in this Section 6.21.
6.22 Loan Proceeds; Project Revenues. Use, pay, transfer,
distribute or dispose of any Loan proceeds in any manner or for any purposes
except as provided in Section 5.1.1 or of any Project Revenues in any manner or
for any Purposes except as provided in Sections 5.1.2 and 7.2.
6.23 Commercial Operation Date. Declare or cause to occur
the Commercial Operation Date under the Energy Sales Agreement without Agent's
prior written consent, which consent may be withheld in Agent's sole
discretion.
6.24 Suspension of Performance Under Gas Sales Agreement.
Direct Fuel Supplier to suspend performance under the Gas Sales Agreement
without Agent's prior written consent, which consent shall not be unreasonably
withheld so long as Borrower has entered into or concurrently enters into
alternative fuel supply contracts or other arrangements (i) which provide for
all of the Project's fuel requirements, (ii) which provide for subordination of
10% of the cost of fuel in substantially the same manner as provided in
Sections 7.2.1 and 7.2.3 and contain substantially the same provisions as are
set forth in Section 8 of the Gas Sales Agreement or make alternative
arrangements reasonably satisfactory to Agent which, based on the Adjusted Base
Case Project Projections, would result in projected annual Debt Service
Coverage Ratios that are equal to or greater than the projected annual Debt
Service Coverage Ratios that would be achieved with such subordination, and
(iii) are with fuel suppliers reasonably acceptable to Agent.
6.25 Power Marketing.
6.25.1 Power Sales Agreements. Without Agent's
prior written consent, enter into an ERCOT Power Purchase Agreement, or allow
Power Marketer to enter into any Power Marketer Power Sales Agreement which
uses services from the Project which:
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(a) except as otherwise permitted or
required in Sections 5.25.2 and 5.25.3 of this Agreement, is not intended to
maximize, in the long-term, the net revenues and profitability of the Project
over the Term or results in a fluctuation in net revenues per kWh under such
agreement of more than ten percent (10%) from the net revenues per kWh
generated under such agreement in either the preceding or following year.
(b) in the case of such agreements for 5
MW or more individually, or 20 MW or more in the aggregate, has a term of three
years or more and whose variable pricing component is not indexed to the price
of gas that Borrower pays under the Gas Sales Agreement;
(c) in the case of such agreements of a
term that exceeds one year, results when aggregated with existing ERCOT Power
Purchase Agreements and Power Marketer Power Sales Agreements of a term that
exceeds one year, on an annual basis over the life of such agreement, in per
kWh gross revenues to the Project that are less than the per kWh gross revenues
to the Project set forth in the Base Case Project Projections as in effect on
the Closing Date;
(d) in the case of agreements for the
sale of firm energy of a term that exceed one year, are not with parties (i)
listed in Appendix A to Borrower's Power Marketing Plan, (ii) whose credit
rating is equal to or better than BB, as rated by S&P (or an equivalent
rating), (iii) whose obligations under such agreements are guaranteed in form
and substance acceptable to Agent by a party whose credit rating is equal to or
greater than BB, as rated by S&P (or an equivalent rating) or (iv) whose
obligations under such agreements are secured by a letter of credit, in form
and substance acceptable to Agent and issued by a financial institution
reasonably acceptable to Agent or other security reasonably acceptable to
Agent.
(e) provide for payment by the purchaser
thereunder for energy or capacity more than sixty- five (65) days after the
energy or capacity was delivered or made available, as the case may be;
(f) do not (i) explicitly preclude any
liability by Borrower for consequential, special and indirect damages including
loss of revenues and (ii) if such agreement is entered into with Power
Marketer, require Power Marketer to indemnify Borrower from and against any
such potential liability sought to be imposed by third parties; or
(g) require Borrower to provide
collateral security to a third party for performance of Borrower's obligations
under such agreement; provided, however, that nothing herein shall restrict or
limit the right of any Affiliates of Borrower (other than the Partners) to
provide any such collateral security.
6.25.2 Capacity Limitations. Sell any electrical
capacity from the Project (a) pursuant to an agreement which does not permit
the buyer of such capacity to request the delivery of energy in the amount of
such capacity or (b) pursuant to any agreement unless such
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capacity is supported by an equal amount of available uncommitted energy from
the Project; provided, however, that nothing herein shall restrict Borrower's
right or ability to sell interruptible or non-firm energy regardless of the
amount of capacity sold or energy committed from the Project.
6.25.3 Power Marketing Affiliates. Permit Calpine
or any of its Affiliates, individually or together with any other Person or
Persons, to form or establish any power marketing entities (other than CPSC)
that are qualified for or otherwise participate or operate in ERCOT; provided,
however, that Calpine or CPSC may form a subsidiary to participate in ERCOT in
which case such subsidiary shall be the only Affiliate of Borrower which is
qualified for or otherwise participates or operates in ERCOT.
6.25.4 Collateral Assignment. Without Agent's
consent, enter into any ERCOT Power Purchase Agreements which do not contain an
acknowledgment and a consent to the collateral assignment of such agreements to
the Banks which acknowledgment and consent shall be in a form reasonably
acceptable to Agent.
6.26 Expansion Property. Without Agent's consent,
exercise its option to lease the Expansion Property (as defined in the Lease)
under Section 6.2 of the Lease or fail to enter into an extension or renewal of
any of the ▇▇▇▇▇▇▇▇ Documents.
ARTICLE 7 - APPLICATION OF FUNDS
7.1 Construction Account.
7.1.1 Establishment of Account. On or prior to the
Closing Date, Borrower and Agent shall establish the Construction Account at
the Depositary Agent's New York office. There shall be deposited into the
Construction Account the proceeds of all Construction Loans made hereunder, all
Project Operating Revenues earned prior to Term-Conversion (which shall be
available for the payment of Project Costs pursuant to the terms of this
Agreement), and all amounts required to be deposited in the Construction
Account pursuant to Section 5.18.
7.1.2 Disbursements from Construction Account.
Amounts shall be disbursed from the Construction Account from time to time
subject to the satisfaction (or waiver) of the provisions of Section 3.2 and
this Section 7.1. Borrower shall have the right to cause Agent to disburse
amounts from the Construction Account to the accounts of each of the
Contractors for amounts due and owing to such Contractors under the
Construction Contracts, or to any other materialmen, subcontractors, the Agent
or any other Person in payment of amounts due and owing to such parties from
Borrower in accordance with a duly completed Drawdown Certificate. Borrower
agrees that Agent may transfer any or all of a Construction Loan and other sums
in the Construction Account directly into the account of any Contractor for
amounts due and owing to such Contractor under the relevant Construction
Contract, or any other materialmen or subcontractors in payment of amounts due
and owing to such parties from Borrower without further authorization from
Borrower; provided, however, that if Borrower has notified Agent that
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it is contesting a claim for payment by a Contractor or a subcontractor or
materialmen in accordance with the requirements of this Agreement and the
definition of "Permitted Liens," Agent will not, except as described in the
proviso to the next sentence, be entitled to pay any amount being contested.
Borrower hereby constitutes and appoints Agent its true and lawful
attorney-in-fact to make such direct payments and this power of attorney shall
be deemed to be a power coupled with an interest and shall be irrevocable;
provided that, except upon the occurrence and continuation of an Event of
Default, Agent shall not exercise its rights under this power of attorney
except to make payments (a) as directed by Borrower or (b) which Agent
reasonably believes, if not promptly made, are reasonably likely to have a
Material Adverse Effect. No further direction or authorization from Borrower
shall be necessary to warrant or permit Agent to make such direct Construction
Loans in accordance with the foregoing sentence, and all such direct
Construction Loans shall satisfy pro tanto the obligations of Agent and the
Banks hereunder, and shall be secured by the Collateral Documents as fully as
if made directly to Borrower, regardless of the disposition thereof by any
Contractor, or any other subcontractors, materialmen, laborers or other
parties.
7.1.3 Rights of Agent. Agent will have the right,
but not the obligation, to (a) supply any missing endorsements of Borrower,
refuse any item for deposit except as required by the terms of this Agreement,
and pay and charge items payable by Agent pursuant to Section 7.1.2 in any
order convenient to Agent; (b) refuse to honor any check drawn on the
Construction Account which is not consistent with this Agreement, or which has
been improperly filled out or endorsed; (c) create and charge to the
Construction Account overdrafts and all applicable charges; (d) remit copies of
checks and other items with statements instead of the originals which may be
retained by Agent; and (e) pay fees, interest and other charges owing by
Borrower as provided herein.
7.1.4 Proceeds of the Final Drawing. Upon
Term-Conversion, after deposit of all proceeds of the Final Drawing, if any, in
the Construction Account, all amounts remaining in the Construction Account (if
any) shall be applied as follows:
(a) An amount sufficient for completion
of the Punch List, and payment of other Project Costs through Final Completion,
determined by Borrower and approved by Agent in consultation with the
Independent Engineer, shall be retained in the Construction Account for
application in accordance with Section 7.1.5; and
(b) Any amounts representing delay
damages under any Construction Contracts shall be applied to the prepayment of
Construction Loans to the extent that performance liquidated damages under any
Construction Contracts would have become payable under such Construction
Contracts but for a limitation on the amount of such liquidated damages under
the relevant Construction Contract.
(c) All other amounts in the
Construction Account shall be transferred (i) first, to the Emissions Offsets
Reserve Account until the balance therein equals the EORA Minimum Balance, (ii)
second, to the Fuel Supply Reserve Account until the balance
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therein equals the FSRA Minimum Balance, and (iii) third, to the Debt Service
Reserve Account in an amount equal to the DSRA Minimum Balance. To the extent
excess amounts remain in the Construction Account after effecting the
applications in the immediately preceding sentence, such excess funds shall be
deposited in the Revenue Account and applied in accordance with Section 7.2.1.
7.1.5 Disbursements Following Term-Conversion.
From and after Term-Conversion until Final Completion, amounts in the
Construction Account shall be disbursed from time to time (but no more
frequently than twice per month) to Borrower in accordance with this Section
7.1 after satisfaction (or waiver) of such conditions set forth in Section 3.2
as Agent in its reasonable discretion requires to be satisfied, to pay for
completion of the Punch List and other items necessary to achieve Final
Completion. Following achievement of Final Completion, amounts, if any,
remaining in the Construction Account shall be transferred to the Revenue
Account for application in accordance with the terms of Section 7.2.1.
7.2 Revenue Account.
7.2.1 Establishment of Account; Priority of
Payments. On or prior to Term-Conversion, Borrower and Agent shall establish
the Revenue Account at the Depositary Agent's New York office. There shall be
deposited into the Revenue Account all Project Operating Revenues earned on or
after Term-Conversion. So long as no Event of Default has occurred and is
continuing, or will occur upon giving effect to the application described
below, funds in the Revenue Account shall be applied at the following times and
in the following order of priority by disbursement or internal account transfer
by the Depositary Agent, (a) on Agent's volition with respect to Waterfall
Levels 1 through 8 or if Agent reasonably believes that failure to make any
such payment could reasonably be expected to have a Material Adverse Effect, or
(b) pursuant to Borrower's disbursement requisition, directly to the Person
entitled thereto, in each case at the following times, commencing on the date
of Term-Conversion, and in the following order of priority (each, a "Waterfall
Level"):
(1) on the last Banking Day of each
month, provided that the Agent has timely received and approved a Disbursement
Requisition delivered pursuant to Section 7.2.2, to the Operating Account for
payment of Senior O&M Costs in an amount determined pursuant to Section 7.2.2,
below;
(2) on the last Banking Day of each
month, to the Accrual Sub-Account as required by Section 7.9;
(3) from time to time in the priority
indicated, as and when due under the terms of this Agreement, to the payment of
all fees, costs, charges and any other amounts due and payable to Agent and the
Banks in connection with this Agreement and the other Credit Documents, other
than Commitment Fees and amounts described in another Waterfall Level;
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(4) from time to time, on a pro rata
basis among the Banks, to the payment of interest on the Term Loans, Commitment
Fees and to payments due by Borrower pursuant to the Interest Rate Agreements
(and the Hedge Transactions thereunder);
(5) on Repayment Dates, on a pro rata
basis among the Banks, to (a) the payment of principal due on the Term Loans in
accordance with Exhibit I and (b) other principal amounts due hereunder;
(6) on Repayment Dates, to the Major
Maintenance Reserve Account as required by Section 7.3;
(7) on Repayment Dates, to the Debt
Service Reserve Account as required by Section 7.6 (the balance remaining in
the Revenue Account after the application of the foregoing payments set forth
in Waterfall Levels 1 through 7 is referred to herein as the "Available Cash");
(8) on Repayment Dates or Calculation
Dates, as the case may be, and only in respect of amounts which were on deposit
in the Revenue Account on the Repayment Date to which such Calculation Date
relates, to Mandatory Prepayment of the Loans and other Obligations to the
extent required under Section 7.2.5;
(9) on Calculation Dates, and only in
respect of amounts which were on deposit in the Revenue Account on the
Repayment Date to which such Calculation Date relates, provided that Agent has
timely received and approved a Disbursement Requisition delivered pursuant to
Section 7.2.3, to the payment of Subordinated Fuel Costs in an amount
determined pursuant to Section 7.2.3 below;
(10) on Calculation Dates, and only in
respect of amounts which were on deposit in the Revenue Account on the
Repayment Date to which such Calculation Date relates, provided that Agent has
timely received and approved a Disbursement Requisition delivered pursuant to
Section 7.2.4, to the payment of Subordinated O&M Costs in an amount determined
pursuant to Section 7.2.4 below; and
(11) on Calculation Dates, and only in
respect of amounts which were on deposit in the Revenue Account on the
Repayment Date to which such Calculation Date relates, (i) in the event that
the conditions to distributions set forth in Sections 6.6(a) and 6.6(b) have
been satisfied, for payment to Borrower or distribution by Borrower as it may
determine in its sole discretion, (ii) in the event that the conditions to
distributions set forth in Section 6.6(b) are not satisfied, to the
Distribution Suspense Account for application as provided in Section 7.10, and
(iii) in the event that the conditions to distributions set forth in Section
6.6(b) are satisfied but those set forth in Section 6.6(a) are not satisfied,
to the Initial Distribution Suspense Account for application as provided in
Section 7.10.
