MASTER LOAN AGREEMENT
Dated as of December 27, 2002
Between
CHUGACH ELECTRIC ASSOCIATION, INC.
AND
COBANK, ACB
MLA NO. 000976
MASTER LOAN AGREEMENT
THIS MASTER LOAN AGREEMENT (this "Agreement") is entered into as of
December 27, 2002, between CHUGACH ELECTRIC ASSOCIATION, INC. (the "Company")
and CoBANK, ACB ("CoBank").
BACKGROUND
CoBank and the Company are parties to a Credit Agreement dated as of
June 22, 1994 (as previously amended, the "Existing Credit Agreement"). Under
the terms of the Existing Credit Agreement, CoBank made various loans to the
Company (the "Existing Loans") and agreed to consider making additional loans to
the Company. The Company's obligation to repay the Existing Loans is evidenced
by the "Existing Bonds" (as hereinafter defined), and the Existing Bonds are
secured under that certain Indenture of Trust dated as of September 15, 1991,
between the Company and U.S. Bank Trust National Association (as previously
amended, the "Existing Indenture").
The parties now desire to amend and restate the terms of the Existing
Credit Agreement and the Existing Bonds and provide a new framework under which
additional loans can be made to the Company. Such is the purpose of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Definitions. Capitalized terms used in this Agreement
and defined in Exhibit A hereto shall have the meanings set forth in such
Exhibit.
SECTION 1.02. Rules of Interpretation. The rules of interpretation
set forth in Exhibit A shall apply to this Agreement.
ARTICLE 2
THE SUPPLEMENTS
SECTION 2.01. Promissory Notes and Supplements.
(A) Initial Promissory Note and Supplement. On the Effective
Date hereof, the Existing Credit Agreement and the Existing Bonds shall be
amended and restated in their entirety by this Agreement and the Promissory Note
and Supplement hereto dated as of the date hereof and numbered MO000976T1 (the
"Initial Promissory Note and Supplement"). On and after the Effective Date
hereof, the Existing Loans shall be governed by this Agreement and the Initial
Promissory Note and Supplement hereto.
(B) New Promissory Notes and Supplements. If on or after the
Effective Date, the Company would like to obtain one or more new Loans from
CoBank, and CoBank is willing to make
such new Loan or Loans to the Company, the parties will enter into one or more
additional Promissory Notes and Supplements to this Agreement. Each such
Promissory Note and Supplement will set forth CoBank's commitment to make the
Loan or Loans, the amount of the Loan(s), the purpose of the Loan(s), the
interest rate or interest rate options applicable to the Loan(s), the Company's
promise to repay the Loans, and any other terms and conditions applicable to the
particular Loan(s). Each Loan will be governed by the terms and conditions set
forth in this Agreement and in the Promissory Note and Supplement relating to
that Loan. In the absence of a Promissory Note and Supplement hereto duly
executed by CoBank, CoBank shall have no obligation to make any new Loan to the
Company under this Agreement.
SECTION 2.O2. Notice and Manner of Borrowing New Loans. Except as
otherwise provided in a Promissory Note and Supplement: (A) new Loans will be
made available on any Business Day upon the written or telephonic request of an
authorized employee of the Company (which telephonic request, if required by
CoBank, shall be promptly confirmed in writing by the Company); (B) requests for
new Loans must be received by 12:00 noon Mountain time on the date the Loan is
to be made; and (C) Loans will be made available by wire transfer of immediately
available funds to such account or accounts as may be authorized by the Company
on forms supplied by CoBank.
SECTION 2.03. Method of Payment (All Loans). The Company shall make
all payments to CoBank under this Agreement and each Promissory Note and
Supplement hereto by wire transfer of immediately available funds or, if
specified by separate agreement between the Company and CoBank, by automated
clearing house or other similar cash handling processes. Wire transfers shall be
made to ABA No. ▇▇▇▇▇▇▇▇▇ for advice to and credit of "CoBANK" (or to such other
account as CoBank may direct by notice). The Company shall give CoBank
telephonic notice no later than 12:00 noon Mountain time of its intent to pay by
wire, and funds received after 3:00 p.m. Mountain time shall be credited on the
next Business Day.
SECTION 2.04. Security. The Company's obligations hereunder and under
each other Loan Document to which the Company is a party (whether executed
contemporaneously herewith or at a later date) shall be secured by a statutory
first priority Lien on all stock and other equity which the Company may now own
or hereafter acquire in CoBank. Except as provided above and except as otherwise
provided in any Promissory Note and Supplement or in Section 6.01(C) hereof, the
obligations of the Company to CoBank shall be unsecured.
ARTICLE 3
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to this Agreement and the Initial
Promissory Note and Supplement Hereto. The effectiveness of this Agreement and
the Initial Promissory Note and Supplement hereto is subject to the following
conditions precedent, which, in the case of instruments and documents, must be
in form and content acceptable to CoBank:
(A) This Agreement. CoBank shall have received a duly
executed original copy of this Agreement.
(B) Note and Supplement. CoBank shall have received a duly
executed original copy of the Initial Promissory Note and Supplement hereto.
(C) Evidence of Authority. CoBank shall have received a copy,
certified by the
Secretary of the Company as of the date hereof, of such board resolutions and
certificates of incumbency that this Agreement and the Initial Promissory Note
and Supplement hereto have been duly authorized, executed and delivered by the
Company.
(D) Delegation and Wire Transfer Form. CoBank shall have
received a duly executed original copy of a delegation and wire transfer
authorization form.
