Exhibit 10.33
EXECUTION VERSION
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CONSTRUCTION CONTRACT UNDERTAKING
by
TECO ENERGY, INC.,
a corporation organized and existing under the laws of Florida
as TECO
in favor of
PANDA GILA RIVER, L.P.,
a Delaware limited partnership
as Borrower
and
CITIBANK, N.A.,
as Administrative Agent under
the Gila River Project Credit Agreement
dated as of January 16, 2002
Exhibit 10.33
CONSTRUCTION CONTRACT UNDERTAKING
THIS CONSTRUCTION CONTRACT UNDERTAKING, dated as of January 16, 2002 (as
amended, supplemented or otherwise modified from time to time, this
"Undertaking"), made by TECO ENERGY, INC., a corporation organized and existing
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under the laws of Florida ("TECO"), in favor of PANDA GILA RIVER, L.P., a
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Delaware limited partnership ("Borrower") and CITIBANK, N.A., as administrative
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agent for the Banks under the Credit Agreement described below ("Administrative
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Agent" and, together with Borrower, the "Beneficiaries").
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RECITALS
A. Borrower intends to construct and either own or lease the Project.
B. Pursuant to the Gila River Project Credit Agreement, dated as of May 31,
2001 (the "Credit Agreement"), among Borrower, LC Bank, the Banks and
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Administrative Agent, the Banks have agreed to provide Loans and issue Letters
of Credit in the amounts specified and on the terms and subject to the
conditions set forth therein.
C. Pursuant to the Construction Contract, Contractor has agreed to provide
certain design, engineering, procurement, construction, start-up and testing
services with respect to the Project at a price and on the terms and subject to
the conditions set forth therein.
D. TECO, as the indirect owner of 50% of the Equity Interests of Borrower,
will derive substantial economic benefit from the Loans and Letters of Credit to
be made by the Banks to Borrower pursuant to the Credit Agreement.
E. Administrative Agent and the Banks have agreed to approve and or make
certain amendments to the Operative Documents on the condition that TECO enter
into this Undertaking with respect to certain obligations of Contractor under
the Construction Contract as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and to induce the Banks to
continue to provide Loans and issue the Letters of Credit pursuant to the Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, TECO hereby agrees as follows:
ARTICLE I
DEFINITIONS.
Unless the context shall otherwise require, capitalized terms used but not
defined herein (including the Recitals) are used as defined in the Credit
Agreement and, except as otherwise expressly provided, the Rules of
Interpretation set forth in Exhibit A to the Credit Agreement shall apply to
this Undertaking. In addition, unless the context shall otherwise require, as
used herein the following terms shall have the following meanings:
"Actual Construction Cost" means the aggregate amounts required to be
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paid to Contractor, Subcontractors and other Persons (i) to complete the work
required by the Contractor under the Construction Contract, (ii) to provide
oversight and auditing of the Contractor in addition to that contemplated in the
original Project Budget or (iii) in connection with the preparation and
execution of the First Amendment to Credit Agreement. The amounts paid as Actual
Construction Cost shall include, and be limited to: (i) the Separated Contract
Price; (ii) any other amounts which may be owed to the Contractor and any
Subcontractor for completion of the work required by the Contractor under the
Construction Contract; (iii) reasonable costs paid to the Independent Engineer
to monitor the work performed under the Construction Contract; (iv) reasonable
costs of personnel to provide management and engineering oversight of the work
performed under the Construction Contract; (v) reasonable legal and accounting
work required to monitor and audit work performed under the Construction
Contract and payments made to the Contractor and Subcontractors; and (vi) costs
to prepare and execute the First Amendment to Credit Agreement.
"Capitalization" means, as to TECO, the sum of Total Debt and
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Consolidated Shareholders Equity, in each case, as at the date of any
determination thereof.
"Capitalized Lease Obligations" means, as to any Person, all rental
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obligations as lessee which, under GAAP, are or will be required to be
capitalized on the books of such Person, in each case taken at the amount
thereof accounted for as indebtedness in accordance with GAAP.
"Collateral Documents" means the "Collateral Documents" referred to in
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the Credit Agreement and the Bridge Loan Agreement.
"Commercial Operation" has the meaning given in the Construction
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Contract.
"Consolidated Adjusted Interest Expense" means, for any period, the
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sum of Interest Expense (a) of TECO and its subsidiaries and (b) accruing on any
Indebtedness of any other Person to the extent such Indebtedness is guaranteed
by TECO or any of its subsidiaries, but excluding any Interest Expense (i) on
Non-Recourse Indebtedness; and (ii) on Indebtedness of a Person before the date
(A) it becomes a subsidiary of TECO, (B) it is merged or consolidated with TECO
or (C) a subsidiary of TECO or its assets are acquired by TECO to the extent
that income or loss of such Person is excluded under the definition of
Consolidated Adjusted Net Income, each determined for such period on a
consolidated basis in accordance with GAAP.
"Consolidated Adjusted Net Income" means, for any period, the net
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income or loss of TECO and its subsidiaries for such period determined on a
consolidated basis in accordance with GAAP (and before giving effect to any
elimination of minority interests in non-wholly owned subsidiaries); provided
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that there shall be excluded the income or loss of any Person accrued before (a)
the date it becomes a subsidiary of TECO, (b) the date it is merged into or
consolidated with TECO or any subsidiary of TECO or (c) the date its assets are
acquired by TECO or any subsidiary of TECO, other than amounts of income accrued
before such date which are actually paid as dividends after such date.
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"Consolidated EBITDA" means, for any period, Consolidated Adjusted Net
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Income for such period plus (a) without duplication and to the extent deducted
in determining such Consolidated Adjusted Net Income, the sum of (i)
Consolidated Adjusted Interest Expense for such period, (ii) consolidated income
tax expense for such period, (iii) all amounts attributable to depreciation and
amortization for such period and (iv) any extraordinary non-cash charges for
such period, and minus (b) without duplication and to the extent included in
determining such Consolidated Adjusted Net Income, any extraordinary gains for
such period, all determined on a consolidated basis in accordance with GAAP.
"Consolidated Shareholders Equity" means, as of the date of any
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determination, the consolidated tangible net worth of TECO and its subsidiaries,
and including amounts attributable to (a) junior subordinated debentures;
provided that such junior subordinated debentures have subordination and
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deferral features substantially similar to those in the TECO Subordinated
Debentures; and (b) preferred stock to the extent excluded from Total Debt,
minus the value of minority interests in any of TECO's subsidiaries, and
disregarding unearned compensation associated with TECO's employee stock
ownership plan or other benefit plans, foreign currency translation adjustments
and other comprehensive income adjustments, all determined in accordance with
GAAP.
"Contingent Obligation" means, as to any Person, any obligation of
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such Person guaranteeing any Indebtedness or lease obligation (each a "primary
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obligation") of any other Person (the "primary obligor") in any manner, whether
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directly or indirectly, including any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor or (c) otherwise to
assure or hold harmless the holder of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall
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not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be the maximum probable liability in respect thereof (assuming such
Person is required to perform thereunder) as determined in good faith by TECO.
"El Dorado Bridge Loan" has the meaning given to the term "Bridge
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Loan" in Exhibit A to the El Dorado Bridge Loan Agreement.
"El Dorado Obligations" means all "Obligations" of El Dorado Borrower
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under, and as defined in, the El Dorado Credit Agreement.
"El Dorado Partners" has the meaning given to the term "Partners" in
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Exhibit A to the El Dorado Credit Agreement.
"El Dorado Undertaking" means the Construction Contract Undertaking,
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dated as of January 16, 2002, by TECO in favor of El Dorado Administrative Agent
and El Dorado Borrower.
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"Equity Interests" means (a) shares of capital stock, partnership
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interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person or (b) any
warrants, options or other rights to acquire such shares or interests.
"Final Acceptance" has the meaning given to such term in the
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Construction Contract.
"First Amendment to Credit Agreement" means the First Amendment to
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Credit Agreement and Waiver, dated as of January 16, 2002, among Borrower,
Administrative Agent (on behalf of the Banks) and LC Bank.