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7.2.2 O&M Costs. On or before the fifth Banking
Day prior to the last Banking Day of each month during which Borrower desires
to transfer sums to the Operating Account for the payment of Senior O&M Costs,
Borrower shall submit to the Agent a certificate in the form of Exhibit C-7
detailing the amounts to be so transferred ("Disbursement Requisition"), which
amounts shall not exceed the Senior O&M Costs which have become, or are
anticipated to become, due and payable during such month, excluding Major
Maintenance costs funded from the Major Maintenance Reserve Account. Agent
shall review such Disbursement Requisition within five Banking Days following
receipt thereof, and shall transfer the amounts specified therein to the
Operating Account for application in accordance with Waterfall Level 1 to the
extent that such expenditures are in accordance with the terms of the Annual
Operating Budget and this Agreement, as such budget may be exceeded pursuant to
the terms hereof. Notwithstanding anything in this Section 7.2.2 to the
contrary, the transfers to, and expenditures from, the Revenue Account for
Senior O&M Costs (other than fuel costs as provided in Section 5.15.2 and O&M
Costs incurred in an emergency) payable pursuant to Waterfall Level 1 (a) with
respect to any Major Budget Category, shall not without Agent's consent exceed
on an annual year-to-date basis 105% of the amounts specified in such Major
Budget Category and (b) with respect to any Budget Category, shall not without
Agent's consent exceed on an annual year-to-date basis 110% of the amounts
specified in such Budget Category, in each case, as set forth in the
then-applicable Annual Operating Budget (net of amounts set forth therein for
Subordinated O&M Costs and Subordinated Fuel Costs). Notwithstanding anything
to the contrary in this Agreement, in no event shall the "Annual Base Fee" (as
defined in the O&M Agreement) be greater than the amount specified therefor in
the then-applicable Annual Operating Budget. Borrower shall promptly pay all
Senior O&M Costs in excess of the amounts permitted under the preceding
sentence from amounts, if any, of Available Cash, or by contribution of
additional equity funds; provided, however, that if Agent subsequently approves
a variation in such Annual Operating Budget which would have allowed the
payment of such excess Senior O&M Costs, Borrower shall be entitled to recover
any such Senior O&M Costs previously paid by the contribution of additional
equity funds from Project Operating Revenues at Waterfall Level 1. Each
Disbursement Requisition shall reflect a reduction in the Senior O&M Costs for
which Borrower requests that funds be transferred to the Operating Account
during such month for any amounts which remain, or are expected to remain, in
the Operating Account at the end of any month as a result of a previous
Disbursement Requisition.
7.2.3 Subordinated Fuel Costs. On or before the
fifth Banking Day prior to each Repayment Date on which Borrower desires to
make payments of Subordinated Fuel Costs, Borrower shall include in the
Disbursement Requisition submitted pursuant to Section 7.2.2 on such date the
amounts to be so paid, which amounts shall not exceed the Subordinated Fuel
Costs which have become due and payable. Agent shall review such Disbursement
Requisition within five Banking Days following receipt thereof, and, to the
extent funds exist in the Revenue Account after application of amounts in such
account to Waterfall Levels 1 through 8, make payment of the Subordinated Fuel
Costs specified therein to the designated payee thereof to the extent that such
expenditures are in accordance with the terms of the Annual Operating Budget.
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7.2.4 Subordinated O&M Costs. On or before the
fifth Banking Day prior to each Repayment Date on which Borrower desires to
make payments of Subordinated O&M Costs, Borrower shall include in the
Disbursement Requisition submitted pursuant to Section 7.2.2 on such date the
amounts to be so paid, which amounts shall not exceed the Subordinated O&M
Costs which have become due and payable. Agent shall review such Disbursement
Requisition within five Banking Days following receipt thereof, and, to the
extent funds exist in the Revenue Account after application of amounts in such
account to Waterfall Levels 1 through 9, make payment of the Subordinated O&M
Costs specified therein to the designated payee thereof to the extent that such
expenditures are in accordance with the terms of the Annual Operating Budget.
7.2.5 Mandatory Prepayment.
(a) If, on any Repayment Date, an Event
of Default shall exist, Borrower shall use all Available Cash on such Repayment
Date (i) to prepay the Loans in inverse order of maturity and (ii) upon
repayment in full of the Loans, to repay all other Obligations of Borrower to
the Banks, as designated by Agent and the Required Banks.
(b) If, on any Extension Determination
Date, the Extension Requirements are not met, Borrower shall, on each Repayment
Date thereafter until the Extension Requirements have been satisfied, use all
Available Cash on such Repayment Dates (i) to prepay the Loans in inverse order
of maturity and (ii) upon repayment in full of the Loans, to repay all other
Obligations of Borrower to the Banks, as designated by Agent and the Required
Banks.
(c) Subject to Sections 7.2.5(a) and
7.2.5(b), if on any Calculation Date during the Term Period the Four-Quarter
Average Debt Service Coverage Ratio for the Repayment Date to which such
Calculation Date relates shall be less than 1.75 to 1.00, Borrower shall use
50% of the Available Cash on such Calculation Date (i) to prepay the Loans in
inverse order of maturity and (ii) upon repayment in full of the Loans, to
repay all other Obligations of Borrower to the Banks, as designated by Agent
and the Required Banks.
(d) Subject to Sections 7.2.5(a) and
7.2.5(b), if on any Calculation Date during the Term Period the Four-Quarter
Average Debt Service Coverage Ratio for the Repayment Date to which such
Calculation Date relates shall be less than 2.00 to 1.00 but shall exceed or
equal 1.75 to 1.00, Borrower shall use fifteen (15%) of the Available Cash on
such Calculation Date (i) to prepay the Loans in inverse order of maturity and
(ii) upon repayment in full of the Loans, to repay all other Obligations of
Borrower to the Banks, as designated by Agent and the Required Banks.
(e) Nothing in this Section 7.2.5 shall
limit in any manner the rights and remedies of Agent and the Banks upon and
during the continuation of an Event of Default under this Agreement.
7.3 Major Maintenance Reserve Account.
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7.3.1 Establishment of Account. On or prior to
Term-Conversion, Borrower and Agent shall establish the Major Maintenance
Reserve Account at the Depositary Agent's New York office.
7.3.2 Funding. On each Repayment Date (other than
Term-Conversion), Borrower shall cause all amounts then in the Revenue Account
in excess of the amounts applied through Waterfall Level 5 to be deposited into
the Major Maintenance Reserve Account, up to an amount equal to the sum of (a)
the Major Maintenance Reserve Requirement plus (b) an amount (without
duplication) up to the aggregate amount, if any, by which Borrower failed to
fund the Major Maintenance Reserve Account on any prior Repayment Date as
required under this Section 7.3.2.
7.3.3 Withdrawals. Borrower shall be entitled to
submit a duly executed Reserve Account Disbursement Requisition in
substantially the form of Exhibit C-8 (a "Reserve Account Disbursement
Requisition") in order to withdraw amounts from the Major Maintenance Reserve
Account to pay all fees, costs, charges and other amounts due in connection
with any Major Maintenance in accordance with the projected Major Maintenance
expenses contained in the Annual Operating Budget, or as otherwise approved by
the Agent and the Independent Engineer.
7.3.4 Earnings. All earnings on monies in the
Major Maintenance Reserve Account shall accrue to the Major Maintenance Reserve
Account up to the amount required under Section 7.3.2 and shall thereafter be
deposited in the Reserve Account.
7.4 Emissions Offsets Reserve Account.
7.4.1 Establishment of Account. On or prior to
Term-Conversion, Borrower and Agent shall establish the Emissions Offsets
Reserve Account at the Depositary Agent's New York office. On the date of
Term-Conversion, Borrower shall deposit or cause to be deposited into the
Emissions Offsets Reserve Account an amount equal to Eight Hundred Thousand
Dollars ($800,000) which amount shall be obtained, to the extent funds are
available, through a transfer from the Construction Account as provided in
Section 7.1.4.
7.4.2 Withdrawals. Borrower shall be entitled to
submit a duly executed Reserve Account Disbursement Requisition in
substantially the form of Exhibit C-8 in order to withdraw amounts from the
Emissions Offsets Reserve Account to pay all fees, costs, charges and other
amounts incurred in connection with the acquisition of any required Emissions
Offsets Credits.
7.4.3 Earnings. All earnings on monies in the
Emissions Offsets Reserve Account shall accrue to the Emissions Offsets Reserve
Account.
7.4.4 Letters of Credit. In lieu of depositing
cash in the Emissions Offsets Reserve Account pursuant to Section 7.4.1,
Borrower may provide an unconditional, irrevocable
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direct-pay letter of credit (the "Emissions Offsets Reserve Letter of Credit")
issued in a stated amount equal to the EORA Minimum Balance for the account of
Borrower by a financial institution rated at least A or the equivalent thereof
by S&P or at least A2 or the equivalent thereof by ▇▇▇▇▇'▇ and otherwise
approved by Agent, naming the Agent on behalf of the Banks as the beneficiary,
and containing terms and provisions satisfactory to Agent in its sole
discretion. Upon delivery of the Emissions Offsets Reserve Letter of Credit to
Agent, all cash in the Emissions Offsets Reserve Account shall be released to
Borrower. In addition to and without limiting the foregoing, the Emissions
Offsets Reserve Letter of Credit (a) shall have an initial expiration date of
at least one (1) year after the date of issuance and (b) shall not be secured
by any of the Collateral. Further, the fees and reimbursement obligations in
respect of the Emissions Offsets Reserve Letter of Credit shall not be recourse
to Borrower or the Project. On each anniversary of the issuance of the
Emissions Offsets Reserve Letter of Credit, Borrower shall cause the stated
amount of the Emissions Offsets Reserve Letter of Credit to be increased to the
EORA Minimum Balance as of such date. If no agreement for a renewal or
replacement of the Emissions Offsets Reserve Letter of Credit has been made
thirty (30) days prior to the expiration of the Emissions Offsets Reserve
Letter of Credit, the Agent may draw the entire undrawn amount of the Emissions
Offsets Reserve Letter of Credit and deposit such drawing in the Emissions
Offsets Reserve Account or Borrower shall deposit cash in the Emissions Offsets
Reserve Account in the amount of the Emissions Offsets Reserve Letter of
Credit. Fees, costs, expenses and reimbursement obligations relating to any
Emissions Offsets Reserve Letter of Credit shall be paid only out of any funds
distributed to Borrower under Waterfall ▇▇▇▇▇ ▇▇.
7.4.5 Release of Funds. Funds in the Emissions
Offsets Reserve Account shall be transferred to the Revenue Account for
application as provided in Section 7.2.1 upon the earlier of the following to
occur: (a) Borrower has demonstrated to the reasonable satisfaction of the
Majority Banks that Borrower owns, free and clear of any Liens, Emissions
Offsets Credits, in final and nonappealable form, in compliance with all Legal
Requirements and to the satisfaction of the Texas Natural Resource Conservation
Commission (the "TNRCC") to enable the Project to be operated at 240 MW based
on the availability factor set forth in the Base Case Project Projections; or
(b) Borrower has demonstrated to the reasonable satisfaction of the Majority
Banks (including an opinion of counsel) that Borrower is no longer subject to
any Legal Requirements to obtain such Emissions Offsets Credits because (i)
either (A) there is a final, nonappealable redesignation under the federal
Clean Air Act of 1970, as amended in 1977 and 1990, 42 U.S.C. Section 7401 et
seq., of the air quality control region within which the Project is located
from a non- attainment area with respect to ozone to an attainment or
unclassifiable area or (B) there is a final, nonappealable repeal, modification
or permanent suspension of all Governmental Rules which require the Emission
Offsets Credits, and (ii) there neither exists nor has there been proposed any
other Legal Requirement that could reasonably be expected to require the
Project to obtain such Emissions Offsets Credits. If, at such time as funds in
the Emissions Offsets Reserve Account would be transferred to the Revenue
Account pursuant to this Section 7.4.5, Borrower has provided Agent with an
Emissions Offsets Reserve Letter of Credit, then, at such time, Agent shall
draw the entire undrawn stated amount of the Emissions Offsets Reserve Letter
of Credit and deposit the proceeds of such draw into the Revenue Account for
application pursuant to Section 7.2.1.