(E) Opinion of Counsel. CoBank shall have received a duly
executed original copy of an opinion of counsel to the Company, which, if not
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & McAulifffe LLP, must be acceptable to the Company.
(F) Representations and Warranties. Each of the
representations and warranties set forth in Section 4.01 hereof shall be true
and correct and CoBank shall have received a duly executed original copy of a
certificate of an officer of the Company (which, if other than the General
Manager or an Executive Manager of the Company, must be acceptable to CoBank) to
the effect that such officer is not aware of any inaccuracy therein.
(G) No Default. No Default or Event of Default shall exist
hereunder.
(H) Fees and Other Charges. CoBank shall have received: (1) a
restructuring fee in an amount equal to 1/8th of 1% of the amount of the
Existing Loans; and (2) all other fees or other charges provided for herein.
(I) Indenture. CoBank shall have received such evidence as
CoBank shall require that upon CoBank returning the Existing Bonds to the
Company as provided in the last paragraph of this Section 3.01, the Existing
Indenture will, without further action, be amended and restated as provided in
the Indenture.
Upon the satisfaction of each condition precedent set forth in this Section
3.01, CoBank will: (1) notify the Company in writing that this Agreement and the
initial Promissory Note and Supplement hereto have become effective and the date
thereof (the "Effective Date"); and (2) return the Existing Bonds to the
Company.
SECTION 3.02. Conditions to Each Supplement. CoBank's obligation to
make the initial Loan under each Promissory Note and Supplement that evidences
one or more new Loans to be made to the Company is subject to the following
conditions precedent (which in the case of instruments and documents, must be in
form and content acceptable to CoBank):
(A) Supplement. CoBank shall have received from the Company a
duly executed original copy of the Promissory Note and Supplement and all Loan
Documents required by the Promissory Note and Supplement.
(B) Evidence of Authority. CoBank shall have received copies,
certified by the Secretary of the Company as of the date of the Promissory Note
and Supplement, of such board resolutions, evidence of incumbency, and other
evidence that CoBank may require that the Promissory Note and Supplement and all
Loan Documents executed in connection therewith have been duly authorized,
executed an delivered.
(C) Consents and Approvals. CoBank shall have received such
evidence as CoBank may require that all consents and approvals referred to in
Section 4.01(K) and 4.02(E) hereof, have been obtained and are in full force and
effect.
(D) Fees and Other Charges. CoBank shall have received from
the Company any fees or other charges provided for herein or in the Promissory
Note and Supplement.
(E) Insurance. CoBank shall have received such evidence as
CoBank may require that the Company is in compliance with Section 5.03 hereof.
(F) Opinion of Counsel. CoBank shall have received a duly
executed original copy of an opinion of counsel to the Company, which counsel
must be acceptable to CoBank.
SECTION 3.03. Conditions to Each Loan. CoBank's obligation under each
Promissory Note and Supplement (other than the Initial Promissory Note and
Supplement hereto) to make any new Loan to the Company thereunder, including the
initial Loan thereunder, is subject to the conditions precedent that: (1) no
Default or Event of Default shall have occurred and be continuing; (2) each of
the representations and warranties of the Company contained in Section 4.02
hereof and in all other Loan Documents executed or furnished in connection with
such Promissory Note and Supplement shall be true and correct as of the date of
the Loan; and (3) the Company shall have satisfied all conditions and
requirements set forth in the Promissory Note and Supplement relating to that
Loan.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. This Agreement and the Initial Supplement Hereto. To
induce CoBank to enter into this Agreement and the initial Promissory Note and
Supplement hereto, the Company represents and warrants that:
(A) Organization. The Company: (1) is an electric cooperative
duly organized, validly existing, and in good standing under the Laws of the
State of Alaska; (2) has the power and authority to own its assets and to
transact the business in which it is engaged or proposes to engage; and (3) is
duly qualified to do business in, and is good standing under the Laws of, each
jurisdiction in which such qualification is required.
(B) Loan Documents. The Loan Documents: (1) have been duly
authorized, executed and delivered by the Company and each other Person that is
a party thereto (other than CoBank); and (2) create legal, valid and binding
obligations of the Company and each other party thereto (other than CoBank)
which are enforceable in accordance with their terms, except to the extent that
enforcement may be limited by applicable bankruptcy, insolvency or similar Laws
affecting creditors' rights generally.
(C) Operation of Business. The Company possesses all
licenses, certificates, permits, authorizations, approvals, franchises, patents,
copyrights, trademarks, trade names, rights thereto, or the like which are
material to the operation of its business or required by Law, and there is no
violation by the Company of the rights of others with respect thereto which
could have a Material Adverse Effect.
(D) Litigation. Except as disclosed in any application or
officer's certificate submitted in connection with this Agreement and the
initial Promissory Note and Supplement or in the Prospectus, there are no
pending or threatened actions or proceedings against or affecting the Company
before any court, governmental agency, mediator, arbitrator, or the like which
could, in any one case or in the aggregate, if adversely decided, have a
Material Adverse Effect.
(E) Ownership of Company and Subsidiaries. The Company: (1)
is an electric generation, transmission and distribution cooperative which is
owned by its customers; and (2) has no Subsidiaries.
(F) Financial Statements. The balance sheet of the Company as
at December 31, 2001, and the related statements of revenues, expenses and
patronage capital and statement of cash flows of the Company for the fiscal year
then ended, and the accompanying notes and schedules, together with the opinion
thereon, dated March 1, 2002, of KPMG LLP, the Company's independent certified
public accountants, copies of which have been furnished to CoBank, are complete
and correct and fairly present the financial condition of the Company as at such
dates and the results of the operations of the Company for the periods covered
by such statements, all in accordance with GAAP consistently applied, and since
December 31, 2001, there has been no material adverse change in the condition
(financial or otherwise), business or operations of the Company. There are no
liabilities of the Company, fixed or contingent, which are material but not
reflected in the financial statements or in the notes thereto.