"Hedge Transactions" means transactions under any interest swap
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agreements, caps, collars or other interest rate hedging mechanisms.
"Indebtedness" of any Person means, without duplication, (a) all
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indebtedness of such Person for borrowed money, (b) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (c) the face amount of all
letters of credit issued for the account of such Person (other than letters of
credit issued to secure a financial obligation of such Person to the extent such
obligation is not outstanding at the time) and all unreimbursed drafts drawn
thereunder, (d) all Indebtedness of another Person secured by any Lien on any
property owned by such Person, whether or not such Indebtedness has been assumed
by such Person, (e) all Capitalized Lease Obligations of such Person, (f) all
obligations of such Person under any subscription or similar agreement, (g) the
discounted present value of all obligations of such Person (other than Tampa
Electric) payable under agreements for the payment of a specified purchase price
for the purchase and resale of power whether or not delivered or accepted, i.e.,
take-or-pay and similar obligations, (h) any unfunded or underfunded obligation
subject to the minimum funding standards of Section 412 of the Code of such
Person to any "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) maintained at any time, or contributed to, by such Person or any other
Person which is under common control (within the meaning of Section 414(b) or
(c) of the Code) with such Person, (i) all Contingent Obligations of such Person
and (j) all obligations of such Person in respect of Hedge Transactions;
provided, however, that Indebtedness shall specifically exclude accounts payable
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arising in the ordinary course of business.
"Interest Expense" means, with respect to any Person, for any period,
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total cash interest expense of such Person payable for such period with respect
to all outstanding Indebtedness of such Person, including all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs under hedging agreements to the
extent such net costs are allocable to such period in accordance with GAAP.
"LC Issuer" means the bank or banks issuing an Undertaking Letter of
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Credit.
"Non-Recourse Indebtedness" means Indebtedness which is not an
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obligation of, and is otherwise without recourse to, the assets or revenues of
TECO or any subsidiary of TECO (other than the assets or revenues of TPS or any
subsidiary of TPS).
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"Owner Caused Delay" has the meaning given to such term in the
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Construction Contract.
"Performance Liquidated Damages" has the meaning given to such term in
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the Construction Contract.
"Pre-Bankruptcy EPC Cost" means the sum of (a) the Separated Contract
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Price in effect on November 30, 2001, and (b) the aggregate amount of change
orders and other engineering, procurement and construction cost adjustments
pending on November 30, 2001, which as of such date was equal to $903,175,311.
"Required Final Acceptance Date" has the meaning given to such term in
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the Construction Contract.
"Schedule Liquidated Damages" has the meaning given to such term in
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the Construction Contract.
"Separated Contract Price" has the meaning given to such term in the
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Construction Contract, which (after giving effect to the second amendment to the
Construction Contract dated as of December 3, 2001 and the clarification letter
to the Construction Contract dated as of January 11, 2002) is equal to
$887,350,746.
"Significant Subsidiary" means, collectively, Tampa Electric Company,
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TPS and any other subsidiary of TECO formed or acquired after the Closing Date
the total assets (after intercompany eliminations) of which exceed 10% of the
total assets of TECO and its subsidiaries (taken as a whole).
"Subcontractors" means Subcontractors and Vendors, each as defined in
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the Construction Contract.
"Substitute Guarantor Date" means the date on which (x) an entity
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reasonably satisfactory to the Majority Banks acquires Contractor or its direct
or indirect parent, merges with Contractor or its direct or indirect parent and
is the surviving entity and, in each case, assumes the obligations of Enron
under the Parent Guaranty entered into by Enron and (y) an entity reasonably
satisfactory to the Majority Banks assumes the obligations set forth in Sections
2.1(c) and (d) of this Undertaking or the Majority Banks determine that such
assumption is not necessary.
"Supported Obligations" has the meaning given in Section 2.1(a).
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"Taxes" means any present or future tax, levy, impost, duty, charge,
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assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Undertaking other than any income, franchise or
similar tax imposed upon or measured by the gross or net income or capital of
either Beneficiary by the United States, New York State, any jurisdiction where
such Beneficiary is organized and/or any other jurisdiction with the ability to
levy such taxes on such Beneficiary.
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"TECO Event of Default" has the meaning given in Section 5.1.
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"TECO Material Adverse Effect" means:
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(a) a material adverse change in the business, property, results
of operations, or financial condition of TECO and its Significant
Subsidiaries (taken as a whole); or
(b) any event or occurrence of whatever nature which materially
and adversely changes TECO's ability to perform its obligations under this
Undertaking,
provided that a change in any Beneficiary's or any of the Beneficiary's
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consultant's view of the future price of electricity or gas will not
constitute a TECO Material Adverse Effect.
"TECO Subordinated Debentures" means the 8.50% Junior Subordinated
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Notes Due 2041, issued by TECO on December 20, 2000, in the original principal
amount of $206,200,000.
"Total Debt" means, without duplication, Indebtedness of TECO and its
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Significant Subsidiaries determined on a consolidated basis outstanding at the
date of any determination thereof, but expressly excluding (a) Non-Recourse
Indebtedness, (b) junior subordinated debentures issued by TECO; provided that
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such junior subordinated debentures have subordination and deferral features
substantially similar to those in the TECO Subordinated Debentures, and (c)
preferred stock of TECO in an amount not to exceed 10% of TECO's Capitalization
on such date.
"Trans-Union Partners" means each of Trans-Union Interstate Pipeline
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I, LLC and Trans-Union Interstate Pipeline II, LLC, each a Delaware limited
liability company.
"Undertaking Letter of Credit" means one or more letters of credit as
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security for the Supported Obligations, which letter(s) of credit shall: (a) be
in an aggregate amount at all times greater than or equal to the then-applicable
Undertaking Limit plus the aggregate then-unfunded amount set forth on Schedule
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1 attached hereto less the aggregate amount (drawn and undrawn) of the retainage
letter of credit provided by TECO pursuant to Section 2.1(b)(i), or such lesser
amount as is satisfactory to the Majority Banks; (b) be issued by a bank or
banks who are not a party to the Credit Documents and whose long term senior
unsecured indebtedness is rated at least A by S&P and A2 by Moody's and are
otherwise reasonably acceptable to Administrative Agent; (c) have an initial
expiration date of at least 60 days beyond the Required Final Acceptance Date
(or an earlier expiration date if such Undertaking Letter of Credit permits
Administrative Agent to draw thereon the full stated amount of such Undertaking
Letter of Credit in the event such Undertaking Letter of Credit has not been
renewed within 30 days of the then-applicable expiration date or a substitute
Undertaking Letter of Credit has not then been provided); (d) not be secured by
any of the Collateral; (e) allow Administrative Agent to draw upon such
Undertaking Letter of Credit in the event that no agreement for a replacement
Undertaking Letter of Credit has been made within 15 days after a bank providing
such
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Undertaking Letter of Credit is downgraded below A by S&P or A2 by Moody's; and
(f) have an "applicant" or "account party" other than Borrower or El Dorado
Borrower.
"Undertaking Limit" means, at any time and from time to time, the
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then-applicable Separated Contract Price (as such amount may be adjusted from
time to time pursuant to the terms of the Construction Contract); provided that
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the Undertaking Limit shall be reduced by fifty percent (50%) of one quarter of
the Separated Contract Price upon achieving Commercial Operation of each Phase.
ARTICLE II
THE UNDERTAKING.