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7.5 Fuel Supply Reserve Account.
7.5.1 Establishment of Account. On or prior to
Term-Conversion, Borrower and Agent shall establish the Fuel Supply Reserve
Account at the Depositary Agent's New York office. On the date of
Term-Conversion, Borrower shall deposit or cause to be deposited into the Fuel
Supply Reserve Account an amount equal to the FSRA Minimum Balance, which
amount shall be obtained, to the extent funds are available, through a transfer
from the Construction Account as provided in Section 7.1.4.
7.5.2 Withdrawals. Amounts on deposit in the Fuel
Supply Reserve Account shall be withdrawn as Agent and Borrower may agree.
7.5.3 Earnings. All earnings on monies in the Fuel
Supply Reserve Account shall accrue to the Fuel Supply Reserve Account.
7.5.4 Letters of Credit. In lieu of depositing
cash in the Fuel Supply Reserve Account pursuant to Section 7.5.1, Borrower may
provide an unconditional, irrevocable direct-pay letter of credit (the "Fuel
Supply Reserve Letter of Credit") issued in a stated amount equal to FSRA
Minimum Balance for the account of Borrower by a financial institution rated at
least A or the equivalent thereof by S&P or at least A2 or the equivalent
thereof by ▇▇▇▇▇'▇ and otherwise approved by Agent, naming the Agent on behalf
of the Banks as the beneficiary, and containing terms and provisions
satisfactory to Agent in its sole discretion. Upon delivery of the Fuel Supply
Reserve Letter of Credit to Agent, all cash in the Fuel Supply Reserve Account
shall be released to Borrower. In addition to and without limiting the
foregoing, the Fuel Supply Reserve Letter of Credit (a) shall have an initial
expiration date of at least one (1) year after the date of issuance and (b)
shall not be secured by any of the Collateral. Further, the fees and
reimbursement obligations in respect of the Fuel Supply Reserve Letter of
Credit shall not be recourse to Borrower or the Project. On each anniversary
of the issuance of the Fuel Supply Reserve Letter of Credit, Borrower shall
cause the stated amount of the Fuel Supply Reserve Letter of Credit to be
increased to the FSRA Minimum Balance as of such date. If no agreement for a
renewal or replacement of the Fuel Supply Reserve Letter of Credit has been
made thirty (30) days prior to the expiration of the Fuel Supply Reserve Letter
of Credit, Agent may draw the entire undrawn amount of the Fuel Supply Reserve
Letter of Credit and deposit such drawing in the Fuel Supply Reserve Account or
Borrower shall deposit cash in the Fuel Supply Reserve Account in the amount of
the Fuel Supply Reserve Letter of Credit. Fees, costs, expenses and
reimbursement obligations relating to any Fuel Supply Reserve Letter of Credit
shall be paid only out of any funds distributed to Borrower under Waterfall
▇▇▇▇▇ ▇▇.
7.5.5 Release of Funds. Agent shall cause any
funds remaining in the Fuel Supply Reserve Account on the tenth (10th)
anniversary of the Commercial Operation Date promptly to be transferred to the
Revenue Account and applied pursuant to Section 7.2.1. If, at such time as
funds in the Fuel Supply Reserve Account would be transferred to the Revenue
Account pursuant to this Section 7.5.5, Borrower has provided Agent with a Fuel
Supply Reserve Letter of Credit, then, at such time, Agent shall draw the
entire undrawn stated amount of the
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Fuel Supply Reserve Letter of Credit and deposit the proceeds of such draw into
the Revenue Account for application pursuant to Section 7.2.1.
7.6 Debt Service Reserve Account.
7.6.1 Establishment of Account. On or prior to
Term-Conversion, Borrower and Agent shall establish the Debt Service Reserve
Account at the Depositary Agent's New York office. On the date of
Term-Conversion, Borrower shall deposit or cause to be deposited into the Debt
Service Reserve Account an amount equal to the DSRA Minimum Balance, which
amount shall be obtained, to the extent funds are available, through a transfer
from the Construction Account as provided in Section 7.1.4.
7.6.2 Funding. After Term-Conversion, on each
Repayment Date, if the balance in the Debt Service Reserve Account is not equal
to or greater than the DSRA Minimum Balance, Borrower shall cause all amounts
then in the Revenue Account on the applicable Repayment Date in excess of the
amounts applied through Waterfall Level 6 to be deposited into the Debt Service
Reserve Account until the amount deposited therein equals the DSRA Minimum
Balance.
7.6.3 Replenishment of Account. In the event that
on any Repayment Date the balance in the Debt Service Reserve Account is less
than the DSRA Minimum Balance, then on each Repayment Date thereafter until the
balance in the Debt Service Reserve Account is equal to the DSRA Minimum
Balance, Borrower shall cause all amounts then in the Revenue Account on the
applicable Repayment Date in excess of the amounts applied through Waterfall
Level 6 to be deposited into the Debt Service Reserve Account.
7.6.4 Withdrawals. Agent shall withdraw amounts
from the Debt Service Reserve Account to pay (a) fees, costs, charges and other
amounts due to Agent and the Banks and to pay amounts of principal and interest
due under the Loans in the event that amounts in the Revenue Account are
insufficient therefor, and (b) if approved by the Majority Banks in their
reasonable discretion, O&M Costs.
7.6.5 Earnings. All earnings on monies in the Debt
Service Reserve Account shall accrue to the Debt Service Reserve Account until
such time as the Debt Service Reserve Account has on deposit therein an amount
equal to the DSRA Minimum Balance, whereupon all amounts in the Debt Service
Reserve Account in excess of such amount shall be deposited in the Revenue
Account as Project Operating Revenues on a monthly basis.
7.6.6 Letters of Credit. In lieu of depositing
cash in the Debt Service Reserve Account pursuant to Section 7.6.1, 7.6.2 and
7.6.3, Borrower may provide an unconditional, irrevocable direct-pay letter of
credit (the "Debt Service Reserve Letter of Credit") issued in a face amount
equal from time to time to or, to the extent cash is deposited, less than, the
DSRA Minimum Balance for the account of Borrower by a financial institution
rated at least A or the equivalent thereof by S&P or at least A2 or the
equivalent thereof by ▇▇▇▇▇'▇ and
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otherwise approved by Agent, naming the Agent on behalf of the Banks as the
beneficiary, and containing terms and provisions satisfactory to Agent in its
sole discretion. To the extent the stated amount of the Debt Service Reserve
Letter of Credit plus amounts on deposit in the Debt Service Reserve Account
exceed the DSRA Minimum Balance, cash in the Debt Service Reserve Account shall
be released to Borrower. In addition to and without limiting the foregoing,
the Debt Service Reserve Letter of Credit (a) shall have an initial expiration
date of at least one (1) year after the date of issuance and (b) shall not be
secured by any of the Collateral. Further, the fees and reimbursement
obligations in respect of the Debt Service Reserve Letter of Credit shall not
be recourse to Borrower or the Project. If no agreement for a renewal or
replacement of the Debt Service Reserve Letter of Credit has been made thirty
(30) days prior to the expiration of the Debt Service Reserve Letter of Credit,
the Agent may draw the entire undrawn amount of the Debt Service Reserve Letter
of Credit and deposit such drawing in the Debt Service Reserve Account or
Borrower shall deposit cash in the Debt Service Reserve Account in the amount
of the Debt Service Reserve Letter of Credit. Fees, costs, expenses and
reimbursement obligations relating to any Debt Service Reserve Letter of Credit
shall be paid only out of any funds distributed to Borrower under Waterfall
▇▇▇▇▇ ▇▇.
7.7 Operating Account.
7.7.1 Establishment of Account. On or prior to
Term-Conversion, Borrower and Agent shall establish at Union Bank of California
an account entitled "Pasadena Project -- Operating Account" ("Operating
Account").
7.7.2 Funding. From time to time, in accordance
with the provisions of Waterfall Levels 1 and 10, Borrower shall cause to be
transferred to the Operating Account the amounts specified in Sections 7.2.1
and 7.2.2.
7.7.3 Withdrawals. Borrower shall be entitled to
withdraw amounts from the Operating Account to pay Senior O&M Costs which have
become due and payable in accordance with the Disbursement Requisition in which
such Senior O&M Costs were described. Amounts transferred to the Operating
Account which are not, for any reason, applied to payment of Senior O&M Costs
in accordance with the Disbursement Requisition pursuant to which such amounts
were transferred, shall be retained in the Operating Account for application to
the following month's Senior O&M Costs in accordance with Section 7.2.2.
7.8 Loss Proceeds Account. On or prior to the Closing
Date, Borrower and Agent shall establish at the Depository Agent's New York
Office the Loss Proceeds Account. All Insurance Proceeds, Eminent Domain
Proceeds and damage payments described in Section 7.13 shall be deposited in
the Loss Proceeds Account and applied (a) as specified in Sections 7.11 through
7.13 and (b) if no such application is specified, to the prepayment of the
Loans in inverse order of maturity, and thereafter to payment of all other
Obligations of Borrower.
7.9 Accrual Sub-Account.
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7.9.1 Establishment of Sub-Account. On or before
Term-Conversion, Borrower shall establish the Accrual Sub-Account at the
Depositary Agent's New York office. On the last Banking Day of each month
following Term-Conversion, Borrower shall deposit or cause to be deposited into
the Accrual Sub-Account from amounts available for application thereto, under
the priority of payments set forth in Section 7.2.2, (a) the amount of any
Senior O&M Costs, which, in accordance with the then applicable Annual
Operating Budget, are to be accrued, and not paid, during the following month
and (b) a prudent and sufficient level of working capital and reserves for the
Project, taking into account projected levels of Project Revenues, O&M Costs
and amounts on deposit in the Revenue Account for a period of approximately
forty-five (45) days to pay any other amounts which will become due and payable
during the ensuing Repayment Period.
7.9.2 Withdrawals. Amounts from the Accrual
Sub-Account may be transferred from time to time at Borrower's request to the
Revenue Account for payment of accrued Senior O&M Costs and other costs and
expenses with respect to which amounts were deposited in the Accrual
Sub-Account in accordance with Section 7.2.1. Amounts on deposit in the
Accrual Sub-Account which were deposited in anticipation of accrued obligations
which for any reason did not become payable when so scheduled to be paid shall
be released into the Revenue Account on the Repayment Date immediately
following the date upon which the anticipated accrued liability was expected to
become due and payable.
7.9.3 Earnings. Investment income from Permitted
Investments of amounts on deposit in the Accrual Sub- Account shall be deemed
Project Operating Revenues for purposes of calculating Debt Service Coverage
Ratios, and shall be transferred to the Revenue Account on a monthly basis.
7.10 Distribution Suspense Account; Initial Distribution
Suspense Account.
7.10.1 Establishment of Account. On or prior to
Term-Conversion, Borrower and Agent shall establish the Distribution Suspense
Account and the Initial Distribution Suspense Account at the Depositary Agent's
New York office.
7.10.2 Funding. From time to time, Agent shall
cause to be transferred to the Distribution Suspense Account and the Initial
Distribution Suspense Account, the amounts specified in Waterfall ▇▇▇▇▇ ▇▇.
7.10.3 Withdrawals.
(a) Distribution Suspense Account. (i)
Until the funds in the Distribution Suspense Account have been applied as
provided in Section 7.10.3(a)(ii), Agent shall withdraw amounts from the
Distribution Suspense Account to pay all fees, charges, costs and other amounts
specified in Waterfall Levels 1 through 8, in such order, to the extent that
amounts in the Revenue Account are insufficient therefor.
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(ii) Upon the satisfaction, on four
consecutive Calculation Dates, of each of the conditions to distribution set
forth in Section 6.6(b), all funds in the Distribution Suspense Account shall
be paid to, or as directed by, Borrower as it may determine in its sole
discretion; provided, however, that in the event that all such conditions have
not been so satisfied, as of the fourth Repayment Date occurring after the
deposit of funds in the Distribution Suspense Account, then such funds
remaining in the Distribution Suspense Account (after any withdrawals made
pursuant to Section 7.10.3(a)(i)) shall be used (x) to prepay the Loans in
inverse order of maturity and (y) upon repayment in full of the Loans, to repay
all other Obligations of Borrower to the Banks, as designated by Agent and the
Required Banks. For purposes of determining whether four Repayment Dates have
occurred since the deposit of any funds in the Distribution Suspense Account,
all withdrawals made pursuant to Section 7.10.3(a)(i) shall be deemed to have
been made on a first-in first-out basis.
(b) Initial Distribution Suspense
Account. (i) Until the funds in the Initial Distribution Suspense Account have
been applied as provided in Section 7.10.3(b)(ii), Agent shall, upon Borrower's
request, withdraw funds from the Initial Distribution Suspense Account to pay
Subordinated Fuel Costs to the extent funds in the Revenue Account are
insufficient therefor.