(G) Ownership and Liens. The Company has such title to, or
valid leasehold interests in, all of its properties, real and personal,
including the property and leasehold interests reflected in the balance sheets
referred to above (other than any property disposed of in the ordinary course of
business), as is necessary to cariy on its business and conduct its activities
as they are currently conducted (subject to any irregularity or deficiency in
the record evidence of title which does not substantially impair the usefulness
of such property for the purposes of the Company), and none of the properties or
leasehold interests of the Company is subject to any Lien (other than a Lien
that will be extinguished as of the Effective Date hereof), except such as may
be permitted under Section 6.01 of this Agreement.
(H) Compliance with Law. Except as disclosed in any
application or officer's certificate submitted in connection with this Agreement
and the Initial Promissory Note and Supplement hereto, all of the properties
owned by the Company and all of its operations, are in compliance in all
material respects with all Laws (including all Laws relating to the environment)
which, if not complied with, could have a Material Adverse Effect.
(I) Environment. Except as disclosed in the Prospectus or any
application or officer's certificate submitted in connection with this Agreement
and the Initial Promissory Note and Supplement hereto: (1) no property owned or
leased by the Company is being used, or to its knowledge, has been used for the
disposal, treatment, storage, processing or handling of hazardous waste or
materials (as defined under any applicable environmental Law) in violation of
any applicable Law; (2) no investigation, claim, litigation, proceedings, order,
judgment, decree, settlement, Lien or the like with respect to any environmental
matter is proposed, threatened, anticipated or in existence with respect to the
properties or operations of the Company which could have a Material Adverse
Effect; and (3) the Company is not aware of any environmental contamination or
condition that currently exists on any property of the Company which, if
required to be remedied, could have a Material Adverse Effect.
(J) ERISA. The Company is in compliance with all requirements
of ERISA, and no suit, claim or other proceeding exists or is threatened
alleging any violation of ERISA.
(K) Conflicting Agreements. None of the Loan Documents
conflicts with, or constitutes (with or without the giving of notice and/or the
passage of time and/or the occurrence of any other condition) a default under,
any other agreement to which the Company is or expects to become a party or by
which the Company or any of its properties may be bound or affected, or
conflicts with any provision of the bylaws, articles of incorporation, or other
organizational documents of the Company.
(L) Consents and Approvals. Except for such as shall have
been obtained and are in full force and effect, and except to the extent that
future rate increases may be subject to the approval of the appropriate
regulatory agency, no consent, permission, authorization, order or license of
any governmental authority or of any party to any agreement to which the Company
is a party or by which it or any of its property may be bound or affected, is
necessary in connection with the execution, delivery, performance or enforcement
of the Loan Documents.
(M) Compliance and no Default. The Company is in compliance
with all of the terms of the Loan Documents and no Default or Event of Default
exists.
SECTION 4.02. Each Supplement. The execution by the Company of each
Promissory Note and Supplement hereto (other than the Initial Promissory Note
and Supplement) shall constitute a representation and warranty that, except as
otherwise provided in an officer's certificate executed by the Company and
delivered to CoBank in connection with such Promissory Note and Supplement:
(A) Reaffirmation. Each of the representations and warranties
set forth in Section 4.01 hereof are true and correct as of the date of the
Promissory Note and Supplement, except that: (1) the references to the fmancial
statements in Section 4.01(F) hereof, and all references in Section 4.0 1(G)
hereof to such statements, shall be deemed to be to the latest annual financial
statements and, if more recent than the latest annual financial statements, to
the latest quarterly financial statements furnished to CoBank under Section
5.06(A) and (B) hereof, (2) the references in Sections 4.01(D), (H) and (1) to
the application or officer's certificate furnished in connection with this
Agreement and the Initial Promissory Note and Supplement hereto shall be deemed
to refer to any application and/or officer's certificate furnished in connection
with the Promissory Note and Supplement being executed at the time.
(B) Compliance. The Company is in compliance with all of the
terms of the Loan Documents (including, without limitation, Sections 5.06(D) and
(E) hereof), and no Default or Event of Default exists.
(C) Applications, Officer's Certificate. Each representation
and warranty and all information set forth in any application or officer's
certificate submitted in connection with, or to induce CoBank to enter into,
such Promissory Note and Supplement is correct in all material respects as of
the date of the Promissory Note and Supplement.
(D) Budgets. All budgets, projections, feasibility studies,
and other documentation submitted by the Company to CoBank in connection with,
or to induce CoBank to enter into, such Promissory Note and Supplement are based
upon assumptions that are reasonable, and as of the date of such Promissory Note
and Supplement, no fact has come to light, and no event has occurred, which
would cause any material assumption made therein to not be reasonable.
(E) Authorizations. Except for such as shall have been
obtained and are in full force and effect, no consent, permission,
authorization, order or license of any governmental authority or of any party to
any agreement to which the Company is a party or by which it or any of its
property may be bound or affected, is necessary in connection with: (1)
execution, delivery, performance or enforcement of the Loan Documents; or (2)
the project, acquisition, or other activity being financed by the Promissory
Note and Supplement, except for consents, permissions, authorizations, orders
and licenses that: (a) are not required to be obtained at the time of the
Company's execution of such Promissory Note and Supplement; and (b) can be
obtained in the ordinary course of business.
