EXHIBIT 4.08
SUBROGATION AND CONTRIBUTION AGREEMENT
Among
PANDA INTERFUNDING CORPORATION
PANDA FUNDING CORPORATION
and
PANDA INTERHOLDING CORPORATION
and
EACH PIC U.S. ENTITY
that is a signatory hereto
Dated as of July 31, 1996
____________________
SUBROGATION AND CONTRIBUTION AGREEMENT
THIS SUBROGATION AND CONTRIBUTION AGREEMENT (this
"Agreement") is made and entered into, effective as of July 31,
1996 among PANDA INTERFUNDING CORPORATION, a Delaware corporation
("PIC"), PANDA FUNDING CORPORATION, a Delaware corporation
("Panda Funding"), and PANDA INTERHOLDING CORPORATION, a Delaware
corporation, and each PIC U.S. Entity that is or shall in the
future be organized as a direct subsidiary of PIC, which PIC U.S.
Entity shall become a party hereto upon its incorporation
(collectively, the "Guarantors").
R E C I T A L S
WHEREAS, PIC has formed Panda Funding as a special purpose,
wholly-owned finance subsidiary to issue debt securities
constituting the Bonds described below;
WHEREAS, Panda Funding, PIC and the Trustee (as trustee for
the holders of the Bonds described below) are party to an
Indenture dated as of July 31, 1996 (as amended, supplemented or
otherwise modified and in effect from time to time, the
"Indenture"), providing, subject to the terms and conditions
thereof, for the issuance by Panda Funding from time to time of
certain Pooled Project Bonds (the "Bonds"), including, without
limitation, $105,525,000 initial aggregate principal amount of 11
5/8% Pooled Project Bonds, Series A due 2012 (the "Series A
Bonds");
WHEREAS, Panda Funding will loan the entire proceeds of the
issuance of the Series A Bonds (the "Loan") to PIC, which Loan
will be made under a Loan Agreement dated of even date with the
Indenture by and between Panda Funding and PIC (the "PIC Loan
Agreement") and evidenced by a promissory note (the "Initial PIC
Note") of PIC dated July 31, 1996, and payable to Panda Funding;
WHEREAS, Panda Funding may from time to time loan the
proceeds of subsequent series of Bonds (the "Additional Loans")
to PIC, which Additional Loans will be made under the PIC Loan
Agreement and evidenced by promissory notes (the "Additional PIC
Notes") of PIC payable to Panda Funding;
WHEREAS, one or more Letters of Credit may be substituted
for cash funds in the Debt Service Reserve Fund (as defined in
the Indenture) pursuant to Section 4.5(c) of the Indenture under
a reimbursement agreement to be entered into between PIC or its
controlling affiliate and a financial institution (the "Letter of
Credit Provider") (to the extent so entered into and as amended,
supplemented or modified and in effect from time to time,
together with any substitution or replacement thereof, the
"Reimbursement Agreement"), and in such event this Agreement
shall be amended to admit the Letter of Credit Provider as a
party hereto;
WHEREAS, to induce the purchase of the Bonds and to secure
Panda Funding's obligations to the holders (from time to time) of
such Bonds (the "Holders" and, together with the Trustee, and the
Letter of Credit Provider, if any, the "Secured Parties"), and to
induce the issuance of any letters of credit by the Letter of
Credit Provider and to secure PIC's or PIC's controlling
affiliate's obligations to the Letter of Credit Provider under
the Reimbursement Agreement (if entered into), Panda Funding has,
pursuant to a Security Agreement dated as of July 31, 1996,
between Panda Funding and the Collateral Agent (the "Panda
Funding Security Agreement"), granted to the Collateral Agent for
the benefit of the Secured Parties, a security interest in all of
Panda Funding's assets, including, without limitation, the
Initial PIC Note, the Additional PIC Notes, and Panda Funding's
other personal property;
WHEREAS, PIC has agreed to guarantee Panda Funding's
obligations to the Holders and the Trustee pursuant to certain
terms and covenants in the Indenture (the "PIC Guaranty");
WHEREAS, to induce the purchase of the Bonds, Panda Energy
Corporation, a Texas corporation ("PEC") and corporate parent of
PIC, has, pursuant to a Stock Pledge Agreement dated as of July
31, 1996, between PEC and the Collateral Agent (the "PEC Stock
Pledge Agreement"), pledged to the Collateral Agent for the
benefit of the Secured Parties, all of the capital stock of PIC;
WHEREAS, to induce the purchase of the Bonds by the Holders,
which the Guarantors acknowledge is of substantial benefit to
them (as the ultimate recipients of certain assets to be