(ii) Upon satisfaction of each of the
conditions to distribution set forth in Section 6.6(a), all funds in the
Initial Distribution Suspense Account shall be paid to, or as directed by,
Borrower as it may determine in its sole discretion.
7.11 Application of Insurance Proceeds.
7.11.1 General. Borrower shall notify Agent of any
casualty and keep Agent timely apprised of insurance claim proceedings. All
amounts and proceeds (including instruments) in respect of the proceeds of any
insurance policy required to be maintained by Borrower hereunder ("Insurance
Proceeds") shall be applied as provided in this Section 7.11. All Insurance
Proceeds shall be paid by the insurers directly to Agent (as loss payee or
additional insured as provided in Exhibit K). If any Insurance Proceeds are
paid directly to Borrower or Calpine with respect to Project by any insurer,
such Insurance Proceeds shall be received only in trust for Agent, shall be
segregated from other funds of Borrower or Calpine, as the case may be, and
shall be forthwith paid over to Agent in the same form as received (with any
necessary endorsement). To the fullest extent that it effectively may do so
under applicable law, Agent shall apply all such Insurance Proceeds in
accordance with the provisions of this Section 7.11.
7.11.2 Business Interruption Insurance. Any
business interruption Insurance Proceeds received by Agent or Borrower shall be
deposited into the Revenue Account for application in accordance with Section
7.2 (provided that Borrower may not apply such Insurance Proceeds toward
payment of the items described in Waterfall Level 10 or 11 without the consent
of the Majority Banks).
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7.11.3 Applications; Mandatory Prepayments. All
Insurance Proceeds (other than those described in Sections 7.11.2 and 7.11.4)
and all Eminent Domain Proceeds shall be applied (a) to the prepayment of Loans
in inverse order of maturity, and (b) to the payment of all other Obligations
of Borrower, unless each of the following conditions are satisfied or waived by
the Agent, or the Required Banks, as required pursuant to Section 7.11.5 or
7.11.6, in which event such amounts shall be applied to the repair or
restoration of the Project in accordance with the terms of such subsections:
(a) such damage or destruction does not
constitute the destruction of all or substantially all of the man-made portion
of the Project;
(b) no Inchoate Default or Event of
Default has occurred and is continuing and after giving effect to any proposed
repair and restoration, such damage or destruction or proposed repair and
restoration will not result in an Event of Default or an Inchoate Default;
(c) Borrower and the Independent
Engineer certify, and Agent (with, if applicable, the consent of the Required
Banks) determines in its reasonable judgment, that repair or restoration of the
Project is technically and economically feasible within a six-month period and
that a sufficient amount of funds is or will be available to Borrower to make
repairs and restorations;
(d) Borrower and the Independent
Engineer certify, and Agent (with, if applicable, the consent of the Required
Banks) determines in its reasonable judgment, that a sufficient amount of funds
is or will be available to Borrower and to make all payments of Debt Service
which will become due during and following repair period and to maintain the
Debt Service Coverage Ratios set forth in the Base Case Project Projections as
in effect on the Closing Date, unless the Required Banks agree otherwise;
(e) if such damage or destruction occurs
during construction, such repair or restoration will not adversely affect, in
the reasonable judgment of Agent in consultation with the Independent Engineer,
achievement of Completion by the Construction Loan Maturity Date;
(f) no Permit is necessary to proceed
with the repair and restoration and no material amendment to the Project
Documents, or, except with the consent of the Required Banks, this Agreement or
any of the Credit Documents, and no other instrument is necessary for the
purpose of effecting the repairs or restorations or subjecting the repairs or
restorations to the Liens of the Collateral Documents and maintaining the
priority of such Liens or, if any of the above is necessary, Borrower will be
able to obtain the same as and when required;
(g) Agent shall receive an opinion of
counsel acceptable to Agent opining as to the Permits described in paragraph
(f) above, and an opinion to the effect that such
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repairs or restoration will be subject to the Liens of the Collateral Documents
at the same level of priority as the other Collateral; and
(h) Agent shall receive such additional
title insurance, title insurance endorsements, mechanic's lien waivers,
certificates, opinions or other matters as it may reasonably request as
necessary or appropriate in connection with such repairs or restoration or to
preserve or protect the Banks' interests hereunder and in the Collateral.
7.11.4 Proceeds Less than $1,000,000. If there
shall occur any damage or destruction of the Project with respect to which
Insurance Proceeds for any single loss not in excess of $1,000,000 are payable,
such Insurance Proceeds shall be held by the Agent in the Loss Proceeds Account
and released by Agent to the Borrower in accordance with Section 7.11.7.
7.11.5 Proceeds in Excess of $1,000,000, Not in
Excess of $5,000,000. Provided that the conditions set forth in Section 7.11.3
have been waived by the Agent and the Independent Engineer, or have been
acknowledged by such Persons as having been satisfied, if there shall occur any
damage or destruction of the Project with respect to which Insurance Proceeds
for any single loss in excess of $1,000,000, but not in excess of $5,000,000,
are payable, such Insurance Proceeds shall be held by the Agent in the Loss
Proceeds Account and released by Agent to the Borrower in accordance with
Section 7.11.7.
7.11.6 Proceeds in Excess of $5,000,000. Provided
that the conditions set forth in Section 7.11.3 have been waived by the Agent,
the Required Banks and the Independent Engineer, or have been acknowledged by
such Persons as having been satisfied, if there shall occur any damage or
destruction of the Project with respect to which Insurance Proceeds for any
single loss in excess of $5,000,000 are payable, such Insurance Proceeds shall
be held by the Agent in the Loss Proceeds Account and released by Agent to the
Borrower in accordance with Section 7.11.7.
7.11.7 Repair and Restoration Procedures. Amounts
which are to be applied to repair or restoration of the Project pursuant to
this Section 7.11 shall be disbursed by Agent from the Loss Proceeds Account in
accordance with the following procedures:
(a) Borrower shall cause any repairs or
restoration to be commenced and completed promptly and diligently at the cost
and expense of Borrower;
(b) From time to time (after the Agent
or the Required Banks, if applicable, shall have duly approved the making of
such repairs or restoration), Agent's authorization of release of Insurance
Proceeds for application toward such repairs or restoration shall be
conditioned upon Borrower's written request and the presentation to Agent of
all documents, certificates and information with respect to such Insurance
Proceeds which would be required in order to obtain a Construction Loan under
this Agreement, including a certificate from Borrower (i) describing in
reasonable detail the nature of the repairs or restoration to be effected with
such release, (ii) stating the cost of such repairs or restoration and the
specific amount
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requested to be paid over to or upon the order of Borrower and that such amount
is requested to pay the cost thereof, (iii) stating that the aggregate amount
requested by Borrower in respect of such repairs or restoration (when added to
any other Insurance Proceeds received by Borrower in respect of such damage or
destruction) does not exceed the cost of such repairs or restoration and that a
sufficient amount of funds is or will be available to Borrower to complete the
Project, and (iv) stating that no Inchoate Default has occurred and is
continuing other than an Event of Default resulting solely from such damage or
destruction.
7.11.8 Excess Insurance Proceeds. If, after
Insurance Proceeds have been applied to the repair or restoration of the
Project as provided in Sections 7.11.4, 7.11.5 or 7.11.6, the Banks in
consultation with the Independent Consultants determine that the Project will
be able to operate at a level enabling Borrower to satisfy its obligations
hereunder as well as before the damage or destruction, any excess Insurance
Proceeds shall be paid into the Revenue Account. In the event that the Banks
in consultation with the Independent Engineer determine otherwise, such excess
Insurance Proceeds shall be applied (a) to the prepayment of Loans in such
order as will enable the Project to operate at a level enabling Borrower to
satisfy its obligations hereunder as well as before the damage and destruction
and thereafter in inverse order of maturity, and (b) to the payment of all
other Obligations of Borrower.
7.11.9 Events of Default. If an Event of Default
shall have occurred and be continuing, then any provisions of this Sections
7.11 to the contrary notwithstanding, the Insurance Proceeds (including any
Permitted Investments made with such proceeds, which shall be liquidated in
such manner as the Banks shall deem reasonable and prudent under the
circumstances) may be applied by Agent (a) to curing such Event of Default, and
any Insurance Proceeds remaining thereafter shall be applied as provided in
this Section 7.11 or (b) if such Event of Default cannot be cured, toward
payment of all other Obligations of Borrower, in connection with exercise of
the Banks' remedies pursuant to Article 8.
7.12 Application of Eminent Domain Proceeds. All amounts
and proceeds (including instruments) received in respect of any Event of
Eminent Domain ("Eminent Domain Proceeds") shall be subject to the same
treatment as Insurance Proceeds as provided in Section 7.10.
7.13 Application of Certain Damages Payments; Mandatory
Prepayments.
7.13.1 Contractor. Delay related Liquidated Damages
shall be deposited in the Construction Account and applied pursuant to Section
7.1.4. Performance related Liquidated Damages received before Term-Conversion
shall be applied to the prepayment of Construction Loans in accordance with
Section 2.1.7. Performance related Liquidated Damages received after Term-
Conversion shall be applied first to the prepayment of Term Loans in accordance
with Section 2.1.7 and thereafter to all other Obligations of Borrower.
7.13.2 Power Purchasers. Any damage payments made
by ▇▇▇▇▇▇▇▇, HL&P, Power Marketer, or any other purchaser of the power
generated by the Project in
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satisfaction of such party's obligations under its purchase agreement shall (a)
to the extent such damages are intended to replace lost revenues, be deposited
in the Revenue Account for application as provided in Section 7.2, and (b)
otherwise, be deposited in the Loss Proceeds Account and (i) applied to the
prepayment of (A) prior to Term-Conversion, Construction Loans, and (B)
following Term-Conversion, Term Loans in inverse order of maturity and (ii) to
the extent that all such Construction Loans or Term Loans, as applicable, have
been prepaid, applied to the other Obligations of Borrower.
7.13.3 Other. Except as otherwise expressly
permitted under this Agreement, including this Section 7.13, Borrower shall
apply the proceeds of any other surety, performance or similar bonds and any
other liquidated or other damages paid in respect of damage payments or
performance payments by any contractors or subcontractors or other Persons
involved in the construction and operation of the Project, to the prepayment of
the Loans in inverse order of maturity, and thereafter to the Obligations of
Borrower or, with the prior written consent of Agent acting in consultation
with the Independent Engineer, to such other application in relation to the
Project as Borrower may request.
7.14 Security Interest in Proceeds and Accounts. Borrower
hereby pledges, assigns and transfers to the Agent on behalf of the Banks and
grants to Agent on behalf of the Banks a security interest in and to all
Insurance Proceeds and Eminent Domain Proceeds (collectively, "Proceeds"),
Accounts, and contents of Accounts, as security for the Loans and the full and
faithful performance of all of Borrower's obligations hereunder and under the
other Credit Documents. Borrower shall not have any rights or powers with
respect to any Account except to have funds on deposit therein applied or
distributed to Borrower in accordance with this Agreement. Agent is hereby
authorized to reduce to cash any Permitted Investment (without regard to
maturity) in order to make any application required by any section of this
Article 7 or otherwise pursuant to the Credit Documents. Upon the occurrence
and during the continuance of an Event of Default, Agent shall have all rights
and powers with respect to Proceeds, the Accounts and the contents of the
Accounts as it has with respect to any other Collateral and may apply such
amounts to the payment of interest, principal, fees, costs, charges or other
amounts due or payable to Agent or the Banks with respect to the Loans in such
order as the Majority Banks may elect in their sole discretion. If such Event
of Default occurs prior to Term-Conversion, until such time as the Majority
Banks so elect to exercise such rights and powers, amounts in the Revenue
Account constituting Project Operating Revenues shall continue to be applied by
Agent to Pre-Conversion Senior O&M Costs to the extent that Agent so elects in
its sole discretion. If such Event of Default occurs following
Term-Conversion, until such time as the Required Banks so elect to exercise
such rights and powers, amounts in the Revenue Account shall continue to be
applied by Agent to the payment categories specified in Waterfall Levels 1 (to
the extent of actual Senior O&M Costs payable to third parties that are not
Affiliates of Borrower) and 2 through 7, and, to the extent that Agent so
elects in its sole discretion, Waterfall Levels 1, 8, 9, 10 and 11. Borrower
shall not have any rights or powers with respect to such amounts except as
expressly provided in this Article 7.
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7.15 Permitted Investments. All amounts held by Borrower
and/or Agent in the Accounts or as Insurance Proceeds or Eminent Domain
Proceeds shall only be invested in Permitted Investments as provided in the
Depositary Agreement. Borrower shall not hold funds in any accounts other than
the Accounts; provided that Borrower shall be permitted to maintain the
Operating Account in accordance with Section 7.7.
7.16 Earnings on Accounts. Except as otherwise expressly
provided herein, including with respect to the Revenue Account and the
Operating Account, all earnings on funds in any Account maintained hereunder
shall, on each Repayment Date, be deposited in the Revenue Account as Project
Operating Revenues.