ARTICLE 5
AFFIRMATIVE COVENANTS
Unless otherwise agreed to in writing by CoBank, while this Agreement
is in effect, the Company agrees to:
SECTION 5.01. Maintenance of Existence. Preserve and maintain its
existence and good standing in the jurisdiction of its formation, quaIif~,' and
remain qualified to transact business in all jurisdictions where such
qualification is required, and obtain and maintain all licenses, permits,
franchises, patents, copyrights, trademarks, tradenames, or rights thereto which
are material to the conduct of its business or required by Law.
SECTION 5.02. Compliance With Laws. Comply in all material respects
with all applicable Laws (including all Laws relating to the environment),
which, if not complied with, could have a Material Adverse Effect. In addition,
the Company agrees to use reasonable efforts to cause all Persons occupying or
present on any of its properties that the Company knows or should know is in
violation of any Laws to comply in all material respects with all such Laws.
SECTION 5.03. Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same business and
similarly situated. The Company agrees to furnish to CoBank such proof of
compliance with this Section as CoBank may from time-to-time reasonably require.
SECTION 5.04. Property Maintenance. Maintain alL of its properties
that are necessary to or useful in the proper conduct of its business in good
repair, working order and condition, ordinary wear and tear excepted, and make
all alterations, replacements and improvements thereto as may from time to time
be necessary in order to ensure that its properties remain in good working order
and condition.
SECTION 5.05. Books and Records. Keep adequate records and books of
account in which complete entries will be made in accordance with GAAP.
SECTION 5.06. Reports and Notices. Furnish to CoBank:
(A) Annual Financial Statements. As soon as available, but in
no event more than 120 days after the end of each fiscal year of the Company
occurring during the term hereof, annual financial statements of the Company
prepared in accordance with GAAP consistently applied. Such financial statements
shall: (a) be audited by a nationally recognized firm of independent certified
public
accountants selected by the Company; (b) be accompanied by a report of such
accountants to the effect that the financial statements: (i) were audited in
accordance with generally accepted auditing standards; and (ii) present fairly,
in all material respects, the financial position of the Company as at the end of
the year and the results of its operations for the year then ended, in
conformity with GAAP; (c) be prepared in reasonable detail and in comparative
form; and (d) include a balance sheet, a statement of revenues, expenses and
patronage capital, and a statement of cash flows, and all notes and schedules
relating thereto.
(B) Interim Financial Statements. If requested by CoBank, as
soon as available, but in no event more than 60 days after the end of each
fiscal quarter of the Company occurring during the term hereof, a balance sheet
of the Company as of the end of such quarter, a statement of revenues, expenses
and patronage capital for the Company for such period and for the period year to
date, and such other interim statements as CoBank may specifically request, all
prepared in reasonable detail and in comparative form in accordance with GAAP
consistently applied.
(C) Officer's Certificate. Together with each set of
financial statements delivered to CoBank pursuant to Subsection (A) of this
Section 5.06, a certificate of an officer of the Company acceptable to CoBank:
(1) computing the financial covenants set forth in Article 7 hereof; and (2)
certifying that, to the best knowledge of such officer, no Default or Event of
Default occurred during the period covered by such statements or, if a Default
or Event of Default did occur during such period, a statement as to the nature
thereof, whether such Default or Event of Default is continuing, and, if
continuing, the action which is proposed to be taken with respect thereto.
(D) Notice of Litigation. Promptly after becoming aware
thereof, notice of: (a) the commencement of any action, suit or proceeding
before any court, governmental instrumentality, arbitrator, mediator or the like
which, if adversely decided, could have a Material Adverse Effect; (b) the
receipt of any notice, indictment, pleading, or other communication alleging a
condition that: (i) may require the Company to undertake or to contribute to a
clean-up or other response under any environmental Law, or which seeks
penalties, damages, injunctive relief, criminal sanctions or other relief as a
result of an alleged violation of any such Law, or which claims personal injury
or property damage as a result of environmental factors or conditions; and (ii)
if true or proven, could have a Material Adverse Effect; and (c) the rendering
of any order, judgment, ruling and the like which could have a Material Adverse
Effect.
(E) Notice of Default. Promptly after becoming aware thereof,
notice of the occurrence of a Default or an Event of Default.
(F) Default Notices. Promptly after furnishing or receiving
same, a copy of all notices of default (including notices of the occurrence of
an event which, with the giving of notice and/or the passage of time and/or the
occurrence of any other condition, would become a default) furnished by or to
the Company under the Indenture, any loan or other credit agreement relating to
any Obligation, or any other loan or credit agreement evidencing Funded Debt.
(G) Ratings. Promptly after obtaining same, a copy of all
Credit Ratings issued by a Rating Agency.
(H) Other Notices. Such other notices as may be required by
any Promissory Note and Supplement or any other Loan Document.
(I) Other Information. Such other information regarding the
condition or operations, financial or otherwise, of the Company as CoBank may
from time to time reasonably request, including, but not limited to, copies of
all pleadings, notices and communications referred to in Section 5.06(D) hereof.
SECTION 5.07. Conduct of Business. Continue to engage in the
business conducted by it on the date of this Agreement.
SECTION 5.08. Capital. Acquire voting stock in CoBank in such amounts
and at such times as CoBank may from time to time require in accordance with its
bylaws and capital plan (as each may be amended from time to time), except that
the maximum amount of voting stock that the Company may be required to purchase
in connection with a Loan may not exceed the maximum amount permitted by the
bylaws at the time the Promissory Note and Supplement relating to such Loan is
entered into or such Loan is renewed or refinanced by CoBank. The rights and
obligations of the parties with respect to such stock and any patronage or other
distributions made by CoBank shall be governed by CoBank's bylaws.