transferred to them in connection with the issuance of the Bonds)
and of substantial benefit to their parent, PIC, as the recipient
of the Loan evidenced by the Initial PIC Note and pursuant to the
Additional Loans evidenced by Additional PIC Notes, of the
proceeds of the issuance of the Bonds, each Guarantor has
executed and delivered the Guaranty Agreement dated as of
July 31, 1996 (such agreement the "Subsidiary Guaranty"),
pursuant to which each Guarantor has jointly and severally
guaranteed the Guaranteed Obligations (as defined in such
Subsidiary Guaranty) in favor of the Collateral Agent for the
benefit of the Secured Parties;
WHEREAS, the Series A Bonds are being sold to the Initial
Purchaser (as defined below) pursuant to the Purchase Agreement
dated as of July 26, 1996 (the "Purchase Agreement") among Panda
Funding, PIC, Panda Energy International, Inc., and Jefferies &
Company, Inc. (the "Initial Purchaser"); and
WHEREAS, it is a condition precedent to the purchase of the
Series A Bonds by the Initial Purchaser that the Guarantors shall
have executed and delivered this Agreement by each of the
Guarantors existing at the time of the purchase of the Series A
Bonds.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1. Each capitalized term used, but not defined, herein
shall have the meaning assigned such term in, or by reference in,
the Indenture or the Subsidiary Guaranty.
2. (a) If any Guarantor makes a payment in respect of the
Guaranteed Obligations, it shall be subrogated to the rights of
the Collateral Agent and the Secured Parties, as applicable, (or
any other payee) against PIC or Panda Funding with respect to
such payment and shall have the rights of contribution set forth
below against the other Guarantors; provided that such Guarantor
shall not enforce its rights to any payment by way of subrogation
or by exercising its rights of contribution until all the
Guaranteed Obligations shall have been paid in full. If any
Guarantor makes a payment in respect of the Guaranteed
Obligations so that the amount of its then current Net Payments
is less than the amount of its then current Contribution
Obligation, any Guarantor making such proportionately smaller
payment shall, when permitted by the preceding sentence, pay to
the other Guarantors an amount such that the Net Payments made by
the Guarantors in respect of the Guaranteed Obligations shall be
shared among the Guarantors pro rata in proportion to their
respective Contribution Percentage. If any Guarantor receives
any payment by way of subrogation or contribution so that the
amount of its then current Net Payments is greater than the
amount of its then current Contribution Obligation, the Guarantor
receiving such proportionately greater payment shall, when
permitted by the second preceding sentence, pay to the other
Guarantors an amount such that the Net Payments received by the
Guarantors shall be shared among the Guarantors pro rata in
proportion to their respective Contribution Percentage. If any
Guarantor makes a payment in respect of the Guaranteed
Obligations so that the amount of its then current Net Payments
is greater than the amount of its then current Contribution
Obligation, any Guarantor making such proportionately larger
payment shall, when permitted by the third preceding sentence,
receive from the other Guarantors an amount such that the Net
Payments made by the Guarantors in respect of the Guaranteed
Obligations shall be shared among the Guarantors pro rata in
proportion to their respective Contribution Percentage.
(b) As used herein, the term "Contribution Obligation"
shall mean an amount equal, at any time and from time to time and
for each respective Guarantor, to the product of (i) such
Guarantor's Contribution Percentage, times (ii) the sum of all
payments made previous to or at the time of calculation by all
Guarantors in respect of the Guaranteed Obligations (less the
amount of any such payments previously returned to any Guarantor
by operation of law or otherwise, but not including payments
received by any Guarantor by way of its rights of subrogation and
contribution hereunder). Notwithstanding anything to the
contrary contained in this Section or in this Agreement, no
liability or obligation of any Guarantor that shall accrue
pursuant to this Agreement shall be paid nor shall it be deemed
owed pursuant to this Agreement until all of the Guaranteed
Obligations shall be paid in full.