2.1 Undertaking.
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(a) TECO hereby unconditionally and irrevocably:
(i) guarantees (as primary obligor and not as surety), in favor
of the Beneficiaries, the prompt performance in full of all performance (in the
case of each reference to "performance" herein, to cause performance through
TECO's causing another party to perform Contractor's performance obligations
strictly in accordance with the terms of the Construction Contract) and payment
obligations of Contractor under the Construction Contract strictly in accordance
with the terms set forth in the Construction Contract (except as expressly set
forth herein) (such obligations being collectively referred to herein as the
"Supported Obligations");
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(ii) agrees that (A) if for any reason whatsoever Contractor
shall fail or be unable to perform or pay in full any of the Supported
Obligations as and when required or due, TECO will promptly perform or pay the
same without regard to any exercise or non-exercise by any Beneficiary of any
right, remedy, power or privilege under or in respect of the Construction
Contract, and (B) in the case of any extension of time of the performance,
payment or renewal of any of the Supported Obligations pursuant to the terms of
the Construction Contract and, if necessary, the Credit Documents, the same will
be promptly performed or paid in full when required or due in accordance with
the terms of such extension or renewal, in each case, except as set forth in
Section 2.1(c) hereof, by expending an aggregate amount up to the
then-applicable Undertaking Limit; and
(iii) agrees that if, notwithstanding the representation and
warranty set forth in Section 3.11 hereof or anything to the contrary herein,
enforcement of the liability of TECO hereunder for the full amount of the
Supported Obligations would be an unlawful or voidable transfer under any
applicable fraudulent conveyance or fraudulent transfer law or any comparable
law, then the liability of TECO hereunder shall be reduced to the highest amount
for which such liability may then be enforced without giving rise to an unlawful
or voidable transfer under any such law.
(b) In fulfilling its obligations hereunder with respect to the
Supported Obligations, TECO hereby irrevocably and unconditionally guarantees,
promises and agrees to perform and comply with the Construction Contract. The
words "perform and comply with" are used in their most comprehensive sense and
include without limitation (x) the payment of all
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costs and expenses with respect to the achievement of Final Acceptance of the
Project within the time and in the manner set forth in the Construction
Contract, (y) the payment, satisfaction or discharge of all Liens arising out
of, or relating to, any work associated with the Construction Contract or any
subcontracts related thereto that are or may be imposed upon or asserted against
the Project and (z) the defense and indemnification of the Beneficiaries against
all such Liens, whether arising from the furnishing of labor, materials,
supplies or equipment, from taxes, assessments, fees or other charges, from
injuries or damage to persons or property, or otherwise, in each case, except as
provided in clause (ii) below and Section 2.1(c), as and to the extent required
by the terms of the Construction Contract. Without limiting the generality of
the foregoing, TECO agrees:
(i) to obtain and maintain in favor of, and deliver to, the
Beneficiaries as security for the performance of its obligations hereunder the
revolving letter of credit referred to in Section 11.11 of the Construction
Contract having a stated amount at all times in accordance with Schedule 2
attached hereto;
(ii) to pay from TECO's own resources up to the then-applicable
Undertaking Limit, Schedule Liquidated Damages and Performance Liquidated
Damages as and when due under the Construction Contract; provided, however,
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notwithstanding the limits on Schedule Liquidated Damages set forth in Section
11.07(c) of the Construction Contract applicable to Contractor, TECO shall be
obligated to pay Schedule Liquidated Damages without regard to any such limits
set forth in Section 11.07(c) of the Construction Contract; provided further,
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however, in the event that the Schedule Liquidated Damages payable by Contractor
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and TECO pursuant to the Construction Contract and this Section 2.1(b)(ii)
exceed fifteen percent (15%) of the Separated Contract Price, such amounts in
excess of such fifteen percent (15%) shall not be considered in determining
whether the limit of twenty five percent (25%) of the Separated Contract Price
for Schedule Liquidated Damages and Performance Liquidated Damages,
collectively, has been met; and
(iii) to cause Final Acceptance of the Project to occur on or
before the Required Final Acceptance Date in accordance with the terms of the
Construction Contract.
(c) TECO acknowledges and agrees that the Actual Construction Cost
will exceed the Pre-Bankruptcy EPC Cost. TECO further acknowledges and agrees
that: (x) Borrower shall not be liable for the difference between (i) the Actual
Construction Costs (less the amount of any change orders under the Construction
Contract increasing the Separated Contract Price entered into after November 30,
2001 in accordance with the Credit Agreement (other than those pending change
orders described in clause (b) of the definition of Pre-Bankruptcy EPC Cost))
and (ii) the sum of (A) the Pre-Bankruptcy EPC Cost plus (B) the aggregate
amount of the Retainage L/C Proceeds; (y) the sum of the amounts set forth on
Schedule 1 attached hereto reflects the estimated amount (as of the date hereof)
by which the Actual Construction Cost will exceed the sum of the Pre-Bankruptcy
EPC Cost plus the aggregate amount of Retainage L/C Proceeds; and (z) TECO shall
be liable to pay the actual amount by which the Actual Construction Cost (less
the amount of any change orders under the Construction Contract increasing the
Separated Contract Price entered into after November 30, 2001 in accordance with
the Credit Agreement (other than those pending change orders
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described in clause (b) of the definition of Pre-Bankruptcy EPC Cost)) exceeds
the sum of the Pre-Bankruptcy EPC Cost plus the aggregate amount of Retainage
L/C Proceeds.
(d) To implement the agreement set forth in clause (c) above, subject
to the following sentence, (i) not later than the last Banking Day of each month
commencing in February 2002, TECO shall be obligated to deposit into the account
referred to below an aggregate amount equal to the amount set forth on Schedule
1 attached hereto corresponding to such month, (ii) at such time, if ever, as
the amount by which the Actual Construction Cost (less the amount of any change
orders under the Construction Contract increasing the Separated Contract Price
entered into after November 30, 2001 in accordance with the Credit Agreement
(other than those pending change orders described in clause (b) of the
definition of Pre-Bankruptcy EPC Cost)) exceeds the sum of the Pre-Bankruptcy
EPC Cost plus the aggregate amount of Retainage L/C Proceeds by more than the
aggregate amount set forth on Schedule 1 attached hereto, TECO shall deposit
such excess amounts in the account referred to below as such excess amounts
become due and payable and use the proceeds thereof to pay any remaining amounts
due to Contractor, Subcontractors and any other Person to which Actual
Construction Costs are then due and owing, and (iii) at such time, if ever, that
TECO provides Administrative Agent evidence, satisfactory to Administrative
Agent (determination of which shall not be unreasonably withheld or delayed),
that the amount by which the Actual Construction Cost (less the amount of any
change orders under the Construction Contract increasing the Separated Contract
Price entered into after November 30, 2001 in accordance with the Credit
Agreement (other than those pending change orders described in clause (b) of the
definition of Pre-Bankruptcy EPC Cost)) exceeds the sum of the Pre-Bankruptcy
EPC Cost plus the aggregate amount of the Retainage L/C Proceeds is less than
the amounts set forth on Schedule 1 by more than $5,000,000, TECO and
Administrative Agent shall amend Schedule 1 to reflect any agreed upon
adjustments. Notwithstanding the immediately preceding sentence, in any month
where funds are not being paid to Persons performing work included within the
"Scope of Work" described in the Construction Contract, TECO's obligation to pay
or deposit any amounts referred to in this Section 2.1(d) shall be deferred
until such date as payments to such Persons resume, at which time TECO shall
deposit all amounts deferred pursuant to this sentence into the account
described below. Within one Banking Day after the date hereof, TECO shall
establish an account with Depositary Agent into which all amounts to be paid by
TECO pursuant to this Section 2.1(c) shall be deposited. Concurrently therewith,
TECO shall execute a control agreement in favor of Administrative Agent granting
a first priority security interest in such account to Administrative Agent.
Provided no Event of Default exists, TECO shall have the right to withdraw
amounts in such account and advance such amounts to Borrower to pay Contractor,
Subcontractors and/or any other Person to which Actual Construction Costs are
then due and owing as and when amounts are due such Persons. At any time an
Event of Default exists, TECO shall have no rights of withdrawal with respect to
such account and, in any event, Administrative Agent's only rights with respect
to such account shall be to pay to Contractor, Subcontractors and/or any other
Person to which Actual Construction Costs are then due and owing with amounts in
such account. To the extent any amounts are remaining in such account after
Final Acceptance has been achieved, such amounts shall be paid to TECO in
accordance with TECO's instructions.