SECTION 5.09. Inspection. Permit CoBank or its agents, upon reasonable
notice and during normal business hours or at such other times as the parties
may agree, to examine the properties, books and records of the Company, and to
discuss its or their affairs, finances and accounts with its or their officers,
directors, employees, and independent certified public accountants.
ARTICLE 6
NEGATIVE COVENANTS
While this Agreement is in effect, the Company will not, without the
prior written consent of CoBank (which consent will riot be unreasonably
withheld or delayed):
SECTION 6.01. Liens. Create, incur, assume, or suffer to exist any
Lien on any of its properties, except:
(A) Liens in favor of CoBank;
(B) Liens to secure indebtedness for borrowed money or the
deferred purchase price of property or services in an aggregate principal amount
not to exceed $5,000,000 at any one time outstanding;
(C) Liens to secure indebtedness for borrowed money or the
deferred purchase price of property or services in excess of the amount set
forth in (B) above if: (1) all obligations owing to CoBank are equally and
ratably secured; and (2) the documentation under which the security is granted
is reasonably acceptable to CoBank; and
(D) Liens other than Liens securing repayment of borrowed
money or the obligation to pay the deferred purchase price for property or
services, if (i) such Liens are statutory Liens securing obligations not yet
delinquent, (ii) such Liens do not attach to assets that are material to the
operation of the Company, (iii) enforcement of such Liens is stayed or Chugach
takes all other action CoBank reasonably deems necessary to prevent foreclosure
of such Liens, or (iv) the aggregate amount necessary
to satisfy or extinguish such Liens (other than Liens described in clauses (i)
through (iii)) does not exceed $5,000,000.
Notwithstanding the foregoing, the maximum amount of obligations that can, at
any one time, be secured by Liens permitted under Subsections B and D hereof may
not exceed, in the aggregate, $20,000,000.
SECTION 6.02. Sale, Transfer or Lease of Assets. Sell, lease or
otherwise dispose of any of its assets except for: (A) the sale, lease or other
disposition of inventory in the ordinary course of business; and (B) the sale,
lease or other disposition of equipment or other property which is: (i)
obsolete, worn-out or no longer necessary for the provision of electric service
to customers in its service territory; and (ii) not occasioned by the
discontinuance of service to any portion of its service territory.
SECTION 6.03. Distributions. Directly or indirectly, declare or pay
any dividend or make any payments of, distributions of, or retirements of
patronage capital to its members (each a "Distribution") if, at the time thereof
or after giving effect thereto: (i) an Event of Default shall exist, or (ii) the
Company's equities and margins (determined in accordance with GAAP) as of the
end of the Company's most recent fiscal quarter would be less than thirty
percent (30%) of the sum of the Company's total long-term debt plus equities
and margins(determined in accordance with GAAP) at such time; provided, however,
that as long as no Event of Default exists and the ratio of the Company's
equities and margins to the sum of total long-term debt plus equities and
margins (all as determined above) would not be less than 22%, the Company may,
in any fiscal year, make a Distribution of up to the lesser of (x) five percent
(5%) of the Company's aggregate equities and margins on the books of the Company
as of the end of the immediately preceding fiscal year or (y) fifty percent
(50%) of the prior fiscal year's margins.
SECTION 6.04. Contingent Liabilities. Assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or liable for the
obligations of any Person (including by means of an agreement to: (A) purchase
any obligation, stock, assets, or services; (B) supply or advance any funds,
assets, or services; or (C) cause any Person to maintain a minimum working
capital or net worth or other financial test), except by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, if the Company would be in violation of this
Agreement (including all financial covenants set forth herein) if such
obligations were treated as direct obligations of the Company.
SECTION 6.05. Mergers. Merge or consolidate with any other Person or
acquire all or a material part of the assets of any other Person.
SECTION 6.06. Change in Business. Make capital expenditures for assets
primarily devoted to any business activities or operations substantially
different from or unrelated to its present business activities or operations,
where such expenditures exceed $5,000,000 in any calendar year or result in a
book value for such assets that exceeds $5,000,000 at any one time.
SECTION 6.07. Subsidiaries. Commence operations under any other name,
or make capital contributions to any Subsidiaries or Affiliates, where such
contributions exceed $5,000,000 in any calendar year or result in an aggregate
book value for the Company's interest in such Subsidiaries or Affiliates that
exceeds $5,000,000 at any one time.
SECTION 6.08. Prepayment or Defeasance. While any Default of Event of
Default shall have occurred and be continuing, prepay or defease any Obligation
or any other Funded Debt.
ARTICLE 7
FINANCIAL COVENANTS
SECTION 7.01. Financial Covenants. Unless otherwise agreed to in
writing by CoBank, while this Agreement is in effect:
(A) Rate Covenant. The Company shall establish and collect rates,
rents, charges, fees and other compensation (collectively, "Rates') for the use
or the sale of the output, capacity or service of the properties of the Company
that: (1) together with other moneys available to the Company, produce moneys
sufficient to enable the Company to meet all of its covenants under the
Indenture; and (2) are reasonably expected to yield "Margins For Interest" (as
defined in the Indenture) for each fiscal year of the Company equal to at least
1.10 times "Interest Charges" (as defined in the Indenture) for such period.
(B) Reserved.
(C) Funded Debt to Operating Cash Flow Ratio. The Company shall have a
ratio of Funded Debt at the end of each fiscal year of the Company to Operating
Cash Flow for each fiscal year of not greater than 8 to 1.