7.17 Dominion and Control. Each of the Accounts and the
amounts held thereunder (including Permitted Investments therein), except for
the Operating Account, shall at all times be under the exclusive dominion and
control of the Depository Agent.
7.18 Termination of Commitments. Upon repayment in full
of all Obligations and expiration or irrevocable termination of all
Commitments, Agent shall disburse any amounts on deposit in the Accounts to
Borrower, or, if applicable, as directed by a court of competent jurisdiction.
ARTICLE 8 - EVENTS OF DEFAULT; REMEDIES
8.1 Events of Default.
The occurrence of any of the following events shall
constitute an event of default ("Events of Default") hereunder:
8.1.1 Failure to Make Payments. Borrower shall
fail to pay, in accordance with the terms of this Agreement, (a) any principal
on any Loan on the date that such sum is due, (b) any interest on any Loan or
any scheduled fee, cost, charge or sum due hereunder or under the other Credit
Documents, within three (3) days after the date that such sum is due, or (c)
any other fee, cost, charge or other sum due under this Agreement within five
(5) days after written notice that such sum is due and has not been paid.
8.1.2 Judgments. A final judgment or judgments
shall be entered against Borrower or any Partner in the amount of $1,000,000 or
more individually or in the aggregate (other than (a) a judgment which is fully
covered by insurance or discharged within 30 days after its entry, or (b) a
judgment, the execution of which is effectively stayed within 30 days after its
entry but only for 30 days after the date on which such stay is terminated or
expires) or which if left unstayed could reasonably be expected to have a
Material Adverse Effect.
8.1.3 Misstatements; Omissions. Any financial
statement, representation, warranty or certificate made or prepared by, under
the control of or on behalf of Borrower and furnished to Agent or any Bank
pursuant to this Agreement, or in any separate statement or
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document to be delivered to Agent or any Bank hereunder or under any other
Credit Document, shall contain an untrue or misleading statement of a material
fact or shall fail to state a material fact necessary to make the statements
therein not misleading as of the date made, in either case, which could
reasonably be expected to result in a Material Adverse Effect.
8.1.4 Bankruptcy; Insolvency. Any of Borrower, the
Partners, the Shareholders, Calpine (until Term- Conversion), ▇▇▇▇▇▇▇▇, HL&P,
Power Marketer or any other purchaser of capacity or energy from the Project
(so long as ▇▇▇▇▇▇▇▇, HL&P, Power Marketer or such other purchaser, as the case
may be, has outstanding or unperformed obligations under the Power Purchase
Documents to which it is party and such party's Bankruptcy Event could
reasonably be expected to have a Material Adverse Effect), the Fuel Supplier or
any Contractor (so long as such Contractor has outstanding or unperformed
obligations under the Construction Contract to which it is a party) shall
become subject to a Bankruptcy Event; provided that, solely with respect to a
Bankruptcy Event affecting any entity other then Borrower, the Partners, the
Shareholders and Calpine, no Event of Default shall occur as a result of such
Bankruptcy Event if Borrower obtains a Replacement Obligor for the affected
party within 90 days thereafter and such Bankruptcy Event has not had and does
not have prior to so obtaining such Replacement Obligor, a Material Adverse
Effect.
8.1.5 Debt Cross Default. Borrower, or, at any
time prior to Term-Conversion, Calpine or any Calpine Affiliate other than a
Calpine Sole Purpose Entity shall default for a period beyond any applicable
grace period (a) in the payment of any principal, interest or other amount due
under any agreement involving the borrowing of money or the advance of credit
and the outstanding amount or amounts payable under all such agreements equals
or exceeds $1,000,000 in the aggregate, or (b) in the payment of any amount or
performance of any obligation due under any guarantee or other agreement if in
either case, pursuant to such default, the holder of the obligation concerned
has the right to accelerate the maturity of an indebtedness evidenced thereby
which equals or exceeds $1,000,000. For purposes of this Section, the term
"Calpine Sole Purpose Entity" shall mean a Calpine Affiliate (i) whose sole
purpose is the ownership and maintenance of a power project (other than the
Project) that has been financed on a non- recourse basis and (ii) that is not
directly connected to the Project or responsible for actions materially and
directly affecting the Project.
8.1.6 ERISA. If Borrower or any member of the
Controlled Group should establish, maintain, contribute to or become obligated
to contribute to any ERISA Plan and (a) a reportable event (as defined in
Section 4043(b) of ERISA) shall have occurred with respect to any ERISA Plan
and, within 30 days after the reporting of such reportable event to Agent by
Borrower (or Agent otherwise obtaining knowledge of such event) and the
furnishing of such information as Agent may reasonably request with respect
thereto, Agent shall have notified Borrower in writing that (i) Agent has made
a determination that, on the basis of such reportable event, there are
reasonable grounds for the termination of such ERISA Plan by the PBGC or for
the appointment by the appropriate United States District Court of a trustee to
administer such ERISA Plan and (ii) as a result thereof, an Event of Default
exists hereunder; or (b) a trustee shall be appointed by a United States
District Court to administer any ERISA Plan; or (c) the PBGC
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shall institute proceedings to terminate any ERISA Plan; or (d) a complete or
partial withdrawal by Borrower or any member of the Controlled Group from any
Multiemployer Plan shall have occurred, or any Multiemployer Plan shall enter
reorganization status, become insolvent, or terminate (or notify Borrower or
any member of the Controlled Group of its intent to terminate) under Section
4041A of ERISA and, within 30 days after the reporting of any such occurrence
to Agent by Borrower (or Agent otherwise obtaining knowledge of such event) and
the furnishing of such information as Agent may reasonably request with respect
thereto, Agent shall have notified Borrower in writing that Agent has made a
determination that, on the basis of such occurrence, an Event of Default exists
hereunder; provided that any of the events described in this Section 8.1.6
shall involve (A) one or more ERISA Plans that are single-employer plans (as
defined in Section 4001(a)(15) of ERISA) and under which the aggregate gross
amount of unfunded benefit liabilities (as defined in Section 4001(a)(16) of
ERISA), including vested unfunded liabilities which arise or might arise as the
result of the termination of such ERISA Plans, and/or (B) one or more
Multiemployer Plans to which the aggregate liabilities of Borrower and all
members of the Controlled Group, shall exceed $500,000.
8.1.7 Breach of Project Documents.
(a) Borrower. Borrower shall be in
breach of any term, condition, provision, covenant, representation, warranty or
obligation, or in default, under a Project Document, and such breach or default
shall not be remediable or, if remediable, shall continue unremedied for a
period of 30 days; provided that, except with respect to a breach or default
under the ▇▇▇▇▇▇▇▇ Documents, if (i) such breach cannot be cured within such 30
day period, (ii) such breach is susceptible of cure within 90 days, (iii)
Borrower is proceeding with diligence and in good faith to cure such breach,
(iv) the existence of such breach has not had and could not after considering
the nature of the cure, be reasonably expected to give rise to termination by
the counterparty to the Project Document which is subject to breach or to
otherwise have a Material Adverse Effect and (v) Agent shall have received an
officer's certificate signed by a Responsible Officer to the effect of clauses
(i), (ii), (iii) and (iv) above and stating what action Borrower is taking to
cure such breach, then such 30 day cure period shall be extended to such date,
not to exceed a total of 90 days, as shall be necessary for Borrower diligently
to cure such breach.
(b) Third Party. A party other than
Borrower shall be in breach of, or in default under, a Project Document or any
Consent, Pledge and Security Agreement or, Shareholder Pledge and Security
Agreement, or any Equity Document such breach or default shall not be
remediable or, if remediable, shall continue unremedied for a period of 30
days; provided that if (i) such breach cannot be cured within such 30 day
period, (ii) such breach is susceptible of cure within 90 days, (iii) the
breaching party is proceeding with diligence and in good faith to cure such
breach, and (iv) the existence of such breach has not had and could not after
considering the nature of the cure, be reasonably expected to have a Material
Adverse Effect, then such 30 day cure period shall be extended to such date,
not to exceed a total of 90 days, as shall be necessary for such third party
diligently to cure such breach; provided further that, no Event of Default
shall be declared as a result of any such action if Borrower obtains a
Replacement Obligor for the
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affected party within the 90 day cure period referred to in this paragraph (or
within the 30 day cure period, if no extension is given) and such action has
not had and does not have prior to so obtaining such Replacement Obligor a
Material Adverse Effect.
(c) Termination. Any material provision
in any Project Document shall for any reason cease to be valid and binding on
any party thereto (other than Borrower) except upon fulfillment of such party's
obligations thereunder (or any such party shall so state in writing), or shall
be declared null and void, or the validity or enforceability thereof shall be
contested by any party thereto (other than Agent and the Banks) or any
Governmental Authority, or any such party shall deny that it has any liability
or obligation thereunder, except upon fulfillment of its obligations
thereunder; provided that no Event of Default shall occur as a result of such
breach or default if Borrower obtains a Replacement Obligor for the affected
party within 90 days thereafter and, such breach or default has not had and
does not have prior to so obtaining such Replacement Obligor, a Material
Adverse Effect.
8.1.8 Breach of Terms of Agreement.
(a) Borrower shall fail to perform or
observe any of the covenants set forth in Section 5.1, 5.9(a), 5.9(f), 5.11,
5.18, 5.19, 5.22.1 or Article 6 (other than Section 6.7, 6.8, 6.14, 6.15 or
6.20).
(b) Borrower shall fail to perform or
observe any other covenant to be observed or performed by it hereunder or any
other Credit Document not otherwise specifically provided for in Section
8.1.8(a) or elsewhere in this Article 8, and such failure shall continue
unremedied for a period of 30 days after Borrower becomes aware thereof or
receives written notice thereof from Agent provided, however, that, if (i) such
failure cannot be cured within such 30 day period, (ii) such failure is
susceptible of cure, (iii) Borrower is proceeding with diligence and in good
faith to cure such failure, (iv) the existence of such failure has not had and
cannot after considering the nature of the cure be reasonably expected to have
a Material Adverse Effect and (v) Agent shall have received an officer's
certificate signed by a Responsible Officer to the effect of clauses (i), (ii),
(iii) and (iv) above and stating what action Borrower is taking to cure such
failure, then such 30 day cure period shall be extended to such date, not to
exceed a total of 90 days, as shall be necessary for Borrower diligently to
cure such failure.
8.1.9 Term-Conversion. Term-Conversion shall not
have occurred by the Construction Loan Maturity Date.
8.1.10 Conditions to Initial Distributions. Any of
the conditions to the initial distribution set forth in Section 3.5, other than
Section 3.5.7, has not been satisfied or waived prior to the Date Certain.
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8.1.11 Loss of Qualifying Facility Status.
(a) If loss of Qualifying Facility
status could reasonably be expected to have a Material Adverse Effect, (i) FERC
shall have issued an order determining that the Project has ceased to be a
Qualifying Facility or (ii) the Project shall have failed to meet the criteria
for a Qualifying Facility, and, subject to the provisions of Section 8.1.7(a),
shall have failed to obtain a waiver from FERC on account thereof within six
months after the end of any calendar year in which the Borrower knows or should
reasonably have known that it has failed to meet such criteria.
(b) Borrower or any Partner shall lose
the exemption from regulation under PUHCA.
8.1.12 Abandonment.
(a) At any time prior to the
Term-Conversion, Borrower shall announce that it is abandoning the Project or
the Project shall be abandoned or work thereon shall cease for a period of more
than 30 consecutive days for any reason (which period (i) shall be measured
from the first occurrence of a work stoppage and continuing until work of a
substantial nature is resumed and thereafter diligently continued, and (ii)
shall not include delays caused by any event of force majeure or default by a
Major Project Participant (other than Borrower or its Affiliates) under the
Construction Contracts or the ▇▇▇▇▇▇▇▇ Documents), or the Project shall not be
constructed substantially in accordance with the Plans and Specifications
(except as to changes therein approved by Agent).
(b) At any time following
Term-Conversion, Borrower shall announce that it is abandoning the Project or
the Project shall be abandoned or operation thereof shall cease for a period of
more than thirty (30) consecutive days for any reason (other than force
majeure).
8.1.13 Security. Any of the Collateral Documents,
once executed and delivered, shall, except as the result of the acts or
omissions of Agent or the Banks, fail to provide the Banks the Liens, first
priority security interest, rights, titles, interest, remedies permitted by
law, powers or privileges intended to be created thereby or cease to be in full
force and effect, or the first priority or validity thereof or the
applicability thereof to the Loans, the Notes or any other obligations
purported to be secured or guaranteed thereby or any part thereof shall be
disaffirmed by or on behalf of Borrower.