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(e) Except as provided in clauses (c) and (d) of this Section 2.1, but
notwithstanding any other provision of this Undertaking to the contrary, the
aggregate amount expended by TECO in the performance of this Undertaking shall
not exceed the then-applicable Undertaking Limit.
2.2 Obligations Absolute and Unconditional.
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(a) The obligations of TECO hereunder are primary obligations of TECO
and are an absolute, unconditional, continuing and irrevocable guaranty of
payment and performance of the Supported Obligations and not of collectibility
and are in no way conditioned on or contingent upon any attempt to enforce in
whole or in part Contractor's liabilities and obligations to the Beneficiaries.
If Contractor shall fail to pay or perform any of the Supported Obligations as
and when they are due or required, TECO shall forthwith perform or pay such
Supported Obligations (and in the case of any payment required hereunder, in
immediately available funds), and each such failure by Contractor to pay or
perform a Supported Obligation shall give rise to a separate cause of action
herewith, and separate suits may be brought hereunder as each cause of action
arises.
(b) Subject to the following sentence, the Beneficiaries may, at any
time and from time to time (whether or not after revocation or termination of
this Undertaking) without the consent of or notice to TECO, except such notice
as may be required by applicable law which cannot be waived or any notice
required hereunder, without incurring responsibility to TECO, without impairing
or releasing the obligations of TECO hereunder, upon or without any terms or
conditions and in whole or in part, (i) change the manner, place and terms of
payment or performance or change or extend the time of such payment or
performance of, renew, or alter any Supported Obligation, or any obligations and
liabilities (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof or in any manner modify, amend or supplement the
terms of the Construction Contract, any documents, instruments or agreements
executed in connection therewith, and the undertaking herein made shall apply to
the Supported Obligations, as changed, extended, renewed, modified, amended,
supplemented or altered in any manner; (ii) exercise or refrain from exercising
any rights against Contractor or others (including TECO) or otherwise act or
refrain from acting; (iii) add or release any other guarantor from its
obligations without affecting or impairing the obligations of TECO hereunder;
(iv) settle or compromise any Supported Obligations and/or any obligations and
liabilities (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof, and may subordinate the payment of all or any part
thereof to the payment of any obligations and liabilities which may be due to
the Beneficiaries or others; (v) sell, exchange, release, surrender, realize
upon or otherwise deal with in any manner or in any order any property by
whomsoever pledged or mortgaged to secure or howsoever securing the Supported
Obligations or any liabilities or obligations (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof and/or any offset
thereagainst; (vi) apply any sums by whomsoever paid or howsoever realized to
any obligations and liabilities of Contractor to the Beneficiaries under the
Construction Contract in the manner provided therein regardless of what
obligations and liabilities remain unpaid; (vii) consent to or waive any breach
of, or any act, omission or default under, the Construction Contract; and/or
(viii) act or fail to act in any manner referred to in this Undertaking which
may deprive TECO of its right to subrogation against Contractor or any other
10
Person to recover full indemnity for any payments made pursuant to this
Undertaking or of its right of contribution against any other party.
Notwithstanding any provision of this Undertaking to the contrary, no amendment
to or modification of the Construction Contract resulting from the Banks', or
any agent acting on behalf of, or transferee of, the Banks acting as Owner
under, and as defined in, the Construction Contract (to the exclusion of TECO)
pursuant to remedies provided in the Credit Documents shall affect or modify the
Support Obligations in any manner without the prior written consent of TECO.
(c) No invalidity, irregularity or unenforceability of the Supported
Obligations or invalidity, irregularity, unenforceability or nonperfection of
any collateral therefor, shall affect, impair, or be a defense to this
Undertaking, which is a primary obligation of TECO.
(d) This is a continuing Undertaking and all obligations to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. In the event that, notwithstanding the
provisions of Section 2.2(a) hereof, this Undertaking shall be deemed revocable
in accordance with applicable law, then to the extent permitted by applicable
law any such revocation shall become effective only upon receipt by the
Beneficiaries of written notice of revocation signed by TECO. To the extent
permitted by applicable law, no revocation or termination hereof shall affect in
any manner rights arising under this Undertaking with respect to Supported
Obligations arising prior to receipt by the Beneficiaries of written notice of
such revocation or termination and the sole effect of revocation and termination
hereof shall be to exclude from this Undertaking Supported Obligations
thereafter arising which are unconnected with Supported Obligations theretofore
arising or transactions theretofore entered into.
(e) Except as otherwise provided by law or by the terms of the
Construction Contract, each payment to be made by TECO to, or on behalf of, the
Beneficiaries hereunder shall be made without deduction or withholding for or on
account of Taxes. If such deduction or withholding is so required, TECO shall,
upon notice thereof from any Beneficiary, (i) pay the amount required to be
deducted or withheld to the appropriate authorities before penalties attach
thereto or interest accrues thereon (including deductions from amounts payable
under this Section 2.2(e)), (ii) on or before the 30th day after payment of such
amount, forward to such Beneficiary an official receipt evidencing such payment
(or a certified copy thereof), and (iii) in the case of any such deduction or
withholding, forthwith pay to such Beneficiary such additional amount as may be
necessary to ensure that the net amount actually received by such Beneficiary,
free and clear of such Taxes, including any Taxes on such additional amount, is
equal to the amount that such Beneficiary would have received had there been no
such deduction or withholding.
2.3 Waiver.
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(a) Subject to Section 2.3(b) and the last sentence of Section 2.2(a),
to the extent permitted by applicable law, TECO hereby unconditionally and
irrevocably waives and relinquishes all rights and remedies accorded by
applicable law to sureties or guarantors and agrees not to assert or take
advantage of any such rights or remedies, including (i) any right to
11
require the Beneficiaries to proceed against Contractor or any other Person or
to proceed against or exhaust any security held by the Beneficiaries at any time
or to pursue any other remedy in any Beneficiary's power before proceeding
against TECO, (ii) any defense that may arise by reason of the incapacity, lack
of power or authority, dissolution, merger, bankruptcy, termination or
disability of Contractor or any other Person or the failure of any Beneficiary
to file or enforce a claim against the estate (in administration, bankruptcy or
any other proceeding) of Contractor or any other Person, (iii) promptness,
diligence, demand, presentment, protest and notice of any kind (other than
notices required hereunder or under the Construction Contract or under the
Credit Documents), including notice of the existence, creation or incurring of
any new or additional indebtedness or obligation or of any action or non-action
on the part of Contractor, Beneficiary, any endorser or creditor of Contractor
or TECO or on the part of any other person under this or any other instrument in
connection with any obligation or evidence of indebtedness held by the
Beneficiaries in connection with any Supported Obligations, (iv) any defense
based upon an election of remedies by the Beneficiaries, including an election
to proceed by non-judicial rather than judicial foreclosure, which destroys or
otherwise impairs the subrogation rights of TECO, the right of TECO to proceed
against Contractor for reimbursement, or both, (v) any defense based on any
offset against any amounts which may be owed by any Person to TECO for any
reason whatsoever, (vi) any defense based on any act, failure to act, delay or
omission whatsoever on the part of Borrower or Contractor or the failure by
Borrower or Contractor to do any act or thing or to observe or perform any
covenant, condition or agreement to be observed or performed by it under the
Construction Contract or the Credit Documents, (vii) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal, (viii) any defense, setoff or counterclaim which may at any time be
available to or asserted by Borrower or Contractor against the Beneficiaries or
any other Person under the Construction Contract, the Credit Agreement or any
other Credit Document (other than, subject to Section 6.14, defense of payment
of the applicable amounts), (ix) any duty on the part of the Beneficiaries to
disclose to TECO any facts the Beneficiaries may now or hereafter know about
Contractor, regardless of whether the Beneficiaries have reason to believe that
any such facts materially increase the risk beyond that which TECO intends to
assume, or have reason to believe that such facts are unknown to TECO, or have a
reasonable opportunity to communicate such facts to TECO, since TECO
acknowledges that TECO is fully responsible for being and keeping informed of
the financial condition of Contractor and of all circumstances bearing on the
risk of non-payment of any obligations and liabilities hereby guaranteed, (x)
any defense arising because of any Beneficiary's election, in any proceeding
instituted under the Federal Bankruptcy Code, of the application of Section
1111(b)(2) of the Federal Bankruptcy Code, (xi) any defense based upon any
borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code and (xii) any other circumstance (including any statute of
limitations) or any existence of or reliance on any representation by the
Beneficiaries that might otherwise constitute a defense available to, or
discharge of, any guarantor or surety (other than, subject to Section 6.14,
defense of payment of the applicable amounts).