(D) Equity to Total Capitalization Ratio. If at the end of any fiscal
year, the ratio of the Company's Equity to Total Capitalization is equal to or
less than 22%, then: (1) the Company will hire an independent consultant,
satisfactory to CoBank, to recommend a course of action to improve such ratio to
25%; and (2) will, subject to any necessary regulatory approval and unless
CoBank otherwise consents, implement the recommendations.
ARTICLE 8
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. Each of the following shall
constitute an "Event of Default" hereunder:
(A) Payment Default. The Company should fail to make when due any
payment to CoBank hereunder, under any Promissory Note and Supplement, or under
any other Loan Document.
(B) Representations and Warranties. Any opinion, certificate or like
document furnished to CoBank by or on behalf of the Company, or any
representation or warranty made by the Company herein or in any other Loan
Document, shall prove to have been false or misleading in any material respect
on or as of the date furnished or made.
(C) Covenants. The Company should fail to perform or comply with any
covenant set forth in Article 5 hereof (other than Sections 5.01 and 5.06(E)
hereof) or any other covenant or agreement contained herein or in any Promissory
Note and Supplement, and such failure continues for 30 days after written notice
thereof shall have been delivered to the Company by CoBank.
(D) Other Covenants and Agreements. The Company should fail to perform
or comply with Sections 5.01 or 5.06(E) hereof or shall use the proceeds of any
Loan for any unauthorized purpose.
(E) Cross Default. The Company should, after any applicable grace
period, breach or be in default under the terms of any other Loan Document or
other agreement with CoBank.
(F) Other Indebtedness. The Company's obligation to repay any Funded
Debt shall be accelerated or declared due and payable prior to its scheduled due
date as a result of the occurrence of any breach or default under any agreement
relating to such indebtedness or obligation. Notwithstanding the foregoing or
any other provision hereof, the Company agrees that upon the occurrence and
during the continuance of any event giving rise to the right to accelerate such
indebtedness or obligation (whether or not such right is conditioned upon the
giving of notice and/or the passage of time and/or the occurrence of any other
condition), a Default shall be deemed to have occurred and be continuing
hereunder.
(G) Reserved.
(H) Insolvency. The Company shall: (1) become insolvent or shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or (2) suspend its business operations or
a material part thereof, or (3) apply for, consent to, or acquiesce in the
appointment of a trustee, receiver, or other custodian for it or any of its
property; or (4) have entered against it (i) a decree or order for relief in
respect of the Company in an involuntary case under any applicable Federal or
state bankruptcy, insolvency, reorganization or other similar law or (ii) a
decree or order adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal or
state law, or appointing a custodian, received, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any material part of
its property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of sixty (60) consecutive days ; or
(5) make an assignment for the benefit of creditors or commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, or liquidation law of any jurisdiction.
ARTICLE 9
REMEDIES UPON DEFAULT
SECTION 9.01. Remedies. Upon the occurrence and during the continuance
of a Default or Event of Default, CoBank shall have no obligation to make any
Loan to the Company and may discontinue doing so at any time without prior
notice. In addition, upon the occurrence and during the continuance of an Event
of Default, CoBank may, upon notice to the Company:
(A) Termination and Acceleration. Terminate any commitment and declare
the unpaid principal balance of the Loans, all accrued interest thereon, and all
other amounts payable under this Agreement, the Promissory Notes and
Supplements, and all other Loan Documents to be immediately due and payable;
provided, however, that upon the occurrence of an Event of Default under Section
8.01(H)(6), any commitments shall automatically be terminated and all such
amounts shall automatically become due and payable. Upon such a declaration (or
automatically, as provided above), the unpaid principal balance of the Loans and
all such other amounts shall become immediately due and payable, without
protest, presentment, demand, or further notice of any kind, all of which are
hereby expressly waived by the Company.
(B) Enforcement. Proceed to protect, exercise, and enforce such rights
and remedies as may be provided by this Agreement, any other Loan Document, or
under Law. Each and every one of such rights and remedies shall be cumulative
and may be exercised from time to time, and no failure on the part of CoBank to
exercise, and no delay in exercising, any right or remedy shall operate as a
waiver thereof, and no single or partial exercise of any right or remedy shall
preclude any future or other exercise thereof, or the exercise of any other
right. Without limiting the foregoing, CoBank may hold and/or set off and apply
against the Company's obligations to CoBank the proceeds of any equity in
CoBank, any cash collateral held by CoBank, or any other balances held by CoBank
for the Company's account (whether or not such balances are then due).
(C) Application of Funds. Apply all payments received by it to the
Company's obligations to CoBank in such order and manner as CoBank may elect in
its sole discretion.
In addition to the rights and remedies set forth above and notwithstanding the
terms of any Promissory Note and Supplement, if the Company fails to make any
payment required to be made under the terms of this Agreement or any Promissory
Note and Supplement hereto when due, then at CoBank's option in each instance
(and automatically following an acceleration), such payment shall bear interest
from the date due to the date such amount is paid in full at the Default Rate.