8.1.14 Loss of Control. The occurrence of any of the following:
(a) At any time prior to
Term-Conversion, without the prior written consent of Agent and the Required
Banks, any Transfer of an ownership interest in Borrower shall occur, other
than a transfer (i) to any Affiliate of Calpine reasonably approved by the
Agent and the Required Banks and (ii) to ▇▇▇▇▇▇▇▇ pursuant to the Equity Rights
Agreement;
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(b) At any time following
Term-Conversion, without the prior written consent of Agent and the Required
Banks, any Transfer of an ownership interest in Borrower shall occur, other
than a transfer (i) to any Affiliate of Calpine reasonably approved by the
Agent and the Required Banks, (ii) to ▇▇▇▇▇▇▇▇ pursuant to the Equity Rights
Agreement and (iii) to any Qualified Transferee;
(c) Calpine shall cease to directly or
indirectly (i) own and control at least 50% of the partnership interests in
Borrower or (ii) maintain a controlling managing general partner interest in
Borrower;
(d) CPC shall cease to directly own and
control 100% of the managing general partnership interests in Borrower; or
(e) any Transfer (including the
transfers described in Sections (a), (b), (c) and (d) above) unless (i) no
Event of Default or Inchoate Default shall have occurred and be continuing or
shall occur as a result of any such Transfer; (ii) all Permits and other
certificates, licenses, appraisals or requirements of any Governmental
Authority with respect to such Transfer have been obtained and are in full
force and effect, and such Transfer complies in all material respects with the
terms, conditions and requirements thereof; (iii) such Transfer complies with
the terms and conditions of the Project Documents; (iv) such Transfer complies
with all applicable laws, rules, regulations, ordinances, codes, orders,
decrees or judgments of any Governmental Authority having jurisdiction with
respect thereto, including all federal and state securities laws; (v) all Base
Equity and Additional Borrower Equity required to be deposited under the
Operative Documents has been applied toward Project Costs or payment of Loans
or provision therefor acceptable to Agent has been made; (vi) the intended
transferee has executed and delivered to Agent a pledge and security agreement
in substantially the form of Exhibit D-5 or D-6 to the Credit Agreement; and
(vii) if such intended Transfer is a pledge, hypothecation or other
encumbrance, the intended lienholder shall have executed and delivered a
Subordination Agreement in the form of Exhibit D-8 to the Credit Agreement.
8.1.15 Loss of or Failure to Obtain Applicable
Permits or Applicable Third Party Permits.
(a) Borrower shall fail to obtain any
Permit on or before the date that such Permit becomes an Applicable Permit, or
any Major Project Participant shall fail to obtain any Permit on or before the
date that such Permit becomes an Applicable Third Party Permit, and such
failure could reasonably be expected to have a Material Adverse Effect.
(b) Any Applicable Permit necessary for
operation of the Project shall be materially modified (other than modifications
requested by Borrower and approved in writing in advance of such modification
by Agent acting at the direction of the Majority Banks which approval shall not
be unreasonably withheld), revoked, cancelled or not renewed by the issuing
agency or other Governmental Authority having jurisdiction and within 30 days
thereafter Borrower is not able to demonstrate to the reasonable satisfaction
of the Majority Banks that such
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modification or loss of such Permit reasonably could not be expected to have a
Material Adverse Effect.
(c) Any Third Party Permit necessary for
performance by the applicable Major Project Participant shall be materially
modified, revoked, cancelled or not renewed by the issuing agency or other
Governmental Authority having jurisdiction and within 90 days thereafter
Borrower is not able to (i) demonstrate to the reasonable satisfaction of the
Majority Banks that such modification or loss of such Third Party Permit will
not have a Material Adverse Effect, or (ii) obtain a Replacement Obligor for
such Major Project Participant, where prior to Borrower obtaining such
Replacement Obligor such breach or default has not had and could not reasonably
be expected to have, a Material Adverse Effect.
8.1.16 Loss of Collateral. Any substantial portion
of Borrower's property is damaged, seized or appropriated without fair value
being paid therefor so as to allow replacement of such property and/or
prepayment of Loans and to allow Borrower in Agent's reasonable judgment to
continue satisfying its obligations hereunder and under the other Operative
Documents.
8.1.17 Material Adverse Effect. Except as otherwise
specifically provided in this Article 8, an event causing a Material Adverse
Effect has occurred and is continuing.
8.2 Remedies.
Upon the occurrence and during the continuation of an Event
of Default, Agent and the Banks may, at the election of the Required Banks,
without further notice of default, presentment or demand for payment, protest
or notice of non-payment or dishonor, or other notices or demands of any kind,
all such notices and demands being waived, exercise any or all of the following
rights and remedies, in any combination or order that the Required Banks may
elect, in addition to such other rights or remedies as the Banks may have
hereunder, under the Collateral Documents or at law or in equity:
8.2.1 No Further Loans. Cancel all commitments,
refuse, and Agent and the Banks shall not be obligated, to continue any Loans,
make any additional Loans or make any payments, or permit the making of
payments, from any Account or any Proceeds or other funds held by Agent under
the Credit Documents or on behalf of Borrower:
8.2.2 Cure by Agent. Without any obligation to do
so, make disbursements or Loans to or on behalf of Borrower to cure any Event
of Default hereunder and to cure any default and render any performance under
any Project Documents as the Majority Banks in their sole discretion may
consider necessary or appropriate, whether to preserve and protect the
Collateral or the Banks' interests therein or for any other reason, and all
sums so expended, together with interest on such total amount at the Default
Rate (but in no event shall the rate exceed the maximum lawful rate), shall be
repaid by Borrower to Agent on demand and shall be secured by the Credit
Documents, notwithstanding that such expenditures may, together
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with amounts advanced under this Agreement, exceed the amount of the Total
Construction Loan Commitment.
8.2.3 Acceleration. Declare and make all sums of
accrued and outstanding principal and accrued but unpaid interest remaining
under this Agreement together with all unpaid fees, costs (including
Liquidation Costs and Hedge Breaking Fees) and charges due hereunder or under
any other Credit Document, immediately due and payable, provided that in the
event of an Event of Default occurring under Section 8.1.4 with respect to
Borrower, all such amounts shall become immediately due and payable without
further act of Agent or the Banks.
8.2.4 Cash Collateral. Apply or execute upon any
amounts on deposit in any Account or any Proceeds, Base Equity or any other
moneys of Borrower on deposit with Agent or any Bank in the manner provided in
the Uniform Commercial Code and other relevant statutes and decisions and
interpretations thereunder with respect to cash collateral.
8.2.5 Possession of Project. Enter into possession
of the Project and perform any and all work and labor necessary to complete the
Project substantially according to the Plans and Specifications or to operate
and maintain the Project, and all sums expended by Agent in so doing, together
with interest on such total amount at the Default Rate, shall be repaid by
Borrower to Agent upon demand and shall be secured by the Credit Documents,
notwithstanding that such expenditures may, together with amounts advanced
under this Agreement, exceed the amount of the Total Construction Loan
Commitment.
8.2.6 Remedies Under Credit Documents. Exercise
any and all rights and remedies available to it under any of the Credit
Documents, including judicial or non-judicial foreclosure or public or private
sale of any of the Collateral pursuant to the Collateral Documents.
ARTICLE 9 - SCOPE OF LIABILITY
The Banks shall have no claims with respect to the
transactions contemplated by the Operative Documents against any Partners,
Shareholders or any of their respective Affiliates (other than the Borrower),
shareholders, officers, directors or employees (collectively the "Nonrecourse
Persons"); provided that (a) the foregoing provision of this Article 9 shall
not constitute a waiver, release or discharge of any of the indebtedness, or of
any of the terms, covenants, conditions, or provisions of this Agreement, any
other Security Document or Credit Document and the same shall continue (but
without personal liability to the Nonrecourse Person) until fully paid,
discharged, observed, or performed; (b) the foregoing provision of this Article
9 shall not limit or restrict the right of the Agent and/or the Banks or Hedge
Banks (or any assignee, beneficiary or successor to any of them) to name
Borrower or any other Person as a defendant in any action or suit for a
judicial foreclosure or for the exercise of any other remedy under or with
respect to this Agreement or any other Security Document or Credit Document, or
for injunction or specific performance, so long as no judgment in the nature of
a deficiency judgment shall be enforced against any Nonrecourse Person, except
as set forth in this Article 9, (c) the foregoing provision of this Article 9
shall not in any way limit or restrict any right or
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remedy of Agent and/or the Banks (or any assignee or beneficiary thereof or
successor thereto) with respect to, and each of the Nonrecourse Persons shall
remain fully liable to the extent that it would otherwise be liable for its own
actions with respect to, any fraud (which shall not include innocent or
negligent misrepresentation), willful misrepresentation, or misappropriation of
Project Revenues, Proceeds or any other earnings, revenues, rents, issues,
profits or proceeds from or of the Collateral that should or would have been
paid as provided herein or paid or delivered to Agent or any Bank (or any
assignee or beneficiary thereof or successor thereto) towards any payment
required under this Agreement or any other Credit Document; (d) the foregoing
provision of this Article 9 shall not affect or diminish or constitute a
waiver, release or discharge of any specific written obligation, covenant, or
agreement in respect of the Project made by any of the Nonrecourse Persons or
any security granted by the Nonrecourse Persons in support of the obligations
of such persons under any Equity Document or as security for the obligations of
the Borrower; and (e) nothing contained herein shall limit the liability of (i)
any Person who is a party to any Project Document or has issued any certificate
or other statement in connection therewith with respect to such liability as
may arise by reason of the terms and conditions of such Project Document (but
subject to any limitation of liability in such Project Document), certificate
or statement, or (ii) any Person rendering a legal opinion pursuant to Section
3.1.8, or otherwise, in each case under this clause (e) relating solely to such
liability of such Person as may arise under such referenced agreement,
instrument or opinion. The limitations on recourse set forth in this Article 9
shall survive the termination of this Agreement and the full payment and
performance of the Obligations hereunder and under the other Operative
Documents.
ARTICLE 10 - THE AGENT; SUBSTITUTION
10.1 Appointment, Powers and Immunities.
10.1.1 Each Bank hereby appoints and authorizes
Agent to act as its agent hereunder and under the other Credit Documents with
such powers as are expressly delegated to Agent by the terms of this Agreement
and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Credit Document, or be a trustee for any Bank. Notwithstanding anything
to the contrary contained herein Agent shall not be required to take any action
which is contrary to this Agreement or any other Credit Documents or any Legal
Requirement or exposes Agent to any liability. Each of Agent, the Banks and
any of their respective Affiliates shall not be responsible to any other Bank
for any recitals, statements, representations or warranties made by Borrower,
its Affiliates or Partners contained in this Agreement or in any certificate or
other document referred to or provided for in, or received by Agent, or any
Bank under this Agreement, for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, the Notes or any other
document referred to or provided for herein or for any failure by Borrower, its
Affiliates, its Partners or the Shareholders to perform their respective
obligations hereunder or thereunder. Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
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10.1.2 Agent and its respective directors, officers,
employees or agents shall not be responsible for any action taken or omitted to
be taken by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, except for its or their own gross negligence
or willful misconduct. Without limiting the generality of the foregoing, Agent
(a) may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by them in accordance
with the advice of such counsel, accountants or experts; (c) makes no warranty
or representation to any Bank for any statements, warranties or representations
made in or in connection with any Project Document or Credit Document; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of any Operative
Document on the part of any party thereto or to inspect the property (including
the books and records) of Borrower or any other Person; and (e) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Operative Document or
any other instrument or document furnished pursuant hereto. Except as
otherwise provided under this Agreement, Agent shall take such action with
respect to the Credit Documents as shall be directed by the Majority Banks.
10.2 Reliance by Agent. Agent shall be entitled to rely
upon any certificate, notice or other document (including any cable, telegram,
telecopy or telex) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by Agent. As to any other matters not expressly provided for by this
Agreement, Agent shall not be required to take any action or exercise any
discretion, but shall be required to act or to refrain from acting upon
instructions of the Majority Banks or, where expressly provided, the Required
Banks (except that Agent shall not be required to take any action which exposes
Agent to personal liability or which is contrary to this Agreement, any other
Credit Document or any Legal Requirement) and shall in all cases be fully
protected in acting, or in refraining from acting, hereunder or under any other
Credit Document in accordance with the instructions of the Majority Banks (or,
where so expressly stated, the Required Banks), and such instructions of the
Majority Banks (or Required Banks, where applicable) and any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.
10.3 Non-Reliance. Each Bank represents that it has,
independently and without reliance on Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of the financial condition and affairs of Borrower and decision to
enter into this Agreement and agrees that it will, independently and without
reliance upon Agent, or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not taking action under this Agreement.
Each of Agent and any Bank shall not be required to keep informed as to the
performance or observance by Borrower, its Affiliates or Partners under this
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of Borrower, its Affiliates
or Partners.
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10.4 Defaults. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Inchoate Default or Event of
Default unless Agent has received a notice from a Bank or Borrower, referring
to this Agreement, describing such Inchoate Default or Event of Default and
indicating that such notice is a notice of default. If Agent receives such a
notice of the occurrence of an Inchoate Default or Event of Default, Agent
shall give notice thereof to the Banks. Agent shall take such action with
respect to such Inchoate Default or Event of Default as is provided in Article
8 or if not provided for in Article 8, as Agent shall be reasonably directed by
the Majority Banks; provided, however, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Inchoate
Default or Event of Default as it shall deem advisable in the best interest of
the Banks.