(b) Notwithstanding any provision of this Undertaking to the contrary
but subject to the following sentence, TECO shall be entitled to assert the
defense that payment or performance is not then due and owing in accordance with
the terms of the Construction Contract. TECO hereby agrees not to assert or take
advantage of and waives all rights hereunder
12
with respect to any Owner Caused Delay except to the extent the same actually
and demonstrably result directly (i) from a breach by third parties of their
obligations under Project Documents or (ii) from "force majeure events"
affecting such Persons (other than claims of force majeure events by Persons
arising out of Contractor's acts or failure to act) or (iii) from the Banks', or
any agent acting on behalf of, or transferee of, the Banks acting as Owner
under, and as defined in, the Construction Contract (to the exclusion of TECO)
pursuant to remedies provided in the Credit Documents.
2.4 Subrogation. For so long as this Undertaking or the El Dorado
-----------
Undertaking remains in effect, except as provided below, (a) TECO shall not
exercise any right of subrogation or enforce any remedy which it or the
Beneficiaries now have or may hereafter have against Contractor in respect of
the Supported Obligations, and, except as provided below, will not claim the
benefit of any rights to, or seek to participate in, any security now or
hereafter held by the Beneficiaries from Contractor and (b) TECO shall not
enforce any claim, right or remedy which TECO may now have or hereafter acquire
against Contractor that arises hereunder, from the existence or enforcement of
this Undertaking and/or from the performance by TECO hereunder, including any
claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of the
Beneficiaries against Contractor, or any security which the Beneficiaries now
have or hereafter acquire, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or otherwise; provided,
--------
however, TECO shall be entitled to receive reimbursement from Contractor, Enron,
- -------
any Subcontractor or from Borrower (in the case of Borrower, solely from funds
provided by Contractor, Enron or any Subcontractor and solely to the extent such
amounts represent amounts previously paid by TECO under this Undertaking) or
evidence of the right to such reimbursement (in the form of a note or other
instrument), and, notwithstanding any provision of the Credit Documents or the
Bridge Loan Documents to the contrary, Borrower shall be entitled to assign to
TECO its rights against Contractor, Enron or any Subcontractor, in each case
solely in respect of, and to the extent it relates to, amounts paid or
obligations performed by TECO under this Undertaking. Subject to any such rights
being assigned to TECO as referred to in the preceding sentence, nothing herein
shall affect the right of Borrower to enforce any rights or claims it may have
against Contractor or Enron or to terminate the Construction Contract, in each
case subject to the terms of the Credit Agreement. Notwithstanding anything to
the contrary in the foregoing proviso, prior to the date on which remedies have
been exercised under the Credit Documents, the consequence of which is that TECO
no longer directly or indirectly owns any interest in Borrower or the Project,
TECO shall not have the right to sue, claim against, institute any action
against or otherwise enforce any right to seek the reimbursement described above
from Borrower for amounts paid or obligations performed by TECO under this
Undertaking.
2.5 Bankruptcy. For so long as this Undertaking or the El Dorado
----------
Undertaking remains in effect, TECO shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of Administrative Agent,
commence, or join with any other Person in commencing, any bankruptcy,
reorganization, or insolvency proceeding against Borrower or Contractor. The
obligations of TECO under this Undertaking shall not be altered, limited or
affected by any proceeding, voluntary or involuntary, involving the bankruptcy,
reorganization, insolvency, receivership, liquidation or arrangement of Borrower
or Contractor, or by any
13
defense which Borrower or Contractor may have by reason of any order, decree or
decision of any court or administrative body resulting from any such proceeding.
2.6 Actions by Administrative Agent. Except as set forth in the definition
-------------------------------
of Undertaking Letter of Credit, Sections 2.1(b)(z), 2.1(c) or 2.1(d), Article
IV, Article V or Article VI of this Undertaking, Administrative Agent shall have
no right to enforce any rights or remedies under this Undertaking unless and
until an Event of Default shall have occurred and be continuing; provided that
--------
nothing in this Section 2.6 shall impact the rights and remedies of the Banks
under the Collateral Documents. Notwithstanding anything to the contrary in this
Undertaking, nothing in this Section 2.6 shall in any way affect, modify or
limit the waivers and agreements of TECO set forth in Section 2.2(b), 2.2(d),
2.2(e), 2.3(a), 2.4 or 2.5 of this Undertaking regardless of whether any Event
of Default exists.
ARTICLE III
REPRESENTATIONS AND WARRANTIES.
TECO hereby represents and warrants that, as of the date hereof:
3.1 Corporate Existence and Business. TECO is a corporation duly organized
--------------------------------
and validly existing in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified to do business and is in good standing in
each jurisdiction in which such qualification is necessary to execute, deliver
and perform this Undertaking and each other document to which it is or is to
become a party to complete the transactions contemplated hereby.
3.2 Power and Authorization; Enforceable Obligations. TECO has full power
------------------------------------------------
and authority and the legal right to execute, deliver and perform this
Undertaking and each other document to which it is or is to become a party to
complete the transactions contemplated hereby and to take all action as may be
necessary to complete the transactions contemplated hereunder and thereunder.
TECO has taken all necessary corporate action to authorize the execution,
delivery and performance of this Undertaking and each other document to which it
is or is to become a party to complete the transactions contemplated hereby. No
consent or authorization of, filing with, or other act by or in respect of any
other Person or Governmental Authority is required in connection with the
execution, delivery or performance by TECO, or the validity or enforceability as
to TECO, of this Undertaking and each other document to which it is or is to
become a party to complete the transactions contemplated hereby, except such
consents or authorizations or filings or other acts as have already been
obtained or where the failure to obtain such consent or authorization could not
reasonably be expected to have a TECO Material Adverse Effect. This Undertaking
and each other document to which TECO is a party relating to the completion of
the transactions contemplated hereby have been duly executed and delivered by
TECO and constitute, and each other such document to which it is to become a
party relating to the completion of the transactions contemplated hereby will
upon execution and delivery thereof by TECO and the other parties thereto (if
any) constitute, a legal, valid and binding obligation of TECO enforceable
against it in accordance with its terms except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the right of creditors generally and by general principles of equity.
14
3.3 No Legal Bar. The execution, delivery and performance by TECO of this
------------
Undertaking and each other document to which it is or is to become a party to
complete the transactions contemplated hereby and the making by TECO of any
payments hereunder or under any other document to which it is a party relating
to the completion of the transactions contemplated hereby will not violate any
applicable law or any material contractual obligation of TECO and will not
result in, or require, the creation or imposition of any Lien on any of the
properties or revenues of TECO pursuant to any applicable law or any such
contractual obligation except, in each case, where such violation, creation or
imposition could not reasonably be expected to have a TECO Material Adverse
Effect.
3.4 No Proceeding or Litigation. No litigation or proceeding of or before
---------------------------
any Governmental Authority is pending or, to the knowledge of TECO, threatened
in writing against TECO with respect to the transactions contemplated by this
Undertaking or any other document to which TECO is or is to become a party
relating to the completion of the transactions contemplated hereby, except where
such litigation or proceeding could not reasonably be expected to have a TECO
Material Adverse Effect.
3.5 Governmental Approvals. All governmental authorizations and actions
----------------------
necessary in connection with the execution and delivery by TECO of this
Undertaking and the performance of its obligations hereunder have been obtained
or performed and remain valid and in full force and effect.