All such interest, together with all overdue amounts, shall be payable on
demand.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Broken Funding Surcharge. Notwithstanding any provision
contained in any Promissory Note and Supplement giving the Company the right to
repay all or any portion of a Loan prior to the date it would otherwise be due
and payable, or to convert any fixed rate balance to another fixed rate or to a
variable rate prior to the last day of the fixed rate period applicable thereto,
the Company agrees that in the event it converts any fixed rate balance prior to
the last day of its fixed rate period or repays any fixed rate balance prior to
the last day of its fixed rate period (whether such payment is made voluntarily,
as a result of an acceleration, or otherwise), or fails to borrow any fixed rate
balance on the date scheduled therefor, the Company agrees that (unless
otherwise expressly provided in a Promissory Note and Supplement) it will pay to
CoBank a surcharge in an amount equal to the present value of the difference
between: (A) the amount of interest which would have accrued on such portion
during the reminder of the applicable fixed rate period; less (B) the amount of
interest that CoBank would earn if such portion were reinvested for the
remaining fixed rate period in U.S. Treasury obligations having a weighted
average life approximately equal to the weighted average life of the balance
being prepaid (or in the event no such obligation then exists, the rate estimate
by CoBank in accordance with its then current methodology to be its all-in cost
to fund a new loan having a weighted average life equal to the weighted average
life of the balance being prepaid). For purpose of calculating present value,
the discount rate will be the rate of interest accruing on the U.S. Treasury
obligations selected in (B) above (or CoBank's estimated cost, as the case may
be).
SECTION 10.02. Complete Agreement, Amendments. The Loan Documents are
intended by the parties to be a complete and final expression of their
agreement. No amendment, modification, or waiver of any provision of the Loan
Documents, and no consent to any departure by the Company herefrom or therefrom,
shall be effective unless approved by CoBank and contained in a writing signed
by or on behalf of CoBank, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. In
the event this Agreement is amended or
restated, each such amendment or restatement shall be applicable to all
Promissory Notes and Supplements hereto. Each Promissory Note and Supplement
shall be deemed to incorporate all of the terms and conditions of this Agreement
as if fully set forth therein.
SECTION 10.03. Applicable Law, Jurisdiction. Except to the extent
governed by applicable federal Law, this Agreement and each Promissory Note and
Supplement shall be governed by the Laws of the State of Colorado, without
reference to choice of law doctrine. The parties agree to submit to the
non-exclusive jurisdiction of any federal or state court sitting in Colorado for
any action or proceeding arising out of or relating to this Agreement or any
other Loan Document. The Company hereby waives any objection that it may have to
any such action or proceeding on the basis of forum nonconveniens.
SECTION 10.04. Notices. All notices hereunder shall be in writing and
shall be deemed to have been duly given upon delivery if personally delivered or
sent by overnight mail or by facsimile or similar transmission, or three (3)
days after mailing if sent by express, certified or registered mail, to the
parties at the following addresses (or such other address as either party may
specify by like notice):
If to CoBank, as follows: If to the Company, as follows:
------------ -----------------
CoBank, ACB Chugach Electric Association, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Post Officer Box 196300
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Energy Banking Group Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
SECTION 10.05. Costs, Expenses, and Taxes. To the extent allowed by
Law, the Company agrees to pay all reasonable out-of-pocket costs and expenses
(including the fees and expenses of counsel retained by CoBank) incurred by
CoBank in connection with the origination, administration, interpretation,
collection, and enforcement of this Agreement and the other Loan Documents,
including, without limitation, all costs and expenses incurred in perfecting,
maintaining, determining the priority of, and releasing any security for the
Company's obligations to CoBank, and any stamp, intangible, transfer or like tax
incurred in connection with this Agreement or any other Loan Document or the
recording hereof or thereof.
SECTION 10.06. Effectiveness and Severability. This Agreement shall
continue in effect until: (A) all indebtedness and obligations of the Company
under this Agreement and the other Loan Documents shall have been paid or
satisfied; (B) CoBank has no commitment to extend credit to or for the account
of the Company under any Promissory Note and Supplement; (C) all Promissory
Notes and Supplements shall have been terminated; and (D) either party sends
written notice to the other party terminating this Agreement. Any provision of
this Agreement or any other Loan Document which is prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or thereof.
SECTION 10.07. Successors and Assigns. This Agreement and the other
Loan Documents shall be binding upon and inure to the benefit of the Company and
CoBank and their respective successors and assigns, except that the Company may
not assign or transfer its rights or obligations under this Agreement or the
other Loan Documents without the prior written consent of CoBank.
SECTION 10.08. Headings. Captions and headings used in this Agreement
are for reference and convenience of the parties only, and shall not constitute
a part of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date shown above.
CoBANK, ACB CHUGACH ELECTRIC ASSOCIATION, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------- --------------------
Title: Assistant Corporate Secretary Title: General Manager
DEFINITIONS AND RULES OF INTERPRETATION
SECTION 1.01 Definitions. As used in the Agreement, any amendment
thereto, or in any Promissory Note and Supplement, the following terms shall
have the following meanings:
Aftiliate shall mean any Person, 5% or more of the voting stock or
other voting rights in which is owned or controlled by the Company.
Agreement shall mean the Master Loan Agreement dated as of December
<>, 2001, between the Company and CoBank, as it may be amended or modified from
time to time.
Business Day means any day other than a Saturday, Sunday, or other day
on which CoBank or any Federal Reserve Bank is closed for business.
Capital Lease shall mean a lease which should be capitalized on the
books of the lessee in accordance with GAAP.
CoBank shall mean CoBank, ACB and its successors and assigns.
Company shall mean Chugach Electric Association, Inc. and its
permitted successors and assigns.
Credit Ratings shall mean a rating assigned by a Rating Agency to any
Debt of the Company.
Debt means: (1) indebtedness or liability for borrowed money; (2)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(3) obligations for the deferred purchase price of property or services
(excluding trade obligations); (4) obligations as lessee under Capital Leases;
and (5) obligations secured by a Lien on any property of the Company, whether or
not the obligations have been assumed.