(c) As used herein, the term "Net Payments" shall mean an
amount equal, at any time and from time to time and for each
respective Guarantor, to the difference of (i) the sum of all
payments made previous to or at the time of calculation by such
Guarantor in respect of the Guaranteed Obligations and in respect
of its obligations contained in this Agreement, less (ii) the sum
of all such payments previously returned to such Guarantor by
operation of law or otherwise and including payments received by
such Guarantor by way of its rights of subrogation and
contribution hereunder.
(d) As used herein, the term "Contribution Percentage"
shall mean, for any applicable date as of which such percentage
is being determined an amount equal to the quotient of (i) the
Net Worth of such Guarantor as of such date, divided by (ii) the
sum of the Net Worth of all the Guarantors as of such date. The
amount set forth opposite each Guarantor's name on Annex 1 hereto
was calculated and agreed to among PIC, Panda Funding and the
Guarantors to be the Contribution Percentage in effect on the
date hereof or as may be amended from time to time to reflect the
addition as a party hereto of any PIC U.S. Entity created as a
direct subsidiary of PIC subsequent to the date of this
Agreement.
(e) As used herein, the term "Net Worth" shall mean for any
Guarantor, calculated on and as of any applicable date on which
such amount is being determined, the difference between (A) the
sum of all such Guarantor's property, at a fair valuation and as
of such date, minus (B) the sum of all such Guarantor's debts, at
a fair valuation and as of such date, excluding the Guaranteed
Obligations.
3. Each party hereto represents and warrants to each other
party hereto and to their respective successors and permitted
assigns that the execution, delivery and performance by such
party of this Agreement are within such party's powers, have been
duly authorized by all necessary action, require no action by or
in respect of, or filing with, any Governmental Authority and do
not contravene, or constitute a default under, any provision of
any applicable Government Rule or of the certificate or articles
of incorporation, bylaws or partnership agreement, as applicable
of such party or of any agreement, judgment, injunction, order,
decree or other instrument binding upon such party or result in
the creation or imposition of any Lien on any asset of such
party.
4. No failure or delay by any Guarantor in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided shall be cumulative and non-exclusive of any rights or
remedies provided by law.
5. Any provision of this Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing
and is signed by the parties hereto and consented to by the
Collateral Agent.
6. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
7. This Agreement and the rights and obligations of the
parties hereunder and under the Bonds and the PIC Guaranty shall
be construed in accordance with and be governed by the laws of
the State of New York (including Section 5-1401 of the New York
General Obligations Law, or any similar successor provision
thereto, but excluding all other conflict-of-laws rules)and to
the extent controlling, laws of the United States of America.
8. Any legal action or proceeding with respect to this
Agreement, the Notes or the other Transaction Documents may be
brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid
courts. Each of the Parties hereto irrevocably waives any
objection, including, but not limited to, any objection to the
laying of venue or based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any such
action or proceeding in such respective jurisdictions.
9. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute
this Agreement by signing any such counterpart. This Agreement
shall become effective when a counterpart hereof shall have been
signed by all the parties hereto.
WITNESS THE EXECUTION HEREOF, by the parties hereto as of
the date first above written.
PIC: PANDA INTERFUNDING CORPORATION
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President, General Counsel
and Assistant Secretary
PANDA FUNDING: PANDA FUNDING CORPORATION
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President, General Counsel
and Assistant Secretary
GUARANTOR[S]: PANDA INTERHOLDING CORPORATION
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President, General Counsel
and Assistant Secretary
__________________
ANNEX I
TO
SUBROGATION AND CONTRIBUTION AGREEMENT
GUARANTOR CONTRIBUTION PERCENTAGE
PANDA INTERHOLDING CORPORATION 100%
_______________
100%