3.6 Financial Statements. All quarterly and annual financial statements of
--------------------
TECO and its Significant Subsidiaries heretofore delivered by TECO to
Administrative Agent were true, correct and complete in all material respects,
did not fail to disclose any material liabilities, whether direct or contingent,
and fairly presented in all material respects the financial condition of TECO or
such Significant Subsidiary, as the case may be, in each case as of the date
delivered and were prepared in accordance with GAAP. Since the date of the most
recent such financial statements, there has been no material adverse change in
the business, operations, property, assets or financial condition of TECO or its
Significant Subsidiaries taken as a whole.
3.7 True and Complete Disclosure. All factual information heretofore or
----------------------------
contemporaneously furnished by TECO or its representatives in writing to
Administrative Agent or any Bank for purposes of or in connection with this
Undertaking or any transaction contemplated herein was true and accurate in all
material respects on the date as of which such information was dated or
certified and at such date did not omit to state any fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. The information referred to in the
immediately preceding sentence furnished to Administrative Agent or any Bank on
or prior to the date hereof, taken as a whole, as updated or supplemented from
time to time, is true and correct in all material respects as of the date
hereof, and as of the date hereof all such information does not omit to state
any fact which could reasonably be expected to have a TECO Material Adverse
Effect.
3.8 Investment Company Act. TECO is not an "investment company" within the
----------------------
meaning of the Investment Company Act of 1940, as amended and is exempt from
regulation under PUHCA and the Federal Power Act.
15
3.9 Compliance with Law. There is no violation by TECO or any Significant
-------------------
Subsidiary of any Governmental Rule which could reasonably be expected to have a
TECO Material Adverse Effect. Except as have been delivered to Administrative
Agent, no notices of violation of any Governmental Rule relating to the Project
or the Site have been issued, entered or received by TECO.
3.10 ERISA. TECO and any other Person which is under common control (within
-----
the meaning of Section 414(b) or (c) of the Code) 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 Undertaking nor the consummation of the
transactions contemplated hereby will involve a Prohibited Transaction.
3.11 Adequate Financial Means. (a) TECO is not, and will not as a result of
------------------------
the execution and delivery of this Undertaking, be rendered insolvent, (b) TECO
does not intend to incur, or believe it is incurring, obligations beyond its
ability to pay, (c) TECO is not executing this Undertaking with any intention to
hinder, delay or defraud any present or future creditor or creditors of TECO and
(d) TECO's property remaining after the delivery and performance of this
Undertaking will not constitute unreasonably small capital.
ARTICLE IV
COVENANTS.
TECO hereby covenants and agrees that:
4.1 Existence. TECO shall, and shall cause each Significant Subsidiary to,
---------
maintain and preserve its existence in good standing in the state of its
formation and its qualification to do business in each other jurisdiction where
such qualification is necessary and all material rights, privileges and
franchises necessary in the normal conduct of its business.
4.2 Consents, Legal Compliance. TECO shall maintain in full force and
--------------------------
effect all consents of any Governmental Authority that are required to be
obtained by it in order for it to perform its obligations under this Undertaking
and will obtain any that may become necessary in the future.
4.3 Prohibition of Certain Transfers.
--------------------------------
(a) TECO shall not, and shall not permit any Significant Subsidiary
to, liquidate or dissolve, or combine, consolidate or merge with or into another
Person; except that TECO or any Significant Subsidiary may combine, consolidate
or merge with another Person if (i) TECO or a Significant Subsidiary, as the
case may be, is the surviving corporation of such merger, consolidation or
combination; (ii) prior to such merger, consolidation or combination, and after
giving effect thereto, no default under this Undertaking shall have occurred and
be continuing; (iii) such merger, consolidation or combination shall not cause a
violation of
16
Section 4.11 hereof; (iv) TECO shall have provided pro forma calculations to
Administrative Agent demonstrating that, to the reasonable satisfaction of
Administrative Agent, after giving effect to such merger, consolidation or
combination (A) the projected ratio of Total Debt to Capitalization for the next
succeeding fiscal quarter will be less than or equal to 0.65 to 1.00 and (B) the
projected ratio of Consolidated EBITDA to Consolidated Adjusted Interest Expense
for the next succeeding twelve months will equal or exceed 3.0 to 1.00; and (v)
TECO's obligations under this Undertaking and the Beneficiaries' rights and
remedies under this Undertaking shall not be diminished in any manner as a
result of such merger, consolidation or combination.
(b) Except as set forth in this Section 4.3 or sales that are in the
nature of financing leases, TECO shall not, and shall not permit any Significant
Subsidiary to, sell, lease, assign or otherwise transfer or dispose of, directly
or indirectly, all or any substantial part of any Significant Subsidiary's
property, business or assets; provided that (i) TECO or any Significant
--------
Subsidiary may sell, lease or otherwise transfer or dispose of, directly or
indirectly, assets to any of TECO, any Significant Subsidiary, either Partner,
either El Dorado Partner, either Trans-Union Partner, Borrower, El Dorado
Borrower or Trans-Union, (ii) Tampa Electric may sell, contribute or transfer
its transmission and transmission-related assets for fair value to a regional
transmission organization and (iii) TPS may sell up to 30% of its assets in
exchange for assets similar to those sold, or for cash so long as the proceeds
of such cash sales are (x) retained by TPS or TECO in cash or equivalent short
term investments (provided that TECO shall not be obligated to so maintain any
such proceeds in cash or equivalent investments at any time that TECO is rated
at least Baa2 by Moody's and BBB+ by S&P or Baa1 by Moody's and BBB by S&P) and
reinvested within nine months of the date of such sale in assets similar to
those sold or (y) applied by Borrower, on a pro-rata basis, toward (a) the
prepayment of the outstanding principal amount of the Bridge Loans and the El
Dorado Bridge Loans, and (b) satisfaction of TECO's then due and payable
obligations under the Equity Contribution Guaranty and under that certain Equity
Contribution Guaranty, dated as of May 31, 2001, by TECO in favor of El Dorado
Administrative Agent, and following the applications set forth in the foregoing
clauses (a) and (b), pro-rata to satisfaction of all other then due and payable
obligations of Borrower and El Dorado Borrower guaranteed by TECO under the
Equity Guaranties and under the "Equity Guaranties" as defined in the El Dorado
Credit Agreement.
(c) Except as set forth in this Section 4.3, TECO shall not, and shall
not permit any Significant Subsidiary to, mortgage, pledge or encumber all or
substantially all of its assets (other than, solely in the case of TPS, pursuant
to limited recourse project financing transactions entered into by TPS after the
Closing Date in the ordinary course of its business), except for encumbrances
listed on Schedule 4.3.
(d) TECO shall not sell, assign or otherwise transfer, by way of
collateral assignment or otherwise, or dispose of, directly or indirectly (by
way of collateral assignment or otherwise) any Equity Interest in any
Significant Subsidiary; provided that for fair value TECO may sell, assign or
--------
transfer up to 20% of its Equity Interests in TPS.
4.4 Payment of Material Obligations. TECO shall, and shall cause each
-------------------------------
Significant Subsidiary to, pay all its material obligations, 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;
17
provided that adequate reserves have been established in accordance with GAAP,
and (b) trade payables which shall be paid in the ordinary course of business.
4.5 Taxes. TECO shall, and shall cause each Significant Subsidiary to, file
-----
all tax returns and 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 it;
provided that TECO or any Significant Subsidiary 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 such Person is in good faith contesting the
same, so long as (a) adequate reserves have been established in accordance with
GAAP, (b) enforcement of the contested tax, assessment or other charge is
effectively stayed for the entire duration of such contest if such enforcement
could reasonably be expected to have a TECO Material Adverse Effect, and (c) any
tax, assessment or other charge determined to be due, together with any interest
or penalties thereon, is promptly paid as required after final resolution of
such contest.
4.6 Maintenance of Property, Insurance. TECO shall, and shall cause each
----------------------------------
Significant Subsidiary to, (a) keep all property useful and necessary in its
business in good working order and condition except where the failure to so
maintain could not reasonably be expected to have a TECO Material Adverse
Effect, (b) maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks as are in accordance with normal industry practice, or make provisions
reasonably satisfactory to Administrative Agent for self-insurance, and (c)
furnish to Administrative Agent, upon written request, full information as to
the insurance carried.