10.5 Indemnification. Without limiting the Obligations of
Borrower hereunder, each Bank agrees to indemnify Agent, ratably in accordance
with their Proportionate Shares for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by or asserted against Agent in any way relating to or arising out
of this Agreement or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or the enforcement
of any of the terms hereof or thereof or of any such other documents; provided,
however, that no Bank shall be liable for any of the foregoing to the extent
they arise from Agent's gross negligence or willful misconduct. Agent shall be
fully justified in refusing to take or to continue to take any action hereunder
unless it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. Without limitation of the
foregoing, each Bank agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred
by Agent in connection with the preparation, execution, administration or
enforcement of, or legal advice in respect of rights or responsibilities under,
the Operative Documents, to the extent that Agent is not reimbursed for such
expenses by Borrower.
10.6 Successor Agent. Agent acknowledges that its current
intention is to remain Agent hereunder. Nevertheless, Agent may resign at any
time by giving written notice thereof to the Banks and Borrower. Agent may be
removed involuntarily only for a material breach of its duties and obligations
hereunder or under the other Credit Documents or for gross negligence or
willful misconduct in connection with the performance of its duties hereunder
or under the other Credit Documents and then only upon the affirmative vote of
the Majority Banks (excluding Agent from such vote and Agent's Proportionate
Share of the Commitment from the amounts used to determine the portion of the
Commitment necessary to constitute the required Proportionate Share of the
remaining Banks). Upon any such resignation or removal, the Majority Banks
shall have the right, with the consent of Borrower (such consent not to be
unreasonably withheld or delayed) to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Banks' removal of the retiring Agent,
the retiring Agent may, on behalf of the Banks, with the consent of Borrower
(such consent not to be
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unreasonably withheld or delayed), appoint a successor Agent, which shall be a
Bank, if any Bank shall be willing to serve, and otherwise shall be a
commercial bank having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Agent under the Operative Documents
by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations as Agent only under the Credit Documents. After any retiring
Agent's resignation or removal hereunder as Agent, the provisions of this
Article 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Operative Documents.
10.7 Authorization. Agent is hereby authorized by the
Banks to execute, deliver and perform each of the Credit Documents to which
Agent is or is intended to be a party and each Bank agrees to be bound by all
of the agreements of Agent contained in the Credit Documents. Agent is further
authorized by the Banks to release liens on property that Borrower is permitted
to sell or transfer pursuant to the terms of this Agreement, the other Credit
Documents or the Operative Documents, and to enter into agreements supplemental
hereto for the purpose of curing any formal defect, inconsistency, omission or
ambiguity in this Agreement or any Credit Document to which it is a party.
10.8 Agent. With respect to its Commitment, the Loans
made by it and any Note issued to it, Agent shall have the same rights and
powers under the Operative Documents as any other Bank and may exercise the
same as though it were not Agent. The term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include Agent in its individual capacity. Agent
and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with Borrower
or any other Person, without any duty to account therefor to the Banks.
10.9 Amendments; Waivers. Subject to the provisions of
this Section 10.9, unless otherwise specified in this Agreement or another
Credit Document, the Required Banks (or Agent with the consent in writing of
the Required Banks) and Borrower may enter into agreements supplemental hereto
for the purpose of adding, modifying or waiving any provisions to the Credit
Documents or changing in any manner the rights of the Banks or Borrower
hereunder or waiving any Inchoate Default or Event of Default; provided,
however, that no such supplemental agreement shall, without the consent of all
of the Banks:
10.9.1 Extend the maturity of any Loan or any of the
Notes or reduce the principal amount thereof, or reduce the rate or change the
time of payment of interest due on any Loan or any Notes; or
10.9.2 Extend the Construction Loan Maturity Date;
or
10.9.3 Modify Section 2.1.1(d), 2.5, 2.6, 2.7, 5.1,
5.18, 6.17, 6.22, 7.1 through 7.18, 8.1.13, 10.1, 10.13 or 10.14; or
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10.9.4 Reduce the amount or extend the payment date
for any amount due under Article 2, whether principal, interest, fees or other
amounts; or
10.9.5 Increase the amount of the Commitment of any
Bank hereunder; or
10.9.6 Reduce or change the time of payment of any
fee due or payable hereunder; or
10.9.7 Reduce the percentage specified in the
definition of Majority Banks or Required Banks; or
10.9.8 Permit Borrower to assign its rights under
this Agreement except as provided in Section 6.17, or permit a Transfer except
as provided in Section 8.1.14, or
10.9.9 Amend this Section 10.9; or
10.9.10 Release any Collateral from the Lien of any
of the Collateral Documents or allow release of any funds from any Account
otherwise than in accordance with the terms hereof.
No amendment of any provision of this Agreement relating to
Agent shall be effective without the written consent of Agent.
10.10 Withholding Tax.
10.10.1 Agent may withhold from any interest payment
to any Bank an amount equivalent to any applicable withholding tax. If the
forms or other documentation required by Section 2.5 are not delivered to
Agent, then Agent may withhold from any interest payment to any Bank not
providing such forms or other documentation, an amount equivalent to the
applicable withholding tax.
10.10.2 If the Internal Revenue Service or any
authority of the United States or other jurisdiction asserts a claim that Agent
did not properly withhold tax from amounts paid to or for the account of any
Bank (because the appropriate form was not delivered, was not properly
executed, or because such Bank failed to notify Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify Agent fully
for all amounts paid, directly or indirectly, by Agent as tax or otherwise,
including penalties and interest, together with all expenses incurred,
including legal expenses, allocated staff costs, and any out of pocket
expenses.
10.10.3 If any Bank sells, assigns, grants
participation in, or otherwise transfers its rights under this Agreement, the
purchaser, assignee, participant or transferee, as applicable, shall comply and
be bound by the terms of Sections 2.4.7, 10.10.1 and 10.10.2 as though it were
such Bank.
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10.11 General Provisions as to Payments. Agent shall
promptly distribute to each Bank, subject to the terms of the assignment and
assumption agreement between Agent and such Bank, its pro rata share of each
payment of principal and interest payable to the Banks on the Loans and of fees
hereunder received by Agent for the account of the Banks and of any other
amounts owing under the Loans. The payments made for the account of each Bank
shall be made, and distributed to it, for the account of (a) its domestic
lending office in the case of payments of principal of, and interest on, its
Base Rate Loans, (b) its domestic or foreign lending office, as each Bank may
designate in writing to Agent, in the case of LIBOR Loans, and (c) its domestic
lending office, or such other lending office as it may designate for the
purpose from time to time, in the case of payments of fees and other amounts
payable hereunder. Banks shall have the right to alter designated domestic
lending offices upon notice to Agent and Borrower.
10.12 Substitution of Bank. Should any Bank fail to make a
Loan in violation of its obligations under this Agreement (a "Non-Advancing
Bank"), Agent shall (a) in its sole discretion fund the Loan on behalf of the
Non-Advancing Bank or (b) cooperate with Borrower or any other Bank to find
another Person that shall be acceptable to Agent and that shall be willing to
assume the Non-Advancing Bank's obligations under this Agreement (including the
obligation to make the Loan which the Non-Advancing Bank failed to make but
without assuming any liability for damages for failing to have made such Loan
or any previously required Loan). Subject to the provisions of the next
following sentence, such Person shall be substituted for the Non-Advancing Bank
hereunder upon execution and delivery to Agent of an agreement acceptable to
Agent by such Person assuming the Non-Advancing Bank's obligations under this
Agreement, and all interest and fees which would otherwise have been payable to
the Non-Advancing Bank shall thereafter be payable to such Person. Nothing in
(and no action taken pursuant to) this Section 10.12 shall relieve the
Non-Advancing Bank from any liability it might have to Borrower or to the other
Banks as a result of its failure to make any Loan.
10.13 Participation. Nothing herein provided shall prevent
any Bank from selling a participation in its Commitment (and Loans made
thereunder) in an aggregate amount of at least $5,000,000 with respect to any
participant; provided that (a) no such sale of a participation shall alter such
Bank's or the Borrower's obligations hereunder, (b) any agreement pursuant to
which any Bank may grant a participation in its rights with respect to its
Commitment (and Loans) shall provide that, with respect to such Commitment (and
Loans), subject to the following proviso, such Bank shall retain the sole right
and responsibility to exercise the rights of such Bank, and enforce the
obligations of Borrower relating to such Commitment (and Loans), including the
right to approve any amendment, modification or waiver of any provision of this
Agreement or any other Bank Document and the right to take action to have the
Notes declared due and payable pursuant to Article 8; provided, however, that
such agreement may provide that the participant may have rights to approve or
disapprove decreases in interest rates or fees, lengthening of maturity of any
Loans, or release of any material Collateral. No recipient of a participation
in any Commitment or Loans of any Bank shall have any rights under this
Agreement or shall be entitled to any reimbursement for Taxes, Other Taxes
increased costs or reserve requirements under Sections 2.4 or 2.6 or any other
indemnity or payment rights against the Borrower (but shall be permitted to
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receive from the Bank granting such participation a proportionate amount which
would have been payable to the Bank from whom such Person acquired its
participation).
10.14 Transfer of Commitment. Notwithstanding anything
else herein to the contrary, any Bank, after receiving Agent's prior written
consent, and after reasonable notice to and consultation with Borrower, may
from time to time, at its option, sell, assign, transfer, negotiate or
otherwise dispose of a portion of its Commitment (and Loans made thereunder)
(including the Bank's interest in this Agreement and the other Credit
Documents) to any bank or other lending institution which in such assigning
Bank's judgment is reasonably capable of performing the obligations of a Bank
hereunder and reasonably experienced in project financing; provided, however,
that no Bank (including any assignee of any Bank) may assign any portion of its
Commitment (including Loans) of less than $5,000,000 (unless to another Bank)
or which leaves the assigning Bank with a Commitment (including Loans) of less
than $5,000,000 after giving effect to such assignment and all previous
assignments (except that a Bank may be left with no Commitment and Loans if it
assigns its entire Commitment and Loans). In the event of any such assignment,
(a) the assigning Bank's Proportionate Share shall be reduced by the amount of
the Proportionate Share assigned to the new lender, (b) the parties to such
assignment shall execute and deliver an appropriate agreement evidencing such
sale, assignment, transfer or other disposition, (c) at the assigning Bank's
option, Borrower shall execute and deliver to such new lender new Notes in the
forms attached hereto as Exhibits B-1 or Exhibit B-2, as appropriate, in a
principal amount equal to such new lender's Commitment, and Borrower shall
execute and exchange with the assigning Bank a replacement note for any Note in
an amount equal to the Commitment retained by the Bank, if any and (d) Agent
may amend Exhibit H attached hereto to reflect the Proportionate Shares of the
Banks following such assignment. Thereafter, such new lender shall be deemed
to be a Bank and shall have all of the rights and duties of a Bank (except as
otherwise provided in this Article 10), in accordance with its Proportionate
Share, under each of the Credit Documents.
10.15 Laws. Notwithstanding the foregoing provisions of
this Article 10, no sale, assignment, transfer, negotiation or other
disposition of the interests of any Bank hereunder or under the other Credit
Documents shall be allowed if it would require registration under the federal
Securities Act of 1933, as then amended, any other federal securities laws or
regulations or the securities laws or regulations of any applicable
jurisdiction. Borrower shall, from time to time at the request and expense of
Agent, execute and deliver to Agent, or to such party or parties as Agent may
designate, any and all further instruments as may in the opinion of Agent be
reasonably necessary or advisable to give full force and effect to such
disposition.
10.16 Assignability to Federal Reserve Bank.
Notwithstanding any other provision contained in this Agreement or any other
Credit Document to the contrary, any Bank may assign all or any portion of the
Loans or Notes held by it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such
assigned Loans or Notes made by Borrower to or for the account of the assigning
and/or pledging Bank in accordance with the terms of this
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Agreement shall satisfy Borrower's obligations hereunder in respect of such
assigned Loans or Notes to the extent of such payment. No such assignment
shall release the assigning Bank from its obligations hereunder.
ARTICLE 11 - INDEPENDENT CONSULTANTS
11.1 Removal and Fees. Agent, in its reasonable
discretion, may remove from time to time, any one or more of the Independent
Consultants and, after consulting with Borrower as to an appropriate Person,
appoint replacements as Agent may choose. Notice of any replacement
Independent Consultant shall be given by Agent to Borrower, the Banks and to
the Independent Consultant being replaced. All reasonable fees and expenses of
the Independent Consultants (whether the original ones or replacements) shall
be paid by Borrower.
11.2 Duties. Each Independent Consultant shall be
contractually obligated to Agent to carry out the activities required of it in
this Agreement and as otherwise requested by Agent and shall be responsible
solely to Agent. Borrower acknowledges that it will not have any cause of
action or claim against any Independent Consultant resulting from any decision
made or not made, any action taken or not taken or any advice given by such
Independent Consultant in the due performance in good faith of its duties to
Agent, except to the extent arising from such Independent Consultant's gross
negligence or willful misconduct.