Debt Service shall mean the sum of: (1) all principal payments made or
scheduled to be made during the period being measured on account of all Debt
which, in accordance with GAAP, should be classified as long-term debt
(including Capital Leases); and (2) all payments of interest made or scheduled
to be made by the Company during the period being measured on account of all
Debt (including all short-term and long-term Debt and the interest component of
Capital Leases).
Debt Service Coverage Ratio shall mean a ratio computed by dividing:
(I) Operating Cash Flow for the fiscal year being measured, less income tax
expense for that year; by (2) Debt Service for the fiscal year being measured.
Default shall mean the occurrence of any event which with the giving
of notice or the passage of time or the occurrence of any other condition would
become an Event of Default under the Agreement or under any other Loan Document.
Default Rate shall mean 4% per annum in excess of the rate or rates
that would otherwise be in effect under the terms of the Promissory Note and
Supplement, except that in the case of overdue interest, fees, and, prior to the
final maturity of a Loan (whether as a result of acceleration or otherwise)
principal, the term Default Rate shall mean 4% per annum in excess of any
variable rate option provided in the Promissory Note and Supplement, or, in the
event no such option is provided, 4% per annum in excess of the rate established
by CoBank from time-to-time during that period as its National Variable Rate.
Dollars and the sign "$" shall mean lawful money of the United States
of America.
Effective Date shall have the meaning set forth in Section 3.01
hereof.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published interpretations
thereof.
Equity shall mean total assets minus total liabilities, as computed in
accordance with GAAP consistently applied.
Event of Default shall mean any of the events specified in Section
8.01 of the Agreement and any event specified in any Promissory Note and
Supplement as an Event of Default.
Existing Bonds shall mean the First Mortgage Bonds, CoBank Series
dated as of August 31, 1995, April 30, 1996, September 26, 1996, and November
19, 1997.
Existing Credit Agreement shall have the meaning set forth in the
first Background clause of the Agreement.
Existing Indenture shall have the meaning set forth in the first
Background clause of the Agreement.
Funded Debt shall mean, as of the date being measured, all
indebtedness for borrowed money or the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of
business), whether classified as long-term or short-term.
GAAP shall mean generally accepted accounting principles in the United
States (as modified pursuant to any applicable regulatory order or policy).
Indenture shall mean that certain Amended and Restated Indenture dated
as of April 1, 2001, between the Company and U.S. Bank National Association, as
Trustee, as same may be amended or restated from time to time.
Laws shall mean all laws, rules, regulations, codes, orders and the
like.
Lien shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement or
preferential arrangement, charge or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement).
Loan shall mean a loan or other type of credit made to or for the
account of the Company, including, without limitation, letters of credit and
bankers acceptances.
Loan Documents shall mean this Agreement, all Promissory Notes and
Supplements hereto, and all instruments or documents relating to this Agreement
or the Promissory Notes and Supplements,
including, without limitation, all applications, certificates, opinions of
counsel, mortgages, deeds of trust, security agreements, guaranties, and pledge
agreements.
Material Adverse Effect shall mean a material adverse effect on the
condition, financial or otherwise, operations, properties, margins or business
of the Company or on the ability of the Company to perform its obligations under
the Loan Documents, the Indenture, any loan or other credit agreement relating
to any Obligation under the Indenture, or any other material credit agreement.
Moody's shall mean ▇▇▇▇▇'▇ Investor Services, Inc. and any successor
thereto.
Obligation shall have the meaning set forth in the Indenture.
Operating Cash Flow shall mean net income, plus depreciation, plus
amortization, plus interest expense, plus income tax expense, plus losses on the
sale of capital assets, less gains on the sale of capital assets, and less
non-cash income from all sources, all as calculated for the period being
measured in accordance with GAAP consistently applied.
Person shall mean an individual, partnership, limited liability
company. corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority, or other entity of whatever
nature.
Promissory Note and Supplement shall have the meaning set forth in
Section 2.01 of the Agreement.
Prospectus means the Prospectus dated January 29, 2002, relating to
$120 million of the Company's 6.2% 2002 Series A Bonds Due 2012 and $60 million
of the Company's 2002 Series B Bonds Due 2012.
Rating Agency shall mean S&P, Moody's, or any other nationally
recognized statistical rating organization (within the meaning of the rules of
the United States Securities and Exchange Commission).
S&P shall mean Standard & Poor's Rating Service, A Division of
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto.
Subsidiary shall mean, as to the Company, a corporation, partnership,
limited liability company, joint venture, or other Person of which shares of
stock or other equity interests having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership, limited liability company, joint venture, or other Person are at
the time owned, or the management of which is otherwise controlled, directly or
indirectly, through one or more intermediaries, or both, by the Company.
Total Capitalization shall mean Equity plus all Debt which, in
accordance with GAAP, should be classified as long-term debt (including Capital
Leases).
SECTION 1.02 Rules of Interpretation. The following rules of
interpretation shall apply to the Agreement, all Promissory Note and
Supplements, and all amendments to either of the foregoing:
Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP consistent with those applied in the
preparation of the financial statements
referred to in Section 5.07 of the Agreement, and all financial date submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
Number. All terms stated in the singular shall include the plural, and
all terms stated in the plural shall include the singular.
Including. The term "including" shall mean including, but not limited
to.
Default. The expression "while any Default or Event of Default shall
have occurred and be continuing" (or like expression) shall be deemed to include
the period following any acceleration of the Obligations (unless such
acceleration is rescinded).
Indenture. All references to the Indenture for the definition of any
term shall be to the Indenture as in effect on the Release Date as defined
therein as of the date hereof.