4.7 Compliance with Laws, Instruments, Etc. TECO shall, and shall cause
--------------------------------------
each Significant Subsidiary to, promptly comply, or cause compliance, with all
Governmental Rules, except where the failure to comply could not reasonably be
expected to have a TECO Material Adverse Effect, including Governmental Rules
relating to pollution control, environmental protection, equal employment
opportunity or employee benefit plans, ERISA Plans and employee safety.
4.8 No Change in Business. TECO shall maintain a substantial part of its
---------------------
business in the power industry and businesses reasonably related thereto and
TECO shall cause each Significant Subsidiary to maintain as a substantial part
of its business the general type of business now conducted by such Significant
Subsidiary.
4.9 Financial Statements. Unless the Beneficiaries otherwise consent,
--------------------
deliver or cause to be delivered to the Beneficiaries, in form and detail
reasonably satisfactory to the Beneficiaries:
(a) As soon as practicable and in any event within 60 days after the
end of the first, second and third quarterly accounting periods of its fiscal
year, an unaudited consolidated balance sheet of TECO and its consolidated
subsidiaries as of the last day of such quarterly period and the related
statements of income, cash flow, and partners' capital (where applicable) for
such quarterly period and (in the case of second and third quarterly periods)
for the portion of
18
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; and
(b) As soon as practicable and in any event within 120 days after the
close of each applicable fiscal year, audited consolidated financial statements
of TECO and its consolidated subsidiaries. Such financial statements shall
include 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 cash flow, all prepared in accordance with GAAP, certified by an independent
certified public accountant selected by TECO. Such certificate shall not be
qualified or limited because of restricted or limited examination by such
accountant of any material portion of the records of TECO.
(c) Each time the financial statements are delivered under Sections
4.9(a) and (b), deliver, along with such financial statements, a certificate
signed by a Responsible Officer of TECO (i) setting forth reasonably detailed
calculations demonstrating compliance with Sections 4.12(a) and (b) and
including a schedule describing all Contingent Obligations of TECO, and (ii)
certifying that (A) such Responsible Officer has made or caused to be made a
review of the transactions and financial condition of TECO during the relevant
fiscal period and that, to such Responsible Officer's knowledge, TECO is in
compliance with all applicable material provisions of this Undertaking and each
Credit Document to which TECO is a party or, if such is not the case, stating
the nature of such non-compliance and the corrective actions which TECO has
taken or proposes to take with respect thereto, and (B) such financial
statements are true and correct in all material respects and that no material
adverse change in the consolidated assets, liabilities, operations, or financial
condition of TECO has occurred since the date of the immediately preceding
financial statements provided to the Beneficiaries or, if a material adverse
change has occurred, the nature of such change.
(d) As long as TECO is required or permitted to file reports under the
Securities Exchange Act of 1934, as amended, a copy of its report on Form 10-K
shall satisfy the requirements of Section 4.9(a) and a copy of TECO's report on
Form 10-Q shall satisfy the requirements of Section 4.9(b).
4.10 Notices. TECO shall promptly, upon acquiring notice or giving notice,
-------
as the case may be, or obtaining knowledge thereof, deliver written notice to
the Beneficiaries of:
(a) Any litigation pending or threatened in writing against TECO or
any Significant Subsidiary involving claims against TECO or such Significant
Subsidiary that could reasonably be expected to have a TECO Material Adverse
Effect, such notice to include 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;
(b) Any dispute or disputes which may exist between TECO or any
Significant Subsidiary and any Governmental Authority and which involve (i)
claims against TECO or such Significant Subsidiary that could reasonably be
expected to have a TECO Material Adverse Effect, (ii) injunctive or declaratory
relief that could reasonably be expected to have a TECO Material Adverse Effect,
(iii) revocation or material modification or the like of any
19
applicable material permit or imposition of additional material conditions with
respect thereto, or (iv) any liens for any material amount of taxes due but not
paid;
(c) Any default under this Undertaking or under any other agreement
with respect to any Indebtedness of TECO outstanding in an amount equal to or in
excess of $50,000,000;
(d) TECO being placed on watch or review for possible rating
down-grade by S&P or Moody's;
(e) Any negative change, from the date hereof, from the rating given
to TECO's long-term senior unsecured debt by either S&P or Moody's; and
(f) Any event or circumstance which could reasonably be expected to
have a TECO Material Adverse Effect.
4.11 Maintenance of Ratings. If TECO's long term unsecured indebtedness is
----------------------
not rated at least (a) BBB- by S&P and Baa2 by Moody's or (b) BBB by S&P and
Baa3 by Moody's, TECO shall, within 15 days following such downgrade, (x) cause
the LC Issuer to issue the Undertaking Letter of Credit, naming Administrative
Agent as beneficiary and (y) in the event the Undertaking Letter of Credit shall
have been issued in accordance with clause (x) of this Section 4.11, secure a
replacement Undertaking Letter of Credit within 15 days after the LC Issuer's
long term unsecured indebtedness is rated below A by S&P or below A2 by Moody's,
or the rating on such indebtedness is removed altogether.
4.12 Financial Covenants. TECO shall comply with the following covenants as
-------------------
of the last day of each fiscal quarter:
(a) The ratio of Total Debt to Capitalization, for the fiscal quarter
then ended, shall be less than or equal to 0.65 to 1.00; and
(b) The ratio of Consolidated EBITDA to Consolidated Adjusted Interest
Expense, for the twelve months then ended, shall equal or exceed 3.0 to 1.0.
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of any of the following events shall
-----------------
constitute an event of default (a "TECO Event of Default") hereunder:
---------------------
(a) Debt Cross Default. (i) TECO or any Significant Subsidiary shall
default for a period beyond any applicable grace period in the payment of any
principal, interest or other amount due under any agreement involving the
borrowing of money or the advance of credit (other than trade payables) and the
outstanding amount or amounts payable under all such agreements equals or
exceeds $50,000,000 or (ii) an event of default shall have occurred and be
continuing under an agreement, or related agreements, under which TECO or any
Significant Subsidiary has outstanding indebtedness for borrowed money of
$10,000,000 or more and, in the
20
case of this clause (ii), such debt has been accelerated by the holder of such
debt, or the holder of such debt has attempted to accelerate but such
acceleration was prevented by applicable Governmental Rule.
(b) Bankruptcy; Insolvency. TECO or any Significant Subsidiary shall
become subject to a Bankruptcy Event.
(c) Misstatements; Omissions. Any representation or warranty of TECO
set forth in this Undertaking shall be untrue or misleading in any material
respect as of the time made and such untrue or misleading representation or
warranty (i) is having or could reasonably be expected to result in a TECO
Material Adverse Effect and (ii) shall remain unremedied by TECO for a period of
30 days after the earlier of the date that TECO becomes aware thereof or
receives written notice thereof from Beneficiary.
(d) Breach of Terms of Agreement. TECO shall fail to perform or
observe any of the covenants set forth in this Undertaking and (except with
respect to any covenants set forth in Section 2.1(c), 2.1(d), 4.1 (with respect
to its obligation to maintain its existence), 4.3, 4.8, 4.11 or 4.12) such
failure shall continue unremedied for 30 days after TECO becomes aware thereof
or receives written notice with respect thereto from either Beneficiary.
(e) Judgments. A final judgment or judgments shall be entered against
TECO or any Significant Subsidiary in the amount of $50,000,000 or more (net of
amounts covered by insurance) individually or in the aggregate (other than (i) a
judgment which is fully discharged within 30 days after its entry, or (ii) 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, in the case of injunctive relief, which if left unstayed could
reasonably be expected to have a TECO Material Adverse Effect.
(f) Change in Control. Without the consent of the Majority Banks, TECO
shall cease to directly or indirectly own and control at least 80% of (i) the
economic interests and (ii) the voting interests (whether by committee, contract
or otherwise) in TPS.
ARTICLE VI
MISCELLANEOUS.