11.3 Independent Consultants' Certificates.
11.3.1 Until the receipt by Agent of certificates
satisfactory to Agent from each Independent Consultant whom Agent considers
necessary or appropriate certifying Completion, Borrower shall provide such
documents and information to the Independent Consultants as any of the
Independent Consultants may reasonably consider necessary in order for the
Independent Consultants to deliver to Agent the following certificates:
(a) certificates of the Insurance
Consultant, Independent Engineer, Fuel Consultant and Power Marketing
Consultant delivered on and dated as of the Closing Date as described in
Sections 3.1.9, 3.1.11, 3.1.12, 3.1.13 and 3.1.14, respectively, and containing
the matters set out therein;
(b) after the Closing Date, all
certificates to be delivered pursuant to Section 3.2.4 or, if no Loan has taken
place in any month, certificates delivered at the end of the month as to the
matters required by Exhibit C-5; and
(c) monthly after the Closing Date, a
full report and status of the progress of the Project to that date, a complete
assessment of Project Costs to Final Completion and such other information and
certification as Agent may reasonably require from time to time.
11.3.2 Following Completion, Borrower shall provide
such documents and information to the Independent Consultants as they may
reasonably consider necessary in order
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for the Independent Consultants to deliver annually to Agent a certificate
setting forth a full report on the status of the Project and such other
information and certification as Agent may reasonably require from time to
time.
11.4 Certification of Dates. Agent will request that the
Independent Consultants act diligently in the issuance of all certificates
required to be delivered by the Independent Consultants hereunder, if their
issuance is appropriate. Borrower shall provide the Independent Consultants
with reasonable notice of the expected occurrence of any such dates or events.
ARTICLE 12 - MISCELLANEOUS
12.1 Addresses.
Any communications between the parties hereto or notices
provided herein to be given may be given to the following addresses:
If to Agent: ING (U.S.) Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Manager, Project Finance
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: Pasadena Cogeneration L.P.
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Asset Manager and General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be considered as properly
given (a) if delivered in person, (b) if sent by overnight delivery service
(including Federal Express, ETA, ▇▇▇▇▇, DHL, AirBorne and other similar
overnight delivery services), (c) in the event overnight delivery services are
not readily available, if mailed by first class United States Mail, postage
prepaid, registered or certified with return receipt requested or (d) if sent
by prepaid telegram, or by telecopy confirmed by telephone. Notice so given
shall be effective upon receipt by the addressee, except that communication or
notice so transmitted by telecopy or other direct written electronic means
shall be deemed to have been validly and effectively given on the day (if a
Banking Day and, if not, on the next following Banking Day) on which it is
transmitted if transmitted before 4:00 p.m., recipient's time, and if
transmitted after that time, on the next following Banking Day; provided,
however, that if any notice is tendered to an addressee and the delivery
thereof is refused by such addressee, such notice shall be effective upon such
tender. Any party shall have the right to change its address
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for notice hereunder to any other location within the continental United States
by giving of 30 days' notice to the other parties in the manner set forth
hereinabove.
12.2 Additional Security; Right to Set-Off. Any deposits
or other sums at any time credited or due from Banks and any Project Revenues,
securities or other property of Borrower in the possession of Agent may at all
times be treated as collateral security for the payment of the Loans and the
Notes and all other obligations of Borrower to Banks under this Agreement and
the other Credit Documents, and Borrower hereby pledges to Agent for the
benefit of the Banks and grants Agent a security interest in and to all such
deposits, sums, securities or other property. Regardless of the adequacy of
any other collateral, Agent and only Agent, may execute or realize on the
Banks' security interest in any such deposits or other sums credited by or due
from Banks to Borrower, may apply any such deposits or other sums to or set
them off against Borrower's obligations to Banks under the Notes and this
Agreement at any time after the occurrence and during the continuance of any
Event of Default.
12.3 Delay and Waiver. No delay or omission to exercise
any right, power or remedy accruing to the Banks upon the occurrence of any
Event of Default or Inchoate Default or any breach or default of Borrower under
this Agreement or any other Credit Document shall impair any such right, power
or remedy of the Banks, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereafter occurring, nor shall any waiver of any single Event of
Default, Inchoate Default or other breach or default be deemed a waiver of any
other Event of Default, Inchoate Default or other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind
or character on the part of Agent and/or the Banks of any Event of Default,
Inchoate Default or other breach or default under this Agreement or any other
Credit Document, or any waiver on the part of Agent and/or the Banks of any
provision or condition of this Agreement or any other Credit Document, must be
in writing and shall be effective only to the extent in such writing
specifically set forth. All remedies, either under this Agreement or any other
Credit Document or by law or otherwise afforded to Agent, LC Bank and the
Banks, shall be cumulative and not alternative.
12.4 Costs, Expenses and Attorneys' Fees; Syndication.
12.4.1 Borrower will pay to Agent all of its
reasonable costs and expenses in connection with the preparation, negotiation,
closing and administering this Agreement and the documents contemplated hereby
and any participation or syndication of the Loans, including the reasonable
fees, expenses and disbursements of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and other attorneys
retained by Agent in connection with the preparation of such documents and any
amendments hereof or thereof, or the preparation, negotiation, closing,
administration, enforcement, participation or syndication of the Loans or this
Agreement, the reasonable fees, expenses and disbursements of the Independent
Consultants and any other engineering, insurance and construction consultants
to Agent incurred in connection with this Agreement or the Loans subsequent to
the Closing Date, and the travel and out-of-pocket costs incurred by Agent
following the Closing Date, and Borrower further agrees to pay Agent the
out-of-pocket costs and travel costs incurred by Agent
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in connection with syndication of the Loans; provided, however, Borrower shall
not be required to pay advertising costs of any of the Banks or the fees of the
Banks' (other than Agent's) attorneys. Borrower will reimburse Agent for all
costs and expenses, including reasonable attorneys' fees, expended or incurred
by Agent in enforcing this Agreement or the other Credit Documents in
connection with an Event of Default or Inchoate Default, in actions for
declaratory relief in any way related to this Agreement or in collecting any
sum which becomes due Agent on the Notes or under the Credit Documents.
12.4.2 In connection with syndication of the Loans
and Commitments, an information package containing certain relevant information
concerning Borrower, the Project and the other Project participants will be
provided to potential Banks and participants. Borrower agrees to cooperate and
to cause the Partners and the Shareholders to cooperate in the syndication of
the Loans and Commitments in all respects reasonably requested by Agent,
including participation in bank meetings held in connection with such
syndication, and to provide, for inclusion in such package, all information
which Agent may request from it or which Agent or Borrower may consider
material to a lender or participant, or necessary or appropriate for accurate
and complete disclosure. Upon request of Agent, Borrower shall represent to
Agent, and indemnify Agent for claims relating to, the accuracy and
completeness of such disclosure, upon terms acceptable to Agent.
12.5 Entire Agreement. This Agreement and any agreement,
document or instrument attached hereto or referred to herein integrate all the
terms and conditions mentioned herein or incidental hereto and supersede all
oral negotiations and prior writings in respect to the subject matter hereof.
In the event of any conflict between the terms, conditions and provisions of
this Agreement and any such agreement, document or instrument, the terms,
conditions and provisions of this Agreement shall prevail. This Agreement and
the other Credit Documents may only be amended or modified by an instrument in
writing signed by Borrower, Agent and any other parties to such agreements.
12.6 Governing Law. This Agreement, and any instrument or
agreement required hereunder (to the extent not otherwise expressly provided
for therein), shall be governed by, and construed under, the laws of the State
of New York, without reference to conflicts of laws (other than Section 5-1401
of the New York General Obligations Law).
12.7 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
12.8 Headings. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only and it is agreed
that such paragraph headings are not a part of this Agreement and shall not be
used in the interpretation of any provision of this Agreement.
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12.9 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and
practices consistent with those applied in the preparation of the financial
statements submitted by Borrower to Agent, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles
and practices.
12.10 Additional Financing. The parties hereto acknowledge
that the Banks have made no agreement or commitment to provide any financing
except as set forth herein.
12.11 No Partnership, Etc. The Banks and Borrower intend
that the relationship between them shall be solely that of creditor and debtor.
Nothing contained in this Agreement, the Notes or in any of the other Credit
Documents shall be deemed or construed to create a partnership,
tenancy-in-common, joint tenancy, joint venture or co-ownership by or between
the Banks and Borrower or any other Person. The Banks shall not be in any way
responsible or liable for the debts, losses, obligations or duties of Borrower
or any other Person with respect to the Project or otherwise. All obligations
to pay real property or other taxes, assessments, insurance premiums, and all
other fees and charges arising from the ownership, operation or occupancy of
the Project and to perform all obligations and other agreements and contracts
relating to the Project shall be the sole responsibility of Borrower.
12.12 Deed of Trust/Collateral Documents. The Loans are
secured in part by the Deed of Trust encumbering certain properties in the
State of Texas. Reference is hereby made to the Deed of Trust and the other
Collateral Documents for the provisions, among others, relating to the nature
and extent of the security provided thereunder, the rights, duties and
obligations of Borrower and the rights of Agent and the Banks with respect to
such security.
12.13 Limitation on Liability. No claim shall be made by
Borrower, any Partner or any of their Affiliates against the Banks or any of
their Affiliates, directors, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any breach or
wrongful conduct (whether or not the claim therefor is based on contract, tort
or duty imposed by law), in connection with, arising out of or in any way
related to the transactions contemplated by this Agreement or the other
Operative Documents or any act or omission or event occurring in connection
therewith except to the extent that any such claims are caused by the gross
negligence or willful misconduct of the Banks; and Borrower hereby waives,
releases and agrees not to ▇▇▇ upon any such claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
12.14 Waiver of Jury Trial. THE BANKS AND BORROWER HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR
ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), OR ACTIONS OF THE
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BANKS OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANKS TO
ENTER INTO THIS AGREEMENT.
12.15 Consent to Jurisdiction. The Banks and Borrower
agree that any legal action or proceeding by or against Borrower or with
respect to or arising out of this Agreement, the Notes, or any other Credit
Document may be brought in or removed to the courts of the State of New York,
in and for the County of New York, or of the United States of America for the
Southern District of New York, as Agent may elect. By execution and delivery
of the Agreement, the Banks and Borrower accept, for themselves and in respect
of their property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Banks and Borrower irrevocably consent to the service of
process out of any of the aforementioned courts in any manner permitted by law.
Nothing herein shall affect the right of Agent to bring legal action or
proceedings in any other competent jurisdiction, including judicial or
non-judicial foreclosure of the Deed of Trust. Notwithstanding the foregoing,
service of process shall not be deemed served or mailed to Agent or the Banks
until a copy of all matters to be served have be mailed to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or such other Person as Agent or the Banks may hereafter designate by notice
given pursuant to Section 12.1. The Banks and Borrower further agree that the
aforesaid courts of the State of New York and of the United States of America
shall have exclusive jurisdiction with respect to any claim or counterclaim of
Borrower based upon the assertion that the rate of interest charged by the
Banks on or under this Agreement, the Loans and/or the other Credit Documents
is usurious. The Banks and Borrower hereby waive any right to stay or dismiss
any action or proceeding under or in connection with any or all of the Project,
this Agreement or any other Credit Document brought before the foregoing courts
on the basis of forum non-conveniens.
12.16 Usury. Nothing contained in this Agreement or the
Notes shall be deemed to require the payment of interest or other charges by
Borrower or any other Person in excess of the amount which the holders of the
Notes may lawfully charge under any applicable usury laws. In the event that
the holders of the Notes shall collect moneys which are deemed to constitute
interest which would increase the effective interest rate to a rate in excess
of that permitted to be charged by applicable law, all such sums deemed to
constitute interest in excess of the legal rate shall, upon such determination,
at the option of the holder of the Notes, be returned to Borrower or credited
against the principal balance of the Notes then outstanding.
12.17 Knowledge and Attribution. References in this
Agreement and the other Credit Documents to the "knowledge," "best knowledge"
or facts and circumstances "known to" Borrower, and all like references, mean
facts or circumstances of which a Responsible Officer of Borrower or a Partner
has actual knowledge.
12.18 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Borrower may not assign or
otherwise transfer any of its rights under this Agreement except as provided in
Section 6.17, and the Banks may not assign or otherwise transfer any of their
rights under this Agreement except as provided in Article 10.
105
118
12.19 Counterparts. This Agreement may be executed in one
or more duplicate counterparts and when signed by all of the parties listed
below shall constitute a single binding agreement.
106
119
IN WITNESS WHEREOF, the parties have caused this Credit
Agreement to be duly executed by their officers or partners thereunto duly
authorized as of the day and year first above written.
PASADENA COGENERATION L.P.,
a Delaware limited partnership
By: Calpine Pasadena Cogeneration, Inc.,
a Delaware corporation,
its General Partner
By:
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Name:
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Title:
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ING (U.S.) CAPITAL CORPORATION,
as Agent
By:
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Name:
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Title:
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By:
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Name:
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Title:
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120
ING (U.S.) CAPITAL CORPORATION,
as Bank
By:
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Name:
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Title:
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By:
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Name:
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Title:
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