6.1 Successions or Assignments.
--------------------------
(a) This Undertaking shall inure to the benefit of the successors or
assigns of the Beneficiaries who shall have, to the extent of their interest,
the rights of the Beneficiaries hereunder.
(b) This Undertaking is binding upon TECO and its successors or
permitted assigns; provided that TECO is not entitled to assign its obligations
--------
hereunder to any other person without the prior written consent of each
Beneficiary and any purported assignment in violation of this provision shall be
void.
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6.2 Waivers.
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(a) No delay on the part of any Beneficiary in exercising any of its
rights (including those hereunder) and no partial or single exercise thereof and
no action or non-action by any Beneficiary, with or without notice to TECO or
anyone else, shall constitute a waiver of any rights or shall affect or impair
this Undertaking.
(b) BORROWER, ADMINISTRATIVE AGENT AND TECO 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 UNDERTAKING OR ANY DOCUMENT ENTERED INTO IN CONNECTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF BORROWER, ADMINISTRATIVE AGENT OR TECO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR BORROWER AND ADMINISTRATIVE AGENT TO
ACCEPT THIS UNDERTAKING.
6.3 Interpretation. The section headings in this Undertaking are for the
--------------
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.
6.4 Remedies Cumulative. Each and every right and remedy of the
-------------------
Beneficiaries hereunder shall be cumulative and shall be in addition to any
other right or remedy given hereunder or under any Credit Document, or now or
hereafter existing at law or in equity.
6.5 Severability. Any provision of this Undertaking that may be determined
------------
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
6.6 Amendments. This Undertaking may be amended, waived or otherwise
----------
modified only with the written consent of all parties hereto.
6.7 Jurisdiction. Administrative Agent, Borrower and TECO agree that any
------------
legal action or proceeding by or against TECO or with respect to or arising out
of this Undertaking 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 the Beneficiaries may elect. By
execution and delivery of this Undertaking, Administrative Agent, Borrower and
TECO accept, for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Administrative Agent,
Borrower and TECO irrevocably consent to the service of process out of any of
the aforementioned courts in any manner permitted by law. Any such process or
summons in connection with any such action or proceeding may also be served by
mailing a copy thereof by certified or registered mail, or any substantially
similar form of mail, addressed to TECO as provided for notices hereunder.
Nothing herein shall affect the right of the Beneficiaries to bring legal action
or proceedings in any other competent jurisdiction. Borrower, Administrative
Agent and TECO hereby waive any right to stay or dismiss any action or
proceeding under or in connection with any or all of the
22
Project, this Undertaking or any Credit Document or any other document related
hereto brought before the foregoing courts on the basis of forum non-conveniens.
6.8 Governing Law. This Undertaking and the rights and obligations of the
-------------
Beneficiaries and of TECO shall be governed by and construed in accordance with
the law of the State of New York without reference to principles of conflicts of
laws (other than Section 5-1401 and Section 5-1402 of the New York General
Obligations Law).
6.9 Integration of Terms. This Undertaking contains the entire agreement
--------------------
between TECO, Administrative Agent and Borrower relating to the subject matter
hereof and supersedes all oral statements and prior writings with respect
hereto.
6.10 Consent. TECO hereby acknowledges receiving copies of the Construction
-------
Contract, the Credit Agreement and the other Credit Documents (in each case, as
amended to consummate the transactions contemplated hereby), and consents to the
terms and provisions of each thereof.
6.11 Notices.
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(a) All notices in connection with this Undertaking shall be given by
notice in writing hand-delivered or sent by facsimile transmission or by
electronic mail or by first class or certified mail return-receipt requested
(airmail, if overseas), postage prepaid. All such notices shall be sent to the
appropriate telecopier number or address, as the case may be, set forth below or
to such other number or address as shall have been subsequently specified by
written notice to the other party, and shall be sent with copies, if any, as
indicated below. All such notices shall be effective upon receipt.
If to TECO: TECO Energy, Inc.
702 North Franklin Street
Tampa, FL 33602
Attention: General Counsel
Telephone No.: (813) 228-1804
Telecopy No.: (813) 228-4811
If to Borrower: Panda Gila River, L.P.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Attention: General Counsel
Telephone No.: (972) 980-7159
Telecopy No.: (972) 980-6815
If to Administrative Citibank, N.A.
Agent: 388 Greenwich Street
20th Floor
New York, NY 10013
Attention: Lorraine Frankel
23
Tel: (212) 816-0988
Fax: (212) 816-0584
Citibank, N.A.
2 Penns Way, Suite 2000
New Castle, Delaware 19720
Attention: Janet Wallace
Tel: (302) 894-6029
Fax: (302) 894-6120
6.12 Collection Expenses. Without regard to any limitation set forth in
-------------------
this Undertaking, if any Beneficiary is required to pursue any remedy against
TECO hereunder, TECO shall pay to such Beneficiary within 30 days after demand
and delivery of reasonable backup documentation, all reasonable attorneys' fees
and all other costs and expenses incurred by such Beneficiary in enforcing this
Undertaking.
6.13 Termination. This Undertaking shall terminate on the earliest to occur
-----------
of: (v) a Substitute Guarantor Date, (w) a Replacement Obligor for TECO executes
and delivers a guaranty substantially in the form of this Undertaking and as is
otherwise reasonably satisfactory to Administrative Agent, (x) indefeasible
payment in full of all Obligations of Borrower under the Credit Documents, (y)
indefeasible performance in full of all Supported Obligations, and (z) the
payment by TECO under this Undertaking of an aggregate amount equal to the sum
of the Undertaking Limit plus the amounts described in clause (c) of Section
2.1.
6.14 Reinstatement. Notwithstanding anything to the contrary in Section
-------------
6.13, this Undertaking shall continue to be effective or be automatically
reinstated, as the case may be, if and to the extent that for any reason any
payment by or on behalf of Contractor in respect of the Supported Obligations is
rescinded or a Beneficiary is otherwise obligated to remit any payment to any
Person, whether as a result of any proceedings in bankruptcy or reorganization
or otherwise, all as if such payment had not been made, and TECO agrees that it
will indemnify the Beneficiaries, on demand for all reasonable costs and
expenses (including reasonable fees of counsel) incurred by the Beneficiaries in
connection with any such rescission or restoration.
6.15 Counterparts. The Undertaking may be executed in one or more duplicate
------------
counterparts, and when executed and delivered by all of the parties listed below
shall constitute a single binding agreement.
6.16 Non-Recourse. Recourse to TECO under this Undertaking shall be limited
------------
to the extent provided in this Agreement and in Article 9 of the Credit
Agreement.
6.17 Limitation on Liability. Recourse against Administrative Agent, the
-----------------------
Banks or any of their Affiliates, directors, employees, attorneys or agents
under this Undertaking shall be limited to the extent provided in Section 12.13
of the Credit Agreement, which Section 12.13 is incorporated by reference
herein, mutatis mutandis.
24
6.18 Further Assurances. TECO shall execute and deliver any such further
------------------
instruments and shall take such further actions as the Beneficiaries may at any
time or times reasonably request in order to carry out the provisions and intent
of this Undertaking.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, intending to be legally bound, TECO has caused
this Undertaking to be duly executed and delivered as of the day and year first
above written.
TECO ENERGY, INC.,
a Florida corporation
By:
------------------------
Name:
Title:
Accepted:
PANDA GILA RIVER, L.P.,
a Delaware limited partnership
By: Panda Gila River I, LLC,
a Delaware limited liability company,
its General Partner
By:
-----------------------------------
Name:
Title:
CITIBANK, N.A.,
as Administrative Agent under
the Gila River Project Credit Agreement
By:
--------------------------------------
Name:
Title:
[TECO UNDERTAKING(GILA RIVER)]
SCHEDULE 1
----------
(see attached)
--------------
Schedule 1
SCHEDULE 2
----------
(see attached)
--------------
Schedule 2
SCHEDULE 4.3
------------
1. First Mortgage Indenture of Tampa Electric Company (First Mortgage on Tampa
Electric assets).
Schedule 4.3